Personal Property Securities Act 2009 - Essay Example

?Commercial Law Table of Contents Question 3 Question 2 4 Question 3 5 Question 4 6 Question 5 7 Question 6 8 Question 7 9 References 10 Question 1The Personal Property Securities Act 2009 (Cth) (PPSA) was established as a national rule specifying a list of security interests, particularly in the field of personal property. The prime objective of this Act was to provide a central list focused on the requirements of different parties, which include the commercial suppliers along with the purchasers and the customers of the property. The Act emphasizes the security interests in the segment of personal property which are owned either by organisations or the individuals (Holding Redlich Lawyers, 2012). This particular Act is stated to be applicable for all personal properties that comprise the tangible properties i.e. the items which have physical presence such as office equipments, motor vehicles, inventory, currency and livestock among others. Moreover, the Act also includes the intangible properties which embrace intellectual properties, licences as well as contract rights owned by organisational as well as individual entities. However, the properties which include lands and licences as well as the statutory rights such as water along with gambling licenses are excluded from the list of personal properties of the Act (Hempel, 2011). There were several personal properties which have been mentioned in the case of Rats River Pty Ltd (Rats River). The properties owned by the corporate entity includes a high tech bottling machine which was to be installed by Rats River in order to increase its production quantity and the oak barrels which were purchased by the company for the production purpose of a new brand of red wine named the Rat Box. Moreover, the personal properties which were referred in the case scenario comprise the new office block built by Rats River for expanding its business operations and original prints which the company borrowed on bailment for setting-up a new and more advanced working atmosphere. Among the aforementioned personal properties, it can be stated that the new office block of Rats River will not covered by the PPSA. This is due to the reason that the new office block built by the company for its business expansion would be treated as a land and is not granted by a Commonwealth (Cth), a Territory or a State law as an entitlement, right or authority. Thus, the asset has been excluded from the register of personal properties of the PPSA Act (Hempel, 2011). Apart from the new office block, the other personal properties belonging to Rats River are duly covered by the PPSA 2009 (Cth). Question 2 Rats River would have a better claim to the grapes which were delivered for toll pressing. This is due to the reason that the company had developed a business plan following legal contracts with 30 local vineyards in order to process their grapes. For entering into the contracts with different local vineyards, Rats River felt the need of obtaining finances from two different banks such as EastPac and BAN. These two banks provided significant amount of financial support to Rats River as a loan for the expansion of the vineyard. In the meantime, the company had also recruited an Assistant Accountant named Ms. Onsen for managing the expanded business operations. Unaware of the personal trait possessed by Ms. Onsen to be seriously addicted to gambling habits, the company had to face severe financial losses. It was in this context that as days passed by, Ms. Onsen exhausted all the funds in the bank account of Rats River which consequently hampered the financial viability of the company to repay its debts within the stipulated period. Therefore, if the company cannot repay the loan amount which they had acquired from the two banks i.e. EastPac and BAN, these two banks would possess the actual claim to the grapes which were delivered for toll pressing. Question 3 According to Section 14 of the PPSA 2009 (Cth), Purchase Money Security Interests (PMSI) is regarded as a specific kind of security interest which is charged on the collaterals obligated for a financial transaction related with the purchase or sales of commodities. It thereby intends to protect the interests of the creditors, encouraging them to sale goods on credit mitigating the ill-effects of credit risks which can also be identified in case of property related transactions (Corrs Chambers Westgarh, 2011). A common PMSI is applicable in a situation when funds are provided to the grantors for assisting them in purchasing any personal properties. Moreover, a PMSI also applies when there exists a lease or bailment transaction while purchasing any personal property. It has been apparently observed that a PMSI commonly applied in commercial transactions in comparison with consumer transactions (PPSR, 2012). After acquiring a brief idea about the perception as well as the nature of the PMSI’s, a presence of PMSI’s can be identified in relation to the given case scenario. It has been viewed that in order to support for the expansion of the vineyard, Rats River has been able to acquire financial support from two banks including EastPac and BAN. The loan which has been provided to the company by the banks had followed a detailed written loan agreement which complied with the requirements of PPSA. The consequence of this PMSI would entitle the company to pay its receivables (i.e. book debts) into its loan account with the two banks by liquidating the collateral agreed. In addition, it has also been viewed that Rats River managed to borrow certain original prints on bailment for a period of one year in order to make the look of its new and modern office premise. This can be regarded as another PMSI mentioned in the case scenario. The probable consequence that might flow from the implementation of this PMSI is that the company can easily obtain the support of financing and thus can purchase the personal property i.e. original prints for its usage in a convenient way. Question 4 According to Section 13 of PPSA 2009 (Cth), the aspect of PPS lease can be defined as a hire or lease as well as a bailment of commodities which is conducted for a period in excess of one year or for an unspecific period. A PPS lease principally covers several operating as well as financial leases that focused upon the possession of any equipment purchased by the customer. It has been apparently observed that a PPS lease