Personal Property Security Act

[RSBC 1996] CHAPTER 359

Contents
Section
Part 1 — Interpretation and Application
 1 Definitions and interpretation
 2 Scope of Act: security interests
 3 Scope of Act: security interests that do not secure payment or performance
 4 Exclusions from scope of Act
 5 Law applicable: general rules for goods and collateral in possession of secured party
 6 Law applicable: parties intend goods to be removed from jurisdiction
 7 Law applicable: mobile goods, intangibles, etc.
 8 Law applicable: substance and procedure
Part 2 — Validity of Security Agreements and Rights of Parties
 9 Effectiveness of a security agreement
 10 Writing requirements for security agreements
 11 Debtor to have copy of written security agreement
 12 Attachment of security interests
 13 Security interests in after acquired property
 14 Future advances
 15 Application of sale of goods law
 16 Acceleration clauses
 17 Rights and obligations of secured parties in possession of collateral
 18 Acquisition of information from secured parties
Part 3 — Perfection and Priorities
 19 When security interests are perfected
 20 Subordination of unperfected security interests
 21 Measure of damages suffered by lessor or consignor
 22 Perfection of purchase money security interests
 23 Continuity of perfection
 24 Perfection by possession of collateral
 25 Perfection by registration
 26 Temporary perfection
 27 Perfection if goods in hands of bailees
 28 Security interests in proceeds
 29 Security interests in returned or repossessed goods
 30 Protection of buyer or lessee of goods
 31 Protection of transferees of negotiable and quasi-negotiable collateral
 32 Priority of liens
 33 Transfer of debtors' rights in collateral
 34 Purchase money security interests
 35 Residual priority rules
 36 Security interests in fixtures
 37 Security interests in crops
 38 Security interests in accessions
 39 Security interests in processed or commingled goods
 40 Subordination or postponement of right to security interests
 41 Assignments of intangibles or chattel paper
Part 4 — Registration
 42 Personal property registry
 43 Registration of financing statements
 44 Duration of and amendments to registrations
 45 Registration of transfers of security interests
 46 Registration documents
 47 Registration not notice
 48 Registry searches
 49 Registration in land title office
 50 Amendment or discharge of registrations
 51 Transfer of debtors' interests in collateral or change of debtors
 52 Recovery of loss caused by error in registry
 53 Recovery of loss if trust deeds involved
 54 General
Part 5 — Rights and Remedies on Default
 55 Application and interpretation
 56 Rights and remedies
 57 Collection of payments under intangibles or chattel paper
 58 Right of seizure or repossession
 59 Disposition of collateral
 60 Distribution of amounts realized from disposition of collateral
 61 Voluntary foreclosure
 62 Rights of redemption and reinstatement
 63 Supervisory jurisdiction of court
 64 Appointment and qualifications of receivers
 65 Obligations of receivers
 66 Court supervision of receiverships and exemption from compliance
 67 Rights and remedies: consumer goods
Part 6 — Miscellaneous
 68 Supplementary law
 69 Consequences of non-compliance with Act
 70 Summary proceedings
 71 Extension of time for compliance
 72 Service of statements, notices and demands
 73 Conflicts with legislation in general
 74 Conflicts with land title or consumer protection legislation
 75 References to other Acts
 76 Power to make regulations
 76.1 Fees
 77 Transition: applicable law
 78 Transition: registrations
Schedule

Part 1 — Interpretation and Application

Definitions and interpretation

1  (1) In this Act:

"accessions" means goods that are installed in or affixed to other goods;

"account" means a monetary obligation not evidenced by chattel paper, an instrument or a security, whether or not the obligation has been earned by performance;

"advance" means the payment of money, the provision of credit or the giving of value and includes any liability of the debtor to pay any interest, credit costs or other charges or costs payable by the debtor in connection with an advance or the enforcement of a security interest securing an advance;

"building" means a structure, erection, mine or works built, constructed or opened on or in land;

"building materials" means materials that are incorporated into a building and includes goods attached to a building so that their removal

(a) would necessarily involve the dislocation or destruction of some other part of the building and cause substantial damage to the building apart from the loss of value of the building resulting from the removal, or

(b) would result in the weakening of the structure of the building or the exposure of the building to weather damage or deterioration,

but does not include

(c) heating, air conditioning or conveyancing devices, or

(d) machinery installed in a building or on land for use in carrying on an activity inside the building or on the land;

"chattel paper" means one or more writings that evidence both a monetary obligation and a security interest in, or a lease of, specific goods or specific goods and accessions;

"chief forester" means the chief forester referred to in the Ministry of Forests and Range Act;

"collateral" means personal property that is subject to a security interest;

"commercial consignment" means a consignment under which goods are delivered for sale, lease or other disposition to a consignee who, in the ordinary course of the consignee's business, deals in goods of that description, by a consignor who,

(a) in the ordinary course of the consignor's business, deals in goods of that description, and

(b) reserves an interest in the goods after they have been delivered,

but does not include an agreement under which goods are delivered

(c) to an auctioneer for sale, or

(d) to a consignee other than an auctioneer for sale, lease or other disposition if it is generally known to the creditors of the consignee that the consignee is in the business of selling or leasing goods of others;

"consumer goods" means goods that are used or acquired for use primarily for personal, family or household purposes;

"court" means the Supreme Court;

"creditor" includes an assignee for the benefit of a creditor, an executor, administrator or committee of a creditor;

"crops" means crops, whether matured or otherwise, and whether naturally grown or planted, attached to land by roots or forming parts of trees or plants attached to land, and includes only trees that

(a) are being grown as nursery stock,

(b) are being grown for uses other than the production of lumber and wood products, or

(c) are intended to be replanted in another location for the purpose of reforestation;

"debtor" means

(a) a person who owes payment or performance of an obligation secured, whether or not that person owns or has rights in the collateral,

(b) a person who receives goods from another person under a commercial consignment,

(c) a lessee under a lease for a term of more than one year,

(d) a transferor of an account or chattel paper,

(e) in sections 17, 24, 26, 58, 59 (14), 61 (8) and 69, a transferee of or successor to the interest of a person referred to in paragraph (a), or

(f) if the person referred to in paragraph (a) and the owner of the collateral are not the same person,

(i)  if the term debtor is used in a provision dealing with the collateral, an owner of the collateral,

(ii)  if the term debtor is used in a provision dealing with the obligation, the obligor, and

(iii)  if the context permits, both the owner and the obligor;

"default" means

(a) the failure to pay or otherwise perform the obligation secured when due, or

(b) the occurrence of an event or set of circumstances that, under the terms of the security agreement, causes the security interest to become enforceable;

"document of title" means a writing issued by or addressed to a bailee

(a) that covers goods in the bailee's possession that are identified or are fungible portions of an identified mass, and

(b) in which it is stated that the goods identified in it will be delivered to a named person, or to a transferee of the person, to bearer or to the order of a named person;

"equipment" means goods that are held by a debtor other than as inventory or consumer goods;

"financing change statement" has the meaning prescribed;

"financing statement" means, if the context requires,

(a) [Repealed 2003-96-56.]

(b) data authorized under the regulations to be transmitted electronically, directly to the computer data base of the registry by a person defined in the regulations as a registering party, to effect a registration, and

(c) a security agreement registered under the Book Accounts Assignment Act, R.S.B.C. 1979, c. 32, Chattel Mortgage Act, R.S.B.C. 1979, c. 48, Company Act, Manufactured Home Act, R.S.B.C. 1979, c. 281, or Sale of Goods on Condition Act, R.S.B.C. 1979, c. 373, before the coming into force of this section together with any statement of particulars that was registered with the security agreement unless there is a conflict between the statement of particulars and the security agreement in which case it means the statement of particulars and not the security agreement;

"financing statement (transition)" has the meaning prescribed;

"fixture" does not include building materials;

"foreign registered ship" means a self propelled, sea going vessel used in international seaborne trade for the transport of goods, passengers or both, that is 20 or more gross registered tons and is registered, other than as a bareboat charter, in the name of the owner, but does not include a vessel registered under the Canada Shipping Act;

"future advance" means an advance whether or not the advance is made in accordance with an obligation and includes reasonable costs incurred and expenditures made for the protection, maintenance, preservation or repair of collateral;

"goods" means tangible personal property, fixtures, crops and the unborn young of animals, but does not include chattel paper, a document of title, an instrument, a security, money, trees other than crops until the trees are severed, or minerals or hydrocarbons until they are extracted;

"instrument" means

(a) a bill of exchange, note or cheque within the meaning of the Bills of Exchange Act (Canada),

(b) any other writing that evidences a right to payment of money and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment, or

(c) a letter of credit or an advice of credit if the letter of credit or advice of credit states on it that it must be surrendered on claiming payment under it,

but does not include

(d) chattel paper, a document of title or a security, or

(e) a bond, debenture or similar document evidencing an obligation secured, in whole or in part, by a mortgage of an interest in land unless the interest being mortgaged is, itself, a mortgage of land;

"intangible" means

(a) personal property, but does not include goods, chattel paper, a document of title, an instrument, money or a security, and

(b) a licence;

"inventory" means goods that are

(a) held by a person for sale or lease, or that have been leased by that person as lessor,

(b) to be furnished by a person or have been furnished by that person under a contract of service,

(c) raw materials or work in progress, or

(d) materials used or consumed in a business;

"lease for a term of more than one year" includes

(a) a lease for an indefinite term including a lease that is determinable by one or both of the parties within one year from its execution,

(b) subject to subsection (3), a lease initially for a term of one year or less if the lessee, with the consent of the lessor, retains uninterrupted or substantially uninterrupted possession of the leased goods for a period in excess of one year after the day the lessee first acquired possession of the goods, and

(c) a lease for a term of one year or less if

(i)  the lease provides that it is renewable for one or more terms automatically, at the option of one of the parties or by agreement of all the parties, and

(ii)  the total terms, including the original term, may exceed one year,

but does not include

(d) a lease involving a lessor who is not regularly engaged in the business of leasing goods,

(e) a lease of household furnishings or appliances as part of a lease of land if the goods are incidental to the use and enjoyment of the land, or

(f) a lease of a prescribed kind of goods regardless of the length of the term of the lease;

"licence" means a right to harvest timber, or to grow and harvest Christmas trees, under an agreement referred to in section 12 of the Forest Act;

"money" means a medium of exchange

(a) authorized by the Parliament of Canada, or

(b) authorized or adopted by a foreign government as part of its currency;

"new value" means value other than an antecedent debt or liability;

"obligation secured" means, when determining the amount payable under a lease that secures payment or performance of an obligation,

(a) the amount originally contracted to be paid under the lease,

(b) any other amount payable in accordance with the terms of the lease, and

(c) any other amount required to be paid by the lessee to obtain ownership of the collateral,

less any amount paid before the determination;

"pawnbroker" means a person who engages in the business of granting credit to individuals for personal, family or household purposes and who

(a) takes and perfects security interests in consumer goods by taking possession of them, or

(b) purchases consumer goods under agreements or undertakings, express or implied, that the goods may be repurchased by the sellers;

"prior security interest" means an interest created, reserved or provided for by a valid security agreement or other transaction made before this section comes into force that is a security interest within the meaning of this Act and to which this Act would have applied if it had been in force at the time the security agreement or other transaction was entered into;

"proceeds" means

(a) identifiable or traceable personal property, fixtures and crops

(i)  derived directly or indirectly from any dealing with collateral or the proceeds of collateral, and

(ii)  in which the debtor acquires an interest,

(b) a right to an insurance payment or any other payment as indemnity or compensation for loss of, or damage to, the collateral or proceeds of the collateral, and

(c) a payment made in total or partial discharge or redemption of an intangible, an instrument, a security or chattel paper;

"purchase" means taking by sale, lease, discount, assignment, negotiation, mortgage, pledge, lien, issue, reissue, gift or any other consensual transaction creating an interest in property;

"purchase money security interest" means

(a) a security interest taken in collateral to the extent that it secures payment of all or part of its purchase price,

(b) a security interest taken in collateral by a person who gives value for the purpose of enabling the debtor to acquire rights in the collateral, to the extent that the value is applied to acquire the rights,

(c) the interest of a lessor of goods under a lease for a term of more than one year, and

(d) the interest of a person who delivers goods to another person under a commercial consignment,

but does not include a transaction of sale by and lease back to the seller and, for the purposes of this definition, "purchase price" and "value" include credit charges or interest payable for the purchase or loan credit;

"receiver" includes receiver-manager;

"registrar" means the registrar of the personal property registry designated under section 42;

"registry" means the personal property registry established under section 42;

"secured party" means

(a) a person who has a security interest,

(b) a person who holds a security interest for the benefit of another person, and

(c) the trustee, if a security interest is embodied in a trust indenture;

"security" means a share, stock, warrant, bond, debenture or similar record, whether or not in the form of a security certificate, that

(a) is recognized in the jurisdiction in which it is issued or dealt with as evidencing a share, participation or other interest in property or an enterprise, or that evidences an obligation of the issuer, and

(b) in the ordinary course of business is transferred

(i)  by delivery with the necessary endorsement, assignment or registration in the records of the issuer or of an agent of the issuer, or by compliance with restrictions on transfer, or

(ii)  by an entry in the records of a clearing agency,

but does not include a bond, debenture or similar record evidencing an obligation secured, in whole or in part, by a mortgage of an interest in land unless the interest being mortgaged is, itself, a mortgage of land;

"security agreement" means an agreement that creates or provides for a security interest and, if the context permits, includes

(a) an agreement that provides for a prior security interest, and

(b) writing that evidences a security agreement;

"security interest" means

(a) an interest in goods, chattel paper, a security, a document of title, an instrument, money or an intangible that secures payment or performance of an obligation, but does not include the interest of a seller who has shipped goods to a buyer under a negotiable bill of lading or its equivalent to the order of the seller or to the order of an agent of the seller, unless the parties have otherwise evidenced an intention to create or provide for a security interest in the goods, and

(b) the interest of

(i)  a transferee arising from the transfer of an account or a transfer of chattel paper,

(ii)  a person who delivers goods to another person under a commercial consignment, and

(iii)  a lessor under a lease for a term of more than one year,

whether or not the interest secures payment or performance of an obligation;

"security with a clearing agency" means a security

(a) in the form of a security certificate

(i)  in bearer form,

(ii)  endorsed in blank by an appropriate person, or

(iii)  registered in the name of the clearing agency or its nominee or custodian,

that is in the custody of the clearing agency, or

(b) not in the form of a security certificate and that is registered or recorded in the records maintained by or on behalf of the issuer in the name of a clearing agency or its nominee or custodian;

"specific goods" means goods identified and agreed on at the time the agreement in respect of those goods is made;

"trust indenture" means a deed, indenture or document, however designated, by the terms of which a person issues or guarantees or provides for the issue or guarantee of debt obligations secured by a security interest, and in which another person is appointed as trustee for the holders of the debt obligations issued, guaranteed or provided for under the deed, indenture or document;

"value" means any consideration sufficient to support a simple contract, and includes an antecedent debt or liability.

(2) For the purposes of this Act

(a) a natural person knows or has knowledge when information is acquired by the person under circumstances in which a reasonable person would take cognizance of it,

(b) a partnership knows or has knowledge when information has come to the attention of one of the general partners or a person having control or management of the partnership business under circumstances in which a reasonable person would take cognizance of it,

(c) a corporation knows or has knowledge when information has come to the attention of

(i)  a managing director or officer of the corporation, or

(ii)  a senior employee of the corporation with responsibility for matters to which the information relates,

under circumstances in which a reasonable person would take cognizance of it or when the information in writing has been delivered to the corporation's registered office or attorney for service,

(d) the members of an association know or have knowledge when information has come to the attention of

(i)  a managing director or officer of the association,

(ii)  a senior employee of the association with responsibility for matters to which the information relates, or

(iii)  all members,

under circumstances in which a reasonable person would take cognizance of it, and

(e) the government knows or has knowledge when information has come to the attention of a senior employee of the government with responsibility for matters to which the information relates under circumstances in which a reasonable person would take cognizance of it.

(3) A lease under paragraph (b) of the definition of "lease for a term of more than one year" does not become a lease for a term of more than one year until the lessee's possession extends for more than one year.

(4) Unless otherwise provided in this Act, the determination whether goods are consumer goods, inventory or equipment must be made as of the time the security interest in the goods attaches.

(5) Proceeds are traceable whether or not there is a fiduciary relationship between the person who has a security interest in the proceeds, as provided in section 28, and the person who has rights in or has dealt with the proceeds.

Scope of Act: security interests

2  (1) Subject to section 4, this Act applies

(a) to every transaction that in substance creates a security interest, without regard to its form and without regard to the person who has title to the collateral, and

(b) without limiting paragraph (a), to a chattel mortgage, a conditional sale, a floating charge, a pledge, a trust indenture, a trust receipt, an assignment, a consignment, a lease, a trust, and a transfer of chattel paper if they secure payment or performance of an obligation.

(2) Despite section 4 (g), this Act applies to conflicting interests in a security and in an instrument, unless the security or instrument is registered, or an application to register the security or instrument has been made, under the Land Title Act, in which case the Land Title Act applies.

Scope of Act: security interests that do not secure payment or performance

3  Subject to sections 4 and 55, this Act applies to

(a) a transfer of an account or chattel paper,

(b) a commercial consignment, and

(c) a lease for a term of more than one year,

that do not secure payment or performance of an obligation.

