The approach to determination of an appropriate penalty
87 Although the High Court has warned against using lists of factors, in particular the 'French factors' (Trade Practices Commission v CSR Ltd [1990] FCA 762 at [42]), as a "rigid catalogue of matters for attention" or a "legal checklist" (Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 274 CLR 450 at [19], quoting Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FLR 560 at [91]), there is a statutory mandate in the present context to take into account at least four matters, in addition to any others that may be relevant.
88 In considering the imposition of an appropriate penalty, s 82 of the Regulatory Powers Act relevantly provides:
82 Civil penalty orders
…
(3) If the relevant court is satisfied that the person has contravened the civil penalty provision, the court may order the person to pay to the Commonwealth such pecuniary penalty for the contravention as the court determines to be appropriate.
…
(6) In determining the pecuniary penalty, the court must take into account all relevant matters, including:
(a) the nature and extent of the contravention; and
(b) the nature and extent of any loss or damage suffered because of the contravention; and
(c) the circumstances in which the contravention took place; and
(d) whether the person has previously been found by a court (including a court in a foreign country) to have engaged in any similar conduct.
89 Section 85 provides for the making of a single civil penalty order against a person for multiple contraventions of a civil penalty provisions if the proceedings are founded on the same facts, or if the contraventions form or are part of a series of contraventions of the same or a similar character. However, the penalty must not exceed the sum of the maximum penalties that could be ordered if a separate penalty were ordered in respect of each of the contraventions.
90 Although separate contraventions arising out of separate acts should ordinarily attract separate penalties where the relevant separate acts are inextricably interrelated, it may be appropriate for the Court to view those acts as a single course of conduct for the purposes of the determining the appropriate penalty: Australian Competition and Consumer Commission (ACCC) v Yazaki Corporation [2018] FCAFC 73; 262 FCR 243 at [234]; Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 at [41]. Nevertheless, "a judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contraventions" per Yazaki at [235].
91 Despite - or perhaps more properly - in addition to, the statutory mandate of s 82(6), the Court's task remains evaluative in determining what is appropriate in the circumstances of the particular case. As the majority said in Pattinson in relation to the discretion conferred by s 546 of the Fair Work Act 2009 (Cth), at [40]:
[It is] like any discretionary power conferred by statute on a court, to be exercised judicially, that is, fairly and reasonably having regard to the subject matter, scope and purpose of the legislation.
92 It is to the subject matter, scope and purpose of the civil penalty provisions within the PPSA that I now turn.
93 Civil penalties are imposed primarily - if not solely - for the purpose of deterrence: Pattinson at [15]. That purpose is "protective in promoting the public interest in compliance": Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 at [55]. In the present context, the purpose of the civil penalty provisions within the PPSA might be characterised as being protective of the 'primacy and predictability' of the PPSR by deterring frivolous or vexatious registrations.
94 As was explained by Jackson J in Curo Capital in the paragraphs set out earlier in this judgment, the heart of the PPSA regime is the PPSR, and it is essential to understand the role of the PPSR within the regime. Section 3 of the PPSA provides an overview of the statute and stipulates, inter alia:
The Register of Personal Property Securities enables secured parties to give notice of actual or prospective security interests. Notice is given by the recording of data about secured parties, grantors and collateral. The register may be kept electronically, for example in a form that is interactive and accessible over the internet.
…
Chapter 5 provides for the establishment and maintenance of a register with respect to personal property securities and certain prescribed personal property (the Register of Personal Property Securities).
The Registrar of Personal Property Securities is responsible for maintaining the register. Chapter 5 also deals with how the register can be searched, and how certain non-registered data can be provided through the register (as a portal).
A search by reference to the details of an individual grantor must be made for an authorised purpose set out in the Act. A person who carries out an unauthorised search, or uses data from an unauthorised search, may be liable to pay compensation or a civil penalty (or both).
