LIENS – week 6 Preliminary matters: o s73(2) PPSA: authorises certain laws to give priority to interests to those laws. [as per the section, in other words, the jurisdiction can declare a law to be in accordance with that law itself, and not in accordance with the PPSA). o In relation to the Disposal of Uncollected Goods Act & Storage Liens Act, the Parliament of Qld has elected to use the authority conferred on it, by s73(2). It has amended the disposal of these acts to ensure that the security interests will prevail over any SI in the PPSA. o No inconsistencies, as the sections allows the Parliament to alleviate certain statutory SI above any of those in the PPSA. o Pursuant to that authority, the Qld Parliament enacted s4A Disposal of Uncollected Goods Act. o s4A(2): [in other words] the rights of a bailee would prevail over any SI in the PPSA, including PMSI. o Storage Liens Act, s4A: priority of storer’s lien. o But what happens if there is a conflict between Disposal of Uncollected Goods Act & Storage Liens Act? there is never a conflict, as will never overlap! o s46 PPSA: if you buy leased goods from a sellor or lessor in the ordinary course of the business, in selling or leasing personal property of that kind; any SI in goods will be extinguished in favour of the buyer or lesee. o There are 2 exceptions, one of which is: s46(2)(b) – the mere fact that SI is registered, is not actual knowledge. Registration is not constructive or actual knowledge, it is extremely unlikely that buyer will have notice that what he purports to buy with unencumbered title is in breach of security agreement between seller and secured party (bank). o “ordinary course...of that kind” in s46(1): if not in ordinary course, does not apply, which means do not even bother with exceptions, as buyer has no protection of this section. o Under pre-PPSA, you’d have a floating charge that floats over the property of the chargor [someone who trades], and would be allowed to trade. As soon as that happened, chargor would be subject to a fixed charge over the gds and is no longer permitted to sell the gds in ordinary course of business. o Under PPSA, [if you were to make an agreement together, floating charge will be construed as SI in a circulating asset], the grantor can still trade with the goods and can still pass unencumbered title to the goods s339(5) PPSA o Bank ----- an all assets SI o Significant difference between old floating charge & SI: floating charge = floats over assets, and charge does not attach to asset until crystallization of the floating charge. Circulating asset - SI in the circulating asset is not floating, it is under s339(5) PPSA, attached; the trader is allowed to pass unencumbered title so long as it is circulating. o s18(3) PPSA: as soon as any future assets is acquired by trader, the SI will attach to those proceeds, as opposed to merely floating over them. s8(1)(c) PPSA: at CL, a lienor (lien-holder) has no power to sell the chattel to a lienee – unlike the pledgee: Clark v Gilbert a lien-holders’ remedy is to detain the personal chattel; not to sell in the case of default by lienee. s12(1) abolished the rule in McEntire v Crossley Bros in regards to SI. But because liens are outside of PPSA, it will still apply to liens arising under general law, thus falls outside s12. A lien may be excluded by contrary agreement express or implied between the parties: Wilson v Lombank Ltd In Disposal of Uncollected Goods Act, s5 Disposal of Uncollected Goods: if someone deposits goods with a bailee for treatment, namely repair, and either does not pay or having paid, does not collect them, then there will be a lien on those goods. However if the goods given to the bailee, are subject to hire-purchase agreement, and the bailee has notice that the hire-purchase agreement prohibits the creation by the hirer of the lien on the goods, then the bailee will not have a lien on the goods, and will not be entitled to sell those goods. The main distinction between Disposal of Uncollected Goods Act & Storage Liens Act = if you deposit goods with a bailee for treatment i.e. motor vehicle to mechanic for servicing, then the bailment to mechanic will be subject to Disposal of Uncollected Goods Act. If you were to deposit a personal chattel with a bailee for storage only, then the Storage Liens Act applies. See s4(1) Disposal of Uncollected Goods Act = s4(2) = excludes motor vehicles for storage?? For mere storage, subject to exception. For motor vehicles, the Storage Liens Act does not apply to their storage. For mere storage, you apply Disposal of Uncollected Goods Act. Storage Liens Act s2 = see defn s3 [don’t bother about s5]: a very wide defn. So if you have a pledgor and pledgee, pledgee is given possession of the goods by the pledgor. The pledgee can, under s3, deposit the personal chattel with a storer; and the storer be entitled to a storer’s lien. Even if the pledgor has not given to the pledgee any authority to create a lien over the pledge, s 3 overrides any CL inhibitions. s4(a) = no reference to repair or other treatment. Dealt with by Disposal of Uncollected Goods Act. Disposal of Uncollected Goods Act s6(1) – conditions for power of sale Storage Liens Act s6 – power to sell goods The possession of a lien-holder must be continuous, so that the lien is terminated by any interruption to the possession of the lien-holder, any interruption will terminate the lien: Dinmore Meatworks Pty Ltd v Kerr & Helton v Sullivan. Equitable liens are not SI at all; trustee’s lien and partners’ lien. Creation of Liens: As a general rule, a lien (CL lien) arises by operation of law; but exceptionally may be created by K. K can vary the scope of the lien. Distinction b/n general lien & particular lien = general is lien to secure all of the indebtedness of the lienee to the lien-holder. For example, a solicitor has a general lien over documents lodged with him by his clients to secure the payment of fees, for all transactions. Particular lien for example, motor mechanics, can