Seminar One

Topic One

1. In dealing with property what is the distinction between ownership and possession?

Answer: It is important to understand the nature of personal property first

Personal Property

Property other than real property• Choses in possession (chattels-things)• Choses in action (rights enforceable by law)-IP, shares in a co, debts, negotiable instruments.

Ownership may include right to use, sell, give away, put into a trust, use as security for a loan, share with co-owners, leave in willTo possess property means to have exclusive control (or dominion) over the item: Parker v British Airways Board see [1982] .Property rights:

Can arise from simple possession Can arise out of a financial transaction i.e. where the property is used as security

property rights arising out of possession

A person in possession of an object has rights which are recognised at law even where that person is not the owner.Costello v Chief Constable of Derbyshire Constabulary—possessory rights of thief: ‘in the case of a theft the title is frail, and of likely limited value…but nonetheless remains a title to which the law affords protection’

2. Why are the distinctions between ownership and possession important in the context of finance?

(So I wasn’t exactly sure how to go about answering this question, if ‘finance’ referred to the finance sector or to finance as coming from a lender to a borrower so I did it in a couple of ways).

A distinction between ownership and possession allows for arrangements such as ‘sale by consignment’, whereby a provider of goods can grant possession to an on-seller but retain ownership of the goods. This protects the buyer from losing their advanced property if the on-seller were to go into liquidation as those assets remain under the ownership of the provider.

A distinction between owner and possession is important in the context of finance because much of what is traded is intangible. The fact that a party doesn’t have actual possession (of stocks for example) is not a bar to them asserts ownership over that property and gaining a bundle of rights associated with ownership.

3. How would you define possession in law?

• To possess property means to have exclusive control (or dominion) over the item: Parker v British Airways Board

• There must be an intention to exercise control or dominion

• 3 types of possession: • 1) de facto – physical control• 2) legal – the owner of property has legal possession• 3) right to immediate possession – right to retake possession, but person not in

actual possession

4. What rights may a finder of goods exercise against a third party? Would your answer be different if the goods were stolen?

FindersArmory v Delamirie (1722) 93 ER 664Finder has property rights/enforceable possessory title against everyone except the true owner.Parker v British Airways Board [1982] 1 All ER 834Donaldson LJRights and obligations of finder

1. Finder acquires no rights unless item abandoned or lost and is taken into finder’s care and control.

2. Finder has limited rights if taken with dishonest intent or while trespassing [NB R v MacDonald [1983] 1 NSWLR 729 —larceny by theft]

3. Finder acquires rights against all but the true owner (or someone with a better claim)4. Servants or agents who find in the course of their employment take item into care and

control on behalf of employer or principal (except where finding incidental to employment or agency). [Exception]

5. Finder has obligation to take reasonable measures in the circumstances to inform true owner and take care of item [Exception]

Rights and liabilities of occupier1. Occupier of land or occupier of building has rights superior to finder where item in or

attached to land or building.2. Occupier of building has rights superior to finder if occupier has manifested intention to

exercise control over the building and things on or in it.3. An occupier who manifests such an intention under obligation to take measures reasonable

in the circumstances to find true owner and to care for chattels in the meantime.Basically, where goods are attached to property, the occupier has priority over the property but if the goods are on the land, to have rights, they must show that they have a manifest intention to control everything on their land.If goods found on the land and occupier hasn’t shown manifest intention to control everything on that property, finder has superior rights.If stolenIf the goods were stolen, fider has no rights for the goods, since the item is not abandoned or lost. What is more, in the case of stealing goods, it can be said that the finder has dishonest intent or trespass, therefore, the fainder has limited rights.

5. What do we learn about the nature of personal property when considering the law of gifts and finding?

Gifts are the gratuitous transfer of title in property

Elements:• Donative intention• Acceptance by donee • Delivery

Outcome: ‘the donor must not only part with possession of the property, but must relinquish all present and future dominion and control over it beyond any power on his part to reclaim it’ Nolan v Nolan [2003] VSC 121

a gift of chattels is not complete unless accompanied by something which constitutes an act of delivery or a change of possession.

In gift, Flinn v White [1950] SASR 195: gift of piano from father to daughter—no effective delivery—no effective transfer of possession

But in the all above mention elements are missing in the finder’s case and finder acquires no rights unless item abandoned or lost and is taken into finder’s care and control. Also, Finder acquires rights against all but the true owner.

Topic Two: Bailment

1. How do principles of bailment, contract and tort operate together?

For a bailee for reward to disprove negligence they will need to illustrate it for the court with reference to the facts and circumstances of the case. The standard the bailee must illustrate is ‘such as a careful and vigilant person would exercise in the custody of their own property of the like character and in the like circumstances’ (Nabal v Sweeting and Denney). The circumstances the court will take into consideration will include:

The level of security at the location the bailed goods were being stored at (Pitt Son and Badgery v Proulefco; Tottenham Investments v Carburettor Services).

Relative value of the bailed goods Knowledge of the area in which the bailed goods were being stored (i.e. prone to

break-ins/vandalism?) Level of care the goods were treated with Any subsequent action the bailee may take to protect against future similar occurrences.

N.B. Not technically relevant to the question of negligence but relevant to a determination of liability is also whether the bailee acted outside the scope of the bailment agreement.

2. How does sub-bailment overcome privity?

Sub bailee owes the same bailment duties as the head bailee, even though the contract is between bailor and head bailee. Example, A (bailor) contracts with B (head bailee). C (sub bailee) may be bound by the same terms governing A and B.

Conversely, bailor’s rights might be varied by contract between head bailee and sub-bailee with the bailor’s consent. Example, sub contract between B and C can affect A’s rights (if with A’s consent) (The Pioneer Container case).

Also, where there is sub bailment with head bailor’s consent, the bailor can bring an action directly against the sub bailee even though there’s no contract between them (Pioneer Container).

3. How can a bailee sue a third party for conversion if the bailee is not the owner of the bailed goods?

If a third party commits a wrongful act against the chattel bailed, for example wrongfully takes possession of it, the bailor has the right to sue the third party in tort for damages for conversion if the bailment is a bailment at will.

A bailee is also entitled to bring an action against a tortfeasor who has negligently caused damage to the bailed chattel while the chattel was in the bailee’s possession. Such an independent cause of action arises because the bailee’s possession is good against any tortfeasor: Goodwin v Ron Heath Tyre Service (SA) Pty Ltd (1999) 74 SASR 508.

Where the bailment is for reward, the bailor’s right to possession of the goods is suspended, and accordingly the general position is that only the bailee can sue the third party for the wrongful interference with the goods. However, if the interference with the goods adversely affects the bailor’s reversionary interest, for example where the goods are destroyed or permanently damaged so that they will not be returned to the bailor in good order at the expiry of the bailment, the bailor may bring an action against the third party: Penfolds Wines Pty Ltd v Elliot (1946) 74 CLR 204 at 226-227.

Where the bailee wrongfully disposes of the chattel, such act entitles the bailor to terminate the bailment; if the bailor does so, he or she will have an immediate right to possession of the goods enabling the bailor to sue not only the bailee but also the third party in an action for conversion.

4. What are the differences between a gratuitous bailment and a bailment for reward?

Differences between gratuitous bailment and bailment for reward

Gratuitous bailment Bailment for reward

Without consideration (therefore, no contract)

Loan Gratuitous safekeeping All of the above examples are revocable

at the will of the bailor

Hire Pledge (goods that are left in the

possession of someone else to secure a loan e.g. pawnbrokers)

Work and labour e.g. car service, carriage of goods (i.e. item to be worked on is bailed)

Safekeeping for a fee There is necessarily a contract- must

follow the terms

Bailor’s Obligations

Bailment for reward Gratuitous bailment

*Entitlement to bail the goods*That the goods are safe and suitable for bailment *To pay the agreed rate for storage*Not to interfere with the bailee’s possession for the term of the bailment

*The right to bail the goods*To warn of the dangers that might arise from the goods – Coughlin v Gillison [1899] 1 QB 145 (exploding ship’s boiler) http://tinyurl.com/ydgbg37 *Make good any damage caused by the goods*Instruct on the proper use of the goods – Pivovaroff v Chernabaeff (1978) 21 SASR1—lent an onion sorting machine without a guard. Bailor told not to be used near children. 13 year old had hand mutilated – bailor was not liable as had warned on proper use of the machine. Bailee was found liable in negligence to the boy.*Revocable at will – Parastatidis v Kotaridis

Difference here between gratuitous bailment and bailment for reward. When it comes to negligence and taking reasonable care it’s fluid but here it’s distinct when it comes to bailor’s obligations. If there’s a bailment for reward and goods are bailed, if there’s anything dangerous about them e.g. they’re not fit for purpose and it leads to loss/injury, bailor is liable. But in gratuitous bailment, bailor only has to tell bailee about dangers they know about . E.g. if you lend someone your lawnmower and blade comes off and injures them, if you didn’t know about the blade, there is no liability. If Kennards lends lawnmower and blade comes off, as goods aren’t fit for purpose, they’re liable.

