IPLA Notes

Sale of goods Act Cheat Sheet
- Key concepts
  - Sale by Description - s 18 - Be careful
  - Fitness for Purpose s 19(1)
  - Merchantable Quality - s 19(2)
  - Sale by Sample - s 20
  - Magic 5 - Rules for ascertaining intention - s 23
  - Exclusion of implied terms and conditions - s 57
- Preliminary
  - S 5 Definitions
- Pt 2 - Formation of the contract - Contract of Sale:
  - S 6 Sale and agreement to sell
  - S 7 Capacity to buy and sell
  - S 8 Contract of sale how made
  - S 10 Existing or future goods
  - S 11 Goods which have perished
  - S 12 Goods perishing before sale but after agreement to sell
  - S 13 Ascertainment of price
  - S 14 Agreement to sell at valuation
- Implied Terms:
  - S 17 Implied undertaking as to title etc
  - S 18 Sale by Description
  - S 19(1) Fitness for Purpose
  - S 19(2) Merchantable Quality
  - S 20 Sale by Sample
- Pt 3 - Effects of a Contract - Passing of Title and Risk:
  - 21 Goods must be ascertained
  - 22 Property passes when intended to pass
  - 23 Rules for ascertaining intention
  - 24 Reservation of right of disposal
  - 25 Risk prima facie passes with property
  - 25A Contracts of sale for goods forming part of bulk quantity
- Exceptions to the Nemo Dat Rule
  - 26 Sale by person not the owner
  - 27 Sale under voidable title
  - 28 Seller or buyer in possession after sale
- Pt 6 Actions for breach of contract - Remedies
  - S 51 Seller’s action for price
  - S 52 Seller’s action for damages for non-acceptance
  - S 53 Buyer’s action for damages for non-delivery – section
  - S 54 Buyer’s remedy for breach of warranty
- Pt 7 Supplemental
  - S 57 Exclusion of implied terms and conditions
- Pt 8 Consumer Sales
  - S 64 Conditions and warranties in contracts for consumer sales
    - S 64(1) Conditions and Warranties in Contracts for Consumer Sales
    - S 64(3) Merchantability and Consumer Sales
    - S 64(5) the court may add the manufacturer of the goods as a party
ACL Cheat Sheet
- Chapter 1 – Introduction:
  - a single set of definitions and interpretive provisions about consumer law concepts.
- Chapter 2 – General protections,
  - which create standards of business conduct in the market, including:
    - A general ban on misleading and deceptive conduct in trade or commerce;
    - A general ban on unconscionable conduct in trade or commerce and specific bans on unconscionable conduct in consumer and some business transactions; and
    - A provision that makes unfair contract terms in consumer contracts and small business contracts void.
    - S 20, s 21, s 22: Prohibitions on unconscionable conduct.
    - S 24 - meaning of unfair
- Chapter 3 – Specific protections which address identified forms of business conduct, including provisions:
  - Dealing with consumer transactions for goods or services
  - On the safety of consumer goods and product related services; and
  - On the liability of manufacturers for goods with safety defects
    - s 106-124: Liability of manufacturers for goods with safety defects.
- Chapter 4 – Offences:
  - criminal offences relating to certain matters covered in Chapter 3.
- Chapter 5 – Enforcement and Remedies
- Sale of Goods Act vs Australian Consumer Law
  Sale of Goods Act 1923 (NSW)
  Australian Consumer Law
  Implied terms into contracts
  Statutory rights in respect of suppliers of goods or
  services to consumers
  Can be contracted out of by express or implied
  intent – section 57 (except in consumer sales)
  Cannot be contracted out of:
  sections 64 and 64A
  Breach = contractual remedies
  Remedies are statutory and wide-ranging
Misleading or Deceptive Conduct (s 18)
- Example: False claims about the performance of a product.
Unconscionable Conduct (s 20-22)
- Example: Taking advantage of a consumer’s lack of understanding.
Acceptable Quality (s 54)
- Includes factors such as fitness for purpose, appearance and finish, freedom from defects, safety, and durability.
- Guarantees in respect of goods
  - This part looks at ss 51-59 which contain a range of guarantees in respect of goods imposed on either the supplier or manufacturer (or both)
    When it applies
    ACL Section
    Guarantee
    Apply to all supplies of goods
    s 51
    The seller has a right to dispose of the goods
    Apply to all supplies of goods
    s 52
    The consumer will have undisturbed possession of the goods
    Apply to all supplies of goods
    s 53
    The goods are free from any undisclosed securities
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 54
    The goods will be of acceptable quality
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 55
    The goods are fit for any disclosed purpose
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 56
    In the case of a sale of goods by description, the goods match
    their description
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 57
    Goods sold by sample or model correspond to sample or model
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 58
    Manufacturer’s guarantee as to availability of repair facilities and
    spare parts
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 59
    Compliance with express warranties made by the supplier or manufacturer

PPSA Cheat Sheet
- PPSA Snapshot
  - Identifying Security Interests:
    - s 12: Definition of security interest.
  - Creating Security Interests:
    - s 19: Attachment of security interest.
    - s 20: Enforceability against third parties.
  - Perfection of Security Interests:
    - s 21: Perfection by registration, possession, or control.
    - s 24: Possession of collateral.
    - s 27: Control of certain types of collateral.
  - Priority of Security Interests:
    - s 55: Priority rules.
    - s 62: Priority of PMSIs.
  - Dealing with Security Interests:
    - s 32-68: Proceeds, taking free rules, and enforcement.
  - Control (s 21, s 27)
    - s 21(2)(c)(i): Security interest perfected by control.
    - s 27: What constitutes control for ADI accounts, investment instruments.
  - Possession (s 21, s 24)
    - s 21(2)(b): Security interest perfected by possession.
    - s 24: Possession of collateral details.
  - Registration and Control
    - s 21(2)(a): Security interest perfected by registration.
    - Combining registration and control for highest priority.
- Answering PPSA Questions
  - Secured Party:
  - Grantor:
  - Collateral:
  - 1. Is the arrangement excluded from the PPSA? (s 8)
    - Interests in Land: This exemption is not applicable as the transaction involves personal property (a dump truck), not an interest in land.
    - Liens and Rights of Set-Off: This exemption applies to statutory liens and similar interests, which do not appear relevant to this lease agreement.
    - Interests Governed by Other Laws: There is no indication that the lease agreement is governed by another specific law that would exclude it from the PPSA.
    - Certain Transfers of Accounts or Chattel Paper: This is not relevant to the lease of the dump truck.
    - Trusts: There is no mention of any trust arrangement in the provided facts.
    - Interests in Boats and Aircraft: This exemption applies to boats and aircraft, not to heavy machinery like the dump truck.
  - 1. Does it involve an ‘in substance’ security interest? (s 12(1))
    - – If not, does it involve a deemed security interest? (s 12(3))
      - (a) the interest of a transferee under a transfer of an account or chattel paper;
      - (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment;
      - (c) the interest of a lessor or bailor of goods under a PPS lease.
    - – Is it a Purchase Money Security Interest (PMSI)? (s 14)
      - Loan specifically for the purchase of a good
  - 1. If so, has the secured party ‘perfected’ their security interest? (ss 19-22)
    - – Attachment of the security interest (s 19)
    - – Enforceability against third parties (s 20)
    - – Perfection through possession, control or registration (s 21)
  - 1. If so, are there any other competing security interests over the same collateral? (if no – go to step 5) If yes then:
    - – Apply the priority rules in Pt 2.6 (start with the default rule s 55)
    - – Check for special types (e.g. PMSI, control over accounts)
  - 1. Apply the enforcement rules (Ch 4) - Are they excluded (e.g. receiverships)? (ss 109-115)
  - 1. Check for taking free (extinguishment) rules (Pt 2.5 - s 43(?))
- General Mapping of the PPSA Based on Re Maiden Civil
  - 1. Definition of Security Interest
    - PPSA, Section 12: Defines a “security interest” as an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation.
  - 1. Creation of a Security Interest
    - Transaction Involvement: A transaction must occur involving personal property where the interest is meant to secure payment or an obligation.
  - 1. Attachment of Security Interest
    - PPSA, Section 19: Specifies the conditions under which a security interest attaches to the collateral.
    - Criteria for Attachment:
      - The debtor must have rights in the collateral.
      - Value must be given (by the secured party).
      - Security agreement must be enforceable.
  - 1. Rights in Collateral
    - Possession and Proprietary Rights: As in Re Maiden Civil, the lessee (debtor) obtains proprietary rights in the goods upon taking possession under a PPS lease.
  - 1. Perfection of Security Interest
    - PPSA, Section 21: Perfection can be achieved through registration on the PPS Register or by possession of the collateral.
    - Importance of Perfection: Protects the security interest from claims by third parties and is crucial in bankruptcy or insolvency scenarios.
  - 1. Priority of Security Interests
    - General Rule: Perfected security interests have priority over unperfected security interests.
    - Competing Interests: The first to perfect or the first to register typically has priority.
  - 1. Effect of Non-Perfection
    - PPSA, Section 267: Unperfected security interests may vest in the grantor (debtor) if they go into administration or bankruptcy, as was a key issue in Re Maiden Civil.
  - 1. Enforcement of Security Interests
    - Rights of Secured Parties: Upon default, secured parties may seize or otherwise enforce their rights in the collateral as per the terms of the security agreement and PPSA provisions.
  - 1. Bankruptcy and Insolvency
    - Impact on Security Interests: The status of security interests during the debtor’s bankruptcy or insolvency can determine the recovery of secured parties, highlighting the importance of timely registration and perfection.
  - 1. Case Application
    - Example from Re Maiden Civil: Maiden Civil’s receivers, appointed by a secured party with a perfected interest, successfully claimed the caterpillars over the unperfected interest of QES, showcasing the practical implications of the PPSA’s provisions on attachment and perfection.
- PPSA Priority table cheat sheet RANKING Hierarchy
  - Control-based Interests (if applicable)
    - Highest priority for certain assets like bank accounts and investment securities.
  - Perfected Purchase Money Security Interests (PMSIs)
    - Superior to other perfected interests if registration is done timely.
  - Other Perfected Security Interests
    - Ranked by the order of registration or perfection date.
  - Unperfected Security Interests
    - Ranked by the order of attachment if none are perfected.
  - Statutory Liens or Charges
    - Specific statutory provisions might provide certain liens with a rank that supersedes even perfected security interests.
- FULL PPSA Priority Table
  Interest 1
  vs
  Interest 2
  Prevailing Interest

Interests that “take free ”
vs
Perfected Security Interest
Taking Free interests prevail - Pt 2.5
Transitional Security Interest
vs
Transitional Security Interest
See rule in s 320
Transitional Security Interest
vs
Interest Perfected by Control
Transitional Security interest - s 322A
Interest Perfected by Control
vs
Interest Perfected by Control

First in time subject to continuous perfection requirement — s 57(2)
Interest Perfected by Control
vs
PMSI
Interest Perfected by Control - s 57
PMSI (seller, lessor or
consignor)
vs
PMSI (not a seller. lessor or consignor)
PMSI (seller, lessor, or consignor) prevails — s 63
PMSI (seller, lessor or
consignor)
vs
PMSi (seller, lessor or consignor)
First in time — s 55
PMSI (not a seller, lessor or
consignor)

PMSI (not a seller. lessor or consignor)
First in time — s 55
Earlier PMSI
vs
Later perfected security interest (not by control)
PMSI prevails — s 62
Earlier perfected security interest (not by control)
vs
Later PMSI
PMSI prevails — s 62
Earlier perfected interest
vs
Later unperfected interest
Earlier perfected interest prevails - s 55(3)
Earlier perfected interest
vs
Later perfected interest
Earlier perfected interest prevails - first in time” s 55(4)
Earlier unperfected interest
vs
Later unperfected interest
Earlier unperfected interest prevails - first in time” s 55(2)
Earlier unperfected interest
vs
Later perfected interest
Perfected interest prevails —
Perfected trumps unperfected — s 55(3)

PMSI Cheat Sheet
- Key Sections of PPSA:
  - Section 14: Defines PMSIs.
  - Section 19: Discusses attachment.
  - Section 20: Enforceability against third parties.
  - Section 21: Details on perfection.
  - Section 62: Priority of PMSIs relative to other interests
- Conditions for a PMSI:
  - Security Agreement: Must be in writing, signed, describe the collateral, and indicate the security purpose.
  - Attachment: The interest must attach to the collateral; this requires:
    - Value given by the secured party.
    - Debtor’s rights in the collateral.
    - Agreement that the security interest attaches.
- Perfection:
  - Typically through registration on the Personal Property Securities Register (PPSR).
  - Must be timely: within 15 business days after the debtor takes possession (non-inventory); before possession for inventory.
Terms
Term
Transaction Type
Definition
Bailor
Bailment
The person who delivers the property to another person for a specific purpose.
Bailee
Bailment
The person who receives the property and is responsible for its care and return.
Lessor
Lease
The person who grants the lease (landlord).
Lessee
Lease
The person who receives the lease (tenant).
Trustor/Settlor/Grantor
Trust
The person who creates the trust by transferring property into it.
Trustee
Trust
The person or entity that holds the legal title to the trust property and manages it for the benefit of the beneficiaries.
Beneficiary
Trust
The person or entity that benefits from the trust.

● Sale of goods Act Cheat Sheet
○ Key concepts
○ Preliminary
○ Pt 2 - Formation of the contract
○ Pt 3 - Effects of a Contract
○ Pt 6 Actions for breach of contract - Remedies
○ Pt 7 Supplemental
○ Pt 8 Consumer Sales
● ACL Cheat Sheet
○ Chapter 1 – Introduction:
○ Chapter 2 – General protections,
○ Chapter 3 – Specific protections which address identified forms of business conduct, including provisions:
○ Chapter 4 – Offences:
○ Chapter 5 – Enforcement and Remedies
● Sale of Goods Act vs Australian Consumer Law
● Guarantees in respect of goods
○ This part looks at ss 51-59 which contain a range of guarantees in respect of goods imposed on either the supplier or manufacturer (or both)
● PPSA Cheat Sheet
○ Answering PPSA Questions
○ General Mapping of the PPSA Based on Re Maiden Civil
○ PPSA Priority table cheat sheet RANKING
○ FULL PPSA Priority Table
● PMSI Cheat Sheet
○ Key Sections of PPSA:
○ Conditions for a PMSI:
○ Perfection:
● Terms
○
Week 1: What is Commercial Law and History of Equity
● The Codification of Commercial Law’
○ Historical Context:
○ Arguments for Codification:
○ Arguments against Codification:
○ Drafting Considerations:
○ Role of the Judiciary:
○ Conclusion:
○ What is Commercial Law
○ Founding of Modern Commercial Law
○ Sources of Commercial Law
○ Common Types of Commercial Dealings
○ Business Finance — some ways businesses obtain finance
○ Basic types of security interest given over property in return for finance recognized at common law:
○ Mortgage elements
○ Chattel Mortgage def
○ Pledge def
○ Charge def
○ Fixed Charge def
○ Floating charge def
○ Lien def
● Eight Principles of Commercial Law
○ Party autonomy
○ Predictability
○ Flexibility
○ Good faith
○ The encouragement of self-help
○ The facilitation of security interests
○ The protection of vested rights
○ The protection of innocent third parties.
● The Nature of Personal Property
○ INTRODUCTION
○ Yanner v Eaton (1999) 201 CLR 351
○ Meagher Gummow & Lehane’s Equity: Doctrines and Remedies
○ Value a system of proprietary interests
○ Bundle of right
○ Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22
○ Classification of property in the Australian legal
○ Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA 30
○ Choses in Action def
○ Characteristics of choses in action
○ Legal choses in action def
○ Equitable choses in action def
○ INTERESTS IN PERSONAL PROPERTY
○ Parker v British Airways Board [1982] 1 QB 1004
○ Possession in Residential Premises
○ Interference with possession
○ Action on the case def
● Ownership
○ Ownership def
○ Joint ownership def
○ Equitable ownership and estate
○ Title def
Week 2:
● What is property
○ Whether it can be owned
○ Is it capable of ownership
○ Examples
● What is a property right
○ Can we define it — Yanner v Eaton
○ Bundle of Rights
● Taxonomy of property
○ The most basic two categories of property are real and personal property
○ Relativity of Title
○ Possession/ownership/title
Week 3: Equitable Interests In Property and Trusts
● Equitable Interests
○ Characteristics of choses in action
○ Legal and equitable choses in action
○ Pure and documentary intangibles
○ History and Nature of Equitable Interests in Property
○ Hierarchy of Equitable Interests
○ Equitable Proprietary Interests
○ Creation of Equitable Interests in Property
○ Examples of equitable proprietary interests
○ The equitable proprietary interest of a beneficiary under a fixed trust
○ Beneficial interest in a fixed trust compared to a discretionary trust
○ Personal Equity/personal rights
○ Importance of understanding the nature of the equity –is it proprietary or not
○ Baker v Archer-Shee [1927] AC 844
○ Latec Investments v Hotel Terrigal Pty Ltd (1965) 113 CLR 265
○ The Use of the Commercial Trust under Australian law
Week 4: Bailment and Agency
● Bailment
○ Bailment def
○ Bailment terminology
○ Types of bailment: bailment for reward
○ Types of bailment: gratuitous (no consideration)
○ Bailment vs Licence
○ Duties of Bailee at Common Law
○ Obligation to Re-deliver
○ Pangallo Estate Pty Ltd & ors v Killara 10 Pty Ltd [2007] NSWSC 1528
○ Duties of Bailor
○ Sub-Bailment
○ Morris v CW Martin [1966] 1 QB 716
○ Tottenham Investments Pty Ltd v Carburettor Services Pty Ltd (1994) Aust Torts Reports 81-292 NSWCA
○ The Role of Contract Law in Bailments
○ Termination of Bailment
○ Enforcement by Bailor
● Agency
○ Agency Importance
○ Agency def
○ Fiduciary Relationship def
○ Creation of Agency
○ Nature and Scope of Agent’s Authority
○ Actual Authority def
○ Consent to Creation of an Agency with Actual Authority
○ Duties of an Agent
○ Rights of an Agent
○ Liabilities of Agents
○ Doctrine of Undisclosed Principal
○ Doctrine of Ratification
Week 5: Statutory Interpretation
● Introduction
○ Sale of Goods Act 1923 (NSW)
○ Australian Consumer Law
○ Personal Property Securities Act 2009 (Cth)
○
● Overview of important principles in interpretation of legislation
○ Role and Aim of Statutory Intention - Construing the Intention of the Legislature
○ An Act should be read as a whole
○ Common law presumptions of interpretation
○ The text is the starting point, always.
○ However Text interpreted in light of Context and Purpose
○ Difficulty where there is more than one purpose
○ Words are generally given their ordinary meaning
● Overview of legislation covered in Property Law
○ The Sale of Goods Act 1923 (NSW)
○ The Australian Consumer Law
○ Personal Property Securities Act 2009 (Cth)
● Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236
○ Jurisdiction:
○ Procedural History:
○ Original Dispute:
○ Current Reason for Trial:
○ Material Facts:
○ Issue Raised:
○ Law(s)/Statute(s) in Contention:
○ Judicial Opinions and Interpretation:
○ Ratio Decidendi:
○ Conclusion and Relevance to Modern Law:
○ Notes Emphasis:
● SAMWISE HOLDINGS PTY LTD v ALLIED DISTRIBUTION FINANCE PTY LTD & ORS [2018] SASCFC 95
○ The focus is on the timing of possession where the circumstances of possession changes but not the fact of possession).
○ Procedural History:
○ Original Dispute:
○ Current Reason for Trial:
○ Material Facts:
○ Issue Raised:
○ Law(s)/Statute(s) in Contention:
○ Precedences:
○ Judicial Opinions and Interpretation:
○ Legal Reasoning:
○ Ratio Decidendi:
○ Relevance to Modern Law:
● Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426
○ Extraterritorial application of statutes and intention of parliament expressed in the provisions.
○ Jurisdiction & Binding Nature
○ Procedural History
○ Original Dispute
○ Reason for Trial
○ Material Facts
○ Issue Raised
○ Laws/Statutes in Contention
○ Precedents Cited
○ Tests & Elements Outlined
○ Judicial Opinions & Interpretation
○ Legal Reasoning & Ratio Decidendi
○ Conclusion & Relevance to Modern Law
○ Notes for Examination
Week 6: Sale of Goods Act Part 1
● Topic 6 – Transfer of property in goods
○ The “transfer of property” in goods means the transfer of legal ownership from seller to the Buyer.
○ S 5 Statutory Definitions
○ Right to sell and transfer of ownership
○ S 6 Sale and agreement to sell
○ What a contract for sale is NOT
○ Section 17 Implied undertaking as to title etc
○ The nemo dat principle at common law
○ Rowland v Divall [1923] 2 KB 500
○ PART A: Title – Rowland v Divall
○ “Goods under the Sale of Goods Act – definition and types
○ Types of Goods under the Sale of Goods Act 1923 (NSW)
○
○ Unascertained/Ascertained Goods
● When does property pass in Specific or Ascertained Goods
○ Section 21: Goods must be ascertained
○ Section 22: Property passes when intended to pass
○ s 23 Rules - 5 magic rules
○ Rule 1: specific goods in a deliverable state
○ Rule 1: Dennant v Skinner [1948] 2 KB 164
○ Rule 1: Bodlingo Pty Ltd v Webb Projects Pty Ltd (1990) ASC 56-001
○ Rule 1: Minister for Supply and Development v Servicemen’s Cooperative Joinery Manufacturers Ltd (1951) 82 CLR 621
○ Rule 1: “a deliverable state” Underwood Ltd v Burgh Castle Brick and Cement Syndicate [1922] KB 343
○ s 23 Rules -
○ When does property pass in Unascertained Goods in Bulk
○ Reservation of right of disposal s 24
○ Reservation of title clauses (“Romalpa clauses”)
○ Transfer of Title by Non-Owner
○ Exceptions to the nemo dat rule
○ Exception 1: s 26: Conduct by the owner
○ Exception 1 - Conduct by the owner: Eastern Distributors v Goldring
○ Exception 2: S 28(1): Seller in possession
○ Exception 3: s 28(2): Buyer in possession
○ Buyer in possession: s 28(2)
○ Factors (Mercantile Agents) Act 1923
○ S. 28 - sale by Mercantile Agents
○ Section 27: Voidable title
● Property in Goods
○ Lay- by
○ Sale of Goods Act (SGA def), ss 13, 14
○ SGA, s 8
○ SGA, s 7
○ SGA, ss 11, 5, 57
○ SGA, ss 12, 25
○ The goods perish after the contract and after risk has passed
● The United Nations Convention on Contracts for the International Sale of Goods (Vienna Sales Convention) (CISG)
○ The Convention governs contracts between parties from different countries if those parties have not excluded the application of the Convention; and the countries are members of the Convention; or conflicts rules result in the application of the law of a country which is a member of the Convention and has not made a reservation to the Convention precluding this application
● Ch 7: Transfer of Property and Title
○ THE PASSING OF PROPERTY
○ Types of goods
○ WHEN DOES PROPERTY PASS?
○ Kursell v Timber Operators and Contractors Ltd [1927] 1 KB 298 (Court of Appeal of England and Wales)
○ SPECIFIC BUT NOT DELIVERABLE GOODS
○ SALE OR RETURN GOODS
○ UNASCERTAINED AND FUTURE GOODS
○ The passing of property by unconditional appropriation with assent
○ The passing of property by intention and ascertainment
○ The passing of an equitable interest in future goods?
○ CONTRARY INTENTION AND RESERVATION OF TITLE
○ THE TRANSFER OF TITLE BY NON-OWNER
○ CONDUCT BY OWNER
○ Representation of apparent authority
○ Negligent omission
○ SALE BY MERCANTILE AGENT
○ SALE WITH A VOIDABLE TITLE
○ SELLER IN POSSESSION
○ BUYER IN POSSESSION
Week 7: Sale of Goods Act Part 2
● Implied Warranties
○ This part covers some of the terms implied into a contract for sale:
○ Sale by Description – s 18 of the Sale of Goods Act Implied term that goods shall correspond with description
○ Sale by Description – section 18
○ Elder Smith Goldsborough Mort Ltd v McBride [1976] 2 NSWLR 631
○ Sale by description – Beale v Taylor [1967] 3 All ER 253
○ Sale by Description – Grant v Australian Knitting Mills Ltd [1936] AC 85
○ Sale by Description – Ashington Piggeries v Christopher Hill [1971] 1 All ER 847
○ Sale by Description – Summary
● Fit for Purpose – section 19(1) of the Sale of Goods Act 1923 Implied condition as to quality or fitness
○ Where the buyer expressly or by implication makes known to the seller the particular purpose in the course of the seller’s business to supply
○ Fit for Purpose – section 19(1)
○ Fitness for Purpose – key questions
○ Fitness for purpose:
○ Henry Kendall and Sons v William Lillico & Sons Ltd [1969] 2 AC 31 (Hardwick Game)
○ Fit for Purpose: “particular purpose” - Hardwick Game
○ Fit for Purpose: Hardwick Game (text [8.400]
○ Fitness for purpose – establishing reliance
○ Fit for Purpose: reliance - Grant v Australian Knitting Mills
○ Fit for Purpose: Trade name exception
○ Fit for Purpose: Trade name exception: Baldry v Marshall Ltd [1924] All ER Rep 155
○ Fitness for Purpose - Summary
○ Merchantable Quality: section 19(2) of the Sale of Goods Act 1923
○ Merchantable Quality: Hardwick Game [1969] 2 AC 31
○ Cammell Laird & Co v Manganese Bronze and Brass Co Ltd [1934] All ER Rep 1
○ Australian Knitting Mills v Grant (1933) 50 CLR 387
● Relationship between section 19(1) – Fit for Purpose and section 19(2) – Merchantable Quality
○ In general terms
○ However, the sub-sections are not mutually exclusive and often overlap
○ Merchantable Quality: Summary
○ Sale by Sample – section 20 of the Sale of Goods Act 1923
○ Exclusion of implied terms and conditions
○ Conditions and Warranties in Contracts for Consumer Sales
○ Merchantability and Consumer Sales
● REMEDIES AND DAMAGES
○ Remedies
○ Seller’s action for Price s. 51
○ Seller’s action for damages – S. 52
○ Effect of Seller’s Statutory Actions
○ Buyer’s damages for non-delivery – s. 53
○ Available Market – Joseph & Co Pty Ltd v Harvest Grain Co Pty Ltd (1996) 39 NSWLR 722
○ Buyer’s remedy for breach of warranty– S. 54
Week 8: Australian Consumer Law Part 1
● Structure and History of the Australian Consumer Law
○ The Australian Consumer Law (ACL) is a comprehensive regime to provide protection to consumers:
○ The ACL is comprehensive package of consumer protection provisions which includes:
○ The ACL applies nationally and in all States and Territories, and to all Australian businesses.
○ The ACL is not intended to cover the field:
○ In addition to the legislation protections under the ACL, Fair Trading Act 1987 (NSW) and limited provisions of the Sale of Goods Acts, consumers can seek remedies under common law, or combinations of both common law and legislation to obtain redress.
● Scope of the ACL
○ Chapter 1 – Introduction:
○ Chapter 2 – General protections,
○ Chapter 3 – Specific protections which address identified forms of business conduct, including provisions:
○ Chapter 4 – Offences:
○ Chapter 5 – Enforcement and Remedies
● Regulations under the ACL
○ Regulations made under the ACL are set out in Parts 6 and 7 of the Competition and Consumer Regulations 2010 (Cth)
○ The ACL Regulations give practical effect to the ACL provisions dealing with:
● Overview of the Consumer Guarantee Law in the ACL
○ The Consumer Guarantee Law is found in Parts 3-2, Div 1, and available remedies in Part 5-4 of the ACL.
○ Provides minimum mandatory standards of quality of goods and services to “consumers” under s 3(1).
○ Does not apply to financial products and services under ACL and in fact not in the ASIC Act for these goods or services.
○ These are statutory rights and remedies, not implied terms into the contract as under the Sale of Goods Act.
● Rationale for the Consumer Guarantee Law
○ These standards were inserted to address the “information asymmetry” (see TradePractices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum, p 607), between consumers and suppliers, given that consumers will ordinarily:
○ Key Definition: Meaning of ‘consumer’
● Tarangau Game Fishing Charters Pty Ltd v Eagle Yachts Pty Ltd [2017] QSC 306
○ In July 2006 Tarangau purchased a yacht from the defendant.
○ Held:
○ Plaintiff not a ”consumer”.
● ‘Ordinarily acquired for personal, domestic or household use or consumption’
○ Crago v Multiquip Pty Ltd (1998) ATPR 41-620
● Ordinarily acquired for personal, domestic or household use or consumption’:
○ Bunnings Group Ltd v Laminex Group Ltd [2006] FCA 682
● Importance of evidence: circumstances may change over time
○ Four Square Stores (Qld) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232
○ Note: consider characterisation of photocopiers today but also apply Bunnings approach
● Commercially rated goods for business purposes
○ Carpet Call Pty Ltd v Chan (1987) ASC ¶55-553
○ Guarantees in respect of goods
● SS 54-59 – limited to supplying goods ‘in trade or commerce’ s 2
○ ACL section 2 defines ‘trade or commerce’ as follows:
○ The “in trade or commerce” limitation
○ Qualifications to s 54
● Guarantee – Fitness for Purpose (s 55)
○ Section 55 provides for a guarantee that the goods supplied to a consumer are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit.
● Breach of guarantees as to acceptable quality and fitness for purpose:
○ Vautin v BY Winddown Inc (formerly Bertram Yachts) (no 4) [2018] FCA 426
● Fitness for disclosed purpose
○ Cavalier Marketing (Australia) Pty Ltd v Rasell (1987) ASC ¶55-553
○ Cavalier Marketing (Australia) Pty Ltd v Rasell and Another (1990) 96 ALR 375
○ Guarantee – Description (section 56)
○ Guarantee – Description (section 58)
○ Guarantee as to express warranties (s 59)
● C: Guarantees in respect of services
○ The Sale of Goods Act does not deal with “services” at all.
○ Guarantees in relation to supply of services ss 60-62
○ Guarantee as to services
○ Guarantee as to services
● Guarantees generally not excluded by contract
○ Most of the guarantees are mandatory and cannot be excluded by contract.
○ Any attempt to exclude will be void and may also be misleading and deceptive:
○ However some exceptions:
● Enforcement and Remedies
○ This part looks at Part 5-4, Divisions 1 and 2 which afford consumers remedies against the supplier or the manufacturer for failure to comply with guarantees as to good and/or services.
○ Remedies and Enforcement Part 5-4 Div 1 Actions against Suppliers
○ Remedies and Enforcement Part 5-4
○ Remedies and Enforcement Part 5-4 Div 2
○ Indemnification of suppliers by manufacturers
● Product Liability – Part 3-5 ACL
○ This final part looks briefly at Part 3-5 of the ACL which is based on the former Part VA of the Trade Practices Act to provide remedies against manufacturers and importers of defective goods.
○ An action can be brought against a manufacturer in respect of unsafe goods giving rise to:
○ Product liability general principles
○ Manufacturers Defences s 142 - Defences to defective goods action
○ Ryan v Great Lakes Council [1999] FCA 177
○ Graham Barclay Oysters v Ryan [2000] FCA 1099
○ Carey-Hazell v Getz Bros and Co (Aust) Pty Ltd [2004] FCA 853
Week 9: Australian Consumer Law Part 2
● A: Misleading or Deceptive Conduct
○ The general prohibition against misleading and deceptive conduct and conduct likely to mislead or deceive under s 18(1) of the ACL derives from the former s 52 of the Trade Practices Act 1974 (Cth).
○ Section 18 - Misleading or Deceptive Conduct
○ The broad reach of Section 18
○ The relevant audience
○ What conduct may be misleading?
● Unconscionable Conduct
○ Unconscionable conduct deals with transactions between dominant and weaker parties.
○ Unconscionable conduct within the unwritten law – s 20 (see also s 12CA ASIC Act)
○ Within the ‘unwritten law’
○ Unconscionable dealing in equity
○ Special Disability in Unconscionable Dealing
○ Unconscionable conduct in connection with goods or services: 21 (see also s 12CB ASIC Act)
○ Unconscionable conduct in connection with goods or services: s 22
○ What is statutory unconscionability? ASIC v Kobelt [2019] HCA 18
○ But see ACCC v Quantum Housing [2021] FCAFC 40
○ ACCC v Quantum Housing [2021] FCAFC 40 (Allsop CJ, Besanko and McKerracher JJ)
○ Damages under s 236
○ Other remedies under s 237
● Unfair Contract Terms
○ Meaning of consumer contract and small business contract
○ Meaning of ‘unfair’
○ Meaning of standard form contract
○ Remedies
○ Relevant provisions in the ACL
○ Section 23(1)-(3)
○ Meaning of small business contract
○ Meaning of “unfair” s 24
○ Burden of Proof that a term is ‘unfair’
○ Examples of Unfair Terms s25
○ Meaning of standard form contract def
○ Meaning of standard form contract continued
○ Unfair terms – exemptions
○ Remedies – Who will enforce the law?
○ Remedies – Who decides if a term is unfair?
○ Remedies – What action can NSW Fair Trading take if a contract term is unfair?
○ ACCC v CLA Trading - summary of key principles
○ Unfair terms and small business contracts - Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224
○ Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224
Week 10: Personal Property Securities Act 2009 (Cth) Part 1
● Personal Property Securities Act 2009 (Cth)
○ What is the PPSA?
○ Exclusions from the PPSA – section 8
○ Security interest def in personal property: common types of collateral
○ Formal classes of collateral under PPSA
○ PPSR Statistics – September 2018 quarter
○ PPSR Statistics – December Quarter 2023 [Inserted]
○ Types of security interests
○ Security interest: An interest in personal property
○ Security interests, title and the PPSA
○ Examples – where no security interest found
○ Security Interest in Leases
○ Security Interest in Retention of Title
○ Priority and Title under the PPSA
○ Deemed Security Interests
○ Case Example: Re Arcabi [2014] WASC 310
○ PPS leases – section 13
○ Case Example: Re Maiden Civil [2013] NSWSC 852
○ Maiden Civil
○ Re Maiden Civil
○ Significance of Maiden
○ Re Maiden Civil [2013] NSWSC 852 (Cont’d)
○ Flowchart of Re Maiden Civil (P&E) Pty Ltd
○ General Mapping of the PPSA Based on Re Maiden Civil
○ Case Example: White v Spiers [2014] WASC 139
○ Flowchart of Re Maiden Civil (P&E) Pty Ltd
○ White v Spiers: Was the hire agreement a security interest under s 12(1)?
○ Exclusions from a PPS Lease – section 13(2)
○ Purchase Money Security Interest (PMSI) – section 14
○ Preview: Attachment and Perfection of a Security Interest
○ Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 292 FLR 11
○ Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs & mgrs apptd)
Week 11: PPSA Part 2
● Personal Property Securities Act 2009 (Cth)
○ Attachment and Perfection – Steps to obtain ‘perfection’ of a security interest
○ Attachment of security interest – section 19
○ Example of Attachment – S19
○ Attachment – S19
○ Case Law on Attachment
○ Attachment – Rights in collateral
○ Rights in collateral – Re Maiden Civil [2013] NSWSC 852
○ Enforcement against third parties (section 20)
○ Requirements for security agreements – section 20(2)
○ Perfection rules
○ Attachment and Perfection
○ Why is perfection important?
○ Failure to maintain perfection
○ Problems with perfection
○ Default Priority Rules (section 55)
○ Special Priority Rules
○ Priority Rules and Proceeds
○ Priority Rules – PPSA v Non-PPSA Interests
○ Priority of PMSI
○ Reminder – what is a PMSI def?
○ Priority Summary - priority order/ priority table
○ Taking Free Provisions
○ Taking Free Provisions
○ Taking Free Provisions
○ Accessions and Comingling
○ Example PPS Bill explanatory memorandum – accessions and comingling
○ Comingling
○ Attachment to Proceeds of Sale
○ Attachment to proceeds of sale
○ Recent Development of PPSA – PPS Lease Change 2017
○ Recent Development of PPSA – ABN v ACN in registration
○ Hamersly Iron Pty Ltd v Forge Group Power Pty Ltd [2018] WASCA 163
● Vesting
○ White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014] WASC 139
Week 12: PPSA Part 3
● Overview: Enforcement of security interests under the PPSA
○ Chapter 4 of the PPSA
○ General enforcement provisions
○ Seizing collateral upon default – section 123
○ Disposing of collateral – section 128
○ Retaining the collateral – section 134
○ Redeeming collateral – section 142
○ Reinstating the security agreement – section 143
○ Recap: Operation of the PPSA
● Registration on the Personal Property Securities Register (PPSR)
● By taking control over the ADI account (but this method is only available if you’re the account bank taking security over a customer’s account held at your bank)

