True Lease Or Security Agreement



The debtor rented a number of vehicles used by his employees in their day-to-day duties. Ford has entered into a master leasing contract (Master Leasing) and several related additions (the “supplements”) for seven trucks. The master leasing contract contained the terms of all leases, while the supplements did not contain the monetary conditions of each leased vehicle, including the activation costs of each vehicle, the monthly rental fee, the duration (60 months) and the supposed residual value of the vehicle. This distinction remains relevant in these cases under the provisions of the BIA [section 65.4.a) ] and the CCAA (Article 34, paragraph 4, point a), which allow individuals, after the initiation of proceedings under the applicable law, an immediate payment for “the use of … Property,” made available to the insolvent debtor. The courts held that only a lessor could benefit from these provisions under an actual lease and that a lessor could not do so under a guarantee lease. The application of the CCAA provision appeared in an unreased decision of the Alberta Commercial Court in 2010. The Tribunal found that the lease in question was a security contract. Under Section 13 of the CCAA, the losing lessor applied for an appeal that allows a person dissatisfied with an order to appeal either to the court that made the order or to the appropriate appel appeals court. The owner tried the same court first (Royal Bank of Canada v. Cow Harbour Construction Ltd., 2010 ABQB 637 (Can LII) and, when that application was denied, took the Court of Appeal (De Lage Landen Financial Services Canada/ Royal Bank of Canada, 2010 ABCA 394 (CanLII)). The reasons for the decision have been set out by both courts, but since they are primarily concerned with whether an applicant should rule on the complaint, they do not contribute much to the debate on the true distinction between rent and lease of guarantee.

Such a test is the economic test of the transaction, during which the court examines ” (1) whether the lease contains a nominal purchase price; and (2) if the lessor develops equity in the property, so that the only economically viable option for the lessor is the purchase of the goods.” In re Purdy, 763 F.3d to 520 (internal citations omitted); GEO Fin., LLC v. Univ. Square 2751, LLC, 105 F.