Cory
J.:-
At
issue
on
these
appeals
is
whether,
on
the
facts
of
this
case,
lending
institutions
are
secured
creditors
pursuant
to
the
provisions
of
s.
224
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63
(ITA)
and
s.
317
of
the
Excise
Tax
Act,
R.S.C.,
1985,
c.
E-15
(ETA),
which
are
practically
identical
in
their
provisions.
The
facts
giving
rise
to
these
appeals
and
the
decisions
of
the
court
below
have
been
ably
set
out
in
the
reasons
of
Justice
Major.
Both
the
Income
Tax
Act
and
the
Excise
Tax
Act
provide
for
the
collection
of
funds
due
to
the
federal
government
by
way
of
income
tax
deductions
from
the
wages
of
employees
and
for
the
remission
of
moneys
owing
for
the
Goods
and
Services
Tax
(GST).
The
sections
under
review
provide
for
the
recovery
of
moneys
owing
from
those
who
are
responsible
for
the
collection
and
remission
of
income
tax
deductions
and
GST
collections
by
way
of
garnishment.
This
system
of
collection
and
remission
of
income
tax
is
exceedingly
important.
For
example,
in
1987
some
87
per
cent
of
all
personal
income
tax
was
collected
through
employer’s
deduction
and
remission.
In
the
cases
under
consideration,
the
company
responsible
for
collection
and
remission
of
income
tax
and
GST
borrowed
money
from
a
lending
institution.
To
secure
their
indebtedness
the
debtor
companies
made
a
general
assignment
of
book
debts
(GABD)
to
the
lending
institution.
If
the
submissions
of
the
appellant
prevail
then
the
Government
of
Canada
will
recover
the
moneys
which
ought
to
be
paid
to
it
by
way
of
employees’
income
tax
or
GST.
If
the
respondents
are
correct
in
their
position,
then
the
lending
institutions
will
retain
the
funds
which
have
come
into
their
possession
as
a
result
of
the
GABD.
Thus
the
decision
in
this
case
will
have
a
very
real
significance
for
both
the
federal
government
and
lending
institutions.
In
essence,
s.
224(1.2)
provides
a
form
of
garnishment
enabling
the
federal
government
to
intercept
moneys
owed
to
tax
debtors.
It
is
not
available
for
the
collection
of
income
tax
generally,
but
is
limited
to
the
recovery
of
funds
owing
by
a
person
or
company
which
has
withheld
moneys
from
another
person,
usually
an
employee,
for
income
tax
purposes
pursuant
to
s.
153
ITA
and
has
failed
to
remit
the
withheld
amounts
to
the
federal
government.
A
similar
garnishment
remedy
is
provided
by
s.
317(3)
ETA.
It
is
applicable
in
circumstances
where
a
company
or
an
individual
has
failed
to
remit
GST
which
was
collected
as
required
by
the
provisions
of
the
ETA.
Major
J.
has
concluded
that
the
Alberta
Court
of
Appeal
was
correct
in
finding
that
an
assignee
of
a
GABD
is
not
a
“secured
creditor”within
the
meaning
of
s.
224(1.3)
ITA
or
s.
317(3)
ETA
because
the
assignee
does
not
hold
a
security
interest
“in
the
property
of
another
person”.
Rather,
the
assignee
is
the
owner
of
those
book
debts.
With
respect
I
cannot
agree
with
that
conclusion.
However
I
am
in
complete
agreement
with
these
conclusions:
1.
The
definition
of
“security
interest”
is
broad
enough
to
include
a
general
assignment
of
book
debts
even
where
that
assignment
is
absolute.
2.
The
wording
of
s.
224(1.2)
ITA
as
amended
in
1990
is
sufficiently
clear
and
non-equivocal
to
allow
a
transfer
of
property
in
the
garnished
funds
to
the
Minister
of
National
Revenue
and
to
grant
him
a
priority
in
circumstances
where
the
balance
of
the
section
applies.
The
Provisions
of
the
G
ABD
Made
in
These
Cases
It
would
be
helpful
first
to
consider
the
assignment
of
book
debts
made
in
these
cases
in
order
to
ascertain
the
apparent
intentions
of
the
parties.
The
two
assignments
in
which
the
Treasury
Branch
was
the
lender
provide:
THE
PRESENT
assignment
and
transfer
shall
be
a
continuing
collateral
security
to
Treasury
Branches
for
the
payment
of
all
and
every
present
and
future
indebtedness
and
liability
of
the
undersigned
to
Treasury
Branches....
[Emphasis
added.]
To
a
similar
effect,
the
Toronto
Dominion
assignment
reads
in
part:
PROVIDED
and
it
is
hereby
distinctly
understood
and
agreed
that
these
presents
are
and
shall
be
a
continuing
collateral
security
to
the
Bank
for
the
general
balance
due
at
any
time
by
the
Assignor
to
the
Bank....
PROVIDED
ALWAYS
and
it
is
hereby
distinctly
agreed
that
these
presents
are
and
shall
be
continuing
and
collateral
security
to
the
present
and
any
future
indebtedness
of
the
Assignor
to
the
Bank.
[Emphasis
added.]
Further,
all
the
assignments
limit
liability
to
the
extent
of
the
outstanding
indebtedness.
Thus,
if
the
loan
secured
by
the
GABD
was
repaid
the
Bank
or
Treasury
Branch
would
have
no
further
interest
in
the
assignment.
The
documents
themselves
refer
to
the
assignment
as
being
a
continuing
collateral
security
for
the
payment
of
the
indebtedness.
The
clear
intention
of
the
parties
is
that
the
assignment
is
given
as
security
for
the
payment
of
a
debt
and
upon
payment
of
the
debt
the
GABD
is
to
be
of
no
force
or
effect.
That
is
to
say
the
lending
institution
could
not,
after
payment
of
the
debt,
make
use
of
the
GABD
to
realise
upon
any
of
the
book
debts
of
the
assignor.
In
my
view
since
the
assignment
by
its
terms
can
be
redeemed
by
payment
of
the
debt
it
cannot
or
at
least
should
not
be
construed
as
an
absolute
assignment.
Neither
the
lending
institutions
nor
the
debtor
companies
by
their
actions
gave
any
indication
that
the
respondents
were
the
owners
of
the
book
debts.
This
is
demonstrated
by
the
fact
that
the
lending
institutions
made
no
efforts
whatsoever
to
realise
upon
the
book
debts
or
in
any
way
to
act
as
“owners”
of
them
until
the
debtor
companies
were
obviously
in
severe
financial
difficulty
if
not
bankrupt.
Only
then
did
the
lending
institutions
seek
to
realise
upon
their
security.
Both
the
wording
of
the
documents
and
the
actions
of
the
parties
indicate
that
they
regarded
the
assignment
to
be
given
as
collateral
security
for
the
indebtedness.
In
commercial
affairs,
it
is
well
known
that
a
GABD
is
indeed
a
means
of
granting
collateral
security
for
a
debt.
In
my
view,
so
long
as
the
possibility
of
redemption
exists,
the
GABD
remains
as
collateral
security.
In
light
of
this
customary
commercial
understanding
of
a
GABD,
it
may
be
helpful
to
review
the
legislation
to
determine
if,
by
its
wording,
it
renders
a
GABD
something
other
than
collateral
security
for
a
debt
and
makes
the
assignee
the
owner
of
the
book
debts.
Pertinent
provisions
of
the
IT
A
and
the
ETA
and
their
history
As
Major
J.
pointed
out,
prior
to
1987
the
provisions
of
the
garnishment
remedy
in
the
ITA
(s.
224(1))
were
almost
unanimously
interpreted
by
the
courts
in
such
a
way
that
a
demand
made
under
the
section
was
ineffective
to
attach
any
of
the
assigned
debts.
The
courts
held
that
by
the
assignment
the
tax
debtor
had
transferred
all
its
interest
in
the
accounts
to
the
assignee
with
the
result
that
there
was
nothing
left
for
the
Minister
of
National
Revenue
to
attach
by
garnishment.
In
an
attempt
to
address
these
decisions,
Parliament
amended
the
ITA
in
1987
by
adding
two
new
subsections.
They
provided
that
the
Minister
of
National
Revenue
could
garnish
funds
owed
by
a
tax
debtor
to
a
“secured
creditor”
and
defined
the
terms
“secured
creditor”
and
“security
interest”.
As
Major
J.
observed,
there
was
a
divergence
of
opinion
in
the
provincial
courts
of
appeal
as
to
whether
the
1987
amendments
permitted
the
Minister
of
National
Revenue
to
effectively
garnish
funds
in
the
hands
of
an
assignee
of
a
GABD.
In
order
to
further
clarify
the
situation
and
resolve
the
differences
of
opinion
in
the
appellate
courts,
Parliament
again
amended
the
ITA
with
the
apparent
aim
of
granting
priority
to
the
Minister
of
National
Revenue.
It
maybe
helpful
to
set
out
s.
224(1.2)
ITA
as
it
now
appears
following
the
1990
amendment:
224(1.2)
Notwithstanding
any
other
provision
of
this
Act,
the
Bankruptcy
Act,
any
other
enactment
of
Canada,
any
enactment
of
a
province
or
any
law,
where
the
Minister
has
knowledge
or
suspects
that
a
particular
person
is
or
will
become,
within
90
days,
liable
to
make
a
payment.
(a)
to
another
person
(in
this
subsection
referred
to
as
the
“tax
debtor”)
who
is
liable
to
pay
an
amount
assessed
under
subsection
227(10.1)
or
a
similar
provision,
or
(b)
to
a
secured
creditor
who
has
a
right
to
receive
the
payment
that,
but
for
a
security
interest
in
favour
of
the
secured
creditor,
would
be
payable
to
the
tax
debtor,
the
Minister
may,
by
registered
letter
or
by
a
letter
served
personally,
require
the
particular
person
to
pay
forthwith,
where
the
moneys
are
immediately
payable
,
and
in
any
other
case,
as
and
when
the
moneys
become
payable,
the
moneys
otherwise
payable
to
the
tax
debtor
or
the
secured
creditor
in
whole
or
in
part
to
the
Receiver
General
on
account
of
the
tax
debtor’s
liability
under
subsection
227(10.1)
or
a
similar
provision,
and
on
receipt
of
that
letter
by
the
particular
person,
the
amount
of
those
moneys
that
is
required
by
that
letter
to
be
paid
to
the
Receiver
General
shall,
notwithstanding
any
security
interest
in
those
moneys,
become
the
property
of
Her
Majesty
and
shall
be
paid
to
the
Receiver
General
in
priority
to
any
such
security
interest.
[Emphasis
added.]
(1.3)
in
subsection
(1.2),
“secured
creditor”
means
a
person
who
has
a
security
interest
in
the
property
of
another
person
or
who
acts
for
or
on
behalf
of
that
person
with
respect
to
the
security
interest
and
includes
a
trustee
appointed
under
a
trust
deed
relating
to
a
security
interest,
a
receiver
or
receiver-manager
appointed
by
a
secured
creditor
or
by
a
court
on
the
application
of
a
secured
creditor,
a
sequestrator,
or
any
other
person
performing
a
similar
function;
“security
interest”
means
any
interest
in
property
that
secures
payment
or
performance
of
an
obligation
and
includes
an
interest
created
by
or
arising
out
of
a
debenture,
mortgage,
hypothec,
lien,
pledge,
charge,
deemed
or
actual
trust,
assignment
or
encumbrance
of
any
kind
whatever,
however
or
whenever
arising,
created,
deemed
to
arise
or
otherwise
provided
for;
The
question
then
is
how
should
these
sections
be
interpreted.
