It is said that love is blind.  It is also said that love can make people do some funny, perhaps even crazy things.  Those observations might explain why acts are done within families and personal relationships that would not be advised by a sage, circumspect legal practitioner.  Often those acts within families occur without any contemplation of the love apparently underlying those acts ever going wrong.  It is usually only when that love has gone wrong that the family members seek legal advice to recover the goods, possessions and / or money that were part of the original transaction.  Sober, dispassionate attention is required when considering such family arrangements and the introduction of that attention to the family fold is not always greeted with great love and affection by the family members.

Almost without exception the ultimate question the Court will ask in respect of those now seemingly controversial family arrangements is whether in all of the circumstances “the parties intended to subject their agreement to the adjudication of the courts”.   (See Morais & Anor -v- Mills [2010] QDC 237 per Dorney QC DCJ at para [9])

A Court charged with the responsibility of determining whether particular family arrangements enjoy the benefits and responsibilities that derive from an intention to create legal or contractual relations will tell you that for there to be a legally enforceable duty the following must be present:  
•    Identifiable parties to the arrangement;
•    Certainty in the terms of the arrangement; and
•    Generally, real consideration for the agreement, unless recorded as a deed.
(See Morais & Anor -v- Mills [2010] QDC 237 per Dorney QC DCJ at para [7])

The Court will make an objective assessment of the state of affairs between the parties to determine what the terms of any family arrangements may mean, rather than enquire as to what each of the parties subjectively intended to achieve. (See Morais & Anor -v- Mills [2010] QDC 237 per Dorney QC DCJ at para [7])   The onus of proof lies on the party alleging that legal relations have been created. (See Morais & Anor -v- Mills [2010] QDC 237 per Dorney QC DCJ at para [10])

Relevant considerations for an inquiry in relation to the existence of such an intention are as follows:  
•    The subject matter of the agreement;
•    The status of the parties to the agreement;
•    Their relationship to one another; and
•    Other surrounding circumstances.
(See Morais & Anor -v- Mills [2010] QDC 237 per Dorney QC DCJ at para [7]

Two areas where one might see family arrangements lead to enquiries about litigation are:
•    Leasing real property to family and friends; and
•    Lending money to family and friends .

Leasing Real Property To Family and Friends
It is not uncommon for families to let out real property they might possess to family or friends. Often such an endeavour is undertaken without anyone involved obtaining legal advice as to the implications of the arrangements or perhaps even recording the arrangements in writing. Should that relationship not progress as planned, such as the tenant not making the rental payments in accordance with the agreement, the landlord might seek to enforce the tenancy agreement he or she contends is in place.  In those circumstances the Plaintiff Landlord would need to demonstrate that:
•    Legal relations have been created between the Plaintiff Landlord and the Respondent Tenant; and
•    The subject tenancy agreement was always one where the Tenant would be sued in the courts for any outstanding rent.
A failure to do so will invariably lead to the Court concluding that no relevant intention to create legal relations existed between the parties.   The Landlord would then not be able to rely upon that avenue of potential recovery.

Lending Money To Family and Friends
Other family dealings worthy of consideration here are those that involve the lending of money to family or friends.  Once again it is not uncommon for money to be loaned to family members or friends in circumstances where none of the participants involved obtain legal advice as to the implications of the arrangements.  Further it is also not uncommon for those arrangements not to be recorded in writing.

Should a situation arise within that relationship whereby the lender contends that the borrower has not made relevant payments under the loan agreement, the lender may wish to have recourse to the courts in order to recover the money he / she says is outstanding under the loan agreement.  Unless the Plaintiff Lender can prove that he / she would subject that Defendant Borrower to being sued in the courts for the return or repayment of the money, the Court is unlikely to find a relevant intention to create legal relations existed between the parties.   What was contended by the lender to be a loan would be seen to more akin to a gift.  Once again the borrower would then not be able to rely upon that avenue of potential recovery.

