Personal Property Protection - Case Study Example

Memorandum To: Jane Lore From: ____ Date: 03.09.1983 Executive Summary This memorandum provides advice on a number of situations to Jane Lore, the general counsel and head of the corporate legal department of Vic flyte. The situations arise from various relations with customers concerning the sale of V-soarers (VS). VS are a range of winglet accessories for all kinds of small passenger aircrafts that operate in Australia. It includes both propeller and jet engine crafts. The VS accessories are made of special high tech composite materials that usually improve the fuel efficiency of the aircrafts once fitted. The case advices will be in a number of legal fields which include; personal property law, agency law, The Sale of Goods Act, bailment and “personal property protection act”. Case one: Personal Property VF vs. BS In this matter I am briefed to advice Jane Lore (“JL”) in relationship to a claim against VF and BS arising from a contract for sale of VS. I am briefed to advice as to the nature and ownership of affixed VS in accordance to the following summary; Summary: VF is the manufacturer of VS. BS is a private developer, and a friend to VF. He gets his private jet fixed with VS. Before making the necessary payments fully, his company goes bankrupt. What will be the situation as removing the VS cannot be as smooth as it will cause damage to both the aircraft and the wing. According to the property law, what is the nature of ownership of the VS? I provide advice as follows: The tussle here is mainly due to the ownership of the VS. VF sold the aircraft wigs to BS at a waiver. It then means that there was no full transfer of ownership of the wings. The wings still belong to VF. Comparing with the case of Knapp v Knapp1 where the court of appeal ruled in favor of the husband, the wings then should belong to VF. In knap vs. knap, the husband had given his car as a gift to his wife though there was transfer of ownership. On consumption of his fuel allowance, the husband had a right to claim back his car. VF then has the right of ownership over the VS. VF has the right over the VS wings as indicated in the case of Button v Cooper [1947] SASR 286 at 292 where it was stated that “Possession defines the relationship that exists between someone and a material object. This relation subsists in fact. This is the right of the person possessing it out of a factual situation”. This hence acts to support the above argument and leaves the VS possession to BS. Having the stated rights and in reference to knap and knap2, the rights of ownership in general topples other subsidiary rights such as exclusive employment and possession to “alienate, destroy, maintain, resume and recover possession from other persons”. VF therefore being the true owner of VS should go ahead and recover possession from BS irrespective of the damages to BS. Case two: Agency law VF vs. RK In this matter I am briefed to advice Jane Lore (“JL”) on the actions of RK who is a sole exclusive agent for VF in Western Australia. I am briefed to advice as to the nature and ownership conduct of RK who has been perceived as a gambler and someone who has squandered funds in the name of entertaining VF’s guest at a very expensive resort. Below is a summary of the case details; Summary of situation: RK is the sole exclusive agent for VF in Western Australia. He is however providing side consultancy to a Chinese company that wants to construct replica VS. He is also a gambler with an addiction and has squandered a lot of money at the Pearl Casino in the name of entertaining guests who are pertinent to VF. What are the rights and liabilities of VF under the necessary agency law? I provide advice as follows: RK is the sole exclusive agent for VS in Western Australia and is therefore supposed to ac t in the interest of the company. His provision of consultancy to a Chinese firm depends on the nature of agency that lies between him and VF. In comparison with the case of Salomon v Salomon, there are some arguments that can be posed; RK was not acting on his own as he entertained guests at the casino. He was an agent of VF and therefore had the right to act on behalf of the company. Being a sales agent, he had the right to use whichever sales strategy as he would have wanted as longs as it was not out rightly spelt out in their agreement. In Tooth v laws3, there was an apparent appearance by Laws that some people were acting on his behalf (as his agents). This was due to the fact that his name was still displaying as the owner of the business and had not informed anyone that he was changing. He no longer had interest in this business though he had not informed his suppliers of having changed ownership. This contract of alleged agency was found to be binding on him. In the same way, the contract between VF and RK seems binding on VF since there is proof that he is an agent of the company and thus acting on behalf of the company to entertain the potential clients4. This case can also be inclined as in the case of Cumming v Sands [2001]5, where an agent can have authority to bind a principle. In such a case, actual authority can be express or implied. In actual