Ryan and Registrar of Personal Property Securities

[2021] AATA 2348

Ryan and Registrar of Personal Property Securities [2021] AATA 2348 (15 July 2021)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2020/3241

Re:Mark Ryan

APPLICANT

AndRegistrar of Personal Property Securities

RESPONDENT

AndXanthea Pty Ltd ACN 159 994 297 (In Liquidation) (Company)

OTHER PARTY

DECISION

Tribunal:Senior Member Damien O'Donovan

Date:15 July 2021

Date of written reasons:        15 July 2021

Place:Canberra

The decision under review is affirmed.

................................[sgd]........................................

Senior Member Damien O'Donovan

Catchwords

PERSONAL PROPERTY SECURITIES REGISTER – register amendment – costs agreement – whether decision of Registrar not to remove the registration in accordance with the registration demand was the correct decision – decision affirmed

Legislation

Personal Properties Securities Act 2009 ss 10, 12, 178, 181.

REASONS FOR DECISION

Senior Member Damien O'Donovan

15 July 2021

1. The question to be determined in these proceedings is whether or not an amendment should be made to the Personal Property Securities Register to remove a registered security interest in the personal property of Mark Ryan.

   Background

2. On 15 March 2019 Mark Ryan (the applicant), entered into a costs agreement with Xanthea Pty Ltd which at that time traded as the law firm Charles Filgate Giles & Associates (the Other Party). The agreement related to the services to the costs payable for the conduct personal injury litigation in the ACT Supreme Court.

3. The agreement set out how legal costs for work performed would be charged.

4. Among other things, the costs agreement allowed the Other Party to register a security interest over the Applicant’s personal property under the Personal Properties Securities Act 2009 (PPSA).[1]

   [1] T-Documents, T10, folio 50.

5. The costs agreement provided:

   You expressly authorise Us to register a security interest pursuant to the Personal Properties Securities Act 2009 (Cth) against all and any of your personal property, presently or in the future held by you, including but not limited to any judgement or settlement obtained in these proceedings, or any other proceedings conducted on your behalf.

6. On 29 April 2019, the Other Party registered a security interest in the Applicant’s personal property on the Personal Property Securities Register (PPSR). The collateral details listed on the register are as follows:

   Commercial property,

   Intangible property – General Intangible; 

   All fruits of litigation including but not limited to substantive judgment and costs orders.

7. Although it is clear from the costs agreement that the Other Party was entitled to do this, the applicant may not have appreciated that this was going to occur.

8. In addition, it is now clear that the applicant believed that the costs agreement that he had entered into was on a no-win no-fee basis. The agreement itself hints at that being the case. In particular the contract states:

   These costs are at our normal rate of charge and do not account for the additional risk that we are carrying in providing You our services on a speculative basis, and the risk, that if You are not successful You may not be able to repay all of the moneys due to Us. [2]

   [2] T-Document s, T10, folio 42

9. This provision suggests that there may be a collateral agreement about when there could be enforcement of the costs agreement. If there was a collateral agreement, the evidence available to the Tribunal about the terms of that agreement is limited.

10. On 27 June 2019, the ACT Civil and Administrative Tribunal made orders recommending that Mr Giles, a director of the Other Party and principal solicitor, have his name removed from the roll of solicitors. Following that decision, on 20 June 2019, the Other Party’s legal practice was sold to London Chambers Pty Ltd trading as Legal on London.

11. On 10 July 2019 the applicant made a costs agreement with Legal on London in the same terms as the costs agreement with the Other Party.

12. Legal on London has since confirmed to the Applicant, in an email dated 3 July 2020, signed by a paralegal, that all of the applicant’s arrangements with lawyers were on a no-win no-fee basis. The email was in the following terms:

    I explicitly confirm that your matters, with Capital Lawyers, Charles Filgate Giles and Legal on London, have all been conducted on a ‘no-win-no-fee’ basis for professional fees…However, this is not the case for disbursements (medical reports, obtaining evidence, witness fees) and as per the costs agreement signed with both CFG and LOL you have to pay these.

13. Again, it is unclear where this nuanced understanding of the terms of the agreement as to costs comes from. It is certainly not clear from the terms of the costs agreement. However, for present purposes, it is not essential that the Tribunal determine where this understanding comes from.

