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S.M. 1993, c. 14
The Personal Property Security and Consequential Amendments Act
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(Assented to July 27, 1993)
HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Manitoba, enacts as follows:
PART 1
DEFINITIONS AND INTERPRETATION
1 In this Act,
"accessions" means goods that are installed in or affixed to other goods; (« accessions »)
"account" means a monetary obligation not evidenced by chattel paper, an instrument or a security, whether or not it has been earned by performance; (« compte »)
"advance" means the payment of money, the provision of credit or the giving of value and includes a liability of the debtor to pay interest, credit costs and other charges or costs payable by the debtor in connection with an advance or the enforcement of a security interest securing the advance; (« avance »)
"building" means a structure, erection, mine or work built, constructed or opened on or in land; (« construction »)
"building materials" means materials that are incorporated into a building and includes goods attached to a building so that their removal
(a) would necessarily involve the dislocation or destruction of some other part of the building and cause substantial damage to the building, apart from the loss of value of the building resulting from the removal, or
(b) would result in weakening the structure of the building or exposing the building to weather damage or deterioration,
but does not include
(c) heating, air conditioning or conveyancing devices, or
(d) machinery installed in a building or on land for use in carrying on an activity in the building or on the land; (« matériaux de construction »)
"business" includes profession; (« entreprise »)
"chattel paper" means one or more writings that evidence both a monetary obligation and a security interest in or lease of specific goods, or a security interest in or lease of specific goods and accessions, but does not include a security agreement providing for a security interest in specific goods and after-acquired goods other than accessions; (« acte mobilier »)
"collateral" means personal property that is subject to a security interest; (« biens grevés »)
"commercial consignment" means a consignment under which goods are delivered for sale, lease, or other disposition to a consignee, who, in the ordinary course of the consignee's business, deals in goods of that description, by a consignor who;
(a) in the ordinary course of the consignor's business, deals in goods of that description, and
(b) reserves an interest in the goods after they are delivered,
but does not include an agreement under which goods are delivered
(c) to an auctioneer for sale, or
(d) to a consignee for sale, lease or other disposition if the consignee is generally known to creditors of the consignee to be selling or leasing goods of others; (« consignation commerciale »)
"consumer goods" means goods acquired or used by the buyer or members of the buyer's family, primarily for personal, household or family purposes of the buyer or the buyer's family; (« biens de consommation »)
"court" means the Court of Queen's Bench; (« tribunal »)
"creditor" includes an executor, an administrator, an assignee for the benefit of creditors, and a committee of a creditor; (« créancier »)
"crops" means crops, whether matured or otherwise, and whether naturally grown or planted, attached to land by roots or forming part of trees or plants attached to land, and includes trees only if they
(a) are being grown as nursery stock,
(b) are being grown for uses other than for the production of lumber and wood products, or
(c) are intended to be replanted in another location for the purpose of reforestation; (« récoltes »)
"debtor" means
(a) a person who owes payment or performance of an obligation secured, whether or not that person owns or has rights in the collateral,
(b) a person who receives goods from another person under a commercial consignment,
(c) a lessee under a lease for a term of more than one year,
(d) a transferor of an account or chattel paper,
(e) in sections 17, 24, 26, 58 and 65 and subsections 59(14), 61(8) and 64(3), the transferee of a debtor's interest in the collateral, or
(f) if the person referred to in clause (a) and the person who has rights in the collateral are not the same person,
(i) where the term is used in a provision dealing with the collateral, the person who has rights in the collateral,
(ii) where the term is used in a provision dealing with the obligation, the obligor,
(iii) where the context permits, both the person who has rights in the collateral and the obligor, and
(iv) where the term is used in connection with a financing statement, the person who has an interest in the collateral; (« débiteur »)
"default" means
(a) the failure to pay or otherwise perform the obligation secured when due or,
(b) the occurrence of an event or set of circumstances whereupon, under the terms of the security agreement, the security becomes enforceable; (« défaut »)
"document of title" means a writing issued by or addressed to a bailee
(a) that covers goods in the bailee's possession that are identified or are fungible portions of an identified mass, and
(b) in which it is stated that the goods identified in it will be delivered to a named person, or to the transferee of that person, or to bearer or to the order of a named person; (« titre »)
"equipment" means goods that are held by a debtor other than as inventory or consumer goods; (« matériel »)
"financing statement" means
(a) a printed financing statement in the form authorized under the regulations and required or permitted to be registered under this Act, and
(b) where the context permits,
(i) data authorized under the regulations to be transmitted to the Registry to effect a registration, and
(ii) a security agreement registered before the day The Personal Property Security Act S.M. 1973, c. 5, came into force; (« état de financement »)
"fixture" does not include building materials; (« accessoire fixe »)
"future advance" means an advance, whether or not the advance is made pursuant to an obligation and includes advances and expenditures made for the protection, maintenance, preservation or repair of the collateral; (« avance future »)
"goods" means tangible personal property, fixtures, crops and the unborn young of animals, but does not include chattel paper, a document of title, an instrument, a security, money or trees that are not crops, until they are severed or minerals until they are extracted; (« objets »)
"instrument" means
(a) a bill of exchange, note or cheque within the meaning of the Bills of Exchange Act (Canada),
(b) any other writing that evidences a right to payment of money and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment, or
(c) a letter of credit or an advice of credit if the letter of credit or advice of credit states on it that it must be surrendered on claiming payment,
but does not include
(d) chattel paper, a document of title or a security, or
(e) a writing that provides for or creates a mortgage or charge in respect of an interest in land that is specifically identified in the writing; (« instrument »)
"intangible" means personal property that is not goods, chattel paper, money, a document of title, instrument or security; (« bien immatériel »)
"inventory" means goods that are
(a) held by a person for sale or lease, or leased by that person as lessor,
(b) furnished or are to be furnished under a contract of service,
(c) raw materials or work in progress, or
(d) used or consumed in a business; (« stock »)
"lease for a term of more than one year" includes a lease
(a) for an indefinite term and includes a lease for an indefinite term that is determinable by one or both of the parties within one year from the date of its execution,
(b) initially for a term of one year or less than one year where the lessee, with the consent of the lessor, retains uninterrupted or substantially uninterrupted possession of the leased goods for a period in excess of one year after the day the lessee, with the consent of the lessor, first acquired possession of them, but the lease does not become a lease for a term of more than one year until the lessee's possession extends for more than one year, and
(c) for a term of one year or less, where
(i) the lease provides that it is automatically renewable or that it is renewable at the option of one of the parties or by agreement of the parties for one or more terms, and
(ii) the total of the terms, including the original term, may exceed one year,
but does not include a lease
(d) involving a lessor who is not regularly engaged in the business of leasing goods,
(e) of household furnishings or appliances as part of a lease of land where the goods are incidental to the use and enjoyment of the land, or
(f) of prescribed kinds of goods, regardless of the length of the lease term; (« bail d'une durée supérieure à un an »)
"minerals" includes petroleum and gas; (« minéraux »)
"minister" means the member of the Executive Council charged by the Lieutenant Governor in Council with the administration of this Act; (« ministre »)
"money" means a medium of exchange authorized by the Parliament of Canada, or authorized or adopted by a foreign government, as part of its currency; (« argent »)
"new value" means value other than antecedent debt or antecedent liability; (« nouvelle prestation »)
"obligation secured" means, when determining the amount payable under a lease that secures payment or performance of an obligation, the amount originally contracted to be paid under the lease and any other amount payable under the terms of the lease or required to be paid by the lessee to obtain ownership of the collateral, less any amount paid before the determination; (« obligation garantie »)
"obligor" means a person who, in an instrument, undertakes a duty or obligation; (« débiteur obligé »)
"pawnbroker" means a person who engages in the business of granting credit to individuals for personal, family or household purposes and who
(a) takes and perfects security interests in consumer goods by taking possession of them, or
(b) purchases consumer goods under agreements or undertakings, express or implied, that the goods may be repurchased by the seller; (« prêteur sur gage »)
"personal property" includes goods, chattel paper, documents of title, instruments, money, securities and intangibles; (« biens personnels »)
"prescribed" means prescribed by regulation;
"proceeds" means
(a) identifiable or traceable personal property, fixtures and crops
(i) derived directly or indirectly from any dealing with collateral or the proceeds of collateral, and
(ii) in which the debtor acquires an interest,
(b) a right to an insurance payment or any other payment as indemnity or compensation for loss of or damage to the collateral or proceeds of the collateral, and
(c) a payment made in total or partial discharge or redemption of an intangible, chattel paper, instrument or security; (« produit »)
"purchase" means taking by sale, lease, discount, assignment, negotiation, mortgage, pledge, lien, issue, reissue, gift or any other consensual transaction creating an interest in personal property; (« achat »)
"purchase money security interest" means
(a) a security interest taken or reserved in collateral to the extent that it secures all or part of its purchase price,
