Question 582. - Would section 80 of the Bank Act permit the taking of a mortgage on a vessel for a loan made simultaneously?

Answer. - The section referred to authorizes a bank to take a mortgage "as additional security for a debt contracted to the bank in the course of its business." The latter part of section 76 (2) (c) declares that the bank "shall not either directly or indirectly lend money on the security of any ships." It is clear that the power given in section 80 cannot be used in contravention of section 76 (2), and if the mortgage were given simultaneously with the loan it would require very special circumstances to convince the court that section 76 (2) had not been contravened. This applies only to ships, the construction of which has been completed. For moneys advanced to aid in the building of any ship or vessel a bank may take a mortgage as primary security either before, at the time of, or subsequent to, the advance, in conformity with section 85 of the Bank Act.

Advances to a Liquidator Under Section 84 (a) of the Bank Act.

Question 533. - Re section 84 (a) Bank Act. May a bank take a mortgage security from a liquidator and make him advances, provided, of course, that the liquidator has court authority for his actions?

Answer. - From the context and wording of the section it is evidently the intention that the bank can take a mortgage security from a liquidator, but in view of the fact that such action conflicts with section 76, sub-section 2 (c) the advisability of the bank entering into such a transaction is open to question, and should not be undertaken until the intention of this section is more clearly defined by the court.