Chapter 6 deals with the role of the courts in proceedings that relate to security interests in personal property… It also describes the Registrar's role in judicial proceedings and applies Parts 4 and 6 of the Regulatory Powers Act to enable contraventions of civil penalty provisions to be enforced.
…
95 In Warehouse Sales Pty Ltd (in liq) and Lewis and Templeton v LG Electronics Australia Pty Ltd [2014] VSC 644; 291 FLR 407 at [37]-[38], a case concerned with whether various suppliers retained a security interest in goods sold subject to a typical retention of title clause, Sifris J observed:
The PPSA provides for a priority regime, not a title regime. Under s 273 of the PPSA ownership or title to personal property is not determinative and as a consequence a retention of title ("ROT") financier's ownership interest is replaced by a simple security interest. A ROT supplier must protect that "security interest" by taking possession of the personal property (eg a pledge under pre-PPSA law) or by obtaining a signed security agreement that covers (describes the collateral) and perfecting that security interest by registration of a financing statement on the PPSR. The consequences of non-perfection are that the security interest is ineffective against third parties, and on insolvency a security interest (title) vests in an administrator or liquidator. In other words, it is ineffective in the event of insolvency.
Because the ownership or title interest is merely a security interest, non-perfection also results in loss of priority because of PPSA s 55. A further consequence is that a transferee or buyer can take free of the security interest such as under s 43 because of non-registration and, also, under s 46 which provides that a buyer (transferee) takes free of a security interest given by the seller who sells personal property (mainly inventory) in the ordinary course of business of selling personal property of that kind. This is similar to but not the same as the idea of extinguishment under the old Chattel Securities Act 1987 (Vic).
(Emphasis added.)
96 The significance of registering a security interest by means of a financing statement is thereby made plain. As a practical matter, a person is able to register a financing statement against another person without that person's consent or knowledge. It is the financing statement that gives notice of an actual or potential security interest with respect to a particular grantor's personal property. Priority is afforded to security interests that have been perfected by registration. Hence, as primacy is given to the PPSR, secured parties need to ensure that the PPSR contains an accurate and contemporaneous account of their security interests. Similarly, third-party searchers who consult the PPSR in good faith should expect, at base, that frivolous, vexatious or offensive registrations, or those contrary to the public interest, do not remain on the PPSR. There is an obvious vice in registering an overreaching financing statement, it being likely to deter other financiers from providing credit to a particular grantor. Consequently, as explained in the Replacement Explanatory Memorandum to the Personal Property Securities Bill 2009 (EM) at [5.17]:
A person would not be able to register a financing statement, or a financing change statement, in relation to a security interest unless the person believes on reasonable grounds that a security interest in the property is, or would be held by a person stated in the application as a secured party (clause 151(1) and (7)). Where a person registers without such a belief they would be taken to have contravened an obligation owed to any person with an interest in the personal property (clause 151(5)).
(Emphasis added.)
97 Further, in explaining the maximum penalty prescribed, the EM said, at [5.21]:
… The maximum penalty level is considered to be sufficient in light of the potential impact unauthorised registrations could have on those relying on the registrations as well as the ability of persons with an interest to the property to recover for any loss or damage resulting from these breaches.
98 That ability to "recover damages for any loss or damage" is prescribed in s 271 of the PPSA, which grants a right to recover damages for any loss or damage that was reasonably foreseeable as likely to result from a person's failure to discharge any duty or obligation imposed on them by the PPSA. Section 151(5) provides expressly that, for the purposes of s 271, compliance with s 151(1) or (2) is taken to be an obligation imposed on the person who applied to register a financing statement or financing change statement, and that any person with an interest in the personal property described in the financing statement or financing change statement is taken to be a person to whom that obligation is owed. A contravention of s 151(1) or (2) is taken to be a failure to discharge that obligation.
99 These overlapping provisions make pellucid that the deterrence of frivolous and vexatious applications is the primary purpose of the civil penalty provisions under the PPSA.
