One of the consequences of the Personal Property Securities Act is that a retention of title agreement (for example a sale under which a seller of goods retains title until it is paid in full) becomes a registrable security interest.
Currently most retention of title agreements (also called Romalpa clauses after a UK case of that name) are not registrable as a company charge (if given by a company) and are not tested until the purchaser becomes insolvent and there is a dispute over the right to the goods or the proceeds of sale.
But in some cases the agreement does constitute a security interest which needs to be registered under a State Act (such as the Victorian Chattel Securities Act).
Under the PPS Act a retention of title agreement (whether given by a company, partnership, trust or an individual) will need to be registered for it to be enforceable against third parties.
When the Personal Property Securities Register starts in May 2011, a retention of title agreement will be registrable provided the security agreement is evidenced by writing that is signed by the grantor or adopted or accepted by the grantor with adequate identfication of the goods.
Suppliers must register their interest on the PPS register to preserve the priority of their interest.
They can register for a series of transactions.
A registered security interest will continue even if the goods supplied are mixed in with other goods, or affixed to other goods. There are new rules as to the rights to the proceeds of sale of goods over which a security interest has been registered.
A seller who has a retention of title agreement can register their security interest as a purchase money security interest which has additional priority rights over general registered security interests given by the purchaser.
Suppliers who provide goods on a title retention arrangement will no longer be able to rely on their title to protect their interest in the goods. The interest of a title holder in goods will not automatically have priority over other secured parties.
Suppliers may continue to include the retention of title clause in the terms of trade and orders and invoices. However, to be enforceable against third parties the purchaser must have signed or accepted the documents which incorporate the retention of title and title holders must have registered their interest on the PPS Register.
Failure to register may leave the supplier with a claim as an unsecured creditor.
