Notes on Security Over Personal Property

SYLLABUS X: SECURITY OVER PERSONAL PROPERTY Table of Contents 1. introduction4 1. 1The structure of security4 1. 2Reasons for taking security4 Saloman v A Saloman & Co [1897] AC 22, per Lord Macnaghten4 Re Lind [1915] 2 Ch 3454 1. 3What happens during insolvency? 5 1. 3. 1Cases on PP Rule AD Rule6 Re Jeavons, ex p Mackay (1873) LR 8 Ch App 6436 *British Eagle v Cie Nationale Air France [1975] HL6 International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 37 Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2011] UKSC 387 2. Form vs Substance *8 . 1Artificial transactions8 Re George Inglefield Ltd [1933] Ch 18 Re Curtain Dream Plc [1990] BCC 3419 Welsh Development Agency v Exfinco [1990] BCC 3939 Thai Chee Ken v Banque Paribas [1993] SGCA10 2. 2American legal realism and Article 910 3. Mortgages and Charges10 3. 1Mortgages over personal property10 Pacrim Investments Pte Ltd v Tan Mui Keow [2005] 1 SLR(R) 14110 3. 2Clogs on the equity of red emption11 3. 2. 1Length of mtgage11 Knightsbridge Estates Ltd v Byrne [1939] Ch 441 (ECA)11 Fiscal Consultants Pte Ltd v Asia Commercial Finance Ltd (1981)11 3. 2. 2Collateral advantages11 Samuel v Jarrah Timber12 *Kreglinger v New Patagonia Meat (HL)12 * Citicorp Investment Bank (Singapore) Ltd v Wee Ah Kee [’97 SGCA]12 3. 3Identifying a charge13 3. 3. 1Charge vs Mtgage13 **Swiss Bank Corporation v Lloyds Bank [1982] AC 58413 3. 3. 2Right to take possession =/= charge14 *Re Cosslett (Contractors) Ltd [1998] Ch 49514 3. 3. 3Charge must contain positive undertaking14 Flightline Ltd v Edwards [2003] CA14 3. 3. 4Direction to pay out of fund =/= charge14 *Palmer v Carey [1926] AC 703 (PC from Aus)14 3. 3. 5Equitable set-off vs charge15 3. 4Capturing future assets15 *Tailby v Official Receiver (1888) 13 App Cas 523 Lord Macnaughten16 3. 5Charge-backs16 3. 6Trust Receipts distinguished16 3. 6. 1How it works16 3. 6. 2Deemed continuing pledge16 3. 6. 3Deemed trust? 17 *United Malayan Banking Corp Bhd v Lim Kang Seng [1994] SGHC17 3. 6. 4How is proceeds shared btw Bank and B? 17 4. Fixed and Floating Charges18 4. 1Definition of a floating charge18 Illingworth v Houldsworth [1904] HL (Lord Macnaghten)18 *Re Yorkshire Woolcombers Association Ltd [1904]:18 *Dresdner Bank v Ho Mun-Tuke [’92, SGCA]19 4. 2â€Å"Dealing in the ordinary course of business† (OCOB)19Re Borax [1901] 1 Ch 32719 Ashborder BV v Green Gas Power Ltd [2004] EWHC 151719 4. 3Crystallisation of floating charges19 Re Brightlife [1987] Ch 20020 Re Woodroffes (Musical Instruments) Ltd [1986] Ch 36620 4. 3. 1Apparent agency20 4. 3. 2S 226(1A): a gloss to the automatic/ semi-automatic battle20 4. 4Distinguishing fixed and floating charges20 4. 5The insolvency battleground21 *Agnew v Commissioner of Inland Revenue [2001] 2 AC 71021 *Re Spectrum Plus Ltd [2005] 2 AC 68021 4. 5. 1Expenses of liquidator21 Buchler v Talbot [2004] AC 298 (HL)21 5. Quasi-Security: Title-based Devices22 5. Reserva tion of title (‘Romalpa clauses’)22 Re Bond Worth Ltd [1980] Ch 22822 *Aluminiuim Industrie Vassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 67622 5. 1. 1New goods clauses23 Clough Mill Ltd v Martin [1985] 1 WLR 11123 *Borden (UK) Ltd v Scottish Forest Timber Products Ltd [1981] Ch 2523 Re Bond Worth Ltd [1980] Ch 22823 5. 1. 2Money proceeds clauses23 *E Pfeiffer Weinkellerei Weinenkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 15023 Associated Alloys Pty Ltd v CAN 001 452 106 Pty Ltd [2000] HCA 2524 5. 2Hire purchase24 5. 3Discounting receivables24 6. registration of charges25 6. Registrable charges25 6. 1. 1S 131 registration25 6. 1. 2When is a charge created? 26 6. 2Effect of registration and non-registration26 6. 2. 1No constructive knowledge26 Re Monolithic Co [1915] 1 Ch 64326 6. 2. 2Conclusive evidence26 6. 3Late Registration26 7. Priority Rules27 7. 1Rules in general27 Joseph v Lyons (1884)27 Cheah v Equiticorp Finance Group Ltd [1992] 1 AC 47227 7. 2Constructive notice27 Wilson v Kelland [1910] 2 Ch 30627 *Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978, 999-100528 7. 3Purchase money (security) interests28 7. 4Tacking future advances29West v Williams [1899]29 7. 5Circularity30 8. Remedies30 8. 1General30 8. 1. 1What remedies does Chgee have? 30 8. 1. 2How much notice must creditor give? 30 8. 1. 3Duty of care in choosing receiver30 Gaskell v Gosling [1896] (Rigby LJ)30 8. 2Receivership31 Re Newdigate Colliery [1912]31 Airlines Airspares v Handley Page [1970] 1 Ch 19331 Medforth v. Blake [1999] 2 BCLC 221; [1999] 3 All ER 97 (CA)31 8. 3Judicial management31 8. 3. 1What happens in the JM process? 32 Bristol Airport Plc v Powdrill [1990] Ch 74432 Electro Magnetic (S) Co v Development Bank of Singapore Ltd [1994] 1 SLR(R) 57432 . 3. 2Disposal powers of JM32 9. Insolvency clawback33 9. 1Unfair preferences33 Re M C Bacon Ltd [1990] BCC 7833 9. 2Undervalue transactions33 Hill v Spread Trustee Co Ltd [2006] BCC 64634 9. 3Fl oating charges near insolvency34 Power v Sharp Investments [1993] BCC 60934 Re Yeovil Glove Company [1965] 1 Ch 14834 10. Reform? 34 Focus of course: * Non-possessory security: esp Mtgages and Charges * Title-based security| introduction The structure of security (see mindmap) Reasons for taking security * Main reason: priority over other unsecured creditors (U/Cs) *During insolvency * Obvious advantage * Also, a self-help remedy * Outside insolvency * Borrower (B) has more incentive to repay * In a sense, Secured Creditor (SC) is king; but note that Parliament has intervened with a class of â€Å"Preferential Creditors† (P/C) Saloman v A Saloman & Co [1897] AC 22, per Lord Macnaghten * Salomon ran a company such that there were several U/Cs but Salomon himself was the only S/C * HELD: Salomon’s security was valid, even it was absolutely scandalous that the secured creditor could sweep aside all claims of the company’s other creditors. Case shows that creditor a nd borrower absolutely free to contract in any way they want. * Only exception is if they impose clogs on the equity of redemption. * (Note: After this, Parliament created a special category of P/Cs) Re Lind [1915] 2 Ch 345| Facts| * Case concerned inchoate security – present security over future assets * Son granted creditors security over the reversionary interest in his mother’s estate (which only arises after mum’s death) * Son became bankrupt – Mother dies – Son discharged from bankruptcy | HELD| Security attaches from the date of the security arrangement (ie. hen S first gave the security)| Reasoning| * When prop comes into existence (ie. when mother died) it is captured by the security, but dated all the way back to when S first gave security. * This is so even though prop fall in after bankruptcy! Prop is out of the hands of the trustee in bankruptcy. * S/Cs had priority over other unsecured creditors. * Goode uses analogy of new born being able to sue for injuries sustained during birth. | Bankruptcy Act ss 76, 78 Companies Act s 269 Assets under security do not vest in liquidator/ OA (s 76(3) BA) * If a corporation has ALL assets are covered by security, the liquidator is powerless and has to sit by the sidelines until the secured creditor, typically acting for a receiver, carries out the process of managing the company and dealing with the assets so as to maximize assets to be paid back. What happens during insolvency? * You cannot quite appreciate security until you know what happens to property in the insolvency process: 1. Relevant event† occurs – eg. resolution to wind-up/ petition to court is passed 2. Trustee in bankruptcy/ liquidator appointed 3. Nobody (no officer of the company or individual) may dispose of the assets without the consent of the trustee or liquidator * Prior to insolvency, even if person is about to be bankrupt, assets are at free disposal of Co/ person. * But 2 exceptions: (i) Insolvency clawback * certain pre-insolvency dealings can be reversed. (ii) Anti-deprivation rule (AD Rule) * common law rule of public policy (originates in com-law; not found in insolvency legislation) * If an instrument seeks to transfer prop out or only take effect upon an individual’s bankruptcy, it is generally void. (see Syl 3) * One discredited distinction: * the grant for a limited period which expires upon insolvency = valid * the forfeiture of a full interest upon insolvency = invalid * Hard to see why they are treated diff when effect is same. * Anti-deprivation rule not the same as pari pasu rule (PP Rule) (as held in Belmont Park) * The pari pasu rule of distribution is stated in s. 00 of the companies act states that subject to the claim of the preferential creditors, the assets of the insolvent person are to be distributed in the pari pasu or rateable. This is a legislation that cannot be moulded by the court. Cases on PP Rule AD Rule Re Jeavons, ex p Mackay (1873) LR 8 Ch App 643 * Facts: * J sold one B a patent for improving armour plates manufacture. * In return B would pay J royalties of 15s per ton of plates produced. * B also lent J ? 12,500, and agreed that half J’s' royalties would go to paying back that loan. It was further agreed that if J went insolvent, or made an arrangement with creditors, B could keep all the royalties to satisfy the debt * Held: The second part of agreement ineffective; Brown had a lien on one half of the royalties only * Clear-cut breach of pari pasu and AD Rule both. *British Eagle v Cie Nationale Air France [1975] HL| Facts| * The case concerned the operation of IATA, a clearing house for airlines. Under the IATA arrangement, ‘debts’ owed between members were not payable, but were netted off in the clearing system; only the balance was payable to or by IATA. British Eagle was owed a certain sum by Air France; but at the overall leve, BE was a Net Debtor Airline. * Following a windi ng up petition, British Eagle’s liquidator claimed that such amount was an asset that should be available to its unsecured creditors. * Air France contended that nothing was owed directly to British Eagle, and that, under the clearing house system, British Eagle's only relevant assets or liabilities were rights or obligations as between British Eagle and IATA. The pari passu principle is in issue and not the anti-deprivation rule as if the sums are payable to IATA and not British Eagle, which would have in turn been used to pay off a creditor of British Eagle (Air France), Air France will gain priority vis-a-vis other general unsecured creditors of British Eagle. | HELD| Majority: the parties had, by agreeing that simple contract debts were to be settled in a particular way, contracted out of insolvency legislation which provided for the payment of unsecured debts pari passu. As such, the arrangements were contrary to public policy and the insolvency legislation prevailed. BE could recover $ owed to it by AF; other creditors of BE had to prove in insolvency estate| Reasoning| * it did not matter that the arrangements were entered into bona fide and without the intention of defeating the insolvency laws. * Lord Cross in effect suggested that the only way to obtain priority apart from statute was through security. Lord Morris (Dissent): * Distinguished cases like Ex p Mackay as cases where parties made clear attempt to evade insolvency laws. * Such concerns do not bite when arrangement is for valid commercial reasons. * â€Å"In the contracts [in the present case] †¦ here was no provision which was designed to come into effect or to bring about a change in the event of liquidation†. | Evaluation| Majority’s arg that AF is being preferred, and PP Rule offended, is flawed * At clearing stage, not certain whether AF is even going to be a creditor bec you do not know who is being owed yet. * And if we don’t know where the money is go ing, how can you say air france is given preferential treatment? Better way to rationalize Majority’s decision is on AD Rule * An asset of BE, debt owed by AF to it is being divested from BE’s estate upon insolvency. Counter –arg: Cannot even be said that AF had an obligation to pay BE. (line pursued by Minority)MB: Best way out of this mess may be novation. * Each pair of contracting parties will agree to novate the contract in favour of the central clearing house * Upon insolvency, oblgs and liabilities clearly btw each party and clearing hse. Note: the judgment was overturned by legislation to preclude its operation to clearing houses. IATA also amended the terms of its clearing house to overcome the effects of the judgment. | 30 years later, the IATA clearing house arrangement was litigated again, in Australia: International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 * HELD: no public policy considerations outside of Act – in any case, no violation of any such considerations bec no relationship of debtor and creditor exists between Ansett and other members of the Clearing House * However, HCA noted that there were significant differences between Ansett and British Eagle, including the fact that, unlike in British Eagle, no claim was made between individual members of the Clearing House. When you look at the AD rule and its breadth you can