Anonymised, illustrative composite. This is a genuine provincial fork rather than a change of facts: the identical goods, the identical agreement and the identical search produce opposite answers on either side of the Ontario–British Columbia line, and the party who bears the loss changes with them.
At a glance
The target distributed structural fasteners, anchors and abrasives to steel fabricators and mechanical contractors out of a single Ontario warehouse, with a small branch in Burnaby. It was an inventory business in the literal sense: stock was half the balance sheet and the closing adjustment was dollar for dollar on a physical count taken the weekend before completion.
Diligence was run competently. A PPSA registration search was ordered against the corporation's exact legal name and its two registered business names. It returned three registrations: an equipment lessor over four forklifts, a bank general security agreement, and a discharged registration from 2019. Nothing over inventory beyond the bank's general charge, which was being paid out at closing.
A junior on the buyer's side was reconciling the count to the purchase ledger — a routine cross-check nobody expected anything from — and could not tie out $648,000. Not a variance spread across thousands of lines; two clean blocks. $512,000 of anchors and structural fasteners from one supplier and $136,000 of abrasives from another, present on the floor, counted, valued at standard cost, and traceable to no purchase invoice and no accounts payable entry.
They had never been bought. Both suppliers ran consignment programmes: stock sat in the distributor's warehouse, title stayed with the supplier, and a purchase was recognised only when an item was drawn for a customer order. The arrangements were entirely ordinary, entirely documented, and entirely invisible to the search.
Physical count at standard cost $3,240,000, of which $2,592,000 tied to purchase invoices and $648,000 did not — exactly 20.0% of the warehouse. On a dollar-for-dollar inventory adjustment that $648,000 was money about to move across the closing table for goods the vendor did not own and could not sell.
The Burnaby branch held a further $214,000 of the same anchor programme on the same terms. That is the part of the file that is a rule change rather than a fact change: identical goods, identical agreement, different statute.
Ontario's Personal Property Security Act s.2 defines the Act's reach. It applies to “every transaction without regard to its form and without regard to the person who has title to the collateral that in substance creates a security interest”, and the illustrative list includes “an assignment, lease or consignment that secures payment or performance of an obligation”.
The qualifying words carry the whole rule. A consignment is inside the Ontario Act only where it secures something. A true consignment — supplier retains title, distributor buys on draw, no debt secured — secures nothing, so it is outside the Act. There is no registration to make and no registration to find.
The contrast within the same section is worth noting, because it shows the drafting was deliberate. Section 2(b) extends the Act to “a transfer of an account or chattel paper even though the transfer may not secure payment or performance of an obligation”. The legislature knew perfectly well how to bring a non-securing transaction inside the Act; it did so for receivables and did not do so for consignments. That asymmetry is the reason a factoring arrangement shows on an Ontario search and a consignment does not — compare a PPSA registration that was a sale, not a loan, which turns on the other paragraph of the same section.
British Columbia's Personal Property Security Act s.3 takes the opposite approach, under the heading Scope of Act: security interests that do not secure payment or performance: “Subject to sections 4 and 55, this Act applies to” a transfer of an account or chattel paper, a commercial consignment and a lease for a term of more than one year, “that do not secure payment or performance of an obligation”. A “commercial consignment” is defined in s.1 as “a consignment under which goods are delivered for sale, lease or other disposition to a consignee who, in the ordinary course of the consignee’s business, deals in goods of that description”, by a consignor who also deals in such goods and reserves an interest in them.
Because it is inside the Act, it must be perfected, and the consequence of not perfecting falls on the consignor. Section 20(c) subordinates an unperfected security interest in goods “to the interest of a transferee who (i) acquires an interest under a transaction that is not a security agreement, (ii) gives value, and (iii) acquires the interest without knowledge of the security interest and before the security interest is perfected” — which describes an asset buyer precisely. Section 20(b)(i) does the same against “a trustee in bankruptcy if the security interest is unperfected at the date of the bankruptcy”, and s.21 then deems the consignor to have suffered damages equal to the value of the goods.
So the risk sits with different parties in the two provinces. In British Columbia the consignor must register or lose the goods to a buyer for value without notice; the buyer's search does the work. In Ontario the consignor need do nothing, the search is silent, and the only protection available to a buyer is a physical count reconciled to purchase records. Only British Columbia's text is cited here. The other provinces that adopted the western model are worded similarly, but each should be read on its own terms before it is relied on.
The $648,000 was removed from the inventory adjustment, so the closing count for pricing purposes was $2,592,000. Both consignment agreements were assigned to the buyer with the suppliers' written consent, delivered as a closing condition, so the stock stayed on the floor and the programmes continued — which was the commercially sensible outcome for everyone. Neither supplier had any objection; nobody had been hiding anything.
$648,000 paid for goods the buyer did not acquire, followed by the suppliers exercising their perfectly good right to recover them. The buyer would have been left with a claim against a vendor corporation that had just been emptied by the sale, on a representation that the vendor could reasonably say it had never made — the standard inventory warranty speaks to quality and saleability far more often than it speaks to title.
Reconcile the physical count to purchase records. Every item on the floor should trace to a purchase invoice and a payable or a payment. Anything that does not is consigned, on approval, held for repair, or somebody else's property. This is a single afternoon's work on a distribution business and it is the only test that finds consigned stock in Ontario.
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