does not encompass such type of leases which is carried out by a ‘lessor’, who is not frequently involved in the trade of leasing goods. Similarly, a PPS lease does not comprise any sort of bailment performed by a ‘bailor’ who is not periodically involved in the trade of bailing goods. A PPS lease generally supports the grantors in purchasing any personal property by delivering financial facilities along with longer repayment terms (Australasian Legal Information Institute, n.d.). After acquiring a brief idea about the perception of a PPS lease, it can be stated that one of the transactions which have been referred in the given case, constitutes a PPS lease. For instance, in order to expand the vineyard production, Rats River aims to build a new office block from the funds which have been provided by EastPac. In this regard, the company managed to borrow five original prints of Hokusai prints for the planned office premise. According to the given case, it has been viewed that the company had borrowed the original prints from Basho Art and Design Co Pty Ltd on bailment for a period of one year. The company intended to display the original prints in the reception area of the new office under a rental agreement of 12 months paying an agreed amount of fee to Basho for this rental contract. By considering this transaction performed by Rats River with Basho, a PPS lease can be identified to be applicable. The above transaction can be referred to constitute a PPS lease as it satisfies the criterion encompassing the requirements for the bailment of commodities for a period of one year or for an indefinite period. In relation to the given case, the bailment of original prints was borrowed by Rats River from Basho for a period of one year, which therefore fulfilled the criterion of a PPS lease. Question 5 According to the given scenario, it can be stated that Ms. Onsen has the best interest in selling the Hokusai prints which has been sold to the owner of the Purple Monkey business cafe. This is due to the reason that Ms. Onsen, who deciphered a personal trait of serious gambling problems, exhausted all the funds belonging to Rats River overdrawing huge amounts in frequent intervals. The major reason for Ms. Onsen who possessed the best interest in selling the Hokusai prints to the owner of the Purple Monkey business cafe can be identified as her willingness to substantiate her financial losses incurred from gambling. However, being exposed and held unable to repay the financial amount, she fled to South America with the original prints which the company had borrowed from Basho for its new office block which she had later sold to the owner of the Purple Monkey business cafe. The owner of the Purple Monkey business cafe had purchased Japanese art work i.e. the original prints from Ms. Onsen before with a misunderstanding that the famous Mr. Hokusai was her husband. Thus, on the basis of the above discussion, Ms. Onsen had the greatest interest in selling the Hokusai prints to the owner of the Purple Monkey business cafe. Question 6 With regard to the given case scenario, Rats River intended to expand its business by developing a new brand of red wine named the Rat Box. This particular new wine was matured in traditionally built oak barrels owing to which the company had to purchase several oak barrels from the Red Wood Barrel Company Pty Ltd (Red Wood), a local supplier in the Leeton market. In this similar context, Red Wood delivered 100 oak barrels on consignment to the company on credit where the payment terms depicted that the entire amount must be payable within 30 days from the oak barrels being employed in the wine making procedure. According to Section 12 of PPSA 2009 (Cth), a buyer who purchases any kind of personal property on credit with the employment of collateral, i.e. the signed agreement documenting the transaction, is considered to be entitled for security interests and must be registered on the PPS register. Any failure of the security interests on the PPS register would cause the buyer or the secured party to lose his/her priority over the relevant property being treated as an unsecured creditor (Holding Redlich Lawyers, 2012). It has been viewed that Rats River purchased the oak barrels from Red Wood on a consignment agreement which was not included in the PPS register. Thus, Rats River would be treated as an unsecured creditor where Red Wood can obtain a better claim to the oak barrels. Question 7 As can be observed in the given scenario, it can be stated that Greatly Energetic Company Pty Ltd (GE) has the better claim to the bottling machine. This is due to the reason that Rats River purchased the bottling machine from GE for $750,000 in order to produce large volume of wines. In this regard, the company paid 50% of the purchased amount at the time of signing the contract for sale of the bottling machine and agreed that the balance amount was to be paid by the company in equal instalments per month over the next 9 months. The contract for sale included the provision that the title of the commodity which has been sold to the buyer under this sale contract does not pass to the purchaser until the purchase price would be paid in full to the seller. As Ms. Onsen exhausted the funds of Rats River, the company might fail to pay the remaining amount of the bottling machine to GE. Therefore, by taking into concern the provision stated in the contract of sale between GE and Rats River and due to non-failure of the remaining amount, GE must have the better claim to the bottling machine. References Australasian Legal Information Institute, Meaning of PPS lease (No Date) < http://www.austlii.edu.au/au/legis/cth/consol_act/ppsa2009356/s13.html > Corrs Chambers Westgarh, An overview of the Personal Property Securities Act 2009 (Apr 2011) < http://www.corrs.com.au/assets/thinking/downloads/PPSA_Overview_April_2011.pdf > Holding Redlich Lawyers, The effect of the Personal Property Securities Act 2009 (Cth) on the construction industry (Apr 2012) < http://www.holdingredlich.com.au/construction-infrastructure/the-effect-of-the-personal-property-securities-act-2009-cth-on-the-construction-industry > PPSR, Purchase money security interests (March 2012) < http://www.ppsr.gov.au/AsktheRegistrar/InformationSheets/Pages/Purchase_money_security_interests.aspx > S. Hempel, Personal Property Securities Act2009 (Cth) (May 2011) < http://www.une.edu.au/law/audio-visual/seminars/law-ppsa-practitionerseries.pdf > Read More