At
the
outset
it
should
be
remembered
that
Parliament
was
responding
to
the
division
of
opinion
in
the
appellate
courts
and
attempting
to
make
it
clear
that
the
Minister
of
National
Revenue
could
undertake
garnishment
procedure
in
those
situations
where
a
GABD
has
been
made.
The
appropriate
principles
to
be
considered
in
interpreting
taxation
legislation
were
clearly
set
out
in
Friesen
v.
R.
(sub
nom.
Friesen
v.
Canada),
[1995]
3
S.C.R.
103,
[1995]
2
C.T.C.
369,
95
D.T.C.
5551,
at
pages
112-14
(C.T.C.
373-74;
D.T.C.
5553).
There
the
principles
were
summarized
in
these
words:
C.
Principles
of
Interpretation
The
central
question
on
this
appeal
of
whether
the
appellant
is
entitled
to
take
advantage
of
the
inventory
valuation
method
in
s.
10
of
the
Act
involves
a
careful
examination
of
the
wording
of
the
provisions
of
the
Act
and
a
consideration
of
the
proper
interpretation
of
these
sections
in
the
light
of
the
basic
structure
of
the
Canadian
taxation
scheme
which
is
established
in
the
Income
Tax
Act.
In
interpreting
sections
of
the
Income
Tax
Act,
the
correct
approach,
as
set
out
by
Estey
J.
in
Stubart
Investments
Ltd.
v.
R.
(sub
nom.
Stubart
Investments
Ltd.
v.
The
Queen),
[1984]
1
S.C.R.
536,
[1984]
C.T.C.
294,
84
D.T.C.
6305,
is
to
apply
the
plain
meaning
rule.
Estey
J.
at
page
578
(C.T.C.
316;
D.T.C.
6323)
relied
on
the
following
passage
from
E.A.
Driedger,
Construction
of
Statutes
(2nd
ed.
1983),
at
page
87:
Today
there
is
only
one
principle
or
approach,
namely,
the
words
of
an
Act
are
to
be
read
in
their
entire
context
and
in
their
grammatical
and
ordinary
sense
harmoniously
with
the
scheme
of
the
Act,
the
object
of
the
Act,
and
the
intention
of
Parliament.
The
principle
that
the
plain
meaning
of
the
relevant
sections
of
the
Income
Tax
Act
is
to
prevail
unless
the
transaction
is
a
sham
has
recently
been
affirmed
by
this
Court
in
Antosko
v.
Minister
of
National
Revenue
(sub
nom.
Antosko
v.
Canada),
[1994]
2
S.C.R.
312,
[1994]
2
C.T.C.
25,
94
D.T.C.
6314).
Iacobucci
J.,
writing
for
the
Court,
held
at
pages
326-27
(C.T.C.
31;
D.T.C.
6320)
that:
While
it
is
true
that
the
courts
must
view
discrete
sections
of
the
Income
Tax
Act
in
light
of
the
other
provisions
of
the
Act
and
of
the
purpose
of
the
legislation,
and
that
they
must
analyze
a
given
transaction
in
the
context
of
economic
and
commercial
reality,
such
techniques
cannot
alter
the
result
where
the
words
of
the
statute
are
clear
and
plain
and
where
the
legal
and
practical
effect
of
the
transaction
is
undisputed:
Mattabi
Mines
Ltd.
v.
Ontario
(Minister
of
Revenue),
[1988]
2
S.C.R.
175,
[1988]
2
C.T.C.
294,
at
page
194
(C.T.C.
304);
see
also
Symes
v.
Canada,
[1993]
4
S.C.R.
695,
[1994]
1
C.T.C.
40,
94
D.T.C.
6001.
I
accept
the
following
comments
on
the
Antosko
case
in
page
W.
Hogg
and
J.
E.
Magee,
Principles
of
Canada
Income
Tax
Law
(1995),
subsection
22.3(c)
“Strict
and
purposive
interpretation”,
at
pages
453-54:
It
would
introduce
intolerable
uncertainty
into
the
Income
Tax
Act
if
clear
language
in
a
detailed
provision
of
the
Act
were
to
be
qualified
by
unexpressed
exceptions
derived
from
a
court’s
view
of
the
object
and
purpose
of
the
provision....
[The
Antosko
case]
is
simply
a
recognition
that
“object
and
purpose”
can
play
only
a
limited
role
in
the
interpretation
of
a
statute
that
is
as
precise
and
detailed
as
the
Income
Tax
Act.
When
a
provision
is
couched
in
specific
language
that
admits
of
no
doubt
or
ambiguity
in
its
application
to
the
facts,
then
the
provision
must
be
applied
regardless
of
its
object
and
purpose.
Only
when
the
statutory
language
admits
of
some
doubt
or
ambiguity
in
its
application
to
the
facts
is
it
useful
to
resort
to
the
object
and
purpose
of
the
provision.
Thus,
when
there
is
neither
any
doubt
as
to
the
meaning
of
the
legislation
nor
any
ambiguity
in
its
application
to
the
facts
then
the
statutory
provision
must
be
applied
regardless
of
its
object
or
purpose.
I
recognize
that
agile
legal
minds
could
probably
find
an
ambiguity
in
as
simple
a
request
as
“close
the
door
please”
and
most
certainly
in
even
the
shortest
and
clearest
of
the
ten
commandments.
However,
the
very
history
of
this
case
with
the
clear
differences
of
opinion
expressed
as
between
the
trial
judges
and
the
Court
of
Appeal
of
Alberta
indicates
that
for
able
and
experienced
legal
minds,
neither
the
meaning
of
the
legislation
nor
its
application
to
the
facts
is
clear.
It
would
therefore
seem
to
be
appropriate
to
consider
the
object
and
purpose
of
the
legislation.
Even
if
the
ambiguity
were
not
apparent,
it
is
significant
that
in
order
to
determine
the
clear
and
plain
meaning
of
the
statute
it
is
always
appropriate
to
consider
the
“scheme
of
the
Act,
the
object
of
the
Act,
and
the
intention
of
Parliament”.
What
then
was
Parliament’s
intention
in
enacting
the
1990
legislation?
The
purpose
of
the
legislation
There
can
be
no
doubt
of
the
importance
of
levying
taxation.
The
ITA
entrusts
to
employers
the
duty
of
deducting
income
tax
from
the
wages
of
employees
and
remitting
it
on
their
behalf.
Similarly
the
ETA
imposes
on
those
who
provide
goods
and
services
to
others
the
duty
to
collect
and
remit
the
GST
which
is
payable.
In
essence,
companies
collect
taxes
which
they
hold
in
trust
for
the
government.
The
purpose
of
the
1987
legislation,
which
I
think
is
even
more
appropriately
applied
to
the
1990
legislation,
was
very
clearly
and
forcefully
set
forth
in
Pembina
on
the
Red
Development
Corp,
v.
Triman
Industries
Ltd.,
[1992]
1
C.T.C.
133,
92
D.T.C.
6174
(Man.
C.A.).
There,
at
pages
137-38
(D.T.C.
6176-77),
Scott
C
J.M.
observed:
To
determine
the
dominant
characteristic
of
the
legislation,
it
is
important
to
know
the
governmental
policy
behind
the
section.
The
tax
debtor’s
bank
is
in
the
best
position
to
know
its
customer
and
to
structure
its
business
arrangements
accordingly.
Revenue
Canada,
on
the
other
hand,
does
not
have
the
same
Opportunity
to
become
acquainted
with
the
affairs
of
the
tax
debtor
or
its
creditors.
It
must
therefore
rely
solely
on
the
provisions
of
the
legislation
to
mandate
the
employer
to
remit
the
employee
income
tax
deductions
as
required
by
the
[Income
Tax]
Act,
and
to
establish
its
collectability
in
the
event
of
default.
The
purpose
of
the
Act
is
not
only
to
levy
tax,
but
to
collect
it.
There
is
a
strong
public
duty
on
employers
to
remit;
indeed,
this
is
central
to
the
scheme
of
self-assessment
under
the
Act.
Further,
Lyon
J.A.,
dissenting
in
the
result,
stated
at
pages
149
(D.T.C.
6185):
One
must
always
remember
that
the
withholding
tax
or
source
deduction
to
which
s.
224
applies
is
at
the
heart
of
the
collection
procedures
for
personal
income
taxation
in
Canada.
Indeed,
if
one
makes
a
calculation
from
the
statistics
reported
in
“Taxation
Statistics,
1987”,
a
publication
of
Revenue
Canada
Taxation,
catalogue
No.
RV-1987,
one
finds
that
87
per
cent
of
all
personal
income
taxes
paid
in
Canada
are
collected
by
source
deductions.
It
can
thus
be
seen
that
Parliament
in
passing
s.
224(1.2)
made
it
as
all-encompassing
as
it
is
in
order
to
ensure
its
continued
viability.
No
other
system
is
so
crucial
to
the
overall
collections
procedure
adopted
by
the
Crown.
Parliament
clearly
meant
to
protect
this
system.
Using
the
employer
as
a
tax
collector
requires
such
extra
protection
in
cases
such
as
the
one
at
bar
where
the
employer
converts
the
withheld
tax
money
to
its
own
purposes.
Understandably,
that
conversion
cannot
be
countenanced
if
the
integrity
of
that
system
is
to
be
preserved.
Parliament,
therefore,
acting
within
its
constitutional
authority,
has
taken
this
extraordinary
remedy
to
protect
a
major
collection
source.
In
my
opinion
it
was
intended
by
Parliament
that
anyone
who,
in
the
ordinary
course
of
business,
made
credit
arrangements
with
a
tax
debtor
involving
assignments
of
accounts
receivable,
did
so
subject
to
the
overriding
right
of
the
Crown
to
satisfy
the
primary
obligations
of
the
tax
debtor
to
collect
and
remit
taxes
withheld
from
its
employees.
The
words
of
the
statute
can
mean
nothing
less.
The
section
is
cast
in
the
broadest
of
possible
terms
precisely
because
it
was
meant
to
interfere
with
and
interrupt
payments
under
such
assignments
and
divert
them
to
meet
this
statutory
obligation.
I
do
not
know
what
other
words
Parliament
could
use
to
make
its
overriding
intention
and
claim
more
clear.
These
statements
can
be
applied
even
more
forcefully
to
the
1990
amendments.
The
Parliamentary
intent
was
to
confirm
the
overriding
right
of
the
Minister
of
National
Revenue
to
collect
by
garnishment
the
taxes
collected
which
ought
to
have
been
remitted
by
the
debtor
company
to
the
Minister
of
National
Revenue.
What
is
the
nature
of
a
general
assignment
of
book
debts?
Like
Major
J.,
I
am
of
the
view
that
a
GABD
is
a
form
of
security
for
a
loan
which
is
always
subject
to
the
right
of
the
debtor
to
redeem.
It
will
be
remembered
that
s.
