United Kingdom Legal Documents


Debt & statutory demands

UK statutory demand and transfer of debt documents (novation agreements).

10

How to recover a debt from a company

Introduction

The COMPANIES ACT 1993 provides a quick procedure for ensuring payment, or at least of knowing if the payment is possible.

First, serve a "statutory demand" on the company

To recover money from a company you must serve a "statutory demand" for the debt. This demand must be in writing and should be served on the debtor company's registered office. The demand must require the company to pay the debt, or to secure the debt or settle it in some way.

The company has 15 working days after being served to comply with the notice.

What if the company disputes the debt?

If the company disputes the debt it has 10 days after being served with the statutory demand to apply to the court to have the demand set aside.

If the company does apply to have it set aside, the Court can decide at that hearing if the company should be liquidated.

What if the company hasn't paid after 15 days?

If the company hasn't paid the debt after 15 days, and it has not disputed the debt, then it is deemed unable to pay its debts, and you can therefore apply to the court for the company to be placed in liquidation.

If the company wishes to defend the liquidation, it has 14 days to file and serve a Statement of Defence.

You must advertise in the local newspaper and in the New Zealand Gazette that liquidation proceedings have been started, including the place, date and time set for the hearing. The advertisement must be published at least seven clear days before the hearing date.

The company can pay the debt any time up until the court hearing. However, costs would be paid to the party applying to place the company in liquidation.

Appointment of a liquidator

If the company's defence of your liquidation application is unsuccessful, or if it does not file a Statement of Defence, the court will appoint a liquidator to take control of the company and to try to satisfy its creditors. The liquidator must ensure that all moneys that are recoverable are in fact recovered and that the payments are made in order of preference (see the Cautionary Notes below).

For more on liquidation, see related article How to liquidate a company.

Order of preference for creditors

If you are attempting to recover a debt from a company, you should know where you are in the order of preference for creditors should the company be liquidated. The order is as follows:

  1. those owed wages, including holiday pay
  2. certain payments to the Inland Revenue Department (for example, PAYE)
  3. secured creditors
  4. unsecured creditors

Note that creditors are paid after the costs of the liquidation have been met.

Cautionary notes
  • It is important to be aware of where you are in the order of preference for payments to creditors. If you are an unsecured creditor, and therefore last on the list, you should consider carefully whether it is worthwhile bringing legal proceedings to liquidate the company; it may be that bringing proceedings would lead to costs greater than the debt you are trying to recover.

How to recover a debt from an individual

First, give notice of the debt

To recover a debt from an individual you must first give the person notice of the debt owed, what it is owed for, and when payment is required. If the person does not pay the debt then you should proceed with court action.

Which court do I apply to recover the debt?

  • If the amount is less than $7,500 and the debtor disputes the debt, you can apply to the Disputes Tribunal (formerly the "Small Claims Tribunal"). The Disputes Tribunal can't be used to collect debts that the debtor doesn't dispute. If both you and the debtor agree, you can take amounts up to $12,000 to the Tribunal. (For the procedure in the Tribunal, see How to make a claim to the Disputes Tribunal.)
  • Larger amounts up to $200,000 go to the District Court, with the right of appeal to the High Court, and after that the right of appeal to the Court of Appeal on a point of law.
  • If the amount is over $200,000, then the initial Court is the High Court, with a right of appeal to the Court of Appeal.

How do I start proceedings in the court?

There are two procedures that can be used to obtain a court judgment for a debt:

  • Standard procedure – This is begun by the creditor filing a Statement of Claim and a Notice of Proceeding. The debtor responds with a Statement of Defence and the case goes to a Court hearing.
  • Summary Judgment – This is a faster and simpler procedure, available when the creditor believes that the debtor has no reasonable defence against the claim. The creditor files the same documents as with the standard procedure, plus an additional application and affidavit.

How much will it cost me to go to court?

Be aware that the costs of court action will include the court filing fees, other costs such as service fees (possibly up to $100), and solicitor's costs.