Week 1: What is Commercial Law and History of Equity

The Codification of Commercial Law’
- Historical Context:
  - Codification has a long history, with mixed success in various jurisdictions. Understanding past attempts can inform current efforts.
- Arguments for Codification:
  - Clarity and Certainty:
    - A code can provide clear and predictable rules, which are essential for business planning.
  - Accessibility:
    - Codification can make the law more accessible to non-lawyers and those unfamiliar with common law traditions.
- Arguments against Codification:
  - Rigidity:
    - A code may become rigid and unable to adapt to changing commercial practices.
  - Outdatedness:
    - There is a risk that the code may quickly become outdated in a fast-paced commercial environment.
- Drafting Considerations:
  - A successful code requires careful drafting to balance clarity with flexibility and to anticipate future developments.
- Role of the Judiciary:
  - Judges play a crucial role in interpreting and applying the code, ensuring that it remains relevant and adaptable.
- Conclusion:
  - Codification of commercial law is a challenging but worthwhile endeavour, requiring a cautious and flexible approach to maintain the balance between certainty and adaptability.
- What is Commercial Law
- Commercial Law def
  - rights and duties arising from the supply of goods and services in the way of trade
- Goods def
  - Personal property like cars, furniture, etc
  - Opposed to real property, which is land
- Founding of Modern Commercial Law
  - Influential role of Sir Edward Coke in the early 17th century;
  - Holt CJ — 18th century.
  - Mansfied CJ (pictured) is regarded as the founder of modern commercial law in the 18th
    - The 19th century - scholarly works and the passing of the Bills of Exchange Act 1882 and the Sale of Goods Act 1893 upon which Australian law was modelled.
- Sources of Commercial Law
  - Common Law
    - Contract — law relating to enforceable agreements
    - Tort — laws of misrepresentation and negligence
    - Bailment def — custody of goods for another
    - Agency — acting on behalf of another
    - Property law concepts — real property (land) personal property (goods and intangible forms of property)
  - Equity
    - Equitable property interests — interests in real or personal property, trusts
    - Doctrines of undue influence; unconscionability
  - Statute
    - Sale of Goods Act
    - Australian Consumer Law
    - Persona/ Property Securities Act
  - Voluntary Codes
    - Eg Banking Code of Practice
  - International conventions and model laws (eg United Nations
    - Commission on International Trade Law (UNCITRAL)
- Common Types of Commercial Dealings
  - Sale def
    - Littlewood’s Mai/ Order Stores Ltd v. IRC sale elements
      - (1) parties competent to contract;
      - (2) mutual assent;
      - (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and
      - (4) a price in money paid or promised.”’
    - Now defined in Sale of Goods Act 1923 (nsw)
  - Lease:
    - Finance lease def
      - a form of finance or loan to pay to use an asset for most of its economic lifetime.
      - The lessee is treated as the owner in its balance sheet and can benefit from the depreciation of the asset for tax purposes, and may acquire ownership at the end of the lease so enjoys benefit, control and risk of asset.
    - Operating lease def
      - The lessor is the owner of the goods and the lease term is typically less than the useful life of the goods, so the lessee can return the goods at the end Of the lease.
      - Often office supplies
  - Licence
  - Bailment def
    - ‘A bailment comes into existence upon delivery of goods of one person, the bailor, into the possession of another person, the bailee, upon a promise, express or implied, that they will be re-delivered to the bailor or dealt with in a stipulated way.’ Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, 238 (Windeyer J).
    - Can only arise in relation to chattels, not choses in action.
    - Chattels def / chattel def
      - Property other than land
  - Hire/purchase def
    - Similar to finance lease, often shorter
  - Consignment def
    - A consignment is in essence an arrangement whereby an owner sends goods to another on the understanding that the other person will sell the goods to a third party of behalf of the owner and pay the proceeds to the owner once sold, less any agreed compensation.
- Business Finance — some ways businesses obtain finance
  - Secured loans def
    - (from bank, finance company or other lender and can be with a single lender (bilateral facility) or with a group of lenders (syndicated loan or club loan).
  - Unsecured loans def
    - money given with no interest taken by the lender over any property
  - Debt financing def
    - investment securities issued by mostly large companies where the company raises money by selling debt instruments so that the investor becomes a creditor and the company promises to repay an amount and return at a particular time in the future e.g. bonds such as debentures and notes).
  - Equity financing def
    - raising money by selling shares in the business (does not have to be repaid — injects capital).
  - Receivables financing def
    - raising money against amounts owed to a company by its customers.
    - Factoring — company sells its receivables to a third party (factor) generally for 70-90% of value upfront, rest upon collection by factor from customers at maturity, less a fee.
    - Invoice discounting — similar to factoring but the company remains responsible for collection
    - Asset-based lending loans made against receivables, not a sale of receivables.
  - Securitisation def
    - selling a portfolio of loans (like mortgaaes) to an issuer (special purpose vehicle) which funds it b issuing tradeable interest-bearing securities that are sold on capital markets to investors. See text at [2.190]
  - Specialist finance (project finance, trade finance, bridging finance, aircraft finance etc.)
  - Overdraft - loan.
- Basic types of security interest given over property in return for finance recognized at common law:
  - Regulated by Personal Property Securities Act 2009 (Cth)
    - Mortgage
    - Pledge
    - Charge
    - Lien
- Mortgage elements
  - Handevel Pty v Comptroller of Stamps (Vic) (1985) CLR 177, 192.
  - There must be:
    - A promise by the mortgagor to repay money or obligation to the mortgagee;
    - As security for the obligation, the mortgagee must transfer property to the mortgagee;
    - The transfer must be subject to the proviso that if the mortgagor repays, the mortgagee will retransfer the property back:
  - Waldron v Bird [1974] VR 497 per Gillard J at 501
- Chattel Mortgage def
  - A chattel mortgage refers to a finance agreement that provides funds to purchase goods.
  - In such an interest, the security for the lender (mortgagee) involves the passing of title in the property to the mortgagee from the borrower (mortgagor): Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28
- Pledge def
  - A pledge is a form of bailment.
  - The debtor/ pledgor gives possession of property owned by the debtor to a creditor (the pledgee) to secure a debt or other obligation.
  - Ex parte Official Receiver in re Morritt (1886) 18 QBD 222
- Charge def
  - A charge has been described as “the appropriation of real or personal property for the discharge of a debt or another obligation, without giving the creditor either a general or special property in or possession of the subject of the security.”: Fisher and Lightwood (2005) at [1.6]
  - It is a common law security interest held by a lender over the personal property of a company.
  - The charge is pursuant to agreement where the the interest is given by the owner (the chargor) to the lender (the chargee) to secure payment of a debt or obligation.
  - A charge creates a contractual right to enforce the security interest upon the happening of an event, such as default or insolvency by creating a right to get a court order for sale of the property.
  - The charge can be described as “fixed” over identified property or “floating” in the sense that it floats over assets such as trading stock that the business is free to use until an event triggers its crystalising.
- Fixed Charge def
  - A fixed charge attaches to specific and identified assets of the company.
  - The chargor retains ownership of the assets however, if the chargor defaults in repayments or its obligations, the chargee can enforce payment of the loan through its rights of sale and use of the proceeds of the sale of the asset.
- Floating charge def
  - A floating charge ‘floats’ over all company assets, present or future, or certain categories of assets.
  - The assets are non-specific in that they may change over the duration of the charge, for example, stock in trade or accounts receivable.
  - The company may use the assets in its business and it only becomes fixed in the event of a triggering event such as default in payment.
- Lien def
  - A lien is “a right conferred by law upon a person to retain possession of or to have a charge upon the real or personal property of another until certain demands are satisfied”: Fisher and Lightwood (2005) at [1.10]
  - A lien is functionally like a charge except that it does not arise by agreement for value but by operation of law.
Eight Principles of Commercial Law
- Party autonomy
  - A party is entitled to the benefit of his bargain and to the strict performance of conditions of the contract, whether they relate to the time of performance or the description or quality of what is to be tendered as performance.
  - Only where contract terms are so restrictive, oppressive or otherwise incompatible with society’s goals as to offend against the public interest should the courts intervene to curb the sanctity of contract
  - Caveat emptor
- Predictability
  - A reasonable degree of predictability is needed in the commercial world because so much planning and so many transactions, standardised or high in value, are undertaken on the basis that the courts will continue to follow the rules laid down in preceding cases.
- Flexibility
  - Business requires that law accommodate new practices and developments on the other.
- Good faith
  - In civil law jurisdictions the duty of good faith is inherent not only in contractual but in pre-contractual relationships.
- The encouragement of self-help
  - Acceleration clauses can be invoked, contracts can be terminated or rescinded, goods repossessed, liens and rights of contractual set-off exercised, receivers and managers appointed and securities realised, all without any need for judicial approval, the only limiting factor (in the absence of special legislation) being that one must not commit a breach of the peace.
- The facilitation of security interests
  - More favorable than Civil Law
  - Security can be taken over almost any kind of asset, tangible or intangible, usually with little or no formality; it can cover present and future property without the need for specific description; and it can secure present and future indebtedness.
- The protection of vested rights
  - a general feeling that an owner should not lose his property without fault;
- The protection of innocent third parties.
  - that innocent buyers (including incumberancers) should be protected against proprietary rights of which they have no notice, in order to ensure the free flow of goods in the stream of trade.
The Nature of Personal Property
- INTRODUCTION
  - personal property def
    - ”comprises all recognised types of property other than “real property” (land)
    - Includes intangible property (eg, rights, such as intellectual property)
  - Introduction: Some Theses on Property
    - 1. Property is that which is owned.
    - 1. States extend their possessions in the same way as individuals; so do tribes and communities.
    - 1. The distinction between private ownership and public ownership is not central or even important for a general theory of ownership, or for a discussion of many of its social effects.
    - 1. All ownership, and therefore all property, is in an important sense private or privatising.
    - 1. In discussing the core meaning of the concept of ownership or of property, it is not useful to import differences between different types of owners or changes in some of the social functions and importance of property in the core concept of property itself.
    - 1. In all societies, there are things that are owned, that constitute property that is in our sense private, and things that are not.
    - 1. There are no natural eternal necessities in the matter of the scope of ownership, although the physical capacity to control may vary over time as a result of both technological and political change.
    - 1. There are and there have been no enduring social owners or rules whose power over their property is logically absolute.
    - 1. In law and social life, ownership is a burden as well as a privilege, a responsibility as well as an advantage.
    - 1. The rights and powers conferred by ownership are not and never have been indefeasible or unlimited, in law or in administrative reality.
    - 1. Ownership, even in its core meaning, is not a logical simple
- Yanner v Eaton (1999) 201 CLR 351
  - the High Court of Australia considered the different conceptions of “property”, particularly in terms of the legal relationship with a “thing”
  - In that case, the appellant was an aboriginal man who had killed two animals for his own consumption
  - He was charged with taking “fauna” from the area without a licence, which was alleged to be in contravention of statute which made all “fauna” “property” of the Crown.
  - Because “property” is a comprehensive term it can be used to describe all or any of very many different kinds of relationship between a person and a subject matter
  - Difficulties
    - First, there is the difficulty in identifying what fauna is owned by the Crown.
      - If it leaves border does crown still own it, or any fauna ever crossing border is owned?
    - Secondly, what exactly is meant by saying that the Crown has full beneficial, or absolute, ownership of a wild bird or animal?
      - As Holmes J said in Missouri v Holland: “Wild birds are not in the possession of anyone; and possession is the beginning of ownership”
    - Thirdly, the property rights of the Crown would come and go according to the operation of the exception contained in s 7(1) of fauna taken or kept “otherwise than in contravention of this Act during an open season with respect to that fauna”.
    - Fourthly, it is necessary to consider why property in some fauna is vested in the Crown
- Meagher Gummow & Lehane’s Equity: Doctrines and Remedies
  - Often, “property” is used to refer to any object, tangible or abstract, which is owned or is otherwise the object of property rights.
  - Property rights def
    - rights in rem, are rights that the holder has against other persons in respect of the thing.
    - distinguished in the law from purely “personal rights”, or rights in personam which are rights available against a particular person or persons only and not in respect of a “thing” (property)
    - Minimum elements of property rights: National Provincial Bank Ltd v Ainsworth [1965] AC
      - it must be definable,
      - identifiable by third parties,
      - capable in its nature of assumption by third parties,
      - and have some degree of permanence or stability.
    - Rights commonly associated with property are the right to exclude others, to transfer or assign the property, and the right to use and enjoy the property: see for example Milirrpum v Nabalco (1971) 17 FLR 141
  - Right to exclude def
    - The right to exclude or allow access to a thing is one of the hallmarks of a proprietary right.
  - Right to use def or enjoy
    - It is related to the right to exclude in the sense of affording valuable rights such as the right to license use of, or access to personal
  - Right to transfer or assign: alienability def
    - the ability to transfer or dispose of the right.
    - R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327
      - is not in all circumstances an essential characteristic of a right of property and that by statute some forms of property are expressed to be inalienable
- Value a system of proprietary interests
  - (a) The power to recover the property, the subject of the interest or the income there of (ie, a “property right”) compared with the recovery of compensation from the defendant payable from no specific fund;
  - (b) The power to transfer the benefit of the interest to another;
  - (c) The persistence of remedies in respect of the interest against third parties who thus assume liability thereto; and
  - (d) The extent to which the interest may be displaced in favour of competing dealings by the grantor or others which interests in the subject matter (ie, priorities)
- Bundle of right
  - JT International SA v Commonwealth of Australia [2012] HCA 4
  - ‘property’ generally refers to ‘a legal relationship with a thing’ and in many cases is helpfully described as ‘a bundle of rights’
  - McCaughey v Commissioner of Stamp Duties (1945) 46 SR (NSW) 192
    - Each separate piece of property consists of a bundle of proprietary rights relating to a particular object, including rights of administration and rights of enjoyment, the totality of which may be vested in a single person, or may be divided amongst a number of persons, as for example when they are shared by several who together own them all, jointly or in common”
- Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22
  - Farah’s procurement of the acquisition by Mrs Elias and her daughters of their units in No 15 while not disclosing to Say-Dee why the acquisition of No 15 was advantageous in view of Council’s refusal to permit the redevelopment of No 11 without adjoining properties being involved, and hence failing to get Say-Dee’s informed consent to the acquisition
  - The information which the Court of Appeal considered Mr Elias had learned falls into none of these categories
  - Test was Barnes v Addy
- Classification of property in the Australian legal
  - Property in the common law
  - Types of Personal property
    - Chose def
      - Thing or item
    - Chattels real
      - obselete
    - Chattels personal
      - Choses In Possession of
      - Choses In Action of (a right to)
        
        Legal chose or Equitable chose
        
        and
        
        Pure intangibles or Documentary intangibles
        
        Negotiable instruments (transferrable)
  - Choses in Posession def
    - “tangible, moveable and visible and of which possession can be taken”:
      - Armstrong DLW GmbH v Winnington Networks Ltd [2013] Ch 156 at [44]
    - Fixtures and identifying whether moveable or affixed to the land
      - The ultimate question, when determining whether on common law principles goods brought onto the land have become a fixture and thus part of the land, remains one of the objective intention with which the item was put in place, having regard to the degree and object of annexation of the item:
        
        TEC Desert Pty Ltd v Commissioner of State Revenue [2010] HCA 49 at [24]
- Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA 30
  - concerned competing claims to a number of items of mineral processing plant and equipment which were located on a property owned by the respondents in New South Wales
  - The land had been sold by receivers with various items of mining and processing equipment inside a large shed and other items outside of the shed, including rollers, hoppers and crushers.
  - Principles Addressed
    - The case discusses the law of fixtures, emphasizing the ancient maxim “quicquid plantatur solo, solo cedit” (what is affixed to the ground belongs to the ground), its Roman law origins, and its evolution in common law.
    - It highlights the historical context and evolution of fixture law, from prioritizing physical annexation to considering the purpose or intention behind annexation.
  - Key Points
    - Law’s Evolution: The law of fixtures has adapted over time, moving away from a strict emphasis on physical annexation towards considering the intention behind the annexation and the purpose of the chattel on the land.
    - Modern Application: The doctrine has been adjusted to suit modern needs, recognizing exceptions and shifting focus to the purpose or object of annexation, reflecting changes in societal and commercial practices.
    - Intention and Purpose: Whether an item becomes a fixture is primarily determined by the intention with which it was placed on the land and its purpose, including the degree of annexation and the object of annexation.
  - Factors Considered:
    - Courts consider various factors, including whether removal would damage the land or buildings, the mode and structure of annexation, and whether the item was intended to be permanent or temporary.
  - TEST - the purpose or object of annexation elements
  - Whether the attachment was for the better enjoyment of the property generally or for the better enjoyment of the land and/or buildings to which it was attached …
  - The nature of the property the subject of affixation …
  - Whether the item was to be in position either permanently or temporarily
  - Case Dependency:
    - The application of fixture law depends on the specific circumstances of each case, highlighting the complexity and nuanced nature of determining what constitutes a fixture.
  - Conclusion
    - The doctrine of fixtures remains a vital part of Australian law, evolving to address modern realities while maintaining its foundational principles.
    - The Agripower Barraba Pty Ltd v Blomfield case illustrates the law’s adaptability and the ongoing relevance of intention and purpose in determining the status of fixtures.
- Choses in Action def
  - Intangible and incorporeal
  - Torkington v Magee [1902] 2 KB 427
    - “Chose in Action” is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession
  - Purely personal rights are not a form of property.
    - Jack v Smail (1905) 2 CLR 684 a grocer’s licence under the Victorian Licensing Act 1890 was held to be a purely personal right and not a property righ
  - By the late nineteenth century, legislation such as bankruptcy legislation expressly defined “goods and chattels” as including choses in action, and courts accepted that choses in action were a form of property : see, for example, Colonial Bank v Whinney (1885) 30 Ch D 261
  - Four Chose classes - J G Starke QC
    - (i) debts of various kinds; debentures; dividends; rights to rent; annuities; negotiable instruments (including bills of exchange, promissory notes and cheques);
    - (ii) types of property not capable of physical possession such as shares, a fund in court, and option to purchase land or shares, policies of assurance and insurance, intellectual property; bills of lading and charterparties;
    - (iii) equitable rights to property such as a beneficial interest in a trust; reversionary interest in settled property or trust funds, or interests in a partnership, and
    - (iv) other rights enforceable by action such as those under contract or in tort, including claims for unliquidated damages; claims against directors or trustees for breach of duty or breach of trust; an assignor’s right to be indemnified by an assignee; a lessee’s claim for relief against forfeiture and other such claims.
- Characteristics of choses in action
  - Enforceability.
    - A chose in action must be capable of being enforced by the rightholder (or creditor) against the dutyholder (or debtor): Goldsbrough, Mort & Co Ltd v Tolson (1909) 10 CLR 470 at 479.
  - Incorporeal and intangible.
    - A chose in action is intangible and incorporeal. It is something which is not reducible to physical possession.
    - A chose in action is an “immaterial legal object”: Goldsbrough, Mort & Co Ltd v Tolson (1909) 10 CLR 470 at 479.41
  - Bare Right.
    - A chose in action confers only a bare right: Allgemeine Versicherungs-Gesellschaft Helvetia v Administrator of German Property [1931] 1 KB 672 at 703 per Slesser LJ (citing 2 Blackstone’s Commentaries 396).
- Legal choses in action def
  - Legal choses in action are those which were historically enforceable in a court of common law, such as a debt
  - Examples
    - Debt
      - “debt” is a contractual obligation that a debtor is obliged to pay money to the creditor which has been accepted as a form of property right - king v brown
    - Negotiable instruments (including bills of exchange, promissory notes and cheques):
      - Colonial Bank v Whinney (1886) 11 App Cas 426
- Equitable choses in action def
  - Equitable choses in action are those which were historically only recognised by a court of equity
  - The interest of the holder of an equitable interest in property is commensurate with their ability to compel the owner to recognise their interest and hold it for their benefit: see, for example, Glenn v Federal Commissioner of Land Tax (1920) 27 CL
  - Examples
    - share or interest in a partnership:
      - FCT v Everett (1980) 143 CLR 440
    - The interest of a beneficiary under a fixed trust:
      - Norman v FCT (1963) 109 CLR 9 at 30;
  - mere equity def
    - Mere equities are not proprietary rights, but are ancillary to them in the sense that they arise where a person has an equitable claim (such as a right to set aside a transaction for fraud, or undue influence, or a claim for rectification for mistake or part performance of a contract) which, if successful, will entitle the person to an equitable proprietary interest: see for example
      - Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265
  - Pure intangibles def
    - without any physical evidence of the right itself necessary to prove its existence.
  - Documentary intangibles def
    - a document (technically, itself, a chose in possession) is associated with the right and particular laws govern the transfer of the right by means of the dealing with the document.
    - nemo dat quod non habet (the nemo dat rule def) means that a purchaser cannot acquire title to property which the original owner from whom it was acquired did not possess.
  - Negotiable instruments
    - negotiable instruments enjoy a simpler system of transfer and the ability to transfer a title free of defect.
      - With negotiable instruments, however, the purchaser in good faith and for value acquires a title that is free from of all interests of which it had no notice at the time of the purchase, thus overriding the nemo dat rule that would otherwise apply if, say, a thief of the bill had sold it to the purchaser (or if the value in the instrument has instead been assigned as a mere debt).
- INTERESTS IN PERSONAL PROPERTY
  - Terminology of posesion, ownership, and title
    - Possession def
      - Factual and indivisible
      - Pysichal possession of property or greatest right to item
    - Ownership def
      - highest possible right or interest in a thing that a person can have
    - Title def
      - Relates to the “strength or quality” of the interest which a person claims to have to the property
    - Custody def
      - Custody is in fact not a true form of possession but exists where there is a physical holding of goods but does not of itself amount to possession at law:
      - DPP v Brooks [1974] AC 862;
    - Actual possession def
      - is generally taken to refer to physical possession or control of goods.
    - De facto possession def
      - de facto possession has title as against all the world save a person with a better title:
      - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2003] NSWCA 75
    - Legal Posession def
      - may be actual possession but can exist without it, such as where the owner’s employee, agent, licensee or bailee at will has physical possession.
      - having exclusive control over the goods and thus entitled to use those goods free from interference by any other person: see also Knapp v Knapp [1944] SASR 257 at 265
    - Constructive possession def
      - is said to arise where constructive delivery of goods is accepted as having been made without any change in the actual possession of the thing delivered, as in the case of delivery by attornment or symbolic delivery:
      - Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236.
  - Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 (Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ
    - Jurisdiction: High Court of Australia
    - Issue: Whether “delivery” under s 28(2) of the Sale of Goods Act 1923 (NSW) includes only actual delivery or also constructive delivery.
    - Key Points: The court interpreted “delivery” to encompass both actual and constructive delivery, aligning with the Act’s definition emphasizing the voluntary transfer of possession.
      - The ruling highlights the law’s adaptability in recognizing various delivery methods, thereby protecting third-party interests in transactions made in good faith.
    - Decision: The court affirmed that delivery within the legal context includes constructive methods, ensuring flexibility in the transfer of goods and safeguarding transactions involving third parties.
    - Significance: This case clarifies the scope of “delivery” in goods sale transactions, broadening the understanding to include non-physical transfers of possession, thus enhancing the protection for innocent purchasers.
  - Abandonment of possession and occupation of good
    - Abandonment def
      - possession (and also ownership) of chattels can be divested and thereafter acquired by someone else
    - Occupation is the successor act to the abandonment of a chattel
    - Occupation def
      - occurs when a person takes appropriate steps to possess a chattel following their abandonment by another, coupled with the intention to exercise control over it
  - Finder’s rights def
    - Generally, the rights acquired by a finder of a chattel will be superior to any other person other than the true owner.
    - Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 is early authority for the concept of a possessory title to goods in the hands of a finder.
      - Issue: The case addressed the rights of a finder of lost property and liability for property damage by an apprentice’s actions.
      - Facts: A chimney sweeper’s boy found a jewel and took it to a goldsmith for appraisal. The goldsmith’s apprentice removed the stones, offering the boy a small sum. The boy refused and demanded the jewel back, receiving only the empty socket.
      - Ruling: The court ruled the boy had the right to keep the jewel against all but the rightful owner and could claim damages. It held the master goldsmith liable for his apprentice’s actions, directing that damages be based on the value of the finest jewel that could fit the socket, presuming against the defendant for not producing the original stones.
- Parker v British Airways Board [1982] 1 QB 1004
  - Leading modern decision on the law of finding
  - Where the chattel is found on land occupied by another, the question will be whether there is evidence that the occupier has manifested a prior intention to exercise control over the premises and chattels found on the premises.
    - Case Name and Citation:
      - Parker v British Airways Board [1982] 1 QB 1004 (England and Wales Court of Appeal - persuasive in other jurisdictions but binding in England and Wales).
    - Procedural History:
      - Appeal to the Court of Appeal from a lower court decision.
    - Original Dispute:
      - Dispute over ownership rights to a gold bracelet found in an airport lounge.
    - Reason for Trial:
      - To determine the finder’s rights versus the occupier’s rights to lost property.
    - Material Facts:
      - Alan Parker found a gold bracelet in Heathrow Airport’s lounge and handed it to British Airways, requesting its return if unclaimed.
      - The airline later sold the bracelet.
    - Issue Raised:
      - Whether the finder of a lost item has rights to it against all but the true owner, including against the occupier of the premises where it was found.
    - Law(s)/Statute(s) in Contention:
      - Sale of Goods Act, principles regarding lost property and the rights of finders vs. occupiers.
    - Precedence:
      - Not specifically mentioned, but the case draws on common law principles regarding lost property.
    - Tests:
      - Examination of the intention to control the premises and items within by the occupier.
    - Words and Phrases Considered:
      - “Finder’s rights,”
      - “occupier’s rights,”
      - “constructive possession.”
    - Arguments:
      - Parker argued for the return of the bracelet or its value based on finder’s rights.
      - British Airways argued based on occupier’s rights.
    - Judges’ Thoughts:
      - The court sided with Parker, emphasizing the rights of the finder over the occupier in cases where the occupier does not manifest an intention to control lost items.
    - Legal Reasoning and Ratio Decidendi:
      - The finder of a lost item has rights to it against all but the true owner, and these rights prevail over the occupier’s unless the occupier has shown an intention to exercise control over lost items found on their property.
    - Result and Relevance:
      - Parker was entitled to the value of the bracelet.
      - This case reinforces the legal principle that finders have significant rights to lost property, clarifying the circumstances under which these rights are recognized over those claimed by property occupiers.
- Possession in Residential Premises
  - Generally, exclusive possession of residential premises will suffice to establish the required manifest intention of the occupier to possess all chattels found on those premises
    - Chairman, National Crime Authority v Flack (1998) 86 FCR 16
      - The AFP found a briefcase in a cupboard containing $433,000 during the course of the search for drugs from son.
      - AFP kept briefcase and would not return
      - The Federal Court found in favour of Mrs Flack (Heerey and Tamberlin JJ, Foster J dissenting).
      - The possession of private residential premises was held to be sufficient to establish the required intention to possess all chattels on those premises
      - Jurisdiction:
        
        Federal Court of Australia (Binding in federal jurisdiction; persuasive elsewhere)
      - Procedural History:
        
        Appeal judgment by HEEREY J.
      - Original Dispute:
        
        Involves the rights over chattels found on premises occupied by Mrs. Flack, specifically a briefcase containing cash discovered in her leased residential property.
      - Reason for Trial:
        
        Appeal concerning the possessory rights over found chattels, including unknown items, within the premises.
      - Material Facts:
        
        Mrs. Flack, as the tenant, manifested an intention to exercise control over all chattels on the premises, known and unknown, prior to the discovery of a briefcase with cash.
      - Issue Raised:
        
        Whether an occupier’s intention encompasses control over all chattels on the premises, subject to any superior right, even if unaware of their existence.
      - Law/Statute in Contention:
        
        Common law principles regarding possession and control over chattels found on an occupier’s premises.
      - Precedence:
        
        Comparison made with Parker v British Airways Board [1982] QB 1004 regarding occupier’s intention to control lost property.
      - Tests:
        
        Evaluation of the occupier’s manifest intention to possess or control chattels on the premises, irrespective of awareness of such chattels.
      - Arguments:
        
        Mrs. Flack argued for a broad intention to control, inclusive of unknown chattels, based on her occupancy and possession of the premises.
      - Judges’ Opinions:
        
        HEEREY J. concurred with principles from Parker v British Airways Board, emphasizing common sense in occupiers manifesting control over chattels within their premises.
      - Legal Reasoning:
        
        Occupancy and legal possession of premises were deemed sufficient for Mrs. Flack to manifest control over all chattels therein, regardless of her awareness of specific items.
      - Ratio Decidendi:
        
        An occupier’s legal possession of premises implies control over all chattels therein, known or unknown, barring superior claims.
      - Result:
        
        The appeal was dismissed, affirming Mrs. Flack’s implied control over the chattels, including the briefcase with cash found on her property.
      - Relevance to Modern Law:
        
        This case underscores the breadth of an occupier’s control over chattels within their premises, emphasizing the significance of occupancy and possession in law.
        
        It illustrates the application of common law principles to determine possessory rights in scenarios involving found property, contributing to the understanding of property rights in residential contexts
- Interference with possession
  - Trespass def
    - Trespass may be established where there has been interference with the actual possession of the plaintiff, whether the plaintiff be the true owner or not
  - Conversion elements
    - a positive wrongful act of dealing with goods in a manner inconsistent with the rights of the owner”:
    - Maynegrain Pty Ltd v Compafina Bank [1984] 1 NSWLR 258 at 264 (Privy Council).
    - the immediate right to possession of goods which has been interfered with or the mere fact of physical possession of a chattel gives the holder title to sue anyone in conversion except for someone with a superior title:
    - Jeffries v The Great Western Railway Co 119 ER 680
    - Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204
      - In that case, the respondent sold bulk wine to customers who provided their own bottles.
      - The appellant was a company which made wine and sold it in branded bottles over which it retained ownership.
      - The respondent had filled certain bottles for his brother which his brother had provided and sold the wine (but not the bottles) and delivered them to a third party, Mr Moon.
      - Material Facts:
        
        Penfold Wines maintains ownership of the bottles in which they sell their wine, never parting with the property in these bottles.
        
        They use invoices and bottle branding to inform customers that the bottles are lent, not given, and must be returned on demand.
        
        Elliott, the respondent, was accused of refilling these bottles with wine for his customers, including using Penfold Wines’ bottles, without causing confusion or misappropriation of the bottles’ identities.
      - Issue Raised:
        
        The legality of Elliott’s actions in refilling and using Penfold Wines’ branded bottles, which were not sold but lent to customers under conditions that retained Penfold Wines’ ownership.
      - Law(s)/Statute(s) in Contention:
        
        Common law principles regarding property rights, possession, and the torts of trespass and conversion.
      - Legal Reasoning and Judicial Opinions:
        
        Dixon J concluded there was no infringement upon Penfold Wines’ possession rights by Elliott.
        
        The acts of refilling the bottles and returning them to the customers who brought them did not constitute trespass, conversion, or any other wrong to possession or property.
        
        Trespass was dismissed as Elliott did not invade the possession of anyone, and conversion was ruled out as there was no act or intent by Elliott inconsistent with Penfold Wines’ right to possession.
      - Ratio Decidendi:
        
        The lawful possession of goods by delivery negates the possibility of being punished as a trespasser.
        
        In cases where goods are lawfully possessed through delivery, wrongful acts like conversion require an intent to deprive the true owner of their immediate right to possession, which was not present in Elliott’s actions.
      - Result:
        
        The appeal for injunction and other equitable relief sought by Penfold Wines against Elliott was dismissed.
      - Relevance to Modern Law:
        
        This case emphasizes the importance of clear property rights and possession in cases of chattels lent out for specific purposes.
        
        It underscores the necessity for a demonstrable intent to infringe upon the owner’s rights for actions to constitute conversion or trespass, highlighting the nuances in property law regarding possession and ownership rights over personal chattels.
  - Conversion does not apply to chose in action
    - OBG v Allan [2007] UKHL 21
      - Jurisdiction:
        
        United Kingdom, House of Lords (now the Supreme Court); binding in the UK.
      - Procedural History:
        
        This case reached the House of Lords, the highest court of appeal at the time, for final judgment.
      - Original Dispute:
        
        The dispute involved the tort of conversion, specifically whether it applies to intangible property such as contractual rights or debts.
      - Reason for Trial:
        
        The core legal question was whether the scope of the tort of conversion, traditionally applied to personal chattels, could be extended to include intangible assets.
      - Material Facts:
        
        The case focused on the wrongful actions of receivers who were argued to have interfered with a company’s contractual rights, among other assets.
      - Issue Raised:
        
        Can the tort of conversion be applied to intangible property, such as contractual rights, in addition to tangible personal property?
      - Law(s)/Statute(s) in Contention:
        
        Traditional common law principles of conversion which historically applied only to tangible chattels.
      - Precedences:
        
        Reference to historical cases and legislative acts such as the Factors Act 1889, Cheques Act 1957, and Insolvency Act, which modify or clarify the law of conversion for specific scenarios but do not extend it to intangible property.
      - Tests:
        
        The case did not introduce new tests but discussed the application of existing principles of conversion to intangible assets.
      - Words and Phrases Considered:
        
        “Conversion” in the context of property law, traditionally associated with tangible personal property, not intangible assets.
      - Arguments:
        
        The appellants argued for a broader interpretation of conversion that includes intangible assets.
        
        The House of Lords examined legislative history, common law principles, and the practical implications of such an extension.
      - Judicial Opinions:
        
        Lord Hoffmann led the discussion against extending conversion to intangible property, emphasizing strict liability’s traditional scope and legislative intent.
        
        Baroness Hale explored the logical extension of conversion to all forms of property but ultimately concurred with the majority.
      - Legal Reasoning:
        
        The House of Lords reasoned based on historical context, statutory interpretation, and the potential consequences of extending strict liability to intangible property, concluding that conversion remains confined to tangible personal property.
      - Ratio Decidendi:
        
        Conversion does not apply to intangible assets like contractual rights; it remains limited to tangible personal property.
        
        The decision reflects a cautious approach to expanding strict liability torts beyond their traditional scope.
      - Result:
        
        The claim in conversion for intangible property was unanimously rejected.
      - Relevance to Modern Law:
        
        OBG v Allan is a landmark case reaffirming the boundaries of the tort of conversion in English law.
        
        It illustrates the judiciary’s reluctance to extend strict liability principles to new domains without clear legislative guidance, underscoring the importance of tangible property in conversion claims.
        
        The case highlights the conservative nature of common law evolution concerning property rights and economic interests.
  - Detinue def
    - where the defendant has wrongfully detained the goods despite a lawful demand for the return of the goods
      - a plaintiff may sue in detinue if they were in actual possession of the relevant goods or had an immediate right to possession.
- Action on the case def
  - A plaintiff who does not have an immediate right to possession, but has a right of future possession, may bring an action on the case where the chattel has been destroyed or there is permanent damage to the chattel: Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204
Ownership
- Ownership def
  - Myerson v Collard (1918) 25 CLR 154 at 164
  - the object belongs to the person as his or her own absolute property, and that the person’s interest in the physical object in question is not confined to a mere contractual right (such as an option) which may or may not be exercised by the holder of that supposed right
- Joint ownership def
  - Property owned by multiple parties
  - Joint tenants of personal property share the four unities of possession, interest, title and time of commencement of interest.
  - Tenants in common share the unity of possession, but their title may differ in respect of their share.
- Equitable ownership and estate
  - equitable ownership def
    - a beneficial interest in property, where the equitable owner enjoys the benefits of ownership, even though the legal title may be in another’s name.
  - equitable estate def
    - an interest in property that is recognized by equity, but not by the common law
    - a broader category that includes any interest in property recognized and protected by equity, not limited to those with beneficial use.
- Title def
  - “title” to an interest (such as a claim of ownership) relates to the “strength or quality” of the interest.
  - Whilst conceptually distinct from ownership discussed above, in common usage, the word “title” is often used to refer to “ownership”.

Week 2:

What is property
- Whether it can be owned
- Is it capable of ownership
- Examples
  - Things - most things are property
  - Body parts
    - Henrietta Lacks and the HeLa cells
    - Moore v the Regents of the University of California (1990) 51 Cal 3d 120
  - Virtual or Digital Property
    - Items from MMORPGs, such as WoW
    - Oxford v Moss (1979) 68 Cr App R 183;
    - Dixon v The Queen [2015] NZSC 147
  - Data - USB stick and files
    - Physical element - data stick
    - Data - is the data property?
      - CCTV footage?
What is a property right
- Can we define it — Yanner v Eaton
  - Description of a collection of rights
- Bundle of Rights
  - Key ‘sticks’ in the bundle of the 11
    - Exclusive possession
      - Rights against the world - this is property def
    - Alienability
      - Right to transfer
  - People can hold different ‘sticks’ in the same item
    - Ex - lien
  - Property rights versus contractual rights
    - Parties to a contract versus binding everyone
    - ’ It denotes that the your rights are enforceable against persons generally.
    - In other words, it denotes that the right is against the world at large
    - Property - In rem and Contract - in personam
Taxonomy of property
- The most basic two categories of property are real and personal property
  - Private property
    - Real property
      - This category encompasses everything to do with land.
      - Think ‘real estate’ and ‘real estate agent’
        
        Corporeal – tangible
        
        Incorporeal - intangible
    - Personal property
      - This category encompasses everything that is not real property
        
        Tangible – also known as a chose in possession or as a chattel
        
        Intangible – also known as a chose in action
      - In part 1 of this lecture we saw examples of both:
        
        tangible = cup or phone;
        
        intangible = debt or intellectual property or maybe(?) data.
      - Commonly new forms of property come within this category.
  - Legal and equitable
    - Most forms of property can be owned both at law and in equity
    - There are some exceptions:
      - there are, for example, some forms of property that are purely equitable
- Relativity of Title
  - Multiple people may have claims of differing strength to a particular piece of property at the same time.
  - If more than one person claims a certain property the question of who might be entitled comes down to the question of what kind of interest they have
  - Three concepts:
    - Possession
    - Ownership
    - Title
- Possession/ownership/title
  - Possession — usually physical (or constructive) possession. Possession is immediate control.
    - The property is in your control. So if the property i a cup, you possess if you control it, eg holding it or putting in your cupboard
  - Ownership — The person who has the better right to the property.
    - Ownership is more permanent. The cup is yours permanently. Contrast: ‘l own a cup (l bought and paid for it)’ with ‘you are holding my cup’. You have possession (physical control), I have the right to the cup (l own it). I can take it back from you.
  - Title. This tends to be used interchangeably with ownership — we usually use this word in the context of valuable property (car, house).
    - I own the car. I have title to it.
    - Title can also refer to the document which evidences that you own something. Title deeds to your house.
  - Possessory title - ownership based on possession
    - If not claimed after turning over to the police, then you have possessory title.

