Competitions with Other Claimants

AuthorRonald C.C. Cuming/Catherine Walsh/Roderick J. Wood
ProfessionUniversity of Saskatchewan, College of Law/McGill University, Faculty of Law/University of Alberta, Faculty of Law
1) Introduction
Canadian sec ured financing law ha s always recognized that unsecured
creditors are protected under perfection and priority rules.1 However,
the theoretical basi s for this protection and the operation of these r ules
have not always been consistent. Indeed, there are currently consider-
able dierences among the approaches taken in the various jurisdic-
tions to the respective pr iority positions of the secured and un secured
creditors of debtors. However, in all cases, the eect is to give to an
unsecured judgment creditor the ability to acquire a priority status in
relation to other interests, including PPSA sec urity interests, sim ilar to
that of a secured creditor.
2) The Traditional Approach
a) Prior Binding Eect of a Writ of Execution
The position of a secured party who acquire s a security interest in t an-
gible personal property of a debtor after it is “bound” by the invocation
1 For background, see R Cum ing, “Priority Competit ion Between Secured and
Unsecured Cre ditors: The Evolution of Policy” (2015) 30 Banking & Finance L R
457− 80.
Competitions with Other Claimants 549
of an enforcement measure is determined by judgment enforcement law.
The common law recognized early th at, while the issue and delivery of a
writ of execution to the sheri did not give to the judgment creditor any
claim to or interest in goods of t he judgment debtor, it did “bind” the
goods and chattels of the judgment debtor.2 At common law, the binding
eect did not extend to intangible persona l property; however, under
current Ontar io law, its eect extends to all forms of personal proper ty.3
Goods and chattels “bound” by a wr it of execution could be legally seized
by the sheri from any person who acquired a n interest in the property,
including full ownership, after t he delivery of the writ.4 Consequently,
the goods and chattels subject to the bind ing eect of a writ were treated
as being “encumbered” with the power of the sheri to seize them.5
The harsh consequences that re sulted from this conclusion were
ameliorated by legislation and adopted in some jurisd ictions that retained
the common law approach, patterned on section 1 of the English Me rcan-
tile Law Amendment Act, 1856. It provided that no writ of execution can
prejudice the right of any person to goods acquired from an execution
debtor in good faith, for valuable consideration and without notice. This
approach remains the central feature of enforcement law of British Col-
umbia, Northwest Territories, and Yukon.6 The eect of this legislation
is to insulate from the binding eect of writs of execution subsequent
interests, including secur ity interests, acquired under the circumst ances
described in t he provision. In practical terms, this strips the bind ing
eect of a writ of execution of much of its value in giving priority with
respect to goods over subsequent interest s in debtors’ property.7
2 See, for example, R oss v Dunn (1889), 16 OAR 552 [Ross]. This has been codified
in some Canad ian Acts. See Manitoba E xecutions Act, CCSM c E160, s5(1) [MEA];
Prince Edwa rd Island Judgments and E xecutions Act, RSPEI 1988, c J-2, s16
[PEIJEA]; Yukon Executions Act, RSY 2002, c 79, s 5(1) [YEA]. The British Col-
umbia Court Orders Enforceme nt Act, RSBC 1996, c 78, s 55 [BCCOEA] does not
employ the binding word ing of the common law. It provides that al l goods, chat-
tels, and eect s of a judgment debtor are liable to seiz ure and sale under a writ of
execution again st goods and chattels. However, s 35(1) of the Law and Equity Act,
below, note 6, indicates th at the common law still applies i n British Columbia.
3 Executions Act, RSO 1990, c E.24, ss 10(1) and 18(1) [OEA].
4 See Young v Short (1885), 3 Man R 302 (CA).
5 See Lloyds and Scott ish Finance Ltd v Modern Cars and Caravans (Kingston) Ltd,
[1966] 1 QB 764 [Modern Cars a nd Caravans].
6 Law and Equity Act, RSBC 1996, c 253, s 35(1). Seizures Act, RSNWT 1988, c-S-6,
s 3 [NWTSA] [applicable to Nunavut]; YEA, s 5(1).
7 However, the legislat ion does not protect a person who acquires a n interest
from a debtor in poss ession under an undertak ing to hold seized goods for the
sheri (a so-ca lled walking posse ssion agreement or sheri ’s bond). See Modern
Cars and Caravan s, above note 5.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT