The Definition of Secured Creditor in Insolvency Law
Banking & Finance Law Review, Vol. 25, p. 341, 2010
19 Pages Posted: 18 Nov 2010
Date Written: June 1, 2010
Despite the modernization of secured transactions law in every common law province in Canada, the insolvency statutes continue to define a secured creditor using pre-PPSA common law concepts. In order to fall within this definition, the creditor must hold a mortgage, pledge, charge, or lien against the property of debtor as security for a debt. Although conditional sales agreements and leases that in substance create a security interest are brought within the scope of the PPSA, the crucial issue is whether a seller or lessor falls within the definition of a secured creditor in the insolvency statutes. Courts dealing with a similar definition in connection with the statutory deemed trust in respect of source deductions have held that a conditional sale or security lease does not fall within the federal definition, notwithstanding that these transactions create security interests under provincial law. This article will demonstrate that many of the provisions in the insolvency statutes are premised on the idea that title retention devices were intended to be included and that an extension of the courts’ restrictive interpretation will undermine many important insolvency law policies. It will also examine four approaches that might be employed to avoid these undesirable consequences.
Keywords: Bankruptcy and Insolvency, Secured Transactions
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