Week 3: Equitable Interests In Property and Trusts

Equitable Interests
- Characteristics of choses in action
  - Enforceability
    - A chose in action must be capable of being enforced by the rightholder (or creditor) against the dutyholder (or debtor):
      - Goldsbrough, Mort & Co Ltd v Tolson (1909) 10 CLR 470 at 47
  - Incorporeal and intangible.
    - A chose in action is intangible and incorporeal.
    - It is something which is not reducible to physical possession.
    - A chose in action is an “immaterial legal object”:
      - Goldsbrough, Mort & Co Ltd v Tolson (1909) 10 CLR 470 at 479.41
  - Bare Right.
    - A chose in action confers only a bare right:
      - Allgemeine Versicherungs-Gesellschaft Helvetia v Administrator of German Property [1931] 1 KB 672 at 703 per Slesser LJ (citing 2 Blackstone’s Commentaries 396).
- Legal and equitable choses in action
  - Choses in action remained classified as legal or equitable and governed by the relevant legal or equitable principles:
    - Loxton v Moir (1914) 18 CLR 360 at 368
    - Claims and rights and remedies ONLY recognized through development in Chancery Courts - historically in personam
      - Equitable doctrines or principles
      - Equitable interests in property
      - Equitable remedies
  - Legal choses in action def
    - Legal choses in action are those which were historically enforceable in a court of common law, such as a debt.
  - Equitable choses in action def
    - Equitable choses in action are those which were historically only recognised by a court of equity.
    - All forms of equitable property interest are therefore by definition choses in action, being actions enforceable in a court of equity and not having a physical
    - the relationship between the right and the remedy is central to the nature of the equitable right
  - Commissioner of Stamp Duties (Qld) v Livingstone [1965] AC 694
    - the issue was whether the beneficiary under the will, Mrs Coulson, having such an interest in an unadministered estate, had a beneficial interest in property in Queensland for the purposes of attracting succession duty under the Succession and Probate Duties Acts 1892 (Qld)
    - It was held that that interest was not relevantly a beneficial interest, whilst transmissible by will, in property.
    - The QLD Succession and Probate Duties Acts 1892 levied duty “upon every devolution by law of any beneficial interests in property” being an interest in real or personal property situated in QLD.
    - Mrs Coulson died in NSW but the time of her death was entitled to 1/3 share in the residue of her deceased husband’s unadministered estate which included real and personal property in both QLD and NSW.
    - The Stamp Duties Commissioner for QLD sought to tax Mrs.
      - Coulson’s estate in QLD (succession duty) on the basis that Mrs Coulson died owning a proprietary interest in real and personal property in Queensland.
    - The Privy Council held that Mrs Coulson had no proprietary rights in equity.
      - She only had a right to compel due administration of her husband’s estate that was a personal right.
      - Accordingly, no succession duty was payable.
  - Mere equities are not proprietary rights, but are ancillary to them in the sense that they arise where a person has an equitable claim
    - (such as a right to set aside a transaction for fraud, or undue influence, or a claim for rectification for mistake or part performance of a contract)
  - which, if successful, will entitle the person to an equitable proprietary interest:
    - see for example Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265
  - An equitable interest in real or personal property, whether by way of an equitable estate or an equitable security interest, can be created by agreement or declaration or imposition of a trust, or by court order.
- Pure and documentary intangibles
  - pure intangibles and
    - can exist without any physical evidence of the right itself necessary to prove its existence.
      - debt
  - documentary intangibles
    - have a recognised form of documentary representation, such as cheques, bills of lading, bills of exchange and promissory notes
    - “negotiable instruments”
      - the right to be transferred by delivery of the document in accordance with the relevant requirements of indorsement or other statutory provision
      - Examples include
        
        bills of exchange,
        
        cheques and
        
        promissory
      - negotiable instruments enjoy a simpler system of transfer and the ability to transfer a title free of defect.
        
        the purchaser in good faith and for value acquires a title that is free from of all interests of which it had no notice at the time of the purchase, thus overriding the nemo dat rule that would otherwise apply if, say, a thief of the bill had sold it to the purchaser (or if the value in the instrument has instead been assigned as a mere debt).
- History and Nature of Equitable Interests in Property
  - Commissioner of Stamp Duties (Qld) v Livingston [1965] 1 AC 694, 712: ‘Equity… calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required to give effect to its doctrines.’
  - Equitable property rights can vary in terms of the characteristics of transmissibility, priority, permanence, the remedies available to enforce them, and other matters.
  - Equity at all times presupposes the existence and validity of the common law and legal rights to property, but recognises additional rights to that property
    - Some claims for equitable relief are not property rights at all – they are simply personal rights.
- Hierarchy of Equitable Interests
  - Equitable Proprietary Interests
  - Mere Equity
  - Personal Equity (not a property right)
- Equitable Proprietary Interests
  - All equitable interests in property are choses in action – intangible rights with respect to property owned by another.
  - Bind the holder of the legal interest and volunteers, but not a purchaser for good faith without notice.
  - Transfer of the legal property to a third party for value without notice (actual, constructive or imputed) of the equitable interest, will destroy the underlying equitable interest.
  - Registration of the legal interest over Torrens land on the register by a purchaser affords the purchaser ‘indefeasibility of title’ unless an exception to indefeasibility (such as fraud) applies.
  - Created less formally
- Creation of Equitable Interests in Property
  - Equitable interests can be created by:
    - 1.Agreement i.e. intentionally;
    - 2.By express trust;
    - 3.By operation of law: e.g. by court order as a remedy
    - 4.By implication of law: e.g. resulting trust, equitable lien
- Examples of equitable proprietary interests
  - Interest of a partner in assets of a partnership:
    - Canny Gabriel Castle Jackson Advertising Pty ltd v Volume Sales Finance Pty Ltd (1974) 131 CLR 321, 327-328.
  - Equitable interests created by creation of security interests in property – e.g. an unregistered mortgage will be treated as an equitable mortgage.
    - J H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546.
  - An equitable charge arising from contractual agreement that property be held as security for a debt.
  - The interest of a beneficiary under a fixed trust (not a discretionary trust)
  - The trustee’s right to be indemnified from trust assets in respect of properly incurred trust expenses
  - A restrictive covenant over land:
    - Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 which established that there are occasions in which equitable covenants can bind future purchasers of property and ‘run with the land’.
- The equitable proprietary interest of a beneficiary under a fixed trust
  - A trust can be defined as a relationship between a person known as the trustee, who undertakes to hold property, of which it is the legal owner, exclusively for the benefit of others, known as the beneficiaries.
  - A trust is not a company and has no separate legal entity – it is an undertaking recognised in equity to give a proprietary interest in the beneficiaries.
  - Requires three certainties:
    - Certainty of intention (to create a trust)
    - Certainty of subject matter (any presently existing legal or equitable property)
    - Certainty of object (the identity of the beneficiaries)
  - The right of a beneficiary under a fixed trust is regarded as the highest form of equitable proprietary right.
    - A fixed trust has a trust instrument which determines beneficial shares.
- Beneficial interest in a fixed trust compared to a discretionary trust
  - The interest of a beneficiary under a fixed trust is determined by the trust instrument.
    - This is an equitable proprietary interest.
  - Under a discretionary trust, the trustee has a discretion to choose who of a class of beneficiaries to pay.
    - No beneficiary has any interest in trust assets unless or until they are selected.
    - Therefore the only right is a personal right in equity, to compel proper administration of the estate by the trustee. E.g., discretionary legatees under a will have only a right to be considered by the executor for the purposes of the administration of the estate: Gartside v. IRC [1968] AC 553 House of Lords.
- Personal Equity/personal rights
  - A personal equity is simply the basic right of access to a court of equity of a plaintiff seeking equitable remedies that are not a proprietary remedy.
  - Not a proprietary right at all:
    - not an interest in property.
  - Incapable of assignment
  - Does not attach to particular assets
  - National Provincial Bank v. Ainsworth [1965] Ac 1175 at 1238; 2 All ER 472 at 488 per Lord Upjohn:
- Importance of understanding the nature of the equity –is it proprietary or not
  - The nature of the equity can be important for questions such as taxation, liability to duty, or in a priority dispute with other interests.
  - For example:
    - Baker v Archer-Shee [1927] AC 844
    - Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694
    - Latec Investments v Hotel Terrigal Pty Ltd (1965) 113 CLR 265.
- Baker v Archer-Shee [1927] AC 844
  - An American citizen left the residue property to his daughter, the wife of Lord Archer-Shee, on trust.
  - The property consisted of foreign securities, stocks and shares and income from it was paid into an American bank account.
  - The issue was whether Lord Archer-Shee was liable to pay tax on the income and whether her right under the will was “property”.
  - The House of Lords held that it was a “proprietary right”, not merely a personal right against the trustee and accordingly, the income was taxable.
- Latec Investments v Hotel Terrigal Pty Ltd (1965) 113 CLR 265
  - Hotel Terrigal was the owner of a hotel which was mortgaged to Latec Investments.
  - Hotel Terrigal defaulted on its mortgage obligations and Latec Investments had an equitable power of sale under the mortgage which it exercised and sold the property to Southern Hotels, which was a totally owned subsidiary of Latec.
  - To raise money Southern gave an equitable interest to MLC as security by way of a floating charge over the hotel property.
  - Following the default of Southern, the floating charge crystallised.
  - 5 years after the sale, HT sought to set aside the sale as a fraudulent exercise of the mortgagee’s power of sale.
  - The HC held that, although the mortgagor was entitled to an order setting aside the sale this interest was a “mere equity” which did not compete in a priority competition with the equitable proprietary interest of MLC under its charge.
  - Jurisdiction:
    - Supreme Court of New South Wales, Equitable Jurisdiction
  - Procedural History:
    - Appeal from the decree of the Supreme Court of NSW setting aside a sale and transfer of land under the Real Property Act due to non-compliance with the Money-lenders and Infants Loans Act, and fraud in the exercise of the mortgagee’s power of sale.
  - Original Dispute:
    - Concerned the enforceability of a mortgage and the validity of a sale under a mortgagee’s power of sale.
  - Current Reason for Trial:
    - To determine if the sale could be set aside due to alleged fraud in the exercise of the mortgagee’s power of sale.
  - Material Facts:
    - The mortgagee lent money to the mortgagor, securing the loan with a mortgage over land including Hotel Terrigal.
    - The mortgagee, upon learning of potential interest in the property, decided to sell it to a subsidiary, setting up an auction perceived as not genuinely intended to sell the property but to justify a sale to the subsidiary.
    - The sale was conducted without real intention to obtain a fair price, aiming instead to transfer the property to the mortgagee’s subsidiary.
  - Issue:
    - Whether the sale of the mortgaged property was conducted in fraud of the mortgagor, justifying the setting aside of the sale.
  - Law/Statute in Contention:
    - Real Property Act, 1900-1956 (N.S.W.), sections regarding the indefeasibility of a registered title, and equitable principles concerning mortgagee’s sale.
  - Precedence:
    - Cited previous decisions on the principles of mortgagee’s sales and fraud.
  - Judicial Opinions:
    - Kitto J., leading the opinion, found the sale was not in good faith but constituted fraud against the mortgagor. The appeal was allowed, with the sale to the subsidiary and the subsequent dealings based on it being disrupted.
    - Emphasized that mortgagees are not obligated to obtain the highest possible price but must act in good faith, concluding the sale was a pretense.
  - Legal Reasoning/Ratio Decidendi:
    - The exercise of the power of sale by the mortgagee in favor of its subsidiary, without genuine efforts to obtain a fair market price, constituted fraud against the mortgagor.
    - The court would have normally set aside the sale, recognizing the mortgagor’s right to redeem the property, but due to the delay in asserting this right and intervening interests, considerations were given to the positions of other parties affected by the sale.
  - Conclusion and Relevance to Modern Law:
    - The appeal was allowed; the court made declarations respecting the rights of the parties involved, acknowledging the mortgagee’s and the trustee’s charges over the property, but also the mortgagor’s eventual right to challenge the validity of the mortgagee’s actions under certain conditions.
    - This case emphasizes the necessity of good faith in the exercise of a mortgagee’s power of sale and outlines the consequences of a failure to act within this boundary, illustrating the balancing act courts perform between competing equitable interests.
  - Focus for Notes:
    - The principles guiding the exercise of a mortgagee’s power of sale, especially the requirement of good faith and the potential for a sale to be set aside as fraudulent.
    - The interaction between legal principles and equitable interests when a sale is challenged for not being conducted in good faith.
  - Role of Equitable Proprietary Interests in Commercial Law
    - Personal property is now the most significant form of wealth in modern economies.
    - Trade and investment in choses in action includes both legal choses in action and equitable choses in action.
    - Of particular importance in Australian commerce is the commercial use of the trust as an investment and profit making enterprise, where the investors are beneficiaries in the trust and where the trustee manages trust property with a view to making profit for investors.
  - Advantages to the use of such trading or commercial trusts include taxation:
    - generally trust not taxed as an entity so may make distributions of profits in gross (and losses) to beneficiaries who may be taxed at a lower rate, and distributions of capital.
    - There are further structural advantages – far less regulated than corporations.
  - For further information see: N D’ Angelo Transacting with Trusts and Trustees (LexisNexis Australia 2020)
- The Use of the Commercial Trust under Australian law
  - Superannuation:
    - all superannuation funds are highly regulated forms of trusts.
    - Employees members have an interest in the trust property, rights which are defined by contract.
  - Managed Investment Schemes:
    - almost all in the form of a public unit trust.
    - For example, real estate investment trusts (which if they meet relevant criteria are regulated under Part 5C of the Corporations Act.)
  - Trading trusts
    - generally taken to mean a trust (either a unit trust or discretionary trust) where the trustee is given power to carry on business activities with trust assets and functions as an alternative to a corporation.
    - Usually the trustee is a corporate entity with nominal value.

Week 4: Bailment and Agency

Bailment
- Bailment def
  - ‘A bailment comes into existence upon delivery of goods of one person, the bailor, into the possession of another person, the bailee, upon a promise, express or implied, that they will be re-delivered to the bailor or dealt with in a stipulated way.’:
    - Hobbs v Pe tersham Transport Co Pty Ltd (1971) 124 CLR 220, 238 (Windeyer J).
  - The voluntary assumption of possession is key; there must be knowledge of the goods and the bailee’s consent to hold them:
    - WD & HO Wills (Aust) v State Rail Authority of New South Wales (1998) 43 NSWLE 336, 353-4.
- Bailment terminology
  - Bailor: party who gives possession of goods to another
  - Bailee: takes possession but not ownership of goods
  - Sub-bailee: takes possession from bailee
  - Can only arise in relation to chattels, not choses in action.
  - No intention that there will be a transfer of ownership: typically involves keeping the goods for safe custody or transporting the goods, or doing something to the goods and returning them.
  - Can be for reward or gratuitous
- Types of bailment: bailment for reward
  - Bailee is paid for taking custody or control of goods.
  - Custody for reward. eg: carparks – if car left in custody and control of the carpark owner.
  - Hire of work and/or labour: eg
    - agistment of cattle on land if cattle left in the custody and control of the landowner: see
      - Big Top Hereford Pty ltd v Gavin Thomas [2006] NSWSC 1159;
    - Car left with a mechanic for repairs;
    - drycleaners;
    - Furniture movers.
  - Pledge – eg pawnbroker: Palgo Holdings Pty Ltd v Gowans (2005) 215 ALR 253 [17].
  - Hire-purchase – delivery of goods from the owner to the hirer who holds them for use by the hirer
- Types of bailment: gratuitous (no consideration)
  - Gratuitous bailments arise where the bailee is not paid for taking possession of the property and the bailment is terminated on demand. Eg:
    - Deposit – delivery of goods for gratuitous safekeeping by the bailee
    - Mandate – delivery of goods for work to be done on the goods without reward
    - Loan – delivery of goods for use by bailee under gratuitous loan. Eg when a person lends their car to another to use and return.
  - Other examples:
    - Under a sale of goods where title to property does not pass with transfer of possession, such as where there is a Romalpa clause and title will not pass until payment made in full: Hospital Products Ltd v United States Surgical Corp (1985) 156 CLR 41, 105. Purchaser a bailee until payment;
- Bailment vs Licence
  - A licence is a grant of permission to another to do something and includes a grant of permission to another use property or leave goods at property without an acceptance by the licensor of control over or responsibility for the goods. See text at [3.480]
    - Greenwood v Waverley Council (1928) 28 SR (NSW) 219:
      - not bailment but rather license to use locker - no attendant present.
    - Ultzen v Nicols [1894] 1 QB 92
      - bailment over coat taken by waiter in restaurant where waiter made request and selected place for safekeeping
    - Ashby v Tolhurst [1937] 2 All ER 837
      - in this case it was held that leaving the car in the defendant’s carpark was a mere licence to leave the car on the premises and there was no evidence to point to delivery into the possession of the owners to amount to bailment.
    - Compare Sydney Corporation v West (1965) 114 CLR 481 which did amount to bailment of the vehice.
      - Held: the arrangement constituted a bailment.
        
        Exemption clause did not exonerate the carpark owner for misdelivery.
- Duties of Bailee at Common Law
  - Duty to take reasonable care of the goods
  - Duty to deliver the goods or deal with them as directed (unless unable where inability is not due to want of reasonable care.)
  - Not to depart from the terms of the bailment
  - To not dispute the bailor’s title to goods
  - (though note contract may modify or exclude)
- Obligation to Re-deliver
  - If the bailee is not obliged to return the goods, then no bailment has been created.
  - Goods may be delivered to someone other than the bailor.
  - No bailment where different goods may be substituted:
    - Chapman Bros v Verco Bros & Co (1933) 49 CLR 406
  - However, goods may be altered and redelivered in a changed state:
    - Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad’ (1976) 136 CLR 539 ; Pangallo Estate Pty Ltd v Killara 10 Pty Ltd [2007] NSWSC 1528
- Pangallo Estate Pty Ltd & ors v Killara 10 Pty Ltd [2007] NSWSC 1528
  - Examines if there is still a bailment where the form of the property changes before it is returned
  - Procedural History:
    - Dispute over whether grapes provided for winemaking constituted a bailment or a sale.
  - Original Dispute:
    - Pangallo Estate delivered grapes to Ms. Cecchini for winemaking.
    - Upon her defaulting under her lease, Killara 10 claimed ownership of the wine produced.
  - Current Reason for Trial:
    - To ascertain whether the transaction between Pangallo Estate and Ms. Cecchini was a bailment or sale.
  - Material Facts:
    - Grapes were delivered by Pangallo Estate to Ms. Cecchini for the purpose of winemaking, with the wine to be returned to Pangallo Estate.
  - Issue Raised:
    - Whether the relationship constituted a bailment, with an obligation to return the goods in an altered form, or a sale where ownership of the grapes transferred to Ms. Cecchini.
  - Law(s)/Statute(s) in Contention:
    - Principles of bailment vs. sale of goods.
  - Precedences:
    - Reference to judicial opinions and legal principles relating to bailment and the transformation of goods, including cases like Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd and principles from Halsbury’s Laws of England.
  - Tests and Elements:
    - Examination of the intention of parties, nature of the transaction (service vs. sale), and whether the goods are to be returned in an original or altered form.
  - Judicial Opinions and Interpretation:
    - The court leaned on historical definitions and judicial interpretations to affirm that a bailment can involve returning goods in an altered form, emphasizing the intent of the parties over the mere transformation of the goods.
  - Ratio Decidendi:
    - The essence of bailment lies in the obligation to return the bailed property upon the termination of the bailment term, whether in its original or altered form, contingent on the parties’ intentions.
  - Result:
    - The court concluded that the transaction was a contract for services (winemaking), not a sale of grapes, affirming that no transfer of property to Ms. Cecchini occurred.
    - Thus, Killara 10 had no claim to the wine under a bailment arrangement.
  - Relevance to Modern Law:
    - This case elucidates the distinction between bailment and sale transactions, particularly in the context of goods transformed during the service process.
    - It underscores the critical role of parties’ intentions and contractual terms in determining the nature of such transactions, reinforcing the concept that physical alteration of goods does not automatically imply a change in ownership.
- Duties of Bailor
  - Not interfere with bailee’s possession (depends on term of bailment. Bailor may be liable for trespass, conversion and breach of contract
  - Inform bailee of dangers they are aware of. Where the bailee accepts possession of the goods after being sufficiently warned of their dangerous qualities, the bailor will not be liable for subsequent loss or damage suffered by the bailee
    - (See Pivovaroff v Chernabaeff (1978) 21 SASR 1)
  - Comply with terms of bailment (e.g. payment of agreed fee). Bailee has lien over goods to secure payment
- Sub-Bailment
  - Occurs where bailee transfers possession of goods to a third party for a particular purpose.
    - Bailee is a sub-bailor to third party as sub-bailee.
  - Sub-bailee must be aware they are bailee.
  - May be permitted or prohibited by head/original bailment
  - Sub-bailee owes same bailment duties to bailor as owed by the head bailee (subject to contract)
  - Rights may be varied by contract between head bailee and sub-bailee (but subject to express or implied consent by bailor to the making of the sub-bailment on those terms, and not otherwise).
  - Issues often turn on whether bailor bound by exemption or exclusion clauses in contract between bailee and sub-bailee so that the sub-bailee can escape liability to both the bailee and the bailor.
    - Morris v CW Martin [1966] 1 QB 716 –
      - exclusion clause could not be relied on by cleaner as ‘customer’ was head bailee not fur owner (see next).
    - The Pioneer Container [1994] 2 AC 324 –
      - shipping bailment (without limitation clause) allowed sub-bailment on any terms, subsequent sub-bailment contained exclusive jurisdiction clause which bound bailor.
- Morris v CW Martin [1966] 1 QB 716
  - Facts:
    - Mrs Morris sent her mink stole to a furrier in London, Mr Beder for cleaning.
    - It was agreed that the cleaning would be sub contracted to CW Martins & Sons Ltd, ‘well-known’, ‘reputable’ cleaners.
    - While in their possession the coat was stolen by an employee.
    - Mrs Morris sued CW Martins & Sons Ltd.
    - On appeal, the issue was whether the plaintiff was entitled to sue the cleaners directly for the misappropriation by their servant despite the contract being between Mr Beder and the cleaners and that there was no contract between Mrs Morris and the cleaner.
  - Held:
    - a duty of care was owed by the sub-bailees to Mrs Morris to take reasonable care of the fur coat.
    - This duty was non-delegable so that they were liable for the loss caused by the theft.
    - Denning and Diplock LJ rejected the trial judge’s emphasis on contract theory as it was the existence of the relationship of bailor and bailee of a chattel that gave rise to a duty.
  - CW Martin could not rely on its exclusion clause in the contract with Mr Beder because the relevant ‘customer’ under the contract was Mr Beder, not the owner.
- Tottenham Investments Pty Ltd v Carburettor Services Pty Ltd (1994) Aust Torts Reports 81-292 NSWCA
  - Jurisdiction:
    - The case provides a precedent on the duty of care required from bailees in protecting bailed goods from theft, relevant in the Australian legal context.
  - Procedural History:
    - Initially adjudicated by Levine DCJ in the District Court, who found in favor of the bailee (respondent) by determining no negligence in the theft of a bailed vehicle. The decision was overturned on appeal, emphasizing the bailee’s failure to meet their duty of care.
  - Original Dispute:
    - Concerned the theft of a motor vehicle from the respondent’s premises, which had been entrusted to them for repair—a classic instance of a bailment relationship.
  - Current Reason for Trial:
    - The crux was to assess the adequacy of the bailee’s precautions against theft, specifically whether these actions were reasonable given the circumstances and the nature of the bailed property.
  - Material Facts:
    - The appellant delivered a valuable, collector’s item vehicle to the respondent for repair services. Despite some security measures, the vehicle was stolen due to a break-in.
  - Issue Raised:
    - The legal contention revolved around the bailee’s obligations under bailment to safeguard the bailed goods and the extent of care required to prevent theft.
  - Law(s)/Statute(s) in Contention:
    - The case delves into bailment law, focusing on the nuanced duty of care the bailee owes to the bailor, especially in preventing theft or damage to bailed goods.
  - Precedences:
    - Cited prior judgments highlight the established duty of bailees to take reasonable steps to protect bailed goods, adjusting this standard to the risk of theft.
  - Tests and Elements:
    - Examination centered on the reasonableness of the bailee’s security measures, influenced by the value of the bailed goods and the prevailing risk of theft.
  - Judicial Opinions and Interpretation:
    - The appellate court critiqued the trial judge’s findings, asserting that the post-theft security enhancements underscored their prior feasibility and the bailee’s negligence.
  - Ratio Decidendi:
    - Emphasized that the bailee’s duty in a bailment extends to implementing reasonable and practicable security measures to prevent theft, influenced by the specific context of the bailed goods.
  - Result:
    - The appellate decision mandated the bailee to compensate the bailor for the stolen vehicle’s value plus interest, highlighting the bailee’s breach of duty in safeguarding the bailed property.
  - Relevance to Modern Law:
    - This case underlines the dynamic nature of a bailee’s duty of care, particularly against theft, setting a precedent for how security measures should be evaluated in light of the specific circumstances of the bailment and the inherent risks.
    - It stresses the significance of foreseeability in determining the scope of reasonable care required from bailees.
      - in the light of available precautions and their cost, the steps taken by the defendant were sufficient in the circumstances in which his business was operating (including the area in which it was situated and the nature of the property on his premises) to be regarded by the court, looking at the question objectively, as reasonable for safeguarding the property of the plaintiff.
- The Role of Contract Law in Bailments
  - Contract determines scope of bailment and nature of duties and liabilities
  - Exclusion clauses operate according to terms
  - Implied terms in bailments for reward (hire) eg that goods are reasonably fit for purpose
  - Bailment operates more broadly than contract by:
    - Modifying privity rule by conferring rights against third parties
    - Bailee may sue third party for damages caused to bailed goods as possession is title against the wrongdoer (The Winkfield [1902] P 42)
- Termination of Bailment
  - A bailment may come to an end by:
    - Expiry of the term
    - Demand of gratuitous bailee, at any time
    - By wrongful act of bailee
    - Re-delivery of goods to the bailor
    - Transfer of ownership to the bailee
    - Destruction of the goods
- Enforcement by Bailor
  - A bailor who suffers loss or damage to goods may have a range of different actions:
    - Contract
      - Damages for breach of contract (suing on the rights under the contract with the bailee) to put bailor in position as if the contract had been performed.
    - Tort
      - detinue for delivery up of the goods
      - Damages for conversion – dealing in a manner repugnant to immediate right of possession of person with title to property
      - Damages for trespass to goods – to put the bailor back in the position as if the wrong had not occurred; if bailee has intentionally or negligently damages goods.
      - Damages for breach of duty to take reasonable care – restitutio in integrum general principle.
Agency
- Agency Importance
  - Agency arises in so many different and important ways in commercial law:
    - Agents for sellers and buyrs;
    - Solicitors act as agents for clients; real estate agents for buyers and sellers;
    - Partnership: every partner in a partnership acts as agent of the partnership;
    - Companies: implied authority attached to certain positions, eg managing director.
    - In banking and finance, syndicated finance works by a group of lenders appointing one of their number as the ‘facility agent’ for the group in arranging finance to be provided to an entity.
    - Common commercial types of agents include:
      - Broker
      - Factor (or mercantile agent)
      - Commission agent
      - Del credere agent
      - Attorney under a power of attorney
- Agency def
  - Agency in the legal sense is a relationship between two parties where one (the agent), with the authority of the other (principal), can bind that other in a legal relationship with a third party.
    - It can be distinguished from “agency” as used in a non-legal sense in business usage which may bear a different meaning:
      - International Harvester Co of Australia v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644.
    - In Petersen v Moloney (1951) 84 CLR 91, 94, the High Court observed that “.. An agent is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal, and third parties.”
- Fiduciary Relationship def
  - Hospital Products Ltd. v. United States Surgical Corporation (1984) 156 CLR 41 at 96-7; 55 ALR 417 at 454, per Mason J:
    - “The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations …
    - The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.”
- Creation of Agency
  - Express by consent – established by writing or words;
  - Estoppel by representation (ostensible authority)
  - Ratification—retrospective
  - Agency by operation of law
    - Agency of necessity
    - Agency by cohabitation
  - Can arise despite parties denying it
    - South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611
- Nature and Scope of Agent’s Authority
  - Actual Authority
    - Express Actual Authority
    - Implied Actual Authority
  - Apparent or Ostensible Authority
- Actual Authority def
  - Actual authority requires consent of the parties:
    - Garnac Grain Co Inc v HMF Faure v Fairclough Ltd [1968] AC 1130.
  - Actual Express Authority
    - Consent may be in writing or words
  - Actual Implied Authority
    - Consent implied from the conduct of, or relationship between, the parties:
      - Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72
    - Covers acts normally incidental to expressly authorized acts
    - Covers acts that a person in that position would usually have authority to do (eg managing director)
    - Covers acts in accordance with reasonable or customary business practice for the type of market
    - Must be consistent with the nature of the agency and not contrary to any existing directions forbidding such an act.
    - A manager hired to run a retail store has the implied authority to order inventory necessary for the store’s operation, even if not explicitly stated in their contract.
- Consent to Creation of an Agency with Actual Authority
  - Garnac Grain Co Inc v HMF Faure v Fairclough Ltd [1968] AC 1130
    - Contract for delivery of 15,000 tons of lard from Allied to Garnac Grain.
    - Garnac sold the goods to Faure.
    - Faure had independently agreed to sell the goods back to Allied.
    - Allied went into liquidation and the goods were never delivered leaving Garnac and Faure with heavy losses.
    - Garnac sought to rescind alleging Faure contracted as undisclosed principal of Allied, and the fraud warranted rescission.
  - Implied actual authority:
    - Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
      - Facts:
        
        Richards was the chairman and chief executive of Brayhead.
        
        Richards acted as de facto managing director with board’s acquiescence.
        
        He provides guarantee and indemnity to managing director of related company in breach of statutory obligations to Brayhead.
      - Held:
        
        Board had acquiesced in Richards acting as CEO and had implied authority from the board of Brayhead to enter into those contracts.
  - Ostensible authority def / constructive authority def
    - Does not arise from consent - arises from conduct – permitting an agent to act in a way in the conduct of the principal’s business:
      - Freeman & Lockyer v Buckhurst Park (Mangal) [1964] 2 QB 480, at 503–504 per Diplock LJ:
    - operates as an estoppel, preventing a principal from denying an agent’s authority: see generally K R Handley, Estoppel by Conduct and Election (Sweet & Maxwell, 2nd ed, 2016) at 149 and the cases cited therein.
    - Where it is made out, the principal is bound by acts within the scope of the agent’s ostensible authority.
    - covers a range of circumstances:
      - where the agent has been permitted to assume a particular position that carries a usual authority; and
      - where a specific representation is made as to the agent’s authority: SEB Trygg Liv Holding AB v Manches [2006] 1 WLR 2276, Buxton LJ at 2291.
      - If a company’s letterhead lists an employee as a “sales director,” the employee has constructive authority to negotiate sales on behalf of the company, leading third parties to reasonably believe they have such authority.
    - Elements:
      - a representation (express or implied) by the principal to the third party that the agent has authority to do a certain act;
      - Reliance upon that representation by the third party
      - Detriment suffered by third party
  - Ostensible authority: Freeman & Lockyer v Buckhurst Park (Mangal) [1964] 2 QB 480
    - Facts:
      - Freeman and Lockyer sued Buckhurst Park Ltd and its director for unpaid fees for their architecture work on developing the ‘Buckhurst Park Estate’.
      - The company’s articles said that all four directors of the company were needed to constitute a quorum.
    - The director had acted alone in engaging the architects without actual authority.
      - The company argued it was not bound by the agreement.
    - On appeal, Diplock LJ held the company was bound to pay Freeman and Lockyer for their architecture work as a result of the ostensible authority of the director.
  - Prospect Industries v Anscor Pty Ltd [2003] QSC 296
    - Legal Issue:
      - Determining Count’s liability for Woodrow’s representations under the Trade Practices Act 1974, Corporations Law, and common law principles of actual or apparent authority.
    - Key Allegations:
      - Prospect Industries claimed reliance on Woodrow’s advice, believing he acted with actual or apparent authority from Count.
      - The representations included the safety and security of investments in the Wattle Scheme.
    - Arguments for Actual Authority:
      - Prospect argued Woodrow’s authority as wide as for “provision of investment advice and financial services,” based on the Count Representative Agreement.
      - Count contested, highlighting the agreement’s clause limiting Woodrow to recommending only Count-approved products, which did not include the Wattle investment.
    - Conclusion on Actual Authority:
      - The court found Woodrow lacked actual authority for the advice and representations regarding the Wattle Group, based on a clear contractual limitation to recommend only Count-approved products.
    - Ostensible (Apparent) Authority:
      - Analysis focused on Count’s conduct, particularly the use of business cards identifying Woodrow as an authorised representative, and whether this amounted to Count holding out Woodrow with authority in financial planning matters.
    - Findings on Ostensible Authority:
      - The court did not accept the presence of a relevant holding out by Count or reasonable reliance by Prospect on such a holding out.
      - It noted inconsistencies and lack of evidence of reliance on Count’s supposed backing.
    - Count’s Liability:
      - Based on the findings regarding actual and ostensible authority, the court determined Count was not liable under common law, the Trade Practices Act 1974, or the Corporations Law for Woodrow’s actions.
    - Key Judicial Opinion:
      - The judgment underscored the importance of clear authority and representations by the principal (Count) and the reliance on such representations by third parties (Prospect Industries).
      - The absence of direct or apparent authority led to the dismissal of claims against Count.
  - Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72
    - Facts:
      - Family business—Bruce Sr, director; Bruce Jr managing director; Peter (Bruce Jr’s brother) no designation. Peter enters into contract for printing press and signs against company printed order form per Bruce Jr.
    - Held:
      - Bruce Jr as managing director had ostensible authority to purchase and could have actually authorized Peter.
      - However it was found that he did not give actual authority in the first place, therefore Peter could not have ostensible authority derived from Bruce Jr.
      - Further Bruce Jr had no actual authority to make the contract, only the Board or three directors acting together.
- Duties of an Agent
  - An agent is a fiduciary so owes to the principal the fiduciary duties:
    - to act bona fides in the interests of the principal
    - Not to place itself in a position of conflict between self-interest and duty
    - Not to profit from the scope of the undertaking (save for agreed remuneration or commission)
  - to follow the principal’s instructions
  - to act in person (not delegate responsibility)
  - to act in good faith
  - to make a full disclosure of any personal interest
  - to not make a secret profit
  - to exercise reasonable care and skill
- Rights of an Agent
  - Remuneration: no right to remuneration outside of contract. Therefore only if it is an express or implied term of agreement. The onus on agent to prove authority to support claim for remuneration
  - Indemnity and reimbursement:
    - Right to be reimbursed for all expenses and indemnified for all losses and liabilities incurred whilst acting in the scope of the authority: Re Clune; Ex parte Verge v Isabella Nominees Pty Ltd (in liq) (1988) 14 ACLR 261.
  - Right to a lien:
    - If the agent is not indemnified it is entitled to exercise a particular lien over that property of the principal in respect of which the obligation arose Re Clune at 267.
- Liabilities of Agents
  - Liability of Agent to Principal
    - Breach of contract—not following instructions
    - Negligence—not exercising reasonable care and skill
  - To third parties
    - Where existence of principal disclosed (named or unnamed), no liability unless agent operates outside of authority
    - Undisclosed principal—agent may be personally liable or both agent and principal joint liability
  - Liability under Australian Consumer Law
    - Eg s 18 misleading and deceptive conduct
- Doctrine of Undisclosed Principal
  - The principles of undisclosed principals were summarized by Lord Lloyd of Berwick, delivering the judgment of the Privy Council in Siu v Eastern Insurance Co. Ltd. [1994] 2 A.C. 199 at 207 -
  - Agent is not liable on contract when the principal is fully disclosed
    - Partialy liable when partially disclosed
      - Partial disclosure is when there’s a reference to an undisclosed entity
    - liable when principle is disclosed
    - liable when performing duties outside of agency scope regardless of disclosure status
- Doctrine of Ratification
  - Ratification occurs when an agent does an act without authority, but the subsequent conduct of the principal ratifies the unauthorized act as if it had been authorized at the time.
  - The act becomes valid and effective from the date of the act, not simply the date of the ratification.
  - Applies where the agent exceeded their authority or where the agent at the time had no authority at all.
  - Conditions:
    - Agent must have purported to act as agent for a principal:
      - Keighley, Maxsted & Co v Durant [1901] AC 240;
    - At the time of the act, there needs to have existed a principal;
    - At the time of ratification, the principal must be capable of doing the act himself.

