Lessons Learned - Lesson One Supplement Two: Get The Name Right On The Financing Statement

Cassels Brock developed this Lessons Learned series based on our experience with priority disputes between secured creditors and the realization that many secured parties make fundamental errors of law that cause them to lose priority in their collateral. Each lesson in the series will outline a basic mistake and the lesson to be learned...

Wrong name and correct vin? out of luck in Manitoba, but not everywhere

Our first instalment in the series "Lessons Learned" - and following supplement - cautioned secured parties of the risks associated with registering their security using an incorrect name for the debtor, even if the error was inadvertent and seemingly minor.

The case of Bankruptcy of Rosa Argentina Gonzalez, 2017 MBQB 178 further confirms this point, but also highlights a potential saving point in the PPSA for secured lenders in Ontario.

Facts

An auto leasing company (the Lender) financed the purchase of a motor vehicle by Rosa Argentina Gonzalez (the Debtor). The Lender registered a financing statement (the Financing Statement) in the Manitoba Personal Property Registry (PPR) in accordance with the Manitoba Personal Property Security Act (the PPSA). The Financing Statement identified the Debtor as "R Argentina Gonzalez" (the Debtor's certificate of Canadian citizenship stated her name as "Rosa Argentina Gonzalez"), but correctly set out the vehicle's serial number.

The Debtor made an assignment in bankruptcy. A search of the PPR using the Debtor's full legal name did not disclose the Financing Statement, nor a "similar match," however the Lender's registration was disclosed when the motor vehicle was searched by serial number.

The Lender filed a proof of claim as a secured creditor with the bankruptcy trustee, which was disallowed on the grounds that the Financing Statement contained a seriously misleading error, and therefore the Lender's security interest was not validly perfected.

Decision

The Court held that, despite the fact that the trustee had conducted a serial number search and was aware...