IPLA TUTORIAL QUESTIONS

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 	UTS CRICOS PROVIDER CODE 00099F  

70327
Introduction to Property and Commercial Law

AUTUMN 2024 TUTORIAL GUIDE
(Topics 1-3: Introduction to Property, Equitable Interest and Trust)

Table of Contents
Topic 1: Introduction to Commercial Law 4
To do before your tutorial 4
Conceptual questions 4
Problem questions 6
Scenario 1 6
Scenario 2 7
Scenario 3 7
Scenario 4 7
Scenario 5 7
Scenario 6 8
Scenario 7 8
Scenario 8 8
Scenario 9 9
Scenario 10 9
Topic 2: What is Property? 11
To do before your tutorial 11
Conceptual questions 11
Problem questions 12
Problem question 1 12
Problem question 2 12
Scenario 1 13
Scenario 2 13
Scenario 3 13
Topic 3: Equitable Interests in Property and the Nature of a Trust 15
To do before your tutorial 15
Conceptual questions 16
Problem questions 17
Problem question 1 17
Problem question 2 17
Problem question 3 17
Problem question 4 18

Topic 1: Introduction to Commercial Law

To do before your tutorial

1. Read: Goode, Roy ‘The Codification of Commercial Law’ (1988) 14 Monash University Law Review 135. http://www.austlii.edu.au/au/journals/MonashULawRw/1988/5.pdf
2. Watch: Lecture Podcast: Introduction to Commercial Law
3. Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute.
   Note1: Check the Tutorial Leaders folder in Module 1 in Week 1 (Tutorial Guide Topic 1). From Week 2 (Tutorial Guide Topic 2), 4-5 students are nominated each week to be seminar leaders. This means that your tutor will first direct questions to the seminar leaders about the readings. Contributions are not formally assessed but may be taken into account in borderline final results. Problem questions are done as a group.
   There will be no tutorial leaders in Week 1 (Tutorial Guide Topic 1) as we get to know our tutorial groups and about the subject.
   Note2: The first tutorial class will start on 19 Feb 2024 (Week 1) (covering the contents in Tutorial Guide Topic 1). 

Conceptual questions

• Consider some of these questions from the Topic 1 Slides. What are the issues and how do we go about finding the answer to these problems:
  • What rights does Bob have if the fridge he bought from Harvey Norman does not work?
  • What happens if the car Alan buys from Barbara was in fact stolen from a caryard?
  • Who is liable if Anne is injured when a tv bought by Bob from JB HiFi explodes?
  • What happens if Bank A lends Bob money to buy a car, and takes an interest in the car to secure the repayments, and Bob loses his job and cannot pay?
  • What can Mr Adams do if the car he leaves with the repair shop for servicing is damaged?
  • Who bears the loss if goods you have ordered are damaged in transit before you receive them?
  • What happens if Mr Adams give Bank A an interest in his truck to borrow money, and then gives Bank B an interest in the same truck to borrow more money, and goes bankrupt?
  • How does a bank or lender protect itself by taking an interest in a company’s assets when it provides finance to the company?
• Commercial law is largely concerned with the rights and duties arising from the supply of goods and services in trade. Discuss what you think might be some of the concerns and priorities of the following parties in commercial transactions:
  • Purchaser
  • Seller
  • Manufacturer/ supplier
  • Delivery driver/ transporter
  • Warehouse/ storage facility
  • Bank or lender lending money to a purchaser or business
  • Borrower of money
• Describe the history of commercial law and the sources of it now?
• What do you understand by “common law” and “equity” – what is the difference between them?
• What are some commercial law concepts we get from the common law? How do you see statutes impacting on common law?
• What is the nature of a lease? Discuss the differences between an operating lease and a finance lease?
• What is the essence of a bailment?
• What is the difference between a bailment and a consignment?
• What distinguishes a licence from a lease?
• What is the difference between a sale and a hire purchase?
• What is the role of finance and lending in commercial law and what is the function of providing security?
• What are some forms of property that could be used as security for a loan?

Problem questions
– in each of the following scenarios identify:

• (a) The type of transaction(s)
• (b) Name the party and their role (eg purchaser/ vendor/ consignor)
• (c) Describe the concerns and interests of the parties.
  Note: these are issues we will return to later in the session. The purpose of the questions in Topic 1 is to think about the types of commercial dealings, the types of interests that different parties can have in property, and where tensions can arise between parties having an interest in the same property. You do not need to apply any legislation to solve these problems – at this stage simply identify the issues.

Scenario 1
Amanda is a recently admitted barrister. She is intending to start practice at the bar in mid 2021. She has applied to rent chambers from Ground Floor Wentworth Chambers. She is starting from scratch and needs a number of things to commence: barristers’ robes, a wig, a new computer and printer. She has heard of a company that supplies office equipment and you just pay a monthly fee for 12 months and they give you upgraded models every year. The other alternative is to buy them from JB Hifi and borrow some money from the bank to buy it. She buys the robes and send them to the drycleaners to be cleaned and have some alterations done before she uses them. However on return, there are burn marks on the robes.

Scenario 2
Mr and Mrs Smith want to buy a car. They approach their local car dealer who says they can buy the car with a loan from BMW Finance Pty Ltd. BMWF gives them the $100K if they agree that the car is security for the loan. The local car dealer obtains the cars to show in their showroom from BMW under an arrangement where BMW supplies the cars and the dealership pays BMW when the car is sold.

Scenario 3
Mr and Mrs Moss run a business selling tyres. They have entered into a financing arrangement with a Bank and the bank secures any outstanding debts by taking an interest in all of Moss’s present and after-acquired property. They are authorised to use stock in the ordinary course of business as long as they pay their debts.

Scenario 4
Mr and Mrs Moss allow a construction company working next door to their premises
to use the back corner of their land for storage of building materials and valuable in exchange for a small fee. Mr Moss urgently needs some money. He takes two computers from the goods stored by the construction company and takes them to a pawnbroker and gives them to the broker to hold until he repays the $2000 he borrows from them.

Scenario 5
In 2015, Wal’s Garden Services purchased some gardening equipment with a loan from a third party lender. Wal then agrees to lease some of the equipment (5 rideon mowers) to his friend Andy for a year. Andy took possession of the mowers and moved them to Queensland in his new business up there.
In March 2017, Andy borrowed money from Quick Money Queensland (QMQ). He gave QMQ a security interest over all of his assets including the mowers. In mid 2017 Andy went bankrupt.

Scenario 6
Rick is very pleased with the new BMW he has recently purchased (worth over $100,000, with a loan from BMW Finance Ltd secured against the vehicle.) Rick takes his new car around to his friend’s place for a party. During the course of the party the host (Elliott) realises they need more beer. Unfortunately Rick’s car is the last in the driveway and Rick is currently engrossed in a karaoke session with other party goers so Elliott asks Rick if he can take the car, which Rick agrees to. During the trip Elliott has a minor accident which dents the driver’s side door. Rick puts it in for repair at “Beamers R’ Us” smash repairs. Rick is told by the repairer that a new part needs to be ordered and this will take 2 days, during which time the car must remain in the workshop.

Scenario 7
Sunshine Bank loaned money to HappyDays Hotel secured against the land on which the hotel was located. HappyDays fell into arrears in repaying the loan and Sunshine exercised its rights, sold the property to a third party, Southern Hotels. Southern became the registered proprietor. Subsequently, Southern needed to raise money. It issued debentures to a superannuation trustee and gave an interest in the property.

Scenario 8
Javier is a car salesman with Spectacular Motors. Javier has recently dealt with a customer Max Smith. Max has traded in his Lexus for a value of 100,000 (with 90,000, and provides Vivian with finance for the purchase.

Scenario 9
Jenny is the general manager of Aztec Mining Ltd which is a mining services company that operates in the Hunter Valley in NSW. Aztec’s assets include 20 large industrial vehicles that are worth 10,000 into a separate bank account with Ebank (not Aztec’s normal bank) which can be used by TCo to pay its invoices of Aztec is more than 30 days late.

• (a) The type of transaction(s)
  • operating Lease
  • floating charge
  • operating Lease
  • fixed charge of 10k in bank of vendors choice if they don’t pay
    • security
• (b) Name the party and their role (eg purchaser/ vendor/ consignor)
  • Aztec (Lessee) and Lease Co (Leasor)
  • Aztec (Purchaser) and TCo (Vendor)
• (c) Describe the concerns and interests of the parties.
  • Lease Co has an interest in current assets and any future assets
  • TCo has an interest in just the drills, but may butt heads with Lease Co if Aztec defaults, however, Aztec does not have title

Scenario 10
Sunsafe Pty Ltd (Sunsafe) is a zinc mining company in South Australia. While zinc prices have been falling Sunsafe had calculated that increasing output would enable them to maintain profits. The strategy required acquiring further equipment. Sunsafe contacted businesses which had access to the sorts of equipment it needed.
Hard Rock Imports Pty Ltd (Hard Rock) usually only imported equipment to sell to mining equipment hire companies. But considering Sunsafe’s circumstances agreed to draw up a one-off lease agreement at 10,000 per month over an initial period of 2 years with an option to extend the lease after 2 years. There was also an option to purchase the equipment for a fixed amount at the end of the lease. In the agreement the lessee was prohibited from disposing of the Komatsu to a third party unless the option to buy had been exercised and title transferred. Tonka Pty Ltd also had an Hitachi EH5000 dump truck for hire. Sunsafe were not sure how long they would need to use the truck so they entered into a monthly rental agreement with Tonka Pty Ltd for $10,000 per month. The lease contract allowed the lessee to extend the lease at the end of each month which Sunsafe has done for 18 months.

• (a) The type of transaction(s)
  • Operating Lease
  • Operating Lease
  • Hire / purchase
• (b) Name the party and their role (eg purchaser/ vendor/ consignor)
  • Sunshine (Lessee) and Hard Rock Imports (Leasor)
  • Sunshine (Lessee) and Tonko (Leasor)
  • Sunshine (Hiree) and Tonko (Hirer)
• (c) Describe the concerns and interests of the parties.
  • Each Leasor has interest in their own property

Topic 2: What is Property?

To do before your tutorial

• Read: Text Chapter 1 and the cases Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA 30 and Parker v British Airways Board [1982] 1 QB 1004.
• Watch: Lecture Podcast: Introduction to Property
• Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions.
  The Week 2 seminar leaders will be asked questions about the allocated readings, including the case of the week.
  (Check the Tutorial Leaders folder in Module 1 to know which week you are allocated to lead discussion in your tutorial.)