Week 5: Statutory Interpretation

Introduction
- Sale of Goods Act 1923 (NSW)
- Australian Consumer Law
- Personal Property Securities Act 2009 (Cth)
- - Mischief Rule / Purpose rule
  - Literal Rule
  - Golden Rule
Overview of important principles in interpretation of legislation
- Role and Aim of Statutory Intention - Construing the Intention of the Legislature
  - The function of the court is to construe the intention of the legislature through the words used in a statute:
    - Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355;
- An Act should be read as a whole
  - Metropolitan Gas Co V Federated Gas Employees Industrial Union (1924) 35 CLR 449 at 455,
    - Isaacs and Rich JJ observed:
      - “Every passage in a document must be read not as if it were entirely divorced from its context, but as part of the whole instrument.
- Common law presumptions of interpretation
  - Noscitur a sociis - the meaning of a word or phrase should be derived from its context
    - Or that the meaning of a word can be gathered from its associated words.
    - Eg in Prior v Sherwood (1906) 3 CLR 1054 the court held that a prohibition against bookmaking in any “house, office, room or place” did not extend to a public lane outside – limiting the meaning of “place”.
  - Ejusdem generis - ‘of the same kind’, which usually applies to lists, particularly where a general item is included after specific items.
    - Determine whether the items are of the same genus.
    - It must be possible to see the initial words as intended to form, or capable of identification as, a genus.
    - Re Latham (dec’d) [1962] Ch 616:
  - Expressio unius est exclusion alterius -
    - the express mention of one thing excludes all others
  - Generalia specialibus non derogant -
    - specific provisions prevail over general ones.
    - The maxim refers to the rule of construction which presumes that a general enactment is not intended to interfere with a special provision unless it manifests that intention very clearly.
  - Hendiadys:
    - a composite expression two phrases connected with “and” – like “complete and furnish a tax return
- The text is the starting point, always.
  - Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 Per Hayne, Heydon, Crennan and Kiefel JJ 46–7 [47]:
    - This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself.
    - The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
- However Text interpreted in light of Context and Purpose
  - SZTAL v Minister for Immigration and Border Protection [2017] HCA 34;
    - The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose
      - Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected
- Difficulty where there is more than one purpose
  - In Carr v Western Australia [2007] HCA 47; 232 CLR 138 the Court noted at [5]
    - … In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act is to be preferred to a construction that would not promote that purpose or object.
    - Whatever the difficulties of construction may be, a court is bound to give some meaning to a provision in a statute, and a court cannot hold that an Act is a nullity because of the uncertainty of the language used.
- Words are generally given their ordinary meaning
  - Words will generally be interpreted in accordance with their ordinary and current meaning unless there is some indication that a different meaning is intended.
    - Australian Leisure and Hospitality Group Pty Ltd v Director of Liquor Licensing [2012] WASC 463
  - Check the Acts Interpretation Act 1901 (Cth)/Interpretation Act 1987 (NSW) for common definitions
  - Can extrinsic materials can assist in interpretation? Note rules for their use in Acts Interpretation Act 1901 (Cth)/Interpretation Act 1987 (NSW) s 34
Overview of legislation covered in Property Law
- The Sale of Goods Act 1923 (NSW)
  - The law of sale of goods in Australia is drawn from three main sources. These are:
    - (1) legislation in each state that is substantially identical, codifying the common law – in NSW being the Sale of Goods Act 1923 (NSW);
    - (2) other specific statutes regulating or dealing with sale of goods transactions (not covered in this subject other than the Australian Consumer Law found in Schedule 2 to the Competition and Consumer Act 2010 (Cth), such as the (NSW) Factors (Mercantile Agents) Act 1923, and the National Credit Code); and
    - (3) the common law, including contract law, the law of personal property that is not otherwise changed by the relevant legislation
  - The Sale of Goods legislation is regarded as codifying the law.
    - The proper approach to such legislation is in the first instance to examine the language of the statute and ask what is its natural meaning, although of course, reference will often be made to prior law where a provision is unclear or if words have previously acquired a technical meaning
- The Australian Consumer Law
  - The Australian Consumer Law is found in Schedule 2 to the Competition and Consumer Act 2010 (Cth). The Australian Consumer Law (ACL) is a comprehensive regime to provide protection to consumers.
  - The ACL applies as a law of the Commonwealth under the Competition and Consumer Act 2010 (Cth) (“the CCA”), comprising:
    - Schedule 2 of the CCA;
    - The provisions of Part XI of the CCA that relate to Schedule 2 and Regulations under the CCA relating to the ACL.
    - The ACL also applies as a law of each state and territory.
    - In NSW that is under the Fair Trading Act 1987 (NSW).
  - The Australian Securities and Investments Commission Act 2001 (ASIC Act), provides for the same protections in relation to financial products and services as provided under the AC
  - The main differences between the ACL and SOGA in relation to consumer guarantees:
    - Cover different transactions: SOGA applies to contracts for the sale of goods whereas ACL applies to contracts for the supply of both goods and services;
    - Impose obligations on different persons: the SOGA applies to sellers whereas the ACL also applies to manufacturers and suppliers;
    - Create rights in favour of different persons
- Personal Property Securities Act 2009 (Cth)
  - Re Maiden Civil [2013] NSWSC 852 and replaces more than 40 existing state registration systems for security interests over personal property with one Commonwealth register
  - the PPSA regime is not a complete code. (see s 254)
  - It deals with priority contests involving PPSA security interests, although not all priority contests are covered by PPSA rules (e.g. for those that involve non-PPSA security interests)
    - It is critical for lawyers to appreciate if the PPSA applies or not. Some interests are NOT covered – look at s 8 of the Act
Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236
- Jurisdiction:
  - High Court of Australia, binding within Australia.
- Procedural History:
  - Originated from the Supreme Court of New South Wales.
  - Concerns the application of s. 28(2) of the Sale of Goods Act 1923 (NSW).
- Original Dispute:
  - Dispute over possession and title to eight motor vehicles between Gamer’s Motor Centre (Newcastle) Pty Ltd (Gamer, a wholesaler) and Natwest Wholesale Australia Pty Ltd (Natwest, a finance company).
- Current Reason for Trial:
  - Appeal to the High Court of Australia to determine whether “delivery” under s. 28(2) of the Sale of Goods Act 1923 (NSW) includes constructive delivery, allowing Natwest to claim title to the vehicles despite not having received physical delivery from the dealer.
- Material Facts:
  - A dealer agreed to buy vehicles from Gamer but sold them to Natwest without paying Gamer.
  - Natwest paid the dealer without physical delivery of the vehicles, claiming title based on documents and agreements.
- Issue Raised:
  - Whether the Sale of Goods Act permits constructive delivery to transfer title under s. 28(2), enabling Natwest to acquire title to the vehicles from the dealer who had not paid Gamer.
- Law(s)/Statute(s) in Contention:
  - Sale of Goods Act 1923 (NSW), specifically s. 28(2).
- Judicial Opinions and Interpretation:
  - Majority Opinion: The High Court, with a majority, held that “delivery” under s. 28(2) of the Sale of Goods Act includes constructive delivery.
    - This interpretation allows a third party, like Natwest, to acquire good title to goods despite the original seller’s (Gamer’s) rights being superseded, provided the goods or documents of title were received in good faith without notice of the original seller’s claim.
  - Dissenting Opinion: A different interpretation argued that actual physical delivery is required for s. 28(2) to apply, emphasizing protection of property rights over facilitating commerce.
- Ratio Decidendi:
  - The High Court’s decision broadens the concept of “delivery” within the context of the Sale of Goods Act to include constructive delivery, facilitating the movement of goods in commercial transactions and offering protection to third parties who deal in good faith.
- Conclusion and Relevance to Modern Law:
  - The ruling confirms that, within the framework of Australian commercial law, constructive delivery can suffice to transfer title under s. 28(2) of the Sale of Goods Act.
  - This outcome supports commercial efficiency and the protection of third parties in good faith transactions, while highlighting the tension between traditional property rights and the needs of modern commerce.
- Notes Emphasis:
  - Focus on the legal reasoning behind extending “delivery” to include constructive delivery and the implications for commercial transactions and property rights in Australian law.
SAMWISE HOLDINGS PTY LTD v ALLIED DISTRIBUTION FINANCE PTY LTD & ORS [2018] SASCFC 95
- The focus is on the timing of possession where the circumstances of possession changes but not the fact of possession).
- Procedural History:
  - Appeal from a lower court decision granting declaratory relief that the respondent’s perfected purchase money security interest (PMSI) under the Personal Property Securities Act 2009 (Cth) had priority over other registered security interests concerning 40 motorcycles.
- Original Dispute:
  - The original dispute centered around the priority of security interests under the Personal Property Securities Act 2009 (Cth), specifically regarding whether a perfected PMSI has priority over all other registered security interests in the context of 40 motorcycles.
- Current Reason for Trial:
  - The trial was to determine if the PMSI of the respondent was perfected by registration before the grantor obtained possession of the motorcycles, thus having priority over other security interests.
- Material Facts:
  - Allied Distribution Finance Pty Ltd had a PMSI in 40 motorcycles previously owned and financed under a different arrangement.
  - Allied Distribution’s interest was registered before it obtained ownership and issued bailed goods notices, but the motorcycles were already in possession of the dealership under a different finance arrangement.
- Issue Raised:
  - Does a PMSI in inventory have priority over other registered security interests if it is perfected by registration before the grantor (or another person at the grantor’s request) obtains possession of the inventory?
- Law(s)/Statute(s) in Contention:
  - Personal Property Securities Act 2009 (Cth), specifically sections relating to PMSIs and their priority (e.g., s 62(2)(b)(i)).
- Precedences:
  - References to decisions and principles from various jurisdictions on PMSIs and the requirement of perfection by registration relative to possession by the grantor.
- Judicial Opinions and Interpretation:
  - The Full Court unanimously dismissed the appeal, affirming the trial court’s decision.
  - It held that the phrase “obtains possession” in the context of PMSI priority refers to possession ‘as grantor’ and not mere physical possession.
  - This interpretation aligns with the purpose of the PPS Act to provide clear priority rules and protect future secured parties by ensuring timely notice through registration.
- Legal Reasoning:
  - The court focused on the statutory interpretation of the PPS Act, especially the language and purpose of provisions related to PMSIs.
  - It concluded that possession by the grantor as contemplated in the act refers to when the grantor, in its capacity as such, obtains possession, reinforcing the importance of registration timing for priority.
- Ratio Decidendi:
  - The decision establishes that for a PMSI to have priority over other security interests in inventory under the PPS Act, it must be perfected by registration at the time the grantor, in its capacity as such, obtains possession of the inventory.
  - This interpretation ensures the protection of future creditors by emphasizing the significance of the registration process.
- Relevance to Modern Law:
  - This decision clarifies the application of PPSI priority rules under the Personal Property Securities Act 2009 (Cth), specifically regarding the critical timing of registration and possession in the grantor’s capacity.
  - It is pivotal for future secured transactions involving PMSIs, ensuring legal practitioners and financiers understand the importance of the order and timing of registration and possession in securing priority.
Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426
- Extraterritorial application of statutes and intention of parliament expressed in the provisions.
- Jurisdiction & Binding Nature
  - Federal Court of Australia, binding within its jurisdiction and persuasive elsewhere.
- Procedural History
  - The applicant, Mr. Vautin, initiated action against Bertram Yachts Inc. (first respondent) and Eagle Yachts Pty Ltd (second respondent) over a defective recreational fishing vessel named “Revive”.
  - Eagle Yachts pursued a cross-claim against Bertram Yachts for indemnity.
- Original Dispute
  - Mr. Vautin purchased “Revive” for a significant sum, asserting it was defectively manufactured, rendering it unseaworthy.
- Reason for Trial
  - To determine the liability of Bertram Yachts and Eagle Yachts for the alleged defects and the appropriate remedy.
- Material Facts
  - Mr. Vautin disclosed the purpose of open ocean motoring at the time of purchase.
  - Post-purchase, “Revive” exhibited hull delamination due to manufacturing defects, specifically unfilled kerfs and inadequately primed foam core in the sandwich construction of the hull, decks, and superstructure.
- Issue Raised
  - Whether Bertram Yachts and Eagle Yachts breached Australian Consumer Law (ACL) guarantees, particularly regarding acceptable quality and fitness for disclosed purpose.
- Laws/Statutes in Contention
  - Australian Consumer Law (ACL), part of the Competition and Consumer Act 2010 (Cth).
- Precedents Cited
  - Medtel Pty Ltd v Courtney [2003] FCAFC 151 and similar cases interpreting “acceptable quality” and “fitness for a disclosed purpose” under the ACL.
- Tests & Elements Outlined
  - The case involved applying ACL standards to assess whether the vessel met guarantees of acceptable quality and fitness for a disclosed purpose, considering the nature of the goods, price, statements made about the goods, and other relevant circumstances.
- Judicial Opinions & Interpretation
  - The court found both Bertram Yachts and Eagle Yachts liable to Mr. Vautin for breaches of ACL guarantees.
  - It rejected Bertram’s defense regarding its non-responsiveness to warranty claims and non-compliance with manufacturing standards.
- Legal Reasoning & Ratio Decidendi
  - The court’s decision was based on the vessel not being of acceptable quality and not fit for the disclosed purpose of ocean-going motoring, due to significant manufacturing defects impacting safety and durability.
- Conclusion & Relevance to Modern Law
  - This case reaffirms the standards set by the ACL for acceptable quality and fitness for a disclosed purpose, emphasizing the rights of consumers to receive goods that meet explicit and implicit standards.
  - It underscores manufacturers’ and distributors’ obligations under the ACL, particularly in relation to high-value consumer goods.
- Notes for Examination
  - Focus on the application of ACL guarantees, the interpretation of “acceptable quality” and “fitness for a disclosed purpose”, and the importance of manufacturing standards in assessing liability. The case illustrates judicial scrutiny of manufacturing processes and consumer protection laws’ role in ensuring the safety and reliability of purchased goods.

Week 6: Sale of Goods Act Part 1

Topic 6 – Transfer of property in goods
- The “transfer of property” in goods means the transfer of legal ownership from seller to the Buyer.
  - Remember: property (or ownership) in goods can pass independently of possession.
  - The time at which ownership passes in a sale can be very important for a number of reasons including:
    - when goods are lost or destroyed prior to delivery;
    - In insolvency;
    - Rights and remedies under the Act;
    - In tort.
- S 5 Statutory Definitions
  - “Contract of sale” includes an agreement to sell as well as a sale.
  - “Buyer” means a person who buys or agrees to buy goods.
  - “Seller” means a person who sells or agrees to sell goods.
- Right to sell and transfer of ownership
  - Under the Sale of Goods Act, “seller” is defined as a person who sells or agrees to sell goods.”
  - The seller does NOT have to be the owner of the goods.
  - The Act contemplates sale of goods by owners and non-owners.
  - In either case, the object of a contract for sale of goods is to confer good title (that of ownership) to the buyer.
- S 6 Sale and agreement to sell
  - (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price.
  - There may be a contract of sale between one part owner and another.
  - (2) A contract of sale may be absolute or conditional.
  - (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time, or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
  - (4)An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled, subject to which the property in the goods is to be transferred.
- What a contract for sale is NOT
  - Note that it can be tricky to distinguish a contract for sale of goods from a contract for work and materials that is a contract for services.
    - Compare s 6 with:
      - Mortgage,
      - Pledge,
      - Charge,
      - Lien,
      - Bailment,
      - hire purchase:
    - none of these is a contract for sale.
- Section 17 Implied undertaking as to title etc
  - In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is:
    - (1) an implied condition on the part of the seller that in the case of a sale the seller has a right to sell the goods, and that in the case of an agreement to sell the seller will have a right to sell the goods at the time when the property is to pass,
    - (2) an implied warranty that the buyer shall have and enjoy quiet possession of the goods,
    - (3) an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.
- The nemo dat principle at common law
  - If the seller has good title, the buyer becomes the legal owner once property in the goods has passed to him (regardless of possession).
  - If the seller does not have good title (like a thief) the nemo dat principle applies – a person cannot convey what they do not have.
  - A purported sale by someone who does not have good title means that the buyer does not obtain good title to the goods, but has a statutory ground for rejecting the goods and claiming a breach of implied warranty as to title.
  - Note however, the Sale of Goods Act provides for certain exceptions to the nemo dat rule exceptions in ss 26-28.
- Rowland v Divall [1923] 2 KB 500
  - Nemo Dat, Title and implied undertaking as to title
  - Facts:
    - Motor vehicle dealer had purchased car from defendant who did not know car had been stolen.
    - Dealer had use of car for several months and had on sold it.
    - Vehicle seized by police and returned to true owner.
  - Held:
    - total failure of consideration despite dealer having had use of the vehicle for a number of months
    - ‘…there can be no sale at all of goods which the seller has no right to sell.
    - The whole object of a sale is to transfer property from one person to another.
    - And I think that in every contract of sale of goods there is an implied term to the effect that a breach of the condition that the seller has a right to sell the goods may be treated as a ground for rejecting the goods and repudiating the contract notwithstanding the acceptance’ (Atkin LJ)
- PART A: Title – Rowland v Divall
- “Goods under the Sale of Goods Act – definition and types
  - “Goods def” include all chattels personal other than things in action and money.
    - The term includes emblements and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.
    - software remains excluded from the definition of “goods” under the SGAs.
  - “Future goods” means goods to be manufactured or acquired by the seller after the making of the contract of sale.
  - “Specific goods” means goods identified and agreed upon at the time a contract of sale is made.
- Types of Goods under the Sale of Goods Act 1923 (NSW)
  - Specific Goods
    - Particular car with VIN
  - Future Goods
    - Contract to sell once existing
  - Unascertained Goods
    - 100 tons of wheat out of 1k tons
  - Ascertained Goods
    - Once the 100 tons of wheat are selected and packaged, become ascertained
- Unascertained/Ascertained Goods
  - There is no definition in s 5 of unascertained goods, but they are goods which are not specific – ie not identified or agreed upon at the time of making the contract:
    - Re Goldcorp Exchange Ltd (in rec) [1995] 1 AC 74, 89.
    - For example:
      - Generic goods sold on terms which preserve the freedom on the seller to decide how and from where they will be sourced;
      - Goods sold ex bulk. Goods supplied from a source from within which the seller can make a choice like “50 of my 100 cows” or “10 tonnes of my 100 tonnes of wheat”.
    - “Unascertained goods” become “ascertained goods” once identified after the contract is made.
When does property pass in Specific or Ascertained Goods
- Section 21: Goods must be ascertained
  - Subject to section 25A, where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.
- Section 22: Property passes when intended to pass
  - (1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
  - (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.
- s 23 Rules - 5 magic rules
  - Rule 1. Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.
  - Rule 2. Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such thing be done and the buyer has notice thereof.
  - Rule 3. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done and the buyer has notice thereof.
  - Rule 4. Where goods are delivered to the buyer on approval or on “sale or return” or other similar terms, the property therein passes to the buyer:
  - (a) when the buyer signifies approval or acceptance to the seller, or does any other Act adopting the transaction,
  - (b) if the buyer does not signify approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.
  - Rule 5. (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.
  - Summarized
  - Rule 1 – unconditional sale of specific goods in deliverable state
    - S 23 Rules for ascertaining intention
    - Unless a different intention appears …
      - Rule 1. Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.
- Rule 1: specific goods in a deliverable state
  - Enacts the common law as it was at the time in the late 19 th century.
  - Requires:
    - An unconditional contract: in other words, the contract does not suspend passing of title by its provisions:
      - McPherson, Thom, Kettle & Co v Dench Bros [1921] VLR 437;
    - Sale of specific goods: as defined in s 5;
    - In a deliverable state: s 5(4): Goods are in a deliverable state within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them
- Rule 1: Dennant v Skinner [1948] 2 KB 164
  - Fact:
    - An auctioneer (Dennant) sold a number of cars to a person (King) who identified himself as George Albert King from King’s Motors of Oxford, which was a highly reputable firm in the industry.
    - Before arranging delivery, Dennant accepted a cheque from King and a signed certificate which stated that ownership of the vehicles would not pass until the cheque was honoured.
    - The cheque was dishonoured, and it was subsequently discovered that King had no connection with King’s Motors. Some time later, King sold the relevant vehicle to a third party who sold it to the defendant (Skinner), who refused to return the vehicle. Dennant sued Skinner for return of the vehicle.
  - Held: the contract was formed at the time the hammer fell and the certificate entered into subsequently did not form part of that contract as it was made.
- Rule 1: Bodlingo Pty Ltd v Webb Projects Pty Ltd (1990) ASC 56-001
  - Facts:
    - Webb sold its business to the plaintiff and the sale included identified office equipment and supplies worth $360,000 with the price was to be paid in 10 equal monthly instalments.
    - Bodlingo defaulted after 5 instalments becoming insolvent. Webb claimed that property in the goods had not passed and demanded their return.
  - Held: (per Handley JA) “In my opinion … the appeal can be decided by reference to broader considerations.
    - Under r 1 of s 23, and subject to a different intention appearing, where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.
    - The agreement was unconditional. … the goods were clearly specific and .. were in a deliverable state. Consequently, subject to any contrary intention, the property in the equipment passed to the purchaser when the contract was made even though the time for payment was postponed… I am unable to discern any contrary intention.”
- Rule 1: Minister for Supply and Development v Servicemen’s Cooperative Joinery Manufacturers Ltd (1951) 82 CLR 621
  - Facts:
    - (taken from CLR headnote) The Commonwealth let to S. Ltd. premises which contained machinery the property of the Commonwealth and permitted the tenant to use the machinery while negotiations for its purchase by the tenant were proceeding.
    - Subsequently a contract for the sale of the machinery to S. Ltd. was entered into in terms of a document dated 3rd October 1946 which stated : “ Net cash before delivery. £3,243 Is. 8d… . Delivery obtainable from ” the leased premises. The purchase price was never paid. The Commonwealth, by letter, demanded payment of the price and stated that, if it was not paid, legal proceedings would be taken for its recovery.
    - Thereafter the Commonwealth obtained possession of the machinery by resuming possession of the leased premises. S. Ltd. proceeded against the Commonwealth for detinue and alternatively conversion of the machinery, claiming that the property therein had passed to it on 3rd October 1946 by virtue of rule 1 of s. 18 of the Sale of Goods Act 1895-1943 (S.A.) and, in the alternative, that the Commonwealth’s demand for payment of the purchase price acknowledged that the property had passed.
  - Held:
    - The effect of the term of the contract, “Net cash before delivery”, was that the property in the machinery was not to pass to S. Ltd. until the price had been paid.
- Rule 1: “a deliverable state” Underwood Ltd v Burgh Castle Brick and Cement Syndicate [1922] KB 343
  - Facts:
    - the parties had contracted for the sale of a “horizontal tandem condensing engine”, a machine weighing 30 tons that had been cemented to the seller’s floor.
    - The seller was in the process of loading the machine onto a railway truck when it was badly damaged.
    - The buyer refused delivery of the machine, and the seller sued for the purchase price.
    - It was held that as it was the seller’s responsibility to deliver the machine in a ‘deliverable state’, property remained with the seller who had to bear the loss.
  - Held:
    - It was held that as it was the seller’s responsibility to deliver the machine in a ‘deliverable state’, property remained with the seller up until the goods were placed safely on rail for delivery, so the seller had to bear the loss.
- s 23 Rules -
  - Rule 2 – specific goods not yet in a deliverable state
    - S 23 Rules for ascertaining intention
      - Unless a different intention appears …
      - Rule 2. Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such thing be done and the buyer has notice thereof.
  - Rule 3 – specific goods in deliverable state where seller is bound to weigh measure test
    - S 23 Rules for ascertaining intention
      - Unless a different intention appears …
      - Rule 3. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done and the buyer has notice thereof
  - Rule 4 – sale or return agreement
    - S 23 Rules for ascertaining intention
      - Unless a different intention appears …
      - Rule 4. Where goods are delivered to the buyer on approval or on “sale or return” or other similar terms, the property therein passes to the buyer:
        
        (a) when the buyer signifies approval or acceptance to the seller, or does any other Act adopting the transaction,
        
        (b) if the buyer does not signify approval or acceptance to the seller, but retains the goods without giving notice of rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time.
      - What is a reasonable time is a question of fact.
  - Rule 5 – sale or return agreement
    - S 23 Rules for ascertaining intention
      - Unless a different intention appears …
      - Rule 5: Unascertained goods or future goods by description, property passes when goods are unconditionally appropriated to the contract with the assent of the other.
        
        Unconditional appropriation:
        
        where the contract becomes attached to the goods – the selection by one party (usually the seller) of goods and the adoption of that by the other party so that it is agreed that they are the goods to be sold.
        
        For eg. goods given to carrier for delivery to buyer = ascertained. Assent by the buyer may be express or implied.
- When does property pass in Unascertained Goods in Bulk
  - 25A Contracts of sale for goods forming part of bulk quantity
    - Ss 1-7b
- Reservation of right of disposal s 24
  - Section 24: Reservation of right of disposal
    - Section 24(1) Where there is a contract for the sale of specific goods, or where goods are subsequently appropriated to the contract, the seller may by the terms of the contract or appropriation reserve the right of disposal of the goods until certain conditions are fulfilled.
  - In such case, notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
- Reservation of title clauses (“Romalpa clauses”)
  - Reservation of title clauses in contracts are a common way for the seller to preserve rights until paid in full by the buyer.
  - In essence, these clauses prevent property passing until payment.
  - Often they also give the seller proprietary rights over assets into which the goods have been mixed or transformed or over proceeds of sale of goods by the buyer.
  - The purpose of such clauses is to facilitate the seller recovering the goods or proceeds of sale of goods and prevent the goods becoming the property of the buyer in the event of the buyer becomes insolvent (where the goods would form part of the buyer’s property in the hands of the liquidator for distribution to its creditors.)
  - See Aluminium Industrie Vaasen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676
- Transfer of Title by Non-Owner
  - Nemo dat non quod habet - no one can give what they don’t have (i.e. a person cannot transfer better title than that which they have.)
  - Where goods are sold by a person who is not the owner and does not sell with authority or consent of the owner, the buyer will not obtain good title at law.
  - Stolen goods remain the property of the original owner even after subsequent purported sale by the thief.
  - There are however a number of recognized exceptions.
- Exceptions to the nemo dat rule
  - S 26 Conduct by the owner
  - S 28(1) Seller in possession
  - S. 28(2) Buyer in Possession
  - S 28(3) Mercantile agents
  - S 27 Voidable Title
- Exception 1: s 26: Conduct by the owner
  - Section 26 Sale by person not the owner
    - Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority of or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by the owner’s conduct precluded from denying the seller’s authority to sell.
  - The words “by the owner’s conduct precluded from denying” have been held to incorporate common law estoppel at common law.
- Exception 1 - Conduct by the owner: Eastern Distributors v Goldring
  - Eastern Distributors v Goldring [1957] 2 All ER 525
  - Facts:
    - Murphy, owner of van, supplies ownership documents to Coker who sells van to finance company in order to facilitate the re-purchase of the van and another vehicle (a Chrysler) from Coker. Total deal falls through however van is successfully sold.
    - Owner of van remains in possession and sells it to Goldring. Finance company claims vehicle from Goldring.
  - Held:
    - Coker was armed by Murphy with documents which enabled him to represent to the plaintiffs that he was the owner … The result is that Murphy is… precluded from denying Coker’s authority to sell, and consequently the plaintiffs acquired the title to the goods which Murphy himself had and Murphy had no title left to pass to the defendant.
- Exception 2: S 28(1): Seller in possession
  - S 28(1)
    - Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.’
  - Seller in possession exception to nemo dat – s 28(1)
    - Applies where the seller has sold the goods already under a valid sale but retains continuous possession and sells the goods again to a third party.
    - The third party wins over the first buyer because the first buyer left the goods with the seller which enabled the next sale.
    - Constructive delivery to the third party will suffice.
  - Seller in possession:
    - Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] 2 All ER 105
    - Facts:
      - Motor Creditors (MC) was a finance company which entered into an arrangement whereby it authorized Motordom, a motor dealer, to buy cars which were then sold to MC even though the cars were kept on the premises of Motordom.
      - Motordom had authority from MC to sell cars in its own name and account to MC.
      - However, in late 1965 MC withdrew Motordom’s authority to sell cars off the floorplan.
      - Pacific (PMA) was an auctioneer that bought and sold cars with Motordom.
      - After MC had withdrawn Motordom’s authority to sell cars, PMA purchased 16 cars from Motordom as seller and paid Motordom with a cheque.
    - Held:
      - PMA obtained good title to the cars. Motordom had retained uninterrupted physical possession of the goods, and was in a position to effect a subsequent sale to an innocent third party with no knowledge of the lack of title arising from the intervening withdrawal of authority to sell
- Exception 3: s 28(2): Buyer in possession
  - s 28(2)
    - Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.’
- Buyer in possession: s 28(2)
  - Applies where the buyer agrees to buy goods and is given possession of the goods by the seller with the seller’s consent, even though property has not yet passed to make them the owner, and the buyer on-sells the goods to a third party.
    - The seller is penalized for having given possession to the buyer to enable the next transaction.
    - Delivery for the purposes of the section includes constructive delivery to the third party.
  - Buyer in possession: Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 72 ALR 321
    - Facts:
      - Motor vehicle wholesaler sells cars to dealer with the proviso that property not to pass until payment completed (i.e. no transfer of title) [Note operation of Romalpa clause (retention of title clause).]
      - Dealer has possession of vehicles.
      - Dealer in turn sells vehicles to finance company (Natwest) under a ‘floor plan’ agreement. Wholesaler remains unpaid and repossesses vehicles.
      - Finance Co sues wholesaler in detinue and conversion.
    - Issue:
      - Vehicles never delivered to Natwest by dealer; can there be transfer of title? [Note s 28(2) requires ‘delivery or transfer’].
      - Dealer provided receipts from wholesaler to finance company against which cheques were drawn.
    - Held:
      - Receipts evidence that dealer holds vehicles pursuant to agreement with Natwest and as Natwest’s bailee which constituted voluntary transfer of possession.
      - Constructive delivery sufficient for section 28(2)
- Factors (Mercantile Agents) Act 1923
  - The Factors Act deals with the powers of mercantile agents. ie, people who are authorised to deal in goods on behalf of others.
  - Section 3 – Definitions “Mercantile agent”
    - means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.
  - Section 5 of the Sale of Goods Act – Powers of mercantile agent
    - Where a mercantile agent is entrusted as such with the possession of any goods or the documents of title to goods, any sale pledge or other disposition of the goods made by the agent in the ordinary course of business of a mercantile agent shall, subject to the provisions of this Act, be as valid as if the agent were expressly authorised by the owner of the goods to make the same:
    - Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same. It provides protection to innocent purchasers who deal with agents selling goods on behalf of a principal, who:
      - may be acting without authority, where
      - that is just not apparent to the purchaser.
- S. 28 - sale by Mercantile Agents
  - Sections 28(1) and 28(2) Sale of Goods Act dealing with sale by the seller in possession or the buyer in possession both refer to
    - “…the delivery or transfer by that person or by a mercantile agent acting for that person of the goods…”
  - Section 28(3) provides that ‘In this section the term mercantile agent means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.’
  - This exception applies where the owner has done something to make it appear that the mercantile agent has the right to sell and where the mercantile agent sells in the ordinary course of business.
  - The exception only arises where the buyer transacts in good faith and without notice of the fact that the person making the sale has no authority.
- Section 27: Voidable title
  - Section 27 Sale under voidable title
    - Where the seller of goods has a voidable title thereto but the seller’s title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided the buyer buys them in good faith and without notice of the seller’s defect of title.
      - What is voidable title? If a contract of sale is vitiated by fraud or mistake or misprepresentation, the contract is voidable.
      - Avoidance is a species of election which generally must be communicated.
      - (Note though that a mistake which goes to the root of the contract is void and passes no good title.)
Property in Goods
- Lay- by
  - Lay-by def
    - This is a sale of goods where the price is paid by instalment and the delivery of the goods is delayed until the whole of the price is paid
    - ACL, Pt 3-2, ss 96-99
- Sale of Goods Act (SGA def), ss 13, 14
  - Section 13 Ascertainment of price
    - (1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties.
    - (2) Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.
  - Section 14 Agreement to sell at valuation
    - (1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and the third party cannot or does not make the valuation, the agreement is avoided:
      - Provided that if the goods or any part thereof have been delivered to and appropriated by the buyer, the buyer must pay a reasonable price therefor.
    - (2) Where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain an action for damages against the party in fault
- SGA, s 8
- Section 8 Contract of sale how made
  - Subject to the provisions of this Act and of any statute in that behalf, a contract of sale may be made in writing (either with or without seal), or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties:
    - Provided that nothing in this section shall affect the law relating to corporations.
- SGA, s 7
  - Section 7 Capacity to buy and sell
  - Capacity to buy and sell is regulated by the general law concerning capacity to contract and to transfer and acquire property:
    - Provided that where necessaries are sold and delivered to a person who, by reason of mental incapacity or drunkenness, is incompetent to contract, the person must pay a reasonable price therefor.
    - Necessaries in this section mean goods suitable to the condition in life of such person, and to the person’s actual requirements at the time of the sale and delivery.
- SGA, ss 11, 5, 57
- Section 11 Goods which have perished
  - Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void.
- Section 5 Definitions
  - (1) In this Act, unless the context or subject-matter otherwise requires:
    - Specific goods means goods identified and agreed upon at the time a contract of sale is made.
- Section 57 Exclusion of implied terms and conditions
  - Where any right, duty, or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement, or by the course of dealing between the parties, or by usage, if the usage be such as to bind both parties to the contract.
- SGA, ss 12, 25
  - Section 12 Goods perishing before sale but after agreement to sell
    - Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is thereby avoided.
  - Section 25 Risk prima facie passes with property
    - Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk, whether delivery has been made or not:
      - Provided that where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault:
      - Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.
- The goods perish after the contract and after risk has passed
  - If the goods perish after the contract has been entered into and after the risk has passed, will the buyer or the seller bear the loss?
    - The buyer bears the loss
The United Nations Convention on Contracts for the International Sale of Goods (Vienna Sales Convention) (CISG)
- The Convention governs contracts between parties from different countries if those parties have not excluded the application of the Convention; and the countries are members of the Convention; or conflicts rules result in the application of the law of a country which is a member of the Convention and has not made a reservation to the Convention precluding this application
Ch 7: Transfer of Property and Title
- THE PASSING OF PROPERTY
  - the risk of the loss of goods passes with the property in the goods: see SGA (NSW), s 25
    - If the buyer has property and risk but no possession of goods, it is the buyer who bears the loss or destruction of the goods, even though the buyer has not received the goods.
    - Returning to the buyer who has property in goods but not possession, if the goods are lost or destroyed, the seller can still bring an action to recover the price of the goods because property in the goods has passed
      - S 51
- Types of goods
  - Ascertained vs specific goods
    - Ascertained def probably means identified in accordance with the agreement after the time a contract of sale is made”:
      - Re Wait [1927] 1 Ch 606 at 630 per Lord Hanworth
    - Categories of unascertained goods
      - generic goods
        
        (ie, goods “sold on terms which preserve the seller’s freedom to decide for himself how and from what source he will obtain goods answering the contractual description”) and
      - “goods sold ex bulk” or
        
