Pogana Pty Ltd and Registrar of Personal Property Securities
[2022] AATA 2441
•2 August 2022
Pogana Pty Ltd and Registrar of Personal Property Securities [2022] AATA 2441 (2 August 2022)
AppID:Pogana Pty Ltd and Registrar of Personal Property Securities
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2021/0650
Re:Pogana Pty Ltd
APPLICANT
AndRegistrar of Personal Property Securities
RESPONDENT
AndAlbert Katombe
OTHER PARTY
DECISION
Tribunal:Mrs J C Kelly, Senior Member
Date:2 August 2022
Place:Sydney
The reviewable decision is affirmed.
.
.......................................[sgd]................................
Mrs J C Kelly, Senior Member
CATCHWORDS
PERSONAL PROPERTY SECURITIES – amendment demand for a financing change statement to be registered to amend registration of security interest – whether there are reasonable grounds to suspect that the amendment was not authorised – application of s 32 of the Personal Property Securities Act 2009 (Cth) – whether the secured party expressly or impliedly authorised a disposal giving rise to the proceeds – whether the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest – decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s 37
Personal Property Securities Act 2009 (Cth) ss 32, 178, 180, 181
Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth)
CASES
Davidson and Registrar of Personal Property Securities [2015] AATA 549
Gibson v Stockco Ltd [2010] NZHC 2398
Wickham Hill Investment Pty Ltd v Ding [2019] NSWSC 631
SECONDARY MATERIALS
Explanatory Memorandum, Personal Property Securities (Corporations and Other Amendments) Bill 2010 (Cth)
REASONS FOR DECISION
Mrs J C Kelly, Senior Member
2 August 2022
The reviewable decision
The Applicant, Pogana Pty Ltd, seeks to have set aside the decision made by the Registrar of Personal Property Securities (the Respondent) on 18 January 2021 to remove Registration number 201806150043526 from the Personal Property Securities Register (PPSR) (the reviewable decision). The Applicant was the secured party under that registration. The reviewable decision was made pursuant to s 181(1) of the Personal Property Securities Act 2009 (Cth) (the PPSA).
The proceedings before the Tribunal
The oral evidence of the witnesses was given on 1 December 2021 and the matter adjourned for oral submissions which were made on 17 January 2022 when the Other Party raised the application of s 32 of the PPSA for the first time which resulted in written submissions being provided by the parties after the hearing.
Background
The following facts are not in dispute.
On 23 May 2018, the Applicant entered into a Deed of Loan in which it agreed to loan Pro Pump Concrete Pumping NSW Pty Ltd (the Grantor) $200,000 to enable it to purchase a concrete pump. Mr Dogmehsaz was the guarantor of the loan. He was the sole director and secretary of the Grantor which was deregistered on 2 September 2019. Mr Khamsi was the “Lender’s Authorised Representative”.
The term of the loan was one year. The Grantor was to pay the interest by monthly instalments. If paid on the due dates, the Applicant would accept a 12% rate of interest. Otherwise, an interest rate of 24% applied.
The Deed of Loan contained a clause in which the Grantor granted a security interest in specified personal property as security for the obligation to repay the loan. Clause 11.2.1 states:
The [Grantor] acknowledges and agrees that this Deed provides the [Lender] a right to register a Security Interest in both the Collateral Security and in all present and after acquired property, by way of a charge over any personal property owned by the [Grantor].’
‘Collateral Security’ was defined by detailed reference to the manufacturer, model, vehicle identification number (VIN) and number plate (the concrete pump).
On 24 and 25 May 2018, the Applicant paid into Mr Dogmehsaz’s bank account the sum of $100,000, a total of $200,000.
On 15 June 2018 the Deed of Loan was varied by a Deed of Variation, which substituted a Sermac 41m Concrete Pump mounted on a DAF CF85 motor vehicle with a specified VIN (the Collateral) as the Collateral Security in place of the concrete pump in the original Deed of Loan.
The Deed of Loan and Deed of Variation will collectively be referred to as the loan agreement.
On 15 June 2018, the Applicant made the Registration on the PPSR. The Registration was for a seven-year period and recorded the Applicant as the secured party in relation to a security interest in the Collateral. The Registration records the Grantor as the grantor and the collateral is the Collateral created by the loan agreement.
The registration did not include “all present and after acquired property” of the Grantor “by way of a charge over any personal property owned by the Borrower”.
On 6 August 2019, the Other Party, as purchaser, and the Grantor and Mr Dogmehsaz as the owners, entered into a written agreement for the Other Party to purchase the Collateral. That agreement did not refer to the Collateral being subject to any pre-existing security interest or PPSR registration.
On or about 19 September 2019 the sale agreement was completed. It is not in dispute that the Other Party paid the purchase monies.
It is not disputed by either the Applicant or the Other Party that the Registration was current on the PPSR and available for search at the time of Other Party’s purchase of the Collateral.
On a date in dispute, 5 or 10 November 2019, there was a meeting of the Applicant, Mr Dogmehsaz and his father (the father), and the Other Party about the Collateral at the Dural property where it was stored.
On 10 November 2019, Mr Khamsi sent a text message to the Other Party advising that he had released his security over the collateral online with the PPSR.
On 17 July 2020, the Other Party sent to the Applicant an amendment demand under s 178 of the PPSA.
On 24 July 2020, a response from the Applicant’s email account read:
Hi Albert
Biggest mistake I made is releasing the car to you he still owed me money plus 14 weeks of storage at $350 per week for parking the pump I gave him authority to release the pump
So I need you to cover the parking then I’m happy to release it again I don’t know where the hell he is I believe he’s gone back to Iran lots people looking for him
The decision-making process
On 29 July 2020, the Other Party issued an amendment demand to the Applicant demanding that it remove the Registration from the PPSR. When the Applicant did not comply with the demand, the Other Party issued an amendment statement to the Respondent (in accordance with s 180(3) of the PPSA) seeking removal of the Registration by the Respondent under s 181 on 3 November 2020.
Following receipt of the Other Party’s amendment statement, the Respondent issued to the Applicant an amendment notice under s 180(1) of the PPSA on 4 November 2020.
The amendment notice referred to the Other Party’s amendment demand and requested a response in writing before the end of 12 November 2020, including evidence of the security interest and that a debt or obligation was still owing. The notice also informed the Applicant that the Respondent would consider its response and remove the registration unless it suspected on reasonable grounds that the amendment was not authorised.
On 9 November 2020 the Respondent sent a further email to the Applicant following up on the amendment notice as no response had been received. It reiterated that if no response was received by 12 November 2020, a decision would be made based on information available, which may result in a removal of the Registration.
In response, on 9 November 2020 the Applicant sent an email to the Respondent stating: “The money is still owed to me And I’m not removing till fully paid”. No attachments or other documentation accompanied that email. The Respondent replied on the same day, again requesting evidence to support the Applicant’s registration by 12 November 2020.
As no further reply was received, on 13 November 2020 the Respondent sent a follow up email to the Applicant requesting evidence to support the registration, and sought a response by 23 November 2020, indicating that no further time to reply would be provided. From that date, up until the making of the decision by the Respondent on 18 January 2021, no further response of any kind was received from the Applicant.
