Two in the Bush: When Registered Security is not a Bird in the Hand

On November 5, 2010, the Supreme Court of Canada gave judgment in two companion cases involving security granted under section 427 of the Bank Act (Canada) (the "Bank Act Security") in competition with security granted under the Personal Property Security Act (Saskatchewan) (the "PPSA"). The two cases, Bank of Montreal v. Innovation Credit Union¹ and Royal Bank of Canada v. Radius Credit Union Ltd.², gave the Court an opportunity to bring some clarity to what had become, in the Court's words, "a muddled area of law"³.

In both Innovation and Radius, a debtor had executed a general security agreement ("GSA") under the PPSA in favour of a credit union, prior to granting Bank Act Security in the same collateral to the bank. In each case the credit union had not registered notice of its interest in the Personal Property Registry, and the debtor had not disclosed the pre‐existing GSA at the time that the bank took and registered Bank Act Security.