Supreme Court New South Wales Medium Neutral Citation: Macquarie Leasing Pty Ltd v DEQMO Pty Ltd [2014] NSWSC 1466 Hearing dates: 17 October 2014 Decision date: 17 October 2014 Jurisdiction: Equity Division - Duty List Before: Rein J Decision: See paras [30]-[32] Catchwords: EQUITY - Securities - Personal property securities - Personal property securities register - Competing security interests - Amendment demand pursuant to s 178 of the Personal Property Securities Act 2009 - Company cannot give security interest to itself - No authority to grant a security interest upon appointment of liquidator - No evidence of security agreement governing the asserted collateral in favour of the first defendant Legislation Cited: Personal Property Securities Act 2009 (Cth) Cases Cited: Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217 Toyota Finance New Zealand Ltd v Christie [2009] NZHC 827 Texts Cited: Harris and Mirzai, Annotated Personal Property Securities Act 2009 (Cth), Wolters Kluwer, 2nd Ed, 2014 Category: Principal judgment Parties: Macquarie Leasing Pty Ltd (Plaintiff) DEQMO Pty Ltd (First Defendant) Rodney Norman Culleton (Second Defendant) The Registrar of Personal Property Securities Register (Third Defendant) Representation: Counsel: E Glover (Plaintiff) Solicitors: Douros Jackson (Plaintiff) Mr R Culleton (self-represented) (First and Second Defendants) File Number(s): 2014/249407 EX TEMPORE Judgment 1On 5 August 2008 the plaintiff, Macquarie Leasing Pty Ltd ("Macquarie") for whom Ms Glover of counsel appears, entered into a chattel mortgage agreement with Elite Grains Pty Ltd ("Elite") for the purchase of a Kenworth Prime Mover ("the truck"). 2Macquarie registered its security interest in the truck on the Register of Company Charges. That registration was migrated to the Personal Property Securities Register ("the Register") now maintained under the Personal Property Securities Act 2009 (Cth) ("the PPSA"). 3On 6 March 2012 following Elite's default under the agreement Macquarie demanded return of the truck. 4Elite did not return the truck. Macquarie commenced proceedings against Elite and Rodney Culleton ("Mr Culleton"), the second defendant, who was the sole shareholder and director of Elite, and also a guarantor of the obligations of Elite. 5Macquarie obtained judgment against Elite, Mr Culleton and others in the Western Australia District Court. As against Elite it obtained a judgment of approximately $93,000 and as against Mr Culleton $94,000 approximately. 6On 14 November 2013 a liquidator was appointed to Elite. On 26 November the liquidator disclaimed the truck and any interest under the Security Agreement. (See p 63 of exhibit A and see also pp 61 to 62). 7On 24 June 2014 Macquarie repossessed the truck. 8On 7 August 2014 the truck was sold at or after a public auction held by Mannheim Fowles and arrangements were made for the purchaser to take possession of the truck on 8 August. 9On 7 August however, DEQMO Pty Ltd ("DEQMO") had registered a security interest in the truck on the Register. The sale to the purchaser effected on 7 August could not be completed because clear title could not be given due to the claimed interest by DEQMO on the Register. It is this which makes the present matter one of urgency and why the matter is in the Duty List today. 10Macquarie then discovered that its security interest in the truck had not been extended after 7 September 2012. It again registered its interest on the Register on 8 August 2014. 11On 11 August 2014 Macquarie served a demand on DEQMO pursuant to s 178 of the PPSA demanding that a finance change statement be registered to amend the registration by removing DEQMO's registration. DEQMO did not respond to that demand or take any steps to comply within the five day period provided by the legislation (s 179(1)(b)) or at all. 12Between 7 September 2012 and 24 June 2014 no security interest in the truck was registered on the Register. On 7 August 2014 when DEQMO registered its claimed security on the Register, the truck had been in the possession of Macquarie since 24 June 2014. 13The facts to which I have referred above are found in the affidavit of Mr Gregory Angus McCulloch of 25 August 2014, Exhibit GMII to his affidavit which has become Exhibit A, the affidavit of Mr Jonas Bartlett of 25 August 2014 and that of Mr Ryan Crow of 14 October 2014. 14By its summons filed 25 August 2014 Macquarie seeks: (1)A declaration that DEQMO's security interest be void and of no effect; (2)An order that the Registrar register a financing charge statement removing the registration of DEQMO's claimed security interest; (3)An order restraining DEQMO its servants and agents or Culleton or any other company in which he is involved from registering or causing to be registered any financing statement claiming interest; and (4)An order that DEQMO and Culleton pay Macquarie's costs of and incidental to the proceedings. 15Mr Culleton appears for himself and has sought leave to appear on behalf of DEQMO, he being its sole director and secretary and also a shareholder in the company. He has provided, (see Exh 1) a copy of the Australian Business Register confirming he is the public officer of DEQMO. He did not produce a resolution of a company authorising him to act on behalf of DEQMO nor an affidavit in accordance with Part 7 of the Rules (See Rule 7.2) but he was ordered to provide a copy of a resolution of DEQMO authorising him to appear on its behalf in the proceedings within seven days of today's date. 16Mr Culleton sought to rely on his affidavits of 15 July 2014, 16 July 2014, 23 September 2014 and 15 September 2014, all being affidavits filed by him in the Federal Court in connection with bankruptcy proceedings brought against him by Macquarie. 