        simply “bulk goods” (ie, “goods which are by express stipulation to be supplied from a fixed and a pre-determined source”,
- WHEN DOES PROPERTY PASS?
  - SGA ss 21-23, 25A, 5(4), 60(2), 10(3)
    - Section 60 Auction sales
      - (2) [A] sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner: until such announcement is made any bidder may retract his bid.
    - Section 10 Existing or future goods
      - (3) Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods
    - Section 5 - Definitions
      - Goods are in a “deliverable state” within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them.
- Kursell v Timber Operators and Contractors Ltd [1927] 1 KB 298 (Court of Appeal of England and Wales)
  - Jurisdiction
    - Court of Appeal of England and Wales - Persuasive
  - Parties
    - Plaintiffs/Appellants: Timber Operators and Contractors Ltd
    - Defendants/Respondents: Kursell
  - Procedural History
    - The arbitrator and the judge at first instance both held the contract to be frustrated.
  - Original Dispute
    - The dispute concerned a contract for the sale of merchantable timber in Latvia, which was later annulled by Latvian law, leading to a claim of frustration by the buyers.
  - Reason for Trial
    - Determination of whether the contract had been frustrated and the implications for property ownership and obligations under the contract.
  - Material Facts
    - The contract defined “merchantable timber” with specific criteria.
    - The Latvian Assembly passed a law that annulled the contract and confiscated the property, making the contract’s performance illegal.
  - Issue Raised
    - Whether the contract was frustrated due to subsequent legislation rendering its performance illegal, and whether property in the timber had passed to the buyers.
  - Laws/Statutes in Contention
    - Sale of Goods Act, 1893
  - Precedences
    - Heilbutt v Hickson (1872)
    - Tarling v Baxter (1872)
    - James Jones & Sons v Earl of Tankerville [1909]
    - Morison v Lockhart [1912]
  - Tests and Elements
    - The case revolves around the interpretation of what constitutes “specific or ascertained goods” and the intention of the parties regarding the transfer of property.
  - Judicial Opinions and Interpretation
    - Lord Harnworth MR rejected the construction of the contract suggested by the vendors, indicating the determination of merchantable timber was to be made at the time of felling, negating the agreement as a sale of specific or ascertained goods.
    - Scrutton LJ and Sargant J both held the contract did not involve the sale of specific goods as the trees were not identified and agreed upon at the time of sale, nor was the timber in a deliverable state until severed by the buyer.
  - Legal Reasoning and Ratio Decidendi
    - The key legal reasoning focuses on the nature of the goods sold and the impact of subsequent legal changes on the contract.
    - The ratio decidendi is that the contract was not for the sale of specific goods since the trees could not be identified as merchantable at the time of the contract, and thus, the property had not passed to the buyers.
    - Additionally, the contract was held to be frustrated due to the impossibility of its performance following the enactment of the Latvian law.
  - Conclusion and Relevance to Modern Law
    - The appeal by the vendors was dismissed with costs.
    - This case highlights the complexity of contracts involving goods not yet ascertained and the potential for external legal changes to frustrate contracts.
    - It emphasizes the need to clearly define the terms of a contract and the circumstances under which property is considered to have passed from seller to buyer, a principle relevant in modern sales of goods law, especially regarding goods that require identification or extraction before delivery.
- SPECIFIC BUT NOT DELIVERABLE GOODS
  - s 23 r 2 and r 3
  - If goods are specific but not in a deliverable state, property may pass once the goods have been put into a deliverable state and the buyer has been informed that the goods are in a deliverable state
  - Underwood Ltd v Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343 (Court of Appeal of England and Wales)
- SALE OR RETURN GOODS
  - s 23 r 4
  - A sale or return agreement gives the buyer an election to buy.
    - The goods are bailed to the prospective buyer (see Chapter 3) who may elect to buy them or return the goods.
    - Until the buyer exercises the election to buy, the buyer is not obliged to buy and the property remains with the prospective seller
  - Weiner v Harris [1910] 1 KB 285 (Court of Appeal of England and Wales)
    - Parties
      - Plaintiff: Weiner (Manufacturing Jeweller)
      - Defendant: Harris
    - Original Dispute
      - The plaintiff sought to recover certain jewellery which had been pledged by Fisher (F), a retail jeweller, to the defendant as security for an advance.
      - Fisher had received the jewellery from Weiner on terms outlined in a letter, for sale or return.
    - Material Facts
      - Fisher received jewellery from Weiner on a sale or return basis, as per a letter agreement.
      - Fisher was to sell the jewellery, entering transactions in a specific book, with property in the goods remaining with Weiner until sold or paid for.
      - Fisher’s remuneration was one half of the profit from each sale, with the requirement to remit the cost price and half of the profit to Weiner upon sale.
    - Issue Raised
      - Whether the goods provided to Fisher were on a sale or return basis, making Fisher a buyer with the right to pledge the goods, or whether Fisher was merely an agent for Weiner with no right to pledge the goods.
    - Law/Statute in Contention
      - Sale of Goods Act (SGA) s 23 r 4
    - Judicial Opinions and Interpretation
      - The court held that the arrangement between Weiner and Fisher did not constitute a sale or return transaction but rather appointed Fisher as an agent for sale.
      - The terms of the letter, particularly the mechanism for remuneration and the stipulation that the goods remained Weiner’s property until sold or paid for, supported this interpretation.
      - The court emphasized that the mere use of the term “sale or return” did not define the nature of the contract; instead, the actual agreement and intended roles of the parties determined their relationship.
    - Legal Reasoning and Ratio Decidendi
      - The key legal reasoning centered on the interpretation of the agreement and the roles it established for Fisher and Weiner.
      - The court concluded that Fisher acted as an agent with a duty to sell on behalf of Weiner, without ever becoming the buyer of the goods himself.
      - This decision was supported by the terms of remuneration, the treatment of the goods as Weiner’s property, and the nature of Fisher’s obligations under the agreement.
    - Conclusion and Relevance to Modern Law
      - The court’s decision clarified the application of SGA s 23 r 4 in situations where goods are provided for the purpose of sale by another party.
      - It distinguished between transactions where goods are given on sale or return (implying potential transfer of ownership to the recipient) and those where the recipient acts as an agent for the owner (with no transfer of ownership for goods unsold).
      - This case underscores the importance of clearly defining the nature of transactions involving goods to ascertain the passing of property and risk, relevant for determining rights and liabilities under the Sale of Goods Act.
  - Re Ferrier; Ex parte The Trustee v Donald [1944] 1 Ch 295 (Chancery Division, High Court, England)
    - Facts
      - In November 1941, certain furniture was delivered by D, a dealer, to F, “on sale for cash or return” within a week. Two days after the delivery execution was levied on the goods of F on behalf of creditors, and the furniture was seized.
    - Held
      - I do not take the view that Mrs Ferrier retained the goods until November 20, 1941, within the meaning of [297] s 18, r 4.
      - She retained them until November 15, 1941, when, according to the trustee’s own evidence, the goods were seized under the execution.
      - From that time on I think that the goods were “retained” by the sheriff, and were so retained until, pursuant to the order of the master, he withdrew from possession of them.
  - DFS Australia Pty Ltd v Comptroller-General of Customs [2017] FCA 547 (Federal Court of Australia)
    - Jurisdiction
      - Federal Court of Australia
    - Parties
      - Applicant: DFS Australia Pty Ltd (Duty-Free Retailer)
      - Respondent: Comptroller-General of Customs
    - Original Dispute
      - DFS Australia sought a “drawback” (repayment) of import duties for goods sold duty-free and exported from Australia, claiming to be the legal owner of the goods at the time of export.
      - The Comptroller-General contested, arguing that legal ownership had passed to the customers at that point.
    - Material Facts
      - DFS Australia sold duty-free goods in tamper-proof bags, indicating the goods were under customs control and warning against opening before export.
      - Terms and Conditions required customers to export the goods within specific timelines or return them if not exported.
    - Issue Raised
      - Whether DFS Australia retained legal ownership of the goods at the time of export, qualifying for a drawback claim.
    - Laws/Statutes in Contention
      - Sale of Goods Act 1923 (NSW) s 22, 23, 24
      - Sale of Goods Act 1896 (Qld) s 20
    - Judicial Opinions and Interpretation
      - Justice Burley evaluated the Sale of Goods Acts provisions and the contractual terms between DFS Australia and its customers.
      - DFS argued the sealed bag regime and Terms and Conditions evidenced an intention that property in the goods did not pass until export.
      - The Comptroller-General argued that property passed to the traveller at the point of sale in the store.
    - Legal Reasoning and Ratio Decidendi
      - Justice Burley concluded that the sales terms, documentation, and the conduct of the parties indicated that property was intended to transfer to the traveller at the point of sale.
      - The contractual conditions set by DFS Australia were not seen as reserving the right of disposal until certain conditions were fulfilled but rather as an obligation to return the goods upon specified conditions.
      - Thus, property in the goods passed to the traveller upon sale, and the Terms and Conditions reflected obligations under the contract rather than conditions affecting the transfer of legal ownership.
    - Conclusion and Relevance to Modern Law
      - The court ruled against DFS Australia, finding that legal ownership of the goods passed to the customers at the point of sale, disqualifying DFS from the drawback claim.
      - It clarifies the application of the Sale of Goods Act regarding the transfer of ownership and conditions that might appear to reserve rights to the seller but do not legally prevent the passage of property to the buyer.
- UNASCERTAINED AND FUTURE GOODS
- The concept of unconditional appropriation is distinct from the concept of ascertainment.
  - goods cannot be unconditionally appropriated unless they are ascertained.
  - Even if goods are unconditionally appropriated to a contract, property will not pass if there is a contrary intention:
  - property in unascertained or future goods may pass by the intention of the parties, pursuant to the general rule in s 22.
- Under either method of transfer, unascertained or future goods must be ascertained before the property in such goods can pass: SGA (NSW), s 21.
  - ascertainment “by exhaustion”
  - ascertainment “by segregation and constructive delivery”
- The passing of property by unconditional appropriation with assent
  - Under SGA (NSW), s 23 r 5(2), delivery to a buyer, or carrier or other bailee in order to send the goods to the buyer, is an unconditional appropriation so long as the seller has not reserved a right of disposal.
  - Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240 (Queen’s Bench Division, High Court, England)
    - Jurisdiction:
      - Queen’s Bench Division, High Court, England
    - Facts:
      - The plaintiffs, merchants, ordered cycles and tricycles from the defendants under a FOB contract with CIF features.
      - The goods were manufactured and prepared for shipment but were not dispatched due to the defendant’s receivership.
    - Issue:
      - Whether property in the goods had passed to the plaintiffs through appropriation by the sellers with the buyers’ assent.
    - Holding:
      - The court held that for property to pass, there must be an appropriation of specific goods to the contract by mutual assent, which did not occur in this case since the goods were not shipped nor was there any agreement to change ownership before shipment.
      - Thus, the property had not passed to the buyer, and the plaintiffs’ action failed.
  - Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd [2001] NSWCA 281 (Supreme Court of New South Wales, Court of Appeal)
    - Jurisdiction:
      - Supreme Court of New South Wales, Court of Appeal
    - Facts:
      - Riviera contracted to manufacture and ship a motor cruiser to a buyer.
      - The cruiser was damaged while being transported to the ship for export.
      - Riviera claimed damages for the repair of the cruiser.
    - Issue:
      - At what point did property and risk pass from the seller to the buyer in a scenario involving the manufacture and intended export of goods?
    - Holding:
      - The court concluded that property did not pass until the goods were loaded onto the exporting freighter.
      - The arrangements and practices of the parties indicated that the risk and property remained with the seller until this final act of loading onto the freighter was completed.
  - Wardar’s (Import and Export) Co Ltd v W Norwood & Sons Ltd [1968] 2 QB 663 (Court of Appeal of England and Wales)
    - Jurisdiction:
      - Court of Appeal of England and Wales
    - Facts:
      - Plaintiffs bought a portion of frozen ox kidneys which were later found to be unfit for human consumption.
      - The issue was whether the damage occurred before or after the property passed to the buyers.
    - Issue:
      - When did property and risk in the goods pass from the seller to the buyer?
    - Holding:
      - The court held that property and risk passed to the buyer when the carrier, acting on behalf of the buyer, took delivery of the goods.
      - Since the damage occurred after this moment, the risk was on the buyer, and the seller’s counterclaim for the price of the kidneys succeeded.
  - Common Themes and Legal Principles:
    - Unconditional Appropriation:
      - For property to pass, there must be an unconditional appropriation of specific goods to the contract with the mutual assent of both parties.
    - Role of Delivery and Risk:
      - The passing of risk is closely tied to the passing of property, typically occurring simultaneously.
    - Seller’s Acts:
      - The final act performed by the seller, often involving delivery or preparation for it, is crucial in determining the point at which property passes.
    - Contractual Terms and Practices:
      - The intentions of the parties, as reflected in their contract and practices, play a significant role in determining when property passes, especially in contracts involving the shipment of goods.
- The passing of property by intention and ascertainment
  - SGA (NSW), ss 21 and 23
    - Property might pass in unascertained goods otherwise than by unconditional appropriation.
    - For this to be the case, the goods must be ascertained and there must be a clear intention that property should pass.
  - Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74 (Privy Council)
    - Facts:
      - Goldcorp sold “non-allocated metal” to investors, implying ownership of gold as part of a larger bulk without specific appropriation.
      - Upon insolvency, Goldcorp lacked sufficient bullion to meet its obligations.
    - Issue:
      - Whether non-allocated claimants had proprietary rights in the remaining stock of bullion.
    - Holding:
      - Non-allocated claimants had no proprietary rights over the bullion, as the goods were unascertained at the time of sale and no specific appropriation or mutual assent occurred.
  - Re Stapylton Fletcher; Re Ellis, Son & Vidler Ltd [1994] 1 WLR 1181 (Chancery Division, High Court, England)
    - Facts:
      - Wine merchants held unallocated wine stocks for customers, with stocks not specifically marked for individual customers.
      - Upon insolvency, a dispute arose over customers’ proprietary rights to the wines.
    - Issue:
      - Whether customers had proprietary rights in unascertained or bulk goods and the conditions under which property in such goods could pass.
    - Holding:
      - Property could pass in unascertained or bulk goods if there was a common intention and goods were segregated for storage, even without immediate appropriation to each customer.
      - The court applied a flexible approach to the ascertainment requirement, focusing on the practical context of storage agreements and collective intention.
- The passing of an equitable interest in future goods?
  - It may be possible for a buyer, under a sale of goods, to obtain an equitable interest in future goods as soon as the seller obtains the goods: see
    - Holroyd v Marshall (1862) 10 HLC 191 at
  - In the Australian context, it has not been decided whether the SGA should be regarded as a complete code:
    - see Hewett v Court (1983) 149 CLR 639 at 646 per Gibbs CJ and
    - Electrical Pty Ltd v Rodgers (1989) 15 NSWLR 473 at 492–493 per Kearney J
- CONTRARY INTENTION AND RESERVATION OF TITLE
  - “Romalpa clause def”
    - Aka “retention of title” or “reservation of title”
    - see Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676),
      - protects a seller of goods in the circumstance where possession of the goods has passed to the buyer but the buyer has not paid for the goods.
    - property does not pass in the goods until the buyer has paid the seller, either for the goods in question or in satisfaction of all debts owed to the seller.
    - SGA S 24
- THE TRANSFER OF TITLE BY NON-OWNER
- The scheme of the SGA is two-fold.
  - First, the legislation determines whether “property” has passed to the buyer. Second, if the seller’s title to the goods is defective, it asks whether the buyer has nonetheless obtained good “title” to the goods.
- Exceptions to nemo-dat rule
  - Under the SGA, competing interests in the title of goods are resolved under exceptions to the nemo dat rule.
  - Exceptions to the nemo dat rule are set down in the SGA (NSW), ss 26-28, 5 and in the Factors (Mercantile Agents) Act 1923 (NSW) (Factors Act (NSW)), ss 5, 3. 12
  - Those exceptions are:
    - 1. conduct by owner;
    - 1. sale under a voidable title;
    - 1. sale by a mercantile agent;
    - 1. seller in possession; and
    - 1. Buyer in possession.
- Section 5 Definitions
  - (1) “Delivery” means voluntary transfer of possession from one person to another.
  - (2) A thing is deemed to be done “in good faith” within the meaning of this Act when it is in fact done honestly, whether it be done negligently or not
- CONDUCT BY OWNER
  - If the true owner of goods does not sell the goods, the buyer may nonetheless obtain good title if the owner has done something or failed to do something which disentitles him from asserting ownership
  - SGA s 26
  - Representation of apparent ownership
- Representation of apparent authority
  - Apparent authority
    - Appears that seller has authority to sell
  - Apparent ownership
    - Appears that seller truly owns goods
  - The critical question is often the scope of the seller’s authority to sell and whether the seller acted outside that authority with respect to the sale in question.
    - Motor Credits (Hire Finance) Ltd v Pacific Motor Auctions Pty Ltd (1963) 109 CLR 87 (High Court of Australia)
- Negligent omission
  - Negligence elements for omission to inform of right to sell
    - (a) the true owner owes that buyer a duty of care to ensure that the seller cannot falsely represent he is the owner; and
    - (b) the true owner has breached that
  - Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 (Supreme Court of New South Wales, Court of Appeal)
    - Facts:
      - Barclays leased a Mercedes Benz to ICC, controlled by Kerr.
      - Kerr, without title, sold the car to Thomas Vehicle Trading Company, which later sold it to Marac Finance.
      - ICC defaulted on the lease, and Barclays repossessed the car. Marac sued Thomas for breach of implied condition of title.
      - Kerr misrepresented ownership and provided false information about the car’s financial status to Thomas.
    - Issue:
      - Whether Barclays, by their actions or inactions, owed a duty to Thomas (the purchaser) to prevent Kerr from misrepresenting ownership, leading to an estoppel preventing Barclays from claiming title against Marac.
    - Holding:
      - The court concluded that estoppel by conduct can arise not only from positive actions but also from inactions or omissions.
      - However, for an omission to lead to estoppel, the owner must breach a duty owed to the purchaser who bought from a seller without title.
      - The court found no such duty existed between Barclays and Thomas under the given circumstances, as there was no central register of motor vehicle hire purchase agreements known to both parties that could have established a duty of care.
      - The alleged breaches by Barclays (not controlling the car’s location, failing to require labels or marks, and allowing registration in Kerr Real Estate Pty Ltd’s name) did not constitute breaches of duty that could lead to estoppel.
      - The appeal was dismissed, holding that Barclays’ conduct did not preclude them from asserting title over the car because their failure to disclose their interest to Thomas was not in breach of a duty owed to him.
    - Conclusion:
      - The case reaffirms the principle that for estoppel by conduct to apply due to an owner’s inaction, there must be a breach of a duty owed to the purchaser.
      - In the absence of such a duty, the owner’s failure to disclose their interest does not automatically preclude them from asserting their title against a buyer who was misled by a third party without title.
- SALE BY MERCANTILE AGENT
- Factors Act (NSW) ss 3 and
- The statutory definition of “mercantile agent” (see the Factors Act (NSW) s 3) is circular:
  - a mercantile agent is basically someone whose business it is to buy and sell goods on behalf of others
  - Mere possession of the goods by the agent is not enough to enliven s 5 of the Factors Act (NSW).
- SALE WITH A VOIDABLE TITLE
- SGA (NSW), s 27
- A person may buy goods from a seller who has the right to rescind the contract of sale, eg, for fraud, misrepresentation, undue influence or unconscionability.
  - the critical question is whether the original seller has elected to rescind the contract of sale before the subsequent sale to the subsequent buyer.
  - Unless the original seller has elected to rescind the contract, title passes to the subse-quent buyer.
- Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525
  - Facts:
    - Caldwell advertised his Jaguar for sale. Norris, using fraudulent means, acquired the car from Caldwell with a bounced cheque.
    - Caldwell attempted to recover the car upon discovering the fraud but could not communicate with Norris, who had sold the car to Motobella, leading to several transactions ending with Car and Universal Finance Co Ltd purchasing the car.
  - Issue:
    - Can a contract voidable due to fraud be terminated by the aggrieved party without communicating the rescission to the fraudulent party, especially when the fraudulent party is untraceable?
  - Ruling:
    - Yes, Lord Denning MR held that in cases of fraudulent misrepresentation, the aggrieved party can rescind the contract through unequivocal acts of election to terminate, even without direct communication to the other party, provided they take all possible steps to regain the goods upon discovering the fraud.
  - Conclusion:
    - The Court of Appeal upheld that Caldwell had effectively rescinded the contract upon discovering the fraud, rendering subsequent sales void and revesting property in him.
    - The car was rightfully returned to Caldwell, emphasizing that in cases of fraud, the defrauded party’s right to rescind the contract can be exercised without direct communication if the fraudulent party evades contact.
- SELLER IN POSSESSION
  - Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867 (Privy Council)
- BUYER IN POSSESSION
  - A person who has bought goods and who has obtained possession but not title to the goods (the “original buyer”) may on-sell the goods to a third party (the “subsequent buyer”).
  - In limited circumstances, by reason of SGA (NSW), s 28(2), the subsequent buyer may obtain good title
  - For the exception to apply, the original buyer must possess the goods (or documents of title) with the consent of the original seller: contrast SGA (NSW), s 28(1).
  - Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236; 61 ALJR 415 (High Court of Australia)

Week 7: Sale of Goods Act Part 2

Implied Warranties
- This part covers some of the terms implied into a contract for sale:
  - Sale by Description – s 18
  - Fitness for Purpose –s 19(1)
  - Merchantable Quality – s 19(2)
  - Sale by Sample – s 20
  - Exclusion of Implied Terms and Conditions
- Sale by Description – s 18 of the Sale of Goods Act Implied term that goods shall correspond with description
  - Section 18 of the Sale of Goods Act 1923 (NSW):
    - Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and if the sale be by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.
  - Not limited to retail sales – applies to private sale.
  - Future goods or unascertained goods being of a certain class are always sold by description - purchaser having not seen or inspected the relevant good(s) relies on the seller to provide a good that meets the description.
  - Specific goods may be characterised as being sold by description depending on the circumstances but applies where bought by the buyer at least in part in reliance upon the description given.
- Sale by Description – section 18
  - The description needs to be a statement of the kind, class or species or characteristics rather than quality and it needs to influence the sale (reliance).
  - For example in Taylor v Combined Buyers [1924] NZLR 627, 642-643. :
    - a set of antique mahogany chairs will not be satisfied by delivery of a set of modern replica mahogany chairs;
    - Sale of a case of port wine is not satisfied by delivery of a case of beer.
    - If the contract is for sale of a particular make of car and the car delivered is two halves of a car put together: Beale v Taylor [1967] 1 WLR 1192.
  - Question of fact – the difference is between a purchaser who relies on a specifically identified good to nonetheless meet a certain description or a purchaser who has identified the good and is happy to take the thing ‘as is’ and how it is described is of no importance
- Elder Smith Goldsborough Mort Ltd v McBride [1976] 2 NSWLR 631
  - Facts:
    - Bull purchased at auction described as a ‘breeding bull’. Bull was sterile. Auctioneer brought action against purchasers for purchase price. Purchaser refused to pay on grounds of deviation from description.
    - A sale of specific goods will not usually be a sale by description where the buyer has had the opportunity of inspecting the goods (at 640)
    - [quoting Chalmers’ Sale of Goods] ‘Where goods are described by the contract and the buyer contracts in reliance on that description, there is a sale by description even if the goods be specific…And it may apply even where…the buyer…has seen and selected the goods, if the deviation of the goods from the description is not apparent…’ (at 641)
    - ‘…although the sale was of specific goods it was nevertheless a sale by description, the description being ‘a breeding bull’’ (at 641)
- Sale by description – Beale v Taylor [1967] 3 All ER 253
  - Facts:
    - Seller advertises 1961 Triumph Herald Convertible. Unknown to seller vehicle comprises two different Herald models welded together. Buyer claims damages for breach of warranty that goods sold corresponded with description. The vehicle had been inspected by the buyer and test driven by buyer’s mother.
  - Issue:
    - ‘The question in this case is whether this was a sale by description or whether, as the seller contends, this was a sale of a particular thing seen by the buyer and bought by him purely on his own assessment of the value of the thing to him’ [at 255]
    - ‘I think that, on the facts of this case, the buyer, when he came along to see this car, was coming along to see a car as advertised, that is, a car described as a “Herald convertible, white, 1961”.
    - When he came along he saw what ostensibly was a Herald convertible, white, 1961, …; it was on that basis that he was making the offer and in the belief that the seller was advancing his car as that which his advertisement indicated. Apart from that, the selling of a car of that make, I would on the face of it rather agree with the submission of the seller that he was making no warranties at all and making no contractual terms; but fundamentally he was selling a car of that description.’
- Sale by Description – Grant v Australian Knitting Mills Ltd [1936] AC 85
  - Facts:
    - Dr Grant purchased “Golden Fleece” woolen underwear but contracted dermatitis because a chemical remained in the material.
    - The Privy Council held there was a breach of implied terms of fitness for purpose and of merchantable quality but also discussed when goods are bought by description:
      - “A difficulty, therefore, cannot but arise in determining when the sale is “by” the description and when not.
      - Apparently the distinction is between sales of things sought or chosen by the buyer because of their description and of things of which the physical identity is all important.
      - When the ground upon which the goods are selected or identified is their correspondence to a description and when, therefore, it may be said that the buyer primarily relies upon their classification or possession of attributes, then, notwithstanding that they are bought as specific goods ascertained and identified, the goods are bought by description.
      - In the ordinary case of a sale over the counter by a shopkeeper to a customer, who calls for an article of a given description, inspects the specimens produced, and buys one, the transaction is a sale by description.
- Sale by Description – Ashington Piggeries v Christopher Hill [1971] 1 All ER 847
  - Facts:
    - Mink food prepared to specifications of plaintiff.
    - Mink feed contained dimethylnitrosamine in herring component which was highly toxic to mink.
    - It was toxic to all mammals but mink were particularly affected.
  - Held:
    - No breach of implied condition as to correspondence with description.
    - “The test of description, at least where commodities are concerned, is intended to be a broader, more common sense, test of a mercantile character. The question whether that is what the buyer bargained for has to be answered according to such tests as men in the market would apply, leaving more delicate questions of condition, or quality, to be determined under other clauses of the contract or sections of the Act.” (Lord Diplock)
    - ‘In my opinion, it is working the word ‘description’ too hard to say that ‘herring meal’ was a misdescription.
    - The herring meal was contaminated but no poisonous substance was added to it so as to make the description ‘herring meal’ erroneous.’ (Lord Hodson) [p 853]
- Sale by Description – Summary
  - Description is a statement of the essential or specific nature of the kind, class or species to which the article belong (ie not merely quality).
  - The description needs to have so influenced the sale as to become a term of the contract.
  - Identity – an issue usually with future or unascertained goods
  - Specific goods may be characterised as being sold by description in particular circumstances
  - Description separate from quality
  - Key question – was there reliance by buyer on description provided by seller?
Fit for Purpose – section 19(1) of the Sale of Goods Act 1923 Implied condition as to quality or fitness
- Where the buyer expressly or by implication makes known to the seller the particular purpose in the course of the seller’s business to supply
- Fit for Purpose – section 19(1)
  - Prima facie, the position is caveat emptor - buyer beware.
    - Condition def
      - A condition is a fundamental term of a contract whose breach allows for termination of the contract and claims for damages
  - However, a condition that a good sold will be fit for purpose will be implied into a contract for sale where:
    - The purchaser expressly or impliedly makes a “particular purpose” known to the seller; and
    - The purchaser relies on the seller’s skill or judgment to propose a good that would be fit for that purpose; where
    - The seller was aware – or ought to have been aware – the his/her judgment was being relied upon; where
    - The seller usually sells goods of that type in the ordinary course of their business, and not sold under patent or trade name
  - Priest v Last [1903] 2 KB 148
    - When goods are by their description suitable for one purpose only, it will be inferred that the buyer has made known the purpose for which the goods are required;
    - If no specific purpose is made known, it will be inferred that the buyer has made known that goods are being bought for their normal purpose;
    - Where goods are capable of being used for more than one purpose, the buyer must make known the purpose for which he requires them;
    - And the purpose must be disclosed before or at the time of the contract.
- Fitness for Purpose – key questions
  - 1. Did the buyer make known the particular purpose for which goods are required?
  - 1. Did the buyer rely on the seller’s skill and judgment?
  - 1. Were the goods of a description which it is in the course of the seller’s business to supply?
  - 1. Does the trade name exception apply?
  - 1. Has the condition been breached?
- Fitness for purpose:
- Henry Kendall and Sons v William Lillico & Sons Ltd [1969] 2 AC 31 (Hardwick Game)
  - Facts:
    - Kendall and Holland imported groundnut from Brazil and sold it to Lillico and Grimsdale.
    - Lillico and Grimsdale sold it to the Suffolk Agricultural Poultry Producers Association with a written condition of sale including a clause that buyers take responsibility or latent defect.
    - Hardwicke Game bought the groundnut however it was found to contain a toxic fungus and its pheasants died.
  - Held:
    - The House of Lords held that Grimsdale was liable to SAPPA for breach of fitness of purpose and that the exclusion did not apply to the term, and that Kendal and Holland were in turn liable to Lillico and Grimsdale for breach of implied fitness for purpose.
- Fit for Purpose: “particular purpose” - Hardwick Game
  - Particular Purpose made known - resale for compounding for cattle and poultry rations.
    - Grimsdale was liable to SAPPA for breach of fitness of purpose;
    - Kendal and Holland were in turn liable to Lillico and Grimsdale for breach of implied fitness for purpose
- Fit for Purpose: Hardwick Game (text [8.400]
  - Held:
    - “It was argued that, whenever any purpose is stated so as to bring this subsection into operation, the seller must supply goods reasonably fit to enable the buyer to carry out his purpose in any normal way.
    - But that can only be right if the purpose is stated with sufficient particularity to enable the seller to exercise his skill or judgment in making or selecting appropriate goods. …it could not be right that the buyer, merely by stating that he wants the goods for resale in the course of his business, could impose on the seller the obligation to supply goods reasonably fit for resale to every ordinary customer of the buyer no matter what his requirements might be.” (Lord Reid)
- Fitness for purpose – establishing reliance
  - Reliance must be evident to a reasonable seller at or before the time the contract is formed.
  - No presumption of reliance
  - Usually arises by implication from the circumstances
  - Not required to be reasonable
  - As between a seller and a retail customer, it is usually inferred; in Grant v Aus Knitting Mills it was held that a buyer goes to a shop with the confidence that the tradesman has selected his stock with skill and judgment (better the shop easier it is to draw the inference)
  - Reliance is a question of fact
  - Partial reliance is sufficient if it constitutes a substantial and effective inducement even if the buyer has to some extent relied on own knowledge etc
- Fit for Purpose: reliance - Grant v Australian Knitting Mills
  - Grant v Australian Knitting Mills [1936] AC 85
    - “It is clear that the reliance must be brought home to the mind of the seller, expressly or by implication.
    - The reliance will seldom be express: it will usually arise by implication from the circumstances:
      - thus to take a case like that in question, of a purchase from a retailer, the reliance will be in general inferred from the fact that a buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment:
      - the retailer need know nothing about the process of manufacture: it is immaterial whether he be manufacturer or not:
      - the main inducement to deal with a good retail shop is the expectation that the tradesman will have bought the right goods of a good make:
      - the goods sold must be, as they were in the present case, goods of a description which it is in the course of the seller’s business to supply:
      - there is no need to specify in terms the particular purpose for which the buyer requires the goods, which is none the less the particular purpose within the meaning of the section, because it is the only purpose for which any one would ordinarily want the goods.
    - In this case the garments were naturally intended, and only intended, to be worn next the skin.” (Lord Wright) (emphasis added)
- Fit for Purpose: Trade name exception
  - Section 19(1) ‘…Provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.’
  - Baldry v Marshall Ltd [1924] All ER Rep 155
- Fit for Purpose: Trade name exception: Baldry v Marshall Ltd [1924] All ER Rep 155
  - ‘The mere fact that an article sold is described in the contract by its trade name does not necessarily make the sale a sale under a trade name.
  - Whether it is so or not depends upon the circumstances.
  - I may illustrate my meaning by reference to three different cases. … …
  - In my opinion the test of an article having been sold under its trade name within the meaning of the proviso is: Did the buyer specify it under its trade name in such a way as to indicate that he is satisfied, rightly or wrongly, that it will answer his purpose, and that he is not relying on the skill or judgment of the seller, however great that skill or judgment may be?” (Bankes LJ)
- Fitness for Purpose - Summary
  - Express or implied ‘particular purpose’ (ie given purpose) communicated to seller with sufficient particularity to enable the seller to identify characteristics with the goods need to possess to fit the purpose;
  - Goods must be of a description (i.e. of a kind) that is in the course of the seller’s business to supply – not private sale;
  - Actual reliance on skill or judgment of seller (substantial and effective inducement) known to the seller?
  - Partial reliance sufficient
  - Reliance determined by circumstances - Seller should have known in the circumstances that their skill or judgment was being relied upon
- Merchantable Quality: section 19(2) of the Sale of Goods Act 1923
  - Implied condition that the goods shall be of merchantable quality
  - Section 19(2) states
    - 2) Where goods are bought by description from a seller who deals in goods of that description (whether the seller be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:
    - Provided that if the buyer has examined the goods there shall be no implied condition as regards defects which such examination ought to have revealed.
  - Elements of implied condition:
    - Goods bought by description (ie same as s 18);
    - Seller commonly deals with goods of that description;
    - the buyer did not inspect the good before purchase, or if they did, defects were not such as would have been reasonably discoverable.
  - Speedway Safety Products Pty Ltd v Hazell & Moore Industries Pty Ltd [1982] 1 NSWLR 255
    - Facts:
      - Hazell was a distributor of Suzuki motorcycles.
      - It was put into receivership and was selling all its stock. Speedway agreed to buy all the stock.
      - The contract described the goods sold as ‘stock situated at the premises of 74-78 Wentworth Avenue, Sydney’.
      - When Speedway received the goods, it found that some of them were unusable.
    - Held:
      - No sale by description – Speedway attended the premises and, after inspection, bought the goods ‘as is’.
    - ‘Of course what appears there is a description in the loosest sense.
      - But in my view it is not an expression which designates a general category, the membership of which implies certain attributes.
      - To classify the goods sold as stock is to adopt a category so all embracing in its extent as to predicate no qualities of its members.
      - On the contrary the memorandum adopts a form of language which merely identifies the goods sold by locating them at a particular address.’ (Glass JA).
- Merchantable Quality: Hardwick Game [1969] 2 AC 31
  - Facts:
    - Breeding pheasants killed by being fed Aflatoxin tainted Brazil nuts.
    - Feed suitable for cattle at a mix of no more than 5%.
  - Held:
    - “It seems to follow that if goods are sold under a description which they fulfill, and if goods under that description are reasonably capable in ordinary use of several purposes, they are of merchantable quality…if they are reasonably capable of being used for any one or more of such purposes, even if unfit for use for that one of those purposes which the particular buyer intended…”
  - Was the groundnut of merchantable quality?
    - Yes, it could have safely been used to feed other animals.
    - This meant that it could be sold on the market under the description ‘groundnut’, even if it was not fit for the particular purpose of feeding pheasants.
  - “The learned judge analysed the evidence carefully.
    - He came to the conclusion that though the meal was unfit for use for one purpose (i.e. for use in a compound food for poultry) it could not be said that in the form in which it was tendered the meal was of no use for any purpose for which the meal (in its defective state) would normally be used:
      - accordingly he could not hold that under its description it was unsaleable.
      - The learned judge had a great deal of evidence to consider and as there was evidence which warranted his conclusion I do not think that it can be disturbed.” (Lord Borth-y-Guest)
- Cammell Laird & Co v Manganese Bronze and Brass Co Ltd [1934] All ER Rep 1
  - Facts:
    - Shipbuilders order two propellers to be manufactured according to their exact specifications for two ships.
    - One propeller as supplied had vibration problems at specific RPM and needed to be replaced twice.
    - In all four propellers were manufactured.
    - The shipbuilders sued the manufacturers for breach of contract; the manufacturers sued for payment for all four propellers.
  - Held:
    - [Goods are not of merchantable quality if they]…in the form in which they were tendered were of no use for any purpose for which such goods would normally be used and hence were not saleable under that description…the question is whether the defective propeller could be used…on any vessel
- Australian Knitting Mills v Grant (1933) 50 CLR 387
  - “In the ordinary case of a sale over the counter by a shopkeeper to a customer, who calls for an article of a given description, inspects the specimens produced, and buys one, the transaction is a sale by description.
    - There is in such a case a condition that the goods are of merchantable quality but a condition which, because of the examination, is qualified by the proviso to the sub-section and extends only to defects not reasonably discoverable by such an examination.” (Dixon J)
  - “The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms.” (Dixon J
Relationship between section 19(1) – Fit for Purpose and section 19(2) – Merchantable Quality
- In general terms
  - Section 19(1) applies where a particular purpose is made known to the seller
  - Section 19(2) applies even when no particular purpose is made known to the seller
- However, the sub-sections are not mutually exclusive and often overlap
- Merchantable Quality: Summary
  - Goods must be purchased by description
  - Seller must deal in goods of that description (ie not private sale)
  - If goods are inspected, no implied condition in relation to defects which inspection ought to have revealed (latent defects are those that cannot be detected on examination/inspection)
- Sale by Sample – section 20 of the Sale of Goods Act 1923
  - Section 20: Sale by Sample
    - (1) A contract of sale is a contract for sale by sample where there is a term in the contract express or implied to that effect.
    - (2) In the case of a contract for sale by sample:
      - there is an implied condition that the bulk shall correspond with the sample in quality,
      - there is an implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with the sample,
      - there is an implied condition that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample
- Exclusion of implied terms and conditions
  - Section 57 of the Sale of Goods Act 1923
    - ‘Where any right, duty, or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement, or by the course of dealing between the parties, or by usage, if the usage be such as to bind both parties to the contract.’
- Conditions and Warranties in Contracts for Consumer Sales
  - Section 64(1)
    - Any provision in, or applying to, a contract for a consumer sale and purporting to exclude or restrict the operation of all or any of the provisions of sections 18, 19 and 20 (section 19(4) excepted) or any liability of the seller for a breach of a condition or warranty implied by any provision of those sections is void
    - Warranty def
      - Warranty means an agreement with reference to goods which are the subject of a contract of sale, but collateral to the main purpose of such contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated.
- Merchantability and Consumer Sales
  - Section 64(3)
    - Without limiting the meaning of the expression merchantable quality, goods of any kind which are the subject of a contract for a consumer sale are not of merchantable quality if they are not as fit for the purpose or purposes for which goods of that kind are commonly bought as is reasonable to expect having regard to their price, to any description applied to them by the seller and to all other circumstances.
  - Section 64(5)
    - Where, in any proceedings arising out of a contract for a consumer sale (not being a consumer sale of second-hand goods), it appears to the court that the goods, at the time of their delivery to the buyer, were not, by reason of any defect in them or for that and any other reason, of merchantable quality, the court may add the manufacturer of the goods as a party to the proceedings and, if of the opinion that the defect should be remedied by the manufacturer, may make against the manufacturer
REMEDIES AND DAMAGES
- Remedies
  - Seller’s action for price – section 51
  - Seller’s action for damages for non-acceptance – section 52
  - Buyer’s action for damages for non-delivery – section 53
  - Buyer’s remedy for breach of warranty – section 54
- Seller’s action for Price s. 51
  - (1) Where under a contract of sale the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods.
  - (2) Where under a contract of sale the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract.
- Seller’s action for damages – S. 52
  - Section 52 – Damages for non-acceptance
    - (1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for non-acceptance.
    - (2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of contract.
    - (3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or if no time was fixed for acceptance, then at the time of the refusal to accept.
- Effect of Seller’s Statutory Actions
  - Where property has passed to the buyer, the buyer has accepted the goods but does not pay:
    - The seller can sue for the price.
  - Where property in the goods has not passed and the buyer refuses to accept them:
    - The seller can sue for damages (not price).
  - Where property in the goods has passed, but the buyer has not accepted or paid for the goods:
    - The seller can sue for price OR damages
- Buyer’s damages for non-delivery – s. 53
  - Section 53 Damages for non-delivery
    - (1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery.
    - (2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the seller’s breach of contract.
    - (3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or if no time was fixed, then at the time of the refusal to deliver.
- Available Market – Joseph & Co Pty Ltd v Harvest Grain Co Pty Ltd (1996) 39 NSWLR 722
  - Facts:
    - Chickpeas bought for re-sale. Non delivery exposed the purchaser to liability to its own customers.
    - An issue was whether a buyer’s resale agreement was too remote for the purpose of damages.
  - Held:
    - ‘Available market then would seem to mean that buyers and seller are procurable at once and within a reasonable distance of the aggrieved party in sufficient numbers to constitute the relationship of supply and demand and the consequent establishment of a price.
- Buyer’s remedy for breach of warranty– S. 54
  - Section 54 Remedy for breach of warranty
    - (1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods, but the buyer may:
      - (a) set up against the seller the breach of warranty in diminution or extinction of the price, or
      - (b) maintain an action against the seller for damages for the breach of warranty.
    - (2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty.
    - (3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.
    - (4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent the buyer from maintaining an action for the same breach of warranty if the buyer has suffered further damage.

