Reinstating a discharged PPSR security interest: Can it be done?
The Personal Property Security Register (PPSR) is the register upon which security interests may be registered to gain the benefit of the interest being “perfected” within the meaning of the Personal Property Security Act (2009) (PPSA).
The PPSR is maintained by the Registrar of the PPSR (Registrar). Registration is undertaken by a secured party registering their specific security interest on the PPSR in respect to the property of another party (the Grantor). Where the debt the subject of a security interest is paid or the security is otherwise released at the request of the secured party, the Registrar undertakes the process of discharging the security interest from the PPSR .
In a recent matter ERA Legal’s clients took an assignment of debt and registered securities over the property of a company from a lender in consideration of our clients discharging the debt owed by the company to the lender. The security interests were properly registered on the PPSR.
Unfortunately when it was paid by our client, the lender inadvertently discharged registrations of the security interests, rather than transferring them to our client as had been agreed.
The legislation and recent commentary
Pursuant to section 186 of the PPSA:
(1) The Registrar may (at his or her initiative) register a financing change statement to restore data to the register (including an entire registration) if it appears to the Registrar that the data was incorrectly removed from the register under this Act.
(2) If data is restored to the register under subsection(1), for the purposes of this Act the data is taken never to have been removed from the register.
Section 195(2) PPSA provides that:
The Registrar has power to do all things necessary or convenient to be done for or in connection with the performance of his or her functions.
In the decision of Scottish Pacific (BFS) Pty Ltd v Registrar of Personal Property Securities  FCA 1378 (ScottPac), Justice Farrell of the Federal Court of Australia gave some useful insight into the powers of the Registrar. In referring to the decision in SFS Projects Australia Pty Ltd v Registrar of Personal Property Securities  FCA 846 (SFS Projects), the Court outlined that the power to restore data to the PPSR is invoked when a registration is altered due to an error in a financing change statement lodged by a secured party as well as well as when data is incorrectly removed by the Registrar.
Following the decision in SFS Projects the Registrar published Practice Statement No.8 which provides that the purpose of the PPSR is to provide more certain, consistent, simpler and cheaper arrangements for personal property securities for the benefit of all parties. The Practice Statement says:
“…the Registrar recognises that a secured party who has incorrectly removed data from the PPSR, in relation to their security interest, is likely to have an interest in having the removal reversed if possible.
The Registrar will be likely to exercise the discretion in section 186 to restore the missing data if the likelihood of a third party having relied upon the state of the PPSR after the date it was removed, and thereby being disadvantaged by restoration, is very low”
In Scottish Pacific, Justice Farrell went on to say that the word “incorrectly” in section 186 of the PPSA:
“…does not require the identification of an error on the part of the Registrar in removing data from the register. What is required is that data has been removed from the register which ought correctly to be included in the register”
The purpose of section 186 of the PPSA is to ensure that data that has been removed incorrectly can be restored. After submissions, the Registrar agreed to reinstatement of the registration. The process was much cheaper and quicker than obtaining Court orders and our clients’ priory received.
Take away points
Our clients were able to preserve their rights consistent with the decision in ScottPac and SFS Projects.
Despite the Registrar having wide discretion to re-instate discharged security interest, the costs of having to appeal an unfavourable decision can be avoided by ensuring you have proper procedures in place to ensure a registration is not inadvertently discharged. Equally, should an error occur, it is comforting to know an effective remedy is at hand.
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