Remedies

• Author: Ronald C.C. Cuming, Catherine Walsh, Roderick Wood
• Pages: 613-691

613

CHA PTER 12

R EMEDIES

A. InTRoduCTIon

1) Personal Claims and Proprietary Claims

A creditor who is given a security i nterest in the debtor’s property ob-

tains a proprietar y right to the collateral. The def‌ining characterist ic of

a proprietary right (which is also referred to as a real right or a right in

rem) is that it is a r ight in a thing that is generally enforceable against

the world. By way of contrast, a personal right is a r ight in respect of

a particular person or identif‌iable group of persons. For example, a

creditor who lends money to a debtor has a personal right to recover

the debt. This right is owed only by the debtor to the creditor.

A proprietary right in t he form of a security intere st may be directly

vindicated by enforcement of the security interest. This will t ypically

involve the seizure and sale of tang ible collateral in the hands of the

debtor or in the hands of some third par ty to whom it has been trans -

ferred. The law provides another means by which the secured party ’s

proprietary right in t he collateral may be protected. A secured part y is

given a personal right against a person who wrongfully interferes with

the secured part y’s security interest in the collateral. A secur ity interest

therefore provides the foundation for two distinct ty pes of claims th at

can be made by the secured party: (1) the enforcement of the security

interest against the collatera l; and (2) a personal claim aga inst persons

who wrongfully interfere wit h the collateral.

PERSO NAL PROPERT Y SECUR ITY LAW614

Part 5 of the PPSA provides a comprehensive remedial system t hat

sets out in considerable detail the right s and obligations of a secured

party who seeks to en force its claim against the collateral. In contrast,

the right of a secured part y to bring a personal action again st those

who interfere with the collateral i s almost entirely unregulated by t he

PPSA. Instead, the Act leaves these matters to be determined by the

common law.

This chapter will focus pr imarily on the remedi al system found

in Part 5 of the Act. However, in order to appreciate the full range of

remedies available to a secured pa rty, it is also necessar y to understand

how the common law protects proprietary interests through the avail-

ability of personal actions against persons who unlawf ully interfere

with the secured pa rty’s interest. This chapter will therefore conclude

with a discussion of the available personal actions.

2) Secured and Unsecured Creditors’ Remedies

One of the major reasons why a creditor may wish to take a security

interest in the debtor’s property is th at it gives the creditor a superior

set of enforcement remedies. Without a security interest, the creditor

has no proprietary interest in the debtor’s assets, and must enforce the

claim through the provincial judgment enforcement system. In order

to do this, the creditor must bring a civil action and obtain a judgment.

This can produce delays, part icularly if the debtor defends the action.

Once a judgment is obtained, the creditor will usually obtain a writ of

execution, writ of enforcement or judgment charge. The creditor will

then seek to enforce the judgment through seiz ure and sale of the debt-

or’s personal property, garnishment of intang ible claims, or sale pro-

ceedings against t he debtor’s land. These proceedings tend to be more

cumbersome, particul arly in jurisdictions t hat have not reformed their

judgment enforcement systems. As well, the judgment enforcement

creditor is generally required to share f unds produced as a result of

enforcement proceedings with other judgment enforcement creditors.

A creditor who takes a secur ity interest in some or all of the debtor’s

personal property has a more powerful set of default remedies. The se-

cured creditor does not need to obtain a judgment before commencing

enforcement proceedings. Upon default, the secured creditor ha s the

right to take posse ssion of the collateral. In most jurisdict ions, a seizure

and sale of personal property does not need to be undertaken by the

sheriff. In six PPSA juri sdictions, provincial and ter ritorial exemptions

law does not apply to secured creditors (the other six have enacted legis -

lation that makes security interests subject to exemptions).

Remedies 615

Despite the superiority of its secured party remedies, a creditor

may decide to invoke its judgment enforcement remedies. If the se-

cured party is undersecured (that is, if the anticipated proceeds from

the collateral are insu ff‌icient to cover the obligation secured), the se-

cured party may wish to obtain a judgment to cover the shortfall. Thi s

shortfall is commonly referred to a s a “def‌iciency,” and the judgment

obtained in respect of it is called a “def‌iciency judgment.” The creditor

may then use the judgment enforcement system in order to proceed

against the debtor’s unencumbered property to collect the def‌icien-

cy. The PPSA provides that a security interest does not merge merely

because the clai m has been reduced to judgment.1 The creditor may

therefore invoke its secured party remedies against the collateral and

concurrently invoke its judgment enforcement remedies against the

debtor’s other assets. Of course, the creditor can not receive more than

one satisfaction of the judgment debt. Any amount received from the

disposition of the collateral must be applied so as to reduce the amount

payable on the judgment.

In other instances, a sec ured party may decide to enforce its claim

using its judgment enforcement remedies inste ad of its secured party

remedies. This might occur if t he secured party ha s a security interest

in one piece of equipment, but has obtained judgment and is direct ing

seizure of several other pieces of equipment under judgment enforce-

ment proceedings. Under these circum stances, it may be more conven-

ient to have all the property seized under the judgment enforcement

proceedings rather than having to effect two different types of enforce-

ment proceedings. The fact that the secured party instructs seizure

of the collateral under judgment enforcement proceedings should not

prevent the secured party f rom asserting its secured party’s remedies.

Therefore, the secured party may choose to sell its collateral under the

sale mechanism set out in the PPSA despite the fact that seizure was

undertaken under judgment enforcement proceedings.

Although the remedies are cumulative, a secured party will even-

tually be required to m ake an election between inconsistent remedies.

For example, a secured party who elects to e xercise its right under the

PPSA to retain the collateral in satisfaction of the obligation secured

thereafter loses t he right to recover on a judgment, since the underlying

obligation is extinguished. However, a claimant will not be regarded

1 PPSA (A, NB, PEI, NW T, Nu) s 55(8); BC s 55(9); M s 55(4); (NL, NS) s 56(8); O

s 59(7), S s 55(7); Y s 53(9).