Exclusions from scope of Act

4  Except as otherwise provided in this Act, this Act does not apply to the following:

(a) a lien, charge or other interest given by a rule of law or by an enactment unless the enactment contains an express provision that this Act applies;

(b) a security agreement governed by an Act of the Parliament of Canada that deals with rights of parties to the agreement or the rights of third parties affected by a security interest created by the agreement, including but without limitation

(i)  a mortgage under the Canada Shipping Act, and

(ii)  any agreement governed by Part V, Division B of the Bank Act (Canada);

(c) the creation or transfer of an interest or claim in or under a contract of annuity or policy of insurance except the transfer of a right to money or other value payable under a policy of insurance as indemnity or compensation for loss of or damage to collateral;

(d) the creation or transfer of an interest in present or future wages, salary, pay, commission or any other compensation for labour or personal services other than fees for professional services;

(e) the transfer of an interest in an unearned right to payment under a contract to a transferee who is to perform the transferor's obligations under the contract;

(f) the creation or transfer of an interest in land, other than an interest arising under a licence, including

(i)  a lease,

(ii)  a petroleum and natural gas lease under the Petroleum and Natural Gas Act,

(iii)  a lease, issued under the Coal Act, that confers the right to produce coal, or

(iv)  any similar interest that is prescribed for the purposes of this section;

(g) the creation or transfer of an interest in a right to payment that arises in connection with an interest in land, including an interest in rental payments payable under a lease of land;

(h) a sale of accounts or chattel paper as part of a sale of a business out of which they arose unless the vendor remains in apparent control of the business after the sale;

(i) a transfer of accounts made solely to facilitate the collection of the accounts for the assignor;

(j) the creation or transfer of an interest in a right to damages in tort;

(k) an assignment for the general benefit of creditors made in accordance with an Act of the Parliament of Canada relating to insolvency;

(l) a mineral claim or a placer claim as those terms are defined in the Mineral Tenure Act.

Law applicable: general rules for goods and collateral in possession of secured party

5  (1) Subject to sections 6 to 8, the validity, perfection and effect of perfection or non-perfection of

(a) a security interest in goods, or

(b) a possessory security interest in a security, an instrument, a negotiable document of title, money or chattel paper,

is governed by the law of the jurisdiction where the collateral is located when the security interest attaches.

(2) For the purposes of subsection (1) a security with a clearing agency is located where the records of the clearing agency are kept.

(3) A security interest in goods perfected under the law of the jurisdiction in which the goods are located at the time the security interest attaches, but before the goods are brought into British Columbia, continues perfected in British Columbia if it is perfected in British Columbia

(a) not later than 60 days after the goods are brought into British Columbia,

(b) not later than 15 days after the day the secured party has knowledge that the goods have been brought into British Columbia, or

(c) before the date that perfection ceases under the law of the jurisdiction in which the goods were located when the security interest attached,

whichever is the earliest, but the security interest is subordinate to the interest of a buyer or lessee of the goods who acquires his or her interest without knowledge of the security interest and before it is perfected in British Columbia under section 24 or 25.

(4) A security interest that is not perfected as provided in subsection (3) may be otherwise perfected in British Columbia under this Act.

(5) If a security interest referred to in subsection (1) is not perfected under the law of the jurisdiction in which the collateral was located when the security interest attached and before the collateral was brought into British Columbia, it may be perfected under this Act.

Law applicable: parties intend goods to be removed from jurisdiction

6  (1) Subject to section 7,

(a) if the parties to a security agreement that creates a security interest in goods in one jurisdiction understand at the time the security interest attaches that the goods will be kept in another jurisdiction, and

(b) if the goods are removed to the other jurisdiction, for purposes other than transportation through the other jurisdiction, not later than 30 days after the security interest attaches,

the validity, perfection and effect of perfection or non-perfection of the security interest is governed by the law of the other jurisdiction.

(2) If the goods are removed out of British Columbia, but are later brought into British Columbia, the security interest in the goods is deemed to be a security interest to which section 5 (3) applies if it was perfected under the law of the jurisdiction to which the goods were removed.

Law applicable: mobile goods, intangibles, etc.

7  (1) For the purposes of this section, a debtor is located

(a) at the place of business, if any, of the debtor,

(b) at the chief executive office of the debtor, if the debtor has more than one place of business, and

(c) at the place of the principal residence of the debtor, if the debtor has no place of business.

(2) The validity, perfection and effect of perfection or non-perfection of

(a) a security interest in

(i)  an intangible, or

(ii)  goods, other than a foreign registered ship, that are of a type that are 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, and

(b) a non-possessory security interest in a security, an instrument, a negotiable document of title, money or chattel paper,

is governed by the law, including the conflict of laws rules, of the jurisdiction where the debtor is located when the security interest attaches.

(3) If the debtor relocates to another jurisdiction or transfers an interest in the collateral to a person located in another jurisdiction, a security interest perfected in accordance with the law applicable as provided in subsection (2) continues perfected in British Columbia if it is perfected in the other jurisdiction

(a) not later than 60 days after the day the debtor relocates or transfers an interest in the collateral to a person located in the other jurisdiction,

(b) not later than 15 days after the day the secured party has knowledge that the debtor has relocated or has transferred an interest in the collateral to a person located in the other jurisdiction, or

(c) before the date that perfection ceases under the law of the first jurisdiction,

whichever is the earliest.

(4) If the law governing the perfection of a security interest referred to in subsection (2) or (3) does not provide for public registration or recording of the security interest or a notice relating to it and the collateral is not in the possession of the secured party, the security interest is subordinate to

(a) an interest in an account payable in British Columbia, or

(b) an interest in goods, a security, an instrument, a negotiable document of title, money or chattel paper acquired when the collateral was located in British Columbia,

unless it is perfected under this Act before the interest referred to in paragraph (a) or (b) arises.

(5) A security interest referred to in subsection (4) may be perfected under this Act.

(6) The validity, perfection and effect of perfection or non-perfection of a security interest in a foreign registered ship is governed by the law of the jurisdiction where the ship is registered at the time that the security interest attaches.

(7) Despite section 6 and subsection (2) of this section, the validity, perfection and effect of perfection or non-perfection of a security interest in minerals or hydrocarbons or in an account resulting from the sale of the minerals at the minehead or the hydrocarbons at the wellhead

(a) that is provided for in a security agreement executed before the minerals or hydrocarbons are extracted, and

(b) that attaches to the minerals or hydrocarbons upon extraction or attaches to an account upon sale of the minerals or hydrocarbons,

is governed by the law of the jurisdiction in which the minehead or wellhead is located.

(8) Despite subsection (2), the validity, perfection and effect of perfection and non-perfection of a security interest in a licence is governed by this Act.

Law applicable: substance and procedure

8  (1) Despite sections 5 to 7,

(a) procedural issues involved in the enforcement of the rights of a secured party against collateral, other than an intangible, are governed by the law of the jurisdiction in which the collateral is located when the rights are exercised,

(b) subject to paragraph (c), procedural issues involved in the enforcement of the rights of a secured party against an intangible are governed by the law of the forum,

(c) procedural issues involved in the enforcement of the rights of a secured party against a licence are governed by the law of British Columbia, and

(d) substantive issues involved in the enforcement of the rights of a secured party against collateral are governed by the proper law of the contract between the secured party and the debtor.

(2) For the purposes of sections 5 to 7, a security interest is perfected under the law of a jurisdiction when the secured party has complied with the law of the jurisdiction with respect to the creation and continuance of a security interest, and the security interest has a status in relation to the interests of other secured parties, buyers, judgment creditors or a trustee in bankruptcy of the debtor, similar to that of an equivalent security interest created and perfected under this Act.

Part 2 — Validity of Security Agreements and Rights of Parties

Effectiveness of a security agreement

9  Subject to this and any other enactment, a security agreement is effective according to its terms.

Writing requirements for security agreements

10  (1) Subject to subsection (2), a security interest is only enforceable against a third party if

(a) the collateral is in the possession of the secured party, or

(b) the debtor has signed a security agreement that contains

(i)  a description of the collateral by item or kind, or by reference to one or more of the following: goods, securities, instruments, documents of title, chattel paper, intangibles, money, crops or licences,

(ii)  a statement that a security interest is taken in all of the debtor's present and after acquired personal property, or

(iii)  a statement that a security interest is taken in all of the debtor's present and after acquired personal property except

(A)  specified items or kinds of personal property, or

(B)  one or more of the following: goods, securities, instruments, documents of title, chattel paper, intangibles, money, crops or licences.

(2) For the purposes of subsection (1) (a), a secured party is deemed not to have taken possession of collateral that is in the apparent possession or control of the debtor or the debtor's agent.

(3) Subject to subsection (6), a description is inadequate for the purposes of subsection (1) (b) if it describes the collateral as consumer goods or equipment without further reference to the kind of collateral.

(4) A description of collateral as inventory is adequate for the purposes of subsection (1) (b) only while it is held by the debtor as inventory.

(5) A security interest in proceeds is enforceable against a third party whether or not the security agreement contains a description of the proceeds.

(6) If personal property is excluded from a description of collateral, the excluded property may be described as consumer goods without further reference to the item or kind of property excluded.

Debtor to have copy of written security agreement

11  If a security agreement is in writing, the secured party must deliver a copy of the security agreement to the debtor within 10 days after it is executed and, if the secured party fails to do so after a request by the debtor, a court may, on application by the debtor, order the delivery of the copy to the debtor.

