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PPSA Retention of Title Precedent Case - Debtor Transfers to Related Entities and Lay-by Sales

The Supreme Court of Victoria on 17 December 2014 delivered judgment in Lewis and Templeton as liquidators of Warehouse Sales Pty Limited (in Liquidation) (“Warehouse Sales”) [2014] VSC 644 which is relevant to businesses which sell goods on retention of title terms.

The court found:

  • A transfer of goods by a debtor to a related entity of the debtor was a transfer free of the retention of title security interest of certain suppliers over the goods.
  • The supplier’s retention of title security interests over stock has priority over a claim of lay by sale customers of  the debtor.
  • All other sales by a debtor, even part paid sales, were free of any retention of title security interest of a supplier.

In light of this judgment, trade suppliers may better protect their retention of title rights over stock sold on credit terms by having a provision in their terms of trade prohibiting sales by their customers to related parties.

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