A tradie buys a second-hand vehicle
Sparky Jed is starting up on his own, and is shopping for a low-mileage van to get his business moving.
Having seen the perfect vehicle being sold privately for a very reasonable price, he eagerly stumps up the cash.
He’s soon busier than he could have imagined, but work comes to a grinding halt when 3 weeks later his new vehicle is repossessed to pay the previous owner’s outstanding debts.
Jed is out of pocket and seriously inconvenienced, but could have avoided the pitfall had he searched the PPSR before buying the van to see if there were any security interests registered on the vehicle.
A company leases out a vehicle to a retail business
Useful Utes Ltd leases a delivery van to Cater-4-U Ltd for a period of 2 years. Both parties sign the lease. Before delivering the vehicle, Useful Utes registers a financing statement on the PPSR.
Six months later, Cater-4-U gets into financial difficulty and is placed into liquidation.
Useful Utes gets its van back, but those creditors who didn’t register their interests on the PPSR are forced to wait in line, and may only get back a small portion of what they are owed.
A company's interest in goods that are 'commingled'
Developer Sceneview owns land on which it has permission to build a warehouse. It contracts with Projex to build the warehouse. The contract provides that Projex sources the materials needed for the building process. Projex will submit monthly invoices to Sceneview for works and materials, whether the materials are on site or off site.
Sceneview has a security interest, under the contract, in all building materials in the possession of Projex, to secure performance of Projex’s obligations under the warehouse contract.
Sceneview registers that security interest against Projex on the PPSR.
Back at Projex’s yard, it mixes materials to make concrete, which it then pre-fabricates into composite steel–concrete girders for the warehouse. It invoices Sceneview that month for the materials.
A month after the Sceneview contract was signed and after Sceneview had registered on the PPSR, Projex’s bank registered a security interest over all of Projex’s present and after-acquired property to secure the bank’s general lending to Projex.
One year later, Projex is struggling and unable to complete its contract work including the Sceneview contract. The bank places Projex into receivership, with the girders still in its yard.
Because Sceneview registered its security interest on the PPSR, it can claim the value of the Projex materials even though they have been incorporated into the girders.
Sceneview registered before Projex’s bank did, so it takes priority over the bank for the unpaid and invoiced materials.
A company supplied equipment on a 'Retention of title' clause
XYZ Limited supplies security equipment to the home, commercial and the retail markets. XYZ Limited delivered and installed security equipment to the value of $50,000 in a retail store in Auckland. The equipment was supplied under XYZ Limited’s standard terms of trade — that is, the customer would receive an invoice and payment was due by the 20th of the month. Such arrangements are also known as 'Romalpa' or 'Retention of Title' clauses and may fall within the definition of Purchase Money Security Interests (PMSI).
Two days after the equipment was installed, the retail store company was placed into liquidation. Upon learning this information, XYZ Limited sought legal advice in an attempt to recover the goods.
As XYZ Limited had not registered a financing statement on the Personal Property Securities Register (PPSR) in respect of their security interest they became an unsecured creditor. Secured creditors (that is, those that had registered their security interests on the PPSR) were given a higher priority over unsecured creditors in the liquidation.
If XYZ Limited had registered its security interest on the PPSR, they may have been able to recover the goods or money owed in the liquidation.
A company enters a change demand
Motobank specialises in supplying finance to all sectors in the vehicle and automotive industry. It supplies finance to the retail sector to enable retail customers to acquire vehicles on finance terms, when customers are acquiring local or imported vehicles.
Downdown Diggers Ltd wanted to acquire a truck, from an importer Custom Construction Supplies Ltd, using finance on offer from Motobank.
In this scenario Downdown pays a deposit and Custom arranges the import.
Downdown signs a credit application for the balance to be financed by Motobank.
Motobank registered its security interest in the truck on the PPSR in preparation for extending finance to Downdown for the purchase.
However, while Motobank’s finance department was attending to the paperwork, Downdown pulled out of the deal. Downdown’s manager had found a similar product on sale at a lower price elsewhere. The manager decided to forfeit Downdown’s deposit and cancel its order with Custom, so it could take advantage of the cheaper deal.
Six months later, Custom finally finds another buyer for the truck it had imported for Downdown.
However, the new buyer’s financier, Drawfast, does a PPSR search and finds Motobank’s registration still on the PPSR, against the truck’s serial numbers and against Downdown’s name and NZ Business Number.
Drawfast contacts Motobank to query the registration, but cannot seem to find someone who can help them, so Drawfast issues a change demand to Motobank to request that they discharge the registration.