StockCo Agricapital Pty Ltd v Dairy Livestock Services Pty Ltd

Chronology of key facts

1. Affidavit evidence was presented by both parties, and at the hearing on 28 and 29 October there was some short cross-examination. But as a result of the way the arguments have fallen out, it is not necessary to resolve any factual disputes.
2. At all relevant times, Reid Agricultural was controlled by members of the Reid family. The Reids were graziers near Moama in Victoria. Three members of the family come into this judgment. They are Pamela Gwenda Reid, Michael William Reid and Bradley Michael Reid. Michael Reid and Pamela Reid are husband and wife. Bradley Reid is their son.
3. Reid Agricultural was incorporated in July 2010. At all times relevant for the purposes of these proceedings, its shareholders were Pamela Reid and Michael Reid, who each held six of the twelve shares on issue. Pamela Reid was the sole director and secretary. Bradley Reid was not a shareholder or officer of the company, although the company search shows that he had previously been both.
4. The Reids also had a family trust, known as the Reid Family Trust. The Trust was established by trust deed in June 2010. Initially Bradley Reid was the trustee. He was replaced by Reid Agricultural in February 2013. The business of the Trust was registered on the Australian Business Register, and allocated an Australian Business Number ("ABN"), under the name "The Trustee for the Reid Family Trust".
5. The events which are relevant for the purposes of this judgment began in early September 2016 when the Reids established a credit account with DLS for Reid Agricultural. The documentation consisted of a standard form application for a commercial trading account. This was signed by Michael Reid and Pamela Reid as directors of Reid Agricultural, although in fact Michael Reid does not appear to have been a director at the time. The application form disclosed the applicant as "Reid Agriculture" and gave the applicant's ABN as that of the Reid Family Trust.
6. The credit application included a standard set of "general credit terms". It also incorporated standard livestock auction terms and conditions of sale. The general credit terms provided that the customer granted DLS a Purchase Money Security Interest ("PMSI") and a Security Interest ("SI") over, in general terms, stock supplied by DLS.
7. The application was accepted by DLS on 6 September. In its accounting database DLS allocated a new account number, the account name for which was recorded as "Reid Agriculture TTF Reid F/Trust".
8. On the following day, 7 September, DLS registered a PPSA financing statement against the Trustee for the Reid Family Trust (using its ABN) as grantor. The statement described DLS' security as covering all livestock "supplied, provided or otherwise made available by or through the secured party to the grantor from time to time". The security was identified as being a PMSI.
9. Scott Alistair Lord, who is a director of DLS, was responsible for its dealings with the Reids. In his affidavit, Mr Lord stated that in about mid-November 2016 he had a telephone conversation with Bradley Reid to the following effect: Reid: We are looking at buying store cattle to trade within a StockCo finance facility. The loan has not been approved yet. StockCo has requested that an agent manage the purchasing of the cattle. Is DLS comfortable with being the agent? DLS can charge a fee for commission when the cattle are sold. Lord: We will charge commission of $25 plus GST per head. Are you going to pay all of the associated expenses? Reid: Can DLS pay them and take out of sale proceeds. My intention is to buy lighter unfinished stock, to feedlot them for 70-90 days and then market them as slaughter finished stock. Lord: Spring weaners are too fresh in condition and need to be backgrounded prior to entering a feedlot. Reid: Can you identify an agistment location that the cattle can be placed on before going to the feedlot? Lord: We do have a property near Sunbury available, however they will ask us to guarantee payment. Who will be paying the agistment, trucking, feedlotting and animal husbandry accounts? Reid: If DLS can pay these costs and take these charges from the sale proceeds when livestock are sold. Lord: If you are happy with this agistment, we can arrange. How are you intending to purchase the livestock? Reid: I am planning on attending a number of auctions. I will let you know what the market is like and if anything suitable comes up, we can make a start. Lord: There are some opportunities on Auctions Plus. I will monitor this on a regular basis for you. I will let you know if there is anything suitable.
10. This evidence was not disputed. The parties referred in their submissions to the agreement contained in the telephone conversation as the "Maintenance Agreement".
11. The first purchases of the cattle the subject of these proceedings took place before the StockCo facility to which Bradley Reid referred had been established. The earliest purchase was made by DLS on 22 November. It consisted of twelve cattle purchased from SCA (which appears to have been Bradley Reid's own company) for $20,400. A further purchase followed on 28 November (17 cattle from SCA for $19,550). When DLS effected the purchases, it issued tax invoices to the Trustee for the Reid Family Trust using the ABN and corresponding account number for the Trust which had been allocated in September.
12. The StockCo facility was established in early December. The documentation took the form of a letter of offer within a facility term sheet. It described the "client" (customer) as Reid Agricultural, both in its own capacity and as trustee of the Reid Family Trust, and specified a facility limit of $500,000 plus GST. The offer was accepted by Michael Reid and Pamela Reid, and dated 6 December. It was accompanied by a printed form of agreement described as a "Master Livestock Agreement". The Agreement was signed on behalf of Reid Agricultural by Pamela Reid as sole director/secretary. Her signature was witnessed by Bradley Reid.
13. I will refer to the terms of the Master Livestock Agreement in more detail below. At this point it is enough to say that the Agreement provided that stock acquired under the facility were acquired by the customer as agent for StockCo. The customer was required to sell the stock (again, as agent for StockCo) at the end of a defined period, whereupon the proceeds were to be used to repay StockCo, with the customer receiving the balance. Under the Agreement the customer also granted a security for the purposes of the PPSA over such stock, any product derived from the stock, and any proceeds thereof. The Agreement also gave StockCo a general security over all of the customer's livestock, whether purchased under the facility or not.
14. On 6 December, following execution of the Master Livestock Agreement, StockCo registered PPSA financing statements to notify its interest under the Agreement. Two financing statements were registered. One notified StockCo as holding a PMSI. The other notified that StockCo held a non-PMSI interest (reflecting StockCo's general security). In each case the grantor was identified as the Trustee for the Reid Family Trust, using its ABN. The collateral specified was "all present and after acquired livestock over which the grantor has granted a security interest to the secured party".
15. StockCo's practice was to require its customers to sign a written supplementary agreement prepared by StockCo specifying the particulars of the purchase. Once this had happened, StockCo would arrange for the funding of the purchase to proceed on or by a specified "payment date", when property in the stock would pass. Repayment was due by a specified "delivery date".
16. Once the StockCo facility had been established, steps were taken so as to treat the two November purchases by DLS as purchases under the StockCo facility (in the meantime, the purchase price for the 22 November purchase had in fact been paid on 2 December; the 28 November purchase was paid for on 8 December). A new account number was created in DLS' accounting system with the account name "Reid Agricultural Company Pty Ltd As Agent for StockCo". The corresponding ABN was different from that for the Reid Family Trust (presumably it was one belonging to StockCo). The November purchases were then re-invoiced to the new account.
17. Further purchases (a total of 55 cattle costing $77,946) took place on 9 December. These purchases were invoiced to Reid Agricultural as agent for StockCo on the new account. Payment was made by DLS to the vendors on 20 December.
18. In total there were seven purchases, or groups of purchases, by DLS. Details of the purchases are set out in the following table: Supplier invoice date Cattle Amount Date paid by DLS 1 22 & 30/11/16 29 $39,950 2 & 8/12/16 2 9/12/16 55 $77,946 20/12/16 3 13 & 16/12/16 148 $201,245 28/12/16 4 5/1/17 48 $74,681 17/1/17 5 6/1/17 79 $128,156 20/1/17 6 12/1/17 15 $17,175 13/1/17 7 24/2/17 23 $27,830 6/3/17 Total 397 $566,983

