Internet auctions

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When an equipment financier disposes of seized equipment using an internet auction site, how does the financier comply with the B.C. Personal Property Security Act requirement that notice of the “date, time and place” of the auction be given to the lessee? This was the dilemma addressed by Mr. Justice Betton of the Supreme Court of B.C. in the recent decision of CNH Capital Canada Ltd. v. Diamond 4 Holdings Ltd.

Such internet auction sites do not function like traditional auctions, in that bids are received continuously rather than at a specified date and time, and of course internet auctions have no physical location or “place” where the auction is held.

CNH Capital, the equipment financier in this case, tried to argue that such an internet sale was not really a “sale by public auction” at all, and therefore there was no need to specify a date, time and place for the auction. Betton J. did not agree, and held that CNH Capital had failed to comply with the Personal Property Security Act. CNH’s deficiency claim against the lessee was reduced by the amount that the equipment should have sold for, had proper notice been given.

In the wake of this decision equipment financiers, including lessors, will need to re-think their disposition strategies, particularly regarding internet auction sites.

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