Month: September 2013

Introduction

The Personal Properties Securities Register (PPSR) is an electronic register which allows a secured party to register the details of property that they have an interest in. For example, if a Bank (the secured party) lends money to a company, the Bank will take a charge over the company’s property, creating a security interest, until the debt is repaid. The Bank will then register its interest on the PPSR which gives notice to other parties that the Bank has an interest against the company’s property.

The purpose of the PPSR is to provide an avenue for individuals or companies who lend money or provide goods on credit to register their interest against the borrowers property as security. Dependent on what the parties agree, the secured party may register an interest against all the borrower’s assets or against specific assets e.g. a laptop, a car or a computer.

It is important to be aware of when the PPSR may be relevant as it acts as a notice board for both secured parties and purchasers (debtors).

Secured parties

Common situations where a security interest will be registered against property is when individuals or companies purchase property on hire purchase, or borrow money to purchase property such as a car. The secured party may register its interest against the car alone, or they may negotiate to register their interest against all of the borrower’s current and future acquired property, which is known as a ‘general security agreement’. A general security agreement most commonly arises when a company borrows from a finance provider and in return the financier will take a charge over all assets currently held by the company, and any future assets that are purchased.

Purchasing property

It is important for consumers to be aware that when they purchase second hand property, a secured party may have a security interest registered against property that relates to money borrowed from the previous owner. Irrespective if the property is bought in good faith and at market value, if a security interest is registered against the property and there is still an outstanding debt, the secured party has the right to repossess the property. For example, if John borrows money from the bank to purchase IT equipment, the bank would take security over the IT equipment until the debt was repaid. If the IT equipment was on sold to Jim and John’s debt was not repaid in full, the Bank would be entitled to repossess the IT equipment from Jim to repay John’s debt.

The PPSR is an imperative tool to notify prospective purchasers of any interests against property they intend to purchase, which may still have money owing, and can be repossessed.

Securing property

In situations where you are a secured party the Personal Property Securities Act 1999 (PPSA), sets out how to register your security interest against the borrowers property. The priority of your interest in the property is determined by the date you register your interest on the PPSR and not that date the parties signed the agreement. When registering your interest (registering your financing statement) you want to ‘perfect’ your interest. Perfecting your interest is the term used to determine whether you followed the right process to give you the first claim to the property, meaning you are the first to be repaid if the borrower defaults. There are two ways to ‘perfect’ your interest; you can ‘perfect by registration’ which gives you first priority if you are the first to register or ‘perfection by possession’. Although the PPSA does not define what actions must be taken for ‘possession’, leaving the property with the debtor after they have defaulted does not constitute possession. Therefore, as a minimum you must be seen to go through the appropriate channels to try and repossess the property.

Exception – PMSI

It is important to note there are exceptions to the ‘perfection’ rule. A common and very important exception to the priority rule is the Purchase Money Security Interest (PMSI). A PMSI is a security interest which gives superior priority over all other interests, even if there has been a financing statement registered against the same property at an earlier date. The requirement to claim a PSMI status will occur where the secured party has loaned funds to the borrower to purchase property, and the funds can be traced to show the property purchased was what the secured party intended to be purchased. This is an important requirement and is why the secured party will often pay the owner of the property directly to ensure the loan funds are used to purchase the agreed property. The second PSMI requirement is for the secured party to register their interest on the PPSR within 10 working days (perfection by registration) from the date the debtor takes possession of the asset (e.g., picks up the new car).

Another common example of a PMSI is where a secured party supplies inventory to their customers and retains ownership of the property until full payment is received. However, in most situations ownership is irrelevant when it comes to the PPSR as ownership will not protect either party if the correct perfection rules have not been adhered to.

If a secured party correctly complies with the registration requirements, a PMSI will take priority over all other security interests, including all interests that were registered prior to the PMSI.

In practical terms, it is important when purchasing second hand goods to check the PPSR register to ensure there are no interests registered against the property and run the risk of the property being repossessed. However, there are strict privacy conditions that determine who can search the register, they are as follows:

• You must have the consent of the individual/company who you are searching;
• The search is required to help you decide whether to lend or invest with the individual or company; or
• The search is required to establish whether there is a security interest over the property you intend to purchase.

You can check the PPSR by going online at www.ppsr.govt.nz or using your mobile phone (TXTB4UBUY).

If you would like further information please contact Laura Monahan on 07 958 7479.

Introduction

The divisive Government Communications Security Bureau Amendment Bill (the Bill) was passed into law after its third reading on 21 August 2013 by a vote of 61 to 59. It amends the Government Communications Security Bureau Act 2003 (the Act), the Inspector-General of Intelligence and Security Act 1996 (IGISA), and the Intelligence and Security Committee Act 1996 (ISCA).