1. The first of the StockCo supplementary agreements was dated 21 December. This agreement corresponded with the cattle purchased by DLS on 9 December. A second agreement, also dated 21 December, corresponded with the 22 and 28 November purchases.
2. Seven StockCo supplementary agreements were ultimately signed or otherwise approved, purportedly on behalf of Reid Agricultural (there is a question about whether the signatures and approvals were effective, which I deal with later on). Details of the agreements are shown in the following table: Date of agreement Cattle Cost Specified payment date Date payment received by DLS 1 21/12/16 55 $78,023 23/12/16 28/12/16 2 21/12/16 29 $39,950 23/12/16 28/12/16 3 23/12/16 148 $201,245 23/12/16 28/12/16 4 10/1/17 48 $74,681 12/1/17 5/1/17 5 11/1/17 79 $128,156 17/1/17 6/1/17 6 19/1/17 15 $17,175 19/1/17 19/1/17 7 1/3/17 23 $25,300 7/3/17 13/3/17 Totals 397 $564,530

1. In each case the delivery date was three months after the payment date. The table also shows the approximate date on which DLS received payment for the cattle the subject of the agreements, according to Mr Lord's affidavit.
2. The total amount financed by StockCo was slightly less than the total cost of the purchases paid for by DLS. This difference is attributable to the seventh purchase. No point was taken about it.
3. Based on the dates given in the table, DLS was paid for the stock the subject of the fourth and fifth agreements before those agreements were made. This seems curious, but Mr Lord was not asked about it in cross-examination.
4. Starting on 11 December, most of the cattle purchased by DLS for Reid Agricultural under the StockCo facility were agisted at Diggers Rest, near Melbourne. The land was made available by Rodwells & Co Pty Limited ("Rodwells"), a related company of DLS. Rodwells accepted the cattle only on the basis that DLS guaranteed payment of the agistment charges.
5. At first, 55 cattle were agisted with Rodwells (the same number as were the subject of the second supplementary agreement). Thereafter the numbers built up to 330 (this number equates to the number of cattle in the second, third, fourth and fifth supplementary agreements). The agistment ceased on 19 February. DLS paid Rodwells' agistment charges.
6. On 20 February, 144 cattle were transported to Wanderribby Feedlot at Meningie in South Australia. There the cattle remained at least until May. DLS paid the Wanderribby feedlot charges.
7. On 28 February, 206 cattle were transported to a feedlot operated by Irwin Stock Feeds at Lang Lang in Victoria (also referred to in evidence as the Five Star Feedlot). DLS paid the Lang Lang feedlot charges (plus a charge from Rodwells for drench and vaccinations which were required before the cattle entered the feedlot).
8. The delivery dates under StockCo's supplementary agreements fell from 23 March onwards. On 31 March, an employee of StockCo wrote to Mr Lord confirming that StockCo had funded the purchase of 397 of Reid Agricultural's cattle and that the cattle were to be sold through DLS. The email gave notice that the proceeds of sale were to be paid directly to StockCo.
9. The next correspondence between StockCo and DLS in evidence dates from about five weeks later. At this stage the cattle were still unsold. Chris Stiven, an employee of StockCo, was responsible for dealing with Mr Lord and Mr Reid on StockCo's behalf.
10. From 5 May onwards, negotiations took place between Mr Stiven, Mr Lord and Mr Reid about the sale of the cattle. StockCo's position was that it was the owner of the cattle and it was entitled to all of the proceeds of sale (except DLS' direct costs). More than once, StockCo formally stated that it required DLS to account to it for the proceeds of the sales. For its part, DLS wished to obtain payment out of the proceeds for the amounts owing under the Maintenance Agreement.
11. The first sale, of 75 cattle, took place on 18 May. The cattle in question had been trucked from the Lang Lang Feedlot to Hargraves Abattoir at Kyneton. They netted $121,689.08.
12. Meanwhile the negotiations between the parties continued, culminating in a discussion which took place on 1 June. At that point the proceeds of the first sale had been received by DLS. DLS retained the sum of $118,924.78 and accounted to StockCo for the balance.
13. The monies retained by DLS represented costs the subject of the Maintenance Agreement up to 22 May, four days after the sale. The composition of the costs are shown in the following table: Payee Description Amount Rodwells Agistment 11/12/16 to 19/2/17 $11,741.65 Wanderribby Feedlot Charges 20/2/17 to 15/5/17 $48,402.80 Rodwells Invoiced drench & vaccinations 10/3/17 $820.13 Lang Lang Feedlot Invoiced charges 3/3/17 to 19/5/17 $57,950.20 Total $118,914.78

1. The second sale took place on 5 June and the third sale on 14 June. On 20 June, a three-way telephone conversation took place between Mr Stiven, Mr Lord and Mr Reid. Following the conversation, Mr Stiven sent an email to Mr Lord and Mr Reid giving his summary of what had been agreed.
2. The email recorded that StockCo was to provide Mr Reid with a reconciliation of the precise amount due under its facility and that Mr Reid proposed to settle any shortfall by making available additional cattle (not subject to StockCo's security). Once the amount owing had been identified, together with the number of cattle to be made available, application would be made to StockCo for the necessary funding. The next dot point stated: In the interim DLS will continue to hold the approximately $119,000 of retained proceeds in trust until further notice and subject to my correct understanding will pay other proceeds across to StockCo excepting the last sale which should be sufficient to pay remaining feed costs.
3. The email ended: Please advise if any of the above is not your understanding of our discussion.
4. Neither Mr Lord nor Mr Reid raised any dispute about what Mr Stiven had recorded, and there was no suggestion in these proceedings that Mr Stiven's account was inaccurate. Counsel for DLS accepted that DLS had expressly stated that it would account to StockCo for the proceeds of the second and third sales.
5. But when the proceeds of the second and third sales came in, they were paid across to Reid Agricultural. This happened because DLS had previously recorded Reid Agricultural's bank account details in its systems and failed to change the payment details before the proceeds of the second and third payments had gone out. The error was not discovered until about 12 July. The monies were never recovered from Reid Agricultural.

