If a client [a supplier] has a customer that has goods on their floor that HAVE
been paid for, but owes them for goods that have not been paid for, but since
used / on-sold can they go in and get the paid for goods?
Our client’s rights in this begin with the terms of their Retention
of Title clause [ROT].
While a basic ROT would only allow for the client to
recover unpaid for goods, an ‘All Monies’ extension to the ROT would allow the
client’s recovery rights to also attach to goods that had been paid for
provided that other goods they had supplied had not.
However, while the ROT will describe what security interest is
present, it is the PPSA that will determine the relative priority of that
security interest over other competing interests.
Under PPSA an interest in collateral that secures its own purchase
price is designated as a Purchase Money Security Interest [PMSI] and a PMSI will have, effectively, the highest
priority around. Thus recovering unpaid for property should be relatively
straightforward and uncontentious (we obviously know better but this is the
theory at least!).
However, under an All Monies clause we are not referring to goods
that are securing their own purchase price, we are instead referring to goods
that have already been paid for but secure the purchase price of other goods
that have not yet been paid for.
The paid for collateral that enters the scenario by virtue of the
All Monies clause cannot, therefore, be designated as a PMSI security interest.
The upshot being that the unpaid for collateral can be treated
as a PMSI and recovered without the need to worry about higher priority
competing claims while the paid for collateral is treated as a general non-PMSI
security interest and may only be recovered once higher priority competing
claims have been considered.
In this instance, a higher
priority competing claim may be an earlier all present and after acquired
property security interest put in place many years ago by the customer’s
bankers.
If this is a question regarding an actual situation a client is
finding themselves in then I would suggest they have a go at recovering all
they can as soon as they can. This is still very new territory to many
and our client may get lucky!
P
Thanks for consulting. We are also from PPSR.
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