Do you use a “retention of title” clause in your business terms of trade?

If you do you must (if you are not already doing so) register your security interest in the goods sold on the Personal Property Securities Register (PPSR) or risk losing the goods even though you have not been paid and still own them.

In a recent Victorian Supreme Court decision[1] relating to transitional security interests, the Court found that cleaning goods sold to a customer which went into liquidation could not be retrieved by the seller of those goods who attempted to rely on a retention of title clause. The goods were found to vest in the control of the liquidator of the customer because the supplier’s security interest in the goods was unperfected.

The supplier of the goods failed in being able to rely upon its retention of title clause for two reasons:

1. The supplier’s credit application (which was signed in 2009) contained a reference to its “Standard Terms and Conditions”. The supplier’s invoices on the other hand (provided after 30 January 2012 and to which the goods in question relate) contained a “Condition of Sale” which referred to the retention of title in “Goods the subject of this sale”.

   The Court found that, due to the wording / timing above, each invoice constituted a separate and distinct contract between the parties that provided for the security interests. Therefore, the transitional provisions did not serve to perfect them.

   The credit application did not temporarily perfect the supplier’s interest as it was not the document governing the supply of the relevant goods.

2. As a consequence, the supplier’s failure to register each of its security interests on the PPSR resulted in such interests being unperfected and the goods vesting in the liquidator of the customer.

Although temporary perfection for transitional security interests no longer applies, the decision is a timely reminder for those who supply goods on credit to:

1. Review their credit application documentation; and
2. Ensure that their internal processes for the registration of their security interests on the PPSR are sound and will result in such interests being perfected and enforceable.

We have considerable experience in acting for suppliers of goods to ensure that their security interests are protected. We would welcome any enquiry which you may have in relation to your terms and conditions and registration of your security interests on the PPSR.

If you have any queries regarding this case, please feel free to contact Nicholas Brand of our office on 03 9614 7707.