(b) a security interest taken or reserved in collateral by a person who gives value for the purpose of enabling the debtor to acquire rights in the collateral, to the extent that the value is applied to acquire the rights,
(c) the interest of a lessor of goods under a lease for a term of more that one year, and
(d) the interest of a consignor who delivers goods to a consignee under a commercial consignment,
but does not include a transaction of sale and the lease back to the seller; and for the purpose of this definition, "purchase price" and "value" include credit charges or interest payable in respect of the purchase or a loan given to enable the debtor to acquire rights in the collateral; (« sûreté en garantie du prix de vente »)
"receiver" includes receiver-manager; (« séquestre »)
"Registrar" means the Registrar of Personal Property Security designated under section 42; (« registraire »)
"Registry" means the Personal Property Registry designated under section 42; (« Bureau d'enregistrement »)
"secured party" means
(a) a person who has a security interest,
(b) a person who holds a security interest for the benefit of another person, and
(c) a trustee, if a security interest is embodied in a trust indenture; (« créancier garanti »)
"security" means a document that is
(a) issued in bearer or registered form,
(b) of a type commonly dealt with on securities exchanges or markets, commonly recognized in an area in which it is issued, or dealt in as a medium of investment,
(c) one of a class or series or, by its terms, divisible into classes or series of documents, and
(d) evidence of a share, participation or other interest in property or in an enterprise or is evidence of an obligation of the issuer,
and includes an uncertificated security, but does not include a writing that provides for or creates a mortgage or charge in respect of an interest in land that is specifically identified in the writing; (« valeur mobilière »)
"security agreement" means an agreement that creates or provides for a security interest, and if the context permits, includes a writing that evidences a security agreement; (« contrat de sûreté »)
"security interest" means
(a) an interest in personal property that secures payment or performance of an obligation, but does not include the interest of a seller who ships goods to a buyer under a negotiable bill of lading or its equivalent to the order of the seller or an agent of the seller, unless the parties otherwise evidence an intention to create or provide for a security interest in the goods, and
(b) the interest of
(i) a transferee arising from the transfer of an account or a transfer of chattel paper,
(ii) a consignor who delivers goods to a consignee under a commercial consignment, and
(iii) a lessor under a lease for a term of more than one year,
whether or not the interest secures payment or performance of an obligation; (« sûreté »)
"specific goods" means goods identified and agreed upon at the time a security agreement in respect of the goods is made; (« objets déterminés »)
"trust indenture" means a deed, indenture or document, however designated, by the terms of which a person issues, guarantees or provides for the issue or guarantee of debt obligations secured by a security interest and in which another person is appointed as trustee for the holders of the debt obligations issued, guaranteed or provided for under the deed, indenture or document; (« acte de fiducie »)
"value" means consideration sufficient to support a simple contract, and includes an antecedent debt or antecedent liability. (« prestation »)
2(1) For the purpose of this Act,
(a) a natural person knows or has knowledge when the person acquires information under circumstances in which a reasonable person would take cognizance of it;
(b) a partnership knows or has knowledge when information comes to the attention of one of the general partners, or a person having control or management of the partnership, under circumstances in which a reasonable person would take cognizance of it;
(c) a corporation knows or has knowledge
(i) when information comes to the attention of
(A) a managing director or officer of the corporation, or
(B) a senior employee of the corporation with responsibility for matters to which the information relates,
under circumstances in which a reasonable person would take cognizance of it, or
(ii) when information in writing is delivered to
(A) the registered office of the corporation, or
(B) the attorney for service for the corporation;
(d) the members of an association know or have knowledge when information comes to the attention of
(i) a managing director or officer of the association,
(ii) a senior employee of the association with responsibility for matters to which the information relates, or
(iii) all members,
under circumstances in which a reasonable person would take cognizance of it; and
(e) a government knows or has knowledge when information comes to the attention of a senior employee of the government with responsibility for matters to which the information relates under circumstances in which a reasonable person would take cognizance of it.
2(2) Except where otherwise provided in this Act, the determination whether goods are "consumer goods", "inventory" or "equipment" shall be made as of the time the security interest in the goods attaches.
2(3) Proceeds are traceable whether or not a fiduciary relationship exists between the person who has a security interest in the proceeds, as provided in section 28, and the person who has rights in or has dealt with the proceeds.
When transferee or secured party takes possession
2(4) Where collateral is a security, the transfer of which may be effected by an entry in the records of a clearing agency as provided in the relevant law relating to the transfer of an interest in the security, the transferee or secured party is deemed to take possession of the security when the appropriate entries are made in the records of the clearing agency.
PART 2
APPLICATION
3(1) Subject to section 4, this Act applies
(a) to every transaction that in substance creates a security interest, without regard to its form and without regard to the person who has title to the collateral; and
(b) without restricting the generality of clause (a), to a chattel mortgage, conditional sale, fixed charge, floating charge, pledge, trust indenture, trust receipt, assignment, consignment, lease, trust and transfer of chattel paper, where it secures payment or performance of an obligation.
Application to transfer, lease, consignment
3(2) Subject to section 4 and subsection 55(1), this Act applies to a transfer of an account or chattel paper, a lease for a term of more than one year and a commercial consignment that does not secure payment or performance of an obligation.
4 Except as otherwise provided in this Act, this Act does not apply to
(a) a lien, charge or other interest given by a rule of law or a statute in force in Manitoba, unless the statute expressly provides that this Act applies;
(b) the creation or transfer of an interest or claim in or under a contract of annuity or policy of insurance except the transfer of a right to money or other value payable under a policy of insurance as indemnity or compensation for loss of or damage to collateral;
(c) the creation or transfer of an interest in present or future wages, salary, pay, commission or any other compensation for labour or personal services other than fees for professional services;
(d) a transfer of an unearned right to payment under a contract to a transferee who is to perform the transferor's obligations under the contract;
(e) the creation or transfer of an interest in land including a lease;
(f) the creation or transfer of a right to payment that arises in connection with an interest in or a lease of land, other than a transfer of rental payments payable under a lease of land and a right to payment evidenced by a security or instrument;
(g) a sale of accounts or chattel paper as part of a sale of a business out of which they arose unless the vendor remains in apparent control of the business after the sale;
(h) a transfer of accounts made solely to facilitate the collection of accounts for the transferor;
(i) the creation or transfer of a right to damages in tort;
(j) an assignment for the general benefit of creditors made pursuant to an Act of the Parliament of Canada relating to insolvency; or
(k) a security agreement governed by a statute of the Parliament of Canada that deals with the rights of parties to the agreement or the rights of third parties affected by a security interest created by the agreement, including an agreement governed by Part VIII of the Bank Act (Canada) and a mortgage under the Canada Shipping Act.
Applicable law respecting validity and perfection
5(1) Subject to this Act, the validity, perfection and effect of perfection or non-perfection of
(a) a security interest in goods; or
(b) a possessory security interest in a security, an instrument, a negotiable document of title, money and chattel paper;
is governed by the law of the jurisdiction where the collateral is situated when the security interest attaches.
5(2) For the purpose of subsection (1), an uncertified security is situated where the records of the clearing agency are kept.
Perfection when goods previously perfected
5(3) A security interest in goods perfected under the law of the jurisdiction in which the goods are situated at the time the security interest attaches but before the goods are brought into the province continues perfected in the province if it is perfected in the province,
(a) not later than 60 days after the goods are brought into the province;
(b) not later that 15 days after the day the secured party has knowledge that the goods have been brought into the province; or
(c) before perfection ceases under the law of the jurisdiction in which the goods were situated when the security interest attached;
whichever is earliest, but the security interest is subordinate to the interest of a buyer or lessee of the goods who acquires the interest without knowledge of the security interest and before it is perfected in the province under section 24 or 25.
5(4) A security interest that is not perfected as provided in subsection (3) may be otherwise perfected in the province under this Act.
Perfection when goods not previously perfected
5(5) Where a security interest referred to in subsection (1) is not perfected under the law of the jurisdiction in which the collateral is situated at the time the security interest attaches and before the collateral is brought into the province, it may be perfected under this Act.
Applicable law where goods moved
6(1) Subject to section 7,
(a) if the parties to a security agreement that creates a security interest in goods in one jurisdiction understand at the time the security interest attaches that the goods will be kept in another jurisdiction; and
(b) if the goods are removed to the other jurisdiction, for a purpose other than transportation through the other jurisdiction, not later than 30 days after the security interest attaches;
the validity, perfection and effect of perfection or non-perfection of the security interest is governed by the law of the other jurisdiction.
Where goods brought into province perfected elsewhere
6(2) If the other jurisdiction referred to in subsection (1) is not this province, and the goods are later brought into this province, the security interest in the goods is a security interest to which subsection 5(3) applies if it was perfected under the law of the jurisdiction from which the goods were removed.