begin to see it can pose a threat to perfectly straightforward transaction: (It was only starting from this case that Cts seem more aware of distinction btw AD Rule and PP Rule; but court doesn’t bring the distinction home here) Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2011] UKSC 38| Facts| Priority swap arrangement * The case concerned the enforceability of so-called â€Å"flip clauses†: Lehman Brothers (LBSF) vsNoteholders * Ordinarily, LBSF has priority over Noteholders; but in event of insolvency, Noteholders are given priority over enforcement of charge over securities. * Note that LBSF does not lose ability to enforce charge; just priority. | HELD| The ‘flip’ clause was valid and enforceable and did not offend the AD Rule| Reasoning| * Two major grounds: * Firstly, not sure if priority is property; hence the swap cannot be said to offend AD Rule (Lord Mance) * Secondly, there is a good and sound commercial reasons for the transaction. However, Ct does not go as far as to say this ground is a defence; but it is certainly relevant. | Evaluation| HL raised an example of a scheme where Insurance Broker pays out to Employer for Employee’s claims for injury. HL said it breached AD Rule. (MB does not think it does).. | Form vs Substance * * Starting: Freedom of contract – free to arrange affairs btw parties * Two exceptions: 1. Sham transactions * A pretence. Appear to enter into a contract to do X; in effect they do Y. * Courts rarely strike down transactions as shams 2. The internal route† – courts will re-label a transaction if in substance that is what it is. * That is tantamount to embracing the spirit of American realism as exemplified by UCP 600 Art 9. * But, courts will not strike intervene just bec parties choose to use a more artificial and less straightforward route * We will look further into this: Artificial transactions * It is impt to distinguish whether is in fact a security transaction bec security often requires registration before they can be recognised. Re George Inglefield Ltd [1933] Ch 1 Usually cited for is a 3 part test for distinguishing a charge (or mtgage) from a sale (or discount) * (S = purported seller (usually borrower); B = purported buyer (usually the lender)) * Romer LJ: (i) Redemption * If S is able to recover asset upon repayment suggests a charge (ii) Surplus * If upon selling asset there is a surplus, and B is obliged to return surplus to S more likely charge (iii) Deficiency * If B realises asset bring s him less than amt advanced + he has right to make S â€Å"top up† more likely charge * (This one can be easily breached – most discounting agreements (ie. ale of debt) contain a recourse agmt – seller to reimburse to the buyer in an event of certain debts proving to be bad) Re Curtain Dream Plc [1990] BCC 341| Facts| In this case, a sale and repurchase was characterised as mortgage * 2 separate agreements: (i) Facility letter – B open line of credit for S; (ii) Sale agmt – S sold fabric to B, with a resale at 90 days where S had to repurchase the same fabric with increased price at LIBOR + 1% * Whether this was a charge such that it had to be registered? | HELD| When the two agmts are viewed tgt, their legal effect is that of a mortgage.Failed for lack of registration. | Reasoning| * Agmt (i) was very suggestive of a loan * Used language such as â€Å"credit† and â€Å"credit line† + calculated against LIBOR * Agmt (ii) contained a right of repurchase that looked a lot like equity of redemption. | Evaluation| However, a mere right to repurchase should not too easily be characterised as an equity of redemption because such repos transactions occur very frequently (for good commercial reasons not limited to raising finance) and no reason to suppose they are not genuine sales. * Courts have at other times been transaction-friendly: Welsh Development Agency v Exfinco [1990] BCC 393| Facts| 1. P grants WDA a floating charge over its book debts 2. P’s dealings with Exfinco (E) * P sells software to E * P then acts as E’s agent to negotiate sale from P to overseas customers * Overseas customers don’t know P is agent (E wishes to be undisclosed principal) * Payments go into a blocked acct in P’s name; but only E can draw from that acctIssue:Does E have a charge over the book debts from overseas customers that is paid to P? (Rmb P had charged all its book debts to WDA) * On the one hand, it is charge; it is unregistered; WDA stands in priority * On the other hand, not charge: it is E’s software that is being sold; so money coming in belongs to E, not P. | HELD| Not a security; parties are free to structure their affairs even if it means doing so to avoid statute; Parliament should revise statute if it wishes to capture this. – Book debts belong to E, not P. Reasoning| * There was also a clause allowing P to shut down the scheme with E with 3 mth’s notice held not an equity of redemption * | Evaluation| * This case stands for a freedom of contract and parties can choose an artificial route for perfectly sensible commercial reasons * They can strive for the best priority position they can get and can contract to do so even if it means they wish to avoid statute. | * Singapore courts seem to be quite transaction-friendly as well: Thai Chee Ken v Banque Paribas [1993] SGCA| Facts| * Classic sale and repurchase| HELD| Not a security |Reasoning| * Court acknowledges Romer LJ’s 3-part test * Accepts principle that court must look at true substance of agreement at law * Sale and leaseback has commonly been taken at face value, even with a financing element. * Court viewed it as double sale; no qn of equity of redemption. * | Evaluation| * You will realise that the arg about equity of redemption is circular. | American legal realism and Article 9 * See M. Bridge (2008) article * Be aware that American realism compelled drafgint Art 9, UCC. Focus there is on economic reality of transaction. Mortgages and ChargesMortgages over personal property * Mtgage = conveyance (or assignment) of property to Mtgee as security for the repayment of a debt (Keith v Burrows (1876) 1 CPD 722) * There is an actual transfer of property already/]. Pacrim Investments Pte Ltd v Tan Mui Keow [2005] 1 SLR(R) 141| Facts| DP had shares in MSL – shares were issued subject to a moratorium tt they cannot be disposed or assigned without MSL’s wr itten consent for 1 yr – purpose was to prevent depression of MSL’s share value if sold en masse – DP â€Å"pledged† shares to Pacrim – P sought to get its shares registered – MSL refused bec. t had not given approval for the transfer to P. Issue: Was equitable mtgage of shares a â€Å"disposal† or â€Å"assignment† of those shares in breach of the Moratorium? | HELD| The words â€Å"assign† or â€Å"dispose of† should be construed according to what it normally means in securities markets – ie. restriction on sale in open mkt. Does not stop shares being used as security. | Reasoning| Counsel for Pacrim conceded that the deposit of the share certificates together with the signed blank transfers for the 70 million Consideration Shares created an equitable mortgage. We agree that, in law, a â€Å"pledge† of share certificates accompanied by duly signed transfers is an equitable mortgage. â€Å"The cour t interprets restrictions on transferability strictly, and if there is an ambiguity or uncertainty, inclines to the interpretation which will give the shareholder the greatest freedom to transfer. † * Pers prop is prima facie transferable; need very clear language to stop a person’s having that transferability. | Note| In Re Lin Securities Pte Ltd [1988] 1 SLR(R) 220, court went further to say that a deposit of share certs can be an equitable mtgage whether accompanied by transfer in blank or not. Clogs on the equity of redemption * Common law used to be very strict – any arrangement that fettered B’s redemption was a â€Å"clog† and would be struck down * Today, Cts tend only to strike it down when it (1) is unconscionable, (2) amounts to a penalty, or (3) is repugnant to the contractual right to redeem (Kreglinger) * Judicial progress: the sentiment in contract law tt must look away from substantive unfairness and only intervene when there is proc edural unfairness. Length of mtgage Knightsbridge Estates Ltd v Byrne [1939] Ch 441 (ECA)|HELD| Mtgag for a long duration does not kill right to redeem. There is no doctrine of a â€Å"reasonable time to redeem†. | Facts| Mtgage was to be repaid over 40 years| Reasoning| * Court shd only intervene when there is unconscionability – none in this case bec. parties were companies who were dealing at arm’s length. | * Similar view about duration of mtgage in Singapore: Fiscal Consultants Pte Ltd v Asia Commercial Finance Ltd (1981)| HELD| Mtgag for a long duration does not kill right to redeem. There is no doctrine of a â€Å"reasonable time to redeem†. Facts| Mtgage was to be repaid over a long period- term stipulated tt if M redeemed bef date of redemption, he must pay the full interest due the entire period of mortgage| Reasoning| * Clause not harsh tt this was not harsh and unconscionable bec. parties were of equal bargaining power | Collateral advantages * Most common are clauses entitling B the option to purchase. * Collateral advantages are terms in the mortgage that confer a benefit on L but do not form part of the security (ie. it does nothing to make L’s debt more secure). Courts’ have decided this issue on whether such advantages are IN the mtgage agmt or whether they are collateral atm. If not, they are upheld *Samuel v Jarrah Timber | HELD| Mtgag for a long duration does not kill right to redeem. There is no doctrine of a â€Å"reasonable time to redeem†. | Reasoning| so long as the option is â€Å"a term of the loan†, it will not be upheld. | *Kreglinger v New Patagonia Meat (HL) | HELD| * Held that tt option was a collateral agreement and did not form part of the mortgage (even though it was in the same loan document). Further, tt bec. it was a floating charge, it was easier to find tt this was a collateral agreement. | Facts| K lent money to to NPM – agreement stated tt K would have a 5- year right to purchase the sheepskins produced by NPM (this effectively creates a floating charge) – NPM had 5 years to repay the loan but could pay it all off earlier if it wished – loan repaid bef. 5yrs was up; K continued to demand right to purchase sheepskins. | Reasoning| * | * * This â€Å"collateral contract† approach is done to avoid continued invocation of â€Å"clog on the equity† doctrine. Citicorp Investment Bank (Singapore) Ltd v Wee Ah Kee [’97 SGCA]| HELD| Option to purchase was a collateral agmt (ie. not part of mtgage); further, it was not void bec there was no unconscionability. | Facts| K lent money to to NPM – agreement stated tt K would have a 5-year right to purchase the sheepskins produced by NPM (this effectively creates a floating charge) – NPM had 5 years to repay the loan but could pay it all off earlier if it wished – loan repaid bef. 5yrs was up; K continued to demand right to purchase sheepskins. R easoning| * Notably, CA departed from HC’s arg on â€Å"clog on the equity†| * SG law and Eng law DIVERGE on this: * England = Clog on the equity’ doctrine not done away (recent case: Jones v. Morgan was one whr cl was struck in the absence of unconscionability). * SG = has moved away from such a restricted view and unconscionability is the more decisive factor. Identifying a charge * Charge vs Mtgage * Both allow Chgor/Mtgor to retain possession of asset * But charge does not involve conveyance (or assignment) to Chgee * Thus, Salmond: â€Å"casting a shadow over the property† in question No legal charge * Bec common law has found it difficult to carve prop interest out of undifferentiated bulk; charge is so bec prop is only encumbered so far as necessary to support repayment of debt. Charge vs Mtgage * As a matter of evidence, it is more difficult to determine if a charge has been granted than so for a mtgage. * The following case (1) tries to explain d iff btw a charge and a mortgage and (2) shows how easily a charge may be granted, even though parties may not have realised so! **Swiss Bank Corporation v Lloyds Bank [1982] AC 584|Facts| * Very complicated * In a nutshell, IFT had some shares in a company. (1) To comply w Bank of Eng regulations, IFT allowed Swiss Bank (SB) consideratble measure of control over those shares. (2) It subsequently granted Lloyds Bank (LB) a charge. * Priorities battle. | HELD| SB did not have a charge. IFT and SB only arranged as such to comply with BOE rules, not to secure the debt. * Lord Wilberforce (at HL): Further, in such transactions there is usually a â€Å"charge-back† arrangement on IFT’s active acct w SB. Reasoning| * Equitable mtgage * Though insufficient to pass legal title, Mtgor nonetheless demonstrates a binding intention to create a security in favour of mtgee * Equity will confer title if subject matter of contract makes it specifically enforceable. * Charge which is no t mtgage * Property is specially appropriated to the discharge of a debt; * Chgee has right of realisation by judicial process * Whether a charge has arisen