



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:


674921 
          B.C. Ltd. v. New Solutions Financial Corporation,







2006 
          BCCA 49



Date: 20060203





Docket: CA033224

Between:

674921 
    B.C. Ltd.

Respondent

(Appellant by Cross Appeal)

(Petitioner)



And

New 
    Solutions Financial Corporation

Appellant

(Respondent by Cross Appeal)

(Respondent)












Before:


The 
          Honourable Mr. Justice Donald




The 
          Honourable Madam Justice Newbury




The 
          Honourable Madam Justice Levine








J.R. 
          Sandrelli and S.A. Dubo


Counsel for the Appellant




R.A. 
          Finlay


Counsel for the Respondent




Place 
          and Date of Hearing:


Vancouver, British Columbia




December 13, 2005




Place 
          and Date of Judgment:


Vancouver, British Columbia




February 3,2006








Written 
          Reasons by
:




The 
          Honourable Madam Justice Newbury




Concurred 
          in by:




The Honourable Mr. Justice Donald

The Honourable Madam Justice Levine





Reasons for Judgment of the Honourable Madam Justice 
    Newbury:

INTRODUCTION

[1]

This appeal involves what in recent years has become a rarity in this 
    court  a priority dispute between two secured creditors over the proceeds 
    of chattel security.  Such disputes have become rare since the adoption, by 
    most Canadian provinces, of Personal Property Security Acts

in 
    broadly similar terms, based on Article IX of the 1978
Uniform Commercial 
    Code
, a document prepared by the American Law Institute and the National 
    Commissioners on Uniform State Law.  In British Columbia, as in most other 
    Canadian provinces, the
Personal Property Security Act
, S.B.C. 
    1989, c. 36 swept away various statutory, common law and equitable rules dealing 
    with secured transactions involving personal property, including most notably 
    the
Sale of Goods on Condition Act
, the
Assignment of

Book Accounts Act
, and the
Chattel Mortgage Act
. 
    This patchwork of rules relating to constructive and actual knowledge, title, 
    registration, crystallization, realization and priorities had developed over 
    many years in response to changing exigencies and without any overall rationale. 
     The new unified statutory scheme ("PPSA") applies to all interests 
    that in substance create security interests on personal property. In the 
    words of D. Doan in
British Columbia Personal Property Security Act 
    Practice Manual
(The Continuing Legal Education Society of  British 
    Columbia, 1996), vol. 1 at §1.3:

The
PPSA
is based upon a practical, common sense 
    view of obtaining, registering, and protecting security interests.  Simply 
    stated, if a security interest is found to exist, the
PPSA
applies, 
    including the regime for protecting the secured partys rights and enforcing 
    the security interest.  Form and labels are rejected in favour of a substance 
    test.

Arbitrary and artificial structures are abandoned in 
    favour of flexibility and accommodation to modern business transactions.  
    The parties to security agreements are, in large measure, allowed to tailor 
    their agreement to fit their particular circumstances.  In addition, the priority 
    rules between secured parties are understandable and predictable.  Even the 
    codification of enforcement rights and obligations after default is useful 
    and imposes only those restrictions that are reasonable and in the public 
    interest.

[2]

A very general review of some of the concepts of the PPSA that are 
    material to this appeal may be in order here.  (I have attached a copy of 
    the relevant provisions of the
Personal Property Security Act
, 
    R.S.B.C. 1996, c. 359 (the Act) to these reasons.)  First, the Act provides 
    for the attachment of security interests to personal property.  Under s. 
    12, a security interest 
attaches
 when value is given (i.e., a loan 
    is advanced by the creditor), the debtor has acquired rights  (ownership or 
    something less) in the collateral,
and
except for the purpose of enforcing 
    rights between the parties to the security agreement, the security interest 
    [is]
enforceable
under s. 10.  (There are various exceptions and qualifications 
    not relevant to this case.)  Section 10(1) states that a security interest 
    is enforceable against a third party if:

(a)        
    The collateral is in the possession of the secured party, or

(b)        
    The debtor has signed a security agreement that contains

(i)         a description of the collateral by item or 
    kind, or by references to one or more of the following: goods, securities, 
    instruments, documents of title, chattel paper, intangibles, money, crops 
    or licenses,

(ii)        a statement that the security interest is 
    taken in all of the debtors present and after acquired personal property, 
    or

(iii)       a statement that a security interest is taken 
    in all of the debtors present and after acquired personal property except

(A)       specified items or kinds of personal property, or

(B)       
    one or more of the following: goods, securities, instruments, documents of 
    title, chattel paper, intangibles, money, crops or licenses.

Finally, a security interest is 
perfected
, according to s. 19, 
    when it has attached
and
all steps for perfection under the Act have 
    been completed, regardless of the order of occurrence.  The circularity of 
    this provision is broken by s. 25, which states that subject to s. 19, 
registration
of a financing statement perfects a security interest in collateral.  (Again, 
    there are other routes to perfection, but we are not concerned with them in 
    this case.)

[3]

Section 43(4) of the Act expressly permits the registration of a financing 
    statement (not the security agreement itself) before a security agreement 
    is made and before a security interest attaches.  Thus a lender, or prospective 
    lender, may effect a registration, which does not require the signature (or 
    even the knowledge) of the customer or borrower, and at a later date, obtain 
    the latters written assent to the granting of a security interest.  According 
    to Professors R.C. Cuming and R.J. Wood (
British Columbia Personal Property 
    Security Act Handbook
(4
th
ed., 1998) at 313), this feature 
    of the PPSA

was designed to facilitate commercial financing 
    by enabling a lender to file a financing statement in the registry, confirm 
    its priority position
via
a search, and then advance funds immediately 
    upon the borrowers execution of a security agreement.  The authors note that 
    although there is potential for abuse of this right, the Act

contains 
    an elaborate system of checks and balances.  (Presumably, one of these checks 
    is the non-enforceability against third parties of any security interest (e.g., 
    one granted orally) until the debtor has signed a security agreement that 
    complies with s. 10.)  Cuming and Wood elaborate further:

A central feature of the Act is the great flexibility that it affords 
    to secured parties or prospective secured parties when registering financing 
    statements.  It is possible for a prospective creditor to register a financing 
    statement that has a registration life of infinity and which claims a security 
    interest in all of the named persons present and after-acquired property.  
    This can all be done without the consent or knowledge of the person named 
    as debtor in the registration.  This flexibility is balanced by the system 
    contained in s. 50 under which the person named as debtor can require the 
    registration to be discharged or corrected so as to reflect the legal relationship, 
    if any, between the person the prospective creditor.  [
Supra
, at 329]

[4]

Section 35 of the Act, headed Residual Priority Rules, provides a 
    set of default rules to be applied in contests between security interests. 
    Importantly for this case, priority between perfected security interests in 
    the same collateral is generally determined according to the order of the 
    registration of  financing statements, 
without regard to the date of attachment 
    of the security interest
.  (My emphasis.)  Thus as Cuming and Wood observe, 
    although the perfection of a security interest is an essential feature of 
    priority, priority is not based on the time of perfection. A security interest 
    may have priority even though it was not the first security interest to be 
    perfected.  Time of attachment is also not a factor in determining priorities 
    between two secured parties (except in the unlikely event that both secured 
    parties have failed to perfect their security interests.)  (
Supra
, 
    at 256)  It is the operation of this provision in combination with s. 10 of 
    the Act that forms the crux of the cross appeal, to which I shall return in 
    due course.

