Category Archives: PPSA

PPSA Case Law Update – 2021

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Last week I delivered an update on developments in PPSA case law to an audience at Leo Cussens, an update I present twice each year. The seminar covered 10 recent cases and was part of a morning of presentations on the PPSA by various speakers.

A copy of the paper and overheads presented at the seminar can be found here:

Some of the interesting decisions include:

Keon Pty Ltd as trustee for Keon Family Trust v Goldfields Equipment Pty Ltd (In Liquidation) [2020] WASC 61, a harsh lesson for a lender relying on an (undrafted) agreement to provide a charge as a security interest (the lender failed)

Allied Master Chemists of Australia Limited, Re [2020] NSWSC 291, an extension of time case under s588FM where the court did not require a Guardian Securities order mainly because the borrower was a large listed pharmaceutical group with no material insolvency risk

Everlyte Ltd v Registrar of Personal Property Securities [2020] AATA 2584, a demonstration that an ownership interest of itself, not securing payment or performance of an obligation, is not a security interest. The applicant was the owner of a stolen helicopter who registered its interest on the PPSA as owner after the theft.

Thanks to Leo Cussens for hosting the seminar.




  1. The Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 (the Bill) was introduced in Parliament on Thursday 12 November 2020. I have previously commented on the exposure draft of the Bill here and made a submission to Treasury concerning that Bill here.
  2. The text of the Bill as read in Parliament is available at the parliamentary website here, with a mark up against the exposure draft available here.
  3. On 17 November 2020 the Treasury released exposure drafts of the proposed regulations and rules that will be introduced with the Bill once enacted, which are available here.  The content of the regulations and rules and the revised Bill have been summarised extensively elsewhere, see for example an excellent summary by HWL Ebsworth at their website here.
  4. In this article I comment on particular aspects of the regulations that are of interest to insolvency practitioners in operating under the reforms, aspects of the reforms that impact on PPSA issues and other matters of interest.  This article is not intended to be a general review of the regulations or rules, which can be obtained by referring to the sources noted above.

Issue:  employee entitlements and tax lodgment

  1. Despite many submissions to government to exclude these thresholds, they remain.  In short, companies will have to have their employee entitlements paid up and have lodged all outstanding federal tax returns and similar documents before being eligible to take part in a restructuring process.

Issue:  debts incurred in the restructuring are provable in a subsequent winding up

  1. The Bill has amended s553(1A) of the Act so that debts incurred by the company when it is under restructuring or under a restructuring plan are provable.  See the Bill, schedule 1, Part 2 item 48.  The text of the existing sub-section is repealed and replaced to that effect.   
  1. The Bill has amended s553(1A) of the Act so that debts incurred by the company when it is under restructuring or under a restructuring plan are provable.  See the Bill, schedule 1, Part 2 item 48.  The text of the existing sub-section is repealed and replaced to that effect.   

Issue:  Temporary protection of insolvent small businesses from statutory demands to eligible companies, where declaration is made

  1. There will be an extension of the effective moratorium on statutory demands to 31 July 2021 for companies eligible for temporary restructuring relief:  see regulation 5.4.01AAA. 
  2. The government anticipates a shortage of practitioners available to take appointments from 1 January 2021.  This measure is a device to shelter companies from statutory demands whilst waiting to line up an appointee. 
  3. The meaning of the phrase “eligible for temporary restructuring relief” is given by s 458 of the Act.  To qualify, directors must make and publish a written declaration of three matters:
    • Insolvency of the company and the company would meet the eligibility criteria for restructuring;
    • The board has resolved to appoint a restructuring practitioner;
    • There is no other current insolvency appointment (Restructuring Practitioner, VA or liquidator).
  4. Once made a company has made a declaration, the company is eligible for temporary restructuring relief for three months, which can be extended a further month if directors have been unable, despite trying, to appoint a restructuring practitioner.
  5. How are creditors supposed to know whether any particular debtor is eligible for restructuring when they are not insiders of the company?  Some relief will come from the publication of the notice.  One would need to know that the company has less than $1m in liabilities excluding contingent claims.  This will add a degree of uncertainty for people proposing to use a statutory demand process.