100 The need for adequate deterrence in the context of the PPSA regime was discussed by Nicholas Mirzai in "Pollution on the PPSR - and what to do about it" (2015) 33 Company & Securities Law Journal 30. At that time, the regime was barely three years old. The learned author said, at 39:
… there is a present and growing concern that the Australia PPSR is quickly becoming polluted with unjustifiable interests which are, in certain circumstances, either non-existent, expired or not otherwise connected to a PPSA security interest. This is contrary to the transparency and efficacy that the PPSA and the PPSR were designed to provide.
101 The Commonwealth Attorney-General commissioned a review of the PPSA as required by s 343. In his Review of the Personal Property Securities Act 2009 - Final Report (27 February 2015) (Whittaker Review), Bruce Whittaker considered the purpose of s 151(1), particularly in the context of submissions calling for its repeal. The deterrent value of the civil penalty provisions was pivotal to his ultimate recommendation that s 151 be retained (Recommendation 128). I interpolate that, on 22 September 2023, the Attorney-General announced the Government's response to the Whittaker Review and accepted Recommendation 128. Whittaker's consideration of s 151(1) is set out at [6.10.4.2.1] in the Whittaker Review:
Should we repeal s 151(1)?
A number of submissions argued that s 151(1) should be repealed. They said that there is no need for it, and that it erodes the value of a secured party's ability to make an advance registration.
I am not convinced that there is no need for the section. While it has been suggested that the experience in Canada and New Zealand is that the risk of frivolous or vexatious registrations is low, there have been a number of Canadian cases in which a person made an unnecessary registration against another party as a means of applying commercial pressure. I have also been advised informally that vexatious registrations are not unknown in New Zealand.
It is also instructive to note that vexatious filings seem to be an unfortunate fact of life in the United States. There, it appears that it is not at all uncommon for a person to register a financing statement against another person for reasons that are entirely unrelated to a financing transaction. Article 9 responds to these so-called "bogus" or "harassment" filings by allowing the debtor (ie grantor) to file an information statement that states that the financing statement should not have been filed, or is overly broad. That information statement becomes part of the financing statement (and so would presumably be revealed by a search), but does not alter the legal effect of the financing statement as filed.
There have also already been a number of reported decisions under the Act in relation to what appear to have been groundless filings [Sandhurst and DEQMO], and I am aware of some anecdotal evidence that suggests that these are not isolated examples.
A further reason for retaining 151(1) is that it may also be able to be employed as a tool to deal with concerns that were expressed in submissions regarding the making of overly-broad registrations …
(References omitted. Emphasis added.)
102 Thus, it can be seen that in some respects, the civil penalty provisions within the PPSA are analogous to those contained in the consumer protection context in the Competition and Consumer Act 2010 (Cth) (CCA), the object of which under s 2 is "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection", and in the consumer protection provisions within Ch 7 of the Corporations Act 2001 (Cth). Section 760A of the latter Act provides that the main object of the chapter is, inter alia, to promote "confident and informed decision making by consumers of financial products …" (s 760A(a)), "the provision of suitable financial products to consumers of financial products …" (s 760A(aa)), and "fairness, honesty and professionalism by those who provide financial services …" (s 760A(b)). In other respects, the civil penalty provisions within the PPSA resemble those within the suite of financial services legislation where enhancement of "compliance" is often at the forefront. For example, the objects of the Australian Securities and Investments Commission Act 2001 (Cth) require the Australian Securities and Investments Commission to, inter alia, "take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it" (s 1(2)(g)).
Assessment of the appropriate penalty
103 The Registrar submits that it is appropriate to view Mr Brookfield's contraventions of ss 151(1) and (2) as arising from two courses of conduct: the first in relation to that surrounding Registration 2809; and the second in relation to the conduct surrounding Registration 9183. That is appropriate, not least because of the effluxion of two years between the two courses of conduct.
