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| Rules of
action
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198. The following rules apply in an action
on a security:
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(a) each signature on the security certificate
or in a necessary endorsement is admitted
unless specifically denied in the pleadings;
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(b) a signature on the security is presumed
to be genuine and authorized but, if the
effectiveness of the signature is in issue, the
burden of establishing that it is genuine and
authorized is on the party claiming under
the signature;
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(c) if a signature is admitted or established,
production of a certificate entitles the
holder to recover on it unless the other party
establishes a defence or defect going to the
validity of the security; and
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(d) if the other party establishes the defence
or defect, the plaintiff has the burden of
establishing that the defect is ineffective
against the plaintiff or some other person
under whom the claim is made.
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| Delivery of
securities
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199. (1) A person who is required to deliver
securities may deliver any security of the
specified issue
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(b) in registered form in the name of the
transferee; or
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(c) endorsed to the person or in blank.
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| Limitation
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(2) Subsection (1) is subject to any
agreement to the contrary, to any applicable
Act of Parliament or the legislature of a
province or to any applicable regulation or
stock exchange rule.
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| Incorporation
by reference
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200. (1) The terms of a security include
those stated on the security and those
incorporated by reference to another
document, Act of Parliament or the legislature
of a province, regulation, rule or order to the
extent that the incorporated terms do not
conflict with those stated on the security.
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| Purchaser
without notice
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(2) Subsection (1) applies to a good faith
purchaser but the incorporation by reference is
itself not notice of a defect to the purchaser
even if the security expressly states that a
person accepting it admits that notice.
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| Validity of
security
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201. A security is valid in the hands of a
good faith purchaser.
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| Defence
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202. Subject to section 205, the fact that a
security is not genuine is a complete defence
even against a good faith purchaser.
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| Defences
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203. All other defences of an issuer,
including non-delivery and conditional
delivery of a security, are ineffective against
a good faith purchaser.
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| Deemed
notice
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204. (1) A purchaser is deemed to have
notice of any defect in the issue of a security
or any defence of the issuer if the security
becomes stale within the meaning of
subsection (2).
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| Stale security
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(2) A security becomes stale if
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(a) the purchaser takes the security more
than two years after
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(i) the date on which performance of the
principal obligation evidenced by the
security was due, or
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(ii) the set date on or after which the
security is to be presented or surrendered
for redemption or exchange; or
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(b) the payment of money or the delivery of
securities is required in order to present or
surrender the security, the money or
securities are available on the day for the
payment or delivery and the purchaser takes
the security more than one year after that
day.
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| Unauthorized
signature
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205. (1) Subject to subsection (2), an
unauthorized signature on a security is
ineffective.
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| Limited
effectiveness
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(2) An unauthorized signature on a security
is effective in favour of a good faith purchaser
if the signature was made by
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(a) an authenticating trustee, transfer agent
or other person entrusted by the issuer with
the duty to sign the security, or similar
securities, or to prepare them for signing; or
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(b) an employee of the issuer or a person
referred to in paragraph (a) who handles the
security in the ordinary course of their
duties.
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| Completion of
form
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206. If a security contains the signatures
necessary for its issue or transfer but is
incomplete in another respect, any person may
complete it in accordance with their authority.
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| Enforceability
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207. A security that was completed
incorrectly is enforceable by a good faith
purchaser.
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| Fraud
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208. A completed security that was
improperly altered, even if fraudulently
altered, remains enforceable but only
according to its original terms.
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| Guarantees
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209. (1) A person signing a security as an
authenticating trustee, transfer agent or other
person entrusted by the issuer with the duty to
sign the security guarantees to a good faith
purchaser that
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(a) the security is genuine;
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(b) the person's acts in connection with the
security are within the person's authority;
and
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(c) the person has reasonable grounds for
believing that the security is in the form and
within the amount the issuer is authorized to
issue.
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| Liability
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(2) Unless agreed otherwise, a person
referred to in subsection (1) does not assume
any further liability for the validity of the
security.
