Anonymised, illustrative composite. A buyer signed an asset purchase agreement with a receiver that included $610,000 of inventory. Two suppliers served repossession demands in the following fortnight. One got its pallets back; one did not; and a third claimant took a charge over everything left.
At a glance
A receiver was appointed over a mid-sized food processor — sauces, purees and frozen vegetable blends — on the application of its operating lender. A regional buyer with an adjacent plant signed an asset purchase agreement eight days later: plant, equipment, the brand, the customer list, and inventory carried on the receiver's schedule at $610,000 across raw materials, work-in-process and finished goods.
Inventory diligence was a physical count and a valuation. Nobody cross-referenced the receiving log against the accounts-payable ageing.
Eleven days after the receivership, a packaging supplier served a written demand for repossession of corrugate and film delivered across the preceding six weeks. Two days later an ingredient supplier served a demand for 31 pallets of a specialty starch delivered nineteen days before the receiver was appointed, still shrink-wrapped in the raw-materials bay. Separately, a vegetable grower filed a proof of claim for $146,000 of produce delivered in the last fortnight of operations.
Three claimants, three outcomes, and none of them an ordinary money claim the buyer could ignore. Two reached into the building and took things off a schedule the buyer had already priced.
The schedule broke down as $214,000 of raw materials, $171,000 of work-in-process and $225,000 of finished goods. The packaging supplier's claim covered $63,500 of delivered material, of which roughly $41,000 had already been printed, cut and married to product. The starch supplier's 31 pallets invoiced at $84,200, none of it paid. The grower was owed $146,000.
The exposure was therefore not $610,000 but the part of it that was identifiable, unaltered, delivered inside the window and not contracted away — plus the part subject to a charge nobody had priced. Four tests on four subsets of one line item.
BIA s.81.1(1) carries the marginal note Right of unpaid supplier to repossess goods, and it is drafted as an obligation on whoever is holding them: the supplier “may have access to and repossess the goods at the supplier's own expense, and the purchaser, trustee or receiver, or the purchaser's agent or mandatary, as the case may be, shall release the goods”, on four conditions.
The unit is the identified goods, not the debt. That is why this mechanic is different from every other unsecured claim in an insolvency: it does not compete for a distribution, it removes assets from the schedule. And s.81.1(10) confirms the trade-off from the supplier's side — a supplier who repossesses “is not entitled to be paid for those goods”.
The two clocks are the first place these claims fail. Paragraph (1)(a) requires the written demand “within a period of 15 days after the day on which the purchaser became bankrupt or became a person who is subject to a receivership”; paragraph (1)(b) requires that the goods “were delivered within 30 days before the day” of that same event. Fifteen days forward, thirty days back, from one date. Section 81.1(5) then extinguishes the right if the 15-day period lapses, unless extended before expiry by the trustee, receiver or court.
Paragraph (1)(c) is the substantive test, and it is what split the two suppliers. At the time the demand is presented the goods must be in the possession of the purchaser, trustee or receiver; “identifiable as the goods delivered by the supplier and not fully paid for”; “in the same state as they were on delivery”; not resold at arm's length; and not subject to an agreement for sale at arm's length. The packaging supplier's material had been printed and applied — not in the same state, and no longer separately identifiable. The starch was sealed, labelled and untouched.
Two qualifications matter to a buyer specifically. Where the goods are partly paid for, s.81.1(2) converts the right into repossession of a proportional share, or all of them on refunding the partial payment. And s.81.1(6) ranks a valid repossession right “above every other claim or right against the purchaser in respect of those goods”, other than a bona fide subsequent purchaser for value without notice — so a general security agreement does not defeat it, and a buyer's position depends on whether it closed before the demand and without notice.
The receiver released the 31 pallets. The packaging demand was refused and the supplier did not apply under s.81.1(8), so its claim reverted to an ordinary provable one. Inventory came off the schedule at $84,200, and because the agreement priced inventory at an agreed count on closing rather than a fixed sum, the reduction flowed to the buyer automatically. That drafting choice was the only reason the loss cost nothing; on a fixed-sum line the buyer would have paid for pallets that left the building.
A food target usually carries two regimes at once, and they are not variants of each other. BIA s.81.2(1), marginal note Special right for farmers, fishermen and aquaculturists, has a shorter delivery window — products delivered within “the fifteen day period preceding” the bankruptcy or the first day there was a receiver — and requires a proof of claim in the prescribed form within thirty days.
What it produces is different in kind. It is not a right to take back identified goods; the claim “is secured by security on all the inventory of or held by the purchaser” as of that day, and that security “ranks above every other claim, right, charge or security against that inventory, regardless of when that other claim, right, charge or security arose, except a supplier's right, under section 81.1, to repossess goods”. A grower owed $146,000 therefore takes a first-ranking charge over the entire inventory pool, whether or not a single carrot of its own remains. Section 81.2(1) also makes a receiver who disposes of charged inventory liable to the extent of the net amount realised, so the claim follows the money as well as the goods.
The tell is a document pair nobody asked for: the receiving log and the accounts-payable ageing, read side by side against the date of the receivership. Every delivery inside the thirty-day window that is still unpaid is a candidate for repossession, and every one of those still sitting sealed and labelled is a live one. An inventory schedule organised by SKU and value is the wrong shape for this question; the schedule that answers it is organised by supplier and delivery date.
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