Q: What relevant changes will Bill 28 bring to
movable hypothecs on bank deposits in Québec?
A: On April 21, 2015, the government of
Québec adopted An Act mainly to implement certain
provision of the Budget Speech of June 4, 2014 and return
to a balance budget in 2015-2016 ("Bill 28").
In a previous bulletin, we covered amendments relating to hypothecs
granted in favour of a "fondé de
pouvoir". We will now focus on the amendments relating to
a movable hypothec with delivery on bank deposits, which amendments
will enter into force on Jan. 1, 2016.
Currently, the system that applies to movable hypothecs with
delivery on bank deposits is the same as the system that applies to
hypothecs on claims found at articles 2710 to 2713 of the
Civil Code of Québec ("CCQ"). Following
the adoption of Bill 28, a new section comprised of
articles 2713.1 to 2713.9 is added to the CCQ. Those articles
were inspired by section 9 of the Uniform Commercial
Code ("UCC") in effect in the United States. It must
be noted that the articles of the CCQ relating to conflict of laws
relating to securities on bank deposits are also amended by
Under article 2713.1 CCQ, the concept of "monetary
claim" was introduced. Such concept is defined as "any
claim requiring the debtor to reimburse, return or restore an
amount of money or make any other payment in respect of an amount
of money". As an example, a monetary claim could be a money
deposit with a financial institution or an amount deposited as
security. Although this definition seems quite broad, some claims
are specifically excluded, such as a claim represented by a
negotiable instrument, a security or a security entitlement and
claims resulting from the delivery of certain and determinate
currency whose repayment must be made by restitution of the same
currency. Furthermore, the mechanisms to obtain control further
limit the application of the definition of "monetary
In order to obtain control of a monetary claim, the creditor may
proceed in two (2) different ways:
By obtaining control of a claim that the grantor has against
the creditor (bilateral relationship where the creditor is the
depositary of the amount of money; for example, a lender who
receives deposits and a creditor who receives security deposits);
By obtaining control of a claim that the grantor has against a
third party (tripartite relationship where the creditor is not the
depositary of the account; for example, a creditor whose claim is
guaranteed by the balance of an account deposited at a third party
Within the context of a bilateral relationship, the creditor
will obtain control of a monetary claim if the grantor consents to
the claim guaranteeing the execution of his obligation towards the
creditor. A written consent is not required.
In the context of a tripartite relationship, the creditor may
obtain control of a monetary claim in the
two (2) following cases, but only if the claim relates to
a financial account maintained by the third person for the grantor
or the claim relates to an amount of money transferred to the third
person to secure the performance of an obligation towards the
The creditor has entered into an agreement with the third party
and the grantor, called a control agreement, by which the third
party agrees to comply directly with the creditor's
The creditor becomes the account holder of the financial
account that is the object of a monetary claim relating to its
A hypothec on a monetary claim shall be published and shall take
rank from time of control and will rank ahead any other hypothec
without delivery relating to the same claim. Furthermore, the
control obtained within the context of a bipartite relationship
will rank ahead of any hypothec obtained within the context of a
In practice, this modification will have a favourable effect for
depositary banks since their claim will have priority over any
other claim from a third party relating to the affected accounts,
whether the claim is registered or not at the Québec
Register of Personal and Movable Real Rights. Those modifications
will also be advantageous for lessors, since they will have
priority over the security deposits of their lessees. There is no
doubt that the practical consequences of the entry into force of
Bill 28 will need to be further analyzed by
1 The attached algorithm sets out the different control
arrangements that may arise.
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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