Currently most retention of title agreements (also called Romalpa clauses after a UK case of that name) are not registrable as a company charge (if given by a company) and are not tested until the purchaser becomes insolvent and there is a dispute over the right to the goods or the proceeds of sale.

But in some cases the agreement does constitute a security interest which needs to be registered under a State Act (such as the Victorian Chattel Securities Act).

Under the PPS Act a retention of title agreement (whether given by a company, partnership, trust or an individual) will need to be registered for it to be enforceable against third parties.

When the Personal Property Securities Register starts in May 2011, a retention of title agreement will be registrable provided the security agreement is evidenced by writing that is signed by the grantor or adopted or accepted by the grantor with adequate identfication of the goods.

Suppliers must register their interest on the PPS register to preserve the priority of their interest.

They can register for a series of transactions.

A registered security interest will continue even if the goods supplied are mixed in with other goods, or affixed to other goods. There are new rules as to the rights to the proceeds of sale of goods over which a security interest has been registered.

A seller who has a retention of title agreement can register their security interest as a purchase money security interest which has additional priority rights over general registered security interests given by the purchaser.

Suppliers who provide goods on a title retention arrangement will no longer be able to rely on their title to protect their interest in the goods. The interest of a title holder in goods will not automatically have priority over other secured parties.

Suppliers may continue to include the retention of title clause in the terms of trade and orders and invoices. However, to be enforceable against third parties the purchaser must have signed or accepted the documents which incorporate the retention of title and title holders must have registered their interest on the PPS Register.

Failure to register may leave the supplier with a claim as an unsecured creditor.

But the PPS Act does not affect rights and obligations arising under the National Credit Code, where the NCC applies.

Where both the PPS Act and the NCC apply concurrently, many of the provisions of the PPS Act will be taken to have been complied with if the corresponding provisions of the NCC have been complied with .

For example, when a secured party who takes possession of what the NCC calls ‘mortgaged goods’ complies with the NCC obligation to give ‘the debtor’ notice under section 102 of the NCC within 14 days, they will be taken to have complied with the obligation they have under section 130 of the PPS Act to give ‘the grantor’ notice at least 10 business days before what the Act calls ‘the collateral’ is disposed of.

Future notes on our Personal Property Securities site will discuss special registration requirements, priority rules and enforcement procedures relating to security interests in motor vehicles and goods used predominantly for personal, domestic or household purposes.

What registers will be migrated to the PPS Register?

If you have a security registered on the following registers as at the commencement date (scheduled for May 2011) they will be migrated to the PPS Register and thereafter you will not be able to register new security interests on these registers:

Commonwealth
• Australian Register of Ships
• ASIC - Register of Company Charges (including provisional charges)
• Fisheries Register

New South Wales
• Register of Encumbered Vehicles (REVS NSW)
• Security Interest of Goods Register
• Registers of charges for co-operatives and co-operative housing societies

Queensland
• Register of Encumbered Vehicles (REVS Qld)
• Register of Security Interests and Liens
• Register of Co-operative Charges

South Australia
• Vehicle Securities Register
• Bills of Sale Register, Stock Mortgages and Wool Liens Register and the Liens on Fruit Register
• Register of Co-operative Charges

Tasmania
• Register of Bills of Sale, Stock, Wool and Crop Mortgages and Co-operative Charges
• Register of Vehicle Security Interests

Victoria
• Vehicle Securities Register
• Register of Liens on Crops and Liens on Wool and Stock Mortgages
• Register of Co-operative Charges

Western Australia
• Register of Encumbered Vehicles (REVS WA)
• Bills of Sale Register

Australian Capital Territory
• Register of Encumbered Vehicles (REVS ACT)
• General Register of Deeds and Instruments
• Register of Co-operative Charges

Northern Territory
• Register of Interests in Motor Vehicles and Other Goods
• Bill of Sale, Stock Mortgages and General Register
• Register of Co-operative Charges

You will have 2 years to check that in fact all of your existing securities have been migrated to the new PPS Register.

New securities from May 2011 that would previously have been registered on these securities will have to be registered on the PPS Register.

What security interests that are not currently registered should be registered?
There are a number of new registrable security interests but the one of particular relevance to ADI’s will be a security over a debtor’s deposit with the ADI.

While section 8(1)(d) of the Act excludes any right of set-off or right of combination of accounts from the application of the Act, section 13(4) (meaning of security interest) states that an ADI may take a security interest in an ADI account that is kept with the ADI.

Failure to register the security interest may result in loss of priority in the account as against a competing creditor or an obligation to account to a trustee for the depositor in the event of his insolvency.

Future notes on our Personal Property Securities site will discuss other registrable security interests, registration requirements and enforcement procedures.