Claim for $118,924.78 retained by DLS from proceeds of first sale

1. The issue in substance is one of priority between DLS on the one hand and StockCo on the other. DLS' security was granted first in time and was the first registered. Generally this would be sufficient to give priority to DLS under the PPSA. StockCo, however, advanced various arguments contending that DLS had no priority in the circumstances of the present case.
2. StockCo's claim was formulated in several different ways in its Statement of Claim, but ultimately counsel for StockCo was content to proceed on the basis of an action for money had and received. In essence, StockCo's contention that it was entitled, whether as true owner or as prevailing security holder, to restitution of monies which in law belonged to it. Counsel for DLS did not dispute that if StockCo had been the owner of the cattle, or had held a security interest in the cattle which prevailed over DLS' interest, the action for money had and received would be available.
3. StockCo's claims to priority were put on two independent bases. The first contention was that StockCo was actually the owner of the cattle at the relevant time. The argument was that, as StockCo owned the cattle, Reid Agricultural had no capacity to create any security interest in it without StockCo's authority (relying on the maxim nemo dat quod non habet). StockCo's alternative contention was that if the PPSA applied, its security prevailed.
4. StockCo's case under the PPSA itself contained two alternatives. StockCo first relied upon its PMSI registration. Its contention was that its PMSI was entitled to "super priority" over DLS' earlier-registered security unless that security gave DLS a PMSI which extended to the proceeds of the first sale. StockCo contended that DLS' security did not give it such a PMSI. DLS both contested StockCo's "super priority" and contended that, in any event, it held a PMSI extending to the sale proceeds.
5. Alternatively, StockCo relied on its registered general security. StockCo's contention here was that DLS' failure to register its security as both a PMSI and general SI was fatal. StockCo accepted that DLS' security had initially been a PMSI, but pointed out that the purchase monies had been paid. StockCo's argument was that the effect of PPSA ss 164 and 165 was that the security was no longer valid as a PMSI and, no general (non-PMSI) security having been registered, the registration was wholly ineffective. This meant that StockCo's general security interest prevailed. As well as contesting the steps in StockCo's reasoning, DLS pointed out that StockCo had not pleaded reliance on its general security and contended that this alternative case was not available to StockCo.

Were the cattle "Stock" for the purposes of the Master Livestock Agreement?

1. Under the Master Livestock Agreement, StockCo had a general security over all cattle owned by Reid Agricultural, whether acquired under the StockCo facility or not. But StockCo's more powerful rights were limited to cattle financed under the StockCo facility. Such cattle were referred to in the Agreement by the term "Stock", which had the following definition: "Stock" means all livestock specified in the Schedule and in any Supplementary Agreement and in any subsequent amendment and includes all livestock of whatever description AND includes any born and unborn property of that livestock together with any existing or additional livestock that may be included with the Stock from time to time.
2. There was no schedule attached to the Master Livestock Agreement. The definition of "Supplementary Agreement" was: "Supplementary Agreement" means any supplemental or further agreement between StockCo and the Client.
3. The Master Livestock Agreement also described how the Supplementary Agreements were to work. Clause 1 provided: This Master Livestock Agreement is executed on terms that separate supplementary agreement(s) containing specific Schedule(s) may be added at a later date and be effected by separate documents signed by the Client and then communicated to StockCo. This Master Livestock Agreement is in any event binding and is provided on terms that the parties acknowledge the Master Livestock Agreement is binding to it now stands AND THAT the terms of this Master Livestock Agreement will apply to any separate agreement containing supplementary terms although completed separately and communicated directly or by post email or by facsimile.
4. Clause 3 was to similar effect. It provided: This Agreement will apply to all transactions between StockCo and you described herein. This Agreement is executed on terms that a separate agreement or agreements containing specific details of Stock and Schedules, may be added at later dates and may be effected by separate documents signed by you and them communicated to StockCo. This Agreement is in any event binding and is provided on terms that you acknowledge the Agreement is binding as it now stands AND THAT THE TERMS OF THIS Agreement will apply to any separate agreement containing supplementary terms including detail and Schedules although completed separately and communicated directly or by post, or by email or by facsimile AND you covenant to produce the original signed Agreement any/or separate agreements upon request by StockCo. Any Supplementary Agreement executed at later dates forms part of this Agreement.
5. The effect of these provisions was that, for the cattle to meet the definition of "Stock" in the Master Livestock Agreement, the relevant supplementary agreements had to meet the definition of a "Supplementary Agreement".
6. None of the Supplementary Agreements was signed, or, on the evidence, otherwise approved, by Reid Agricultural's sole director, Mrs Reid. The first and second Supplementary Agreements were signed by Bradley Reid. The seventh was also signed. The argument before me proceeded on the basis that the signature was that of Michael Reid. But having now seen Michael Reid's signature on other documents which are in evidence, I do not think this is correct.
7. The signature on the seventh supplementary agreement looks nothing like Michael Reid's signature on other documents. It is, however, generally similar in size and shape to Bradley Reid's. Bradley Reid's signature has a prominent B at the beginning of it. In the signature on the seventh supplementary agreement the B is sloped so that it looks at first sight like an M. On closer inspection I think that it is the same signature as that on the first and second supplementary agreements, and is Bradley Reid's.
8. The other four supplementary agreements were not signed. Instead an email response was sent in the form of an approval. Three of those responses (for the third, fifth and sixth) went out over the typed name "Bradley Reid". The fourth went out over the typed name "Michael". Nevertheless all of the email responses were sent from the same email address, which appears from the evidence to be that of Bradley Reid. I have therefore proceeded on the basis that the approval of the fourth supplementary agreement was also sent by him.
9. Although the four supplementary agreements approved by email were not signed, no point was taken about this. The email responses were accepted by counsel for DLS as being equivalent to signing and returning the form.
10. The contention for StockCo was that each of the seven supplementary agreements in this case, as signed or approved by Bradley Reid, met the definition of a "Supplementary Agreement" under the Master Livestock Agreement. This was disputed by DLS.
11. Counsel for DLS based his argument on a trustee's certificate from Reid Agricultural which formed part of the security documentation provided to StockCo. This certificate was signed by Mrs Reid on behalf of Reid Agricultural. Clause 9 of the certificate stated: Authorised signatures The following are the true, specimen signatures of the persons who have been authorised to sign supplementary agreements, give notices and other communications, and take any other action required, under or in connection with the Documents and on behalf of the Trust: Below this clause appeared the signature of Mrs Reid as authorised person.
12. Counsel for DLS submitted that this certificate meant that only Mrs Reid could execute or otherwise agree to a Supplementary Agreement for the purposes of the Master Livestock Agreement.
13. But although the certificate was executed at the same time as the Master Livestock Agreement, it was not referred to, or otherwise incorporated in the Agreement. The certificate was a separate set of representations from Reid Agricultural as trustee to StockCo. The definition of "Supplementary Agreement" extended to any "agreement between StockCo and the Client" whether in writing or not. In my opinion it did not prevent an agreement signed by someone else having authority from Reid Agricultural from taking effect as a Supplementary Agreement.
14. The same result follows from the language of cl 2 of the Agreement. The clause referred to "any separate agreement". That language, in its natural meaning, encompassed an agreement executed (or otherwise made) by anyone having authority on Reid Agricultural's behalf.
15. The argument from counsel for DLS was based on the wording of the Master Livestock Agreement. Counsel did not generally challenge Bradley Reid's authority to act for Reid Agricultural. Counsel could not realistically have done so, given that DLS' own claim depends on the Maintenance Agreement, which was an oral agreement made by Mr Lord on behalf of DLS with Mr Reid.
16. It is therefore unnecessary to consider whether Mr Reid had implied actual authority, or if not, ostensible authority, to enter into the transactions which are the subject of these proceedings on Reid Agricultural's behalf. Nor is it necessary to consider whether, if he was not so authorised, his conduct was subsequently ratified by Reid Agricultural.