Attachment of security interests

12  (1) A security interest, including a security interest in the nature of a floating charge, attaches when

(a) value is given,

(b) the debtor has rights in the collateral, and

(c) except for the purpose of enforcing rights between the parties to the security agreement, the security interest becomes enforceable under section 10,

unless the parties have specifically agreed to postpone the time for attachment in which case the security interest will attach at the time specified in the agreement.

(2) For the purposes of subsection (1) (b) and without limiting other rights, if any, which the debtor has in the collateral, a debtor has rights in goods leased to the debtor or consigned to the debtor when the debtor obtains possession of them in accordance with the lease or consignment.

(3) For the purposes of subsection (1), a debtor has no rights in any of the following:

(a) crops until they become growing crops;

(b) the young of animals until they are conceived;

(c) minerals or hydrocarbons until they are extracted;

(d) trees, other than crops, until they are severed.

Security interests in after acquired property

13  (1) Subject to section 12 and subsection (2), a security agreement that provides for a security interest in after acquired property attaches to that property in accordance with the terms of the agreement without any need for a specific appropriation by the debtor.

(2) A security interest does not attach to after acquired property that is

(a) a crop that becomes a growing crop more than one year after the security agreement has been entered into, except that a security interest in a crop that is given in conjunction with a lease, purchase or mortgage of land, may, if the parties agree, attach to a crop to be grown on the land during the term of the lease, purchase or mortgage, or

(b) consumer goods other than an accession, unless the security interest is a purchase money security interest or a security interest in collateral obtained by the debtor as replacement for collateral described in the security agreement.

Future advances

14  (1) A security agreement may provide for future advances.

(2) Unless the parties otherwise agree, an obligation owing to a debtor to make future advances is not binding on a secured party if the collateral has been seized, attached, charged or made subject to an equitable execution under the circumstances described in section 20 (a) (i) or (ii) and the secured party has knowledge of this fact before making the advances.

Application of sale of goods law

15  If a seller has a purchase money security interest in goods, the law relating to contracts of sale governs the sale including a disclaimer, limitation or modification of the seller's performance obligations with respect to the goods.

Acceleration clauses

16  If a security agreement provides that a secured party may accelerate payment or performance by the debtor when the secured party is or believes himself insecure or decides that the collateral is in jeopardy, the provision must be construed to mean that the secured party has the right to accelerate payment or performance only if the secured party, in good faith, believes and has commercially reasonable grounds to believe that the prospect of payment or performance is or is about to be impaired or that the collateral is or is about to be placed in jeopardy.

Rights and obligations of secured parties in possession of collateral

17  (1) In this section, "secured party" includes a receiver.

(2) A secured party must use reasonable care in the custody and preservation of collateral in the possession of the secured party and, unless the parties otherwise agree, in the case of an instrument, a security or chattel paper, reasonable care includes taking necessary steps to preserve rights against other persons.

(3) Unless otherwise agreed, if collateral is in the secured party's possession,

(a) reasonable expenses, including the costs of insurance and payment of taxes or other charges incurred in obtaining, maintaining possession of and preserving the collateral, are chargeable to the debtor and secured by the collateral,

(b) the risk of loss or damage to the collateral, unless caused by the negligence of the secured party, is on the debtor to the extent of any deficiency in insurance coverage,

(c) the secured party may hold as additional security any increase or profits, except money, such as the young of animals or dividends paid in additional shares received from the collateral, and must apply any money so received, unless remitted to the debtor, immediately on its receipt to reduce the obligation secured by the collateral, and

(d) the secured party must keep the collateral identifiable, but fungible collateral may be commingled.

(4) Subject to subsection (2), a secured party may use the collateral

(a) in the manner and to the extent provided in the security agreement,

(b) for the purposes of preserving the collateral, or

(c) in accordance with an order of a court in the manner directed.

Acquisition of information from secured parties

18  (1) The debtor, a creditor, a sheriff, a person with an interest in personal property of the debtor or an authorized representative of any of them may, by a demand in writing containing an address for reply and delivered to the secured party,

(a) if an address is in the records of the registry,

(i)  at the secured party's most recent address in a registered financing statement that relates to the property, or

(ii)  at an address of the secured party, whether or not in the records of the registry, that is more recent than the address referred to in subparagraph (i), or

(b) if no address is in the records of the registry, at the current address of the secured party,

require the secured party to send or make available to the person making the demand or, if the demand is made by the debtor, to any person at an address specified by the debtor, any of the information specified in subsection (2).

(2) The information that may be demanded under subsection (1) may be one or more of the following:

(a) a copy of any security agreement providing for a security interest held by the secured party in the personal property of the debtor;

(b) a statement in writing of the amount of the indebtedness and of the terms of payment of that indebtedness as of the date specified in the demand;

(c) a written approval or correction of an itemized list of personal property attached to the demand indicating which items in the demand are collateral as of the date specified in the demand;

(d) a written approval or correction of the amount of the indebtedness and of the terms of payment of the indebtedness as of the date specified in the demand;

(e) sufficient information as to the location of the security agreement or a copy of it, as specified in the demand, to enable a person entitled to receive a copy of the security agreement to inspect it at that location.

(3) A person with an interest in personal property of the debtor is entitled to make a demand under subsection (1) only with respect to a security agreement that provides for a security interest in the property in which that person has an interest.

(4) A person who is entitled to make a demand under subsection (1) may demand that the secured party permit the person to inspect a copy of the security agreement by giving the secured party a written demand to that effect in accordance with subsection (1).

(5) If a secured party receives a demand under subsection (4), the secured party must permit the person making the demand or that person's authorized representative to inspect, during normal business hours, the security agreement at the place specified by the secured party.

(6) If a demand is made requiring an approval or correction referred to in subsection (2) (c) and the secured party claims a security interest in

(a) all of the personal property of the debtor,

(b) all of the personal property of the debtor, other than a specified kind or item of personal property, or

(c) all of a specified kind of personal property of the debtor,

the secured party may indicate this instead of approving or correcting the itemized list of the personal property.

(7) If the secured party is a trustee under a trust indenture, the secured party must reply to a demand under subsection (1) or (4) within 25 days after the secured party receives it.

(8) Any other secured party must reply to the demand within 10 days after the secured party receives it.

(9) If, without reasonable excuse,

(a) the secured party fails to comply with the demand within the specified period, or

(b) in the case of a demand under subsection (1) the secured party's reply to the demand under subsection (1) is incomplete or incorrect,

the person making the demand, may in addition to any other remedy provided for in this Act, apply to a court for an order requiring the secured party to comply with the demand.

(10) If a demand is made under subsection (1) or (4) and the person receiving the demand no longer has an interest in the obligation or property of the debtor that is the subject of the demand, the person must, not later than 10 days after receiving the demand, disclose

(a) the name and address of the person's immediate successor in interest, and

(b) if known to the person, the current successor in interest.

(11) If, without reasonable excuse, the person receiving the demand fails to comply with subsection (10), the person making the demand may, in addition to any other remedy provided for in this Act, apply to a court for an order requiring the person to whom the demand has been made to comply with this section.

(12) On application under subsection (9) or (11), the court may make an order requiring the secured party or the person receiving the demand to comply with the demand or to disclose the information.

(13) The court may provide for the actual or possible failure of a secured party to comply with an order under subsection (12) by making one or more of the following orders either on application or as part of the order under subsection (12):

(a) any order the court considers necessary to ensure compliance with the demand;

(b) in the case of non-compliance by a secured party or the person receiving the demand, an order that the security interest of the secured party with respect to which the demand was made is unperfected or extinguished and that any related registration be discharged.

(14) On an application

(a) under subsection (11), or

(b) under this subsection made by

(i)  the secured party referred to in subsection (9), or

(ii)  the person referred to in subsection (10) as receiving the demand,

the court, subject to section 69 (2), may, unless the demand is made by the debtor, exempt the secured party or person receiving the demand in whole or in part from complying with subsections (8) to (10) or may extend the time for compliance.

(15) A secured party who has replied to a demand referred to in subsection (1) is estopped, for the purposes of this Act, against the person making the demand or against any other person who can reasonably be expected to rely on the reply from denying

(a) the accuracy of the information referred to in subsection (2) (b) to (d) and contained in the reply to the demand, and

(b) that the copy of the security agreement referred to in subsection (2) (a) that is provided in response to a demand under subsection (1) is a true copy of that security agreement,

but only to the extent that the debtor or the other person has in fact relied on

(c) the information referred to in paragraph (a), or

(d) the accuracy of the copy of the security agreement referred to in paragraph (b).

(16) A successor in interest referred to in subsection (10) is estopped for the purposes of this Act, against the person making the demand referred to in subsection (1) and any other person who can reasonably be expected to rely on the reply to the demand, from denying

(a) the accuracy of the information referred to in subsection (2) (b) to (d) and contained in the reply to the demand, and

(b) that the copy of the security agreement referred to in subsection (2) (a) that is provided in response to a demand under subsection (1) is a true copy of that security agreement,

but only to the extent that the debtor or the other person has in fact relied on

(c) the information referred to in paragraph (a), or

(d) the accuracy of the copy of the security agreement referred to in paragraph (b).

