TITLE RETENTION, MIXED MATERIALS, CHARGES AND TRUSTS

Associated Alloys Pty Ltd v Metropolitan Engineering and Fabrications Pty Ltd ((1998) 14 ACLC 952, 20 ACSR 205)

In a landmark decision which should be studied by all who transact on reservation of title terms, the High Court of Australia has held that a contractual attempt to create a trust of sub-sale proceeds received by buyers, in favour of the sellers of industrial materials which the buyers transformed into composite products and sub-sold, was effective in law even though the trust purported to extend only over that part of the sub-sale proceeds which corresponded with the buyers’ debt, rather than over the whole of those proceeds as received.