Challenge a PPSR Registration- the how and why

Commercial Law

Inaccurate, misleading, or out-of-date registrations on the Personal Property Securities Register (PPSR) can have a devastating effect on a purported grantor. So how do you, as grantor, challenge a PPSR registration?

In this first post, we look at the registration requirements and at amendment demands.

By Connor James, Law Quarter. 

The complexity of this area of law and the potential consequences of a ‘bad registration’ are disproportional to the simplicity and cost of the PPSR registration process. In other words, it is very easy to make a mistake and to cause havoc by lodging a ‘bad registration’ on the PPSR. There are methods you can use to challenge a PPSR registration and we will look at those in this post and a post to follow.

I. The Registration Requirements

The process for registering a security interest is set out in chapter 5 of the Personal Property Securities Act 2009 (PPSA). To register a security interest, a party must register a financing statement with respect to a relevant ‘security interest’ as defined in section 12 of the PPSA.

The PPSR is administered by the Registrar who, under section 150(3), is only obliged to register a security interest if:

(a)  the application is in the approved form; and

(b)  the fee (if any) determined under section 190 has been paid; and

(c)  the Registrar is not satisfied that the application is:

(i)  frivolous, vexatious or offensive, or contrary to the public interest; or

(ii)  made in contravention of section 151 (belief about security interest); and

(d)  the registration would not be prohibited by the regulations.

There is a civil penalty provision in section 151 of the PPSA which may apply where a party registers a security interest without a reasonable belief that the person described in the statement as the secured party is, or will become, a secured party in relation to the collateral (other than by virtue of the registration itself). The penalty for a breach of section 151 is 50 penalty units for an individual and 250 penalty units for a body corporate. A breach of section 151 allows an affected party to obtain damages pursuant to section 271 of the PPSA.

There are a range of formal requirements for a registration to be valid, including those set out in the PPSA and the regulations.

A party seeking to challenge a PPSR registration should consider if the registration is compliant with the formal requirements. A party seeking to challenge a PPSR registration should also consider the interplay with their contractual obligation such as any warranties provided to the secured party.

II. The Amendment Demand

A party wishing to challenge a registration has two options. They may lodge an amendment demand and proceed with an adminstrative challenge or they may commence court proceedings.

An amendment demand is a written demand to a secured party that is made by a person with an interest in the subject collateral, relates to a registration which is in respect of a security interest in the subject collateral; and requires the secured party to amend a registration to end the effective registration; or omit particular collateral from the description.

Section 178 provides that: A person with an interest (including a security interest) in collateral described in a registration with respect to a security interest may give a demand (an amendment demand ), in writing, to the secured party for a financing change statement to be registered to amend the registration as authorised by the following table:

On receipt of an amendment demand, the secured party has 5 days to respond.

Before sending a demand, you should conduct a search of the PPSR. You must send the amendment demand to the secured party’s email or postal address as listed in the registration.

The amendment demand process (to Challenge a PPSR Registration) is set out in the following diagram:

In our second post, we will look at the court process and some practical considerations when challenging a PPSR registration. If you have any questions on the above, contact us.

Joining with others for mutual gain? An introduction to joint ventures in Australia (part two)

Commercial Law

In our last piece (part one) on joint ventures we described some of the common characteristics of a joint venture and some of the legal forms that such a venture might take. Today, we take a look at how parties to a joint venture might acquire legal obligations to one another. Note, as usual, this is general commentary only and does not constitute legal advice.

The importance of the joint venture agreement

The legal obligations of the participants in a joint venture depend on the legal form of the joint venture. For example, incorporated joint ventures have obligations which arise from the Corporations Act 2001. Joint ventures which take the form of a trust will incur the obligations of trustees. In unincorporated joint ventures, the obligations of the participants will arise largely from the agreement between the parties.

Just last year, the NSW Supreme Court considered in Coyte and Anor v Norman and Anor; Centre Capital (Newcastle) Pty Ltd and Anor [2016] NSWSC 1242 a series of claims and counterclaims relating to a ‘Unit Trust’ joint venture. In that case, several claims relied on the breach of contractual obligations relating to an oral “further agreement”. The court did not find that that agreement existed. This emphasises the importance of a clear written agreement setting out the specific obligations of participants to each other in a joint venture.

The importance of distinguishing between a partnership and other joint ventures

In part one, we mentioned that a distinction can be made between a legal partnership and unincorporated joint ventures. The definition of a ‘partnership’ is provided in various state laws as “persons carrying on a business in common with a view of profit”.