224(1.3)
defines
the
“security
interest”
in
these
words:
“security
interest”
means
any
interest
in
property
that
secures
payment
or
performance
of
an
obligation
and
includes
an
interest
created
by
or
arising
out
of
a
debenture,
mortgage,
hypothec,
lien,
pledge,
charge,
deemed
or
actual
trust,
assignment
or
encumbrance
of
any
kind
whatever,
however
or
whenever
arising,
created,
deemed
to
arise
or
otherwise
provided
for;
This
definition
encompasses
the
general
assignments
of
book
debts
which
are
at
issue
in
these
appeals.
However,
I
cannot
agree
with
Major
J.’s
conclusion
that
the
creditors
are
not
secured
creditors.
I
find
it
difficult,
indeed
impossible,
to
conclude
that
the
same
document
can
be
both
a
security
interest
and
an
absolute
assignment.
The
same
document
cannot,
simultaneously,
embrace
two
such
conflicting
concepts.
Basically,
security
is
something
which
is
given
to
ensure
the
repayment
of
a
loan.
Black’s
Law
Dictionary
(6th
ed.
1990),
at
page
1357,
gives
a
clear
definition
of
a
“security
interest”
in
these
terms:
The
term
“security
interest”
means
any
interest
in
property
acquired
by
contract
for
the
purpose
of
securing
payment
or
performance
of
an
obligation
or
indemnifying
against
loss
or
liability.
A
security
interest
exists
at
any
time,
(A)
if,
at
such
time,
the
property
is
in
existence
and
the
interest
has
become
protected
under
local
law
against
a
subsequent
judgment
lien
arising
out
of
an
unsecured
obligation,
and
(B)
to
the
extent
that,
at
such
time,
the
holder
has
parted
with
money
or
money’s
worth.
This
definition
is
consistent
with
that
set
out
in
the
ITA.
It
is
in
sharp
contrast
to
the
definition
of
the
word
“absolute”
set
out
in
the
same
source
at
page
9
in
these
terms:
Complete;
perfect;
final,
without
any
condition
or
incumbrance;
as
an
absolute
bond
(simplex
obligatio)
in
distinction
from
a
conditional
bond.
Unconditional;
complete
and
perfect
in
itself;
without
relation
to
or
dependence
on
other
things
or
persons.
These
definitions
are,
in
my
view,
correct.
If
that
is
the
case,
then
it
can
be
seen
that
the
same
instrument
cannot
be
both
a
“security
interest”
and
an
“absolute
assignment”.
If
an
instrument
is
an
absolute
assignment,
then
Since
it
is
complete
and
perfect
in
itself,
there
cannot
be
a
residual
right
remaining
with
the
debtor
to
recover
the
assets.
By
definition,
a
complete
and
perfect
assignment
cannot
recognize
the
concept
of
an
equity
of
redemption.
An
absolute
assignment
cannot
function
as
a
means
of
“securing”
the
payment
of
a
debt
since
there
would
be
no
basis
for
the
debtor
to
recover
that
which
has
been
absolutely
assigned.
An
absolute
assignment
is
irrevocable.
To
say
that
the
same
instrument
can
operate
both
as
an
absolute
assignment
and
as
a
security
interest
is
to
simultaneously
put
forward
two
incompatible
positions.
The
two
conflicting
concepts
cannot
live
together
in
the
same
document.
Cases
which
have
considered
the
nature
of
a
general
assignment
of
book
debts
Major
J.
expressed
the
opinion
that
it
is
“well-established
law”
that
a
GABD,
such
as
those
in
issue,
has
the
effect
of
transferring
all
title
and
ownership
in
the
property
assigned
so
that
they
can
no
longer
be
considered
to
be
the
property
of
the
assignor.
Yet
ordinarily,
in
the
world
of
commerce,
a
GABD
is
considered
to
be
a
security
interest.
As
a
security
interest,
it
simply
cannot
transfer
all
“right,
title
and
ownership
in
and
to
the
property
assigned”.
This
conclusion
has
found
support
in
other
cases.
In
Thermo
King
Corp.
v.
Provincial
Bank
of
Canada
(1981),
34
O.R.
(2d)
369,
130
D.L.R.
(3d)
256
(C.A.),
leave
to
appeal
refused,
[1982]
1
S.C.R.
xi,
Wilson
J.A.
(as
she
then
was)
held,
for
a
unanimous
court,
that
a
GABD
is
a
security
document.
In
that
case
she
was
required
to
consider
an
instrument
which
was
very
similar
if
not
identical
to
those
presented
in
these
appeals.
At
page
381
(D.L.R.
268)
she
concluded:
While
these
provisions
appear
on
their
face
to
constitute
the
assignor
a
trustee
for
the
bank
of
any
payments
it
receives
from
its
customers
and
to
permit
the
bank
to
appropriate
them
at
will,
whether
or
not
any
debt
is
then
due
to
the
bank
by
the
assignor,
this
seems
to
be
quite
incompatible
with
the
nature
of
the
instrument
as
a
collateral
security.
[Emphasis
in
original.]
Similarly,
in
Bonavista
(Town)
v.
Atlantic
Technologists
Ltd.,
[1994]
2
C.T.C.
234,
117
Nfld.
&
P.E.I.R.
19,
Osborn
J.
considered
a
GABD.
He
wrote
at
pages
238-39
(Nfld.
&
P.E.LR.
24):
One
may
ask,
if
the
assignment
is
absolute
to
the
point
of
ownership,
why
does
it
specifically
give
to
the
Bank
the
power
to
collect
or
dispose
of
the
debts.
Are
not
such
powers
incidents
of
ownership?
Similarly,
if
the
assignment
is
absolute,
what
remaining
rights
reside
in
the
customer
that
may
be
“extinguished”
if
the
Bank
buys
the
accounts
at
a
sale?
In
my
view,
the
assignment
contemplates
that
it
will
operate
as
a
security
interest.
It
vests
in
the
Bank
title
to
the
debts
owed
to
Atlantic,
but
such
vesting
is
for
the
purpose
of
security;
it
is
not
to
transfer
ownership,
as
that
term
is
commonly
understood....
The
Bank
is
a
“secured
creditor”.
The
nature
of
the
interest
held
by
the
Bank,
even
if
considered
to
be
an
absolute
assignment,
cannot
be
divorced
from
the
circumstances
in
which
it
arose.
The
commercial
reality
is
that
the
Bank
held
a
security
interest
in
the
property
of
Atlantic.
Atlantic
transferred
its
receivable
to
the
Bank
to
secure
payment
of
money
Atlantic
owed
to
the
Bank.
Once
Atlantic
paid
off
the
Bank,
it
was
entitled,
not
to
a
reassignment
of
the
debt,
but,
by
the
wording
of
the
assignment,
“to
the
cancellation
hereof”.
The
Bank
was
a
secured
creditor
holding
a
security
interest.
[Emphasis
added.
I
I
agree
with
the
reasoning
expressed
in
these
cases.
As
well,
I
would
note
that
the
Newfoundland
Court
of
Appeal
in
Bank
of
Montreal
v.
Baird
(1979),
33
C.B.R.
(N.S.)
256,
leave
to
appeal
refused,
[1980]
1
S.C.R.
v,
dealt
with
a
GABD
as
a
security
interest.
Further,
the
New
Brunswick
Court
of
Appeal
in
R.V.
Demmings
&
Co.
v.
Caldwell
Construction
Co.
(1955),
4
D.L.R.
(2d)
465,
found
that
a
bank
holding
a
GABD
was
a
secured
creditor,
subject
to
an
equity
of
redemption
in
the
assignor
company.
I
also
find
support
for
this
conclusion
from
the
reasoning
in
cases
which
considered
a
situation
similar
to
that
created
by
a
GABD.
These
cases
arise
when
a
borrower
grants
to
a
lending
institution
a
fixed
charge
or
mortgage
based
upon
the
borrower’s
present
and
future
stock-in-trade
and
inventory
but
reserves
to
the
borrower
the
right
to
make
sales
of
the
stock-in-trade
and
inventory
in
the
ordinary
course
of
business.
In
British
Columbia
v.
Federal
Business
Development
Bank,
[1988]
1
W.W.R.
1,
17
B.C.L.R.
(2d)
273,
McLachlin
J.A.
(as
she
then
was),
on
behalf
of
the
majority
of
the
Court
of
Appeal,
considered
the
manner
in
which
courts
have
dealt
with
such
instruments
and
in
so
doing,
reached
the
following
conclusions
at
page
31
(B.C.L.R.
303):
Generally
speaking,
the
authorities
draw
a
clear
distinction
between
fixed
and
floating
charges,
recognizing
nothing
between
and
taking
the
view
that
any
charge
which
permits
dealing
in
the
ordinary
course
of
business
must
be
regarded
as
floating....
She
then
went
on,
at
page
33
(B.C.L.R.
303-04),
to
discuss
the
conceptual
possibility
of
a
fixed
charge
on
stock-in-trade
coupled
with
a
licence
to
deal
in
those
goods,
a
situation
analogous
to
that
which
the
lending
institutions
claim
exists
under
a
GABD.
She
noted
at
page
34
(B.C.L.R.
305):
The
generally
accepted
view...is
that
such
a
charge
should
be
regarded
as
floating
rather
than
fixed
because
it
involves
no
final
and
irrevocable
appropriation
of
property
to
the
creditor.
She
also
observed
that
the
English
courts
have
specifically
rejected
the
possibility
of
an
absolute
assignment
being
coupled
with
a
licence
to
deal
at
page
34
(B.C.L.R.
305-6):
..this
theory
was
soon
rejected
by
the
English
courts,
as
is
seen
from
the
comments
of
Lord
Buckley
in
Evans
v.
Rival
Granite
Quarries
Ltd.,
[1910]
2
K.B.
979
at
page
999
(C.A.):
A
floating
security
is
not
a
future
security;
it
is
a
present
security,
which
presently
affects
all
the
assets
of
the
company
expressed
to
be
included
in
it.
On
the
other
hand,
it
is
not
a
specific
security;
the
holder
cannot
affirm
that
the
assets
are
specifically
mortgaged
to
him.
The
assets
are
mortgaged
in
such
a
way
that
the
mortgagor
can
deal
with
them
without
the
concurrence
of
the
mortgagee.
A
floating
security
is
not
a
specific
mortgage
of
the
assets,
plus
a
licence
to
the
mortgagor
to
dispose
of
them
in
the
course
of
his
business,
but
is
a
floating
mortgage
applying
to
every
item
comprised
in
the
security,
but
not
specifically
affecting
any
item
until
some
event
occurs
or
some
act
on
the
part
of
the
mortgagee
is
done
which
causes
it
to
crystallize
into
a
fixed
security.
[Emphasis
added
by
McLachlin
J.A.]
In
determining
whether
a
particular
charge
over
book
debts
is
fixed
or
floating,
McLachlin
J.A.
referred
(at
page
35
(B.C.L.R.
307))
to
R.A.
Pearce
in
“Fixed
Charges
Over
Book
Debts”,
[1987]
J.B.L.
18,
at
page
29:
the
essential
characteristic
for
deciding
whether
a
charge
of
book
debts
is
fixed
or
floating
is
whether
the
book
debts
can
be
disposed
of
free
from
charge;
if
they
can,
the
charge
is
a
floating
charge,
otherwise
it
is
a
fixed
charge.
Modern
authorities
have
accepted
the
either-or
approach
to
fixed
and
floating
charges
upon
which
the
courts
settled
in
the
late
19th
and
early
20th
centuries.
