Nov 18, 2014

Gold Key is the secured party. Pinecraft is the debtor. Pinecraft leased 5 cars from Gold Key. Gold Key registered under the PPSA, but when in the debtor name it used “Pinecraft” (its trade name, not the company number). Pinecraft went bankrupt. Gold Key asked the trustee for their cars back. The Trustee said no, that their mistake was seriously misleading. Does this defect meet the “seriously misleading” threshold under the PPSA? No.

Act requires two things from a financing statement: debtor's name and description of the collateral. If the collateral is serial-numbered goods and used for the debtor's own personal purposes, then it must be described in accordance with the regs. The determination of whether or not a defect is seriously misleading is an objective one: seriously misleading to a reasonable person. The description of the debtor by their trade name instead of their registered name was a serious error. The “name of the artificial body” where a corporation is concerned must refer to its proper name as stated on its certificate of incorporation. Further, a reasonable person cannot be expected to carry out a second search by trade name. In this situation the secured party got the debtor’s name wrong, but the goods were prescribed serial numbered goods. The goods were equipment, so the secured party didn’t have to put the serial number in. BUT, Gold Key did include the correct serial numbers.

The approach to a determination of whether a defect is seriously misleading is an objective one: would a reasonable person be seriously mislead by the omission? Where the interest is serial numbered goods, at the very least, a reasonable person will carry out a search by serial number. In the case of a correct VIN and incorrect name, this does not amount to a seriously misleading defect in BC.