Were the cattle actually cattle which had been financed by StockCo?

1. Counsel for DLS initially questioned whether the 75 cattle the subject of the first sale were, or were all, cattle which had been financed by StockCo. Counsel pointed to evidence that the Reids had other cattle and were dealing with other financiers.
2. The National Livestock Identification Scheme ("NLIS") establishes a national database for keeping track of livestock. Each head of livestock is fitted with a tag or other device having a unique identification number. The database records details of the animal. Among other things, it allows the animal's location (identified by a Property Identification Code, or "PIC") to be recorded, and updated as the animal is moved around.
3. In the case of the cattle the subject of these proceedings, the device used for the purposes of the NLIS was a radio frequency identification device ("RFID"). Each RFID has a unique number and can be read with a scanner. This allows the location of the cattle to be tracked in real time.
4. The paperwork which is in evidence for the first sale does not contain RFIDs for the cattle sold. It is therefore not possible to match those cattle up with individual purchases by DLS (and the RFID data for the purchases is also incomplete). Counsel for DLS submitted that the Court could therefore not be sure whether the 75 cattle were StockCo's or someone else's. But there is other evidence before the Court on the question.
5. The first relevant matter is the business context. The Maintenance Agreement only applied to cattle financed through StockCo. It was not a general agreement on DLS' part to pay for the maintenance of all of Reid Agricultural's cattle. Although the RFID evidence before me is not complete, it appears that both StockCo and DLS had access to the NLIS database and were able to use it to track nearly all of the stock (there were some deaths and some stock whose RFID tags did not scan). The practical reality is that DLS is very unlikely to have paid for agistment and feedlot charges for Reid's cattle unless those cattle were subject to the Maintenance Agreement, and thereby cattle being financed by StockCo.
6. There is also more specific evidence. During the negotiations in May, the parties were concerned to reconcile the stock numbers and locations using their RFID records. At one point there were 30 stock missing and it was thought they might have been mixed up with other stock held under a different name at Wanderribby. But there was never any doubt that the cattle at the Lang Lang feedlot (where the 75 cattle which were the subject of the first sale came from) were StockCo cattle.
7. In fact, the Lang Lang cattle were expressly so treated in email correspondence from Mr Lord to Mr Stiven which is in evidence. If Mr Lord did not have personal knowledge of where the cattle had come from, he must have derived his knowledge from Mr Reid, who did. As a business record, the email correspondence is thus direct evidence that the cattle at the Lang Lang feedlot were StockCo cattle.
8. After these points had been brought out by counsel for StockCo, counsel for DLS pursued his argument very faintly, if at all, in reply. By the end of the argument it was unclear to me whether the argument was being maintained. But if it was, I am satisfied that the 75 cattle sold in the first sale were cattle which had been financed by StockCo and therefore fell within the term "Stock" in the Master Livestock Agreement.

Did StockCo's interest in the cattle fall outside the PPSA?

