Over two years have now passed since the introduction of the Personal Property Securities Act 2009 (PPSA) and we are now finally starting to see the courts provide some guidance on practical issues secured parties have been faced with since its inception.

In SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities [2014] FCA 846, Justice Gleeson of the Federal Court rejected the Registrar’s argument for a narrower interpretation of the PPSA favouring a more practical application that will come as welcome relief to anybody dealing with the Personal Property Securities Register (PPSR).

Background

In this case, a secured party agreed to assign certain security interests that were registered on the PPSR to the assignees, SFS Projects Australia Pty Ltd and Rothschild Capital Pty Ltd.

Once the underlying documentation came into effect, the assignor was obligated under the assignment documentation to amend the PPSR in order to transfer the security interest to the assignees.

An officer of the assignor, in error, applied to amend the registration for the security interests to record that the security interests were released instead of amending the registrations to reflect the transfer of the secured interest from the assignor to the assignees. The application was registered and in effect the security interests were no longer effective.

The assignees applied to the Registrar of the PPSR under section 186 of the PPSA for the error to be corrected by having the security interest reinstated to the PPSR.

The Registrar contended that section 186 of the PPSR did not provide the legislative power to make such a correction.

As a result of the response by the Registrar, the assignees sought orders to compel the Registrar to restore the security interests.

Issue

The Registrar is granted the power, by virtue of section 186 of the PPSA, to restore registrations to the register “if it appears to the Registrar that the [registration] was incorrectly removed from the register” under the PPSA.

In this case the court had to decide whether section 186 of the PPSA applied in circumstances where the Registrar had rightly removed a registration in accordance with a financing change statement, but where the lodgement of the financing change statement itself was in error.

Judgement

The court decided that, contrary to the Registrar’s own view, the purpose of section 186 was to ensure registrations incorrectly removed, may be restored to the register.

The court’s view was that the PPSA is intended to benefit security holders by providing for the perfection of security interests in order to establish priority among other security holders.

Section 186 is plainly a remedial or beneficial provision, whereby if any ambiguity existed it should be resolved in favour of the intended beneficiaries which, in this case, were the assignees.

Specifically and importantly, as to section 186 of the PPSA, the court held that the word “incorrectly” does not require the identification of an error on the part of the Registrar in removing the data from the register.  What is required is that data has been removed from the register which should correctly be included in the register.

Lessons learnt

If you are having a security interest assigned to you on the PPSR as part of an assignment arrangement, always request the token number be made available to you at settlement to allow you to effect the assignment on the PPSR at settlement.

If you are assigning a security interest on the PPSR to an assignee, ensure you have sufficient protocols in place to stop errors occurring which could cause a security interest to be discharged rather than transferred.

Otherwise, the decision gives comfort that in circumstances of genuine error, the Registrar has the power to intervene and restore a registration to the register, which is good news for everyone.

It remains to be seen whether the Registrar will appeal the decision.