[5]

Underlying the entire PPSA scheme, however, is the principle that the 
    law of contract continues to apply to relationships between secured creditors 
    and their debtors and that agreements between them must still be construed 
    according to [their]  terms, as s. 9 of the Act provides. In this case, 
    several of the documents executed between the respondents predecessors in 
    interest, two individuals who were dealing directly with the debtor, Advanced 
    Wing Technologies Corp. (AWTC), were drawn without legal assistance and 
    in apparent ignorance of much of the PPSA regime.  Consequently, several issues 
    of fact and contractual interpretation were raised for the learned Chambers 
    judge below, and six of them are again raised on the main appeal.

FACTUAL BACKGROUND

The Doctors Security

[6]

As the Chambers judge noted at para. 11 of his reasons (2005 BCSC 1113, 
    44 BCLR (4
th
) 376), the sequence of events underlying the parties 
    dispute is complex.  The respondent in this court (petitioner below) is a 
    numbered company which I will call the petitioner, as did the Chambers judge.  
    It is the assignee of the rights, including security interests, originally 
    taken from AWTC by two individual investors, Drs. Kane and Cleator.  At different 
    points in 1999, they were persuaded to enter into joint venture agreements 
    with AWTC, which was in the business of manufacturing wings and floats for 
    float planes.  When AWTC was unable to meet its obligations under the joint 
    venture arrangements, it entered into Amended Loan Agreements with the doctors 
    which were back-dated two or three months to March 2000.  The name Amended 
    Loan Agreements was in each case a misnomer since, as the Chambers judge 
    noted, they did not amend any previous loan agreements but simply replaced 
    the joint venture arrangements.  As he also noted, they appeared to have been 
    drafted by AWTC probably without legal assistance.  (Para. 16)  Each of 
    the Amended Loan Agreements contained a promise that AWTC 
will provide
its assets as collateral for the loan.  (My emphasis.)  The Agreements were 
    amended in the fall of 2000 (although again back-dated to March of that year) 
    by a one-page document in each case that stated,
inter alia,
The agreement 
    of March 01, 2000 already provides for AWTC providing its assets as collateral 
    security for the outstanding amount of principal and interest.

[7]

When their loans were not repaid in the spring of 2001, the doctors 
    consulted a solicitor, who registered financing statements against AWTC in 
    the PPSA registry on June 20.  Each financing statement described the collateral 
    as All present and after-acquired personal property of the debtor (as those 
    items are defined in the Personal Property Security Act of British Columbia). 
     The solicitor also prepared a form of general security agreement (GSA) 
    for execution by AWTC, but it resisted providing same until some months later.

[8]

As mentioned earlier, s.10(1)(b) of the Act states that a security 
    interest is only enforceable against a third party if the debtor has signed 
    a security agreement that contains a description of the collateral in compliance 
    with the statute.  One of the questions raised for the Chambers judge below 
    was whether the Amended Loan Agreements of March 2000 gave the doctors a security 
    interest
at that time
or contemplated that security would be given 
    later.  The competing creditor in this case, New Solutions Financial Corporation 
    (New Solutions), appellant in this court, submitted that the Agreements 
    were merely agreements to provide security at some later date, on demand 
    and that security interests were not actually granted until AWTC executed 
    the GSAs.

[9]

The Chambers judge stated that the Amended Loan Agreements could be 
    read either way, but found that the circumstances surrounding them favoured 
    the petitioners position that the documents granted immediate security interests 
    in favour of the two doctors.  He reasoned:

I 
    say this for a number of reasons. There was no element of the Amended Loan 
    Agreements that was executory in nature. The debt was owed prior to the agreements 
    being entered into and their entire purpose was to provide the doctors with 
    an assurance that the amounts that were owed to them would be repaid. It is 
    sensible, from a business standpoint, that they would require security to 
    be furnished to them immediately. Further, there does not appear to have been 
    any reason why AWTC would have been reluctant to grant security immediately, 
    but would have nonetheless bound itself to provide security on demand.



I also note that the Amended Loan Agreements were drafted 
    by AWTC; to the extent that it is necessary to do so, I would apply the
contra 
    proferentem
rule. The ambiguity ought to be resolved in favour of the 
    doctors. In the result, I am satisfied that the intent of the Amended Loan 
    Agreements was to create an immediate security interest in favour of the doctors.  
    [Paras. 39-40]

This conclusion is challenged by New Solutions on appeal.

[10]

The Chambers judge also addressed what he regarded as a second ambiguity 
    in the terms of the Amended Loan Agreements which, as noted above, referred 
    to AWTCs assets without more.  The Chambers judge considered whether assets 
    referred only to assets owned by AWTC at the time the Agreements were executed 
    or whether the word referred as well to after-acquired assets.  He noted the 
    statement by Cuming and Wood (
supra,
at 101) to the effect that the 
    failure of a security agreement to mention after-acquired property is not 
    always conclusive, and agreed with the Court in
Re Alda Wholesale Ltd
., 
    2001 BCSC 921, 26 C.B.R. (4
th
) 1 that in the absence of a clause 
    indicating that after-acquired property is included in the collateral, it 
    is considered
not
to be included.  In the case of the Amended Loan 
    Agreements, however, the Chambers judge found an intention on the part of 
    the debtor to include such assets in the charge.  In his analysis:

The agreement refers to the future by providing that AWTC 
will provide
its assets as collateral.  The amendment of the agreement also appears to 
    contemplate assets becoming subject to an ongoing security interest in stating 
    that the original agreement already provides for AWTC
providing its assets
as collateral security.  While inelegant, I find that these phrases would 
    alert a reader to the fact that after-acquired property was to be included 
    in the collateral.