7(1) For the purpose of this section, a debtor is located at
(a) any place of business of the debtor;
(b) the executive office of the debtor, if the debtor has more than one place of business; and
(c) the principal residence of the debtor, if the debtor has no place of business.
Applicable law for mobile goods, intangibles, etc.
7(2) The validity, perfection and effect of perfection or non-perfection of
(a) a security interest in
(i) an intangible, or
(ii) goods that are of a type that are normally used in more than one jurisdiction, if the goods are equipment or inventory leased or held for lease by a debtor to others; and
(b) a non-possessory security interest in a security, an instrument, a negotiable document of title, money and chattel paper;
is governed by the law, including the conflict of law rules, of the jurisdiction where the debtor is located when the security interest attaches.
Perfection where debtor relocates
7(3) Where a debtor relocates to another jurisdiction or transfers an interest in the collateral to a person located in another jurisdiction, a security interest perfected in accordance with the law applicable as provided in subsection (2) continues perfected in the province if it is perfected in the other jurisdiction
(a) not later than 60 days after the day the debtor relocates or transfers an interest in the collateral to a person located in the other jurisdiction;
(b) not later than 15 days after the day the secured party has knowledge that the debtor has relocated or transferred an interest in the collateral to a person located in the other jurisdiction; or
(c) before the day that perfection ceases under the law of the first jurisdiction;
whichever is earliest.
Possible subordination of interest
7(4) If the law governing the perfection of a security interest referred to in subsection (2) or (3) does not provide for public registration or recording of such security interest or a notice relating to it, and the collateral is not in the possession of the secured party, the security interest is subordinate to
(a) an interest in an account payable in the province; and
(b) an interest in goods, a security, an instrument, a negotiable document of title, money or chattel paper acquired when the collateral was situated in the province;
unless it is perfected under this Act before the interest referred to in clause (a) or (b) arises.
7(5) A security interest referred to in subsection (4) may be otherwise perfected under this Act.
7(6) Notwithstanding subsection (2) and section 6, the validity, perfection and effect of perfection or non-perfection of a security interest in minerals or in an account resulting from the sale of the minerals at the minehead
(a) that is provided for in a security agreement executed before the minerals are extracted; and
(b) that attaches to the minerals upon extraction or attaches to an account upon sale of the minerals;
is governed by the law of the jurisdiction in which the minehead is located.
7(7) In subsection (6), "minehead" includes wellhead.
Procedural and substantive issues
8(1) Notwithstanding sections 5 to 7,
(a) procedural issues involved in the enforcement of the rights of a secured party against collateral other than intangibles are governed by the law of the jurisdiction in which the collateral is located when the rights are exercised;
(b) subject to clause (c), procedural issues involved in the enforcement of the rights of a secured party against intangibles are governed by the law of the forum; and
(c) substantive issues involved in the enforcement of the rights of a secured party against collateral are governed by the proper law of the contract between the secured party and the debtor.
8(2) For the proposes of sections 5 to 7, a security interest is perfected under the law of a jurisdiction if the secured party has complied with the law of the jurisdiction with respect to the creation and continuance of a security interest with the result that the security interest has a status in relation to the interests of other secured parties, buyers, judgment creditors or a trustee in bankruptcy of the debtor similar to that of an equivalent security interest created and perfected under this Act.
PART 3
VALIDITY OF SECURITY AGREEMENTS AND RIGHTS OF PARTIES
Effectiveness of security agreement
9 Except as otherwise provided in this or any other Act, a security agreement is effective according to its terms between the parties to the agreement and against third parties.
Enforceability against third party
10(1) Subject to subsection (2), a security interest is enforceable against a third party only where
(a) the collateral is in the possession of the secured party; or
(b) the debtor signs a security agreement that contains
(i) a description of the collateral by item or kind,
(ii) a statement that a security interest is taken in all of the debtor's present and after-acquired personal property, or
(iii) a statement that a security interest is taken in all of the debtor's present and after-acquired personal property except specified items or kinds of personal property.
10(2) For the purpose of clause (1)(a), a secured party is deemed not to have taken possession of collateral that is in the apparent possession or control of the debtor or the debtor's agent.
Enforcement of security interest in proceeds
10(3) A security interest in proceeds is enforceable against a third party whether or not the security agreement contains a description of the proceeds.
Delivery of copy of security agreement
11 Where a security agreement is in writing, the secured party shall deliver a copy of it to the debtor not later than 10 days after it is executed and, if the secured party fails to do so after a request by the debtor, the court may, on application by the debtor, order the secured party to provide a copy to the debtor.
Attachment of security interest
12(1) A security interest, including a security interest in the nature of a floating charge, attaches when
(a) value is given;
(b) the debtor has rights in the collateral; and
(c) except for the purpose of enforcing rights as between the parties to the security agreement, the security interest becomes enforceable within the meaning of section 10;
unless the parties specifically agree to postpone the time of attachment, in which case it attaches at the time specified in the agreement.
Right of lessee or consignee in goods
12(2) For the purpose of clause (1)(b) and without limiting any other rights of the debtor, a lessee under a lease for a term of more than one year or a consignee under a commercial consignment has rights in the goods when the lessee or consignee obtains possession of them pursuant to the lease or consignment.
Rights of debtor in certain goods
12(3) For the purpose of subsection (1), a debtor has no rights in
(a) crops until they become growing crops;
(b) the young of animals until they are conceived;
(c) minerals until they are extracted; or
(d) trees, other than crops, until they are severed.
Interest in after-acquired property
13(1) Subject to section 12 and subsection (2), where a security agreement provides for a security interest in after-acquired property, the security interest attaches in accordance with section 12 without specific appropriation by the debtor.
Security interest attaching to after-acquired crops
13(2) A security interest does not attach to after-acquired property that is
(a) a crop that becomes a growing crop more than one year after the security agreement is entered into, except that a security interest in a crop that is given in conjunction with a lease, agreement for sale or mortgage of land may, if the parties so agree, attach to a crop to be grown on the land during the term of the lease, agreement for sale or mortgage; or
(b) a consumer good other than an accession, unless the security interest is a purchase money security interest or a security interest in collateral obtained by the debtor as replacement for collateral described in the security agreement.
14(1) A security agreement or a related agreement may provide for future advances.
Where future advances not binding
14(2) Unless the parties otherwise agree, an obligation owing to a debtor to make future advances is not binding on a secured party if the collateral is seized, attached, charged or made subject to an equitable execution under circumstances described in subclause 20(a)(i) or (ii), and the secured party has knowledge of it before making the advances.
Application of sale of goods law
15 Where a seller retains a purchase money security interest in goods, the law relating to contracts of sale, including a disclaimer, limitation or modification of the seller's performance obligations with respect to the goods, governs the sale.
Acceleration of payment or performance
16 Where a security agreement provides that a secured party may accelerate payment or performance by the debtor if the secured party considers that he or she is insecure or that the collateral is in jeopardy, the provision shall be construed to mean that the secured party has the right to do so only if the secured party believes and has commercially reasonable grounds to believe that the collateral is or is about to be placed in jeopardy or that the prospect of payment or performance is or is about to be impaired.
17(1) In this section, "secured party" includes a receiver.
Custody and preservation of collateral
17(2) A secured party shall use reasonable care in the custody and preservation of collateral in the possession of the secured party, and, unless the parties otherwise agree, in the case of an instrument, a security or chattel paper, reasonable care includes taking necessary steps to preserve rights against other persons.
Effect of collateral in possession of secured party
17(3) Unless the parties otherwise agree, where collateral is in the secured party's possession,
(a) reasonable expenses, including the cost of insurance and payment of taxes or other charges incurred in obtaining and maintaining possession of the collateral, are chargeable to the debtor and are secured by the collateral;
(b) the risk of loss or damage, except where caused by the negligence of the secured party is on the debtor to the extent of any deficiency in insurance coverage;
(c) the secured party may hold as additional security any increase or profits, except money, resulting from the collateral, and shall apply money so received, unless remitted to the debtor, immediately upon its receipt in reduction of the obligation secured; and
(d) the secured party shall keep the collateral identifiable, but fungible collateral may be commingled.
17(4) Subject to subsection (2), a secured party may use the collateral
(a) in the manner and to the extent provided in the security agreement;
(b) for the purpose of preserving the collateral or its value; or
(c) in accordance with an order of the court.
Demand for information from secured party
18(1) The debtor, a creditor, a sheriff, a person with an interest in personal property of the debtor, or an authorized representative of any of them may, by a demand in writing containing an address for reply and delivered to the secured party
(a) at the secured party's most recent address set forth in a registered financing statement containing a description of personal property of the debtor; or
(b) at the current address of the secured party, if known by the person making the demand;
require the secured party to send or make available the information specified in subsection (2) to the person making the demand or, if the demand is made by the debtor, to a person at an address specified by the debtor.
