Canada: Cross-Border Security Interests: Choice Of Law In Canada

Last Updated: April 4 2012

Article by Deborah S. Grieve*

1. Introduction

In this global economy, the laws of different jurisdictions come into play with respect to the priority and enforcement of interests against personal property when, for example, a debtor carries on business in different countries or provinces, or its personal property moves across borders.

This paper offers a primer on Canadian personal property security legislation choice of law provisions, and suggests a general approach from a Canadian perspective to address inter-jurisdictional disputes regarding personal property. The finance lawyer may find this analysis a useful in considering how to ensure that secured transactions are enforceable not only as against the debtor, but also against third parties claiming an interest in the collateral.

2. Canadian PPS Choice of Law Rules

In Canada, the "choice of law" (also referred to "conflict of laws") rules in personal property security ("PPS") legislation determine which jurisdiction's laws are to be applied to collateral issues with multi-jurisdictional aspects. As laws governing interests in personal property are under provincial, and not federal, legislative authority in Canada and provincial PPS choice of law rules are almost identical to each other, the focus of this paper is on Ontario personal property security legislation, specifically the Ontario Personal Property Security Act ("OPPSA").1

The original OPPSA was modelled after the Uniform Commercial Code ("UCC").2 The choice of law rules in the current OPPSA are substantially similar to those in Article 9 of the UCC as it was prior to amendments in 1999. (Note, however, that there are pending amendments to the rule regarding the location of the debtor, discussed below.)

Similar to Article 9 of the UCC, the OPPSA incorporates the concepts of validity, attachment and perfection of security interests. A "security interest" is defined as an interest in personal property that secures payment or performance of an obligation. Validity, though not defined in the OPPSA, covers the formal requisites for the creation of a security interest.3 Attachment refers to the point at which the secured party's interest materializes, while perfection relates to the publication of the interest, which will in turn affect its enforceability against third parties.4

3. How to Determine Applicable PPS Law in Ontario While there may be situations which require more sophisticated considerations, a simple general approach to determine the proper law is to consider whether: (a) there an issue relating to a security interest such that PPS legislation should apply; (b) if so, which PPS choice of law provisions should be used to determine the proper law to apply; and (c) do the choice of law provisions contain a rule applicable to the particular facts.5

(a) Is there a security interest?

Once the court is satisfied as to its jurisdiction over the matter (which will often be the location of the personal property within its jurisdiction), the next step is to consider whether there is an issue regarding a security interest—as to the validity or the effect of perfection or non-perfection in various types of personal property—such that a PPS law would apply.

If there is an agreement that in essence secures payment or performance of an obligation, that security agreement might provide that the law of a particular jurisdiction will apply. While debtor and creditor, as parties to a security agreement, are free to select the law to govern their rights inter se contractually,6 these choices will not necessarily be effective to address claims of third parties who are not privy to the agreement.7

According to the Ontario Court of Appeal, it is not necessary that there be a "security interest" strictly within the definition of the OPPSA for the OPPSA conflict rules of that jurisdiction to apply to direct the choice of law. In GMAC Commercial Credit Corp. v TCT Logistics Inc.,8 a secured party in Alberta sought to enforce its security interest in truck trailers located in Alberta against the Ontario lessor of the trailers. The Ontario lessor argued that because the leases were "true leases" and, at that time, the OPPSA did not create a security interest and require registration of "true leases" under the OPPSA, the choice of law provisions of the OPPSA did not apply. The Ontario Court of Appeal nevertheless applied the Ontario choice of law rule, which directed that the issue be determined under Alberta law, reasoning that an expansive application of the choice of law was warranted by the underlying purpose of the statute.9

(b) Which PPS choice of law will apply?

Once it is determined that there is an issue regarding a security interest in collateral, the forum court will tend to look first at whether its own jurisdiction has PPS legislation that might either resolve the problem, or provide a rule to designate a jurisdiction whose laws might do so.

For example, in Gimli Auto Ltd. v. BDO Dunwoody Ltd.10 ("Gimli"), the Alberta court started its analysis by reference to the Alberta PPS legislation conflict of law rule. As stated in paragraphs 8 and 9 of that case: One need not consider common-law choice-of-law rules, because Alberta's P.P.S.A. replaces them with new statutory choice-of-law rules. (So do all the other P.P.S.A.'s, and they are very similar, though that probably does not matter much here.) Nor need one consider a choice-of-law clause in a lease, for the statute sets which law applies. Nor is this a suit between two parties to a contract. The whole point of the P.P.S.A. is to overrule certain contractual or property rights: Re Giffen, The lessor and lessee could not, by contracting that the lease would be valid even if not registered, bind others. This is legislation on priorities: ibid.

(c) Do the choice of law provisions contain an applicable rule?

Although PPS choice of law rules are intended to replace confusing and inconsistent common law with a consistent set of statutory rules,11 there may be instances not adequately addressed by those rules. In such situations, a common law conflicts of law analysis will be required.12 As common law conflicts of laws constitute their own substantial topic, they will not be discussed here.

Once the appropriate law has been selected, in applying the substantive law it must then be confirmed that the secured party has taken all proper steps to create a valid, perfected and enforceable security interest, that there are no additional considerations under that law regarding enforcement or priority of the interest. Specific priority rules, such as purchase-money security interests, or laws regarding specific assets such as fixtures and accessions, will then come into play.

