Central Cleaning Supplies (Aust) Pty Ltd V Elkerton (2015)


On appeal from the first instance decision ([2014] VSC 61) the court held that Central Cleaning’s security interests were transitional security interests, and accordingly benefited from temporary perfection.

The appeal court reversed the first instance decision as it took a different view about the way in which the master agreement governing the supplies had been formed.  Swan Services’ credit application, signed before the registration commencement date, provided that Central Cleaning’s standard terms and conditions applied to all supplies, but the ROT terms (which formed part of the standard terms and conditions) were not made known until supplies were made and invoices bearing the terms were provided.

The first instance decision had considered that the credit application was an agreement, but that it did not include the ROT terms as they had not been provided at the time the agreement was formed. Rather, the ROT terms formed part of separate agreements made at the time of each supply; and as the relevant supplies were made after the registration commencement date and no registrations had been made, the security interests created by the separate supply agreements were not perfected.

On appeal, the court considered that the credit application was not an agreement. Rather, it was an application, which only became an agreement when accepted by Central Cleaning making its first supply and providing its invoice. This happened a day after the credit application was signed (well before the registration commencement date). So at the point the agreement was formed, the ROT terms had been made known and were incorporated in the agreement. The agreement constituted by acceptance of the credit application was therefore a security agreement which provided for future security interests (by way of ROT) that arose each time a supply was made. Accordingly they were temporarily perfected as transitional security interests.

The summary of the pertinent points in this legal case update has been provided by Steve Pemberton, Lawyer and Consultant, as an extract from his digest of PPSA cases.