31/05/2013

As our reader will recall, these pages had much content in 2012 on the new Personal Property Securities Act 2009 (Commonwealth) (“PPSA”), which came into force early last year. Since late last year, it has been “All Quiet on the PPSA Front”.

However, the recent case of Carson, in the matter of Hastie Group Limited (No. 3) has demonstrated some major practical problems involved in PPSA matters.

This case was brought by administrators appointed to 33 companies in the Hastie Group. The companies had 2,500 employees on 1600 different projects throughout Australia, on as many as 1000 sites.  

Adding to the woes of the administrators were the following:
•    The companies’ administrative functions were not centralised and so asset registers and contracts were held by each different company in the Hastie Group
•    The companies had plant & equipment (“Plant”) at 36 different locations
•    The costs of moving the Plant would exceed its commercial value
•    Weekly rent for sites occupied solely to house Plant exceeded $60,000
•    All but 20 of the employees had their employment terminated, so there was little assistance available from employees or former employees
•    There were 995 registrations noted against the companies on the register under the PPSA (“PPSR”)

The administrators wrote to all creditors who had registered interests on the PPSR but 80% of those creditors did not respond and many of the responses did not identify property properly.

The administrators also:
•    wrote to financiers who had a secured claim in any Plant
•    placed advertisements in appropriate newspapers, and
•    sent emails to 3,000 creditors, to flush out claims to specific Plant.

Despite all these efforts, administrators were left with more than 3,600 “unclaimed” items of Plant, which was about 77% of identified Plant.

The administrators argued that it was in the best interests of the companies and their creditors that all unclaimed Plant be sold as soon as possible, by online auction.

To overcome the significant logistical difficulties, the administrators sought court approval to:
•    advertise the auction in “The Australian” newspaper and on the auctioneers website
•    hold the auction
•    hold the net proceeds of sale in an escrow account for three months after completion of each sale
•    write to all known creditors advising them of the sale
•    at the end of the three months, apply the proceeds in the ordinary course of the administration of companies, that is in payment of costs, towards any valid claim for unclaimed Plant and finally, distributing the balance of proceeds of the sale to unsecured creditors.

The court agreed with the proposed conduct of the administrators, noting that “there have been genuine and substantial difficulties in identifying those items of [Plant]” and the administrators have taken a number of steps to clarify the situation “as best they can”.   

So, if you or a client of yours has a security over plant & equipment owned by another party, you should make sure that:
•    your security is registered appropriately on the PPSR; and
•    the actual property secured can be readily identified eg by registration or engine numbers or specific description and locations.

It might also help to keep in touch with the debtor so that if they become insolvent you know how to access the secured property.

If your security is not registered properly on the PPSR and the other party (called the “grantor” in the PPSA) is wound up or goes into bankruptcy, the secured property may vest in the grantor – ie become theirs by default.

If you need help with the PPSA, please contact Townsends Business & Corporate Lawyers, please contact us on (02) 8296 6222.