A lawyer contact of mine recently sent me a summary of a PPSA New Zealand case (McCloy v Manukau Institute of Technology [2013] NZHC 936) which deals with the issue of perfection by possession.

In this case McCloy was a construction company which had hoists on a building site when receivers were appointed over it. The contract that McCloy had entered into with the building company (Hobson Gardens) strikes me as a little unusual in that it contained a clause that read that in the event of the contract being ended as a result of McCloy’s insolvency, then ownership in the hoists would pass to Hobsons.

Obviously the secured creditor of McCloy objected to losing two pieces of valuable equipment and applied to court for a determination of ownership. Interestingly the Court decided that both parties had a valid security interest. Accordingly the matter hinged upon priority. In this instance, because the bank had no knowledge of this clause in the contract which transfered ownership and it held that Hobson’s method of perfection amounted to seisure, the bank won back its hoists. Seizure in New Zealand, much like the Australian version, does not constitute ‘acquiring possession’ under the PPSA.

When presenting on this topic I always make the point of ensuring the audiance is aware that repossession does not constitute possession as a method of perfection. Repossession (or seizure) is clearly an outcome of an enforcement undertaking rather than a positive step in securing the interest in the first place. This outcome is very similar to the well known ‘Bloodstock’ case involving the repossession of a stallion used for breeding

Always keen to know if these cases will influence Australian decisions… I would think so?


2 thoughts on “Seizure is not possession in PPSA

    • Repossession is a common method used by suppliers to a business. Often done without regard to the PPSA legislation or without any PPSA registrations being in place… Many may soon find themselves being accussed of theft & trespass in the near future

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