If you've used the summary judgment procedure and the debtor has not disputed your application, costs between $500 and $1,000 may be awarded by the court, and these will go towards your lawyer's fees when paid by the debtor.

What will I be awarded if the court decides in my favour?

If the judgment is in your favour then the court order will include the following:

  • the original debt
  • interest at either the rate agreed in the terms of trade, or at 7.5 percent (a standard rate set by legislation), or at some other rate that the court decides
  • legal costs and disbursements associated with obtaining the judgment (these will not cover all your expenses)

How do I enforce the judgment if the debtor still doesn't pay?

If the debtor still does not pay after the court has given you a judgment for the debt, you can use the court to enforce payment of the debt. The most common methods of enforcement are:

  • Order for Examination - This is a court order to have the debtor brought before the court Registrar and examined about his or her financial situation. If the Registrar decides the debtor can pay the debt, the Registrar will make an order for payment. Usually the Registrar will try to negotiate an arrangement for payment that suits both parties. The Registrar can also make a number of other enforcement orders (including the ones listed below).
  • Attachment Order - This instructs the debtor's employer to make regular deductions from the debtor's wages or salary (including bonuses and incentive payments). It can also order ACC or Work and Income to make deductions from ACC payments or welfare benefits. An Attachment Order can also be made against commissions and payments received as an independent contractor. An Attachment Order can't be made unless there has first been an Order for Examination
  • Distress Warrant (for personal property) - This authorises a Collections Officer from the court (a "bailiff") to seize goods from the debtor to the value of the debt. The seized goods are held for five days and then sold, usually by public auction.
  • Charging Order and Writ of Sale (for land) - The registration of a charging order puts a stay on the debtor's property, preventing him or her from selling the property until the debt is satisfied; the property can be sold to satisfy the debt by a writ of sale.
Cautionary notes
  • The court procedures for recovering debts are complex, and you may therefore need to obtain legal advice.
  • If you've obtained judgment for the debt, note that you are responsible for pursuing the debt, not the court.
  • Always be aware of the possibility that the individual may in fact be bankrupt or have no assets. In such a case it is best to seek legal advice in order to fully understand what is involved in enforcing the sale of the debtor's property in order to have the debt repaid. A bankruptcy notice and bankruptcy proceedings in the High Court is a separate set of court proceedings against the judgment debtor. The costs for such a court case in the High Court include filing fees, disbursements such as other service fees (which could be up to $150), and solicitor's costs calculated on an hourly basis. The other enforcement steps are also separate proceedings.

How to exercise a creditor's right to repossession

Introduction

In exercising a right of repossession as a creditor you must comply with the requirements set out in the CREDIT (REPOSSESSION) ACT 1997. The Act applies to all "credit agreements", which means hire-purchase agreements and other security instruments, such as chattel mortgages (secured loans) and security interests over motor vehicles.

The Act sets out the procedure for repossession and places restrictions on when and how you can repossess, but it does not in itself grant a right to repossess. Whether or not you have that right will be determined by the agreement itself.

Under the Act, you may not repossess unless:

  • the debtor is in default under the credit agreement, or
  • the goods are at risk of being removed, destroyed or damaged

Creditor must first send a pre-possession notice

Before you can take steps to repossess, you must first send the debtor a "pre-possession notice". This must be in writing; a standard form is set out in Schedule 1 of the CREDIT (REPOSSESSION) ACT 1997. The notice must:

  • state the amount the debtor owes, and
  • give the debtor at least 15 days to pay the amount owed

If you do not follow these requirements:

  • you commit an offence and are liable for a fine of up to $3,000, and
  • the debtor can apply to the court for relief (see related article How to protect a debtor's interest after repossession)

The notice must also be sent to any guarantors of the debt.

It is not necessary to send a pre-possession notice if you are repossessing because the goods are at risk.

When and how must the repossession be carried out?

The repossession must be carried out in a reasonable manner, and only between 6 am and 9 pm, Monday to Saturday. The debtor can, however, consent to the goods being repossessed outside those hours, provided the consent is given after the default in payment has occurred and before you or your agent arrive at the debtor's premises to take the goods.

