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Security over personal property and the importance of getting registration right

The High Court’s decision in Partners Finance and Lease Limited v Richmond [2019] NZHC 34 serves as a timely reminder to ensure that your registrations on the Personal Property Securities Register are accurate.  Companies and other entities that lease or provide goods and services to customers on consignment or deferred payment arrangements, in particular, should take note.


The case was about a bulldozer, the expensive kind.  Partners Finance and Lease Limited (Partners) loaned money (Westland Hire) for the purchase of the bulldozer.  Partners then registered a financing statement on the Personal Property Securities Register (PPSR).

A few years later Westland Hire agreed to sell the bulldozer to the trustees of the Richmond Business Trust.  The trustees borrowed money from ASB Bank Limited (ASB) to fund the purchase, and ASB took security over the bulldozer.  ASB registered a financing statement on the PPSR.

Partners applied for summary judgment against the trustees and ASB, claiming that Partners was the rightful owner of the bulldozer and requiring ASB to discharge its security interest over the bulldozer.  ASB also applied for summary judgment on Partners’ claim.

Who has priority?

The central issue to be determined by the High Court was whether Partners’ or ASB’s financing statement had priority.  ASB claimed that its registration had priority as Partners’ financing statement was incorrectly registered such that it was ‘seriously misleading’.

‘Seriously misleading’ financing statements

Sections 149 to 152 of the Personal Property Securities Act (1999) (the Act) deal with the validity of registration of financing statements.  The key, in section 149, is that a PPSR registration will be invalid only if it is ‘seriously misleading’.  This is to be objectively determined.

The High Court provided the following guidance:

  • The registration must specify the correct collateral type.  In this case, Partners’ registration was made against 'goods - other' on the basis that the bulldozer had no VIN or chassis number, which is required for a registration against motor vehicles.  The Court looked to the expert evidence and the definitions of ‘motor vehicle’ and ‘chassis number’ in the Act.  It decided that the bulldozer was a motor vehicle and therefore Partners’ registration was made against the wrong collateral type.  It is also worth noting that ASB was not aware of the Partners’ registration, as it had conducted a search of the PPSR under the motor vehicle category only.
  • Every ‘yellow goods item’ will have a unique identification number stamped on it or an attached plate, and it is industry practice to use that as the 'chassis number'.
Final decision and thoughts

The High Court granted ASB summary judgment.

The obvious learning from this case is to ensure that registrations correctly record the asset or collateral that is secured.  Too often we come across incorrect registrations.  Small to medium enterprises often have terms of trade which allow them to register against goods or services supplied by them and which they are yet to receive payment for.  Those rights are worthless unless the registration is correct.  The difficulty is that the responsibility for making the registrations often falls to a person who does not have access to or knowledge of the requirements.  There is a need for wider education on the PPSR.

Interestingly, the High Court did not make mention of the fact that Partners’ registration was out of time to be considered a Purchase Money Security Interest (PMSI).  PMSI registrations apply to goods leased for a term greater than 1 year and have a ‘super priority’ over other registrations.  In this case Partners leased the bulldozer to Westland for a term of 6 years commencing in July 2015, but did not register its financing statement until November 2015.  Presumably the issue was not mentioned as there were no prior registrations made against Westland that would have affected priority. 

Amanda is an Associate in our Commercial Team and can be contacted on 07 958 7451.

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