must depend on intention of the parties * Intention could be (1) express or (2) inferred * Express intention is found in documents * This is objectively construed – ie. f docs reveal that transaction has a legal effect of granting charge, does not matter if parties did not realise the consequences. * They are presumed to intend the consequences of their acts. | Evaluation| Is court being contradictory? Does intention not matter? * Submitted that intention of parties is being given effect; Ct focus is on the legal effect they intended and not judge intention by the label they’ve chosen to use. That’s all it means. | Right to take possession =/= charge * A right to step in and take possession of the assets, without more, does not give rise to a charge: *Re Cosslett (Contractors) Ltd [1998] Ch 495 Concerned bui lding contract – common in such contracts to allow employer to step in and take over the plant on default of contractor. * This case opined that typically this would not amount to a charge: * Employer not seeking to secure contractor’s liability; rather the purpose is to allow employer to carry out performance instead. * Held: In this particular case, it was an equitable charge. * This contract contained right to sell the plant and apply the proceeds to discharge contractor’s debt. * (This was a contractual right; did not stem from possessory transfer of plant) Charge must contain positive undertakingFlightline Ltd v Edwards [2003] CA * A charge must entail a positive obligation for the property to be applied as security * Facts: Pf had injunction on all of airline’s assets – airline agrees to pay a large amt of $ into an acct – covenanted to retain 75% in that acct as unencumbered = effectively, a negative undertaking. * Held: Not a charge. * An arrangement, however short-term it may be, can amount to a charge if that is the legal effect of it. * Letter of hypothecation * Letter of hypothecation Bank advances funds to exporter * Bank holds on to BOL until borrower pays It is a short-term arrangement; but capable of being a charge. Direction to pay out of fund =/= charge *Palmer v Carey [1926] AC 703 (PC from Aus)| Facts| 1. L lent B money to purchase his stock-in-trade 2. When B sells his goods, proceeds are to be paid into L’s bank acct 3. L would deduct loan amt + 1/3 of profit; balance paid to B * L argues this is equitable charge| HELD| L did not have a charge- | Reasoning| * An agreement that a fund be applied in a certain way, without more, will not find a charge. * It is necessary to find an oblg to pay the debt out of the fund. Only then has there been a beneficial prop interest that will allow court to decree spec perf. * Depositing money in L’s acct only gives lender a â€Å"more efficient hol d to prevent the misapplication of proceeds† but it does not give him property. | Evaluation| * Seem to lay down two criteria (Blackburne J. in Re TXU Europe Group plc): (i) There must be contractual appropriation of asset to the debt; (ii) There must be a specifically enforceable right to look to asset to discharge debt. * MB: PC seemed to be laying down a wafer-thin distinction; might have to confine decision only to cases where the asset in qn is a fund. If you undertake to pay me out of monies in your hand = charge * If you undertake to pay into my acct + injunction on how you can use acct, with the effect that L is the one taking steps to identify what is owed to him = not charge * Confine case to fund; see difference when it is building contract in Cosslett: * A fund = repository of money typically revolving as to contents from time to time, like the contents of a bank account but not limited to it(See Small Goode @ pp 18 – 19)| * Note that Cosslett; Flightline; P almer can all be analysed in framework of â€Å"contractual appropriation† of asset to debtEquitable set-off vs charge * Conceptually, a right of set-off, being a personal right ,is not a security * Imagine if B borrows from L; prior to that L happened to be indebted to B as well. * It has been held that a charge can be effected by B charging to L his contractual indebtedness to B (Re Bank of Credit and Commerce International (No. 8) [1998] AC 214) * Practically, this is done by book entry and works same as contractual set-off. So line is very blurred now. Capturing future assets * Book debts Only equity will recognise conveyances of future property It will treat the present conveyance as a binding contract to convey, and PROVIDED CONSIDERATION IS GIVEN, which is subject specific performance. * The future propert will automatically be conveyed in euiqty to Tfree once it comes into existence. * Halroyd v Marshall (1862, HL): * Mtgage granted over inter alia, future machinery t hat is in substitution of machinery already being used. * Held: Mtgee’s rights over prop prevailed over subsequent creditors. * Once machinery came into mill, it was encumbered by the Mtgee’s equitable interest; Mtgor held machinery on trust for mtgee. *Tailby v Official Receiver (1888) 13 App Cas 523 Lord Macnaughten 1. How do I know whether a particular future property is captured? * Essentially there must be an adequacy of description in the instrument of the charge or debenture * Best way = charge states to capture all book debts, present and future. * Makes process clean and automatic * If you try and capture only certain â€Å"types† of book debts, there is problem of identification when as and when that debt comes into existence. 2. Why is â€Å"specific performance† used to justify the automaticity of the process? a) Bec damages are insufficient – in an insolvency situation, damages are useless (b) Just a convenient metaphor (MB’s fa voured view) * Technically there is no need to compel B to do anything, all happens automatically. * So think of specific performance as a type of mere instrumentality or metaphor. Charge-backs * Charge over my own indebtedness to you. * Common: banker’s charge-back * Usually contains a flawed asset clause – bank does not need to repay your deposit until your loan is repaid. * Is this possible? MB: Conceptually, it may be seen as impossible using charge-back as mtgage/ charge * But banker’s charge-back is allowed in legislation (S. 13 of CLA) and in case law (Re BCCI (No. 8)) Trust Receipts distinguished Letter of credit How it works * Usually for import business 1. Bank advances $ to Buyer (B) 2. As security, bank holds on to B’s BOL. Thus, bank has a pledge over the BOL itself. * In fact, often BOL names bank as consignee. * Through the BOL, Bank effectively has pledge over underlying gds. 3. B needs to collect goods. 4. So, Bank releases the BOL with t he limited mandate to allow B to collect gds from port. This is reflected in a trust receipt) 5. After B collects, BOL is effectively â€Å"spent†. Deemed continuing pledge * What is the nature of the r/s btw Bank and B at (4)? * Bank has a deemed continuing pledge of the BOL (even though BOL is no longer in bank’s possession). * A pledge can be deemed to continue despite a temporary transfer of possession back to Pdgor (North Western Bank) * [When looking at TR, rmb to have a look at Mercantile Bank of India case (earlier syllabus)] Deemed trust? * What is the nature of the r/s btw Bank and B at (5)? Q: If after BOL is â€Å"spent† it no longer represents the goods, then what interest does Bank have in gds after collection? B has to take delivery of goods as agent of Bank and has to account to bank from the proceeds (for the amt of advance). Thus, this is a kind of deemed trust. * If it is, it is a funny kind of â€Å"trust† bec there is the Buyer (†Å"trustee†)’s equity of redemption. So the trust is liable to be unwound upon repayment. | * MB: Another possibility = Bank has charge over the goods. * Problem: CA and BOS Act seem to exclude trust receipts from charges registration suggests they are not charges * S 131, CA BOS leg excludes short-term import/ export bills * Bank clearly does not become legal owner of the goods; it only has a security interest. *United Malayan Banking Corp Bhd v Lim Kang Seng [1994] SGHC * Issue: Whether a bank operating under trust receipt terms had full legal and beneficial ownership of the goods after collection (w B acting simply as Blee)? * Held: NO. * Bank was not in business of dealing in building materials and clearly did not purchase these goods to deal with them. * Further, court also held that whether trust receipt can give security even if the pre-existing LOC granted to B was secured by other securities. See Rev Lect 1 and 2 for more on registration] How is proceeds shared btw Bank and B? * Quite obviously, proceeds from goods will be different from amt advanced (assuming there is profit). * Re David Allester (1922) 2 Ch 11 * Two possible ways: (i) Surplus from sale all goes to bank. * Using trust analysis, Bank is sole beneficiary (ii) Bank entitled to proceeds only up to amt of advance + interest. * MB: more commercially realistic * Then this would be a trust where both B and Bank are beneficiaries? Fixed and Floating Charges Definition of a floating charge | (1) Fixed Charge| (2) Floating Charge| * Prop that are ascertained or capable of being ascertained| Re Yorkshire Woolcombers: * Usually a class of assets, present and future * Contents of that class would change from time to time| Illingworth v Houldsworth [1904] HL (Lord Macnaghten)| – Once granted, it fastens on prop â€Å"without more†| – It is â€Å"ambulatory and shifting in nature, hovering over and so to speak floating with the property†- Does not bite until c rystallising event. | Priorities| Ranks in priority to floating charge, provided subsequent fixed Chgee has no notice of any –ve pledge| Ranks in priority to unsecured creds; except for preferential creditors| Floating charge is a present security interest * But its full force will not be felt until a future date; hence its also described as a â€Å"dormant† security Three features of floating charges (though not all 3 must be present):*Re Yorkshire Woolcombers Association Ltd [1904]: (i) If it is a charge on a class of assets of a company present and future; (ii) If that class is one which, in the ordinary course of business of the company, would be changing from time to time; and (iii) If it is contemplated that, until some future step is taken by those interested in the charge, the company may carry on its business in the ordinary way as ar as concerns the particular class of assets. [ Of all, (3) is the most impt – degree of control by Chgee most defining fe ature! ]| – When looking at whether B is free to deal with asset, Courts will look beyond words in agmt and at the actual practice btw the parties *Dresdner Bank v Ho Mun-Tuke [’92, SGCA] * Pal-El scandal – â€Å"daily certificates†-type cases – in this case, notwithstanding tt docs strictly said tt Co had to get bank’s approval before dealing in e shares – it was found tt Co. had freedom to alter the pool of shares tt constituted the security + Co. ever sought nor did bank demand such approval – HELD to be floating charge â€Å"Dealing in the ordinary course of business† (OCOB) * It is the hallmark of a floating charge that Chgor can deal with asset in the ordinary course business. But what does this mean? * MB: We see a rather wide and extravagant defn of ordinarycourse of business. Re Borax [1901] 1 Ch 327 * It means Chgor company can do anything, except: (i) Deliberately destroy its business (ii) Ultra vires transact ions (ie. adhere to MoA of Co) There has long been an intimate relationship between law relating to floating charge and lwa relating to corporate capacity (iii) Anything expressly prohibitied by the debenture. * Short of any of these 3 grounds, Chgee cannot intervene in Chgor’s business – eg. try and get injunction against Chgor Ashborder BV v Green Gas Power Ltd [2004] EWHC 1517 [Read paras 192 – 227 for summary of authorities; para 227 concisely states law] * Reaffirms Borax; and goes further! * Even if the company in question grants an unlawful preference = not be out of the ordinary course of business. Even if one or more of the directors are in breach of fiduciary duties = not be out of the ordinary course of business. * In present case, there was unlawful preference (Dirs lent $ to Co – Co has financial problems – Dirs sue Co – Dirs pass reso not to defend action); but not out of OCOB. Crystallisation of floating charges * Crystallisat ion does two things: (i) transforms floating charge fixed charge (ii) removes Chgor’s authority to deal w assets in OCOB * Crystallising events can be: (a) automatic – happens without Chgee/ Chgor knowing Eg. Chgor can crystallise charge at will (as was the case in Brightlife) (b) semi-automatic – exact + give notice * Eg. winding-up of Chgee Re Brightlife [1987] Ch 200 * There is no public policy reason to restrict parties’ freedom of contract. They can choose whatever crystallisation event. * However, automatic crystallisation can give rise to commercial inconvenience and hence there is a strong presumption that parties did not intend it. Very clear language will be required, but not excluded by rule of law. Acknowledged that some may not be happy w state of law but up to Parliament to change it Re Woodroffes (Musical Instruments) Ltd [1986] Ch 366 * Cessation of business is always a crystallising event * â€Å"A cessation of business necessarily puts an end to the company's dealings with its assets. That which kept the charge hovering has now been released and the force of gravity causes it to settle and fasten on the subject of the charge within its reach and grasp. † Apparent agency * While 3P would not know when crystallising event has taken place, they can â€Å"seek shelter† in apparent agency. Small Goode: Termination of Chgor’s apparent authority to deal w assets is purely btw Chgor and Chgee Taken tgt w the wide ambit of OCOB, what courts are saying is that they will be slow to fetter freedom of contract; but 3Ps are not w/o protection either. * Small Goode (at 4-29): â€Å"No outsider is entitled to dictate the terms on which the company’s management powers are to be brought to an end†¦ but whether the ending of [the power] binds third parties dealing with assets is an entirely separate question. | S 226(1A): a gloss to the automatic/ semi-automatic battle Re Brightlight was decided on f acts before a vital statutory change – s 226(1A): * Defines a floating charge as one that is a floating charge at creation. * Upon liquidation, liquidator has duty to pay Pref Creds before floating chgee * So the whole point of automatic crystallisation was a race to convert from floating fixed before liquidation * If fixed at liquidation = no need to be subordinate to Pref Creds * With s 226(1A) , this race is now pointless. * Hence, floating charges per se have lost favour links to Insolvency Battleground (see section 4. 