(17) A successor in interest is not estopped under subsection (16) if

(a) the debtor or other person who relied on the reply knows that the interest has been transferred to the successor in interest and knows that person's identity and address, or

(b) before making the demand, a financing change statement has been registered under section 45 disclosing the successor in interest as the secured party.

(18) The person to whom a demand is made under this section may require payment in advance of a fee in a prescribed amount for each reply to a demand, but the debtor is entitled to make a demand and receive a reply to it without charge once every 6 months.

(19) A secured party who receives a demand that purports to be made by a person entitled to make it under subsection (1) may act as if the person is, in fact, entitled to make the demand unless the secured party knows that the person is not entitled to make it.

Part 3 — Perfection and Priorities

When security interests are perfected

19  A security interest is perfected when

(a) it has attached, and

(b) all steps required for perfection under this Act have been completed,

regardless of the order of occurrence.

Subordination of unperfected security interests

20  A security interest

(a) in collateral is subordinate to the interest of

(i)  a person who causes the collateral to be seized under legal process to enforce a judgment including execution, garnishment or attachment, or who has obtained a charging order or equitable execution affecting or relating to the collateral,

(ii)  a sheriff who has seized or has a right to the collateral under the Creditor Assistance Act,

(iii)  a judgment creditor entitled by law to participate in the distribution of property or its proceeds seized under legal process as provided in the Creditor Assistance Act, and

(iv)  a representative of creditors, but only for the purposes of enforcing the rights of a person referred to in subparagraph (i),

if that security interest is unperfected at the time

(v)  the interest of a person referred to in subparagraph (i), (ii) or (iv) arises, or

(vi)  the judgment creditor referred to in subparagraph (iii) delivers a writ of execution or certificate to the sheriff under section 3 of the Creditor Assistance Act,

(b) in collateral is not effective against

(i)  a trustee in bankruptcy if the security interest is unperfected at the date of the bankruptcy, or

(ii)  a liquidator appointed under the Winding-up and Restructuring Act (Canada) if the security interest is unperfected at the date that the winding-up order is made, and

(c) in chattel paper, a document of title, a security, an instrument, money, an intangible or goods is subordinate to the interest of a transferee who

(i)  acquires an interest under a transaction that is not a security agreement,

(ii)  gives value, and

(iii)  acquires the interest without knowledge of the security interest and before the security interest is perfected.

Measure of damages suffered by lessor or consignor

21  If the interest of a lessor under a lease for a term of more than one year or of a consignor under a commercial consignment is not effective against a judgment creditor under section 20 (a) or a trustee or liquidator under section 20 (b), the lessor or consignor is deemed, as against the lessee or consignee, as the case may be, to have suffered, immediately before the seizure of the leased or consigned goods or the date of the bankruptcy or winding-up order, damages in an amount equal to

(a) the value of the leased or consigned goods at the date of the seizure, bankruptcy or winding-up order, and

(b) the amount of loss other than that referred to in paragraph (a) that results from the termination of the lease or consignment.

Perfection of purchase money security interests

22  (1) A purchase money security interest in

(a) collateral, other than an intangible, that is perfected not later than 15 days after the date the debtor or a third person at the request of the debtor, obtains possession of the collateral, whichever is earlier, or

(b) an intangible that is perfected not later than 15 days after the day the security interest attaches,

has priority over the interests of persons referred to in section 20 (a) and (b).

(2) For the purposes of this section, if goods are shipped by common carrier to a debtor or to a person designated by the debtor, the debtor does not have possession of the goods until the debtor or the third person at the request of the debtor has obtained actual possession of the goods or a document of title to the goods, whichever is earlier.

Continuity of perfection

23  (1) If a security interest is perfected under this Act and is again perfected in some other way without an intermediate period during which it is unperfected, the security interest is continuously perfected for the purposes of this Act.

(2) A transferee of a security interest has the same priority with respect to perfection of the security interest as the transferor had at the time of the transfer.

Perfection by possession of collateral

24  (1) Subject to section 19, possession of the collateral by the secured party, or on the secured party's behalf by another person, perfects a security interest in

(a) chattel paper,

(b) goods,

(c) an instrument,

(d) a security,

(e) a negotiable document of title, and

(f) money,

unless possession is a result of seizure or repossession.

(2) For the purposes of subsection (1), a secured party does not have possession of collateral that is in the actual or apparent possession or control of the debtor or the debtor's agent.

(3) If the collateral is a security with a clearing agency, a secured party is deemed to have taken possession of the security when the appropriate entries have been made in the records of the clearing agency.

Perfection by registration

25  Subject to section 19, registration of a financing statement perfects a security interest in collateral.

Temporary perfection

26  (1) A security interest perfected under section 24 in

(a) an instrument or a security that a secured party delivers to the debtor for the purpose of

(i)  ultimate sale or exchange,

(ii)  presentation, collection or renewal, or

(iii)  registration of transfer, or

(b) a negotiable document of title or goods held by a bailee that are not covered by a negotiable document of title, which document of title or goods the secured party makes available to the debtor for the purpose of

(i)  ultimate sale or exchange,

(ii)  loading, unloading, storing, shipping or transshipping, or

(iii)  manufacturing, processing, packaging or otherwise dealing with the goods in a manner preliminary to their sale or exchange,

remains perfected, despite section 10, for the first 15 days after the collateral comes under the control of the debtor.

(2) After the 15 day period expires, a security interest referred to in this section is subject to the provisions of this Act relating to the perfection of a security interest.

Perfection if goods in hands of bailees

27  (1) Subject to section 19, a security interest in goods in the possession of a bailee is perfected by

(a) issue of a document of title by the bailee in the name of the secured party,

(b) if the bailee has issued a negotiable document of title to the goods, perfection of a security interest in the negotiable document of title,

(c) holding by the bailee on behalf of the secured party in accordance with section 24,

(d) deposit, by a secured party to whom a non-negotiable receipt has been transferred, of the transfer with the warehouser who issued the receipt in accordance with section 21 (2) of the Warehouse Receipt Act, or

(e) registration of a financing statement relating to the goods.

(2) The issue of a negotiable document of title covering goods does not preclude any other security interest in the goods arising during the period that the negotiable document of title is outstanding.

(3) A perfected security interest in a negotiable document of title covering goods takes priority over a security interest in goods otherwise perfected after the goods become covered by the negotiable document of title.

Security interests in proceeds

28  (1) Subject to this Act, if collateral is dealt with or otherwise gives rise to proceeds, the security interest

(a) continues in the collateral unless the secured party expressly or impliedly authorizes the dealing, and

(b) extends to the proceeds,

but if the secured party enforces a security interest against both the collateral and the proceeds, the amount secured by the security interest in the collateral and the proceeds is limited to the market value of the collateral at the date of the dealing.

(2) A security interest in proceeds is a continuously perfected security interest if the interest in the original collateral is perfected by registration of a financing statement that

(a) contains a description of the proceeds that would be sufficient to perfect a security interest in original collateral of the same kind,

(b) covers the original collateral, if the proceeds are of a kind that are within the description of the original collateral, or

(c) covers the original collateral, if the proceeds consist of money, cheques or deposit accounts in deposit taking institutions.

(3) If the security interest in the original collateral was perfected other than in a manner referred to in subsection (2), the security interest in the proceeds is a continuously perfected security interest, but becomes unperfected on the expiration of 15 days after the security interest in the original collateral attaches to the proceeds, unless the security interest in the proceeds is otherwise perfected by any of the methods and under the circumstances prescribed for original collateral of the same kind.

Security interests in returned or repossessed goods

29  (1) If a debtor sells or leases goods that are subject to a security interest under circumstances in which the buyer or lessee takes free of the security interest under section 28 or 30, the security interest reattaches to the goods if

(a) the goods are returned to, or are seized or repossessed by, the debtor or a transferee of chattel paper created by the sale or lease, and

(b) the obligation secured remains unpaid or unperformed.

(2) If a security interest reattaches under subsection (1), the perfection of the security interest and the time of registration or perfection is determined as if the goods had not been sold or leased if the security interest was perfected by registration at the time of the sale or lease and the registration is effective at the time of the return, seizure or repossession.

(3) If a sale or lease of goods creates an account or chattel paper, and

(a) the account or chattel paper is transferred to a secured party, and

(b) the goods are returned to, or are seized or repossessed by, the debtor or a transferee of the chattel paper,

the transferee of the account or chattel paper has a security interest in the goods that attaches when the goods are returned, seized or repossessed.

(4) Despite section 24 (1), a security interest arising under subsection (3) of this section is perfected if the security interest in the account or chattel paper was perfected at the time of the return, seizure or repossession, but becomes unperfected on the expiry of 15 days after that unless the transferee registers a financing statement relating to the security interest or takes possession of the goods, by seizure or repossession of the goods or otherwise, before the end of that period.