Information that may be demanded
18(2) The information that may be demanded under subsection (1) may be any one or more of the following:
(a) a copy of any security agreement providing for a security interest held by the secured party in the personal property of the debtor;
(b) a statement in writing of the amount of the indebtedness and of the terms of payment of the indebtedness, as of the date specified in the demand;
(c) a written approval or correction of an itemized list of personal property attached to the demand indicating which items are collateral as of the date specified in the demand;
(d) a written approval or correction of the amount of indebtedness and of the terms of payment of the indebtedness, as of the date specified in the demand;
(e) the location of the security agreement or a copy of it to enable a person entitled to receive a copy of the security agreement to inspect it.
18(3) A person with an interest in personal property of a debtor is entitled to make a demand under subsection (1) only with respect to a security agreement providing for a security interest in the property in which the person has an interest.
Inspection of security agreement
18(4) The secured party, on demand of the person entitled to receive a copy of the security agreement under subsection (1), shall permit the person to inspect the security agreement of a copy of it during normal business hours at the location referred to in clause (2)(e).
Security interest in type of collateral
18(5) If the secured party claims a security interest in all of a particular type of collateral of the debtor, or the proceeds thereof, the secured party shall so indicate in addition to approving or correcting the itemized list of personal property attached to the demand made under clause (2)(c).
Reply within 10 days of demand
18(6) Subject to subsection (7), the secured party, other than a trustee under a trust indenture, shall reply to the demand made under subsection (1) not later than 10 days after the demand is made.
Trustee to reply within 25 days
18(7) A secured party who is a trustee under a trust indenture shall reply to the demand made under subsection (1) not later than 25 days after the demand is made.
Where reply not complete or correct
18(8) Where, without reasonable excuse,
(a) the secured party fails to comply with the demand within the time specified; or
(b) in the case of a demand under subsection (1), the reply is incomplete or incorrect;
the person making the demand, in addition to any other remedy provided by this Act, may apply to the court for an order requiring the secured party to comply with the demand.
18(9) Where a person receiving a demand under subsection (1) no longer has an interest in the obligation or property of the debtor that is the subject of the demand, that person shall, not later than 10 days after receiving the demand, disclose the name and address of the immediate successor in interest and, if known, the latest successor in interest.
18(10) Where, without reasonable excuse, the person receiving the demand fails to comply with subsection (9), the person making the demand, in addition to any other remedy provided in this Act, may apply to the court for an order requiring that person to comply with subsection (9).
18(11) On application under subsection (8) or (10), the court may make an order requiring
(a) the secured party referred to in subsection (8) to comply with the demand referred to in that subsection; or
(b) the person referred to in subsection (9) to disclose the information referred to in that subsection.
Further content of court order
18(12) In an application under subsection (8) or (10) or in a separate application, the court may make
(a) any order it considers necessary to ensure compliance with the demand; and
(b) in the case of an application under subsection (8), an order that, in the event of non-compliance with the order of the court to respond to the demand, the security interest of the secured party with respect to which the demand was made is unperfected or extinguished and that any related registration be discharged.
Extension of time, exemption from compliance
18(13) On an application under subsection (8) or (10), or on an application of the secured party referred to in subsection (8) or the person referred to in subsection (9), the court may, subject to section 65,
(a) exempt the secured party or person receiving the demand in whole or in part from complying with subsection (1) or (9), other than with respect to a demand made by the debtor; or
(b) extend the time for compliance.
18(14) A secured party who replies to a demand made under subsection (1) is estopped, for the purpose of this Act, as against
(a) the person making the demand; or
(b) any other person who can reasonably be expected to rely on the reply;
to the extent that the person relies on the reply, from denying
(c) the accuracy of information contained in the reply to the demand under clause (2)(b), (c) or (d); and
(d) that a copy of a security agreement provided under clause (2)(a) is a true copy of the security agreement required to be provided in response to the demand.
Successor in interest estopped
18(15) A successor in interest referred to in subsection (9) is estopped, for the purpose of this Act, as against
(a) the person making the demand referred to in subsection (1); and
(b) any other person who can reasonably be expected to rely on the reply to the demand;
to the extent that the person has relies on the reply, from denying
(c) the accuracy of information contained in the reply to the demand under clause 2(b), (c) or (d); and
(d) that the copy of a security agreement provided under clause (2)(a) is a true copy of the security agreement required to be provided in response to the demand.
Successor in interest not estopped
18(16) A successor in interest referred to in subsection (9) is not estopped under subsection (15) where
(a) the person making the demand knows the identity and address of the successor in interest; or
(b) before the demand, a prescribed financing statement is registered as provided in section 51 disclosing the successor in interest as the secured party.
18(17) The person to whom a demand is made under this section may require payment in advance of a fee in the amount prescribed for each demand, but the debtor is entitled to a reply without charge once every six months.
Person not entitled to information
18(18) A secured party who receives a demand that purports to be made by a person entitled to make it under subsection (1) may act as if the person is, in fact, entitled to make the demand unless the secured party knows that the person is not entitled to make it.
PART 4
PERFECTION AND PRIORITIES
Perfection of security interest
19 A security interest is perfected when it attaches and every other step required for perfection under this Act is completed, regardless of the order of occurrence.
Subordination of unperfected security interest
20 A security interest
(a) in collateral is subordinate to the interest of
(i) a person who causes the collateral to be seized under legal process to enforce a judgment, including execution, attachment or garnishment, or who has obtained a charging order or equitable execution affecting or relating to the collateral,
(ii) a sheriff who seizes the collateral under The Executions Act,
(iii) a judgment creditor entitled by law to participate in the distribution of property seized under legal process, or its proceeds, as provided in The Executions Act, and
(iv) a representative of creditors, but only for the purpose of enforcing the rights of persons referred to in subclause (i),
if that security interest is unperfected at the time
(v) the interest of the persons mentioned in subclause (i), (ii), or (iv) arises, or
(vi) the judgment creditor referred to in subclause (iii) causes the collateral to be seized under The Executions Act;
(b) in collateral is not effective against
(i) a trustee in bankruptcy if the security interest is unperfected at the date of bankruptcy, or
(ii) a liquidator appointed under the Winding-up Act (Canada) if the security interest is unperfected at the date that the winding-up order is made;
(c) in goods, chattel paper, a security, a document of title, an instrument or an intangible or money is subordinate to the interest of a transferee who
(i) acquires the interest under a transaction that is not a security agreement,
(ii) gives value, and
(iii) acquires the interest without knowledge of the security interest before the security interest is perfected.
Damages recovereable by lessor or consignor
21 Where the interest of a lessor under a lease for a term of more than one year or of a consignor under a commercial consignment is not effective against an execution creditor under clause 20(a) or a trustee or liquidator under clause 20(b), the lessor or consignor is deemed, as against the lessee or consignee to suffer, immediately before the seizure of the leased or consigned goods or the date of the bankruptcy or winding-up order, damages in an amount equal to
(a) the value of the leased or consigned goods at the date of the seizure, bankruptcy, or winding-up order; and
(b) the amount of loss, other than the amount referred to in clause (a), resulting from the termination of the lease or consignment.
Priority of purchase money security interest
22(1) A purchase money security interest in
(a) collateral, other than an intangible, that is perfected not later than 15 days after the day the debtor, or a third party, at the request of the debtor, obtains possession of the collateral, whichever is earlier; or
(b) an intangible that is perfected not later than 15 days after the day the security interest attaches;
has priority over the interest of a person mentioned in clause 20(a) or (b).
22(2) For the purpose of this section, where goods are shipped by common carrier to a debtor or to a third party designated by the debtor, the debtor does not obtain possession of the goods until the debtor or the third party, at the request of the debtor, obtains actual possession of the goods or a document of title to the goods, whichever is earlier.
23(1) If a security interest is perfected under this Act and is again perfected in some other way under this Act without an intermediate period when it is unperfected, the security interest is continuously perfected for the purpose of this Act.
23(2) A transferee of a security interest has the same priority with respect to perfection of the security interest as the transferor had at the time of the transfer.
Perfection by possession of collateral
24(1) Subject to section 19, possession, repossession or seizure of collateral by the secured party, or on the secured party's behalf by another person, perfects a security interest in
(a) chattel paper;
(b) goods;
(c) an instrument;
(d) a security;
(e) a negotiable document of title; and
(f) money;
but only while the possession, repossession or seizure is pursuant to a right given by the security agreement or this Act.
Possession of collateral by debtor
24(2) For the purpose of subsection (1), a secured party does not have possession of collateral that is in the actual or apparent possession or control of the debtor or the debtor's agent.