Week 8: Australian Consumer Law Part 1

Structure and History of the Australian Consumer Law
- The Australian Consumer Law (ACL) is a comprehensive regime to provide protection to consumers:
  - was the key recommendation of the Productivity Commission’s 2008 Review of Australia’s Consumer Policy Framework.
  - a cooperative reform of the Australian Government and the States and Territories, through Council of Australian Governments (COAG).
  - The ACL applies as a law of the Commonwealth under the Competition and Consumer Act 2010 (Cth) (“the CCA”), comprising:
    - Schedule 2 of the CCA;
    - The provisions of Part XI of the CCA that relate to Schedule 2 and
    - Regulations under the CCA relating to the ACL
- The ACL is comprehensive package of consumer protection provisions which includes:
  - General consumer protections:
    - prohibition against misleading and deceptive conduct
    - Prohibition against unconscionable conduct; and
    - a national unfair contract terms law covering standard form consumer and small business contracts allowing courts to declare them void.
  - Specific consumer protections:
    - Consumer guarantees
    - Prohibitions against false or misleading representations and unfair practices such as pyramid selling, referral selling, harassment and coercion;
    - Protections for unsolicited consumer agreements and lay-by agreements.
  - a national product safety regime
  - penalties, enforcement powers and consumer redress options.
- The ACL applies nationally and in all States and Territories, and to all Australian businesses.
  - For transactions that occurred prior to 1 January 2011, the previous national, State and Territory consumer laws continue to apply.
  - The ACL is administered by the ACCC and state and territory consumer protection agencies and is enforced by all Australian federal, state and territory courts and tribunals.
  - The Australian Securities and Investments Commission Act 2001 (ASIC Act), provides for the same protections in relation to financial products and services as provided under the AC.
- The ACL is not intended to cover the field:
  - s 131C of the CCA provides that Part XI of the CCA “is not intended to exclude or limit the concurrent operation of any law, whether written nor unwritten, of a State or Territory.”
  - As a result, the ACL exists alongside other legislation (and the common law).
    - For eg: the Sale of Goods Act (“SOGA”) implies conditions and warranties, and implied terms as to title and quality of goods into contracts for the sale of goods that continue to operate alongside the consumer guarantee provisions of the ACL.
    - The main differences between the AAL and SOGA in relation to consumer guarantees:
      - Cover different transactions:
        
        SOGA applies to contracts for the sale of goods whereas ACL applies to the supply of both goods and services;
      - Impose obligations on different persons:
        
        the SOGA applies to sellers whereas the ACL also applies to manufacturers and suppliers;
      - Create rights in favour of different persons:
        
        the SOGA creates rights in favour of consumers and non-consumers whereas the ACL provides consumer guarantees only for consumers as defined.
- In addition to the legislation protections under the ACL, Fair Trading Act 1987 (NSW) and limited provisions of the Sale of Goods Acts, consumers can seek remedies under common law, or combinations of both common law and legislation to obtain redress.
  - Further, consumers may have resource to particular industry legislation, e.g. banking law for disputes between themselves and a bank, or credit law if there is a dispute over a contract for credit provision.
  - All courts and tribunals in Australia can hear disputes concerning the ACL.
Scope of the ACL
- Chapter 1 – Introduction:
  - a single set of definitions and interpretive provisions about consumer law concepts.
- Chapter 2 – General protections,
  - which create standards of business conduct in the market, including:
    - A general ban on misleading and deceptive conduct in trade or commerce;
    - A general ban on unconscionable conduct in trade or commerce and specific bans on unconscionable conduct in consumer and some business transactions; and
    - A provision that makes unfair contract terms in consumer contracts and small business contracts void.
- Chapter 3 – Specific protections which address identified forms of business conduct, including provisions:
  - Dealing with consumer transactions for goods or services
  - On the safety of consumer goods and product related services; and
  - On the liability of manufacturers for goods with safety defects
- Chapter 4 – Offences:
  - criminal offences relating to certain matters covered in Chapter 3.
- Chapter 5 – Enforcement and Remedies
Regulations under the ACL
- Regulations made under the ACL are set out in Parts 6 and 7 of the Competition and Consumer Regulations 2010 (Cth)
- The ACL Regulations give practical effect to the ACL provisions dealing with:
  - prescribed requirements for asserting a right to payment;
  - agreements that are not unsolicited consumer agreements;
  - requirements for warranties against defects and repair notices; and
  - reporting requirements for goods or product-related services associated with death, serious injury or serious illness.
Overview of the Consumer Guarantee Law in the ACL
- The Consumer Guarantee Law is found in Parts 3-2, Div 1, and available remedies in Part 5-4 of the ACL.
- Provides minimum mandatory standards of quality of goods and services to “consumers” under s 3(1).
- Does not apply to financial products and services under ACL and in fact not in the ASIC Act for these goods or services.
- These are statutory rights and remedies, not implied terms into the contract as under the Sale of Goods Act.
  Sale of Goods Act 1923 (NSW)
  Australian Consumer Law
  Implied terms into contracts
  Statutory rights in respect of suppliers of goods or
  services to consumers
  Can be contracted out of by express or implied
  intent – section 57 (except in consumer sales)
  Cannot be contracted out of:
  sections 64 and 64A
  Breach = contractual remedies
  Remedies are statutory and wide-ranging
Rationale for the Consumer Guarantee Law
- These standards were inserted to address the “information asymmetry” (see TradePractices Amendment (Australian Consumer Law) Bill (No 2) 2010, Explanatory Memorandum, p 607), between consumers and suppliers, given that consumers will ordinarily:
  - Be less knowledgeable about the goods and services;
  - Unaware of defects;
  - Unable to bargain for a fair contractual allocation of risks of defects.
  - The statutory rights provide some redress for this asymmetry by giving consumers rights in the event that goods or services are faulty or defective
- Key Definition: Meaning of ‘consumer’
  - ‘consumer’ defined (consumer def) in section 3 of the ACL:
    - A person is a consumer of goods or services if, and only if:
      - The amount paid or payable for the goods or services is 100,000 or less or as prescribed by the regulations; or
      - The goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
      - The goods are a commercial road vehicle or trailer
  - Exclusions: does not apply where:
    - goods are acquired for resupply or manufacture or
    - to services that are supplied under a contract for transportation or storage of goods for the purposes of a business or trade by the person for whom they are transported or stored; or
    - a contract of insurance;
    - Financial services or products
  - There is a statutory presumption that persons are consumers: section 3(10);
    - Rights of gift recipients:
      - Under s 266, where consumer acquires goods from a supplier and gives them to another person as a gift that person has the same remedies as the original consumer
    - Under s 2 “affected person”, in relation to goods, means:
      - (a) a consumer who acquires the goods; or
      - (b) a person who acquires the goods from the consumer (other than for the purpose of re‑supply); or
      - (c) a person who derives title to the goods through or under the consumer.
      - [See section 271(1)(b) action against manufacturers: ‘affected person’ ref]
Tarangau Game Fishing Charters Pty Ltd v Eagle Yachts Pty Ltd [2017] QSC 306
- In July 2006 Tarangau purchased a yacht from the defendant.
  - Soon after purchase the fibreglass on the hull began to delaminate and other defects were found.
  - The plaintiff commenced proceedings for breach of implied terms under the Sale of Goods Act and also under the Trade Practices Act (now ACL).
- Held:
  - not reasonably fit for purpose of use for fishing and sailing in the open sea and not of merchantable quality under the Sale of Goods Act.
  - Held that the vessel was of a kind ordinarily acquired for personal use however, the issue was whether the fact that the vessel was purchased for a dual purpose – personal recreational use and chartering for commercial game fishing – meant that it was acquired for the purposes of re-supply.
  - Held this was a substantial purpose and constituted a supply or re-supply of the vessel.
- Plaintiff not a ”consumer”.
‘Ordinarily acquired for personal, domestic or household use or consumption’
- Crago v Multiquip Pty Ltd (1998) ATPR 41-620
  - Facts:
    - supply of incubators and hatchers adapted to accommodate ostrich eggs.
  - Held:
    - not a supply of goods of a kind ordinarily acquired for personal, domestic or household use or consumption for the purposes of ss 74B and 74D of TPA).
  - “… goods may be of a kind ordinarily acquired for personal, domestic or household use or consumption even if the goods of that kind are in many cases, perhaps even a majority of cases, acquired for business use.” [40-798]
  - ‘…onus of proof, clearly the onus was on the party who claimed an entitlement to compensation.’ [40-775]
  - ‘Certainly it cannot be regarded as a matter of common knowledge that an ostrich egg incubator is, like a carpet, a washing machine or a television set, ordinarily acquired for personal, household or domestic use.
  - There was no evidence that anyone in fact acquired such incubators for such use.’ [40-798]
Ordinarily acquired for personal, domestic or household use or consumption’:
- Bunnings Group Ltd v Laminex Group Ltd [2006] FCA 682
  - Aluminium reflective foil laminates used in roof lining purchased for use at Bunnings was held to be goods ordinarily acquired for personal, domestic or household use or consumption. Per Young J:
    - [81] ‘First, the word ‘ordinarily’ means ‘commonly’ or ‘regularly’, not ‘principally’, ‘exclusively’ or ‘predominately.’
    - [82] ‘Secondly, it is preferable to pose the statutory question (i.e. the question whether the goods in issue in the particular case are goods of a kind ordinarily acquired for personal, domestic or household use or consumption) as a single composite question…
    - This can be contrasted with a two-stage inquiry as to, first, the genus of goods in question, and secondly, whether that kind of goods is ordinarily acquired for personal, domestic or household use or consumption…
    - [83] ‘Thirdly, depending the precise statutory question and the circumstances of the particular case, it will be relevant to inquire as to the essential character of the goods in question.’
    - [86] ‘In my opinion in the context of s 74A(2)(a) of the TPA, the essential character test is relevant, but the inquiry does not end there.
      - The statutory question cannot be answered without a broader inquiry into the evidence concerning the design, marketing, pricing and potential uses of the type of goods in question.’
Importance of evidence: circumstances may change over time
- Four Square Stores (Qld) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232
  - Leased reduction photocopier
  - Sued under TPA—not fit for purpose
  - Photocopier not ‘ordinarily acquired for personal, domestic or household use or consumption’ however lease payments <15k ($15k prescribed amount in 1981)
  - Prescribed amount determined by total of lease payments
- Note: consider characterisation of photocopiers today but also apply Bunnings approach
Commercially rated goods for business purposes
- Carpet Call Pty Ltd v Chan (1987) ASC ¶55-553
  - Purchase of heavy duty carpet for nightclub
  - “In my view ‘carpet’ is a commodity or goods ordinarily acquired for domestic consumption and it does not lose that description by reason of a commercial rating or some quality which makes it last longer than other carpet normally supplied for use in a domestic setting.”
  - Per Thomas J
    - The Court concluded that the acquirer was a “consumer” despite the fact that the carpet in question was acquired for use in a night club to withstand heavy human traffic
- Guarantees in respect of goods
  - This part looks at ss 51-59 which contain a range of guarantees in respect of goods imposed on either the supplier or manufacturer (or both)
    When it applies
    Section
    Guarantee
    Apply to all supplies of goods
    s 51
    The seller has a right to dispose of the goods
    Apply to all supplies of goods
    s 52
    The consumer will have undisturbed possession of the goods
    Apply to all supplies of goods
    s 53
    The goods are free from any undisclosed securities
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 54
    The goods will be of acceptable quality
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 55
    The goods are fit for any disclosed purpose
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 56
    In the case of a sale of goods by description, the goods match
    their description
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 57
    Goods sold by sample or model correspond to sample or model
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 58
    Manufacturer’s guarantee as to availability of repair facilities and
    spare parts
    Only apply if supplied in trade or commerce and do not apply to goods sold by auction (auction being conducted by an agent, so excludes online eg ebay)
    s 59
    Compliance with express warranties made by the supplier or manufacturer
SS 54-59 – limited to supplying goods ‘in trade or commerce’ s 2
- ACL section 2 defines ‘trade or commerce’ as follows:
  - ’trade or commerce means:
    - (a) trade or commerce within Australia; or
    - (b) trade or commerce between Australia and places outside Australia;
    - and includes any business or professional activity (whether or not carried on for profit).’
- The “in trade or commerce” limitation
  - Although the concept is a complex one, in essence the conduct must be directed towards persons with whom the defendant has dealings of a commercial nature, such as consumers.
  - In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 614, Toohey J observed that “[t]he questions is not whether the conduct engaged in was in connection with trade or commerce or in relation to trade or commerce.
  - It must have been in trade or commerce.” (emphasis added)
- Qualifications to s 54
  - Nature and price of goods will be relevant to assessing acceptable quality
  - Durability – remain free from defects for a reasonable period following purchase having regard to nature of the goods (may differ from warranty periods)
  - No breach where:
    - defects drawn to consumer’s attention (54(4));
    - defects of goods displayed for sale or hire disclosed in written notice (54(5));
    - caused by abnormal use (54(6));
    - of which consumer should have reasonably become aware if goods were examined before purchase (s 54(7))
Guarantee – Fitness for Purpose (s 55)
- Section 55 provides for a guarantee that the goods supplied to a consumer are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit.
  - Purpose may be made known expressly or by implication, particularly given the nature of the goods.
  - Note that if not fit for common purpose then they will not be of acceptable quality – s 55 goes beyond acceptable quality and addresses particular purpose made known:
    - eg Baldry v Marshall [1925] 1 KB 260 – Bugatti case.
  - However it will not apply where no reliance or reliance unreasonable (s 55(3)) eg where circumstances suggest seller has no particular expertise.
  - Onus on supplier to prove that reliance unreasonable
Breach of guarantees as to acceptable quality and fitness for purpose:
- Vautin v BY Winddown Inc (formerly Bertram Yachts) (no 4) [2018] FCA 426
  - Facts:
    - Mr Vautin purchased a recreational fishing vessel named “Revive” for the purpose of recreational boating and marlin fishing from Eagle Yachts Pty Ltd, a boat which had been constructed by Bertram Yachts Inc, a US company.
    - It had been marketed and sold for ocean going travel and capable of withstanding all but the most extraordinary sea conditions.
    - However the laminated PVC foam core of the vessel had not been constructed in accordance with Bertram’s own specifications, and delaminated rendering the vessel unseaworthy.
  - Claim:
    - It was claimed, inter alia, that the vessel was not of an “acceptable quality” within the meaning of s 54 or fit for purpose under s 55. [Read case extract in text pp 561-569]
  - Held:
    - The vessel was not of an acceptable quality, or fit for purpose under s 54. 55
  - Procedural History:
    - Action brought under the Australian Consumer Law for failure of a recreational fishing vessel, “Revive”, to meet statutory guarantees of acceptable quality and fitness for purpose.
  - Original Dispute:
    - Purchase of a vessel not constructed to the manufacturer’s specifications, resulting in delamination and unseaworthiness.
  - Current Trial Reason:
    - Examination of whether the vessel met the statutory guarantees under the Australian Consumer Law.
  - Material Facts:
    - The vessel “Revive” was purchased for recreational boating and marlin fishing but was found to be unseaworthy due to delamination caused by deviation from the manufacturer’s specifications.
  - Issue:
    - Whether “Revive” met the standards of acceptable quality and fitness for purpose under sections 54 and 55 of the Australian Consumer Law.
  - Law/Statute in Contention:
    - Australian Consumer Law, sections 54 (acceptable quality) and 55 (fitness for a particular purpose).
  - Precedence:
    - Reliance on Prestige Auto Traders Australia Ltd v Bonnefin [2017] NSWSC 149 and Medtel Pty Ltd v Courtney (2003) 130 FCR 182 regarding the interpretation of “acceptable quality”.
  - Tests and Judicial Opinions:
    - The court applied objective tests for acceptable quality and fitness for purpose, considering the nature of the goods, their price, and representations made by the supplier or manufacturer.
    - The court found that the vessel did not meet the high standards required for acceptable quality, primarily due to structural defects.
  - Obiter Dicta:
    - Discussion on the concept of merchantable quality and its comparison with acceptable quality under the Australian Consumer Law.
  - Ratio Decidendi:
    - “Revive” was not of acceptable quality or fit for its intended purpose at the time of supply, violating sections 54 and 55 of the Australian Consumer Law, due to defective construction not in accordance with the manufacturer’s specifications.
  - Result and Relevance to Modern Law:
    - This case underscores the comprehensive protection provided to consumers under the Australian Consumer Law, emphasizing the objective standard of acceptable quality and fitness for purpose, including safety and durability considerations.
Fitness for disclosed purpose
- Cavalier Marketing (Australia) Pty Ltd v Rasell (1987) ASC ¶55-553
  - Facts:
    - Mrs Rasell specifically wanted carpet of multiple colours to blend with the existing decor of exposed brick in her home.
    - The carpet supplied had a reverse pile that looked different from different angles.
  - Held:
    - that whilst there was no question as to quality of the carpet, the evidence supported the finding that the particular purpose had been made known and that she had relied on the skill and judgment of the seller
- Cavalier Marketing (Australia) Pty Ltd v Rasell and Another (1990) 96 ALR 375
  - Jurisdiction:
    - Supreme Court of Queensland.
    - This decision is persuasive in nature, especially in relation to the interpretation of the Trade Practices Act 1974 (Cth).
  - Parties:
    - Appellant:
      - Cavalier Marketing (Australia) Pty Ltd
    - Respondents:
      - Rasell and Another
  - Procedural History:
    - Appeal from a decision in the District Court, where Pratt DCJ ruled in favor of the respondents.
    - The appeal was considered by Justices Kneipp, Shepherdson, and Cooper.
  - Original Dispute:
    - The sale of carpet that developed reverse piling (water marking), which was not disclosed to the buyers, rendering the carpet unfit for the agreed purpose and not of merchantable quality.
  - Material Facts:
    - The appellant supplied carpet that developed an undisclosed condition of reverse piling, affecting its aesthetic purpose and integration with the decor.
    - The appellant was aware of the specific aesthetic purpose for which the carpet was purchased.
  - Issue:
    - Application of the Trade Practices Act 1974 (Cth) concerning goods’ fitness for a specific purpose, merchantable quality, and correspondence with the sample.
  - Law/Statute in Contention:
    - Trade Practices Act 1974 (Cth), particularly sections regarding goods not reasonably fit for their purpose, goods of unmerchantable quality, and goods not corresponding with sample.
  - Judicial Opinions:
    - The carpet was deemed not reasonably fit for its specific purpose, considering the aesthetic importance to the respondents, violating relevant sections of the Trade Practices Act.
    - The phenomenon of reverse piling known to the appellant rendered the carpet not of merchantable quality when it left the appellant’s control.
    - The trial judge’s decision, including the award of damages and interest, was upheld despite a minor error in interest calculation, due to its overall reasonableness.
  - Ratio Decidendi:
    - The decision underscores the importance of disclosing known defects that could affect a product’s fitness for a disclosed purpose.
    - It clarifies the interpretation of “merchantable quality” under the Trade Practices Act, particularly in relation to goods serving aesthetic purposes.
  - Conclusion and Relevance to Modern Law:
    - The appeal was dismissed, affirming the trial court’s decision. This case emphasizes consumer protection under the Trade Practices Act, particularly for goods intended to serve both functional and aesthetic purposes.
    - It highlights the legal expectations for disclosure of known potential defects affecting goods’ intended use.
- Guarantee – Description (section 56)
  - Guarantee relating to the supply of goods by description
    - (1) If:
      - (a) a person supplies, in trade or commerce, goods by description to a consumer; and
      - (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods correspond with the description.
    - (2)
      - A supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer.
- Guarantee – Description (section 58)
  - 58 Guarantee as to repairs and spare parts
- Guarantee as to express warranties (s 59)
  - Section 59 - compliance with an “express warranty”.
    - Defined in s 2 to include any undertaking, assertion or representation in respect of the “quality, state, condition, performance or characteristics of the goods … the natural tendency of which is to induce persons to acquire the goods.
    - Note that this includes precontractual representations making them a consumer guarantee.
      - Therefore cannot be excluded by an “entire agreement” clause.
    - Adds to other actions in contract or tort or misleading or deceptive conduct.
C: Guarantees in respect of services
- The Sale of Goods Act does not deal with “services” at all.
  - The provisions in the ACL derive from s 74 of the TPA and amplify the general law under which a term might be implied that work and labour be done with due care and skill and materials so supplied will be fit for purpose
  - This part looks at ss 60-62 which contain a range of guarantees in respect of services imposed on either the supplier or manufacturer (or both)
- Guarantees in relation to supply of services ss 60-62
  - Section 60 - Guarantee as to due care and skill
    - If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.
  - Section 61 – Fitness for purpose etc
    - S 61 provides for a guarantee that services, and any product resulting from the services, will be reasonably fit for a purpose made known to the supplier and that there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result. [requires proof of reliance]
  - Section 62 – reasonable time
    - S 62 – provides for a guarantee that services will be supplied within a reasonable time if not provided for in the contract.
- Guarantee as to services
  - Seeley International Pty Ltd v Cintro Pty Ltd [2001] FCA 1862
    - Facts:
      - Seeley contracted with Cintro to design and manufacture remote controls for their roof mounted air conditioners. Contract value $31k.
      - Three air conditioners catch fire.
    - Held
      - the design agreement (as distinct from the supply agreement) was not just a contract for the supply of ‘‘goods’’; it was a contract that included the design of the ‘‘goods’’.
      - The work that was involved in designing the remote control was, in my opinion, clearly a contract for the supply by a corporation, in the course of its business, of services to a consumer.
      - Status as consumer not effectively challenged
        
        The evidence that was elicited during the course of the trial…has made it clear that the services that were provided were of a non−personal nature, but they were below the prescribed limit of $40,000.
        
        Seeley has asserted that it was a consumer in its pleadings, and there is no evidence to the contrary.
        
        The applicant is…entitled to rely on the statutory warranties that are contained in s 74 of the Trade Practices Act with respect to the provisions of the design agreement.
        
        Per O’Loughlin J at [169
- Guarantee as to services
  - Moore v Scenic Tours Pty Ltd [2020] HCA 17
    - Facts:
      - Mr Moore was promised “a once in a lifetime cruise along the grand waterways of Europe”, on a luxury river cruise.
        
        Due to the effects of spinal surgery, Mr Moore had could not sit for long stretches.
        
        Because of adverse weather, Mr Moore and his wife were only able to be on the cruise for three out of 10 days.
        
        In a class action on behalf of about 1,500 passengers of Scenic Tours (“Scenic”), Mr Moore sued Scenic under the ACL alleging that Scenic failed to exercise due care and skill in the supply of the tour in breach of the statutory guarantee found in section 60 of the ACL.
        
        Mr Moore claimed arose because Scenic knew or ought to have known about the weather conditions and cancelled or rescheduled the cruise.
      - Mr Moore claimed damages under section 267(4) of the ACL for the difference in value between the price he paid for the cruise services, and the actual value of the cruise services received; as well as damages for “disappointment and distress”.
    - Held:
      - Mr Moore recovered damages in respect of the different in value of the cruise services paid for versus the value of those actually received, and for “disappointment and distress
Guarantees generally not excluded by contract
- Most of the guarantees are mandatory and cannot be excluded by contract.
  - S 64 provides that a term of a contract …is void to the extent that the term purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying the application of the act.
- Any attempt to exclude will be void and may also be misleading and deceptive:
  - Valve Corp v ACCC [2017] FCAFC 224:
    - a term stating that a right to a refund was excluded in the event that computer software failed to comply with the guarantee of acceptable quality was void under s 64.
- However some exceptions:
  - under 64A, where goods or services are not ordinarily acquired for personal domestic or household consumption.
  - Under s 139A a term excluding or limiting liability for personal injury for provision of recreational services is not void unless recklessly provided
Enforcement and Remedies
- This part looks at Part 5-4, Divisions 1 and 2 which afford consumers remedies against the supplier or the manufacturer for failure to comply with guarantees as to good and/or services.
- Remedies and Enforcement Part 5-4 Div 1 Actions against Suppliers
  - Nature of remedy for supplier’s failure to comply with consumer guarantee in most cases depends on the seriousness of it – turns on concept of “major failure”.
  - Failure to comply with a guarantee in relation to goods will be a major failure if
    - the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of failure.(s 260(a);
    - Goods significantly depart from description or sample (s 260(b);
    - Goods cannot be easily remedied to make them fit for purpose within a reasonable time (s 260(c) (d); or
    - Not of acceptable quality because unsafe (s 260(e)
  - Services – major failure:
    - Services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of failure.(s 268(a);
    - services and/or product cannot easily be remedied to make them fit for purpose or
    - Services create an unsafe situation.
- Remedies and Enforcement Part 5-4
  - If a major failure:
    - consumer may reject the goods or recover compensation for the reduction in value of goods:
      - s 259(3).
    - If services, consumer may terminate contract for supply or recover compensation for reduction in value of services.
    - A consumer may also recover damages if it was reasonably foreseeable that the consumer would suffer loss or damage because of the failure to comply:
      - s 259(4).
  - If not a major failure:
    - If it can be remedied, the consumer may required the supplier to remedy within a reasonable time (ss 259(2)(a), 267(2).
    - If the supplier refuses, the consumer may reject goods and obtain a refund or have the failure remedied and recover reasonable costs from the supplier:
      - s 259(2((b), s 267(2)(b).
    - There is also the possibility of damages for the loss or failure if it was foreseeable.
  - Rejection of goods
    - S 262 – some limits to entitlement to reject goods.
    - A consumer cannot reject goods if:
      - Consumer fails to exercise right within a reasonable time (s262(2))
      - Goods have been lost, destroyed or disposed of; or
      - goods were damaged after delivery; or
      - Goods have become attached to or incorporated into other property
    - If a consumer chooses to reject goods the consumer must return unless significant cost in which case supplier must collect at its own expense.
    - Supplier required to give consumer a refund or replace the goods (and guarantees apply to replacement goods.)
    - the possibility of damages for the loss or failure if it was foreseeable.
- Remedies and Enforcement Part 5-4 Div 2
  - Actions against Manufacturers
    - A consumer can recover damages from the manufacturer if goods manufactured do not comply with statutory guarantees as to:
      - Acceptable quality under s 54:
        
        (except where arising from act or omission by another; cause independent of human control after goods leave manufacturer’s control; where supplier charges higher price than manufacturer recommends or average retail price) (s 271(2)).
      - Correspondence with description under s 56:
        
        (as long as description was applied by or on behalf of manufacturer or with consent, and non-compliance was not as a result of act or omission of another or a cause independent of human control after the goods leave the manufacturer)(s 271(3) and (4)).
      - Spare parts and repair facilities and express warranties (s 271(5)) –
        
        damages include reduction in value from the lower of the price paid or average retain price and any other reasonably foreseeable loss or damage – s 272
- Indemnification of suppliers by manufacturers
  - S 274 gives a supplier a right to be indemnified by the manufacturer where the supplier has supplied goods to a consumer and is liable to pay damages under s 259(4) and the manufacturer is or would be liable under s 271 to pay damages for the same loss or damage.
  - The indemnity cannot be excluded, restricted or modified (s 276).
    - However, if the relevant goods are not ordinarily acquired for personal domestic or household use or consumption, the manufacturer’s liability is limited replacement cost, repair or obtaining equivalent goods unless this is unfair having regard to the circumstances (s 276A).
Product Liability – Part 3-5 ACL
- This final part looks briefly at Part 3-5 of the ACL which is based on the former Part VA of the Trade Practices Act to provide remedies against manufacturers and importers of defective goods.
  - It provides compensation for consequential damage caused by defective goods, including property damage, personal injury and death, even if the injured party was not the consumer.
- An action can be brought against a manufacturer in respect of unsafe goods giving rise to:
  - loss or damage sustained by an individual because of injuries sustained from a safety defect (s 138);
    - Loss or damage to another arising from such injury to the first person (s 139);
    - Loss or damage to other goods of a kind ordinarily acquired for personal, domestic or household use from the safety defect (s 140);
    - Loss or damage to land, buildings or fixtures from the safety defect (s141)
  - Section 138
    - Liability for loss or damage suffered by an injured individual
  - S 139
    - Liability for loss or Damage suffered by a person other than an injured individual
  - S 140
    - Liability for loss or damage suffered by a person if other goods are destroyed or damaged
  - S 141
    - Liability for loss or damage suffered by a person if land, buildings or fixtures are destroyed or damaged
  - Definition of ‘safety defect’
    - Section 9 - Meaning of safety defect in relation to goods
- Product liability general principles
  - There is no requirement that the injury must have been reasonably foreseeable.
  - If the injured person dies, the cause of action accrues for the benefit of the individual’s estate.
  - If another person suffers consequential loss from the injury to another caused by defectiv goods, that person can recover their loss from the manufacturer (except in the context of business relationships and if workers compensation applies, then Part 3-5 does not apply.)
  - ‘Goods” not limited to ‘consumer goods’ – s 2 – so includes ships, aircraft, animals, minerals, crops
  - “Manufacturer” is also defined widely – s 7 – includes person who grows, extracts, produces, or assembles goods.
  - Under s 147 if the manufacturer cannot be identified and the supplier is notified and cannot identify the manufacturer within 30 days the supplier will be deemed to be the manufacturer.
  - The standard to be adopted in respect of the definition of ‘defect’ in s 75AC is an objective one based upon what the public at large, rather than any particular individual, is entitled to expect.
  - S 150 – liability cannot be excluded, restricted or modified by contract
- Manufacturers Defences s 142 - Defences to defective goods action
- Ryan v Great Lakes Council [1999] FCA 177
  - The case was a representative action brought forward on the behalf of consumers who contracted hepatitis A after eating oysters harvested from the waters of Wallis Lake’ after the water had been contaminated by human faecal matter (which, in turn, contaminated the oysters).
  - Oysters were held to be “manufactured” under equivalent provisions of TPA.
    - “[377] Section 75AC(1) explains that “goods have a defect if their safety is not such as persons generally are entitled to expect”.
    - Consistently with what I have already said, it seems to me the elements stipulated by s75AD are satisfied in this case.
    - However, s75AK(1)(c) provides a defence to an action under s75AD (amongst other sections) “if it is established that … the state of scientific or technical knowledge at the time when they were supplied by their actual manufacturer was not such as to enable that defect to be discovered”.
    - The paragraph obviously intends the defence be unavailable if the goods were supplied notwithstanding the possibility of discovery of the defect.
    - Conversely, the defence is available if the defect was not capable of discovery before supply.
  - In the present case, discovery and supply were mutually exclusive; the only test that would reveal the defect would destroy the goods.
  - Accordingly, it seems to me the defence applies and the s75AD claim fails.” per Wilcox J
- Graham Barclay Oysters v Ryan [2000] FCA 1099
  - Hepatitis tainted oysters raise issues in negligence, sale of goods and consumer protection
    - then subject to the Trade Practices Act rather than the Australian Consumer Law which has parallel provisions.
  - Jurisdiction:
    - Federal Court of Australia (Binding)
  - Parties:
    - Plaintiff:
      - Graham Barclay Oysters Pty Ltd
    - Defendants:
      - Ryan et al.
  - Procedural History:
    - This case was brought to the Federal Court of Australia, centered around claims arising from the consumption of Hepatitis A-contaminated oysters supplied by Graham Barclay Oysters Pty Ltd.
  - Original Dispute:
    - The plaintiffs alleged they contracted Hepatitis A from consuming contaminated oysters supplied by the defendant.
  - Current Reason for Trial:
    - To determine the liability of Graham Barclay Oysters Pty Ltd for the distribution of contaminated oysters, focusing on duty of care and alleged breaches thereof.
  - Material Facts:
    - Plaintiffs consumed oysters provided by Graham Barclay Oysters Pty Ltd.
    - The oysters were contaminated with the Hepatitis A virus, leading to illness among the consumers.
  - Issue Raised:
    - The core issue was whether Graham Barclay Oysters Pty Ltd owed a duty of care to the plaintiffs, if there was a breach of this duty, and whether the breach caused the plaintiffs’ illness.
  - Law(s)/Statute(s) in Contention:
    - The proceedings examined negligence principles related to the duty of care owed by suppliers of goods to consumers.
  - Judicial Opinions and Interpretation:
    - The court scrutinized the operational practices of Graham Barclay Oysters Pty Ltd, the foreseeability of contamination leading to harm, and compliance with regulatory standards in oyster distribution.
  - Legal Reasoning and the Ratio Decidendi:
    - The decision focused on whether Graham Barclay Oysters Pty Ltd had a duty of care to the consumers, identified any breach of this duty through insufficient safety measures, and established causation between this breach and the harm experienced by the plaintiffs.
  - Conclusion and Relevance to Modern Law:
    - The case highlights the critical importance of health and safety standards in the food supply chain, emphasizing suppliers’ legal obligations to prevent harm.
    - It reinforces the duty of care suppliers owe to consumers, especially in industries like food distribution where the potential for harm is significant.
    - The judgment contributes to legal precedents regarding supplier liability and consumer protection within the context of foodborne illnesses.
- Carey-Hazell v Getz Bros and Co (Aust) Pty Ltd [2004] FCA 853
  - Facts:
    - In Carey-Hazell, the applicant had undergone surgery to replace her mitral valve.
    - The applicant later suffered complications which she alleged were caused by the existence of a chip on the valve.
    - The Court considered what was required for the manufacturer to establish the defence, namely that the “defect did not exist when the goods left the control of the actual manufacturer…”.
    - The manufacturer led evidence that at the point of assembly the valve was tested and checked by visual examination at 7x magnification.
    - The valve then passed further tests after rework before supply.
    - After the valve was explanted, it was re tested, during which microscopic examinations did not reveal any abnormalities or defects apart from a blood clot.
    - However, four years later (post commencement of the claim), tests detected a small chip on the valve.
    - The Court found that the “evidence of the examinations of the valve’s component parts prior to assembly establishes the likelihood that any chip present would have been detected”.
  - The defence was successful

Week 9: Australian Consumer Law Part 2

A: Misleading or Deceptive Conduct
- The general prohibition against misleading and deceptive conduct and conduct likely to mislead or deceive under s 18(1) of the ACL derives from the former s 52 of the Trade Practices Act 1974 (Cth).
  - There is extensive case law on s 52 which remains relevant to the interpretation of s 18.
  - The general prohibition against misleading and deceptive conduct and conduct likely to mislead or deceive establishes a norm of conduct for the market.
    - A person who has suffered loss by conduct that breaches s 18 is entitled to damages under s 236 of the ACL.
  - This Part provides an overview of the scope and operation of the prohibition.
    - Note that it is also covered other subjects including Contracts, and Remedies
- Section 18 - Misleading or Deceptive Conduct
  - Section 18(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.
- The broad reach of Section 18
  - The section has a broad reach. It can be relied upon not only by consumers, but also by commercial entities and applies to conduct of individuals, corporations and government bodies.
  - The general prohibition is complemented by prohibitions on specific kinds of conduct in ss 29-34 and 37 of the ACL.
  - Conduct must be “in trade or commerce”:
    - Concrete Constructions (NSW) Ltd v Nelson (1990) 169 CLR 594 therefore excludes conduct not of a business activity, and merely private
- The relevant audience
  - To assess whether conduct is misleading or deceptive it is necessary to identify its likely effect on the audience to whom the conduct is directed:
    - Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36].
  - Conduct may be directed to:
    - the public at large, or a section of the public, or class, such as through advertisements in connection with mass marketing of products, or
    - specific individuals.
  - Where directed to a members of a class “it is necessary to isolate by some criterion a representative member of that class”:
    - Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45, [103].
    - (selling Nike labelled fragrance in stores next to other sports fragrances was misleading and deceptive)
  - The ordinary, reasonable member of a class is expected to take reasonable care of his or her own interests.
  - Parkdale Custom Built Furniture Pty ltd v Puxu Pty Ltd (1982) 149 CLR 191 (branding on expensive lounges was not misleading if you read the labels properly)
- What conduct may be misleading?
  - Conduct will be misleading if it has the capacity to lead into or cause error in the sense of a person being led to believe that something that is in fact untrue or incorrect:
    - Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546, 554-555..
  - “[T]he question is whether in light of all the relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive.”
    - Demagogue Pty ltd v Ramensky (1992) 39 FCR 31, 41 per Black CJ.
  - Context is important: eg advertising puffery.
  - Conduct need not be fraudulent, negligent or reckless to breach the section, and silence can breach the prohibition where there would be an expectation of disclosure.
Unconscionable Conduct
- Unconscionable conduct deals with transactions between dominant and weaker parties.
  - Overlaps with duress and undue influence in equity.
  - Unconscionable conduct is prohibited both in equity and, more recently, by statute.
  - There are three key sections under the ACL relating to unconscionable conduct :
    - Unconscionable conduct under the ‘unwritten law’ (section 20);
    - Unconscionable conduct affecting consumers (section 21); and
    - Matters the court may have regard to for the purposes of section 21 (section 22)
- Unconscionable conduct within the unwritten law – s 20 (see also s 12CA ASIC Act)
  - Section 20(1) of the ACL states that ‘A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.
  - The purpose of this section is to:
    - Widen the range of remedies available to the victim of unconscionable dealing; and
    - Enable the ACCC to investigate unconscionable conduct and, if necessary, bring legal action on behalf of the person who has been treated unconscionably.
    - Section 20 does not apply to:
      - Financial services
      - Conduct that is prohibited under section 21
- Within the ‘unwritten law’
  - Section 20 appears to refer to the equitable doctrine of unconscionable dealing as it has been interpreted in case law:
    - see for example Commercial Bank of Australia v Amadio (1983) 151 CLR 447.
  - However, the words are general and the courts have not yet settled on what constitutes unconscionable conduct under the ‘unwritten law.’
  - In ACCC v CG Berbatis Holdings Pty Ltd, the High Court accepted that s 51AA of the TPA (now s 20) applied more broadly to “manifestations of equity’s concern with unconscientious or unconscionable conduct” although it did not need to be decided.
  - However it only applies if the other ACL unconscionability provisions do not apply:
    - s 20(2).
    - As s 21 statutory unconscionability in the provision of goods and services is considered wider than unconscionability under the “unwritten law”, s 20 may have little work to do.
- Unconscionable dealing in equity
  - Equity intervenes where one party has taken advantage of a ‘special disability’ held by the other where the defendant knew or ought to have know of the disability.
  - Commercial Bank of Australia v Amadio (1983) 151 CLR 447 per Deane J at 474:
    - “The jurisdiction is long established as extending generally to circumstances in which
      - (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and
      - (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it.
      - Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable…”
- Special Disability in Unconscionable Dealing
  - It is a disabling condition which is “one which seriously affects the ability of the innocent party to make a judgment as to his own best interests when the other party knows or ought to know of the existence of that condition or circumstance and its effect on the innocent party.”
    - Commercial Bank of Australia v. Amadio (1983) 151 CLR 447 at 462 per Mason J.
  - In Blomley v Ryan (1956) 99 CLR 327 Fullagar J said at 386:
    - “The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified.
    - Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy, or lack of education, lack of assistance or explanation where assistance or explanation is necessary.
    - The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other.”
- Unconscionable conduct in connection with goods or services: 21 (see also s 12CB ASIC Act)
  - Section 21: Unconscionable conduct def in connection with goods or services
    - (1) A person must not, in trade or commerce, in connection with:
      - (a) the supply or possible supply of goods or services to a person; or
      - (b) the acquisition or possible acquisition of goods or services from a person;
    - engage in conduct that is, in all the circumstances, unconscionable
- Unconscionable conduct in connection with goods or services: s 22
  - Section 22: Matters the court may have regard to for the purposes of section 21
    - Section 22 of the ACL provides guidance as to what amounts to unconscionable conduct.
    - The section sets out a number of considerations the court may have regard to including:
      - the relative strengths of the bargaining positions;
      - whether the customer was required to comply with conditions that were not reasonably necessary to protect the legitimate interests of the supplier;
      - whether the customer could understand any documents;
      - whether any undue influence or pressure or unfair tactics were used;
      - and the price and terms on which identical or equivalent goods or services could be acquired from another person.
- What is statutory unconscionability? ASIC v Kobelt [2019] HCA 18
  - Facts
    - It is unclear the extent to which statutory unconscionability is a broader concept than equity, and in particular, how it differs from unconscionable dealing in equity.
    - In ASIC v Kobelt Mr Kobelt ran a book-up credit system in a general store in remote SA where most of his customers were indigenous Australians, under which Mr Kobelt was authorised to access his customer’s wages or Centrelink payments and PIN for their bank cards to pay for food and make payments on second-hand cars bought on credit.
    - They had no other source of credit, most impoverished and illiterate, and the interest rate was very high.
    - However, they entered the scheme willingly and it gave them access to credit.
    - The case concerned whether this supply of credit under the book-up system contravened the proscription of unconscionable conduct fixed by s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) which is equivalent to s 21. The trial judge held it did; reversed on appeal.
    - In a 4:3 majority decision, the High Court found Mr Kobelt’s conduct did not amount unconscionable conduct
  - Held
    - The majority (Kiefel and Bell JJ; Gageler and Keane J agreeing) held that Kobelt had not taken unconscientious advantage of the situation – the system did not exploit the lack of education or literacy as most of his customers had a rudimentary understanding of the system so there was an element of choice.
    - There were benefits to them in that it protected them from family pressure to share benefits. Kiefel CJ and Bell J stated that, having regard to the parties’ submissions, the appeal was not the occasion to determine whether it was necessary to find a special disadvantage which was taken advantage of.
      - Keane J identified that ‘unconscionable’ as identified in s 12CB of the ASIC Act relates to a level of exploitation and “victimisation of the vulnerable”. Gageler J noted it could be seen both ways but noted the lack of allegation of undue influence on the customers, no absence of good faith, and that customers could always cancel their cards or change the account into which money was deposited.
      - The implication from the majority is that by use of the term “unconscionable” the equitable concept of exploitation is still required.
    - However, the minority held that Kobelt had engaged in unconscionable conduct.
    - Nettle and Gordon JJ identified the difficult nature of unconscionability, and the tension between the customers choosing to enter into the book-up credit system and the benefits of such a transaction system for them, in light of the customers’ vulnerability and the conduct of Mr Kobelt.
    - Edelman J noted that the customers were largely “impoverished and often illiterate and innumerate Aboriginal customers” who do not voluntarily enter into the book-up system as suggested by the majority but are rather, given the “choice” to utilise the system and have credit or have none at all
  - In Kobelt, the question left unresolved was how far the notion of ‘systemic advantage-taking’ needs to go in order to constitute unconscionable conduct under Section 12CB of the Australian Securities and Investments Commission Act 2001, especially in dealings with Indigenous customers.
- But see ACCC v Quantum Housing [2021] FCAFC 40
  - The ACCC brought proceedings against Quantum alleging that the defendant had made false or misleading representations and engaged in systemic unconscionable conduct in breach of s 21 by devising a “Roll Up Plan” which pressuring investors to transfer the management of properties that qualified for the National Rental Affordability Scheme to property managers approved by Quantum.
  - Quantum failed to tell investors that it had commercial links with the property managers it recommended.
  - “This is an extremely important decision for all Australian consumers and businesses,” ACCC Chair Rod Sims said.
    - “The Full Court has made clear that for conduct to be held to be ‘unconscionable’ under the Australian Consumer Law and other similar laws, it is not necessary to establish that the business engaging in the conduct has exploited some disadvantage or vulnerability on the part of the consumers or small businesses affected, although this may often be the case.”
- ACCC v Quantum Housing [2021] FCAFC 40 (Allsop CJ, Besanko and McKerracher JJ)
  - “Conclusion from Kobelt in the High Court
    - 78. From the above we reject the proposition that ratio or seriously considered obiter dicta of a majority of the High Court, indeed, of any justice of the Court in Kobelt (other than Keane J) requires in any case that for conduct to be unconscionable by reference to ss 12CB and 12CC of the ASIC Act (or ss 21 and 22 of the ACL) there must be found some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken.
    - 1. The notion of what is a “pre-existing” vulnerability or disadvantage as we described it at [36] above introduces a requirement that the so-called victim of the conduct brings to the relationship an attribute of vulnerability in some factor and to some degree.
    - Such vulnerability or disadvantage will often exist: as it did in the Anangu people in Kobelt.
    - But their Honours’ reasons in Kobelt (other than Keane J) do not express that requirement as a matter of principle as to the meaning of s 12CB (s 21).
  - The judgments of the Full Court of this Court and other intermediate appellate courts
    - 80. The judgments of this Court are contrary to the proposition that the taking of advantage of a special disability is an essential ingredient of statutory unconscionability. “
- Damages under s 236
  - Section 236 Action for damages
    - (1) If:
      - (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
      - (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
    - (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued
- Other remedies under s 237
  - Section 237 Compensation orders etc. on application by an injured person or the regulator
Unfair Contract Terms
- Meaning of consumer contract and small business contract
- Meaning of ‘unfair’
- Meaning of standard form contract
- Remedies
- Relevant provisions in the ACL
  - Chapter 2 – General Protections
  - Part 2-3 – Unfair Contract Terms
    - Section 23: Unfair terms of consumer contracts and small business contracts
    - Section 24: Meaning of unfair
    - Section 25: Examples of unfair terms
    - Section 26: Terms that define main subject matter of consumer contracts or small business contracts etc. are unaffected
    - Section 27: Standard form contracts
    - Section 28: Contracts to which this Part does not apply
- Section 23(1)-(3)
  - Unfair terms of consumer contracts and small business contracts
    - (1) A term of a consumer contract is void if:
      - (a) the term is unfair; and
      - (b) the contract is a standard form contract.
    - (2) The contract continues to bind the parties if it is capable of operating without the unfair term.
    - (3) A consumer contract def is a contract for:
      - (a) a supply of goods or services; or
      - (b) a sale or grant of an interest in land; to an individual (not corps) whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.
    - Three key elements:
      - (1) consumer or small business contract;
      - (2) standard form contract;
      - (3) unfair term.
- Meaning of small business contract
  - s 23 (4) A contract is a small business contract if:
    - BEFORE 9 NOV 2023
      - (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and
      - (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and
      - (c) either of the following applies:
        
