Supplier and Trade Creditor Disputes — recover what you are owed before it is too late

The Personal Property Securities Register (PPSR) under the Personal Property Securities Act 2009 allows suppliers to register a security interest in goods they supply on credit. Registration gives the supplier a perfected security interest — meaning that if the buyer becomes insolvent, the supplier can recover the goods (or their proceeds) ahead of the liquidator and unsecured creditors. To register, you need a financing statement identifying the grantor (the buyer), the collateral (the goods), and the nature of the security interest. Registration should be completed before or at the time of each supply. An unregistered retention of title clause is generally ineffective against a liquidator under section 267 of the PPSA 2009.

A retention of title (ROT) clause in a supply contract provides that legal title to goods does not pass to the buyer until full payment is received. Under the PPSA 2009, an ROT clause constitutes a security interest in the goods and must be registered on the PPSR to be enforceable against third parties, including a liquidator. If the ROT clause is unregistered, it is void in an insolvency — the goods are treated as belonging to the insolvent buyer's estate and distributed to creditors. Even a registered ROT clause has limits: it does not attach to proceeds of sale (e.g. where the buyer on-sells the goods) unless a specific all-present-and-after-acquired property (ALLPAAP) or proceeds clause is included and registered.

If you have a registered security interest (PPSR) in the goods at the time of insolvency, you can enforce that interest against the administrator or liquidator — typically by demanding the return of the goods or their sale proceeds. The administrator or liquidator must give effect to a perfected security interest. If the goods have already been sold or mixed with other goods, your rights depend on whether your security interest extended to proceeds and whether the proceeds can be traced. Without PPSR registration, you rank as an unsecured creditor and are unlikely to recover the goods or their value ahead of other creditors. Acting quickly when a customer enters administration is critical — goods can be sold by the administrator quickly in the early stages.

Each Australian state and territory has Security of Payment legislation (e.g. Building and Construction Industry Security of Payment Act 1999 (NSW), Building Industry Fairness (Security of Payment) Act 2017 (QLD)) that allows subcontractors and suppliers in the construction industry to recover unpaid progress claims quickly through adjudication. The process involves: serving a valid payment claim on the respondent; if a payment schedule is not served in time the claim becomes a debt; or if disputed, both parties submit to an adjudicator who determines the amount payable within 10 business days. An adjudication determination is enforceable as a court judgment. The process is faster and cheaper than litigation but has strict procedural requirements and tight deadlines.

For trade debts not covered by Security of Payment legislation, the typical process is: (1) a formal letter of demand giving the debtor a final opportunity to pay (usually 7–14 days); (2) if unpaid, commencement of proceedings in the appropriate court — Magistrates Court (or Local Court) for smaller claims, County/District Court or Supreme Court for larger amounts; (3) if the debt is undisputed, seeking default judgment; (4) if defended, proceeding to trial or mediation; (5) once judgment is obtained, enforcement through garnishee orders on bank accounts, seizure of assets, or other enforcement mechanisms. For debts over $4,000, a statutory demand under section 459E Corporations Act 2001 can also be used as a precursor to a winding-up application.

In most Australian states and territories, the general limitation period for a simple contract debt is six years from the date the debt became due (under the relevant Limitation Act). For debts under deed, the limitation period is typically 12 years. The limitation period can be reset if the debtor makes a written acknowledgment of the debt or makes a part payment. Once the limitation period expires the debt becomes statute-barred and unenforceable in court. Prompt action — including issuing a letter of demand and commencing proceedings before the limitation period expires — is therefore essential. PPSR security interests also have registration timeframes that must be managed to maintain their priority.