(5) A security interest in goods that a transferee of an account has under subsection (3) is subordinate to

(a) a security interest arising under subsection (1) that is a perfected security interest, and

(b) a security interest of a transferee of chattel paper arising under subsection (3).

(6) A security interest in goods that a transferee of chattel paper has under subsection (3) has priority over

(a) a security interest in the goods that reattaches under subsection (1), and

(b) a security interest in the goods as after acquired property that attaches on the return, seizure or repossession of the goods,

if the transferee of the chattel paper would have priority under section 31 (6) as to the chattel paper over an interest in the chattel paper claimed by the holder of the security interest in the goods.

(7) A security interest in goods given by a buyer or lessee of the goods referred to in subsection (1) that attaches while the goods are in the possession of the buyer, lessee or debtor and that is perfected when the goods are returned, seized or repossessed has priority over a security interest in the goods arising under this section.

Protection of buyer or lessee of goods

30  (1) In this section:

"buyer of goods" includes a person who obtains vested rights in goods under a contract to which the person is a party as a consequence of the goods becoming a fixture or accession to property in which the person has an interest;

"seller" includes a person who supplies goods that become a fixture or accession under a contract with a buyer of goods or under a contract with a person who is party to a contract with the buyer;

"the ordinary course of business of the seller" includes the supply of goods in the ordinary course of business as part of a contract for services and materials.

(2) A buyer or lessee of goods sold or leased in the ordinary course of business of the seller or lessor takes free of any perfected or unperfected security interest in the goods given by the seller or lessor or arising under section 28 or 29, whether or not the buyer or lessee knows of it, unless the buyer or lessee also knows that the sale or lease constitutes a breach of the security agreement under which the security interest was created.

(3) A buyer or lessee of goods that are acquired as consumer goods takes free from a perfected or unperfected security interest in the goods if the buyer or lessee

(a) gave value for the interest acquired, and

(b) bought or leased the goods without knowledge of the security interest.

(4) Subsection (3) does not apply to a security interest in

(a) a fixture, or

(b) goods the purchase price of which exceeds $1 000 or, in the case of a lease, the market value of which exceeds $1 000.

(5) A buyer or lessee of goods takes free from a security interest that is temporarily perfected under section 26 (1), 28 (3) or 29 (4) or a security interest the perfection of which is continued under section 51 during any of the 15 day periods referred to in those sections, if the buyer or lessee

(a) gave value for the interest acquired, and

(b) bought or leased the goods without knowledge of the security interest.

(6) If goods are sold or leased, the buyer or lessee takes free from any security interest in the goods perfected under section 25, if

(a) the buyer or lessee bought or leased the goods without knowledge of the security interest, and

(b) the goods were not described by serial number in the registration relating to the security interest.

(7) Subsection (6) applies only to goods that are equipment and that are defined in the regulations as serial numbered goods.

(8) A sale or lease referred to in subsection (2), (3), (5) or (6) may be for cash, by exchange for other property or on credit and includes delivering goods or a document of title to goods under a pre-existing contract for sale, but does not include a transfer as security for, or in total or partial satisfaction of, a money debt or past liability.

Protection of transferees of negotiable and quasi-negotiable collateral

31  (1) A holder of money has priority over a security interest in money perfected under section 25, or temporarily perfected under section 28 (3), if the holder

(a) acquired the money without knowledge that it was subject to a security interest, or

(b) is a holder for value whether or not the holder acquired the money with knowledge that it was subject to a security interest.

(2) A creditor who receives an instrument drawn or made by a debtor and delivered in payment of a debt owing to the creditor by that debtor has priority over a security interest in the instrument whether or not the creditor has knowledge of the security interest at the time of delivery.

(3) A purchaser of an instrument or a security has priority over a security interest in the instrument or security perfected under section 25 or temporarily perfected under section 26 or 28 (3) if

(a) the purchaser gave value for the instrument or security,

(b) the purchaser acquired the instrument or security without knowledge that it was subject to a security interest, and

(c) in the case of a security or instrument that

(i)  is not a security with a clearing agency, the purchaser took possession of the instrument or security, or

(ii)  is a security with a clearing agency, an entry has been made in the records of the appropriate clearing agency indicating that the security has been transferred to the purchaser.

(4) A holder of a negotiable document of title has priority over a security interest in the document of title that is perfected under section 25 or temporarily perfected under section 26 or 28 (3), if the holder

(a) gave value for the document of title, and

(b) acquired the document of title without knowledge that it was subject to a security interest.

(5) For the purposes of subsections (3) and (4),

(a) a purchaser of an instrument or a security, or

(b) a holder of a negotiable document of title,

who acquired his or her interest under a transaction entered into in the ordinary course of the transferor's business has knowledge only if he or she acquired the interest with knowledge that the transaction violates the terms of the security agreement creating or providing for the security interest.

(6) A purchaser of chattel paper who takes possession of the chattel paper in the ordinary course of business and for new value has priority over any security interest in it that

(a) was perfected under section 25, if the purchaser does not know at the time of taking possession that the chattel paper is subject to a security interest, or

(b) has attached to proceeds of inventory under section 28, whatever the extent of the purchaser's knowledge.

Priority of liens

32  A lien on goods that arises as a result of the provision, in the ordinary course of business, of materials or services in respect of the goods, has priority over a perfected or unperfected security interest unless the lien arises under an enactment that gives priority to the security interest.

Transfer of debtors' rights in collateral

33  (1) For the purposes of this section, a "transfer" includes a sale, the creation of a security interest or a transfer under judgment enforcement proceedings.

(2) Despite a provision in a security agreement prohibiting transfer or declaring a transfer to be a default, the rights of a debtor in collateral may be transferred consensually or by operation of law but a transfer by the debtor does not prejudice the rights of the secured party under the agreement or otherwise, including the right to treat a prohibited transfer as an act of default.

Purchase money security interests

34  (1) Subject to section 28, a purchase money security interest in

(a) collateral or its proceeds, other than intangibles or inventory, that is perfected not later than 15 days after the day the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier, or

(b) an intangible or its proceeds that is perfected not later than 15 days after the day the security interest in the intangible attaches,

has priority over any other security interest in the same collateral given by the same debtor.

(2) Subject to subsection (5) and section 28, a purchase money security interest in inventory or its proceeds has priority over any other security interest in the same collateral given by the same debtor if

(a) the purchase money security interest in the inventory is perfected at the time the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier,

(b) the secured party gives a notice to any other secured party who has, before the time of registration of the purchase money security interest, registered a financing statement containing a description that includes the same item or kind of collateral,

(c) the secured party gives notice to any other party who has, before the time of registration of the purchase money security interest, registered a security agreement providing for a prior security interest on the same item or kind of collateral,

(d) the notice referred to in paragraph (b) states that the person giving the notice expects to acquire a purchase money security interest in inventory of the debtor and describes the inventory by item or kind, and

(e) the notice is given before the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier.

(3) A notice referred to in subsection (2) may be given in accordance with section 72 or by registered mail addressed to the address of the person to be notified as it appears in the financing statement referred to in subsection (2) (b) or the security agreement referred to in subsection (2) (c).

(4) Subject to section 28 a purchase money security interest in goods and its proceeds taken by a seller, lessor or consignor of the collateral, that is perfected

(a) in the case of inventory, at the date the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier, and

(b) in the case of collateral other than inventory not later than 15 days after the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier,

has priority over any other purchase money security interest in the same collateral given by the same debtor.

(5) A non-proceeds security interest in accounts given for new value has priority over a purchase money security interest in the accounts as proceeds of inventory if a financing statement relating to the security interest in the accounts is registered before

(a) the purchase money security interest is perfected, or

(b) a financing statement relating to it is registered.

(6) A non-proceeds purchase money security interest has priority over a purchase money security interest in the same collateral as proceeds if the non-proceeds purchase money security interest,

(a) in the case of inventory, is perfected at the date the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier, and

(b) in the case of collateral other than inventory, is perfected not later than 15 days after the debtor, or another person at the request of the debtor, obtains possession of the collateral, whichever is earlier.

(7) For the purposes of this section, if goods are shipped by common carrier to a debtor or to a person designated by a debtor, the debtor is deemed not to have obtained possession of the goods until the debtor, or another person at the request of the debtor, has obtained actual possession of the goods or a document of title to the goods, whichever is earlier.

(8) A perfected security interest in crops or their proceeds given for value to enable a debtor to produce or harvest the crops and given

(a) while the crops are growing crops, or

(b) during a period of 6 months immediately prior to the time when the crops become growing crops,

has priority over any other security interest in the same collateral given by the same debtor.

(9) A perfected security interest in fowl, cattle, horses, sheep, swine or fish or the proceeds of any of them given for value to enable the debtor to acquire food or drugs to be fed to or placed in the animals or fish has priority over any other security interest in the same collateral given by the same debtor other than a perfected purchase money security interest.

