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Toomey, Elizabeth --- "It's not yours, it's mine! The security interest holder, the mortgagee, and fixtures - a powerful cocktail" [2010] OtaLawRw 8; (2010) 12 Otago Law Review 369

Last Updated: 25 February 2012

^{It’s Not Yours, It’s Mine!}

The Security Interest Holder, the Mortgagee, and Fixtures

A Powerful Cocktail

Elizabeth Toomey*

1. Introduction

The holder of a security interest under the Personal Property Securities Act 1999 (the “NZPPSA”) watches warily in times of recession. The reason for this angst is best illustrated with the following example.

A developer of a large-scale residential complex begins a two-to-three year project at a time when the economy is strong. Burdened with an extensive registered mortgage over his project land, he or she wastes no time marketing the product. A typical advertisement might read:

Prestigious development: river outlook; huge apartment; state-of-the- art kitchen with fully integrated top model appliances; bathrooms with Gaggenau fittings; luxurious carpets throughout; music system; electronic blinds; air-conditioning throughout; 4 heat pumps; gas fires; electronic garage door; alarm system..... Don’t waste this wonderful opportunity. Apartments selling fast...

Shortly after the completion of the project, the developer is caught in an unplanned economic downturn, and dreams turn to dust as sales targets are not met and mortgage payments become an impossible burden. Eventually the developer faces financial ruin. The affected security interest holders have been diligent; and their interests, that protect many of the items listed in the early advertisements, have been perfected by registration under the NZPPSA. Nonetheless, the registered mortgagee seeks to protect its investment; and begins the process of exercising its power of sale pursuant to the Property Law Act 2007.¹ Not surprisingly, the mortgagee points to the advertisement which, to the “Clapham bus” purchaser, suggests that the apartment package includes the very items the security interest holders have perfected. Two statutes

- the NZPPSA and the Land Transfer Act 1952 (the “LTA”) collide; and a circuitous argument ensues over whether or not the security interests are fixtures.

This paper explores a pragmatic solution.

* Associate Professor, School of Law, University of Canterbury. The writer acknowledges the valuable comments of Associate Professor Richard Scragg, School of Law, University of Canterbury; Robyn Merrett, Lecturer, School of Law, University of Canterbury; John Goddard, undergraduate Law (Hons) student, University of Canterbury; and Georgina Toomey, undergraduate Law (Hons) student, University of Auckland.

^{1 Property Law Act 2007, ss176-186.}

^{II. The NZPPSA}

The NZPPSA, New Zealand’s principal statute governing security over personal property, has been described as a “complicated, provocative, and yet fascinating scramble of legislation”;² or, alternatively, as “an incomplete and to some extent imperfect document.”³ Based on Article

9 of the United States’ Uniform Commercial Code (the “USUCC”), it is almost identical to the Saskatchewan Personal Property Security Act,⁴ the provisions of which are similar to the corresponding statutes of other Western Canadian provinces. The one significant difference forms the basis of this article. The NZPPSA does not provide any priority to the holder of a perfected security interest in fixtures.⁵

This paper questions whether this omission was a mistake; and examines how the NZPPSA would work if fixture provisions had, in fact, been included. It then explores a better option.

(i) The Scope of the Act

The NZPPSA applies only to personal property. One or more security interests must have been created in that personal property; and s 23 further limits the Act’s scope in a number of situations.⁶

“Personal property” is defined in the NZPPSA as including:⁷

chattel paper, documents of title, goods, intangibles, investment securities, money and negotiable instruments.

^{This definition has been described as “exhaustive”,8 on the ground that}

^{the definition of “intangible”:9}

means personal property other than chattel paper, a document of title, goods, an investment security, money, or a negotiable instrument.¹⁰

“Goods” are defined as:¹¹

(a) ... tangible personal property; and

² L Widdup and L Mayne “Personal Property Securities Act: A Conceptual Approach” (revised ed, LexisNexis Butterworths, Wellington, 2002) at [1.6].

^{3 J Ziegel “Canadian Perspectives on the New Zealand Chattel Securities}

^{Act” (2001) 7 NZBLQR 118 at 125.}

^{4 Personal Property Security Act 1993, c P-6,SS, 1993.}

^{5 The corresponding Canadian statutes provide that a security interest in}

^{goods that attaches before or at the time when the goods become fixtures}

^{has priority with respect to the goods over a claim to the goods made}

^{by the person with an interest in land. See, for instance, Saskatchewan’s}

^{Personal Property Security Act 1993, P 6.2.SS, s 36(3).}

^{6 For a full discussion, see New Zealand Law Society Seminar, “PPSA- a}

^{review four years on” ( October 2006), Part 2.}

^{7 Personal Property Securities Act 1999 (NZ), s 16 (1).}

^{8 The New Zealand Law Society Seminar, above n 6, at 4.}

^{9 Personal Property Securities Act 1999 (NZ), s 16 (1).}

^{10 The NZPPSA cites trademarks, patents and copyright as examples.}

^{11 Personal Property Securities Act 1999 (NZ), s 16 (1).}

(b) includes crops, the unborn young of animals, trees that have been severed and petroleum or minerals that have been extracted;

^but

(c) does not include chattel paper, a document of title, a negotiable instrument, an investment security, or money,

To resolve the resulting circularity in the definitions, it has been suggested that “personal property” when used in the definition of “intangible” or “goods” should be interpreted as bearing its common law meaning; and the common law draws a distinction between personal property and real property.¹² While the NZPPSA does not specifically state that personal property is any property other than land, or an interest in land, ¹³ this is the accepted position.

“Security interest” as defined in s 17(1):¹⁴

(a) Means an interest in personal property created or provided for by a transaction that in substance secures payment or performance of an obligation, without regard to –

(i) The form of the transaction; and

(ii) The identity of the person whose has title to the collateral;

^and

(b) Includes an interest created or provided for by a transfer of an account receivable or chattel paper, a lease for a term of more than

1 year, and a commer cial consignment (whether or not the transfer, lease, or consignment secures payment or performance of an obligation).

(ii) The NZPPSA’s Registration and Priority System

The NZPPSA does not protect a security interest that attaches to personal property when that property becomes a fixture. It is useful to assess the protection the statute does provide, especially with respect to priorities, before that change occurs. The concept of NZPPSA’s discrete registration system underpins the solution posited in this paper.

^{The NZPPSA establishes the Personal Property Securities Register}

^{(the “NZPPSR”).15 This is a centralised, electronic register available for}

¹² The New Zealand Law Society Seminar, above n 6, at 4.