5) Distinguishing fixed and floating charges It is important to distinguish fixed and floating charges. It is legislatively required: * S 226, CA: Preferential creditors to have priority over floating Chgee * The case of Re Cimex Tissues Ltd [1994] BCC 626 was probably not correct to say that fixed/ floating charge exist on a continuum. The insolvency battleground * Parliament make Pref Cred ; Floating Chgee + Automatic crystallisation not effective = Float ing Charge not popular. * Instead, they took fixed charges over as many assets as they possibly could with a floating charge to sweep up anything behind that might be unaccounted for. A particularly difficult asset to be subject to a fixed charge are book debts *Agnew v Commissioner of Inland Revenue [2001] 2 AC 710 * Cannot have fixed charge debt; floating charge proceeds * No diff btw debt and proceeds; failure to control proceeds = no charge over debt * To have fixed charge over debt = control collection of proceeds * Lord Millet: contractual stipulation tt proceeds are to be paid into blocked acct is not enough if account is not in fact operated as blocked. *Re Spectrum Plus Ltd [2005] 2 AC 680 * Agreed that insufficient for contractual right to control if it is not carried out. However, exactly how much control is needed is unknown. * Suggested that control exists on a spectrum – with total freedom of Chgor at one end; total prohibition on dealings at the other. * Court seems to imply that virtually all possibilities in between = floating * Simply if there is power to make item by item substitution = not fixed charge. Expenses of liquidator * It is a basic principle in insolvency proceedings that expenses of liquidation are not payable out of assets which are the subject of security. * Asset that is subject to security is not available to debtor thus cannot be used to pay.Buchler v Talbot [2004] AC 298 (HL) * Reversing earlier decisions, affirmed that liquidation expenses only paid out from assets that are not encumbered by any security (incl floating charge) * Thus, 2 diff funds: Floating Charge Assets| Unencumbered| (a) (Remaining Pref Creds if Unencumberd fund not enough) (b) Floating Chargees| (a) Liquidation expenses (b) Pref creditors| * Only when unencumbered fund is exhausted do Pref Creds get to touch floating charge assets * In England * Buchler was overruled by Parliament s 1282, UK CA 200 * Now Pref Creds are paid in priority to Floatin g Chgees * In Singapore It seems that the â€Å"2 funds† approach in Buchler is the law in our Companies Act * Reading s 328(5), on one level, seems like Pref Creds ; Floating Chgee * But read closely, this is only the case where Pref Creds cannot all be satisfied out of the â€Å"general creditors† assets * But read together w s 226 Pref Creds only to be paid out of â€Å"any assets coming to the hands of the receiver * By defn, floating charge assets are not in receiver’s hands Quasi-Security: Title-based Devices Reservation of title (‘Romalpa clauses’) * Eng + SG law = ROT is NOT security ADV: NO NEED COMPLY W REGISTRATION * How effective an ROT is depends on the commercial life of the goods. * Eg. widget – easily mixed as machine part = will lose identity = no point reserving title * Such was the case in Gebrueder Buehler AG became fixture * ROT clause can be created in two ways: * S Reserving right of disposal (s 19, SGA) * Making it a term of appropriation * ROT clause can be wider than mere purchase price; can cover all debts owed btw the parties. This is done using an â€Å"all moneys† clause (Armour) * Surplus market value goes to S Re Bond Worth Ltd [1980] Ch 228 S sought to reserve beneficial ownership only – failed – such a clause construed as full benef +leg ownership B + B to grant back benef ownership to S – failed for lack of registration as floating charge. Limitations of ROT – new goods *Aluminiuim Industrie Vassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 | Facts| * S – sold aluminium B * The written agreement mandated that ownership of the aluminum would not pass to the buyer until the purchase price was fully satisfied * Problem: Clause could cover aluminium foil; but not the money proceeds on resale of the foil. Crucially, in this case, B had conceded it was a Blee. | HELD| As B was Blee (ie fiduciary), proceeds from aluminium could be traced| Evaluation | Gerard McMeel: hard to believe parties were in a fiduciary relationship when perhaps a more natural interpretation was that the parties were dealing at arms length in a commercial transaction| * In the absence of such a fiduciary r/s, the opposite result was reached in Borden where S failed to trace his resin into the manufactured chipboard.Court held there were various different materials and it was difficult to quantify value. * Hence, ROT clauses have their limitations. Drafters have sought to get around it by including: * â€Å"New goods† clauses = states ownership of new goods shall be and remain in the seller. * â€Å"Money proceeds† clauses = reserves title to the money proceeds from sale of gds New goods clauses * Default rule of Eng law = ownership of new thing is in creator of the new thing (ie. Buyer). Courts will strike this down bec it cannot ignore the rule that creator = owner; so the proper construction is that B is owner – but B gives a grant- back to S – but doing so makes it a charge – you need registration. Clough Mill Ltd v Martin [1985] 1 WLR 111 * Attempt to retain ownership in new goods – failed – construing clause as â€Å"retaining† title for S would mean that S is owner of goods even after contract is terminated – S will get windfall. * Must use charge analysis. Here, court was in principle willing to give effect to such clauses. However, Borden concluded that such clauses effectively don’t work. *Borden (UK) Ltd v Scottish Forest Timber Products Ltd [1981] Ch 25 * ROT clause retaining title from passing into new goods failed * Buckley LJ: * â€Å"It was impossible for the plaintiffs to reserve any property in the manufactured chipboard, because they never had any property in it; the property in that product originates in the defendants when the chipboard is manufactured.Any interest which the plaintiffs might have had in the chipboard must have arisen either by transfer of ownership or by some constructive trust or equitable charge, and, as I say, I find it impossible to spell out of this condtion anything of that nature. † * (Note: since there was no wrongful disposition here, there cannot be a CT). * In such cases, it would also not aid S to try and retain â€Å"beneficial ownership† only: Re Bond Worth Ltd [1980] Ch 228 * S sought to reserve beneficial ownership only – failed – such a clause onstrued as: full benef +leg ownership B + B to grant back benef ownership to S – failed for lack of registration as floating charge. Money proceeds clauses * Courts generally construe any such right of S to the proceeds as creating a charge, which is void for failure of registration *E Pfeiffer Weinkellerei Weinenkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150 * Such clauses are inconsistent with a trust relationship * S only gets moneys up to amount owed by B but if S = beneficiary, ALL proceeds should vest in him. * Language of such clauses talk of assignment from B to S not consistent with trust. Only case such clause succeeded = HCA case of Associated Alloys Associated Alloys Pty Ltd v CAN 001 452 106 Pty Ltd [2000] HCA 25 * Clause interpreted as creating a trust with BOTH B and S as beneficiary * MB: However, to say it is a part-trust gives rise to its own set of problems like whether B must keep funds separate from his own etc. * (Moreover, once the Commonwealth of Australia‘s Personal Property Security Act comes into force, Associated Alloys is likely to be of only historical (rather than precedential) value in Australia) Hire purchase For many years, finance companies (FC) had best of all worlds bec H-P agmts were not: (i) Sale * Finance companies will always say they don’t make goods because they want to be responsible for the quality and fitness of the goods. * Helby v Matthews [1893] AC 471: Not sale under SGA bec B is not legally bound to exercise the option, then the buyer is not someone who has bought or agreed to buy the goods. exe * However, some owners will draft a HP that maximises instalments. Hirer is obliged to pay all instalments + deemed to have exercised option = this is a conditional sale, not HP (Forthright Finance) * Note: this case also touches on buyer in possession. * Such conditional sales do not need to be registered under BOS Act bec hirer is not granting FC power to seize but FC is â€Å"reserving† that power (McEntire) (ii) Loan * FC did not want to be caught under Moneylenders Act (iii) Security arrangement * FC does not want to have to register * FC’s damages in conversion (Whiteley; Belsize): Situation: FC —– hires out to H — sells it without permission 3P * FC sues 3P in conversion * FC’s measure of damages is NOT value of asset; but the value minus any paid up instalments FC has enjoyed. * Shows that courts want economic reality to trump proprietary orthodoxy so that FC don ’t get windfall. Discounting receivables * Debts are sold off at a discount * Contains clauses for recourse and surplus but courts resist temptation to characterise as security. registration of chargesRegistrable charges * Actually company has to register all charges, as well as other stuff (see my lecture notes). * However, our real concern is with the s 131 registration bec it is the only one with â€Å"civil sanction† * Civil sanction = if a charge is not registered it is â€Å"void† against the liquidator and any creditor of the company. * (Mb: CA says â€Å"void† but it really means voidable) * Strange thing about our laws * Company has duty to register; but secured creditor suffers the harm from failure to register. Sg and Eng law = registration serves as negative priority * Priority is from the agreement that creates the security * But if you don’t comply w CA and register in 30 days (see the list of information required listed out on the CA ), you stand to lose what the instrument gave you. S 131 registration * Under s 131, there are THREE types of charges that must be registered: * s 131(3d): a charge which if executed by an individual, would require registration as a bill of sale * s 131 (3f): charge on book debts of company s 131 (3g): floating charge on undertaking or property of company * s 131(3f): Charge on book debts * What is book debt? * If something is entered into well kept books, then that is a book debt. * A charge over a speculative contingency =/= book debt * Paul ; Frank: L has charge over an insurance policy (policy pays B if B’s overseas purchaser fails to pay) = not a book debt * But a charge over present and future book debts qualifies. * There will be outstanding contracts – don’t know if book debts will fall in future = but it still qualifies. Independent Automatic Sales Ltd) * So far as you are looking into the future, there is a certain degree of contingency. * But the cont ingency in Paul is speculative in a sense. * In contrast, courts treat present and future book debts as a present and continuing stream of funds. * Even if Co fails to register charge, the Chgor – Chgee contract is still valid (s 131(2)). Chgor has to pay out to the unregistered Chgee. * Who can challenge a failure to register? * Unsecured creditor * Has no standing prior to