1. Clause 4.1 of the Master Livestock Agreement provided: You will acquire the Stock for StockCo as agent for StockCo and strictly in accordance with instructions given by StockCo or its nominated livestock buyer from time to time.
2. Clause 4.4 provided: You covenant that the Stock upon acquisition will be StockCo's absolute property exclusively and that the same are free and unencumbered.
3. Clauses 4.5 and 4.6 provided: 4.5 StockCo appoints you to act as its agent for the purchase or acquisition of the Stock within the price and within the time and according to the strict specification specified by StockCo. 4.6 You indemnify StockCo against any cost, loss or liability or expenses whatsoever incurred by StockCo as a result of you acting in any manner except in strict accord with the authority hereby given.
4. Clause 6 dealt with stock procurement and payment. Clause 6.1 repeated cl 4.4, providing: 6.1 Title and property in all Stock will pass to and remain at all times with StockCo.
5. There was further reinforcement in cl 6.9: Legal and beneficial ownership of the Stock and any animals, free of any security interest or other encumbrance will be deemed to be transferred to us on the Settlement Date. We own the Stock.
6. Clause 7 dealt with grazing and managing the stock the subject of the agreement. It contained a series of obligations on the customer to maintain the stock. StockCo had the option of providing funds for this purpose, but this was subject to StockCo's absolute discretion. Otherwise compliance with the obligations was at the cost of the customer. Clause 8 obliged the customer to report when required on the numbers and condition of the stock.
7. Clause 10 dealt with the delivery of the stock at the end of the fattening period and payment. On the nominated delivery date the customer was obliged to deliver the stock to a processor or selling agent. Clause 10.3 provided: You will arrange for the Stock to be processed as our agent and the proceeds directly credited to our nominated bank account.
8. The rest of the clause contained "waterfall" provisions dealing with the application of the proceeds (the "Processing Price"). This entitled StockCo to recoup all of the monies advanced by StockCo for the purchase of the stock, together with interest and any maintenance expenses incurred by StockCo if it exercised its discretion to fund such expenses under cl 7. After all such expenses were paid, StockCo was to remit the balance (if any) to the customer.
9. Clause 9 dealt with stock deaths. Clause 9.2 provided: When stock die or are lost or are sold without the sale proceeds being remitted to StockCo during the term of this Agreement, you are responsible for the value thereof and shall pay to us by way of liquidated damages an amount calculated by reference to the actual aggregate. Purchase Price for the Stock paid by us, plus fees and interest at the Default Rate compounded on the first calendar day of each month commencing from the Settlement Date provided that we may elect whether you shall make payment for Stock losses by way of deduction from the net Processing Price payable by us to you, or by sending you a demand for payment which is payable by you immediately upon receipt thereof.
10. The Master Livestock Agreement allowed StockCo to protect its rights under the PPSA. Clause 6.7 provided: For the purposes of the PPSA but without limiting any other terms of the Agreement by executing this Agreement or any subsequent amendment or Schedule you grant a security interest in the Stock to us. For the avoidance of doubt this clause does not in any way limit or reduce the absolute exclusive title held by us.
11. Clause 25(a) provided: For the purposes of the PPSA, but without limiting any other term of this Agreement, by executing this Agreement and any subsequent amendment, you grant a security interest to us in the following: (i) The Stock; (ii) Any products derived from the Stock including without limitation all carcasses, meat and any other products which includes, without limitation, comingled goods; (iii) All proceeds in relation to any goods or products referred to in clause 25(a)(i) or (ii) including without limitation money, accounts receivable and insurance proceeds; and (iv) Any products for which any of the goods or products referred to in clause 25(a)(i)-(ii) have been exchanged or traded or that have been acquired in lieu of the Stock as security for your obligations under this Agreement. For the avoidance of doubt, this clause does not in any way limit or reduce the absolute title to the Stock held by us.
12. Clause 23.1 contained a general grant of security over the customer's livestock. It provided: As security for the due performance of all of your obligations under this Agreement at any time owed to us you charge at present and alter acquired livestock you own, all born and unborn property of the Stock or any other livestock you own and any personal property that are proceeds (as defined in the PPSA) of the collateral referred to in this clause.
13. Despite these security provisions, counsel for StockCo contended that the true nature of the transaction between Reid International and StockCo did not involve the grant of a security interest under the PPSA. In counsel's submission, Reid Agricultural purchased the cattle, and thereafter held them, as agent for StockCo and nothing more.
14. Counsel characterised the provisions in the Agreement conferring security as a form of "belt and braces". That term is not really apposite, since the agency analysis is inconsistent with, rather than complementary to, a grant of security. In reality, on StockCo's case, the security provisions would have to be understood as provisions which the parties agreed would apply if the agency analysis was not correct. There may be some conceptual difficulty with this, but no point was taken about it and I will proceed accordingly.
15. The term "agent" can be a slippery one. In Kennedy v De Trafford [1897] AC 180 Lord Herschell LC said at 188: No word is more commonly and constantly abused than the word "agent". A person may be spoken of as an "agent", and no doubt in the popular sense of the word may properly be said to be an "agent", although when it is attempted to suggest that he is an "agent" under such circumstances as create the legal obligations attaching to agency that use of the word is only misleading.
16. The High Court in International Harvester Company of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 said at 652: Agency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties.
17. Both of these passages were quoted by Gummow J in Scott v Davis (2000) 204 CLR 333 at 408 [227]; and also by Hayne J (at 435 [299]). That case concerned a tort claim against the owner of an aeroplane who permitted a pilot to use the plane for a joyride which resulted in a crash in which passengers and observers were killed or injured. The claim was put on the basis that the pilot was the owner's "agent", based on earlier cases involving car accidents where the driver had been permitted by the owner to drive the car. Gummow J analysed those cases and went on at 413 [238] to quote the following statement from Professor Markesinis' and Dr Munday's textbook on the law of agency: First, it should be clear that the law of agency does not come into play every time one person represents another. For example, no rules of agency apply when a husband sends his wife to a wedding to congratulate the newly-weds, for in such cases the representation only serves a social purpose. For the rules of agency to come into play the representation of one person by another must be meant to affect the principal's legal position though, of course, this does not mean that the legal purpose intended to be achieved by the use of an agent need be a complex one. A father who sends his son to the nearby shop to buy him a newspaper is making an agent of him and will be liable to the shopkeeper for the price of the newspaper. Secondly, for an agency relationship to arise, one person must intend to act on behalf of another. This is a question of fact. But, it is submitted, such an intention is no, in itself, enough; the purpose of the relationship must be for the agent to enter into a contract on behalf of his principal (or to dispose of his principal's property). If this approach is adopted, cases like Ormrod v Crosville Motors Ltd [a case involving a tort claim against the owner of a car on the basis that the driver was the owner's "agent"] should be excluded from the ambit of agency textbooks. Since between A and B there is no master-servant relationship (in the traditional sense of the term), it is difficult to bring this factual situation under the heading of vicarious liability. The tendency has thus grown to use agency terminology and to describe B as A's agent. But since B's aim is not to enter into any contract on behalf of A, and since B cannot normally incur any expenses on behalf of A (eg, pledge A's credit to purchase petrol for the journey), it proves equally difficult to describe their relationship as one of true agency.
18. In my view these observations apply to StockCo's agency analysis. The Master Livestock Agreement contemplated that the cattle would be purchased from a third party vendor by StockCo through its customer as agent. At the end, the customer would also sell the stock as StockCo's agent. To that extent, there was an agency in the sense described in the authorities just cited. StockCo was buying the cattle from the vendor with the customer acting as StockCo's agent.
19. But after the purchase was completed the customer ceased to have authority to deal with third parties on StockCo's behalf. Unless StockCo specifically decided otherwise (which it did not in the present case), any expenses incurred in looking after the cattle were the customer's own responsibility. Rather like the motor car driver who was unable to pledge the credit of the car's owner for purchasing petrol, Reid Agricultural had no authority to subject StockCo to liability to third parties for access to the land on which the cattle were to be run or for the fodder necessary to sustain them. Once the purchase was completed, the agency ceased for practical purposes until it revived at the end for the limited purpose of selling the cattle. In the meantime, it was nothing more than a case of StockCo allowing the customer to have possession of the cattle which the customer had bought on its behalf.
20. PPSA s 12 relevantly provides: Meaning of security interest (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). Note: For the application of this Act to interests, see section 8. (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a) a fixed charge; (b) a floating charge; (c) a chattel mortgage; (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; (f) a pledge; (g) a trust receipt; (h) a consignment (whether or not a commercial consignment); (i) a lease of goods (whether or not a PPS lease); (j) an assignment; (k) a transfer of title; (l) a flawed asset arrangement.
21. The Master Livestock Agreement provided clearly, and indeed insistently, that as between StockCo and Reid Agricultural, StockCo was to be the owner of the cattle. But this is not necessarily inconsistent with a security arrangement under s 12. It is a feature of a hire purchase agreement that the financier retains ownership of the goods, but such an agreement is expressly defined as giving rise to a security interest for the purposes of the PPSA (s 12(2)(e)).
22. Counsel for StockCo did not accept this comparison. Counsel pointed out that under a hire purchase agreement there is usually an obligation to make the residual payment and acquire the asset in due course. But I do not see why this should make any difference. The fact is that until the residual is paid, property in the asset remains in the financier, yet the PPSA has expressly treated the arrangement, as a matter of substance, as being one involving the grant of a security. Furthermore, a chattel lease is also defined as an arrangement giving rise to a grant of security (s 12(2)(c)), and it is not a requirement of such a lease that the lessor eventually purchase the property. So too the transfer of property on consignment (s 12(2)(h)) or under a conditional sale agreement with the vendor retaining title (s 12(2)(d)) does not result in the transferee obtaining ownership of the property.
23. As a matter of commercial substance, the Master Livestock Agreement was structured so that StockCo would provide the funds for the purchase of the cattle; Reid Agricultural would have possession of them (at its own expense) for the purpose of rearing and fattening them; and when the cattle were sold StockCo would be paid out of the proceeds of sale. Reid was in no way carrying on some sort of farming business on behalf of StockCo as principal.
24. I think this is reinforced by cl 9.2, the provision of the Agreement about the death of cattle. It purported to provide for an obligation on Reid to pay "liquidated damages" in the event of the death of a beast. But although Reid had obligations to StockCo under the Agreement to maintain the cattle, the death of a beast would not necessarily amount to, or result from, a breach of those obligations. The provision concerning "liquidated damages" was simply a device to ensure that Reid would remain liable to repay the purchase price for an individual beast (together with interest and other expenses) if the beast died.
25. The artificiality of the "agency" is particularly clear in the case of the second supplementary agreement. The cattle the subject of that agreement were purchased and paid for by DLS well before the agreement was entered into. In the case of one of the purchases, payment was made before the facility was even granted. What was really happening was that StockCo's money was coming in to pay out and replace Reid's indebtedness to DLS resulting from the prior purchase of the cattle by DLS on Reid's behalf. The same comments apply to the first and sixth supplementary agreements where, again, the purchases were completed before the supplementary agreements were entered into.
26. Under the terms of Reid Agricultural's arrangements with DLS it remained the owner until paid; on payment, property passed to Reid. In the case of the first, second and sixth supplementary agreements (at least), StockCo could only acquire property in the cattle from Reid. No question of StockCo acquiring property in the cattle from the vendor through Reid as its agent could arise.
27. In my view, the commercial substance of the arrangements between Reid Agricultural and StockCo was to give StockCo a security interest in the cattle for the purposes of the PPSA.
28. This conclusion makes it unnecessary to consider the complex arguments put to me by counsel for StockCo about how the priorities would work if StockCo's interest in the cattle was as owner, outside the PPSA. All I will say is that I am not sure that in such circumstances StockCo would have prevailed over DLS. In the case of the first, second and sixth supplementary agreements (at least), the maxim nemo dat quod non habet may have worked against StockCo rather than in its favour.

