Possible Changes to the Canadian Personal Property Security Acts 2000

Section 13 – Security in After-Acquired Collateral

13.(2) A security interest does not attach to after-acquired property that is:

(a) a crop that becomes a growing crop more than one year after the security agreement has been entered into, except that a security interest in crops that is given in conjunction with a lease, agreement for sale or mortgage of land may, if the parties so agree, attach to crops to be grown on the land concerned during the term of the lease, agreement for sale or mortgage;

(b) consumer goods, other than an accession, unless the security interest is a purchase money security interest or a security interest in collateral obtained by the debtor as replacement for collateral described in the security agreement . [delete subject to replacement legislation referred to in comments 2 and 3 below]

COMMENT

1. It is proposed to delete the one-year limitation on security in future growing crops from current section 13(2)(a) on the basis that it is paternalistic and unfair. The experience with the current rule indicates that crop financing under the PPSA is generally not available because of the increased transaction costs and risks resulting from the restriction. Since security taken under the federal Bank Act is not subject to any equivalent restriction, agricultural producers are effectively limited to bank financing and are denied access to the wider credit market available to other debtors.

1. It is also proposed to delete current subsection 13(2)(b) restricting non-purchase money security in after-acquired consumer goods (a change which already has been made in the Saskatchewan Act). The social policy concerns which underpin the section are more appropriately met by extending the exemptions on seizure of consumer goods in provincial judgment enforcement law to all creditors including secured creditors. The proposed approach would still deter the use of secured financing purely for its in terrorum value, and would still protect consumer debtors and their families from the risk of deprivation of consumer goods essential to their subsistence and livelihood. However, it would accomplish this without depriving all consumer debtors of all access to secured financing against future consumer goods.

1. In some provinces, the extension of provincial exemption policy to secured creditors has been effected via amendments to existing exemptions legislation (e.g. Saskatchewan) and in others via amendments to part 5 of the PPSA (e.g. the Atlantic provinces). The square-bracketed note above contemplates either approach.

Next Annual Meeting

2018 Conference (Centennial)

Delta Hotel

Québec City, QC

August 12 - 16, 2018