        (i) the upfront price payable under the contract does not exceed $300,000;
        
        (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000.
      - (5) In counting the persons employed by a business for the purposes of paragraph (4)(b), a casual employee is not to be counted unless he or she is employed by the business on a regular and systematic basis.
    - AFTER 9 NOV 2023
      - (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and
      - (b) at least one party to the contract satisfies either or both of the following conditions:
        
        (i) the party makes the contract in the course of carrying on a business and at a time when the party employs fewer than 100 persons;
        
        (ii) the party’s turnover, worked out under subsection (6) for the party’s last income year (within the meaning of the Income Tax Assessment Act 1997) that ended at or before the time when the contract is made, is less than $10,000,000.
      - (5) In counting for the purposes of subparagraph (4)(b)(i) the number of persons that a person employs:
        
        (a) a casual employee is not to be counted unless employed on a regular and systematic basis; and
        
        (b) a part‑time employee (including a part‑time casual employee counted under paragraph (a) of this subsection) is to be counted as an appropriate fraction of a full‑time equivalent
- Meaning of “unfair” s 24
  - Section 24(1) A term of a consumer contract or small business contract is unfair if:
    - (a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
    - (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
    - (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
  - Section 24(2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but it must take into account the following:
    - (a) the extent to which the term is transparent;
    - (b) the contract as a whole.
  - Section 24(3) A term is transparent if the term is:
    - (a) expressed in reasonably plain language; and
    - (b) legible; and
    - (c) presented clearly; and
    - (d) readily available to any party affected by the term
- Burden of Proof that a term is ‘unfair’
  - Section 24(4)
    - A term is presumed to be not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by it, unless the party proves otherwise
- Examples of Unfair Terms s25
  - The ACL contains a list of terms that may be considered unfair – section 25
  - Note these are examples only and not a definitive list
  - Some examples are:
    - Terms that allow a business to make unilateral changes to important aspects of the contract such as terminating or renewing it, increasing the charges or varying the type of product to be supplied
    - Terms that have penalise one party for a breach or termination of the contract
    - Terms that limit or restrict liability of one party or limits the right of another party to sue
- Meaning of standard form contract def
  - ACL s 27
  - It is common for goods or service providers to offer a pre-prepared contract.
    - This is known as a standard form contract.
  - Suppliers may use standard form contracts to improve efficiency but they must take account of consumer rights and small business rights when preparing their contracts.
  - The ACL has not defined ‘standard form contract’ however in broad terms a standard form contract will typically be one that has been prepared by one party to the contract that is not subject to negotiation between the parties – that is, offered on a ‘take it or leave it’ basis.
  - Examples of industries that use standard form contracts include: telecommunications; finance; domestic building; gyms; motor vehicles; travel; utilities
  - There is a presumption that a contract is a standard form contract – see section 27(1)
    - ‘If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise.’
- Meaning of standard form contract continued
  - While the ACL does not define ‘standard form contract’, section 27(2) sets out the matters the court must take into account when determining whether a contract is a standard form contract including:
    - Whether one of the parties has all or most of the bargaining power
    - Whether the contract was prepared by one party
    - Whether another party was required to accept or reject the terms of the contract in the form they were presented
    - Whether another party was given an opportunity to negotiate the terms
    - Whether the terms take into account special characteristics of another party or a specific transaction
    - Any other matters prescribed by regulation.
- Unfair terms – exemptions
  - Contract terms that are not covered (section 26)
    - Terms that set the price
    - Terms the define the product or service being supplied
    - Terms that are required or permitted by another law
  - Contracts that are not covered (section 28)
    - Most insurance contracts such as car insurance, home and contents insurance, consumer credit insurance contracts (which may be covered under the Insurance Contracts Act 1984).
    - Note however that some insurance contracts, such as private health insurance, are covered.
    - Constitutions, including the constitutions of many superannuation funds, companies and managed investment schemes.
    - Contracts for the shipping of goods.
- Remedies – Who will enforce the law?
  - The following agencies will enforce provisions relating to consumer goods and services
    - Australian Competition and Consumer Commission (ACCC)
    - NSW Fair Trading and
    - Other State and Territory consumer protection agencies.
  - The Australian Securities and Investments Commission (ASIC) will enforce provisions relating to financial products and services
- Remedies – Who decides if a term is unfair?
  - Only a court or the Consumer, Trader and Tenancy Tribunal can decide if a term is unfair.
  - The court or Tribunal must consider:
    - Whether the term meets the three tests of unfairness
    - How the term was expressed in the contract. For example, it may be hidden in fine print or written in legalese.
    - The contract as a whole. A term that seems unfair may be reasonable if it is balanced by other terms offering benefits such as lower prices.
  - If a court or Tribunal finds that a term is unfair, it is void.
    - The term is treated as if it never existed and cannot be enforced or relied on.
    - However, the contract will still bind the consumer and trader if it can operate without the unfair term
- Remedies – What action can NSW Fair Trading take if a contract term is unfair?
  - NSW Fair Trading may seek the cooperation of business in removing terms that seem unfair but it cannot make a decision that a term is unfair.
  - NSW Fair Trading can seek a declaration from the Supreme Court that a term in a standard form consumer contract is unfair.
    - A declaration binds all parties to consumer contracts of that kind, unless the Supreme Court orders otherwise.
    - A declared unfair term is void.
    - A trader who tries to enforce a declared unfair term against a consumer is in breach of the Fair Trading Act.
- ACCC v CLA Trading - summary of key principles
  - ACCC v CLA Trading Pty Ltd [2016] FCA 377 provides a summary of key principles relating to unfair contract terms (at [54]):
    - ‘(a) the underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated:
      - Jetstar Airways Pty Ltd v Free [2008] VSC 539 at [112];
    - (b) the requirement of a “significant imbalance” directs attention to the substantive unfairness of the contract:
      - Director-General of Fair Trading v First National Bank plc [2001] UKHL 52; [2002] 1 AC 481 at [37];
    - (c) it is useful to assess the impact of an impugned term on the parties’ rights and obligations by comparing the effect of the contract with the term and the effect it would have without it:
      - Director-General of Fair Trading v First National Bank plc at [54]
    - ‘(d) the “significant imbalance” requirement is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in its favour – this may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty:
      - Director-General of Fair Trading v First National Bank at 494 [17] per Lord Bingham, applied in ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [950];
    - (e) significant in this context means “significant in magnitude”, or “sufficiently large to be important”, “being a meaning not too distant from substantial”:
      - Jetstar Airways Pty Ltd v Free at [104]-[105] per Cavanough J: Cf.
      - Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 at [32]- [33];
    - (f) the legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer’s attention:
      - Jetstar Airways Pty Ltd v Free at [115]; and
    - (g) in considering “the contract as a whole”, not each and every term of the contract is equally relevant, or necessarily relevant at all.
      - The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question:
      - Jetstar Airways Pty Ltd v Free at [128].
- Unfair terms and small business contracts - Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224
  - First court action taken by the ACCC to enforce the small business unfair contract terms provisions. The Federal Court declared, by consent, that eight terms in the standard form contract used by JJ Richards & Sons Pty Ltd (JJ Richards) to engage small businesses are unfair, and therefore void, following ACCC action.
  - JJ Richards is one of the largest privately-owned waste management companies in Australia and provides recycling, sanitary and green waste collection services. The terms related to:
    - Automatic renewal
    - Price variations
    - Agreed times
    - Credit terms
    - Exclusive rights
    - Indemnities
    - Termination rights
  - JJ Richards was restrained from using any of the impugned terms, and required to :
    - publish a corrective notice;
    - notify parties who had entered into the standard form contract (only those who were small businesses);
    - and establish and implement a compliance program
- Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224
  - These terms had the effect of:
    - binding customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term
    - allowing JJ Richards to unilaterally increase its prices
    - removing any liability for JJ Richards where its performance is “prevented or hindered in any way”
    - allowing JJ Richards to charge customers for services not rendered even when caused by reasons beyond the customer’s control
    - granting JJ Richards exclusive rights to remove waste from a customer’s premises
    - allowing JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days
    - creating an unlimited indemnity in favour of JJ Richards
    - preventing customers from terminating their contracts if they have payments outstanding and entitling JJ Richards to continue charging customers equipment rental after the termination of the contract.

Week 10: Personal Property Securities Act 2009 (Cth) Part 1

Personal Property Securities Act 2009 (Cth)
- What is the PPSA?
  - Personal Property Securities Act 2009 (Cth) - operational from 30 January 2012
    - Law about security interests in personal property (see section 3 for overview of Act)
    - Personal Property Securities Regulations 2010 (Cth)
    - Based on a referral of state power to Commonwealth (States can decide particular property that won’t come within PPSA)
    - Administered by the PPS Registrar (within AFSA www.afsa.gov.au)
    - Extensive changes to Corporations Act 2001 (Cth) dealing with fixed and floating charges
  - A new system, with many concepts previously unknown in Australian law
    - Based on PPS laws in New Zealand and Canada, so overseas cases are useful. See Re Maiden Civil [2013] NSWSC 852, [32]
    - Replaces more than 40 existing state registration systems for security interests over personal property with one Commonwealth register (www.ppsr.gov.au)
    - Will affect most types of commercial transactions including some that were not traditional security agreements (e.g. forms of bailment, conditional sales, leases, trusts etc.)
  - The PPSA regime is not a complete code! (see s 254)
    - It adds to general law rules relating to how transactions are entered into (e.g. contract law, SOGA, lease, bailment etc.)
    - It deals with priority contests involving PPSA security interests
    - Not all priority contests are covered by PPSA rules (e.g. for those that involve non-PPSA security interests)
    - Critical for lawyers to appreciate if the PPSA applies (perfection rules, timing rules, enforcement provisions, taking free provisions, vesting rules (s 267))
- Exclusions from the PPSA – section 8
  - Statutory security interests (e.g. arising under tax laws) – s 8(1)(b)
  - Security interests by operation of law (e.g. liens) – s 8(1)(c)
  - Interests in land and fixtures – ss 8(1)(f)(i)-(ii), s8(1)(j)
    - Forge Group Power P/L v General Electric [2016] NSWSC 52
  - Special purpose trusts (Quistclose trusts) – s 8(1)(h)
    - This does not mean all trusts are excluded but typical private trust most likely won’t involve a security interest anyway although a trust may be set up as a security arrangement – e.g. in certain corporate finance transactions
  - Commonwealth and state laws may exclude property from the PPSA – e.g. mining and fishing licenses
  - Note: s 8(2) may apply some PPSA provisions*
- Security interest def in personal property: common types of collateral
  - All assets (both present and future)
  - Goods (including goods held as inventory)
  - Accounts (book debts – accounts receivable)
  - Motor vehicles (may be described by serial number)
  - Negotiable instruments
  - Intellectual property (may be described by serial number, except copyright)
  - Investment instruments (shares, debentures)
  - Chattel paper (instrument that evidences a debt combined with a security right in goods – e.g. hire purchase agreement)
  - Chattel paper is itself collateral (i.e. separate from the security interest in the goods)
    - Contrast with accounts receivable (i.e. debt obligation only) either account OR chattel paper
    - Chattel paper has special priority rules
  - NOTE: Different registration requirements apply depending on whether commercial or consumer property (see s 153(1) item 4)
- Formal classes of collateral under PPSA
  - A financing statement (i.e. the PPSR registration form) must place collateral into a single class of collateral: PPS Regs Sch 1 item 2.3
  - (1)
    - (a) Agriculture (see reg 1.6);
    - (b) Aircraft (see reg 1.6);
    - (c) ‘all present and after-acquired property’(see reg 1.6);
    - (d) ‘all present and after-acquired property, except’ (see reg 1.6);
    - (e) financial property (see s 10);
    - (f) intangible property (see s 10);
    - (g) motor vehicles (see reg 1.7);
    - (h) other goods;
    - (i) watercraft (see reg 1.6).
  - (2) In paragraph(1)(h): other goods means personal property that is goods, other than agriculture, aircraft, motor vehicles and watercraft.
- PPSR Statistics – September 2018 quarter
  - Approximately 2.33 million searches (~ 51% motor vehicles)
    - Only 6.5% of searches done by casual users
  - Approximately 521,000 new registrations (approximately 10 million current registrations in total)
  - 49% of registrations are for motor vehicles
  - 76% of registrations are for commercial property
  - Top three classes of collateral: motor vehicle; other goods; all present and after acquired property.
  - See Australian Financial Security Authority, PPSR Quarterly Statistics
    - https://www.afsa.gov.au/statistics/ppsr-quarterly-statistics#download-the-data
  - See also Australian Financial Security Authority, Report: September quarter 2018 PPSR quarterly statistics
    - https://www.afsa.gov.au/statistics/report-september-2018-ppsr-quarterly-statistics
- PPSR Statistics – December Quarter 2023 [Inserted]
  - Approximately 3.08 million searches (~ 53% motor vehicles)
  - 11.4% of searches done by casual users (Only 6.5% in Sep Quarter 2018)
  - Approximately 550,000 new registrations (10.4 million current registrations in total)
  - 46.8% of registrations are for motor vehicles
  - 79.3% of registrations are for commercial property
  - Top three classes of collateral: motor vehicle; other goods; all present and after acquired property.
  - See Australian Financial Security Authority, PPSR Quarterly Statistics
    - https://www.afsa.gov.au/statistics/ppsr-quarterly-statistics#download-the-data
  - See also Australian Financial Security Authority, State of personal property securities system report (July 2023), at
    - https://www.afsa.gov.au/about-us/statistics/state-personal-property-securities-system-report
- Types of security interests
  - Title and form of transaction irrelevant
    - Whether traditional security or not does not matter
    - Focus is on the effect of the transaction (i.e. does it secure payment or performance)
    - See section 273
  - In sub-stance security interest def – section 12(1)
    - ‘A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).’
    - Elements:
      - (i) an interest in personal property,
      - (ii) provided for by a transaction (this involves a consensual dealing –
        
        see Dura [2014] VSCA 326
      - (iii) interest provided by the transaction secures the payment or performance of an obligation (as a matter of substance rather than form).
    - Specific examples - section 12(2)
    - Even if the arrangement satisfies section 12(1), it may be excluded by section 8
  - Deemed security interest – section 12(3) – regardless of whether or not the transaction concerned, in substance, secures payment or performance of an obligation.
    - The interest of a transferee under a transfer of account or chattel paper
    - The interest of a consignor who delivers goods to a consignee under a commercial consignment
    - The interest of a lessor bailor of goods under a PPS lease
  - PPS lease defined in section 13 as:
    - Lease or bailment of goods: for a term of more than 2 years or indefinite term where possession maintained for more than two years.
    - Lessor or bailor must be in the business of leasing or bailing goods (s 13(2))
    - Only bailments for reward (not gratuitous) (s 13(3))
- Security interest: An interest in personal property
  - ‘Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.’
  - National Provincial Bank Ltd v Ainsworth [1965] AC 1175
  - See section 10 (definitions of personal property, licence and land)
    - Includes legal and equitable rights
    - Note mining and gas licences are declared by states not to be personal property under the PPSA
  - Does not have to be a complete ownership interest
    - e.g. lessee granting security interest in leased goods (see e.g. s 19(5))
- Security interests, title and the PPSA
  - BOM v Innovation Credit [2010] 3 SCR 3, [19]
    - ‘The PPSA does not rely on either the common law notion of title or the equitable concepts of beneficial interest or equity of redemption to resolve priority disputes.
    - Rather, for those interests that come within the scope of the Act, the PPSA provides a compendium of rules establishing priority rankings both as between different security interests as well as between security interests and other interests in the collateral, with no regard to the question of who actually has title to the collateral.’
  - Warehouse Sales Pty Ltd (in liq) v LG Electronics Australia Pty Ltd [2014] VSC 644
    - ‘The concept of the ‘security interest’ assimilates or re-characterizes all types of security interest, including retention of title arrangements, to a simple concept where the purpose and economic effect is essentially the same. ’ [32]
    - ‘The PPSA provides for a priority regime, not a title regime.’ [37]
    - ‘The PPSA discloses no intention to displace the existing law relating to the sale of property (as opposed to the operation of security interests over property).
    - When the PPSA refers to existing concepts such as the sale of property, and those concepts are not necessarily affected by the PPSA’s reconfiguration of personal property securities law, there is no reason to suppose that the Parliament intended anything other than a reference to the accepted meaning of familiar concepts.’ [47], [72]
- Examples – where no security interest found
  - Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326
    - Payment of money into an account for the benefit of a respondent to an appeal (not a consensual transaction so s 12 not applicable)
  - THC Holding Pty Ltd v CMA Recycling Pty Ltd [2014] NSWSC 1136
    - Leaving goods at supplier after title had passed and goods paid for was not a security interest
  - JS Brooksbank [2009] NZCA 122
    - Wool supplied to carpet manufacturer by mistake, should not have been supplied until cleared funds provided - no intention to create an ‘in substance’ security interest
  - Re Ellingsen (2000) 1 PPSAC (3d) 307 (BC CA)
    - Transfer of possession of motor vehicle under purchase agreement that was ‘subject to finance’;
      - when finance fell through there was no intention to contract and hence no right to retain truck as sale contract rescinded
  - Re Skybridge Holidays Inc (1999) 15 PPSAC (2d) 24 (BC CA)
    - Money held by travel agency on behalf of customers was not held as security for payment and hence not a security interest when travel agent became insolvent
- Security Interest in Leases
  - Finance lease creates an ‘in substance security interest under section 12(1).
  - Lessor is treated as the secured party.
  - Lessor’s title to equipment is treated by PPSA as a security interest
  - Lessor’s title is not enough to protect them in a PPSA priority contest.
  - Note: long term operating lease > 2 years will be a PPS lease under section 13 (deemed security interest under section 12(3)).
- Security Interest in Retention of Title
  - Supply of goods subject to retention of title creates an ‘in substance’ security interest under section 12(1)
  - Supplier is treated as the secured party
  - Supplier’s title to goods is treated by PPSA as a security interest
  - Supplier’s title is not enough to protect them in a PPSA priority contest
- Priority and Title under the PPSA
  - Warehouse Sales Pty Ltd (in liq) v LG Electronics Australia Pty Ltd [2014] VSC 644, [37]
    - ‘The PPSA provides for a priority regime, not a title regime. Under s 273 of the PPSA ownership or title to personal property is not determinative and as a consequence a retention of title (“ROT”) financier’s ownership interest is replaced by a simple security interest.
    - A ROT supplier must protect that ‘security interest’ by taking possession of the personal property (e.g. a pledge under pre-PPSA law) or by obtaining a signed security agreement that covers (describes) the collateral and perfecting that security interest by registration of a financing statement on the PPSR.
    - The consequences of non-perfection are that the security interest is ineffective against third parties, and on insolvency a security interest (title) vests in an administrator or liquidator. In other words, it is ineffective in the event of insolvency. ’
      - Sections 20-21 – enforceability of security interest against third parties and perfection
      - Section 267 – Vesting of unperfected security interests in the grantor upon the grantor’s winding up or bankruptcy.
- Deemed Security Interests
  - These are included to address the problem of apparent ownership
  - Section 12(3)
    - Transfer of account – see s 10 (account)
    - Transfer of chattel paper – see s 10 (chattel paper)
    - Commercial consignment – see s 10 (commercial consignment)
    - PPS lease (defined in s 13):
      - Lease or bailment of goods for more than 2 year or indefinite term > 2 years
      - Lessor or bailor must be in the business of leasing or bailing goods - s 13(2)
      - Only bailments for reward (not gratuitous) – s 13(3)
  - ‘The primary purpose for including non-security transfers under the Act was to ensure that all major methods of inventory and receivables financing would be brought within the same Act.
    - Thus, whether the parties find one particular procedure for financing more convenient than another, all conflicting interests in the same collateral can be resolved by a single set of priority rules.
    - The uniformity of application of the Act to the various types of financing methods results in a neutral impact on the relative cost of one financing method over another. The Act seeks to regulate transactions in order to create a comprehensive notice-filing system, but not to make one financing method more or less attractive than another.
    - Having the rigours of registration under the Act apply to these non-security transfers equally means that there is limited cost differentials caused by the Act as between any non-security transfer.’
      - McLaren, Secured Transactions in Personal Property in Canada (Westlaw) [3.01][B]
- Case Example: Re Arcabi [2014] WASC 310
  - Coin and bank note dealer went into receivership
  - Company was in possession of hundreds of items - some held in its own right, some held for customers
    - Were they covered by an in substance security interest?
    - Were they held under a PPS lease?
      - –Long term bailment, commercial consignment (s 13)
    - Goods were held in storage by Arcabi
      - –Goods purchased from Arcabi but held in storage by Arcabi for customer
      - –Goods not purchased from Arcabi but stored by it for customer
  - Re Arcabi - Bailment as a security interest
    - [20] ‘There are several factors accepted by overseas courts as indicia of when bailment arrangements secure payment or performance of an obligation. These include:
      - a) the bailment provides that the ownership of the goods will vest in the bailee on expiry of the bailment agreement;
      - b) the bailee has an obligation to purchase the goods or an option to purchase the goods or extend the term of the arrangement at a ‘bargain’ price such that it would be reasonable to expect the bailee to exercise the option;
      - c) the term of the arrangement is for a major part of the economic life of the goods; and
      - d) the minimum payments under the bailment amount to substantially all the capital cost of the goods.’
        
        In this case, storage bailment was not covered by s 12(1)
        
        Customers did not ‘regularly engage in the business of bailing goods’ and so s 13 did not apply to the bailment
  - Re Arcabi – was the arrangement a consignment?
    - Goods held for customers pending sale was a consignment
      - But was not an in substance security interest under s 12(1) because it did not secure the payment or performance of an obligation owed to Arcabi
    - Goods were not covered by a ‘commercial consignment’ (i.e. a deemed security interest) as s 10 definition not satisfied
      - (customers did not deal in goods of the kind in the ordinary course of business; and Arcabi generally known to be selling as consignee)
- PPS leases – section 13
  - Important to distinguish between a finance lease (which will come within s 12(1)) and a true lease (which won’t but may come within s 13)
    - PPS leases are ‘deemed security interests’ under s 12(3)
    - Not all provisions of the PPSA apply to deemed security interest e.g. enforcement provisions (s 109(1)(c)), variation of vesting rules
  - Relevant factors in distinguishing between true and finance leases:
    - An automatic vesting of ownership upon completion of the lease term;
    - An obligation to purchase;
    - Length of the term of the lease (useful life of the goods?)
    - Value of the lease payments (total value of the property?)
    - The price of an option to purchase (nominal figure?);
    - Onus to repair the goods?
    - The nature of contractual remedies available (if there is an accelerated payment clause or a sudden increase in ‘rents’ owed this reflects a financial remedy inconsistent with the existence of a true lease).
      - See Mirzai, (2011) 22 JBFLP 3
- Case Example: Re Maiden Civil [2013] NSWSC 852
  - Case concerned competing claims over 3 large Caterpillar vehicles used in excavation
  - Each vehicle could be driven and had a VIN
  - Vehicles were acquired from a Qld based finance co (QES) in 2010, which itself had purchased the vehicles using finance from Esanda (for 1) and Westpac (for the other 2)
  - Maiden paid QES’s financing costs + 10% fee
    - Maiden retained possession of 20t vehicle once Esanda was paid off (and no further invoices issued). Maiden continued paying invoices on other 2 vehicles
  - ‘Leasing agreement’ was oral, really hire purchase
  - Maiden obtained finance in March 2012, from Fast Financial - vehicles included as assets
    - Fast executed a detailed written contract and registered its security interest over all of the assets on the PPSR
    - Fast appointed receivers in July 2012 when Maiden defaulted - VA on 27.8.12.
    - Receivers claimed the vehicles but QES purported to lease them to another and 1 of them was held by another company (Central) pursuant to a verbal agreement over a disputed debt (which was undocumented)
- Maiden Civil
- Re Maiden Civil
  - Court found:
    - Maiden owned vehicle purchased from Esanda
    - QES still owned remaining 2 vehicles
    - No evidence that Central had perfected security interest
  - Fast had a properly perfected security interest in the collateral
    - Maiden as PPS lessee in possession of the vehicles could grant a security interest to Fast: at [26]
    - Court applied Canadian and NZ cases
  - QES had a PPS lease - entered into prior to 30.1.12, but did not benefit from deemed perfection (transitional provisions) because not registered its interest on pre-PPS register in NT
    - See PPSA s 322(3), PPS Regs 9.2
    - Conflict of laws argument that Qld register relevant was rejected as vehicles located in NT
  - Therefore Fast as perfected secured party defeated QES as unperfected secured party (PPSA s 55(3))
- Significance of Maiden
  - Confirms that overseas PPSA cases may be used to help interpret our PPSA:
    - ‘The Commonwealth Parliament, in enacting legislation that was modelled on the New Zealand and Canadian legislation, should be taken to have intended the same approach, which was by then well-established in Canada and New Zealand, to apply.’ at [32]
  - Confirmed that priority between 2 PPSA secured parties does not depend on title: at [35]
  - In discussing the application of the vesting rule in s 267:
    - ‘The practical effect is that QES’s security interest is extinguished; QES has no further interest in the Caterpillars; and Maiden holds them subject only to the perfected security interest of Fast.’ at [72]
- Re Maiden Civil [2013] NSWSC 852 (Cont’d)
- Procedural History:
  - This case involves a dispute over the possession of several construction vehicles (caterpillars) which were the subject of various security interests under the Personal Property Securities Act 2009 (PPSA).
- Original Dispute:
  - The dispute centers around the rights to several caterpillars leased by Queensland Excavation Services (QES) to Maiden Civil, where ownership was to pass upon full payment.
- Reason for Trial:
  - The trial was necessitated when Maiden Civil went into voluntary administration and subsequently liquidation, and the appointed receivers from Fast Financial Solutions claimed possession of the caterpillars, arguing that QES’s interest was an unperfected security interest that vested in Maiden Civil under PPSA s 267(2).
- Material Facts:
  - QES leased caterpillars to Maiden Civil with a conditional ownership transfer upon full payment.
  - Receivers were appointed to Maiden Civil by its secured party, Fast Financial Solutions, claiming a security interest created in May 2012.
  - Maiden Civil entered liquidation, leading to a contest over the possession of the caterpillars.
- Issue:
  - Whether the security interests concerning the caterpillars were perfected, and particularly whether Maiden Civil’s rights under the PPS lease were sufficient for attachment to occur.
- Law/Statute in Contention:
  - Personal Property Securities Act 2009 (PPSA), specifically sections related to the definition and perfection of security interests.
- Judicial Opinions and Interpretation:
  - Justice Brereton analyzed whether Maiden Civil’s possession under a PPS lease gave it sufficient rights in the caterpillars for a security interest to attach.
  - The court concluded that Maiden Civil, as a lessee, did have proprietary rights in the caterpillars, sufficient for attachment of a security interest.
- Legal Reasoning/Ratio Decidendi
  - PPSA s 19(5) indicates that a grantor has rights in goods leased to them sufficient for a security interest to attach once they obtain possession.
  - This interpretation aligns with similar provisions in the New Zealand and Canadian PPS legislation, suggesting that lessees have a proprietary interest in leased goods that allow for security interests to attach and be perfected through registration or repossession.
- Conclusion and Relevance to Modern Law:
  - The case underscores the importance of properly understanding and applying the provisions of the PPSA concerning attachment and perfection of security interests.
  - It highlights the potential vulnerability of lessors with unperfected security interests and the implications of the PPSA on traditional notions of ownership and secured transactions.
- Flowchart of Re Maiden Civil (P&E) Pty Ltd
  - Lease Agreement Initiation
    - Action: QES leases caterpillars to Maiden Civil.
    - Condition: Ownership to pass upon full payment.
  - Creation of Security Interest
    - Action by Maiden Civil: Enters into a lease agreement under terms that constitute a PPS lease.
    - Relevant Legislation: PPSA, Section 12 - Definition of “security interest” (interest in personal property provided by a transaction that secures payment).
  - Possession of Caterpillars
    - Action by Maiden Civil: Takes possession of the caterpillars.
    - Relevant Legislation: PPSA, Section 19(5) - A grantor has rights in goods leased to them sufficient for attachment of a security interest once they obtain possession.
  - Attachment of Security Interest
    - Condition: Attachment of the security interest is contingent on the lessee having rights in the goods.
    - Action: Attachment occurs when Maiden Civil obtains possession.
  - Perfection of Security Interest
    - Action by Fast Financial Solutions: Claims a security interest over the caterpillars, created in May 2012.
    - Relevant Legislation: PPSA, Section 21 - Perfection requires registration or possession.
  - Bankruptcy and Liquidation
    - Action by Maiden Civil: Goes into voluntary administration and then liquidation.
    - Legal Consequence: Triggers concerns about the perfection of security interests.
  - Claim of Possession
    - Action by Receivers: Appointed by Fast Financial Solutions, claim possession of the caterpillars.
    - Legal Argument: QES’s interest is unperfected and second-ranking, thus vests in Maiden Civil under PPSA s 267(2).
  - Court’s Determination
    - Finding: Maiden Civil had sufficient proprietary rights in the caterpillars.
    - Legal Application: Because Maiden Civil’s security interest (as per Fast’s claim) is attached and was possibly perfected before bankruptcy, it takes priority over QES’s unperfected interest.
  - Outcome
    - Ruling: Receivers entitled to claim the caterpillars, overriding QES’s unperfected security interest.
- General Mapping of the PPSA Based on Re Maiden Civil
  - 1. Definition of Security Interest
    - PPSA, Section 12: Defines a “security interest” as an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation.
  - 1. Creation of a Security Interest
    - Transaction Involvement: A transaction must occur involving personal property where the interest is meant to secure payment or an obligation.
  - 1. Attachment of Security Interest
    - PPSA, Section 19: Specifies the conditions under which a security interest attaches to the collateral.
    - Criteria for Attachment:
      - The debtor must have rights in the collateral.
      - Value must be given (by the secured party).
      - Security agreement must be enforceable.
  - 1. Rights in Collateral
    - Possession and Proprietary Rights: As in Re Maiden Civil, the lessee (debtor) obtains proprietary rights in the goods upon taking possession under a PPS lease.
  - 1. Perfection of Security Interest
    - PPSA, Section 21: Perfection can be achieved through registration on the PPS Register or by possession of the collateral.
    - Importance of Perfection: Protects the security interest from claims by third parties and is crucial in bankruptcy or insolvency scenarios.
  - 1. Priority of Security Interests
    - General Rule: Perfected security interests have priority over unperfected security interests.
    - Competing Interests: The first to perfect or the first to register typically has priority.
  - 1. Effect of Non-Perfection
    - PPSA, Section 267: Unperfected security interests may vest in the grantor (debtor) if they go into administration or bankruptcy, as was a key issue in Re Maiden Civil.
  - 1. Enforcement of Security Interests
    - Rights of Secured Parties: Upon default, secured parties may seize or otherwise enforce their rights in the collateral as per the terms of the security agreement and PPSA provisions.
  - 1. Bankruptcy and Insolvency
    - Impact on Security Interests: The status of security interests during the debtor’s bankruptcy or insolvency can determine the recovery of secured parties, highlighting the importance of timely registration and perfection.
  - 1. Case Application
    - Example from Re Maiden Civil: Maiden Civil’s receivers, appointed by a secured party with a perfected interest, successfully claimed the caterpillars over the unperfected interest of QES, showcasing the practical implications of the PPSA’s provisions on attachment and perfection.
- Case Example: White v Spiers [2014] WASC 139
  - Spiers agreed to sell earthmoving business to BEM in 2010
  - 2 agreements entered into:
    - Sale agreement
    - Hire agreement over equipment and vehicles worth $1.4m (BEM possessed and used hired equipment and vehicles)
  - Spiers did not register it’s hire agreement under pre-PPSA law or on the PPSR
    - Equipment and vehicles needed to be registered under pre-PPSA law (so no protection under transitional provisions)
  - BEM granted security interest to NAB in 2011 (i.e. before PPSA)
  - BEM entered voluntary administration and receivership in July 2013 (i.e. after PPSA)
    - White was receiver of BEM
  - Spiers claimed that receivership terminated the hire agreement and they were entitled to hired equipment and vehicles: who was entitled to equipment and vehicles?
  - ‘It may seem anomalous to say that the defendants’ interest in the Hire Assets is provided for by the Hire Agreement where the defendants owned the Hire Assets before the transaction was entered into.
    - However, PPSA s 12(2) shows that the PPSA is intended to apply to relationships such as lessor and lessee and hirer and hiree under a hire purchase agreement, where the secured party already had its interest in the property before the security interest was granted.
    - The relevant issue in this case is whether or not the Hire Agreement in substance secures payment or performance of an obligation.’ at [18]
  - ‘The concept of being in substance security for payment or performance of an obligation refers to the economic or commercial substance of a transaction.
    - To determine whether the Hire Agreement in substance secures payment or performance of an obligation it is necessary to consider the rights and obligations of the parties under the Hire Agreement.’ at [19]
- Flowchart of Re Maiden Civil (P&E) Pty Ltd
  - 1. Definition of Security Interest
    - PPSA, Section 12: Defines a “security interest” as an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation.
  - Lease Agreement Initiation
    - Action: QES leases caterpillars to Maiden Civil.
    - Condition: Ownership to pass upon full payment.
  - Creation of Security Interest
    - Action by Maiden Civil: Enters into a lease agreement under terms that constitute a PPS lease.
    - Relevant Legislation: PPSA, Section 12 - Definition of “security interest” (interest in personal property provided by a transaction that secures payment).
  - Possession of Caterpillars
    - Action by Maiden Civil: Takes possession of the caterpillars.
    - Relevant Legislation: PPSA, Section 19(5) - A grantor has rights in goods leased to them sufficient for attachment of a security interest once they obtain possession.
  - Attachment of Security Interest
    - Condition: Attachment of the security interest is contingent on the lessee having rights in the goods.
    - Action: Attachment occurs when Maiden Civil obtains possession.
  - Perfection of Security Interest
    - Action by Fast Financial Solutions: Claims a security interest over the caterpillars, created in May 2012.
    - Relevant Legislation: PPSA, Section 21 - Perfection requires registration or possession.
  - Bankruptcy and Liquidation
    - Action by Maiden Civil: Goes into voluntary administration and then liquidation.
    - Legal Consequence: Triggers concerns about the perfection of security interests.
  - Claim of Possession
    - Action by Receivers: Appointed by Fast Financial Solutions, claim possession of the caterpillars.
    - Legal Argument: QES’s interest is unperfected and second-ranking, thus vests in Maiden Civil under PPSA s 267(2).
  - Court’s Determination
    - Finding: Maiden Civil had sufficient proprietary rights in the caterpillars.
    - Legal Application: Because Maiden Civil’s security interest (as per Fast’s claim) is attached and was possibly perfected before bankruptcy, it takes priority over QES’s unperfected interest.
  - Outcome
    - Ruling: Receivers entitled to claim the caterpillars, overriding QES’s unperfected security interest.
- White v Spiers: Was the hire agreement a security interest under s 12(1)?
  - Yes (at [20]-[23]):
  - Total hire amount was agreed value of equipment
    - Monthly payments paid off the price of the equipment
  - Option to purchase by paying the market value
  - Hire agreement was part of a transaction to buy the business
    - Condition of purchase that hire agreement entered into
  - ‘In substance, the Company purchased the Hire Assets by the payment of the purchase price by instalments over time, together with interest, and the defendants got security over the assets by way of it being a hire purchase agreement rather than a sale.’
    - Long term hire agreement was also a deemed security interest under s 12(3)
    - As Spiers did not perfect its interest, it vested in BEM upon its voluntary administration (s 267)
- Exclusions from a PPS Lease – section 13(2)
  - Not a PPS lease where the lessor/bailor is not regularly engaged in the business of leasing/bailing goods
  - Regular means:
    - ‘normal, that is, not abnormal in the context of the lessor’s business, but a proper component of it’ (at [49])
    - ‘the correct approach is to recognise that frequency or repetitiveness of transactions is a factor relevant to, and in an appropriate case may be the critical factor in, the assessment of whether the leasing business being engaged in is regular. ’ (at [52])
  - Forge Group Power Pty Ltd v General Electric International Inc [2016] NSWSC 52
- Purchase Money Security Interest (PMSI) – section 14
  - Section 14(1) A purchase money security interests means any of the following:
    - (a)
      - a security interest taken in collateral to the extent that it secures all or part of its purchase price;
    - (b)
      - a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral to the extent that the value is applied to acquire those rights;
    - (c)
      - the interest of a lessor or bailor of goods under a PPS lease;
    - (d)
      - the interest of a consignor who delivers goods to a consignee under a commercial consignment.
  - Section 14(2) sets out exceptions.
    - Sale and leaseback
    - Interest in special collateral (chattel paper, investment instrument, monetary obligation etc.)
    - Security interest in collateral that grantor intends to use predominantly for personal, household or domestic purposes (unless collateral is serial no property (s14(2A))
- Preview: Attachment and Perfection of a Security Interest
  - Section 19: Attachment elements required for enforceability
    - Section 19(2) Security interest attaches to collateral when: the grantor has rights in the collateral (or the power to transfer rights in the collateral to the secured party);
      - and either (i) value is given for the security interest;
      - or (ii) the grantor does an act by which the security interest arises.
  - Section 20: Enforceability of security interests against third parties
    - Section 20(1) Security interest is enforceable against a third party if:
      - (a) security interest is attached to the collateral; and
      - (b) one of the following applies:
        
