Protecting your Interests in Personal Property after Registration

Protecting your Interests in Personal Property after Registration

Introduction

In the first Court decision since the proclamation of the Personal Property Securities Act (PPSA), the Federal Court in Carson, in the matter of Hastie Group Limited (No 3) [2012] FCA 719 (5 July 2012) ("Hastie") has illustrated that protecting your property interests may require more than mere registration on the Personal Properties Security Register (PPSR).

Facts

Administrators appointed to a number of companies that comprise the Hastie Group applied to the Court for permission to dispose of plant and equipment held by various companies in the Hastie Group across 36 different locations.  The total estimated auction value of the plant and equipment was $6.4 million.

There were 995 registrations recorded against the companies in the PPSR.  The administrators sent letters to all creditors who had an interest recorded against the companies on the PPSR.  Each creditor was requested to provide notification of its interest.  Approximately 80% of those secured creditors did not respond to the letter and the responses received by administrators did not adequately particularise the relevant property or security agreement.  Administrators had great difficulty identifying property that is subject to the security interests of third parties.  To add to the complexity, property had been relocated to various sites owned by the Hastic Group making it difficult to identify the location of property belonging to creditors.  Additionally, administrators had difficulty relying on the PPSR for the purpose of identifying property subject to security interests of third parties because many of the descriptions were too general.

Decision

At the time of the decision, approximately 3684 items of plant and equipment remained "unclaimed".  The ongoing storage and maintenance of that plant and equipment represented a significant cost to administrators.  The Court was satisfied that there had been genuine and substantial difficulties in identifying those items of plant and equipment that might be subject to a security interest and other claims, and that the administrators had taken a number of steps to attempt to identify security holders.  The Court allowed the administrators to sell the unclaimed plant and equipment by public online auction.  The proceeds of sale were then to be held in a separate account to be distributed first towards the payment of administrators' costs incurred in the sale, second towards any claim in respect of the unclaimed property and finally, after a period of three months, the balance would be distributed in the ordinary course of the administration. 

Implications

The decision in Hastie serves as a warning to creditors that they should actively take steps to protect their property interests beyond mere registration on the PPSR.  We recommend that creditors:

  • Register security interests on the PPSR including security interests created before 30 January 2012 (transitional security interests);
  • Provide an accurate description for each item of secured property and particularise as much detail as possible to enable administrators to identify the property;
  • Attach labels, name plates or serial numbers to property to distinguish it from property belonging to other creditors and to assist administrators trying to identify it;
  • Have a system in place to track or record the location of property;
  • Monitor the status of customers and other businesses (i.e. whether insolvent);
  • If a customer is under administration, take steps to contact the administrator to notify them of your secuity interest;
  • Respond to such requests from administrators within the stipulated time and particularise, in as much detail as possible, the relevant property and the security agreement under which the security interest was granted;
  • If you currently have an interest in property concerning any of the companies within the Hastie Group, contact us or the liquidators immediately for advice on how you should proceed with the enforcement of your interest.

Cronin Litigation Lawyers comprises lawyers who are dedicated to protecting and enforcing interests in personal property. Our team has in-depth experience in dealing with companies under administration and in liquidation.  If you are seeking to protect or enforce your interest in personal property, please contact Derek Cronin at Cronin Litigation Lawyers on (07) 5592 6633 to find out how we may be of assistance.