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| Acquisition of
rights
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210. (1) On delivery of a security, the
purchaser of the security acquires the rights in
it that the transferor had or had authority to
convey.
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| Claim free
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(2) A good faith purchaser of a security
acquires it free from any adverse claim.
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| No better
position
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(3) A purchaser who was a party to a fraud
or illegality affecting a security or who, as a
prior holder, had notice of an adverse claim
does not have a better position by taking from
a later good faith purchaser.
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| Limited
interests
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211. A purchaser of a limited interest
acquires rights only to the extent of the interest
purchased.
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| Deemed
notice
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212. (1) A purchaser of a security, or a
broker for a seller or purchaser, is deemed to
have notice of an adverse claim if
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(a) the security has been endorsed ``for
collection'' or ``for surrender'' or for some
other purpose other than transfer; or
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(b) the security is in bearer form and has a
statement on it that it belongs to a person
other than the transferor.
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| Name
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(2) The mere writing of a name on a security
is not a statement for the purposes of
paragraph (1)(b).
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| No duty to
inquire
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213. (1) A purchaser of a security, or a
broker for a seller or purchaser, has no duty to
inquire into the rightfulness of the transfer
and, subject to section 214, has no notice of an
adverse claim.
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| Third party
holding
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(2) Subsection (1) applies even if the
purchaser or broker has notice that the security
is held by a third person or is registered in the
name of or endorsed by a fiduciary.
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| Deemed
notice
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214. A purchaser or broker who knows that
the transaction is for the personal benefit of
the fiduciary or is otherwise in breach of the
fiduciary's duty is deemed to have notice of an
adverse claim.
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| Staleness
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215. (1) The following events do not
constitute notice of an adverse claim except if
the security becomes stale within the meaning
of subsection (2):
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(a) an event that creates a right to
performance of the principal obligation
evidenced by the security; or
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(b) an event that sets the date on or after
which the security is to be presented or
surrendered for redemption or exchange.
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| Staleness of
security
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(2) A security becomes stale if
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(a) the purchaser takes the security more
than one year after
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(i) the date on which performance of the
principal obligation evidenced by the
security was due, or
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(ii) the date on or after which the security
was to be presented or surrendered for
redemption or exchange; or
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(b) the payment of money or the delivery of
securities is required in order to present or
surrender the security, the money or
securities are available on the day for the
payment or delivery and the purchaser takes
the security more than six months after that
day.
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| Guarantee
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216. (1) A person who presents a security
for registration of transfer or for payment or
exchange guarantees to the issuer that the
person is entitled to do so.
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| Limitation on
guarantee
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(2) A good faith purchaser who receives a
new, re-issued or re-registered security and
who registers a transfer guarantees only that
the purchaser has no knowledge of any
unauthorized signature in a necessary
endorsement.
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| Content of
guarantee
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217. A person who transfers a security to a
purchaser for value guarantees by the transfer
only that
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(a) the transfer is effective and rightful;
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(b) the security is genuine and has not been
materially altered; and
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(c) the person knows of nothing that might
impair the validity of the security.
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| Guarantee of
intermediary
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218. An intermediary delivering a security
to a purchaser who knows that the
intermediary is an intermediary guarantees
only good faith.
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| Guarantee of
broker
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219. A broker gives to a customer, to the
issuer and to a purchaser the guarantees
provided in sections 216 to 218 and has the
rights and privileges of a purchaser under
those sections, and those guarantees of and in
favour of the broker acting as an agent or
mandatary are in addition to guarantees given
by the customer and guarantees given in
favour of the customer.
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| Right to
compel
endorsement
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220. If a registered security is delivered to
a purchaser without a necessary endorsement,
the purchaser has the right to demand the
endorsement. The purchaser becomes a good
faith purchaser after the endorsement.
