Remedies

• 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: 511-583

CHAP TER 13

REMEDIES

A. INTRODUCTION

1) Personal Claims and Proprietary Claims

A creditor who is given a securit y interest in the debtor’s property ob-

tains a proprieta ry right to the collatera l. The def‌ining characteri stic of

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

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

the world. By way of contrast, a personal r ight 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 r ight in the form of a security interest may be direct ly

vindicated by enforcement of the secur ity interest. This w ill typically

involve the seizure and sale of ta ngible collateral in the ha nds of the

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

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

proprietary right in the collateral may be protected. A secured party is

given a personal right again st a person who wrongfully interferes with

the secured part y’s security interest in the collateral. A s ecurity 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 t he collateral.

511

PERSO NAL PR OPERTY SEC URI TY LAW512

Part 5 of the PPSA provides a comprehensive remedial system that

sets out in considerable detail the r ights and obligations of a secured

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

the right of a secured par ty to bring a personal action against t hose who

interfere with the collateral i s almost entirely unregulated by the PPSA.

Instead, the Act leaves the se matters to be determined by t he common

law.

This chapter will focu s primar ily on the remedial system found

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

remedies available to a secure d party, it is also neces sary to understand

how the common law protects proprietar y interests th rough the avail-

ability of personal act ions 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 w ish to take a secur ity

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 proprietar y interest in the debtor’s assets, a nd must enforce the

claim through the prov incial judgment enforcement system. In order

to do this, the creditor must bring a civil action and obtain a judg-

ment. This can produce delays, par ticularly if t he debtor defends the

action. Once a judgment is obtained, t he creditor will usually obtain

a writ of execution or writ of enforcement. The creditor will then seek

to enforce the judgment through seizure and sale of the debtor’s per-

sonal property, garnishment of inta ngible claims, or sale proceed ings

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

some, particularly in jurisdictions t hat have not reformed their judg-

ment 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 security interest in some or all of t he debtor’s

personal property h as 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 jurisdictions, a seizure

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

sheriff. In se ven PPSA jurisd ictions, provinci al and terr itorial exemp-

tions law does not apply to secured cred itors (the other f‌ive have enacted

legislation that makes security i nterests subject to exemptions).

Remedies 513

Despite the superiority of its secured party remed ies, a creditor

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

cured party is undersecured (that is, if the anticipated proceed s from

the collateral are ins uff‌icient to cover the obligation secured), the se-

cured party m ay wish to obtain a judgment to cover t he shortfall. This

shortfall is popula rly 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 propert y to collect the def‌icien-

cy. The PPSA provides that a security intere st 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 t he

debtor’s other assets. Of course, the cred itor cannot receive more than

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

disposition of the collatera l 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 ci rcumstances, it may be more conven-

ient to have all the property sei zed under the judgment enforcement

proceedings rather th an having to effect t wo different ty pes of enforce-

ment proceedings. The fact that the sec ured party instructs seizure

of the collateral under judgment enforcement proceedings should not

prevent the secured part y from asserting its secured part y’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 wi ll even-

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

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

PPSA to retain the collateral in s atisfaction of the obligation secured

thereafter loses the right to recover on a judgment, since the under-

lying obligation is extinguished. However, a claimant will not be re-

1 PPSA (A, NB, PEI, NWT, 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).