The Saskatchewan Court of Appeal (the Court) recently addressed the issue of priority in instances where valid but conflicting Bank Act and the Personal Property Security Act (Saskatchewan)(the PPSA) security interests were being asserted in after-acquired property. In its decision, the Court held that the priority rule to be applied was qui prior est tempore potior est jure (whomever is first in time, is first in right), and that this rule should apply based on the respective dates of execution of the agreements. Further, the Court held that this rule shall apply even if the PPSA interest is unperfected.
In Royal Bank of Canada v. Radius Credit Union Limited, a priority dispute arose between Radius Credit Union (the Credit Union), which held security on after-acquired property under the PPSA, and Royal Bank of Canada (the Bank), which held security on after-acquired property under the Bank Act. Although the Credit Union’s security interest was unperfected when the Bank’s interest came into existence, the Credit Union security agreement had been executed prior to the date of execution of the Bank's security agreement.
Since the Bank Act does not provide a rule to address this priority dispute, the Court found it necessary to resort to the ordinary law of the province. The Court held that both security interests were legal interests and that both attached simultaneously to the collateral, when the collateral was acquired by the debtor. Notwithstanding that the competing interests, were legal interests and that the Credit Union’s interest was unperfected at the time of the acquisition by the Bank of its Bank Act security, the Court held that the priority rule to be applied was qui prior est tempore potior est jure and that this rule should apply based on the respective dates of execution of the respective security agreements. In the result, the Credit Union’s prior unperfected security interest took priority over the interest of the Bank.