Possible Changes to the Canadian Personal Property Security Acts 2000

Section 41 – Effects on Account Debtors of an Assignment of Accounts or Chattel Paper

41.(10) Within 15 days after receiving an authenticated demand in writing from the assignor, the assignee shall send to an account debtor who has received notice of the assignment, an authenticated notice in writing that releases the account debtor from any further obligation to the assignee if:

(a) all of the obligations under the security agreement to which the assignment relates have been performed;

(b) the assignee is not committed to make advances, incur obligations, or otherwise give value; and

(c) the assignment relates to a transaction referred to in subsection 3(1).

COMMENT

Derived from revised article 9-209, proposed new subsection 41(10) would add a useful measure of protection for account debtors on an account or chattel paper which has been assigned as collateral under a ‘true’ security agreement within subsection 3(1) of the Act. If all outstanding obligations under the security agreement to which the assignment relates have been performed, and the secured party is not committed to extend further advances or otherwise incur any further obligations to the debtor, the proposed subsection would empower the debtor to require the secured party to send a written notice to any account debtor to whom a notice of the assignment has been sent, releasing the account debtor from any further obligations to the secured party.

[1]In the fall of 1998, new Article 9 was disseminated to each state, to be introduced and adopted with a common effective date of July 1, 2001.

[2]The Act has not yet been proclaimed in the Northwest Territories and Manitoba. However, at the annual meeting of the CCPPSL in May 2000 in Montreal, representatives of these jurisdictions stated that they expected proclamation to take place within the coming year. The Ontario Branch of the Canadian Bar Association has recommended changes which would bring the Ontario PPSA closer in line with the CCPPSL Model Act, particularly in the critical area of scope: see Submission to the Minister of Consumer and Commercial Relations Concerning the Personal Property Security Act (Canadian Bar Association – Ontario: 21 Oct 1998). However, that recommendation has not been acted upon by government.

[3]Readers should be aware that there are a number of minor differences between the New Brunswick and Saskatchewan versions of the Model Act. For present purposes, the most significant of these are: (1) the addition in the New Brunswick version of “a sale of goods without a change of possession” to the list of deemed security interests to which the Act applies pursuant to section 3; (2) the use of registration of a notice of judgment in the Personal Property Registry as the relevant point for determining priority between an unperfected security interest and a judgment creditor pursuant to section 20.

Next Annual Meeting

2018 Conference (Centennial)

Delta Hotel

Québec City, QC

August 12 - 16, 2018