^{13 It is noted in L Widdup and L Mayne “Personal Property Securities Act:}

^{A Conceptual Approach” above n 2, that this lack of specificity should}

^{not be confused with s 23(e)(i) of the Act which, although it excludes}

^{the creation or transfer of an interest in land from the scope of the Act,}

^{does not clarify that personal property is any property other than land.}

^{However, another school of thought deems s 23(e)(i) a definitive statement}

^{that the Act does not apply to real property.}

^{14 Personal Property Securities Act 1999 (NZ), s 17 (1)(a). Subject to the}

^{limited exceptions in s 23, a transaction that is so described falls within}

^{the scope of the Act.}

^{15 Personal Property Securities Act 1999, s 139.}

registrations and searching¹⁶ at any time.

A person may register a financing statement.¹⁷ This statement contains information about the debtor; the secured party;¹⁸ the collateral to which the security interest relates; the date of prior registration if any; and any other data required by the Act or the regulations (the Personal Property Securities Regulations 2001).¹⁹ A financing statement may be registered before or after a security agreement has been made; or before or after a security interest has attached.²⁰ Except as otherwise provided in the Act or regulations, a registration of a financing statement is effective until the earlier of the expiration of the term specified in it, or the expiration of five years from the date on which and at the time at which it was registered.²¹

A registration can be renewed by registering a financing change statement at any time during the period that the registration is effective.²² Debtors can require secured parties to represent correctly security interests on the NZPPSR. They are able to lodge change demands to amend the details of a financing statement; or to discharge it. ²³

One of the fundamental differences between the NZPPSA and its predecessors is that the NZPPSA removes title from priority considerations.²⁴ Key concepts of the NZPPSA are “attachment” and “perfection”. Attachment occurs when the security interest attaches to the personal property that the debtor provides to the secured party as collateral.²⁵ A security agreement may provide for security interests in after-acquired property; and, subject to an exception, such a security interest will attach without specific appropriation by the debtor.²⁶ A security interest is perfected when it has attached and either a financing statement has been registered in respect of it, or the secured party has possession of the collateral except where possession is the result of

¹⁶ The PPSR may only be searched by people authorised to do so under the

^{Act: Personal Property Securities Act 1999,s 173.}

^{17 Personal Property Securities Act 1999, s 141.}

^{18 A secured party means a person who holds a security for the person’s}

^{own benefit or for the benefit of another person; and includes a trustee}

^{where the holders of the obligations issued, guaranteed or provided for}

^{under a security agreement are represented by a trustee as the holder of}

^{the security interest: Personal Property Securities Act 1999, s 16.}

^{19 Personal Property Securities Act 1999, s 142.}

^{20 Personal Property Securities Act 1999, s 146.}

^{21 Personal Property Securities Act 1999, s 153.}

^{22 Personal Property Securities Act 1999, s 154.}

^{23 Personal Property Securities Act 1999, ss 162, 163.}

^{24 Personal Property Securities Act 1999, s 17(1)(a)(ii) above; and s 24 that}

^{states that the fact that the secured party has title to the collateral rather}

^{than the debtor does not affect the Act’s application.}

^{25 Personal Property Securities Act 1999, s 40; and Part 4.}

^{26 Personal Property Securities Act 1999, ss43 and 44. Section 44 excepts}

^{consumer goods where those goods are not an accession (see below for}

^{commentary on accessions) or do not replace the collateral described in}

^{the security agreement; or where the security interest in those consumer}

^{goods is not a purchase money security interest.}

seizure or repossession.²⁷

A significant part of the NZPPSA relates to rules of priority.²⁸ In summary, the rules comprise the following. A perfected security interest has priority over an unperfected security interest in the same collateral (s 66(a)). Where there are two perfected security interests in the same collateral (where perfection has been continuous) priority is determined by the order in which the following first occurs in relation to the particular security interest: the registration of the financing statement; the secured party taking possession of the collateral (again, except where possession is a result of seizure or repossession); the temporary perfection of the security interest in accordance with the Act (s 66(b)). The priority between two unperfected security interests in the same collateral is determined by their order of attachment (s 66(c)).

There are a number of exceptions to the priority rule in s 66(b).²⁹ The most important of these is the perfected purchase money security interest that, provided perfection is achieved within certain prescribed time frames, takes priority over all other security interests.³⁰

The essential factor is the time at which registration occurs, possession has been taken, or where temporary perfection has occurred.³¹

(iii) Accessions

Accessions means goods that are installed in, or affixed to, other goods.³²

^{A security interest in goods that become an accession continues in that}

^accession.33

The basic rule with respect to priority of accessions is set out in s 79 of the NZPPSA:

Except as otherwise provided in this Act, a security interest in goods that is attached at the time when goods become an accession has priority over a claim to the goods as an accession by a person with an interest in the whole.

The exceptions to this rule are found in s 80 of the Act. When the security interest in the goods has not been perfected when the goods become an accession, the following people have priority over a person

²⁷ Personal Property Securities Act 1999, s 41; and Part 4.

^{28 Personal Property Securities Act 1999, Parts 7 and 8 (ss 66-103).}

^{29 These are discussed in detail, “PPSA – a review four years on” above n}

^{6, at ch 6.}

^{30 Personal Property Securities Act 1999, ss 73-75. These sections apply only}

^{to the priority between a purchase money security interest and a security}

^{interest which is not a purchase money security interest. When both the}

^{security interests are purchase money security interests, s 76 determines}

^{the priority; and, if s 76 does not apply and neither of the purchase money}

^{security interests is a purchase money security interest of a seller, lessor}

^{or consignor of the goods, s 77 provides that s 66 will apply.}

^{31 See discussion in, “PPSA – a review four years on” above n 6, at ch 6.}

^{32 Personal Property Securities Act 1999, s 16(1).}

^{33 Personal Property Securities Act 1999, s 78.}

with a security interest in an accession: a person who acquires for value an interest in the whole;³⁴ an assignee for value of a person with an interest in the whole;³⁵ a person with a perfected security interest in the whole who makes an advance under a security agreement relating to the security interest but only to the extent of the advance;³⁶ and a person with a perfected security interest in the whole who acquires the right to retain the whole in satisfaction of the obligation secured.³⁷

Pursuant to s 81 of the NZPPSA, a security interest in goods that attaches after the goods become an accession is subordinate to the interest of the following people:

(a) A person who has an interest in other goods at the time when the goods become an accession and who–

(i) Has not consented to the security interest in the accession;

^and

(ii) Has not disclaimed an interest in the accession; and

(iii) Has not entered into an agreement under which another person is entitled to remove the accession; and

(iv) Is otherwise entitled to prevent the debtor from removing the accession; or

(b) A person who acquires an interest in the whole after the goods become an accession, but before the security interest in the accession is perfected.³⁸

(iv) Enforcement of Security Interests

The enforcement of security interests is set out in Part 9 of the NZPPSA. Part 9 does not apply to: security interests in consumer goods to which the Credit (Repossession) Act 1997 applies;³⁹ deemed security interests;⁴⁰or receivers.⁴¹ Many of the provisions in Part 9 can be contracted out of;⁴² and some grant rights to the secured party with priority over all other secured parties.⁴³

³⁴ Personal Property Securities Act 1999, s 80(a).

