Purpose
Significant task that requires forward planning and adequate time for research, reading and reflecting. It comprises 35% of your assessment in this subject. You should begin researching early to gather information and establish a plan as soon as possible.
The purposes of the assignment are to enable you to:
- develop your law reading, research and writing skills;
- enhance your understanding of law as a dynamic process;
- learn how to independently research a particular aspect of the law;
- reflect on and consider particular legal issues;
- demonstrate understanding of the legal environment, including relevant laws as well as economic, ethical, social/cultural, international and political issues;
- develop your knowledge about the subject area of your research;
- demonstrate the ability to investigate, synthesise and analyse;
- communicate the findings in a formal piece of work and meet a deadline;
- enhance your analytical and written communication skills; and
- apply your legal skills.
Read Paul Latimer, Australian Business Law (a 2011-2014 edition) chapter 13 and 7-040 then consider the following scenario and then answer the three set questions.
Scenario
On 3 July 2014 Max Speed, who conducts a second-hand car business, purchased under a written signed contract an inventory of luxury used second hand cars. The cars comprised twelve Audi A7s purchased from Euro Prestige Pty Ltd (Euro Prestige). The contract contained a seller's retention of title (ROT) clause whereby Euro Prestige retained title in the cars until Max made the final payment due under the contract. The total price of the inventory was $1.2 million and Max took possession of the cars on the day the contract was signed. On that same day Euro Prestige duly registered in the Personal Property Securities Register its purchase money security interest created by the ROT clause.
During September 2014 Max sold six of the Audi A7s to various customers and six remained in his car yard. All sold cars were to bona fide purchasers, buying at fair market value and without notice of any financial difficulties that Max might be in.
In November 2014 a creditor's petition made by Max's bank has led to his bankruptcy. The date of bankruptcy is 18 November 2014 and its commencement date is 15 August 2014.
His bankruptcy was triggered by Max's default under his 2007 home mortgage with the bank. The amount Max owes the bank under the loan is much greater than the value of his home.
Under the contract for the Audi A7s Max was also in default and now owes Euro Prestige over $1.2 million. At the date of bankruptcy the remaining six Audi A7s remained in Max's possession.
Max's debt to his other creditors is vastly more than the value of his assets. His unsecured creditors are owed an amount over $2 million.
Questions
1. In the above scenario, explain the position of Max's six customers who purchased the Audi A7s in September 2014. In particular, are their transactions with Max able to be set aside by the trustee-in-bankruptcy? Can Euro Prestige take possession of their cars without it compensating them? Do they have any remedy? What explains their treatment?
2. In the above scenario, explain how the trustee-in-bankruptcy will deal with the six Audi A7s that have remained in the bankrupt's estate. In particular will the cars be available to meet the debt of Max's bank, Euro Prestige's debt or the debt of the unsecured creditors? What explains that treatment?
3. Explain the background to the Personal Property Securities Act 2009 (Cth) including the reasons why it was considered desirable to have a national registration system for personal property security interests.