Did StockCo have a PMSI with priority under PPSA s 62?

1. It is convenient to deal first with StockCo's PPSA registration claiming to have a PMSI. If StockCo indeed had a PMSI then it was entitled to claim "super priority" under PPSA s 62 over DLS's earlier security, unless that security was itself a PMSI. Section 62 relevantly provides: 62 When purchase money security interests take priority over other security interests Scope (1) This section sets out when a perfected purchase money security interest that is granted by a grantor in collateral or its proceeds has priority over a perfected security interest that is granted by the same grantor in the same collateral, but that is not a purchase money security interest. Inventory (2) The purchase money security interest has priority if: (a) the purchase money security interest is in inventory or its proceeds; and (b) the purchase money security interest is perfected by registration at the time: (i) for inventory that is goods - the grantor, or another person at the request of the grantor, obtains possession of the inventory; or (ii) for any other kind of inventory - the purchase money security interest attaches to the inventory; and (c) the registration that perfects the purchase money security interest states, in accordance with item 7 of the table in section 153, that the interest is a purchase money security interest.
2. I have already concluded that the Master Livestock Agreement conferred on StockCo a security interest over cattle purchased under the supplementary agreements which secured purchase money obligations of Reid Agricultural. StockCo's interest had been perfected by registration (s 62(1)), and the registration had claimed a PMSI (s 62(2)(c)). Nor was there any dispute that the cattle in question constituted "inventory" for the purposes of s 62(2). But counsel for DLS took two points.
3. Counsel's first point focussed on the requirements of s 62(2)(b). The parties agreed that the cattle were "goods" for the purposes of that provision. Counsel's point was that the requirement that the security be perfected by registration at the time Reid Agricultural obtained possession (s 62(2)(b)(i)) had not been satisfied.
4. Counsel's point applied to the two November cattle purchases which later became the subject of the second supplementary agreement. The purchases took place on 22 and 28 November. This was more than a week before the registration by StockCo of its claimed PMSI, which took place on 6 December. Counsel submitted that the cattle would have been released into the possession of the purchaser, Reid Agricultural, within seven days of the purchase by DLS.
5. I am not sure that I can simply assume that this was so, in the absence of any evidence of what DLS' procedures actually were. But as counsel pointed out, the onus lay on StockCo to demonstrate that the requirements for a valid PMSI were satisfied for all of the relevant cattle.
6. I think that I could infer that, in the ordinary course, Reid Agricultural would have received possession at the latest when the purchases were completed and DLS paid for the cattle. The cattle purchased on 28 November were not paid for until 8 December, but the cattle purchased on 22 November were paid for on 2 December, well before StockCo's registration on 6 December. On any view counsel's point applied to those cattle.
7. But counsel for StockCo had a riposte to the point. Counsel referred me to the decision of Blue J in Allied Distribution Finance Pty Ltd v Samwise Holdings Pty Ltd [2017] SASC 163, where at [115] his Honour stated that the "possession" referred to in s 62(2)(b)(i) is possession as grantor of the security. Prior possession in another capacity does not count. His Honour's decision was upheld by the South Australian Full Court: Samwise Holdings Pty Ltd v Allied Distribution Finance Pty Ltd (2018) 131 SASR 506, at [64]-[75], [84]-[87], [106]-[134]. Counsel submitted that, therefore, the date on which Reid Agricultural obtained possession, for the purposes of s 62(2)(b)(i), of the cattle the subject of the second supplementary agreement was on or after 21 December, when the agreement was made. This was well after StockCo's registration on 6 December.
8. This appears to be a complete answer to the point raised by counsel for DLS. In his oral submissions, counsel did not invite me not to follow, or to distinguish, this authority; indeed, counsel did not refer to the authority at all. The point (to the extent pressed) therefore fails.
9. Counsel's second point was that StockCo's PMSI did not cover the whole of the proceeds of the first sale. The submission was based on PPSA s 14 (relevantly set out at [123] below), which has the effect that a PMSI only operates as such to the extent that it secures "purchase money obligations".
10. Counsel presented calculations which, so he submitted, demonstrated that the purchase money obligations secured by the Master Livestock Agreement amounted to only about $30,000. These calculations were based on the application against Reid Agricultural's debt of other monies which have been received by StockCo.
11. But, as has been seen, StockCo's cause of action against DLS is for money had and received. DLS' liability under that cause of action must depend on the state of affairs when DLS first asserted its entitlement to the monies and declined to account to StockCo for them. This was before there were any other recoveries by StockCo. When I put this to counsel for DLS, he accepted it and acknowledged that he could not pursue his point any further.
12. In the end, therefore, I conclude that StockCo held a PMSI over the proceeds of sale of the 75 cattle, and that PMSI secured purchase money obligations which exceeded the amount withheld by StockCo. Unless DLS held a prior registered PMSI (and then only to the extent that any such PMSI secured purchase money obligations), StockCo is entitled to prevail.
13. This conclusion makes it unnecessary to consider whether StockCo is entitled to rely, in the alternative, on its general security under cl 23.1 of the Master Livestock Agreement and its separate non-PMSI registration.