Conceptual questions

• When and why do we need to ask whether something is property?
  • When there is contention of ownership and rights
  • To define if something is in fact property and whether rights apply, often in transactions or theft
• What are the characteristics of 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.
• What is the difference between ownership and possession?
  • The person who has the better right to the property.
    • Ownership is more permanent. The cup is yours permanently
  • usually physical (or constructive) possession. Possession is immediate control.
• What are choses in action and choses in possession?
  • Choses in action
    • Intangible and incorporeal Personal property
    • 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
  • Choses in Possession
    • “tangible, moveable and visible and of which possession can be taken”:
      • Armstrong DLW GmbH v Winnington Networks Ltd [2013] Ch 156 at [44]
    • A type of personal tangible property
    • AKA Chattel
• Give 2 examples of legal choses and 2 examples of an equitable chose
  • 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
    • 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;
• What circumstances might a person be said to have a right to possession of an item of personal property?
  • UNSURE - Possessory title
    • ownership based on possession
    • If not claimed after turning over to the police, then you have possessory title.
  • Leasing
• What is the difference between actual possession and legal possession?
  • legal possession is Having exclusive control over the goods and thus entitled to use those goods free from interference by any other person
    • Knapp v Knapp [1944] SASR 257 at 265
  • Actual possession is generally taken to refer to physical possession or control of goods.
    • leasing
• What are 3 ways that personal property can be transferred?
  • Lost
  • inheritance
  • gifting
  • abandoned
  • sold
• What does the concept of “better title” to property mean? What do you think it mean in the context of the British Airways case? What was the result in that case?
  • “better title” pertained to whether British Airways (BA) had a superior claim to lost property found at an airport it managed, over the finder’s claim. The case examined the rights of possession and ownership concerning lost property on premises controlled by another.
  • Result
    • 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.
• What was the importance of determining whether an item is a fixture or not in the Agripower case? What is the test?
  • Importance
    • It highlights the historical context and evolution of fixture law, from prioritizing physical annexation to considering the purpose or intention behind annexation.
    • Established how the law distinguishes between personal and real property.
      • The case underscored the evolution of fixture law, moving away from the simplistic criterion of physical annexation towards a more nuanced consideration of the purpose or intention behind the annexation
  • Test
    • 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

Problem questions
Problem question 1
Mike and Mary Moss (the Moss’) together with their daughter Rachel and her husband Reuben Ross (the Ross’) have recently decided to purchase an existing car dealership on Princes Highway, Kogarah called “Spectacular Motors” from Vendor Pty Ltd. Vendor has registered the business name Spectacular Motors and also has a registered trademark over that name. They set up a company called Moss Ltd to purchase Spectacular Motors. Vendor Pty Ltd (through its managing director-Zachary) has promised in the conversations during the sale process that the business will generate more than $2 million in profit a year.
Spectacular Motors will be run as a family business. Mike is the Managing Director of Moss Ltd, Mary is the Company Secretary and Rachel and Reuben are directors. The purchase contract is signed by Mike (as director of Moss Ltd) and Mary (as company secretary of Moss Ltd). Zachary signs the contract ‘for and on behalf of Vendor Pty
Ltd’.
The Moss’ and Ross’ come to you for legal advice with the purchase of the business.
Specifically advise them in relation to the following questions:

• List the types of personal property they would expect to be included in the sale of the business.
  EXAM EXPECTATION: REAL PROPERTY AND PERSONAL PROPERTY TABLES
  • Cars - vehicles
  • Merchandise
  • Interior amenities and furniture
  • Parts
  • Vehicle Equipment
  • Office equipment
  • Rights to brand servicing
  • Employee contracts
  • Rights to trademark
  • Logos
  • Rights to business name
  • Vehicle database
  • dumpsters
  • financial record access
  • contracts with third parties (suppliers, leasing, cleaners)
• List the types of real property they would expect to be included in the sale of the business.
  • Land - whatever form it comes in
  • relevant storage/garage
  • parking lot spaces
• Explain to them the difference between Property Rights and Personal Rights.
  • Personal Right
    • 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”

Problem question 2
The premises of Spectacular Motors are quite dated so the Moss’ and Ross’ are keen to renovate the dealership to make it more attractive to customers. The Moss’ engage the services of their nephew Pete from Compete Cleaners to do a thorough clean before the workmen commence renovations. Consider the following scenarios:
Scenario 1
At the end of a long day of cleaning Pete opens the oversized dumpster, which is located on the premises, to throw out the last rubbish bag when something shiny catches his eye. He reaches in and pulls out a dirty large diamond encrusted watch. Pete can’t believe his luck at such a find!
Pete initially thought it could belong to his careless cousin Rachel whom had just discarded it in the bin as she was always purchasing new flashy things, but he doesn’t call Rachel to verify this. Later that night Pete shares his good news with his neighbour and friend Louis Little. Pete explains to Louis how he found it amongst the garbage and that he had no idea who the true owner is. As Pete is very busy the next day with cleaning jobs, Louis offers to take the watch to get it valued.
A few days later Pete pops by Louis’ house and asks Louis how the valuation went. Louis then refuses to hand it over saying as it was in his possession and Pete did not know who the true owner was he was entitled to keep it.

• Bail relationship
• British airways - better rights
  • Never made an effort to call rachel, however he was contracted to remove all property from that dumpster
  • Pete never made an effort to find owner
  • Item was abandoned by true owner.
• Pete was cleaning in his capacity as an employee, all work in Cth is done for the benefit of the employer
  Scenario 2
  Pete is scrubbing the inside wall of the showroom when one of the wall panels comes loose and falls on the ground. When Pete bends down to pick up the panel to replace it, he notices that there is a large hole inside the wall. Inside the wall is a large black garbage bag, which is filled with $100 notes.
  Pete rings his uncle Mike Moss and tells him what he has found. Mike had no idea about the large sum of money and immediately calls the police. The Kogarah police come to Spectacular Motors and seize the bag of money “pending further investigation”.
  Scenario 3
  Pete is vacuum cleaning the fleet of Peugeots. As he is vacuum cleaning one of the cars, he finds a small diamond ring under the mat in the front seat. A label on the windshield of each Peugeot reads that they are proudly exclusively imported and commercially leased to dealers by “Prestige Motor Dealers Botany”. Pete finds a terms and conditions document in the glovebox which reads “The lessee is at all time responsible for all items of personal property. The lessor accepts no responsibility for loss or damage to personal property.”
  Pete stops by Prestige Motor Dealers Botany on his way home and hands in the diamond ring to an employee. Pete leaves his phone number and address and says to the employee that if the owner is not found to call him and return it to him.
  Pete comes to you for legal advice in relation to the following questions:
• Who has the better claim to the watch/ring in scenarios 1, 2, and 3?
• Would your advice be any different if Pete wasn’t working as a cleaner at Spectacular Motors but instead found the watch/ring when he was there as a customer of Spectacular Motors?
• What could the Moss’/Ross’ have done to assert property rights in the watch/ring?
• What rights does Pete have in relation to the watch/ring in the above scenarios?
• Explain to Pete the difference between:
  • Ownership and possession; and possession and title
  • Actual possession and legal possession.

Topic 3: Equitable Interests in Property and the Nature of a Trust

To do before your tutorial

• Read: e-reading Ch 3 of Parkinson and Wright (Eds)The Principles of Equity (2nd ed, Lawbook Co, 2003) and text book ch 1 [1.130]-[1.140], [1.240]-[1.300].
  • Listen to the narrated Topic 3 slides in the Subject Documents folder.
  • Think about these issues and problem questions and bring your ideas and questions to seminars (online or face to face)
    Cases:
  • Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 (only paras 1-42, 100-119);
  • Commissioner of Stamp Duties v Livingston [1965] AC 694;
  • Latec Investments Ltd v Hotel Terrigal Pty Ltd (in Liq) (1965) 113 CLR 265
• Watch: Lecture Podcast: Equitable Interests in Property
• Prepare:
  • Go through the Week 3 tutorial materials and think about the conceptual and problem questions.
  • Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions.
  • Week 3 seminar leaders will be asked questions about the allocated readings, including the case of the week.
  • (Check the Tutorial Leaders folder in Module 1 to know which week you are allocated to lead discussion in your tutorial.)

Conceptual questions

• How do equitable rights in property and common law rights in property work together?
  • Equitable rights in property complement common law rights by providing remedies and protections based on principles of fairness and justice, where common law may be inadequate or inflexible, ensuring a comprehensive legal framework for property interests.

• What are the characteristics of equitable property? How are they created?

• Consider and explain the meaning of these statements in DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431: Per Aickin J:
  • ‘If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable.’
    • when a person holds both the legal ownership and the full beneficial interest in a property, they possess a single, complete legal interest, rather than two distinct interests (legal and equitable).
  • Per Brennan J: ‘An equitable interest is not carved out of a legal estate but impressed upon it.’
    • Brennan J’s statement emphasizes that an equitable interest does not reduce or split the legal estate; instead, it is a separate interest that is applied to or affects the legal estate.
• Can you think of a form or forms of equitable property for which there is no counterpart at law? What forms of equitable property DO have a counterpart at law?
  • Equitable Interests in Trusts
  • Both: Legal and Equitable Estates such as mortgage
• What is the ratio of Livingstone’s case? [See Commissioner of Stamp Duties (Qld) v Livingstone [1965] AC 694.
  • It was held that that interest was not relevantly a beneficial interest, whilst transmissible by will, in property.
• What is the difference between proprietary and personal rights in equity, and what is a ‘mere’ equity?
  • Proprietary
    • Rights in property recognized by equity, such as the beneficial interest in a trust.
  • Mere Equity
    • Equitable rights arising from fairness considerations, not attached to property, such as equitable estoppel.
  • 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.
• Give some examples of a mere equity. What was the mere equity in Latec’s case?
  • equitable estoppel
  • Latec argued for equitable relief to rectify or adjust the rights between the parties concerning financial transactions and property interests linked to the development and operation of the Hotel Terrigal
• What are the differences between legal choses in action and equitable choses in action?
  • Legal choses in action are those which were historically enforceable in a court of common law, such as a debt
  • • 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
• How are equitable interests regarded as property for some purposes and not others?
  • Equitable interests are treated as property where fairness demands protection, such as in trusts, but may lack the same enforceability or recognition in contexts like third-party transactions due to their foundational basis in principles of equity rather than strict legal title.
• What is a 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.
• Name two different types of equitable interest in trust assets.
  • fixed trusts
  • Discretionary Trust
• What is the difference between a fixed trust and 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.
• How are trusts used commercially?
  • 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.
      Problem questions
      Problem question 1
      Mary Moss has recently discovered that she has been left something under the will of her great-aunt in Queensland who died earlier this year. Her aunt Martha was very wealthy and owned a large portfolio of debentures, bonds and shares. Martha was herself a beneficiary under the will of her ex-husband Rupert. Rupert has left Martha a residuary interest in his estate which consists of several large cattle stations in Western Australia. Neither estate has been administered yet.
      Mary is also a partner in an accounting firm run as a partnership and the partners own a building and office equipment in their practice in Bondi. Last year, the partners borrowed money from the NAB to fund their business during the pandemic, and gave all their assets as security for the loan.
      Mary has come to you for legal advice in relation to the nature of her interests. Her accountant has told her that there is some issue about being taxed if the interest is an interest in property. She also wants to transfer all her property to her sister Jackie to hold for her and her children. She owns a house in Bondi in her own name.
      Specifically advise Mary in relation to the nature of the different interests and what can be transferred.
• Mary has property right in unadministered land
• NAB has equitable mortgage
  • NAB has proprietary rights in all other assets (partnership assets assumed)
  • Partnership has legal ownership / proprietary interest

Problem question 2
Jackie becomes the trustee of Mary’s property for Mary and her 3 children. Jackie incurs costs in repairing the roof and other repair work on the house in Bondi. Does Jackie have to use her own money to pay? What sort of interest does Jackie have in the property?

• Jackie has a proprietary interest in the property
• Proprietary right to the property
  • indemnified to the trust if she pays the difference
  • Fiduciary property - Farah
    Problem question 3
    Ten years ago Spectacular Motors (SM) owned a different property to the premises it is now using and it has a long standing dispute in relation to what happened to it. The property was Old System Title, not Torrens title land.
    10 years ago SM mortgaged the property to Fancy Finance Ltd for a business loan, but fell into arrears in repaying the loan and Fancy Finance, purporting to exercise its mortgagee’s power of sale, sold the property. It held an auction on a Monday with little time for proper advertisement (and the Mosses believe this was to make sure that the property could not be sold at the auction). The highest bid was well below what the property was worth and the next day Fancy Finance sold the property to its wholly owned subsidiary, Fiddly Finance for just over the price of the highest bidder, and it became the registered proprietor.
    The Mosses were very upset about this but did nothing about it. Five years ago, Fiddly Finance granted a floating charge over all its assets as security for a debenture issued to the trustee of a group of debenture holders, De Best Debentures Pty ltd. The prospectuses for the debentures offered explicitly stated that the land was owned by Fiddly.
    Five years later, now, the Mosses as directors of Spectacular Motors want to argued that Fancy Finance had fraudulently sold the property to Fiddly Finance, giving rise to an equitable right to rescind and set aside the sale of the property.
    Questions:
• Describe the nature of the different equitable interests in this scenario.
• Which case is this analogous to?
• What happened in that case?
• What is your advice to the Mosses?
• Would the answer be different if the charge had not been created?

