The Personal Property Security Act (hereafter referred to as PPSA), first enacted as 1979–80, c. P-6.2 (proclaimed in force, May 1, 1981) and significantly modified in 1993, implemented in Saskatchewan one of the most modern regimes of secured financing law in the world. Secured financing law is that branch of the law regulating credit transactions under which a creditor takes security to guard against non-payment by the person to whom the credit was granted. It regulates relationships that arise where, for example, a bank or credit union loans money and takes a charge (“security interest”) on the personal property (any type of tangible or intangible property other than land) of the borrower (likely the property purchased with the loan), or when a seller agrees to sell personal property to a buyer on terms that the seller will remain the owner of the property until the purchase price is paid.
There are two principal aspects to this law. One is regulation of the rights and obligations of secured creditors and debtors. This part of the law focuses principally on ensuring that the debtor is treated fairly when he/she fails to repay the loan or purchase price and it is necessary for the creditor to seize the property taken as security. The second aspect of this law addresses situations where, for example, the person who has agreed to give a security interest in his/her car to a credit union or bank then sells the car to someone else without telling that person that the security interest exists. Simply stated, the law provides that a secured creditor will be entitled to seize the car from the buyer only if the security interest has been registered in a public registry. Buyers can protect themselves by searching the public registry before acquiring their interests. The PPSA also applies to certain types of leases of personal property, since the problem of third- person protection arises in the same way under leasing transactions.
The importance of the Personal Property Security Act can be appreciated only in a historical context. Until its enactment, personal property security law in Canadian common law provinces was a complex mixture of English law and laws influenced by legal and commercial developments in the eastern states of the USA. By the early 1920s Saskatchewan had developed a functionally adequate, but conceptually inconsistent, system of secured financing law. Each type of financing transaction was addressed in a separate statute, and each statute provided for the registration of the secured creditor’s interest in a public registry. Little care had been taken to provide consistency of approach among these statutes; registration requirements were complex and often not met.
The first important move toward modernizing the secured financing law of Saskatchewan came in the 1950s when the decision was made to centralize registration of conditional sales contracts, chattel mortgages and assignment of book debtors rather than to have these transactions registered on a regional basis in court houses throughout the province. However, one of the major difficulties with the central registry for security interests was that registration involved the filing of paper copies of the financing transactions: this resulted in the need to store large volumes of paper and guard against the risk of loss through fire. Starting in the 1950s, the volume of registrations dramatically increased as a result of the expanded use of consumer and agricultural credit to acquire motor vehicles and agricultural equipment. Since registration of transactions and searches of the central registry had to be carried out manually, an ever-increasing number of registry clerks was required to provide the minimally acceptable level of service for persons using the system.
A study of the central registry by the Department of the Attorney General in the early 1970s led to the conclusion that the manual system of registration would soon break down or become prohibitively expensive to operate. By that time, it took several weeks to get confirmation of a registration or to obtain a search from the registry. Fortunately, computerization of records was becoming feasible, and attention was directed towards use of this technology to address the problem. Coincident with the study of the central registry, the Saskatchewan Law Reform Commission undertook a project designed to reform and modernize not only the registry, but also the entire legal infrastructure for secured financing law. The Commission prepared reports containing recommendations and draft legislation for a Personal Property Security Act that would provide a new law for all secured-financing transactions involving personal property, and a modern, computerized notice registry system. The proposals contained in the Law Reform Commission Act were inspired by legislation implemented in the 1970s in Ontario and Manitoba, which in turn was patterned on legislation in the United States. However, the Personal Property Security Act proposed by the Commission contained many novel features which at the time were viewed as radical. The draft law proposed by the Commission was enacted as the Personal Property Security Act, 1979–80, c. P-6.2.
The registry system that was established under the 1980 Act and modified under the 1993 Act employed the most up-to-date technology. All records are now kept in electronic form rather than as paper documents. Secured parties may register their security interests on-line and obtain electronic searches of the registry data base. The Information Services Corporation, the Crown corporation that now operates the Personal Property Security Registry, is currently planning further modernization of the system in light of technological developments that have occurred in recent years.
While the Saskatchewan Personal Property Security Act is not unique, the “novel” features contained in the 1980 Act and refined in the 1993 Act have influenced developments well beyond the borders of the province or of Canada. During the 1990s the Personal Property Security Act, 1993 provided a model for development of similar laws in all other common law jurisdiction in Canada except Ontario. The measures that were considered radical in 1980 became basic features of the Personal Property Security Acts of other provinces. Some of them were included in the Ontario Personal Property Security Act, 1989. The Saskatchewan Act was the basis for the New Zealand Personal Property Securities Act enacted in 1999, and for recommendations put forward in 2004 by the Law Commission for modernizing the secured-financing law of England and Wales.
Ronald C.C. Cuming