25 Subject to section 19, registration of a financing statement perfects a security interest in collateral.
26(1) A security interest perfected under section 24 in
(a) an instrument or a security that a secured party delivers to the debtor for the purpose of
(i) ultimate sale or exchange,
(ii) presentation, collection or renewal,
(iii) registration of a transfer; or
(b) a negotiable document of title or goods held by a bailee that are not covered by a negotiable document of title, which document of title or goods the secured party makes available to the debtor for the purpose of
(i) ultimate sale or exchange,
(ii) loading, unloading, storing, shipping or trans-shipping, or
(iii) manufacturing, processing, packaging or otherwise dealing with goods in a manner preliminary to their sale or exchange;
remains perfected, notwithstanding section 10, for the first 15 days after the collateral comes under the control of the debtor.
Perfection after expiry of time
26(2) After the expiration of the period of time set out in subsection (1), a security interest referred to in this section is subject to the provisions of the Act relating to the perfection of a security interest.
Perfection where goods in possession of bailee
27(1) Subject to section 19, a security interest in goods in the possession of a bailee is perfected by
(a) issue of a document of title by the bailee in the name of the secured party;
(b) perfection of a security interest in a negotiable document of title to the goods where the bailee has issued one;
(c) a holding on behalf of the secured party under section 24;
(d) deposit, by a secured party to whom a non-negotiable warehouse receipt has been transferred, of the transfer with the warehouseman who issued the receipt in accordance with subsection 22(2) of The Warehouse Receipts Act; or
(e) registration of a financing statement relating to the goods.
Issue of negotiable document of title
27(2) The issue of a negotiable document of title covering goods does not preclude any other security interest in the goods from arising during the period that the negotiable document of title is outstanding.
Priority of negotiable document of title
27(3) A perfected security interest in a negotiable document of title covering goods takes priority over a security interest in goods otherwise perfected after the goods become covered by the negotiable document of title.
Collateral giving rise to proceeds
28(1) Subject to this Act, where collateral is dealt with or otherwise gives rise to proceeds, the security interest
(a) continues in the collateral unless the secured party expressly or impliedly authorizes such dealing; and
(b) extends to the proceeds;
but where the secured party enforces a security interest against both the collateral and the proceeds, the amount secured by the security interest in the collateral and the proceeds is limited to the fair market value of the collateral at the date of the dealing.
28(2) Where the security interest was perfected by registration when the proceeds arose, the security interest in the proceeds remains continuously perfected so long as the registration remains effective or, where the security interest is perfected with respect to the proceeds by any other method permitted under this Act, for so long as the conditions of the perfection are satisfied.
29(1) Where a debtor sells or leases goods that are subject to a security interest under circumstances in which the buyer or lessee takes free of the security interest under clause 28(1)(a) or section 30, the security interest reattaches to the goods if
(a) the goods are returned to, seized or repossessed by the debtor or by a transferee of chattel paper created by the sale or lease; and
(b) the obligation secured remains unpaid or unperformed.
Perfection after interest reattaches
29(2) Where a security interest reattaches under subsection (1), the perfection of the security interest and the time of registration or perfection is determined as if the goods had not been sold or leased if the security interest was perfected by registration at the time of the sale or lease and the registration is effective at the time of the return, seizure or repossession.
Interest of transferee of account or chattel paper
29(3) Where a sale or lease of goods creates an account or chattel paper and
(a) the account or chattel paper is transferred to a secured party; and
(b) the goods are returned to, seized or repossessed by the debtor or by the transferee of the chattel paper;
the transferee of the account or chattel paper has a security interest in the goods that attaches when the goods are returned, seized or repossessed.
Perfection of interest in goods under ss.(3)
29(4) A security interest in goods arising under subsection (3) is perfected if the security interest in the account or chattel paper was perfected at the time of the return, seizure or repossession, but becomes unperfected on the expiry of 15 days thereafter unless the transferee registers a financing statement relating to the security interest or takes possession of the goods by seizure, repossession or otherwise, before the expiration of that period.
Subordination of interest of transferee
29(5) A security interest in goods that a transferee of an account has under subsection (3) is subordinate to a perfected security interest arising under subsection (1) and to a security interest of a transferee of chattel paper arising under subsection (3).
Priority of interest of transferee
29(6) A security interest in goods that a transferee of chattel paper has under subsection (3) has priority over
(a) a security interest in goods reattaching under subsection (1); and
(b) a security interest in goods as after-acquired property that attaches on the return, seizure or repossession of the goods;
if the transferee of the chattel paper would have priority under subsection 31(7) as to the chattel paper over an interest in the chattel paper claimed by the holder of the security interest in the goods.
29(7) A security interest in goods given by a buyer or lessee of the goods referred to in subsection (1) that attaches while the goods are in the possession of the buyer, lessee or debtor and that is perfected when the goods are returned, seized or repossessed has priority over a security interest in the goods arising under this section.
30(1) In this section,
"buyer of goods" includes a person who obtains vested rights in goods pursuant to a contract to which the person is a party, as a consequence of the goods becoming a fixture or accession to property in which the person has an interest; (« acheteur d'objets »)
"ordinary course of business of the seller" includes the supply of goods in the ordinary course of business as part of a contract for services and materials; (« cours normal des affaires du vendeur »)
"seller" includes a person who supplies goods that become a fixture or accession under a contract with a buyer of goods or under a contract with a person who is party to a contract with such a buyer of goods. (« vendeur »)
Rights of buyer or lessee of goods
30(2) A buyer of goods or lessee of goods sold or leased in the ordinary course of business of the seller or lessor takes free of any perfected or unperfected security interest given by the seller or lessor or arising under section 28 or 29, whether or not the buyer of goods or lessee knows of it, unless the buyer of goods or lessee also knows that the sale or lease constitutes a breach of the security agreement under which the security interest was created.
Goods acquired free of perfected interest
30(3) A buyer of goods or lessee of goods that are acquired as consumer goods or goods bought for farming uses takes free of a perfected or unperfected security interest in the goods if the buyer of goods or lessee
(a) gives value for the interest acquired; and
(b) buys or leases the goods without knowledge of the security interest.
30(4) Subsection (3) does not apply to a security interest in
(a) a fixture; or
(b) goods the purchase price of which exceeds $1,000. or, in the case of a lease, the fair market value of which exceeds $1,000.
Conditional right of buyer or lessee
30(5) A buyer of goods or lessee of goods takes free of a security interest that is temporarily perfected under subsection 26(1) or 29(4), or a security interest the perfection of which is continued under section 51 during the 15 day periods referred to in those subsections, if the buyer of goods or lessee
(a) gives value for the interest acquired; and
(b) buys or leases the goods without knowledge of the security interest.
Sale or lease not in ordinary course of business
30(6) Where goods that are equipment and of a kind prescribed as serial numbered goods are sold or leased, the buyer of goods or lessee takes free from any security interest in the goods perfected under section 25 if
(a) the buyer of goods or lessee buys or leases the goods without knowledge of the security interest; and
(b) the goods are not described by serial number in the registration relating to the security interest.
30(7) A sale or lease under subsection (2), (3), (5) or (6) may be
(a) for cash;
(b) by exchange for other property; or
(c) on credit;
and includes delivering goods or a document of title under a pre-existing contract for sale but does not include a transfer as security for, or in total or partial satisfaction of, a money debt or past liability.
31(1) A holder of money has priority over a security interest in it perfected under section 25 if the holder
(a) acquired the money without knowledge that it is subject to a security interest; or
(b) is a holder for value, whether or not that person acquired the money without knowledge that it is subject to a security interest.
31(2) A creditor who receives payment of a debt owing by a debtor through a debtor initiated payment has priority over a security interest in
(a) the funds paid;
(b) the intangible which was the source of the payment; and
(c) any instrument used to effect the payment;
whether or not the creditor has knowledge of the security interest at the time of the payment.
31(3) In subsection (2), "debtor initiated payment" means
(a) subject to clause (c), payment effected through use of an instrument, debit or transfer order, authorization or similar written payment mechanism executed by the debtor;
(b) subject to clause (c), payment effected through an electronic funds transfer initiated by the debtor;
(c) in the case of payment to a deposit-taking institution from a deposit account of the debtor held by the institution,
(i) payment referred to in clauses (a) and (b) initiated or made by the debtor at the time the debt is payable or thereafter,
(ii) payment effected through the use of a post-dated cheque drawn by the debtor, or
(iii) payment under a written authorization executed by the debtor as part of a loan or other credit transaction, under which the debtor became indebted to the deposit-taking institution, which
(A) sets out specified amounts to be debited to the deposit account at specified times or intervals, or
(B) authorizes debits to the deposit account when the credit in the deposit account exceeds an amount specified in the written authorization,
but does not include payment authorized by the deposit-taking institution as agent of the debtor.