authority, the principal grants and the agent accepts leading to a consensual agreement between the two parties. This might have been the case in the issue of RK vs. VF. With RK having express authority, he could make orders on behalf of the principle. This is a challenge that could lead to VF losing against RK. This relationship could however be established only from the consent between the two parties, that is the principle and the agent6. Considering the above case, RK is in fact an actual agent since he was the sole exclusive agent for VF. Disclosure of information to a third party, in this case the Chinese company was an action that would be revoked by VF. VF should therefore act according to relevant procedures as stipulated in the agreement with the agent (If so stated) on the manner in which disbursement of information to outsiders should be dealt with7. In this case, I would also like to note that, in accordance to the carriers and innkeepers act8, section 26-31, there will be no direct legal issue that can be subjected to RK unless through other acts. Case three: Goods Act In this matter I am briefed to advice Jane Lore (“JL”) on the sale of goods (VS) to clients, KS and PA. There will also be application of the Goods Act 1958 for sale of goods out of Victoria. The case summary is as below; KS is a company that services aircrafts. It wants to purchase all the available VS. PA is a smaller company that is also interested in the VS through I wants to purchase some VS. What will be the application of the goods act and how will the sale of the VS be undertaken? What will be the application of Goods Act 1958 (Vic) for this sale and to the sale of VS outside Victoria? I provide advice as follows: The clause falls in part VI of the goods act on international sale of goods. This convention applies for the sale of goods between parties which are located in different states. This happens for the case of contracting states and when the rules of international laws lead to the contracting states. In such a case, the fact that the parties come from different states is disregarded when it is not stated so in the contract. According to article to of the same convention, it does not apply to aircrafts. In this case, the clause will not apply for the sale of the aircraft wings to both KS and PA and so their contracts will be local. According to the competition and consumers act 2010, the seller has the right to sell their goods9. Section 51 of this act grants the owner of the goods the right to ell the goods and also transfer the ownership of the goods. In this regard, VF has the right to sell the VS to whichever client they may deem appropriate and deserves to get no limitations from either PA or KS. Section 55 of this law states that the goods to be sold should be fit for the purpose for which they are sold. The goods should be also be of good quality meaning that the VS should be in a superior condition in terms of quality. Case four: Bailment In this matter I am briefed to advice Jane Lore (“JL”) on the principles of bailment as they apply on a parked aircraft at the hangar of VS. The case is as below. HF is a company that offers travel services and has four jets. The jets are serviced by VF. The company has not been paying VF for some time and owes VF $485,000. Currently, one of their jets has been parked at VF’s hangar. What action is VF supposed to take in terms of bailment? What are the rights and obligations of the VF over the Gulfstream at the hangar under the principles of bailment? I provide advice as follows: Bailment occurs through delivery of personal property without transferring the title from the bailer to the bailee. It usually happens under an agreement which does not necessarily have to be a contract. For some purpose, it gives rise to the duty of care. Upon the completion of the purpose to which the property was bailed, the bailee has an obligation of returning the property or deal directly with that property as directed. In the case of Ashby V. Tolhurst10, Tolhurst was the owner of a car park where Ashbay parked his car for a fee. The fee was paid to the attendant. Ashby locked his car and went away only to find out that the car was given to someone else. According to the terms stipulated in bailment, this was supposed to be a bailment issue. There was however a bone of contention on whether this was a case of contract, bailment or license. In the case of VF vs. HF, VF is the bailee and has some legal duties to fulfill whilst in possession of the aircraft. According to the case of Morris v CW Martin & Sons Ltd11, the bailee is responsible for goods under their care if stolen by third parties. In this regard, the responsibility of the goods is left in the hands of the bailee. In the bailment principles, one has the legal authority of dealing with the goods as directed, if not return the goods. This means that the bailee, that is VS, had the right to detain the aircraft and take further legal actions thereafter. This could be getting the authority from the courts of law to auction or any other authority as it may have been deemed right. In bailment, the principles state that the bailee is allowed12;- To take care of the goods in this case the