The Background
WOW Sight and Sound, the first major receivership since the commencement of the Personal Property Securities Act 2009 (Cth) ("PPSA") on 30 January 2012, has seen a large number of suppliers unable to reclaim goods supplied to WOW on retention of title terms.
The suppliers received a rude awakening to the PPSA when WOW's receivers, Ferrier Hodgson, apparently explained that they would only recognise retention of title arrangements that were registered on the Personal Property Securities Register ("PPSR") at the date of their appointment. All other suppliers will be unsecured creditors of the company.
The Impact
The receivers intend to realise all stock (subject to claims of any supplier who had made a PPSR registration) and distribute the proceeds to WOW's creditors according to priority. It appears the majority of the proceeds will be distributed to WOW's secured creditors and the suppliers, generally unsecured creditors, will be left out of pocket. That position may also be subject to the Receivers' consideration of any protection afforded to retention of title or consignment suppliers by the transitional provisions in the PPSA.
How did it happen?
The PPSA is one of the most significant reforms to Australian commercial law in decades and it has dramatically changed, or should have changed, core business practices for a wide-range of Australian services and businesses. As WOW's suppliers have discovered, the legislation affects not only banks and financiers, but also retention of title suppliers and those that supply goods on consignment or lease terms.
Although the PPSA protects unregistered retention of title and consignment suppliers and leased goods for a 24 month transitional period, those provisions don't protect arrangements entered on or after 30 January 2012.
Recommendation
The message is clear. If you supply stock on retention of title, consignment or lease terms then you MUST ensure:
- your credit terms have been reviewed for PPSA compliance; and
- any goods supplied on retention of title, consignment or lease terms are protected by a PPSR registration.
Thynne & Macartney is assisting its clients navigate PPSA risk and compliance issues. We can offer general PPSA advice and also advice on specific issues of concern. We can also have a member of our PPSA team attend your workplace to conduct a PPSA seminar specifically tailored to your business needs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.