^{35 Personal Property Securities Act 1999, s 80(b).}

^{36 Personal Property Securities Act 1999, s 80(c).}

^{37 Personal Property Securities Act 1999, s 80(d).}

^{38 The rules relating to commingled goods fall outside the ambit of this}

^paper.

^{39 Personal Property Securities Act 1999, s 105(a).}

^{40 Personal Property Securities Act 1999, s 105(b).}

^{41 Personal Property Securities Act 1999, s 106. Receivers’ powers and duties}

^{are governed by the Receiverships Act 1993.}

^{42 Personal Property Securities Act 1999, s 107.}

^{43 See, for instance, the ability to apply certain collateral in satisfaction of}

^{the secured obligation (s 108); the ability to take possession of and sell}

^{collateral (s 109); and the ability to take possession of collateral by taking}

^{apparent possession (s 111).}

There are provisions for the enforcement of security interests in accessions. The most significant relate to damage on removal. An entitled secured party must remove the accession from the whole in a manner that causes no greater damage to the other goods or that puts the person in possession of the whole to no greater inconvenience than is necessarily incidental to the removal of the accession.⁴⁴ Anyone other than the debtor who has an interest in the other goods at the time the goods become an accession is entitled to reimbursement for any damage caused by the removal;⁴⁵ and is entitled to refuse permission to remove the accession until the secured party has given adequate security for the reimbursement.⁴⁶

III. Why Did the NZPPSA Omit Fixture Provisions?

The Canadian provinces’ varying versions of their Personal Property Securities Acts, and Article 9 of the USUCC, provide a qualified priority to the holder of a personal property security interest in fixtures through specific fixture provisions. This paper chooses the Saskatchewan Personal Property Security Act 1999 (the “SasPPSA”) as its Canadian model. Section 36 of that Act sets out the fixture priority rules, and these are discussed below.

However, before any such discussion, it is worth questioning why New Zealand chose to deviate from the Canadian models and to design the NZPPSA to apply only to personal property security interests.

The fixture omission has puzzled many; and an underlying theme in the critics’ comments is that the New Zealand legislators simply found it too hard.

This criticism gains considerable strength from an examination of a draft NZPPSA. Section 29 of that draft, appended to a 1989 Law Commission report,⁴⁷ purported to provide in the First Schedule of the Act a set list of goods. Even if they were attached to land or buildings, the named goods were to remain subject to the Act’s provisions, and would thus be capable of removal by a secured creditor.⁴⁸ The First Schedule listed only one good: partition walls of commercial premises.

The commentary in the 1989 Report explains why the legislators chose not to adopt the Canadian s 36-style precedent:⁴⁹

⁴⁴ Personal Property Securities Act 1999, s 125.

^{45 Personal Property Securities Act 1999, s 126(1).}

^{46 Personal Property Securities Act 1999, s 127.}

^{47 Law Commission A Personal Property Securities Act for New Zealand (NZLC}

^{R8, 1989).}

^{48 As noted by S Baas in “Fixtures under the Personal Property Securities Act:}

^{What New Zealand Doesn’t Know It’s Missing” (2001) 19 NZULR 403,}

^{404, the s 29 system, which both allowed for, and controlled, the removal}

^{of the goods by a creditor, was remarkably similar to the provisions of}

^{the former Chattels Transfer Act 1924, one of the Acts absorbed by the}

^NZPPSA.

^{49 NZLC R8, above n 47, at 132-133.}

The proposed statute rejects this approach on a number of grounds. Firstly, much of the detail of the North American enactments reflects patterns of construction financing which are not practised in New Zealand. Secondly, the regime originated in a jurisdiction which has no counterpart to the New Zealand system of land registration. Finally, the relatively complicated set of rules required to mediate between personal property security and real security have proven less than satisfactory in practice. More than any other feature of the uniform enactment, they have been subject to successive amendments and variations amongst different North American jurisdictions.

Critics have been quick to identify flaws in this argument.⁵⁰ Most importantly, while the USUCC originated in a jurisdiction with no counterpart to the New Zealand system of land registration, Canadian provinces have the same Torrens system of registration as New Zealand. There is no rationale for the Committee’s second argument. As to the first argument, one critic notes:⁵¹

...the Committee misunderstood the rationales of the Canadian provisions. They have deep roots and go back to Ontario conditional sellers’ reactions in the 19^th century to the English Court of Appeal’s decision in Hobson v Gorringe [[1897] 1 Ch 182] holding that goods supplied under a hire-purchase agreement became fixtures when affixed to land and that parties’ agreement could not change the common law characterisation to the prejudice of third parties. This led to early Ontario legislation protecting conditional sellers’ rights in the event of affixation and formed the basis for later and more complex provisions adopted in the Canadian Uniform Conditional Sales Act. The current Canadian PPSA provisions are essentially elaborations and expansions of the conceptual structure established in the pre-PPSA legislation. The underlying objective, however, remains the same – to regulate competing rights to fixtures between chattel financiers and realty claimants.

That comment precedes the introduction of the Construction Contracts

^{Act 2002 in New Zealand, the effects of which are discussed below.}

While the critics accept that the Canadian PPSA provisions have generated much litigation, the standard disputes do not focus on the fundamental fixture priority rules.

The critics also observe that the NZPPSA contains provisions dealing with accessions to goods, and goods that have become commingled, when in fact:⁵²

... fixture provisions are much more important practically because they generate problems on a daily basis, whereas so far there are very few reported cases in Canada under the Canadian accessions and commingled goods provisions.

⁵⁰ See, for example, J Ziegel, “Canadian Perspectives on the New Zealand

^{Chattels Securities Act (2001) 7 NZBLQR 118, 126; S Baas above n 48, at}

^410.

^{51 J Ziegel, ibid, at 126.}

^{52 Ibid.}

^{IV. The Saskatchewan Model}

Section 36 of the SasPPSA sets out the rules for the priority of fixtures.

^{Three prior provisions provide the necessary context.}

In s 2 of the SasPPSA the definition of a fixture is short and reasonably

^unhelpful:

“fixture” does not include building materials.

Also in s 2, “goods” are defined as meaning:

... tangible personal property, fixtures, crops and the unborn young of animals, but does not include chattel paper, a document of title, instrument, an investment property, money or trees, other than trees that are crops, until they are severed or minerals until they are extracted.

