The Personal Properties Securities Act 2009 (Cth) (PPSA) commenced on 30 January 2012. The PPSA makes significant changes to the concept of security interests over personal property.
Central to the PPSA is the Personal Properties Securities Register (PPSR). Primacy of the register is a fundamental to the Act. Therefore it is essential that secured creditors are aware of their security interests recorded against a company in the PPSR. This places creditors in a position to respond efficiently to requests as to a claim or for further information about the registration from insolvency plaintiffs appointed to a company, and staves off potential sale of the secured assets.
Knowledge of the particulars of the security interests is very important. Currently the general nature of registrations on the PPSR and the number of unregistered transitional security interests makes it difficult for insolvency administrators to rely on the PPSR to identify particular property that is subject to a third party interest. This issue was highlighted in the following case.
In Carson, in the matter of Hastie Group Limited (No 3)  FCA 719, the Federal Court found that administrators were justified in selling unclaimed plant and equipment.
Administrators were appointed on 28 May 2012 to the Hastie Group of companies. At the time of their appointment the Hastie Group held a large number of individual items of plant and equipment at different locations with an estimated total auction value of $6.4 million. There were 995 registrations on the PPSR: many were very general as to the nature of the security interest claimed. Inadequate record keeping by the company meant that the nature and location of all the plant and equipment could not be determined.
The administrators undertook extensive efforts to determine claims upon the equipment, including personal correspondence and advertising in national newspapers.
Yates J found that:
- Three weeks after the initial correspondence, approximately 80% of the secured creditors had failed to respond;
- The creditors that did respond could not adequately particularise the equipment or the security agreement under which the security interest arose;
- Despite their best efforts, the administrators continued to face great difficulty identifying the property in which a security interest might be claimed. In addition there were ongoing costs, including significant rental costs of storage of the plant and equipment, being incurred.
Yates J found that it was in the best interests of the companies and their creditors to make directions to the administrators to sell the unclaimed plant and equipment.
His Honour also made directions that the administrators hold the proceeds of sale in a separate account and apply them:
- First towards the payment of the administrators' costs;
- Then towards any valid claim in relation to the currently unclaimed plant and equipment, and then;
- After three months, distributing the balance of the sale proceeds in the ordinary course of the administration of the companies.
In similar circumstances, it is advisable for administrators to seek equivalent Court directions. This case demonstrates willingness from the Courts to assist administrators.
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.