liquidation Only comes into play when liquidator is appointed upon liquidation * Floating Chgee * Cannot selectively intervene without crystallizing the charge (Evans) * Secured creditor * Only person who can intervene. * Fixed charge ranks before then it can assert priority but if it comes after it can chllange to rank ahead of the unregistered fixed charge When is a charge created? * For purposes of the 30 day rule, it is crucial to know at what point is a charge considered created! * An agreement to grant a charge = a charge; But an agreement to grant a charge upon a contingency happening =/= charge * (Re Gregory Love: Co agreed to grant charge if a guarantee in its favour was called in. Held: no present charge – caught by late charge rule). * A clause that says L is â€Å"entitled to charge† =/= present charge (Asiatic Enterprises (Pte) Ltd v UOB [1999] SGCA 85) Effect of registration and non-registration No constructive knowledge * There is no room to import any notion of actual or constructive knowledge to deny a registered Chgee’s priority.Re Monolithic Co [1915] 1 Ch 643 * Dirs who refused to register earlier charge – Dirs later became Chgee for subsequent charge, which they duly registered – ie. Dirs were knowingly favouring their own charge. * HELD: Dirs’ subsequent registered charge prevailed despite their knowledge. * There is no rule that exploiting your legal advantage was not allowed. * Promote integrity of the register don’t wish to â€Å"go behind† it and import constructive knowledge etc. * MB: Parliament shou ld change statute? Hard case to see justice in it. Conclusive evidence * S. 34(3) and (4) CA: Certificate of registration is conclusive evidence of what is covered by charge. There is no room to â€Å"get behind† it. * Cases where there was a mistake/ negligence, but certificate cannot be impugned: * National Provincial Bank v Charnley [1924] 1 KB 431 * Re CL Nye Ltd [1971] Ch 442 Late Registration * S. 137: court has discretion to grant permission to register out of time and will do under certain conditions * Grounds: * Failure to register are accidental or due to inadvertence * Quite wide reasons in statute Basically reasons that non-reg was not to prejudice other creditors * In granting late reg, courts will protect creditors who come in between * Caveat that those who take charge after 30 days but before date of late registration = have priority over late Chgee * Similarly, to protect unsecured creditors, court will not grant late reg if insolvency is looming * But we nev er know when a Co is close to winding up. Hence, parties seeking late registration will sign consent order agreeing to disregard the registration certificate if there is winding up within a stipulated time (Re Ashpurton Estates) Priority RulesRules in general (Note: these are rules, not the order of priority! ) Rule 1: Where the equities are equal, the first in time prevails| (a) Btw a prior fixed charge and a subsequent floating charge = Fx charge prevails * In that sense, the equities are not equal (b) Knowledge/ notice does not reverse a Fx Chgee’s priority (English ; Scottish Mercantile [1892] ) Rule 2: A legal interest acquired for value and without notice overrides prior equitable interest. | Joseph v Lyons (1884) Competition btw (1) Holder of registered Bill of Sale [eq interest] vs (2) Pawnbroker [legal security interest] * HELD: (2) trumps bec it is legal interest + no notice * Entry of BoS into register does not equate to notice. Rule 3: Mtgee may tack further advan ces and rank in priority to subsequent mtgees| Rule 4: Priority rules may be varied by agreement. | Cheah v Equiticorp Finance Group Ltd [1992] 1 AC 472 * Subordination between two secured creditors. The point made by the case is that the 2 secured creditors can change their priority and the debtor has no standing in the matter.Constructive notice * Notice is relevant, at least in the case of Rule2 * Question is: can entry into company’s charge register equate to constructive notice? Wilson v Kelland [1910] 2 Ch 306 * Earlier chgee vs Later purchaser * In dicta: registration of a charge amounts to constructive notice of the existence of a charge. * What he does not say is how far such constructive notice goes. * The better view would be that registration is constructive notice against those who ought to examine the register. * Hence, purchasers or factors would not reasonably be expected to check. Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 1 WLR 978, 999-1 005 * Lord Millet questions whether Eng law should be so resistant to having constructive notice in commercial transactions: * â€Å"The doctrine of constructive notice has developed in relation to land, where there is a recognised procedure for investigating the title of the transferor. There is no room for the doctrine of notice in the strict conveyancing sense in a situation in which it is not the custom and practice to investigate the transferor's title. But in the wider sense it is not so limited. * He then cites Lord B-W in Barclays Bank v O’Brien: â€Å"The doctrine of notice lies at the heart of equity. † * He acknowledges that in many states in US, there is a doctrine of notice for share transactions * â€Å"I know of no reason why this should not be the case in England; on the contrary, I do not see how it would be possible to develop a logical and coherent system of restitution unless it were. * It is true that many distinguished judges in the past have wa rned against the extension of the equitable doctrine of constructive notice to commercial transactions (see Manchester Trust v.Furness [1895] 2 Q. B. 539, 545-546 , per Lindley L. J. ), but they were obviously referring to the doctrine in its strict conveyancing sense with its many refinements and its insistence on a proper investigation of title in every case. * The relevance of constructive notice in its wider meaning cannot depend on whether the transaction is â€Å"commercial:† the provision of secured overdraft facilities to a corporate customer is equally â€Å"commercial† whether the security consists of the managing director's house or his private investments.The difference is that in one case there is, and in the other there is not, a recognised procedure for investigating the mortgagor's title which the creditor ignores at his peril. † Purchase money (security) interests * Problem mainly in US * ROT is considered a security interest * Financier 1 (F1) h as charge over all present and future assets * F1 will get (1) windfall; (2) situational monopoly if borrower (B) goes to F2 for advance for equipment * F1 doesn’t do short-term financing * US solution = reversal of ordinary rules of priority; F2 gets priority * Eng + SG Not usually a problem bec ROT here is not security * Limited case in land where F2 sells land to B but is granted mtgage * No scintilla temprois * B only gets transferred an equity of redemption. * Abbey National Building Society v Cann [1991] AC 56: not impt Tacking future advances * The American system: * In Art 9 you can file a security interest even before you advance the value to the debtor. The whole system of filing is simplified and computerised * Also, you can file your security interest now and not only for an advance you contemplate making in the future but a whole string of advances. Later mtgee can see its on the register and its up to him to make subordination arrangements. * SG + Eng law on tac king * Tacking situation: * M1 $100K * M2 $50K * M1 $75K * Can M1’s later $75K â€Å"tack† to M1’s initial $100K so that M1’s total of $175K stands in priority to M2’s $50K? * Parties free to enter into subordination agmt. * But other than that, Eng law only recognised three grounds: (i) When making later advance, M1 has no notice of the later mortgage. * Hopkinson v Rolt (1861) * Applies even if M1 was under legal oblg to make 2nd advance * Reasons: Prevent M1 having monopoly ii) M1’s later advance is made pursuant to a contractual commitment incurred before the creation of the 2nd mortgage West v Williams [1899] * ECA held that this ground is no more. * Not sure if SG follows this case. * This exception has been reinstated in the case of land: * S 94, Eng LPA * S 80, SG LTA * Clearly the LTA is only for land. So if SG accepts West, then this ground is no more. * If so, the scope of tacking will be really slim. * (iii) Tabula in naufragio ( ‘plank in the shipwreck’) * M1, M2, M3; M3 (provided he has no notice of M2) can buy M1’s legal interest M3 now ranks in priority to M2 * M3 has to get Mtgor to sign blank share transfer forms – M3 sends forms to Co transferring from M1 to M3 = M3 is now in priority to M2. * (Logic akin to Dearle v Hall for assignments) * Macmillan: Tabula doctrine doesn’t apply anymore in land; applies for shares Circularity * See foolscap Remedies General * What remedies does a holder of security (mtgage/ charge in particular) have? * Entirely up to parties to contract * But typically, mtgage will see more remedies than charge: * Charge cannot foreclose * Also, cannot sell. Distinction not very great bec in drafting practice, the distinction btw charge and mtgage has been eliminated. What remedies does Chgee have? (i) Court-appointed Receivers * Limited powers; only collect and distribution powers * Officer of the court (ii) Receiver and Manager (R&M) * Created pu rely in the charge agmt; no need to go to court * How it works: Through power of attorney + Chgee having interest in assets Chgee has irrevocable power to appoint R&M in B’s name. * So theoretically, B has appointed R&M as agent for himself (iii) Judicial management (in UK, called â€Å"administration†) * Cf. eceivership, it is a broad-based management * Use of this has fallen in decline How much notice must creditor give? * Question of fact; as much notice as needed for B to get money from a convenient place (Bank of Baroda) * No need to allow B to have time to seek alternate financing. Duty of care in choosing receiver Gaskell v Gosling [1896] (Rigby LJ) * Creds do not like to take direct possession bec to avoid fiduciary duties. * Cred is NOT a trustee when it comes to choosing and appointing a receiver, it can favour its own commercial interest when deciding on when and who to appoint. Also, receiver can be totally selfish; no oblg to act in preference of interest of the company!! * But the cred and receiver owe certain equitable duty of care * Not same as com-law DOC * It is

Piggery Business Plan

piggery University of Technology, Jamaica Introduction to Entrepreneurship Course code: ENT3001 Lecturer: Dr. Horace Williams October 4, 2012 Group Members: Garyann Robertson – 1105821 Nastassia Rowe-1101791 Adrean Dawkins-1103471 Oneika Robinson-1102703 Vancine Brown-1100550 Darain Harris -1104783 Table of Contents Content| Page| Executive Summary| | Industry Analysis| | Definition of Market| | Purpose Of the Business Plan| | Business Feasibility| | Justification Of the Business| | Organization and Management| | Human Resources| | Operational Considerations| | Marketing Arrangement| |Financial Considerations| | Implementation of Schedule| | Appendices| | | | | | | | | | | | | | | | | | Executive Summary The name of the business will be Argyle Mountain Piggery. In Jamaica rearing of animals for sale is a common business practice; many people enter into such ventures when quests for finding alternate employment prove to be futile. Most of these entrepreneurs do not recognize th e immense potential such businesses have to succeed. The entrepreneurs of the proposed business realized an opportunity to build a profitable and successful pig rearing and selling business and took advantage of it.The decision taken to embark on such a business can prove to be most profitable; the entrepreneurs recognized an opportunity which is the demand for the product and will seek to supply the potential market with pigs and pork and collect the profits to be had. The business’s focus will be on the sale of live pigs and pork, it will be concerned with the breading and rearing of pigs for consumption. The product that the proposed business opts to sell will be live pigs, dressed pig carcasses and pig offal. The business established will be a partnership; the venture will have six co-owners all of which will be general partners.The finances will be shared among the partners as follows: Oneika Robinson will contribute approximately 40% of the capital needed to start the b usiness as she possesses the collateral that is required to receive loans. She will in turn be the major shareholder of the business. The other 60% of the capital needed will be shared equally among the remaining partners Darain Harris, Nastassia Rowe, Adrean Dawkins, Vancine Brown and Gary- Ann Robertson. A lawyer will prepare a partnership deed that will outline the specifics of the contract.The business is a small private venture and has unlimited liability, each partner is fully liable for the debts incurred or profits gained. The business will be based in the rural district of Argyle Mountain located in the parish of Westmorland. The land on which the business will be situated was acquired from one of the partners, who is owner of the property. The small house on the property will be converted to a storage unit for feed needed for pig rearing. The property also has a nearby water source; water will be pumped to the pens for the pigs from this stream. This location is also seclu ded with no close eighbours; public nuisance from the operation of the business will be avoided. The entrepreneurs of Argyle Mountain piggery took advantage of an opportunity that presented itself on the market; explain. this business concept was developed out of the need for pork on the market. The entrepreneurs sort to address the demands for a reliable supply of pork as the competitors fail to satisfy this demand. The business is also situated at an opportunistic location close to the target market. The business, exemplary service and products will facilitate its growth and expansion.Once a market for a product a business produces is available the business has a good chance to succeed. What will determine the faith of the business is how it is managed and operated. Definition of Business The name of the proposed business will be Argyle Mountain Piggery. The business’ focus will be on the sale of live pigs and pork. The business will be located in the community of Argyle Mo untain in the parish of Westmoreland. Argyle Mountain Piggery is proposed to start with ten pig, four pens and a small storage unit where feed and the equipment and tools will be stored.For the first six months of operation the business will have three employees where two will be working shifts on weekdays and the other on the weekend. As the business expands more man power will be employed. The venture will start as a small farm that shall expand as the pigs reproduce. Piggery will sell primarily to restaurants, local butchers and supermarkets. As the business it will seek out more lucrative clients such as hotels, or large cooperation’s such as Grace, Eve, Lasco ect. Contracts with such entities will bring additional revenue for further expansion.By the end of the second year of operation the business is expected to double its out. By the end of year six of operations the business is expected to accumulate enough wealth to facilitate growth in the form of opening a new bran ch in St. Mary Jamaica. 6. 0 Justification of the Business Entrepreneurs creates something of value by pulling together resources, and in order for the venture to be worthwhile the entrepreneur should assume the economic, social and personal satisfaction or benefits associated with venturing in the business of choice. Economic BenefitsOne of the economic benefits of operating a piggery is the opportunity to contribute to the society whilst gaining recognition for the effort. Operation of a business of this kind helps to contribute to the development and growth of the society in various ways such as: creating employment especially to those members of the community where the business is located, helping to improve the well being of such employees; the payment of taxes and contributing to the Gross Development Product (GDP), whilst helping to build the community as well. Social BenefitsThe social aspect of a business is very much important seeing it involves the relationship between pe ople. There are several social benefits to be gained from operating a business. Firstly there is a close personal contact with employees and customers, which makes good personal relationships with employees and owner creating a better understanding of customer needs. Also through the promotion and transaction of business potential clients and business partners are developed. Finally there is the opportunity to sponsor community events thus developing stronger relationships.Personal Benefits It is said that although money is not the primary force driving most entrepreneur the possible profits the business will earn is a motivating factor in the decision to start the business. Owning a business also provides entrepreneurs the independence and opportunity to achieve what is important to them, also reaping the rewards of knowing that the driving force behind the business are them. Finally any modification of the business or its products and services are easily facilitated as well as fos tering easy decision making. 8. Human Resources Human resource looks at the activities undertaken by an organisation to attract, develop and maintain an effective work force within the organisation. Some of the key factors of human resource is staffing which involves the selecting, training, developing, placing and orienting new employees, where they can be most productive. The entrepreneurs of Argyle Mountain Piggery realize how crucial it is to have an effective workforce in order to be better able to meet and even exceed the ever changing demands and needs of our target market.Therefore it is of great importance to recruit the right individuals, who are able to interact with customers, provide good customer service and are able to contribute positively to the overall growth of the business. In addition employees have to be trained in order to meet up to the standards, goal and objectives of the organisation as well as ensuring that each employee is capable of performing the assig ned tasks. The positions required are designed in the organizational chart.In recruiting members of staff a number of methods will be employed; such functions would include job advertisements through electronic or printed media especially in the Argyle District community. Persons with the required qualifications and experience will be shortlisted and screened then the most suited and fit persons will be interviewed. Those recruited will be provided with the rules and operations of the business and these principles will be outlined in a worker’s manual provided; as well as through verbal briefings with regards to their job description.A job analysis which will be performed to determine the job specifications for each assignment and subsequently the job descriptions will be developed. 8. 1 Training and Development There will be On the Job Training (OJT) as selected individuals will gain hands on and practical knowledge as they attempt to carry out their job tasks. Also there wi ll be weekly meetings in order to have an effective performance evaluation which will be done to evaluate the weekly activities and to identify how best to improve the worker’s skills and abilities.This will allow employees to gain constructive feedback with regards to deficiencies if any and assist in determining if employees are have the right behaviour and attitude to complete task towards achieving the goals of the organisation. 8. 2 Compensation In compensating employees their ability, education and skills should be considered as well as the task assigned to them. Therefore full-time employees will be remunerated based on their job functions and their responsibilities as well as the hours worked. They will also benefit from special discounts.A revision of salary will be performed based on the rate of inflation and profitability of the business and will be revised by the Human Resources Management. 9. 1 Location The Argyle Mountain Piggery prospected location is the commu nity of Argyle District in Westmoreland. Based on the feasibility study the demands is high for pork in Argyle District, as the community of Argyle Mountain and its surroundings consume about 2,053 pigs annually, which is equivalent to approximately 350,030 pounds of pork. 9. 2 Technical Requirements 9. 2. 1 Business ProcessesArgyle Mountain Piggery is proposed to start with nine sows and one boar, four pens and a small storage unit for feed and the equipment and tools. For the first six months of operation the business will have three employees where two will be working shifts on weekdays and the other on the weekend. As the business expands more man power will be employed. Butcher shops are the main market for Argyle’s Pigs, and contracts will be made with these butchers as well to slaughter animals for the organisation in order to supply carcasses to other customers such as Restaurants, Meat shops and supermarkets. . 3 Equipment Required Argyle Mountain Piggery would be co nsidered a retail business as pigs will be reared and sold to various consumers of the product. On the farm certain equipment and supplies are needed to carry out operations including: * Pig Feeding and Watering Equipment * Waste Disposal Equipment * Pest and Disease Control Supplies * Pig house cleaning Equipment * Pig Weight and Handling Equipment 9. 4 Suppliers of Raw MaterialThe farm supplies and equipment will be purchased at AgroGrace farm and garden centre as well as Rapid True Value which are both located at the Fairview Shopping Centre, Bogue Montego Bay. The stores are located at approximately half an hour from Argyle Mountain. Supplies can also be ordered on a monthly basis. 9. 5 Utilities 9. 5. 1 Electricity Electricity for the farm will be supplied by the Jamaica Public Service Company (JPS Co. ). There might be possible considerations of alternatives if cheaper such as a generator or solar energy to be a part of the going green concept for protecting the environment. . 5. 2 Water Water will be obtained from the National Water Commission (NWC) as well a river is located in the community which water could be taken from, carried and stored in a tank that could be utilized in the carrying out of more domesticated processes such as cleaning pens, flushing toilet facilities, washing equipment etc. 9. 6 Opening Hours The piggery will be in operation for seven days of the week from Sunday to Sunday. Purpose of the Business Plan In order to emphasize the issues and expectations of the Argyle Mountain Piggery, this business plan was prepared.Blurred issues such as the target market, the aims of the business, the market segment and the proper pricing strategy will be addressed. These factors will aid the competitiveness of the proposed business and allow the future success of the venture. In doing the business plan the factors mentioned previously will be harmonized as the areas of weaknesses and strengths will be identified and also the prediction of possi ble problems before they might occur. The business plan however, will not be definite as there maybe future changes in the proposed business so the business plan will be made to accommodate these changes.The business plan will also outline the duties and responsibilities of the professionals of the business which will give them a chance to concentrate their efforts on their specific tasks. A clear method of operation will be outlined to further guild the members of the proposed venture. Also the business plan is to be used as a reference for loans and investment funds that will be borrowed for the purpose of the proposed business as lending agencies will seek proof and a properly expressed idea before they invest money.Also for the purpose of borrowing money, the business plan will outline a feasible method of obtaining capital for the repayment of the loan and also for the sustainability of the proposed venture. The business plan will also be used to attract new employees as well a s new partners for the future expansion of the proposed venture as this expansion will trigger a bigger revenue as well as profit. ? Marketing Arrangements The market targeted by the Argyle Mountain Piggery would generally be supermarkets/ mini marts, public butchers attached to an abattoir, meat shops, restaurants as well as jerk establishments.These establishments are singled out because of their basic operations would require the service the proposed business would provide. The characteristics of the pork being offered by Argyle Mountain Piggery will possess: soundness, muscling, free of excess fat, width of body, frame size, general appearance. Soundness – The pig’s soundness is determined by the amount of space the pig has to move as this will determine the amount of ‘exercise’ the pig will get. This will ultimately affect the overall muscle and fat development. This is important for the soundness as well as the appearance of the pigs.A level-topped p ig will have a more correct slope to its shoulder and legs and have an advantage in ease of movement. Muscle – Our pigs will possess two important things that contribute to the evaluating of its muscle are the amount and type of muscle as the grade of the pigs would have been carefully selected and bred to yield the best results for the quality. Freedom of excess fat – Excess fat on the finished product is not a desirable feature for customers with the exception of persons in the business of jerk as the fat is used as a part of the jerking procedure; therefore, pigs with very little fat should be ideal.This can also be linked to the grade of the pigs; however the grade that is targeted by the proposed venture will help to solve this matter. Frame Size – Frame refers to the skeletal size of the pig. Frame size is determined by the grade of pigs. The grade of pigs targeted is of the Duroc and Yorkshire breed as these pigs have the desired skeletal frame and when b readed with one another will generate good results. The prices of the produce from the piggery will vary based on the orders received from the market. The pigs will be sold as either live weight of dead weight.The offal will also be offered. With that established, a regulated pricing strategy must be employed. Pigs sold at live weight (average weight being 240 pounds) would be sold at $170. 