Consumers can not only be affected by the Personal Property Securities Act 2009 (Cth) (“PPSA”), they may have rights that warrant enforcing. This hypothetical factual scenario hopes to shed some light on that world.
The Student Share-House
Four university students live in rented accommodation whilst they undertake their full-time studies. With their combined resources they are also able to afford to furnish that accommodation with some relevant necessities by undertaking a chattel lease of some personal property. In so doing they may find that they come within the reach of the PPSA.
Four university students live in rented accommodation whilst they undertake their full-time studies. With their combined resources they are also able to afford to furnish that accommodation with some relevant necessities by undertaking a chattel lease of some personal property. In so doing they may find that they come within the reach of the PPSA.
Homeware Rentals is a business that rents out such personal property in the ordinary course of its business and its customers sign contracts of lease recording the terms and conditions of that rental. For the purpose of this exercise I will assume that lease is simple and not controversial. The students would undertake to make the lease payments in accordance with the contractual terms and Homeware Rentals agree to provide the relevant subject personal property to them for the duration of the lease.
It should be noted that the transaction with the students is considered to be a consumer transaction under the PPSA. This gives it special status, as we will see. (See ss.42, 46-47 PPSA)
Register Security Interest
In order to protect its interests Homeware Rentals registered the security interest that arose in respect of that property and obligation on the Personal Property Securities Register (PPSR). As the students do not have a security interest in the relevant property, they had nothing to register in respect of the property.
In order to protect its interests Homeware Rentals registered the security interest that arose in respect of that property and obligation on the Personal Property Securities Register (PPSR). As the students do not have a security interest in the relevant property, they had nothing to register in respect of the property.
Importantly also, Homeware Rentals has borrowed money from Worstpac Bank. To secure its obligations, Worstpac Bank registers a security interest over all of the goods of Homeware Rentals. These goods include the ones leased by the students. Therefore the goods of the students are subject to the following security interests:
1 In favour of Homeware Rentals (first security interest); and
2 In favour of Worstpac Bank (second security interest).
1 In favour of Homeware Rentals (first security interest); and
2 In favour of Worstpac Bank (second security interest).
Receivers Appointed
Hard times fell upon Homeware Rentals and Hardball Receivers were appointed to it as a result of an application to the Court by a major secured creditor, Worstpac Bank. On behalf of Worstpac Bank, Hardball Receivers would seek to recover as much of the money owing to Worstpac Bank by Homeware Rentals as possible, if not all of it. One of the ways open to it to do this is by seizing the goods of Homeware Rentals and selling them. (Ss.123, 125, 128) It seems though that Worstpac Bank cannot take possession of the subject goods because the students are protected by s47(1) PPSA. Under this section, the students take free from any security interest, because the goods are consumer goods.
Hard times fell upon Homeware Rentals and Hardball Receivers were appointed to it as a result of an application to the Court by a major secured creditor, Worstpac Bank. On behalf of Worstpac Bank, Hardball Receivers would seek to recover as much of the money owing to Worstpac Bank by Homeware Rentals as possible, if not all of it. One of the ways open to it to do this is by seizing the goods of Homeware Rentals and selling them. (Ss.123, 125, 128) It seems though that Worstpac Bank cannot take possession of the subject goods because the students are protected by s47(1) PPSA. Under this section, the students take free from any security interest, because the goods are consumer goods.
The effect of this is that the students will only need to deal with Homeware Rentals; they will not face the prospect of Worstpac Bank showing up and resuming or repossessing the subject goods. In a way this retains the contractual nexus between Homeware Rentals and the students.
Power To Seize Collateral
Homeware Rentals is a secured party in respect of the goods by virtue of the first security interest. S123 (1) of the PPSA gives it the power to seize collateral or the goods the subject of the lease, by any method permitted by law, if the students are in default under the first security interest.
Homeware Rentals is a secured party in respect of the goods by virtue of the first security interest. S123 (1) of the PPSA gives it the power to seize collateral or the goods the subject of the lease, by any method permitted by law, if the students are in default under the first security interest.
While Worstpac Bank is not entitled to exercise its rights to seize the goods under the second security interest (s47(1) PPSA), s53 PPSA allows Homeware Rentals to stand in the shoes of Worstpac Bank to recover the chattels.
Position of The Students
There are two relevant considerations for the students:
There are two relevant considerations for the students:
1 They are not in default under their lease with Homeware Rentals – so Homeware Rentals has no right to seize the goods on its own account (under the first security interest).
2 But what about the interest of Worstpac Bank under the second security interest? While Worstpac Bank itself seems to have no rights directly over the goods (they are exempt – s47(1)), Homeware Rentals may stand in its place to recover money owing. The way in which this provision will operate is perhaps a little unclear. However, it is likely that so long as the students are not in breach of their agreement with Homeware Rentals, they can continue to keep the goods free from threat.
How Do Consumers Go About Enforcing Their Rights?
There is plenty of assistance available for consumers, such as our students, to enforce their rights. Community legal centres, consumer law advice services and even student service centres in universities are equipped to provide advice and education on consumer rights. See for example Caxton Consumer Law Service
There is plenty of assistance available for consumers, such as our students, to enforce their rights. Community legal centres, consumer law advice services and even student service centres in universities are equipped to provide advice and education on consumer rights. See for example Caxton Consumer Law Service
Conclusion
What is your view of the operation of these provisions? They seem to point towards protection of the consumer: is it feasible that the students would lose their goods to Worstpac Bank?
What is your view of the operation of these provisions? They seem to point towards protection of the consumer: is it feasible that the students would lose their goods to Worstpac Bank?
No comments:
Post a Comment