The following documents must be produced when repossession takes place:

  • The debtor must be given a copy of the pre-possession notice that was served on him or her.
  • If your agent is repossessing the goods, he or she must produce evidence of authority to act as your agent.
  • If the entry is during the prohibited hours, you or your agent must produce the debtor's written consent to this.

What if the debtor isn't home?

If the occupier of the premises isn't home when the entry takes place, you or your agent must leave a notice specifying:

  • that the premises have been entered and the date of entry, and
  • a list of any goods that have been taken

This notice must be accompanied by copies of the documents referred to above.

People who are disqualified from carrying out repossessions

Certain people are disqualified from carrying out repossessions, whether as agents or as the creditor:

  • anyone who has been convicted in the last five years of a crime of violence or dishonesty
  • anyone who has ever been sentenced to a prison term of 10 years or more, or to life imprisonment
  • anyone who has been released from prison within the last year

Anyone who repossesses property in contravention of these restrictions commits an offence and is liable to a fine of up to $10,000.

Post-possession notice

Within 21 days after repossessing, you must send a "post-possession notice" to the debtor and any guarantors. The form for the notice is set out in Schedule 2 of the CREDIT (REPOSSESSION) ACT 1997. The notice states that the debtor is entitled to get back the repossessed property if, within 15 days of receiving the notice, the debtor either:

  • "reinstates", which means to pay everything owed under the credit agreement, plus the costs of repossession and any storage costs, or
  • "settles" the agreement, which means to completely pay off or finish the agreement

The notice must contain your estimate of the value of the goods.

If you don't send a post-possession notice, you are not entitled to recover the costs of repossession from the debtor or the guarantor.

Selling the goods

If the debtor hasn't reinstated or settled within 15 days of the post-possession notice, you may sell or dispose of the goods. You are under a positive duty to make reasonable efforts to obtain the best price.

Within 10 days after selling the goods, you must send the debtor a third notice (a "statement of account"), showing:

  • the amount the goods sold for
  • the costs and expenses of the sale
  • the amount the debtor owed at the date of the sale
  • whether there is money left over from the sale or whether the debtor still owes you money, depending on the amount the goods sold for

If there is money left over from the sale, the debtor has six months to begin court proceedings to recover the money from you.

Cautionary notes
  • Especially if you run a repossession agency, it is important that you obtain advice from a lawyer so that you can ensure that your repossession practice complies with the legal requirements.
  • Note that special rules apply if the repossession takes place 21 days before the debtor is adjudicated bankrupt.

How to recover debt from a bankrupt

Introduction

If a person who owes you money (a debtor) is adjudicated bankrupt under the INSOLVENCY ACT 1967 (see How to undergo bankruptcy ), you will need to work in conjunction with the Official Assignee to attempt to recover the money owed. It is the Official Assignee's role to sell the assets of the bankrupt estate and distribute the proceeds to the bankrupt's creditors.

Lodging your Proof of Debt form

If the bankrupt identifies you as a creditor, you will be notified of the bankruptcy and be sent a report outlining the bankrupt's financial position. (Bankruptcies are also advertised in local newspapers and in the New Zealand Gazette.) If payments are likely to be paid to creditors, a Proof of Debt form will be included with the report for you to complete.

It is in your best interests to complete the form correctly and include documents supporting your claim as soon as possible to avoid any later delays. This is because once the debtor is adjudicated as bankrupt the standard procedures available for recovering debt are prohibited (see How to recover a debt from a company and How to recover a debt from an individual).

If you do not receive the Proof of Debt form you should make the appropriate enquiries with the Insolvency and Trustee Service, which is part of the new Ministry of Economic Development.

What can I claim for?

The Insolvency and Trustee Service will also advise you as to what you may claim for. You may be unable to recover:

  • debts incurred after the date of the bankruptcy
  • interest accrued after the date of bankruptcy
  • legal costs of debt recovery (unless this was provided for in your contract with the debtor)

What rights do I have as a creditor?

