Financiers and clients who supply goods on credit have been greatly impacted by the Federal Government’s Personal Property Securities Act (PPSA) which came into force on 30 January 2012.
The practicality of this new legislation has been tried and tested in a recent liquidation in our office.
The company in liquidation received goods from a supplier after the PPSA came into force. The supplier of the goods claimed that they held retention of title (ROT) over these goods.
For any goods supplied prior to the PPSA commencing, the creditor has a two year transitional period in which to register their charge.
For goods supplied after the commencement of the PPSA, the creditor must register their security interest before the goods are actually delivered to the customer. If the registration is not completed, the charge is then technically invalid. In the case of a liquidator being appointed, goods supplied after the start of the PPSA become company assets regardless of ROT clauses, if no charge is registered. That is there is no protection for suppliers if the registration does not occur prior to the delivery of goods to the customer.
In this particular case, as liquidators we returned the goods to the supplier on a practical and commercial basis as they held minimal value and it was not commercial to dispute ownership over the goods – most of which were supplied before the commencement of the provisions.
Suppliers of goods with substantial value will be undoubtedly impacted greatly in this scenario. We are aware of a number of suppliers to a recently insolvent large retail chain who are likely to suffer significant losses.
This serves as a timely reminder to ensure your clients are familiar with the PPSA and register their securities.