Week 8 Tutorial PDF

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Week 8: In week 8, answer tutorial questions 8.1 - 8.4 as set out below. Question 8.1 Andrew owns a number of collectable motor vehicles as part of his business of hiring out vehicles for special events. Andrew gives a mortgage over these vehicles to secure repayment of a loan from WhichBank and signs a security agreement describing the vehicles in accordance with s 20(2) PPSA. WhichBank perfects its security interest in the vehicles by registering against all of Andrew’s motor vehicles generally, but does not register each motor vehicle individually by its serial number. Susie buys one of the motor vehicles from Andrew. A search of the PPS Register by reference to the motor vehicle’s serial number would not disclose that WhichBank has a security interest. Susie searches the register against Andrew’s name and discovers the Bank’s registration against Andrew in relation to motor vehicles generally. Susie is not aware that her purchase of the motor vehicle constitutes a breach of Andrew’s security agreement with WhichBank. Does Susie take her interest in the motor vehicle free of WhichBank’s security interest in the motor vehicle? 1. Parties Secured party: WhichBank Grantor: Andrew 2. Nature of transaction Chattel mortgage (mortgage). S 12(1)-(2). 3. Validity 3.1 Attachment (s 19) Does Andre has rights over the motor vehicle? -

Andrew owns vehicle and thus, he has rights in relation to vehicle.

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WhichBank give loan = value

3.2 Enforceability (s 20) -

Atttachment

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Security agreement in accordance with s 20(2) PPSA

3.3 Perfection (s 21) -

Registration must be “effective”. S 153 + sch 1 regulations

o Commercial motor vehicles. May need to have serial number (s 2.2 PPSR). No obligation o Can register without register number. o Perfected security interest. 4. Taking free rules S 45 and 44 are relevant (only need to satisfy one). 5. Conclusion Susie takes the motor vehices free of security interest: s44 WhichBank = proceed (S 32)

Question 8.2 Wally Wholesaler deals in wholesale motor vehicles and supplies them to dealers for the purposes of sale or lease to consumers. Dan Dealer is a licensed motor dealer and operates a business selling new motor vehicles. Dan needed more stock so on 1 June signed a written agreement to take two vehicles from Wally Wholesaler on these terms:

‘1 This is a contract of sale or return. Dan may buy the vehicles (a description was inserted) for $25,000 or return them within six months. 2. After six months, Wally may retake possession of the vehicle if Dan has not paid Wally for it. 3. In the meantime: (a) Dan may sell the vehicle to a customer at any price Dan chooses; (b) Dan may display the vehicle for sale and store it at his discretion; and (c) Dan must keep the vehicle insured against loss or damage.

Dan signed the contract which described the goods in accordance with s 20(2) PPSA. Wally Wholesaler registered his security interest against Dan’s name on the PPS Register and not by reference to the individual serial numbers of the motor vehicles. Carl is a motor vehicle dealer who conducts a business near Dan’s. Carl agreed to purchase this vehicle from Dan. Carl did not search the PPS Register before buying

the car. Carl holds the vehicle for sale to consumers in the course of his business as a motor vehicle dealer. Does Carl take his interest in this car free of Wally’s security interest or subject to it? 1. Parties Secured Party: WholeSaler Grantor: Dan 2. Nature of transaction -

Consignment: s 12(2)(h)

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Commercial Consignment: s 12(3) o Likely to be commercial consignment

3. Validity 3.1 Attachment Dan has right to the motor vehicle Wholesaler gives motor vehicle = value 3.2 Enforceability 3.3 Perfection No obligation Perfected 4. Taking free rules S 44+ S 45 Carl take the motor vehicle as an inventory. The rules do not apply 5. Conclusion No taking free rules Wholesaler = proceeds (s 32) Question 8.3 Sam Seller operated a business selling new motor vehicles. Sam needed more stock so signed a written agreement to buy four vehicles from Wally Wholesaler on these terms: 1. The ownership of the vehicles (a description was inserted) will only pass to the buyer when the buyer has paid the price to Wally.

2. In the meantime, the buyer may resell and must keep the proceeds of any sale in trust for the seller.’

Sam did not pay Wally any part of the purchase price but took delivery of the vehicles. Sam is now bankrupt and cannot pay Wally for the vehicles. The trustee in bankruptcy has identified three of the vehicles delivered by Wally but found that Sam has sold the other one to Bill. Bill had visited Sam’s showroom with his wife, taken the vehicle for a test drive and then decided to purchase it. Bill had paid Sam $30,000 for the vehicle and had taken delivery of it. The trustee in bankruptcy has found $30,000 in Sam’s bank account which definitely came from the sale of this vehicle. Consider these alternative fact situations separately: a. Wally had not taken any steps to protect his interests under the Personal Property Securities Act 2009 (Cth). Advise Wally of his position under the Personal Property Securities Act 2009 (Cth). b. When Wally made the agreement with Sam, Wally registered his interest in each vehicle under its serial number on the Personal Property Securities Register. Bill did not search the Personal Property Securities Register before he bought his vehicle.

1. Parties Secured party: Wally Grantor: Sam 2. Nature of transaction Retention of title (s 12(2)(d)) 3. Validity 3.1 Attachment 3.2 Enforceability 3.3 Perfection Unperfected Security interest 4. Taking free rules

Vesting rules in s 267. The 3 vehicles vest in the grantor means Wally has lost the interests in the 3 vehicles

S 43. 5. Conclusion No interests, but Wally still have personal rights against Sam. Bill can take free of interest. Alternative scenario: Perfected security interest 4. Taking free rules S 44+ 45 5. Enforcement rights -

S 123:

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S 128:

Question 8.4 Adam is an antique dealer. He gave Fast Finance a charge over three antique chairs to secure a loan and agreed not to sell them until he repaid Fast Finance. He signed a security agreement which described the chairs in accordance with s 20(2) PPSA. Fast Finance registered a financing statement against Adam’s name on the PPS register. In breach of the agreement and without having repaid Fast Finance, Adam sold one antique chair to Bill Buyer for $4,000. Bill does not believe the market value of the chair to be more than $5,000 and while similar chairs are selling for $6,000 at a rival antique shop, Bill does not know this. Does Bill take the chair free of the security interest?

Nature of transaction: A charge Validity: Perfected security interest Taking free rules: S 44+45+46+47...