Section 19.2(1) of the SasPPSA defines when certain security interests

^{are perfected:}

(1) Asecurity interest arising in the delivery of a financial asset pursuant to

^{subsection 12.1(3)53 is perfected when it attaches.}

(2) Asecurityinterestininvestmentpropertycreatedbyabrokerorsecurities intermediary is perfected when it attaches.

(3) Asecurity interest in a futures contract or a futures account created by a futures intermediary is perfected when it attaches.

The most relevant subsections of s 36 of the SasPPSA comprise the following:

(1) In this section, “secured party” includes a receiver.

(2) Subject to the regulations, this section applies only with respect to land for which a title has been issued pursuant to The Land Titles Act,

^2000.

(3) Except as provided in this section and in section 30⁵⁴ a security interest in goods that attaches before or at the time when the goods become fixtures has priority with respect to the goods over a claim to the goods made by a person with an interest in land.

(4) A security interest mentioned in subsection (3) is subordinate to the interest of:

(a) a person who, without fraud and before an interest based on the security interest is registered in accordance with s 49, ⁵⁵

⁵³ Section 12: “Securities intermediary”.

^{54 “Buyer or lessee takes free of security interest”. This provision applies to}

^{the buyer or lessee of goods.}

^{55 Section 49 (2) provides:}

(2) All or any of the following interests may be registered in the Land

^{Titles Registry, accompanied by a notice in the prescribed form:}

(a) an interest based on a security interest in a fixture pursuant to s 36

acquires for value an interest in the land after the goods become fixtures, including an assignee for value of a person with an interest in the land at the time when the goods become fixtures;

(b) a person with a registered interest based on a mortgage on the

^{land who, after the goods become fixtures:}

(i) makes an advance pursuant to the mortgage, but only with respect to the advance; or

(ii) obtains an order nisi for sale or foreclosure.

without fraud and before an interest based on the security interest is registered in accordance with section 49; and

(c) a person who obtains a vesting order with respect to the land after the goods become fixtures, without fraud and before an interest based on the security interest is registered in accordance with section 49.

(5) Where:

(a) a search is made in the Land Titles Registry;

(b) at the time of the search there is no interest registered pursuant to section 49 against the title;

(c) on the day on which the search is made, an advance is made pursuant to a mortgage, where an interest based on that mortgage is registered against the title;

the advance is deemed to have been made before registration of a notice pursuant to section 49 that was not disclosed by the search, notwithstanding that the notice was registered on the day that the search was made.

(6) A security interest in goods that attaches after the goods become

^{fixtures is subordinate to the interest of a person who:}

(a) has an interest in the land at the time when the goods become

^{fixtures and who:}

(i) has not consented to the security interest;

^{(ii) has not disclosed an interest in the goods or fixtures;}

^{(iii) has not entered into an agreement pursuant to which a person}

^{is entitled to remove the goods; or}

^{(iv) is not otherwise precluded from preventing the debtor from}

^{removing the goods; or}

(b) acquires an interest in land after the goods become fixtures, if the interest is acquired without fraud and before an interest based on the security interest in the goods is registered in accordance with

(b) an interest based on a security interest in a growing crop pursuant to s

37.

section 49.

...

(18) The priority rights of persons mentioned in subsections (4) and (6) are not affected by priority rights to the land that are provided in The Land Titles Act, 2000.

Section 36(9)–(17) details the secured party’s right to remove the fixture if he or she is so entitled. The removal must not cause any greater damage to the land, or any greater inconvenience to the occupier than is necessarily incidental to the removal.⁵⁶ There is a provision for reimbursement for any damages on removal, but there is no entitlement to any reimbursement for any reduction in the value of the land caused by the absence of the removed goods.⁵⁷ The person so entitled may refuse permission to remove the goods until the secured party has given adequate security for reimbursement.⁵⁸ The secured party may apply to the court for orders concerning, inter alia, entitlement to reimbursement and the amount and kind of security that should be provided.⁵⁹ A person who has an interest in the land that is subordinate to a security interest may, before the goods are removed, retain the goods by paying to the secured party the lesser of: the amount secured by the security interest that has priority over that interest; and the market value of the goods if the goods were removed from the land.⁶⁰ There are mandatory notice provisions to all interest-holders who appear on the records of the Land Titles Registry with respect to the relevant land.⁶¹

Section 36 highlights the interface between the SasPPSA and the Land Titles Act 2000. The two statutes are discrete. The former relates to personal property; the latter real property. The magnet is the fixture, the legal status of which requires scrutiny. This is considered below.

V. Adopting A S 36-type Provision in the NZPPSA

The consensus from the critics is that the fixtures omission in the NZPPSA should be remedied. The arguments raised in the main Canadian cases on fixtures generally fall into two categories: whether the disputed item is a chattel or a fixture; or whether the removal provisions in the fixture priority provision have been followed correctly. There is no suggestion from the Canadian courts that the respective PPSAs should not include fixtures.

The example in Part 1 demonstrates what a s 36-type amendment would mean to a New Zealand security holder. It necessarily requires some expansion in order to assess exactly what a fixtures amendment in the NZPPSA might mean to the affected security interest holders.

⁵⁶ Personal Property Security Act 1993 (Saskatchewan), s 36(9).

^{57 Ibid, s 36(10).}

^{58 Ibid, s 36(11).}

^{59 Ibid, s 36(12).}

^{60 Ibid, s 36 (13).}

^{61 Ibid, s 36 (14)-(17).}

^{• In 2006, the owner developer (X) bought the land.}

• Also, in 2006, X registered a mortgage to the Bank of New Zealand

^{(the “BNZ”).}

• In 2007, X entered into a number of security interests in order to furnish the suite of apartments: two ( SI 1 and SI 2) were perfected; the third (SI 3) was not. All three collaterals then became fixtures. SI 1 and SI 2 were registered on the relevant land title.

• In 2009, X borrowed further money; and a second registered mortgage to Westpac (“Westpac”) was registered over the title.

• Later in 2009, X entered into a further security interest (SI 4) over a fixture that was already attached to the land. SI 4 was perfected; and registered on the land title.

• In 2010, X can no longer meet his financial commitments, and the BNZ begins the process of exercising its power of sale of the completed apartments pursuant to the Property Law Act 2007.

Who owns what? By applying the model statutory provision (s 36

^{SasPPSA) the security interest holders’ rights over the fixtures are quite}

^clear:

(i) SI 1 and SI 2 have priority over the BNZ. It would not have mattered whether the interests had been registered on the land title or not.⁶²

(ii) SI 1 and SI 2 also have priority over Westpac. Both security interests were registered on the title before the Westpac advance was made, thus giving the required notice to Westpac. ⁶³ Without registration on the relevant land title, SI 1 and SI 2 would not have attracted this priority.

