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Fair Trading Act 1986

Consumer transactions and auctions - Layby sales

36J: Bankruptcy, receivership, or liquidation of supplier: consumer priority

You could also call this:

“What happens if a store goes out of business before you finish paying for something?”

If a supplier goes bankrupt, into receivership, or liquidation, you have special rights if you’re a consumer in a layby sale agreement. This applies if you’re entitled to a refund or couldn’t complete the agreement because of the supplier’s situation.

In these cases, you become a creditor in the bankruptcy, receivership, or liquidation. You can get back the money you’ve paid under the layby agreement. You have priority over other unsecured creditors and some secured creditors.

Your claim has priority over creditors with security interests on the supplier’s accounts receivable and inventory. However, there are some exceptions to this rule for certain types of security interests.

The money owed to you must be paid according to specific laws. These laws are different for bankruptcies, receiverships, and liquidations.

This special protection doesn’t apply if you’ve already received a refund or if you’re a consumer who chose to complete the layby sale agreement after learning about the supplier’s situation.

The law uses some special terms like ‘account receivable’, ‘inventory’, ‘new value’, ‘purchase money security interest’, and ‘security interest’. These terms have specific meanings defined in another law called the Personal Property Securities Act 1999.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6156631.

Topics:
Money and consumer rights > Consumer protection
Business > Fair trading
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36I: Bankruptcy, receivership, liquidation, or voluntary administration of supplier: completion of layby sale agreement, or

“What happens to your layby purchase if the shop goes broke?”

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36K: Meaning of uninvited direct sale agreement, or

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Part 4A Consumer transactions and auctions
Layby sales

36JBankruptcy, receivership, or liquidation of supplier: consumer priority

  1. This section applies if—

  2. an event described in section 36I(1)(a)(i) to (iii) has occurred; and
    1. the consumer described in section 36I(2)—
      1. is entitled to a refund under section 36H(a); or
        1. has been unable to complete the layby sale agreement in accordance with section 36I(2) or (3), as the case may be.

        2. If this section applies, the consumer—

        3. is a creditor in the bankruptcy, receivership, or liquidation, to the extent of the payments made to the supplier in accordance with the layby sale agreement; and
          1. is entitled to recover a sum equal to those payments with priority over—
            1. all other unsecured creditors; and
              1. all creditors secured by a security interest of the kind described in subsection (3).

              2. The kind of security interest referred to in subsection (2)(b)(ii) is a security interest that is over all or any part of the supplier's accounts receivable and inventory, or all or part of either of them, other than—

              3. a purchase money security interest that has been perfected at the time specified in section 74 of the Personal Property Securities Act 1999; or
                1. a security interest that—
                  1. has been perfected under the Personal Property Securities Act 1999 at the date of the event described in section 36I(1)(a)(i) to (iii); and
                    1. arises from the transfer of an account receivable for which new value is provided by the transferee for the acquisition of that account receivable (whether or not the transfer of the account receivable secures payment or performance of an obligation).

                    2. Debts to which priority is given by subsection (2)(b) must be paid in accordance with—

                    3. section 274(3) of the Insolvency Act 2006 (in the case of bankruptcies); or
                      1. section 30 of the Receiverships Act 1993 (in the case of receiverships); or
                        1. section 312 and Schedule 7 of the Companies Act 1993 (in the case of liquidations).

                          1. To avoid doubt, this section does not apply in relation to—

                          2. a consumer referred to in section 36I(4); or
                            1. a payment refunded under section 36I(5).

                              1. In this section, account receivable, inventory, new value, purchase money security interest, and security interest have the meanings given to them in section 16 of the Personal Property Securities Act 1999.

                              Notes
                              • Section 36J: inserted, on , by section 23 of the Fair Trading Amendment Act 2013 (2013 No 143).