Written by: Eloise Turnbull, Associate Solicitor, Litigation, and John Greenhalgh, Solicitor Director (Updated: 5 November 2026)
Understanding your rights as a trade creditor, the prospects of recovering unpaid invoices and the options available when a customer becomes insolvent.
David Jones enters administration: what does it mean for suppliers?
On 5 November 2026, David Jones was placed into voluntary administration. Its directors appointed McGrathNicol as voluntary administrators, and its secured lender appointed FTI Consulting as receivers and managers. The stores continue to trade under the receivers’ control while the business is reviewed. The collapse follows months of reported financial strain, including missed payments to concession holders and suppliers insisting on payment upfront.
David Jones has not entered liquidation. Voluntary administration may end in a deed of company arrangement, a sale or a liquidation. For suppliers, however, some rights were fixed the moment the administrators were appointed. Under the Personal Property Securities Act 2009 (Cth), a retention-of-title interest that was not properly perfected on the day of appointment can vest in the company. The supplier is then left as an unsecured creditor for goods it may have assumed it still owned.
Few businesses supply a national department store. The same questions arise whenever any customer becomes insolvent, and the answers usually lie in documents signed long before payments stopped.
What happens to unpaid invoices when a company enters liquidation?
Liquidation involves winding up a company’s affairs, realising its assets and distributing the proceeds to creditors according to the priorities set by the Corporations Act 2001 (Cth). A liquidator is appointed to investigate the company’s affairs, deal with its assets and determine whether funds are available for creditors.
Unsecured creditors generally cannot commence or continue debt recovery proceedings against a company in liquidation. In a court-ordered winding up, section 471B requires the court’s leave. In a voluntary winding up, section 500(2) has a similar effect. Section 471C preserves certain rights of secured creditors to realise or otherwise deal with their security.
What if the company is in voluntary administration instead?
Voluntary administration gives an independent administrator the opportunity to investigate the company’s financial position and to consider whether the business can be saved or whether creditors would be better off under a restructure.
During the administration, section 440D generally prevents proceedings against the company from being commenced or continued without the administrator’s written consent or the court’s leave. Section 440B places similar restrictions on recovering property the company is using or holds, subject to limited exceptions. An overdue invoice therefore cannot simply be pursued through ordinary debt recovery while the administration continues.
If your customer enters liquidation or voluntary administration, your immediate priorities should be to:
- confirm the appointment of the external administrator and obtain their contact details
- establish the amount outstanding and preserve supporting documents
- review your credit application, supply agreement and terms of trade for security or guarantee provisions
- check whether your business holds a registered security interest over goods or other assets
- identify any stock supplied under retention-of-title terms that remains in the company’s possession
- ask the external administrator how to submit your claim and whether any deadlines apply.
You can verify appointments through the insolvency notices and company records published by the Australian Securities and Investments Commission (ASIC). The earlier you identify your rights, the better placed you are to protect them.
What can unsecured trade creditors expect to recover?
If your business supplied goods or services on credit without taking security, you will generally be an unsecured creditor. You have no security interest over particular company assets. Instead, you participate in the liquidation and may receive a dividend if funds remain after higher-ranking claims are paid.
Sections 555 and 556 of the Corporations Act 2001 (Cth) provide that debts and claims rank equally, subject to statutory priorities for certain categories. Liquidation expenses and certain employee entitlements are paid first, and secured creditors may have separate rights over particular assets. For ordinary suppliers, the result is often disappointing. Even an undisputed debt may attract little or no dividend.
Lodging a proof of debt
A proof of debt is the formal process by which a creditor establishes its claim in a liquidation. The liquidator will generally call for formal proofs of debt when a dividend is likely to be paid. Monitor the liquidator’s notices and comply with any deadline. Supporting documents may include:
- signed contracts and credit applications
- outstanding invoices and statements of account
- purchase orders and delivery records
- correspondence confirming the debt or payment arrangements.
