By Melissa Higham - 7 Sep 2012
There are many things a buyer must think about when buying
goods. One that is often overlooked, with serious consequences, is
securities which may be registered over the goods you are
buying. If there is a security over the goods you are buying,
you may not get clear title to those goods.
Under the Personal Property Securities Act a buyer of goods
takes the goods free of any security interest when the goods are
sold in the ordinary course of the seller's business
unless the buyer knows that the sale constitutes a breach of a
security agreement.
The recent case of Stockco Limited v Gibson highlights
the importance of a buyer accurately assessing when goods are in
fact being sold "in the ordinary course of business".
In this case Stockco relied on the vendor's representation that
the sale of livestock was in the ordinary course of the vendor's
business. The Court found that it was not. This case
confirms that relying on a vendor's representation is no longer
enough.
As a buyer you should make your own enquiries as to:
- any security interests held in the goods; and
- whether the sale is within the seller's ordinary course of
business.
Working out whether a sale is within the seller's ordinary
course of business requires investigation into the factual
circumstances of the sale. You must consider whether the sale
is an isolated transaction or is part of a wider transaction that
is out of the ordinary. If so, further investigations should be
made to ensure that you can make the purchase free of any security
interest.
If there are security interests and there is any question as to
whether the sale is in the seller's ordinary course of business,
the safest and best approach is to seek a release of the security
interests held over the goods you are buying.
Prudent purchasers should always check the Personal Property
Securities Register for any security interests and deal with any
potential problems before they arise. Better not to take the
risk!
For more information, or if you have any concerns relating to
any purchase you may be making, please contact:
Melissa
Higham