Retention of title dealt with by the Personal Property Security Register

Since the commencement of the PPSR, retention of title clauses are ineffective against the interests of a registered creditor or a liquidator, unless the supplier’s continuing interest in goods supplied is registered. If the supplier fails to register their interest then they will at best be considered an unsecured creditor in the event that the purchaser goes into liquidation or bankruptcy.

Security interests under retention of title and leasing agreements are capable of being registered (and should be) as ‘Purchase Money Security Interests’ (PMSIs). The major benefit of a PMSI is that, if registered correctly, the PMSI takes priority over all other security interests (registered and unregistered) in the same collateral notwithstanding that some of the other registrations may be earlier in time. This priority survives the purchaser going into liquidation or becoming insolvent. It therefore makes it easier for the supplier to prove their interest as against any liquidator or trustee.

It is possible to register a security interest in all goods which have been provided to a particular Purchaser pursuant to a supply agreement. This only requires one initial registration.

To do this, when the security interest is first registered, the collateral should be identified as “all goods provided pursuant to a specific supply agreement to a named purchaser”. The supplier will then have a security interest in all goods provided pursuant to the supply agreement thereafter. The description of the types of goods supplied needs to be broad enough or exhaustive enough so that it identifies all goods which could conceivably be supplied under the Agreement otherwise a new registration may have to be created down the track.

The registration of the security interest under the supply agreement must occur before goods have been delivered to the purchaser.

Although the supply agreement need not be lodged when the security interest is registered, it must be in writing and the retention of title clauses contained therein must be valid and enforceable. It will likely be called upon if the Purchaser goes into liquidation.

You should obtain legal advice before using a “Romalpa” clause and also before attending to registration.

by  Adam Johnston

Riba Business Lawyers

Strength Through Knowledge

Franchising, Leasing, Acquisitions

Head office:  34 Duporth Avenue, Maroochydore, Sunshine Coast, Queensland.

Maroochydore:  07  54791488

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