        (i) the secured party possesses the collateral;
        
        (ii) the secured party has perfected the security interest by control;
        
        (iii) a security agreement that provides for the security interest covers the collateral in accordance with s 20(2).
    - Section 20(2) Security agreement –
      - (a) evidenced by writing signed by grantor (or adopted or accepted by grantor);
      - (b) contains description of collateral
  - Section 21: Perfection (main rule)
    - Perfection by registration, possession, control.
- Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 292 FLR 11
  - The PPSA is aimed at establishing a “a single national law governing security interests in personal property”.
    - It came into effect on 30 January 2012.
  - Some general observations can be made about the PPSA:
    - security interest def
      - an interest “in personal property that is provided for by a transaction that, in substance, secures payment or performance of an obligation”
    - Secured party def
      - The holder of a security interest
      - the person selling or leasing you the car
    - Unsecured party def
      - a creditor who does not have a security interest
    - Transaction def for PPSA
    - Debtor def
      - the person who owes payment or performance of an obligation that is secured by a security interest in personal property
    - Grantor def
      - a person who has the interest in the personal property to which a security interest is attached.
      - More often than not, the debtor and the grantor will be the same person.
    - A security interest attaches to collateral when the grantor has rights in the collateral, or the power to transfer rights in the collateral
    - perfected def
      - when the security interest in particular collateral has attached to the property [17] and the secured party has either taken possession or control of the property or has registered it on the PPS Register established under s 147
      - AKA the creditor (such as a mortgage lender) has established its priority in the encumbered property regarding other creditors.”
    - unperfected security interests held by a secured party vest in the grantor upon the bankruptcy or the winding up of the latter.
    - Transaction def and interest in personal property def for PPSA
      - the phrase, and the words that constitute it must be given their natural and ordinary meaning.
      - Transaction signified that a security interest must be created consensually
  - Procedural History:
    - This case was heard in the Victorian Court of Appeal, where Dura, the judgment debtor, and Hue, the judgment creditor, disputed over funds held in a joint solicitor’s account pending an appeal.
  - Original Dispute:
    - Dura paid money into a joint account following a court order while an appeal was pending.
    - Dura then attempted to charge its interest in this money to an associated company.
  - Reason for Trial:
    - Upon Dura’s liquidation, both Dura’s receivers and Hue claimed the money in the joint account.
    - The issue was whether Hue’s interest in the money was a “security interest” under the Personal Property Securities Act 2009 (PPSA), which would affect whether it vested in Dura upon liquidation.
  - Material Facts:
    - Dura paid money into a joint account held by solicitors.
    - Dura charged its interest to an associated company.
    - Dura entered liquidation, triggering claims over the money.
  - Issue:
    - Whether the interest of Hue in the fund was a “security interest” under s 12 of the PPSA.
  - Law/Statute in Contention:
    - Personal Property Securities Act 2009 (PPSA), particularly sections 12 and 267.
  - Precedents Cited:
    - Interpretations of “transaction” and “security interest” were considered based on previous case law and academic commentary.
  - Judicial Opinions and Interpretation:
    - The court found that Hue’s interest was an equitable charge over the money in the joint account.
    - It was determined that Hue’s interest did not arise out of a consensual transaction but as a result of a court-imposed condition, hence not a “security interest” under the PPSA.
    - Consequently, since it was not a “security interest”, s 267 of the PPSA did not apply, and Hue’s interest did not vest in the liquidator.
  - Legal Reasoning/Ratio Decidendi:
    - The definition of “security interest” requires a consensual transaction, which was not present in this case.
    - Equitable charges created by court order are not covered by the PPSA as they do not arise from consensual transactions.
  - Conclusion and Relevance to Modern Law:
    - The case highlights the interpretation of “security interests” under the PPSA and the importance of consensual transactions in establishing such interests.
    - It emphasizes the exclusion of court-imposed or non-consensual interests from the scope of the PPSA, which is critical for legal practitioners dealing with insolvency and security interests.
- Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs & mgrs apptd)
  - PPSA s 19 - attachment
    - Fixed charge becomes a security interest attached to a noncirculating asset def
    - Floating charge becomes a security interest attached toa circulating asset def

Week 11: PPSA Part 2

Personal Property Securities Act 2009 (Cth)
- Attachment and Perfection – Steps to obtain ‘perfection’ of a security interest
  - Attachment of the security interest – section 19
  - Enforceability of the security interest against third parties – section 20
  - Perfection by registration, possession or control – section 21
  - Note: These steps can occur in any order
- Attachment of security interest – section 19
  - Important for rights
    - Between debtor and secured creditor (section 19)
    - Between secured creditor and third party (section 20)
  - Attachment under section 19 only allows rights against grantor – rights against third parties requires more (sections 20, 21)
  - No enforcement unless security interest attaches to collateral (section 19(2))
    - Grantor must have ‘rights in the collateral’
    - Value must be given
  - Note: use of floating charge terminology does not create deferred attachment (section 19(4))
    - Attachment under section 19 is not the same as crystallisation of a floating charge
  - Security interest over goods bailed or leased under PPS lease attaches when grantor obtains possession of goods (section 19(5))
- Example of Attachment – S19
  - You are the owner of equipment
  - You lease it to me for use in my business
  - You still have title but I now have possession and have provided value (the lease payments)
  - I now have rights in the collateral and can grant a security interest to you, or to anyone else
  - If you don’t register your security interest first, and I grant another security interest to another lender who does register, in the event of my default you will lose priority to the second lender even though you still ‘own’ the equipment
  - See Maiden Civil case
- Attachment – S19
  - 1. There must be a valid security agreement;
    - Is about enforceability of the obligation between lender and borrower
    - Usually about the inclusion of, and validity of, a contractual term
  - 1. The secured party must give value for the security interest; and
    - Consideration that would support a simple contract
    - Could be the loan or a promise of a loan
    - Antecedent debts satisfy the requirement
    - Need not be paid to the secured party
  - 1. The grantor must have rights in the collateral
    - May be ownership (title)
    - Possession may be sufficient
    - Exception to the nemo dat rule
    - For sales subject to a retention of title clause s19(5) applies
- Case Law on Attachment
  - ‘Absent an agreement between the person who has the power to transfer rights in the collateral in return for value being provided by the transferee, the security interest cannot attach to the collateral.’
    - Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326, [120]
  - ‘What is considered as rights in the collateral encompasses a range of interests beyond legal and equitable title…Without rights in the collateral then the nemo dat rule continues to apply and no security interest can be granted.’
    - iTrade Finance Inc v BOM (2011) 77 CBR (5th) 231, [44]
  - ‘It is not necessary that those rights be of absolute ownership, although it may be necessary that they be more than mere possession.’
    - Re Gelpack Enterprises Pty Ltd [2015] NSWSC 1558
- Attachment – Rights in collateral
  - Lessee can grant security interest that results in greater rights being conferred on the secured party than the lessee had – that is, nature of security interest created can extend beyond the duration of original lease where a PPSA priority dispute arises.
    - Graham v Portacom New Zealand Ltd [2004] 2 NZLR 528, [28]
      - ‘The rights of a lessee in leased goods [under the PPSA] are not therefore confined to the lessee’s possessory rights. As against the lessee’s secured creditors, the lessee has rights of ownership in the goods sufficient to permit a secured creditor to acquire rights in priority to those of the lessor.’ (applied in Re Maiden Civil [2013] NSWSC 852)
  - Important to identify role of title in non-PPSA priority disputes
    - Gray v Royal Bank (1997) 12 PPSAC (2d) 126 (purported sale of motorhome by rogue to purchaser who granted security interest to the bank to finance purchase – contest between non-secured interest holder as owner and bank)
    - RSL Canada Inc (2006) 9 PPSAC (3d) 240 (condition precedent not satisfied so no sale took place, competition between non-secured interest holder as owner and bank)
  - ‘The issue is not ownership of the [collateral], but rather priority to it’ Re Giffen [1998] 1 SCR 91
- Rights in collateral – Re Maiden Civil [2013] NSWSC 852
  - Is the PPS lessee’s right merely possessory? What is the effect of section 112?
    - ‘…Maiden did not have only a mere right to possession under the QES leases.
    - The Canadian and New Zealand cases already mentioned demonstrate that a PPS lessee on taking possession of the collateral acquires not only a possessory right but also proprietary rights to the extent that it can grant security interests to third parties, so that the lessor’s interest if unregistered is vulnerable to being defeated by security interests so granted to such third parties.
    - The PPSA treats the lessee under a PPS lease as the grantor of a security interest with rights in the collateral, and the lessor as a secured party, because it sees the transaction as, in substance, a security transaction, though in form it is a lease.
    - As the cases mentioned above show, it recognises that the lessee may validly and effectively grant security interests in the collateral to third parties, that can take priority of the lessor’s unperfected interest, because the lessee is regarded for that purpose as having rights in the collateral.
    - Maiden acquired possessory and proprietary rights in the Caterpillars upon taking possession of them, and granted a security interest in them to Fast under the General Security Deed.’ ([73])
  - Section 112 (secured party exercising rights under Ch 4 limited by grantor’s rights) does not mean that if grantor’s lease terminated then secured party’s rights also terminated: at [78].
    - Furthermore, Ch 4 would not apply because Maiden was in receivership (section 116).
- Enforcement against third parties (section 20)
  - Secured creditor may enforce security interest against third party if:
    - Security interest attached to collateral (section 19); and
    - Secured creditor has possession of collateral (i.e. a pledge), perfected interest by control (only limited collateral can do this) or has a security agreement that covers the collateral.
  - Effectively this means most security interests will need a security agreement that covers the collateral.
- Requirements for security agreements – section 20(2)
  - Section 20(2)(b) the writing evidencing the agreement contains:
    - (i) a description of the particular collateral, subject to subsections (4) and (5); or
    - (ii) a statement that a security interest is taken in all of the grantor’s present and after-acquired property; or
    - (iii) a statement that a security interest is taken in all of the grantor’s present and after-acquired property except specified items or classes of personal property.
  - See, e.g., Re Maiden Civil [2013] NSWSC 852, [39]-[40]
- Perfection rules
  - Secured creditor must perfect their security interest in order to obtain priority
  - Must maintain continuous perfection
  - Perfection can occur by (s 21(2))
    - Registration (see PPS Register Podcast)
    - Possession of the collateral (but not by seizing on default - see s 24 for definition of possession)
    - Control of the collateral (limited categories of collateral only – most important is control of ADI account ss 25, 57, 75).
  - In addition, attachment must occur (s 19) and secured party must have rights against third parties (s 21(1))
  - Attachment and registration can occur in any order (s 161), but priority does not arise until both occur, that is, until perfection
  - Multiple transactions can be perfected by a single registration (called a financing statement) – but must be same collateral class
  - Note: special temporary perfection rules (s 33)
    - Other special rules for transferred and returned collateral
- Attachment and Perfection
  - ‘Security interests are effective and enforceable against grantors where those interests have attached to the collateral that is the subject of the interest; they are enforceable against third parties where they have been perfected.’
  - Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326, [17]
- Why is perfection important?
  - The idea behind ‘perfecting’ a security interest is essentially to put the world at large on notice of all existing security interests over personal property.
  - The PPSA deals with the problem of apparent ownership.
  - Perfection is important for at least two reasons:
    - Subsequent creditors can make an informed decision regarding whether to advance further funds to a particular party or not;
    - End users of property (i.e. purchasers, lessees etc) can find out if property is otherwise encumbered
  - If you are putting all prudent third party searchers on notice of your existing security interest it follows that you should be entitled to retain priority from the time perfection is satisfied (provided the perfection is valid and effective).
- Failure to maintain perfection
  - A failure to continuously maintain perfected status can result in extinguishment of security
    - Application of the taking free rules in Pt 2.5
      - Section 43 - sale or lease of unperfected security interest
      - Section 46 - sale or lease in ordinary course of business – See Warehouse Sales [2014] VSC 644, [78]-[111] for meaning of ‘ordinary course of business’.
      - Section 47 - sale or lease under $5k for personal, domestic, household purpose
      - Sections 44, 45 – serial number property
      - Effect of taking free is to surrogate secured party into position of transferor (section 53(2))
    - The secured party’s security interest ‘vesting in the grantor’ if the grantor:
      - Goes into liquidation, voluntary administration or personal bankruptcy (section 267)
      - Late registration (section 588FL Corporations Act)
    - Authorised deposit-taking institutions def (ADI def)
      - Banks are ADIs
      - treated by s 25 as having control of an ADI account for the purposes of s 21 simply by reason of their status as the ADI
      - Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (recs & mgrs apptd)
        
        Appointment of receivers and perfection of security interest
        
        The court concluded that the receivers did have possession but found that that possession was by way of seizure, which is expressly excluded under PPSA, s 21
        
        If the words “affected by” are to be given any sensible interpretation, they must contemplate the expansion or contraction of the meaning that would otherwise be applicable.
        
        It would not be possible to perfect a security interest in an intangible by possession.
  - Failing to perfect does not affect secured party rights against grantor, unless vesting occurs.
  - Rights between secured party and grantor established by attachment (s 19).
  - Failing to perfect will affect priority contests between multiple secured parties in same collateral.
- Problems with perfection
  - Need for an effective continuous registration (section 56)
    - Perfection by possession lost if possession lost
    - Possible to possess and register
  - Registration may be defective (section 164)
    - Seriously misleading defect
      - Defect – search of register would not produce a result
      - Future Revelation Ltd v Medica Radiology & Nuclear Medicine Pty Ltd [2013] NSWSC 1741, [6] (Secured party’s ACN wrong)
      - Prescribed defects (section 164(1)(b), section 165)
  - Even if not a defect under section 164, a failure to correctly register may result in no registration being effective and the application of the taking free rules.
- Default Priority Rules (section 55)
  - Knowledge of prior interest is largely irrelevant
    - Priority not based on actual or constructive knowledge
    - Some taking free rules recognise knowledge as exception (e.g. s 47(2)(b))
  - Perfected security interest beats unperfected (s 55(3))
    - Later created security interest may beat a prior interest by perfecting (e.g. registering) first
  - Unperfected interests are determined by order of attachment (s 55(2))
  - Priority between security interests determined by earliest ‘priority time’ (ss 55(4),(5))
    - Registration; (even if registration occurs prior to attachment – s 161)
    - Perfection by registration or control; or
    - Temporary perfection (e.g. by transfer of collateral)
  - Priority time must remain ‘continuously perfected’ until enforcement (see s 56)
- Special Priority Rules
  - Transitional security interests (s 320)
  - Perfection by control beats all other forms of perfection (note only some forms of collateral may have security interests perfected by control) (s 57)
  - Bank security interests in ADI accounts held by them beat all other security interests (s 75)
  - Priority over proceeds and advances will be same as for original security agreement (ss 33, 58)
  - Purchase money security interest (PMSI) (ss 62-65)
  - Payment of debt in ordinary course of business (s 69)
  - Negotiable interests, chattel paper and negotiable documents of title (ss 70-72, 79-81)
  - Transferred collateral (s 34)
  - Accession (Pt 3.3)
  - Commingled goods (Pt 3.4)
  - Voluntary subordination possible (s 61)
- Priority Rules and Proceeds
  - Section 18 recognises that security agreements can cover future property
  - Section 32 provides that security interest continues in collateral that gives rise to proceeds unless secured party expressly/impliedly authorised disposal giving rise to proceeds
    - See also ‘transfer rule’ s 34 (temporary perfection)
  - Security interest will attach to proceeds (s 32)
  - Perfection against proceeds if registration
    - Includes proceeds (s 33(1)(a)) or the original collateral typically includes the proceeds (s 33(1)(b))
    - Covers the collateral and the proceeds are currency, cheques or an ADI account (s 33(1)(c))
    - Temporary perfection for five business days otherwise (s 33(2))
  - Proceeds are defined in s 31
- Priority Rules – PPSA v Non-PPSA Interests
  - Determined by section 73
    - Special priority for general liens arising in relation to the provision of goods or services (s 73(1))
    - Determined by a statute (s 73(2))
    - Determined by ministerial declaration (s 73(3))
  - Canadian cases have held that where there is no statutory rule the general law first in time rule applies.
- Priority of PMSI
  - Perfected PMSI will generally take priority over other security interests (except those perfected by control or over accounts for new value (ss 57, 64, 75)
  - Registration of financing statement must state that security interest is a PMSI
    - PMSI over goods held as inventory (s 62(2)): Perfection by registration must be done before grantor takes possession of goods.
    - PMSI over goods not held as inventory (s 62(3)): Within 15 days after the grantor takes possession of goods
    - Constructive possession does not operate – see s 24
  - Claiming PMSI status is a serious defect in a financing statement if the security interest is not a PMSI to any extent (s 165(c))
- Reminder – what is a PMSI def?
  - Section 14(1)
    - (a) a security interest taken in collateral, to the extent that it secures all or part of its purchase price;
    - (b) a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights;
    - (c) the interest of a lessor or bailor of goods under a PPS lease;
    - (d) the interest of a consignor who delivers goods to a consigned under a commercial consignment.
  - If security includes PMSI and non-PMSI, then PMSI only to the extent that s 14(1) satisfied (ss 14(3), (4))
  - Exclusions from PMSI (s 14(2)):
    - Sale and leaseback
    - Interest in special collateral (chattel paper, investment instrument, monetary obligation etc)
    - Security interest in collateral that grantor intends to use predominantly for personal, household or domestic purposes (unless collateral is serial no property (s 14(2A))
- Priority Summary - priority order/ priority table
  - ** Assuming the timing rules in section 62 are satisfied
  - Note Perfection by control will defeat all other priority (section 57)

Interest 1
vs
Interest 2
Prevailing Interest

Taking Free Provisions
- Unperfected security interests:
  - Under s 43, “a buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property” unless they are a party to the transaction by which the security interest was created.
- Serial numbered property:
  - Under s 44 a buyer or lessee of personal property takes the personal property free of a security interest in the property the serial number incorrect or missing.
  - Exception:
    - where the buyer or lessor takes the personal property as inventory.
- Motor vehicles generally:
  - The “day and a half rule” A purchaser who searches the register at any time between the start of the previous day (that is the day before the sale) and the time of the sale takes free of a security interest that was not revealed by a search for the serial number.
  - A buyer or lessee for value will also take free of security interests if they buy from a dealer in the state in which the transaction takes place whether or not the security interest is registered.
  - These exceptions do not apply if the buyer had actual or constructive notice of the existence of the security interest and so if the buyer does actually search and finds the registration of the security they can’t then continue with their purchase and take free.
Taking Free Provisions
- Ordinary course of business.
  - s46 (1) states that a “buyer or lessee of personal property takes the personal property free of a security interest given by the seller or lessor, or that arises under section 32 (proceeds—attachment), if the personal property was sold or leased in the ordinary course of the seller’s or lessor’s business of selling or leasing personal property of that kind.”
- Personal domestic or household property.
  - Purchases of this type for a value of less than $5,000 will not be affected by a security interest (s47) nor will a holder of currency (s48) unless, in either case the purchaser has actual or constructive notice of the security interest.
  - In this context, constructive notice does not mean that they would have found the security interest had they actually searched the register.
- s300 Registration of data does not constitute constructive notice
- A person does not have notice, or actual or constructive knowledge, about the existence or contents of a registration merely because data in the registration is available for search in the register
- Re Renovation Boys [2014] NSWSC 340
Taking Free Provisions
- Investment instruments and intermediated securities: ss49 - 51 provides that “a person who buys an investment instrument or an intermediated security in the ordinary course of trading takes the instrument or intermediated security free of a security interest”.
- This exception is also subject to the requirement that the purchaser not have notice that the purchase is in breach of the security interest
Accessions and Comingling
- Accessions are goods that “are installed in or affixed to, other goods” unless the other goods are required or permitted by the regulations to be described by unique serial number.
  - For example, an engine installed in a motor vehicle is an accession because the engine is physically attached to the motor vehicle and only the car is described by a unique serial number.” (PPS Bill EM)
- Default rule:
  - s88 “A security interest in goods that become an accession to other goods continues in the accession”
- Default priority rule:
  - s89 “ a security interest in goods that is attached at the time when the goods become an accession has priority over a claim to the goods as an accession made by a person with an interest in the whole”
- No priority where the secured party to the accession has not perfected its security interest in the accession at the time it became affixed to the whole.
Example PPS Bill explanatory memorandum – accessions and comingling
- “Grant A borrows money from Finance B to buy a new motor for its pump which is placed into the pump.
- Before Finance B registers its security interest in the motor on the PPS Register, Grant A offers the pump as security for a loan from Bank A, which advances the money and perfects its security interest in the pump through registration.
- Bank A has priority over Finance B to the motor because Bank A acquired for value an interest in the whole (the pump) before the security interest in the accession (the motor) was perfected.
- Bank A’s search of the register would not have disclosed Finance B’s security interest, and Bank A was entitled to assume that its perfected security interest would have the highest priority of any security interest attached to the pump”
Comingling
- Default rule: s100;
  - A security interest continues in goods which are “manufactured, processed, assembled or comingled so that they become part of a product of mass and their separate identity is lost in the product or mass (s99).
- “any priority that a security interest continuing in the product or mass has over another security interest in the product or mass is limited to the value of the goods on the day on which they became part of the product or mass”
- Where there is more than one perfected security interest in the product or mass then s 102(2) applies:
  - 102(2) If more than one perfected security interest continues in the same product or mass, each perfected security interest is entitled to share in the product or mass according to the ratio that the obligation secured by the perfected security interest bears to the sum of the obligations secured by all perfected security interests in the same product or mass
Attachment to Proceeds of Sale
- S 30 defines proceeds as:
  - Proceeds of collateral are identifiable or traceable personal property that is derived from dealings with the collateral.
  - Proceeds also includes certain insurance or indemnity rights, payments in redemption of certain intangible collateral, certain rights of licensors of intellectual property, and certain rights relating to investment instruments and intermediated securities
- A security interest in collateral continues in the proceeds (except in certain cases).
- 31(2):
  - “proceeds are traceable whether or not there is a fiduciary relationship between the person who has a security interest in the proceeds, as provided in section 32, and the person who has rights in or has dealt with the proceeds”.
Attachment to proceeds of sale
- General rule about attachment of proceeds:
  - s 32 “if collateral gives rise to proceeds (by being dealt with or otherwise), the security interest continues in the collateral unless:
    - the secured party expressly or impliedly authorised a disposal giving rise to the proceeds; or
    - the secured party expressly or impliedly agreed that a dealing giving rise to the proceeds would extinguish the security interest; and
Recent Development of PPSA – PPS Lease Change 2017
- In May 2017, there was a change to the legislation regarding PPS leases
- The Personal Property Securities Amendment (PPS Leases) Act 2017 (Cth) which commenced on 20 May 2017 revised the concept of a PPS Lease under s 13.
- The Amendment Act extends the period that leases and bailments need to have before they will be PPS Leases under the PPSA.
- The minimum duration of PPS Leases has been extended from more than one year, to more than two years.
- Leases of an indefinite term will not be deemed to be PPS Leases unless and until they ‘run’ for a period of more than two years.
- This change does not affect agreements entered into prior to 20 May 2017
- For leases and bailments entered into prior to the changes, the law remains unchanged and registrations should proceed for these leases and bailments as usual.
Recent Development of PPSA – ABN v ACN in registration
- Section 153 of PPSA requires a financing statement to include the grantor’s details as prescribed by the PPS Regulations 2010.
  - Clause 1.3 of Schedule 1 of the PPS Regulations provides that where the grantor is a body corporate that has an ACN, the financing statement must refer to the grantor’s ACN.
  - Sections 164(1)(b) and 165(b) of the PPSA provide that a registration is ineffective if a search of the grantor’s details on the PPSR is not capable of disclosing the registration.
- While many businesses now understand the importance of registering their rights on the PPSR, errors remain common.
- Some of these errors can be fatal and result in the loss of assets.
- On 31 January 2017, the NSW Supreme Court confirmed that an administrative error made in PPSR registration would result in the loss of a $23m ore crusher
  - The error was simple – Alleasing had registered over its customer’s ABN rather than its ACN.
  - See OneSteel Manufacturing Pty Ltd (administrators appointed) [2017] NSWSC 21
Hamersly Iron Pty Ltd v Forge Group Power Pty Ltd [2018] WASCA 163
- Attachment and it’s impact
- The court concluded that the attachment of the security interest precluded mutuality
  - overturned on appeal by reason of the Court of Appeal’s interpretation of the operation of particular provisions in the security agreement
- WASCA Found that
  - … the attachment of a security interest in collateral, as provided for by s 19 of the PPSA, confers on the secured party a proprietary interest in the collateral at the time of attachment; …
  - … the concept of crystallisation of a floating charge is rendered redundant by the PPSA
- Jurisdiction and Context
  - Court: Supreme Court of Western Australia
  - Relevance: This case is pivotal in understanding the application of the Personal Property Securities Act 2009 (Cth) (PPSA) in determining the rights of secured creditors and the treatment of set-off claims in insolvency contexts.
- Parties
  - Plaintiff: Hamersley Iron Pty Ltd
  - Defendant: Forge Group Power Pty Ltd (in liquidation)
- Procedural History
  - This case arises from the insolvency proceedings of Forge Group Power Pty Ltd, where cross-claims existed between Hamersley and Forge based on previous contractual dealings.
- Original Dispute
  - Both parties had claims against each other arising from contracts entered into in 2012.
  - The complication arose with Forge’s insolvency, where different claims needed to be reconciled and set off.
- Current Trial Issue
  - The issue at trial was whether the creation of a security interest by Forge in favor of ANZ bank affected the mutuality required for the right of set-off under the insolvency context.
- Material Facts
  - At the time of Forge’s liquidation in 2014, there were unresolved mutual claims stemming from contracts made in 2012.
  - Crucially, Forge had granted a security interest in its claims to ANZ, registered in July 2013.
- Legal Issue
  - The key legal question was whether the attachment of a security interest under the PPSA precludes the possibility of a set-off because it disrupts the mutuality of interest.
- Statutes in Contention
  - The discussion centered on Section 19 of the PPSA, which deals with the attachment of security interests and its implications on the rights of creditors and debtors.
- Precedents and Judicial Opinions
  - The case is significant as it discusses the attachment rule in the context of the PPSA and examines the abolition of the traditional concept of crystallisation of security interests upon insolvency.
- Judicial Interpretation
  - Attachment Rule:
    - Justice Tottle found that the attachment of a security interest under s 19 of the PPSA creates a proprietary interest in the collateral for the secured party immediately upon satisfaction of the conditions in s 19(2).
  - End of Mutuality:
    - Such an attachment ends the mutuality of interest, thereby precluding set-off claims between the creditor (Hamersley) and the debtor (Forge) in insolvency scenarios.
- Crystallisation and Floating Charges:
  - The judgment also highlighted that the PPSA renders traditional concepts like crystallisation and the use of floating charges redundant in the regulation of security over personal property.
- Key Legal Reasoning
  - The court emphasized that the PPSA intends to simplify and modernize the law surrounding security interests, moving away from common law principles and focusing on statutory rules that provide clarity and predictability.
  - The proprietary interest is recognized for all legal purposes, thus ensuring that the secured party’s rights are protected universally, not just in specific contexts like insolvency.
- Conclusion and Relevance to Modern Law
  - The decision underscores the comprehensive effect of the PPSA on traditional securities law, demonstrating its intent to provide a uniform framework that decreases reliance on varied interpretations of common law concepts.
  - It highlights the importance of understanding statutory provisions in managing commercial and legal risks in insolvency situations.
Vesting
- White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214; [2014] WASC 139
  - Jurisdiction
    - Court: Supreme Court of Western Australia
  - Parties
    - Plaintiff: White (acting through receivers)
    - Defendant: Spiers Earthworks Pty Ltd
  - Procedural History
    - This case addresses the issue of vesting of unperfected security interests under the Personal Property Securities Act 2009 (Cth) (PPSA) during corporate administration.
  - Original Dispute
    - Spiers Earthworks entered into a hire purchase agreement involving various vehicles and equipment with a company.
    - The agreement was part of a broader sale of a business transaction.
  - Current Trial Issue
    - Whether the unperfected security interest of Spiers Earthworks in the hire assets vested in the company upon the appointment of administrators, as per PPSA s 267.
  - Material Facts
    - The company entered into administration on July 24, 2013, with a bank holding a perfected security interest over the company’s assets.
    - Receivers sought a declaration that Spiers Earthworks’ unperfected security interest in the hire assets had vested in the company under PPSA s 267.
  - Legal Issues
    - The court needed to determine if the conditions for the application of PPSA s 267 were met, specifically if the security interest was unperfected at the time the administration commenced.
  - Relevant Law/Statute
    - PPSA s 267: Discusses the vesting of unperfected security interests in the grantor upon the occurrence of certain events, such as the appointment of an administrator.
  - Judicial Interpretation
    - Le Miere J analyzed whether the unperfected security interest of Spiers Earthworks in the hire assets should legally vest in the company.
    - The judge also considered the defendants’ argument that applying PPSA s 267 would constitute an unjust acquisition of property not on just terms, violating PPSA s 252B, which protects against such acquisitions under the Australian Constitution.
  - Key Points and Legal Reasoning
    - Vesting of Security Interest:
      - The court confirmed that Spiers Earthworks’ security interest was unperfected at the time of the company’s administration and therefore vested in the company as per PPSA s 267(2).
    - Constitutional Considerations:
      - The court addressed the constitutional argument by noting that the PPSA’s operation, in this case, was part of a regulatory scheme for adjusting rights among creditors, which does not constitute an acquisition of property under s 51(xxxi) of the Constitution.
  - Conclusion and Relevance to Modern Law
    - The decision reinforces the importance of perfecting security interests under the PPSA to avoid unintended vesting during insolvency events.
    - It also clarifies the constitutional operation of the PPSA, especially regarding the non-applicability of s 252B in contexts where the act is part of a regulatory scheme adjusting creditor rights.
    - This case is a critical reference for understanding the interplay between security interests and corporate insolvency under Australian law.

Week 12: PPSA Part 3

Overview: Enforcement of security interests under the PPSA
- Chapter 4 of the PPSA
  - Seizure of collateral
    - Disposal of collateral
    - Retention of collateral
  - Distribution of proceeds
  - Redeeming
  - Reinstatement
- General enforcement provisions
  - Enforcement provisions in the PPSA are in addition to other rights and remedies available to the parties – section 110
  - Rights and duties under enforcement provisions must exercised honestly and in commercially reasonable manner – section 111
  - Parties may contract out of most enforcement provisions where the collateral is not used predominantly for personal, domestic or household purposes – section 115
  - Exclusions from enforcement provisions set out in section 109
- Seizing collateral upon default – section 123
  - Section 123(1):
    - A secured party may seize collateral, by any method permitted by law, if the debtor is in default under the security agreement.
  - Section 127:
    - If the collateral is seized by one secured party and another party has a higher priority security interest, the higher priority party may obtain possession of the seized collateral subject to notice requirements (section 127(2)).
  - Section 125:
    - Secured party who seizes collateral is under an obligation to dispose of or retain the collateral
  - Section 140: Distribution of proceeds
    - Order of application set out in section 140(2)
- Disposing of collateral – section 128
  - Section 128(2): A secured party may dispose of collateral by:
    - Private or public sale
    - Lease (if the security agreement so provides)
    - Licence (if the collateral is intellectual property)
  - Section 130: Secured party must provide notice of proposed disposal to the grantor and any other secured party with a higher priority interest.
    - Notice requirements set out in section 130(2)
  - Section 131: Secured party has duty to exercise all reasonable care to:
    - Obtain at least market value (if the collateral has a market value at the time of disposal) or
    - Obtain the best price that is reasonably obtainable at the time of disposal
  - Section 132: Secured party must provide a statement of account
  - Section 133: Party takes collateral as result of disposal free of following interests in collateral
    - Interest of grantor
    - Security interest of secured party that disposed of collateral
    - All security interests in the collateral that have a lower priority than the security interest of that secured party.
- Retaining the collateral – section 134
  - Section 134:
    - A secured party may retain the collateral if the secured party gives notice and no notice of objection is given to the secured party.
  - Section 135:
    - Sets out notice requirements
  - Section 136:
    - Retain collateral free of interests of the grantor; security interest of the secured party to whom title passes; and all security interests that have a lower priority than the security interest of that secured party.
  - Sections 137, 138:
    - Provisions relating to objections
- Redeeming collateral – section 142
  - Section 142: Prior to disposal of the collateral, any other person with an interest in the collateral or the grantor may redeem the collateral by paying:
    - the amount required to discharge the obligations, or by performing the obligations, secured by security interests in the collateral; and
    - the expenses incurred in relation to enforcement.
- Reinstating the security agreement – section 143
  - Section 143: Prior to disposal or retention of the collateral, a person may reinstate the security agreement by:
    - Paying any amounts in arrears and expenses incurred in relation to enforcement; and
    - Remedying any other default.
- Recap: Operation of the PPSA
  - 1. Is the arrangement excluded from the PPSA? (s 8)
  - 1. Does it involve an ‘in substance’ security interest? (s 12(1))
    - – If not, does it involve a deemed security interest? (s 12(3))
    - – Is it a Purchase Money Security Interest (PMSI)? (s 14)
  - 1. If so, has the secured party ‘perfected’ their security interest? (ss 19-22)
    - – Attachment of the security interest (s 19)
    - – Enforceability against third parties (s 20)
    - – Perfection through possession, control or registration (s 21)
  - 1. If so, are there any other competing security interests over the same collateral? (if no – go to step 5) If yes then:
    - – Apply the priority rules in Pt 2.6 (start with the default rule s 55)
    - – Check for special types (e.g. PMSI, control over accounts)
  - 1. Apply the enforcement rules (Ch 4) - Are they excluded (e.g. receiverships)? (ss 109-115)
  - 1. Check for taking free (extinguishment) rules (Pt 2.5)
      Perfecting security interest over bank accounts
      A valid security interest over an ADI account must be “perfected” to ensure that it enjoys the highest possible priority. Failure to perfect a security interest may result in it being defeated by a subsequently perfected security interest or rendered unenforceable in the grantor’s insolvency (see sections 55(3) and 267, PPSA).
      You can perfect security over an ADI account in two ways:
Registration on the Personal Property Securities Register (PPSR)
By taking control over the ADI account (but this method is only available if you’re the account bank taking security over a customer’s account held at your bank)
These options are summarised in the table below.

Perfection by control
Perfection by registration
Who can perfect?
Only an ADI that takes security over an account held with it can perfect by control (section 25, PPSA).
Any person who takes security over an ADI account can perfect by registration on the PPSR.
Steps required to perfect
Perfection occurs automatically without the need to register a financing statement (section 21, PPSA).
Requires a financing statement be lodged online with the PPSR.
Advantages
Security interests perfected by control will defeat security interest perfected in any other way (section 57, PPSA).
If a secured party has control over an ADI account for the purposes of Part 9.5 of the PPSA it can make a registration on the PPSR disclosing that it has control. This avoids the ADI account being a “circulating asset” and the security interest being subject to certain statutorily preferred creditors.
Note, the concept of “control” for the purposes of Part 9.5 is different from the concept of perfection by control. The former concept is the level of control the secured party needs to exercise over the ADI account to avoid it being a circulating asset. The latter concept refers to a method of perfecting a security interest over an ADI account (which is only available to an ADI taking security over an account held with it). See ADI account and circulating assets below for more information on this advantage.
Disadvantages
Only available to the ADI that holds the account.
A security interest over an ADI account (other than a term deposit) will be a “circulating security interest” subject to certain statutorily preferred claims. See ADI account and circulating assets below for more information on this disadvantage.
Security interests perfected by registration alone will rank behind a security interest perfected by control (section 57, PPSA).

Law School Notes Repository

Explorer

IPLA Notes

Table of Contents

Week 1: What is Commercial Law and History of Equity

Week 2:

Week 3: Equitable Interests In Property and Trusts

Week 4: Bailment and Agency

Week 5: Statutory Interpretation

Week 6: Sale of Goods Act Part 1

PART A: Title – Rowland v Divall

Week 7: Sale of Goods Act Part 2

Where the buyer expressly or by implication makes known to the seller the particular purpose in the course of the seller’s business to supply

Week 8: Australian Consumer Law Part 1

Week 9: Australian Consumer Law Part 2

Week 10: Personal Property Securities Act 2009 (Cth) Part 1

Maiden Civil

Week 11: PPSA Part 2

Priority Summary - priority order/ priority table

Week 12: PPSA Part 3

Graph View

Table of Contents

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