Do you use third parties to store your wine?  Might you be providing their financiers with something to celebrate?

A lot of wineries (and individuals) store their wine with third-party storage providers. Does this give rise to a risk that the storage provider or their financier may claim ownership of your wine?

Under the Personal Property Securities Act 2009 (Cth) (‘PPSA’) if a financier has properly registered a security interest over property in the possession or control of a third party (such as a storage provider) then they may have an interest over that property following a default by the storage provider, even if that property belongs to someone else.

Whether the provisions of the PPSA apply may turn on whether the arrangement between you and your storage provider gives rise to a security interest or a ‘PPS Lease’ (as defined under the PPSA).

Under the PPSA there is no need to register your interest in your own wine if the arrangement between you and the storage provider is merely a ‘bailment’, the handing over to the storage provider of possession and control of your wine on your behalf, and does not amount to a PPS Lease.

The definition of a PPS Lease has been significantly clarified since May 2017.  Accordingly, if your arrangements with your storage provider fall within any of the following then it is more likely to be a mere bailment and not a PPS Lease and you therefore don’t need to register your interest in your own wine in order to prevent a third party celebrating at your expense:

  1. If your arrangement was entered into after 20 May 2017 and has a maximum term of less than two year;
  2. If your arrangement was entered into before 20 May 2017 but you’re not regularly engaged in the business of leasing or bailing goods. This may be harder to assess if you regularly enter into arrangements for the storage of your wine;
  3. If the storage provider does not provide value, for example by way of payment, in exchange for possession of your wine (which is unlikely).

If your arrangement was entered into prior to 20 May 2017 and is for more than 1 year (or an indefinite term) then there’s a real risk that your arrangement may fall within the definition of a PPS Lease (meaning that if you don’t record your security interest in your own wine against the storage provider you may be at risk of losing your wine should they default in their obligations to third parties).  If you think this applies to you please speak to Michael Chrisohoou who’ll be able to give you specific advice.

While this note provides a general guide, many of the specifics of the PPSA have not yet been clarified by the courts.  Accordingly, you should seek specific advice on your particular circumstances before entering into an arrangement that is either a bailment or a PPS Lease.

After all, it would be a shame if you couldn’t ultimately enjoy your own wine simply because someone else did the wrong thing.

Written by Mark Ferrarato