^{(iii) SI 3 has not been perfected, so does not gain priority.}

^{(iv) SI 4 will not gain priority over the BNZ or Westpac if those parties}

^{have not consented to the security interest; have not disclosed an}

^{interest in the goods or fixtures; have not entered into any}

^{agreement pursuant to which a person is entitled to remove the}

^{goods; or are not otherwise precluded from preventing the debtor}

^{from removing the goods.64 Once SI 4 has been registered on the}

^{land title, it gains priority over any subsequent interest.65}

The similarities between this s 36-type structure (goods that become fixtures) and the existing NZPPSA accessions rules (goods that become fixed to other goods) are obvious.

From the above analysis, a fixtures priority provision in the NZPPSA

^{would alter dramatically the New Zealand position. Currently, both the}

⁶² Ibid, s 36(3).

^{63 Ibid, s 36(4).}

^{64 Ibid, s 36 (6)(a). As noted by S Baas, above n 48, at 409, this limited priority}

^{that will only arise in certain circumstances could be omitted from the}

^{New Zealand Personal Properties Securities Act 1999.}

^{65 Personal Property Security Act 1993 (Saskatchewan), s 36(6)(b).}

^{BNZ and Westpac have priority over any security interest holder.}

VI. A Better Solution

In the above analysis, SI 1 and SI 2 have priority over the BNZ. This addresses any “windfall” argument; but contradicts the priority registration rules under the LTA.⁶⁶ As long as they are registered on the land title, SI 1 and SI 2 also have priority over Westpac.

SI 3 has no priority as it has not been perfected. It cannot expect any priority outside the NZPPSA.

SI 4 is an “odd ball” and will only gain priority under very limited circumstances.

The fixture priority regime in the SasPPSA is complex and does not blend well with the Land Titles Act 2000. The registration schemes of the discrete statutes are far from compatible. This paper suggests a more sophisticated approach. A security interest that is perfected by registration in the NZPPSR (a “perfected security interest”) before or at the time the collateral becomes a fixture should simply override all other relevant interests on the land transfer title. If this scheme were adopted, SI 3 and SI 4 would be erased from the scheme. SI 1 and SI 2 would keep their priority. The only detrimental difference would involve Westpac: it would register its mortgage unaware of the priority of SI 1 and SI 2.

VII. Why An Overriding Provision?

Whether one statute overrides another is a matter of statutory construction. The three main principles are well-known: later laws abrogate prior inconsistent laws (leges posteriors priores contraries abrogant);⁶⁷ general provisions in a statute will be overridden by a specific subject (generalia specialibus); and precedence is given to public rights over purely private rights. Before discussing the effect of these canons in this context, this paper explains why an overriding provision should be adopted.

(i) Simplicity

A simple overriding provision negates the complex fixture priority provisions in s 36 SasPPSA. There are a number of useful statutory precedents. A provision, modelled on s 350(4) Property Law Act 2007,⁶⁸ might read:

(a) A security interest in goods that is perfected by registration before or at the time when the goods become fixtures has priority with respect to the goods over a claim to the goods made by a person with an interest in land.

⁶⁶ Land Transfer Act 1952, s 37: Priority according to time of registration.

^{67 However, if the two statutes can co-exist, this maxim need not be}

^applied.

^{68 Property Law Act 2007, Part 6, sub-part 6 (ss 340-350) provide for the}

^{setting aside of dispositions that prejudice creditors.}

(b) This provision overrides the Land Transfer Act 1952.

The removal provisions in s 36 (9)-(17) SasPPSA could be adopted in a subsequent provision.

In the interests of true simplicity, there is a school of thought that suggests that the proposed ss(b) (above) would be superfluous. In Regal Castings Ltd v Lightbody,⁶⁹ the Supreme Court was divided in its opinion as to whether the disputed statutory provision (the now repealed s 60 of the Property Law Act 1952 that did not have an express override) overrode the indefeasibility protection provided by the LTA. Four judges found no conflict between the two Acts, and considered that the Torrens principles of indefeasibility were not engaged by the statutory remedy under s 60. In McGrath J’s terms, it was:⁷⁰

... reasonably possible to construe s 60 consistently with the indefeasibility provisions as a special additional...exception...[that could] stand alongside other exceptions with minimal intrusion on the doctrine of indefeasibility of title.

Tipping J disagreed. His Honour considered that s 60 could not be read as overriding Land Transfer Act principles “unless that is expressly stated by Parliament to be the case or the conclusion arises by necessary implication from the terms of the allegedly overriding statute.” ⁷¹ That debate was academic:⁷² s 60’s successor, s 350(4) Property Law Act 2007 (above) provides the express override.

Nonetheless, the concept of a statute overriding indefeasibility of title is a principal theme in Miller v Minister of Mines.⁷³ In his short judgment, Lord Guest stated:⁷⁴

It is not necessary in their Lordships’ opinion that there should be a direct provision overriding the provisions of the Land Transfer Act. It is sufficient if this is proper implication from the terms of the relative statute.

Despite strong support for this view,⁷⁵ the Law Commission, in its review of the LTA⁷⁶ suggests that an express override in the overriding statutory provision might help to clarify legislative intention. Section

⁶⁹ Regal Castings Ltd v Lightbody [2008] NZSC87[2008] NZSC 87; , [2009] 2 NZLR 433 (SC). For a full discussion of this decision, Bennion, Brown, Thomas and Toomey New Zealand Land Law (2nd ed, Thomson Reuters, 2009) at 2.13.03.

^{70 Ibid, at [193] per McGrath J.}

^{71 Ibid, at [138] per Tipping J. His Honour took support from City of Canada}

^{Bay Council v Bonaccorso Pty Ltd [2007] NSWCA 351; (2007) 156 LGERA 294.}

^{72 When the Supreme Court heard this case, the Property Law Act 2007 was}

^{in force.}

^{73 Miller v Minister of Mines [1963] NZLR 560.}

^{74 Ibid, at 569.}

^{75 See, for instance, Murtagh v Murtagh [1960] NZLR 890; Silvera v Savic}

^{[1999] NSWSC 83; (1999) 46 NSWLR 124 (NSWSC); Green v Schneller [2002] NSWSC 67. For}

^{further discussion, see Bennion, Brown, Thomas and Toomey, above n}

^{69, at 2.9.05.}

^{76 Law Commission Review of the Land Transfer Act 1952 (NZLC IP 10, 2008).}

^{350(4) of the Property Law Act 2007 provides a perfect example.}

(ii) No clutter on the Land Transfer title

Registration of security interests under a s 36 SasPPSA-type fixture priority scheme⁷⁷ would add extra entries on a Land Transfer title. This system appears to pose no problems in the Canadian Torrens jurisdictions, but the writer suggests that it is cumbersome. The registrations also raise the much more fundamental problem of the security interest’s status as a registered interest. This issue is considered below.

