Bank Act – PPSA Interaction: Still Waiting for Solutions

The co-existence of a federal secured transactions regime (Bank Act security) and a provincial personal property security system (the PPSA) has given rise to a number of difficulties concerning the resolution of priorities. There has been a recent burst of activity – two Supreme Court of Canada decisions in 2010 followed by a federal legislative response in the form of an amendment to the Bank Act provisions, which the government expects to put in place by April 2012. Unfortunately, this latest legislative amendment is wholly inadequate. The new priority rule fails to confront the fundamental root of the problem: the fact that the priority mechanisms of the two regimes are based on two radically different ideas. It is a band aid solution that does not resolve the lack of compatibility between the two systems, but which will produce new interpretive problems and generate more litigation. As a consequence, many of the significant transactional efficiencies introduced by the modernization of provincial secured transactions law are severely compromised.