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Navigating Priority Disputes under the PPSR: Pathways and considerations for Secured Parties
The Personal Property Securities Register (PPSR) serves as a vital framework for establishing and protecting interests in personal property in Australia. However, disputes regarding priorities under the PPSR can lead secured parties into complex administrative and judicial review processes. The resolution options available under the Personal Property Securities Act 2009 (PPS Act) often vary depending on practical and legal considerations.
This article provides an overview of the pathways for resolving priority disputes under the PPS Act and their key components and implications. It is important that anyone facing these disputes seeks independent legal advice to determine the most appropriate course of action.
Amendment Demands
Part 5.6 of the PPS Act establishes the rules by which a person with an interest in collateral described in a PPSR registration may apply to amend or remove that registration.
To commence an amendment demand dispute, the applicant must first serve a formal written demand (Amendment Demand) on the secured party and allow at least five (5) business days for the secured party to either contest or comply with the Amendment Demand. If the secured party contests the Amendment Demand, the applicant may escalate the matter pursuant to either the administrative or the judicial process.
The Administrative Process involves the applicant making an application to the Registrar of the PPSR setting out the grounds to either amend or remove a PPSR registration.
The Judicial Process requires the applicant to apply directly to a court for an order to enforce the Amendment Demand.
Each option presents its own set of benefits and disadvantages. Careful consideration should be given to the applicant’s circumstances including complexity of the issues, timeframes for resolving the dispute, and costs, before deciding which process is suitable.
Complexity
In most priority disputes, the appropriate course of action will depend on the complexity of the legal issues involved. For instance, the administrative process may be quicker and more cost-effective for a straightforward issue. For example, all moneys to the secured party have been paid and the secured party has failed to remove the registration. However, if the dispute involves complex legal questions such as whether an obligation is secured by the registration, the judicial process may be more appropriate to resolve those questions.
Under the Administrative process, the Registrar can amend or remove a PPSR registration if it is not satisfied that the secured party’s response, along with any other relevant information, justifies its retention. The case of Davidson v Registrar Personal Property Securities [2015] AATA 549 established the legal test for refusing an amendment demand is whether the Registrar has reasonable grounds ‘to suspect’ that the relevant secured obligation remains outstanding. This standard is less rigorous than the usual ‘balance of probabilities’ test applied in other proceedings. The Courts have further clarified that, to form a suspicion on reasonable grounds, the Registrar is not required to determine complex issues of fact or law.[1] The simple fact that there is a bona fide contest of fact or law as between the parties might be sufficient to raise a proper basis for suspicion that the amendment demand is not allowed.[2]
It is generally accepted that the low standard applicable in the administrative process will favour the secured party resisting an Amendment Demand. This is because the Registrar is unlikely to make a determination on contentious matters of fact or law which are often central to an applicant’s case. Although an favourable finding will leave the applicant with a right of review to the Administrative Review Tribunal, the Tribunal’s scope for determining complex legal issues is subject to the same standard and is therefore often unlikely to result in a different outcome.
Accordingly, while the administrative process offers a quicker and less costly avenue for resolving straightforward disputes, it may not be suitable for complex cases involving contested facts or legal questions. For disputes that require a deeper examination of complex issues, an applicant should therefore consider the judicial process.
Timeframes
The administrative process is a time efficient option for simple matters. More contentious matters will often involve an extended timeframe anywhere from 3 to 8 months to reach a decision. During this period, the Registrar may request multiple rounds of submissions from the parties. The complexity of the legal issues and the volume of supporting evidence can further extend the timeline, as the Registrar must carefully review submissions, loan and security documents, and other relevant materials in order to each a decision.
In situations where legal issues are unlikely to be addressed by the Registrar or the Tribunal due to complexity, the judicial process may offer a more efficient and comprehensive avenue, as it allows for the resolution of all issues, including those outside the scope of the PPS Act and scope of the administrative process.
It is important to note that the judicial process can also be time-consuming due to court scheduling, procedural requirements, and the need for additional hearings. However, where timely resolution is critical, the judicial process may be preferable particularly if the administrative process may simply delay the inevitable need to escalate the matter to the judicial process following an administrative decision.
When deciding whether the administrative process is appropriate, the applicant should consider whether the complexity of the matter exceeds what can be addressed administratively. If matters involve complex legal issues, the judicial process may be a better option that ensures all relevant issues are considered by the Court.
Costs
The administrative process, including decisions by the Registrar and Administrative Review Tribunal, operates as a no-costs jurisdiction.[3] The Tribunal can only order costs if other legislation enables it to do so.[4] This means each party will generally be responsible for its own legal expenses, regardless of the outcome. This provides a cost-effective option for the applicant, particularly when the dispute concerns a straightforward amendment demand. This may also mean that there is no financial incentive for either party to engage in prolonged disputes, potentially leading to a quicker resolution.
The judicial process carries the risk of substantial legal costs. If the matter proceeds to court, the parties will typically be responsible for its own costs. Additionally, there remains a risk of a costs order being made in favour of the successful party. This can be a significant consideration in cases where the dispute is complex or the financial stakes are higher.
Conclusion
Navigating priority disputes under the PPSR requires a careful assessment of the relevant legal and practical factors. The administrative process offers a less expensive, but often less conclusive resolution, especially when complex legal issues are at stake. For disputes that involve substantial financial interests or significant legal intricacies, the judicial process may provide a thorough and definitive resolution, albeit at a higher cost and potentially longer timeframes.
Understanding these dynamics is crucial for any person navigating the PPSR landscape. Given the potential risks and complexities, seeking independent legal advice is critical to ensuring the most appropriate strategy is chosen for resolving priority disputes effectively.
Final remarks
The PPSR system is a powerful tool for protecting security interests, but it is not without its complexities, especially when disputes arise over priorities. Secured parties must navigate this system with care, balancing the need for timely resolution against the risks of drawn-out legal challenges. Whether engaging in the administrative or judicial process, it is critical to take a strategic approach that considers the nuances of each process and priorities of the relevant party.
[1] Wickham Hill Investment Pty Ltd v Ding [2019] NSWSC 631.
[2] Wickham Hill Investment Pty Ltd v Ding [2019] NSWSC 631 at [141].
[3] Section 191 of the Personal Property Securities Act 2009.
[4] Section 115 of the Administrative Review Tribunal Act 2024.