00/lb while pigs sold at dressing/dead weight would be sold at $185. 00/lb. The offal will be sold at a price of $100. 00/lb. Specific cuts will also be priced at the dead weight price per pound. Discounted prices may be considered when over a certain amount of meat or pigs are purchased. The penetrating pricing strategy will be used to gain access to the market as well as to gain a loyal customer base.The distribution of the products (meat) will be done via a refrigerated bus and the live pigs will be delivered to the respective clients using an open back, two (2) ton truck. However, the appropr iate preparations will be made in the case of the client having an operational vehicle to do their own transport. Argyle Mountain Piggery would be advertised on a wide scale with much emphasis being placed on popularizing the business. Argyle Mountain Piggeries would take advantage of the new and innovative social networks to promote and advertise its services.The Jamaica Yellow pages will also be considered as a source of advertisement. Newspapers advertisements will also be utilized. This will be done on a continually until a customer base is formed. Flyers will be distributed to allow persons to become aware of the new and upcoming business. The final promotional strategy will be via word of mouth from our developing customer base. However, this method is not necessarily directly related to the members of the business as we would rely on the satisfied customers to relate their satisfaction to potential clientele. Mission StatementArgyle Mountain piggery aims to provide the best g rade of pork and pigs to the community and its clients we aim to raise the standard of Jamaican pork and find more innovative ways to advertise the versatility of pig meat. Corporate Goals * To operate a sustainable and profitable business * To rare and sell high quality pigs * To expand in accordance to the growth of the business to accommodate three butcher shop and four distribution centres * Competitiveness of the business will be maintained by continuous market research into competitors and consumer demands. To achieve a contract with Grace and five major hotels in Jamaica * To appeal to a wider and more diverse target market in the Caribbean * To maintain a healthy and profitable relationship with members of the clients. The organization chart for Argyle Mountain Priggery Financial Manager Financial Manager Managing Director Managing Director Human Resource Manager Human Resource Manager Marketing Manager Marketing Manager Administrative Manager Administrative Manager Producti on & Operation Manager Production & Operation Manager Auxiliary staff Auxiliary staff Oneika (Managing Director)Vancine (Financial Manager) Adrean Dawkins (Human Resource Manager) Gary-Ann Robinson (Marketing Manager) Derain Harris (Administrative Manager) Nastassia Rowe (Production & Operation Manager) The Role and Responsibility of Each Personnel Managing Director Their main responsibility is to provide strategic direction, an operating framework and an effective management unit. * Ensuring all resources are utilised * Establish objectives with employees in support of these plans in order to achieve current year profit targets whilst ensuring sustainable longer term growth and profitability. Ensure that the sales function across the business units maintains effective and profitable relationships with existing customers * Personally participating in major negotiations/discussions as required. * Ensure that the manufacturing and site management processes of the units employ best pra ctice techniques to achieve maximum operational efficiency * Establish consistency in production standards * Ensure that the businesses purchasing function maintains an effective/mutually beneficial relationships with suppliers. * Ensure that the local purchasing function maintains effective relationships with customers.Financial Manager Some of the main functions of a Finance Manager include: * Setting up financial goals and planning strategies to reach these goals, * Keeping a high check on profits and loss, * Monitoring cash flows * Developing procedures in order to minimize financial risk * decide how much of the company’s profits should be returned into investment * Paying taxes * Development and Implementation of financial policies and systems * Preparation of various financial reports * Monitor employment costs and productivity levels Develop and analyse information to assess the current and future financial status of business. * Establish procedures for the control of assets, loan collateral, and securities, in order to ensure safekeeping. * Evaluate data pertaining to costs in order to plan budgets. * Network within target area to find and attract new potential customer. * Approval and rejection of, lines of credit, personal loans. Human Resource Manager Human resource managers may perform the following tasks: * determine Monetary payments or wages and/or salaries determining a cost-effective pay structure that will attract and retain competent employees * Determining the proper incentive for employees to work hard * Oversee the maintenance of personnel records * Coordinate occupational health and safety programs * make sure of compliance with law * Responsible for the hiring of employees and the dismissal employees * ensure each person is qualified to perform hisher responsibility * Provide information about policies, job duties, working conditions, wages, and employee benefits * resolve disputes administering disciplinary procedures * ensure that pay levels of all employees are perceived as fair * responsible for the evaluation of employees performance Marketing Manager * Is responsible to promoting the product to the public * Establish advertising accounts for the business with clients and advertising agencies * Develop efficient ways of advertising the company * Developing and maintaining effective continuous marketing strategies Production & Operation ManagerIt is concerned with managing the process that converts inputs (in the forms of materials, labour, and energy) * Review financial statements, sales and activity reports, and other performance data to measure productivity and goal achievement and to determine areas needing cost reduction and program improvement. * Ensuring that business is operating as efficiently as possible in terms of using as few resources as needed while maintaining the products quality * Concerned with overseeing, designing, controlling the process of production * To check that the machines and equipment’s are n good working condition. * Manage staff, preparing work schedules and assigning specific duties * To maintains the machinery and plant so that it produce quality work * Provide and implement strategies for a safe working environment * Monitor the businesses so that it stays within budgetary limits * Responsible for meeting customer request * Oversee hired personnel Administrative Manager He will supervise the day-to-day operation of the farm to see to it that: * The assets are in good condition The equipment for the farm is present and accounted for * To communicated with other partners in getting work done accordingly * Approving invoices. * Maintains professional and technical knowledge by attending educational workshops * This person is responsible for all the documentation of the company. He will organised and supervisor all the work to be done by the Administrative. Appendices Tools used in the feasibility study. Questionnaire Good day. The aim of th is questionnaire is to determine the market for pork in the Argyle Mountain district and surrounding area.Your honesty is greatly appreciated as it will help in establishing the feasibility of the proposed piggery. All information you provide will be held confidential. 1. What is the nature of the business you operate? a. Restaurant b. Supermarket c. Slaughter House d. Other__________________________ 2. How long have this business been operational? e. 1-3 years f. 4-6 years g. 7-9 years h. 10 years and over 3. How frequently do you buy pork/pigs? i. Weekly j. Biweekly k. Monthly l. Quarterly 4. What quantity of meat (dead/live) would you normally require per purchase? . Between 50-100lbs n. Betweent0100-500lbs o. Between500-1000lbs p. Other__________________ 5. In what manner would you prefer the pork products to be weighed? q. Live weight only r. Dead weight only s. Dead weight with offal t. Offal only 6. Indicate by ticking in the box provided what cuts of the pork you prefer? * S houlder square cut * Loin, back and ribs * Leg and ham trim * Middle and rack * Rump and shoulder picnic * Whole pig/carcase 7. State the price per pound that you are prepared to pay for live meat? A. 100-130 B. 130-160 C. 60-200 8. State the price per pound that you are prepared to pay for carcase? A. less than $150 B. $150-$170 C. $170-$200 9. State the price per pound that you are prepared to pay for offal? _____________________ 10. Would you buy pork from a piggery based in your community? Yes No 11. If possible what duration of contract would you be prepared to enter into with the proposed business? u. 1-2 year v. 3-4 years w. 5 years and over x. Not interested 12. Who is your current supplier of pork/live pigs? ___________________________________ 13.Do you currently have any problems with this supplier? Yes No If yes state the problem ________________________________________________________________________________________________________________________________________________ ________________________________________________________________________ 14. Would you prefer the pork you order to be delivered? YesNo Profile of Management Team Name: Adrean Dawkins Age: 19 Position: Human Resource Manager Qualification/s: BSc. Environmental Health Name: Oneika Robinson Age: 20 Position: Managing DirectorQualification: BSc. Environmental Health Name: Vancine Brown Age: 20 Position: Finance manager Qualification: BSc. Environmental Health Name: Nastassia Rowe Age: 21 Position: Production & Operation Manager Qualification/s: BSc. Environmental Health Name: Derain Harris Age: 20 Position: Administrative Manager Qualification: BSc. Environmental Health Name: Gary-Ann Robinson Age: 19 Position: Marketing Manager Qualification: BSc. Environmental Health Letter of Commitment form costumer DATE: __/__/__ BUSINESS NAME: I†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. (Name) the current †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Position in business), her eby commit to a contract with Argyle mountain piggery, to receive a monthly supply of live pig/pork from the company for a period †¦Ã¢â‚¬ ¦. year. I therefore acknowledge that argyle Mountain piggery is my one and only supplier of pig related meat. My company will be responsible for the pick-up and delivery of the product, that will be picked up at every†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. days. The business will pay Argyle Mountain Piggery for it product at the start of every month. Signature of business manager†¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Signature of representative of Argyle Mountain Piggery†¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Signature of Argyle Mountain Piggery manager†¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Witness signature†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Letter of Commitment to Supplier DATE: __/__/__ BUSINESS NAME: We the partners o f Argyle Mountain Piggery, hereby commit to a contract with HI-PO, to receive a monthly supply of pig feeding from the company for a period five year. I therefore acknowledge that HI-PO pig feeding will be our one and only supplier of pig feeding for the stated time period. My company will be responsible for the pick-up of the product that will be picked up at every weekend.The business will pay HI-PO for it product at the start of every month. Signature of sales manager†¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Signature of Administrative Manager of Argyle Mountain Piggery†¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Signature of Argyle Mountain Piggery manager†¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Witness signature†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Meat Cuts that will be provided by Argyle Mountain Piggeries Label of Identification For Argyle Mountain pi ggery Promotional campaign As a new business vigorous and aggressive promotional and advertising strategy will be employed.The proposed business will need to build up a reliable customer base before its official opening which will be ten months after operations begin. At this point in time the business will have a constant monthly supply of pigs. The most