104 The effect of treating the contraventions of ss 151(1) and (2) separately in respect of each registration takes into account that the initial applications for each, and the failure to bring them to an end within the time period specified by s 151(3), are "substantially contemporaneous and connected" (Electoral Commissioner of Australian Electoral Commission v Wharton (No 3) [2021] FCA 742 at [33]) and mitigates the risk of imposing a penalty which might be inappropriate or oppressive in the circumstances.
105 The Registrar submits that a penalty of $5,000 is appropriate with respect to the contraventions related to Registration 2809 and $10,000 with respect to the contraventions related to Registration 9183. His submission is that a total penalty of $15,000 is appropriate for both contraventions.
106 Turning then to the factors required to be considered by s 82(6) of the Regulatory Powers Act. First, the nature and extent of the contraventions. The nature of the contraventions must be considered in the context of the PPSA scheme in which they occurred. As has been explained, the scheme permits registration of a financing statement over another's personal property without their knowledge or consent. It is a scheme that is premised on the assumption that those who use the PPSR hold a reasonable belief that they are entitled to register a financing statement. The consequences of misusing the PPSR may be grave both for the person over whose property the security interest is registered and for third parties in assessing their potential rights and interests in relation to the property. The nature of the contraventions was, therefore, serious.
107 The extent of the contraventions that are the subject of the orders sought might, at first blush, seem reasonably confined. Penalty orders are sought only in relation to two registrations. Those contraventions must be assessed, however, in light of the Previous Registrations that were in substantially the same terms, all of which had been removed by the Registrar or his Delegate for the same reasons, of which Mr Brookfield had been notified. As between the two registrations in respect of which civil penalty orders are sought, Registration 2809 was created by Mr Brookfield after he had been informed by the Deputy Registrar that applying to register a security interest without a reasonably held belief as to its validity may breach s 151 and result in civil penalties being ordered. Nevertheless, Mr Brookfield persisted, not merely in the face of his inability to point to anything that had changed in relation to the underlying transaction on which all previous applications to register had been based, but also despite express judicial observations about the validity of the Assignment. Similarly, Registration 9183 was a repeat attempt by Mr Brookfield to register a security interest on precisely the same basis as the Previous Registrations, notwithstanding repeated explanations by the Registrar or his Delegate that the Agreement did not create a security interest in personal property.
108 I am cognisant of the fact that Mr Brookfield is not legally trained. However, his occupation and previous experience with litigation leads me to the impression that, whilst not being dishonest, he was nonetheless being deliberately obtuse about whether merely continuing to apply to register a security interest would improve his position vis à vis his dispute with Mr Mergard and/or Real Estate Now.
109 The second factor to consider is the nature and extent of any loss or damage suffered. Similar language is used in relation to the assessment of the mandatory considerations relating to the imposition of a civil penalty under s 224(2) of Sch 2 of the CCA (The Australian Consumer Law). As is well accepted, the words "loss" and "damage" in this context should not be given a narrow meaning limited to financial harm: Australian Competition and Consumer Commission v Google LLC (No 4) [2022] FCA 942 at [39]-[40]; Australian Competition and Consumer Commission v Volkswagen Aktiengesellschaft [2019] FCA 2166 at [235]; Australian Competition and Consumer Commission v Uber B.V. [2022] FCA 1466 at [15]. In considering s 82(6) in the context of arriving at an appropriate penalty for a breach of the Commonwealth Electoral Act 1918 (Cth), Logan J said, in Wharton (No 3) at [34]:
Obviously enough, there is no loss or damage suffered by reason of the contravention in a monetary sense, but there is a loss which society suffers, having regard to the purposes, which I have mentioned. And that is a loss in relation to Mr Wharton's candidacy of transparency.
110 In the present case, there is no evidence that any loss or damage was suffered by any person. Nonetheless, there was no doubt a considerable administrative burden placed on the Registrar and his staff, as is evidenced by the extensive correspondence exhibited to Mr Marshall's affidavit. This is ultimately a cost to the taxpayer. Importantly, however, Mr Brookfield's conduct also had the effect of undermining the integrity of the PPSR. That is a cost to the public at large to which I have had regard.
