AuthorRonald C.C. Cuming, Catherine Walsh, Roderick Wood
C H A P T E R 5
The concept of perfection plays a central role in the operation of the
PPSA system. The drafters of the PPSA adopted, perhaps unfortunately,
the terms “perfected” and “perfection” from Article 9 of the Uniform
Commercial Code, which in turn were copied from § 60 of the United
States Bankruptcy Code, as it existed at t he time Article 9 was drafted.
In the context of United States bankruptcy law, the term “perfection”
means that a security interest has a st atus giving it inv ulnerability to
defeat by the debtor’s trustee in bankruptcy or judgment creditors.1
However, it is not particularly helpful in the context of the PPSA to seek
the meaning of the term in its origins. The scope of the concept can be
determined only by reference to its use in t he PPSA itself.
The principal use of the term per fection in the PPSA is to describe
a priority status acquired by a security interest. The Act2 provides
that a security i nterest is perfected when it has attached (that is, ha s
come into existence)3 and all steps required for perfection have been
1 11 USC § 547(e)(1)(B) provides that a transfer of p ersonal property or a f‌ixt ure
is perfected whe n a creditor on a simple contract cannot ac quire a judicial lien
that is super ior to the interest of the tra nsferee.
2 PPSA (A, BC, M, NB, NW T, Nu, O, PEI, S) s 19; (NL, NS) s 20; Y s 18.
3 PPSA (A, BC, M, NB, NWT, Nu, PEI, S) s 12; (NL, NS) s 13; (O, Y) s 11.
Perfection 297
completed, regardless or the order of occurrence. In other words, an
extant security interest acquires the st atus of being perfected when a
prescribed step has been taken or the status i s conferred (temporarily
or permanently) by the Act.4
The starting point in the analysis of the concept of perfection is
recognition that a secur ity interest is a property interest in the col-
lateral.5 Proprietary right s generally confer priority status i n the sense
of being effective against th ird parties under common law pr inciples.
Perfection is the status that must be achieved if the property right s ac-
quired under a security ag reement are to be protected against specif‌ied
competing rights in or claims to the collateral. The Act inferentia lly
def‌ines perfection, not by stating what it is, but by specifying the in-
terests that can defeat (subordinate or cut off) a security intere st that
is not perfected.6 These interests include judgment creditors (under
prescribed circumstances),7 the debtor’s trustee in bankruptcy,8 other
secured creditors,9 and buyers of the collateral.10
There can be several perfected secur ity interests in t he same col-
lateral. Perfection is not invulnerability — it is relative, not absolute.
The priority status a perfected security interest ha s depends upon the
nature and status of the interest or interests with which it is i n com-
petition. The relativeness of the status of per fection results from the
various priority rules contained in the Act and in related legislation. A
perfected security i nterest can be defeated by other interest s in the col-
lateral, including those of un secured judgment creditors, other secured
creditors, and transferees of the collateral. Consequently, the only gen-
eralized desc ription of the concept of perfection that is possible is that
it is a status that norm ally must be attained in order for a secur ity in-
terest to have priority over other specif‌ied proprietary interests in the
4 As noted below, perfect ion does not always require the t aking of a “perfection
step.” There are circumsta nces in which the Act confers t he status automatically.
5 For a brief descript ion of the nature of a PPSA securit y interest, see Bank of
Montreal v Innovation Credit Union, 2010 SCC 47 at paras 41–43.
6 Lack of perfection does not re sult in a security intere st being “void.” It is still
enforceable again st the debtor and a donee of the collatera l.
7 See Chapter 9, Section A .
8 PPSA (NWT, Nu, O, PEI) s 20(1); (BC, M) s 20(b); (NB, S) s 20(2); A s 20(a); NL
s 21(1); NS s 21(2); Y s 19(1).
9 PPSA (A, BC, M, NB, NWT, Nu, PEI, S) s 35(1); (NL, NS) s 36(1); O s 30(1); Y s
34 (1).
10 PPSA (NWT, Nu, O) s 20(1); (BC, M) s 20(c); (NB, S) s 20(3); A s 20(b); NL s
21(2); NS s 21(3); PEI s 20(2).

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