effective ways of informing the public and prospective customers of the proposed business is via popular radio programs on various radio stations such as mellow, love 101, ZIP etc; radio is the best means to advertise the proposed business because it has a vast audience, capable of reaching the target market as well as more potential customers.It is also more affordable and practical than television. The internet is also a good avenue for advertising, popular websites and social networks such as Facebook and twitter will also be targeted for adverts since a substantial number of potential customers frequently visit these sites; it is also a means of free advertising and promoting. Ads will be placed in the Jamaica Yellow Pages, the national directory of the island. Advertisements will be placed in the WesternMirror, Observer and Jamaica Gleaner; these media also have a large audience and will successfully reach prospective customers. Flyers will be designed and placed at strategic central point’s such as community notice boards and Bus Parks in order to promote the business. Within Month ten of operation the business will have its official opening. This mile stone will be marked by a cook out; this cook out will be arranged with the primary intention of swaying potential customers to be official clients of the proposed business; A cook out is an ideal promotional and advertising strategy.Prospective customers will be given the opportunity sample the product; Pigs will be prepared whether jerked, stewed-, curry pork etc. they will be able to draw their own conclusion about the quality of the product and should most likely be impressed. Live pigs will also be on show to exhibit their superior qualities. Flyers and brochures will be distributed prior to this even to enable maximum turn out. Floor plan Feeding hole Feeding hole Feeding hole Feeding hole Feeding hole Feeding hole Feeding hole Feeding holeIndustry analysis It is estimated that pig production in Jamaica accounts for less than 2. 0% to the country’s gross domestic product. The industry provides direct employment of some 5900 persons, representing 3. 1% of the total agricultural labor force. However, only eleven per cent (13%) of pig farmers depends fully on pig production as a means of subsistence and finance. Pig production and marketing contribute to indirect employment and income through linkages with the food service industries and other services.Argyle Mountain Piggery is a potential establishment which will be dealing with the rearing and catering of pigs. It will be located in the argyle mountain area where land is owned by one of the partners, and it will be catering for the people of Jamaica especially in the parish of Westmoreland. The base for choosing this site is that it is deemed accessible to all potential consumers and will boost marketing. The business will be equip will the required equipment in order to run such an establishment.A pen will be build which will house the pigs until they are ready to be slaughtered or sold to the public, there will also be a storage unit which the feed and other material for the lifespan of the pig will be stored and kept clear from contaminates, a shed will also be built in order to keep grounds equipment safe from looting. A slaughter house will also be built and measures put in place to keep it sanitary since the pigs will be killed in this designated place.The major competitors to the proposed business includes Butcher Livingston and Green Grosser’s Meats and also other small scale pig farmers, however this would pose a challenge i n finding consumers as these other competitors would have already been familiar and have loyalty with the consumers. The advantage which the proposed business would have is being close to the region to which most of the customers are located; this would almost guarantee our share of the market, due to ease of travel, accessibility, convenience.Even though the amount of competitors are in the area are in a mid region most of them are on small scale, therefore they are likely to have a negative respond to this business venture. Given the fact that most of the competitors are on small scale, there is inconsistence in the service and product provision also poor customer services, unreasonably high prices and weak promotional strategies, so I strongly believe that the business can complete with the competitors. The Companies Act (Act of 2004) is the major regulatory laws that stipulate the proceedings of any organization within Jamaica.There are subsidiary regulations that guide the proc ess of registration of a business and the consequences that are attached to any offences that may be committed. It rules for the membership proceedings of the country and all that is attached to business laws. The Public Health Act also serves as a regulatory body as it relates to food handling and meat inspection. It states that each members of the business be administered with a food handler’s permit, and also the regulation to which slaughtering of swine and also the sanitary conditions of the business should be in.Implementation Schedule. 1st 30 days before start of the business The 1st month before for the start up of the business would see to include the conception of the idea of starting the argyle mountain piggery and also look at the partners to which would be involved in the creation the business, after the visualization of this idea is complete the commencing of a feasibility study would be done in order to gain specific information to a conclusion would be drawn i f the business is feasible or if it is not .Next 20 days before start of the business After a feasibility study is done time will be spent in order to create a business plan which will be most suitable for the proposed business to be most effective, it will include information which will discuss topics such as marketing strategies/arrangement, industrial analysis, and also the purpose of the business . Next 29 days before start of the businessThis period would be used to gain funds for the start up cost of the proposed business and the main source of these funds would be in acquiring a bank loan which would be repayable over a period of time, other funds would be gain via different mediums in order to successfully have enough capital to launch the proposed business. Next 50 days before start of the businessAfter the granting of a loan and accumulation of other funds from different sources, construction would begin, and these constructions would include; pig pen, 2 sheds, slaughter h ouse, any other building that will be needed will be provided by a structure which is already on the premises. All of the construction that would be taken place would be on the land which is owned by one of the partners within in the business so no time would be wasted in search and buying/leasing land for use of the piggery.Next 53 days before start of the business The livestock (pigs) which will be grown on the farm would have to be sourced before the opening of the proposed business so this would take some time as the best quality would need to be sought after before being bought. Time would also be needed to source equipment, material, feed and other farm supplies that will be used by the business as the most economical prices would be sought after. Also the hiring of staff would also be done to facilitate the business operations.Next 2 days before start of the business These days would be needed to sort out and set up the equipment that would be used by the business, and also t o make sure that all the necessary document are in place and up to date. Next 1 day before start of the business This would be the official launch of the business, meaning the doors would be open to customers and also sales would commence on this day Next 60 days after start of the businessThis would be the period in which advertisements would be sent out seeking persons to work with the proposed business doing duties assigned to them, interviews are don’t in order to select the rite persons for the job. In this same period there would be a training period for the new and existing employees to ensure productivity is at a high. Next 21 days after start of the business These next days would be for normal operations but at the same time new partners or new investors would be sought; also strategies to attract new customers would be implemented and put into place in this time period.Next 10 days after start of the business In this period the purchasing of supplies in order to con tinue running the business efficiently would be done in or to replenish what was used in the 1st place, depending of well the previous product was these days would be needed to get better products to be used by the business. Next 25 days after start of the business In these next up coming days, the business will try to source and buy equipment or jus try to make the business more efficient in its operations e. . implementing the nipple system for pigs which limits to loss of water. Next 17 days after start of the business These days will be used to fine tune who does what and when who does what, this will be done in order to build efficiency and also build a stronger working relationship as people would have jus began to settle down and get comfortable with each other. Gant Chart Business FeasibilityThe findings of the feasibility study showed that there is a high demand for the Argyle Mountain Piggery, so when the proposed business is actually started, it is going to be very succes sful. This statement is based on the fact that eighty eight percent of the respondent said they were willing to support the proposed business. Also, Another reason for the expected success of Argyle Mountain is the fact that the demand for all parts of the pig are high, with dead weight at sixty percent, live weight at thirty three percent and dead weight with offal at seven percent.The feasibility study that was carried out also equipped the operators with the knowledge that a large number of the prospective customers would want a reasonable amount of pork on a regular basis; so the demand will be great. The study also revealed the different part of the pig that the proposed buyers would like, so in this case the operators know the specific parts that the different customers want and would be able to satisfy their needs; thus adding to the success of the business.When entering a business, there are some risks that come along with it. The business risks of proposed Argyle Mountain P iggery are the possibility of a recession, when there is a recession most of the potential clients are likely to spend less in purchasing from the Argyle Mountain Piggery; so there is a high possibility of failure. Other market risks that the piggery might experience include sales variation, which cannot be avoided. These may occur as a result of financial situations of the prospective customer. Therefore sales may fluctuate.A decrease in sales means difficulties in financing fixed costs such as wages, rent and other overheads. A difficulty will also be faced in maintaining the business, as the cost of the raw materials is very high. Another business risk is that of the fluctuation of currency, the Jamaican dollar is losing value on a daily basis therefore the cost to purchase most foreign currency is very high. A constraint will also be placed on the profitability of the business due to the high interest rates at which most banks in Jamaica lend money.So borrowing money at those hi gh interest rates will cause more strain on the business in terms of making a profit. Business risks such as technology and regulatory aspect are also present. Technology might cause changes and in this case employees will have to be retrained to the more advanced technology and this will in turn cause the business more expense. Political/regulatory aspects may also be a risk to the Argyle Mountain Piggery, since licenses and approval are necessary for the business to be legal and it is not a guarantee that these will be approved by the government.Even though the competitors were indentified in the feasibility study, it is highly likely that a new competitor can enter the market and be stronger than Argyle Mountain Piggery. The business will then be forced to change its marketing strategy by lowering the cost and in this case the quality will definitely have to be improved. It is very important for the environment to be protected and the operators of the Argyle Mountain Piggery are aware of this so the necessary precautions will be taken to keep it safe.So the waste materials that are generated will be treated and sold to farmers as manure/ fertilizer, as it contains nutrients that will increase crop yield and during this process appropriate storage will be done in order to minimize the amount of greenhouses gases been emitted. In the case where it is not treated a private contractor will be hired to dispose of the waste. The materials and equipment used in the production of the product, will be environmentally friendly as operators are going green in order to sustain the environment.