The liquidator may admit or reject the claim in whole or in part. A rejected claim can be challenged, subject to the applicable procedures and time limits.
In a voluntary administration, creditors are usually asked for details of their claim so they can vote at creditors’ meetings. Admission of a claim for voting purposes does not establish an entitlement to any later distribution.
Lodging a claim does not guarantee payment. Before spending more on recovery, consider whether the administration or liquidation is likely to produce a return.
Does your retention-of-title clause protect unpaid goods?
For suppliers of goods, a central question is whether the supply terms contain a retention-of-title clause, which provides that ownership stays with the supplier until payment is made. A clause on its own does not mean you can recover the goods once the customer is insolvent.
Under the Personal Property Securities Act 2009 (Cth), most retention-of-title arrangements create a security interest that must be perfected, usually by registration on the Personal Property Securities Register (PPSR). Depending on the arrangement, the interest may qualify as a purchase money security interest (PMSI), which can give priority over other secured creditors if the statutory requirements are met.
Timing is critical. Under section 267, a security interest that is unperfected when a company enters administration or liquidation, or executes a deed of company arrangement, generally vests in the company. Even a registered interest may not survive. Under section 588FL of the Corporations Act 2001 (Cth), an interest registered late, close to the appointment, can also vest in the company.
If your business holds a valid and perfected security interest, you may be able to recover identifiable goods or claim an interest in their proceeds. The position becomes more complicated where the goods have been sold, incorporated into other products, mixed with inventory or can no longer be identified.
Holding a security interest is also different from being able to enforce it immediately. During voluntary administration, a supplier generally cannot repossess goods without the administrator’s consent or the court’s leave, even where its interest is registered.
For example, a clothing supplier that delivered stock to a retailer on 30-day terms may expect to collect the unsold stock when the retailer enters administration. Whether it can do so depends on the supply terms, its PPSR position, whether the goods can still be identified, and the restrictions on enforcement during the administration.
Can you recover the debt from a company director personally?
A company’s insolvency does not make its directors personally liable for its debts. Some trade creditors, however, hold a personal guarantee from a director or another individual.
The original credit application is worth revisiting. It may have been signed years ago, when the trading relationship began, and filed away. It may contain a personal guarantee from a director who agreed to be responsible for the company’s debts.
Where an enforceable guarantee exists, the creditor may pursue the guarantor for amounts owed by the company, subject to the terms of the guarantee. An indemnity may create a separate obligation, but its effect depends on its wording. It should not be assumed to operate in the same way as a guarantee.
In a liquidation, the restrictions on proceedings against the company do not generally prevent a creditor from enforcing a valid personal guarantee. Voluntary administration is different. Under section 440J of the Corporations Act 2001 (Cth), a guarantee of the company’s liability given by a director, or by a director’s spouse or relative, generally cannot be enforced during the administration without the court’s leave.
Before pursuing a guarantor, consider:
- whether the guarantee or indemnity was properly executed and is enforceable
- whether the debt falls within the obligations it covers
- whether any demand or notice must first be given
- whether the company’s external administration affects when you can enforce
- whether the guarantor has assets or income to meet the claim.
An enforceable guarantee can significantly improve recovery prospects, but it is of limited value if the guarantor has no assets or disputes liability. The original credit agreement may prove more important to recovery than the invoices themselves.
What if you are still supplying a company in administration?
A company in administration often keeps trading, as David Jones is doing. That creates an important distinction between debts incurred before the appointment and supplies made afterwards.
An existing unpaid invoice is a pre-appointment debt and is dealt with in the administration. New supplies may be treated differently. Under section 443A of the Corporations Act 2001 (Cth), a voluntary administrator is personally liable for debts they incur in performing their functions, including for goods and services. Under section 419, a receiver is personally liable for debts incurred in the course of the receivership, including for goods purchased.
That protection depends on the order having been placed by, or with the authority of, the relevant appointee. Where both administrators and receivers have been appointed, as with David Jones, the receivers usually control trading. Before supplying further goods or extending more credit, confirm in writing who is placing the order, on whose authority, and on what payment terms. Continuing to supply without that confirmation may simply increase an unpaid account.
