If a garnishee summons is served after crystallization of the security provided by the debenture, which should have priority?

Alberta, Canada


The following excerpt is from Alberta Paper Company Ltd. v. Metropolitan Graphics Ltd., 1983 CanLII 1114 (AB QB):

However, I need not consider this point further because in the present case the garnishee summons was served after crystallization of the security provided by the debenture. Where service of the garnishee summons follows crystallization, the debenture would in all cases have priority. Crystallization, having created a legal interest in the debenture holder, protects him from all subsequent claims, be they equitable, legal or otherwise. The rule in Dearle v. Hall would be inapplicable as the competition would involve at least one legal interest. In order to succeed, the applicant would have had to prove that service of the garnishee summons preceded crystallization. Moreover, if I am wrong in the view I have inconclusively expressed, that a floating charge creates no interest prior to crystallization, then the applicant would also have to convince the court that service of the summons created an equitable interest in the garnished funds.

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