Nov 18, 2014

Cameron (the debtor) signed a lease agreement for a Dodge Ram truck. He purchased the car from a dealership, but the lease was then assigned to another branch of Daimler. Cameron was supposed to pay $1000/month for 24 months, he was also limited in the amount he could use the truck as there was a km limitation. There was a buyout option of $30,000 at the end of the agreement. If Cameron were to make all the payments and if he bought out the truck at the end of the agreement, it would cost him a total of $78,000. The truck’s value new was $150,000. The creditor seizes the truck and sues for the unpaid lease amount. Cameron says you can't do this: part 5 of the BC PPSA says you can only seize or sue. However, this only applies if you are within the enforcement regime of the PPSA (security lease). If not, then common law applies and creditor can seize or sue. This rule applies in BC only. Does the enforcement section of the act apply?

If a true lease, then the enforcement rules in s. 56 do not apply. If security lease, then enforcement does apply. Trial judge finds this is a security lease, so creditor is bound by the PPSA. CA overturns and finds a true lease. CA: look to the substance of the agreement. Impact of the acceleration clause. TJ felt this pointed towards a security lease. CA says this is the only factor that leans towards security lease, and the rest of the factors point towards true lease. Factors: nature of lessor's business; nature of lesee's use; maintenance obligations; buyout amount; buyout options; existence of acceleration clause; et al

Look to the above factors to determine if interest is a true lease or security lease. The designation can be important for the purposes of enforcement under the PPSA.