only secure the payment of a liability incurred by the lienee for a particular transaction. So if you bring your car to be serviced, the lien will only apply for the charges for the particular service, not all the debt. George Barker (Transport) Ltd v Eynon Mercantile Credits Ltd v Jarden Morgan Australia Ltd According to these cases, [possession is essential to a lien] the lien can be created at the time of the making of the K. You only need possession of the relevant personal chattel at the time of the enforcement of the lien, not the creation of the lien. The Banker’s general lien: A bank possesses a general lien over all negotiable instruments and document of titles which belong to any of its customers, provided that such documents are received in its capacity as a banker, and provided the customer owes it money. But no bankers lien, if bank receives documents not as a banker, but as a mere bailee: Brandao v Barnett & In re European Bank In Gellibrand v Murdoch, Justice Dickson said such documents of title included share certificates. Authority to create lien: There’s a general rule, established in Fisher v Automobile Finance Co of Australia Limited & Lombard Australia Ltd v Wells Park Motors Pty Ltd, that you cannot create a lien over a personal chattel without the express or implied authority of the owner of the personal chattel. If the owner has precluded himself by estoppel from saying there was no authority to make the lien, by virtue of estoppel, there will be an authority to create a lien. s3 Storage Liens Act, someone with lawful possession of the personal chattel, even though the person has no lien over it, can by depositing to the storer, create in the storer, a storer’s lien. An exception to the statutory rule. Floating charges and garnishee orders: Evans v Rival Granite Quarries Ltd: pre-PPSA, this case was definitive. In the case, there was stage 1) floating charge [s339(5) PPSA converts it into a SI in a circulating asset]; stage 2) garnishee order. A garnishor is one type of execution creditor. Distinction between creditor, a judgment creditor & stage 3) execution creditor (received an order from court to enforce the judgement debt) In the case, there was a bank, and a chargor company (grantor) had money in the bank (credit balance). There was a garnishee order issued by the execution creditor (garnishor) against the bank directing the bank to pay the money in the bank, not to the chargor/debtor but to the garnishor. Garnishee order = [made under s35 of Common Law Process Act relocated to s77 of Supreme Court Act] an order given to debtor to pay the debt owed to execution debtor not to the execution debtor but to the garnishor, the execution creditor instead. Execution debtor --------------------------------- Bank (garnishee) credit balance GO= order directed to bank The floating charge, because it remained floating, could not prevent the garnishor from compelling the bank from paying the garnishor. But today, with the circulating asset, the SI does attach to the circulating asset, which can only be used in the ordinary course of trader of the grantor/trade. If you are compelled to pay money under a garnishee order, that payment is not trading with your assets, in the ordinary course of business. In the Evans case, because the charge was floating, garnishor could compel bank to pay the garnishor. Today, the credit balance under the PPSA would be a circulating asset to which the SI would have attached under s339(5) PPSA. That SI would be perfected, and because if was perfected before the issue of the garnishee order, would have priority over the garnishee order. Thus Evans would be decided the opposite way. See s74 PPSA ‘Execution creditor has priority over unperfected security interest’. s74(4)(b)(ii) – if the interest is unperfected at the time of the issue of GO, then the GO will prevail. However if SI is perfected before the issue of GO, then the SI being perfected will be superior of the execution creditors GO. Despite the fact, that the asset is a circulating test. The test is whether it has been perfected. Tricontinental Corporation Ltd v Commissioner of Taxation: there was a floating charge over an asset of the chargor. Then the FCT gave a notice of attachment given to the debtor, requiring the debtor to pay the money owed to the chargor, not to the chargor, but to the FCT. This asset was money owed to the chargor (grantor). The Commissioner’s direction is a special form of garnishee order. Held that the notice of attachment prevailed over the chargee’s later crystallised charge, over the same asset [Commissioner had priority, even though at the time of crystallization of the fixed charge [stage 3], the debtor had not yet paid the Commissioner]. Argued unsuccessfully, the chargee would now have priority over the Commissioner, given that the Commissioner had not yet received payment from the debtor to the chargor. Today, there would be no issue; as the floating charge would be a perfected SI (assuming registration) in a circulating asset, because there will be attachment under stage 1: s339(5) PPSA. Thus, the secured party would have priority over FCT. s8 PPSA: excludes a no. of interests or rights from the operation of the PPSA: One obvious is - Liens under s8(1)(c); another is “an interest of a kind prescribed by the regulations for the purposes of this section” under s8(1)(l). Authority of Commissioner to give that direction is given in s260-5 schedule 1 to the Taxation Administration Act 1953 (Cth). [This section used to be known as s218 of Income Tax Assessment Act 1936]. Personal Property Securities Regulations 2010, Reg 1.4(1): ”For paragraph 8 (1) (l) of the Act, the Act does not apply to a right or interest in personal property mentioned in section 260-5 of Schedule 1 to the Taxation Administration Act 1953”. In other words, the act does not apply to the FCT’s power to issue the s260-5 order which means Commissioner’s authority does not give to the Cth government any SI within the meaning of the PPSA.