Who does it affect?
If you are a
• Lender
• ADI
• Equipment Lessor
• Manufacturer
• Wholesaler
• Distributor
• Franchisor
• Securitiser
• Retailer
• Consignor
• Buyer of accounts receivable
• Inventory financier
• Farmer
• Builder
• Insurer
• Secured party
• A trustee
• Pawnbroker
and you
• take or give fixed and floating charges
• give long term and finance leases
• take chattel mortgages
• enter retention of title arrangements
• make commercial consignments
• factor debts
• make conditional sales
• accept pledges
• provide hire purchase
• provide credit on sales
• take mortgage-backed securities
• enter repurchase agreements
• take guarantees
then your business will be affected.

Now is the time to start preparing for the changes to your credit policies and systems.

We have set up a specialist site here.

You can subscribe to our specialist Personal Property Securities RSS Feed here or to email updates here.

If you are an existing subscriber to our Langes+ combined email or feed then PPS updates will be automatically included.

For background, have a look at our previous posts here.

Who is affected by the Personal Property Securities Act?
The impact on credit unions and building societies
The effect of the PPS Act on consumer credit

The key resources are:
Personal Property Securities Act 2009 (Cth)
Draft Regulations
Personal Property Securities Register website

You can subscribe to our RSS Feed here or to email updates here.

Judge Sulan decided that it was not unlawful for the meeting to be recorded but then decided that it was within the power of the chair and the meeting itself to decide whether a recording was permissible:

“Although the chairman’s role is facilitative, it is clear that the duty and function of the chairman is to preserve order and to ensure that the proceedings are conducted in an orderly and proper manner. I consider that the chairman’s decision to prevent the tape-recording of a meeting is procedural in nature. It does not deal with matters of substance discussed at the meeting. For example, if a chairman were to prevent a member at the meeting from raising substantive issues about a relevant topic, then that would be more than a mere matter of procedure. There was no attempt in this case by the chairman to limit the discussion on any topic relevant to the joint venture. I consider that a ruling made bona fide to prevent a meeting from being tape recorded is within the scope of the chairman’s powers. ..

The chairman exercised his powers to adjourn the meeting because Alliance expressed the intention that it was not prepared to abide by the chairman’s ruling and resolution of the Management Committee in relation to preventing the tape-recording of meetings. I conclude that it was a valid exercise of the chairman’s powers to adjourn the meetings in circumstances where he was exercising procedural control over the meetings and where the failure of Alliance to comply with the ruling and resolution prevented the continuation of business at the meetings…

a properly convened meeting has the inherent power to regulate its own affairs in the absence of express provisions to the contrary. Such regulation will include matters which are incidental to the manner in which meetings are conducted, including whether or not the proceedings of a meeting can be tape recorded. Any disagreement between the participants should necessarily be resolved by a vote of those entitled to vote at the meetings.

I find that the committee, in the absence of an express provision in the JVA to the contrary, had the inherent power to make a majority ruling on matters incidental to the manner in which meetings are conducted. This extends to the power to preclude a party from taking an electronic recording of the meeting. ”

The FCS was established in October 2008 and is designed to provide depositors with timely access to their deposits in specified covered financial products, up to a defined amount (currently up to $1 million per depositor in any one ADI until 12 October 2011), in the event that their ADI becomes insolvent. The Government will review the FCS deposit limit by October 2011.

The response paper provides comments on key issues raised in submissions to APRA’s discussion paper on the FCS released in January this year. APRA has made some modifications to the original proposals in response to certain concerns raised by industry. These include:

• extending the period for providing FCS-related data to APRA from 48 hours to 72 hours of a request being made for the data;
• requiring a reasonable assurance audit initially and every three years thereafter, rather than every year as proposed earlier, with limited assurance reviews in the intervening years;
• no requirement for ADIs to include accrued interest, fees and charges in their reporting of deposit data for FCS testing purposes; and
• providing a transition period of at least 12 months (extendable for up to a further 24 months on a case-by-case basis) before the FCS reporting obligations take effect.

Submissions on the response paper and reporting standard are due by 15 October 2010. Subject to industry feedback, APRA will release the final reporting standard in late 2010, to take effect from 1 April 2011.

However, as there will be a transition period of 12 months for ADIs to make the necessary systems and other changes, reporting obligations will not take effect until early 2012. Individual ADIs requiring a longer transition period must contact APRA for consideration on a case-by-case basis.

In particular APRA states it is not appropriate for ADIs to base their assessment of significant credit risk transfer through securitisation on the existence of lenders mortgage insurance, excess spread and/or holdings of subordinated tranche(s) being less than the 20 per cent threshold referred to in APS 120 Attachment F paragraph 8(c).

Langes can assist you with the self-assessment process required in APS120.

Magistrates Court: the $50,000 monetary limit will be increased to $150,000;
District Court: the $250,000 monetary limit will be increased to $750,000;
Supreme Court: the minimum claim requirement of $250,000 and over will be increased to claims of $750,000 and over.

From 1 November 2010 there will be no requirement for parties to transfer existing proceedings from a higher court to a lower court.

However, if a lower Court (such as the Magistrates Court) has no jurisdiction to hear the matter, the Magistrates Court must transfer the proceedings to the District Court.

A new Scale of Costs for the Magistrates Court for proceedings between $50,000 and $150,000 will apply from 1 November 2010.