How To Recover Unpaid Goods Legally In New Zealand

You’ve delivered stock, your customer’s been invoiced, and payment was “due last week”. Now they’re dodging your calls or promising they’ll “sort it soon”.

When cash flow is tight, chasing unpaid invoices isn’t just frustrating - it can seriously impact your ability to restock, pay wages, and keep the lights on.

The good news is that, in many cases, you can recover unpaid goods (or at least recover the value of them) - but the “right” approach depends on what paperwork you have in place, how the goods were supplied, and what the customer’s financial position looks like. Getting your legal foundations right from day one makes this process much easier.

1. Can You Actually Recover Unpaid Goods In NZ?

Sometimes yes, sometimes no - and the difference usually comes down to what your contract says and whether you’ve set up the right security.

From a practical standpoint, there are a few common outcomes when a customer doesn’t pay:

• You recover the goods (for example, by relying on a retention of title clause and enforcing your rights properly).
• You recover the money (through a debt recovery process, settlement, or a Tribunal/court order).
• You write it off (often when the customer is insolvent and you’re an unsecured creditor).

A key point many small businesses miss is this: even if the goods are yours “in your mind”, once they’re delivered it doesn’t automatically mean you have a legal right to enter someone’s premises and take them back.

Recovering unpaid goods usually requires you to prove one (or more) of the following:

• You retained ownership until payment (typically via a retention of title clause in your terms).
• You have a valid security interest that gives you priority over other creditors (and it’s properly “perfected”, usually by correct, timely PPSR registration).
• You have an enforceable payment obligation and you’re pursuing a debt recovery pathway.

If you’re unsure whether your agreement is enforceable in the first place, it’s worth checking the basics of what makes a contract binding, because it affects every step that comes after: what makes a contract legally binding.

2. Start With Your Paper Trail (Before You Escalate)

When you’re trying to recover unpaid goods, the strongest position is when you can quickly show:

• what was ordered (quote, purchase order, online checkout, email trail);
• what terms applied (terms of trade / T&Cs accepted by the customer);
• what was delivered (delivery dockets, courier tracking, signed acceptance);
• what is owed (invoice, statements of account, any partial payments); and
• what you’ve already done to resolve it (reminders, calls, follow-up emails).

Before you send a formal demand or take action, do a quick “reality check”:

• Is the customer disputing anything? (Wrong items, damaged stock, timing issues, warranty claims.)
• Was this a B2B or B2C supply? If you sold to a consumer, you may have Consumer Guarantees Act 1993 obligations (for example, around acceptable quality and remedies). If you’re dealing business-to-business, your contractual terms usually carry more weight.
• Where are the goods now? Have they been on-sold, installed, mixed into other products, or consumed?

Even if you’re confident you’re in the right, taking a measured, well-documented approach early often leads to faster payment (and fewer legal costs later). If you want a broader system for improving payment outcomes, this is also useful reading: ensuring your clients pay.

Send A Clear “Final Reminder” First

For many small debts, a final reminder gets the job done - especially if it’s polite, clear, and gives a firm deadline. Keep it simple:

• amount owing and invoice numbers;
• what was supplied and when;
• payment options (bank details, card link, etc.);
• deadline (for example, “by 5pm Friday”); and
• what happens next (for example, “we’ll issue a formal letter of demand and may commence recovery action”).

If they respond with a genuine cash flow issue, you might consider a payment plan - but make sure you document it in writing and include consequences if they miss payments.

3. The Legal Tools That Make Recovering Unpaid Goods Easier

If you regularly supply goods on invoice or on credit, the best time to protect yourself is before you deliver. Once the customer has the goods and doesn’t pay, your options narrow.

Here are the legal tools that most often matter when trying to recover unpaid goods.

Strong Terms Of Trade (Including Retention Of Title)

Your terms of trade (sometimes called “terms and conditions” or “business terms”) set the rules for payment, interest, recovery costs, disputes, and ownership.

A retention of title clause (also called ROT) generally means: you keep ownership of the goods until you’ve been paid in full.

This clause can be a game-changer - but only if it’s properly drafted and properly incorporated into your contract (meaning the customer actually agreed to it, not just that it’s sitting on your website somewhere).

