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Thanks, Barry, for raising this. Yes, it's a deep issue! We did some work on tracing here at Otago and found a line of authority on Canadian PPSA suggesting that some tracing problems at least are governed by the provisions of the statute and not by the common law - see eg Agricultural Credit Corp v Pettyjohn [1991] 3 WWR 689. Nor does the bank itself necessarily escape just because the account is no longer in credit, if the bank is treated as security holder rather than mere creditor. The cases relate to purchase money security interests and proceeds. Since the NZ PPSA is taken from the most recent Canadian legislation, this may be authoritative here. But I don't think we really got on top of it all!

Your point on the generally unsatisfactory nature of tracing when there are multiple claims is well taken, and is in line with the thinking in the NZ Law Commission's recent Study Paper No 3 on Priority Debts in Insolvent Estates (1999). This strongly emphasises pro rata division as the paramount approach. Somewhat surprisingly, however, the Commission's brief did not extend to tracing, or to secured creditors (even though, in NZ, priority debts such as unpaid wages take precedence over charges against circulating capital). There's much thinking still to do.

All the best with your book.

Richard

Richard Sutton,
Faculty of Law, University of Otago
PO Box 56, Dunedin, New Zealand
Telephone: (64) (3) 479-8856
Fax: (64) (3) 479-8855