Identify and explain the main shortcomings of the law

relating to security over personal property in

INTRODUCTION
In this essay, the main question is regarding the shortcomings of the law relating to security
over personal property in Singapore. The simple answer to this question according to my
analysis is, yes there are few areas in Singapore which require reformations but it will be wrong
to say that Singapore requires an entirely new legal framework or regime regarding security
over personal property law. Few amendments are needed due to extensive change in the
economy and new vehicles which are introduced in business and finance industry. The common
law approach in Singapore has an undersized concept and has developed in an inchmeal
manner.

In this essay, I will be focusing on shortcomings laid down in Bills of Sales Act1 and Companies
Act2, in Singapore. I will explain this by characterising into sub-parts. In Singapore, the major
loophole which has to be cured is regarding, individuals and corporate individuals which are
treated differently.
Before getting into the detail it is better to understand what is personal property and security
interest, many scholars have given their different views on the definition but there is no tailor
-made definition for personal property but, in, general it is defined as; Property which is not
land nor statutory rights, entitlements or authorities.
A Term defined in section 10 as follows: Property (including a licence) other than:3
a) land; or
b) a right, entitlement or authority that is:
i. granted by or under a law of the Commonwealth, a State or a Territory;
ii.

and
declared by that law not to be personal property for the purposes of this
Act;

Despite paragraph (a) of the definition, 'personal property' includes crops and mortgagebacked securities. Real property mortgage loans are also included where transferred to a
person issuing a mortgage-backed security.
Security interest: "An interest in personal property provided for by a transaction that, in
substance, secures payment or performance of an obligation (without regard to the form of the
transaction or the identity of the person who has title to the property)" (section 12(1)).4
Breakdown of the current state of the law in Singapore regarding security over personal
property law is conceptually weak whilst issues are raised regarding Registration, Priorities, and
Collateral v. Choose in Action etc.
1 Bills of Sales Act, 1886, Revised 2011.
2 Companies Act, 1967, Revised 2006.
3 Report by Personal Property Securities Working Group Business Law Committee, Law Society of New South Wales: Key
Concepts in the Personal Property Securities Act, 2009 and Regulations 2010 (Cth).

4 Report by Personal Property Securities Working Group Business Law Committee, Law Society of New South Wales: Key
Concepts in the Personal Property Securities Act, 2009 and Regulations 2010 (Cth).

REGISTRATION
The reformation of the law of security interests is dependent on the central notion of the
perfection of registration; Singapore has different regimes that govern the creation of security
interest in corporate and non-corporate entities which makes it rambling. The Bills of Sales Act
governs individuals and the Companies Act applies to corporate entities. Therefore, the above
notion leads us to multiple registers which create a problem for the intended creditor to check
multiple registers where the debtor has created security interests in several assets and creditor
has to pay duplicate search fees to attain the exact picture of debtor's indebtedness. Hence, in
Singapore, there should be a uniform single registration streamlined process which will help out
to achieve the performance of the same security function at a reasonable cost and that will save
time too.5
In BoSA and Companies Act have different rules with regard to registration requirements,
assets over which they cover, and effect of registration. BoSA is very restricted on formality
requirement for registration process and on the another hand the companies' act quotes that a
company creating charge is not constrained to follow any particular mode of creation. After
considering above points in the registration use, Singapore should dismantle the dual
registration process and introduce single registration process for individuals and corporate
entities.

PRIORITIES
Next important point which is to look here is priorities issue which is very complex and
bewildering and Singapore is continuously struggling to get over with it. Tan Yock Lin in his
article said, there are two important issues in the assessment of priorities law, first one is the
rankings of security interests, including the possibilities of reversals of priorities by party
autonomy and statutory imposition and secondly the soundness of law to respond decisively to
novel priority conflicts.6 As a common law country, Singapore has always applied the first-in5 Tan Yock Lin, Chapter24: Rights and Duties in Relation to Security Interests, pg: 1331-1337.
6 Yock Lin Tan, Ch: 12: Personal property security interests in Singapore, "The reform of UK personal property security law"
Edited by John de Lacy, (Routledge-Cavendish, 2010), page 408.

time principle which is legitimate to a large extent but the catastrophe occurred when equitable
ownership is introduced and complications started occurring when questions related to the
relationship between an equitable interest and a subsequent legal title are raised.
In BoSA and Companies Act, the difficulty arises when priorities are compounded by
registration systems and the most problematic distinction is to decide over fixed and floating
charges. The Dearle v. Hall7 rule, "clarifies that the assignee who is first to give notice to the
debtor would be having priority over the other but there is implied condition that when the
assignee notice will only prevail over the other assignee if he is unaware of the previous
assignment. The courts while deciding the distinction between floating and fixed charge has to
consider various issues such as crystallisation and notice of any negative pledge"8.
Professor Tan Yock Lin has made concerning issue which is unresolved and has to be
considered for reformation, conflict between the equitable tracing creditor and receivables
financier.
There is always a discussion that whether collateral is good or choose in action, there is no
perfect answer to it but according to Dearle v Hall Rule different priority, the rule applies as
between equitable assignments of legal choses in action. But according to "Article 9 of UCC the
reform also extends personal property law over security interests in choses in action which the
reform committee were failed to understand the importance of choses in action in secured credit
financing". 9 Therefore this is one area where the Singapore government has to look into it and
clear the insufficiency prevailing in the law.
The reformation should bring a comprehensive system of priority of security interests when
new registration system is established which will bring coherence both in registration and
priority provisions.
LEGITIMACY OF ARTICLE 9 OF UNIFORM COMMERCIAL CODE10
7 (1828) 3 Russ 1.
8 Made by Professor Dora Neo for Credit & Security (LL5019V) taught at NUS in 2015-2016.
9 Article by Singapore Academy of Law, "Reform of Bills of Sales Act", 1996.

