The Effect Of An Assignment Of Security On Unsecured Claims

Eagle Eye Investments Inc. v. CPC Networks Corp.

"When One Plus One Still Equals One"

Introduction

The numerous motions in the Saskatchewan Court of Queen's Bench in Eagle Eye Networks Inc. ("Eagle Eye") and CPC Networks Corp. ("CPCN") paint a remarkable history of a falling out among the major shareholders of CPCN, who were its first directors and officers, and the many and varied steps taken by two such shareholders to recover monies allegedly loaned by one of them to CPCN. The saga is not yet over. No decision has been made whether CPCN actually owes monies to Eagle Eye. But one decision recently released by the Court has possibly provided certainty and laid to rest an issue that has troubled secured creditors and debtors alike for a long time. Can an unsecured creditor take an assignment of a perfected security position and thereby secure its unsecured debt?