Franchisee fails to amend the Personal Property Securities Register

In Denbride Pty Ltd and Registrar of Personal Property Securities [2015] AATA 938 an Eagle Boys Pizza franchisee failed in its attempt to remove the franchisor’s security from the Personal Property Securities Register after termination of the franchise. Denbride applied to the AAT to order the Registrar to amend the Personal Property Securities Register after the Registrar refused to register Denbride’s request to remove the security.

The franchise agreement secured obligations by the franchisee to pay a range of costs.

The obligations were secured through fixed and floating charges over Denbride’s assets registered on the Personal Property Securities Register.

Denbride did not exercise its option to renew the franchise and there was a dispute over the process by which Eagle Boys could value and buy back the business. That process incurred legal costs for which Denbride was liable.

The AAT presiding member said:

“I accept there is a valid franchise agreement. Denbride and Eagle Boys are parties to that agreement. It creates obligations, including the obligation to indemnify in clause 8 and obligations in relation to the option to purchase which are set out in clause 31. The performance of those obligations is explicitly secured by the fixed and floating charge, which is registered. Eagle Boys has incurred legal and other fees as a result of correspondence with the applicant in connection with the exercise of the option to purchase: the Franchise Agreement, on its face, provides the applicant will indemnify Eagle Boys against those costs. … It follows there are obligations, including debts, which have arisen under the agreement and which are ongoing. I am satisfied I have reasonable grounds for suspecting the amendment sought is not authorised in those circumstances.

Denbride has argued the fees and other obligations were not reasonable. There is certainly a whiff of unconscionability in the air, and there may be a valid claim that the contract, or some of its terms, was unfair. But that is a question to be decided by a court of competent jurisdiction having regard to all the facts and the Australian Consumer Law and other enactments. My role, and the role of the Registrar, is narrower. We are not in a position to resolve the larger commercial dispute between the parties. It is enough that I am satisfied the obligations appear to be real; unless and until those obligations are set aside or varied in subsequent proceedings in another place, I am not in a position to order an amendment to the register.”

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