It is currently proposed that the Bill will be divided into three separate amending Bills, each corresponding to their respective Act.

The history of the Government Communications Security Bureau

The New Zealand Government has recognised the need for signals intelligence, technical security, and communications security since the Second World War. However, these services were historically provided for by various agencies such as the New Zealand Defence Force and the New Zealand Security Intelligence Service (NZSIS). It was not until Prime Minister Robert Muldoon approved the formation of the Government Communications Security Bureau (GCSB) in 1977 that these activities were centralised in the GCSB.

In early 2000 it was decided that the GCSB should have a statutory basis similar to the NZSIS and so began an extensive legislative process and public consultation that culminated in the the Act coming into effect on 1 April 2003.

The Government Communications Security Bureau Act 2003

The Act sets out the GCSB’s objective as contributing to the national security of New Zealand by providing the New Zealand Government with foreign intelligence. The external oversight of its activities is set out in the IGISA and ISCA.

The Act essentially provides that the three core functions of the GCSB are information assurance and cyber security; foreign intelligence; and cooperation with and assistance to other entities. It sets out that the GCSB:

• Can gather intelligence through spying on foreigners;
• Cannot spy on New Zealanders to gather intelligence;
• Protects New Zealand Government communications from cyber attack; and
• Assists domestic agencies like the NZSIS, the New Zealand Defence Force and the New Zealand Police (although it does not specify the manner in which it does this)

The Government Communications Security Bureau Amendment Bill

On 15 April 2013, John Key, as Prime Minister and hence Minister responsible for the GCSB, announced the introduction of the Bill, which was seen as an attempt to strengthen the oversight regime of New Zealand’s intelligence community. However, the Bill has been met with significant controversy, with opposition arguing it will have potentially invasive impacts on the New Zealand public.

The three main purposes of the Bill are:

• To provide a clear governing framework for GCSB activities;
• To update this framework to accommodate changes in the security and public environment since the Act; and
• To enhance external oversight mechanisms by strengthening and improving the offices of the Inspector-General of Intelligence and Security (IGIS) and the Parliament’s Intelligence and Security Committee (ISC) functional capabilities.

So, bearing these in mind, what exactly are the amendments the Bill makes to the three acts it purports to amend?

With respect to the Act:

• The GCSB will continue to collect foreign intelligence, and will still be prevented from spying on New Zealanders under this function (as is the case in the Act). However, this protection will only extend to private communications and not to metadata (data logs) or conversations that could reasonably be expected to be interrupted;
• The GCSB will be allowed to assist the NZSIS, the New Zealand Police and the Department of Defence in spying on New Zealanders but only to the extent these agencies are authorised under warrant or statute to do so;
• The GCSB’s cyber security function will be extended from protection of Government communications only to private-sector cyber systems as well, if they are deemed important enough to New Zealand;
• A written reporting requirement on the GCSB to maintain records of warrants and authorisations;
• Certain principles of the Privacy Act 1993 may be modified to allow the GCSB to achieve its functions more effectively and efficiently; and
• An increase in the maximum penalty for unauthorised disclosure of information.

While the main amendments are directed toward the Act, the Bill also affects the IGISA and ISCA.

The IGIS is supposedly a source of independent external oversight that is responsible for examining issues of legality and propriety. Under the Bill the key amendments to the IGISA are:

• The working nature of the IGIS is extended to include regular examination of issues affecting operational activities;
• The IGIS is able to conduct its own independent inquiries;
• IGIS reports will be unclassified (up to a certain point); and
• The pool of potential IGIS candidates extends beyond retired High Court Judges.

The ISC is the parliamentary mechanism of oversight for intelligence agencies and examines efficacy, efficiency, budgetary and policy issues.

Under the Bill the key amendments are:

• The Prime Minister must relinquish the Chair of the ISC if reviewing an intelligence agency they are ministerially responsible for; but can nominate the Deputy Prime Minister or the Attorney-General to act as an alternate chair; and
• Subject to sensitive information restrictions, the ISC will also be required to table its reports in the House and make them publicly available.

The future

In light of the recent intelligence scandal surrounding Kim Dotcom and the media furore created by Edward Snowden’s acknowledgment of the National Security Agency’s use of ‘PRISM’ in the United States, the public has been put on red alert and are generally calling for greater transparency and accountability for intelligence and security services.

The Snowden issue is particularly relevant to New Zealand due to its membership with the ‘Five Eyes’ spying alliance initiative between the United States, Australia, Canada and Britain.

Make of it what you will, whether the Bill achieves its desired status within New Zealand is still unclear. However, what is evident will be the continuing debate and controversy this Bill will stimulate over the coming months, and even years, as the New Zealand public wait with bated breath to see the true effect this Bill will have on their personal privacy.

If you would like further information please contact Laura Monahan on 07 958 7479.