For
example,
they
accept
the
conclusion
that
a
fixed
charge
on
book
debts
is
inconsistent
with
the
assignor
having
the
freedom
to
deal
with
proceeds
in
the
course
of
his
business:
see
Siebe
Gorman
&
Co.
v.
Barclays
Bank
Ltd.,
[1979]
2
Lloyd’s
Rep.
143
(Ch.
D.);
Re
Armagh
Shoes
Ltd.,
[1982]
N.I.
59
(Ch.D.);
Re
Keenan
Bros.
Ltd.
(1985),
5
I.L.R.M.
641
(S.C.).
In
Great
Lakes
Petroleum
Co.
v.
Border
Cities
Oil
Ltd.,
[1934]
O.R.
244,
[1934]
2
D.L.R.
743
(C.A.),
an
assignment
of
book
accounts
which
permitted
the
debtor
to
continue
to
“collect,
get
in,
and
deal
with
said
debts,
accounts,
claims,
moneys,
and
choses
in
action
in
the
ordinary
course
of
the
business”
was
held
to
be
a
floating
charge.
The
same
result
obtained
in
R.
v.
Lega
Fabricating
Ltd.
(1980),
22
B.C.L.R.
145
(S.C.).
She
indicated
that
the
sole
exception
to
this
rule
appeared
to
be
the
case
of
Evans
Coleman
&
Evans
Ltd.
v.
R.A.
Nelson
Construction
Ltd.
(1958),
27
W.W.R.
38,
16
D.L.R.
(2d)
123
(B.C.C.A.),
cited
by
Major
J.
in
his
reasons.
Significantly
she
went
on
to
observe
at
page
35-36
(D.L.R.
307):
Why
did
the
courts
reject
the
concept
of
a
fixed
charge
with
a
licence
to
deal?
In
doing
so,
they
undeniably
limited
the
freedom
of
debtor
and
creditor
to
contract
as
they
might
choose
in
an
age
when
freedom
of
contract
was
paramount.
The
answer,
it
may
be
suggested,
lies
in
the
effects
which
recognition
of
such
a
concept
would
have
upon
the
rights
of
third
parties
and
general
commercial
activity,
as
well
as
the
perceived
injustice
of
allowing
the
debtor
to
trade
freely
while
remaining
immune
from
the
normal
incidents
of
legal
process.
As
Fletcher-Moulton
L.J.
put
it
in
Evans
v.
Rival
Granite
Quarries
Ltd.,
supra
(page
995):
The
results
of
such
a
contention
are
astonishing;
it
means
that
by
giving
such
a
debenture
a
company
retains
the
full
right
of
trading
with
untied
hands
and
at
the
same
time
obtains
immunity
from
the
operation
of
all
processes
of
law.
I
should
be
slow
to
come
to
the
conclusion
that
such
an
anomaly
was
recognized
by
the
law.
Nor
do
I
think
that
it
is.
A
consideration
of
the
effect
of
floating
charges
and
of
the
fact
that
the
freedom
of
the
company
to
carry
on
its
business
is
not
based
on
special
words
creating
that
freedom,
but
on
the
nature
of
the
charge
itself,
leads
me
to
the
conclusion
that
the
right
of
the
company
to
carry
on
its
business
as
it
wills
pending
the
enforcement
of
the
security
must
mean
that
it
may
carry
it
on
in
accordance
with
law,
including
a
liability
to
the
processes
of
the
law
if
it
does
not
pay
its
debts.
Finally,
at
page
37-38
(B.C.L.R.
309),
McLachlin
J.A.
concluded:
In
general,
the
courts
have
been
unwilling
to
characterize
charges
which
permit
the
debtor
to
deal
with
his
property
in
the
ordinary
course
of
business
as
fixed
charges
with
licenses
to
sell.
Rather,
the
courts
have
characterized
such
charges
as
floating,
with
the
result
that
they
give
the
chargeholder
no
priority
over
third
parties
prior
to
crystallization....
In
short,
the
answer
to
the
question
of
whether
the
courts
have
recognized
a
fixed
charge
subject
to
a
licence
to
sell
in
the
ordinary
course
of
business
is
no.…
The
significance
of
the
equity
of
redemption
For
the
resolution
of
these
appeals,
it
is
essential
that
there
be
a
clear
recognition
of
the
fundamental
difference
between
an
absolute
and
a
conditional
assignment
of
book
debts.
In
an
absolute
assignment,
all
interests
are
transferred
and
no
property
remains
in
the
hands
of
the
assignor.
It
1s,
simply,
a
sale
of
the
book
debts
of
the
company.
This
is
the
basis
of
the
business
of
factoring.
Factoring
is
described
in
R.
Burgess,
Corporate
Finance
Law
(2nd
ed.
1992),
at
page
100,
in
this
manner:
Factoring
is
a
legal
relationship
between
a
financial
institution
(the
factor)
and
a
business
concern
(the
client)
selling
goods
or
providing
services
to
trade
customers
(the
customers)
whereby
the
factor
purchases
the
client’s
book
debts
either
with
or
without
recourse
to
the
client
and
administers
the
client’s
sales
ledger.
From
this
definition
it
is
apparent
that
factoring
arrangements
involve:
1.
the
purchase
of
the
client’s
book
debts;
2.
the
taking
over
and
administration
of
the
client’s
sales
ledger
and
credit
control
functions;
and
3.
the
provision
to
the
client
of
finance
which
will
be
a
specified
percentage
of
the
nominal
value
of
the
debts.
The
author
goes
on
(at
page
101)
to
consider
the
requirements
for
an
assignment
of
book
debts
under
English
law
and
observes
that
to
be
effective
the
assignment
must
be
absolute.
The
text
defines
“absolute”,
in
these
terms:
The
ordinary
legal
meaning
of
“absolute”
is
unconditional,
so,
for
an
assignment
to
be
absolute,
it
must
not
be
conditional
in
any
way;
specifically,
it
must
not
purport
to
be
by
way
of
charge
only.
A
factoring
of
accounts
receivable
is
based
upon
an
absolute
assignment
of
them.
It
is
in
effect
a
sale
by
a
company
of
its
accounts
receivable
at
a
discounted
value
to
the
factoring
company
for
immediate
consideration.
In
my
view,
s.
224
ITA
does
protect
those
engaged
in
the
factoring
business
and
those
lending
institutions
that
have
succeeded
in
perfecting
their
security
interest
prior
to
any
intervention
by
the
Minister
of
National
Revenue.
However,
I
cannot
accept
the
submission
that
Parliament,
by
this
section,
intended
to
create
an
interest
which
was
both
conditional
as
a
security
interest
and
at
the
same
time
unconditional
as
an
absolute
assignment.
There
cannot
have
been
an
intent
to
combine
such
incompatible
concepts.
Clearly
a
GABD
does
not
meet
the
standard
required
for
a
factoring
arrangement
which
requires
an
absolute
transfer
of
the
proprietary
interest
of
the
assignor
in
the
book
debts.
Pursuant
to
the
instruments
presented
in
this
case
the
borrower
retains
the
right
to
redeem
the
book
debts
once
the
debt
is
paid
off.
This
right
of
redemption
irrefutably
demonstrates
that
the
assignment
is
something
less
than
absolute.
I
agree
with
the
Minister
of
National
Revenue
that
what
the
actual
equity
of
the
borrower
in
the
book
debts
may
be
from
time
to
time
is
irrelevant
for
the
purpose
of
determining
the
legal
effect
of
the
equity
of
redemption.
It
would
be
absurd
if
a
company
were
to
fluctuate
between
having
title
and
not
having
title
to
their
book
debts
based
on
their
ratio
of
debt
to
assets.
This
is
particularly
true
of
a
company
engaged
in
a
seasonal
business.
Yet
if
a
GABD
is
treated
as
an
absolute
assignment,
this
can
be
the
only
result,
as
the
bank
is
limited
to
recovering
the
amount
of
the
loan.
Since
the
bank
could
not
recover
any
book
debts
if
the
company
had
a
surplus
in
their
account,
the
book
debts
would
belong
to
the
company.
When
there
was
a
deficit,
some
or
all
of
the
book
debts
would
belong
to
the
bank.
Such
a
fluctuating
state
of
affairs
is
inconsistent
with
the
certainty
required
in
commercial
matters.
I
believe
that
the
correct
view
is
that
a
GABD
represents
a
security
interest
with
the
legal
title
being
with
the
lender
and
the
equitable
title
remaining
with
the
borrower.
This
is
supported
both
by
the
jurisprudence
and
by
the
wording
of
the
section.
This
Court,
in
Quebec
(Commission
de
la
santé
&
de
la
se’cuite’
du
travail)
v.
Banque
fédérale
de
développement
(sub
noms
Federal
Business
Development
Bank
v.
Quebec
(Commission
de
la
santé
et
de
la
sécurité
du
travail),
[1988]
1
S.C.R.
1061,
50
D.L.R.
(4th)
577,
interpreted
“property
of
a
bankrupt”
in
section
67
of
the
Bankruptcy
and
Insolvency
Act,
R.S.C.,
1985,
c.
B-3,
as
including
property
subject
to
a
security
interest,
even
when
the
legal
title
to
the
property
is
transferred
to
the
security
holder.
This
indicates
that
the
concept
of
“property”
is
not
so
narrow
as
to
encompass
only
legal
title.
It
would
be
inconsistent
to
hold
in
this
case
that
a
transfer
of
legal
title
by
means
of
a
GABD
is
an
absolute
transfer
when
it
has
already
been
held
in
another
that
an
equity
of
redemption
is
a
property
interest
which
remains
with
the
borrower.
The
recent
case
of
R.
v.
National
Bank
of
Canada
(sub
nom.
Canada
v.
National
Bank
of
Canada,
[1993]
2
C.T.C.
149,
[1993]
2
F.C.
206,
Federal
Business
Development
Bank
v.
Quebec
(Commission
de
la
santé
et
de
la
sécurité
du
travail),
supra,
to
provide
an
appropriate
answer
to
the
question
as
to
whether
or
not
a
borrower
under
a
GABD
retains
a
property
interest
in
the
book
debts.
Rothstein
J.
held
(at
page
159
(F.C.
224-25)):
Based
on
the
reasoning
of
Houlden
J.
in
Re
Broydon
Printers,
supra,
as
approved
by
Lamer
J.
in
Federal
Business
Development
Bank,
supra,
the
right
of
redemption
of
book
debts,
in
my
view,
comes
within
the
definition
of
“property”
in
the
Bankruptcy
Act.
As
such,
the
reasoning
of
Lamer
J.
in
Federal
Business
Development
Bank
would
apply
and
the
book
debts
would
constitute
“property
of
the
bankrupt”
for
purposes
of
subsection
107(1)
of
the
Bankruptcy
Act.
In
summary,
an
assignment
cannot
be
both
absolute
and
yet
leave
an
equity
of
redemption
in
the
form
of
the
right
to
redeem
with
the
assignor.
The
retention
of
an
equity
of
redemption
is
consistent
with
a
security
interest
and
not
with
an
absolute
assignment.
A
GABD
simply
cannot
constitute
an
absolute
transfer
of
property.
This
conclusion
is
supported
by
section
63
of
the
Alberta
Personal
Property
Security
Act,
S.A.
1988,
c.
P-4.05,
which
stipulates
the
basis
upon
which
the
right
of
redemption
in
personal
property,
including
book
debts,
will
be
terminated.
