Bank Act Security Interest vs. Unregistered PPSA Security Interest: Supreme Court Has Declared a Winner

While the availability and securitization of credit is a cornerstone of the Canadian economy, there has nevertheless remained an intolerable degree of legal uncertainty surrounding the priority rules that should govern when Canadian federal and provincial security regimes collide. Neither provincial/territorial personal property security statutes ("PPSA") nor the federal Bank Act¹ (the "Bank Act") address which secured party has priority when a borrower grants security over an asset to a bank under the Bank Act and another secured party under the PPSA. This uncertainty is most problematic when the party that has taken security under the PPSA has not registered or perfected its security thereunder.