This is a sad reality of what happens when certain “buy now, pay later” arrangements go wrong.   Indirectly though this is also a story about how little bit of legislation - the old Layby Sales Act, now part of the Fair Trading Act 1986 - is something of an unsung hero for NZ retail shoppers.

Down-payment arrangements are common, perhaps unavoidable, when you are buying high-end, bespoke, items, like a wedding dress.  The supplier frequently won't start making anything (and so incurring cost themselves) until they have the deposit, in case you don't pay at the end and so they are out of pocket themselves.  The is perfectly understandable. 

The catch though, as these brides are finding out, is that you don't own your bespoke dress until it has been both paid for in full, and delivered.  The risk lies in the time between down-payment and delivery.

In a traditional retail situation, there is no risk, in that you go to the shop, choose your dress, pay, walk out of the shop holding the dress.  But in a down-payment situation, there are gaps between when you start and finish paying money, and can take it away.  The dress is not “yours” until it’s paid for, and you (generally) have no rights to any of the money you contribute along the way.  There will usually be no obligation on the retailer to put that money aside for you, in a sort of savings account, until the full amount is reached.  So in practical reality, the money has been given to the retailer (to use, in its business) until the full amount is paid, whereupon the retailer is required to deliver the dress to you.    

It all goes horribly wrong, however, if in the process, the retailer gets into trouble and goes into liquidation.  At that point, the retailer generally stops trading and everything stops.  The liquidator takes whatever money and other assets are left, and sells them to get the best deal possible for the retailer's secured creditors.  As a bride, owed a dress, you are an unsecured creditor and so well down the line in terms of priority.  There will frequently be nothing left, and you will be left with no dress and no refund of the money you have already paid.    

The punt you take, when making down payments of any sort, is that the person you have paid it to has a sound business and can keep their business running smoothly such that you get your goods.   You can protect yourself by checking who you are actually paying your money to.  Do you trust them? Are they the actual manufacturer, or is there a middle man involved (and so yet more risk, as was the case with these brides) ?  You could well have a security interest in respect of the goods you've paid for (meaning that you are closer to the front of the queue to get your money back from the liquidator), but you will need to have registered that interest if it is to have any practical effect, and this is most unlikely. 

Much better news for the many New Zealand retail shoppers out there who buy goods on "layby".  This is also a down payment  / pay by instalment mechanism, but which - thanks to the layby sales provisions of the Fair Trading Act - protects buyers somewhat in a liquidation scenario. Essentially, if the goods have been set aside for you (ie they are in a bag with your name on it), and the shop goes under, then you can claim the goods if you pay whatever is left owing on them.  So you get the credit of what's already been paid, and you get the goods if you pay the rest.   The story is different, and more like the brides', if the shop doesn't set the goods aside for you, so check every now and then that they have done this.