The PPSA requires that in reaching a decision under s 181(1), the decision maker must have regard to the secured party’s response, if any, to the amendment notice (s 181(4)). No supporting documentary evidence was provided by the Applicant until after the reviewable decision was made.
The Applicant’s unsubstantiated claim to be owed money did not cause the Respondent to suspect on reasonable grounds that the Applicant had been granted a security interest in the Collateral to support the Registration. Accordingly, applying the test in s 181(1), the Respondent was bound to act in accordance with the Other Party’s amendment demand and removed the Registration from the PPSR on 18 January 2021.
In June 2021, police seized the Collateral.
The law
Part 5.6 of the PPSA deals with amendment demands. Section 178 sets out how a person with an interest in collateral described in a registration with respect to a security interest is to give a demand to the secured party for a financing change statement to be registered to amend the registration. It sets out when amendment is authorised and what amendment is authorised. In this case the question is whether the Collateral secures any obligation owed by the Grantor to the Applicant. If it does, the amendment is not authorised. If it does not, the amendment is authorised.
Section 180 sets out the administrative process for giving an amendment notice to the secured party.
Section 181 provides for the registration of amendments. The reviewable decision was made pursuant to s 181(1) of the PPSA which provides:
If an amendment notice is given to a secured party under section 180, after the end of the period covered by subsection (3), the Registrar must (at his or her initiative) register a financing change statement amending the registration (including an amendment to remove the registration) in accordance with the amendment demand, unless the Registrar suspects on reasonable grounds that the amendment is not authorised under section 178.
In Davidson and Registrar of Personal Property Securities [2015] AATA 549, after considering several authorities, Deputy President Forgie concluded, at [60]:
The procedure set out in s 178 followed by the administrative process set out in ss 180 and 181 enables a person who has an interest in personal property that is the subject of a registered security interest to demand rectification of the Register. Parliament has not imposed an onus on the person seeking rectification to establish that payment has been made or the obligation performed. It has not left the matter to be decided on the balance of probabilities. Instead, it has weighted the scales in favour of rectification as sought by the person who gave the secured party the amendment notice under s 180. That weighting, however, can be overcome not by the secured party’s having to establish on the balance of probabilities that the amendment is not authorised but by there being material that leads the Registrar, and this Tribunal in turn, to suspect on reasonable grounds that the amendment is not authorised by s 178. Suspicion on reasonable grounds is a less rigorous standard than satisfaction on the balance of probabilities. The weighting can be contrasted with that in s 182, which sets out the judicial process for considering an amendment demand. On an application to it, a court must consider whether the amendment demanded is, or is not, authorised by s 178. It would do that on the balance of probabilities for no mention is made of any other standard of proof.
In Wickham Hill Investment Pty Ltd v Ding [2019] NSWSC 631, Parker J said:
In deciding whether to register a financing change statement the Registrar is required to consider any response from the secured party to the amendment notice and any other relevant information. But the Registrar has no duty to resolve factual disputes or complex issues of law (and no real means of doing so); …
Clearly the Act gives the Registrar the power (and the duty) to consider amendment demands. But the Registrar is not necessarily concerned to enquire into whether the amendment demand is in fact justified. … (Emphasis added.)[1]
[1] At [140]-[141].
The application of s 32 of the PPSA arises for consideration in this case because of a submission made by the Other Party. Section 32 is found in Part 2.4 of the PPSA. Chapter 2 is titled: General Rules relating to security interests and personal property. Part 2.4 contains rules about when attachment and perfection of security interests occurs. Section 31 defines “proceeds”. Subsection 32(1) provides:
Subject to this Act, if collateral gives rise to proceeds (by being dealt with or otherwise), the security interest:
(a) continues in the collateral, unless:
(i) the secured party expressly or impliedly authorised a disposal giving rise to the proceeds; or
(ii) the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest; and
(b) attaches to the proceeds, unless the security agreement provides otherwise.
The issues
The ultimate question the Tribunal must answer is whether it suspects, on reasonable grounds, that the relevant secured obligation is still outstanding. A preliminary issue arises from the submission of the Other Party that the loan of $200,000 was made by the Applicant to Mr Dogmehsaz personally.
The issues are:
(a)Did the Applicant lend the $200,000 to the Grantor or to Mr Dogmehsaz personally? If the latter, no further consideration is necessary.
(b)Did the Applicant expressly or impliedly authorise the sale (disposal) of the Collateral to the Other Party in accordance with s 32(1)(a)(i) of the PPSA?
(c)Did the Applicant expressly or impliedly agree that the sale would extinguish the security interest pursuant to s 32(1)(a)(ii) of the PPSA?
(d)Did the security interest remain attached to the Collateral when it was purchased by the Other Party?
The evidence
The evidence before the Tribunal included the documents provided by the Respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth), and written and oral evidence from Mr Khamsi, the sole director of the Applicant, Mr Katombe, the Other Party, and Ms Garcea, a friend of the Other Party. It is necessary to set out the evidence in detail.
Mr Khamsi’s evidence
Mr Khamsi gave the following evidence in his affidavit.
He became friends with Mr Dogmehsaz’s father (the father) in about 2003 and had been friends for about 15 years when in May 2018 the father asked if Mr Khamsi would be prepared to set up Mr Dogmehsaz in business by lending him money to purchase a concrete pumping truck.
Despite the loan agreement saying otherwise, Mr Khamsi stated that he had a verbal agreement with Mr Dogmehsaz that he would not make monthly payments but would pay all that was owing on 23 May 2019.
When the Grantor/Mr Dogmehsaz had not repaid him, they agreed that Mr Dogmehsaz surrender the Collateral to Mr Khamsi, they would sell it, and Mr Khamsi would receive the proceeds of sale. By about late July 2019, Mr Khamsi had possession of the Collateral and was storing it in a yard of an acquaintance which was next to a yard he owned in Dural.
Mr Khamsi claimed that Mr Dogmehsaz advertised the Collateral under his direction and found the Other Party as a prospective buyer. Mr Dogmehsaz assured him that if Mr Khamsi let him handle the sale, Mr Khamsi would at least get back his capital.
After two weeks he asked Mr Dogmehsaz if the sale had been completed. Mr Dogmehsaz said that the Other Party had paid only a small deposit. Mr Khamsi demanded to see and was sent a copy of the sale contract between Mr Dogmehsaz and the Other Party. Mr Khamsi called the lawyer whose details appeared on the contract because Mr Dogmehsaz insisted that the Other Party had not paid him. The lawyer advised Mr Khamsi that the transaction had been completed.
Mr Khamsi had numerous conversations with Mr Dogmehsaz and the father asking for his money. In October 2019, Mr Dogmehsaz admitted that he had been paid by the Other Party and had given the money to someone else to whom Mr Dogmehsaz owed money. Mr Khamsi told Mr Dogmehsaz and his father that the Other Party would be likely to report this to police as Mr Dogmehsaz had committed fraud. The father begged Mr Khamsi not to go the police and said that he would immediately arrange for his lawyer to transfer to him a property in Iran which Mr Khamsi knew and was happy with that as settlement of Mr Dogmehsaz’s debt.