17No objection was taken by Ms Glover to the fact that these affidavits had not actually been filed in the current proceedings but she did object to them on the grounds of relevance. The affidavits upon which Mr Culleton sought to rely contained no material relevant to the present matter. It seems that Mr Culleton has complaints about the manner in which the truck was repossessed, as to the conduct of the auction and the price obtained and the unwillingness of Macquarie to accept his proposals for resolution. None of these matters, even if the evidence in the affidavits were in appropriate form, which they largely are not, are in issue in the proceedings before me. 18Mr Culleton's affidavits do not address the question of Macquarie's standing as a holder of security nor the claimed security interest of DEQMO in the truck. 19I received detailed and helpful written submissions from Ms Glover and written submissions from Mr Culleton. Much of the written submissions of Mr Culleton amounted to assertions of fact which were not relevant to the matter before me. However, in paragraph 21 of his submissions Mr Culleton said "The defendant submits to the court that DEQMO does have security interest over the equipment in question and has every right to hold a financial statement to the collateral" (sic). That submission was not, however, supported by any evidence. 20I also invited oral submissions from Ms Glover and Mr Culleton. 21I am satisfied that the court has jurisdiction to hear this matter - jurisdiction is conferred by section 207 of the PPSA. Section 182 specifically provides for a judicial process to consider the amendment demand and see also s 184(1)(e) and Regulation 5.10.2. 22On the evidence before me Macquarie has established that it has a security interest over the truck and that it had that interest as at the date Elite was placed in liquidation and at the date of the auction, even though Macquarie allowed the registration to lapse in 2012. By the terms of the charge granted by Elite to Macquarie (clause 20.2, p 17) judgment against Elite is held collaterally with the mortgage and was not to merge with the judgment. 23The next question for the court is whether DEQMO has a security interest in the truck and, secondly, if it does whether DEQMO's security interest has priority over Macquarie's interest or that there is at least a serious question to be tried that DEQMO's interest has priority over Macquarie's security: see Toyota Finance New Zealand Ltd v Christie [2009] NZHC 827 at [16] and Harris and Mirzai, Annotated Personal Property Securities Act 2009 (Cth), Wolters Kluwer, 2nd Ed, 2014, para 182.5.1-5.2. 24There are a number of reasons why DEQMO's claimed interest can be seen not to be a valid claim: (1)The claimed interest is one given by DEQMO to DEQMO. A person or company cannot give a security interest to itself: s 12 which defines security interest as "means an interest for personal property provided for by a transaction that in substance secures payment or performance of an obligation. (With regard to the former transaction or the identity or person who has title to the property)"; also subsection 3 which provides: (3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation: (a) the interest of a transferee under a transfer of an account or chattel paper; (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment; (c) the interest of a lessor or bailor of goods under a PPS lease. None of these requirements can be satisfied by a claimed interest by DEQMO given to itself. (2)There is no evidence before the court of any agreement by which Elite gave a charge to DEQMO. There is no evidence of any value having been given by DEQMO to Elite for a security interest nor how DEQMO might have any other interest in the truck. Once the liquidator was appointed Mr Culleton had no authority to act on behalf of Elite: see s 417A of the Corporations Act 2001 and he could not grant an interest to DEQMO on behalf of Elite. (3)Also for a security interest to be enforceable against a third party s 20 of the PPSA provides that either the secured party possesses or controls the collateral or there is a security agreement governing the collateral. Any agreement governing the collateral must be evidenced in writing and signed by the grantor. Again, there is no evidence of such an agreement. (4)Pursuant to the charge Elite could not encumber the truck or lease or transfer (see Clauses 6.4 and 6.5 at page 40 of Exhibit A, and also see pages 13 and 14 of the charge which indicate the powers given to Macquarie on default). 25In addition to the above not only has DEQMO not provided any evidence in support of its claim by filing evidence in these proceedings, it did not respond to the amendment demand given by Macquarie pursuant to 178 of the PPSA. 26The first reason, at [24](1), is, I think, sufficient on its own to support the relief sought in para (1) of the Summons. 27In relation to [24](2) I am of the view that the circumstances of the case, including the service of the amendment demand made it incumbent on DEQMO, if it wished to resist the order sought by the judicial process specified in s 182 of the PPSA, to establish the basis of its security interest, which it has wholly failed to do. Further, I draw the inference from DEQMO's failure to produce any evidence that it could not support the claim to security interest and I would decide in favour of Macquarie on that basis as well. 28On my conclusion I do not need to determine as a matter of law that Elite could not, even before appointment of the liquidator, grant an interest, although it does appear to me most unlikely it could given the terms of the charge. 29The second question identified in [23] above does not arise. 30Macquarie is entitled to the orders it seeks including the order that DEQMO and Mr Culleton be precluded from from seeking to register any further claim in the Register in respect of the truck. The possibility and appropriateness of such an order was discussed by Robson J in Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217 (14 May 2014) at [108]-[119], and I adopt, with respect, the approach taken by his Honour in that matter. 31I make a declaration in accordance with paragraph 1 of the Summons. I order the Registrar in accordance with paragraph 2 of the Summons. I make an order in accordance with paragraph 3 of the Summons. 32I also order that the defendants, DEQMO and Mr Culleton, are to pay the plaintiff's costs of and incidental to these proceedings as agreed or as assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 October 2014