Justice Iacobucci and the Canadian Law of Deemed Trusts and Chattel Security
I Introduction
One of the many challenges facing a member of the Supreme Court of Canada is that he or she is assumed, on taking office, to have become omniscient in all branches of Canadian law, public and private, regardless of prior experience and level of expertise, and to be able forthwith to pronounce authoritatively on any one of the myriad issues coming before the Court. As if these challenges were not sufficiently daunting, the new appointee, together with the other members of the Court, is expected to make binding decisions for all the lower courts in Canada and cannot seek refuge in the reflection that if the Court makes mistakes they can be rectified by a higher court. The buck stops with the Supreme Court.
As the contributions to this volume richly attest, Justice Iacobucci met these challenges magnificently during his thirteen years' tenure on the Supreme Court. He has left Canada with a rich and enduring legacy of thoughtful, carefully reasoned, and penetrating judgments that will serve the country well for many years to come. As members of the academic legal community, we wish to acknowledge our indebtedness [End Page 227] for his salient contributions to the areas of the law in which we have a particular interest.
In this short essay, we describe Justice Iacobucci's contribution in a discrete and highly specialized branch of commercial law to which he would likely have had little exposure prior to joining the Supreme Court. That branch is the law of chattel security, although it overlaps with many other branches of law, particularly, from the perspective of this essay, with the bankruptcy and tax laws. Chattel security law deals with the creation, perfection, priorities, and enforcement of security interests given by business and consumer borrowers to secure payment or other performance of their obligations. Most enterprises and individuals seeking substantial amounts of credit are required to provide such security to their bankers and other creditors, and, as a result, chattel security law plays a very important role in contemporary Canadian commercial law.
Not many chattel security cases reach the Supreme Court. For the purposes of our discussion, we have selected three such cases in which Justice Iacobucci played the leading role and a fourth in which he delivered a short but significant judgment concurring with Justice Major in dissent. These cases all involve the interaction between chattel security law and other laws, and they reveal Justice Iacobucci's capacity for addressing difficult policy questions in an open and forthright manner. The first case, Re Giffen,1 is important because it addresses the relationship between the provincial personal property security statues and federal bankruptcy law. It is also important because, in the course of his judgment, Justice Iacobucci confirms the policy behind the rule, common to all the provincial Personal Property Security Acts (ppsas), that an unperfected security interest is ineffective against the debtor's trustee in bankruptcy. For reasons we will explain, this aspect of the decision has implications extending beyond Canada. The other three cases we have selected, Royal Bank of Canada v. Sparrow Electric Corp.,2 First Vancouver Finance v. M.N.R.,3 and Alberta Treasury Branches v. M.N.R.,4 involve the interplay between consensual security interests and deemed trusts created under federal tax legislation against the taxpayer's property for unremitted taxes deducted or collected by the taxpayer. Justice Iacobucci's majority judgments in the first two cases, together with his short dissenting judgment in Alberta Treasury Branches, reflect a strong policy commitment to avoiding the potentially chilling effect of overly broad tax collection provisions on secured lending activity. [End Page 228]
