Document ID: chunk:federal_register_of_legislation:C2024C00719:section:127:p1
Version: federal_register_of_legislation:C2024C00719
Segment Type: section
Provision Reference: s 127 (pt 1/2)
Character Range: 226285–229043

127  Seizure by higher priority parties—notice

Scope
 (1) This section applies if, at any time while collateral is seized by a secured party (the enforcing party) (whether under section 123 or otherwise) for the purposes of enforcement, another secured party (the higher priority party) has a security interest in the collateral that has a higher priority under this Act.

Notice requiring enforcing party to give possession of collateral to higher priority party
 (2) The higher priority party may give a written notice to the enforcing party, requiring the enforcing party to give the higher priority party possession of the seized collateral.
Note: If a person has a perfected security interest in the collateral that ranks higher than that of the secured party, and the person does not give a notice under this section, the person retains a security interest in the collateral.
 (3) However, the higher priority party must not give a notice to the enforcing party under subsection (2) unless the higher priority party would be entitled to seize the collateral (in the higher priority party's own right) in accordance with section 123, had the enforcing party not first seized the collateral.
 (4) An enforcing party who is given a notice under subsection (2) must comply with the notice before the end of the following period:
 (a) the period of 5 business days after the day the notice is received;
 (b) such further period as is reasonable in the circumstances.
Note: The period may also be extended by a court under section 293.
 (5) A higher priority party who is given possession of collateral under this section is taken to have complied with the requirements of subsection 123(2) (notice of seizure) in relation to the seizure of the collateral.

Payment of enforcing party's expenses
 (6) A higher priority party who is given possession of collateral under this section must, subject to subsections (7) and (8), pay the enforcing party the amount of any reasonable expenses paid or incurred by the enforcing party, in relation to the enforcement of the security interest in the collateral.
Note: 2 secured parties can contract out of this provision (see subsection 115(6)).
 (7) A higher priority party must pay an amount of expenses under subsection (6) only to the extent that, before the higher priority party disposes of the collateral and any proceeds of the collateral sufficient to meet the expenses, the enforcing party gives the higher priority party evidence showing that the enforcing party incurred the amount.
 (8) The amount payable under subsection (6) is the lesser of the following amounts:
 (a) the amount mentioned in the subsection;
 (b) the amount of any proceeds from the higher priority party's disposal of the collateral.