Report on Commercial Liens 1994

1994 Charlottetown PE

Civil Section Documents - Report on Commercial Liens

I. ARE THERE SOME LIENS CONSIDERED BY THE ALBERTA REPORT FOR WHICH UNIFORMITY CANNOT BE CONSIDERED ESSENTIAL SUCH THAT THEY SHOULD BE GOVERNED BY LOCAL OPTION ONLY?

II. ON WHAT BASIS DO WE WANT TO CONTINUE TO CONFER SPECIAL STATUS ON THE COMMERCIAL ENTERPRISES THAT THESE LIENS REPRESENT?

III. WHETHER THE REMAINING TYPES OF LIENS SHOULD BE CONTINUED AS NON-POSSESSORY LIENS AFTER POSSESSION IS RELINQUISHED?

IV. WHETHER THE LIEN OF A COMMON CARRIER SHOULD BE EXPANDED TO PROVIDE LIEN PROTECTION TO THOSE WHO TRANSPORT GOODS WITHOUT HAVING THE STATUS OF A COMMON CARRIER?

V. WHETHER THE LIENOR NEED NEVER HAVE HAD POSSESSION AS A REQUIREMENT TO CREATE THE LIEN?

VI. SHOULD THE LIEN BE DEEMED TO BE A SECURITY INTEREST AND TAKE ITS PLACE IN THE PERSONAL PROPERTY SECURITY RÉGIME?

VII. SHOULD THE RELEVANT PPSA PROVISIONS BE INCORPORATED BY REFERENCE OR SHOULD THE PROVISIONS BE REPEATED AS THE ALBERTA REPORT RECOMMENDS?

VIII. WHETHER THE PRIORITY RULE BETWEEN LIEN CLAIMANTS AND SECURED PARTIES AS SELECTED BY THE ALBERTA REPORT IS THE APPROPRIATE ONE?

IX. WHAT SHOULD BE THE PRIORITY RULES BETWEEN COMPETING LIEN CLAIMANTS?

X. WHAT ARE THE APPROPRIATE CONFLICTS OF LAWS RULES FOR LIENS?

XI. SHOULD A LIENHOLDER BE ABLE TO GIVE THE ITEM LIENED TO CHARITY WHERE THE COST OF REALIZATION EXCEEDS THE VALUE OF THE ITEM?

ALBERTA REPORT RECOMMENDATIONS WITH COMMITTEE RESPONSE

 


At the meeting of the 1992 Uniform Law Section, the Section considered the possibility of embarking on a project to harmonize commercial liens. With this project in mind, the Section was referred to the work of Professor Rod Wood. Prof. Wood had prepared, on behalf of the Alberta Law Reform Institute, a major report entitled Report on Liens. With this work before it, the Uniform Law Section passed a resolution establishing a Committee to study the issues arising out of the Alberta Report and prepare recommendations for the Section. The current members of the Committee are Mr. Arthur Close, Q.C., Professor R.C.C. Cuming, Q.C. and Mr. Gérald Tremblay, Q.C. with Justice Georgina Jackson as the Chair. (Mr. Basil Stapleton, Q.C. provided comments on an earlier draft.) Prof. Wood has also provided comments on the Committee's work. All references to the Québec Civil Code have been provided by Mr. Gérald Tremblay. As part of its mandate, the Committee consulted with the Canadian Conference on Personal Property Security Law which body has been working for some years to achieve uniformity of secured transactions law.

Since the Alberta Law Reform Institute released the Alberta Report, the Law Reform Commission of British Columbia released a report regarding wood workers' liens entitled Working Paper No. 68-Liens for Logging Work which also included a draft Act. In the course of working on this Report, the B.C. Law Reform Commission released its final Report on the Woodworker Lien Act (June, 1994). The B.C. Working Paper will be referred to in this paper.

In addition to the Alberta Report and the B.C. Working Paper, the Committee referred to An Act to revise and consolidate the law related to Repairers' and Storers' Liens S.O. 1979, c. 17. That Act brought together and expanded the traditional warehousekeeper's liens and the liens of those who improve chattels, and, as such, marked the first major Canadian reform in this area. Mr. Arthur Close, Q.C. prepared a commentary on the discussion paper leading up to the Repairers' and Storers' Liens Act which is found at (1985) 10 C.B.L.J. 359. This commentary has also been a reference document for the Committee.

