In the past it has been difficult for a supplier to recover a product that, once delivered to the buyer, has been mixed in with other similar or identical products. Goods of this type are known as “commingled goods”. A typical example of such goods would be grains that are mixed together for the purposes of storage upon delivery to the buyer’s premises.
This difficulty stemmed from the common law principle that once mixed, the goods could not be separated. Under this principle suppliers could not recover those goods if the buyer took delivery and then later failed to pay.
However the Personal Property Securities Act 2009 (PPSA) provides a mechanism for suppliers to recover commingled goods.
Although it will not be possible to identify the individual load of commingled goods, the supplier can recover the amount of product originally contributed, even if the form has changed through processing, manufacturing or assembly.
How can a Supplier Recover Commingled Goods?
Suppliers can take advantage of this change by:
- Having a written contract for the supply of goods with the necessary PPSA clauses; and
- Registering that contract with the Personal Properties Securities Register (PPSR).
By registering the contract with the PPSR, the supplier’s interest becomes a security interest and is recoverable. This also means that if the buyer is subsequently wound up, the supplier’s interest is ranked ahead of ordinary unsecured creditors.
It is essential that supply contracts are drafted to include a right to recover goods in accordance with the PPSA. Suppliers who have older style terms of trade agreements will need to update their contracts to take advantage of the PPSA.
If you require legal advice in relation to commingled goods, terms of trade contracts or PPSA, we advise that you seek advice from Chamberlains Law Firm. We can draft a terms of trade contract with the appropriate PPSA clauses and can register the contract in the PPSR for the supplier.
Article by Sayward Brest
Stipe Vuleta – Practice Manager – Dispute Resolution, Insolvency & Reconstruction
P 02 6215 9100