Mr Khamsi recalled first meeting the Other Party at a convivial meeting at a café in Castle Hill in about October 2019 where Mr Dogmehsaz introduced him “as the buyer of the truck”.
… as much as I wanted to talk to Albert and [Mr Dogmeshaz] about the truck and my money I decided against it, but Albert gave me his phone number. Albert wanted input about dual occupancy buildings as he knew I was a builder.
Mr Khamsi believed that Mr Dogmehsaz had told the Other Party about the unit transfer because the Other Party started messaging Mr Khamsi about the transaction from 26 October 2019. He referred to screen shots of messages that had been exchanged with the Other Party on 27 and 28 October. The Other Party’s first request was “Can you update me news? About this truck?”. The requests on 28 October did not specifically refer to the truck but requested an “update” and “news”. On 28 October 2019, Mr Khamsi replied: “I’m still awaiting I believe it was public holiday in Iran yesterday”.
On 3 November 2019, the Other Party sent a message that had had heard nothing from Mr Dogmehsaz who was not replying to his messages and his patience had run out. In a reply on the same day, Mr Khamsi wrote that he was meeting the father “tomorrow afternoon”.
On 4 November 2019 Mr Khamsi met the father who insisted that the unit transfer would happen on 5 November 2019. Mr Khamsi referred to a text message which he claimed he sent on 5 November 2019, in reply to a message from the Other Party who asked how the meeting was “yesterday”. Mr Khamsi replied:
Morning we’re waiting for my lawyer to write the. Agreement I met with him to extend my disappointment with his son and what’s done as soon anything worth telling happen
I’ll let you know
By the way the proposal what happened
He claimed that he was referring to his lawyer in Iran who was going to confirm the transaction and explained that a full stop should have appeared after the word “agreement”.
On 9 November 2019 Mr Khamsi messaged the Other Party:
The [sic] have the spare key to give you and open the gate at 1:0 for you good luck and I hope I get my money too.
Thank you [Mr Khamsi]
Mr Khamsi claimed that he had agreed to the Other Party taking delivery of the Collateral on 10 November 2019 provided that Mr Khamsi had received title to the unit in Iran. On 9 November 2019, he was doubting whether that would happen over the weekend. Because he knew Mr Dogmehsaz had a key to the truck, he had instructed his acquaintance to lock the gate to the yard and not to let anyone take the truck without his express authority.
Mr Khamsi “clarified” the message he sent to the Other Party on 9 November 2019, saying that he knew that they would not unlock the gate unless he expressly authorised them to, ‘hence my sarcastic “good luck”’.
He gave the following account of a meeting on 10 November 2019 at the Dural property where the Collateral was stored.
The Other Party messaged him at 2:40 pm: “We are at Dural where are the release papers you Said you were going to give me today”. Shortly after that, Mr Khamsi received a phone call from his friend’s son at the Dural property telling him that people were there to take away the Collateral. Mr Khamsi immediately went there and arrived at the same time as the police. Mr Dogmehsaz, his father, the Other Party and a person called Ramona (Ms Garcea) were there. He later found out that she was a friend of the Other Party. The police talked to everyone. They talked to him last. After he told the police that he had a security interest in the truck, the police advised everyone that it was a civil matter, and they did not want to or could not get involved and left.
The father was very distressed as he was sure that the Other Party would report his son’s actions as fraud and told Mr Khamsi that the police suggested that Mr Dogmehsaz may go to gaol. Mr Khamsi initially refused to release the Collateral to the Other Party but with the Other Party, Mr Dogmehsaz and the father imploring him to release it, he finally agreed to release it to Mr Dogmehsaz on the following “strict” terms. Knowing that he had a registered interest over the Collateral on the PPSR, Mr Khamsi let Mr Dogmehsaz take the Collateral on the basis that Mr Khamsi would not remove the PPSR registration until he was paid, that Mr Dogmeshaz take it to a local repairer and call Mr Khamsi immediately once it had been delivered to tell him where it was, and that the father would pay him the full amount within seven days.
Mr Khamsi trusted the father because he knew he had assets in Australia and overseas and he had been a man of his word and a good friend for 15 years.
Mr Khamsi wrote in his affidavit that he had not seen Mr Dogmehsaz or the father since then and as far as he knows they went to Iran. He did not know where the Collateral was until 24 November 2020. He denied having ever told the Other Party that he had received any money or property in respect of the loan or having received any.
Mr Khamsi explained his email to the Other Party of 24 July 2020. He said that if the Other Party had paid the storage costs and Mr Dogmehsaz paid the money he owed, he would have removed the PPSR registration.
The Other Party’s evidence
The Other Party resides overseas. His first language is French and English is his second language in which he described himself to be “reasonably proficient” but preferred to give his evidence in French with the assistance of an interpreter. In his affidavit sworn on 23 July 2021 (the first affidavit), he said he was in Australia around the end of July 2019 when he saw the advertisement for the Collateral, contacted Mr Dogmehsaz by telephone and arranged to meet him and inspect the Collateral in Dural the following day. Mr Dogmehsaz advised the Other party that he would have to ring his partner to see if the price was acceptable, which he did. Following the telephone call, the purchase price of $215,000 plus GST was agreed. The Other Party left Australia on 28 July 2019 and returned around the end of September 2019. In his second affidavit he said that he left again on 10 November 2019.
The Other Party claimed that he instructed the solicitor acting on his behalf that he would pay the purchase monies into the trust account and not directly to the Grantor’s bank account and that he was not to release any monies to the Grantor until Mr Dogmehsaz had provided him with the keys and registration papers and the solicitor had “made all checks”.
The trust account records of the Other Party’s solicitor for “the client” Mr Dogmehsaz and “Matter” “28 – Pro Pump Concrete Plumbing Pty Ltd” during August 2019 showed a deposit on 12 August 2019 of $212,000 from the Other Party for settlement sum for purchase. Release or payment of those funds to Mr Dogmehsaz were made on 15 August 2019 ($100,000), 19 August 2019 ($90,000), 23 August 2019 ($15,000) and 26 August 2019 ($4,700).
On 19 August 2019, the Other Party received an email from the solicitor. It stated that the GST funds had not been received and attached copies of the registration papers. Contrary to the Other Party’s claim, it did not say that the solicitor was in possession of the registration papers or had a key to the Collateral.
Mr Khamsi and the Other Party communicated using WhatsApp and SMS. All quotations from that correspondence are accurate, reflecting errors in the original messages.
On 22 August 2019, Mr Khamsi sent the Other Party a WhatsApp message:
Hi my name is [Mr Khamsi] and my company has financed the pump you’re purchasing from [Mr Dogmeshaz]
I believe you’re concern on refunds on GST paid check with any accountant as soon as to take the pump outside the AU you can get the GST
However if you’ve changed your mind please let’s us know as I have a buyer myself so your earliest reply is essential thanks
That was the first time Mr Khamsi had contacted the Other Party who did not know who he was. In his first affidavit, the Other Party said that all written communications with Mr Khamsi were on WhatsApp. In his second affidavit, he explained that there also SMS messages between the two and annexed “the complete thread” of those messages from 28 October 2019 to 10 November 2019. The Other Party did this after rereading Mr Khamsi’s affidavit which had annexed only some of the SMS messages. They are included in the following chronological account where relevant.