There are two preliminary points which must be kept in mind as one reads this Report on Commercial Liens. First, this is not intended to be an exhaustive study of all liens. For example, this report does not address Crown liens or liens for wages or other deemed interests. Rather, it addresses only those liens which share these characteristics: (i) they exist now in several provinces; (ii) they have a commercial basis; and (iii) they have a rational link to the PPSA.

Secondly, this report must be read in conjunction with the Alberta Report (referred to above). There was no significant debate on many issues canvassed by the Alberta Report. It contemplates a modernization of repairers', storers', common carriers', woodworkers', threshers', agisters' and hotelkeepers' liens based, in large measure, on modern PPSA principles. In that respect, the Alberta Report cannot be challenged. All the above liens need to be modernized and rationalized. Thus, if an issue has not been raised in this report it can be taken that the Alberta Report's treatment of the issue has been accepted by the Committee. For ease of reference, appendix "A" reproduces the Alberta Report's recommendations and summarizes the Committee's recommendations in relation thereto.

A threshold issue considered by the Committee was whether the special status of a lienholder should continue to be conferred at all. As one of the Committee members expressed it, one of the purposes of the commercial lien is to assist in the collection of a debt. If that is the main purpose of the lien, perhaps modern commercial law should abolish commercial liens leaving lienholders to their own devices which could include the taking of a security agreement. If it was thought necessary the various PPSAs could be amended to give a lienholder a status similar to that of a purchase-money secured party. For example, some of the new PPSAs contain a provision which some call a "value added security interest." In B.C. this is s. 34(9) of the PPSA and it reads as follows:

34.(9) A perfected security interest in fowl, cattle, horses, sheep, swine or fish or the proceeds of any of them given for value to enable the debtor to acquire food or drugs to be fed to or placed in the animals or fish has priority over any other security interest in the same collateral given by the same debtor other than a perfected purchase money security interest.

The Committee considered whether this provision, or something similar, could be expanded to accommodate many, if not all the liens, discussed in this report. However, that is not the approach taken in Ontario, or recommended by either the Alberta or B.C. Working Papers, and after full discussion by the Committee and with the Canadian Conference on Personal Property Security Law it was decided there was a rational basis to retain separate rights for those who improve or add value to chattels and to keep a separate statute for such liens as distinct from deeming such liens security interests under the PPSA. Persons who improve or add value are generally not in the same position as persons who lend money or sell property. This policy choice will be canvassed further in this report.

The Committee noted that in Civil Law the device which most closely resembles the commercial lien is the privilege conferred upon the person who exercises a right of retention. The right of retention is known as a statutory right which allows the creditor, so long as he or she is not paid, to retain a thing owned by the debtor, notwithstanding the fact that the thing was not received by way of a contract of pledging. Any right of retention always carries with it a privilege: the holder of a right of retention can refuse to return the thing, so long as the holder has not been fully paid. But the holder does not generally have the right to sell the thing withheld. To give up possession of the article is to lose the right of retention , unless the loss of possession was the result of a false representation. The Civil Code will be referred to in this report wherever comparisons can be made.

The Committee took the Alberta Report (supplemented by the B.C. Working Paper and the Repairers' and Storers' Liens Act) as the starting point for its discussions on liens. While accepting many of the recommendations contained in the Alberta Report, the Committee identified the following issues for further discussion:

  1. is uniformity of treatment essential for all liens considered by the Alberta Report (i.e., should some of the liens be governed by local option only);
  2. on what basis do we want to confer special status on the commercial enterprises that these liens represent (i.e., should any of these liens be considered obsolete);
  3. should the remaining liens be allowed to exist as non-possessory liens;
  4. should the lien of a common carrier be expanded to provide lien protection to those who transport goods, but do not have common carrier status;
  5. should the scope of the repairer or "value-added" lien be expanded to permit the creation of a lien even if the person repairing the article has never had possession of it;
  6. should the lien be deemed to be a security interest and tie into the PPSA as another form of a security interest (as is provided in the B.C. proposal regarding forestry workers' security interests);
  7. should the relevant PPSA provisions be incorporated by reference only or be repeated in the new statute as the Alberta Report recommends;
  8. whether the priority rule suggested by the Alberta Report for resolving disputes between secured creditors and lienholders is the appropriate one;
  9. what should be the priority rules between competing lien claimants;
  10. what are the appropriate conflicts of laws rules; and
  11. should a lienholder be able to give the item liened to charity where the realization costs exceed the value of the item?

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