BC PPSA: Clear And Predictable Priority Rules Prevail Despite Unfairness

The British Columbia Court of Appeal has overturned the B.C. Supreme Court decision in KBA Canada¹, which was reviewed in the September 2012 issue of Fully Secured.  In its decision², the Court of Appeal disagreed with the reasoning in the court below, and held that neither equitable principles nor unjust enrichment can be used to override the clear priority rules in the BC PPSA.³

In this case a third party inadvertently discharged a financing statement registered in the B.C. Personal Property Registry ("BC PPR") in favour of KBA Canada, Inc. ("KBA") as secured party against 3S Printers Inc. ("3S") as debtor.  KBA had no knowledge of the discharge at the time it was made, but when it became aware of the discharge it re-registered its financing statement against 3S outside of the statutory 30-day grace period for the reversal of mistaken discharges.  KBA therefore lost the perfected purchase money security interest ("PMSI") priority it had against the asset that