In February 2014, Australia and New Zealand Banking Group
Limited ("ANZ") appointed KordaMentha
Pty Ltd ("KordaMentha") as receivers and
managers of the mining services firm, Forge Group Limited
("Forge"). Forge had secured debts of approximately $500
million, including over $300 million owed to ANZ and other
insurance bond groups such as QBE and Asset Insure.
KordaMentha has now decided to issue legal proceedings in the
Supreme Court of New South Wales claiming that four gas turbines
leased to Forge are subject to ANZ's security interest and may
be sold by them to recover ANZ's debt.
The turbines are estimated to be worth $50 million. They were
leased to Forge by APR Energy PLC
("APR"), a company listed on the London
Stock Exchange, and always remained the property of APR. However,
APR failed to register the leasing arrangement on the Personal
Properties Security Register
As this case unfolds we will learn more as to why the gas
turbines were not registered on the PPSR.
The consequence of not registering could mean that the gas
turbines are subject to ANZ's security interest, thus allowing
KordaMentha to sell them and pay the $50 million in sale proceeds
to ANZ. If there is anything left over after ANZ's secured debt
is fully repaid, then APR may still not be entitled to this amount
and may have to fight it out with Forge's other secured and
From what we know about the case it does not bode well for APR.
A case was decided in April this year where KPMG had been appointed
as receivers of BEM Equipment Pty Limited
("BEM"). In this case, the Supreme Court
of Western Australia ruled that Spiers Earthworks
("Spiers"), who had leased about $1
million in plant and equipment to BEM under a hire purchase
agreement, did not "perfect" their interest by
registering the lease on the PPSR. Spiers lost their interest in
the plant and equipment under the lease agreement and KPMG were
free to sell the equipment to recover monies owing to National
The Forge case is by far the largest legal proceedings that have
been brought under the PPSA and is a salient warning to all
equipment suppliers as to the potentially devastating implications
if they don't put in place robust procedures for PPSR
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.
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When determining if a DOCA is to be terminated, public interest can, and often will, outweigh any benefit to creditors.
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