Typically, well-drafted terms will cover things like:

• when payment is due (and what happens if it’s late);
• interest on overdue amounts;
• your right to suspend supply for non-payment;
• who wears risk during transit;
• retention of title and when ownership passes; and
• recovery costs (for example, legal fees on an indemnity basis, debt collection fees).

This is exactly the kind of document you don’t want to DIY from a generic template, because small wording issues can cause big enforcement problems later. Having proper Business Terms in place is one of the most practical ways to protect your cash flow.

If you’re still building or tightening your T&Cs, good business terms & conditions are worth prioritising early.

PPSA Registration (So You’re Not Last In Line)

In New Zealand, the Personal Property Securities Act 1999 (PPSA) is a major piece of the puzzle for suppliers of goods on credit.

In plain English: if you supply goods and want a real shot at getting them back (or getting paid ahead of other creditors) when things go wrong, you often need to:

• have a contract that creates a security interest (your terms can do this); and
• register that security interest on the PPSR (Personal Property Securities Register) correctly and on time.

Why does this matter? Because if your customer becomes insolvent, there may be multiple parties claiming the same assets - banks, finance companies, other suppliers, and the liquidator. A properly registered security interest can improve your priority position significantly.

One important nuance: under the PPSA, it’s not just whether you “have” a security interest, but whether it has attached and been perfected (most commonly by registration), and whether it was registered within the required timeframes for your type of supply (priority rules can be strict, especially where other secured creditors are involved). A late or incorrect registration can mean you drop behind other creditors - even if your terms include retention of title.

This area can get technical fast, so it’s worth getting advice about how your terms interact with the PPSA, what you should be registering (and when), and how to register against the right debtor details so it’s actually enforceable.

Security Documents (When The Risk Is Higher)

If you’re supplying high-value goods, offering long payment terms, or dealing with a customer whose creditworthiness is uncertain, you might want more than “standard” terms.

Depending on the situation, you may consider security arrangements such as:

• a personal guarantee from a director (so you’re not relying only on the company paying);
• a security over broader assets; or
• a formal security document such as a General Security Agreement.

These steps aren’t always necessary for everyday trading, but they can make a big difference where the financial exposure is significant.

4. Step-By-Step: What To Do When A Customer Doesn’t Pay

When payment is overdue and informal chasing isn’t working, you’ll usually want to move through an escalation pathway. The goal is to recover unpaid goods or recover the debt while keeping risk (and cost) proportionate to the amount owed.

Step 1: Confirm Whether It’s A Dispute Or A Straight Non-Payment

If the customer is raising quality issues, missing items, delays, or alleged misrepresentations, treat it as a dispute and manage it carefully. Your approach should also be consistent with the Fair Trading Act 1986 (for example, around representations you made about the goods) and your contractual obligations.

If it’s simply “we can’t pay right now”, move to formal recovery steps.

Step 2: Issue A Formal Letter Of Demand

A letter of demand is often the turning point. It shows you’re serious, creates a clear written record, and sets a deadline.

A well-structured letter of demand will usually include:

• the debt amount and how it’s calculated;
• what goods were supplied and when;
• the contractual terms relied on (for example, payment terms, interest, recovery costs);
• a deadline to pay; and
• what action you’ll take if they don’t pay (for example, Disputes Tribunal, court proceedings, enforcement, insolvency steps).

It’s also a good time to propose a commercial solution (like a payment plan) - as long as it’s documented and you’re not accidentally waiving your rights.

Step 3: Consider Your “Recover The Goods” Options Carefully

If your terms include retention of title and you’ve protected your position under the PPSA where required, you may be able to pursue repossession/recovery of the goods.

But you need to be careful here. Even if you “own” the goods under your contract:

• you generally can’t just enter premises without consent (trespass and other risks can apply);
• goods may have been on-sold, transformed, or mixed with other property, making recovery difficult; and
• if insolvency is involved, the liquidator’s process and creditor priorities may apply (and priority can turn on whether your interest was correctly perfected and, in some cases, registered within specific PPSA timeframes).

This is one of those areas where getting tailored legal advice early can save you from making a stressful situation worse.

Step 4: Use A Low-Cost Forum If Appropriate (Disputes Tribunal)

For many small businesses, the Disputes Tribunal can be a practical way to recover a debt - especially where the amount is relatively modest and you want a faster, lower-cost process.