Problem question 4
When the Mosses formed their business, Spectacular Motors Pty Ltd, they had great hopes for the business. They purchased a block of land for the sum of 200,000 against the security of the land as the property was now worth 200,000 secured against the property. Darren and the Mosses completed the paperwork. However, the mortgage documents did not describe the amount secured by the property or the nature of the loan in any way, rendering the mortgage defective.
In 2010, Bob and Jackie had no money and no customers. The business was going very badly and they could not pay their debts.
Advise Darren Doorstop. Identify the different interests.
The 800k is properly mortgage - registered mortgage
200k second loan - unregistered mortgage - no info
200k loan - floating charge over business and mortgage over property made on faulty premises

 	UTS CRICOS PROVIDER CODE 00099F  

70327
Introduction to Property and Commercial Law

AUTUMN 2024 TUTORIAL GUIDE
(Topics 4-5: Bailment, Agency, and Statutory Interpretation)

Table of Contents
Topic 4: Bailment and Agency 3
To do before your tutorial 3
Part A – Bailment: Conceptual questions (Week 4) 3
Part A – Bailment: Problem questions 4
Pt A - Problem question 1 4
Pt A - Problem question 2 5
Pt A - Problem question 3 5
Part B – Agency: Conceptual questions (Week 5) 6
Part B – Agency: Problem questions 6
Pt B - Problem question 1 6
Pt B - Problem question 2 7
Topic 5: Statutory Interpretation (Week 5) 8
To do before your tutorial 8
Tutorial Questions 9

Topic 4: Bailment and Agency

To do before your tutorial

• Read:
• Text chapters 3 and 4 and the cases
• Pangallo Estate Pty Ltd v Killara 10 Pty Ltd [2007] NSWSC 1528 (bailment where the form of the property changes ie grapes into wine); and
• Prospect Industries v Anscor Pty Ltd [2003] QSC 296 (the difference between actual and ostensible authority).
• Watch: Topic 4 Lecture Podcast: Bailment and agency
• Prepare: Go through the Topic 4 tutorial materials below and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 4 seminar leaders will be asked questions about the allocated readings, including the cases of the week.
• (Check the Tutorial Leaders folder in Module 1 to know which week you are allocated to lead discussion in your tutorial.)
  Note: TheWeek 4 tutorial will focus on the bailment topic, and the agency topic will
  be covered in Week 5.

Part A – Bailment: Conceptual questions (Week 4)

• How do you define bailment?
  • The voluntary assumption of possession is key; there must be knowledge of the goods and the bailee’s consent to hold them:
• Explain the difference between Bailment for Reward and Gratuitous Bailment
• Bailment for reward
  • Bailee is paid for taking custody or control of goods.
  • mechanic
• Gratuitous bailment
  • Gratuitous bailments arise where the bailee is not paid for taking possession of the property and the bailment is terminated on demand. Eg:
    • Deposit
    • loaning a car
• Who are the parties to a bailment?
• Bailor: party who gives possession of goods to another
• Bailee: takes possession but not ownership of goods
• Sub-bailee: takes possession from bailee
• What was the issue in Pangallo Estate v Killara 10 [2007] NSWSC 1528? What was the basis of Killara’s claim to the property?
• Dispute over whether grapes provided for winemaking constituted a bailment or a sale.
• Said they were sold to her
• What are some of the rights of a bailee for reward?
• 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
• When might a bailee be liable for damage to the property?
• 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
• Explain how liability rules may operate for a sub-bailment arrangement.
• 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.
• Distinguish a bailment from:
  • Bailment vs. Sale or Gift: intention to return it vs transfers ownership permanently vs transfers ownership without expectation of return or payment.
  • Bailment vs. Agency Relationship: physical possession of goods with an obligation to return them vs allows the agent to act on behalf of the principal, often without taking custody of the principal’s property.
  • Bailment vs. Trust Relationship: temporary transfer of possession without transferring ownership vs holding property on behalf of another for the benefit of a third party, with a fiduciary duty to act in the best interest of the beneficiary.
  • Bailment vs. Security Interest: temporary possession of goods without conferring a security interest vs a legal claim or lien on assets that are typically provided as collateral to secure a loan or obligation.

Part A – Bailment: Problem questions
Pt A - Problem question 1
Rick is very pleased with the new BMW he has recently purchased (worth over $100,000). Rick takes his new car around to his friend’s place for a party. During the course of the party the host (Elliott) realises they need more beer. Unfortunately Rick’s car is the last in the driveway and Rick is currently engrossed in a karaoke session with other party goers so Elliott asks Rick if he can take the car, which Rick agrees to. During the trip Elliott has a minor accident which dents the driver’s side door.
Rick is furious with the damage to his new car and the next week he puts it in for repair at “Beamers R’ Us” smash repairs. Rick is told by the repairer that a new part needs to be ordered and this will take 2 days, during which time the car must remain in the workshop. Rick chose Beamers as they advertise themselves as the experts at expensive European cars. Unfortunately for Rick, the first night his car is in the repair shop a fire breaks out in the workshop after an apprentice panel beater spills flammable chemicals due to negligence. Rick’s car is destroyed by a fire that burns out the workshop, which did not have a fully functioning sprinkler system installed. Rick’s contract with the repairer has a clause which states:
“While all due care is taken, Beamers R’ Us bears no responsibility for damage caused to the customer’s property due to negligence”
Advise Rick as to his rights against Elliott and Beamers R’ Us.
Would d your answer be different if Rick’s car had been delivered to Beamers R’ Us by his local BMW dealer?

Pt A - Problem question 2
Reuben has used a new cleaning chemical which has unfortunately left white streaks on a brand new Mercedes GLA. Reuben calls Vinnie from Vintage Motor Repairs and explains the situation to him. Vinnie has a reputation as being the best in the field. Vinnie asks Reuben to drop the car at the repair shop in Botany and to leave it with him.
Later that day, having inspected the car, Vinnie realises that he is out of stock of the special chemical R100, and the only place that will have the product in Australia is at a garage called ‘In Mint Condition’ (“IMC”) located in Ballarat, Victoria. With Reuben’s consent, Vinnie arranges with his distribution agent TOLL to pick up the car and deliver it to IMC’s garage before 6pm the following evening. The car was collected as arranged but a few days later the car has still not arrived at IMC’s garage and it has come to light that the car had been stolen during transit. It is unclear whether a TOLL employee has stolen the car or whether it was a third party thief. The contract between TOLL and Vinnie contains an exclusion clause that excludes liability ‘under any circumstances and for any reason.’
Advise Reuben who would be liable in the circumstances.

Pt A - Problem question 3
Cars are everything to the Moss family. In addition to their business, Mr and Mrs Moss have an interest in showing and restoring vintage cars. In 2019, they purchased the chassis of 2 old Jag E type cars. The cars were essentially a shell – they had no wheels or engine and needed to be rebuilt. They are not mechanics themselves, so sent their cars to Jag Perfection Pty Ltd, an expert at rebuilding cars who would rework the parts sent to them into a fully functional car. The arrangement between the parties was long standing.
Jag Perfection has gone into liquidation and the liquidator is claiming that Jag Perfection has title to all property in the workroom, including the E Types. The liquidator claims that Jag Perfection has property in the shells and the arrangement was for a sale of a new product – a rebuilt vehicle - to the Moss but that in the circumstances, the property was available for the company’s insolvency.
Advise the Moss’s.
pangello wine case - bailment not a sale of a new product, there is a contract to transform and inheritance from original item.

Part B – Agency: Conceptual questions (Week 5)
Note: The Week 5 tutorial will continue with the agency topic (Week 4) and then transition to Topic 5 statutory interpretation.

• How do you define or explain the concept of “agency”? Why is it a difficult concept to define?
• 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.
• Can take multitude of forms
• Explain the difference between actual authority and ostensible authority.
• What is the difference between implied authority and constructive authority? .
  • Implied authority example: 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.
  • Constructive authority example: 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.
• What was the issue in Prospect Industries v Anscor [2003] QSC 296? Do you think the outcome might have been different if it had been found that Mr Woodrow had introduced himself to Mr Hope as representing Count?
• whether representations made by Mr. Woodrow, which led Prospect Industries to invest in the Wattle Scheme, bound Count through either actual or ostensible authority, given that Woodrow was alleged to have made these representations on behalf of Count. If it had been found that Mr. Woodrow had explicitly introduced himself as representing Count to Mr. Hope, the outcome might have been different, as this could have established a clearer basis for Count’s ostensible authority, leading to potential liability for the representations made.
• What is the role of consent in agency? What occurred in Garnac Grain Co v HMF Faure & Fairclough Ltd ?
• 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.
• How can an unauthorised act be ratified by a principal? What is the purpose 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.
• What are some of the duties and liabilities 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
• What is the doctrine of undisclosed principal? How does it render an agent liable to a third party?
• 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
  • liable when principle is disclosed
  • liable when performing duties outside of agency scope regardless of disclosure status

Part B – Agency: Problem questions
Pt B - Problem question 1
Spectacular Motors Pty Ltd has expanded its business since it was bought by the Moss’s. The Moss’s daughter, Rachel Moss, is particularly keen to start selling luxury cars. Mr and Mrs Moss are not so keen as they see the local market in family vehicles. Rachel’s role as a director in the company has been as the Accounts Manager.
Mike, Mary, Rachel and Reuben attend trade fairs regularly together. At the Porsche stand at the 2020 show, Mike introduced Rachel to Mr Schmidt of Porsche, as a director of the company and they spoke generally of their business and interests in expanding their offering over time. They spoke for about ten minutes and handed over their Spectacular Motors business cards.
Subsequently Rachel visits Mr Schmidt and advises that Spectacular Motors would like to enter a consignment arrangement with Porsche for delivery of 10 vehicles. They enter a contract.
Mike Moss finds a copy of the contract on Rachel’s desk. He is horrified – he never discussed with Rachel the possibility of her entering contracts on behalf of Spectacular Motors like this.
Advise Mike.

Pt B - Problem question 2
Meanwhile, Reuben had been in negotiation with one of his friends, Sandy Davidson, to purchase 10 vans for a company fleet. His friend had started working for his father’s business Davidson Electrics, 3 weeks ago. He had a business card, describing him as Sandy Davidson, Assistant Purchasing Officer.
Sandy signed the contract placing the order. Sandy’s father Eric found out and rang Mike to cancel saying Sandy should not have done this. However, Reuben has already placed an order with Toyota for 10 vans that Mike Moss does not want if he cannot sell them.
Advise Mike

• Is Dawson Electrics bound by the contract?
  • ostensible authority, not liable though
• Would your answer be different if there was evidence that Reuben and Sandy had come up with the plan knowing that Sandy didn’t really have responsibility for purchasing cars?
  • yes, knowledge would indicate that he is trying to take advantage

Pt A - Problem question 3
Cars are everything to the Moss family. In addition to their business, Mr and Mrs Moss have an interest in showing and restoring vintage cars. In 2019, they purchased the chassis of 2 old Jag E type cars. The cars were essentially a shell – they had no wheels or engine and needed to be rebuilt. They are not mechanics themselves, so sent their cars to Jag Perfection Pty Ltd, an expert at rebuilding cars who would rework the parts sent to them into a fully functional car. The arrangement between the parties was long standing.
Jag Perfection has gone into liquidation and the liquidator is claiming that Jag Perfection has title to all property in the workroom, including the E Types. The liquidator claims that Jag Perfection has property in the shells and the arrangement was for a sale of a new product – a rebuilt vehicle - to the Moss but that in the circumstances, the property was available for the company’s insolvency.
Advise the Moss’s.
Pangallo Estate Pty Ltd & ors v Killara 10 Pty Ltd - bailment not a sale of a new product, there is a contract to transform and inheritance from original item.