Coughlin v Gillison

Ship’s boiler explodes. Lent gratuitously. No liability as bailor had no idea that the rivets were weak.

Cottee v Franklins Self- Serve Pty Ltd

Difficulty here is classifying whether there was bailment for reward or not. Woman goes to Franklins with small child, buys groceries, and uses trolley. Pushes trolley but wheel falls off and injures herself from trying to prevent trolley from tipping over. If it’s a gratuitous bailment, it’d be much harder to prove Franklin’s liability. Franklins would only be liable if they know about it. If bailment for reward, Franklins would be liable as good isn’t fit for purpose it’s provided for e.g. carrying groceries. Held to be a bailment for reward because either: the payment for the grocery was sufficient consideration as it included the use of the trolley or the fact that the woman was coming to shop at Franklins, because she could use the trolley was enough for consideration. Analysis could make you suspicious that the judges were concerned about a remedy being provided for the woman. Good case for showing distinction between gratuitous bailment and bailment for reward.

Topic Three: Sale of Goods Act

1. How are goods defined?

Goods defined in s 5 of SOGA 1923

All chattels personal except choses in action and money; ie chose in possession Thus, generally includes tangible things

2. What is a sale of goods? How is this different from a license, lease or hire purchase of goods?

A contract of sale of goods is defined by the Sale of Goods act as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price (s 6 of SOGA)

In every contract for sale of goods there must be present three main matters: ‘goods’, ‘money consideration’, and ‘transfer of property’.

‘Transfer of property’ means the transfer of ownership in the goods. In license, lease and hire purchase, the ownership of the property is not transferred from

one party to another.4. What remedies does a seller have if the purchaser refuses to accept delivery?

If a purchaser refuses to accept delivery (wrongly) then the seller may sue for damages for non-acceptance.

The general rule is that on a buyer’s non-acceptance of the goods, the measure of damages recoverable by the seller is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of contract. Where there is no ‘available market’, this rule will apply.

Where there is an ‘available market’ for the goods, the measure of damages is prima facie, the difference between the contract price and the market or current price at the time when the goods ought to have been accepted. An ‘available market’ means a market available from day-to-day in which the goods might be sold at a then current price or at a fair price at the will of the vendor.

On the other hand, where the seller doesn’t have a replacement buyer, the seller is entitled to recover for the loss which they suffer on the resale of the goods i.e. the price agreed to by the original buyer and the price at which the goods were resold.

Where a buyer has agreed to buy a unique item, the amount recoverable is the difference between the original contract price and the amount the seller obtains on resale.

5. What is the nemo dat rule? What exceptions are provided under the Sale of Goods Act? Seller without title cannot give title (s26 SOGA), therefore no property passes to the buyer

who buys from seller without title. Exceptions:

o 1. Estoppel – owner, by his/her conduct, is estopped from denying seller’s authority to sell (s 26, SOGA)

o 2. Sale under voidable title (s 27) where buyer is a bona fide purchaser for value without notice AND the voidable transaction has not yet been rescinded at the time of sale.

o 3. Seller or buyer (3rd party) in possession (s 28); S28(1): bona fide purchaser without notice of the previous sale obtains the

goods *note this assumes there is a double sale Example: A sells to B and C; C has no notice of B and takes possession. C has

good title. S 28(2): bona fide purchaser without notice of any lien or right of the original

seller Example: A sells to B who has not yet paid; B sells to C without notice of A’s

lien. C has good title.

6. How is merchantability assessed under the Sale of Goods Act?

-Where goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods are of merchantable quality provided that, if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed (s19 of SOGA).

Thornett & Fehr v Beers [1919]

-If the buyer examines the goods before the contract is made, the condition is not implied as regards defects which such examination ought to have revealed.

Australian Knitting Mills v Grant (1933)

The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition without special terms…

per Dixon J at 418

-Three definitions of merchantability. If you’re determining merchantability, can look at three different ways although they’re all quite similar.

Person buys underwear that causes severe dermatitis that requires hospitalisation (and the man hasn’t washed them for a week and worn them this way)- in this case, buying by description can mean buying something from a shop as a specific good, where in the transaction, there is a description applied to them.

Merchantability means that knowing everything there is to know about the goods, you would buy them without an abatement/ discount in price. So, in this case, if the buyer knew there was an excess sulphide in the underwear, he’d still buy them for full price but then just wash them a few times.

