Alert

Who does this affect?

Sellers who supply goods on retention of title arrangements or consignments and equipment lessors.

What do you need to do?

Start thinking about personal property securities reform now so that you can take the opportunity to provide feedback on the proposed reforms before they are introduced. We can help.

John Canning
Partner
T +61 2 9296 2098

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Melbourne
Ros Grady

Perth
Nicholas Creed

Brisbane
Berkeley Cox

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Author
Helena Busljeta

Do you supply goods on retention of title terms? Or do you own goods that you lease to someone else? If so, proposed changes to the law of personal property securities mean that you may need to take additional steps to protect your interest in these goods. Failure to do so could result in your goods being sold out from under you.

A consultation draft of the Personal Property Securities Bill 2008 (Bill) was released for public comment today. The Bill will reform the law on personal property securities (PPS) by establishing a national system for the registration of security interests in all property other than land. It will include new rules for determining priority between competing security interests in the same personal property. The new system will be in place by 2010.

What does this have to do with suppliers and lessors of goods?

Under the PPS system, transactions which provide for the supply of goods on a retention of title basis, under lease arrangements for a term of more than one year or on consignment will be registrable as “security interests”. The supplier or lessor will need to register its security interest in order to ensure it has priority over competing interests. If it does not, it may lose those goods to a third party if the customer becomes insolvent (for example, to another secured creditor).

Traditionally, lessors and suppliers of goods on retention of title terms have relied on the fact that they have title to the goods to ensure that they have priority over any third party who claims a competing interest in those goods. Under the PPS system, the fact that the supplier or lessor has title to the goods is irrelevant.

What will you have to do when PPS happens?

You will need to consider whether any of your transactions are registrable. If they are, you:

• will need to implement systems to ensure that those transactions are registered
• may need to review your standard form documents for those transactions, and
• may need to review your existing contracts as part of the transitional arrangements.

What should you be doing now?

• Consider whether you want to provide submissions on the Bill. The consultation period gives you an opportunity to provide feedback on the proposed reforms before they are introduced. You have until 15 August 2008 to provide comments.
• Learn how the PPS system will affect your business. The Attorney-General’s department will present a series of seminars on the Bill during 26 to 29 May 2008 in Sydney, Melbourne, Brisbane and Perth. Each seminar will provide an overview of the Bill and its effect. More information on the seminars can be found here.
• Start planning for the transition to the PPS system.

Further information

A copy of the Bill together with commentary can be viewed here.

For more background on PPS, see our previous Review.

If you want more information on PPS, please contact any of the Mallesons PPS team members.