August 2012

PPSA - Carson, in the matter of Hastie Group Limited: sale of equipment in insolvency

As the following case will demonstrate a PPSA registration is not always enough - hire businesses and equipment lessors need to monitor their customers.

Facts of the Case

Carson, in the matter of Hastie Group Limited (No 3) [2012] FCA 719

In a decision involving the Hastie Group, which collapsed in May this year, the Federal Court has considered the rights of equipment owners who have made PPSA registrations but who failed to contact the administrators.  The administrators of Hastie have obtained Court orders allowing sale of equipment,  despite indications on the PPS register and from Hastie's books that the equipment was owned by third parties, who would presumably include hire businesses and other equipment lessors.   

There were 995 PPS registrations against Hastie when it collapsed and (surprisingly) most of the equipment thought to be owned by third parties remained unclaimed even after the administrators wrote to the PPS registered secured parties.  Of course some of the equipment may belong to parties who have not made any registration, either because they are unaware of PPSA or because they believe (rightly or wrongly) they have transitional protection.  

The Court gave orders allowing, the administrators to sell the equipment and eventually dissipate the proceeds.

This case establishes / confirms that an administrator will be able to get directions from the Court allowing the sale of property owned by secured parties and also be able to distribute proceeds of sale in due course, if the secured parties don't respond to the administrator's requests or the administrator can't otherwise determine who owns personal property.

Implications

Hire businesses and equipment lessors should be vigilant in monitoring the status of customers.  They should be sure to answer any requests that might arrive from administrators etc.  These might arrive via the address for service email in the PPS registration, for example.  More specifically any hire business with equipment that might be under the control of the Hastie insolvency administration really needs to make this fact known immediately. 

The Hastie matter is not (yet) a case about anyone's failure to register.  We suspect the same orders could have been obtained by the administrators even before PPSA.  But the decision in Hastie does show that:

  • hire businesses and other equipment lessors need to monitor their equipment and the status of their customers; and

  • PPS registration is not enough to protect goods and ensure proceeds are paid to hire businesses or lessors who don't also monitor and respond to any notices from an administrator. 

We still await a Court decision about the fate of equipment where there has been no registration or a defective registration. Perhaps some of the unknown owners will make themselves known in Hastie's insolvency in time and ask for proceeds even though they were not registered.  That would  trigger enquiry / dispute about whether they had transitional protection or not.  It cannot be long before cases about the substantive PPSA issues start to flow more meaningfully.

Author: Oliver Shtein

 

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