There
must
be
either
a
disposition
of
the
collateral
by
the
secured
party
or
an
irrevocable
election
made
by
the
secured
party
creditor
under
section
62
of
the
Act
to
take
the
collateral.
In
the
absence
of
these
events,
the
debtor
has
certain
rights
under
the
section
to
redeem
the
collateral.
The
facts
presented
on
these
appeals
do
not
disclose
whether
the
lending
institutions
prior
to
receiving
notice
from
the
Minister
of
National
Revenue,
sold
or
transferred
the
book
debts,
or
met
the
requisite
conditions
in
order
to
be
deemed
irrevocably
to
have
taken
the
collateral.
If
they
did
not,
it
would
appear
that
the
debtor
companies
still
retained
a
right
of
redemption
under
the
statute.
I
would
further
add
that
to
conclude
that
a
GABD
results
in
a
change
of
ownership
as
a
result
of
its
absolute
nature
rather
than
constituting
collateral
security
for
a
debt
will
have
serious
implications.
It
could,
for
example,
result
in
a
change
in
the
ordering
of
priorities
provided
by
the
Bankruptcy
and
Insolvency
Act,
the
Companies’
Creditors
Arrangement
Act,
R.S.C.,
1985,
c.
C-36,
and
the
Canada
Business
Corporations
Act,
R.
S.C.,
1985,
c.
C-44.
Further,
it
could
constitute
the
means
by
which
an
unscrupulous
debtor
company,
knowingly
or
unknowingly
abetted
by
a
creditor
company,
could
so
order
its
affairs
that
many
other
bona
fide
creditors
could
be
adversely
affected.
Summary
In
Friesen,
supra,
it
was
held
that
the
words
of
the
Income
Tax
Act
should
be
given
their
plain
and
ordinary
meaning
in
accordance
with
the
structure
and
purpose
of
the
Act.
It
is
clear
that
in
enacting
the
sections
of
the
ITA
and
ETA
under
consideration
Parliament
was
attempting
to
ensure
the
priority
of
the
claim
of
the
Minister
of
National
Revenue
over
that
of
other
creditors.
The
primary
task
of
collecting
and
remitting
taxes
and
contributions
under
both
Acts
rests
with
those
who
are
employers
and
those
who
sell
goods
and
services.
These
amounts
so
collected
could
be
said
to
belong
not
to
the
collecting
debtor
entities
but
to
the
government.
In
a
sense
the
funds
collected
but
not
remitted
might
be
considered
to
be
held
in
a
form
of
trust
since
the
entities
that
have
collected
these
funds
are
not
in
any
circumstances
entitled
to
retain
them.
Rather,
they
must
remit
the
funds.
In
those
circumstances
the
priority
granted
to
the
Minister
of
National
Revenue
to
recover
such
funds
cannot
possibly
be
said
to
be
expropriation
without
compensation.
In
an
effort
to
ensure
the
recovery
of
these
amounts
collected
for
the
Minister
of
National
Revenue,
Parliament
has
endeavoured
to
ensure
the
priority
of
the
claims
of
the
Minister
of
National
Revenue
to
these
funds
over
other
creditors.
The
majority
of
the
courts
that
have
considered
this
issue
since
the
1990
amendment
have
concluded
that
Parliament
has
succeeded
in
achieving
this
aim:
see:
TransGas
Ltd.
v.
Mid-Plains
Contractors
Ltd.
(sub
nom.
Minister
of
National
Revenue
v.
TransGas
Ltd.),
[1993]
1
C.T.C.
280,
93
D.T.C.
5391
(Sask.
C.A.);
aff’d
[1994]
3
S.C.R.
753,
120
D.L.R.
(4th)
715;
Berg
v.
Parker
Pacific
Equipment
Sales,
[1991]
1
C.T.C.
442
(B.C.S.C.);
Coopers
&
Lybrand
Ltd.
v.
Bank
of
Montreal
(sub
nom.
Lundrigans
Ltd.
(Receivership)
v.
Bank
of
Montreal)
(1993),
110
Nfld.
&
P.E.IR.
91,
346
A.P.R.
91
(Nfld.
T.D.);
Bonavista
(Town)
v.
Atlantic
Technologists
Ltd.,
supra,
as
well
as
two
of
the
trial
decisions
in
this
case
on
appeal.
I
am
in
agreement
with
Major
J.
that
a
GABD
is
a
security
interest
and
as
well
that
“secured
creditor”
excludes
those
individuals
who
own
property
absolutely.
However
I
cannot
agree
that
a
GABD
constitutes
an
absolute
assignment
so
that
the
assignee
becomes
the
owner
of
the
book
debts.
The
two
concepts
in
the
same
instrument
are
incompatible
and
an
impossible
contradiction.
Quite
simply,
a
GABD
cannot
be
an
absolute
assignment
since
by
its
very
nature
it
is
a
security
interest.
In
drafting
the
language
of
the
sections
it
must
be
assumed
that
Parliament
sought
carefully
to
achieve
its
purpose,
and
that
it
did
not
intend
to
create
an
absurdity
or
a
redundancy.
My
position
can
be
summarized
in
this
manner:
(i)
The
definitions
of
a
“security
interest”
and
a
“secured
creditor”
cannot
be
contradictory.
Parliament
cannot
have
intended
to
create
definitions
which
overlap
and
contradict
each
other
with
the
result
that
the
same
instrument
can,
at
the
same
time,
be
both
a
“security
interest”
and
not
a
“security
interest”.
This
is
not
to
say
that
all
assignments
are
“security
interests”.
Rather
it
is
simply
that
an
instrument,
once
having
been
defined
as
a
“security
interest”,
cannot
also
be
an
absolute
assignment.
By
definition,
an
absolute
assignment
cannot
be
a
“security
interest”.
(ii)
GABDs
are
“security
interests”
and
not
absolute
assignments
because
they:
(a)
meet
the
definition
of
“security
interests”
as
set
out
in
s.
224(1.3)
ITA;
(b)
are
defined
as
collateral
security
on
their
face;
(c)
are
treated
as
security
for
a
loan
on
the
part
of
the
parties
involved;
(d)
have
been
defined
by
this
Court
as
including
an
equity
of
redemption,
and
thus
provide
a
property
interest
for
the
borrower.
As
a
result
they
cannot
be
absolute;
(e)
cannot
be
simultaneously
a
security
interest
and
an
absolute
assignment;
(f)
to
recognize
GABDs
as
absolute
assignments
would
frustrate
the
purpose
of
several
other
statutes.
(iii)
“secured
creditor”
is
meant
to
exclude
absolute
owners.
By
definition,
one
cannot
be
a
secured
creditor
and
at
the
same
time
an
owner
of
the
security.
An
absolute
assignee
would
be
an
owner
of
the
book
debts
as
is,
for
example,
a
factor.
Parliament
by
this
section
has
excluded
those
financial
institutions
engaged
in
factoring
from
the
operation
of
the
section,
together
with
those
financial
institutions
who
have
perfected
their
security
interest
by
assuming
ownership.
There
is
no
intention
manifested
by
the
1990
amendment
to
accord
any
priority
to
holders
of
GABDs.
Disposition
I
would
allow
the
appeals,
set
aside
the
order
of
the
Court
of
Appeal
and
confirm
the
priority
of
the
Minister
of
National
Revenue,
and
direct
that
the
Minister
of
National
Revenue
recover
in
all
three
cases
in
the
manner
directed
by
the
trial
judge
in
The
Queen
v.
Toronto-Dominion
Bank.
The
Minister
of
National
Revenue
should
have
his
costs
throughout.
Major
J.:
—
I.
Introduction
These
are
appeals
from
a
decision
of
the
Court
of
Appeal
of
Alberta
involving
three
cases.
In
all
cases
Her
Majesty
in
Right
of
Canada
as
represented
by
the
Minister
of
National
Revenue
(the
“M.N.R.”)
is
a
party.
Alberta
Treasury
Branches
is
a
party
in
two
of
the
cases
and
the
Toronto-
Dominion
Bank
is
the
other
party.
Each
appeal
involves
a
priorities
contest
between
the
M.N.R.’s
garnishee
summons,
and
a
general
assignment
of
book
debts
(“GABD”)
to
the
lending
institutions.
Subsection
224(1.2)
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63,
as
amended
in
1990,
S.C.
1990,
c.
34,
s.
1,
provides
a
form
of
garnishment
which
enables
the
M.N.R.
in
certain
circumstances
to
intercept
moneys
owed
to
tax
debtors.
This
form
of
garnishment
is
not
available
for
the
collection
of
income
tax
debts
generally.
It
is
limited
to
the
collection
of
amounts
owing
by
a
person
who
has
withheld,
or
should
have
withheld,
moneys
from
another
under
s.
153
of
the
Income
Tax
Act
and
who
has
failed
to
remit
the
withheld
amounts.
An
identical
garnishment
remedy,
provided
by
the
Excise
Tax
Act,
R.S.C.
1985,
c.
E-15,
s.
317(3),
applies
where
a
person
has
failed
to
remit
GST
which
was,
or
ought
to
have
been,
collected
from
other
persons.
The
issue
in
these
appeals
is
whether
the
sections
apply
to
give
the
M.N.R.
a
priority
over
creditors
who
have
received
an
absolute
assignment
of
book
debts
from
the
tax
debtor.
The
resolution
of
the
appeals
turns
on
the
definition
of
“secured
creditor”,
which
requires
the
holding
of
a
security
interest
in
the
“property
of
another
person”.
In
my
opinion,
the
sections
do
not
grant
the
M.N.R.
a
priority
over
a
creditor
who
holds
an
assignment
of
book
debts.
As
a
matter
of
law,
such
a
creditor
owns
the
book
debts
in
question
and
thus
cannot
be
said
to
have
a
security
interest
in
the
property
of
another
person.
This
result
is
dictated
by
the
common
law
as
well
as
basic
principles
of
the
interpretation
of
the
Income
Tax
Act.
The
wording
of
the
sections
is
simply
not
sufficiently
clear
and
unambiguous
to
authorize
the
expropriation,
without
compensation,
of
a
proprietary
interest
from
the
innocent
holder
of
the
assignment
of
the
book
debts.
II.
Facts
The
first
case
arose
in
1987
from
a
loan
made
by
the
respondent,
Alberta
Treasury
Branches,
to
Country
Inns
Inc.,
an
Alberta
hotel
operator.
The
borrowed
money
was
secured
in
part
by
a
general
assignment
of
book
debts.
Country
Inns
Inc.
was
in
arrears
to
the
appellant
M.N.R.
for
$33,312.
67
in
unremitted
GST,
plus
interest
and
penalties.
Zurich
Canada
owed
Country
Inns
Inc.
$15,000
while
Zurich
Insurance
Company
was
alleged
to
owe
$95,000.
In
June
1992,
the
M.N.R.
served
requirements
to
pay
under
subsection
317(3)
of
the
Excise
Tax
Act
on
Zurich
Canada
and
Zurich
Insurance
Company,
and
all
other
possible
debtors.
After
Country
Inns
Inc.
made
an
assignment
under
the
Bankruptcy
Act,
R.S.C.,
1985,
c.
B-3,
the
trustee
estimated
the
realization
of
the
assets
of
the
estate
would
leave
a
shortfall
to
the
respondent
Alberta
Treasury
Branches,
which
was
owed
in
excess
of
$6,000,000.
