Competitions with Other Claimants

• Author: Ronald C.C. Cuming/Catherine Walsh/Roderick J. Wood
• Profession: University of Saskatchewan, College of Law/McGill University, Faculty of Law/University of Alberta, Faculty of Law
• Pages: 548-572

548

CHAPTER 9

COMPETITIONS WITH

OTHER CLAIMANTS

A. COMPETING INTERESTS UNDER MONEY

JUDGMENT ENFORCEMENT LAW

1) Introduction

Canadian secured financing law has 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 priority positions of the secured and unsecured

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 security interests, similar 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 acquires a security interest in tan-

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 Claimants549

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 the 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 personal 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 an interest in the property,

including full ownership, after the 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 resulted 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 Mercan-

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 the provision. In practical terms, this strips the binding

eect of a writ of execution of much of its value in giving priority with

respect to goods over subsequent interests 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.