Grant McLellan was shocked, to say the least, when he saw his $60,000 Mercedes listed for sale for just $9000.
He had not created the listing and was furious when he found out who it was. He claims it was Christopher Schwartz, a former Christchurch car dealer.
McLellan’s frustrations grew when he found out Schwartz had allegedly used a Government register to list himself as being owed thousands on the vehicle, without having any proof of such debt.
McLellan says it’s a loophole in the Personal Property Securities Register (PPSR) that needs to be closed to prevent people from using it as a tool for intimidation or even vengeance.
Schwartz recently came under fire after a customer took him to the Motor Vehicle Disputes Tribunal for pocketing a $15,000 refund owed to them, and then sending them explicit pictures of excrement.
Since that conduct was revealed, people came forward to claim Schwartz was using the register to claim ownership and interest as a creditor in vehicles he doesn’t own.
The PPSR is an online noticeboard where a person can register a legal claim to personal property, and check if there is any debt or obligation attached to goods you may wish to buy.
Anyone can search the PPSR to check if someone else has registered a legal claim to personal property, providing it is for a legitimate reason. Almost anything of value – excluding land, buildings and ships greater than 24 metres in length – can be used to secure the repayment of a debt.
If a person buys a car on finance then their details, including address, are listed on the register to show there’s money owing on the vehicle.
However, no evidence is required to register a security interest in a vehicle, or even declare yourself the owner.
And the actual owner won’t necessarily be notified that it has been done.
The only deterrent for people using the register for vexatious purposes is the threat of exposing themselves to civil litigation.
This is exactly what McLellan is claiming Schwartz has done with his vehicle.
He’s also allegedly done it to Japanese vehicle-importing giant Nichibo, which acquired vehicles from Schwartz’s company iSeeCars when it went into liquidation.
A spokesperson for the company claimed Schwartz had registered fraudulent security interests in multiple vehicles, though wouldn’t say how many.
“He is abusing the system and using it in a way it wasn’t designed to be used,” the spokesperson claimed.
McLellan is an employee of Autofleet Capital Limited, a vehicle supplier with whom Schwartz purchased cars through his business iSeeCars Limited.
But in October this year, McLellan was tasked with informing Schwartz that the company would no longer be doing business with him.
The next day a security interest was registered on McLellan’s personal vehicle under the name of an employee of iSeeCars.
The $9000 interest was the amount Autofleet Capital owed Schwartz on cars he’d already paid deposits for and the company had agreed to refund him.
The security interest was put into the name of iSeeCars, however, the ownership of the car was put into the employee’s name.
The Mercedes, worth close to $60,000, was then listed for sale on several websites for just $9000.
McLellan happened to be selling the car at the time and claims Schwartz downloaded his photos from Trade Me and used them in his listings.
While Autofleet Capital’s lawyers got involved and Schwartz removed the security interests he’d lodged on its vehicles, less than a week later it happened again to another car McLellan owns.
This time Schwartz registered the car under his own name and claimed a security interest in it.
“It is just vengeance … it’s bullying. He’s trying to intimidate me,” McLellan claimed.
“I have no involvement with him other than being an employee of a company he has a gripe with.”
McLellan has been told by the PPSR that it can take 30 days to investigate a claim of a vexatious or invalid security interest, and in the meantime, he can’t sell any of the cars because as a registered motor vehicle trader he can’t sell a vehicle without a clean debt record.
“I’ve sent them a mountain of evidence and they’ve done nothing,” he said.
“The system has let me down.
“He’s making a mockery of the whole system.”
McLellan says it’s a glaring loophole that needs to be closed, and while he acknowledges most people are unlikely to use the system to bully and harass, it is ripe for the picking for those who do.
No evidence needed
The Ministry of Business Innovation and Employment looks after the PPSR and its national manager for business registries, Bolen Ng, told NZME that anyone registering a security interest must have a valid reason to do so.
“However, they don’t have to provide evidence of a debt owed to the Registrar of Personal Property Securities,” Ng said.
Instead, anyone registering a false security interest could be liable to have civil litigation taken against them.
Ng accepted that any member of the public could take down a number plate from a vehicle and register an interest against it.
While any fraudulent security interest would eventually be uncovered, it could hamstring a person being able to sell their car, like in McLelland’s case.
“A registering party is responsible for the validity of the information that they enter into the PPSR. The possibility of being held liable for any losses suffered by the owner of the vehicle and any third parties should deter anyone from entering invalid financing statements into the PPSR,” Ng said.
However, it can take up to a month to have a false security interest removed from the PPSR, and McLellan is still waiting.
Debt specialist at law firm Tompkins Wake, Wayne Hofer, told NZME the way the register is set up simply doesn’t account for someone using it vexatiously.
“I have come across clients and counterparties registering financing statements almost as a preservation of right, more than an actual entitlement,” he said.
“They know if they slam it on straight away it forces the other party to go through the procedure and it can buy them a bit of time.
“But, I’ve never seen a scenario where you have a party that is just slapping PPSR registration on an asset to prevent the other person from selling it.”
Hofer doesn’t see it as a loophole that’s likely to be used en masse, as a security interest doesn’t mean a person owns an asset, it only communicates that they have an interest in it.
More disgruntled customers
While one disgruntled customer has already taken Schwartz to the Motor Vehicle Disputes Tribunal, another former customer, Ian Tilley, told NZME he’d commissioned Schwartz to sell his Skoda on his behalf when he moved overseas.
The car sold, but Tilley only found out when he got an email from the NZTA informing him that someone else had registered themselves as the owner.
Tilley got in touch and received a response from Schwartz that he’d pay the money he owed him.
“Basically he took the money and did something else with it rather than giving it straight to me,” Tilley claimed.
“Then started sending obscene images, then copied my wife in with a picture of a naked man.”
Tilley said he had received some of the money he is owed and had engaged a debt collector to help recoup the rest.
“We’re five grand in the hole, which doesn’t sound like a lot but it’s a lot of money to us,” he said.
“Money aside, I just don’t want this to happen to anyone else.”
Schwartz has not responded to NZME’s requests for comment.
