Deemed Security Interest, Power Rental v Forge Group, and
Video Games Ltd is an Australian company which Joanna Heller runs. Joanna
imports video game consoles from Japan and sells them through electronics retail
stores in Perth, Sydney, Melbourne and Brisbane. The contractual terms and
conditions with each one of the stores state that Joanna ships 50 consoles to
each store for a period of 3 months. Under the agreement, the Joanna receives a
weekly payment of 88% for each sold console (i.e. the value of each sold console
minus 12% commission of the store). Upon the end of the 3 month period, the
stores must ship the unsold consoles back to Joanna. Joanna's accountant, who is
not familiar with PPSA, does not register security interest for the consoles for any
of the stores.
This arrangement worked well with all retail stores, except two: (1) Brisbane
Store and Perth Store:
Brisbane Store: the owner of this store, Jacob did not like the suggested
arrangement as he thought that there was a good chance that most of consoles
would be sold during the Christmas week, which fell outside of the 3 month
period. Accordingly, in his negotiation with Joanna, he insisted on having the
option to purchase any of the unsold consoles at the end of the 3 month period.
Joanna happily agreed with this request and the parties incorporated it in the
agreement. Unfortunately, a month after the delivery of the consoles, Brisbane
store experienced serious financial difficulties. While no Insolvency Administrator
was appointed, the store did not to pay its weekly payment to Joanna;
Perth Store: in contrast to other stores, this was a new store. The original location
was well known for years as selling fresh vegetables and fruits products.
However, the store was sold to Mary, who decided to move into the new business
of selling electronics. Right before signing the agreement with Joanna, Mary sent
a letter to all her suppliers, introducing herself and describing the nature of the
new business. Unfortunately, and similar to Brisbane's Store, Perth's store faced
severe financial difficulties. The Insolvency Administrator has been appointed
and no payments are made to Joanna.
Would Joanna be able to repossess the consoles from the Brisbane
In the case with the Brisbane Store, Joanna's company had an agreement that allowed the
store owner to buy unsold consoles. This created a legal right for Joanna's company over the
consoles. However, this right needed to be registered under the law to be fully protected.
Since it wasn't registered, Joanna might face challenges in repossessing the consoles if the
store faces financial trouble.
In simple terms, because the legal right wasn't officially recorded, Joanna's company might
have a harder time getting back the consoles from the Brisbane Store if the store can't pay.
Legal rules can be complex, so getting specific advice is importan