Conclusion
When relationships sour and/or love goes wrong the parties involved tend to look at their relevant relationships differently from when they were first created.  Return or recovery of goods, possessions and/or money is sought in circumstances where it may not have been, had the relevant relationship conformed to its originally planned path.  The path the court takes in such circumstances is not one similarly prone to change.  If it can be demonstrated that the parties intended to subject their agreement to the adjudication of the courts, then the courts will continue to entertain the matter. A failure to demonstrate that intention to create legal relations on the part of the relevant parties will invariably leave the parties without the assistance of the courts to resolve their dispute.

Those seeking to embark upon family dealings which do not manifest an intention to create legal relations would do well to consider the implications of that failure before they conclude their dealings.

Ross Bowler LLB

Consumers can not only be affected by the Personal Property Securities Act 2009 (Cth) ("PPSA"), they may have rights that warrant enforcing. This hypothetical factual scenario hopes to shed some light on that world.

The Student Share-House
Four university students live in rented accommodation whilst they undertake their full-time studies. With their combined resources they are also able to afford to furnish that accommodation with some relevant necessities by undertaking a chattel lease of some personal property. In so doing they may find that they come within the reach of the PPSA.

Homeware Rentals is a business that rents out such personal property in the ordinary course of its business and its customers sign contracts of lease recording the terms and conditions of that rental. For the purpose of this exercise I will assume that lease is simple and not controversial. The students would undertake to make the lease payments in accordance with the contractual terms and Homeware Rentals agree to provide the relevant subject personal property to them for the duration of the lease.

It should be noted that the transaction with the students is considered to be a consumer transaction under the PPSA. This gives it special status, as we will see. (See ss.42, 46-47 PPSA)

Register Security Interest
In order to protect its interests Homeware Rentals registered the security interest that arose in respect of that property and obligation on the Personal Property Securities Register (PPSR). As the students do not have a security interest in the relevant property, they had nothing to register in respect of the property.

Importantly also, Homeware Rentals has borrowed money from Worstpac Bank. To secure its obligations, Worstpac Bank registers a security interest over all of the goods of Homeware Rentals. These goods include the ones leased by the students. Therefore the goods of the students are subject to the following security interests:
1     In favour of Homeware Rentals (first security interest); and
2     In favour of Worstpac Bank (second security interest).

Receivers Appointed
Hard times fell upon Homeware Rentals and Hardball Receivers were appointed to it as a result of an application to the Court by a major secured creditor, Worstpac Bank. On behalf of Worstpac Bank, Hardball Receivers would seek to recover as much of the money owing to Worstpac Bank by Homeware Rentals as possible, if not all of it. One of the ways open to it to do this is by seizing the goods of Homeware Rentals and selling them. (Ss.123, 125, 128) It seems though that Worstpac Bank cannot take possession of the subject goods because the students are protected by s47(1) PPSA. Under this section, the students take free from any security interest, because the goods are consumer goods.

The effect of this is that the students will only need to deal with Homeware Rentals; they will not face the prospect of Worstpac Bank showing up and resuming or repossessing the subject goods. In a way this retains the contractual nexus between Homeware Rentals and the students.

Power To Seize Collateral
Homeware Rentals is a secured party in respect of the goods by virtue of the first security interest. S123 (1) of the PPSA gives it the power to seize collateral or the goods the subject of the lease, by any method permitted by law, if the students are in default under the first security interest.

While Worstpac Bank is not entitled to exercise its rights to seize the goods under the second security interest (s47(1) PPSA), s53 PPSA allows Homeware Rentals to stand in the shoes of Worstpac Bank to recover the chattels.
   
Position of The Students
There are two relevant considerations for the students:

1     They are not in default under their lease with Homeware Rentals - so Homeware Rentals has no right to seize the goods on its own account (under the first security interest).

2     But what about the interest of Worstpac Bank under the second security interest? While Worstpac Bank itself seems to have no rights directly over the goods (they are exempt - s47(1)), Homeware Rentals may stand in its place to recover money owing. The way in which this provision will operate is perhaps a little unclear. However, it is likely that so long as the students are not in breach of their agreement with Homeware Rentals, they can continue to keep the goods free from threat.

How Do Consumers Go About Enforcing Their Rights?
There is plenty of assistance available for consumers, such as our students, to enforce their rights. Community legal centres, consumer law advice services and even student service centres in universities are equipped to provide advice and education on consumer rights. See for example http://www.caxton.org.au/consumer_law.html

Conclusion
What is your view of the operation of these provisions? They seem to point towards protection of the consumer: is it feasible that the students would lose their goods to Worstpac Bank?

Ross Bowler LLB

In Provident Capital Ltd v Anderson & Anor [2012] NSWSC 525 Adamson J was asked to consider the following legal concepts: Family Law; Interlocutory injunction; priorities; personal property; restrain from dealing; contract; equity; purchaser for value without notice not bona fide; delay; lack of frank disclosure to the Court.

The Facts
By Deed of Loan dated 21 December 2006, Provident (“the Plaintiff") lent the First Defendant (“D1") the sum of $5.7m. On the same day, in order to secure the monies advanced, D1 granted a goods mortgage to Provident (the Goods Mortgage) and a real property mortgage over the property known as "Barry Station".

The effect of the Goods Mortgage was to charge all of the personal property of D1 that was intended to be, or which was in fact, used for his farming business, wherever it was conducted.

On 25 June 2010, by short form of statement of claim for possession against a mortgagor, Provident commenced these proceedings against D1 seeking a judgment for possession of Barry Station (the Possession Proceedings)

On 26 August 2010, D1 and the second Defendant (“D2") filed consent orders in proceedings brought by D1 against D2 in the Family Court (the Family Court Consent Orders)

By application filed on 11 May 2011 in the Possession Proceedings, Provident applied for an order to join D2 as second defendant and also sought orders restraining her from disposing of cattle which have been removed from Barry Station. D2 was joined as second defendant to those proceedings.

On 30 April 2012, it came to the attention of Provident that D2 had advertised four items for sale on an Internet site, one of which was already listed as sold.

By letter dated 2 May 2012, solicitors for the Plaintiff brought this matter to the attention of solicitors for D2 and requested undertakings that no further items be sold and that the proceeds of any sold items be paid into court or into a controlled money account.

On 3 May 2012, solicitors for D2 advised solicitors for Provident that three of the four items had in fact been sold and gave the undertakings sought until 17 May 2012.

By oversight, the solicitors for Provident did not take any further action to obtain either an extension of the undertakings of an order of the Court until 15 May 2012, when the solicitors for Provident realised the imminent expiry of the undertakings.

On 16 May 2012, Provident sought an extension to those undertakings which was not forthcoming.

Accordingly, on 16 May 2012, Provident approached the Court for short service.

On 17 May 2012 the interlocutory application was heard.

The Law
The task to be undertaken in an application such as this is to determine:
•    Has the Applicant established that it has a prima facie case; and
•    Where does the balance of convenience lie.
•    Are there any disentitling matters which may make the grant of relief inappropriate?

Prima Facie Case
 “The plaintiff must show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial."
(See Beecham Group Ltd -v- Bristol Laboratories Pty Ltd [1968] HCA 1; 118 CLR 618 at 622-623 & Australian Broadcasting Corporation -v- O'Neil [2006] HCA 46; 227 CLR 57 per Gummow and Hayne JJ at [65])

In determining the facts relevant to such an application, the Court is not entitled to determine facts on any final basis.
(See Shercliff -v- Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 724 and 1st Fleet Pty Ltd -v- Australian Cooperative Foods Ltd [2006] NSWSC 881 per White J at [5])

Balance of Convenience
Relegation from secured creditor to unsecured creditor was sufficient prejudice to warrant the interlocutory injunction orders being made in this case.

Disentitling Matters
The Court found there were no disentitling matters, such as delay, which would make the grant of relief inappropriate.

Result
The Court granted the relief sought by The Plaintiff.

Conclusion
Of itself this case may not be particularly remarkable. However it is a useful reminder that the reach of the family law goes well beyond the Family Court and into the commercial law arena.

Ross Bowler LLB