Personal Property Security Act (Canada)

The Personal Property Security Act ("PPSA") is the name given to each of the statutes passed by all common law provinces, as well as the territories, of Canada. They regulate the creation and registration of security interests in all personal property within their respective jurisdictions.

It is similar in structure to Article 9 of the Uniform Commercial Code in the United States, but there are important differences.[1]

PPSA regime

The legislation that implemented the PPSA scheme was first introduced in Ontario, followed by the remaining provinces and territories (which followed a newer uniform model with notable differences). The Atlantic provinces, together with the Northwest Territories and Nunavut, have fully computerized registries, while the others have varying degrees of electronic and paper registration. The following is a brief outline of how the regime generally works.

Personal property subject to the Act

The scope of the Act is extremely broad, as it is concerned with every transaction which in substance creates a security interest, without regard to its form and without regard to the person who has title to the collateral. There are small differences between the provinces as to how far this extends, but the concept is basically the same. That said, however, there are some items that are specifically excluded:

  • liens
  • interests in annuities and insurance policies
  • interests in land (other than interests arising under a license), including leases
  • assignments for the general benefit of creditors
  • interests in any compensation for labour or personal services

Personal property is classified into the following categories:

  • goods (further classified into consumer goods, equipment and inventory)
  • instruments
  • documents of title
  • chattel paper (including leases and conditional sales contracts)
  • securities
  • money
  • intangibles (licenses and any other matter not included above)

Creation of security interests

Security interests are created through attachment, which can be followed on by perfection.

Attachment occurs when

  • value is given,
  • the debtor has rights in the collateral, and
  • it is enforceable against third parties.

Perfection can occur by possession of the collateral, or by registration. In certain circumstances, possession can be considered to be the superior form of perfection.

Purchase money security interests (PMSIs)

A PMSI is a special type of security interest taken in collateral by a party who gives value for the purpose of enabling the debtor to acquire rights in the collateral. Some examples are:

Type of interest Collateral
Loan to purchase goods The goods
Sale of goods The goods
Leases (terms > 1 year) The leased asset
Consignment of goods The goods

Creation of "super-priorities"

In specified circumstances, PPSA registrants can obtain "super-priority" status over other secured parties, when the following steps are taken:

Collateral Steps to take
Inventory Perfection at the time of possession, provided that notice has been given to other secured parties before registration (and possession by the debtor)
Intangibles Perfection no later than the specified number of days after attachment
Other than the above Perfection no later than the specified number of days after possession by the debtor

The PPSA and land

PPSA security interests can have priority over real property security interests against fixtures, when the secured party registers notice against the land at the local registry or land titles office. Where attachment occurs before the affixation to the land, the interest will have priority, However, where attachment occurs after affixation, the interest is subordinate unless where the debtor otherwise consents.

Other intersections can also occur with interests in land. For example, a lender that grants a mortgage over a rental property will also register a PPSA security interest against the rents being generated, in order to attorn the rents in the event the mortgage goes into default.

Priorities of security interests

In the absence of any other special priority rules, the general order of priority is as follows:

Event Priority given
Competing interests are perfected by registration First interest to register
Competing interests are perfected other than by registration First interest to perfect
One interest is perfected by registration, and the other interest other than by registration Registered interest takes priority if registered and perfected before the other is perfected. Interest perfected other than by registration takes priority if it is perfected prior to the registration of the other interest.
Competing interests are both unperfected First interest to attach
One interest is perfected, and the other is unperfected Perfected interest

Regime under Québec legislation

For moveable property in Québec, secured creditors create their security interests by way of hypothec through the Registre des droits personnels et réels mobiliers (RDPRM).[2][3]

Security interests created under Federal legislation

Federal legislation has also created certain security interests that may take precedence over provincial legislation.[4] They notably include:

  • Bank Act security for loans granted by banks
  • interests in patents, copyrights and trademarks
  • interests in railway and rolling stock
  • federal property
  • matters relating to Indians and Indian lands
  • deemed trusts under taxation laws
  • priorities of claims under bankruptcy and insolvency laws

Conflicts between provincial PPSAs and federal legislation

S. 89(1) of the Indian Act governs the application of security interests on reserves:

89. (1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a band.[5]

Recent jurisprudence[6] has tended to restrict how this provision should be applied.[7]

There can also be complex interplay with security interests under admiralty law.[8]

Resources by province
Province PPSA Citation Provincial registry or agent
 British Columbia RSBC 1996, c. 359 BC Registry Services
 Alberta RSA 2000, c. P‑7 Service Alberta Registries Online (registration through agents only)
 Saskatchewan SS 1993, c. P-6.2 Information Services Corporation
 Manitoba CCSM c. P35 The Property Registry of Manitoba
 Ontario RSO 1990, c. P.10 Service Ontario
 New Brunswick SNB 1993, c. P-7.1 ACOL (electronic service only)
 Nova Scotia SNS 1995-96, c. 13 ACOL (electronic service only)
 Prince Edward Island SPEI 1997, c.33, also referred to as c. P-3.1 ACOL (electronic service only)
 Newfoundland and Labrador SNL 1998, c. P-7.1 ACOL (electronic service only)
 Yukon RSY 2002, c. 169 ACOL (electronic service only) as of June 27, 2016.
 Northwest Territories SNWT 1998, c.8 ACOL (electronic service only)
 Nunavut As NWT ACOL (electronic service only)

Notable cases
  • Bank of Montreal v. Innovation Credit Union

Documents

References
  1. Daryl E. Clark (2003). "Revised Article 9 and the PPSA - A comparison of the American and Canadian secured property legal regimes". The Secured Lender (as reprinted at the CBS Interactive Business Network Resource Library). Retrieved 2011-09-29.
  2. Kiriakoula Hatzikiriako (Summer 2010). "An attempt to "demystify" Québec secured transactions law (Part I)" (PDF). ABA Commercial Law Newsletter as reprinted by McMillan LLP. Retrieved 2011-09-13.
  3. "Registre des droits personnels et réels mobiliers". Archived from the original on 2011-10-29. Retrieved 2011-09-13.
  4. "Federal Security Interests: Contract #99-08-2" (PDF). Fraser Milner Casgrain under contract to the Law Commission of Canada. June 2000. Retrieved 2011-09-14.
  5. "Indian Act (R.S.C., 1985, c. I-5), s. 89".
  6. McDiarmid Lumber Ltd. v. God's Lake First Nation 2006 SCC 58, [2006] 2 SCR 846 (15 December 2006)
  7. Anita G. Wandzura (2007). "The Enforcement of Security Interests Against the Personal Property of First Nations Persons on a Reserve". Ottawa Law Review. University of Ottawa. 39 (1). Archived from the original on 2013-12-02.
  8. Christopher J. Giaschi. "Summary of Canadian Law of Priorities". Archived from the original on 2002-06-16. Retrieved 2011-09-30.
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