18 Sep 2014
The Rare Coin Company: What happens to unclaimed assets?
There are three things prudent insolvency practitioners can do when left with non-company assets.
A not too infrequent issue for insolvency practitioners: what can you do with unclaimed assets of third parties? Clayton Utz recently acted for the receivers and managers of Arcabi Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (known as “The Rare Coin Company”) and developed a strategy to deal with the issue.
The company sold rare coins and bank notes to investors and entered into arrangements to store these goods at the Company’s premises.
In July 2013, receivers were appointed to the company. Over 1,600 investors stored or consigned goods with the company. It was the receivers’ task to review the company records and separate company-owned stock from Investors’ stock. The receivers requested information and documentation from investors.
The potential implications of the Personal Property Securities Act 2009 (Cth) relating to goods held by the company in a bailment arrangement and on consignment, meant that the receivers sought directions from the Supreme Court of Western Australia that they were justified in returning certain investors’ goods. These directions were granted in December 2013.
The unclaimed goods
By April 2014, the receivers had still not been contacted by all of the investors. In an effort to find each of the investors listed in the company’s records, the receivers:
- sent nine separate letters/circulars to the investors’ addresses recorded in the company’s records;
- sent one letter to the Investors’ addresses recorded in company records and the Australian Electoral Commission’s records; and
- published two advertisements in each of The West Australian and The Australian newspapers.
Despite these efforts, the receivers did not receive claims from a number of investors.
The receivers also contacted the Commissioner of Police as required under the Disposal of Uncollected Goods Act 1971 (WA).
The directions sought
The receivers sought directions from the Court that:
- it would be appropriate for the receivers to treat the goods that remain unclaimed as property of the company; and
- the receivers would be justified in distributing the balance of the proceeds of the sale of the goods in the ordinary course of the receivership.
The Master granted the directions sought by the receivers. The Master agreed that the receivers were justified in selling the unclaimed goods and holding the proceeds for six months before distributing the balance of the proceeds in the course of the receivership.
Distinguished from Hastie
Although the terms of the orders sought closely followed the orders sought in Carson, in the matter of Hastie Group Limited (No 3)  FCA 719, Rare Coins advances the law in two ways.
First, the applicants in Hastie were administrators, not receivers. Unlike the administrators, the Receivers could not rely on section 442 of the Corporations Act 2001 (Cth).
Secondly, Hastie concerned property that was probably owned by one of the group companies, with a third party security interest attached, whereas Rare Coins concerned property that appeared to be owned by third parties. For this reason, the receivers also referred the Court to another decision involving property which was not company property – International Art Holdings Pty Ltd (Administrators Appointed) v Adams  NSWSC 164.
In International Art, Justice Yates declined to make a declaration as to the ownership of certain unclaimed artworks on the basis that he was not satisfied the claimants had abandoned any interest in the artwork at that point in time.
In this case, the receivers successfully submitted that these investors had abandoned any interests in the unclaimed goods on the basis that the investors had not made a claim after over 10 months, despite the receivers' numerous attempts to contact them. It provides more certainty to controllers, allowing them to quickly fulfil their roles without being left with open-ended liabilities (or never ending administrations). Of course, repeated efforts to find the apparent owners must be made before the orders will be granted.
This case is useful for insolvency practitioners who are left with non-company assets. In summary, it would seem prudent for insolvency practitioners to:
- contact the probable owners of the goods and publish at least two advertisements before seeking directions to sell unclaimed non-company assets; and
- follow the spirit of the procedures described in the Disposal of Uncollected Goods Act in relation to unclaimed non-company assets by contacting the Commissioner of Police.