Henry Kendall & Sons v William Lillico & Sons Ltd [1969]

Definition of merchantability:

Merchantable can only mean commercially saleable…

…it may be that in practice only one quality of goods answers that description—then that quality and only that quality is merchantable quality. Or it may be that various qualities of goods are commonly sold under that description—then it is not disputed that the lowest quality commonly so sold is what is meant by merchantable quality; it is commercially saleable under that description (per Lord Reid)

"It seems to follow that if goods are sold under a description which they fulfill, and if goods under that description are reasonably capable in ordinary use of several purposes, they are of merchantable quality…if they are reasonably capable of being used for any one or more of such purposes, even if unfit for use for that one of those purposes which the particular buyer intended…"

If a buyer wants more than this he must get his seller to sell on the basis that the goods are reasonably fit for some stated purpose (per Lord Morris, quoting from Lord Wright in an earlier case)

-Merchantability in this case means commercially saleable. In this context, the Brazil nuts were commercially saleable because at certain amounts, if added to cattle feed, they were fine for cattle. Having a purpose doesn’t mean any purpose at all-it means a purpose within a reasonable class. The Brazil nuts were still useful for cattle feed at a certain percentage of the feed, so Brazil nuts were commercially saleable.

-A thing bought might be useful or bought for a number of purposes. If it’s not fit for one purpose but still fit for a range of other purposes, it’s still merchantable under the implied terms.

If you look at all three of them together, what they’re all really saying is that merchantability

David Jones v Willis (1934)

-An element of the provision, that in order to rely on s 19(2), goods have to be sold by description. Problem arises where there’s the purchase of specific goods e.g. Shoes in this instance. What the quote is saying is that if a description is applied to an item during the transaction, even if it is a specific item, is still a sale by description.

Topic 4

1. How do you establish that a transaction has involved a consumer?

A transaction involves a ‘consumer’ if:a) The amount payable does not exceed $40, 000b) The goods are of a kind ordinarily acquired for personal, domestic or household use or

consumptionc) The goods consisted of a vehicle or trailer acquired for use primarily in the transport of

goods on public roads: ACL s3(1)

You must also be the end user, therefore you can’t acquire the goods for the purpose of resupply or to use them in the course of production or in the repair of other goods or fixtures on land: s3(2) ACL. ‘a’ and ‘b’ above, under the ACL apply to acquiring services as a consumer.

2. Can a business purchaser still fit within the definition of consumer?

Yes, a business consumer can fall within the definition of consumer in s 3(1) ACL:

(a)(i) amount paid does not exceed $40K (b) goods were of a kind ordinarily acquired for personal/ domestic/ household use (c) goods were a vehicle or trailer used to transport goods on public roads

Note business purchaser should not fall within the exceptions (not a consumer) in s 3(2) ACL:

(a) goods acquired for purpose of re-supply (b) goods used up or transformed for:

o (i) production/ manufacturing processo (ii) repairing other goods or fixtures

3. What is the relevance of contractual exclusion and limitation clauses for terms implied by statute?

An exclusion clause is a term of the contract which limits, or excludes altogether, a liability to which one party to the contract would otherwise be subject. The function of exclusion clause is to limit or exclude liability for breach of an express or implied contractual obligation, or negligence in the performance of the contract.

The implied conditions and warranties may be, and frequently are, excluded or varied by express or implied agreement between the parties to the sale. It is provided by the Sale of Goods Act that where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties or by usage, if the usage is such as to bind both parties to the contract (s57 of SOGA). A clause may be included in the contract excluding liability as follows: ‘all conditions, warranties and liabilities implied by statute, common law or otherwise are excluded’. Such a clause does not protect the seller against any express warranty which may be included in the contract (Andrews Bros Ltd v singer & Co Ltd [1934]).

5. Why is the inclusion of a contract important for the application of these provisions?

Implied terms under the SOGA can be excluded or limited by a contract (s57), however the implied terms under the ACL cannot be excluded or limited by such a contract (s64 ACL) but this Act only applies to consumers. Also, contracts can provide a source of remedies for breach.

