Possible Changes to the Canadian Personal Property Security Acts 2000

Section 14 – Future Advances

14.(2) Unless the parties otherwise agree, an obligation owing to a debtor to make future advances is not binding on a secured party if:

(a) [Alternative A] the collateral has been seized, attached, charged or made subject to an equitable execution under circumstances described in clause 20(1)(a) or (b), or

(b) [Alternative B] a notice of judgment [or equivalent] has been registered in the Registry; or

(b) the collateral has been sold to a buyer; and

the secured party has knowledge of this fact before making the advances.

COMMENT

1. The addition of proposed clause (b) is explained in the comment to the proposed new section 35(6.1) below.

1. The insertion of a proposed “alternative B” to current clause (a) reflects the fact that some PPSA jurisdictions have adopted registration of a notice of judgment (or judgment enforcement order) in place of (or in addition to) seizure of the collateral as the relevant priority point for assessing priority between a judgment creditor and an unperfected security interest under section 20.

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