Tornado Tyres Inc borrowed $1 000 000 from National Bank. As security for its loan, Tornado gave National a security interest in all personal property that it owned at the time that it entered into the security agreement or acquired later. National registered a financing statement relating to its interest on 1 January 2015. In June 2016, Tornado ran into financial difficulty and failed to remit to the Canada Revenue Agency $50 000 that it had withheld from employee wages for income tax. Tornado also stopped making its loan payments to National.

Acting under its security agreement, National seized all of Tornado's assets, including the $50 000 that was in Tornado's bank account at National. National has checked and there are no other security interests registered under the PPS legislation. Is there any reason that National should not apply the $50 000 against the liability of Tornado under the loan? Would it make any difference to your answer if National had never properly registered its interest under the PPS legislation?