6. What remedies are available to a purchaser?

Remedies available for breach of guarantee

S 259 ACL, action against supplier of goods; s 267 ACL, action against supplier of services

SUMMARY TABLE

Failure can be remedied and NOT a major failure Failure CANNOT be remedied OR a major failure

S 259(2)(a): consumer can require failure to be remedied within reasonable time

Same applies for supply of services (s 267(2)(a) ACL

If supplier does not remedy after being required:

S 259(2)(b)(i): consumer can have failure remedied from a 3rd party and recover all reasonable costs from the supplier

Same applies for services: s 267(2)(b)(i)OR

S 259(2)(b)(ii): consumer can reject the goods

Must notify supplier of rejection and grounds for rejection

Rejection subject to s 262: when consumer cannot reject goods, eg rejection period lapsed, goods damaged after delivery, etc

For services: s 267(2)(b)(ii)

See s 260 for definition of ‘major failure’

S 259(3)(a): consumer can reject the goods

Must notify supplier of rejection and grounds for rejection

Rejection subject to s 262: when consumer cannot reject goods, eg rejection period lapsed, goods damaged after delivery, etc

For services: s 267(3)(a)OR

S 259(3)(b): recover from supplier any reduction in the value of the goods below the purchase price

For services: s 267(3)(b)

Consumer entitled to recover reasonably foreseeable losses from the supplier’s failure (s 259(4))

Except if breach of guarantee only because of a cause independent of human control (s 259(5))

7. How can actions be taken against importers and/or manufacturers of defective or unsuitable products?

Where goods supplied to a consumer are defective then, generally speaking, the immediate supplier of the goods (eg retailer) will be liable to the consumer for non-compliance with the statutory guarantees of fitness for purpose or acceptable quality. Liability for non-compliance with the guarantees does not depend on proof of negligence on the part of the supplier but simply on the existence of a contractual relationship between the parties.

If the consumer suffers personal injury or property damage because of the defective nature of the goods, then the consumer may well have an alternative action for damages for negligence at common law against the manufacturer of the goods. However, an action for negligence requires proof of fault on the part of the defendant, which can give rise to difficult factual and legal questions.

It was decided that there was no good reason why a manufacturer should not be directly responsible to a consumer for loss arising from the defective nature of the manufacturer’s products without the need for the consumer to establish fault on the part of the manufacturer as required in an action for negligence.

The Australian Consumer Law contains important provisions which impose liability upon manufacturers for defective goods without the need to rely on the more difficult action in tort for negligence against the manufacturer.

The provisions of the Australian Consumer Law imposing liability on manufacturers for defective goods are discussed under the following headings:

1. Liability of manufacturer for goods with safety defects: Pt 3-5 (ss 138 – 150).

2. Liability of manufacturer to consumer for non-compliance with statutory guarantees: s 271.

3. Liability of manufacturer to seller of defective goods: s 274.

This is followed by consideration of the product safety and information provisions of the Australian Consumer Law.

The effect of the Australian Consumer Law is to make the manufacturer of goods containing a “safety defect” liable to compensate a person who is injured, or whose property is damaged, because of the safety defect. More specifically, it is provided that:

(1) A manufacturer is liable to compensate an individual if:

(a) the manufacturer supplies the goods in trade or commerce; and

(b) the goods have a safety defect; and

(c) the individual suffers injuries because of the defect: s 138(1).

Where these conditions are satisfied the individual may recover from the manufacturer the amount of the loss or damage suffered by them: s 138(2). The meaning of “safety defect” is considered separately at.

It will be observed that liability in the section set out above is not restricted to where the person injured had, for example, bought or hired the defective goods but applies generally whenever a person is injured by goods having a safety defect.

Furthermore, where, in effect, the dependants of an individual suffer loss as a result of the injuries sustained or the death of that individual because of a safety defect in the goods, such loss is recoverable from the manufacturer: s 139.

Liability extends to loss resulting from other goods of a kind ordinarily acquired for personal, domestic or household use being destroyed or damaged because of the defective goods: s 140.

Similarly, a person who suffers loss as a result of land, buildings, or fixtures ordinarily acquired for private use being destroyed or damaged by the defective goods is entitled to recover that loss from the manufacturer. Damage to commercial property is outside the scope of the provisions.

Basically, the provisions impose liability on a manufacturer to compensate a person for the loss or damage suffered as a result of the supply of goods that have a safety defect. The meaning of “safety defect”, “goods” and “manufacturer” in this context require further explanation.

A manufacturer includes a person who:

(a) grows, extracts, produces, processes or assembles goods;

(b) hold themselves out to the public as the manufacturer of the goods;

(c) causes or permits their name, business name or brand name to be applied to the goods;

(d) causes or permits another person to hold them out to the public as the manufacturer of the goods; or

(e) imports the goods and the actual manufacturer does not have a place of business in Australia: Australian Consumer Law, s 7(1).