A party can take steps to protect their personal property which is in the possession of a third party.
There are critical elements to be satisfied and timeframes to be met when a security interest is registered on the Personal Property Securities Register (PPSR). Careful attention must be adopted to ensure that the relevant provisions of the Personal Property Securities Act 2009 (Cth) (PPSA) are applied and understood so that an entity obtains the relevant priority and that its security interest can be enforced in the event of default.
Failure to properly consider all relevant issues and address the relevant requirements to ensure that the registration of the security interest on the PPSR is valid and has a proper basis could be fundamental – one small mistake could mean that the party loses its ability to enforce a security interest and recover its goods, particularly in circumstances where a company goes into liquidation.
However, a party who seeks to register a security interest on the PPSR must have a proper basis for registration – failure to have a proper basis could result in the registration being removed by the Registrar or in the worst case scenario, a pecuniary penalty being imposed if an application is made to Court by the Registrar of Personal Property Securities.
In the decision of Registrar of Personal Property Securities v Brookfield [2024] FCA 29, the party who registered a security interest found himself in a situation where his security interest was not registered, and his contraventions of the PPSA landed him on the receiving end of a substantial pecuniary penalty. The brief facts were as follows:
- An agreement was entered into between Blueprop Pty Ltd and Real Estate Now Pty Ltd for the sale of its rent roll in relation to the management of 62 properties (the Agreement). It is not clear whether the purchase price was paid to Blueprop. Blueprop purported to assign its debt under the agreement to Mr Ian Brookfield.
- The essential dispute between the Registrar of Personal Property Securities and Mr Brookfield (who was a self-represented litigant) was whether, by virtue of the Agreement, Blueprop held a “security interest” for the purposes of the PPSA. It is relevant that Mr Brookfield had made applications to register a financing statement for a security interest on the PPSR on seven previous occasions and those registrations had all been removed by the Registrar. This application related to two further registrations by Mr Brookfield and declarations were sought by the Registrar for contraventions of the PPSA and for which a pecuniary penalty could be imposed.
There were several interesting issues which were raised in the case:
- Mr Brookfield maintained his position that he held a security interest in the rent roll and subsequent income from the rent roll. He contended that interest was equitable. In order for Mr Brookfield’s position to be accepted, he must have first established that Blueprop held a security interest in the Rent Roll. If it did not, the assignment could not assist Mr Brookfield. In correspondence, the Registrar indicated that “…my decision only relates to whether or not you had provided evidence of a valid security interest (not whether or not a debt may be owed to you, or whether you may be the owner of the rent roll).”
- In circumstances where a party does not have a proper basis for registering a financing statement, this could give rise to a contravention of section 151(1) of the PPSA which is a civil penalty provision and provides as follows:
A person must not apply to register a financing statement, or a financing change statement, that describes collateral, unless the person believes on reasonable grounds that the person described in the statement as the secured party is, or will become, a secured party in relation to the collateral (otherwise than by virtue of the registration itself).Civil penalty: 50 penalty units
- Mr Brookfield relied on s 12(1) of the PPSA in support of his submission that Blueprop held a security interest arising from the Agreement which obliged Real Estate Now to pay Blueprop for the rent roll and therefore, the Agreement was a transaction that secured the obligation to pay. This submission was not accepted as Blueprop never held a security interest in the rent roll. Mr Brookfield apparently obtained advice from Senior Counsel who indicated that he had a valid security interest and in the course of his submissions, Mr Brookfield said that he has had “30 years [of] coming in the Federal Court”. This comment appears to suggest that Mr Brookfield was perhaps a professional litigant (or possibly more correctly, a vexatious litigant!!).
- It was necessary for the Court to examine the grounds upon which Mr Brookfield relied to assert the reasonableness of his belief and to determine whether those grounds were reasonable and were reasonable at the relevant dates – the Court found in favour of the Registrar in this regard. Whilst Mr Brookfield may have had a reasonable belief that he had a proper basis to register on the PPSR, the Court was not persuaded that there were reasonable grounds for his belief at each of the relevant dates.
