by: Bill Hazlett,
Partner and Hannah Linossier, Lawyer
(published in the October 2013 property law special edition of the Victorian Law Institute Journal)
Part IVA of the Landlord and Tenant Act 1958 (L&T Act) which dealt with the disposal of uncollected goods has been repealed and replaced by Part 4.2 of the Australian Consumer Law and Fair Trading Act 2012 (the Act), which came into effect on 1 September 2012.
The replacement of the old uncollected goods provisions with Part 4.2 of the Act reflects the position that goods left behind by tenants constitute an “involuntary bailment” arrangement, rather than an aspect of landlord and tenant law.
The Act is intended to enable bailees to dispose of bailors’ uncollected goods in a manner that is equitable to both parties’ interests. Therefore Part 4.2 allows landlords and tenants to reach their own agreement about the disposal of uncollected goods (s56(6) of the Act), and where an agreement about the disposal of uncollected goods already exists between the parties, the Act only applies to matters not dealt with by the agreement (s56(4) of the Act).
Part 4.2 also preserves the operation of any common law rights a person may have about the recovery of goods, or compensation for the loss of, or damage to, goods except to the extent to which the Part otherwise provides (s57 of the Act).
Part IVA of the L&T Act allowed a landlord, at the landlord’s own cost, to remove and store any goods left at the end of a lease which the tenant failed or refused to remove (s42B(1) of the L&T Act).
If there was no claim of ownership over the uncollected goods from the tenant, the landlord could sell the uncollected goods by public auction three months after recovery of possession of the premises (s42C(1)(b) of the L&T Act). However, the landlord had to serve one month’s prior notice of his or her intention to sell the goods on every person he or she knew had an interest in the goods, and place a notice in a newspaper published in Melbourne and circulating throughout Victoria and the district in which the premises were situated (s42C(1)(a) of the L&T Act).
|A new part to the Australian Consumer Law and Fair Trading Act is intended to enable bailees to dispose of bailors’ uncollected goods in a manner equitable to both parties.
The landlord could deduct from the proceeds of the sale the costs incurred due to the removal, storage, sale and preservation of the uncollected goods. Any money remaining three months after the sale, together with any interest, had to be paid to the Registrar of Unclaimed Money, to be placed to the credit of the Consolidated Fund (s42D(1) of the L&T Act).
The new law – part
4.2 of the Act
Part 4.2 now applies to the possession of goods under bailment, regardless of whether possession was taken before or after the commencement of Part 4.2 (s56(1) of the Act). However, Part 4.2 does not apply to a lease or other agreement to which Part IVA of the L&T Act applied immediately before it was repealed (s56(5) of the Act).
Also, Part 4.2 does not apply to goods left behind at the end of a tenancy agreement to which the Residential Tenancies Act 1997 applies, to unsolicited goods (s56(2)(b) of the Act), and to certain goods and vehicles under other legislation specified in s56(2) of the Act.
New terminology – “receiver”, “provider” and “relevant” charge
The Act defines:
- a “receiver” as the person who takes possession of the goods under a bailment (s3 of the Act), effectively replacing “landlord”;
- “provider” as the person who gives possession of goods under a bailment (whether or not the person is the owner of the goods) (s3 of the Act), and replaces the “tenant”; and
- a “relevant charge” as the amount payable by the provider to the receiver for goods under bailment that entitles the provider to take delivery of the goods (s55(1) of the Act).
The amount payable to the receiver, unless determined otherwise by a court order, is the sum of the cost of any carriage or storage of the goods or their repair, cleaning, treatment or other work done in connection with them. It also includes the receiver’s cost of any storage, maintenance or insurance of the goods from the giving of a notice of intention to dispose of the goods until their disposal, or from the making of an application for a court order under Division 3 of Part 4.2 (s55(2)(b) of the Act).
The amount may be agreed between the provider and the receiver (s55(2)(a) of the Act), or, if there is no agreement, it will be an amount that is reasonable (s55(2)(a) of the Act). If a dispute arises about the amount, either party can apply to a court for an order to determine it (s69 of the Act).
When do goods become uncollected goods?
Section 54 provides that goods under bailment are uncollected goods if:
- they are ready for delivery to the provider as required by the terms of the bailment, but the provider has not taken delivery and has not given directions as to their delivery (s54(1)(a) of the Act); or
- the receiver is required to give notice to the provider when the goods are ready for delivery but cannot locate or communicate with the provider (s54(1)(b) of the Act); or
- the receiver can reasonably expect to be relieved of any duty to safeguard the goods on giving notice to the provider but cannot locate or communicate with the provider (s54(1)(c) of the Act); or
- the provider has not paid the relevant charge within a reasonable time after being informed by the receiver that the goods are ready for delivery (s54(1)(d) of the Act).
However, the goods are not uncollected goods if the provider’s failure to take delivery arises from the receiver’s refusal to deliver them or the receiver prevents the provider from taking delivery (s54(2) of the Act).
The introduction of categories of uncollected goods, defined by their value, is a significant change from the old provisions.
Different sale and procedural requirements apply to low-value goods (less than $200), medium-value goods ($200 to $4999) and high-value goods ($5000 and above).
A receiver can dispose of low-value uncollected goods if the provider is given written notice of the intention to dispose of the goods (s60(1)(a) of the Act) and the provider has not taken delivery of the goods, or given directions as to their delivery, within 28 days of the provider’s giving the notice (s60(1)(b) of the Act). If the receiver cannot locate or communicate with the provider to give the notice, after making reasonable attempts to do so, the receiver can dispose of the goods 60 days after they became uncollected goods (s60(2) of the Act).