I am satisfied, as well, that from the standpoint of 
    business efficacy, it is sensible to assume that the parties to the Amended 
    Loan Agreements intended them to create a security interest in both existing 
    and after-acquired assets.  I therefore interpret the Amended Loan Agreements 
    as creating an immediate security interest in AWTCs assets, and extending 
    to both existing and after-acquired assets.  [Paras. 42-3]

[11]

Further, the Chambers judge ruled that the Amended Loan Agreements 
    complied with the requirements of s.10(1)(b)(ii), quoted above at para. 2, 
    given his finding that there was a clear intention to cover all present and 
    after-acquired personal property.  It followed in his analysis that the security 
    interests he found to have been granted in the Amended Loan Agreements were 
    enforceable against New Solutions, the third party for purposes of s. 10(1).

[12]

The doctors pressure on AWTC to execute formal GSAs did not bear fruit 
    until May of 2002  at least, that is what the Chambers judge below found, 
    even though the two GSAs were dated July 1, 2001 and July 19, 2001 respectively.  
    The Chambers judge reasoned as follows on this point:


I accept the following statement from
Phipson on Evidence
(15
th
ed.) (London, Sweet & Maxwell, 2000) at §40-03 as accurate:

Documents 
    are presumed to have been executed on the day and date they bear, but where 
    there is no date or wrong one, the true date may be proved by parol.

In the case at bar, there is considerable reason to doubt 
    that the date on the documents reflects the date it was executed.  The doctors 
    were engaged in discussions with AWTC for several months after June 2001 in 
    attempts to shore up their security. It does not seem reasonable to suppose 
    that AWTC executed the GSA near the outset of those discussions, but did not 
    immediately hand it over to the doctors, given that they were pressing to 
    receive such a document.

Further, AWTC was clearly in the habit of back-dating 
    agreements that were given to the doctors  the two Amended Loan Agreements, 
    the amendments to those two agreements, and the July 1, 2001 GSA were 
    all backdated.

In view of the fact that it was not provided to the doctors 
    until after the execution of the other GSA on May 28, 2002, I find it most 
    likely that this second GSA was not executed until after that date.  [Paras. 
    20-23]

Again, this finding is challenged  this time by the petitioner on the 
    cross appeal.

[13]

Each of the GSAs purported to grant the doctors a security interest 
    in and to all present and after-acquired personal property of whatsoever 
    nature and kind both of AWTC and an affiliated company, AWT Holdings Ltd.  
    (Holdings).  Also around this time (late May 2002) the doctors and AWTC 
    entered into a new Convertible Term Loan Agreement dated for reference May 
    27, which confirmed the amount due and owing, provided for payment on demand, 
    and granted the doctors an option to convert any or all of the debt into common 
    shares of AWTC  a right that was never exercised.  This agreement
clearly
granted a security interest in all of AWTC's assets, including after-acquired 
    property, and stated that it was entered into in full settlement of all rights 
    and obligations between the parties as of its effective date.

[14]

Contrary to the Chambers judges suggestion at paras. 56 and 59 of 
    his reasons, a financing statement registered on behalf of the doctors in 
    the PPSA registry on August 15, 2002, was registered only against Holdings 
    and not against AWTC.

The New Solutions Financing

[15]

In the meantime, AWTC had been in discussions with New Solutions aimed 
    at obtaining additional financing.  New Solutions agreed in January of 2002 
    to finance AWTCs accounts receivable under a factoring agreement and as security 
    therefor prepared a GSA which AWTC signed and delivered.  A financing statement 
    was registered on New Solutions behalf on February 5, 2002.  It described 
    the collateral as including equipment, inventory, accounts, other; general 
    security agreement.

[16]

We may assume that New Solutions performed a search in the PPSA registry 
    and noted the financing statement that had been filed on behalf of the two 
    doctors in June of 2001.  Evidently, this led it to require as a condition 
    of its financing that the doctors subordinate their interests to that being 
    taken by New Solutions.  On February 10, 2002, the doctors signed a postponement 
    agreement in the form of a one-page Letter of Understanding prepared by 
    AWTC, the entire text of which was as follows:

It is agreed by both parties that Cleator/Kane are currently registered 
    against the AWTC and AWT Holdings assets on a General Security Agreement (GSA) 
    for loans outstanding. Cleator/Kane hereby agree to postpone their security 
    interest to New Solutions Financial Corporation for a period of 6 months from 
    the date of this document. Cleator/Kane do have outstanding loans with AWTC 
    and until such time as these loans are repaid in full will remain on the GSA 
    for AWTC and AWT HOLDINGS Ltd.

[17]

It appears that within the six-month period, New Solutions made its 
    advances to AWTC.  Also within the six months, it demanded repayment of the 
    amount owed to it by AWTC, some $307,000, by July 31, 2002.  On August 6, 
    New Solutions also sent a Notice of Intention to Enforce Security to AWTC, 
    in apparent compliance with the notice requirements of s. 244(1) of the
Bankruptcy 
    and Insolvency Act,
S.C. 1985, c. B-3 as amended (the 
BIA
).  
    Evidently, further discussions then took place between the lenders.  New Solutions 
    told Dr. Cleator it was considering advancing further funds under a so-called 
    Purchase Order Financing Program.  The two doctors signed another document 
    agreeing to postpone their security interests to New Solutions Financial 
    Corporation, up to $260,000 only, for the Purchase Order Financing Program 
    up to October 10, 2002.  Although at one point the doctors denied having 
    executed this document, the Chambers judge found at para. 29 of his reasons 
    that they had done so.  Ultimately, however, New Solutions did not advance 
    further funds on the strength of the second postponement, so that we are concerned 
    only with that signed in February of 2002.

[18]

Unfortunately, none of these financial infusions was sufficient to 
    save AWTC, which by the end of 2002 was heading towards insolvency. On December 2, 
    2002, it filed a Notice of Intention to Make a Proposal under the
BIA
. 
     This bought some time, but in September 2003, AWTC defaulted on its proposal 
    and in January 2004, it became bankrupt.  In the meantime, on October 27, 
    2003, the two doctors assigned their AWTC assets to the petitioner, which 
    now stands in their place in asserting priority to the funds (approximately 
    $650,000) realized from the sale of AWTCs assets.  This sum is being held 
    in trust pending the determination of this proceeding and we are told that 
    it is not sufficient to pay New Solutions claim.

Priority Issues

[19]

We have seen, then, that the following key steps took place on the 
    following dates:




May 
          or June 2000


AWTC executed 
          the Amended Loan Agreements with the doctors stating that it will provide 
          its assets as collateral for the loans




June 
          20, 2001


Doctors financing statements registered.




February 
          5, 2002


New Solutions financing statement registered.




February 
          10, 2002


The doctors executed the six-month postponement agreement 
          in favour of New Solutions, which then advanced funds to AWTC.




May 
          27, 2002


Reference date of Convertible Term Loan Agreement between 
          AWTC and doctors, superseding previous loan agreements.




After 
          May 28, 2002


AWTC executed first GSA in favour and, as found by Chambers 
          judge, executed second GSA shortly thereafter.




July 
          31, 2002


New Solutions demanded payment of its loans.




December 
          2, 2002


AWTC filed Notice 
          of Intention to make a Proposal under
BIA
.





[20]

At para. 53 of his reasons, the Chambers judge noted that if he was 
    correct that the Amended Loan Agreements had created enforceable security 
    interests, it was not necessary for him to consider what priority the petitioner 
    would have taken had it been required to rely solely on the GSAs.  Setting 
    aside for the moment the priority agreement of February 10, 2002, the doctors 
    registration of their financing statement in June of 2001 would obviously 
    prevail over New Solutions later registration.  However, since the priority 
    question had been fully argued, the Chambers judge proceeded to consider it 
    on the assumption that the GSAs had constituted the first valid security agreements 
    in favour of the doctors.  The petitioner naturally argued that the fact the 
    GSAs were not delivered until after May 28, 2002 did not affect their priority, 
    relying on the default rule at s. 35(1)(a) of the

Act.  For convenience, 
    I set out the material portion here:

35(1)    If this Act does not provide another 
    method for determining priority between security interests

(a)      
    priority between perfected security interests in the same collateral is determined 
    by the order of the occurrence of the following:

(i)
the registration of a financing statement without regard to the date of 
    attachment of the security interest
;

(ii)        
    possession of the collateral in accordance with s. 24 without regard to the 
    date of attachment of the security interest;

(iii)       
    perfection under s. 5, 7, 26, 29 or 78;

whichever is the earliest   [Emphasis added]

Sections 5, 7, 26, 29 and 78 are not relevant to this case; nor was any 
    lender in possession of the collateral at any material time.  One is left, 
    then, with the rule that priority between perfected security interests in 
    the same collateral goes to the party who was first in time to file a financing 
    statement, regardless of the date of attachment of the security interest held 
    by that party.  The Chambers judge noted
Rogerson Lumber Co. v. Four 
    Seasons Chalet Ltd.
(1980), 113 D.L.R. (3d) 671 (Ont. C.A.), relied 
    on by the petitioner to illustrate the application of this principle, although 
    the wording of the Ontario priority rule is materially different from its 
    British Columbia counterpart.

[21]

New Solutions on the other hand relied on s. 10.  (See para. 2 above.)  
    In the words of the Chambers judge, New Solutions contended that a security 
    agreement is unenforceable against third parties unless it is in writing, 
    and  such an agreement does not become enforceable retroactively simply because 
    it was registered before it was created.  The Court noted the following passage 
    from Cuming and Wood,
supra,
on this point
:

Under 
    s. 10, the lack of writing renders the security interest unenforceable against 
    a third party.
It is unclear whether an unenforceable security interest 
    can become retroactively enforceable when the security agreement between [the 
    secured party] and the debtor is put in writing.



It 
    is the view of the authors that it cannot
.  
    If the only issue involved were attachment, [the secured party] would be able 
    to establish priority on the basis of s. 35.  However, s. 10 suggests that 
    any interest acquired in the collateral at a time when the security agreement 
    was not in writing acquires a vested priority.  While s. 35(1) gives priority 
    on the basis of a first-to-register rule, the opening words of the section 
    make it clear that this rule is subject to other priority rules of the Act.
Section 10 is such a priority rule.



There is a good policy reason for giving supremacy to the priority rule 
    of s. 10.  If, as is suggested by the authors, the purpose of the writing 
    requirement of s. 10 is to provide corroboration of the claim of a secured 
    party  that she has an interest in the specified collateral of the debtor,
it is crucial that a written record of the essential features of a security 
    agreement between the debtor and a secured party be available by the time 
    that a third party  acquires an interest or enters into a contact [
sic
] 
    providing for the acquisition of an interest in the collateral.  There is 
    little value in making this information available after the interest of the 
    third party has been acquired
.  If s. 10 is not seen as having priority 
    effect where secured parties are involved, a secured party who has registered 
    a financing statement against the name of a person can at least temporarily 
    prevent the person from getting credit from other sources simply by alleging 
    an oral security agreement with the person.  [At 103; emphasis added]

[22]

The Chambers judge reasoned, however, that it was unnecessary to resolve 
    the question of the interaction of s. 35(1)(a) and s.10, since in his opinion 
    the doctors financing statements (registered June 20, 2001) had not contemplated 
    the GSAs.  The Chambers judge had found these were not registered until 
    August 15, 2002.  In his words:

While I accept that the language of the June 2001 registrations 
    (all present and after-acquired personal property of the debtor (as those 
    terms are defined in the
Personal Property Security Act
of British 
    Columbia) was broad enough to encompass the GSAs, it is apparent to me that
what was being registered was the existing amended Amended Loan Agreements.  
    Those Amended Loan Agreements were, at the time, the only security agreements 
    held by the doctors.  While they hoped that they might obtain more formal 
    GSAs in the future, those GSAs were not contemplated by the June 2001 registration.

In the result, I find that the GSA security of the doctors 
    was not registered until August [2002], and that it does not have priority 
    over the security of New Solutions.  The petitioner nonetheless has priority 
    over New Solutions by virtue of the prior execution and registration of the 
    Amended Loan Agreements.  [Paras. 60-61; emphasis added]

These conclusions are challenged on both the appeal and cross appeal.

[23]

At paras. 74-85 of his reasons, the Chambers judge considered whether 
    the priority agreement granted by the doctors in favour of New Solutions in 
    fact gave it priority in respect of the funds being held in trust.  He began 
    by noting
Sun Life Assurance Co. of Canada v. Royal Bank of Canada
(1995), 129 D.L.R. (4
th
) 305, 37 C.B.R. (3d) 89 (Ont. Gen. Div), 
    where Winkler J. said that a waiver of priority must be made in clear and 
    unequivocal terms.  This statement was adopted by Lowry J. (as he then was) 
    in
Bank of Montreal v. Kimberley Brewing Co.,
(1999), 12 C.B.R. 
    (4
th
) 10 (B.C.S.C.), at 13-14.  The Chambers judge in the case 
    at bar agreed with New Solutions that in interpreting the agreement, the court 
    should favour an interpretation that promotes a sensible commercial result.  
    However, he did not agree that the only commercially sensible interpretation 
    was that the priority agreement was intended to permanently subordinate the 
    doctors security to the indebtedness that [AWTC] incurred during the period 
    to which the priority agreement applies.  In his analysis:

Situations can arise in which a lender is prepared to 
    take long-term risks, but wishes to ensure that existing creditors do not 
    grab a cash injection before the borrower has an opportunity to use it in 
    an attempt to turn its financial situation around. In the case at bar, I find 
    it quite conceivable that New Solutions would be prepared to enter into the 
    factoring agreement with AWTC, but required some forbearance by the doctors 
    before doing so. By granting a time-limited priority to New Solutions, the 
    doctors might have simply       been giving AWTC time to use New Solutions 
    money to transform itself into a more viable operation, without surrendering 
    their priority in the longer term.

