The Registration System

• 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: 225-277

CHAP TER 6

THE REGISTR ATION

SYSTEM

A. INTRODUCTION AND BACKGROUND

1) Scope of Chapter

The requirement that security intere sts be perfected to take full effect

against third parties is examined in chapter 5. The usual mode of per-

fection — and the only one universally available — is registr ation in

the Personal Property Reg istry est ablished by the PPSA.1 This ch apter

addresses t he nature and operation of the registry, the registration pro-

cess, the requirements for a valid reg istration, and the circumsta nces in

which errors or omissions may prove fatal to perfected statu s.

The question of where registration should be made is dealt with

in chapter 3 on conf‌lict of laws. Chapter 14 addresses t he question

of whether alternative or supplementary registration may be require d

under federal law — in part icular, under the federal intellectual prop -

erty statutes (where the collateral is federally regulated intellectual

property rights), the Canada Shipping Act (where the collateral is a ship

registered in the federal ship registry), or the Bank Act (where the se-

curity is granted by a commercial debtor to a federally regulated bank).

The question of whether supplementary f‌ilings in t he land registry are

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

sion for the regist ry is made in PPSA (A, BC, M, NB, NW T, Nu, PEI, S) s. 42(1);

(NL, NS) s. 43(1); O s. 41; Y s. 40.

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PERSO NAL PR OPERTY SEC URI TY LAW226

required for f‌ixtures and crops (and rents in the case of Ontar io) to

preserve priorit y against those with an interest in the related l and is

dealt with in chapter 12.

2) Pre-PPSA Registration Systems

Canadi an law ref‌lect s a long-stand ing commit ment to the pri nciple

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

effectiveness of a non-possessory securit y interest against th ird par-

ties.2 The f‌irst public regist ry for personal propert y security d ates back

to pre-Confederation with the pas sage 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.

The Bills of Sale Act required a sale or mortgage of goods without a

change of possession to be registered on pain of subordination to sub-

sequent purchasers and mortgagees, a s well as unsecured creditors and

their representatives. A fter the conditional sale came into common com-

mercial use in Ca nada (circa the 1860s), legislatures in the common law

jurisdictions began to impose a similar registration requirement, begin-

ning about 1882. This policy was eventually ref‌lected in the adoption of

the Uniform Conditional Sales Act by the ULCC in 1922.3

The registration requirements for intang ible assets in the form of

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

mon law struck upon notif‌ication of the account debtor as t he closest

functional equivalent to a physical t ransfer of posses sion. Under the

rule in Dearle v. Hall,4 priority between successive assignments or char-

ges of the same obligation was determined by t he order of notif‌ication

to the account debtor, provided that the f‌irst-notify ing creditor did not

ha ve act ual know ledg e of a prio r ass ign ment or ch arge when it acq uir ed

its own interest. The rule d id not apply to a competition between the

holder of an assignment or charge and a garnishing creditor or trustee

in bankruptcy. To remedy the absence of any publicity mechan ism to

protect unsecured creditors, the federal Bankruptcy Act of 1919 em -

2 Generally, see R.C.C. Cumin g, “Harmonization of Busi ness Law in Canada,”

in Royal Comm ission on the Economic Union and Developme nt Prospects for

Canada [The Macdona ld Report], Report of the Royal Commission on the Econom-

ic Union and Develop ment Prospects for Canada (Ottawa: M inister of Supply and

Service s Canada, 1985) book 56.

3 See J.S. Ziegel, “Uni formity of Legislation i n Canada: The Conditional S ales

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

4 (1828), 3 Russ. 1, 38 All E.R . 475.

The Registrat ion System 227

powered a trustee in ba nkruptcy to avoid any general assignment of

book debts, whether absolute or by way of security, which had not been

registered. The new federal rule forced the prov incial legisl atures to

establish a public regist ry system for assig nments of and security in-

terests in monetar y intangibles. The ty pical legislative vehicle was the

Assignment of Book Debts Act under which an unregistered assignment

(def‌ined to also include an assignment by way of sec urity) was void not

just against the as signor/debtor’s unsecured creditors, but al so against

subsequent assignees and charge-holders.5

The proliferation of registry regi mes for different categories of col-

lateral and different kinds of security dev ices created particular dif-

f‌iculties for corporations, which in pract ice tended to charge all their

assets by way of a single security device, the equitable charge. Some

provinces, following t he example of the English Companies Act of 1900,

incorporat ed a registration system into t heir compan ies’ legislation. In

1931, the ULCC adopted a Uniform Corporation Securities Registration

Act. Enacted (in varying form s) in a number of common law jurisdic-

tions, the Act made it possible to register the grant of securit y in both

tangible (goods) and intangible (book debts) assets through a single

registration. However, the new Act did not replace the other regi stra-

tion statutes. Its scope was restricted to corporate debtors and corpor-

ate debt instruments. Even then, security was def‌ined in conventional

terms to exclude securit y created by retention of title, that is, condi-

tional sales agreements and f‌inancing leas es.

B. THE PPSA REGISTRATION SYSTEM:

GENER A L CONSIDER ATIONS

1) Nature of the Personal Property Registry

The Personal Property Regi stry is very different from its predeces sors. The

functional concept of a security interest adopted by the Act has made it

possible to consolidate all reg istrations in a si ngle registry, regardless

5 However, the courts gene rally ruled that reg istration was not const ructive notice

for the purpose s of the rule in Dearle v. Hall with the result that the f‌irst-regis-

tered assig nee could still be defeated i f a subsequent assignee w as the f‌irst to

notify the acc ount debtor. It was not until the 1990s that t he Nova Scotia Court

of Appeal f‌ina lly reversed this po sition, just prior to the advent of PPSA refor m in

that province: see Catherine Walsh, ”Registration, Constructive Notice and the

Rule in Dearle v. Hall: Judicial Reform in Nova S cotia” (1996) 12 B.F.L.R. 131.