111 The third factor to be considered are the circumstances in which the contraventions took place. The circumstances involve a long history of acrimonious litigation in several courts, underpinned by "enmity and animosity" ([2019] FCA at [1]) between Mr Brookfield, on the one hand, and Mr Mergard on the other, the sole director of Real Estate Now. In essence, the underlying dispute between Mr Brookfield and Mr Mergard is whether Mr Brookfield is owed a debt arising from the Agreement. That dispute was resolved by the Court of Appeal of the Supreme Court of Queensland on Friday 15 December 2023, two days prior to the trial of this matter on Monday 18 December 2023 (Brookfield [2023] QCA). Neither party referred me to this decision. Neither the finding of the trial judge, nor the judgment of the Court of Appeal, is directly relevant to the issues in these proceedings, except perhaps on the question of costs, to which I will return. I refer to it at this point only to give colour to the totality of the circumstances in which Mr Brookfield's contraventions occurred. The Court of Appeal upheld the decision of the trial judge dismissing Mr Brookfield's claim for damages for breach of contract, and misleading and deceptive conduct, arising from the Agreement. The trial judge found that the Agreement was not, in fact, the relevant contract governing the sale of the Rent Roll by Blueprop to Real Estate Now, accepting the evidence of Mr Mergard that, despite his signature apparently appearing on the document, he never in fact signed the Agreement. Rather, the relevant contract was entered into on 1 September 2015 and was "duly performed until it was terminated by Real Estate Now for breach" (Brookfield [2023] QCA at [6]).
112 Brookfield [2023] QCA was the culmination of multiple skirmishes as to solvency and winding up, some initiated by Mr Brookfield against Real Estate Now, in the Federal Court (QUD 951 of 2016, QUD 913 of 2018, and QUD 790 of 2019) and the District Court of Queensland (868/21). Another was initiated by Real Estate Now against the estate of Mr Brookfield in the Federal Circuit Court (BRG 552 of 2018). There have been other disputes involving the State of Queensland, arising out of complaints by Mr Mergard against Mr Brookfield that resulted in charges of stalking and harassment using a carriage service, in the Supreme Court of Queensland (BS15087 of 2021).
113 It is tolerably clear that the circumstances of the underlying dispute between Mr Brookfield and Mr Mergard, over a period of some seven years up to the date of Registration 9183, were a significant motivation for Mr Brookfield's continuing attempts to register a security interest, despite him holding no reasonable belief as to the legitimacy of that conduct.
114 It is uncontroversial that Mr Brookfield has not previously been found by the Court to have engaged in previous contravention of the PPSA, which is the fourth factor to be considered.
115 The Registrar submits that Mr Brookfield's lack of cooperation in the proceedings is a matter that should be taken into account in relation to penalty. In my view, that matter, to the extent that I agree with the Registrar's submissions, is a matter more properly to be taken into account when considering the question of costs.
116 I take into account that the contraventions of s 151(2) in relation to Registration 2809 and Registration 9183 are limited to 9 and 18 occasions respectively only because the Deputy Registrar caused those registrations to be removed. Mr Brookfield did not take steps to remove either of the registrations of his own volition.
117 In my view, the significance of the PPSR to the personal property securities regime overall - namely, its role in the protection of consumer interests coupled with its importance within the financial services sector - requires that a penalty for serious contraventions be significant enough to pose a real deterrent to those who may seek to use the PPSR for inappropriate purposes.
118 Taking into account all the circumstances, my assessment is that a penalty of $10,000 is appropriate in respect of the contraventions relating to Registration 2809, and $20,000 in respect of the contravention relating to Registration 9183. The higher proportion of the maximum penalty available in respect of Registration 9183 reflects the circumstances that Mr Brookfield was repeating the same conduct as with respect to Registration 2809 in circumstances where there had been no change whatsoever to the grounds on which (and since) Registration 2809 had been removed. The total penalty is therefore assessed at $30,000 which represents slightly less than 10% of the maximum penalty available.