I do not make any findings of fact as to whether this 
    conceivable scenario is what actually occurred. What is important is that 
    applying the ordinary meaning to the words used in the priority agreement 
    does not result in an absurdity, or in a commercially nonsensical agreement. 
    In view of the cautious approach which courts must take to priority agreements, 
    and in view of the language of the initial priority agreements in this case, 
    I find that the priority granted to New Solutions was time-limited in nature. 
    Upon the expiration of the priority agreements, New Solutions security reverted 
    to being behind the Doctors Security.

While I am of the view that the language of the priority 
    agreements is fairly clear, I would also note that the priority agreements 
    were provided to the doctors by AWTC, and apparently drafted by that company. 
    Again, if it were necessary to do so, I would resort to the
contra proferentem
principle in interpreting the priority agreements.  [Paras. 79 - 81]

[24]

The Chambers judge was of the view that
if
New Solutions had 
    taken proceedings pursuant to its GSA during the period covered by the (first) 
    priority agreement, New Solutions would have been entitled to maintain its 
    priority over the Doctors Security for the duration of its execution proceedings.  
    However, he held, its demand letter and notice under the
BIA
fell short of what was required. In his words:

Neither of these documents constitutes a proceeding 
    nor should they be seen as steps in enforcing the GSA. Instead, these were 
    simply notices to [AWTC] that proceedings to enforce obligations under the 
    GSA might be taken in future  New Solutions, therefore, failed to preserve 
    its priority beyond the terms of the priority agreements.  [Para. 84]

Consequently, the Chambers judge concluded that the priority agreements 
    granted by the doctors in favour of New Solutions had expired prior to the 
    taking of any steps by the latter that would have preserved its priority.  
    [Para. 85]

Equitable Subordination and s. 139 of the
BIA

[25]

Finally for purposes of this appeal, the Chambers judge considered 
    New Solutions argument that even if the doctors, and hence the petitioner, 
    were entitled to priority, that priority should be found to have been lost 
    by operation of s. 139 of the
BIA
or through the doctrine of 
    equitable subordination.  Section 139 provides:

Where a lender advances money to a borrower engaged or 
    about to engage in trade or business under a contract with the borrower that 
    the lender shall receive a rate of interest varying with the profits or shall 
    receive a share of the profits arising from carrying on the trade or business, 
    and the borrower subsequently becomes bankrupt, the lender of the money is 
    not entitled to recover anything in respect of the loan until the claims of 
    all other creditors of the borrower have been satisfied.

The Chambers judge considered that s. 139 was not applicable in the circumstances 
    of this case for various reasons  the doctors had not been equity participants 
    in AWTC itself, although at one point they may have been joint venturers; 
    long before AWTCs bankruptcy, they had taken the Amended Loan Agreements 
    in substitution for any interests in AWTCs profits; and consequently, the 
    debt assigned to the petitioner had not provided for any participation in 
    the profits of AWTC.  The Chambers judge also declined to apply the doctrine 
    of equitable subordination, an American principle described in
Canadian 
    Deposit Insurance Corp. v. Canadian Commercial Bank
, [1992] 3 S.C.R. 
    558 at 609.  The Court in that case did not determine whether or not the doctrine 
    applies in Canada but found that in any event the requirements for its application 
    had not been met.  Similarly here, the Chambers judge found that the doctors 
    had not engaged in any inequitable conduct that would engage the doctrine 
    if it were applicable in Canada.  (Para. 71).

Trial Judges Disposition

[26]

In the result, having found that the priority in favour of New Solutions 
    granted by the doctors was not operative in the absence of proceedings taken 
    by New Solutions during the six-month period, the Court held that the doctors 
    security interests were entitled to rank in priority to that of New Solutions.  
    In accordance with this finding, the Chambers judge ordered certain amendments 
    to an earlier order made in the receivership proceeding (which order had been 
    made without prejudice to the petitioners position) to clarify that the Doctors 
    Security ranked in priority to the interests of Subsequent Claimants, including 
    New Solutions.  (A stay was eventually obtained by New Solutions in this court 
    pending the determination of the appeal.)

ON APPEAL

[27]

The first group of questions raised on appeal relate to the Amended 
    Loan Agreements.  New Solutions submits that the Chambers judge was wrong 
    in ruling that these Agreements granted a security interest that arose immediately; 
    that if an interest was granted, it included after-acquired property of AWTC; 
    and that therefore  the Agreements complied with the requirements of s. 10 
    so as to be enforceable against third parties.  I see each of these as a question 
    of law and therefore reviewable on a standard of correctness.

[28]

I will say straightaway that I am of the view that New Solutions is 
    correct on all three of these points.  Although it is correct that no particular 
    wording needs to be used to create a security interest, a covenant by a debtor 
    that it will provide security seems to me to mean just what it says  that 
    it
will
provide security, at a future date.  Consistent with this covenant, 
    AWTC did, some months later, execute GSAs in favour of the doctors, after 
    resisting doing so in the interim. The amending document delivered in the 
    fall of 2000 is consistent with this interpretation: rather than stating that 
    AWTC had already provided its assets as collateral security, it stated that 
    the Agreement of March 1, 2000 already provides for AWTC providing its assets 
    as collateral security .  Further, if the Amended Loan Agreements had been 
    ambiguous, it would not have been proper to apply the doctrine of
contra

proferentem
against New Solutions when New Solutions was neither a 
    party to the Agreements nor had any involvement in drafting them.

[29]

My conclusion makes the second issue moot, but if it were not, I would 
    also, with respect, disagree with the Chambers judge that the Amended Loan 
    Agreements conformed to the requirements of s. 10(1)(b) of the Act. The Agreements 
    referred only to the assets of AWTC and thus failed to describe the collateral 
    by item or kind or by reference to any of the classes of goods set forth in 
    sub-paragraph (i).  Further, the Agreements did not state that security interests 
    were taken in all of the debtors present and after-acquired personal property 
    or any words with a similar effect, nor that security was taken in all of 
    the debtors present and after-acquired personal property with specified exceptions. 
    Although I accept that a court should not take an overly technical approach 
    to the Act and its interpretation, I regard the wording as fatal to the enforceability 
    of a security interest, given the apparently mandatory nature of s. 10(1)(b). 
     I also take Mr. Sandrellis point that the Chambers judges interpretation 
    is difficult to reconcile with his previous finding of a present and immediate 
    grant of security.