No entries on the land title are necessary if a simple overriding provision is adopted.

(iii) Minimal detrimental effect

^{In the above scenario, apart from SI 4 (and it is fair to assume that SI}

^{4’s priority is dispensable)78 the only party that suffers any detriment is}

^{Westpac. As with any statute that overrides the LTA, incoming interest-}

^{holders do not have any notice protection warning them of outside}

^{interests. While some consider that these statutory interests undermine}

^{the conclusive register and security of a registered proprietor ’s title,}

^{others view their existence as “inevitable and justifiable on policy}

^{grounds.”79}

In the security interest scenario, this problem is overcome quite simply. Mortgagees lend money according to the security. Apprised of an overriding fixture provision, they would simply instruct their valuers to value only the land and buildings, not the added fixtures.

(iv) Construction works can attract a charge

Construction works – for example, the joiner ’s windows and doors in Whenuapai Joinery (1988) Limited v Trust Bank Central Ltd ⁸⁰ - now have statutory protection. The Construction Contracts Act 2002 imposes a new regulatory regime on the construction industry. The impetus for this reform arose largely from deficient payment practices among construction contractors that often left the vulnerable subcontractors in an unenviable position. Any party to a construction contract⁸¹ for construction works⁸² may refer a payment dispute to adjudication and

77. Personal Property Security Act 1993 (Saskatchewan), s 49 prescribes a straightforward registration process.

^{78 This is suggested by S Baas, above n 48, at 409.}

^{79 NZLC IP 10, above n 76, at 9.28-9.29. Statutes that contain provisions that}

^{appear to override the principle of indefeasibility include the following:}

^{Property Law Act 2007; Public Works Act 1981; Property (Relationships)}

^{Act 1976; Companies Act 1993; Housing Act 1955; Unit Titles Act 1972;}

^{Resource Management Act 1991; Crown Minerals Act 1991. For further}

^{discussion, see Bennion, Brown, Thomas and Toomey, above n 69, at 2.9.}

^{80 Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd [1994] 1 NZLR 406.}

^{81 The definition of a “construction contract” includes a commercial}

^{construction contract or a residential construction contract: Construction}

^{Contracts Act 2002, s 5.}

^{82 “Construction work” is defined in s 6 Construction Contracts Act 2002}

seek approval for the issue of a charging order over the construction site where the respondent is the owner of the site⁸³ or is found to be an associate of the owner and is jointly and severally liable with him or her.⁸⁴ If it is sought, the adjudicator must approve the issue of a charging order if it is determined that the owner or associate is liable to pay the amount due.⁸⁵ A successful adjudicator ’s determination and approval of an issue of a charging order may be entered as a judgment in the District Court;⁸⁶ and the Registrar of that Court must issue immediately the charging order on entry of judgment.⁸⁷

This statute provides a welcome solution for fixture disputes on a construction site. Obviously, completed apartments fall outside its ambit. It is interesting to note that the SasPPSA simply excludes building materials from its definition of “fixture” in s 2.⁸⁸

(v) No need for a chattels/fixture argument

If the suggested overriding provision is adopted, any chattel/fixture

and includes:

^{(a) the construction, erection, installation... of any building, erection,}

^{edifice, or structure forming, or to form, part of land...}

^...

^{(c) the installation in any building or structure of fittings forming,}

^{o r to fo rm , part o f la nd ; inc lud ing he ating, l ighti ng, air}

^{conditioning, ventilation, power supply, drainage, sanitation,}

^{water supply or fire protection, security, and communications}

^systems.

^{83 Construction Contracts Act 2002, s 29.}

^{84 Construction Contracts Act 2002, s 30.}

^{85 Construction Contracts Act 2002, ss 49, 50. A charging order cannot be}

^{sought against an owner who is a residential occupier of the construction}

^{site: s 31 Construction Contracts Act 2002.}

^{86 Construction Contracts Act 2002, s 73.}

^{87 Construction Contracts Act 2002, s 76.}

^{88 The term “building materials” in s 2 Personal Property Security Act 1993}

^{(Saskatchewan) means:}

materials that are incorporated into a building, and includes goods attached to a building so that their removal:

(i) would necessarily involve the dislocation or destruction of some other part f the building and cause substantial damage to the building, apart from the loss of value of the building resulting from the removal; or

(ii) would result in weakening the structure of the building or exposing the building to weather damage or deterioration;

^{but does not include}

^{(iii) heating, air conditioning or conveyancing devices; or}

^{(iv) machinery installed in a building or on land for use in carrying on}

^{an activity in the building or on the land.}

It is worth noting that an astute analysis of both the “fixture” and “building materials” definitions in s 2 Personal Property Security Act 1993 (Saskatchewan) suggests that the items in (iii) and (iv) are identified by statute as fixtures.

disputes between a mortgagee and the holder of a perfected security interest in a fixture simply disappear. It does not matter whether the item is a chattel or a fixture. If it is a chattel, the mortgagee has no claim to it; if it is a fixture, priority belongs to the security interest holder.

(vi) The sanctity of the Torrens title

What sort of interest in land, if any, is a perfected security interest in a

^{fixture? This is a fundamental issue that has escaped scrutiny. The s 36}

^{SasPPSA provisions allow registration of the interest on the land title.}

^{Where does that entitlement come from?}

^{Edwards J in Fels v Knowles89described the object of the Land Transfer}

^{Act in the following oft-cited statement:90}

The cardinal principle of the statute is that the register is everything... Nothing can be registered the registration of which is not expressly authorised by the statute...

If New Zealand adopted a s 36-type fixtures priority provision, would a perfected security interest in a fixture meet this threshold? The writer suspects not.

Section 41(1) of the LTA provides that no instrument is effectual until registration. Generally, the courts are required to interpret the words “until registration”, and there are two powerful schools of thought as to the correct interpretation of s 182 of the Act.⁹¹ Nonetheless, s 41 clearly states that only instruments can be registered. An “instrument” is defined in s 2 of the Act as:

(a) ...any printed or written document, map, or plan relating to the transfer of or other dealing with land, or evidencing title to land; and

(b) includes a memorandum within the meaning of section 155A(1)⁹² and an electronic instrument.