Forsyth
J.
of
the
Court
of
Queen’s
Bench,
in
an
application
to
determine
priorities,
held
that
the
M.N.R.
had
priority
by
virtue
of
the
provisions
of
the
Excise
Tax
Act:
(1992),
5
Alta.
L.
R.
(3d)
141.
In
the
second
case,
Pigott
Project
Management
Ltd.
contracted
with
Land-Rock
Resources
Ltd.
for
excavation
work
on
the
Old
Man
River
Dam
spillway.
In
1989,
Land-Rock
borrowed
moneys
from
the
respondent
Alberta
Treasury
Branches
and
granted
it
a
general
assignment
of
book
debts.
After
Land-Rock
completed
the
contract
work,
Pigott
held
$161,821.77
in
contract
holdback
funds.
These
funds
were
claimed
by
various
creditors
of
Land-Rock,
including
the
appellant
M.N.R.,
to
whom
Land-Rock
was
indebted
for
unremitted
employee
source
deductions,
interests
and
penalties.
In
1991,
the
M.N.R.
served
two
requirements
to
pay
on
Pigott,
under
subsection
224(1.2)
of
the
Income
Tax
Act,
for
almost
$600,000.
On
an
application
to
determine
priority
to
the
moneys
in
question,
Master
Waller
of
the
Court
of
Queen’s
Bench
decided
the
respondent
Alberta
Treasury
Branches
had
priority
through
its
general
assignment
of
book
debts.
An
appeal
to
Hunt
J.
was
dismissed:
(1993),
9
Alta.
L.
R.
(3d)
349.
In
the
third
case,
Bodor
Drilling
Ltd.
operated
a
drilling
company
which
borrowed
moneys
from
the
respondent
Toronto-Dominion
Bank.
The
borrowed
money
was
secured
in
part
by
a
general
assignment
of
book
debts.
Bodor
owed
the
appellant
M.N.R.
$83,325.
19,
in
unremitted
GST,
interest
and
penalties.
In
March
1992,
the
M.N.R.
served
requirements
to
pay
under
subsection
317(3)
of
the
Excise
Tax
Act
on
the
trade
debtors
of
Bodor.
Another
of
Bodor’s
creditors
successfully
filed
a
petition
under
the
Bankruptcy
Act
to
have
Bodor
declared
a
bankrupt.
Bodor
was
indebted
to
the
respondent
Toronto-Dominion
Bank
in
the
amount
of
$266,331.
12.
In
an
application
to
determine
priority,
MacLeod
J.
of
the
Court
of
Queen’s
Bench
held
that
the
M.N.R.
had
priority
under
the
provisions
of
the
Excise
Tax
Act.
All
three
cases
were
appealed
to
the
Alberta
Court
of
Appeal.
It
held
that
in
each
case
the
lending
institution
had
priority
over
the
M.N.R.:
(1994),
16
Alta.
L.
R.
(3d)
1.
III.
Analysis
Before
1987,
the
primary
garnishment
remedy
in
the
Income
Tax
Act
was
provided
by
subsection
224(1),
which
stated:
224(1)
Where
the
Minister
has
knowledge
or
suspects
that
a
person
is
or
will
be,
within
90
days,
liable
to
make
a
payment
to
another
person
who
is
liable
to
make
a
payment
under
this
Act
(in
this
section
referred
to
as
the
“tax
debtor”),
he
may,
by
registered
letter
or
by
a
letter
served
personally,
require
that
person
to
pay
forthwith...the
moneys
otherwise
payable
to
the
tax
debtor
in
whole
or
in
part
to
the
Receiver
General
on
account
of
the
tax
debtor’s
liability
under
this
Act.
Where
a
tax
debtor
had
assigned
its
debts
to
another
party
as
part
of
a
security
arrangement,
courts
were
virtually
unanimous
in
finding
that
a
demand
under
subsection
224(1)
was
ineffective
to
attach
any
of
the
as-
signed
debts.
The
courts
held
that,
by
the
assignment,
the
tax
debtor
had
transferred
its
interest
in
its
accounts
to
the
assignee,
leaving
nothing
for
the
M.N.R.’s
garnishment
to
attach.
See:
Royal
Bank
of
Canada
v.
R.
(sub
nom.
Royal
Bank
of
Canada
v.
The
Queen),
[1984]
C.T.C.
573,
84
D.T.C.
6439
(F.C.T.D.),
at
pages
581-83
(D.T.C.
6445-47);
aff
d
[1986]
2
C.T.C.
211,86
D.T.C.
6390
(F.C.A.).
Parliament
amended
the
Income
Tax
Act
in
1987
(S.C.
1987,
c.
46,
s.
66)
and
added
two
additional
subsections
(ss.
224(1.2)
and
(1.3)).
Supsections
317(3)
and
(4)
were
also
added
to
the
Excise
Tax
Act.
For
the
purposes
of
the
issue
raised
in
these
appeals
the
wording
of
the
sections
in
the
Excise
Tax
Act
is
identical
to
that
of
the
Income
Tax
Act.
For
the
sake
of
convenience
I
will
refer
to
the
sections
of
the
Income
Tax
Act.
Subsection
224(1.2)
provided
that
the
M.N.R.
could
garnish
funds
owed
to
a
tax
debtor
or
to
a
“secured
creditor’.
Section
224(1.3)
provided,
inter
alia,
definitions
of
“secured
creditor”
and
a
“security
interest”:
224(1.2)
Notwithstanding
any
other
provision
of
this
Act,
the
Bankruptcy
Act,
any
other
enactment
of
Canada,
any
enactment
of
a
province
or
any
law,,
where
the
Minister
has
knowledge
or
suspects
that
a
particular
person
is
or
will
become,
within
90
days,
liable
to
make
a
payment
(a)
to
another
person
who
is
liable
to
pay
an
amount
assessed
under
subsection
227(10.1)
or
a
similar
provision,
or
to
a
legal
representative
of
that
other
person
(each
of
whom
is
in
this
subsection
referred
to
as
the
“tax
debtor”),
or
(b)
to
a
secured
creditor
who
has
a
right
to
receive
the
payment
that,
but
for
a
security
interest
in
favour
of
the
secured
creditor,
would
be
payable
to
the
tax
debtor,
the
Minister
may,
by
registered
letter
or
by
a
letter
served
personally,
require
the
particular
person
to
pay
forthwith,
where
the
moneys
are
immediately
payable,
and
in
any
other
case,
as
and
when
the
moneys
become
payable,
the
moneys
otherwise
payable
to
the
tax
debtor
or
the
secured
creditor
in
whole
in
or
in
part
to
the
Receiver
General
on
account
of
the
tax
debtor’s
liability
under
subsection
227(10.1)
or
a
similar
provision.
(1.3)
In
subsection
(1.2),
“secured
creditor”
means
a
person
who
has
a
security
interest
in
the
property
of
another
person
or
who
acts
for
or
on
behalf
of
that
person
with
respect
to
the
security
interest
and
includes
a
trustee
appointed
under
a
trust
deed
relating
to
a
security
interest,
a
receiver
or
receiver-manager
appointed
by
a
secured
creditor
or
by
a
court
on
the
application
of
a
secured
creditor,
a
sequestrator,
or
any
other
person
performing
a
similar
function;
“security
interest”
means
any
interest
in
property
that
secures
payment
or
performance
of
an
obligation
and
includes
an
interest
created
by
or
arising
out
of
a
debenture,
mortgage,
hypothec,
lien,
pledge,
charge,
deemed
or
actual
trust,
assignment
or
encumbrance
of
any
kind
whatever,
however
or
whenever
arising,
created,
deemed
to
arise
or
otherwise
provided
for,
The
operation
of
the
1987
version
of
subsection
224(1.2)
as
against
the
holder
of
a
GABD
was
considered
by
courts
in
Alberta,
British
Columbia,
Saskatchewan,
Manitoba
and
Nova
Scotia.
In
Alberta,
in
Lloyds
Bank
Canada
v.
International
Warranty
Co.,
[1989],
1
C.T.C.
401,
89
D.T.C.
5279
(Q.B.);
rev’d
[1990]
2
C.T.C.
360,
68
Alta.
L.R.
(2d)
356
(C.A.);
McDonald
J.
held
that
the
new
definition
of
“security
interest”
was
broad
enough
to
include
moneys
which
were
equitably
assigned
by
a
tax
debtor
to
a
bank
(at
pages
410-11
(D.T.C.
5285)):
the
definition
of
“security
interest”
is
so
broad
as
to
include
moneys
which
have
been
equitably
assigned
by
the
tax
debtor
to,
for
example,
a
bank.
The
ownership
by
the
bank
of
the
funds
that
are
the
subject
of
the
assignment
constitutes
an
“interest
in
property”.
That
interest
in
property
is
one
which
“secures
payment”
of
the
“obligation”
of
the
tax
debtor....
The
provision
of
such
security
is
the
very
purpose
of
the
assignment
of
book
debts.
Moreover,
the
bank’s
interest
is
one
“created
by
or
arising
out
of
[an]
assignment...of
any
kind
whatever,
however
or
whenever
arising....”
As
a
result,
he
held
that
the
M.N.R.
obtained
priority
to
the
garnished
funds
over
the
claim
of
Lloyds
Bank
as
the
assignee
of
the
book
debts.
The
Alberta
Court
of
Appeal
reversed
the
trial
decision
in
Lloyds
Bank
but
on
other
grounds.
Relying
on
its
decisions
in
Re
Lamarre',
Morrison
v.
University
of
Calgary,
[1978]
2
W.W.R.465,
78
D.T.C.
6155,
and
Canada
(Attorney
General)
v.
Royal
Bank
of
Canada,
[1979]
1
W.W.R.479,
13
A.R.
318,
the
Court
of
Appeal
held
that
the
provisions
of
subsection
224(1.2)
provided
at
most
for
a
form
of
extra-judicial
attachment
which
could
bring
the
funds
into
the
custody
of
the
M.N.R..
The
court
held
that
the
section
fell
short
of
effecting
a
transfer
of
property
in
the
funds
or
establishing
the
priority
of
the
M.N.R.’s
claim.
It
concluded
(at
C.T.C.
page
364)
that
“[s]omething
further
is
required
to
accomplish
either
purpose”.
The
decision
of
the
Alberta
Court
of
Appeal
in
Lloyds
Bank
was
followed
by
the
Manitoba
Court
of
Appeal
in
Pembina
on
the
Red
Development
Corp.,
supra,
and
the
British
Columbia
Court
of
Appeal
in
Concorde
International
Travel
Inc.
v.
T.I.
Travel
Services
(B.C.)
Inc.
(1990),
72
D.L.R.(4th)
405,
47
B.C.L.R.
(2d)
188.
In
the
B.C.
decision,
Hinkson
J.A.
referred
to
the
decision
of
the
Alberta
Court
of
Appeal
in
Lloyds
Bank
and
stated
at
page
409
(B.C.L.R.
192):
In
my
opinion,
section
224
styled
as
it
is
“Garnishment”
deals
in
subsections
(1)
and
(1.2)
with
the
mechanics
of
garnishment.
The
Minister
in
serving
a
demand
pursuant
to
that
section
must
be
proceeding
upon
the
basis
that
he
asserts
a
tax
debtor’s
liability
to
him.