The goods may be disposed of by sale, destruction, appropriation or any other means (s60(3) of the Act).
The receiver is also required to give written notice to the owner of medium-value goods (s61(1)(a) of the Act). If the provider or owner has not taken steps to recover the goods within 28 days of service of the notice, the goods may be disposed of (s61(1)(b) of the Act). If the provider or owner cannot be located, the goods may be disposed of at the end of 90 days after they become uncollected goods (s61(2) of the Act) by public auction or private sale. Reasonable care must be taken to ensure that the goods are sold for the best price reasonably obtainable, having regard to the circumstances when the goods are sold (s61(3) of the Act).
The receiver must also notify any person who has a publicly registered interest in the goods and any person who they are aware has or claims an interest in the goods (s62(1)(a) of the Act). A “publicly registered interest” is defined as an interest in goods that is recorded in the register within the meaning of the Personal Properties and Securities Act
2009 (PPSA) if the goods are described by serial number in that register or in any register prescribed by the regulations.
Therefore, the receiver must search the PPSA register to determine if any person has a security interest in goods described by a serial number before taking any action on goods valued over $5000.
If the receiver has made reasonable attempts to contact the provider, owner or person with a publicly registered interest, and they cannot be located, then the goods may be disposed of 180 days after the goods become uncollected goods (s62(2)(b) of the Act) by public auction or private sale (s62(3) of the Act). If the goods are disposed of by public auction, the goods must be advertised for, or the auction held over, a period of seven days (s62(3) (a) of the Act).
The goods can only be sold by private sale where notice has been given to the provider or owner and the receiver has a reasonable belief that that is the only way to achieve the best price (s62(4) of the Act). The receiver must also take reasonable care to ensure that the goods are sold for the best price that can reasonably be obtained, having regard to the circumstances at the time (s62(4)(c) of the Act).
A receiver is not required to advertise the intention to sell the goods in a Melbourne newspaper.
Although the classifications are defined by the value of the goods, there is no direction as to how the value is determined.
Relationship with the Personal Property Securities Act 2009 (PPSA)
The Act does not provide any guidance about the priority of a receiver’s right to sell uncollected goods when a competing, registered security interest exists. Further, whether or not a receiver can sell low and medium-value goods subject to a registered security interest is not specifically dealt with.
Section 8(1)(b) of the PPSA provides that the PPSA does not apply to a lien, charge or any other interest in personal property that is created, arises or is provided for under a federal, state or territory law, unless the person who owns the property in which the interest is granted agrees to the interest. Section 8(2) then provides that despite s8(1), s73 also applies.
Section 73(1)(a)(i) states that an interest in collateral has priority over a security interest in the collateral if the priority interest arises under a federal, state or territory law and arises from providing goods and services in the ordinary course of business.
Accordingly, the applicability of the PPSA to uncollected goods at the end of a commercial lease may depend on whether the lease is considered a service provided in the ordinary course of business.
We recommend that practitioners closely follow developments between the Act and the PPSA requirements.
Records of sale
The receiver must create a record of the details of the sale of uncollected goods within seven days of their disposal (s74 of the Act) and retain the record for six years from the date of disposal (s74(2)(a) of the Act).
A failure to keep adequate records constitutes an offence under the Act (s74(1) of the Act).
Proceeds of sale
Once uncollected goods are sold, the receiver is entitled to retain the relevant charge and the disposal costs (s73(1) of the Act). The balance of the proceeds is then to be dealt with as if the receiver was a business and the money was unclaimed money under the Unclaimed Money Act 2008 (s73(2) of the Act).
If the proceeds of the sale are insufficient to pay the relevant charge and disposal costs, the receiver may recover the deficiency from the provider as a debt in court (s73(3) of the Act).
Rights of the purchaser of uncollected goods
The purchaser of goods sold under Division 2 of Part 4.2 acquires good title to the goods (s75(1) of the Act), unless the purchaser received notice of any failure by the receiver to comply with the Act, or is aware of any defect or want of title of the provider (ss75(1) (a) and (b) of the Act).
A receiver who disposes of low-value goods by appropriation also acquires good title to the goods (s75(2) of the Act).
The LIV lease of real estate (LIV lease)
The Act enables a provider and receiver to make an agreement about the disposal of uncollected goods that excludes provisions contained in Par t 4. 2 (s56(4) and (6) of the Act).
The LIV Lease has been varied to classify and outline procedures for dealing with uncollected goods and to exclude the operation of Part 4.2. The relevant clauses are:
“If the tenant leaves any tenant’s installations or other tenant’s property on the premises after the end of the lease, unless the landlord and tenant agree otherwise–
“5.1.3 all items of the tenant’s installations and tenant’s property will be considered abandoned and will become the property of the landlord, but the landlord may remove any of the tenant’s installations or other property and recover the costs of removal and making good as a liquidated debt payable on demand; and
“5.1.4 the parties intend that clause 5.1. 3 operate in place of any legislation that might otherwise apply to goods remaining on premises”.
When entering into LIV Leases after 1
September 2012, care should be taken to ensure that the amended clause is included in the copyright conditions or by a special condition.
Part 4.2 provisions are more onerous than those of the L&T Act as they require different processes for goods of different value. However, they allow the landlord and tenant f lexibility to negotiate an agreement about uncollected goods to suit specific circumstances.
Landlords of commercial and retail tenancies not governed by the LIV Lease who wish to avoid the application of any unsuitable provisions of the Act should consider inserting provisions that comprehensively deal with the disposal of uncollected goods and exclude Part 4.2.
As the new provisions are located outside the familiar territory of leasing and property law, practitioners need to understand both how to enforce and how to avoid their application.