The Court of Appeal, constituted by Maxwell, Tate and Beach JJA, has allowed an appeal by Central Cleaning Supplies (Aust) Pty Ltd and upheld a number of retention of title clauses contained in various invoices. No security interest had been registered on the Personal Property Securities Register (PPSR).
The decision appealed from was Central Cleaning Supplies (Aust) Pty Ltd v Elkerton (2014) APPSR ¶701-013;  VSC 61. Central Cleaning Supplies (Aust) Pty Ltd (Central) was unsuccessful in establishing it had a perfected transitional security interest in equipment supplied to a company in liquidation. The retention of title clause being relied on was included in each invoice sent but was not held to be part of the credit application entered into by the parties. The result was that the liquidators were able to claim that the relevant equipment had vested in them on the date of liquidation and the applicant became an unsecured creditor in the estate.
The problem for Central was that they had not registered their security interest on the Personal Property Securities Register (PPSR) and therefore had to rely on the transitional provisions of the Personal Property Securities Act 2009 (Cth) (PPSA). The transitional provisions only apply to security agreements that were immediately in force before 30 January 2012 and continued to be in force after that date (s 307 PPSA). Although the credit application had been executed before this date, the judge held that the retention of title provision had not been incorporated into it. The retention of title clause was, however, incorporated into each separate contract of supply by way of the invoice. As each of these occurred after 30 January 2012, the security interest was not protected by the transitional provisions but was required to be registered on the PPSR. As this had not been done, the equipment and goods vested in the liquidator.
On 11 November 2014, the Victoria Court of Appeal heard an appeal from Central Cleaning. The issue before the court was whether the equipment supplied after 30 January 2012 was “provided for” by an arrangement entered into between Central Cleaning and Swan Services in September 2009 for the supply of equipment on 30-day credit.
The Court of Appeal (Maxwell, Tate and Beach JJA) held that “the terms on which Central agreed to provide credit to Swan included provision for the ROT clause as a standard term of each future supply of equipment” (at ). In particular the court held as follows:
- The legislature has thus specified three types of relationships between the “agreement or act”, on the one hand, and the security interest, on the other. The existence of any one of those relationships will qualify the agreement or act as a “security agreement” .
- An agreement or act will “provide for” a security interest if it makes provision for the creation of a security interest in the future and/or by some other agreement or act .
- Section 308 of the PPSA contemplates:
- a) a security agreement in force before the commencement time (although continuing thereafter)
- b) a security interest arising after the commencement time, and
- c) the qualifying relationship between the agreement and the interest being that the agreement “provides for the granting of the security interest” .
- A transitional security agreement will “provide for” a security interest if it “provides for the granting of” the security interest at some time in the future .
- The relevant definitions will be satisfied if the agreement or act said to constitute the transitional security agreement makes provision for the grant of future security interests in goods supplied .
- Central’s acceptance of Swan’s application for credit was an acceptance by conduct. The relevant conduct was the delivery of the equipment which Swan had ordered, and the sending of the invoice confirming that the supply was on 30 day credit. By that conduct, Central signified its acceptance of Swan as an account customer. The sending of the invoice was the critical step, of course, as it was the first communication confirming that credit was being provided .
- It is immaterial that the credit application form did not set out Central’s “Standard Terms and Conditions”. On ordinary principles, Swan’s signing of the credit application bound it to accept those terms and conditions for all future supplies of equipment .
The case Central Cleaning Supplies (Aust) Pty Ltd v Elkerton  VSCA 92 will be reported in the Australian Personal Property Securities Law Reporter at (2015) APPSR ¶701-031.