The solicitor’s trust account records a deposit from the Other Party for the GST payment of $21,429.52 on 9 September 2019 and a withdrawal on the same day to Mr Dogmehsaz of $19,779.62 for payment of GST for Invoice.
On 27 September 2019 the Other Party returned to Sydney from overseas and attended his solicitor’s office with Ms Garcea. He was given the registration papers and a key for the Collateral. The Other Party asked where the second key for the Collateral was. The solicitor said that Mr Dogmehsaz had lost it and asked if he wanted to arrange a meeting with Mr Dogmehsaz, to which the Other Party agreed. In his second affidavit, the Other Party said that he had returned to Australia to take possession of the Collateral.
On 30 September 2019, the Other Party messaged Mr Khamsi that he had arrived in Sydney. Mr Khamsi replied: “Are you still interested in buying the pump”. The Other Party replied: “Do you have a Pump for sale”.
The Other Party was under the impression that Mr Khamsi was offering to sell him another truck.
Also on 30 September 2018, Mr Dogmehsaz attended the Other Party’s hotel in the Sydney CBD and drove him to Dural where the truck was stored and unlocked the padlock on the gate. The Other Party “turned over” the truck engine and asked Mr Dogmehsaz for a key to the front gate so he could arrange for it to be picked up. Mr Dogmehsaz said that he could not but would pick up the Other Party and drive him to Dural when the Other Party arranged to have the Collateral picked up.
On 15 October 2019, Mr Khamsi messaged the Other Party: “Are you buying this pump or not”.
On 17 October 2019 at 3.30 am, Mr Khamsi messaged the Other Party an address in Cherrybrook which the Other Party recalled was an address of a property Mr Khamsi was developing and seeing whether the Other Party was interested in investing.
At 7:34 am Mr Khamsi sent a message: “Your lawyer has not call me give me his number”. At 7:59 am, the Other Party sent the number. At 8:07 am he wrote: “Just to confirm the settlement sum if $215,000 plus GST”. At 8:08 am he sent the name, position, address, telephone number and email address of the solicitor. Underneath was written: “Friday 27 September 2019 at 6 pm”.
Also on 17 October 2019, the Other Party had arranged to meet Mr Dogmehsaz at the Dural property. When the Other Party arrived, Mr Dogmehsaz was not present but arrived after the Other Party telephoned him. While waiting for Mr Dogmehsaz, the Other Party telephoned Mr Khamsi and told him he was the one who had bought the truck from Mr Dogmehsaz. Mr Khamsi said that Mr Dogmehsaz owed him money, Mr Khamsi had the Collateral at his place and the Other Party was not allowed to enter the property.
When Mr Dogmehsaz arrived, the Other Party told him about the conversation with Mr Khamsi. After calling Mr Khamsi, Mr Dogmehsaz said to the Other Party “Yeah, [Mr Khamsi] says you can’t take the truck”. The Other Party replied that it was his truck, and they were going to see his solicitor “to sort this out”. They attended the solicitor’s office. The Other Party told the solicitor that Mr Dogmehsaz owed money to Mr Khamsi and that he could not take the truck until the money was paid. The solicitor checked with Mr Dogmehsaz that that was right and said that Mr Dogmehsaz had not told him. Mr Dogmehsaz said that the father and Mr Khamsi were good friends and the father was coming out to fix it with Mr Khamsi.
Immediately after the meeting, the Other Party called Mr Khamsi and asked him to send copies of his documents to the Other Party’s lawyers. Mr Khamsi agreed to do so and requested the details. The Other Party claims that is the reason for the message sent at 8:08 am set out above providing the lawyer’s details.
Mr Khamsi never sent any documentation to the Other Party’s lawyers. That evening, the Other Party undertook a PPSR search for the first time and found the Applicant’s registration.
At a meeting in the Sydney CBD the following week Mr Dogmehsaz told the Other Party that there would be no issues after his father arrived in Sydney but did not know the exact date of arrival.
On 24 October 2019 the Other Party met Mr Dogmehsaz at Dural for the Other Party to collect the Collateral. Mr Dogmehsaz said that he was unable to open the gate on Mr Khamsi’s instruction. The Other Party sent a message to Mr Khamsi at 2:36 am: “Hi [Mr Khamsi], I need you to Come here now the police coming right now we Will Brock padlock”.
At 2:54 am, Mr Khamsi replied: “That truck is in a private property and until I allow no one can take the truck ask police to call me you go see your lawyer he’s at fault by allowing you to pay without a release from my company who has security on the truck”.
At 3:36 am, Mr Khamsi asked the Other Party to message him what time he wanted to meet the next day. The Other Party said that the meeting was their first face to face meeting which occurred the following day at a coffee shop in Castle Hill. The meeting was arranged by Mr Dogmeshaz who was also present. Mr Khamsi told the Other Party that the father would sort everything out when he came and that they would come to an arrangement to cover the money Mr Khamsi was owed. Mr Dogmehsaz agreed. When Mr Dogmehsaz was absent, Mr Khamsi offered to release the papers for the Collateral if the Other Party agreed to invest $1,400,000 in one of his developments. He would hand over the discharge papers once the first instalment of $600,000 was paid. The Other Party did not agree.
On 27 October 2019, the Other Party messaged Mr Khamsi asking for an update about the Collateral. Mr Khamsi replied that he would call “today”.
On 28 October 2019, the Other Party messaged Mr Khamsi asking how he was. Mr Khamsi replied the next day: Hi Albert, I thought you’re going to call me last night with a proposal?” which the Other Party believed was referring to the investment discussed on 25 October 2019.
On 30 October 2019, there was the following exchange of messages. The Other Party wrote: “Hey [Mr Khamsi], good morning your Friend it a Real rober”. Mr Khamsi replied: “What happened”. Two unclear images follow, which the Other Party said were of houses Mr Khamsi was constructing. The next message from the Other Party thanked Mr Khamsi, and said “i got it” and then asked how he was going with Mr Dogmehsaz. Mr Khamsi replied: “He’s sending you invoice Tonight for gst”. The Other party replied: “I am talking about you and [the father]. Is ok or no”. Mr Khamsi replied that the father was arriving Saturday and Mr Khamsi’s lawyer had not sent him the proposal “yet”. The Other Party thanked him and wrote that he still had not received the “commotion invoice” from Mr Dogmehsaz. A minute later he wrote that they needed to make the appointment for “visit’.
The next day, 1 November 2019, Mr Khamsi sent an address to the Other Party and said “see you soon”. The Other Party explained that Mr Khamsi had previously sent him a floor plan of a building he was constructing in that suburb, a copy of which was annexed to the first affidavit. The Other Party did not meet Mr Khamsi because he was not interested in investing in his project.
On 2 November 2019, Mr Khamsi advised the Other Party that “[the father] arrives tomorrow not today”. The Other Party did not send to or receive from Mr Khamsi any further WhatsApp messages until 11 January 2021.
On 5 November 2019, the Other Party attended a police station in the Sydney CBD and reported his dispute with Mr Dogmehsaz and Mr Khamsi to Constable Watt.
On 5 November 2019, Mr Dogmehsaz had arranged a meeting with Mr Khamsi, the father and the Other Party at Dural. He sent the following messages to the Other Party:
·Hi [Other Party] I’ll call you my dad and [Mr Khamsi] are together
·I’m waiting for correct details to give for release.
·Hi [Other Party] all paper is signed finished and exchange [Mr Khamsi] … will finish and then call his lawyers for relwase [sic]
Shortly after receiving the messages, the Other Party spoke to Mr Dogmehsaz who advised that “the three of them would be at Dural at around 1”.
The Other Party travelled to Dural with Ms Garcea, arriving a little before 1 pm.
He had arranged for a tow truck to be present because he anticipated collecting the Collateral.
“They” arrived at Dural travelling in one car shortly after.
The Other Party had arranged for the police to attend. After the police arrived, they spoke to Mr Khamsi who said: “No, I won’t release the truck, and I wont allow him access to the property”.
The police officer advised the Other Party that it was a civil dispute and not a police matter.
Mr Dogmehsaz, the father and Mr Khamsi continued to talk in their native tongue. They are all of Iranian origin. At the end of the conversation, Mr Khamsi said to the Other Party: “We’ll sort this out overnight and you will be able to pick up the truck tomorrow”.
On 6 November 2019, Mr Dogmehsaz sent a message to the Other Party that “all paper is signed finished and exchange[d]”, and that Mr Khamsi would call his lawyers for release when he was finished doing something related to his boat.
The Other Party replied that “We will there this afternoon at 2:00 as discussed with the Constable Yesterday to collect my Pump truck” [emphasis in original]. The Other Party was unable to attend on that day and tried contacting Mr Dogmehsaz who did not answer the calls.
The SMS exchanges on 9 and 10 November 2019 between the Other Party and Mr Khamsi included the following:
·On 9 November the Other Party confirmed the appointment for the following day at 11:30 am. Mr Khamsi replied: “1 to 1:30 pm tomorrow he’s not there earlier”.
·On 10 November, Mr Khamsi wrote: “The[y] have the spare key to give you and open the gate at 1:0 for you good luck and I hope I get my money too”. The Other Party thanked Mr Khamsi. His next message was: “Hi [Mr Khamsi], We are at Dural where are the release papers you Said you were going to give me today.” Mr Khamsi replied: “It’s already been released online with PPSR”.
The Other Party and Ms Garcea drove to Dural on 10 November 2019. Two young men identified themselves as sons of the owner of the property and advised that “Mr Khamsi’s given me the key to the truck to give to you, and here’s the key to the padlock”. The Other Party requested the release papers, but they did not have them.
The Other Party arranged and paid $320 for storage on the property for one month because he was not ready to have the truck towed on that day. He had it picked up on 12 November 2019 and towed to an engineer’s premises.
On 19 November 2019 he left Sydney to return to his home.
In his second affidavit, the Other Party provided information about the possession of the Collateral from November 2019. He took possession of it on 13 November 2019 by arranging for it to be towed from the Dural property to the workshop of mechanical engineers in St Mary’s (CPE). The servicing took longer than the Other Party anticipated and by February 2020 he was in dispute with CPE over their fees. The dispute resulted in possession of the Collateral being given to a third party, and the involvement of police, who found it, have taken possession of it and have applied to the NSW District Court for a determination of who is entitled to possession. In those proceedings, the Applicant and the Other Party claim entitlement to possession of the Collateral.
On 11 January 2021, the Other Party sent a message to Mr Khamsi to the effect that he knew Mr Khamsi had taken his pump and was playing games and he would hear from him.
In his second affidavit, the Other Party provided information about his contact with Mr Dogmehsaz and the father in August 2021. On 11 August 2021, the Other Party telephoned the father in Iran from his home. He was able to find him because he knew the name of the manufacturing company the father owned in Tehran. He used the services of an Iranian interpreter. He explained “these proceedings” to the father and Mr Khamsi’s assertion that Mr Dogmehsaz still owed him money and that the charge over the Collateral had not been paid out. He asked the father to have Mr Dogmehsaz contact him. On the same day, Mr Dogmehsaz emailed him. He annexed copies of the emails exchanged on that day.
Annexed to the second affidavit were copies of:
·Mr Dogmehsaz’s bank statement showing a cash withdrawal of $200,000 on 15 November 2019.
·A copy of the telegraphic transfer details from Westpac Bank confirming the transfer of the $200,000 into Mr Khamsi’s account.
·Copies of correspondence between the lawyers for the Applicant and the Other Party in the course of these proceedings.
The correspondence between the lawyers was unproductive in terms of what the Other Party’s lawyer was trying to obtain. Mr Khamsi’s instructions in respect of the $200,000 deposit from Mr Dogmehsaz into his account on 15 November 2019 was that it did not relate to the Collateral.
Ms Garcea’s evidence
Ms Garcea corroborated the evidence of the Other Party about:
·the meeting with Mr Dogmehsaz in July 2019 when the purchase of the truck was arranged, including the telephone conversation between Mr Dogmehsaz and his “partner” and the agreement on the purchase price;
·the Other Party’s solicitor handing to the Other Party signed registration papers and a key for the Collateral and advising that Mr Dogmehsaz had said he had lost the second key and that they should arrange a meeting with Mr Dogmehsaz;
·a man called Frank (Mr Khamsi) contacting the Other Party and claiming to be owed money on the Collateral;
·a meeting she attended with the Other Party on 5 November 2019 at Dural with Mr Dogmehsaz, the father and Mr Khamsi. She reported the following conversation with the father. She said: “This is not ok, you need to fix this”. Mr Dogmeshaz interpreted this to the father, who in response tapped his chest and replied: “I fix. I fix.”Before she and the Other Party left, Mr Khamsi said to the Other Party words to the effect: “We’ll fix this matter overnight and you’ll be able to pick up the truck tomorrow”.
·going to Dural on 10 November 2019 with the Other Party to meet Mr Khamsi and Mr Dogmehsaz at 1 pm. Neither was present. The Other Party spoke to two young men who identified themselves at the sons of the owner of the property, one of whom said that Mr Khamsi had given them the key to the Collateral and to the padlock on the gate which he handed to the Other Party. The Other Party had not organised a tow truck but arranged and paid to store the truck at Dural. When asked, one of the men said that Mr Khamsi had not given them any documents or release papers.
On 18 November 2020, Ms Garcea forwarded to the Respondent a copy of email correspondence dated 12 November 2019 from Constable Watt to the Other Party, asking if he had got “possession of the truck” on Sunday. On the same day, the Other Party replied that:
· he had “managed to get [his] pump on Sunday”;
· the property where the pump was being held belonged to a neighbour and not to Mr Khamsi;
· Mr Khamsi and Mr Dogmehsaz did not show up on Sunday as they passed the keys onto the property owner;
· the Other Party would see the police before he departed Sydney “as this is measuring up to be a larger scam tha…” (words on right had side of email not visible).
