Commercial transaction newest assignment PDF

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Read the factual scenario below and answer the questions posed at the end.

Darryl purchased a plot of land by the beach in 2014 to build his two-storey dream home with ocean views. Darryl did not have the immediate funds to build the dream home, as he had scraped together all of his savings to buy the land. He came up with the idea of buying a cabin that he could temporarily live in on the land until he had saved enough to build his home. In 2016, Darryl purchased a prefabricated two-bedroomed cabin (with sitting room, kitchen and bathroom) from Kitfit Homes and it was delivered to his plot of land on a large lorry and trailer. The model was called ‘The Castle’ in the company’s brochure. The cabin was lowered by Kitfit’s crane onto preplaced concrete blocks, which were partly above and partly (1.5 metres) below the ground. The terms of the sale agreement between Kitfit and Darryl confirmed receipt from Darryl of a 10% deposit on delivery, and stated that the full price would be due and payable within 60 days. The sale agreement also stated that ‘title to the cabin shall be retained by Kitfit until full payment has been made’.

However, Darryl soon realised that he would not be able to build and complete the dream home for several years and so he quickly set about making the cabin feel like home (he did not need to give it a name, as it already came with the words ‘The Castle, by Kitfit Homes’ engraved on the front). He attached a rainwater tank to the cabin by a pipe running under the cabin, and had power and telephone installed by the service providers by running cables from the roadside junction boxes. The power and telephone cables entered the cabin through the back door and were discreetly nailed to the walls before joining up with sockets in the kitchen at the back of the house. Around the back of the cabin, Darryl attached skirting to the base, to provide weather protection. A few months later, Darryl had not paid the balance of the price to Kitfit and had lost his job. Darryl realised that the dream home was becoming just that: a distant dream. As such, he did further work on the cabin and land, using his builder friend Bob’s supplies and labour. They laid further concrete steps leading from the new deck to the garden, added a wooden ‘wraparound’ deck to the front and sides of the cabin, affixing it with deep screws. Darryl planted fast-growing shrubs in a semicircle about 3 metres from the front of the property to form a garden, and laid lawn turf in between the shrubs and the front of the house.

Darryl’s financial situation has now deteriorated after losing his job, and Kitfit’s lawyers have written to him to say that their client wants to repossess the cabin under its retention of title clause, as he still has not paid them. Darryl knows he owes Kitfit the balance of the price but now sees the cabin as his home and so he comes to you for advice on whether Kitfit are entitled to repossess the cabin.

QUESTIONS

1. Is Kitfit Homes entitled to repossess the cabin? (85 marks)

To advise Darryl on whether Kitfit are entitled to repossess the Cabin, firstly we need to know if the Cabin is a personal property. The Personal Property Securities Act 2009 -PPSA, s. 10 1 defined personal property as all tangible and intangible property except for land. Thus, personal property is a residual category that is not land or real property, Cabin is a personal property. There are two contending rights here, property vs contract rights this will guide our analysis further. On the facts Daryl paid 10% deposit of the Cabin on delivery and expected to pay the full amount within 60 days. There is nothing on the facts to suggest that both parties do not intend to have a valid retention of title (RoT) clause in the contract. The purported clause states ‘title to the Cabin shall be retained by Kitfit until full payment has been made. ROT is stark difference. Prima facie, Kitfit homes have delivered the Cabin to Daryl and there was a 60 days credit period to pay for the Cabin, failing there is a valid RoT clause whereby Kitfit homes remain the owner of the Cabin despite the fact it is under Darryl’s possession, they would likely maintain that they have rights of recourse to repossess the Cabin. Similarly, one might advance an argument that possession is the 9th of law, the remnant of the 1 tenth of law means that someone with a better claim can override the possessory right. In other words, owning a personal property is only about possession, the person with the possession has a better claim unless the other party has a better claim. Implication of such rights is that Daryl as the possessor is tantamount to the owner of the Cabin, unless Kitfit homes have a better claim. This might be made out, because having a property right is been able to assert your rights, it is about the legal relationship to the property. Hence, Daryl is likely to argue that he has the possessory rights to the Cabin. Moreover, there are bundle of rights that the possessor enjoys, namely: right to use, exclude and you can dispose of it. Also, it also carries duty to it which has statutory and tortious duties or responsibilities. Also, “a right to possess is ‘a normal incident’ of ownership, and the name of the property is often given to it” 2 On the facts, it is noted that prefabricated two-bedroom cabin has a name that was originally engraved on the front of the cabin ‘The Castle, by Kitfit Homes’. Kitfit will probably argue that the engraved name is distinct and identifiable from the other annexed properties, and that it is sufficient to have his Cabin retrieved.

1 . Personal Property Securities Act 2009 - s. 10 2Y to argu. F Pollock and R Wright , An Essayon Possession in the Common Law (Clarendon Press , Oxford, 1888), 27.

Darryl will likely object to that instead he would counter argue that the property is now a fixture, and if removed it would cause devastating destruction to the adjoining properties. There remains, then, the question of the degree of annexation the primary presumption is how much strongly the object was fixed to the land. The test to guide this are: was the object merely resting by its own weight, or was it fixed with bolt, welded, would its removal cause damage to the remaining structure or to itself, and would cost of removal exceed value of the removed part. Further, Daryl would likely refute this argument that the work he had done on the cabin was substantial one and if removed would cause significant damage especially as given on the facts that “he has laid further concrete steps leading from the new deck to the garden, added a wooden ‘wraparound’ deck to the front and sides of the cabin, affixing it with deep screws.” This is analogous to: Farley v Hawkins. 3 In addition to the above, another important factor to consider is the ‘object of annexation’ tests4. In other words, which is essentially purpose for which it is attached. The tests for this are: Firstly, was the purpose for the better enjoyment of the land, or of the object attached.Secondly, was it temporary or permanent, purpose of annexation, for instance, to stabilise it or secure it, nature of item, and nature of landowners’ title. Thus, both degree of annexation and object of annexation have to be considered.

