Businesses and individuals that provide finance secured by personal property, or who supply goods on a retention of title (ROT) basis, should be aware of the introduction of the Personal Property Securities Act.
The new legislation will require that, where businesses are supplying goods on credit, their interest should be registered on the new Personal Property Securities Register (PPSR) to secure the interest in the credit provided to the customer.
In order for the legislation to apply to you, your sales terms are required to include a “retention of title clause” (“ROT clause”). The ROT clause seeks to retain your ownership in the goods until such time as the buyer has paid for the goods in full.
To ensure that your ROT arrangement is enforceable against your customers, the legislation provides that the ROT must have “attached” itself to the goods. In the case of an ROT clause, attachment occurs where you give value for the security interest arising from the transaction, or otherwise do an act by which the security interest arises. In the context of an ROT agreement, the value given by the supplier will be the delivery of the goods or use of the goods pending payment.
If your customer defaults or becomes insolvent, there is a risk that other creditors who hold an interest in the same goods as you (such as banks), will have better rights in the goods than you. To ensure that this does not happen, you will need to register your ROT agreement on the Personal Property Securities Register (“PPS Register”). Where the requirements of the PPS Act have been complied with, registration of an ROT agreement will ensure that your security interest takes priority over all other, including earlier, security interests in your goods.
In circumstances where you make repeated supplies to the same customer, you are only required to make a single registration against the customer. This is because a single transaction is valid for one or more orders against the customer.
At this stage it is anticipated that the PPS Register will be up in running in October 2011. It is important that you review and amend your Sales Terms now, in preparation for the commencement of the PPS Register. If you have any questions regarding The Personal Property Securities Act, please don’t hesitate to contact me.
The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.
Prefer to get in touch?
With offices in Brisbane, Sunshine Coast, North Queensland and Sydney, our team is well equipped to provide both advice and support across a broad range of legal areas.