Issue:  Restrictions on voidable transactions in simplified liquidation

  1. In regulation 5.5.04, the restrictions on unfair preference recoveries have been set out.  In essence, unfair preference recoveries will be restricted to debts that exceed $30,000 in total or in cumulative series of related transactions, and will be restricted to transactions entered into on the three month period ending on the relation back day rather than 6 months.
  2. Preference recoveries against related entities of the company will be unaffected.

Issue:  Restructuring appointment triggers PPSA Vesting

  1. The Bill as read in parliament now amends s 267 of the Personal Property Securities Act 2009 (Cth) (PPSA) so that the effect of a restructuring appointment is to trigger vesting of unperfected security interests in the company.  See items 115 to 117 of the Bill. This was left out of the exposure draft.

Issue:  Determining the amount of liabilities to be counted in the $1 million cap for restructuring – still messy

  1. Two issues that were open from the exposure draft of the Bill were the types of debts to be counted into the $1 million threshold, whether other indicia might be used (eg turnover opr employee numbers) and whether the amount of the threshold might be changed.
  2. By the regulations, contingent debts are to be excluded from calculation but future debts remain: see r 5.3B.03(1).  The threshold is confirmed to be $1m, to be calculated on the day the restructuring begins.  No other indica are to be used.
  3. The total will accordingly exclude contingent debts where the contingency has yet to crystallise but include future non-contingent debts, for example rent, which whilst not yet due are certain to arise.
  4. Query the position of contingent debts that crystallise on an insolvency appointment or associated act of default.  The wording of the regulation is ambivalent as to whether crystallised debts of that sort are to be included, since the calculation is to be taken on the day the restructuring begins, not upon the commencement of the restructuring.  It would seem to me that crystallised debts are included since by application of section 36 of the Acts Interpretation Act 1901 (Cth), the restructuring period would be taken to include the whole of the day on which it commences. 
  5. It follows that the commencement of the restructuring may well push the company over the $1 million threshold when such cystallised debts are included.  The Law Council of Australia has recommended in a submission on the regulations that the threshold be calculated fromimmediately before the appointment (see item 1 here), which seems to me to be sensible.  It avoids the need for a review of company contracts to detect contingent debts which might not be disclosed in the accounts of the company. 

Issue:  it appears payments to referrers for appointments are allowed

  1. The regulations appear to permit a restructuring practitioner to pay a “broker”, being a person referring an appointment, for the referral – see reg 5.3B.16. 
  2. This has attracted criticism – it will feed perceptions of a lack of independence of the practitioner to say the least.

Issue:  What Transactions are in the ordinary course of business in the restructuring period?

  1. By s.453L of the Act there is a general prohibition on dealings outside the ordinary course of the company’s business, unless the restructuring practitioner has consented or the transaction was entered into under an order of the Court.
  2. The regulations provide a definition of “ordinary course of business” – see 5.3B.04. 
  3. A transaction that is for the purposes of paying a debt or claim arising prior to the commencement of the restructuring, relating to the transfer or sale of the whole or part of the business, or relating to the payment of a dividend are all outside the ordinary course of business.  Payments of company employee entitlements are not considered outside the ordinary course of business. 
  4. It seems the intent of the regulation is to give the practitioner a measure of control and require their supervision during the restructuring period.  The company will not be able to pay any essential debts arising before the appointment without consent:  for example, a payment to a key supplier might be necessary to continue trading. 
  5. Reg 5.3B.05, sets out a process for restructuring practitioners to follow when consenting to transactions outside the ordinary course of business.  Written consent is to be given by the practitioner and a record of the consent to be kept by the practitioner and given to the company within two business days of the consent being given.
  6. Practitioners should be aware of that requirement as it seems to me it will be a not uncommon occurrence.