You as a creditor have certain rights that you are able to enforce, especially if you are concerned about your position. These are:

  • the right to inspect certain documents relating to the bankruptcy (such as other Proof of Debt forms, the bankrupt's books of account and the minutes of any creditors' meetings)
  • request a creditors' meeting
  • inspect the Official Assignee's trust account for the bankrupt estate of which you are a creditor

In what order are the proceeds of the estate distributed?

Once the bankrupt's estate has been sold, there is an order of priority that the Official Assignee must follow when distributing the funds:

  • the Official Assignee's fees and administration costs
  • costs and expenses incurred by the creditor who petitioned the High Court for the adjudication of bankruptcy
  • wages owing to the bankrupt's employees for the period up to four months immediately before the date of bankruptcy, and holiday pay (but there is a maximum pay-out of $6,000 for each employee)
  • taxes that the Inland Revenue Department collects, such as GST and PAYE
  • unsecured creditors
  • deferred creditors

All the money available for unsecured creditors (if any) is distributed proportionately and the debt is then discharged.

Can I appeal a decision made by the Official Assignee?

As a creditor you have the right to appeal to the High Court against a decision made by the Official Assignee.

Obtaining information on bankruptcies: the National Insolvency Database

The Ministry of Economic Development has established a National Insolvency Database that each office of the Insolvency and Trustees Service has access to. Through this you can search for:

  • the bankrupt's name
  • the bankrupt's address
  • the bankrupt's occupation
  • the date and place of bankruptcy
  • the time and details of the bankrupt being discharged from bankruptcy (there is an automatic discharge after three years, although the bankrupt can seek a court order to be discharged earlier)

You can also access and search this database through the Ministry's website at www.med.govt.nz (Business and Registries Branch).

Cautionary notes
  • A bankrupt is usually discharged after three years but you may lodge an objection to this in the High Court. It is advisable to consult a lawyer, who can advise you as to the likely success of doing this.

How to check the Personal Property Securities Register for money owed on property offered to you for sale

Introduction

The Personal Property Securities Register (PPSR) is an official Internet-based register that you can use to check whether someone such as a finance company has a legal interest in something that you are considering buying, such as a car or computer.

The seller may have bought the property on hire purchase, or borrowed money from a finance company using the property as security for the loan. If the seller stills owes money, you will be able to check for this on the PPSR.

If you find they do owe money, don't buy the item. This is because a creditor who has registered its interest on the PPSR has a legal interest in the property that will (with some exceptions) take priority over your own rights in the property. This means that they can take possession of the property and sell it to recover the debt owed.

The Register is established under the PERSONAL PROPERTY SECURITIES ACT 1999. It is run by the Business and Registries Branch of the Ministry of Economic Development.

What's new and different about the PPSR?

The PPSR began operating on 1 May 2002. There have always been official registers for security interests in personal property, and it's always been desirable for potential buyers to check these registers to find out whether money is owed on the property. But the PPSR is a modern, centralised, electronic register, and is easier for the general public to understand and to access.

The PPSR replaces several different registers that emerged at different times historically and in an uncoordinated way. It was difficult for the ordinary public to know which register they had to check, because this depended on what kind of property it was and on whether the debtor was a company or an individual. It was also often difficult to get access to the register even once you knew which one to check, because it might be a register in a High Court office in a different part of the country.

So if the property was a car and the owner was an individual, the security interest was registered on the separate Motor Vehicle Securities Register. But if the owner was a company, the interest would be registered on the Companies Charges register held at one of the five regional Companies Offices. If it was some other kind of property – say, a boat – then the interest would be registered on the Chattels Register at the High Court if the debtor was an individual, but on the Companies Charges register if the debtor was a company.

By contrast, the Personal Property Securities Register brings all security interests onto a single national register. It also covers some security interests – like hire-purchase agreements – that didn't have to be registered under the old system in order to protect the creditor.

The old registers continued side-by-side with the PPSR for a transitional period from 1 May to 1 November 2002. During that transition you had to check both the PPSR and the old registers.

