Inaccurate, misleading, or out-of-date registrations on the Personal Property Securities Register (PPSR) can have a devastating effect on a purported grantor.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.
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.
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.