That
justified
garnishing
the
funds
in
the
hands
of
a
creditor
of
the
tax
debtor.
But,
I
am
unable
to
see
in
that
section
any
provision
that
would
have
the
effect
of
transferring
the
property
in
the
funds
to
the
Minister
or
establishing
a
priority
of
Revenue
Canada’s
claim.
That
was
the
point
dealt
with
by
the
Alberta
Court
of
Appeal.
[Emphasis
added.]
To
the
opposite
effect
are
decisions
by
courts
in
Saskatchewan
and
Nova
Scotia:
Royal
Bank
of
Canada
v.
Saskatchewan
Power
Corp.
(sub
nom.
Royal
Bank
v.
Canada),
[1991]
1
C.T.C.
532,
[1991]
1
W.W.R.
1
(Sask.
C.A.);
aff’g
[1991]
1
C.T.C.
505,
[1990]
2
W.W.R.
655
(Sask.
Q.B.);
and
Touche
Ross
Ltd.
v.
Minister
of
National
Revenue
(sub
nom.
Touche
Ross
Ltd.
v.
Canada),
[1991]
1
C.T.C.
505,
71
D.L.R.
(4th)
648
(N.S.T.D.).
Apparently
in
order
to
deal
with
the
competing
lines
of
authority
as
to
whether
s.
224(1.2)
was
sufficient
to
grant
a
priority
to
the
M.N.R.,
Parliament
amended
the
section
in
1990
by
adding
the
following
to
the
end
of
the
section:
and
on
receipt
of
that
letter
[i.e.
the
garnishment
summons]
by
the
particular
person,
the
amount
of
those
moneys
that
is
required
by
that
letter,
to
be
paid
to
the
Receiver
General
shall,
notwithstanding
any
security
interest
in
those
moneys,
become
the
property
of
Her
Majesty
and
shall
be
paid
to
the
Receiver
General
in
priority
to
any
such
security
interest.
This
1990
amendment
was
made
to
both
the
Income
Tax
Act
and
the
relevant
provisions
of
the
Excise
Tax
Act.
The
three
trial
decisions
in
the
cases
at
issue
in
these
appeals
are
principally
concerned
with
the
issue
of
whether
this
amendment
constituted
the
“something
further”
which
Lloyds
Bank
had
held
was
necessary
to
transfer
the
property
interest
in
the
funds
to
the
M.N.R.
or
to
grant
a
priority
to
the
M.N.R..
Two
judges
of
the
Court
of
Queen’s
bench
held
that
the
1990
amendments
did
constitute
the
“something
further”
and
that
as
a
result
the
M.N.R.
gained
priority
over
the
book
debts
to
the
lending
institutions
in
question.
Forsyth
J.
based
his
decision
expressly
on
the
wording
of
the
1990
amendment
and
held
that
it
was
sufficiently
explicit.
In
addition
to
the
1990
amendments,
MacLeod
J.
placed
reliance
on
the
finding
of
McDonald
J.
in
Lloyds
Bank
that
a
GABD
falls
within
the
definition
of
a
security
interest
in
subsection
224(1.3).
In
the
third
case,
the
Master
in
Chambers
held
that
the
1990
amendments
were
still
not
sufficiently
broadly
worded
to
allow
Revenue
Canada
to
attach
moneys
in
which
the
tax
debtor
has
no
interest
by
virtue
of
an
absolute
assignment.
Hunt
J.
on
appeal
agreed
with
his
conclusion.
She
relied
on
a
perceived
ambiguity
in
the
definition
of
security
interest,
stating
at
pages
360-61:
I
am
of
the
view,
moreover,
that
it
is
not
clear
whether
the
modifying
provisions
at
the
end
of
the
definition
of
“security
interest”
(the
words
“of
any
kind
whatever,
however
or
whenever
arising,
created,
deemed
to
arise
or
otherwise
provided
for”)
are
meant
to
apply
to
each
of
the
enumerated
types
of
interests
or
instruments
(debenture,
mortgage,
assignment,
etc.
)
or
whether
these
words
are
meant
only
to
modify
the
term
“encumbrance”.
McDonald,
J.
[in
Lloyds
Bank,
supra]
assumed
the
former
to
be
the
case,
but
in
my
view
the
meaning
is
not
without
doubt.
There
is
a
third
way
of
reading
the
modifying
words
at
the
end,
namely
that
the
words
“of
any
kind
whatever”
describe
“encumbrance”,
with
the
balance
of
the
words
applying
to
each
of
the
listed
types
of
interests.
The
words
“of
any
kind
whatever”
might
also
be
taken
to
apply
to
assignments
and
encumbrances.
Were
this
provision
more
clear,
it
would
be
easier
to
conclude
that
Parliament
meant
to
include
all
types
of
assignments,
including
unconditional
assignments,
in
the
definition.
This
would
make
it
plainer
that,
indeed,
Parliament
intended
Revenue
Canada’s
claim
to
take
priority
over
the
property
of
someone
other
than
the
tax
debtor,
such
as
an
assignee
of
the
tax
debtor’s
book
debts.
[Emphasis
in
original.]
I
agree
with
Forsyth
J.
that
the
1990
amendments
to
the
Income
Tax
Act
and
the
Excise
Tax
Act
were
sufficient
to
provide
the
“something
further”
which
the
Alberta
Court
of
Appeal
thought
to
be
necessary
in
Lloyds
Bank.
As
Côté
J.A.
in
the
decision
of
the
Court
of
Appeal
in
this
case
stated
about
the
amendment
to
subsection
224(1.2),
at
page
6:
the
amendments
to
that
subsection
say
that
service
transfers
the
debt
to
Her
Majesty,
and
that
it
shall
be
paid
to
Her
Majesty
notwithstanding
the
security
interest,
and
in
priority
to
the
security
interest.
Where
those
amendments
apply,
in
my
view
they
reverse
our
Lloyds
Bank
decision
and
give
the
M.N.R.
priority
over
earlier
mortgages
and
assignments.
I
cannot
confine
them
to
floating
or
conditional
assignments
and
must
disagree
with
one
of
the
Justices
appealed
from.
I
also
agree
with
MacLeod
J.
that
McDonald
J.
at
trial
in
Lloyds
Bank
was
correct
to
hold
that
a
GABD
falls
within
the
definition
of
security
interest
in
subsection
224(1.3).
That
section
defines
“security
interest”
as
including:
any
interest
in
property
that
secures
payment
or
performance
of
an
obligation
and
includes
an
interest
created
by
or
arising
out
of...[an]
assignment...of
any
kind
whatever,
however
or
whenever
arising....
With
respect,
I
do
not
accept
the
conclusion
of
Hunt
J.
that
the
definition
of
“security
interest”
is
ambiguous
and
that
the
phrase
“of
any
kind
whatever”
should
be
read
to
modify
only
“encumbrance”
which
is
the
last
type
of
security
listed.
When
the
definition
is
read
in
its
plain
and
ordinary
sense,
it
is
clear
that
the
broad
phrase
“of
any
kind
whatever”
is
intended
to
cover
all
of
the
listed
types
of
security
including
an
assignment.
The
phrase
“a[n]
assignment...of
any
kind
whatever”
is
broad
enough
to
encompass
the
absolute
assignments
of
book
debts
which
are
at
issue
in
these
appeals.
The
finding
that
a
GABD
is
a
security
interest
for
the
purposes
of
the
Income
Tax
Act
or
the
Excise
Tax
Act
is
also
consistent
with
the
manner
in
which
the
assignments
are
dealt
with
in
the
contracts
which
create
the
assignments.
For
instance,
the
instrument
which
creates
the
assignment
of
book
debts
from
Land-
Rock
Resources
Ltd.
to
Alberta
Treasury
Branches
provides,
inter
alia:
THE
PRESENT
assignment
and
transfer
shall
be
a
continuing
collateral
security
to
Treasury
Branches
for
the
payment
of
all
and
every
present
and
future
indebtedness
and
liability
of
the
undersigned
to
Treasury
Branches
and
any
ultimate
unpaid
balance
thereof
with
interest.
[Emphasis
added.
I
My
conclusions
that
the
GAB
Ds
at
issue
in
these
appeals
fall
within
the
statutory
definition
of
a
security
interest
and
that
the
1990
amendment
is
effective,
when
it
applies,
to
give
the
M.N.R.
a
priority
over
earlier
mortgages
and
assignments,
do
not,
however,
lead
inevitably
to
the
conclusion
that
the
M.N.R.
has
priority
over
the
lending
institutions
to
the
debts
at
issue
in
these
appeals.
A
new
argument
was
raised
before
the
Alberta
Court
of
Appeal
and
this
Court
to
the
effect
that
even
if
an
unconditional
GABD
is
a
security
interest,
the
lending
institutions
do
not
fall
within
the
definition
of
“secured
creditor”
in
subsection
224(1.3)
of
the
Income
Tax
Act.
Côté
J.A.
held
at
pages
7-8:
The
M.N.R.
must
believe
or
suspect
that
the
intended
recipient
of
the
letter
is
liable,
or
will
soon
become
liable
to
make
a
payment
under
para.
(a)
or
para,
(b)
of
the
operative
subs.
(1.2).
No
one
suggests
that
para.
(a)
applies
here,
given
the
general
assignments
of
book
debts
and
other
assignments.
So
the
effective
precondition
in
these
cases
is
para.
(b).
It
says:
(b)
to
a
secured
creditor
who
has
a
right
to
receive
the
payment
that,
but
for
[a]
security
interest
in
favour
of
the
secured
creditor,
would
be
payable
to
the
tax
debtor
[emphasis
added],
Subsection
(1.3)
defines
“security
interest”,
and
that
definition
appears
to
be
satisfied
in
the
present
cases.
But
subsection
(1.3)
also
defines
“secured
creditor”....
I
will
restate
that
definition
slightly
using
square
brackets:
à
[certain]
person
who
has
a
security
interest
in
the
property
of
another
person
or
who
acts
for
or
on
behalf
of
that
person
with
respect
to
the
security
interest
and
includes...[emphasis
added]
In
each
of
these
three
appeals,
there
was
a
general
assignment
of
book
debts
which
purported
immediately
to
transfer
title
to
the
Bank
or
Treasury
Branch.
Doubtless
it
was
done
to
secure
a
loan,
but
legal
title
was
thereafter
in
the
transferee,
the
Bank
or
Treasury
Branch.
Therefore,
the
Bank
or
Treasury
Branch
is
not
a
“secured
creditor”
under
this
definition,
because
it
does
not
have
any
interest
“in
the
property
of
another
person”.
The
Bank
or
Treasury
Branch
itself
is
the
owner.
The
tax
debtor,
both
sides
agree,
would
have
to
be
the
“other
person”.
But
he
has
no
title.
So
one
cannot
say
that
the
book
debts
(receivables)
assigned
are
“the
property
of”
the
tax
debtor.
I
agree.
The
wording
of
s.
224(1.2)
clearly
requires
not
only
that
there
is
a
security
interest,
but
also
that
the
payment
be
made
either
to
the
tax
debtor
or
to
a
secured
creditor.
Here,
because
of
the
assignments,
the
payments
are
made
to
the
lending
institutions
and
the
question
is
whether
these
lending
institutions
meet
the
definition
of
“secured
creditor”
as
defined
in
the
statutes.
