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CLQ Vol34 No4 Dec 2020-Feb 2021

If I ‘hold’, do I therefore ‘possess’? Perfection by possession under the Personal Property Securities Act 2009 (Cth)
By Sheelagh McCracken
 
The title for this article is suggested by a statement by the Western Australian Supreme Court in the recent case of Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (‘Dalian’). In holding that the plaintiff’s interest in funds in a bank account was a security interest for the purposes of the Personal Property Securities Act 2009 (Cth) (‘PPSA’), the Court observed2 that the trustee of those funds acting on behalf of the plaintiff: ‘… held (and actually then possessed) the Trust Amount (the PPSA “property”) …’
That finding of possession enabled the Court to conclude that the plaintiff’s security interest was duly perfected under PPSA s21. At stake were funds amounting to $ 27m.
Moving away from the facts of Dalian, this general proposition — ‘held, and actually then possessed’ — raises an important conceptual, yet very practical, issue. The phrase ‘to hold’ is common usage. In a banking context, funds are often described as held in a bank account. Does ‘holding’ however necessarily equate to the legal concept of possession in the PPSA?
This article focuses only on the issue of possession of the particular collateral for the purposes of PPSA s21, although that is by no means the only controversial issue arising on the facts of Dalian. In particular, the article makes no comment on the Court’s analysis of the arrangement as creating a security interest or of the relationship between the trustee and the plaintiff.
The article commences by placing the general issue in context, exploring the meaning and purpose of ‘perfection’ as a concept under the PPSA. It then examines the statutory basis on which perfection of a security interest may be obtained by possession and the meaning of ‘possession’ in that context. While the wording of the relevant PPSA provisions may in places be ambiguous, the article contends that possession is generally only available as a means of perfection under PPSA s21 where collateral has a physical manifestation and that the extended circumstances set-out in PPSA s24 offer no basis for modifying that general rule when the collateral in question is funds held in a bank account.
In exploring the issue, the article draws by way of comparison on equivalent legislation in Canada and New Zealand, whilst noting the observations made in 2018 by the Full Court of the Supreme Court of South Australia in Samwise Holdings Pty Ltd v Allied Distribution Finance Pty Ltd:
‘While many of the key concepts in the PPS Act are drawn from, and reflect, the legislation in these jurisdictions, and in particular the legislation in New Zealand and Canada, the PPS Act is ultimately something of an amalgam of the legislative experience in these jurisdictions rather than a direct transportation of any particular legislative regime into Australia. There are differences of expression and detail between the PPS Act and each of the other legislative regimes. Thus, while authorities from these jurisdictions are of some assistance in understanding the operation of the PPS Act, it cannot be assumed that they will have direct application.’
 
 
Force majeure and frustration: an overview of the case law
By Jeffrey Goldberger
 
In this age of COVID-19 many contractors are scrutinising their contracts to identify a provision affording them relief from obligations which have become impossible to perform or where the contracts containing those obligations have become uneconomic because of the impact of the virus. Routinely, a force majeure clause will be invoked to meet the challenge.
The expression ‘force majeure’ is not a defined expression or term of art in Australian or English law and it is rare for the expression to appear otherwise than as a heading to a clause. There is no doctrine of force majeure corresponding to French law. The expression is conventionally used to identify a clause in a contract which provides relief either by way of suspension or on occasions cancellation of obligations following the occurrence of one or more of a catalogue of events specified in the clause which prevent, delay or hinder performance. Typically, the clause requires:
(i) that the occurrence of the event is beyond the reasonable control of the party affected; and
(ii) that the affected party must take reasonable steps to minimise the effects of the event.
Whether such a clause is effective to afford relief to a contractor in any given situation turns upon the proper construction of the clause in its application to the event or events which have occurred. This process of construction is governed by the principles of Australian law relating to the construction of contracts generally. These principles are reviewed in the article.

  • If I 'hold', do I therefore 'possess'? Perfection by possession under the Personal Property Securities Act 2009 (Cth)
    By Sheelagh McCracken
    page 3
  • Force majeure and frustration: an overview of the case law
    By Jeffrey Goldberger
    page 12
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