Topic 5: Statutory Interpretation (Week 5)

Note: The Week 5 tutorial will continue with the agency topic (Week 4) and then transition to Topic 5 statutory interpretation.
To do before your tutorial

• Read:
  The following cases:
  • Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236; (on the meaning of “delivery” in s 28(2) of the Sale of Goods Act 1923 (NSW)) and
  • Vautin v BY Winddown Inc [2018] FCA 426 (Extraterritorial application of statutes and intention of parliament expressed in the provisions of the Australian Consumer Law), and
  • Samwise Holdings Pty Ltd v Allied Distribution Finance Pty Ltd [2018] SASCC 95 (This case turns on the purported timing of possession of property in the context of a provision of the Personal Property Securities Act)
  • Leeming, Mark “Theories and Principles Underlying the Development of the Common Law: The Statutory Elephant in the Room” (2013) 36 UNSWLJ 1002.
• Watch: Lecture Podcasts: 1 Statutory Interpretation principles and 2. Introduction to navigating and reading legislation
• Prepare: Go through the following tutorial plan and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 5 seminar leaders will be asked questions about the allocated readings, including the cases of the week.
  (Check the Tutorial Leaders folder in Module 1 to know which week you are allocated to lead discussion in your tutorial.)

Tutorial Questions

• What is the modern approach to statutory interpretation?
  - Mischief Rule / Purpose rule
  - Literal Rule
  - Golden Rule

  • What is the difference between a literal and purposive approach to statutory interpretation?
    • Literal means interpret based on dictionary meaning
    • Purpose approach is taking the legislative intention, often at second reading speech or in full title name
  • In what sense do we mean that the court is trying to ascertain the “intention” of the Parliament?
    • court takes second reading, parliamentary discussion, full title and act purpose sections of the act and compares those to the act itself and what it purports to address

• How do the common law and statute interact?
  - Common law and statute interact as a dynamic and evolving legal framework, where statutes can modify or codify common law principles, and common law can interpret and fill gaps in statutory provisions

• What does the maxim “generalia specialibus non derogant” refer to?
  - 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.

• What types of extrinsic materials may a court have regard to in interpreting a statute?
  - parliamentary debates (Hansard),
  - explanatory memoranda,
  - reports of law reform commissions,
  - and international treaties

• What is the ejusdem generis principle?
  - 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:

• How does the court consider the context and purpose of an act and why?

• How does statute alter the common law?
  - A statute can alter the common law by explicitly modifying, abrogating, or supplementing existing legal principles to address contemporary issues or policy changes.

• Discuss the interrelationship between the common law, equity and statute as explained by Leeming JA in Leeming, Mark “Theories and Principles Underlying the Development of the Common Law: The Statutory Elephant in the Room”.
  - Leeming JA explains that the interrelationship between common law, equity, and statute is symbiotic and integral, with statutes not merely supplementing but fundamentally shaping and being shaped by judicial decisions in common law and equity, thereby driving the evolution and coherence of the legal system.

• Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236
  - Parties: Gamer’s Motor Centre (Newcastle) Pty Ltd vs. Natwest Wholesale Australia Pty Ltd
  - Issue: Whether “delivery” under s. 28(2) of the Sale of Goods Act 1923 (NSW) includes constructive delivery.
  - Relevant Section of the Statute: Section 28(2) of the Sale of Goods Act 1923 (NSW).
  - Part of the Act: This section is located within the provisions governing the effects of the contract in terms of the transfer of property and possession of goods.
  - Relevant Definitions: “Delivery” might be defined within the Act to encompass various means of transferring goods from seller to buyer, including constructive delivery.
  - Court’s Finding: The Court found that “delivery” includes constructive delivery, allowing a third party to acquire good title under certain conditions.
  - Application of the Section: The Court applied this interpretation to find that Natwest could claim title to the vehicles despite the original seller’s rights, as the vehicles or documents of title were received in good faith without notice of any claim.
  - SAMWISE HOLDINGS PTY LTD v ALLIED DISTRIBUTION FINANCE PTY LTD & ORS [2018] SASCFC 95
  - Parties: SAMWISE Holdings Pty Ltd vs. Allied Distribution Finance Pty Ltd & Others
  - Issue: Priority of a perfected purchase money security interest (PMSI) over other registered security interests.
  - Relevant Section of the Statute: Personal Property Securities Act 2009 (Cth), specifically sections related to PMSIs.
  - Part of the Act: Located within the sections detailing the rules for secured transactions and priorities among security interests.
  - Relevant Definitions: “PMSI” and “possession” are defined within the Act to clarify the conditions under which a PMSI gains priority.
  - Court’s Finding: The Court found that the phrase “obtains possession” refers to possession ‘as grantor’ for the purposes of PMSI priority.
  - Application of the Section: The Court concluded that Allied Distribution’s PMSI had priority over other security interests as it was perfected by registration before the dealership, acting as grantor, obtained possession of the motorcycles.
  - Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426
  - Parties: Mr. Vautin vs. BY Winddown, Inc. (formerly Bertram Yachts) & Eagle Yachts Pty Ltd
  - Issue: Breaches of Australian Consumer Law guarantees regarding acceptable quality and fitness for a disclosed purpose.
  - Relevant Section of the Statute: Australian Consumer Law, part of the Competition and Consumer Act 2010 (Cth), concerning consumer guarantees.
  - Part of the Act: The ACL is located within the Competition and Consumer Act 2010, focusing on consumer protection and fair trading.
  - Relevant Definitions: “Acceptable quality” and “fitness for a disclosed purpose” are defined within the ACL to protect consumers.
  - Court’s Finding: The Court found Bertram Yachts and Eagle Yachts liable for breaches of ACL guarantees due to significant manufacturing defects.
  - Application of the Section: The Court applied ACL standards to determine that the vessel did not meet the guarantees of acceptable quality and was not fit for the disclosed purpose of ocean-going motoring, impacting the vessel’s safety and durability.
  -

    UTS CRICOS PROVIDER CODE 00099F  
  

70327
Introduction to Property and Commercial Law

AUTUMN 2024 TUTORIAL GUIDE
(Topics 6-7: Sale of Goods Act)

Table of Contents
Topic 6: Sale of Goods Act (Part 1) 3
To do before your tutorial 3
Conceptual questions 3
Problem questions 4
Problem questions - Who bears the loss in the following scenarios? 4
Problem questions - Nemo Dat 6
Problem question 1 - Nemo Dat 6
Problem question 2 - Nemo Dat 6
Topic 7: Sale of Goods Act (Part 2) 7
To do before your tutorial 7
Conceptual questions 7
Problem questions 8
Problem question 1 [NEW] 8
Problem question 2 [NEW] 9
Problem question 1 [Optional] 10
Problem question 2 [Optional] 11

Topic 6: Sale of Goods Act (Part 1)

To do before your tutorial

• Read: Text chapters 6 (note we will not focus in detail on the cases referred to in ch 6); chapter 7 and the cases:
• Bodlingo Pty Ltd v Webb Projects Pty Ltd (1990) ASC 56-001 and Motor Credits (Hire Finance) Ltd v Pacific Motor Auctions Pty Ltd (1963) 109 CLR 87
• Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 72 ALR 321 and
• Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] 2 All ER 105.
  You must download or have access to the Sale of Goods Act 1923 (NSW) and read the sections of the Act referred to in the lecture podcast.
• Watch: Lecture Podcast: Sale of Goods - Part 1
• Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 6 seminar leaders will be asked questions about the allocated readings, including the cases of the week.
  (Check the Tutorial Leaders folder in Module 1 to know which week you are allocated to lead discussion in your tutorial.)

Conceptual questions

• How are goods defined under the Sale of Goods Act?

  • “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.

• What is a sale of goods? How is this different from a license, lease or hire purchase?

  • (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.
  • Ownership is actually transferred

• Why is it important to know when title passes in a sale of goods?

  • determines the precise moment the buyer gains legal ownership and the seller’s right to payment, affecting the rights and obligations of both parties, particularly in situations of loss, damage, or insolvency.

• What does the concept of “ascertained” and “unascertained” goods refer to?

  • Unascertained Goods

    • 100 tons of wheat out of 1k tons
    • Goodot identified or agreed upon at the time of making contract

  • Ascertained Goods

    • Once the 100 tons of wheat are selected and packaged, become ascertained
    • Identified after the time a contract is made (in accordance with agreement between the parties)

• What are the basic rules for determining when property passes under a sale of goods?

• Section 21: Goods must be ascertained

• Section 22: Property passes when intended to pass

• S 23 Rules for ascertaining intention

• When can a buyer receive title even though the seller has no title?

• 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

Problem questions

Problem questions - Who bears the loss in the following scenarios?

• B advertises that she has a second hand car for sale for $10,000. A visits B and inspects the car. A is unsure about whether he’ll buy the car. B offers to sell the car to A and, if A takes it and is not happy with it, he can return it. A takes the car. Two weeks later it is wrecked in a car accident, which is not the fault of A.
  B has already transferred ownership and has offerred a satisfaction guarantee, not a damage insurance guarentee s 24 (4)
• B advertises that she has a second hand car for sale for 10,000, subject to B cleaning and polishing the car. The next day B has the car cleaned and polished and calls A the day after that to let him know that the car is ready to be picked up. A picks up the car that afternoon. On the way home, the car is wrecked in a car accident, which is not the fault of A.
  • loss is bared by A due, ownership has transferred and conditions were met
• B advertises that she has a second hand car for sale for 10,000. A says that he will return the following day to pay for the car and take it. Overnight, the car is badly damaged in a car accident caused by a third party negligently crashing into the parked vehicle.
  • s 24 rule 1, loss
• B advertises that she has a second hand vintage car for sale for 85,000. B offers to have the car valued by two valuers – one chosen by A the other by B – and then to sell the car at the price which is midway between the 2 valuations. A agrees to this. B has the car valued over the next week by two valuers with the midway price set at $95,000. While driving the car home from the second valuation, the car is wrecked in an accident which is not the fault of B.
  • s 24 rule 3
• B advertises that she has a second hand car for sale for $10,000, which she is expecting to receive under a will from a deceased relative. A and B inspect the car and A agrees to buy it. B says that she’ll let A know ‘when all the will stuff is finalised’. One month later, the estate is finalised and B takes possession of the car. She telephones A to let him know that the car is available. A says that he will pick it up in the morning. Overnight, the car is badly damaged in a car accident caused by a third party negligently crashing into the parked vehicle.
  • s 24 rule 2, once condition was met and call sent, ownership was transferred
• B advertises that she has a second hand car for sale for 10,000. B offers to sell the car to A for 1,000 payment immediate, then 10,000 is fully paid. A agrees, pays 1,000 a month for the next eight months. The day after the eighth payment, the car is damaged by the negligence of a third party.
  • B has registration still, rule 25
• B advertises that she has a second hand car for sale for $10,000. A visits B and inspects the car. A is unsure about whether he’ll buy the car. B offers to sell the car to A and, if A takes it and is not happy with it, he can return it. B says that ‘obviously, if anything happens to the car while you’ve got it, that’s your problem’. A takes the car. Two days later it is wrecked in a car accident, which is not the fault of A.
  • B has already transferred ownership and has offerred a satisfaction guarantee, not a damage insurance guarentee s 23 (4)
• B deals in restored second hand cars. A visits B’s stores and looks at a brochure of new cars that B is expecting to receive in the next month. A vintage Lotus Elan is advertised in the brochure for 20,000 and a lease agreement is drafted.
  However a few days later Mary sells the Transit Van to Susie for $20,000 and Susie drives off with it.
  Shark Finance discovers this transaction and claims that the Transit Van belongs to them whereas Susie asserts ownership. Who will prevail in these facts? Shark Finance or Susie?
  Susie - S 28(1)
  Problem question 2 - Nemo Dat
  Spectacular Motors has a stock of vehicles some of which are on a floor plan. That is, the possession of the vehicles is financed by a transfer of title to Shark Finance. Spectacular Motors is having liquidity problems and sells some of the vehicles through an agent to Hellonwheels in an after-hours transaction. Hellonwheels has no knowledge of the floor plan arrangement.
  Will Hellonwheels receive good title to the vehicles?