The requirement to be “carrying on a business” is suggestive of one potential difference between a partnership and other joint ventures; the former tends to be (though there are exceptions) a repetitive endeavour rather than a one-off. Furthermore, it is common for the relationship in a joint venture to involve a common undertaking to produce a product to be shared amongst themselves, rather than profit.

So, what is the relevance of the joint venture/partnership distinction? The relevance is that the existence of a partnership imposes stringent fiduciary obligations on the partners, such as a duty against undisclosed conflicts of interest and a duty not to profit to the detriment of the other partners.

Note, however, that some fiduciary obligations may also arise whether or not the joint venture constitutes a partnership. In many cases this will be as a result of what the participants agreed to and the circumstances of the agreement. Fiduciary duties that may arise include:

• A joint venture participant may be restricted from dealing in assets committed to that joint venture without the informed consent of the other parties
• A joint venture participant may be restricted from obtaining any “collateral advantage” in relation to the joint venture, without the knowledge and informed consent of other participants.

 

[1] See, for example, (NSW) Partnership Act 1892, s1(1)

[1] Smith v Anderson (1880) 15 Ch D 247 at 277-8; [1874-80] All ER Rep 1121

[1] United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1

[1] United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 13

Joining with others for mutual gain? An introduction to joint ventures in Australia (part one)

Joining with others for mutual gain? An introduction to joint ventures in Australia (part one)

Commercial Law

Today is part one of a two-part introduction to joint ventures. In today’s piece, we look at some of the common characteristics of joint ventures as defined by the courts and the forms that a joint venture might take. In part two we will look at the obligations that hold between participants in a joint venture

The concept of a joint venture

There is no all-encompassing legal definition of “joint venture” in Australian legislation. While the term does appear in various statutes, those definitions are for specific legal purposes, rather than offering a general definition.[1] Nor has a general legal definition been provided by the courts.

One oft-quoted case remarks:

“As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.’”[2]

So, from this we might say that the ordinary concept of a joint venture captures a general idea of people or entities working together for mutual gain. And while this ‘association’ might take various legal forms, the focus is on those associations that are not legal partnerships.

‘Recognisable and common characteristics’ of joint ventures

A more recent case held that, while the existence or otherwise of a joint venture will be a question of fact depending on the particular case, the following are “recognisable and common characteristics” of a joint venture:[3]

  • Participants have property, or property interests in the assets of the association
  • Participants exercise joint control
  • Participants both contribute, though not necessarily in equal measure
  • Participants have rights and obligations in relation to the association and these are often relative to the ownership of shares and/or contributions made
  • Participants have a joint interest in achieving the purpose of the association
  • Participants enter into the association for mutual gain, often for mutual profits.

Types of joint venture

Two key types of joint venture (though by no means the only ones) are contractual joint ventures (or ‘unincorporated joint ventures’) and corporate joint ventures.

A contractual joint venture binds two individuals or entities via a contract. This kind of arrangement provides considerable flexibility for both participants and can be particularly useful for short-term or single purpose ventures.

A corporate joint venture is registered as a limited liability company. In this arrangement parties to the venture become shareholders of the joint venture company. This arrangement means that the joint venture is subject to the requirements for companies in the Corporations Act 2001 and other corporate legislation such as the Australian Securities and Investments Commissions Act 2001 and Competition and Consumer Act 2010.

In our next piece, we will look at the obligations that participants in a joint venture owe each other.

Please note, that the information here is intended as a general introduction and for advice specific to your business, please seek professional legal advice.

 

 

[1] See, for example, the definitions contained in section 128A(1) of the Income Tax Assessment Act 1936 and section 4J of the Competition and Consumer Act 2010.

[2] United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, at [10].

[3] Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749 at [80].

Who represents your business? Agency law in Australia (Part Two)

Who represents your business? Agency law in Australia (Part Two)

Commercial Law

In our last article, part one on a brief introduction to agency law, we looked at the basic idea of agency, the ways in which agency can come about, and the scope of the legal relationship of agency. Today, in part two, we look at the legal definition of agency and the duties that attach to an agency relationship including the impact of a recent decision of the High Court of Australia.

The legal definition of agency

In part one, we described the basic idea of agency as the relationship between one person who acts on behalf of or represents another. This basic idea has developed into the legal definition of agency to mean “an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties”.[1] At the heart of this definition is the agent having the legal authority to stand in place of another.