Issue: when a restructuring ends

  1. How a restructuring is to end was left out of the Bill and is now provided for in the regulations.  Regulation 5.3B.02 deals with when a restructuring is to end.  In summary, a restructuring will end if the company:
    • fails to propose a restructuring plan in the restructuring period;
    • a proposal to make a restructuring plan lapses;
    • the restructuring practitioner terminates the restructuring;
    • the Court orders the restructuring to end;
    • an administrator of the company is appointed;
    • a liquidator or provisional liquidator is appointed;
    • or the company makes a restructuring plan (a successful ending).
  2. There are a couple of interesting points:
    • It appears to me that directors can still appoint a voluntary administrator even though the company is under restructuring;
    • Directors have a power under r5.3B.02(2) to unilaterally end a restructuring on giving notice to the practitioner and ASIC.  It seems odd to me that given that a company that enters into a restructuring is presumed to be insolvent and it would seem to be poor policy to allow the directors of the company to end the restructuring process without completing it and continuing to trade.
  3. If a restructuring is terminated by the restructuring practitioner, regulation 5.3B.02(6) requires the contents of the written notice required from the restructuring practitioner of the decision to terminate (see s.453J(3)(b) of the Act) are set out.  The notice must include the reasons for terminating the restructuring.

Issue: Proposing a restructuring plan and its contents

  1. Section 455B of the Act as amended provided for regulations to be made about the process of proposing a restructuring plan.
  2. Those regulations are included in Division 3 of the proposed regulations.  Practitioners will need to be familiar with these provisions and develop precedents that conform with them for draft plans to be used in practice.
  3. The plan must conform with that approved form and must also include various matters including regulation 5.3B.13.  They include matters such as:
    • how the company property is to be dealt with;
    • what property is to be the subject of the plan;
    • the remuneration of the practitioner;
    • the date on which the plan was executed.
  4. The plan may also:
    • authorise the practitioners to deal with identified property in a specified way (eg by sale);
    • providefor any matters relating to the company’s financial affairs;
    • be conditional upon the occurrence of events within a specified period no longer than 10 business days after the proposal is made and accepted (presumably, provision of finance, third party consents etc).
  5. Plans cannot provide for the transfer of property other than money to a creditor and plans can only have a life of 5 years beginning on the day that the plan is made in respect to payment.  In other words, payments under the plan have to be made within a maximum period of 5 years.
  6. By regulation 5.3B.14 a restructuring proposal statement must be prepared to accompany the plan which will include a schedule of debts and claims that are affected by it, and that statement must be in a prescribed form.
  7. The Act and regulations use the phrase “making a restructuring plan” and distinguish “proposing a plan”.  Making a plan is where a proposed restructuring plan is accepted by creditors and is accordingly binding.  Compare a deed proposal and a DOCA.

Issue:  the “proposal period” and extending it

  1. The default period of the restructuring process is 20 business days.  That period can be extended by another 10 business days if the restructuring practitioner is satisfied that requiring the company to give their plan within the 20 day period would not be reasonable in the circumstances.  Only one such extension can be given, that the Court can give further extensions on application.  See regulation 5.3B.15.
  2. This regulation mimics the practice in relation to voluntary administration of extensions made by the Court which, on the first request, are routinely given.  It seems to me to be a sensible regulation but one could expect the Court to be less accommodating than in VA on the first request to it for more time. 