Did DLS have a PMSI?

1. There was no dispute that, upon making the purchases of cattle which it made for Reid Agricultural, DLS had a PMSI for the purchase price laid out in paying the vendor. But DLS recouped all of these amounts when it was paid out under StockCo's facility. DLS, however, contended that amounts due under the Maintenance Agreement were covered by its PMSI.
2. PPSA s 14 relevantly provides: 14 Meaning of purchase money security interest General definition (1) A purchase money security interest means any of the following: (a) a security interest taken in collateral, to the extent that it secures all or part of its purchase price; (b) a security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that the value is applied to acquire those rights; (c) the interest of a lessor or bailor of goods under a PPS lease; (d) the interest of a consignor who delivers goods to a consignee under a commercial consignment. … Mixed securities (3) If a security interest in collateral secures obligations covered by subsection (7) (purchase money obligations) and other obligations, the security interest is a purchase money security interest only to the extent that it secures the purchase money obligations. … Purchase money obligations (7) This subsection covers an obligation of a debtor incurred: (a) as all or part of the purchase price of the collateral; or (b) for value given to enable the grantor to acquire or use the collateral (provided the collateral is so acquired or used). References to purchase price and value (8) In this section, a reference to a purchase price, or value, includes a reference to credit charges and interest payable for the purchase or loan credit.
3. Counsel for DLS presented two arguments. Counsel's first argument focused on the reference to acquisition in s 14(1)(b) and s 14(7)(b).
4. Counsel submitted that under the Maintenance Agreement DLS undertook to meet the expenses of maintaining the cattle purchased by DLS for the purposes of the StockCo facility. Counsel argued that by giving that undertaking, DLS "[gave] value for the purpose of enabling [Reid Agricultural] to acquire rights in" the cattle. On this argument DLS had a PMSI which covered Reid's obligations under the Agreement. Similarly Reid's obligations under the Agreement satisfied the definition of a purchase money obligation under s 14(7)(b).
5. Counsel for StockCo disputed this construction of the Maintenance Agreement. Counsel argued that the agreement involved two parts. The first was an undertaking by DLS to act as del credere agent, in return for an entitlement to reimbursement (plus a fee). The second was a separate obligation by DLS to fund the maintenance of the cattle, in return for an entitlement to recoup itself from the proceeds of sale.
6. I do not think that it is realistic to divide the Maintenance Agreement up into two separate agreements, each with its own separate consideration. The deal was done in a single conversation, and DLS' undertaking to meet maintenance costs would have been an important element in the overall bargain.
7. But although an undertaking to meet the costs of maintaining the cattle was part of the consideration provided by DLS, that does not necessarily mean that it satisfied s 14(1)(b). In my opinion the natural meaning of "to enable the grantor to acquire" collateral is to provide financial means to the grantor sufficient for the grantor to carry out the acquisition. On this view the "value" which is supplied is money or some other benefit which is capable of being applied to the acquisition. It does not include every obligation that the lender undertakes to the grantor which constitutes valuable consideration under the law of contract.
8. In applying s 14(1)(b) it is important to bear in mind exactly what DLS' obligation was. DLS was undertaking to meet maintenance costs. But there was no obligation on Reid Agricultural to fund such costs through DLS; it was open to Reid to fund them in some other way if it chose (on the evidence, Mr Reid undertook some of the transport of the cattle himself (presumably to have money). DLS' obligation under the Maintenance Agreement was to meet maintenance costs if called upon to do so.
9. In my view DLS' undertaking in the Maintenance Agreement to fund the maintenance of the cattle was not the provision of "value" enabling Reid to acquire the cattle. The undertaking in no way helped Reid to pay the purchase costs. Reid was not even obliged, by entering into the Agreement, to use DLS' funding to maintain the cattle after purchase.
10. It also must be remembered that it is not enough for value to be provided by the lender which enables the collateral to be acquired. That value must actually be applied to the acquisition of the collateral.
11. In Agricultural Credit Corporation of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22, borrowers successfully applied to a financier for loans to purchase cattle. After the loans were approved, they went ahead and bought some cattle using a credit line with their bank as their immediate source of funding. The loan agreements were then formally executed and the monies advanced by the financier were used to pay the bank back.
12. The Saskatchewan Court of Appeal held that the financier's security was a PMSI. The Court treated the dealings as one overall transaction, so that even though the financier's money went to pay off the bank, in a wider commercial sense it had been used to acquire the cattle. The Court's reasoning was approved by the Privy Council in Federal Republic of Brazil v Durant International Corporation [2015] UKPC 35 at [37].
13. This authority shows a lender's provision of value to the acquisition of collateral may to some extent be indirect. But it is far removed from the present case. It is not really possible to speak of the value provided by DLS' mainatenance undertaking as having been applied to the purchase of cattle at all.
14. The Maintenance Agreement may have made it more attractive from Reid's point of view to purchase the cattle, by giving Reid a source of finance for maintaining the cattle should it need such finance. But it did not itself enable the acquisition of the cattle. In my view it only enabled their subsequent maintenance. Nor, in my view, was the value provided by giving that undertaking applied in the acquisition of the cattle. For these reasons I reject DLS' first argument.
15. DLS' second contention fastened on paragraph (b) of the definition of "purchase money obligations" in subs (7). There is a parallel between that paragraph and paragraph (b) of the definition of "purchase money security interest" in subs (1). But the definition of "purchase money obligations" goes further by including the "use" of the collateral as its acquisition.
16. Because of the way subs (1) is framed, for a lender to obtain a PMSI requires that the lender fund the initial acquisition of the collateral. A lender who only funds the later use of the collateral cannot obtain PMSI protection. But on a literal reading of paragraph (7)(b), a lender who initially obtains a PMSI by funding the acquisition of collateral may be able to tack onto the PMSI purchase money obligations attributable to the "use" of that collateral.
17. In the present case, DLS sought to exploit this apparent opening. DLS' argument was that its advances under the Maintenance Agreement were provided to Reid Agricultural to enable Reid to "use" the cattle it had purchased through DLS, by maintaining and fattening them. It followed, on this argument, that Reid's indebtedness under the Maintenance Agreement was a "purchase money obligation" protected by DLS' PMSI registration.
18. I was not referred by counsel for DLS to any authority on the interpretation of the phrase "to enable the grantor to … use the collateral" in PPSA s 14(7)(b). Counsel for StockCo submitted that s 14(7)(b) appears to have been derived from a provision of the United States Uniform Commercial Code, 84 USC Art 9 s 103(a)(2) (2017). The wording of s 14(7)(b) is close to that of s 103(a)(2), although the parallel between s 14 and s 103, taken as a whole, is not exact. In any event, the US authorities to which counsel referred me did not provide any guidance on the current problem. I must therefore approach it as a matter of principle.
19. In the ordinary use of language, to "enable" the "use" of a chattel may have a broad meaning. In the case of a piece of electrical machinery, for instance, it would usually encompass the installation of the machine. It could also extend to the supply of electricity required for the machine to operate, or the carrying out of repairs necessary to keep it running, or even, arguably, the provision of supplies without which the machine cannot operate or at least cannot achieve its purpose (such as toner for a photocopier).
20. There may, however, be arguments against reading "use" so widely in the present context. The scope for a security holder's interest to be displaced by a prior ranking PMSI would be widened. In particular, a general creditor who advanced funds to the debtor long after a chattel had been acquired and paid for under a PMSI held by another creditor would be liable to be displaced by that creditor funding further expenditure on the chattel. It would be difficult if not impossible for a general creditor in this position to protect itself from being displaced in this way. Arguably such a displacement would not have been intended by the legislature.
21. I do not think it is necessary to explore these general ideas further in this judgment. The present case is concerned with one particular type of collateral, namely livestock. In the ordinary use of language, one would not speak of a grazier who fattens livestock for sale as "using" those livestock. The grazier merely owns or possesses the livestock over a period of time. This suggests, in my opinion, that the type of costs covered by the Maintenance Agreement do not fall within the concept of enabling the stock to be "used".
22. The presence in the Act of s 86 tends to reinforce this view. That section provides: 86 Priority of livestock A perfected security interest (the priority interest) that is granted by a grantor in livestock or the proceeds of livestock has priority over any other security interest (other than a purchase money security interest) that is granted by the same grantor in the same livestock or proceeds if: (a) the priority interest is granted for value; and (b) the priority interest is granted to enable the livestock to be fed or developed; and (c) either: (i) the livestock are held by the grantor at the time the security agreement providing for the priority interest is made; or (ii) the livestock are acquired by the grantor during the period of 6 months after the day the security agreement providing for the priority interest is made.
23. This section creates a separate level of priority, coming after a PMSI but before a general security, for a creditor funding the purchase of supplies and services necessary to sustain livestock. It speaks of enabling the livestock to be "fed and developed" rather than "used". It seems to me that by s 86 the legislature has recognised that creditors who fund such supplies and services should not be assimilated either to creditors who fund the initial purchase of the livestock, or to general creditors. Instead they are treated sui generis.
24. This point can be expressed in another way. If DLS' argument in the present case were correct, an anomaly would arise. The holder of an "all monies" PMSI who finances the purchase of livestock, is paid out for the price, but later provides further funds to enable the livestock to be fed and developed would have absolute priority. But a new creditor providing funds for exactly the same purpose would only have a more limited priority interest under s 86.
25. For these reasons, I do not think that Reid Agricultural's liabilities to DLS under the Maintenance Agreement fell within the definition of "purchase money obligations" in PPSA s 14(7). Accordingly, they were not covered by DLS' PMSI.
26. Had I taken a different view, DLS would still not have been wholly successful. The argument proceeded on the basis that DLS needed to identify liabilities under the Maintenance Agreement which related specifically to the 75 head of cattle sold. As the 75 cattle came from the Lang Lang Feedlot, the charges for the cattle sent to the Wanderribby Feedlot clearly do not meet the test. It would also be necessary to determine the extent to which the other charges related to the 75 cattle sold, presumably by doing some sort of apportionment. I do not need to take this any further for the purposes of the present judgment.
27. Given my conclusion that the debts owing under the Maintenance Agreement were not the subject of DLS' PMSI, DLS' defence fails. It is unnecessary to consider the enforceability of DLS' general security or DLS' entitlement (if any) under PPSA s 86.