s 5 Mercantile act - ordinary course of business (after hours transaction)

Topic 7: Sale of Goods Act (Part 2)

To do before your tutorial

1. Read: Text chapter 8 and ch 10 (note we will not focus in detail on the cases referred to in ch 10) and the cases:

• Grant v Australian Knitting Mills [1936] AC 85,
• Ashington Piggeries v Christopher Hill Ltd [1972] AC 441 and
• Henry Kendall & Sons v WIlliam Lillico and Sons (“The Hardwick Game Farm Case”). [1969] 2 AC 31
  You must download or have access to the Sale of Goods Act 1923 (NSW) and read the sections of the Act referred to in the lecture podcast, in particular 18, 19, 20, 51-54, 62-64. .
• Watch: Lecture Podcast: Sale of Goods - Part 2
• Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 7 seminar leaders will be asked questions about the allocated readings, including the cases of the week.

Conceptual questions

• What is the difference between a condition and a warranty?
  • A condition is a fundamental term of a contract whose breach allows for termination of the contract and claims for damages, while a warranty is a lesser term, the breach of which allows for claims of damages but not termination of the contract.
• What is a sale of goods by description? Does it make a difference if goods being sold are future or unascertained or specific goods?
  • 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.
• How does the implied term of fitness for purpose overlap with the implied term of merchantable quality under the Sale of Goods Act?
  • The implied term of fitness for purpose overlaps with the implied term of merchantable quality in that both ensure goods sold must meet certain standards, with fitness for purpose requiring goods to be fit for a specified use, and merchantable quality requiring goods to be of a standard that a reasonable person would consider acceptable.
    • make purpose known (fitness of purpose) - recommend
    • receive recommendation
    • needs to be in the seller’s line of trade - relying on the seller’s skill
    • Does the trade name exception apply?
    • Has the condition been breached?
• In relation to each of:
  • Ashington Piggeries v Christopher Hill Ltd [1972] AC 441
  • Henry Kendall & Sons v Willam Lillico and Sons (The Hardwicke Game Farm case) [1969] 2 AC 31
• Identify in each case:
  • the parties
  • The issue
  • The relevant comparable section of the NSW statute
• Find any relevant definitions that apply in the Act itself
• How did the Court apply the section or find the section satisfied on the facts?
  • 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]
  • 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)
• How and when can implied terms be excluded from a contract for sale?
  • 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.’
• What principle of statutory interpretation applies to resolve the effect of s 57 and 64 when read together?
  • The principle of harmonious construction is applied to resolve the effect of sections 57 and 64 when read together, aiming to interpret the provisions in a way that makes them consistent and gives effect to both, thereby avoiding any conflict or rendering one provision redundant.
• What are the remedies of a buyer and seller under the Sale of Goods Act?
  • 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

Problem questions

Problem question 1 [NEW]
Autobianchi Pty Ltd, a sports car manufacturer in Sydney, approached Skoil Pty Ltd, also in Sydney, to discuss the supply of synthetic oil for use in its high performance engines. Synthetic oils are superior engine lubricants because they flow easily when the engine is cold and they don’t carbonise at extreme temperatures. Skoil has a reputation for supplying the best synthetic oils. Autobianchi did not advise Skoil of the exact specifications required for use in the engines and Skoil only intended to supply the oil it usually provides to all the vehicle manufacturers it deals with.
Skoil provided a sample of the oil prior to the sales contract being executed. But Autobianchi didn’t test the oil.
Autobianchi ordered 1500 litres of Skoil oil at a total price of $22,500 and started using it in their Duesenberg turbo sports coupe. Some customers started complaining of smoky exhausts and in extreme cases the engines would seize. Autobianchi traced the problem to the oil which was not suitable for the engine. Autobianchi now has a reputation for unreliable vehicles.

• Does the Sale of Goods Act 1923 (NSW) apply?
• What are Autobianchi’s rights under the legislation?
  .
  What difference would it make if:
• At the time of ordering Autobianchi spelt out the performance requirements of the oil to Skoil.
• Skoil had been made aware of the performance requirements of the oil, but had themselves in turn contracted with a third party to provide the oil which would comply with Autobianchi’s specifications and who were also engine lubrication specialists.
• The contract referred to ‘high performance engine oil which would operate at extreme temperatures’; and contained the obligation that ‘the buyer relies on its own engine bench tests to verify suitability of oil’.

Problem question 2 [NEW]
Four Legs Good (FLG) imports and manufactures dining chairs and has its warehouse in Tweed Heads in NSW. Domestic Bliss is a furniture retailer situated on Victoria Rd in Five Dock. Domestic Bliss has had a successful few months and needs to restock with dining room chairs. Domestic Bliss lets FLG know that they only want to stock hardwood furniture and they want any furniture they buy to be made from oak.
The FLG representative meets with Domestic Bliss and brings some dining chairs that are within its range: the Windsor, the Shaker and the Ladderback. The Domestic Bliss buyer looks at the chairs and sits on them and declares that’s exactly what they want. Domestic Bliss would like stock of each model. They order 80 of the Windsor, 80 of the Shaker and 80 of the Ladderback. The total value of the order was 72.00.
During the meeting Domestic Bliss reiterated the requirement that the furniture be made with hardwood and the Four Legs Good representative assured Domestic Bliss that the chairs would be made of oak.
Note however, each of the chairs shown to Domestic Bliss were in fact made with pine, which is a softwood rather than a hardwood.
The contract was signed at the meeting.
Clauses of the contract included:
Cl 22 The seller will provide dining chairs which correspond to the models and materials as inspected and identified by the buyer.
Cl 23 Unless already in stock the dining chairs will be manufactured or imported by the seller and will be delivered by 24 January 2019.
Cl 24 Payment is due once each part of the order is available for delivery.
As none of the models of chair were in stock FLG had to arrange for the Windsor, the Shaker and the Ladderback chairs had to be made.
The Windsors were available first and were made available for delivery on Monday January 21. Both the Shakers and the Ladderbacks were available on January 23. However on the 24th of January there was fire at the Four Legs Good warehouse and all the Shakers and half the Ladderbacks were destroyed. The salvaged Ladderbacks (40) were finally able to be delivered on the 29 January.
In the meantime Domestic Bliss has discovered that both the Windsors and the Ladderback were made of pine rather than oak. However customers have been buying them without making any complaint.

• Does the Sale of Goods Act 1923 (NSW) apply? Do not attempt Q1. An answer has already been provided below.
• Does the delivery of pine rather than oak chairs breach the contract?
  • doesn’t breach the contract, s 57 express agreement, s 19 (2) - 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.
  • merchantable quality - customers seem to be buying it
• Who bears the loss of the destroyed chairs and why?
  • seller’s liability, not the description and because the delivery clause has been breached - s 23 (2)
• If there has been a breach of contract what remedy is available to Domestic Bliss?
  • Cl 24 seems like a condition
  • s 53 (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.
• What difference would it make if the contract had a clause stating that the written document represented the entire agreement, and excluded any pre-contractual negotiations?
  • The entire agreement clause would nullify any exceptions, s 19(2) and representative complication is removed

Problem question 1 [Optional]
Kim required lithium batteries for her laptop repair business. As well as repairing laptops she sells generic laptop batteries as spares. Her batteries sell for half the price of branded original equipment.
Kim orders her batteries from Sleeper Cells who manufacture batteries in Australia from battery cells imported from China. The specifications of the batteries are critical. The correct external dimensions of the battery are critical otherwise they won’t fit; and the power output needs to correlate with the power usage of the respective laptop.
Sleeper Cells won Kim’s business by emphasising their skill in manufacturing third party batteries which will work as well as the originals in a wide range of laptops. They also claimed they keep up to date with all the technology developments of the leading laptop brands.
Kim ordered four sets of batteries to suit the W10, X12, Y15, Z20 model XYZ laptops. XYZ is a global laptop brand. Kim provided complete specifications for the batteries and was also assured by Sleeper Cells that their battery manufacturing experience meant they had a good idea of what was required for the respective XYZ models.
Sleeper Cells sent Kim preproduction examples of each of the four types of batteries for initial testing. They appeared to work. Kim ordered one thousand of each.
After a month of selling the batteries to her customers, Kim started to get complaints from a number of different customers.

• Mr White complained that the W10 battery worked well initially but after a few charges was not holding its charge as well as the original XYZ branded battery.
• The X12 battery turned out to be a NiCad battery and not a lithium battery. Mr Green said that it worked according to its specifications except it sometimes exhibited a ‘memory effect’ which meant it would not charge completely unless put through a complete discharge/recharge cycle.
• The Y15 battery worked perfectly. However Mr Redmond notified Kim that a subsequent XYZ firmware update meant that the corresponding laptops no longer recognised the Y15 battery. The aim of the firmware update was to restrict users to XYZ batteries only.
• Mr Brown from the Department of Defence said that the Z20 model worked perfectly except occasionally overheated leading to laptops suddenly shutting down.
• Kim has a clause in her sale contracts that says:
  “No liability for failure of goods to meet your purposes is accepted by us.”
  Kim lost the battery maintenance contract for the Department of Defence.
• Only half the batteries have been delivered and Kim now refuses to accept delivery of the balance of the order.
  Kim can no longer sell the batteries and has useless stock.
  Does Kim have a remedy against Sleeper Cells? On what basis would each of Mr White, Mr Green, Mr Redmond and Mr Brown be able to bring a claim against Kim?

Problem question 2 [Optional]
Sally is an 18-year-old student who visits Gigaflop Computing in Sydney and informs the salesperson she wants a laptop for gaming and doing university assignments.
The salesperson told her the computer had 16GB of RAM, a fast CPU and a separate graphics card so the laptop would be perfect for games as well as standard office applications.
Sally also informed the salesperson that the laptop needed to be reliable because she was a full fee paying student doing distance education and if her assignments were late and she failed a subject it would cost her a small fortune to repeat any subjects.
The salesperson assured her the brand of computer came top in the list of most reliable laptops in a range of surveys.
Sally told the salesperson that she would buy the computer because of its reputation for reliability, and because it would be suitable for both gaming and writing assignments. The laptop cost 50.00 for this service. It was explained the RAM must have come loose during transport. However RAM chips are held in place by clips which would not usually be dislodged by minor bumps. Next time Sally logged on the 16GB RAM was confirmed.
When Sally tried playing games she discovered that the graphics card was not adequate to run the games she liked at Full High Definition (FHD) resolution. She had to play her games at 720p rather than 1080p resolution. Most modern PC games are designed to run on 1080p.
And then after six weeks the laptop wouldn’t turn on at all. Sally took it to be checked and was told that the motherboard had short circuited and it needed to be replaced (after yet another 300.
Because Sally didn’t have the use of her laptop she wasn’t able to hand an assignment in on time and lost all her notes and she ended up failing a subject which cost her an extra 50.00 to inspect goods which may be subject to a warranty claim. Further, Gigaflop’s own assessment of any right to a claim is final.’
Sally now wants to return the laptop and get her money back.

