UNIQUELY TREACHEROUS WATERS: MORE ON THE "SELLER IN POSSESSION" STATUTORY REGIMES OF NEW BRUNSWICK, NEWFOUNDLAND & LABRADOR, NOVA SCOTIA AND PRINCE EDWARD ISLAND.

• Author: Bangsund, Clayton
• Position: Canada

Aucupia verborum sunt judice indigna. (1)

1. Introduction

   In a trio of recent articles published in the Saskatchewan Law Review, (2) Dalhousie Law Journal (3) and Supreme Court Law Review, (4) I have criticized numerous aspects of the diverse provincial and territorial statutory regimes that govern "seller in possession" title disputes in common law Canada. In this fourth edition of the pentalogy, the theme continues as I sharpen my critical focus on the quartet of regimes in Atlantic Canada.

   A "seller in possession" title dispute occurs when an initial buyer leaves bought goods in the possession of the seller who then transfers them to a subsequent transferee. (5) Presently, there are four distinct statutory models in force, across common law Canada, that apply to resolve such conflicts. (6) Except for Manitoba, Ontario and Yukon (the "Model 1" jurisdictions), all provinces and territories have incorporated electronic personal property registry infrastructure into their statutory priority regimes. However, the manner of integration sharply diverges between western and northern jurisdictions on one hand (Alberta, British Columbia, Northwest Territories, Nunavut, Saskatchewan, the "Model 2" jurisdictions), and eastern jurisdictions on the other. Only in New Brunswick, Newfoundland and Labrador, Nova Scotia (the "Model 3" jurisdictions) and Prince Edward Island (the sole "Model 4" jurisdiction) does the Personal Property Security Act1 (PPSA) potentially apply to resolve the title dispute between the initial buyer and subsequent transferee.

   In the Dalhousie Law Journal, I identified problems with statutory Models 3 and 4 that deserve attention from eastern Canadian lawmakers. (8) In short, by defining a "sale of goods without a change of possession" (9) as a transaction that creates a deemed security interest under the PPSA, legislators in Atlantic Canada have exposed buyers, who postpone possession of bought goods, to intolerable levels of risk of loss to a variety of competitors in an array of arguably unwarranted circumstances. For this reason, I think New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island should uniformize their "seller in possession" statutory regimes with Model 2 provinces and territories. Here, in my penultimate piece on this subject, I briefly highlight two additional technical difficulties with Models 3 and 4 that strengthen the case for statutory and regulatory reform in Atlantic Canada even if my principal advice is rejected. The first problem concerns attachment, the second concerns perfection.

2. Attachment

   Creation

   To ensure a sound conceptual framework for the governance of security interests, personal property security legislation is replete with technical language and concepts. "Attachment" concerns the creation or establishment of a security interest in personal property. The term is not statutorily defined but the elements of attachment are clearly laid out in Part II of the PPSA. A secured party acquires a non-possessory security interest in goods only when the conditions for attachment have been satisfied, namely: (1) the secured party gives value; (10) (2) the debtor signs a security agreement describing the goods; (11) and (3) the debtor has rights, or the power to transfer rights, in the goods. (12) Until these conditions of attachment have been met, the secured party has, at most, an inchoate interest. (13) Upon satisfaction of the conditions, the secured party acquires a statutory charge that may be asserted against third parties.

   Rights or Powers

   For many secured transactions involving goods, the third element of attachment--rights, or the power to transfer rights, in the collateral--is easily satisfied. Where, for example, the debtor owns the goods that are subject to the security interest, the secured party encounters no conceptual or practical difficulty attaching its security interest. But this is not so for the deemed security interests. (14) Consider the "lease for a term of more than one year" (15) and the "commercial consignment", (16) the other two types of deemed security interests involving goods. In respect of these transactions, it is not clear that the putative debtor (the lessee or consignee, as the case may be) has rights in the goods capable of supporting attachment in favour of either the original deemed secured party (the lessor or consignor) or a future true secured party. Indeed, nemo dat (17) suggests the very opposite. It is for this reason that the PPSA explicitly provides, ex abundanti cautela, (18) that a lessee under a lease for a term of more than one year, or a consignee under a commercial consignment, has rights in the goods sufficient to support attachment of a security interest. (19) Subsection 12(3) of the NBPPSA (in this article, New Brunswick law will serve as proxy for the law of all Model 3 and 4 provinces) is reproduced below:

   For the purposes of paragraph (1)(b) and without limiting other rights, if any, which the debtor has in the goods, a lessee under a lease for a term of more than one year or a consignee under a commercial consignment has rights in the goods when the lessee or consignee obtains possession of them under the lease or consignment. (20) Argument from Silence

   It is peculiar that there is no express reference to a "sale of goods without a change of possession" in the above provision in light of such transaction's characterization as a deemed PPSA security interest. Does a seller under a sale of goods without a change of possession have rights in the goods, or the power to transfer rights, sufficient to support attachment of a security interest? Recall that the seller no longer owns the goods, instead occupying the role of bailee in possession of the buyer's property. Accordingly, there is foundation for the view that the absence of express statutory language deeming a seller in possession to have rights or powers sufficient to support attachment, coupled with the presence of such language respecting the other deemed security interests involving goods, implies that a seller in possession...