Wednesday, May 11, 2011 - Posted by Philip Harvey
An example of PPSR in action in New Zealand which is similar to the Australian legislation commencing in October 2011.
SEGARD MASUREL (NZ) LTD V NICOL & ORS HC AK CIV 2007-404-003603 
Wool was delivered on 5 September 2006 in three batches under 3 different invoices. Payment was not made at the time of delivery. Segard made inquiry the following day as to the reason why payment had not been made and was advised by the Financial Controller of Feltex, that payment had been temporarily delayed as the ANZ Bank in Australia would not authorise any payments at that time. He was given an assurance that payment would be made by Feltex as soon as possible
Several days later, payment had still not been made. Feltex was contacted and a "personal guarantee" was provided by the head wool purchaser of Feltex that Feltex would not touch the wool delivered by the Segard and would keep it separate from the rest of the wool in storage until payment had been made. Segard felt reassured and it had influenced them not to take steps to repossess the wool immediately. In addition, payment was received from Feltex on 15 September 2006 in respect of the wool that had also been delivered on 5 September (another of the batches).
Feltex had been placed in receivership by ANZ National Bank Ltd and Australia and New Zealand Banking Group Ltd who held a debenture over all of Feltex's assets. Both had registered financing statements on the Personal Properties Securities Register under the PPS Act in respect of the security interest created by the composite debenture.
The Receivers refused to return the wool to Segard despite demands and application was made for summary Judgment in the District Court. The value of the wool was $180,000 (NZD).
In Segard submission they emphasised the trading terms of Cash on Delivery. Invoices would normally be issued for the wool up to one week before it was to be delivered. Payment was then generally made by Feltex on the same day as the delivery. Generally payment was actually made 1-3 days later.
The District court ruled against Segard with the judge stating "by tacit agreement or actual agreement credit was effectively given to the company". The Judge had difficulty with the appellant's proposition that notwithstanding what had occurred, on the facts, the payment of cash on delivery remained the effective intention of the parties. The district court judge then looked at if title had not passed there would have been a conditional sale creating an interest under the PPSA (NZ). As Segard had not registered its interest under the PPSA it came behind the registered interest of ANZ.
In appealing to the Supreme Court, the Judge found;
- The course of dealing between the parties shows that the appellant apparently did not usually insist on concurrent payment, and it did not do so on this occasion.
- When the Segard did not insist on payment on the date of delivery of the wool, it effectively demonstrated an intention to grant credit if the goods were delivered, without requiring payment.
- Upheld the District Courts ruling that the conditional sal created an interest under the PPSA (NZ) and Segard should have registered its interest.
The cost of registering interest in the PPSA in New Zealand is approximately $3.00 The loss before court costs & solicitors costs to Segard as a result of not registering their interest was $180k (NZD).