The Registration System

• Author: Ronald C.C. Cuming, Catherine Walsh, Roderick Wood
• Pages: 318-375

318

CHA PTER 6

THE R EGISTR ATION

SYSTEM

A. INTRODUCTION AND BACKGROUND

1) Scope of Chapter

Under the PPSA, a security interest general ly must be perfected in order

to be effective against most categories of th ird party competing cla im-

ants.1 The usual mode of perfection — and the only one avail able for all

types of collatera l — is registration in the Personal Property Registr y

(PPR) established by the PPSA.2 This chapter addresses the nature and

operation of the PPR, the registration process, the information permit-

ted or required to be included in a regist ration and the circumstance s

in which errors or omissions in t he entry of that information may prove

fatal to perfected status. Also covered are the rules and procedures ap-

plicable to the mandatory discharge or amendment of existing regi stra-

tions, and the extent to which a secured party is required to amend or

correct the information set out in an init ial registration as a re sult of

subsequent events that may af fect the accuracy of that information.

The question of where regi stration should be made is dealt with

in Chapter 3 on conf‌lict of laws. Chapter 13 addresse s the question

of whether alternative or supplementary regi stration may be necessar y

1 See Chapter 5, Sect ion A.

2 PPSA (A, BC, M, NB, NW T, Nu, PEI, S) s 25; (NL, NS) s 26; (O, Y) s 23. Provi-

sion for the establi shment of the Registr y is made in PPSA (A, BC, M, NB, NWT,

Nu, PEI, S) s 42(1); (NL, NS) s 43(1); O s 41; Y s 40.

The Registrat ion System 319

under federal law or international l aw — in particular, under the Bank

Act (where the security is granted by a commercial debtor to a federally

re gul ate d ban k),3 the Can ada Shipping Act (where the collateral is a ship

registered in the federal ship reg istry),4 the federal intellectual property

statutes (where the collateral is federally regulated intellectual prop-

er ty r ight s),5 the Canada Transportation Act (where the collateral is rail-

way assets and rolling stock),6 and the pending Cape Town Convention

on International Interests in Mobile Equipment (where the collateral is

an airframe or aircraft engine.7 Chapter 11 deals with the question of

whether supplementary registr ation in the land registr y is required for

security interest s in f‌ixtures, crops (and land-related intangibles in the

case of Ontario) in order to preserve priority aga inst those claiming an

interest in the related land.8

Whether registration is necessarily the most advantageous form of

perfection from a priority perspective depends on the nature of the

collateral. Perfection by possess ion generally provides superior priority

status for security intere sts in money, instruments, documents of title,

and chattel paper;9 the same is tr ue of perfection by control for security

interests in investment property.10

2) Pre-PPSA Registration Regimes

Canadian law ref‌lects a long-standing commitment to the principle

that some form of public registration should be a precondition to the ef-

fectiveness of a non-possessory security interest again st third parties.11

The f‌irst public registry for personal property security was e stablished

prior to Confederation with the passage by the legislature of the Prov-

ince of Canada in 1849 of the Bills of Sale (and Chattel Mortgages) Act.

By the end of the nineteenth centur y all the common law provinces had

enacted equivalent legislation.

3 See Chapter 13, Sect ion A.

4 See Chapter 13, Sect ion B.

5 See Chapter 13, Section C .

6 See Chapter 13, Section D.

7 See Chapter 13, Sect ion E.

8 See Chapter 11, Section D.

9 See Chapter 7, Section E.

10 See Chapter 7, Section G an d Chapter 8, Section E.

11 Generall y, Jacob S Ziegel, “Canadian C hattel Security Law : Past Experience and

Current Development s” in JG Sauveplanne, ed, Security over Cor poreal Mov-

ables (Leiden: AW Sijthoff, 1974); RCC Cuming, “Harmon ization of Canadia n

Personal Prope rty Security Law” i n Harmonization of Business Law in Can ada

(Toronto: University of Toronto Press, 1986).

PERSO NAL PROPERT Y SECUR ITY LAW320

The pre-PPSA bills of sale legislation required a sale or mortgage of

goods without a change of posses sion to be registered on pain of sub-

ordination to subsequent purchaser s and mortgagees and the seller’s

or debtor’s unsecured creditors and their represent atives. When con-

ditional sales and hire purchase leases emerged as f‌inancing options

(circa the 1860s), legislatures in the common law jurisd ictions began

to impose a similar registration requirement, beginning about 1882, as

ref‌lected in the eventual adoption of a Uniform Conditional Sales Act by

the ULCC in 1922.12

The registration requirements for intangible assets in the form of

accounts evolved along a more circuitous path. The early English com-

mon law struck upon notif‌ication of the debtor on the account as the

closest functional equiva lent to a physical transfer of pos session. Under

the rule in Dearle v Hall,13 priority between the holders of successive as-

signments of the same obligation, whether outright or by way of secur-

ity, was determined by the order of notif‌ication to the account debtor,

provided that the f‌irst as signee to give notice did not have actual know-

ledge of a prior assignment or charge when it acquired its own i nterest.

The rule did not apply to a competition between the holder of an assign-

ment or charge and a garnishing creditor or trustee in bankruptcy. To

remedy the absence of any publicity mechanism to protect unsecured

creditors, the federal Bankruptcy Act of 1919 empowered a trustee in

bankruptcy to avoid any general as signment of book debts, whether

absolute or by way of security, which had not been registered. The new

federal rule forced the provincial legislatures to establish a public regi s-

try system for assig nments of and security intere sts in monetary intan-

gibles. The t ypical leg islative vehicle was the Assignme nt of Book Debts

Act under which an unregistered a ssignment (def‌ined to also include an

assignment by way of secur ity) was void not just against the assignor/

debtor’s unsecured creditors, but also again st subsequent assignees and

secured parties.14

12 See JS Ziegel, “Uniformit y of Legislation in Can ada: The Conditional Sales

Experienc e” (1961) 39 Can Bar Rev 165.

13 (1828), 3 Russ 1, 38 All ER 475.

14 The court s generally ruled that reg istration was not const ructive notice for the

purpose s of the rule in Dearle v Hall with th e result that the f‌irst-regi stered as-

signee could sti ll be defeated if a subsequent a ssignee was the f‌irst to not ify the

account debtor. It was not until t he 1990s that the Nova Scotia Cour t of Appeal

f‌inally rever sed this position, jus t prior to the advent of PPSA reform in th at

province: see C atherine Walsh, ”Regist ration, Constructive Notice a nd the Rule

in Dearle v Hall: Judicial R eform in Nova Scotia” (1996) 12 BFLR 129.