Duties of an agent  

Once someone becomes an agent of another, what obligations does that place on them? In many cases this will be specified by a legal agreement, but there are a range of duties that apply to agents in general. Breach of these duties can result in a range of different court actions based on tort, contract or equity. The duties include:

  • A duty to act as instructed by the principal, and to do it in person[2]

 

  • A duty of care, skill and diligence. An agent must exercise the care that is reasonably necessary to do what they have undertaken to do. If an agent holds themselves out as carrying out a particular trade, they will be required to exercise the degree of care which is exercised in the proper and ordinary course of that trade[3]

 

  • A duty to avoid conflict of interest/not to profit. Agency is generally considered to be a fiduciary relationship, which means that the agent is obliged to act in good faith towards the principal. If there is a conflict between the interests of the agent and the principal, or the possibility of profiting, the agent needs the consent of the principal[4].

Note, however, that the High Court of Australia held last year in Australian Competition and Consumer Commission v Flight Centre Travel [2016] HCA 49, that in spite of this duty, it is still possible for an agent and a principal to be in competition with each other. This means that the behaviour of an agent can count as anti-competitive under competition law

  • A duty to keep accounts.[5] An agent has a duty to keep proper accounts of transactions and provide them, if asked, to the principal.

Note, this is not an exhaustive list of the duties of an agent, and as with part one, is provided as a general introduction. If you need legal advice on any matter of agency law, let us know and we can put you in contact with the right expertise.

[1] International Harvester Co of Australia Pty Ltd v Carrigan’s Haselden Pastoral Co (1958) 100 CLR 644 at 652; [1958] HCA 16.  This definition was re-affirmed recently in Australian Competition and Consumer Commission v Flight Centre Travel [2016] HCA 49.

[2] Catlin v Bell (1815) 4 Camp 183; 171 ER 59.

[3] Beal v South Devon Railway Co (1864) 3 H & C 337 at 341; 159 ER 560.

[4] Hurstanger Ltd v Wilson [2007] 4 All ER 1118; [2007] 1 WLR 2351.

[5] Gray v Haig (1855) 20 Beav 219; 52 ER 587.

Who represents your business? Agency law in Australia (Part One)

Who represents your business? Agency law in Australia (Part One)

Commercial Law

When it comes to our personal finances, we regularly engage agents (or, at least, those who call themselves ‘agents’). When we want to sell a house, we use a real estate agent, we book our holidays with a travel agent and when we want a new job we use a recruitment agent. It is a term which also turns up constantly in the ordinary running of a business. Are employees, agents?  Are your distributors your agents? This article is part one of a two-part introduction to the law of agency.

Please note, this is general information, for legal advice about your specific situation, consult a lawyer.

The basic idea of agency

There is no legislation in Australia which provides an all-encompassing definition of the agency relationship. Rather, agency is a legal relationship defined primarily by the courts over several centuries (albeit with contributions from legislation, from time to time).

The basic idea of agency is that an agent is someone who acts on behalf of, or represents, another person. This other person we can call the principal. Of course, there is a lot more nuance involved to the legal concept of agency than this basic idea. We flesh this idea out by looking at how the relationship of agency comes about, its potential scope, and in our next article, the duties of agents.

How does agency come about?

There are several different ways in which the legal relationship of agency can come about:

  • Through express or implied agreement between two parties that one will act for the other
  • A principal approving of all ‘ratifying’ an act done on his or her behalf, after the fact
  • Operation of law, such as legislation
  • This doctrine, crafted by the courts, holds that, where one person leads a second person to consider some third person an authorised agent, and the second person relies on this, the first person is ‘estopped’ from denying that that third person is their agent[1].

It must be emphasised that a relationship of agency is not created simply by two individuals claiming that an agency relationship exists (whether in writing or otherwise). It depends on the nature of the underlying relationship.

What is the scope of the relationship?

Through the agency relationship, the principal provides an agent with the authority to do certain things. This is never an unlimited authority. For example, no one can authorise their agent to do unlawful acts.[2] This authority can be actual (such as through a written agreement) or apparent (such as in the case of ‘estoppel’, explained above). In turn, actual authority could come from what is explicit (such as written into an agreement), or implicit (such as is customary in a particular industry[3]).

 

In our next article, we look further at the legal concept of agency by exploring the legal duties of agents.

If you have any questions on this article please contact us.

[1] Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147.

[2] Collins v Blantern (1767) 2 Wils 341; [1558-1774] All ER Rep 33; (1767) 95 ER 847.

[3] Lienard v Dresslar (1862) 3 F & F 212; 176 ER 95.