In the current economic downturn, it is worth reviewing your
current terms of trade, especially if you use retention of title
clauses (also known as Romalpa clauses) to retain title to goods
that are sold on credit.
Prior to the introduction of the Personal Property Securities
Act 1999 (PPSA), suppliers who reserved their title to goods
continued to retain ownership of the goods until the buyer paid for
the goods in full. However under the PPSA further steps must be
taken to ensure suppliers retain priority to the goods
In particular, a written agreement signed by the customer
containing your retention of title is required (with limited
exceptions). Also, to be in the best priority position against
third parties, suppliers must 'perfect' their security
interests by registering on the Personal Property Securities
A security interest registered in relation to inventory or
equipment supplied to a buyer is an example of a Purchase Money
Security Interest (PMSI). A PMSI is a security interest which
secures the buyer's obligation to pay the purchase price for
goods supplied. It can also provide a 'super-priority' to
suppliers. If you are supplying inventory, you must register a PMSI
before the buyer takes possession of the inventory. However, if you
are supplying equipment, you must register a PMSI within 10 working
days of the buyer taking possession of the equipment. If a PMSI is
registered within these timeframes, it will take priority over all
other security interests (including general security agreements
registered by the buyer's bank) even if the other security
interest was registered first.
If you fail to register your security interest, you run the risk
of your security interest being defeated by a third party who has
registered their interest on the PPSR for the same goods or if the
goods are sold to a third party. If a third party does register an
interest in the same goods, and you have not registered your
interest, the registered third party will have the right to take
the goods you have supplied to satisfy their debt ahead of you.
This is the case even if you still have title to those goods.
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
This publication is intended as a first point of reference
and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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