Issue:  Certification of the restructuring plan by the restructuring practitioner

  1. Regulation 5.3B.16 provides detail of a certificate that restructuring practitioners have to provide in respect of each restructuring plan.  They should be of concern to restructuring practitioners as to the burden of certification, because of their broad scope, remembering that practitioner’s  freedom from liability in performance of their duties requires an absence of negligence.  The certificate must confirm the following matters:
    • the eligibility criteria for restructuring are met by the company;
    • the company is likely to be able to discharge the obligation created by the plan when they become due and payable;
    • the practitioner believes on reasonable grounds that all information required to be set out in the company restructuring proposal has been set out in the statement;
    • if the practitioner believes that is not the case, they must set out or identify the matters in relation to which a belief on reasonable grounds could not be formed; and
    • if a person referred the company to the restructuring practitioner it requires them to set out any details of that relationship and any payments made to the broker in connection with the referral.
  2. These obligations are serious and require a restructuring practitioner to satisfy themselves of the eligibility of the company for restructuring and the likelihood that the company imposing a plan will be able to satisfy the obligations that it is taking on.
  3. A restructuring practitioner commits an offence if they prepare a certificate under this regulation and do not make reasonable inquiries into the company’s business, property, affairs and financial circumstances or take reasonable steps to verify the company’s business, property, affairs and financial circumstances.  It is a 50 penalty unit penalty and an offence of strict liability.
  4. The prospect of civil liability for breach of these provisions (if such a breach is either because of a lack of good faith or because of the presence of negligence) and the fact that failure to make reasonable inquiries and take reasonable steps as noted above is an offence, should make practitioners cognisant of the important role in investigating the affairs of the company and certifying the proposed plan under these provisions.
  5. Further by Regulation 5.3B.17, a restructuring practitioner commits an offence if they fail to notify the company of incompleteness or inaccuracies in information in the plan or the restructuring proposal statement that accompanies it, where those flaws are likely to affect the company’s ability to meet its obligations under the plan.
  6. By regulation 5.3B.18 a restructuring practitioner can cancel a restructuring proposal under certain conditions, which include the restructuring practitioner discovering before the plan is made that the information in the plan is incomplete, affected creditors have not been disclosed, the proposal statement was deficient because it omitted a material particular or there has been a material change in the company’s circumstances not previously foreshadowed which is capable of affecting creditors’ decisions as to whether to accept the plan.
  7. That regulation provides the restructuring practitioner with a safety valve having regard to the onerous obligations that they are subject to.

Issue:  Acceptance of the plan

  1. Two interesting points regarding how a plan is accepted:
    • a plan is accepted if there is a majority in the value of the company’s affected creditors in favour who reply before the end of the acceptance period.  It would seem that if creditors choose not to vote, the plan can be accepted provided the majority of those voting are in favour by value.  Conceivably if one credited voted in favour and no other creditors voted, the plan would be approved.
    • if an affected creditor is entitled to vote because they have purchased another creditor’s claim, then the value of their vote is limited to the value that they paid for the debt.  In other words it’s the purchase price of the debt, not its face value that matters.
  2. The regulations make it an offence to give or agree or offer to give an affected creditor (simply a creditor who is bound by a plan or will be if the plan is made) any valuable consideration with the intention of securing an acceptance or non-acceptance of the plan.  Vote buying is out! 

Issue:  Appointment functions and powers of a restructuring practitioner under a plan

  1. The functions and powers of a restructuring practitioner under a plan, once made, are  provided in subdivision D, regs 5.3B.32 to 40.
  2. The functions include to receive and hold money for the company, pay money to creditors in accordance with the plan, realise property and distribute its proceeds if requested to do so by the directors,  do anything incidental to the performance or exercise of their functions and powers and to do anything else necessary or convenient for the purposes of administering a plan.
  3. By regulation 5.3B.34, there is a prohibition on a practitioner disposing of encumbered property, with exceptions.  The exceptions are if the property is PPSA retention of title property, disposals in the ordinary course of business, disposals with the consent of a secured party or with leave of the Court.
  4. By regulation 5.3B.35 the restructuring practitioner is the company’s agent when carrying out the company’s restructuring plan, and has qualified privilege in that respect and a right of indemnity with priority.  The priority is dealt with in reg 5.3B.39.  The right of indemnity prevails over all of the company’s unsecured debts, debts secured by a PPSA security interest that has vested, and debts secured by circulating security interest, except where a receiver has been appointed.
  5. By regulation 5.3B.40, the restructuring practitioner has a lien to secure the indemnity on the company’s property. 

