This week's TGIF considers the Federal Court
decision of National Australia Bank Ltd v Garrett 
FCA 714 in which the Court stepped in to invalidate and restrain an
improper registration on the PPSR
An undischarged bankrupt, and serial vexatious litigant,
registered a financing statement on the Personal Property
Securities Register (PPSR) claiming a security
interest over all the property of the Bank. The security interest
was said to arise from a charge granted by the Bank to secure an
undertaking as to damages provided by the Bank in an earlier
proceeding, even though the Bank was never required to provide
security in support of that undertaking.
The Bank served an amendment demand on the bankrupt requiring
him to submit a financing change statement to remove the
registration of the security interest from the PPSR. The bankrupt
refused and, instead, purported to appoint himself as the managing
controller of the Bank in respect of all of its property the
subject of the purported security interest.
The Bank brought an application seeking orders, amongst other
That the registration of the purported security interest be
removed from the PPSR;
For an injunction restraining the bankrupt from registering any
further financing statements on the PPSR in respect of any
purported security interests in the property of the Bank; and
For a declaration that the purported appointment of the trustee
as 'managing controller' of the Bank was invalid.
The bankrupt attempted to file, and in some cases did file, a
"plethora" of what he described as "interlocutory
applications", affidavits and submissions running to thousands
In making the orders sought by the Bank, Beach J held that apart
from the fact that the bankrupt had no standing to pursue any
claims in relation to the purported security interest (as any
right, if any, had vested in his trustee in bankruptcy):
Under the Personal Property Securities Act
(PPSA), a security interest is defined as being an
interest in personal property provided for by a transaction that
secures payment or performance of an obligation.
The word 'transaction' indicates that in relation to
security interests, the PPSA is concerned with consensual
The PPSA specifically excludes a lien, charge, or any other
interest in personal property, that is created, arises or is
provided for by operation of the general law. Accordingly, a
security interest based on obtaining equitable relief from a court
does not arise from any consensual transaction and is not a
security interest for the purposes of the PPSA.
For that reason, an undertaking as to damages cannot be a
security interest for the purposes of the PPSA and cannot be
The Court has jurisdiction to restrain a person from
registering a security interest in another person's personal
property where the first person is found to have no such security
The PPSA provides that a person must not apply to register a
financing statement unless they believe on reasonable grounds that
the person described as the secured party is, or will become, a
secured party in relation to the secured property.
This decision represents one of only a handful of occasions
where the Court has been asked to resolve a dispute as to the
validity of a PPSR registration. Even though the facts of the case
are at the extreme end of the spectrum, the decision demonstrates
the Court's willingness to step in and prevent abuses of the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Chambers Asia Pacific Awards 2016 Winner
Client Service Award
Employer of Choice for Gender Equality
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Solicitors should think carefully before disclosing sensitive information to experts in a letter of instruction.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).