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Difference between revisions of "Creditors' Remedies against Debtors (10:III)"
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Creditors' Remedies against Debtors (10:III) (view source)
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For agreements that are subject to the ''PPSA'', Part 5 of the ''PPSA'' outlines the creditor’s remedies (ss 56 - Rights and remedies, 57 - Collection of payments under intangibles or chattel paper, 58 – Right of seizure or repossession, and 67 - Rights and remedies: consumer goods). For agreements that involve fixtures, crops or accessions, ss 36 – 38 apply. In addition, Part 6 contains some sections (i.e. ss 68(2) - Good faith and commercially reasonable, and 72 - Notice) that are of procedural importance. | For agreements that are subject to the ''PPSA'', Part 5 of the ''PPSA'' outlines the creditor’s remedies (ss 56 - Rights and remedies, 57 - Collection of payments under intangibles or chattel paper, 58 – Right of seizure or repossession, and 67 - Rights and remedies: consumer goods). For agreements that involve fixtures, crops or accessions, ss 36 – 38 apply. In addition, Part 6 contains some sections (i.e. ss 68(2) - Good faith and commercially reasonable, and 72 - Notice) that are of procedural importance. | ||
'''NOTE:''' These are examples of issues that may be encountered by clinicians while dealing with the ''PPSA''. Remember that ''PPSA'' issues, particularly those involving | '''NOTE:''' These are examples of issues that may be encountered by clinicians while dealing with the ''PPSA''. Remember that ''PPSA'' issues, particularly those involving priority disputes or matters relating to the transitional provisions, are complex and may have to be referred to a lawyer. | ||
=== 3. What Does the PPSA Govern? === | |||
The scope of the PPSA is defined in s 2 as including every transaction that in substance creates a security interest without regard to its form. As well, under s 3, a transaction involving either a transfer of an account or chattel paper, a commercial consignment, or a lease for a term of more than one year that does not secure payment or performance of an obligation (i.e. does not create a security interest) is subject to the PPSA. Section 55 provides that Part 5 does not apply to transactions brought within the PPSA by s 3. It is necessary to look to the terms and the common law. NOTE: Section 4 lists types of transactions that are exempt from the PPSA. The PPSA does not apply to a “lien, charge or other interest given by a rule of law or an enactment unless the enactment contains an express provision that the PPSA applies”. Generally this excludes real property and natural resources. a)Perfection For a creditor’ s interest in a good to be practically effective, s 35(1)(b) of the PPSA states that the interest must be “perfected”, whereby the creditor becomes a “secured” party. By virtue of s 19, a security interest must satisfy two conditions to be “perfected”: i) the security interest must have “attached” (see below); and ii)the secured party must ensure that “all steps required for perfection under this Act have been completed” (see below). In general, attachment will ensure that the security interest is enforceable against the debtor, while perfection will protect the security interest against competing third party claims. “Attachment”: Section 12 states that a security interest attaches to the good when: ivalue is given; iithe debtor has rights in the collateral; and iiiexcept for the purpose of enforcing rights between the parties to the security agreement, the security interest becomes enforceable under s 10 (unless the parties specifically agreed to postpone the time for attachment in which case the security interest will attach at the time specified in the agreement). 4.Methods of Perfection i)perfection by possession of collateral applies to all forms of security interests (s 24); ii)perfection by registration. Subject to s 19, registration of a financing statement perfects a security interest in collateral. (s 25); andiii)temporary perfection(ss 5(3), 7(3), 26, 28(3), 29(4) and 51). 5.Remedies Where a debtor defaults on a security agreement, s 56 provides that the only rights and remedies the secured party has against the debtor are those provided in the security agreement (as long as they do not derogate those rights given to the debtor by the PPSA), as well as those specifically provided by the PPSA (s 17 and ss 36 – 38). | |||