114Proceeds of sale of property

114 Proceeds of sale of property

Property subject to a possessory security interest

(1) If:

(a) a body corporate is under statutory management; and

(b) property of the body corporate is subject to a possessory security interest; and

(c) the statutory manager of the body corporate disposes of the property by way of sale;

then:

(d) if the net proceeds of sale equals or exceeds the total of the debts secured by:

(i) the possessory security interest; and

(ii) any other security interest in the property, where the debt secured by the security interest has a priority that is equal to or higher than the priority of the debt secured by the possessory security interest;

the statutory manager of the body corporate must:

(iii) set aside so much of the net proceeds as equals the total of those debts; and

(iv) apply the amount so set aside in paying those debts; or

(e) if the net proceeds of sale fall short of the total of the debts secured by:

(i) the possessory security interest; and

(ii) any other security interest in the property, where the debt secured by the security interest has a priority that is equal to or higher than the priority of the debt secured by the possessory security interest;

then:

(iii) the statutory manager must set aside the net proceeds; and

(iv) the statutory manager must apply the amount so set aside in paying those debts in order of priority, on the basis that if the amount is insufficient to fully pay debts of the same priority, they must be paid proportionately; and

(v) if any of those debts is not fully paid—so much of the debt as remains unpaid may be recovered from the body corporate as an unsecured debt.

PPSA retention of title property

(2) Subsection (3) applies if the statutory manager of a body corporate disposes of PPSA retention of title property of the body corporate by way of sale.

(3) The statutory manager must apply the net proceeds of the sale in the same way as a secured party is required, under section 140 of the Personal Property Securities Act 2009, to apply an amount, personal property or proceeds of collateral received by the secured party as a result of enforcing a security interest in the property.

Note: PPSA retention of title property does not include property that is subject to a retention of title clause: see the definitions of PPSA retention of title property and retention of title clause. Subsection (4) deals with property that is subject to a retention of title clause.

Property subject to a retention of title clause