[30]

As a result, the Amended Loan Agreements did not in my opinion create 
    security interests enforceable against third parties in accordance with s. 
    10.  It was not until AWTC executed and delivered the GSAs in the doctors 
    favour that the requirements of s. 10 were met and the doctors received an 
    enforceable security interest covering all present and after-acquired assets 
    of AWTC.  The question is when this occurred. The petitioner on its cross 
    appeal argues that the Chambers judge erred in finding that the first GSA, 
    which was dated July 19, 2001, had not been executed until after May 28, 2002.  
    It contends that this finding was one of mixed fact and law, given that generally, 
    documents are presumed to have been executed on the day and date they bear. 
    The Chambers judge declined to apply this presumption, holding that there 
    was considerable reason to doubt that the date on the document reflected the 
    date it was executed.

[31]

The question of when a document was signed and delivered (for delivery, 
    or some other communication of acceptance, is also necessary for the creation 
    of a contract) is, I would have thought, almost always  one of fact, although 
    it is true that in reaching his decision on this point the Chambers judge 
    applied legal principles in this case. In any event, having reviewed the evidence 
    on this point, including the discovery transcripts, I find no error, clear 
    or otherwise, in the Chambers judges finding.

[32]

The second question raised on the cross appeal is whether the Chambers 
    judge erred in finding that the GSAs were not perfected by the registration 
    of the earlier financing statement on June 20, 2001, which purported to cover 
    all present and after-acquired assets of AWTC in compliance with s. 10.  The 
    petitioner contends that even though the GSAs were not executed and delivered 
    until May or June of 2002 and were likely not contemplated at the time the 
    financing statement was filed a year earlier, the petitioner may rely on that 
    filing to assert priority over the interest of New Solutions, which registered 
    its financing statement some months later, on February 5, 2002.

[33]

Again, I believe the Chambers judge was in error.  Contrary to his 
    assumption (at para. 59), neither the GSAs nor any other loan
agreements
could be registered in the PPSA registry.  Only a financing statement complying 
    with the Regulation to the Act can be filed. The specified form of financing 
    statement does not call for the disclosure of any terms of the borrowing, 
    nor even the principal amount secured. There is no basis in my view for the 
    imposition of a requirement that it contemplate, or be filed in respect of, 
    any particular loan. This is supported by the fact that a financing statement 
    may relate to one or more security agreements (s. 43(5)), and that the secured 
    party may specify any period of time for which the filing is to be effective 
    (s. 44(1)). We have also seen that a lender may file a financing statement 
    even before the borrower has executed a loan agreement or agreed to borrow 
    at all (s. 43(4)).  Professors Cuming and  Wood provide the following example 
    of the advantages of pre-agreement registration:

D has decided to seek financing for business activity and approaches a 
    commercial lender (SP).  SP immediately registers a financing statement describing 
    D as a debtor and specifying kinds of property of D as collateral.  SP then 
    obtains a search result which displays the priority position that his registration 
    would give if SP should proceed to loan money to D.  See s. 35(1).  After 
    a period of negotiation between the parties, an agreement is struck and a 
    security agreement is executed.  Since SP has already registered his financing 
    statement and knows what his priority position is with respect to the loan, 
    he can immediately release the money to D.  In the absence of this feature, 
    SP would be imprudent to advance funds until he had registered and thus determined 
    his priority status.  [At 313]

It seems to me implicit in this arrangement that a security agreement 
    may be supported by an earlier filing and thus be perfected for purposes of 
    ss. 19 and 25 of the Act.  If this were not the case, the advantages of pre-agreement 
    registration pointed out by Cuming and Wood would be largely negated by the 
    necessity of deciding in each case what borrowing was contemplated by a financing 
    statement, or of re-filing once the exact terms of the borrowing had been 
    agreed upon.  I conclude that the Chambers judge fell into error in holding 
    that because the doctors GSAs were not contemplated by the financing statement 
    filed in June 2001, the security interests they purported to create were not 
    perfected by that filing.  As noted in the petitioners factum:

In fact all that need occur was that the GSAs and the registration contained 
    consistent collateral descriptions  which [the Chambers judge] found they 
    did.  Under the provisions of the PPSA, the parties need not enter into multiple 
    registrations and connect specific registration to specific security agreements.  
    In fact, such activity would complicate and confuse the registration system 
    and other parties.  Analytically, the situation was simple:  after June, 2001 
    any security agreements obtained by the doctors consistent with their original 
    registration were automatically subsumed under that registration.

[34]

Normally, the foregoing findings would squarely raise for this court 
    the question of the interaction of ss. 10 and 35 of the Act: the doctors 
    financing statement was registered on June 20, 2001; New Solutions financing 
    statement was registered on February 5, 2002; and the doctors security agreements 
    became enforceable, for purposes of s. 10, after May 28, 2002.  If the priority 
    rule at s. 35(1)(a)(i) applied, the doctors would have priority, having registered 
    their financing statement before New Solutions registered its financing statement. 
    However, the rule in s. 35(1)(a)(i) is stated to be subject to any other method 
    provided by the Act for determining priority between security interests, and 
    s. 10 is a rule about enforceability against third parties.  To repeat, it 
    provides that a security interest is enforceable against a third party only 
    if the debtor has signed a compliant security agreement  a step which in 
    this case did not occur with respect to the doctors security until after 
    May 28, 2002.  The doctors interests were not perfected until that date: 
    see s. 19 and 25.  I quote again a passage from Cuming and Woods exposition 
    of s. 10:

Delay in executing a security agreement or failure to 
    obtain a written agreement will result in loss of priority to a transferee 
    of the property claimed as collateral.
It is not clear what effect, if 
    any, delay in executing a security agreement has on the priority status of 
    a secured party who has registered a financing statement
.  The problem 
    that arises in this context is displayed in the following scenario:

SP1, 
    who has registered a financing statement, enters into an
oral security 
    agreement
with the debtor providing for a security interest in specified 
    collateral.  Before the agreement is reduced to writing, the debtor gives 
    a security interest in the same collateral to SP2 under a written security 
    agreement.  SP2 registers a financing statement.  Thereafter the agreement 
    between SP1 and the debtor is reduced to writing in compliance with s. 10.

Under s. 10, the lack of writing renders the security 
    interest unenforceable against a third party.
It is unclear whether 
    an unenforceable security interest can become retroactively enforceable when 
    the security agreement between SP1 and the debtor is put in writing
.

It is the view of the authors that it cannot
.  
    If the only issue involved were attachment, SP1 would be able to establish 
    priority on the basis of s. 35.  However, s. 10 suggests that any interest 
    acquired in the collateral at a time when the security agreement is not in 
    writing acquires a vested priority.  While s. 35(1) gives priority on the 
    basis of a first-to-register rule, the opening words of the section make it 
    clear that this rule is subject to other priority rules of the Act.  Section 
    10 is such a priority rule.

