The recently reported case on Personal Property Securities Act (PPSA) is the NSW Supreme Court case of Crossmark Asia v Retail Adventures [2013] NSWSC 55 (23 January 2013)
In summary, ROT terms appeared on the invoices between the supplier (Crossmark) and the customer (Retail Adventures). Prior to VA, Crossmark advised Retail that it was now on CBD (cash before dispatch) which was accepted by Retail.
The Administrators argued, amongst other things, that Section 267 of the PPSA ought to apply such that this ROT was an unperfected security interest and therefor void against the Administrator.
Section 267 of the PPSA provides for the vesting of an unperfected security interest in the grantor upon the grantor being wound up etc.
In this instance S267 did not apply as:
• The ROT clause in the pro-forma invoices would originally have created a security interest under the PPSA.
• However, the termination of the contract occurred before the administrators were appointed.
• When the contract was cancelled, there was no longer a ROT as the sale contract had already been terminated and the title to those good supplied had remained (or reverted back) with/to Crossmark and therefore Crossmark was entitled to possession and sell them accordingly. There was no longer a security interest in the goods which had remained unenforced and unperfected at the commencement of voluntary administration.
• Section 267 applies if two criteria (set out in s 267(1)(a) and (b)) are satisfied.
Section 267(1)(a) was satisfied because an administrator had been appointed: s 267(1)(a)(ii). The criteria in s 267(1)(b) was that a security interest granted by RAPL was unperfected at a particular time, namely the s 513C day within the meaning of the Corporations Act 2001 (Cth). The s 513C day was the day on which RAPL’s administration began, that is, 26 October 2012. However, there was no security interest on that date. Therefore s 267 of the PPSA did not apply.
The above case demonstrates the interaction between the insolvency provision and those enforcement provisions within the PPSA. Early termination by a supplier may be effective in some circumstances, such as this case, to unwind a ROT sale transaction, and dis-apply the application of the PPSA to it. Once this occurs, it is possible, as was held in this case, that an unperfected ROT transaction is not necessarily defeated by a VA provided it does not constitute a security interest when the VA commences.
Portions of the above have been extracted from CCH’s article on this case can be found via CCH’s Australian Corporate, Company and Securities Law Tracker, “PPS case: no vesting because contract cancelled”, Issue 2, February 2013.
Adrian Hunter 