The British Columbia Court of Appeal has overturned the B.C.
Supreme Court decision in KBA Canada1, which
was reviewed in the September 2012 issue of Fully
Secured. In its decision2, the Court of
Appeal disagreed with the reasoning in the court below, and held
that neither equitable principles nor unjust enrichment can be used
to override the clear priority rules in the BC
In this case a third party inadvertently discharged a financing
statement registered in the B.C. Personal Property Registry
("BCPPR") in favour of
KBA Canada, Inc. ("KBA") as secured
party against 3S Printers Inc. ("3S") as
debtor. KBA had no knowledge of the discharge at the time it
was made, but when it became aware of the discharge it
re-registered its financing statement against 3S outside of the
statutory 30-day grace period for the reversal of mistaken
discharges. KBA therefore lost the perfected purchase money
security interest ("PMSI") priority it
had against the asset that was the subject of the registration to
two prior-registered holders of general security interests, Supreme
Graphics Ltd. ("SGL") and CIT Financial
KBA brought an action to re-establish its priority. The
Supreme Court found in favour of KBA, on the basis that it had the
power and jurisdiction under sections 68 and 72 of the BC PPSA to
apply common law and equitable principles to override the harsh
application of the priority rules in the circumstances of the
case. The Court also held that it could apply the equitable
principle of unjust enrichment to reverse the windfalls of SGL and
In no uncertain terms, the Court of Appeal disagreed with the
reasoning of the Supreme Court and restored the priority of SGL and
CIT. The Court of Appeal, in holding that the BC PPSA did not grant
the Courts the broad jurisdiction that had been exercised by the
Supreme Court judge, stated that if it did "equitable and
common law principles would dominate the determination of
priorities. The statutory purpose of replacing those complex and
convoluted principles with simple rules that provide certainty and
predictability would be undermined."4
The Court of Appeal was equally clear that unjust enrichment did
not apply, finding that while there had been an enrichment of SGL
and a corresponding deprivation to KBA, the BC PPSA priority
provisions were a "juristic reason" for the
The Court of Appeal decision is a clear statement of the law
with respect to the priority regime under the BC PPSA and indicates
that predictability and certainty override possible unfairness
resulting from strict application of the BC PPSA priority
As a result, secured creditors must be careful to verify and
maintain their registrations in the BC PPR, and in particular
should have procedures in place for immediately reviewing and
dealing with any discharge verification statements that they
receive from the BC PPR.
The prospect of an internal investigation raises many thorny issues. This presentation will canvass some of the potential triggering events, and discuss how to structure an investigation, retain forensic assistance and manage the inevitable ethical issues that will arise.
From the boardroom to the shop floor, effective organizations recognize the value of having a diverse workplace. This presentation will explore effective strategies to promote diversity, defeat bias and encourage a broader community outlook.
Staying local but going global presents its challenges. Gowling WLG lawyers offer an international roundtable on doing business in the U.K., France, Germany, China and Russia. This three-hour session will videoconference in lawyers from around the world to discuss business and intellectual property hurdles.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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).