Issue:  Information to be provided to the restructuring practitioner and reporting obligations

  1. Divisions 4 and 5 of the regulations deal with the company’s obligations to provide information to an incoming restructuring practitioner, declarations required to be made by the directors in relation to the appointment, notice of the restructuring plan and notices of contravention and termination of the plan. 
  2. A declaration by directors is required of the company’s eligibility to be under restructuring and other matters by regulation 5.3B.44.  The declaration must include whether any transactions that have been entered into by the company would be voidable under s.588FE if the company were wound up, other than transactions which would be an unfair preference.  This interesting obligation (one doubts it will be thoroughly observed) seems to require the directors to seek professional advice concerning the company’s transaction history to assess whether any voidable transactions may have occurred.  It seems to me that an unadvised company director would identify such transactions and the director/s will probably seek assistance from the restructuring practitioner before making of this declaration.

Issue:  Powers of the Court

  1. Much of the powers of the Court are left to be dealt with in the regulations and those regulations are contained in Division 6 in regulations 5.3B.50 to 55.
  2. Points of interest:
    1. The Court has a jurisdiction to deal with creditor disputes over claims and debts that are not resolved by agreement.  The jurisdiction only activates where a disagreement has arisen between the affected creditor and the restructuring practitioner; has refused to make a recommendation about it or has recommended that the dispute be referred to Court. 
    2. The Court also has a jurisdiction to vary restructuring plans on application of a company, an affected creditor, the restructuring practitioner or ASIC or on its own initiative. 
    3. The Court has a wide power to make orders to terminate, void or validate a restructuring plan. 

Issue:  Simplified liquidation

  1. The regulations also provide for circumstances in which a simplified liquidation process will end. 
  2. A problematic point is a deeming provision in reg 5.5.07.  If the company or a director of the company has been engaged in fraudulent or dishonest conduct that has had a material adverse effect on the interest of creditors as a whole or class of creditors as a whole, then the simplified liquidation process is taken to have ceased.  It is an interesting provision because the activating event is the formation by the liquidator of a that the dishonest or fraudulent conduct has occurred, where held on reasonable grounds. 

Date:  26 November 2020

Mark McKillop

Castan Chambers

Melbourne Victoria

Common Issues with the PPSA and how to deal with them as a solicitor or barrister

I recently presented a video podcast with my learned friend and fellow barrister Amanda Carruthers on the topic “PPS Issues in Insolvency”: see below. The format is to highlight the frequent PPSA issues that we see as barristers and how best to tackle them as a practitioner.

You can also download the seminar and watch at

Enjoy. The seminar is part of a series presented by Foleys List on a wide range of topics relevant to commercial lawyers. See the full range at


On 23 June 2020, here in Melbourne, in the calm between the lockdowns (which seems like an eternity ago now) I delivered an update to lawyers on COVID implications for the operation of the PPSA to the Leo Cussens Institute via Zoom. A copy of the paper presented is attached at this link.

The key takeaways were:

  1. as a practitioner, know the basics: what is a security interest, why to register and how to register
  2. make sure that clients take steps to protect themselves from simple mistakes;
  3. in an environment where a pandemic of insolvency is a real risk, errors in dealing with the PPSA will be costlier than ever.

I suggested the minimum basics that a practitioner should know were:

  • The main impact of the PPSA is difficult times is in insolvency.  The first thing a liquidator, administrator or bankruptcy trustee will do when appointed is search the PPSR for relevant registrations.
  • In most appointments of liquidators or bankruptcy trustees, unsecured creditors will either receive nothing or very few cents in the dollar.  Therefore, if you propose to offer funds or goods to a person or entity on credit, considering security for the obligation should be the first thing at front of mind.
  • A first-ranking secured party can then generally choose whether to enforce their security and take the property or get priority of payment from the sale of the property.
  • To take security over personal property, clients will need two things:
  1. a security agreement that is well drafted:  usually within the terms of trade, or in a separate document; and
  2. to register that security on the PPSR.


PPSA Update – February 2020 Paper

In February 2020 I delivered a now annual seminar providing an update on recent PPSA developments at the Leo Cussen Institute. The seminar covered three interesting recent cases:

Bluewaters Power 1 Pty Ltd v The Griffin Coal Mining Company Pty Ltd
[2019] WASC 438 (Bluewaters)

BMW Australia Finance Limited v @Civic Park Medical Centre Pty Ltd as trustee for @Civic Park Medical Centre Unit Trust [2019] FCA 999 (Civic Park)

In the matter of Beechworth Land Estates Pty Ltd (admins apptd) and Griffith Estates Pty Ltd (admins apptd); Cussen and of Beechworth Land Estates Pty Ltd v Douglas Estate Holdings Pty Ltd and Others [2019] NSWSC 1129 (Beechworth)

Topics covered in the seminar included:

  • the breadth of a “security interest”:  do step-in rights require registration on the PPSR?  The decision in Bluewaters;
  • PMSIs – traps where the debtor is the trustee of a trust:  extension of time to register in the decision in Civic Park;
  • Administrators’ Lien over interests in land and proceeds of its sale: the decision in Beechworth;
  • Inventory security:  issues of priority and vesting in relation to processing raw materials

A copy of the paper is attached at the following link:

PPSA – Recent Developments – the O’Keeffe and Psyche cases

I recently presented a paper to Leo Cussens during a half day PPSA conference on the topic recent developments in the PPSA.  A full copy of the paper can be found at this link: Leo Cussens – PPSA – 23.5.19

The PPSA is relatively new (for a law at least) and so the Courts are still working through the legislation as cases come before them.  Many recent cases consider relatively straight forward aspects of the legislation.

As such, they are not of great significance other than as a demonstration of principle.  In the matter of O’Keefe Heneghan Pty Ltd (in liq) & Ors (2018) NSWSC 1958 (O’Keefe) is one of those cases, considering the continuing super-priority of approved deposit taking institutions (ADI) (usually banks or non-bank financial institutions) under the Act.

One significant development has been repeated demonstration of the drastic consequences of failing to identify a grantor by its proper identification number, leading to a lot of decisions considering efforts to overcome such errors. The problem was identified to drastic effect for the secured creditor in OneSteel Manufacturing Pty Ltd (administrators appointed) (2017) NSWSC 21.

There has been a rash of subsequent cases grappling with the same issue from different angles, and the recent case of Psyche Holdings Pty Limited (2018) NSWSC 1254 (Psyche) is one of them.

In the matter of O’Keeffe Heneghan Pty Ltd (in liq) & Ors (2018) NSWSC 1958

Takeout:  An ADI has super priority over ADI Accounts under its control, even where it has failed to register its security interest, since it is able to perfect its security interest by control of the ADI account.  That follows since the account is held with it and is at all times the balance is under its direct control.  An ADI which has perfected by control is entitled to follow its security interest out of the account into the control of others without losing its priority.  Secured creditors who are not ADIs should be on notice  that their priority will virtually always be secondary when competing against an ADI which has perfected by control, even after registration of their secured interest.

In the matter of Psyche Holdings Pty Limited [2018] NSWSC 1254

Takeout:  It is very important to register a security interest in accordance with the requirements of the PPSA, particularly with regard to time limits and the form of application.  That is particularly so with regard to use of an ABN or ACN in appropriate cases.   If a security interest is not validly registered within time limits set by the PPSA, the secured party may lose priority or may lose the interest completely.  While the Court has a discretion to order an extension of time for registration, the ability of the Court to grant extensions is limited and uncertain.  Practitioners should not assume that an extension of time will be available on application to the court.