Purchaser of instrument or security
31(4) A purchaser of an instrument or a security has priority over a security interest in the instrument or security perfected under section 25 if the purchaser
(a) gives value for the instrument or security;
(b) acquires the instrument or security without knowledge that it is subject to a security interest; and
(c) takes possession of the instrument or security.
Holder of negotiable instrument
31(5) A holder to whom a negotiable document of title is negotiated has priority over a security interest in the document of title that is perfected under section 26 or subsection 28(4) if the holder
(a) gives value for the document of title; and
(b) acquires the document of title without knowledge that it is subject to a security interest.
Where purchaser or holder has knowledge
31(6) For the purpose of subsections (4) and (5), a purchaser of an instrument or a security or a holder of a negotiable document of title who acquires it under a transaction entered into in the ordinary course of the transferor's business has knowledge only if the purchaser or holder acquires the interest with knowledge that the transaction violates the terms of the security agreement creating or providing for the security interest.
31(7) A purchaser of chattel paper who takes possession of it in the purchaser's ordinary course business and for new value has priority over a security interest in the chattel paper that
(a) is perfected under section 25, if the purchaser does not have knowledge at the time of taking possession that the chattel paper is subject to a security interest; or
(b) attaches to proceeds of inventory under section 28, whatever the extent of the purchaser's knowledge.
Priority of lien of person furnishing material
32 Where a person in the ordinary course of business furnishes materials or services with respect to goods that are subject to a security interest, any lien the person has in respect of such materials or services has priority over a perfected or unperfected security interest unless the lien is given by an Act that provides that the lien does not have such priority.
33(1) In this section, "transfer" includes a sale, the creation of a security interest or a transfer under judgment enforcement proceedings.
33(2) The rights of a debtor in collateral may be transferred consensually or by operation of law notwithstanding a provision in the security agreement prohibiting transfer or declaring a transfer to be a default, but a transfer by the debtor does not prejudice the rights of the secured party under the security agreement or otherwise, including the right to treat a prohibited transfer as an act of default.
34(1) In this section, "non-proceeds security interest" or "non- proceeds purchase money security interest" means a security interest or purchase money security interest in original collateral.
Priority of purchase money security interest
34(2) Subject to subsection (6) and section 28, a purchase money security interest in
(a) collateral or its proceeds, other than intangibles or inventory, that is perfected not later than 15 days after the day the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier; or
(b) an intangible or its proceeds that is perfected not later than 15 days after the day the security interest in the intangible attaches;
has priority over any other security interest in the same collateral given by the same debtor.
Security interest in inventory or proceeds
34(3) Subject to subsection (6) and section 28, a purchase money security interest in inventory or its proceeds has priority over any other security interest in the same collateral given by the same debtor if
(a) the purchase money security interest in the inventory is perfected at the time the debtor,or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier;
(b) the secured party gives a notice to any other secured party who, before the time of registration of the purchase money security interest, registers a financing statement containing a description that includes the same item or kind of collateral;
(c) the notice referred to in clause (b) states that the person giving the notice expects to acquire a purchase money security interest in inventory of the debtor, and describes the inventory by item or kind; and
(d) the notice is given before the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier.
34(4) A notice referred to in subsection (3) may be given in accordance with section 68 or by registered mail to the address of the person to be notified as it appears in the financing statement referred to in clause (3)(b).
Priority of purchase money interest
34(5) Subject to section 28, a purchase money security interest in goods and their proceeds, taken by a seller, lessor or consignor of the collateral, that is perfected
(a) in the case of inventory, at the date a debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier; and
(b) in the case of collateral other than inventory, not later than 15 days after a debtor, or another person at the request of a debtor, obtains possession of the collateral, whichever is earlier;
has priority over any other purchase money security interest in the same collateral given by the same debtor.
Non-proceeds security interest
34(6) A non-proceeds security interest in accounts given for new value has priority over a purchase money security interest in the accounts as proceeds of inventory if a financing statement relating to the security interest in the accounts is registered before the purchase money security interest is perfected or a financing statement relating to it is registered.
Priority of non-proceeds purchase money interest
34(7) A non-proceeds purchase money security interest has priority over a purchase money security interest in the same collateral or proceeds, if the non-proceeds purchase money security interest is perfected
(a) in the case of inventory, at the date a debtor, or another person at the request of a debtor, obtains possession of the collateral, whichever is earlier; and
(b) in the case of collateral other than inventory, not later than 15 days after a debtor, or another person at the request of a debtor, obtains possession of the collateral, whichever is earlier.
Debtor obtaining possession of goods
34(8) For the purpose of this section, where goods are shipped by common carrier to a debtor or to a person designated by a debtor, the debtor is deemed not to obtain possession of the goods until the debtor obtains actual possession of the goods or a document of title to the goods, whichever is earlier.
Security interest ends on discharge of obligation
34(9) A purchase money security interest in an item of collateral does not extend to or continue in the proceeds of the collateral after the obligation to pay the purchase price of the item, or to repay the value given for the purpose of enabling the debtor to acquire rights in the item, is discharged.
34(10) A perfected security interest in crops or their proceeds given for value to enable a debtor to produce the crops and given while the crops are growing crops or during a period of six months immediately before the time the crops become growing crops, has priority over any other security interest in the same collateral given by the same debtor.
34(11) A perfected security interest in animals or their proceeds given for value to enable the debtor to acquire food, drugs or hormones to be fed to or placed in the animal has priority over any other security interest in the same collateral given by the same debtor other than a perfected purchase money security interest.
General determination of priority
35(1) Where this Act provides no other method for determining priority between security interests,
(a) priority between conflicting perfected security interests in the same collateral is determined by the order of the occurrence of the following:
(i) the registration of a financing statement without regard to the date of attachment of security interest,
(ii) possession of the collateral under section 24 without regard to the date of attachment of the security interest, or
(iii) perfection under section 5, 7, 26, 28, 29 or 74,
whichever is earliest;
(b) a perfected security interest has priority over an unperfected security interest; and
(c) priority between conflicting unperfected security interests is determined by the order of attachment of the security interests.
Continuously perfected interest
35(2) For the purpose of subsection (1), a continuously perfected security interest shall be treated as perfected by the method by which it was originally perfected.
Time of registration, possession, perfection
35(3) For the purpose of subsection (1), but subject to section 28, the time of registration, possession or perfection of a security interest in original collateral is the time of registration, possession or perfection of its proceeds.
Registration of interest in equipment
35(4) A security interest in goods that are equipment and are of a kind prescribed as serial numbered goods is not registered or perfected by registration for the purpose of subsection (1), (7) or (8) or subsection 34(2) unless a financing statement relating to the security interest and containing a description of the goods by serial number is registered.
Priority applies to all advances
35(5) Subject to subsection (6), the priority which a security interest has under subsection (1) applies to all advances, including future advances.
Priority of interest re clause 20(a)
35(6) A perfected security interest has priority over the interests of persons referred to in clause 20(a) only to the following extent:
(a) advances made before the interests of the persons arise, or made before the sheriff seizes the collateral under The Executions Act;
(b) advances made before the secured party acquires knowledge of
(i) the interests of the persons,
(ii) seizure of the collateral by the sheriff, or
(iii) an order giving the sheriff rights to the collateral;
(c) advances made pursuant to
(i) a statutory requirement, or
(ii) a legally binding obligation owing to a person other than the debtor entered into by the secured party before acquiring the knowledge referred to in clause (b);
(d) reasonable costs and expenses incurred by the secured party for the protection, preservation, maintenance or repair of the collateral.
Lapsed or discharged registration
35(7) Where registration of a security interest lapses as a result of a failure to renew the registration or where a registration is discharged without authorization or in error, and the secured party registers the security interest not later than 30 days after the lapse or discharge, the lapse or discharge does not affect the priority status of the security interest in relation to a competing perfected security interest that immediately before the lapse or discharge has a subordinate priority position, except to the extent that such competing security interest secures advances made or contracted for after the lapse or discharge and before the reregistration.
Debtor's transfer of interest in collateral
35(8) Where a debtor transfers an interest in collateral which at the time of the transfer is subject to a perfected security interest, that security interest has priority over any other security interest granted by the transferee before the transfer except to the extent that the security interest granted by the transferee secures advances made or contracted for
(a) after the expiry of 15 days from the day the secured party who holds the security interest in the transferred collateral has knowledge of the information required to register a prescribed financing statement showing the transferee as the new debtor; and
(b) before the secured party referred to in clause (a) amends the registration to disclose the name of the transferee as the new debtor or takes possession of the collateral.
35(9) Subsection (8) does not apply where the transferee acquires the debtor's interest free from the security interest granted by the debtor.
36(1) In this section, "secured party" includes a receiver.
