Remedies

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

613

CHAPTER 12

REMEDIES

A. InTRoduCTIon

1) Personal Claims and Proprietary Claims

A creditor who is given a security interest 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 right in a thing that is generally enforceable against

the world. By way of contrast, a personal right is a right 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 typically

involve the seizure and sale of tangible collateral in the hands of the

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

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

proprietary right in the collateral may be protected. A secured party 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 types of claims that

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

interest against the collateral; and (2) a personal claim against persons

who wrongfully interfere with the collateral.

PERSO NAL PROPERT Y SECUR ITY LAW614

Part 5 of the PPSA provides a comprehensive remedial system that

sets out in considerable detail the rights and obligations of a secured

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

the right of a secured party to bring a personal action against those

who interfere with the collateral is almost entirely unregulated by the

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

common law.

This chapter will focus primarily on the remedial 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 unlawfully interfere

with the secured party’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 that 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, particularly 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 seizure and sale of the debt-

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

ceedings against the debtor’s land. These proceedings tend to be more

cumbersome, particularly in jurisdictions that have not reformed their

judgment enforcement systems. As well, the judgment enforcement

creditor is generally required to share funds produced as a result of

enforcement proceedings with other judgment enforcement creditors.

A creditor who takes a security 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 has the

right to take possession of the collateral. In most jurisdictions, a seizure

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

sheriff. In six PPSA jurisdictions, provincial and territorial 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 insuff‌icient to cover the obligation secured), the se-

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

shortfall is commonly referred to as 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 claim 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 cannot 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 secured party may decide to enforce its claim

using its judgment enforcement remedies instead of its secured party

remedies. This might occur if the secured party has a security interest

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

seizure of several other pieces of equipment under judgment enforce-

ment proceedings. Under these circumstances, 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 from 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 make an election between inconsistent remedies.

For example, a secured party who elects to exercise 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).