I also mentioned three other cases of some note.

G. Murch Nominees Pty Ltd v Paul David Annesley & Ors [2019] VSC 107: registration of baseless security interest by mortgagor after purchase of property from mortgagee:  steps taken to restrain further registrations and remove invalid registrations.

Rubis v Garrett as Trustee of the Andrew Garrett Family Trust Trading as Dynamic Commercial Workforce Solutions (No 2) [2018] FCA 2011 – Vexatious baseless registrations against 46 alleged grantors with whom registering party had no security relationship, including a Judge in separate proceedings. Whether Registrar had breached duty not to permit vexatious registrations to be registered, in circumstances where the Registrar knew vexatious history of lodging party.

Toll Energy and Marine Logistics Pty Ltd v Conlon Murphy Pty Ltd [2019] FCA 532: extension of time for registration of a PMSI under s588FM of the Corporations Act (not insolvent, no objections)

Stopping sham PPSR Registrations – again, and again

The PPSR is Ripe for abuse

One of the weaknesses of the Personal Property Security Register (PPSR) is that anyone can go online and lodge a registration for a few dollars in fees by claiming to hold a “security interest” in respect of the personal property of another, with very few immediate consequences.

The victim of the sham registration can suffer real prejudice:  searches of the register will show apparent security interests over the victim’s personal property.  The impression given can lead to delays in completing other transactions involving the giving of real security over the affected assets or other transactions involving them, whilst time and money is required to remove the registration.

Jurisdiction to Remove and Restrain Sham Registrations

In 2014 as Counsel for the plaintiff I appeared in Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217 where the plaintiff obtained an interlocutory and then final injunction to restrain the repeated registration of a sham “security interest” on the PPSR on the basis that it was an abuse of process.    I published a blog post about the case here.

The case has since attracted some attention, being reported at (2014) 285 FLR 267.

It has now also been followed in Victoria as a precedent establishing the Court’s inherent jurisdiction to grant injunctive relief of the type and on certain other points, in National Australia Bank Ltd v Garrett [2016] FCA 714.

The facts in National are a great illustration of the ease of registration on the PPSR.

Mr Garrett had been a customer of the Bank through various entities he controlled in the wine industry.   It is apparent from reading the judgment that the relationship between bank and customer had deteriorated markedly over time.  It appears again from the judgment that Mr Garrett had been subject of at least one vexatious litigant order and there was a history of applications involving him and the bank.

A financing statement was registered by the “Trustee for The Andrew Garrett Family Trust No. 4” on 24 April 2016 on the PPSR claiming a security interest in respect of the property of NAB and Treasury Wine Estates Vintners Ltd.  The collateral was said to be “All present and after-acquired property – No exceptions”.

The basis of the registration appears to have been a purported charge of which NAB gained notice in these circumstances (at para 12 of the judgment):

The registration of the financing statement followed NAB’s receipt of an email from Mr Garrett on 24 April 2016 in which Mr Garrett stated that he intended to register a charge on the PPSR over NAB’s property. Attached to the 24 April 2016 email was a copy of a Security Deed (titled “Distributor License Purchase Vendor Finance Performance Security Deed”) which purported to be a charge granted by NAB in favour of OenoViva and Mr Garrett as trustee for the Andrew Garrett Family Trust ABN 78 761 760 976. The Security Deed relevantly stated that: “This Charge is registered pursuant to the undertaking as to loss costs and damage given by the Chargee in SCI-2004-127; Andrew Garrett Wines Resorts Pty Ltd & Anor v National Australia Bank Limited”. The Security Deed has not been signed or otherwise executed by NAB. It is a creation of Mr Garrett’s and built upon the misconceived foundation that an undertaking as to damages given in a prior proceeding could somehow give rise to a security interest; I will return to the undertaking later.