When am I protected against a registered security interest?

The general rule is that if creditors has a registered security interest, their rights in the property are superior to someone who buys the property from the debtor.

But there are some important exceptions to this that protect ordinary consumers. When those exceptions apply, a person who buys property subject to a registered security interest get full rights in the property. This means that the creditor is not able to force a sale of the property to recover the debt, and must instead pursue other legal remedies against the debtor.

You'll get full ownership despite any registered security interest in the following cases.

  • Buying from dealers
  • - You'll get full ownership if you buy from a dealer, as opposed to a private sale.
  • Consumer goods under $2,000
  • – You will be protected if you bought goods that are normally bought for personal or household use, and that were worth less than $2,000 when the security was taken out.
    Note that this $2,000 limit usually applies to the price that the seller paid for the goods, not the price you paid the seller for the goods. If you paid $1,500 for the goods, but they were worth $2,500 when the seller bought them or took out the loan secured by them, you won't come under this exception; therefore the creditor's interest in the property will take priority over yours.
  • Buying from registered car dealers
  • – You will be protected if you buy a car from a motor vehicle trader who is registered with the Ministry of Economic Development.

In other words, you won't be protected from a registered security interest when you:

  • buy non-consumer goods (say, a printing press) in a private sale, or
  • buy consumer goods (say, a home computer) in a private sale, if the goods were worth more than $2,000 when the seller originally bought them or used them to take out a loan

So how do I check the PPSR?

You can either check the official register yourself, for a small fee, or you can pay for a private agency to check the register for you.

Checking the register yourself

The PPSR can be checked on-line at www.ppsr.govt.nz, 24 hours a day, seven days a week. You can check it from your own computer if you have access to the Internet. It's also expected that the public will be able to access it from computers available in places such as Courts, Government departments and libraries.

You can search for a security interest either by the name of the person selling you the property (that is, the person who would owe the debt to the interest-holder), or by details of the property itself, such as a car's registration or chassis number.

It costs $1 to search each time. You can pay this on-line using a credit card. Alternatively you can set up an account and be billed later. It won't cost anything to set up the account.

Are there private agencies that will search for security interests for me?

In some cases it may be easier and more convenient for you to pay for a private agency to search for registered security interests for you. Perhaps you don't have and can't get a credit card, or you don't think it's worth starting an account for the PPSR if you're unlikely to be using it again for a long time.

A private agency that is often used to check for registered security interests in motor vehicles is "Autocheck", which is listed in the phonebook. It covers cars, trucks, motorcycles, tractors, trailers and other vehicles. You'll need to give the registration and chassis numbers on the vehicle; make sure you give the ones imprinted on the vehicle itself, not the ones given on the ownership papers. If Autocheck tells you the vehicle has no registered security interest you'll be safe to buy until 9.00 am the next day. If you intend to buy it after that time, you should check with Autocheck again to make sure no security has been registered in the meantime.

It seems that there's currently no private phone service that provides easy and convenient checking of registered interests in property other than vehicles. You will probably be able to find legal search agents who can check for you if you look in the Yellow Pages under "Legal Agents". But it's likely to be cheaper for you to learn how to check the PPSR yourself in these cases.

Cautionary notes
  • Checking the Personal Property Securities Register will not tell you whether the property you're considering buying has been stolen. If you suspect it has been stolen, you'll need to check with the Police.

How to register your security interest on the Personal Property Securities Register if you're a creditor

Introduction

If your business gives credit, the Personal Property Securities Register (PPSR) affects you. It also affects you if you lend money and take an interest in an item of the borrower's personal property as security for the loan. In both those situations you have a "security interest" in personal property: you'll therefore need to understand how to use the PPSR and how registering your security interest will protect you.

Having a system of official registration of security interests is not new. What was new about the PPSR system when it was introduced in 2002 was that it created a single, centralised and much more accessible register for security interests over personal property (basically all property other than land). The PPSR replaced an outdated and uncoordinated system involving several different registers.