• Does the Sale of Goods Act 1923 (NSW) apply?

• What rights does Sally have under the Sale of Goods Act 1923 (NSW)?

• What remedies might be available to Sally?

• Does Clause 5 of the contract make any difference to Sally’s rights?

• What difference would it make if all the facts are the same but it was revealed Sally made most of her income buying and reselling on eBay which is why she really required the laptop?

    UTS CRICOS PROVIDER CODE 00099F  
  

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Introduction to Property and Commercial Law

AUTUMN 2024 TUTORIAL GUIDE
(Topics 8-9: Australian Consumer Law)

Table of Contents
Topic 8: Australian Consumer Law (Part 1) 3
To do before your tutorial 3
Conceptual questions 3
Problem questions 4
Problem question 1 4
Problem question 2 5
Scenario 1: Simon 6
Scenario 2: Susie 7
Sub-scenario (b) 7
Problem question 3 (Optional) 8
Topic 9: Australian Consumer Law (Part 2) 10
To do before your tutorial 10
Conceptual questions 10
Problem questions - General Protection under Chapter 2 of ACL 11
Problem question 1 11
Problem question 2 12
Problem question 3 13

Topic 8: Australian Consumer Law (Part 1)

To do before your tutorial

• Read: Text chapter 9 and the following cases:
• Vautin v BY Winddown [2018] FCA 426;
• Graham Barclay Oysters v Ryan [2000] FCA 1099;
• Ryan v Great Lakes Council [1999] FCA 177;
• Cavalier Marketing v Rasell [1991] 2 Qd R 323
  You must download or have access to the Australian Consumer Law and read the sections of the Act referred to in the lecture podcast, in particular : 2, 3, 51-59, 138-142, 147, 150, 236-238, 250-275.
• Watch: Lecture Podcast: Australian Consumer Law Part 1
• Prepare: Access the Week 8 tutorial materials in Canvas and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 8 seminar leaders will be asked questions about the allocated readings, including the cases of the week.

Conceptual questions

• How do you establish that a transaction has involved a consumer under the ACL? Can a business be a consumer for this purpose?
• 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
• Business can be a consumer (bunnings)
• When does the Consumer Law’s consumer guarantees apply to the supply of goods?
• (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.
• What is the difference between the scope of s 19(1) of the Sale of Goods Act and s 55 of the ACL in relation to fitness for purpose?
• 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
• 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
• What is the difference between the scope of s 19(2) of the Sale of Goods Act and s 54 of the ACL in relation to merchantable/ acceptable quality?
• ; while s 19(2) focuses primarily on goods being of “merchantable quality” based on their description and the buyer’s opportunity to examine them, s 54 considers a broader range of factors including the nature, price, and durability of goods, and excludes liability for defects made known to the buyer or arising from abnormal use.
• What actions does a consumer have against a manufacturer under the ACL that they do not have under the Sale of Goods Act?
• 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
• What remedies were available in Vautin v BY Windown (No 4) [2018] FCA 426 against the supplier and the manufacturer?
• damages for the breach of statutory guarantees of acceptable quality and fitness for purpose under the Australian Consumer Law, specifically sections 54 and 55, to compensate for the defective construction and unseaworthiness of the vessel.
• What are the similarities and differences between the protections under the Sale of Goods Act and the ACL?
• The Sale of Goods Act focuses on implied conditions and warranties in the sale of goods, primarily concerning merchantability and fitness for purpose, while the ACL provides broader consumer protections including statutory guarantees on quality, safety, and fitness for purpose, along with direct actions against manufacturers, creating a more comprehensive regime for consumer rights.
• If there is a breach of the statutory guarantees under the Australian Consumer Law, what remedies does a consumer have available to them?
• 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.
• Compare the Sale of Goods Act and the ACL with respect to the provision of services.
• The Sale of Goods Act specifically governs the sale of goods and does not address the provision of services, whereas the Australian Consumer Law (ACL) provides comprehensive protections for both goods and services, including guarantees on the quality, safety, and fitness for purpose of services.
• How do the exclusion of liability provisions compare in the Sale of Goods Act compared with the ACL? What is the effect of s 139A of the Competition and Consumer Act 2010?
• The Sale of Goods Act allows parties to contractually exclude or limit liability for breaches of implied terms to a greater extent than the Australian Consumer Law (ACL), which imposes stricter limitations on the exclusion of consumer guarantees. Section 139A of the Competition and Consumer Act 2010 reinforces this by rendering any contract term that purports to exclude, restrict, or modify the application of the ACL’s consumer guarantees void, thereby prioritizing consumer protection and limiting the scope for businesses to exclude liability for breaches of these guarantees.

Problem questions

Problem question 1

• Are any of the following parties a “consumer” for the purposes of the ACL:
  • The University buys a spectrometer for use in its chemistry lab for 1m.
    iii) The University buys a 10,000 hatchback to sell as retail.
• Can Mary Moss bring an action against David Jones in the following circumstances:
  • Mary Moss bought a coat from David Jones. After she had worn it for some time, she contracted dermatitis.
  • Mary Moss bought a coat on sale from David Jones. She operates a stall at Balmain Markets, selling coats. Her plan was to wear it and then resell it. After she had worn it for some time, she contracted dermatitis.
  • Mary Moss bought a coat on sale from David Jones. She wanted a coat to match her green crocodile skin shoes. She told the salesperson what she wanted it for. The coat purchased was a faux leather jacket that looked identical to crocodile skin with a blue-green tinge to it. When she wore it in the light, the coat looked blue. It fit perfectly and was beautifully made. David Jones have a no-return policy on sale items.
• Begone Burglars Pty ltd installed an alarm system into Spectacular Motors premises. Mike Moss spoke with their managing director who assured him that if the wired were cut, the backup battery would take over. Thieves broke in and cut through the wires and the alarm did not work. On what basis might there be a claim against Begone Burglars?

Problem question 2
Scenario Problem for Advice
Spectacular Motors has a range of 2016 Svalbard X1s in stock. Initially, they were sold at the recommended retail price of 40,000.00. Mary plans on advertising on the front page of the Spectacular Motors website and on a billboard outside the front of Spectacular Motors.
Rachel Ross is head of IT at Spectacular Motors and designs the web page. Rachel hasn’t test driven the Svalbard X1 at Spectacular Motors. Mary tells Rachel to photo shop a picture of the Sydney Cignets team next to a fleet of Svalbard X1s. Mary has not received authority to use the Sydney Cignets picture but she figures that as Svalbard is their official sponsor, it won’t be an issue. The website and the large billboard is launched on the Spectacular Motors website and on site, which reads:

Buy a Svalbard X1 from Spectacular Motors ON SALE NOW $39,999.00* Svalbard is the car of choice of the Sydney CignetsTest Driven and approved by all Spectacular Motors directors We guarantee our Svalbard X1’s will never let you down
For every purchased Svalbard, Spectacular Motors will do a same day oil change and safety check of your car for free, valid for a year.

• No refunds whatsoever or exchanges on sale items
  Scenario 1: Simon
  Simon is an avid Sydney Cignets fan and he sees the advertisement online advertising his beloved team and a flash new Svalbard. He purchases a white X1 from Spectacular Motors a few days before the Football Grand Final between the Cignets and the Kew Cats. On the day of the Grand Final whilst Simon is driving, the X1 suddenly breaks down on the Eastern Distributor causing major traffic delays. As a result Simon misses the Grand Final which he had premium box tickets to attend. The car is towed to the nearest Svalbard dealer at Rushcutters Bay and upon inspection the car has a faulty Electronic Control Unit which controls how much fuel gets to the engine. Simon is furious and demands a refund from Spectacular Motors.

Scenario 2: Susie
Susie is on her way to work in Marrickville one day when her car starts making strange spluttering noises. It has been playing up lately and showing its age. Her boyfriend has a bakery across from Spectacular Motors and told her about the sign he saw about the great price of the Svalbard X1. Susie hasn’t seen the advertisement but she trusts her boyfriend, so she calls them and asks to purchase a car that is 100% reliable for work as she drives a fair distance every day and she has had problems with lemon cars in the past]. Mike takes the call and says, “The Svalbard won’t let you down.” Susie says, “Sounds fantastic, I’ll take it.”
Sub-scenario (a)
A week after purchasing her Svalbard X1 it develops a slight rattling noise that does not interfere with its normal operation. Susie returns the car to Spectacular Motors who inspects it, determines the cause of the noise and offers to repair it in two days. Based on her previous experience with defective cars, Susie refuses this offer and demands a refund, claiming a major failure to comply with the guarantee of acceptable quality.
Sub-scenario (b)
6 months after purchasing her Svalbard X1 which has been running perfectly, Susie brings her X1 to Spectacular Motors for the free basic service. When she goes to pick it up later that day, she gets behind the wheel and when she turns on the ignition the car won’t start and despite all efforts by Spectacular Motors the major engine fault cannot be identified.
After reading each scenario:

• Discuss the potential liability of Mary, Mike and Rachel under the consumer protection provisions of the Australian Consumer Law and any other applicable statute, and
• identify the potential claimants.
  Please answer this question by referring to relevant provisions in relation to statutory guarantees under the ACL.

Problem question 3 (Optional)
Rhine Oh Cruises
Betty and Jim had just retired and as they had already paid off their house decided to spend some of their super lump sum on European river cruise. In all their lives they had never had a big overseas holiday. They wanted five-star luxury all the way. They decided on a twenty-one-day cruise from Budapest to Amsterdam with RhineOh Cruises described as a ‘trip of a lifetime’. The total cost of the cruise for the couple was $42,000.
Included in the cruise was three gourmet meals per day, all beverages including the best wine, beer and champagne, and all onshore excursions including transport and any admission fees. They would be accommodated in the boat’s Riverview Suite for the duration of the cruise, and be able to see highlights of four countries without having to constantly pack and change accommodation.
This particularly suited Jim who had a chronic illness and was less mobile than his partner. The package also included five-star hotel accommodation at the beginning and end of the cruise as well as return business class flights from Sydney.
However, in the month before the trip was to begin there was two weeks of record breaking torrential rain which flooded the Danube and the Rhine rivers making them unnavigable for the cruise boats used by Rhine-Oh because the height of the water prevented boats getting under bridges and docking at wharves. This was to be the case for a period of six weeks and understood by the cruise operators.
Nevertheless, passengers were not warned that they would not be able to enjoy cruising for the entirety of the trip. So, even though the cruise company knew weeks before embarkation that the way the holiday would be run would be completely different, the passengers were not given an opportunity to rebook at another date. When Betty and Jim arrived in Budapest they discovered that the tour instead would comprise coach trips throughout the itinerary. And although accommodation would still be five star, and all food was provided, most of their time was spent on the road and packing and unpacking at each stop. They did not see the same sights as listed on the Rhine-Oh tours brochure but instead were taken to sights which Rhine-Oh assured them were of equivalent interest and grandeur. Instead of an enjoyable and relaxing river cruise Betty and Jim endured a fraught and frantic road trip.
The Rhine-Oh Tours cruise was advertised in Australia, sold through an Australian travel agent, payment was made in Australian dollars and the contract was executed in Sydney.
The contract contained the following conditions:
The proper law of this contract will be the law of Hungary. Any dispute between the parties will be resolved by arbitration.
Cruise itineraries may be varied due to circumstances beyond Rhine-Oh’s control such as weather and river levels.
In these circumstances Rhine-Oh Tours reserves the right to substitute transport modes and accommodation of a similar standard where these variations are deemed necessary.
Rhine-Oh Tours has no liability to passengers for variations made to the itinerary under circumstances beyond their control.
Advise Betty and Jim.

