PPSA

Question 1

What is a security interest

Answer 1

Section 17(1) “security interest”

An interest in personal property

Created or provided by a transaction that in substance secures payment or performance of all obligations

Without regard to; the form of the transaction; and the identity of the person who has title in the collateral

Question 2

What is attachment

Answer 2

Attachment occurs when the secured party gives 1. value for the loan, 2. the debtor has rights in the personal property that is used as security for the loan, and, 3. in the case of third parties, the security agreement is enforceable against third parties

Question 2

s 17(3) and 16 on what types of things are SI’s

Answer 2

Fixed charge, secured charge, chattel mtg, conditional sale agreement (agreement to sell included), hire purchase agreement, etc.

Leases of indefinite terms or more than one year

Does not include, a lease where the leaser is nor regularly leasing goods, etc.

Question 2

After acquired property

Answer 2

any property obtained after the SI was granted can be included as after acquired property

Question 3

when do consumer goods still apply as after acquired property

Answer 3

S 44(1): A SI in after-acquired property attached without specific appropriation by the debtor, unless the after acquired property is consumer goods where:

Those consumer good are not an accession or do not replace the collateral in the security agreement (i.e. a hard drive or replacement of a laptop that is in the security agreement)

The SI in those consumer goods is not a purchase money interest

Question 4

what is the deal with specific appropriation

Answer 4

where a good is specifically set aside for a purpose

This essentially means that consumer goods need to be specifically appropriated to attach to chattel

Question 5

what are the three types of goods

Answer 5

consumer goods: goods the debtor uses primarily for personal use

equipment: goods owned by and used in the course of business

inventory: goods to be sold by a business - a stock that a shop has to sell/anything used by a business that is not the above two

Question 6

case of portable buildings

Answer 6

NDG got a loan from HKSB in exchange for a perfected SI over present and after acquired property. NDG defaults, HKSB argues that portable buildings leased from Portacom were attached to the SI. This meant they could sell them. These leases were for an indefinite period terminable by will

Under s 16, the leases are deemed to create a SI. Therefore, NDG had sufficient rights in the building that were being leased an attached to HKSC’s perfected SI as “after acquired property”

Question 6

SI against thirs parties

Answer 6

the collateral is in the possession of the secured party; and

he debtors has signed a security agreement that contains either;

• An adequate description of the collateral by item or kind that enables the collateral to be identified; or
• A statement that a SI is taken in all of the debtor’s present and after-acquired property; or
• A statement that a SI is taken in all of the debtor’s present and after-acquired property except for specified items or kinds of personal property

Question 7

what is perfection

Answer 7

Perfection provides the greatest amount of protection to a SP under the PPSA. Perfection can be achieved in two ways: possession by the SP or by a registered financing statement.

Question 8

example case of a SI against a third party with a horse

Answer 8

NZ Bloodstock
GM granted a SI to Lock over all present and after acquired property (this was perfected). GM then entered into a lease purchase agreement with NZBS (security agreement) for a horse. GM got into financial difficulties - both parties want the horse.

When GM got possession of the horse from NZBS, s 40(3) applied which attached NZB’s security interest but also implicitly gave GM rights in the horse, and thus Lock could claim their SI extends as it was after acquired property. Locks interest was perfected and NZB’s wasn’t therefore Lock could claim the horse

Question 9

what are the requirements for financing statements

Answer 9

S 142: requirements for financing statements

If the SP or D is an individual, their name and address (incl. DOB for debtor)

If the SP or D is an orgnaisation, name, address, unique number assigned to org. and contact details of person on behalf

A description of the collateral (including serial number if applicable)

Any other data required by regulations

Question 10

motor vehicles - description of collateral

Answer 10

Whether it is plane or vehicle
Year and make and model
Registration number, VIN or CHASSIS

Question 11

what is a seriously mislead errors

Answer 11

Financing statement must be searchable so that a third party interested in the good can search it up and see if it is subject to any SI