36(2) Subject to the regulations, this section applies only with respect to land for which a certificate of title is issued under The Real Property Act.
Interest in goods before becoming fixtures
36(3) Except as provided in this section and in section 30, a security interest in goods that attaches before or at the time the goods become fixtures has priority with respect to the goods over a claim to the goods made by a person with an interest in the land.
Priority of interest in fixture
36(4) A security interest referred to in subsection (3) is subordinate to the interest of
(a) a person who acquires for value an interest in the land after the goods become fixtures including an assignee for value of a person with an interest in the land at the time the goods become fixtures; and
(b) a person with a registered mortgage of the land who, after the goods become fixtures
(i) makes an advance under the mortgage, but only with respect to the advance, or
(ii) obtains an order for sale or foreclosure;
without fraud and before the security interest is registered in accordance with section 49.
Advance of mortgage money after search
36(5) Where a search is made of a certificate of title and
(a) at the time of the search, no notice under section 49 is recorded on the certificate of title; and
(b) on the day the search is made, in reliance on the search, mortgage money is advanced under a mortgage registered against the certificate of title;
the mortgage money is deemed to be advanced before the registration of any notice under section 49 that is not disclosed by the search, notwithstanding that a notice is registered against the certificate of title on the day the search is made.
Interest in goods after becoming fixtures
36(6) A security interest in goods that attaches after the goods become fixtures is subordinate to the interest of a person who
(a) has an interest in the land at the time the goods become fixtures and who
(i) has not consented to the security interest,
(ii) has not disclaimed an interest in the goods or fixtures,
(iii) has not entered into an agreement under which the person is entitled to remove the goods, or
(iv) is not otherwise precluded from preventing the debtor from removing the goods; or
(b) acquires an interest in the land after the goods become fixtures, if the interest is acquired without fraud and before the security interest in the goods is registered in accordance with section 49.
Subordinate interest in fixture
36(7) A security interest referred to in subsection (3) or (6) is subordinate to
(a) the interest of a creditor of the debtor who causes a writ of execution affecting the land to be transmitted to the appropriate land titles office; and
(b) the interest of a person who registers in the appropriate land titles office a certificate affecting the land issued under The Judgments Act;
before the security interest is registered in accordance with section 49.
Priority of purchase money security interest
36(8) The interest of a creditor or person referred to in subsection (7) does not take priority over a purchase money security interest in goods in respect of which a notice is registered in accordance with section 49 not later than 15 days after the goods become fixtures.
Removal of goods from land by secured party
36(9) A secured party who, under this Act, has the right to remove goods from land shall exercise this right of removal in a manner that causes no greater damage or injury to the land and to other property situated on it or that puts the occupier of the land to greater inconvenience than is necessarily incidental to the removal of the goods.
Reimbursement for damages to interest in land
36(10) A person, other than the debtor, who has an interest in the land at the time the goods subject to the security interest become fixtures is entitled to reimbursement for any damages to the interest of the person in the land caused during the removal of the goods, but is not entitled to reimbursement for diminution in the value of the land caused by the absence of the goods removed or by the necessity of replacement.
36(11) A person entitled to reimbursement under subsection (10) may refuse permission to remove the goods until the secured party gives adequate security for reimbursement.
Application to court by secured party
36(12) The secured party may apply to the court for one or more of the following orders;
(a) determining the person entitled to reimbursement under this section;
(b) determining the amount and kind of security to be provided by the secured party;
(c) determining the depository for the security; or
(d) authorizing the removal of the goods without the provision of security for reimbursement under subsection (11).
36(13) A person having an interest in the land that is subordinate to a security interest as provided in this section may, before the goods are removed from the land by the secured party, retain the goods on payment to the secured party of the lesser of
(a) the amount secured by the security interest having priority over such interest; and
(b) the fair market value of the goods if the goods were removed from the land.
Notice of intention to remove goods from land
36(14) A secured party who has a right to remove goods from land shall give to each person who appears by the records of the land titles office to have an interest in the land, a notice of the intention of the secured party to remove the goods, and the notice shall contain
(a) the name and address of the secured party;
(b) a description of the goods to be removed;
(c) the amount required to satisfy the obligation secured by the security interest;
(d) the fair market value of the goods, if the goods were removed from the land;
(e) a description of the land to which the goods are affixed; and
(f) a statement of intention to remove the goods, unless the amount referred to in subsection (13) is paid on or before a specified date than is not less than 15 days after the notice is given in accordance with subsection (15).
36(15) A notice referred to in subsection (14) shall be given not less than 15 days before removal of the goods, and may be given in accordance with section 68 or by registered mail to the address of the person to be notified as it appears in the records of the land titles office.
Application for postponement of removal
36(16) A person entitled to receive a notice under subsection (14) may apply to the court for an order postponing removal of the goods from the land.
37(1) In this section "secured party" includes a receiver.
37(2) Subject to the regulations, this section applies only with respect to land for which a certificate of title has been issued under The Real Property Act.
Priority of interest in growing crop
37(3) Except as provided in this section, a security interest in growing crops has priority with respect to the crops claimed by a person with an interest in the land.
Subordination of interest in growing crop
37(4) A security interest referred to in subsection (3) is subordinate to the interest of
(a) a person who acquires for value an interest in the land while the crops are growing crops, including a person who is an assignee for value of a person with an interest in the land while the crops are growing crops; and
(b) any person with a registered mortgage on the land who
(i) makes an advance under the mortgage after the crops become growing crops, but only with respect to the advance, or
(ii) obtains an order for sale or foreclosure after the crops become growing crops;
without fraud and before the security interest is registered in accordance with section 49.
Interest of creditor in growing crop
37(5) A security interest referred to in subsection (3) is subordinate to
(a) the interest of a creditor of the debtor who causes a writ of execution affecting the land to be transmitted to the appropriate land titles office; and
(b) a person who submits for registration in the appropriate land titles office a certificate affecting the land issued under The Judgments Act;
before the security interest is registered in accordance with section 49.
Priority of purchase money security interest
37(6) The interest of a creditor or person referred to in subsection (5) does not take priority over a purchase money security interest in the crops, or a security interest in the crops referred to in subsection 34(10), that is registered in accordance with section 49 not later than 15 days after the day the security interest in the crops attaches.
Seizure and removal of growing crop
37(7) Subsections 36(8) to (15) apply with necessary modifications to seizure and removal of growing crops from the land.
38(1) In this section,
"other goods" means goods to which an accession is installed or affixed; (« autres objets »)
"secured party" includes a receiver; (« créancier garanti »)
"the whole" means an accession and the other goods to which the accession is installed or affixed. (« le tout »)
Interest attaching before goods become an accession
38(2) Except as provided in this section and in section 30, a security interest in goods that attaches before or at the time the goods become an accession has priority with respect to the goods over a claim to the goods as an accession made by a person with an interest in the whole.
38(3) A security interest referred to in subsection (2) is subordinate to the interest of
(a) a person who acquires for value an interest in the whole after the goods become an accession including an assignee for value of a person with an interest in the whole at the time the goods become an accession; and
(b) a person with a security interest taken and perfected in the whole who, after the goods become an accession,
(i) makes an advance under a security agreement but only with respect to the advance, or
(ii) acquires the right to retain the whole in satisfaction of the obligation secured;
without knowledge of the security interest in the accession and before it is perfected.
Interest attaching after accession of goods
38(4) A security interest in goods that attaches after the goods becomes an accession is subordinate to the interest of a person who
(a) has an interest in the other goods at the time the goods become an accession and who
(i) does not consent to the security interest,
(ii) does not disclaim an interest in the goods or accessions,
(iii) does not enter into an agreement under which the person is entitled to remove the accession, or
(iv) is not otherwise precluded from preventing the debtor from removing the accession; or
(b) acquires an interest in the whole after the goods become an accession, if the interest is acquired without knowledge of the security interest and before the security interest in the accession is perfected.
Interest of creditor or sheriff
38(5) A security interest referred to in subsections (2) and (4) is subordinate to the interest of a creditor or a sheriff who has seized or caused the whole to be seized under legal process to enforce a judgment, if the seizure occurs under circumstances referred to in section 20 and if the security interest is not perfected at the date of seizure.
Priority of purchase money security interest
38(6) The interest of a creditor or a sheriff referred to in subsection (5) does not take priority over a purchase money security interest in goods that is perfected not later than 15 days after the goods become an accession.
38(7) A secured party who, under this Act, has the right to remove an accession from the whole shall exercise this right of removal in a manner that causes no greater damage or injury to the whole or the other goods or that puts the person in possession of the whole to greater inconvenience that is necessarily incidental to the removal of the accession.
38(8) A person, other than the debtor, who has an interest in the whole at the time the goods subject to the security interest become an accession is entitled to reimbursement for any damages to the interest of such person in the whole caused during the removal of the accession, but is not entitled to reimbursement for diminution in the value of the whole caused by the absence of the accession removed or by the necessity of its replacement.
