On 11 October 2013, the Administrative Appeals Tribunal affirmed the refusal by the PPS Registrar to amend a registration:  Cirillo and Registrar of Personal Property Securities [2013] AATA 733.

While there has been significant speculation as to how the Courts will respond to applications to remove PPS registrations, this is the first Australian case on point. 

Background

Cirillo concerned the financing of a Holden Commodore (Vehicle).  Finance was advanced by GE Personal Finance, both through an initial loan and subsequent consolidation financing.

Both the original and subsequent financing was provided by GE before the commencement of the Personal Property Securities Act (PPSA).  Accordingly, GE’s interest was registered on the NSW Register of Encumbered Vehicles (Registration).  The Registration was properly migrated onto the Personal Property Securities Register (PPSR). 

On 24 December 2011, GE sold a collection of debts, including the Vehicle financing, to Lion House.  In March 2012, GE lodged a financing change statement transferring the Registration to Collection House and Lion Finance (Secured Parties) as the secured parties.

Attempted removal of Registration

In July 2012, the borrower sought to remove the Registration.  The grounds claimed were varied and included allegations regarding the validity of the loan agreement and its subsequent assignment, and regarding the Secured Parties’ calculation of the debt. 

The borrower utilised the process provided in the PPSA.  This included:

  1. Issue of an amendment demand by the borrower to the Secured Parties requiring the removal or amendment of the Registration to exclude the Vehicle on the grounds that the collateral did not secure any obligation to the Secured Parties.

  2. Issue of an amendment statement by the borrower to the Registrar on the grounds that the Secured Parties had failed to comply with the amendment demand.

  3. Issue of an amendment notice by the Registrar to the Secured Parties providing the opportunity to respond.

Predictably, the Secured Parties responded to the amendment notice served by the Registrar to the effect that the Registration was valid and should not be removed. 

Amendment demand not authorised

The Registrar was concerned that the borrower’s allegations were not borne out on the documentary material.  The Secured Parties had presented compelling evidence of the initial loan, the assignment, the repayments (and lack thereof) and the final amount owing.  Accordingly, the Registrar refused to remove or amend the Registration on the grounds that the amendment demand was not authorised under the PPSA. 

The Tribunal agreed with the Registrar’s decision, finding that the borrower continued to owe a debt, secured by the Vehicle, which debt had been lawfully sold to the Secured Parties and the Registration appropriately amended.  On this basis, the Tribunal agreed that the amendment demand was not authorised.

Salient reminders

Cirillo provides a salient reminder at to the importance of ensuring that:

  • security agreements are properly executed and stored, including amendments to those agreements;

  • PPS registrations are correct;

  • assignments of securities are properly documented and recorded on the PPSR;

  • proper use is made of the amendment demand procedure; and

  • regular searches are undertaken by businesses to confirm that they have agreed to the PPS registrations recorded against them.