There is a good public policy reason for giving supremacy 
    to the priority rule of s. 10.  If, as is suggested by the authors, the purpose 
    of the writing requirement of s. 10 is to provide corroboration of the claim 
    of a secured party (SP1) that she has an interest in the specified collateral 
    of the debtor, it is crucial that a written record of the essential features 
    of a security agreement between the debtor and a secured party be available 
    by the time that a third party (SP2) acquires an interest or enters into a 
    contact [sic] providing for the acquisition of an interest in the collateral.  
    There is little value in making this information available after the interest 
    of the third party has been acquired.  If s. 10 is not seen as having priority 
    effect where secured parties are involved, a secured party who has registered 
    a financing statement against the name of a person can at least temporarily 
    prevent the person from getting credit from other sources simply by alleging 
    an oral security agreement with the person.  [At 102-3; emphasis added]

[35]

The authors disagree with the holding of the Ontario Court of Appeal 
    in
Rogerson Lumber Co.,
supra,
in which the majority 
    rejected the contention that in order to be enforceable against another lender, 
    the plaintiffs security agreement (a conditional sale contract) had to be 
    signed at the latest, when the goods left the possession of the plaintiff. 
     Houlden J.A. could find no basis for this argument and concluded that as 
    long as the agreement was signed before proceedings were taken to enforce 
    it, the requirements of s.10 had been met. In the result, a financing statement 
    that had been registered
after
the granting of the competing security 
    but
within
the time required by the Ontario PPSA, was held to rank 
    in priority to bank security taken prior to the date of registration.

[36]

I hasten to reiterate that the Ontario PPSA, and

in particular 
    its residual priority rule,

was quite different from its British Columbia 
    counterpart when
Rogerson
was decided.  On one view, however,
Rogerson
may be seen as a retroactive validation of the kind 
    argued for by New Solutions in this case and doubted by Cuming and Wood (although 
    cf. their comments quoted above at para. 33 regarding "pre-agreement 
    registration.)  On another view, the critical factor may be the point in 
    time at which the priority rule is applied  if the relevant time is when 
    priority is asserted against the third party (in this case, long after the 
    security interest had been granted), there would seem to be no reason for 
    s.10(1)(b) to come into play.  It has by then already operated to confirm 
    the enforceability of the interest.  If priority is determined as at an earlier 
    date (e.g., prior to the execution and delivery of the GSAs), the enforceability 
    of the doctors interest would be in greater doubt due to the operation of 
    s. 10(1)(b), and no resort to s. 35 would be necessary.

[37]

The petitioner submits that Cuming and Wood are inconsistent in their 
    approaches to s. 10 and s. 35.  Neither provision, it is said, requires a 
    written security agreement to be completed by the time the second creditor 
    registers a financing statement covering the same collateral.  If such a requirement 
    were imposed, the petitioner contends that:

it is likely that the legislature would impose a specific time limit 
    for the existing secured party to enter into a written security agreement 
    after receiving notice.  Otherwise, a properly registered secured party who 
    has not yet obtained a written security agreement would lose its priority 
    to a party who obtains a written security agreement and registers a subsequent 
    financing statement.  In effect, the registration system established under 
    the PPSA would be meaningless; priority would now be determined on the basis 
    of the time when the written security agreement was entered into.

New 
    Solutions responds that if a creditor may enter into a written agreement to 
    support a personal property registration after intervening security interests 
    have been created, it is open  for parties to construct security agreements 
    after the fact to the detriment of those intervening parties who had no 
    ability to confirm the details of the earlier security arrangements before 
    deciding to deal with the debtor. In essence, this is precisely what the doctors 
    attempted to do.  New Solutions says this result was not intended by the 
    Act and is an incorrect interpretation of the PPSA priority rules.

[38]

My own tentative view is that the risk described by New Solutions was 
    consciously left open by the framers of the PPSA system.  In fact, the Act 
    does provide a safeguard in the ability of any person with an interest in 
    the personal property of the debtor to require a secured party to provide 
    the information described in s. 18(2) of the Act.  (Presumably, a
prospective
lender could also require such information simply by refusing to fund until 
    copies of the documents were provided.)  In the case at bar, the safeguard 
    for one in New Solutions' position would lie in searching the register and 
    if necessary, requesting a copy of whatever security agreement existed in 
    favour of the doctors and in requiring a priority agreement; or if no security 
    agreement existed, in requiring the registration to be discharged by the doctors 
    or by court order under s. 18(13)(b).  If pre-agreement registration is legitimate 
    (as s. 43(4) states) and intended to be relied upon by creditors, the 
    system will work as intended only if priority is determined according to the 
    date of registration of the financing statement without regard to the date 
    of attachment of the security interest.  As far as competing creditors are 
    concerned, attachment cannot occur unless a security agreement has been executed: 
    s. 12(1)(c).  Once that has occurred, it seems to me that s. 10(1)(b) is spent, 
    and priority falls to be determined in accordance with the default rule in 
    s. 35(1)(a)(i).  On this view, the two provisions operate harmoniously, and 
    in accordance with the apparent intent of the PPSA scheme.

[39]

Fortunately, I need not finally decide this interesting question because 
    in this instance, the Act (and New Solutions) worked in the way they were 
    supposed to: before advancing funds, New Solutions searched the registry, 
    noted the doctors financing statement and required that they grant a priority 
    agreement.  Had New Solutions found at that time that in fact no enforceable 
    security interest had been granted, it could have proceeded on the strength 
    of s. 10(1)(b).  But since such an interest was alleged to have arisen by 
    virtue of the Amended Loan Agreements, New Solutions prudently required a 
    postponement of the doctors' position.  The next question raised on the main 
    appeal is whether the Chambers judge erred in ruling that the priority agreement 
    did not operate to subordinate the doctors security to that of New Solutions.

[40]

For convenience, I set out again the wording of the postponement agreement:

It is agreed by both parties that Cleator/Kane are currently registered 
    against the AWTC and AWT Holdings assets on a General Security Agreement 
    (GSA) for loans outstanding.  Cleator/Kane hereby agree to postpone their 
    security interests to New Solutions Financial Corporation for a period of 
    6 months from the date of this document.  Cleator/Kane do have outstanding 
    loans with AWTC and until such time as these loans are repaid in full will 
    remain on the GSA for AWTC and AWT Holdings Ltd.