Topic 9: Australian Consumer Law (Part 2)

To do before your tutorial

• Read: Text chapter 11, 12, 13 and the cases
• Australian Securities and Investments Commission v Kobelt [2019] HCA 18; see also
• ACCC v Quantum Housing Group Pty Ltd [2021] FCAFC 40 and
• ACCC v CLA Trading Pty Ltd [2016] FCA 377;
• ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51.
  You must download or have access to the Australian Consumer Law and read the sections of the Act referred to in the lecture podcast.
• Watch: Lecture Podcast: The Australian Consumer Law - Part 2
• Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 9 tutorial leaders will be asked questions about the allocated readings, including the cases of the week.

Conceptual questions

• How do you establish that a transaction has involved a consumer under the ACL? Can a business be a consumer for this purpose?
  • s 23 A consumer contract 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 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.
• Can both the Sale of Goods Act and the Australian Consumer Law apply to a single transaction? When will a transaction attract the operation of one act, but not the other?
  • Yes, Sale of Goods is implied while ACL is statutory
  • A transaction will attract the operation of the Australian Consumer Law but not the Sale of Goods Act when it involves consumer goods or services under $100,000 typically acquired for personal use, and conversely, the Sale of Goods Act applies exclusively in purely commercial transactions where goods purchased exceed this threshold and are not for personal use.
• How can you establish that one or more terms of a contract are unfair for the purposes of the unfair contract terms regime in the Australian Consumer Law?
  • PENALTIES
  • 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
  • SEE NEXT QUESTION
• What is an ‘unfair contract’ under the Australian Consumer Law?
  • A contract which may cause a significant imbalance in the parties’ rights and obligations, are not reasonably necessary to protect legitimate interests, and would cause detriment if applied or relied upon.
• What are some examples of unfair terms in a contract?
  • 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
• What is a standard form contract?
  • 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.
  • section 27(2)
    • 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
• What is a consumer contract for the purposes of the unfair contract provisions of the Australian Consumer law? Is the meaning of consumer any different in these provisions compared to the definition of consumer used elsewhere in the Australian Consumer Law?
  • A consumer contract under the unfair contract provisions of the Australian Consumer Law refers to any contract for goods, services, or land when acquired predominantly for personal, domestic, or household use, aligning closely with the broader ACL definition of a consumer but focusing specifically on the purpose of the contract.
  • s 23
• What is a business contract for the purposes of the unfair contract provisions?
  • 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
• Section 20 of the Australian Consumer Law defines unconscionable conduct in terms of the “unwritten law from time to time”. What does this mean?
  • 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.’
  • Indicating that its interpretation can change over time based on judicial decisions.
• The cases which have granted relief in the basis of unconscionable conduct have often referred to a plaintiff as being under a “special disability”. What does this mean? Give some examples.
  • 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.”
  • age, illiteracy, lack of education or a combination of factors
• What was the question left unresolved in Kobelt? What clarification has Quantum Housing brought to that question?
  • 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.
  • Quantum Housing clarified that it is not necessary to establish that the business engaging in the conduct has exploited some disadvantage or vulnerability
    Problem questions - General Protection under Chapter 2 of ACL

Problem question 1
Note: We looked at this question last week, but this week when answering this question, please focus on three general prohibitions under the ACL, which have been introduced in today’s lecture (such as s18, s20 and/or s24).
Spectacular Motors has a range of 2016 Svalbard X1s in stock. Initially, they were sold at the recommended retail price of 40,000.00. Mary plans on advertising on the front page of the Spectacular Motors website and on a billboard outside the front of Spectacular Motors.
Rachel Ross is head of IT at Spectacular Motors and designs the web page. Rachel hasn’t test driven the Svalbard X1 at Spectacular Motors. Mary tells Rachel to photo shop a picture of the Sydney Cignets team next to a fleet of Svalbard X1s. Mary has not received authority to use the Sydney Cignets picture but she figures that as Svalbard is their official sponsor, it won’t be an issue. The website and the large billboard is launched on the Spectacular Motors website and on site, which reads:
Buy a Svalbard X1 from Spectacular Motors ON SALE NOW $39,999.00* Svalbard is the car of choice of the Sydney Cignets Test Driven and approved by all Spectacular Motors directors
We guarantee our Svalbard X1’s will never let you down
For every purchased Svalbard, Spectacular Motors will do a same day oil change and safety check of your car for free, valid for a year
*No refunds whatsoever or exchanges on sale items.
10 customers have bought Svalbard cars and all of them now have been brought back for engine faults.
Discuss the potential liability of Mary, Mike and Rachel under the general consumer protection provisions of the Australian Consumer.

• Mary can state that no change of mind sales, but not “no refunds”
  • cannot state “will never let you down” coupled lack of refund “whatsoever”
    • s 64 - cannot contract out exclusion clause
    • s 29 (1)(m) - cannot hide warranty, etc
    • unfair contract terms
    • implied invitation to treat
  • s 18
    • misleading contact - sponsor of team does not mean car of choice, photoshopped team in
    • car of choice of the cignets
    • s 29 False or misleading representations about goods or services
      • (1)(g)-(h) - sponsorship deception
• Rachel is likely violating copyright law - deceptive or misleading conduct
• Mike has family relation
  Problem question 2
  The Sun’s Out Guns Out gym membership contract contains the following terms:
• Once a Membership Agreement has been entered into the agreement is binding even in the event of disability which prevents the member from attending the gym.
• In the event the gym at which the agreement was executed ceases operation the member’s rights will be transferred to a neighbouring Sun’s Out Guns Out Gym location and the contractual obligations will remain.
• At the expiry of the initial agreed term of the Membership Agreement when this Membership Agreement reverts to a month-to-month obligation Sun’s Out Guns Out Gym reserves the right to increase the monthly membership fee with at least 30 days’ notice.
• Cancellation of the Membership Agreement may only be done in person at the premises where the contract was originally signed. A cancellation appointment must be made with the respective Sun’s Out Guns Out Gym. There is a cancellation fee of $200.
  Are these terms enforceable?

Problem question 3
Snake Oil Pty Ltd claims that they have an effective herbal acne cure. Their marketing is targeted at adolescents and their parents and emphasises the destructive impact of acne on self-esteem, confidence and social activity of school students. The product is only sold by consultants who visit the family home. The acne cure can only be purchased as an ongoing treatment regime which is paid by direct debit. The total cost can run into thousands of dollars. The consultants are trained to expound on the long term destructive outcomes of untreated acne in the presence of the parents and the afflicted teen together. The cure is not ineffective. However products which have similar properties costs only a few dollars.
Do parties who enter into these contracts have a remedy under the Australian Consumer Law?
if there was a remedy, it may be unconscionable if bargaining power is unveven ( s 22)
s 22 (1)(d)
s 22 (1)(e)

 	UTS CRICOS PROVIDER CODE 00099F  

70327
Introduction to Property and Commercial Law

AUTUMN 2024 TUTORIAL GUIDE
(Topics 10-12: PPSA)

Table of Contents
Topic 10: Personal Property Securities Act (Part 1) 3
This topic covers 3
To do before your tutorial 3
Conceptual questions 4
Problem questions 4
Problem question 1 4
Problem question 2 (Case study continuation) 5
Topic 11: Personal Property Securities Act (Part 2) 7
This topic covers 7
To do before your tutorial 7
Conceptual questions 7
Problem questions 8
Problem question 1 8
Problem question 2 9
Topic 12: Personal Property Securities Act (Part 3) 10
This topic covers 10
To do before your tutorial 10
Problem questions 10
Problem question 1 - Priority Exercise - Moss, Big Bank and Fast Cars. 10
Problem question 2 - Aztec Mining Ltd 12
Problem question 3 - Sunsafe 13

Topic 10: Personal Property Securities Act (Part 1)

This topic covers

• Overview of the Personal Property Securities Act (PPSA)
• Security Interests under the PPSA
• Creating and enforcing a Security Interest Under the PPSA

To do before your tutorial

• Read: Text ch 5 [5.10] - [5.250] and reading materials on UTS Online and the cases
• Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 292 FLR 114; [2014] VSCA 326;
• Re Arcabi Pty Ltd (in liq) (2014) 288 FLR 236 and - Re Maiden (2013) 277 FLR 337; [2013] NSWSC 852.
  You must download or have access to the Personal Property Securities Act 2009 (Cth) and read the sections of the Act referred to in the lecture podcast.
• Watch: Lecture Podcast: PPSA Part 1
• Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 10 tutorial leaders will be asked questions about the allocated readings, including the cases of the week.

Conceptual questions

• What are some of the features of the PPSA that make it a different system to the prior law for security over personal property?

  • The Personal Property Securities Act (PPSA) introduced a single, national online register for security interests in personal property, creating a more transparent and accessible system, replacing the fragmented framework of various registers and laws that previously governed securities over personal property in Australia.
    • not a complete code

• What are the elements of the definition of a security interest under the PPSA?

• 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

• What are some of the forms of personal property that are excluded by the PPSA?

• 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*

• How are supplies of goods under retention of title arrangements covered by the PPSA?

• 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

• What is the difference between attachment and perfection of a security interest?

• Attachment of a security interest occurs when it becomes enforceable against the debtor with respect to the collateral, whereas perfection occurs when the security interest is made enforceable against third parties and is typically achieved through registration, possession, or control of the collateral.

• 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.

• What forms of property may be used as collateral?

• 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.