This will likely be Daryl stronger point as he would insist that he is not just a tenant, but he he is the owner of the land in which the Cabin sat on. If he were a tenant in possession of land for a certain period, it would be presumed that he did not intend to make any permanent improvement to the land itself as his lease is temporary. However, the evidence shows that Daryl is reconstructing the Cabin for permanent use and his sole purpose was to secure it. This same sentiment was demonstrated on the facts, “Daryl soon realised that he would not be able to build and complete the dream home for several years and so he quickly set about making the cabin feel like home.”

Prima facie, Daryl’s argument is sound, as far as it goes, but it may not be far enough. In Anthony v The Commonwealth5, there was a similar scenario where the Court ruled that the telephone cables and power lines installed upon land were not fixtures which, similar installation were done in this scenario. This was solidified or reinforced in Neylon v Dickens, ‘it was determined, that a prefabricated house, helicopter hangar, and meat storage and freezing facilities were not fixtures.”6Similarly, if the evidence presented show that the Cabin could be repossess without destroying much of the value of the remaining part and the cost is minimal: Neylon v Dickens,7 then Kitfit homes will likely repossess their Cabin. Nevertheless, a decision must be made.

3 Farley v Hawkins [1997] 2 Qd 36

4. NAB v Blacker [2000]FCA 1458 5 6 7

Here, on the other hand, Lord Berwick, in Elitestone Ltd v Morris 8, while many tests, like the degree and object of the annexation are very important, they are less useful when one is considering the house itself, what matters here is common sense and precise analysis. Furthermore, Lord Berwick said that a house which is constructed in such a way that is removable, even though it is connected to utilities like power and water, it will still be a chattel. Whereas, if a house is constructed in such away it cannot be removed, it not a chattel but is intended to form part of the reality9. Consequently, on the facts that he is inclined to make Cabin a home/house and to form part of the realty. This will be a matter of fact. Is Cabin lying on its weight? Is the rainwater tank attached to the cabin and the power and telephone installed from the roadside has devasted effect to the land when removed? Is the additional work done on the Cabin concrete steps leading from the new deck to the garden, the wooden ‘wraparound’ deck to the front and sides of the cabin that was affixed with deep screw permeant? What was Darryl’s intention to add a Lawn turf in between the shrub and 3 metres from the front of the property that form a garden? It seems that all these is an ancillary fact showing that Darryl want to make the Cabin a house and to form part of the reality.

It may arguably be reasonably necessary to say it seems likely that the removal of the Cabin would cause damage to the adjoining properties, and it would be costly also. As per Lord Berwick’s statement about common sense and precise analysis: Elitestone Ltd v Morris.10I would add that there is nothing on the facts that suggests Daryl intended not to pay Kitfit homes, if his financial situation has not deteriorated. Therefore, is likely the court will rule in favour of Daryl and Kitfit likely fail in repossess the cabin. 2. What relevance, if any, does the Personal Property Securities Act 2009 (Cth) have to Kitfit? (15 marks) The Personal property securities Act 2009 s. 10 11 provides that collateral may include personal property as this case regardless of whether the security interest has attached. Also, there are no formalities required for transfer of interest in personal property. The retention of title (ROT) Under Sale of Goods Act12, otherwise known as (Romalpa) is in accordance to Aluminium Industrie Vaasen Bv v Romalpa Aluminium Ltd13, ROT serves as an instrument by which a seller attempts to prevent the passing of title in goods supplied until he receives payment in full by the buyer. On the facts both parties did intend to have a valid retention of title (ROT) clause in the contract. Hence, it states ‘title to the Cabin shall be retained by Kitfit until full payment has been made. The Personal property securities Act 2009,14 tells us the meaning of security interest to ascertain if it is the applies in this scenario, s 12 (1) states, “A security interest means an 8 9 10 11 12 13 14

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)”. PPSA s. 12,15 considered RoT another Security interest -Purchase money security interest (PMSI-s. 62)16, hence it is relevant in this scenario. PPSA s.55 has priority provision.17 registration of a personal property, although it is not compulsory to register your security interest. But if you don’t register you may lose priority because it effects priority: PPSA s.55 has priority provision.18Thus, the incentive is if the debtor is insolvent your security interest over the property become ineffective. However, on the facts, there is no mentioned of registration with PPSR by both parties on the. In addition to that, if the argument of fixtures holds sway, under s. 8 of the PPSA it provides that you cannot raised security interest. As we did discuss the concept of fixtures under s 10 of the PPSA is wider than the common law meaning of fixtures, which is contingent on the degree and object of annexation. Therefore, Kitfit security interest will be invalidated or ineffective. Under section 267(2) of the Personal Property Securities Act 2009 (Cth) (PPSA), a security interest granted by a company or individual (Grantor) in favour of another ( Secured Party), may, if it is not previously perfected, upon insolvency or bankruptcy of the Grantor (as the case requires), vest with the Grantor and not the Secured Party. In other words you may lose the property which is subject of the unperfected security interest!

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