The PPRS strikes: Retention of Title is not what it used to be and not enough Australian businesses have noticed
Many suppliers to defunct WOW Sight and Sound have got a $25m shock because they didn't pay enough attention to a big change to Australian business law which took effect on Jan 30, 2012: the PPSR. They've discovered they are now unsecured creditors because they didn't register Retention of Title interests.
Australian businesses which sell physical goods on credit to other businesses usually have a Retention of Title (ROT) clause in their trading terms and on their invoices. Retention of Title is a common law concept meaning that a customer doesn't get title in goods until they're paid for, meaning the supplier can retrieve unpaid property if the customer goes into administration. It's of most relevance to trading stock.
Common law Retention of Title doesn't really exist any more, because at the end of January 2012 Australia has implemented the New Zealand system of a national registry of security interests. This is innovative for a few reasons: it combines consumer and business securities, it presumably greatly reduces the risk of security-interest fraud and lowers validation costs ... and it also completely replaces the old retention of title law.
ROT is now a security interest that needs to be registered. I haven't personally registered one, so I don't know how it works, but the idea seems to be that you register a ROT-situation once per customer, not for every invoice. Presumably businesses should make it part of the process of giving credit terms to a customer. It's not free.
Apparently a lot of suppliers to Wow Sight and Sound didn't take action. The administrator has refused claims to pick up unpaid goods which have not been registered at the PPRS. One report values this at $25m. A great win for secured creditors.
I'm not sure whether this is correct behaviour by the administrator since there are transitional arrangements, but the old protection (title is not transferred if goods are not paid for) has been substantially reduced if the PPSR is not used. According to the article below, the WOW administrator is refusing claims and is selling the stock to raise funds, which of course go to priority creditors.
Read more about PPSR and Retention of Title
http://www.ppsr.gov.au/ForBusiness/Newrules/Pages/default.aspx
and
http://www.mondaq.com/australia/x/164934/Contract+Law/Retention+of+title+ROT+clauses+under+the+PPSA