Question 12

when is a error seriously misleading

Answer 12

S 150: a financings statement will be seriously misleading if there is a seriously misleading defect, irregularity, omission, or error in;
- The name of the debtor
- The serial number of the collateral where the regulations require it

usually an error at the end of number or name will be alg if it is at start there is an issue

Onus is on the data enterer to get it correct (polymer International)

Question 13

what happens if a buyer or lessee buys an unperfected SI

Answer 13

buyers or lessees of that collateral, for value, will take it free of the SI (s 52)

Question 14

what is the effect of a perfected SI

Answer 14

• The SP’s SI continues in the collateral and extends to its proceeds (s 45)
• The SP takes the collateral over other SP’s who are not perfected (takes priority) (s 66)

Question 15

what is the rule of priority for perfected SI

Answer 15

S 66: if more than one party has a perfected SI over the same collateral - the first in time to register takes priority

Question 16

bulldozer case on seriously misleading errors

Answer 16

Partners finance: PF’s statement was seriously misleading and therefore invalid for perfection. They had classified the bulldozer as “other” when it should have been classified as a serial numbered good/motor vehicle.

Question 17

caravan case on thief obtaining a SI

Answer 17

Grey v Royal Bank of Canada
not yet accepted in NZ but likely will be:

Under nemo dat, since the seller was a thief the sale is not valid. H took mere possession which was enough to constitute “rights in”, therefore the bank’s SI attached. However the banks SI could not be enforced against the true owner

Question 17

Sale of low value consumer goods

Answer 17

A buyer or lessee of consumer goods take them free of any SI if;

• Value is >$2000 at time of attachment
• Buyer or lessee gave new value
• Buyer or lessee had no knowledge of the SI (s 19: actual knowledge, s 20: regardless of financing statement)

Question 18

what are the exceptions to perfection

Answer 18

Section 54: sale of low value consumer goods acquired as consumer goods

Section 45: sale authorised by the SP (expressly or impliedly)

Section 53: sales and leases conducted in the ordinary form of business

Section 55: Sale of incorrectly described serial numbered goods

Question 19

case on sale authorised by the SP

Answer 19

Gibson v Stockco:
- Where the SP is aware of the specific dealing or previous dealings of the same type
- Cannot be first time they did that transaction

Question 20

sale authorised by the SP

Answer 20

A SI will continued in collateral, unless the SP expressly or impliedly authorised the dealing

Impliedly more common: e.g. Deb sells 20 computers to Leonie who is a retailer. Leonie sells the computers on. Did she impliedly authroise the sale knowing she was a retailer

Question 21

sales and leases conducted in the ordinary form of business

Answer 21

A buyer or lessee of goods sold or leased in the ordinary course of seller or lessor’s business, takes the goods free of any perfected SI, unless the buyer knows the sale is breach of the security agreement.

Question 22

Test for sales and leases conducted in the ordinary form of business

Answer 22

Orix
Two step test
1. What is the ordinary course of business
2. Was this sale within that ordinary course of business

Here there was nothing extraordinary about selling a paver as he did that often within his business

Question 23

car salesman case

Answer 23

Estevan
* Estevan had a perfected SI over Dyer’s traded in cars. Dyer is a car dealer who has sold 13 to cars to another dealer and used money to pay another creditor
Outside of normal course of business. No history of selling half of the inventory to another dealer.

Question 24

Sale of incorrectly described serial numbered goods

Answer 24

A buyer or lessee of goods that are acquired as consumer goods or equipment takes them free of a SI perfected by registration, if
- Buyer has no knowledge of SI
- Goods are described by a serial number
Serial number not correctly described in the financing statement

Question 25

Tracing SI

Answer 25

S 45(1)(b): a perfected SI continues in the collateral and extends to the proceeds

S 45(2): the amount secured is limited to the value of the collateral at the date of the dealing that gave rise to the proceeds