14. Notwithstanding that the legal practice operated by the Other Party was sold to Legal on London in July 2019, it would appear that at least some of the debts owed to the company remained with the Other Party. On 16 September 2019 the Other Party issued an invoice to the applicant for legal costs and disbursements in the amount of $477,403.33. That invoice remains unpaid.

15. Understandably this invoice triggered concerns for the applicant. It appears that the only possible way he could pay a sum of money of that size was if he was successful in his litigation and a costs and damages award was made by the Supreme Court. Further, he believed that no sum was payable until the litigation in which he was involved had been successfully resolved.

16. Seemingly, as a way to challenge the sum demanded by the Other Party, the applicant took steps to have the registered security interest removed.

17. On 9 December 2019, the Applicant issued what is called an ‘amendment demand’ which can be issued under section 178 of the PPSA. The amendment demand was directed to the Other Party, demanding that it remove the registered interest from the PPSR. The amendment demand stated:

    1. Claimed fees are not agreed with at all and verge on fraud

    2. You are no longer acting for me in any legal capacity or otherwise

    3. You have been deregistrated (sic) as a Solicitor on professional grounds and at the time of first consulting me and there after You never were up front with these deregistration processes. By the Law Society.

    …

    In all of this, the registration is dodgy as I see it.

    Also possibly related I make this demand because no collateral described in the registration secures any obligation including fees (especially fraudulent ones) owed by a debtor to a secured party.

18. The Other Party did not comply with the demand, and the Applicant issued a document called an ‘amendment notice’ seeking removal of the registered interest by the Respondent pursuant to section 181. He did this on 20 December 2019.[3] On 22 January 2020, the Respondent notified the Other Party about the Applicant’s request to have the PPSR registration removed.[4] The Other Party disputed, with evidence of the costs agreement, the removal of the interest on the PPSR and on 9 April 2020 the Respondent made the decision not to remove the registered interest on the PPSR pursuant to s 181 of the PPSA. On 4 May 2020 the Respondent provided written reasons for making its decision, including the parties’ review rights.[5]

    [3] T-Documents, T5, folio 16-20.

    [4] T-Documents, T6, folio 21-31.

    [5] T-Documents, T33, folio 113-121.

19. On 12 May 2020 a liquidator was appointed to the Other Party.

20. On 27 May 2020 the Applicant applied to the Tribunal for review of the Respondent’s decision.

21. On 23 December 2020 the ACT Supreme Court handed down its decision in relation to the litigation to which the costs agreements related. The applicant was successful in 2 of his 5 claims which were pursued in the proceedings and was awarded damages in respect of those claims. However, the damages awards were small, and, as a consequence of more generous offers having been made earlier in the proceedings, indemnity costs orders made against the applicant are likely to dwarf any damages sum he will otherwise receive.

22. It is against this background that the applicant says the Tribunal should review the decision of the Respondent to refuse to register a financing change statement in accordance with the amendment demand. The applicant contends that the Tribunal should remove the Other Parties registration on the PPSR which relates to him. 

    Consideration

23. Not surprisingly, the applicant is very concerned about the way he has been treated by the Other Party and its pursuit of the debts which it says it is owed. From his perspective the issuing of the invoice for more than $477,000 was at the very least premature or at worst completely unjustified. However, it is not the Tribunal’s role to determine conclusively what rights the Other Party has against the applicant to recover such a sum or whether it has behaved appropriately. That is a question which can only be resolved if action is taken to recover the debt.

24. Further, it is not the task of the Tribunal to determine whether the initial registration was invalid. The applicant asserts that the registration was invalid because at the time of registration of a security interest in the ‘fruits of litigation’, the interest was not personal property. The argument as put is that the ‘fruits of litigation’ are a mere expectancy and not an interest in property which could be registered under the PPSA. While that is an interesting argument, it is not one that I can deal with. To have the original registration set aside as unlawful requires action in the Federal Court.

25. The only question which I can resolve is whether the decision of the respondent not to remove the registration in accordance with the registration demand was the correct decision when the statutory criteria are applied.

26. Section 181(1) of the PPSA requires that the decision-maker must act in accordance with an amendment demand unless it suspects on reasonable grounds that the amendment demanded by the applicant is not authorised.

27. Section 178(1) of the PPSA provides that an amendment to end effective registration of the security interest is authorised when the collateral described in the registration does not secure any obligation (including a payment) owed by a debtor to the secured party.