aircraft To retain possession To return the goods or make use of them as per the directions Not to dispute the title of the bailer13 Looking at the case Australian consumer law, there was a breach of contract from the buyer of the wing accessories. In accordance to this act, the consumer is protected from repossession of the goods by the “undisturbed possession” clause14. In this clause, it states that no person scan take back the goods sold to a consumer except in certain conditions which are; - The consumer not meeting their lease obligation The consumer had knowledge that some other party had interest in the goods before the sale The consumer has the goods on hire or lease, The buyer was aware that the seller had limited title over the goods before the sale. For not honoring part one of this clause where the buyer did not meet the full obligations of the seller, VF is protected by the law to repossess the goods from HF. Case five: PPSA In this matter I am briefed to advice Jane Lore (“JL”) on the application of the PPSA for the case represented in the summary below; There is currently a customer who is on an installment plan by having paid 20% of the deposit for the purchase of VS. The customer wants to sell that aircraft though the VS have not been paid for. How can the Personal Property Securities Act 2009 (Cth) (“PPSA”) be used to protect VF? I provide advice as follows; The PPSA concept has acted to dissolve the meaning of “title”. In this act it brings up the usage of the term “security interest” instead of title15. In this legislation, the term is used to define as a transaction which secures the performance or the payment of an obligation. According to the definition, and in lieu with the principles of PPSA, it is assumed that the asset is generally available for realization by a practitioner responsible for insolvency and reimbursement of the creditors who are secured without regarding the title. This is true unless security over such property is perfected by the owner who is also the holder of the title. Without proper registration of the business or the asset, there is a high likelihood that this asset can be lost16. With regard to the above stated argument, VF has been protected by the PPSA over the ownership of the VS as the customer who bought the VS is just in possession of the wing though has no security interest over the wing. A person or the customer can only have the security interest by perfectly fulfilling the obligation laid down in the pour chase. The PPSA allows VF to use any method available in the law to reclaim the property from the customer17. The clause mainly protecting the company can also be based on attachment, perfection and insolvency. In this case, a secured party is supposed to attach and perfect their security interest in the property that they are dealing with. This happens when the parties get into an agreement that results to the creation of a security interest. Such a case can be signing of a sales contract even with the retention of the title18. The secured party is then supposed to perfect the security interest so as to preserve their priority and make sure that the security interest is in an enforceable condition in the event of some insolvency. Without the perfection, the party is treated as unsecured. This happens to be the case of the customer who only paid 20% of the deposit. This customer did not perfect the security interest and thus is not deemed as secured. He can thus lose ownership of the VS if VF takes further action in accordance with the law. References Legislation ACL Consumer Guarantees Carriers and Innkeepers Act (1958) Vic Competition and Consumer Act 2010 (Cth) Personal Property Securities Act 2009 (Cth) Corporations Act 2001 (Cth) Books Ahmadu, M. (2005). Commercial Law & Practice in the South Pacific, New York: Routledge. Bruce, A. (2010). Consumer protection in Australia, Chatswood: LexisNexis Butterworths Fisher, S. (2000). Agency Law, Chatswood: LexisNexis Butterworths. Heuston, R.E.V.; Buckley, R.A. (1996). Salmond and Heuston on the Law of Torts. Sweet & Maxwell. p. 443 Lindregen, K. et al. (1987). Business Law of Australia. California: Lexis Law Publishing. Margaret and Ivor Griffiths; Commercial Law; 2nd edition; 2001 Palmer, N. E (1991). Palmer on bailment, Second Edition, London: Wildy and Sons. Sulaiman, A. et al (2008), Commercial Applications of Company Law in Malaysia, 3rd Edition, CCH Asia Pte Ltd. Smith v Hull Glass Co (1852) 11 CB 897 Thomas, G. (2003). Thomas on Powers. Oxford: Oxford University Press. Turner, O. (2010). Australian Commercial Law 28th Edition, Australia: Lawbook Co. Cases Ashby V. Tolhurst (1937) 2 KB 242 Button v Cooper [1947] SASR 286 Cumming v Sands [2001] NSWSC 2 Equiticorp Finance Ltd (in liq) v Bank of NZ (1993) 32 NSWLR 50 Gamer’s Motor Ctr. (Newscastle) P/L Natwest Wholesale Aust. P/L (1987) 163 CLR 236 Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 Knapp v Knapp [1944] SASR 257 Morris v CW Martin & Sons Ltd [1966] 1 QB 716 Tooth v Laws (1888) 9 LR (NSW) Journals Devonshire, Peter (1996). "Sub-bailment on terms and the efficacy of contractual defences against a non-contractual bailor". Journal of Business Law, Sweet & Maxwell. Read More