Executive Summary: Key Legal and Evidentiary Issues

• The dispute concerns whether a general security agreement (GSA) secures litigation-based claims beyond original promissory notes.

• 2109062 Alberta Ltd. seeks to maintain its registration under s. 50(7) of the Personal Property Security Act (PPSA) despite repayment of the initial debt.

• Strait Pipeline & Integrity Ltd. contends the GSA was never intended to secure claims arising from shareholder oppression.

• The GSA’s definition of “Indebtedness” is broad and includes contingent and future liabilities, supporting continued registration.

• The court found the plain language of the GSA unambiguous and declined to read it down or narrow its interpretation.

• Registration was upheld without imposing new terms, leaving negotiation of conditions to the parties themselves.

Facts of the case

On March 3, 2025, Strait Pipeline & Integrity Ltd. and Strait Projects Ltd. (collectively referred to as Strait) served notice under s. 50(3) of the PPSA to 2109062 Alberta Ltd. (210), seeking discharge of a registration related to a general security agreement (GSA). The GSA was granted on September 30, 2015, as part of a shareholder loan from 1315736 Alberta Ltd. (now 210) to Redcore Enterprises Ltd. (now Strait).

While Strait repaid the specific promissory notes that originally constituted the debt, 210 claimed further amounts were owing. These were based on allegations related to Strait’s conduct toward 210 as a 30% shareholder. 210 argued that actions by Strait gave rise to additional indebtedness beyond the initial loan. Litigation had been ongoing since 2020, including a Third Amended Statement of Claim filed on February 12, 2025, in which 210 sought judgment or damages of up to $5.5 million from Strait and two of its principals.

Strait maintained that the GSA was intended solely to secure repayment of the promissory notes and was now impeding its ability to obtain third-party financing from ATB. Strait argued that allowing the registration to remain would result in an unjust perpetual obligation.

Discussion of policy terms and clauses

Section 3 of the GSA defined “Indebtedness” to include “any and all obligations, indebtedness and liability… present or future, direct or indirect, absolute or contingent…” This language was central to the dispute. Strait sought to narrow this definition based on the original intent of the parties. However, the court emphasized the clarity and breadth of the wording.

Further, the signatory to the GSA stated during questioning that the agreement was intended to secure “whatever might happen in business.” The court found this evidence supported 210’s interpretation. The GSA also included standard provisions binding successors and assigning rights without requiring prior enforcement to retain future rights.

In 2022, when Strait first sought discharge of the registration, 210 refused, referencing the definition of “Indebtedness” in Section 3 of the GSA. It is also noted that 210’s interest had been subordinated to RBC, Strait’s primary lender, which currently had a zero balance.

Outcome

Justice J.S. Little found that the definition of “Indebtedness” in the GSA was broad enough to potentially include the claims advanced by 210, even though they were contingent and subject to ongoing litigation. The judge rejected Strait’s argument that the GSA should be limited to known debts at the time of execution, noting that a simpler agreement would have sufficed if that had been the intention.

Although Strait offered to place funds in trust and retain assets up to the $5.5 million value of 210’s claim, this was rejected by 210 due to insufficient security. 210 also offered “no interest” letters under conditions that ensured sale proceeds were used to replace sold assets.

Justice Little declined to impose conditions or amendments to the GSA in the court’s order, noting that doing so would go beyond the scope of judicial oversight and require ongoing monitoring. The order confirms, under s. 50(7) of the PPSA, that the Alberta PPR registration 15093031184 may remain active and is not to be amended or discharged.

A postscript clarified that use of the statutory mechanism by Strait was not an abuse of process. Costs were left to be addressed by further application if necessary.