The letter stated that it had been agreed to February 10, 2002, at which 
    date the doctors were pressing AWTC for the GSAs that were ultimately delivered 
    after May 28, 2002.  The priority agreement was prepared by AWTC, not 
    by New Solutions, and I have already indicated it is erroneous to apply the 
    doctrine of
contra proferentem
against a party who had no role in the 
    drafting of the document.  Indeed, New Solutions was not even a signatory 
    to the agreement.  (Notwithstanding this, there is no argument that New Solutions 
    may not rely on the document which was granted in its favour.)

[41]

The Chambers judge correctly found that the priority granted to New 
    Solutions was time-limited in nature.  (Para. 80)  However, applying the 
    cautious approach signalled by cases such as
Sun Life Assurance
,
supra
, and the doctrine of
contra proferentem,
he interpreted 
    the agreement as requiring New Solutions to take proceedings pursuant to 
    the GSA during the six-month period if it wished to rely on the priority.  
    With respect, the agreement contained no such requirement and did not in particular 
    mention the taking of proceedings.  It simply provided for postponement 
    of the doctors security interest for a period of six months.  In my view, 
    the most commercially sensible interpretation of the agreement, if it is 
    at all ambiguous, is that advances made by New Solutions during the six-month 
    period were to rank in priority to the doctors claims.  It simply would not 
    make sense, in my view, for the parties to have contemplated that New Solutions 
    would have had to enforce its security and recover its funds within the six 
    months, as a condition of its priority.  If I were wrong in this regard, I 
    would also hold that the steps taken by New Solutions during the six-month 
    period  specifically the demand made on AWTC for repayment of the loans and 
    the Notice of Intention to Enforce Security  were sufficient to invoke the 
    priority clause.

Statutory and Equitable Subordination

[42]

Although it is not necessary to decide this issue in view of my conclusions 
    in respect of the postponement agreement, I see no error in the Chambers judges 
    rejection of both the doctrine of equitable subordination and the application 
    of s. 139 of the
BIA
.  Indeed, I agree with his reasoning 
    that the doctors did not engage in any inequitable conduct that would trigger 
    the doctrine of equitable subordination were it applicable in Canada; and 
    that s. 139 was not by its terms applicable to the circumstances of this case.

DISPOSITION

[43]

In the result, I conclude 
    that the postponement agreement of February 10, 2002 operated to give 
    priority to New Solutions, notwithstanding any priority to which the doctors 
    might otherwise have been entitled by reason of s. 35(a)(i) of the Act.  I 
    would dismiss the cross appeal, allow the appeal, set aside the Chambers judges 
    order, and order that New Solutions has priority in respect of the proceeds 
    of realization being held in trust.


The Honourable
Madam Justice Newbury

I 
    Agree:

The 
    Honourable
Mr. Justice Donald

I 
    Agree:

The Honourable
Madam Justice Levine

SCHEDULE

Relevant portions of the
Personal Property and Security Act
, R.S.B.C. 1996, 
    c. 359

Writing 
    requirements for security agreements

10
(1) Subject to subsection (2), a security 
    interest is only enforceable against a third party if

(a)    the collateral is in the possession 
    of the secured party, or

(b)    the debtor has signed a security 
    agreement that contains

(i)         a description of the collateral 
    by item or kind, or by reference to one or more of the following: goods, securities, 
    instruments, documents of title, chattel paper, intangibles, money, crops 
    or licences,

(ii)        a statement that a security 
    interest is taken in all of the debtor's present and after acquired personal 
    property, or

(iii)       a statement that a security 
    interest is taken in all of the debtor's present and after acquired personal 
    property except

(A)       specified items or kinds 
    of personal property, or

(B)       one or more of the following: 
    goods, securities, instruments, documents of title, chattel paper, intangibles, 
    money, crops or licences.

*  
    *  *

Attachment of security interests

12
(1) A security interest, including 
    a security interest in the nature of a floating charge, attaches when

(a)    value is given,

(b)    the debtor has rights in the 
    collateral, and

(c)    except for the purpose of enforcing 
    rights between the parties to the security agreement, the security interest 
    becomes enforceable under section 10,

unless 
    the parties have specifically agreed to postpone the time for attachment in 
    which case the security interest will attach at the time specified in the 
    agreement.

*  *  *

When security interests are perfected

19
A security interest is perfected when

(a)    it has attached, and

(b)    all steps required for perfection 
    under this Act have been completed,

regardless 
    of the order of occurrence.

*  *  *

Perfection by registration

25
Subject to section 19, registration 
    of a financing statement perfects a security interest in collateral.

*  *  *

Residual priority rules

35
(1) If this Act does not provide another 
    method for determining priority between security interests,

(a)    priority between perfected security 
    interests in the same collateral is determined by the order of the occurrence 
    of the following:

(i)         the registration of a financing 
    statement without regard to the date of attachment of the security interest;

(ii)        possession of the collateral 
    in accordance with section 24 without regard to the date of attachment 
    of the security interest;

(iii)       
    perfection under section 5, 7, 26, 29 or 78;

whichever 
    is the earliest,

(b)    a perfected security interest 
    has priority over an unperfected security interest, and

(c)    priority among unperfected security 
    interests is determined by the order of attachment of the security interests.

(2) 
    For the purposes of subsection (1), a continuously perfected security interest 
    must be treated at all times as perfected by the method by which it was originally 
    perfected.

(3) 
    Subject to section 28 for the purposes of subsection (1), the time of 
    registration, possession or perfection of a security interest in original 
    collateral is also the time of registration, possession or perfection of its 
    proceeds.

(4) 
    A security interest in goods that are equipment and that are of a kind defined 
    in the regulations as serial numbered goods is not registered or perfected 
    by registration for the purposes of subsection (1), (7) or (8) unless 
    a financing statement relating to the security interest and containing a description 
    of the goods by serial number is registered.

(5) 
    Subject to subsection (6), the priority that a security interest has under 
    subsection (1) applies to all advances, including future advances.

*  *  *

Registration of financing statements

43
(1) A person who wishes to have a 
    financing statement registered must submit it for registration at an office 
    of the registry.

(2) 
    Registration of a financing statement is effective from the time assigned 
    to it in the office of the registry and, if 2 or more financing statements 
    are assigned the same time, the order of registration is determined by reference 
    to the registration numbers assigned to the financing statements in the registry 
    office.

(3) 
    The registrar must not register a financing statement or issue a search result 
    under this Part until any prescribed fees have been paid or arrangements satisfactory 
    to the registrar for their payment have been made.

(4) 
    A financing statement may be registered before a security agreement is made 
    and before a security interest attaches.

(5) 
    A registration may relate to one or more than one security agreement.

(6) 
    The validity of the registration of a financing statement is not affected 
    by a defect, irregularity, omission or error in the financing statement or 
    in the registration of it unless the defect, irregularity, omission or error 
    is seriously misleading.