What about insolvent trading claims against directors?
Directors may be liable under the Corporations Act 2001 (Cth) where a company incurs debts while insolvent and the statutory requirements for insolvent trading are met. This is a different claim from enforcing a guarantee.
The liquidator ordinarily investigates and pursues insolvent trading claims for the benefit of all creditors. An individual creditor may bring proceedings under section 588M only in limited circumstances, and sections 588R to 588U impose consent and notice requirements before it can do so.
A director’s involvement in an insolvent company does not give a creditor a personal claim for every unpaid invoice. Whether a claim exists depends on when the debt was incurred, the company’s financial position at that time, the director’s conduct, and any available defences, including safe harbour.
Could the liquidator ask you to repay money already received?
Payments received before liquidation may be challenged as unfair preferences. Under sections 588FA to 588FF of the Corporations Act 2001 (Cth), a liquidator may seek to recover certain payments made to creditors before the liquidation.
For unrelated creditors, the relevant period is generally the six months ending on the relation-back day, together with the period from that day until the winding up began. Different rules apply under the simplified liquidation process.
Not every payment in that period is recoverable. The company must have been insolvent at the time, or have become insolvent because of the payment, and the creditor must have received more than it would have received as an unsecured creditor in the liquidation.
Two defences matter most for trade suppliers.
The first is the running account. Under section 588FA(3), where payments form part of a continuing business relationship, the transactions are treated as a single transaction. The liquidator can generally recover only the net reduction in the debt over the relevant period, not each payment in isolation. A supplier that kept delivering goods while it was being paid may have a significantly reduced exposure, or none at all.
The second is good faith. Under section 588FG, a payment is not recoverable if the creditor received it in good faith, had no reasonable grounds to suspect insolvency, and gave valuable consideration or changed its position in reliance on the payment. All three elements must be established.
If a liquidator demands repayment of an alleged unfair preference, obtain advice before accepting liability or returning any money. The demand does not, by itself, establish that the payment is recoverable.
Before writing off the debt, check your rights
The David Jones administration shows how quickly a long-standing trading relationship can become uncertain. For businesses that supply on credit, the consequences can extend well beyond a single unpaid invoice.
Unsecured creditors may recover little or nothing in a liquidation. The position can be different where a supplier holds an enforceable personal guarantee, a properly perfected retention-of-title interest or another form of security. Those rights are easily overlooked, particularly where the trading relationship began years before the customer’s difficulties emerged.
At Greenhalgh Pickard, our commercial litigation lawyers assist Queensland businesses with unpaid commercial debts, the enforcement of guarantees, and disputes about security interests and insolvency. We review credit agreements, terms of trade, PPSR registrations and guarantee documents to identify recovery rights beyond an ordinary unsecured claim.
Before writing off a substantial unpaid account, speak with our litigation team. An early assessment can identify recovery options worth pursuing and avoid further legal expense where the prospects are limited.
Sources
- section 471B, Corporations Act 2001 (Cth)
- section 500, Corporations Act 2001 (Cth)
- section 556, Corporations Act 2001 (Cth)
- section 588FA, Corporations Act 2001 (Cth)
- section 588M, Corporations Act 2001 (Cth)
- section 14, Personal Property Securities Act 2009 (Cth)
- section 267, Personal Property Securities Act 2009 (Cth)
- rule 22, Uniform Civil Procedure Rules 1999 (Qld)
- section 4, Magistrates Courts Act 1921 (Qld)
Disclaimer: This article provides general information only and does not constitute legal advice. It does not take into account your personal circumstances and should not be relied on as a substitute for professional legal advice. Litigation involves significant risks, costs and strict procedural requirements. For advice about your specific situation, please contact Greenhalgh Pickard on (07) 5444 1022.
Greenhalgh Pickard’s Litigation Team
