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Home   About Us Reports Final Report 2004 - Modernizing Canada's Secured Transactions Law: The Bank Act Security Provisions Principles for Guiding Reform
Final Report
Modernizing Canada's Secured Transactions Law: The Bank Act Security Provisions
5. Principles for Guiding Reform The Commission believes that the current law is unacceptable and that reform is required. Before considering the various options for reform, it is desirable to identify the fundamental principles that will be used to assess the benefits and costs of each proposal. One of the overarching principles is that the reform should facilitate the use of secured credit by ensuring that secured transactions law is efficient and effective. This involves two components. The first concerns legal certainty. There must be a greater degree of predictability so that parties who transact with one another can know their legal position in advance without having to establish their rights through expensive and time-consuming litigation. The second element is that the law should be structured so that costs of entering into secured transactions are reduced, since unnecessary costs reduce the credit available to businesses. The second guiding principle is that any law that is proposed should be compatible with both the common law and the civil law secured transactions regimes. The existing federal provisions are badly “Forcing Parliament to choose explicitly is also the best guarantee that the interests in national uniformity of commercial law will be mediated with the interests of regional diversity. ... If Parliament should then decide that these provincial initiatives are contrary to its economic policy relating to bans and bankruptcy, let it then exercise its constitutional jurisdiction to specify in detail the legal regime it wishes to apply. But let it do so on the basis of carefully thought out economic principles, and consciously adopted legal techniques responsive to the bijural character of Canadian private law.” R. A. Macdonald, “Provincial Law and Federal Commercial Law:
Is ‘Atomic Slipper' a New Beginning?” (1991–92)
7 Banking & Finance Law Review 436 at 451. |
deficient in that they have introduced concepts that are incompatible with the civil law jurisdiction of Quebec and that are at odds with the modernized personal property security regimes that have been adopted by the common law jurisdictions. It is essential that the reformed law operate effectively in both legal traditions. The third guiding principle is that the federal law should not interfere with valid provincial or territorial legislative measures that are generally applicable within the provinces and territories unless it is necessary to achieve an identified federal objective. Since the doctrine of federal paramountcy can pre-empt valid provincial law, federal legislation should be designed so that the doctrine of paramountcy will not be invoked unless an identified federal objective cannot otherwise be met. Principles for Guiding Reform Principle 1 The problems associated with the co-existence of two legal regimes governing security interests in personal property should be addressed to increase the predictability of outcomes and to ensure that the legal regimes governing secured credit are efficient and effective. Principle 2 Federal secured transactions law should utilize terminology and concepts that are compatible with both the civil law system of Quebec as well as the common law systems of the other provinces and territories. Principle 3 Federal secured transactions law should not interfere with valid provincial and territorial legislative measures that are generally applicable within the provinces and territories unless it is necessary to achieve an identified federal objective. |
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