If your terms of trade documents don't have the correct
provisions, you can lose goods supplied to a customer that becomes
insolvent, even though you may have title to the goods.
A recent Supreme Court decision highlights the need for
retention of title suppliers to have adequate terms of trade
documents and to register security interests on the Personal
Property Securities Register (PPSR) to avoid losing assets if a
customer becomes insolvent.
The decision of In the matter of Swan Services Pty Ltd
 VSC 61 concerned a dispute between a cleaning equipment
supplier (Central) and the liquidator of its insolvent customer
When Swan went into liquidation in 2013, Central sought to
recover equipment delivered between November 2012 and April 2013,
which Swan hadn't paid for. Central relied on a retention of
title clause printed on separate invoices provided when equipment
was supplied. Central argued that the retention of title clauses
formed part of the 2009 credit application, which Swan signed.
In so arguing, Central sought to rely on the 24 month temporary
'perfection' for transitional security interests provided
for by an agreement existing prior to the PPSA's
The effect of the Court's decision was that:
Wording in the credit application stating that supply was
governed by Central's 'Standard Terms and Conditions'
suggested that the parties intended the terms to be incorporated
were recorded in a separate document existing at the date of the
As each supply of equipment after the credit application was
signed was intended to be a separate contract, the credit
application was not an overarching supply agreement.
The credit application did not give rise to any of the security
The retention of title clause on each invoice meant that each
separate supply gave rise to a security interest that needed to be
'perfected' by registration on the PPSR in order for
Central's interest to gain priority over security interest
holders already registered on the PPSR or the liquidator.
As Central had not registered any security interests on the
PPSR, Central lost its equipment to the liquidators.
Update your terms of trade documents before it's too
If you have not yet updated your terms of trade documents to
take account of the PPSA or identified and registered your security
interests on the PPSR, please contact a member of our team for
You should also seek advice as to whether your terms of trade
adequately address the Competition and Consumer Act 2010 (Cth) or
the amendments to the Privacy Act 1988 (Cth) that recently took
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
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