(The Sunday before 12 November 2019 was 10 November 2019.)
On 14 January 2021, Ms Garcea sent an email to the Respondent seeking assistance. Relevantly, she wrote that Mr Khamsi had been in contact “with our mechanic, where our pump was stored, and is trying to get it from them, and bypassing us.”
On 15 January 2021, Ms Garcia advised the Respondent of “Police Event No … 5/11/19 Constable Watts”.
Mr Khamsi’s evidence in cross-examination
During cross-examination, Mr Khamsi gave the following evidence.
He emphasised that his dealings were with the father or based on the father’s guarantee and not with Mr Dogmehsaz. That was not the only money he had leant them. He had leant them $170,000 to buy a property and money to buy property in Dubai and they still owe him money in Iran. He has helped them buy three properties in Australia and he went to auction and bid for them. He had been a very good friend for 15 years and had been taken advantage of.
He received $200,000 on 15 November 2019 from the father not Mr Dogmehsaz. He agreed that the payment he made to Mr Dogmehsaz and the payment he received were from and to his same account. Mr Dogmehsaz transferred the $200,000 to him because the father closed his account in Australia because he owed money to the Tax Office. It related to a property transaction with the father and Mr Dogmehsaz.
When asked about his contact with Mr Dogmehsaz and his father since 10 November 2019, Mr Khamsi said that he has not had contact with them about this matter. He explained that he has seven or eight matters in hand. They still owe him money which they pay him monthly in Iran which pays for his mother’s expenses. She is now about 90 years old and lives in one of his properties in Iran. He employed two qualified nurses to look after her and her house. He cannot send money to Iran because of the current sanctions.
They are in contact on WhatsApp.
When asked if he had contact with the father about his failure to keep his promise, Mr Khamsi initially said “maybe”. He then said that the father had gone into depression since that “saga”, and it was not easy to talk directly to him and reagitate the matter. He had been in contact with Mr Dogmehsaz on WhatsApp but cannot believe what he writes.
Later, he conceded that he had been in contact with both the father and Mr Dogmehsaz since 10 November 2019 on WhatsApp and social media and other things.
Mr Khamsi said that transfer to him of the apartment in Tehran only occurred on paper in Farsi in Iran but the title was not transferred. He did not file a copy of the written agreement in these proceedings because the transfer did not happen. Mr Khamsi knew the apartment which used to be the father’s office. No other property has been transferred to him or an associated entity by the father.
The father used to be successful but now he is running away from that business because suppliers are after him.
Mr Khamsi was asked about the SMS he sent to the Other Party about “the” having a spare key to give him and opening the gate at 1 pm, wishing him good luck and expressing the hope that he got his money too. He denied that he was arranging for the Other Party to pick up the Collateral from Dural. He said that he was sarcastically telling him if he was not there, they have the keys to open it for the Other Party. He left the spare key for the Collateral so the people who looked at it could inspect the Collateral. He accepted that he had sent the SMS.
Mr Khamsi said that he did not remember sending the message advising the Other Party on 10 November 2019 that he had released the PPSR registration online, but if he did, it was just to get the Other Party off his back.
Mr Khamsi explained that he was in possession of the Collateral while it was at the Dural property. He controlled who gained access.
Mr Khamsi was not sure of the date of the meeting at Dural.
Consideration
Is Mr Khamsi’s evidence reliable?
When giving evidence, Mr Khamsi was combative and defensive. Many of his answers were unresponsive to the question asked. The messages he attached to his affidavit provided an incomplete record of communications with the Other Party and consequently were misleading.
Mr Khamsi claimed that the meeting was held at Dural on 10 November 2019 and because of pressure from the other parties, he gave Mr Dogmehsaz possession of the Collateral on strict terms. His evidence is contradicted by the messages he sent on 10 November 2019 and the evidence of the Other Party and Ms Garcea which I prefer. Their evidence is that Mr Khamsi, the Other Party, Ms Garcea, the father, Mr Dogmehsaz and the police attended the meeting at Dural on 5 November 2019 and Mr Khamsi gave the Other Party possession of the Collateral on 10 November 2019. He authorised the people on the Dural property to give the Other Party the second key to the Collateral and a key to the padlock on the property. The Other Party removed it from Dural on 13 November 2019. That the meeting occurred on 5 November 2019 is also supported by the messages from Mr Dogmehsaz to the Other Party on that day.
Mr Khamsi did not include in his evidence his 10 November 2019 response to the Other Party’s request for the release papers that “It’s already been released online with PPSR”. His evidence about that message was unsatisfactory. He did send it. He deliberately deceived the Other Party.
His explanation of his email of 24 July 2020 was unconvincing and self-serving. It did not accord with the clear words Mr Khamsi had used which only required the Other Party to pay the outstanding storage fees before he would release it “again”, which also shows that he knew that he had “released” it before, which may refer to giving the Other Party possession of the Collateral rather than releasing the security.
Mr Khamsi’s evidence is not reliable. I do not accept his uncorroborated evidence. Where there are inconsistencies between his evidence and the evidence of the Other Party, which is corroborated by Ms Garcea and contemporaneous evidence, I prefer the evidence of the Other Party.
Was the loan to Mr Dogmehsaz personally?
The Other Party submitted that the loan of $200,000 was made personally to Mr Dogmehsaz and not to the Grantor. The submission relied on Mr Khamsi’s payment into Mr Dogmehsaz’s account and on 15 November 2019 Mr Dogmehsaz’s payment from the same account into Mr Khamsi’s same account. A further piece of evidence faintly supporting that argument is that the contract for sale of the Collateral from the Grantor and Mr Dogmehsaz to the Other Party nominated the Grantor’s bank account for the deposit of purchase monies, which shows in August 2019, the Grantor had a bank account.
Both Mr Khamsi and Mr Dogmehsaz were the sole directors of the Applicant and Grantor respectively. The payment of the loan funds into Mr Dogmehsaz’s personal bank account may reflect a casual approach to running a business or inexperience. Mr Dogmehsaz’s business experience is not apparent from the evidence.
The loan agreement documents were for a loan for $200,000 from the Applicant to the Grantor. The evidence did not establish that the Applicant and/or Mr Khamsi entered into two $200,000 loans to the Grantor and/or to Mr Dogmehsaz. I do not accept that the loan was made personally to Mr Dogmehsaz.
Section 32 of the PPSA
The parties’ submissions
The Other Party submitted that pursuant to s 32 of the PSSA, the security was effectively extinguished by the sale of the Collateral to the Other Party because the Collateral gave rise to proceeds and the Applicant expressly or impliedly authorised the disposal or expressly or impliedly agreed that a dealing would extinguish the Applicant’s security interest.
The Respondent provided helpful submissions on the law but quite properly did not address the application of the law to the facts in this case. It observed that the questions raised by s 32 may involve issues of fact which cannot be resolved on the state of the evidence as it stands.
