thereafter, UMI’s security interest was re-registered by way of a new financing statement (the “new financing
statement”) registered in the registry. The new financing statement stated:
This is a re-registration under section 35(7) of the PPSA base registration #9058643 originally
registered on September 6, 2002.
The new financing statement did not describe the collateral of UFM in which UMI was taking security interest.
Approximately eight months after the new financing statement was filed, UFM filed for bankruptcy.
Subsequently, UMI filed a notice of intention to enforce security with the respondent, trustee in bankruptcy. The
trustee asserted that the new financing statement was seriously misleading because of UMI’s failure to describe
the collateral, and accordingly rejected the validity of the registration of the new financing statement.
Consequently, UMI applied for an order declaring the registration of the new financing statement valid and
enforceable as against the trustee in bankruptcy. While UMI conceded that its failure to reproduce the
description of the collateral in the new financing statement was an error, UMI relied on the curative provision in
s. 43(6) of the PPSA and referred to the definition of “seriously misleading” in Re Munro, supra, to argue that
the failure to describe the collateral was not a seriously misleading error. In particular, UMI argued that a
reasonable person, upon discovering that the new financing statement referred to another document in the
description of the collateral, namely the base registration number of the original financing statement, would not
be “led astray” or “led into error”, but rather would or should be led to a further investigation or inquiry. UMI
also relied upon decisions in Coates, Gold Key and Alda to buttress this argument.
UMI submitted that the latter decisions support the proposition that if the information is available in the registry,
a reasonable searching party has an obligation to make that further inquiry, and failure to do so does not render
the financing statement seriously misleading. UMI further asserted that any person searching the debtors name
would find the new financing statement and would discover that UMI had registered a financing statement
against some collateral of UFM. While the new financing statement did not specifically describe the collateral, it
referred to a lapsed document that did so describe it. Therefore, a reasonable searcher would realize it needed to
make one further inquiry of the registry to obtain the original financing statement. Moreover, a historical
documents database at the registry contained the original financing statement, which properly described the
collateral. Thus, UMI argued that the defect in the new financing statement would not mislead a reasonable
searching party to conclude that the collateral covered was something other than what it actually was. The court
accepted UMI’s submissions and, in granting the order sought by UMI, stated at paras. 44, 45 and 47:
In the case at bar the immediate search would have disclosed the New Financing Statement. The
searcher would know immediately that the secured party was User Friendly Media Inc. and that the
base debtor was UF Media Inc., and most importantly, that the document was re-registration under s.
35(7) of the Act under base registration number 9058643 which had originally been registered on
September 6, 2000. The searcher then would search the number 9058643 in an attempt to obtain a copy