If you had security interests in personal property that were registered on the old system of registers, you had to reregister them on the PPSR in order to continue to get the protection of official registration. And any new security interests that you took had to be registered on the PPSR in order to be protected.

Further, the PPSR covers some types of security interest – such as hire-purchase agreements – that didn't have to be registered under the old system in order to be protected.

The PPSR is established under the PERSONAL PROPERTY SECURITIES ACT 1999. The Register is run by the Business and Registries Branch of the Ministry of Economic Development.

When did the PPSR take effect?

New security interests were able to be registered on the PPSR from 1 May 2002, and the old registers no longer operated after that date. But there was a transition period to 1 November 2002; the PPSR did not fully replace the old registers until then. This transition is explained in detail below.

Adapting to the PPSR: What to do?

As a creditor, you should consider which of your existing security interests, and which future interests, you should register on the PPSR in order to be protected against other creditors and people who buy from the debtor.

You should also review your business documents to make sure that you are collecting all the information you need to register on the PPSR. For example, you should be recording each debtor's full name and date of birth.

How does registering my interest protect me?

Registering your interest on the PPSR gives it priority if the debtor later uses the same property as security for a loan from another creditor. Your registered interest has priority over other interests that are registered after your own registration date, and also over any unregistered interests, whenever they were created. If you have priority over another creditor's interest, that means they will have to wait in line behind you to recover their money from any sale of the property.

However, there is an exception for an interest called a "purchase money security interest", which has priority over other registered interests: see below, "Special status for ‘purchase money security interest' (PMSI)".

In general, if your interest is registered, you will also be protected if the debtor sells the property to a third party. In those cases you will still be able to require the property to be sold so that you can recover the money owed to you, regardless of the fact that the debtor has sold it on to someone else. But there are some important exceptions to this that protect ordinary consumers: see below, "When does registration not protect me against people buying from the debtor?".

What if I don't register my interest?

If you don't register your security interest, another creditor with a registered interest in the same property will have priority over yours, even if their interest was registered after your unregistered interest was created.

When does registration not protect me against people buying from the debtor?

The general rule is that if you have a registered security interest, your rights are superior to someone who buys the property from the debtor. But there are some exceptions to this rule that protect ordinary consumers, and in these situations a person who buys property subject to a registered security interest gets full rights in the property. This means that you won't be able to force a sale of the property to recover the debt, and must instead pursue other legal remedies against the debtor.

A third-party buyer gets full ownership, despite any registered security interest, in any of the following cases:

  • Buying from a dealer
  • – Third parties get full ownership if they buy the goods from a dealer, rather than in a private sale.
  • Consumer goods under $2,000
  • – Third parties are protected if they buy goods that are normally bought for personal or household use, and that were worth less than $2,000 when the security was taken out. Note that this $2,000 limit usually applies to the price at which you sold the goods to the debtor or to the value of the goods when the debtor took out the loan from you (as the case may be), and not the price at which the third party bought the goods from the debtor.
  • Buying from registered car dealers
  • – Third parties are protected if they buy a car from a motor vehicle trader who is registered with the Ministry of Economic Development.

In other words, third parties won't be protected from a registered security interest when they:

  • buy non-consumer goods (say, a printing press) in a private sale, or
  • buy consumer goods in a private sale, if the goods were worth more than $2,000 when the debtor originally bought them or used them as security for the loan

Special status for "purchase money security interest" (PMSI)

There is a special rule that gives priority to a registered "purchase money security interest" over other types of registered security interests. You hold a "purchase money security interest" (PMSI) in property if you provide credit to the debtor so that the debtor can buy the property. So if you sell property to a buyer under a hire-purchase agreement, and you (not a finance company) are the lender, then your registered security interest will take priority over other kinds of registered security interests, regardless of when they were registered.

What security interests does the new system cover that weren't covered under the old?

