Are there any cases about the Personal Property Securities Act?
The Federal Court of Australia recently had to decide what to do about goods that had security interests recorded on the Personal Property Securities Register (PPSR), which were costing the administrators of the group in question substantial rent in order to continue to hold the property.
The decision, by Yates J in Carson, in the matter of Hastie Group Limited (No 3) (2012) APPSR ¶701-001;  FCA 719, is one of the first decided under the Personal Property Securities Act 2009 (Cth) (PPSA).
The administrators were appointed to the 44 companies that comprise the Hastie Group on 28 May 2012.
The administrators’ investigations revealed that the Hastie Group held at the time of their appointment a large number of individual items of plant and equipment at 36 different locations. The estimated total auction value of this plant and equipment was $6.4 million. The maximum auction value of plant and equipment stored at any one location was no more than approximately $855,000. The administrators continued to exercise rights in relation to 19 sites by reason of the existence of plant and equipment at those sites. The costs associated with moving the plant and equipment would be significant.
It was the administrators’ view that the cost would exceed the commercial value of the plant and equipment to the companies. From 13 July 2012 the total weekly rental payable with respect to the sites occupied solely by reason of the presence of that plant and equipment was going to be $61,134.26. Other plant and equipment had been consolidated and stored by Grays Auctions.
The administrators were faced with 995 registrations recorded against the Hastie Group on the PPSR.
They asked the secured parties (lenders, equipment lessors and suppliers of goods on retention of title terms) for further information to assist them to identify the property that was subject to the security interest being claimed. The court noted in its judgment (in paragraph 10):
Given the level of generality of many of the registrations in the PPSR and the existence of many transitional security interests that are not registered, it has proved extremely difficult for the administrators to rely upon the PPSR for the purpose of identifying property that is subject to third party security interests.
In addition, the administrators placed advertisements in major Australian newspapers and emailed approximately 3,000 creditors, in each case requesting that creditors contact the administrator if they sought to claim an interest in any items currently possessed by the administrators.
A large number of secured parties failed to respond to the administrators. Of those that did respond, many of the responses were of little assistance as they still did not adequately particularise the equipment or the applicable security agreement. As a result, approximately 3,684 items (representing 77% of the items of equipment identified by the administrators) remained unclaimed.
The court granted the administrators' application for directions allowing them to dispose of the equipment, with the proceeds of disposal (after payment of the administrators’ costs of attending to the sale) to be retained for three months. The directions made also provided for the creditors to be notified again of the disposal of the equipment (to afford the creditors an opportunity to claim the proceeds) and, after the three-month period, any remaining proceeds would be distributed in the ordinary course of the administration (ie, the money would be paid to the secured creditors of Hastie Group).
This case is a timely reminder to secured creditors and suppliers who rely on retention of title clauses not only to maintain their secured interests on the PPSR, but to ensure that their contact details on the PPSR are accurate and up to date. The security interest in question should identify, in as much detail as possible, the personal property in which the security interest is claimed.