Personal Property Securities: A New Zealand Maritime Law Perspective

• Author: Geoff Brodie
• Position: Barrister, Christchurch, New Zealand. This is an edited version of a paper presented to the 34th Annual Conference of the Maritime Law Association of Australia and New Zealand in Canberra on 28 September 2007
• Pages: 22-30

PERSONAL PROPERTY SECURITIES:

A NEW ZEALAND MARITIME LAW PERSPECTIVE

Geoff Brodie*

Introduction

In the judgment of the majority in Waller v New Zealand Bloodstock Ltd1 there is an interesting observation:

Cautionary cases which Mr Dale’s argument brings to mind include Salomon v A Salomon & Co Ltd

[1897] AC 22, where at levels below the House of Lords there had been a failure to put aside old

learning and to recognise that the provision for separate legal identity of the company (enacted by what

is now s 15 of the Companies Act 1993) must be given literal effect. Likewise, in Frazer v Walker

[1967] NZLR 1069 it was perhaps easier for the fifth member of the Board, Sir Garfield Barwick, to

appreciate Sir Robert Torrens’ concept of registration as the root of title than for the English Law Lords,

to whom the notion that a forged mortgage could by registration deprive a landowner of his title was no

doubt counterintuitive.

The learned President of the Court of Appeal dissented. He would have allowed the appeal. This divergence of

views, and the fact that the majority thought it necessary to philosophise in this way, points to the radical

rethinking of legal concepts which their Honours discerned in the Personal Property Securities Act 1999

(‘PPSA’).

In essence, the judgments represent two conflicting views of the philosophy underlying the giving of security

over personal property. The minority judgment was founded on the premise that, before the legislation came

into force, the facts and documents underpinning this case could not, as a matter of law, have combined to create

a valid and effective security; substantially on the grounds that, because the borrower had no legal interest at all

in the charged property, the lender could not achieve a better position. The majority judgment holds that the

underlying legal position is irrelevant. The statute is a radical reform which creates legal rights and obligations

where none would otherwise exist. The statute significantly alters the former legal position.

In Wa ller a stud by the name of Glenmorgan obtained funding from New Zealand Bloodstock Ltd and New

Zealand Bloodstock Finance Ltd to pay for a $1,000,000 stallion called Generous. The particular financing

instrument held by New Zealand Bloodstock was a document called a lease to buy. On the expiry of the lease

Bloodstock would sell Generous to Glenmorgan at a price equal to the residual value under the agreement.

Under the lease to purchase agreement Bloodstock retained ownership of Generous. Glenmorgan had possession

and was required to make various payments. It did not, however, have the immediate ability to acquire

ownership of Generous. Glenmorgan Ltd had previously charged all of its assets, both existing and future, under

a familiar fixed and floating debenture.

The timing of the events which unfolded is important.

• On 17 November 1999 Glenmorgan granted its fixed and floating debenture to S H Lock charging

all its present and future assets.

• On 19 November 1999 this debenture was registered under the Companies Act 1993 (NZ).

• On 31 August 2001 Glenmorgan entered into the lease to purchase agreement with Bloodstock.

• On 1 May 2002 the PPSA came into force.

• On 1 May 2002 S H Lock Ltd registered a financing statement to perfect its security interest on the

Personal Property Securities Register.

* Barrister, Christchurch, New Zealand. This is an edited version of a paper presented to the 34th Annual Conference of the Maritime Law

Association of Australia and New Zealand in Canberra on 28 September 2007.

1 [2006] 3 NZLR 629, 634, [18] (CA).

(2008) 22 A&NZ Mar LJ 22