28. If I suspect on reasonable grounds that the collateral described in the registration does secure an obligation owed by the applicant to the Other Party, then I cannot act in accordance with the amendment demand. It is therefore necessary to consider what evidence there is that a security interest in personal property of the kind described in the registration was granted by the applicant, and if so, what evidence there is that the registered interest secures an obligation owed by the applicant.

29. In the present case, I am satisfied that the Other Party entered into a costs agreement with the applicant. That agreement expressly provided for the registering of a security interest in the applicant’s personal property to secure payment of legal costs owed under the agreement. It is common ground that the applicant has not paid for the services which the Other Party provided to him while it was engaged to perform those services, accordingly the secured obligation has not been discharged by payment.

30. The applicant however seeks to cast doubt on whether the obligation is currently owed in a number of ways.

31. First by claiming that the costs agreement is not valid or is unenforceable because:

    a.It was induced fraudulently because the terms of the agreement were misrepresented to him;

    b.He did not know who Xanthea Pty Ltd was;

    c.The secured party is now in liquidation;

    d.Mr Filgate Giles was subsequently disqualified from practising law; and/or

    e.The amounts claimed in the invoice were excessive.

32. Some of these arguments may have substance and might ultimately succeed if proceedings were commenced to recover costs said to be owed under the agreement. However, on the evidence available to the Tribunal, the applicant has not established that these arguments are so strong that I could not reasonably suspect that an obligation is owed by the applicant to the other party to pay for some of the costs associated with the conduct of his litigation and that the collateral described in the registration secures that obligation. Notwithstanding that the applicant has made many good arguments that raise question marks about the enforceability of the costs agreement, it remains the fact that:

    (a)a costs agreement was entered into;

    (b)that agreement provided for the taking of a security interest;

    (c)work was done under that agreement; and

    (d)no money has been paid to discharge any obligation under that agreement.

    Those undisputed facts are sufficient to provide reasonable grounds to suspect that an obligation is currently owed and the collateral described in the register secures that obligation.

33. The second way that the applicant seeks to cast doubt on whether any obligation is currently owed by him to the Other Party is by claiming that the costs agreement was on a no-win no-fee basis and as he didn’t win in the ACT Supreme Court nothing is owed. That argument does not fully reflect the known facts. For a start, the costs agreement is not self-evidently a no-win no-fee agreement. There may well be some kind of collateral arrangement with the applicant which renders the arrangement no-win no-fee but that is not the terms in which the costs agreement before me is expressed. It is possible it is a no-win no-fee arrangement but there are certainly grounds to suspect that it is not.

34. In any event, even if the costs agreement was an agreement that was made on a no-win no-fee basis, a win of sorts has now been obtained in the ACT Supreme Court in the sense that judgment has been entered in the applicant’s favour in two of his five proceedings. This may well trigger payment obligations. Further, even the applicant’s current lawyer accepts that obligations are owed to pay some disbursements under the various costs agreements which the applicant has entered into. Accordingly, I suspect that some kind of obligation is owed by the applicant under the costs agreement with the Other Party and this obligation is secured by the collateral identified on the register.

35. The applicant also claims that there were errors in the description of the collateral or classification of it which render the registration invalid or ineffective. As I have already said, any arguments concerning invalidity of the registration need to be ventilated elsewhere. The argument that the registration is ineffective in the sense that the security interest granted is so narrow that it does not provide any effective security for any amount that might be owed under the costs agreement, seems to have merit. However, it doesn’t lead to the conclusion that the registration should be removed. The collateral identified on the register is commercial property. Commercial property is defined in section 10 of the PPSA as personal property other than consumer property. This seems to limit the collateral specified to personal property held by the applicant in the course or furtherance of carrying on an enterprise to which an ABN has been allocated. As the applicant has indicated that he is currently on the Disability Support Pension it seems unlikely he has any property within that class. While this leads me to question whether the registration has any value to the Other Party, it does not provide a reason remove the registration.

36. In these circumstances the arguments advanced by the applicant about the validity or enforceability of the costs agreement and the utility of the collateral which is registered does not dislodge the suspicion I hold, based on the undisputed facts concerning the costs agreement, that there is an obligation currently owed by the applicant to the Other Party which is secured by the collateral described in the registration.

37. The decision under review is affirmed.

I certify that the preceding 37 (thirty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member Damien O’Donovan.

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Associate