The Purchaser wished to buy a business and prudently the solicitors for the Purchaser did a search of the Personal Property Securities Register ('PPSR') to ensure the Vendor was able to sell all of the business items without any relevant charge over them.
The search revealed that a Finance Company had registered a Security Interest on the PPSR over "all present and after acquired property" of the Vendor. That registration included the boat of the Vendor. That boat was the subject of a fixed charge by the Finance Company and had been in place prior to the PPSR commencing on Monday 30 January 2012.
The fixed charge was also registered with ASIC and at REVS. When the PPSR started, the fixed charge and REVS registration were migrated to the PPSR, but some changes occurred in the registration.
Even though the boat was not included in the sale of the business, the PPSR registration affected the sale. Without a release of the security interest relating to the boat, the Purchaser would not get a clear title to the business it wished to purchase. The Vendor became affected by this development, in addition to the Purchaser. The "add on" that the Finance Company had included for "all present and after acquired property" meant that the Vendor could not sell its other items unencumbered or free from any mortgage or charge.
The Finance Company had no authority to register the Security Interest in the way that it did. Whilst the Finance Company eventually changed the registration, the sale of the business was delayed by over a week.
Here is my take on the rights path enlivened by the PPSA in the above scenario.
- The Purchaser may give The Finance Company an Amendment Demand (See S.178)
- The Finance Company would be required to register a Financing Change Statement
- The Registrar may give the Secured Party an Amendment Notice of the amendment demanded (See s.180 (1) & (5))
- The Financing Change Statement will be registered after five (5) days of the Amendment Notice being given (See s.181)
- The Purchaser may apply to the Court for an Order in relation to an Amendment Demand after the end of five (5) business days after the day the demand is given to the Secured Party (See s.182)
- Any Seriously Misleading Defect in data relating to the registration of a Security Interest will cause a registration to be ineffective (See s.164 & s.165)
- The Finance Company may be liable to the Purchaser for any damages the Purchaser suffered as a result of the delay in the sale of the business due to the incorrect registration of the Security Interest.
Ross Bowler LLB