SUPPLIERS – GET SET FOR THE NEW PERSONAL PROPERTY SECURITIES REGISTER

In Australia, retention of title clauses in terms of trade contracts offer protection to a supplier from non-payment for delivery of goods. The retention of title clause permits a supplier to retain ownership in the goods until payment is made. ROT clauses, if drafted and managed properly, offer valuable security to a supplier in the event of a customer’s insolvency.

The Personal Property Securities Act 2009 (Cth) (“PPSA”) is now expected to come into operation in October 2011. All suppliers and traders that provide goods to their customers, on the basis that they retain title in goods until payment is made, are in danger of their ROT clauses proving ineffective if they do not properly prepare for the PPSA.

PPSA Changes and its effects on Businesses

The PPSA is Commonwealth legislation that will lead to an essential change as to how Australian courts identify rights to ownership of goods and how they deal with opposing claims to interests in those goods.

This legislation replaces several existing Federal and State security registers. It substitutes over 70 pieces of law with respect to “security interests” in “personal property” including charges, conditional sale agreements, hire purchase agreements and leases of goods. Subject to certain exemptions, these common arrangements will now be governed by this exclusive Federal system.

Suppliers and traders need to give careful consideration to how this new legislation will affect their respective businesses. Make no mistake, this is a major and fundamental reform to the commercial law in Australia.

In spite of the changes, the new PPSA will still enable the inclusion of Retention of Title clauses in terms of trade. Where a customer becomes insolvent, a supplier’s security interest will not become void, but the supplier will be limited to claiming as an unsecured creditor (that is, their ROT will be ineffective) unless the supplier’s trading terms and other records meet the requirements of the PPSA. In essence, the PPSA requires the supplier to ensure they have registered their security interest as a retention of title holder (and within the requisite time frames).

What do suppliers need to do?

All suppliers must:

• Register their security interest on the new PPS register to preserve their priority or interest; and
• Review their current provisions/clauses relating to retention of title to ensure that they satisfy the requirements of the PPSA.

Sajen legal serves to protect your business and property. We help add value to the bottom line, by resolving your disputes and eliminating the problems that stand in the way of the successful operation of your business. Sajen legal is the only purely commercial litigation law firm on the Sunshine Coast – it is recognized as being regularly able to deal with the ‘hard problems’ other law firms and advisers are unable to deal with. We provide the relief that comes from being kept informed and being given a clear understanding of the legal issues facing your business.

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