[emphasis added]

The Bank made application to remove the registration after Mr Garrett refused to remove it in response to an amendment demand, being the administrative process provided by section 178 of the PPSA.

Beach J followed and confirmed the broad finding of Robson J’s decision in Sandhurst to the effect that a security interest under the PPSA does not include an interest in property that is said to arise by operation of equity, including an equitable remedial  constructive trust or charge.  Accordingly it cannot be registered.  Specifically, Beach J found [see National at paragraphs 27 to 33]:

  1. A “security interest” under the PPSA is one that is provided for by a transaction where one is dealing with consensual arrangements.  A transaction therefore does not include a claim based on obtaining equitable relief from a court of equity, such as a remedial constructive trust or charge.
  2. In identifying the transaction one must look to the substance and not the form.
  3. Further, certain interests in personal property arising at law are specifically carved out of the definition of security interest by section 8(1)(c) of the PPSA.

Beach J also followed Robson J’s finding in relation to the Court’s inherent jurisdiction under s37 of the Supreme Court Act 1986 to restrain registration as an abuse of process. Robson J accepted that the circumstances were similar to those that existed in abuses of the caveat system, where the Court already had exercised its inherent jurisdiction to remove caveats legally placed but in an abusive manner [see Sandhurst paragraphs 108 to 118, National at  paragraph 50].

Procedural Points on Judicial Process under s182 of the PPSA

In Sandhurst it was unnecessary for the Court to consider the procedure under the PPSA for removing contested registrations.  In National Beach J gave some indications of procedural points that ought to be followed.

In order to remove the an erroneous registration an applicant gives an amendment demand to the secured party under s178(1) of the PPSA.  The demand can only be given where authorized under the section.  Making an amendment demand is authorized by the section where either all of the collateral referred to in the registration, or part of it, does not secure the claimed obligation.

Assuming the amendment demand  is refused, a judicial process established under s182 of the PPSA can be invoked  within 5 business days of giving the demand.  The process provides for a hearing to determine if the amendment demand is authorized.

Beach J made the following comments about that process:

  1. The Court should treat an application made to sustain a contested registration in a similar manner to the defence of a Caveat application;
  2. The onus is on the putative secured party (in this case Garrett) to satisfy the Court that its registration ought remain;
  3. Some caution needs to be exercised in comparing the procedures, since s182(4) of the Act requires the applicant (in this case the National) to discharge a legal onus to establish that the amendment demand that initiates the process is itself authorized under s178(1) by prima facie evidence.  So the applicant would need to satisfy the Court by prima facie evidence that part or some of the collateral did not secure the obligation claimed.  That requirement was met in this case.


Looking forward, I expect these sorts of applications to become quite common, owing to the ease of abuse.  it is probably unlikely that the process for lodging a registration on the PPSR will be changed much as it is intended to be an easy system to use.  It is a question of competing policy imperatives which will not be resolved without some thought by regulators and stakeholders.



A QUESTIONABLE PRACTICE: PPS vesting provisions on appointment do not extinguish a financier’s perfected interest in leased equipment on the PPSR.

I recently had a piece published in the ARITA Journal with the above, rather lengthy, title.

The topic is the extent to which a financier’s security interest is really affected by the vesting provision, section 267, in the PPSA.  There is a current practice of letters being dispatched to the holders of any unperfected security interests in leased equipment, claiming vesting of all interest in the collateral in issue, without regard to upstream financier’s interests. The fact is that there are good arguments that the financier’s interest is not affected, even if the owner of the equipment who has provided the lease may lose its interest because of vesting.

This article deals with such an example where the argument of the VA in that case was defeated by the citation of a Canadian case on point. The issue hasn’t been dealt with by the Courts in Australia yet so is topical, and is relevant to major banks and equipment fleet financiers who can be affected.

A link to a PDF copy appears below.

ARITA Journal March 2016 Mark McKillop