Residual priority rules

35  (1) If this Act does not provide another method for determining priority between security interests,

(a) priority between perfected security interests in the same collateral is determined by the order of the occurrence of the following:

(i)  the registration of a financing statement without regard to the date of attachment of the security interest;

(ii)  possession of the collateral in accordance with section 24 without regard to the date of attachment of the security interest;

(iii)  perfection under section 5, 7, 26, 29 or 78;

whichever is the earliest,

(b) a perfected security interest has priority over an unperfected security interest, and

(c) priority among unperfected security interests is determined by the order of attachment of the security interests.

(2) For the purposes of subsection (1), a continuously perfected security interest must be treated at all times as perfected by the method by which it was originally perfected.

(3) Subject to section 28 for the purposes of subsection (1), the time of registration, possession or perfection of a security interest in original collateral is also the time of registration, possession or perfection of its proceeds.

(4) A security interest in goods that are equipment and that are of a kind defined in the regulations as serial numbered goods is not registered or perfected by registration for the purposes of subsection (1), (7) or (8) unless a financing statement relating to the security interest and containing a description of the goods by serial number is registered.

(5) Subject to subsection (6), the priority that a security interest has under subsection (1) applies to all advances, including future advances.

(6) A perfected security interest has priority over the interest of persons referred to in section 20 (a) only to the extent of

(a) advances made before the interests of the persons arise, or before the sheriff seizes the collateral or obtains a right to it under the Creditor Assistance Act,

(b) advances made before the secured party acquires knowledge of

(i)  the interests of the persons,

(ii)  seizure of the collateral by the sheriff, or

(iii)  an order giving the sheriff a right to the collateral,

(c) advances made in accordance with

(i)  a statutory requirement, or

(ii)  a legally binding obligation owing to a person other than the debtor entered into by the secured party before the secured party acquired the knowledge referred to in paragraph (b),

(d) reasonable costs and expenses incurred by the secured party for the protection, preservation or repair of the collateral, and

(e) the amount of taxes paid by the secured party under section 27 (1) of the Manufactured Home Act.

(7) If registration of a security interest lapses as a result of failure to renew the registration or if a registration has been discharged without authorization or in error, and the secured party re-registers the security interest not later than 30 days after the lapse or discharge, the lapse or discharge does not affect the priority status of the security interest in relation to a competing perfected security interest that immediately before the lapse or discharge had a subordinate priority position, except to the extent that the competing security interest secures advances made or contracted for after the lapse or discharge and before the re-registration.

(8) If a debtor transfers an interest in collateral which, at the time of the transfer, is subject to a perfected security interest, that security interest has priority over any other security interest granted by the transferee before the transfer, except to the extent that the security interest granted by the transferee secures advances made, or contracted for,

(a) after the expiry of 15 days from the day the secured party who holds the security interest in the transferred collateral has knowledge of the information required to register a financing statement disclosing the transferee as the new debtor, and

(b) before the secured party referred to in paragraph (a) amends the registration to disclose the name of the transferee as the new debtor or takes possession of the collateral.

(9) Subsection (8) does not apply if the transferee acquires the debtor's interest free from the security interest granted by the debtor.

Security interests in fixtures

36  (1) In this section, "secured party" includes a receiver.

(2) This section applies to land for which a certificate of title has been issued under the Land Title Act and to prescribed land or classes of land.

(3) Except as provided in this section and in section 30, a security interest in goods that attaches before or at the time the goods become fixtures has priority with respect to the goods over a claim to the goods made by a person with an interest in the land.

(4) A security interest referred to in subsection (3) is subordinate to the interest of

(a) a person who acquires for value an interest in the land after the goods become fixtures including an assignee for value of the interest of a person with an interest in the land at the time the goods become fixtures, and

(b) any person with a registered mortgage on the land who

(i)  makes an advance under the mortgage after the goods become fixtures, but only with respect to the advance, or

(ii)  obtains an order for sale or foreclosure after the goods become fixtures

without fraud and before the notice of the security interest is filed in accordance with section 49.

(5) A security interest in goods that attaches after the goods become fixtures is subordinate to the interest of a person who

(a) has an interest in the land at the time the goods become fixtures and who

(i)  has not consented to the security interest,

(ii)  has not disclaimed an interest in the goods or fixtures,

(iii)  has not entered into an agreement under which a person is entitled to remove the goods, or

(iv)  is not otherwise precluded from preventing the debtor from removing the goods, or

(b) acquires an interest in the land after the goods become fixtures if the interest is acquired without fraud and before the notice of the security interest in the goods is filed in accordance with section 49.

(6) A security interest referred to in subsection (3) or (5) is subordinate to the interest of a creditor of the debtor who caused to be registered under the Court Order Enforcement Act a judgment in the appropriate land title office affecting the land, after the goods become fixtures, and before the notice of the security interest is filed in accordance with section 49.

(7) The interest of a creditor referred to in subsection (6) does not take priority over a purchase money security interest in goods a notice of which is filed in accordance with section 49 not later than 15 days after the goods are affixed to the land.

(8) A secured party who, under this Act, has the right to remove goods from land must exercise this right of removal in a manner that causes no greater damage or injury to the land and to other property located on it or that puts the occupier of the land to no greater inconvenience than is necessarily incidental to the removal of the goods.

(9) A person, other than the debtor, who has an interest in the land at the time the goods that are subject to the security interest become fixtures is entitled to reimbursement for any damages to that interest in the land caused during the removal of the goods, but is not entitled to reimbursement for diminution in the value of the land caused by the absence of the goods removed or by the necessity of replacement.

(10) The person entitled to reimbursement under subsection (9) may refuse permission to remove the goods until the secured party has given adequate security for reimbursement.

(11) The secured party may apply to a court for one or more of the following orders:

(a) determining the person entitled to reimbursement under this section;

(b) determining the amount and kind of security to be provided by the secured party;

(c) designating the depository for the security;

(d) authorizing the removal of the goods without the provision of security for reimbursement under subsection (10).

(12) A person having an interest in the land that is subordinate to a security interest under this section may, before the goods have been removed from the land by the secured party, retain the goods on payment to the secured party of the lesser of the following:

(a) the amount secured by the security interest having priority over the interest;

(b) the market value of the goods if the goods were removed from the land.

(13) The secured party who has a right to remove the goods from the land must give to each person, who appears by the records of the land title office to have an interest in the land, a notice of the intention of the secured party to remove the goods and the notice must contain

(a) the name and address of the secured party,

(b) a description of the goods to be removed,

(c) the amount required to satisfy the obligation secured by the security interest,

(d) the market value of the goods,

(e) a description of the land to which the goods are affixed, and

(f) a statement of intention to remove the goods unless the amount referred to in subsection (12) is paid on or before a specified date that is not less than 15 days after the notice is given in accordance with subsection (14).

(14) A notice referred to in subsection (13) must be given at least 15 days before removal of the goods and may be given in accordance with section 72 or by registered mail addressed to the address of the person to be notified as it appears in the records of the land title office.

(15) A person entitled to receive a notice under subsection (14) may apply to a court for an order postponing removal of the goods from the land.

Security interests in crops

37  (1) In this section, "secured party" includes a receiver.

(2) This section applies to land for which a certificate of title has been issued under the Land Title Act and to prescribed land or classes of land.

(3) Except as provided in this section, a security interest in crops has priority with respect to the crops over an interest in the crops claimed by a person with an interest in the land.

(4) A security interest referred to in subsection (3) is subordinate to the interest of

(a) a person who acquires for value an interest in the land while the crops are growing crops, including an assignee for value of the interest of a person with an interest in the land while the crops are growing crops, and

(b) a person with a registered mortgage on the land who

(i)  makes an advance under the mortgage after the crops become growing crops, but only with respect to the advance, or

(ii)  obtains an order for sale or foreclosure after the crops become growing crops,

without fraud and before the notice of the security interest in the growing crops is filed in accordance with section 49.

(5) A security interest referred to in subsection (3) is subordinate to the interest of a creditor of the debtor who causes to be registered, in accordance with the Court Order Enforcement Act, a judgment in the appropriate land title office affecting the land on which the crops are growing before the notice of the security interest is filed in accordance with section 49.

(6) The interest of a creditor referred to in subsection (5) does not take priority over a purchase money security interest in the crops, or a security interest in the crops referred to in section 34 (8), a notice of which is filed in accordance with section 49 not later than 15 days after the time the security interest in the crops attaches.

(7) Section 36 (8) to (15) applies to seizure and removal of growing crops from land.

Security interests in accessions

38  (1) In this section:

"other goods" means goods to which an accession is installed or affixed;

"secured party" includes a receiver;

"the whole" means an accession and the goods to which the accession is installed or affixed.

(2) Except as provided in this section and section 30, a security interest in goods that attaches before or at the time the goods become an accession has priority with respect to the goods over a claim to the goods as an accession made by a person with an interest in the whole.