The OPPSA contains a functional equivalent to perfection of a security interest for jurisdictions which do not contain this concept.13 Section 8(2) of the OPPSA provides that a security interest is deemed to be perfected under the law of a jurisdiction if the secured party has complied with the law of the jurisdiction with the creation and continuance of a security interest that is enforceable against the debtor and third parties.

4. Applying Ontario Choice of Law Rules

Under OPPSA choice of law rules, it is the type of collateral that determines the applicable law regarding the validity, perfection and effect of non-perfection of a security interest.14 Where the collateral is goods, or a possessory security interest in a security, instrument, document of title, money, or chattel paper (referred to herein as "Goods and Possessory Collateral"), the law of the jurisdiction15 of the location of the collateral governs.16 For all other types of collateral (other than investment property), namely intangibles; non-possessory interests in securities, instruments, documents of title, money, and chattel paper; and "mobile goods";17 the applicable law regarding the validity, perfection and effect of non-perfection will be the law of the location of the debtor.18 (These types of goods will be referred to collectively herein as "Debtor Location Collateral.")

*Deborah S. Grieve is a partner in the Financial Services Group of Cassels Brock & Blackwell LLP in Toronto, Ontario, Canada, specializing in financial restructuring, bankruptcy and insolvency ( This paper was prepared with the invaluable assistance of Eleonore Morris, an associate in the Financial Services Group of Cassels Brock & Blackwell LLP, and of Alec Milne, Student-at-Law. © 2011


1 While a reader must of course refer to the appropriate provincial legislation and obtain competent legal advice for specific queries, comments with respect to the OPPSA choice of law provisions will generally be applicable to the PPS laws across Canada.

2 U.C.C. § 9 (1999). In 1959, a committee of the Canadian Bar Association endorsed the Article 9 approach to secured transactions and prepared an "Ontario version" of Article 9, a revision of which was ultimately enacted by the Ontario legislature as the original OPPSA, Personal Property Security Act most of which came into force in 1976. See A. Duggan & J. Ziegel, Secured Transactions in Personal Property: Cases, Text, and Materials, 5 ed. (2009), at p.18.

3 R. MacLaren, The 2011 Annotated Personal Property Security Act (2010), at p.95.

4 Duggan & Ziegel, Supra note 2, at p. 113.

5 See also D. Tay and J. Stam, "Cross-Border Security Issues: Making Sense of the Con_ict of Laws Provisions in the PPSA" (Paper delivered at the OBA Continuing Legal Education conference: Priorities, Practices and Problems Under the PPSA, Toronto, 2004), at p.4.

6 Subject to certain liabilities—see, for example, Cardel Leasing Ltd. v. Maxmenko, 1991 WL 1128276 (Ont. Gen. Div. 1991), Additional reasons in, 1992 WL 1322561 (Ont. Gen. Div. 1992) ("Maxmenko"), where a contractual choice of law provision was not applied by the court7 See generally London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 WL 1325423, 3 S.C.R. 299, ¶ 200–253 (Can. 1992).

8 GMAC Commercial Credit Corp. — Canada v. TCT Logistics Inc., 2004 WL 595594 (Ont. C.A. 2004), leave to appeal refused by, 2004 WL 2131274 (Can. 2004).

9 The legal rationale in this case, though not the result, has been subject to academic criticism—See Ziegel, Ontario PPSA Choice of Law Rules and Ambulatory Definition of Security Interest: GMAC Commercial Credit Corp. v. TCT Logistics Inc. 40 Can. Bus. L.J. 412, 420 (2004).

10 Gimli Auto Ltd. v. Canada Campers Inc. (Trustee of), 1998 WL 1719402 (Alta. C.A. 1998). 11 Duggan & Ziegel, Supra note 2, at p. 21.

12 Section 72 of the OPPSA provides that the principles of law and equity continue to apply, except as they are inconsistent with the provisions of the OPPSA.

13 MacLaren, Supra note 3, at p.128. 14OPPSA, §§ 5(1) and 7(1).

15 For the purposes of the choice of law provisions in the OPPSA, any reference to the "law of a jurisdiction" is a reference to the internal law of the jurisdiction, excluding its choice of law rules (s.8.1). This has the practical effect of preventing a scenario where the OPPSA defers to another jurisdiction, and the other jurisdiction refers back to the OPPSA by operation of its choice of law rules.

16 OPPSA, § 5(1).

17 "Mobile goods" is the term often used for "goods of a type normally used in more than one jurisdiction, if the goods are equipment or are inventory leased or held for lease by the debtor to others," which is terminology used in § 7(1)(a)(ii) of the OPPSA. Canadian courts have sought to define the "mobile goods" category so it will mirror the analogous category found in Article 9 (§ 9-103(3)(a)): see Northwest Equipment Inc. v. Daewoo Heavy Industries America Corp., 2002 WL 36920, 3 P.P.S. A.C. (3d) 101, ¶ 30 (Alta. C.A. 2002). Also see Gimli, Supra note 10, at paras. 12–17.

18 OPPSA, § 7(1). E UCC Law Journal E Vol. 44 No. 1

To view full article click here.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions