In 2014 I wrote the blog “Do you supply goods to customers on credit terms?” which related to the Personal Property Security Registry (“PPSR”) and is relevant to “retention of title” clauses.
A retention of title clause is a clause that you have in your supply contract when your company provides goods to someone on credit terms to say that the goods belong to the supplier until such time as they are paid in full. You can register goods that you have supplied subject to a retention of title clause on the PPSR in certain circumstances. This gives you a security interest in the goods.
It is important that you have a retention of title clause in any credit application that you enter into with customers and that the security interest that you have through the retention of title clause is registered on the ("PPSR") that came into effect on 30 January 2012. This ensures that you are a secured creditor, rather than an unsecured creditor in the event that the customer you are dealing with goes into liquidation.
Recent developments with the PPSR
However, there have been some recent developments with respect to case law in regards to retention of title clauses. Notably the case of Central Cleaning Supplies (Aust) Pty Ltd v Elkerton  VSC 61 was appealed and overturned. In that matter Her Honour Justice Ferguson in the Supreme Court of Victoria held that a retention of title clause did not form part of the supply agreement governing supplies of cleaning products because there were no terms referring to retention of title in the credit application (only in the tax invoices).
On appeal Central Cleaning Supplies (Aust) Pty Ltd V Anthony Wayne Elkerton (In His Capacity as Joint And Several Liquidator of Swan Services Pty Ltd (In Liquidation)  VSCA 92. it was held that once the goods were supplied, the retention of title clause on the invoice did form part of the supply agreement and the court could enforce the retention of title despite the fact that the goods were not registered on the PPSR.
The decision clarifies how courts construe credit applications, trading terms and invoices and demonstrates that courts are inclined to take a more commercial approach when assessing the intention of business persons entering into legal relations.
It is a good idea to regularly review and update your supply agreements with the assistance of a lawyer.
Below are two previous articles written about this case. Both these articles were written prior to the recent judgement: