The Supreme Court of Canada was faced with competing security
interests under the federal Bank Act and the
Personal Property Security
Act ("PPSA") of Saskatchewan.
Innovation Credit Union had taken an unsecured interest over farm
equipment from the debtor pursuant to the PPSA. Subsequently,
the Bank of Montreal (the "Bank")
registered a security interest over the same farm
equipment pursuant to the Bank Act. The application
judge found that registration under the Bank Act trumped
an unsecured interest under the PPSA, and thus the Bank had first
priority. However, the Saskatchewan Court of Appeal
unanimously overturned this decision.
The Supreme Court unanimously affirmed the Court of Appeal's
decision. The Bank Act governs the dispute because
provincial legislation cannot affect the priority of a validly
created federal security interest. However, this does not
mean that the PPSA is irrelevant. The Bank Act can
only give a secured party an interest in property as great as
the interest the owner of the property has at the time of the
security agreement. In this case, the owner's interest in
the property was subject to the Credit Union's unregistered
interest. Thus, the owner could only convey to the Bank an
interest that was also subject to the Credit Union's
In the companion case of Royal Bank of Canada v Radius
Credit Union Ltd, 2010 SCC 48, released 5 November 2010, both
the unregistered interest under the PPSA and the Bank Act
registration occurred prior to the purchase of the equipment, and
thus theoretically attached to the equipment at the same
time. However, under the PPSA, an unregistered interest is
created at the time of the creation of the security
agreement. As the agreement with the Credit Union was
executed before the security agreement with the Bank, the Bank took
its security subject to the Credit Union's interest.
Again, the unregistered PPSA agreement trumped the subsequent,
registered Bank Act security agreement.
The Court recognized that its decisions may create a
commercially absurd result. The decisions make several
references to the potential desirability of legislative amendments
in the area, and cite (although not explicitly with approval)
articles that have advocated the repeal of the Bank
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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