Change demand lodged at the PPSR

This was a case seeking maintenance of financing statements on the PPSR following lodgement of a change demand by the debtor that they be removed.

In this case 1, a company (the purchaser) purchased two Lamborghini cars from another company (the vendor) in April this year. The changes of ownership were recorded on 18 and 23 May.

Subsequently, the purchaser became aware that a third company (the third party) had registered financing statements in respect of the two cars. Pursuant to section 162(d) of the Personal Property Securities Act (the PPSA), the purchaser lodged a change demand that the financing statements be removed on the grounds that the third party did not hold a security interest over the cars.

Section 165 of the PPSA provides that the person lodging the demand under s 162 may enter a financing change statement discharging the registration if the secured party fails, within 15 working days after the demand is given, to comply with the demand or to obtain a court order maintaining the registration.

Section 167 provides that at any time before the financing change statement is registered, the court may, on application by the secured party, and if satisfied that none of the grounds for making a demand under section 162 exist, order that the registration be maintained or be discharged or amended.

Accordingly, the lodging of the change demand by the purchaser meant that, unless the third party obtained an urgent court order that the financing statements be maintained, they would be discharged.

The third party elected to seek a court order maintaining the financing statements.

It turned out that the third party had filed the financing statements on the grounds that it had a security interest in both cars that derived from either:

• an alleged oral agreement to provide the third party with an opportunity to purchase either of the cars at a reduced price as a commission fee for brokering an arrangement between the vendor and a third party for the exchange of land for the cars; or
  
  
• an oral agreement in respect of one of the cars between the third party and the vendor. Apparently, the vendor had offered to sell the car for a price that the third party wished to pay in two instalments and the vendor had said that it would consider the instalment payment proposal.

The purchaser asserted that no security interest existed and so issued the demand in reliance on s 162(d) of the PPSA.

The court decided that the first alleged agreement failed for lack of certainty as to the essential term of price and as to the nature of the contractual right of the third party. The second alleged agreement failed on the grounds that no concluded contract had been made.

The court noted that, even if a contract could be shown to exist, it would create personal rights and obligations as between the parties to the agreement, and not a security interest in the property.

The financing statements were discharged.

 

1 Asset Traders Ltd v Favas Sportscar World Ltd, 3 August 2006, High Court Auckland CIV 2006-404-004353

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