Litigation and Dispute Resolution case note: Important Victorian decision on priority dispute has implications that could reach well beyond transport industry

Sep 24, 2020

Earlier this year, KCL Law acted for the Plaintiff in the case of Tasman Logistics Services Pty Ltd v Seaco Global Aust Pty Ltd & Ors [2020] VSC 100, which decided an important question under the Personal Property Securities Act 2009 (Cth) (PPSA) of who has priority:

  • the holder of a contractual lien that is in possession of the goods; or
  • the owner of the goods who has registered their security interest in those goods on the Personal Property Securities Register (PPSR) under the PPSA.

Background

On 2 August 2019, the Supreme Court of Victoria ordered that SKM Corporate Pty Ltd (In Liquidation) (SKM), a recycler servicing over half the councils in Victoria, be wound up in insolvency.

Tasman Logistics Services Pty Ltd (Tasman) provided transport and logistics services to SKM, which included storage services whereby Tasman would store shipping containers full of unsorted recyclables for SKM. At the time SKM was placed into liquidation, Tasman was storing 719 containers full of recyclables across two premises.

The liquidator for SKM disclaimed any interest in the shipping containers or their contents. Tasman’s credit terms gave it the benefit of a contractual lien in respect of any goods stored by it and specified in a consignment note.

Tasman attempted to pursue a course of self-help as set out in division 4.2 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA) to either:

  • have the container owners pay the outstanding storage fees if they wanted their containers back; or
  • be able sell the containers to recoup some of the loss on storage fees occasioned by SKM failing to pay its debts to Tasman, and SKM’s subsequent liquidation.

On the evidence available, SKM was the owner of the unsorted recyclables and the shipping containers were owned by various other third parties from whom SKM leased the containers.

Some of the container owners objected to Tasman’s course of self-help and asserted variously that:

  • the shipping containers were their property;
  • Tasman’s proposed course under the ACLFTA was contrary to their interests as owners;
  • they have registered security interests on the PPSR in respect of the containers; and
  • the interests of the container owners as owners and/or secured parties with perfected security interests prevails over any rights that Tasman may have to demand payment of the storage fees for return of the containers, or Tasman’s power to sell the containers and retain the proceeds of sale to recoup the unpaid storage fees.

Court proceedings and decision

Tasman issued proceedings in the Supreme Court of Victoria and applied for a disposal order under s70 of the ACLFTA to enable it to sell the containers and their contents in order to recover the outstanding storage fees due from SKM.

This application was resisted by three of the container owners.

There was no dispute between the parties regarding the defendants’ claimed ownership of the containers, whether the defendants held a valid security interest in the containers, or whether the defendants validly registered those security interests on the PPSR. The dispute was about who had priority.

His Honour Justice Garde found that Tasman had priority over the container owners and was permitted to sell the shipping containers in its possession by public auction or private treaty in accordance with the terms of its credit agreement with SKM, with the proceeds of that sale to be applied for Tasman’s benefit and the surplus to be distributed to the container owners once the outstanding storage fees was paid.

His Honour also made other findings, including regarding the construction of Tasman’s credit terms and whether the credit terms apply to the shipping containers, but they have not been set out for the purposes of this article. A copy of the judgment is available by clicking here.

Importance

This case has implications for the entire transport industry as it found that the holder of a contractual lien who has possession of goods had priority over a third party who is an owner of goods with a registered security interest in the goods on the PPSR. This decision may also have serious implications for other areas of the law too, such as insolvency and construction.

Navigating personal property disputes and rights affected by the PPSA is a complex area. As with most commercial disputes, it pays to get advice early, before the matter spins out of control or costly mistakes are made that
can affect priority.

More information

For more information on this case, or for advice in relation to personal property disputes and rights affected by the PPSA, please contact:

David Weinberger, Principal Lawyer
Head of Litigation and Dispute Resolution
T (03) 8600 8872
E dweinberger@kcllaw.com.au

Arnie VijayakumarSenior Associate
T (03) 8600 0720
E avijayakumar@kcllaw.com.au

Author

This Insolvency update was authored by Arnie Vijayakumar, Senior Associate.

Note: This update is a guide only and is not intended to constitute legal advice.

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