Financing statements – the importance of getting the debtor's name right

In a recent application for summary judgment, the High Court at Napier decided there was an arguable case that a financing statement was seriously misleading (and therefore invalid) because the names of the individual partners, and not the name of the partnership, were recorded on the financing statement.

The case¹ concerned an argument between a financier, who had a first registered financing statement in respect of a general security agreement, and a supplier of farming stock, who had a second registered financing statement in respect of specific assets.

There were two arguments.

The first argument centred around whether or not the supplier had priority over the specific assets, because, it argued, its registration afforded it a purchase money security interest. The court determined that it was arguable that it did not, because the supplier seemed unable to identify exactly which stock it had supplied.

The second argument was about whether the supplier's financing statement was seriously misleading, and therefore invalid. The financier argued that because the debtor was a partnership operating under the name "Awapapa Station" the financing statement should have been registered with that name recorded as the debtor. In fact, the supplier's financing statement recorded the debtor as the two individuals who made up the partnership.

The judge decided that, because the debtor name was the relevant "searchable field" in this case (these were not serial-numbered goods), it was reasonably arguable that the supplier's financing statement may be seriously misleading, with the result that its security interest was unperfected, and subject to the financier's perfected interest.

¹ Rabobank NZ Limited v StockCo Limited [2010] BCL 207

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