(3) A security interest referred to in subsection (2) is subordinate to the interest of

(a) a person who acquires for value an interest in the whole after the goods become an accession including an assignee for value of the interest of a person with an interest in the whole at the time the goods become an accession, and

(b) a person with a security interest taken and perfected in the whole who

(i)  makes an advance under a security agreement after the goods become accessions, but only with respect to the advance, or

(ii)  acquires the right to retain the whole in satisfaction of the obligation secured,

without knowledge of the security interest in the accession and before it is perfected.

(4) A security interest in goods that attaches after the goods become an accession is subordinate to the interest of a person who

(a) has an interest in the other goods at the time the goods become an accession and who

(i)  has not consented to the security interest,

(ii)  has not disclaimed an interest in the accession,

(iii)  has not entered into an agreement under which a person is entitled to remove the accession, or

(iv)  is not otherwise precluded from preventing the debtor from removing the accession, or

(b) acquires an interest in the whole after the goods become an accession if the interest is acquired without knowledge and before the security interest in the accession is perfected.

(5) A security interest referred to in subsections (2) and (4) is subordinate to the interest of a creditor or of a sheriff who has seized or caused the whole to be seized under legal process to enforce a judgment, if

(a) the seizure occurs under circumstances referred to in section 20, and

(b) the security interest is not perfected at the date of seizure.

(6) The interest of a creditor or of a sheriff referred to in subsection (5) does not take priority over a purchase money security interest in goods that is perfected not later than 15 days after the goods become an accession.

(7) A secured party who, under this Act, has the right to remove an accession from the whole must exercise the right of removal in a manner that causes no greater damage or injury to the other goods or that puts the person in possession of the whole to no greater inconvenience than is necessarily incidental to the removal of the accession.

(8) A person, other than the debtor, who has an interest in the other goods at the time the goods subject to the security interest become an accession is entitled to reimbursement for any damages to the person's interest in the other goods caused during the removal of the accession, but is not entitled to reimbursement for diminution in the value of the other goods caused by the absence of the accession or by the necessity of its replacement.

(9) The person entitled to reimbursement as provided in subsection (8) may refuse permission to remove the accession until the secured party has given adequate security for reimbursement.

(10) The secured party may apply to a court for one or more of the following orders:

(a) determining the person entitled to reimbursement under this section;

(b) determining the amount and kind of security to be provided by the secured party;

(c) prescribing the depository for the security;

(d) authorizing the removal of the goods without the provision of security for reimbursement under subsection (9).

(11) A person having an interest in the whole that is subordinate to a security interest as provided in this section may, before the accession has been removed from the whole by the secured party, retain the accession on payment to the secured party of the lesser of the following:

(a) the amount secured by the security interest having priority over the person's interest;

(b) the market value of the accession if the accession were removed from the other goods.

(12) The secured party who has a right to remove the accession from the whole must give to each person

(a) who is known by the secured party to have an interest in the other goods or in the whole, and

(b) who has registered a financing statement

(i)  using the name of the debtor and referring to the other goods, or

(ii)  according to the serial number of the other goods if they are goods defined in the regulations as serial numbered goods,

a notice of the intention of the secured party to remove the accession and the notice must contain

(c) the name and address of the secured party,

(d) a description of the goods to be removed,

(e) the amount required to satisfy the obligation secured by the security interest,

(f) the market value of the accession,

(g) a description of the other goods, and

(h) a statement of intention to remove the accession unless the amount referred to in subsection (11) is paid on or before a specified date that is not less than 15 days after the notice is given in accordance with subsection (13).

(13) A notice referred to in subsection (12) must be given at least 15 days before removal of the accession and may be given in accordance with section 72 or by registered mail addressed to the address of the person to be notified as it appears on the financing statement.

(14) A person entitled to receive a notice under subsection (12) may apply to a court for an order postponing removal of the accession.

Security interests in processed or commingled goods

39  (1) A perfected security interest in goods that subsequently become part of a product or mass continues in the product or mass if the goods are so manufactured, processed, assembled or commingled that their identity is lost in the product.

(2) Subject to subsections (4) and (6), if more than one perfected security interest continues in the same product or mass under subsection (1), and each was a security interest in separate goods, the security interests are entitled to share in the product or mass according to the ratio that the obligation secured by each security interest bears to the sum of the obligations secured by all security interests.

(3) For the purposes of section 35, perfection of a security interest in goods that subsequently become part of a product or mass is also a perfection of the security interest in the product or mass.

(4) For the purposes of subsection (2), the obligation secured by a security interest does not exceed the market value of the goods at the date that the goods become part of the product or mass.

(5) Any priority that a perfected security interest that has been continued in the product or mass under subsection (1) has over a perfected security interest in the product or mass is limited to the value of the goods at the date they became part of the product or mass.

(6) A perfected purchase money security interest in goods that continues in the product or mass under subsection (1) has priority over a non-purchase money security interest

(a) in the goods that continues in the product or mass under subsection (1),

(b) in the product or mass, other than as inventory, given by the same debtor, and

(c) in the product or mass as inventory given by the same debtor if

(i)  the secured party with the purchase money security interest gives a notice to any secured party with the non-purchase money security interest in the product or mass, who registers a financing statement containing a description of collateral that includes the product or mass, before the identity of the goods is lost in the product or mass or who has registered a security agreement providing for a prior security interest in the product or mass before the identity of the goods is lost in the product or mass,

(ii)  the notice contains a statement that the person giving the notice has acquired or expects to acquire a purchase money security interest in goods supplied to the debtor as inventory, and

(iii)  the notice is given before the identity of the goods is lost in the product or mass.

(7) A notice referred to in subsection (6) (c) may be given in accordance with section 72 or by registered mail addressed to the address of the person to be notified as it appears in the financing statement or security agreement referred to in subsection (6) (c).

(8) This section does not apply to a security interest in an accession to which section 38 applies.

Subordination or postponement of right to security interests

40  (1) A secured party may, in a security agreement or otherwise, subordinate his or her security interest to any other interest and the subordination is effective according to its terms between the parties and may be enforced by a third party if the third party is the person or one of a class of persons for whose benefit the subordination was intended.

(2) An agreement or undertaking to subordinate or postpone

(a) the right of a person to the performance of some or all of an obligation to the right of another person to the performance of some or all of another obligation by the same debtor, or

(b) some or all of the rights of a secured party under a security agreement to some or all of the rights of another secured party under another security agreement with the same debtor,

does not, because of the subordination or postponement alone, create a security interest.

(3) Subsection (2) is deemed to have come into force on October 1, 1990 and is retroactive to the extent necessary to give it effect on and after that date.

Assignments of intangibles or chattel paper

41  (1) In this section, "account debtor" means a person who is obligated under an intangible or chattel paper.

(2) The rights of an assignee of collateral which is either an intangible or chattel paper are subject to

(a) the terms of the contract between the account debtor and the assignor and any defence or claim arising out of the contract or a closely connected contract, and

(b) any other defence or claim of the account debtor against the assignor that accrues before the account debtor has knowledge of the assignment,

unless the account debtor has made an enforceable agreement not to assert defences or claims arising out of the contract.

(3) A modification of, or a substitution for, a contract referred to in subsection (2) (a) that is made in good faith and in accordance with reasonable commercial standards is effective against the assignee, unless the account debtor has otherwise agreed.

(4) Subsection (3) applies

(a) to the extent that an assigned right to payment arising out of the contract has not been earned by performance, and

(b) even if there has been notice of the assignment to the account debtor.

(5) If a contract has been modified or substituted in the manner referred to in subsection (3), the assignee obtains rights that correspond to those of the assignor under the modified or substituted contract.

(6) Nothing in subsections (3) to (5) affects the validity of a term in an assignment agreement that provides that a modification or substitution referred to in those subsections is a breach of contract by the assignor.

(7) If collateral, which is either an intangible or chattel paper, is assigned, the account debtor may make payments under the contract to the assignor

(a) before the account debtor receives a notice that

(i)  states that the amount payable or to become payable under the contract has been assigned and payment is to be made to the assignee, and

(ii)  identifies the contract under which the amount payable is to become payable, or

(b) after

(i)  the account debtor requests the assignee to furnish proof of the assignment, and

(ii)  the assignee fails to furnish the proof within 15 days from the date of the request.

(8) Payment by an account debtor to an assignee in accordance with a notice referred to in subsection (7) (a) discharges the obligation of the account debtor to the extent of the payment.

(9) A term in a contract between an account debtor and an assignor that prohibits or restricts assignment of the whole of the account or chattel paper for money due or to become due is binding on the assignor, but only to the extent of making the assignor liable in damages for breach of contract, and is unenforceable against third parties.

Part 4 — Registration

Personal property registry

42  (1) There must be a registry known as the personal property registry for the purposes of registrations under this Act and for registrations that are permitted or required under any other enactment to be made in the registry.

(2) The registrar may have a seal of office in the form prescribed.

(3) The minister may designate a person as registrar.

(4) The registrar may designate one or more persons as deputy registrars.

(5) Despite any regulation made under section 76, when in the opinion of the registrar the circumstances are such that it is not practicable to provide one or more registry services, the registr