WA Homework Question - Help with a Property Law Problem Question?

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17 September 2018
Need some assistance with a Property Law problem question, I can see that this question involves the issue of bailment but I'm not sure what the liability of a third party would be.


Carl Cardealer had a large stock of unsold vehicles and needed finance with which to conduct his business. He entered into a loan agreement with Fast Finance which provided that he could sell them to Fast Finance for 90% of their cost, retain possession of the vehicles as bailee for Fast Finance, sell them to customers in his own name and then refund to Fast Finance the amount previously received, interest-free if the customer entered into a credit agreement with Fast Finance but with interest if the customer paid cash. This is known as “floor plan” or “display plan” financing.

This worked well for some time but then Carl got into further financial difficulties, becoming indebted to Fast Finance and to Andy, another motor vehicle dealer.

As a result Fast Finance told Carl that Carl’s authority to sell any vehicles for which Fast Finance had paid Carl was withdrawn. Andy was aware that many motor vehicle dealers obtain finance through floor plan or display plan financing.

Andy had sold Carl three cars and been paid by cheque, but Carl’s cheque for $30,000 had been dishonoured on presentation. Andy pressed Carl for payment, and Carl assured Andy that the financial difficulties were temporary and that if Andy re-presented the cheque in seven days it would be paid. As security, Carl offered to let Andy select cars to the value of $30000 which Andy was to return if the cheque was met but could resell if it was not.

Andy came around to Carl’s place of business after hours and selected three vehicles at specific prices which made up $30000. In respect of each vehicle, Carl signed a declaration that Carl was the sole owner and that no other person had any interest in the vehicle. This was false, as Carl was holding these vehicles pursuant to the agreement with Fast Finance. When Andy represented the cheque, it was again dishonoured and Andy resold the vehicles.

Fast Finance wishes to sue Andy in conversion for the value of the vehicles. Advise Fast Finance.

Would your answer be different if Carl had sold and delivered the vehicles to Fast Finance and then Fast Finance returned them to Carl with a cheque for 90% of their cost, after which Carl held them as bailee for Fast Finance and sold them to customers?

Rob Legat - SBPL

LawTap Verified
16 February 2017
Gold Coast, Queensland
As a first step, I suggest you consider the operation of the Personal Property Securities Act 2009 (Cth), particularly with regards to what is deemed notice of an interest.