An invalid registration on the PPSR can prove to be costly

Personal Property Securities v Brookfield – January 2014

The Registrar of the Personal Property Securities Register (PPSR) successfully imposed a hefty fine against a user that performed invalid registrations.

What happened?

The Registrar is responsible for managing the PPSR.   The PPSR after a careful investigation concluded that Brookfield (a person) had performed 2 invalid registrations.  They were invalid as the Secured Party (Brookfield) did not have reasonable grounds to expect that he would ever have a secured interest over the collateral that he had described.

Performing an invalid registration contravenes the Act.   This can lead to a fine of $11,100 each time.  So, $22,200 in total.  However, it may not end there.

Upon Brookfield being alerted to the invalid registrations, he was then instructed by the Registrar to immediately discharge them.  A maximum of 5 days’ is allowed to do this.   Brookfield did not comply with that request.

Not complying can lead to even greater penalties being imposed.   Depending upon the number of requests received and the time taken before the registrations are eventually discharged, Brookfield was potentially liable for an additional fine of $294,300.  So, a potential total fine all up of $316,500 for just 2 registrations!

Without any precedent for a matter such as this, the Court imposed a total fine of $30,000.  In addition, Brookfield can expect to be responsible for meeting sizeable Legal fees.   Should a similar scenario arise again in the future, then penalties will most likely increase now that this precedent is available.   The Courts patience will begin to be tested if more of these cases arise.  We can expect the penalties to increase as a deterrent to others.

Why is this unusual?

This is the first occasion that a civil penalty has been imposed for performing and then not discharging, an invalid registration.

The Takeaway

The Registrar has a duty to maintain the integrity of the Register and to protect the public from obvious abuses.  To date, the Registrar has been patient in managing examples of invalid registrations.   But maybe that attitude is now changing.  Certainly as a minimum, if you receive a notice to discharge, then you should either immediately comply with that request or seek advice from a PPSR specialist.  Significant penalties can accumulate from refusing to comply with a request to discharge.

TCS in conjunction with Equifax can assist clients to review and establish PPSR registrations through Andrew McLellan at EDX – please let us help you by emailing [email protected]