This paper suggests that there is not a sufficient nexus between a perfected security interest in a fixture, and an instrument that relates to the transfer of land or any other dealing with land, or that evidences title to land. A perfected security interest in a fixture is not an instrument under the LTA and therefore cannot be registered. It has no place on the land transfer register. The only sound protection for the holder of such an interest lies in that interest being classified as overriding. As such, it correctly lies outside the land transfer register.

⁸⁹ Fels v Knowles [1906] NZGazLawRp 66; (1906) 26 NZLR 604 (CA).

^{90 Ibid at 620.}

^{91 “Purchaser from registered proprietor not affected by notice”. A recent}

^{authoritative statement of the effect of s 182 was delivered by Potter J in}

^{Mercury Geotherm Ltd ( in rec) v McLachlan [2005] NZHC 1207; [2006] 1 NZLR 258.}

^{92 “Incorporation of provisions contained in registered or prescribed}

^{memorandum”.}

VIII. Neither Real Nor Personal Property: “Statutory Property”? The Resource Consent Notice; the Mining Permit; and the Potential Perfected Security Interest in a Fixture

The above discussion leads to a neglected and much-needed debate concerning interests that are neither a personal property interest nor a real property interest. This paper considers two types of these interests, investigates their statutory status, and reflects on the future of the potential perfected security interest in a fixture.

(i) The Consent Notice under the Resource Management Act 1991

The LTA is quite clear. An instrument can only be registered if it creates an interest or estate in land. It is therefore curious to note certain mechanics of the Resource Management Act 1991 (the “RMA”).

Section 122(1) of the RMA provides that “A resource consent is neither real nor personal property.” Despite this, bonds and consent notices are able to be registered under the LTA. They attract indefeasibility of title; and in Rodney District Council v Fisherton Ltd,⁹³ rather to the chagrin of the affected parties, this meant that the terms of the registered bond prevailed, despite the fact that they did not reflect correctly the consent conditions.

A number of decisions debate the nature of property rights in resource consents. For example, in Aoraki Water Trust v Meridian Energy Ltd ⁹⁴ the Court sidestepped the issue by declaring that a water permit conveyed a legitimate expectation that the rights granted therein could not be subsequently eroded by the grant of other permits, and thus the principle of “non-derogation from grant” applied in a public law context. As one commentator observed: ⁹⁵

...the Court could do little else in the face of the clear statement in s 122(1) that permits are not property rights of the types traditionally recognised under the common law ( that is, “real” or “personal”).

In Armstrong v Public Trust,⁹⁶ the Court held that s 122 of the RMA did not exclude the common law as to joint tenancy and the rule of survivorship.⁹⁷ Fogarty J investigated the purpose of s 122(1):⁹⁸

There was a measure of agreement between counsel that it functions by eliminating recognition by the Courts of any property rights be they real or personal property in respect of RMA consents, except and only to the extent that Parliament has provided for them expressly or by necessary implication. I think that proposition is sound.

⁹³ Rodney Distract Council v Fisherton Ltd [2005] NZCA 173; [2005] NZRMA 514.

^{94 Aoraki Water Trust v Meridian Energy Ltd [2004] NZHC 820; [2005] 2 NZLR 268.}

^{95 D Grinlinton “The nature of property rights in resource consents” (2007)}

^{7 BRMB 37, at 38.}

^{96 Armstrong v Public Trust [2007] NZLR 859.}

^{97 Ibid, [23].}

^{98 Ibid, [19].}

In Marlborough District Council v Valuer General ⁹⁹ the Court concluded that the granting of a coastal permit creates no interest in real or personal property. It considered that the Foreshore and Seabed Act 2004 is a clear expression of legislative intention that no property rights to the seabed are created by the granting and exercise of a coastal permit.

It has been argued that resource consents:¹⁰⁰

...are a new form of ‘statutory property’ analogous to a bare licence (that is, to do something that would otherwise be unlawful) coupled with a right to use and/or take whatever natural resources are reasonably acquired in the exercise of that right. Such statutory licences are not subject to the common law principles, or generic statutory rules (such as those found in the [now Property Law Act 2007]), that normally apply to real and personal property. Rather they are solely governed by the rules in the statutes that create them, and other generic principles of law that do not require for their application a traditional ‘real’ or ‘personal’ property right. This would not exclude the application, in appropriate cases, of general legal principles such as derogation from the grant, legitimate expectation or administrative law remedies arising from the unlawful exercise of council discretion.

The ability to register or note this new form of statutory property on the land transfer title remains a vexatious issue.

(ii) The Mining Permit under the Crown Minerals Act 1991

Section 92(1) of the Crown Minerals Act 1991 (the “CMA”) mirrors s 122(1) of the RMA. It states that “A permit is neither real nor personal property.” However, a mining permit cannot be registered on the land transfer title. Prior to the Crown Minerals Amendment Act 2003 (the “CMMA”) all permits¹⁰¹ and access rights¹⁰² recorded in the register held by the Ministry for Economic Development had to be forwarded to Land Information New Zealand (“LINZ”) for noting against any affected titles. These requirements were present in the earlier Mining Act 1971.¹⁰³ The CMAA revoked the provisions for the noting¹⁰⁴ of mining permits but left intact the access noting provisions.¹⁰⁵

The well-known principles enunciated in Miller v Minister of Mines¹⁰⁶

⁹⁹ Malborough District Council v Valuer General [2007] NZHC 2149; [2008] 1 NZLR 690. See also discussion in Hume v Auckland Regional Council [2002] NZCA 167; [2002] 3 NZLR 363 (CA); Dart River Safaris Ltd v Kemp [2000] NZHC 448; [2000] NZRMA 440; Hauraki Maori Trust Board v Waikato Regional Council, HC Auckland CIV 2003-485-000999, 4

^{March 2004.}

^{100 D Grinlinton, above n 95, at 39.}

^{101 Crown Minerals Act 1991, s 81 (repealed).}

^{102 Crown Minerals Act 1991, s 83.}

^{103 Mining Act 1971, s 142.}

^{104 It is clear that the legislators considered that neither registration}

^{nor notification of the mining permit on the land transfer title was}

^acceptable.

^{105 See Crown Minerals Amendment Act 2003, ss10-17, that repeal ss 81, 82}

^{and 86(3)(b) and amend ss 84,85, 86-89 of the Crown Minerals Act 1991.}

^{106 Miller v Minister of Mines [1959] 1 NZLR 220; Miller v Minister of Mines}

(Miller) provide a stark contrast to the accepted relationship between the RMA and the LTA. The courts in Miller established that a mining permit was not capable of being registered under the LTA. The CMA has a detailed system of registration of permits. It describes the procedure for the application and grant of the permit;¹⁰⁷ specifies the conditions of the permit;¹⁰⁸ and how they are to be recorded.¹⁰⁹ These requirements are not in a form that complies with s 92 of the LTA. A mining permit thus becomes an informal instrument; and by virtue of s 42 of the LTA, is not capable of registration.¹¹⁰ Lord Guest observed:¹¹¹

The Mining Act 1926 provides its own separate and independent code for registration of mining licences...If the licence is not registrable under the Land Transfer Act and the indefeasibility provisions of that Act are to override the grant, the licence would be of no value to the licensee except as the original owner...Their Lordships do not consider that this could have been the intention of the legislature in enacting the compendious code for mining privileges which are to exist for at least 42 years.

