Inadvertently Discharged PPSA Financing Statement Saved By Equity (But Caution, This Will Not Always Occur)

A recent Supreme Court of British Columbia decision in KBA Canada v. 3S Printers Inc. held that where a BC PPSA financing statement has been inadvertently discharged and there is no prejudice to subordinate creditors, the court can make an order giving priority to the discharged creditor. This should provide comfort to lenders that a court will impose equity where doing so is consistent with the BC PPSA, but given the limits of equitable intervention and that financing statements can be discharged without confirmation of authority, lenders should consider periodically checking the status of their registrations in conjunction with appropriate credit events.

In this case¹ heard before Justice Kelleher of the Supreme Court of British Columbia, the BC Personal Property Security Act ("BC PPSA") financing statement on which a creditor relied to provide it with a purchase money security interest ("PMSI") in certain equipment was inadvertently discharged. A dispute arose