Problem questions
Problem question 1
Consider whether the following arrangements may involve any PPSA security interests:

• A dry cleaner retains an expensive suit when the customer does not pay his cleaning bill.
  What if the retention of the suit is allowed under an express term of the cleaning contract?
  • s 12(3)(c) the interest of a lessor or bailor of goods under a PPS lease.
• LeaseCo supplies industrial exhaust systems for a bakery that cost $100,000. The bakery is paying off the purchase in monthly instalments and LeaseCo has the right to remove the items if payment falls into arrears. The exhaust systems are built into the ceiling of the premises, and are expensive to remove (but the lessee would bear this cost anyway).
  • Lease co is the secured party
  • the bakery is the debtor
  • the exhaust systems are the collateral
  • fixtures under s 8 (j)
• Travel Co maintains a trust account for its clients who have suffered cancelled flights or accommodation. Mary recently had a trip to Canada cancelled by Air Quebec when the plane malfunctioned and the airline could not arrange another flight within the next week, so the money for the flight was held by Travel Co for a future trip. Unfortunately for Mary, Travel Co goes into liquidation the next week.
  • Grantor is mary
  • Travel co is secured party
  • money is colalteral
  • Re Skybridge Holidays Inc (1999) 15 PPSAC (2d) 24 (BC CA)
  • could have gone and got it
• A construction contractor has contractual ‘step in’ rights in relation to work contracted to be performed by a sub-contractor if the sub-contractor is more than 1 week late with completion or where the sub-contractor enters liquidation, receivership or voluntary administration. The step in rights allows the contractor to complete the work using the materials supplied by the sub-contractor. Would it make a difference if there was no right to use the sub-contractor’s materials?
  • Secured Party: Construction sub-contractor?
  • Grantor: Construction Contractor?
  • Collateral: Martial
  • Secured Interest: Yes / No
  • Exempt? - Yes / No
    Problem question 2 (Case study continuation)
    [This question involves Ron Moss and Spectacular Motors which is the trading name of Moss Ltd, the company set up by Mike and Mary Moss and Rachel and Reuben Ross, which operates a car dealership in Kogarah]
    Ron Moss is the General Counsel of Spectacular Motors. Ron recently attended a CLE event held at the Law Society covering the PPSA which has caused Ron to review the contractual arrangements that Spectacular Motors has in place to ensure it is protected under the PPSA. Ron asks you to review the following transactions and to write a short memo to him advising of whether there are any PPSA security interests involved.
  • Spectacular Motors Finance Pty Ltd (SMF) provides consumer finance for Spectacular Motors (SM) customers to acquire vehicles from it. SMF provides the funds directly to Moss Ltd (trading as SM) (on behalf of the customer who is borrowing the money from SMF) in exchange for a charge in the vehicle being purchased. SM then transfers the registration of the vehicle into the customer’s name.
    Ron wants to know:
• Is there a PPSA security interest here? Why?
  • SMF charge - Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2014) 292 FLR 11
    • s 12(2)(a?)
  • SM transfer - Re Ellingsen (2000) 1 PPSAC (3d) 307 (BC CA)
    • s 12(2)(k)
• If so, who is the grantor, and who is the secured party (and is there more than one secured party)?
  • SMF is the secured party
  • SM secured party
• Who has the obligation to register the security interest?
  • SMF needs to as they have a charge
  • Spectacular Motors allows a construction company working next door to their premises to use the back corner of their land for storage of building materials in exchange for a small fee.
    Ron wants to know:
  • Does SM hold a PPSA security interest in these materials?
    • s 8 exclusion just a license
  • Would the construction company have a PPSA security interest in the materials?
  • Spectacular Motors leases cars to a number of business clients for periods from 1 month to 10 months or more. Moss Ltd (trading as Spectacular Motors) is registered as the owner of the vehicles.
  • Does SM need to do anything else under the PPSA?
    • (e) a hire purchase agreement; yes
  • What legal risks would SM be taking if it did not register under the PPSA?
    being unsecured credior

Topic 11: Personal Property Securities Act (Part 2)

This topic covers

• Priority of Security Interests under the PPSA
• Taking Free under the PPSA

To do before your tutorial

• Read: Text ch 5 [5.250] - [5.720] and reading materials on Canvas and the cases
• Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) [2018] WASCA 163 (note this is the appeal from [2017 WASC 152 in the textbook) and
• White v Spiers Earthworks Pty Ltd (2014) 99 ACSR 214.
  You must download or have access to the Personal Property Securities Act 2009 (Cth) and read the sections of the Act referred to in the lecture podcast in particular sections 18- 20, 31- 33, 54-57, 60-62, 75 (note others are referred to in slides)
• Watch: Lecture Podcast: PPSA Part 2
  Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions. Week 10 tutorial leaders will be asked questions about the allocated readings, including the cases of the week.

Conceptual questions

• How is priority determined between 2 perfected secured parties?
• How might a priority contest be determined between a general security interest in all present and after acquired property and a perfected PMSI?
• On what grounds may a security interest vest in the grantor?
• What is a PMSI? What advantages apply to classifying a security interest as a PMSI under the Personal Property Securities Act?
• What is the relationship between the enforcement provisions of the National Credit Code and the Personal Property Securities Act?

Problem questions
Problem question 1
Mick runs a horse stud near Goulburn where his business provides breeding services for the surrounding farms. Mick is leasing the rural land under a long-term lease. Mick has 150,000. Mick also has an outstanding business loan with GBank worth 100,000 from LeaseCo to assist in growing his business. The leasing arrangement includes a maintenance and insurance charge worth 80,000. LeaseCo registers a financing statement to cover its position on 1 September 2015.
Unfortunately Mick’s business expansion does not go well and he defaults on all of his obligations (to LeaseCo and GBank). Mick is hopeful that he business can pay back the loans but both LeaseCo and GBank seek to enforce rights against Mick’s assets. Mick sells one of the major pieces of equipment to a related entity MFarm Ltd for $5,000 (which is below market value).
Advise LeaseCo and GBank as to their priority rights (if any) under the Personal Property Securities Act 2009 (Cth).
In answering this question disregard Mick’s interests in real property only. Assume that none of the collateral covered by the security interests is serial numbered property or is comingled goods, accessions, crops or livestock. There is no need to discuss the enforcement provisions under Chapter 4 of the Personal Property Securities Act.

Problem question 2
Javier is a car salesman with Spectacular Motors. Javier has recently dealt with a customer Max Smith. Max has traded in his Lexus for a value of 100,000 (with 90,000, and provides Vivian with finance for the purchase. Spectacular Motors records a security interest in Vivian’s car on the PPSR. Vivan then loses the car in a bet with Walter (Vivian has a chronic gambling problem) at an illegal casino.
Who has priority to the 2 cars (new $100k Lexus and Max’s original trade in vehicle) under the Personal Property Securities Act 2009 (Cth)?

Topic 12: Personal Property Securities Act (Part 3)

This topic covers

• Enforcement under the PPSA
• Bringing it all together

To do before your tutorial

• Re-read: Text ch 5 and revise PPSA Part 1 and 2.
  You must download or have access to the Personal Property Securities Act 2009 (Cth) and read the sections of the Act referred to in the lecture podcast.
• Watch: Lecture Podcast: PPSA Part 3
• Prepare: Go through and think about the conceptual and problem questions. Be prepared to work through these in class. Whether online or face to face, be prepared for your tutor to ask you to contribute or answer questions.
  There are no tutorial leaders - this is a final revision class for all students to bring questions.

Problem questions
Problem question 1 - Priority Exercise - Moss, Big Bank and Fast Cars.
On 1 March, Moss enters a financing arrangement with Big Bank. Big Bank takes an ‘all present and after acquired property’ (AllPAP) security interest in all of Moss’s present and after acquired property and registers a financing statement on the same day. On 2 March, Moss buys some office equipment.
On 3 March, Moss deposits some money into its everyday bank account with Big Bank.

• Identify what security interests exist. When to they attach? When are they perfected?

Moss would like to sell a new range of cars manufactured by Fast Cars. Fast Cars agrees to consign the cars to Moss on retention of title terms and Moss is allowed to possess the cars and is given authority to deal with them in the ordinary course of business. The contract is signed on 8 March and Fast Cars registers a financing statement that same day.

• Which security interest will have priority?

On 1 April Moss enters into a three year operating lease to lease a computer and IT network from Office Leasing. Office Leasing registers a financing statement on 1 April.

• Does Big Bank’s security interest attach to this equipment supplied under an operating lease?
• Does Big Bank’s security interest have priority over Office Leasing’s interest?

Moss sells a car consigned to it by Fast Cars. Moss deposits the proceeds into its general operating account at Big Bank.

• Does Fast Car’s security interest continue in the proceeds of the sale?

Melissa is a customer of Moss/Spectacular Motors who has bought one of the cars consigned by Fast Cars to Moss. Fast Cars asserts that its security interest continues in the car that Melissa has bought.

• Advise Melissa on her rights.

Problem question 2 - Aztec Mining Ltd
Jenny is the general manager of Aztec Mining Ltd which is a mining services company that operates in the Hunter Valley in NSW. Aztec’s assets include 20 large industrial vehicles that are worth 5,000 each.
The vehicles are covered by a 5-year finance lease with LeaseCo. LeaseCo’s contract with Aztec provides that LeaseCo has a security interest over all present and after acquired property of Aztec in order to pay off its lease contracts over the vehicles. LeaseCo registers a financing statement on the PPSR which states that it has a PMSI over the vehicles on 1 February 2015 (a claim for proceeds is also made on the financing statement).
LeaseCo’s finance manager is concerned about the security over other assets so LeaseCo registers another financing statement on the PPSR on 20 February 2015 which states that LeaseCo has a PMSI on all of Aztec’s equipment. A third financing statement is also registered on the PPSR by LeaseCo on 20 February 2015 covering all present and after acquired property of Aztec (no PMSI is claimed).
Aztec however obtains types from TCo Ltd which is a specialised industrial tyre company.
The contract between Aztec and TCo includes a retention of title clause which provides that TCo retains title to the tyres until payment is made in full. The supply agreement also provides that Aztec must set aside 750,000 (assume that this is permitted under the terms of the lease and supply agreements). Aztec deposits this in its bank account with Westbank. This is in breach of its contract with TCo which takes enforcement action by writing to Aztec demanding the immediate payment of outstanding amounts or the tyres will be repossessed (as is permitted under TCo’s contract).

• What rights does TCo have?
• Assess the priority position under the PPSA between Westbank and LeaseCo.

Problem question 3 - Sunsafe
Sunsafe Pty Ltd (Sunsafe) is a zinc mining company in South Australia. While zinc prices have been falling Sunsafe had calculated that increasing output would enable them to maintain profits. The strategy required acquiring further equipment. Sunsafe contacted businesses which had access to the sorts of equipment it needed.
Hard Rock Imports Pty Ltd (Hard Rock) usually only imported equipment to sell to mining equipment hire companies. But considering Sunsafe’s circumstances agreed to draw up a one-off lease agreement at 10,000 per month over an initial period of 2 years with an option to extend the lease after 2 years. There was also an option to purchase the equipment for a fixed amount at the end of the lease. In the agreement the lessee was prohibited from disposing of the Komatsu to a third party unless the option to buy had been exercised and title transferred.
Tonka Pty Ltd also had an Hitachi EH5000 dump truck for hire. Sunsafe were not sure how long they would need to use the truck so they entered into a monthly rental agreement with Tonka Pty Ltd for 1 million in the account. Sunsafe has an outstanding business loan with Bigbucks Bank worth 4 million.
With Sunsafe facing insolvency and creditors lining up, advise each of the following as to what they could have and should have done, if anything, to protect their respective interests in Sunsafe assets pursuant to the operation of the Personal Property Securities Act 2009 and justify the advice.

• Sunsafe

• Hard Rock

• Type: traditional lease

• Secured party: Hard Rock

• Grantor: Sunspot

• collateral: Caterpillar 797 dump truck

• exempt s 8: no

• deemed security interes 12(3)

  • pps lease
  • Lease or bailment of goods: for a term of more than 2 years or indefinite term where possession maintained for more than two years.
  • IN THIS INSTANCE, HARD ROCK IS NOT in the business of leasing or bailing goods (s 13(2))

• Tonka

• Type: traditional lease

• Secured party: Tonka

• Grantor: Sunspot

• Collateral:Komatsu 960 dump truck

• exempt s 8: no

• in substance and deemed security interest under s 12(3) - white v spiers

• registration is unknown

• s 19 is assumed as value is given and tonka owns property and cannot dispose until buyout option is excercised

• should register with pssa, unknown

• collateral: Hitachi EH5000 repossessed it

• exempt s 8: no

• no security interest - hire lease

• registration is unknown

• Ironclad

• s 49 A person who buys an investment instrument or an intermediated security in the ordinary course of trading on a prescribed financial market (within the meaning of the Corporations Act 2001 ) takes the instrument or intermediated security free of a security interest in the instrument or intermediated security.

• Bigbucks

• ADI - s 75

• To avoid doubt, a perfected security interest, held by an ADI, in an ADI account with the ADI has priority over any other perfected security interest in the ADI account.

• Should state that they have control

• Shark Finance

  • not an allpaap, would have liked
  • should have registered at PPSR