Claim for $88,085.09 from amount paid out by DLS from proceeds of second and third sales

1. StockCo contended that the dealings culminating in the email of 20 June constituted a contract between itself and DLS, under which DLS had agreed, for valuable consideration, to remit the proceeds to it. Alternatively, StockCo contended, DLS had constituted itself as a trustee for StockCo. Counsel for DLS disputed that the dealings gave rise to a contractual, or trust, relationship. But it is unnecessary to resolve this dispute.
2. The money paid out by DLS to Reid Agricultural was money to which DLS had no claim. It was money which, as between StockCo and Reid Agricultural, belonged to StockCo. DLS was aware at all relevant times of StockCo's interest.
3. I put to counsel for DLS that in these circumstances StockCo appeared on the face of it to be entitled to recover the money from DLS as money had and received (this was one of the alternative bases on which StockCo had pleaded its claim against DLS). Counsel acknowledged that prima facie entitlement, but sought to rely on DLS' standard terms of sale, which provided for DLS to account for the proceeds to the "vendor".
4. Counsel observed that in these proceedings StockCo aggressively and repeatedly put the position that the purchases and sales of the cattle were effected by Reid Agricultural, albeit as StockCo's agent. But I pointed out that by the time the sale took place, StockCo was in the position of a disclosed principal which was demanding payment of the sale proceeds. I asked whether, in such circumstances, accounting to Reid could really be justified. Counsel accepted, as I understood him, that it could not and that he had no further submissions to make.
5. At a later stage I asked counsel whether he had given the defence to this claim away. Counsel said he would seek instructions. The claim was referred to in the list of agreed issues but no further submissions, or instructions, emerged. In the circumstances I think the claim succeeds.

Conclusions and orders

1. I have concluded that: (1) StockCo's interest in the cattle the subject of the financing arrangements in the Master Livestock Agreement was a security interest under the PPSA; (2) that interest was a PMSI which secured purchase money obligations covering the proceeds of the first cattle sale; (3) the debts owed by Reid Agricultural to DLS under the Maintenance Agreement were not purchase money obligations within the terms of PPSA s 14(7) and DLS' prior security interest in the proceeds of the first sale (if any) was displaced by StockCo's PMSI under PPSA s 62; (4) DLS is therefore liable to StockCo for the $118,924.78 withheld by DLS from the proceeds of the first cattle sale, as money had and received; (5) DLS is also liable to StockCo for the proceeds of the second and third sales to the extent of $88,085.09, as money had and received.
2. StockCo has thus succeeded in its claims in these proceedings. Interest down to judgment will need to be calculated. I will direct StockCo to bring in a minute of order giving effect to my judgment. That minute of order should also provide for the costs of the proceedings. If there is any disagreement, the parties may approach my Associate for directions as to how it should be resolved.
3. The order of the Court is:
4. Direct that the plaintiff bring in a minute of order giving effect to this judgment, and dealing with the costs of the proceedings.

Amendments 09 April 2020 - change in [51] "StockCo" to "DLS" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 April 2020