With the introduction of the unfair preference regime in the Corporations Act 2001, a short provision was included which stated:

“… a secured debt is taken to be unsecured to the extent of so much of it (if any) as is not reflected in the value of the security.”(section 588FA(2))

The provision has been rarely considered. There has been little case law providing any judicial interpretation of the subsection.

That is, until the Personal Property Securities Act 2009 (PPSA) commenced.

This week’s TGIF considers the case of Bowesco Pty Ltd v Westpoint Management Ltd [2015] WASCA 184, which considered whether a guarantor had a right of subrogation enabling it to be repaid in advance of the second ranking creditor. 

BACKGROUND

On 14 July 2015, the South Australian District Court in Matthews v The Tap Inn Pty Ltd [2015] SADC 108 handed down a decision whose underlying reasoning could, if applied by superior courts around Australia, broaden the scope for liquidators to pursue unfair preference claims against secured creditors.

The decision

You can lose your equipment by failing to register your interests on the Personal Property Securities Register (PPSR).

Failing to consider the impact of the Personal Property Securities Act 2009 (PPSA) is still having dramatic adverse implications for many construction industry participants. 

Key Points:

A DOCA can extinguish claims under a guarantee, even where those claims arise following the DOCA's termination.

If the underlying debt has already been extinguished by a DOCA, can a secured creditor still enforce the charge? A recent case explored the role of section 444D(2) of the Corporations Act in this situation, with implications for parties seeking to rely on guarantees from companies that have been through a DOCA (Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95).

The important role of standard terms of sale

The standard terms of sale of a supplier can form part of a credit application by its customer, appear on sales invoices or order forms or on the supplier’s website and there are many other combinations of documentation and procedures that can be used to establish written evidence of the terms of the contract between the supplier and its customer. Just as important, there are many reasons why these combinations may come unstuck.

Orla McCoy explains the connections between retention of title clauses, insolvency, and the Personal Property Securities Act.

Click here to view video.

When a company goes into liquidation liquidators will often try to ‘claw back’ uncommercial transactions. The recent case of 640 Elizabeth Street Pty Ltd (in liq) & Ors v Maxcon Pty Ltd [2015] VSC 22 considered whether securing the indebtedness of a third party to avoid potential litigation exposure is an uncommercial transaction. 

Background facts

It is a well understood legal requirement that any time security is granted, it needs to be registered. Failure to register collateral granted as security according to the requirements of the Personal Property Securities Act 2009 (Cth) can result in the property vesting in the company in administration or liquidation. However in certain circumstances the court may make an order extending the time for registration, even after an insolvency event in respect of the grantor.

The final Report of the Whittaker Review into the Personal Property Securities Act 2009 (Cth) (PPSA) was tabled in Federal Parliament on 18 March, 2015.  The Report can be found here.  Our focus here is on key issues in the Report for the hire industry.  There are many, many other recommendations in the 542 page Report which we do not discuss here.