Under the PPSR system, a "security interest" in an item of property means any interest created by a transaction that, in substance, secures payment or performance of an obligation. Unlike the previous system, the particular technical form of the transaction is not important – it's the substance that matters. This definition covers all the security interests that were covered under the old law, and some new ones, such as hire-purchase agreements and "reservation of title" clauses (see "How to be aware of your rights under a -Romalpa' clause (-reservation of title')"

Under the old system, there were a number of technical distinctions that are now irrelevant. For example, previously a business that sold goods on credit could choose between

  • selling the goods outright to the debtor, and taking a mortgage (a "chattel mortgage") on the goods, or
  • supplying the goods to the buyer under an agreement (a "conditional sale") that kept full ownership with the seller until the buyer paid the full price (for example, a hire-purchase agreement)

If the business chose the first option it would have to register its interest on the High Court Chattels Register in order to protect itself. But if it chose the second, it wouldn't have to register its interest, because under a "conditional sale" such as this the buyer couldn't legally sell or deal with the goods in any case, and so the seller would be protected without having to register its interest.

By contrast, the new PPSR system says that this distinction doesn't matter anymore - a hire-purchase agreement is essentially the same as an outright sale with a mortgage, and therefore both should be subject to the same laws as to registration and status. This means that if your business sells goods with "reservation of title" clauses or under hire-purchase agreements (and you supply the finance), you must now register your security interest on the PPSR to be protected.

How does the new PPSR system differ from the old registers?

The PPSR replaced several old registers. These were not co-ordinated and were often difficult for ordinary members of the public to find their way around. These were:

  • the Motor Vehicle Securities Register
  • the Chattels Registers at High Court registries
  • the Companies Charges registers at regional Companies Offices
  • the Industrial and Provident Societies Charges register

Which register a security interest would be on depended on several factors:

  • the technical form of the transaction that created the security interest
  • the kind of property it was
  • whether the person who owned the property was a company or an individual

So if the property was a car, the security interest was registered on the separate Motor Vehicle Securities Register - but not if the owner was a company, in which case the interest would be registered on the Companies Charges register held at one of the five regional Companies Offices. If it was some other kind of property - say, a boat – then the interest would be registered on the Chattels Register at the High Court if the debtor was an individual, but on the Companies Charges register if the debtor was a company.

There was a transition period from 1 May to 1 November 2002, during which the PPSR co-existed with the old registers. Since 1 November 2002, there has been only one register to check - the PPSR.

The 2002 transition period

The old system of registers and the PPSR existed side-by-side for a six-month transition period from 1 May to 1 November 2002. This gave time to reregister any existing interests that people had on the old registers. The Ministry of Economic Development chose not to simply transfer the old registration information, because the PPSR requires more detailed information than the old registers. You must therefore actively reregister.

If you reregistered during the transition you retained the date of registration on the old register as the priority date for your interest as against other creditors.

During the transition period you could also register existing security interests – such as hire-purchase agreements – that didn't have to be registered under the old system. Similarly, registering these interests on the PPSR during the transition meant that you retained the date on which the interest was created as the priority date for that interest.

But during the transition period people could also register new interests on the PPSR. What this meant is that a potential buyer of the property had to search both the PPSR and the old registers during the transition. For example, if you were buying a car privately and wanted to check that no money is owed on it, you had to check the old Motor Vehicle Securities Register, the Companies Charges register and the PPSR.

It wasn't until after the transition period, from 1 November 2002, that as a creditor you could be certain that there was not some security interest that could have priority over a new interest that you registered on the PPSR during the transition period. This is because an old registered interest or an unregistered interest could be registered on the PPSR at any time up to 1 November 2002, and its priority date was then the date of the original registration or, if it was never registered, its creation date.

From 1 November 2002, holders of old registered or unregistered interests could still register them on the PPSR, but their priority date was not backdated, and was instead the actual date of registration on the PPSR.

How is the PPSR accessed?

The Personal Property Securities Register is a centralised electronic register that is available to the public over the Internet. It is accessed on-line at www.ppsr.govt.nz, and is available 24 hours a day, seven days a week. You can check it from your own computer if you have access to the Internet. It's also expected that the public will be able to access it from computers available in places such as Courts, Government departments and libraries.