38(9) The person entitled to reimbursement as provided in subsection (8) may refuse permission to remove the accession until the secured party has given adequate security for the reimbursement.
38(10) The secured party may apply to the court for one or more of the following orders:
(a) determining the person entitled to reimbursement under this section;
(b) determining the amount and kind of security to be provided by the secured party;
(c) determining the depository for the security;
(d) authorizing the removal of the goods without the provision of security for reimbursement under subsection (9).
38(11) A person who has an interest in the whole that is subordinate to a security interest as provided in this section may, before the accession goods are removed from the whole by the secured party, retain the accession on payment to the secured party of the lesser of
(a) the amount secured by the security interest entitled to priority; and
(b) the fair market value of the accession if the accession were removed from the whole.
38(12) The secured party who has a right to remove the accession from the whole shall give to each person
(a) who is known by the secured party to have an interest in the other goods or in the whole; and
(b) who has registered a financing statement
(i) using the name of the debtor and referring to the other goods, or
(ii) according to the serial number of the other goods if they are goods prescribed as serial numbered goods;
a notice of the intention of the secured party to remove the accession, and the notice shall contain
(c) the name and address of the secured party;
(d) a description of the goods to be removed;
(e) the amount required to satisfy the obligation secured;
(f) the fair market value of the accession, if the accession were removed from the whole;
(g) a description of the other goods; and
(h) a statement of intention to remove the accession unless the amount referred to in subsection (11) is paid on or before a specified date that is not less than 15 days after the notice is given in accordance with subsection (13).
38(13) A notice referred to in subsection (12) shall be given not less than 15 days before removal of the accession and may be given in accordance with section 68 or by registered mail to the address of the person to be notified as it appears on the financing statement.
38(14) A person entitled to receive a notice under subsection (12) may apply to the court for an order postponing removal of the accession.
Continued interest in commingled goods
39(1) A perfected security interest in goods that later become part of a product or mass continues in the product or mass if the goods are so manufactured, processed, assembled or commingled that their identity is lost in the product or mass.
39(2) Subject to subsections (4) and (6), where more than one perfected security interest continues in the same product or mass under subsection (1), and each was a security interest in separate goods, the security interests are entitled to share in the product or mass according to the ratio that the obligation secured by each security interest bears to the sum of the obligations secured by all security interests.
Perfected interest in commingled goods
39(3) For the purpose of section 35, perfection of a security interest in goods that later become part of a product or mass shall also be treated as perfection of the interest in the product or mass.
Interest not to exceed fair market value
39(4) For the purpose of subsection (2), the obligation secured by a security interest does not exceed the fair market value of the goods at the date that the goods become part of the product or mass.
Priority limited to certain value
39(5) Any priority that a perfected security interest that continues in the product or mass under section (1) has over a perfected security interest in the product or mass is limited to the value of the goods at the date that they become part of the product or mass.
Priority of purchase money security interest
39(6) A perfected purchase money security interest in goods that continues in the product or mass has priority over a non-purchase money security interest
(a) in the goods that continues in the product or mass under subsection (1);
(b) in the product or mass, other than as inventory, given by the same debtor; and
(c) in the product or mass as inventory given by the same debtor if
(i) the secured party with the purchase money security interest gives a notice to the secured party with the non-purchase money security interest in the product or mass who registered a financing statement containing a description of collateral that includes the product or mass before the identity of the goods is lost in the product or mass,
(ii) the notice contains a statement that the person giving the notice has acquired or expects to acquire a purchase money security interest in goods supplied to the debtor as inventory, and
(iii) the notice is given before the identity of the goods is lost in the product or mass.
39(7) A notice referred to in clause (6)(c) may be given in accordance with section 68 or by registered mail to the address of the person to be notified as it appears in the financing statement referred to in clause (6)(c).
39(8) This section does not apply to a security interest in an accession to which section 38 applies.
Secured party may subordinate interest
40(1) A secured party may, in a security agreement or otherwise, subordinate the secured party's security interest to any other interest, and such subordination is effective according to its terms between the parties and may be enforced by a third party if such third party is the person or one of a class of persons for whose benefit the subordination is intended.
Effect of floating charge type of security interest
40(2) The taking by a secured party of a security interest in the nature of a floating charge does not of itself subordinate the security interest to any other security interest.
41(1) In this section, "account debtor" means a person who is obligated under an intangible or chattel paper.
Assignment of intangible or chattel paper
41(2) Unless an account debtor makes an enforceable agreement not to assert any defence or claim arising out of a contract, the rights of an assignee of an intangible or chattel paper are subject to
(a) the terms of the contract between the account debtor and the assignor and any defence or claim arising from
(i) the contract, or
(ii) a contract closely connected to the contract, where the account debtor meets the requirements for an equitable set-off; and
(b) any other defence or claim of the account debtor against the assignor that accrues before the account debtor acquires knowledge of the assignment.
41(3) A modification of or substitution for a contract made in good faith and in accordance with reasonable commercial standards and without material adverse effect on the assignee's rights under the contract or the assignor's ability to perform the contract is effective against the assignee unless the account debtor has otherwise agreed.
41(4) Subsection (3) applies
(a) to the extent that an assigned right to payment arising out of the contract is not earned by performance; and
(b) notwithstanding that notice of the assignment is given to the account debtor.
Rights of assignee where contract modified
41(5) Where a contract is substituted or modified in the manner referred to in subsection (3), the assignee obtains rights that correspond to those that the assignee had under the original contract.
Modification as breach of contract
41(6) Nothing in subsections (3) to (5) affects the validity of a term in an assignment agreement that provides that a modification or substitution referred to in those subsections is a breach of contract by the assignor.
Payment after assignment of collateral
41(7) Where an intangible or chattel paper is assigned, the account debtor may make payments under the contract to the assignor
(a) before the account debtor receives a notice that
(i) states that the amount payable or to become payable under the contract has been assigned and payment is to made to the assignee, and
(ii) identifies the contract under which the amount payable is to become payable; or
(b) after the account debtor requests the assignee to furnish proof of the assignment and the assignee fails to furnish proof within 15 days after the date of the request.
41(8) Payment by an account debtor to an assignee pursuant to a notice referred to in clause 7(a) discharges the obligation of the account debtor to the extent of the payment.
Provision prohibiting assignment
41(9) A term in a contract between an account debtor and an assignor that prohibits or restricts assignment of the whole of the intangible or chattel paper for money due or to become due is binding on the asignor only to the extent of making the assignor liable in damages for breach of contract, and is unenforceable against third parties.
PART 5 REGISTRATION
42(1) The Personal Property Registry is hereby continued for the purpose of registrations under this Act, under prior registration law and under any other Act, that are permitted or required to be made in the Registry.
42(2) The office of Registrar of Personal Property Security is hereby continued.
Powers and duties of Registrar
42(3) The Registrar and Deputy Registrars shall continue to supervise the registry under the direction of the minister and shall have the powers and obligations set out in this Act and any other Act, and as prescribed in a regulation to this Act or any other Act providing for registration in the Registry.
42(4) Notwithstanding any regulation made under this Act or any other Act providing for registration in the Registry, when, in the opinion of the Registrar, the circumstances are such that it is not practical to provide one or more registry services, the Registrar may
(a) refuse to register financing statements;
(b) refuse to accept requests for search results; and
(c) suspend the operation of other functions of the Registry;
for such period of time as the Registrar considers necessary or advisable.
Registration of financing statement
43(1) A financing statement may be submitted for registration at an office of the Registry as prescribed.
Determination of order of registration
43(2) Registration of a financing statement is effective from the date and time assigned to it by the Registrar and where two or more financing statements are assigned at the same date and time, the order of registration is determined by reference to the sequence of registration numbers in the registry office with the lower number having the earlier registration.
43(3) The Registrar may refuse to register a financing statement or to issue a search result under this Part until any fee prescribed in respect of registrations or searches are paid or arrangements for the payment of fees are made.
43(4) A financing statement may be registered before or after a security agreement is made and before or after a security interest attaches.
Registration re more than one security agreement
43(5) A registration may relate to one or more than one security agreement.
43(6) The validity of the registration of a financing statement is not affected by a defect, irregularity, omission or error in the financing statement or in the registration of it unless the defect, irregularity, omission or error is seriously misleading.
Effect of error in name of debtor
43(7) An error in the spelling of any part of the name of a debtor set forth in a financing statement or other document required or authorized to be registered in the Registry invalidates the registration and destroys the effect of the registration if a search of the registry under the correct name of the debtor would not reveal the registration.
Registration invalidated by error
43(8) Subject to subsection (11), where one or more debtors are required to be disclosed in a financing statement, or wh