You have done the work pursuant to the agreed terms of a customer service agreement ("CSA"). You should not have a dispute with your customer regarding what you have done and what you are entitled to be paid. However, they are not paying you or unable to pay you. What should you do to prevent this happening?


As you are providing services, not goods, a retention of title clause inserted in your CSA is useless for you cannot get back the advice/service you have provided. However, the following are the key options to better secure payment of your fees, WIP and costs:

  1. Obligating third parties to pay the accounts by having them become guarantors; and/or
  2. Taking and perfecting security over assets of the client and/or guarantor.

Guarantees: A guarantee can be as simple as inserting a guarantee clause in your CSA and having the third party sign and return the acknowledgement at the back of the CSA. Guarantees should always be considered when acting for a company or trust (e.g. directors, key shareholders, primary beneficiaries, unit holders, etc�).

This step gives you the option of not only pursuing a customer for your fees but also a more financial guarantor. All too often, service providers are left pursuing an uncommercial result from a customer who is broke, aperson of straw or a $2 Shelf Company.

Guarantees, like all documents, can be subject to dispute and it is best to have the guarantee terms properly drafted. You can have more complex/detailed guarantees (stand alone 20 page documents) and procedures (e.g. sending the guarantor away to get independent legal advice) but this is your call as to how far you want to go.

Security: A liquidator/trustee in bankruptcy ("liquidator") can sell up assets of your customer or guarantors provided they are owned by the customer/guarantor and not subject to perfected security interests. This part focuses on mainstream types of security you can take to better protect yourself.

The service provider should adopt steps lenders take; that is, take security from a customer to make sure that such assets are quarantined to not form part of the liquidator's assets for distribution. The service provider treats their customer as a quasi-borrower and takes a charge, bill of sale and/or mortgage from them and/or their guarantors.

The service provider should register and perfect such security to defeat a liquidator, an unregistered security and/or post ranking registered security holder.

If the security is over:

  1. Land, then a mortgage over such property should be registered with the Titles Office;
  2. Personal Property (non-land) then a security interest should be registered with the Personal Property Securities Register ("PPSR"). Please refer to our PPSA Publications on our website.

Registration can create its own impracticalities for there will most likely be a prior ranking security holder (e.g. a Bank) and they may not take too kindly, cost effectively or timely to any request by a service provider wanting to lodge security and/or request a deed of release or priority. It may be pointless taking out security unless the service provider is aware of the competing security holder's equity position, for the property being secured may already be "maxed-out" with secured debt.

However, it is better to have security and give yourself options then not to have it. You are not obligated to register your security. Just be mindful that if you do not perfect/register it then you run the risk of your security not defeating a liquidator or competing security holder.

Another issue to be mindful of is if the customer (being an individual) has engaged you for personal, domestic or household services. If so, then your CSA and/or security may be governed by the National Consumer Credit Protection Act and Code ("NCCP") and may need to be drafted to be compliant with the NCCP.

Security Documentation

When taking security, it is best, but not mandatory (excluding the NCCP) to have it embodied in a separate document from the CSA. Perfected security empowers you to seize and sell up assets in relation to a debt owing in priority of claims by the customer, other creditors and the liquidator.

If taking and registering a separate security document is too difficult or not appropriate then you should at the very least consider inserting a general charging clause in the CSA which provides that the customer is charging all of their assets in favour of you to secure the debt owed by them to you.

Regarding land, this general charging clause will not defeat a liquidator or a registered and competing security holder but it will give you grounds to lodge a caveat with the Titles Office over your customer's property to prevent them selling up their property and distributing it to others (other than a prior registered mortgagee sale). There are time limits, risks and procedures to be adopted before lodging a caveat. Legal advice must be provided before taking such step. However, the insertion of the general charging clause giving rise to the caveatable interest is quite simple to insert into your CSA and provides you some leverage.

Regarding personal property, this general charging clause is enough provided you register your interest (not the document) on the PPSR because the PPSR is an electronic register that does not require lodgement of a prescribed form.


In the current economic environment, service providers must be vigilant in relation to their credit control. The first step is to document the rules of engagement by having a CSA and the next is to obtain guarantees and perfect security.

Guarantees and security can be as complex or as simple as you like. If you need assistance to draft, review or amend your CSA and security then please contact our office.