The PPSR cannot be accessed in any other way: there is no alternative paper system that can be accessed at a Government office.

How do I register security interests on the PPSR?

To do this, you'll need to register a "financing statement" on the PPSR containing basic details about yourself, the debtor and the property. You must do this on-line. The Ministry of Economic Development will not accept any paper documents.

In general, you'll have to provide the following information:

  • the debtor's name, date of birth and address, if it's an individual
  • if the debtor is an organisation, its name, and the name and address of a person acting for it, and the unique number the organisation received when it incorporated as a company or incorporated society
  • your name and address, if you're an individual
  • if you're an organisation, your name, and the name and address of a person acting for your organisation
  • your email address and fax number
  • the category that the property falls into, a description of the property if the category requires this, and a serial number in the case of vehicles and aircraft

The system distinguishes between different types of property (the property is called "collateral"). You'll have to select the category to which the property belongs, and the Register will ask for different types of information depending on the particular category.

Once you've registered the financing statement, the Register will automatically email you (and the debtor, if you provided an email address for the debtor) with a verification statement, confirming the registration.

How much will it cost to register an interest on the PPSR?

It costs $3 (including GST) to register a new "financing statement" for a security interest on the PPSR.

Users of the PPSR can pay fees either by credit card or by opening an account.

How long does registration last for?

Registration lasts for five years. You can renew the registration of a security interest for another five years for a further fee of $5 (including GST).

What if I need to use the PPSR frequently?

Large organisations that use the PPSR frequently can choose to use a "host-to-host" (or "business-to-business") connection with the Register. This means that their "financing statements" that they register on the PPSR can be formatted on their own computer system, and then simply transferred to the Register.

Does the security agreement creating my security interest have to be in writing?

A spoken agreement is valid as between you and the debtor in creating your security interest in the property. But for registration of this interest to provide protection against other creditors and third-party buyers either

  • the agreement must be in writing, or
  • you must have possession of the property

In other words, if the agreement creating the security interest was merely a spoken one, you won't be protected against third parties when the debtors sells the goods or uses them for further security, unless you still have possession of the goods.

How do I enforce my registered security against a debtor who defaults on the loan?

The PERSONAL PROPERTY SECURITIES ACT 1999 sets out how you go about enforcing your registered security interest against the debtor. These procedures don't apply to consumer goods – that is, things used or acquired mainly for personal or household purposes. Consumer goods are covered instead by the CREDIT (REPOSSESSION) ACT 1997, for which see "How to exercise a creditor's right to repossession.

In cases other than consumer goods, if debtors "default" in their obligations to you, and your registered interest has priority over all other third parties, you can either:

  • take possession of the property and sell it, or
  • take the property as satisfaction of the debt or obligation that it secured

A debtor "defaults" if:

  • the debtor fails to pay the debt or perform the obligation when he or she was required to under the agreement that created the security interest, or
  • an event occurs that, under the security agreement, gives you the right to enforce the security

You must notify the debtor and other interested parties before you sell the property. You have a duty to get the best price that is reasonably obtainable.

After the sale you must account for the proceeds of the sale, and distribute any surplus to other creditors and then the debtor. If there's any dispute over who's entitled to the money, you must pay it into Court, where it will be held until the dispute is resolved.

The debtor's right to redeem the property or reinstate the security agreement

If you've repossessed the property but not sold it, the debtor has the right to obtain the property from you by paying you the full amount owing under the debt, along with your repossession costs and other reasonable costs. Other creditors can also redeem the property from you in this way, but the debtor's right to redeem takes priority over theirs.

The debtor can also reinstate the agreement that created your original interest by paying you the arrears owed on the debt and your reasonable costs, and remedying any other relevant default.

NZ$26.40

Transfer the right to receive a debt repayment from creditor to his transferee.

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Transfer a debt obligation from one party to another with the creditor's permission, for example when restructuring debt or when selling a business and its obligations.

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Serve a statutory demand against a company or limited liability partnership (LLP) using this collection of documents

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Serve a statutory demand against an individual or a business partnership using this collection of documents.

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