It’s designed to be more accessible than traditional court, and it can be suitable for:

• straightforward unpaid invoice disputes;
• arguments about what was agreed; and
• quality/delivery disputes where the facts are clear.

That said, there are important limits. The Disputes Tribunal only deals with claims up to a set monetary cap (commonly $30,000, or $20,000 unless both parties agree to the higher limit), and it won’t handle every type of dispute. The process is also relatively informal, and parties usually represent themselves rather than having lawyers present.

You still need to be organised. Your documents (terms, delivery proof, invoices, communications) matter a lot.

Step 5: Court Proceedings Or Debt Collection (When The Stakes Are Higher)

If the amount is higher, or the customer is actively refusing to pay, you may need to consider court proceedings and/or engaging a debt collection agency.

Before you go down this path, weigh up:

• cost vs likely recovery (there’s no point “winning” if they have no assets);
• time and admin burden on your team;
• relationship impact (sometimes that matters, sometimes it doesn’t); and
• reputation and precedent (being known as a business that enforces its terms can reduce repeat offenders).

Step 6: If Insolvency Is Suspected, Act Fast

If you suspect the customer is insolvent (or close to it), time really matters.

Common warning signs include:

• repeated excuses and missed payment promises;
• multiple suppliers chasing them;
• requests for unusual credit extensions;
• they stop answering calls; or
• you hear they’re closing down or “restructuring”.

In insolvency scenarios, suppliers without a properly protected security interest are often left as unsecured creditors - which can mean you recover little or nothing.

If you have retention of title, a correctly registered PPSA security interest, or other security, you may have better options - but you’ll usually need to move quickly and carefully (including checking whether any relevant PPSA priority/perfection timing rules affect your position).

5. How To Protect Your Business So This Doesn’t Keep Happening

Recovering unpaid goods is much harder than preventing the problem in the first place. The best systems are the boring ones you run consistently - credit checks, clear terms, tight invoicing, and firm follow-up.

Here are practical ways to protect your business from day one.

Get Your Contracts And Ordering Process Right

Many payment disputes happen because there was never a clean “yes, I agree” moment on the terms. You want a process where, before supply:

• your customer receives your terms; and
• they accept them (signature, tick-box, email confirmation, account application acceptance).

If you also supply services (installation, maintenance, design work), consider a separate Service Agreement so responsibilities, milestones, and payment triggers are crystal clear.

Invoice Fast, Follow Up Faster

It’s simple, but it works: invoice immediately, state due dates clearly, and follow up the day after the due date (not “in a few weeks”).

Build a consistent reminder schedule (for example, 3 days overdue, 7 days overdue, 14 days overdue, then letter of demand).

Be Clear In Your Sales And Advertising

Sometimes non-payment starts as a misunderstanding about what was promised. Make sure your sales pages, quotes, and emails are accurate and not misleading - this reduces disputes and keeps you aligned with the Fair Trading Act 1986.

Consider A Credit Application Process

If you’re offering trade credit, a credit application can help you collect key details and lock in acceptance of your terms. It also gives you a paper trail if you need to escalate.

Know When To Stop Supplying

One of the biggest traps for small businesses is continuing to supply to a slow payer in the hope they’ll “catch up”. If your terms allow suspension for non-payment, use it. It can prevent a small problem turning into a major loss.

Key Takeaways

• You can often recover unpaid goods (or recover the debt), but your options depend heavily on what your contract says and what security you have in place.
• Retention of title clauses and PPSA registration are two of the biggest legal tools that can improve your ability to recover unpaid goods when customers don’t pay - but only if they’re properly drafted, correctly registered, and (where relevant) registered within the required timeframes.
• Don’t escalate too fast without checking the basics - confirm whether it’s a genuine dispute, gather your documents, and keep communication in writing.
• A letter of demand is often the next logical step once reminders aren’t working, and it should clearly set out the amount owed, deadline, and consequences.
• Be cautious about repossession - even if you believe you own the goods, you generally can’t just enter premises and take them back without legal risk.
• Prevention is easier than recovery: strong terms, clear acceptance processes, fast invoicing, and consistent follow-up protect your cash flow from day one.

If you’d like help putting the right terms and protections in place (or you’re already dealing with a non-paying customer and want a clear plan), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.