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In previous issues we have kept you up to date with the progress of the introduction of the Personal Property Securities Act 2009 (Cth). Recently, the Federal Court had the opportunity to consider the application of the new legislation in Carson, in the matter of Hastie Group Ltd (No 3) where directions were sought by administrators as to the sale of potentially encumbered assets.
Administrators were appointed to the Hastie Group, which consisted of 44 companies that held 3,684 items in 36 different locations, which items had a combined value of $6.4 million. The administrators caused the companies to cease to trade and some evidence indicates records had not been kept properly, and some property had been moved around the companies. At the time administration commenced, there were 995 entries on the PPS Register that related to property held by the Hasties Group. The administrators wrote to each of the registered creditors to request further information about the interests within three days of the letter. Most of the creditors failed to respond over the coming weeks and where responses were made the interests were still insufficiently described. The administrators applied to the Federal Court at this point to receive directions as to how they should treat the property held by the Hasties Group given the registrations on the PPS Register.
The Federal Court determined that the administrators would be free to deal with the property as if it were that of the Hasties Group noting that the administrators could not rely on the general entries in the register to ascertain which property was subject to security interests. This case emphasises the need for parties to properly perfect their security interests by properly describing the underlying collateral and to take care where transitional interests have been transferred to the PPS Register to ensure that they are protected.