The Applicant agreed with the content of the Respondent’s submissions and embraced that latter observation. It urged the Tribunal to conclude this matter based on the evidence already before it, pointing to the fact that the Other Party did not raise the application of s 32 until oral submissions on 17 January 2022.
The Applicant also submitted that if further evidence was obtained, there was very little guidance in Australian law about the application of s 32. While there is guidance from overseas, the Tribunal would have the difficult task of comparing the overseas legislation with the PPSA and distinguishing or applying that case law.
The Applicant acknowledged that “he” authorised the advertising of the Collateral but submitted that the current evidence is inconclusive as to whether the Applicant expressly or impliedly authorised the disposal of the collateral. The Applicant asserted that any authorisation to dispose of the Collateral would be a matter solely between the Applicant and/or its sole director and the Grantor and/or its sole director.
Additionally or alternatively, the Applicant submitted that any sale the Applicant agreed to was conditional upon his loan to the Grantor being paid out in full. The Other Party was aware that Mr Khamsi would not release the security over the Collateral until he was paid by the father.
Consideration
The Applicant and the Other Party were content for the Tribunal to consider this issue on the existing state of the evidence. I do so. The parties did not distinguish between the acts and words of the Applicant and those of Mr Khamsi and nor do I.
The Applicant’s submission explicitly conceded that the sale of the Collateral by the Grantor and Mr Dogmehsaz to the Other Party was the “disposal” of the collateral and implicitly conceded that the disposal gave rise to “proceeds”.
I proceed on the basis of those concessions. The issues are whether the Applicant:
(a)expressly or impliedly authorised the disposal of the collateral; or
(b)expressly or impliedly agreed that a dealing would extinguish the Applicant’s security interest; or
(c)whether the sale was conditional upon the loan being paid out in full.
The Applicant relied upon the New Zealand and Canadian authorities cited by the Respondent that held for the purposes of the relevant analogous legislation, the word “authorised”, as appears in s 32(1)(a)(i) of the PPSA, requires that the authorisation must have taken place prior to the relevant dealing occurring.
White J, sitting in the High Court of New Zealand, referred to Canadian case law and academic writing to explain the purpose and application of New Zealand’s equivalent to s 32(1) in Gibson v Stockco Ltd [2010] NZHC 2398 (‘Gibson’) at [165]:
a) The purpose of the provision is to enact the common law principle that no one can give a better title than he or she has (nemo dat quod non habet): M Gedye, R C C Cumming QC & R J Wood Personal Property Securities in New Zealand and Garrow and Fenton’s Law of Personal Property in New Zealand at [12.8.2]. When collateral is “dealt with”, a security interest in it continues after the dealing. A perfected security interest persists in the collateral even though the debtor may no longer own the collateral. Subject to the other provisions of the Act, the security interest is not affected by a sale or other disposition and can be enforced against the buyer.
b) As s 45(1)(a) makes clear, however, the security interest will be lost if the secured party “expressly or impliedly authorised the dealing”.
c) In order to “authorise” a dealing, whether expressly or impliedly, the secured party would need to be aware of the specific “dealing” or, at least, previous dealings of the same type, and either have expressly authorised the dealing or by its conduct be taken as having done so impliedly: Royal Bank of Canada v Canadian Commercial Corp, National Livestock Credit Corp v Schultz and Motorworld Limited (In Liquidation) v Turners Auctions Ltd.
d) Whether in a particular case the secured party did “expressly or impliedly” authorise the dealing will be a question of fact in that case.
e) As the use of the word “authorised” in s 45(1)(a) indicates, the authorisation of the dealing needs to be given before the relevant dealing has taken place: Lanson v Saskatchewan Valley Credit Union Ltd at [9] and Royal Bank v Ag-Com Trading Inc.
f) In contrast to s 53 where the focus is on the dealings between the seller (debtor) and the purchaser, s 45 focuses on the arrangement between the security holder and the debtor: Ford Motor Credit Co of Canada v Centre Motors of Brampton Ltd at 525 and Motorworld Limited (In Liquidation) v Turners Auctions Limited at [39].
[Citations omitted.]
The analogous statutes in Canada and New Zealand do not include the term “disposition” but use the word “dealing”, as did the PPSA before the Personal Property Securities (Corporations and Other Amendments) Act2010 (Cth) enacted s 32 in its current form. In addition to the term “dealing”, the term “disposal” was introduced. The Explanatory Memorandum to the Personal Property Securities (Corporations and Other Amendments) Bill 2010 (Cth) said:
9.68 Subsection 32(1)(a) provides that a security interest will continue in collateral if the collateral gives rise to proceeds, unless the secured party authorised a dealing giving rise to proceeds. This currently means that any authorised dealing in collateral, even a short-term lease, would extinguish a security interest. This limits the extent to which a secured party would allow a grantor to deal with the property.
9.69 The item would provide that a dealing in collateral which gives rise to proceeds would only extinguish a security interest if the secured party has agreed that the dealing would extinguish the security interest. This change draws a distinction between a dealing with and a disposal of the collateral.
9.70 This amendment would minimise the risk that a secured party would have their security interests extinguished simply because they authorised a grantor to deal with the collateral and would therefore allow grantors more freedom to deal with the collateral. A disposal of collateral where there is express or implicit authorisation from the secured party would continue to be an exception to the rule that the security interest continues in the collateral.
I can discern in the language of s 32(1) no reason to adopt a different interpretation of “authorised” in s 32(1)(a)(i) of the PPSA from that adopted by White J in Gibson. As his Honour also said, whether in a particular case the secured party did “expressly or impliedly” authorise the dealing (the disposition in this case) is a question of fact.
The Applicant accepted that the agreement for the sale of the Collateral between the Other Party and the Grantor and Mr Dogmehsaz was entered into on 6 August 2019 but submitted that it had no knowledge of the “actual” sale until October 2019. The Applicant was aware that a small deposit ($5,000) had been paid, had repeatedly asked Mr Dogmehsaz what was happening with the sale but was “ignorant of the completed sale”.
The authorisation must be given prior to the disposal. The Applicant cannot have expressly or impliedly consent to a disposal of which he was unaware until well after the event.
Following is a summary of the relevant events.
Mr Khamsi had gained possession of the Collateral before he authorised Mr Dogmehsaz to advertise it for sale. He arranged for it to be stored on a property adjoining his at Dural. He controlled access to the Collateral until he authorised the Other Party to take possession of it on 10 November 2019.
At the meeting between the Other Party and Mr Dogmehsaz around the end of July 2019, Mr Dogmehsaz had to consult his “partner”, who I infer was Mr Khamsi, about the price. Following that conversation, the Other Party and Mr Dogmehsaz agreed on the price of $215,000 plus GST. The contract for sale was entered into on 6 August 2019 for that amount.
By 19 August 2019, the Other Party had deposited funds into the solicitor’s trust account except for the GST amount. On that day, the solicitor sent the Other Party an email about the outstanding GST.
On 22 August 2019, Mr Khamsi sent the Other Party the message stating that he had financed the Collateral “you’re purchasing from [Mr Dogmeshaz]” and addressing the Other Party’s concern about GST refunds. This demonstrates that Mr Khamsi knew who the purchaser was, was aware of details of the purchase process, and was seeking to facilitate completion of the purchase.
