KeyBank National Association v The Ship 'Blaze' HC Auckland, CIV 2006-404-2266, 9 February 2007, Baragwanath J

• Author: Aisha Lala
• Position: Aisha Lala is a final year conjoint Bachelor of Science and Bachelor of Laws student at the University of Auckland
• Pages: 183-187

(2007) 21 A & NZ Mar LJ 183

KEYBANK NATIONAL ASSOCIATION v THE SHIP “BLAZE”

Aisha La la *

In KeyBank National Association v the Ship “Blaze,”1 Baragwanath J considered competing securities over the ship

Blaze in the High Court. The mortgagee plaintiff’s security comprised a United States (US) registered mortgage.

The intervener had purchased the vessel from the mortgagor in New Zealand and further protected its title by

registration of a financing statement on the Personal Properties Securities Register (the PPSR).

In determining the paramount claim the Court had to reconcile the Personal Property Securities Act 1999 (PPSA)

with the Ship Registration Act 1992(SRA); both of which provide a framework for security interests to be registered,

but talk past each other in terms of the mechanics for determining the priority of competing interests on the other

register. The SRA provision (s 70) used to give effect to KeyBank’s mortgage was judicially considered for the first

time and illustrated that, due to its wording, the provision will save foreign securities executed over a ship in a

limited set of circumstances.

1 The Fac ts

The Blaze was a 63-foot ocean-going sloop originally built in New Zealand and sold to a US resident (Bishop).

Bishop borrowed money from KeyBank National Association (KeyBank), a US lender, which secured its loan

against the vessel by a US-registered mortgage entered on the United States Coast Guard Ship register.

The Blaze later arrived in New Zealand and mortgage payments to KeyBank ceased. Bishop then attempted to sell

the vessel while berthed at Westhaven marina in Auckland. No action was taken by KeyBank despite knowledge the

vessel was for sale. The Blaze was later purchased by Mr. Walters, who transferred the vessel to his company

Barrington Charters Ltd (the intervener). The intervener registered a financing statement on the PPSR securing its

ownership, followed two days later by KeyBank registering their security interest in the form of a mortgage over the

Blaze on the PPSR.

KeyBank sought an application for summary judgment against the intervener to enforce its US-registered mortgage

over the newly purchased yacht.

2 Ba ckground

The SRA and the PPSA provide for two independent registries whereby security interests can be registered against

ships. The SRA securities regime functions in concert with the process of ship registration. Ships requiring flagging

tend to be those that travel outside New Zealand waters and are typically more than 24 metres in length (hereinafter

referred to as “large ships”). Flagging of the ship itself, and mortgages registered over a ship, are not, however,

confined to ocean-going ships or large ships, and a voluntary system of registration exists under the SRA for ships

less than 24 metres in length (“small ships”). The Blaze is less than 24 metres long.

Section 70 of the SRA is a provision enacted in response to the heavily criticised decision of the New Zealand Court

of Appeal in The Ship “Betty Ott” v General Bills Ltd.2 The provision was designed to recognise foreign mortgages

and afford them the same priority as if they had been created in New Zealand, with respect to other security interests

in the same vessel.

Section 70 of the SRA provides:

* Aisha Lala is a final year conjoint Bachelor of Scienc e and Bachelor of Laws student at the University of Auckland.

1 HC Auckland, CIV 2006-404-2266, 9 February 2007.

2 [1992] 1 NZLR 655 (CA).