To register a security interest on the Personal Property Securities Register (Register), there is no requirement to file the underlying agreement that creates the security interest.  Accordingly, the Personal Property Securities Registrar cannot determine whether or not a registration is justified simply on the face of the details inputted into the Register. This therefore opens the Register up to abuse by the lodgement of sham registrations.

If a person does not have grounds to lodge a security interest on the Register, the adversely effected party can make use of an administrative Amendment Demand Process. This process can be used whether or not the registration was an inadvertent mistake or a deliberate decision to register a sham financing statement. If the Amendment Demand Process does not result in the desired outcome for an effected party, they may then apply to court for assistance.

The case of Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217 is the first instance of an Australian court intervening to prevent the registration of sham financial statements. In this case, notwithstanding the applicants’ demands that the defendants remove the registrations, the defendants refused to do so and informed the applicants that if the registrations were removed, they would simply lodge new financing statements on the Register. The Supreme Court held that the defendants were not entitled to register a security interest over the applicants’ personal property as they did not have a registrable security interest.

Interestingly, the court then relied on its legislative power under the Supreme Court Act (1986) (Vic) to grant an injunction preventing the defendants from registering further security interests in relation to the applicants’ property. Costs were also ordered against the defendants, making it an expensive process for them. 

This case serves as a warning that, while it might be tempting to register an interest “just in case”, there can be consequences for doing so if there are, in fact, no grounds for registration. In considering whether there are grounds for registration, the parties must consider whether the transaction is consensual and whether it secures the payment or performance of an obligation.

If you believe you are the victim of sham registrations, or if you require assistance in determining whether you have a registrable security interest, please contact:

Joanne D’Andrea
Principal
Harwood Andrews
T: 03 5226 8567
E: jdandrea@harwoodandrews.com.au

Nicole Stornebrink
Lawyer
Harwood Andrews
T: 03 5225 5209
E: nstornebrink@harwoodandrews.com.au