This statement confirmed the Court of Appeal’s conclusions that it is “inconsistent with the nature of a legal interest created by the grant of a legal interest that it should require subsequent registration under the LTA in order to make it effective”¹¹² and that the two systems of registration under the mining legislation and the LTA are “separate and mutually exclusive”.¹¹³

It is now well established that the CMA overrides the LTA.¹¹⁴ In terms of statutory interpretation principles, generalia specialibus must apply; and so, arguably, must leges posteriors prores contraries abrogant as the CMA clearly reflects the principles of the earlier mining statutes.

(iii) Where would a perfected security interest in a fixture be better placed?

A perfected security interest in a fixture should simply override the principles of indefeasibility. It should not compete with registered interests on the land title. In both New Zealand and Saskatchewan, a perfected security interest is personal property; and, as such, is subject to a “compendious code” in the NZPPSA and the SasPPSA respectively. A perfected security interest in a fixture fits neatly into the new class of statutory property. It is neither real nor personal property. If it is not real property, then the writer argues that it has no place on the land title.

The statutory interpretation principles are relevant. As with the CMA,

[1961] 820 (CA); Miller v Minister of Mines [1963] NZLR 560 (PC).

^{107 Crown Minerals Act 1991, s 22-29.}

^{108 Crown Minerals Act 1991, ss 30-42A.}

^{109 Crown Minerals Act 1991, ss 90-91A.}

^{110 Miller v Minister of Mines [1959] NZLR 220, 228.}

^{111 Miller v Minister of Mines [1963] NZLR 560,579, per Lord Guest, delivering}

^{the judgment.}

^{112 Miller v Minister of Mines [1961] NZLR 820, 840, per Cleary J.}

^{113 Miller v Minister of Mines [1961] NZLR 820, 841, per Cleary J.}

^{114 Bennion, Brown, Thomas and Toomey, above n 69, at 2.9.}

leges posteriors priores contraries abrogant must apply. In Saskatechewan, the SasPPSA and the Land Titles Act 2000 are “separate and mutually exclusive”. The same would apply in New Zealand if the Saskatchewan model were adopted. This is best illustrated by the disparate systems of priority. Once blended, the mix is impossible. For instance, as noted, if New Zealand adopted the SasPPSA model, a first registered mortgagee loses priority to a subsequent holder of a registered security interest in a fixture. This makes a mockery of s 37 of the LTA where priority accords to the time of registration.

Generalia specialibus may also be deemed to apply, but this is not as clear-cut as in the CMA/LTA relationship. The writer notes that in the Property Law Act 2007, real property and personal property appear to be treated as equal partners.

(iv) Should resource consent notices also override indefeasibility of title?

All three canons might apply in the RMA/LTA relationship. Chisholm J in Wheeler Forrest Associates Ltd v Farquhar¹¹⁵ had no difficulty reconciling the two statutes:

...it seems to me that these two pieces of legislation can be relatively easily reconciled if a purposive interpretation is adopted. Whereas in the present context the purpose of the Resource Management Act is to manage the use of water, the purpose of the Land Transfer Act is confined to the registration and transfer of title to land.

This statement could be interpreted as implying that the statutes are actually incompatible, especially in terms of registration and priority. Indeed, a non-real property RMA consent notice attracts indefeasibility of title. There is certainly room to argue the leges posteriors priores contraries abrogant maxim. In a similar way, there will undoubtedly be two schools of thought with respect to the generalia specialbus principle. The observation that the RMA “floats, rather like oil on water, across the top of ownership rights without affecting the underlying substance”¹¹⁶ is also open to different interpretations. However, there can be little doubt as to the applicability of the third maxim:¹¹⁷

It must be accepted...that the rights of property owners are to give way to the broader public interest where the legislation, on its true construction, clearly so requires.

There is therefore a strong argument that resource consent notices should also override indefeasible interests, and thus stand outside the land title.

¹¹⁵ Wheeler Forrest Associate v Farquhar [2001] 2 NZLR 687.

^{116 Coleman v Kingston, HC Auckland AP 103-SW00, 3 April 2001, at [27].}

^{117 Waitakere CC v Hickman [2005] NZRMA 204 at [23].}

^{IX. Conclusion}

There is a tense relationship between the holder of a security interest in a fixture and the affected mortgagee. In New Zealand, the NZPPSA and the LTA do not inter-relate. When the music system is well-installed in the walls of a completed apartment, the mortgagee argues that it is a fixture, and the security interest holder maintains it is a chattel.

This paper suggests a solution to that problem. It takes as a starting point the SasPPSA and explores the blending of this Act with the Land Titles Act 2000 with respect to fixtures. It concludes that this is a rather unhappy mix, and thus rejects the adoption of a s 36-type fixture priority provision in the NZPPSA. A more sophisticated solution is suggested. The NZPPSA should be amended to incorporate a provision giving a security interest in goods that is perfected before or at the time when the goods become fixtures priority with respect to the goods over a claim to the goods made by a person with an interest in land. This provision should expressly override the LTA.

If this proposal were adopted, responsibility would lie on the shoulders of both parties. An incoming LTA interest-holder will have no notice of the priority of the perfected security interest. This is the essence of an overriding statute. He or she must search the PPSR for any perfected security interests, and legislators may need to amend s 173 of the NZPPSA to ensure any likely affected individual has access to that register. If the incoming interest-holder is a mortgagee, he or she will be responsible for instructing an appointed valuer to value only land and buildings when assessing the quantum of security. Conversely, the security interest holder must ensure the security interest is perfected. This is a reasonable burden, given the priority strength of the perfected security interest.

This solution creates a simple priority system, has minimal detrimental effect, and preserves the sanctity of the Torrens title. Moreover, while the vendor and the purchaser, or the pontoon owner and the local council¹¹⁸ will still battle in court over the status of a chattel or a fixture, the mortgagee and the holder of a perfected security interest in a fixture have no further part to play in this fraught area of law. The Gaggenau bathroom fittings belong to the security interest holder.

As simple as that!

¹¹⁸ See, for example, Auckland City Council v Ports of Auckland Ltd [2000] 3

^{NZLR 614.}