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| Definition of
``appropriate''
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221. (1) In this section, section 222,
subsections 229(1) and 237(1) and section
241, ``appropriate'', with respect to a person,
means that the person is
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(a) the person who is specified by the
security or by a special endorsement to be
entitled to the security;
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(b) if a person described in paragraph (a) is
described as a fiduciary but is no longer
serving as one, either that person or their
successor;
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(c) if the security or endorsement
mentioned in paragraph (a) specifies more
than one person as fiduciaries and one or
more of those persons is no longer a
fiduciary, the remaining fiduciary or
fiduciaries, whether or not a successor has
been appointed or qualified;
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(d) if a person described in paragraph (a) is
an individual and is without capacity to act
by reason of death, incompetence, minority
or other incapacity, the person's fiduciary;
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(e) if the security or endorsement
mentioned in paragraph (a) specifies more
than one person with right of survivorship
and by reason of death not all of the persons
can sign, the survivor or survivors;
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(f) a person who has the legal power to sign;
or
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(g) to the extent that a person described in
any of paragraphs (a) to (f) may act through
an agent or mandatary, the person's
authorized agent or mandatary.
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| Time for
determination
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(2) The authority of a person signing is
determined as of the time of signing.
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| Endorsement
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222. (1) An endorsement of a security in
registered form for the purposes of assignment
or transfer is made when an appropriate person
signs either the security or a separate
document, or when the signature of an
appropriate person is written without more on
the back of the security.
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| Blank or
special
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(2) An endorsement may be
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| Blank
endorsement
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(3) An endorsement in blank includes an
endorsement to bearer.
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| Special
endorsement
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(4) A special endorsement specifies the
person to whom the security is to be
transferred, or who has power to transfer it.
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| Right of
holder
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(5) A holder may convert an endorsement in
blank into a special endorsement.
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| Immunity of
endorser
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223. Unless agreed otherwise, the endorser
does not, by the endorsement, assume any
obligation that the security will be honoured
by the issuer.
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| Partial
endorsement
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224. An endorsement purporting to be an
endorsement of only part of a security
representing units intended by the issuer to be
separately transferable is effective to the
extent of the endorsement.
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| Effect of
failure by
fiduciary to
comply
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225. Failure of a fiduciary to comply with
the document that is the source of the
fiduciary's power or with the law of the
jurisdiction governing the fiduciary
relationship does not render the fiduciary's
endorsement unauthorized for the purposes of
this Part.
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| Effect of
endorsement
without
delivery
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226. An endorsement of a security does not
constitute a transfer until delivery of the
security on which it appears or, if the
endorsement is on a separate document, until
delivery of both the security and the
document.
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| Endorsement
in bearer form
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227. An endorsement of a security in bearer
form may give notice of an adverse claim
under section 212 but does not otherwise
affect any of the holder's rights.
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| Effect of
unauthorized
endorsement
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228. (1) The owner of a security may assert
the ineffectiveness of an endorsement against
the issuer or a purchaser, other than a good
faith purchaser who has in good faith received
a new, re-issued or re-registered security on
registration of transfer, unless the owner
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(a) has ratified an unauthorized
endorsement of the security; or
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(b) is otherwise precluded from impugning
the effectiveness of an unauthorized
endorsement.
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| Liability of
issuer
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(2) An issuer who registers the transfer of a
security on an unauthorized endorsement is
liable for improper registration.
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| Warranties of
guarantor of
signature
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229. (1) A person who guarantees the
signature of an endorser of a security warrants
that, at the time of signing, the signer was an
appropriate person to endorse and the
signature was genuine.
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| Limitation of
liability
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(2) A person who guarantees the signature
of an endorser does not otherwise warrant the
rightfulness of the transfer to which the
signature relates.
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| Warranties of
guarantor of
endorsement
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(3) A person who guarantees the
endorsement of a security warrants both the
signature and the rightfulness, in all respects,
of the transfer to which the signature relates,
but an issuer may not require a guarantee of
endorsement as a condition to registration of
transfer.
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