Article 9 of UCC is one of the most successful and modern systems of security interests in the
present world. Professor McCormack has advocated Article 9 of UCC by giving three important
advantages:
a) less complexity in the law and comprehensiveness;
b) laid down more rational rules for identifying priorities between competing for security
interest;
c) flexibility in secured financing;
In the above discussion, the identification of shortcomings has been pointed out and
accordingly Singapore has to reform its laws to attain uniformity and coherence. The panorama
of Article 9 of UCC is to bring efficiency and fairness in security over personal property law.
But before getting into the details of reforms provided under Article 9 of UCC it is very
important to understand what does Article 9 of UCC stands for:it deals with all transactions
(other than a finance lease) that maintain the creditor's interest in a debtor's personal
property"11, the debtor can be an individual or any business entity, ranging from a registered
corporation to a single proprietorship. Article 9 of UCC is trying to bring the uniformity
between an individual and corporate entity.
Article 9-314, provides broad power to security rights in investment property, deposits
accounts, letter-of-credit rights or electronic chattel paper to be perfected by control of the
collateral. With regard to priorities, a simple first-to-file priority rule is generally adopted
(Article 9-322). In regard to priorities, first to file rule is generally adopted. It is provided that
Article 9 of UCC applies to almost all types of security, it follows that an authoritative, uniform
priority rule has been provided to almost all types of security. This would be a welcome
development which reduces uncertainty and makes the grant of security more transparent. The
reformation is ultimately balancing the policies. Article 9 of UCC on super priority states "the
perceived unfairness of automatic crystallization will be resolved by the principle of superpriority on secured creditors who inject fresh capital into the business of the debtor."12
10 Article 9 of the US Uniform Commercial Code- Secured Transactions (2010).
11 Business article published by Credit Today, July 2012 (last accessed on 31st March 2016).
12 Tan Yock Lin, Chapter24: Rights and Duties in Relation to Security Interests, pg: 1340.

Article 9-102(11) also defines chattel paper which acts as recording evidence both a monetary
obligation and a security interest in specific goods 13. Therefore, this article promotes chattel
use in financing and affords the flexibility that the secured creditor may choose to file in the
alternative to secure protection in those cases where possession is lost or not taken, on the
above point the Singapore statute is silent."14
We have discussed the brighter side of Article 9 of UCC but it is not that simple to implement in
Singapore because it brings new complexities but currently, it is the most suitable exchange to
the current state of the law. Before reformation various parameters have to be considered
because the law reformation committee in the year 1996 introduced reformation but struck
down due to an anarchic behaviour of BoSA as stated in the report, hence, Article 9 of UCC's
implementation becomes more competitive.15
CONCLUSION
Article 9 of UCC has two important pillars, "attachment" and "perfection", these two notions
will improve the protection afforded to possessory interests but it has to keep in mind that the
above notions are only replacement concepts otherwise, the third parties have nevertheless
pending filing obtain rights by estoppel. There is much of discussion that the difference
between Article 9 of UCC and general law in Singapore are not merely cosmetic or remedial
and cannot be underestimated. Article 9 of UCC relies on the fundamental concept of security;
no alteration is carried with regard to features and attributes of the security agreement or the
rights and obligations of the parties to it.
In the end, I will conclude it what Tan Yock Lin has stated; Article 9 of UCC has managed to
provide an accurate and comprehensive definition of security which was missing under the
Singapore statute. Now it depends on the Singapore Government either to adopt this policy

13 Art 9-102(31) defines electronic chattel paper to mean chattel paper evidenced by a record or records consisting of
information stored in an electronic medium while Art. 9-102(78) defines tangible chattel paper to mean chattel paper
evidenced by a record or records consisting of information that is inscribed on a tangible medium.

14 Yock Lin Tan, Ch: 12: Personal property security interests in Singapore, "The reform of UK personal property security
law" Edited by John de Lacy, (Routledge-Cavendish, 2010), page 400.

15 Article by Singapore Academy of Law, "Reform of Bills of Sales Act", 1996.

which is popularly used in other jurisdictions like New Zealand, Australia, and Canada or opt
for other policy or maybe opt out and continue with the ongoing law.