A recent decision of the Federal Court highlights the need for creditors to actively enforce their security interests.
As a result of the decision, creditors should:
- ensure they have precise details of personal property subject to their security interest
- be specific when describing property on the PPS Register
- have systems that track the location of property
- consider putting name plates on property that is on hire.
The facts
The case is Carson, in the matter of Hastie Group Limited (No 3) [2012] FCA 719 (5 July 2012). The Hastie Group consisted of 44 companies holding plant and equipment across 36 different sites.
The Hastie Group failed to maintain adequate records of their assets and on entering into administration, the administrators discovered 995 registrations against the company on the Personal Property Securities Register (PPS Register).
The administrators wrote to the creditors at least once (and wrote multiple letters to some creditors), advertised in The Australian and sent more than 3,000 emails.
After all their efforts, 77% of the plant and equipment still remained 'unclaimed'.
The administrators applied to the Court for directions allowing them to sell the assets and apply the sale proceeds to the administration in accordance with section 447D of the Corporations Act.
The decision
Justice Yates acknowledged that there had been considerable difficulties for the administrators. He recognised that the administrators had endeavoured to identify claims as best they could and permitted the administrators to dispose of the plant and equipment as proposed.
Implications of the decision
If creditors do not take steps to pursue their security interests, they risk losing some rights under the Personal Property Securities Act and the money and time spent on registering on the PPS Register is effectively wasted.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.