The Other Party deposited the GST amount into the solicitor’s trust account on 9 September 2019.
The messages from 15 to 17 October 2019, including those about the details of the Other Party’s solicitor, show that Mr Khamsi knew that the Other Party was the purchaser, was trying to get him to complete the sale, and lead to the conclusion that at that time Mr Khamsi obtained a copy of the contract for sale and learned that the sale had been completed.
Thereafter, consistent with knowing that the sale had been completed, and not receiving the proceeds of the sale, Mr Khamsi pursued Mr Dogmehsaz and the father for repayment of the debt to him. In order to maintain pressure on the father and Mr Dogmehsaz to repay the debt, Mr Khamsi maintained possession of the Collateral until he made the agreement with the father on 5 November 2019. He then permitted the Other Party to take possession of the Collateral.
I do not accept that because he was unaware that the sale had been completed, he had not authorised the disposal.
If the Applicant’s submission is that “disposal” in s 32(1)(a)(i) refers in this case to completion of the contract for sale of the Collateral, I do not accept it. “Authorised a disposal” refers to authorising the entering into of the contract for sale of the Collateral which Mr Khamsi’s conduct demonstrates he did.
Applying the reasoning of White J in Gibson, Mr Khamsi was aware of the specific “disposition” and while the evidence does not establish that he expressly authorised the disposition, I am satisfied that by his conduct he can be taken to have impliedly authorised the disposition. This provision is an exception to the principle that a perfected security interest persists in the collateral even though the debtor may no longer own the collateral.
I am satisfied that the Applicant impliedly authorised a disposal giving rise to proceeds pursuant to s 32(1)(a)(i) of the PPSA.
It follows from that finding that I do not suspect on reasonable grounds that the amendment is not authorised under s 178 of the PPSA. That would be sufficient to conclude these reasons, but given the lack of detailed consideration of s 32 of the Act, I consider alternative grounds the subject of submissions.
The next question is whether the Applicant expressly or impliedly agreed that a dealing would extinguish the Applicant’s security interest. The parties did not address the purpose and effect of the distinction between s 32(1)(a)(i) and (ii) or refer to any relevant authorities.
Doing the best I can, this provision is directed to an agreement with the debtor that, in this case, the sale of the Collateral would extinguish the Applicant’s security interest. The facts as outlined above do not support that conclusion. There was no question in the mind of the Grantor that the security interest continued in the Collateral after the sale, as shown by the father coming to Australia to deal with the outstanding debt and the Applicant retaining possession of the Collateral until the agreement was reached between the Applicant and the father. This contrasts with s 32(1)(a)(i) which is directed to the protection of a party to a disposal of the collateral, that is the purchaser in this case, which has been expressly or impliedly authorised by the secured party.
The next question is whether the sale of the Collateral to the Other Party agreed to by the Applicant was conditional upon him receiving the proceeds of the sale. I find that it was not, for the reasons that follow. There was no term to that effect in the contract for sale. Mr Khamsi never asserted that the Other Party had not purchased the Collateral according to the contract. Mr Khamsi exercised his right to retain possession of the Collateral as the secured party until he was satisfied that the outstanding debt from the Grantor had been satisfied. The evidence shows that Mr Khamsi authorised the Other Party to take possession of the Collateral on 10 November 2019 after coming to an agreement with the father after the meeting on 5 November 2019. He advised the Other Party that he had released the security “online” with PPSR, although he had not.
There was a separate agreement between Mr Khamsi and Mr Dogmehsaz that Mr Khamsi would receive the proceeds of the sale which would discharge the Grantor’s liability under the loan agreement, if he allowed Mr Dogmehsaz to manage the sale. When Mr Dogmehsaz broke that agreement, the father made a further agreement with the Applicant.
Alternative finding
In the event that I am wrong in respect of the s 32(1)(a)(i) finding, I have come to the same conclusion that I do not suspect on reasonable grounds that the amendment is not authorised under section 178 of the PPSA for the following reasons.
I do not accept that the father did not repay Mr Khamsi as they had agreed. To find for Mr Khamsi would require that I accept his uncorroborated evidence, which I do not because I have not found him to be a reliable witness for the reasons set out above.
According to the evidence there was an agreement between Mr Khamsi and the father drawn up by lawyers in Iran. Mr Khamsi seemed to suggest that one of the reasons for not providing documentation was because it was in Farsi, which is not a convincing reason. Another reason he gave was because the transfer of the apartment in Iran never happened. In any event, he provided no documentation.
On 15 November 2019, ten days after the meeting at Dural, Mr Dogmehsaz paid $200,000 into Mr Khamsi’s account, a sum equivalent to the capital Mr Khamsi had leant Mr Dogmehsaz. Mr Khamsi had agreed to Mr Dogmehsaz selling the Collateral provided he got his capital back and agreed to a selling price of $215,000, excluding GST. Mr Khamsi at no time sought the interest set out in the loan agreement although during the hearing he said that a sum in excess of $400,000 was owed. Mr Khamsi claimed that the payment of $200,000 related to a different property transaction between him and the father. His evidence about that transaction did not demonstrate that he was owed $200,000 exactly. I do not accept that evidence which was not corroborated.
Mr Khamsi had been friends with the father and had undertaken various business transactions with him in Australia and in Iran from 2003 and continued to do so at the time of the hearing of this matter. That the father came to Australia from Iran to rectify the problem caused by Mr Dogmehsaz reflects the importance to him of his relationship and reputation with Mr Khamsi. That conduct is inconsistent with him failing to satisfy the agreement he made with Mr Khamsi.
Mr Khamsi continued the business relationship with the father after the claimed non-repayment and relied on the father for income to pay for his mother’s support in Iran. His conduct is inconsistent with the father being untrustworthy, having a failing business, being difficult to contact because he suffers depression, and having taken advantage of Mr Khamsi and not repaying the debt relating to the Collateral.
There is no suggestion that Mr Khamsi made any effort to repossess the Collateral from 10 November 2019 until after the Other Party applied for a financing change statement to be registered to amend the registration. Mr Khamsi is an experienced businessman. As shown by his conduct in October and November 2019, he acts to enforce his legal rights. He had given possession of the Collateral to the Other Party. He made no inquiry about it. His conduct is not consistent with the father not complying with their agreement.
The father and/or Mr Dogmehsaz may owe Mr Khamsi for other business transactions. I do not accept that they owe him a debt relating to the Collateral.
Decision
The reviewable decision is affirmed.
I certify that the preceding 173 (one hundred and seventy-three) paragraphs are a true copy of the reasons for the decision herein of Mrs J C Kelly, Senior Member
...............................[sgd].........................................
Associate
Dated: 2 August 2022
Date(s) of hearing: 1 December 2021, 17 January 2022 Date final submissions received: 7 February 2022 Solicitors for the Applicant: P Relf, Auslegal Lawyers Solicitors for the Respondent: B May, Australian Government Solicitor Solicitors for the Other Party: P Marsh, Paul Marsh & Associates
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