The
definition
of
secured
creditor
is
a
“person
who
has
a
security
interest
in
the
property
of
another”,
that
other
being
the
tax
debtor.
The
critical
issue
is
whether,
after
an
assignment,
the
lending
institutions
have
a
security
interest
in
the
property
of
the
tax
debtor.
In
my
view,
they
do
not.
An
assignment
passes
title
and
therefore
property
in
the
book
debts
is
held
by
the
lending
institution
and
not
by
the
tax
debtor.
It
is
well-established
law
that
a
GABD,
such
as
the
ones
at
issue
in
these
appeals,
has
the
effect
of
transferring
all
right,
title
and
ownership
in
and
to
the
property
assigned
so
that
it
can
no
longer
be
considered
the
property
of
the
assignor.
See:
Evans
Coleman,
supra,
at
page
42
(D.L.R.
125-26);
Lettner
v.
Pioneer
Truck
Equipment
Ltd.
(1964),
47
W.W.R.
343
(Man.
C.A.),
at
pages
348-49;
Royal
Bank
of
Canada
v.
Canada
(Attorney
General),
[1977]
6
W.W.R.
170,
8
A.R.
225,
(Alta.
T.D.),
at
pages
173-74
and
179-80
(A.R.
231-32
and
237-38),
affd
[1979]
1
W.W.R.
479,
13
A.R.
318
(Alta.
C.A.);
Royal
Bank
of
Canada
v.
R.,
supra,
at
pages
578-79
and
582-83
(D.T.C.
6442-43
and
6446);
Toronto-Dominion
Bank
v.
R.
(sub
nom.
Toronto-Dominion
Bank
v.
Canada),
[1990]
2
C.T.C.
542,
90
D.T.C.
6639
(F.C.T.D.).
In
Evans
Coleman,
supra,
the
plaintiff
attempted
to
garnish
funds
owing
to
the
defendant
which
were
held
by
a
bank.
A
second
bank
held
a
GABD
executed
by
the
defendant.
The
British
Columbia
Court
of
Appeal
concluded
that
the
GABD
passed
property
in
the
book
debts
absolutely,
and
that
the
defendant
no
longer
had
an
interest
that
could
be
garnisheed.
In
Royal
Bank
of
Canada
v.
R.,
Muldoon
J.
of
the
Federal
Court-Trial
Division
came
to
a
similar
conclusion
which
was
unanimously
confirmed
by
the
Federal
Court
of
Appeal.
Under
the
terms
of
the
assignment,
the
assignor
Miles
contracted
to
act
as
a
trustee
for
the
funds
assigned
by
him
to
the
Royal
Bank
under
a
GABD.
The
M.N.R.
argued
that
an
assignee
can
have
no
greater
claim
on
the
garnished
money
than
the
assignor.
Muldoon
J.
rejected
this
argument
and
held
at
pages
582-83
(D.T.C.
6446):
With
respect,
this
contention
misses
the
point.
To
equate
the
respective
rights
of
the
assignee
and
the
assignor
in
and
upon
the
book
debts
is
to
overlook
the
very
nature
and
effect
of
the
assignment,
for
the
assignee
owns
the
book
debts
and
the
assignor
does
not.
To
those
who
have
not
searched
in
the
personal
property
security
register,
the
assignor,
of
course,
might
still
appear
to
be
an
ordinary
trade
creditor,
but
having
assigned
the
book
debts,
the
assignor,
Miles,
was
in
reality
a
trustee
of
them
for
the
assignee,
the
plaintiff
bank.
Here
the
Crown
has
received
that
which
belonged
to
the
bank.
In
Lettner,
supra,
Guy
J.A.
of
the
Manitoba
Court
of
Appeal
commented
upon
the
nature
and
effect
a
GABD
as
follows
at
pages
348-49:
As
between
Pioneer
Truck
and
the
bank,
Pioneer
Truck
knows
that
its
accounts
receivable
or
book
debts
belong
to
the
bank.
In
equity
it
cannot
be
heard
to
say
that
it
owns
these
book
debts.
…
The
fact
that
banking
practice
in
Canada
permits
the
extension
of
credit
to
going
concerns,
and
permits
the
borrowers
(by
licence,
as
it
were)
to
collect
some
accounts
to
pay
wages
and
current
creditors,
does
not
destroy
the
absolute
and
specific
quality
of
the
legal
assignments
to
the
bank.
In
Toronto-Dominion
Bank
v.
R.,
Jerome
A.C.J.
of
the
Federal
Court-
Trial
Division
conducted
a
thorough
review
of
the
authorities,
including
those
discussed
above,
and
concluded
at
pages
544-45
(D.T.C.
6641):
In
light
of
the
preceding
authorities,
and
particularly
in
light
of
the
Federal
Court
of
Appeal’s
decision
in
Royal
Bank
of
Canada
v.
R.,
which
is
entirely
binding
on
this
Court,
I
must
conclude
that
the
general
assignment
of
book
debts
granted
April
26,
1983,
by
J.
K.
Campbell
and
Associates
Limited
to
the
Toronto-Dominion
Bank
constituted
an
absolute
transfer
of
all
property
and
interest
previously
held
by
J.
K.
Campbell
in
its
accounts
or
other
book
debts,
present
or
future.
Accordingly,
after
April
26,
1983,
the
Toronto-Dominion
Bank
had
full
legal
and
equitable
title
in
all
accounts
that
were
owing
or
that
would
become
owing
by
debtors
of
J.
K.
Campbell
unless
such
right
was
otherwise
expropriated
by
competent
and
valid
legislation.
In
addition
to
establishing
that
an
absolute
assignment
of
book
debts
transfers
property
in
the
debts
to
the
assignee,
the
cases
discussed
above
also
stand
for
the
simple
and
obvious
proposition
that
the
true
nature
of
an
assignment
can
only
be
determined
by
examining
the
particular
wording
of
the
instrument
which
creates
the
assignment.
The
assignments
in
each
of
the
three
cases
which
are
involved
in
these
appeals
all
contain
language
which
makes
it
clear
that
they
are
immediate
and
absolute.
Typical
is
the
assignment
from
Land-
Rock
Resources
to
Alberta
Treasury
Branches,
which
provides:
THE
UNDERSIGNED
Land-Rock
Resources
Ltd.
for
valuable
consideration
HEREBY
ASSIGNS
AND
TRANSFERS
to
Province
of
Alberta
Treasury
Branches
(herein
called
“Treasury
Branches”)
all
debts,
demands
and
choses
in
action
now
due
or
hereafter
to
become
due
together
with
all
judgments
and
securities
for
the
said
debts,
demands
and
choses
in
action,
and
all
other
rights
and
benefits
in
respect
thereof
which
now
are
or
may
hereafter
become
vested
in
the
undersigned.
It
was
noted
in
Royal
Bank
of
Canada
v.
R.,
at
pages
575-76
(D.T.C.
6440-41),
that
there
may
be
a
distinction
between
an
absolute
assignment
and
one
that
provides
that,
in
the
event
of
default
and
the
non-remedy
of
the
default,
the
bank
may
without
further
notice
deal
with
the
book
debts.
Such
wording
appears
to
be
less
than
an
absolute
assignment
and
creates
for
the
lending
institution
a
charge
on
the
book
debts
which
does
not
crystallize
into
property
in
the
debts
until
there
has
been
an
unremedied
default.
While
it
does
not
fall
to
be
decided
in
this
case,
it
seems
likely
that
such
an
assignment
does
not
transfer
property
to
the
lending
institution
and
thus,
at
least
prior
to
default
on
the
part
of
the
assignor,
the
lending
institution
would
be
a
secured
creditor
under
s.
224(1.3).
This
type
of
conditional
wording
is
not
present
in
any
of
the
instruments
at
issue
in
these
appeals,
all
of
which
are
unconditional
and
absolute.
Moreover,
at
least
one
of
the
instruments
provides
that
the
assignor
is
a
trustee
for
the
book
debts
held
by
the
lending
institution.
In
Royal
Bank
of
Canada
v.
R.,
Muldoon
J.
held
that
the
fact
that
the
assignor
is
in
the
position
of
a
trustee
is
a
further
indication
that
the
assignment
passes
property
to
the
assignee.
The
assignment
from
Bodor
to
the
Toronto-
Dominion
Bank
provides:
IT
IS
HEREBY
DECLARED
AND
AGREED
that
all
money
received
by
the
Assignor
in
payment
of
any
debts,
demands
and
choses
in
action...shall
be
received
and
held
by
the
Assignor
in
trust
for
the
Bank.
It
should
be
noted
that
the
fact
that
the
GABD
is
referred
to
as
“continuing
collateral
security”
in
two
of
the
instruments
does
not
make
the
GABD
anything
less
than
absolute.
In
both
Evans
Coleman
and
Lettner,
the
GAB
Ds
contained
language
that
the
general
assignment
of
book
debts
would
be
continuing
collateral
security
and
in
each
case
the
courts
held
that
such
language
did
not
affect
the
absoluteness
of
the
assignment.
At
the
Alberta
Court
of
Appeal,
the
M.N.R.
took
the
position
that
even
if
legal
title
was
transferred
to
the
assignee
by
the
GABD,
the
assignor
tax
debtor
retained
an
equitable
interest
in
the
nature
of
an
equity
of
redemption
which
was
sufficient
for
the
book
debts
to
remain
the
“property”
of
the
tax
debtor.
Coté
J.A.
responded
to
this
argument
by
stating
that
while
in
theory
the
tax
debtor
held
an
equity
of
redemption,
this
equity
could
not
be
exercised
in
practice
except
by
application
to
a
court
of
equity.
Such
an
application
would
only
be
granted
by
a
court
of
equity
where
the
value
of
the
book
debts
exceeded
the
value
of
the
loans
which
they
secured.
He
concluded
that
in
cases
like
the
three
on
appeal,
where
the
value
of
the
loans
exceeded
the
value
of
the
book
debts,
there
is
no
real
equity
of
redemption.
He
also
held
that
the
only
property
of
the
tax
debtor
was
the
equity
of
redemption
and
that
the
M.N.R.
did
not
claim
that
interest.
I
agree
with
Côté
J.A.
that
the
tax
debtor
retains
an
equity
of
redemption
upon
an
assignment
of
its
book
debts.
Halsbury’s
Laws
of
England
(4th
ed.
1980),
vol.
32,
at
para.
401,
defines
a
mortgage
as
“a
disposition
of
property
as
security
for
a
debt”
which
“may
be
effected...by
an
assignment
of
a
chose
in
action”
such
as
a
book
debt.
At
para.
407
Halsbury’s
also
states
that:
Incident
to
every
mortgage
is
the
right
of
the
mortgagor
to
redeem,
a
right
which
is
called
his
equity
of
redemption....
This
right
arises
from
the
transaction
being
considered
as
a
mere
loan
of
money
secured
by
a
pledge
of
the
estate.
Thus
prima
facie
an
assignor
of
book
debts
retains
an
equitable
right
to
redeem
his
assignment
of
the
book
debts
once
the
debt
obligation
which
is
secured
by
the
book
debts
has
been
completely
discharged
by
the
assignor.
I
also
agree
with
Côté
J.A.
that
in
the
context
of
these
appeals
the
fact
that
the
tax
debtors
in
theory
hold
an
equity
of
redemption
in
their
book
debts
is
of
purely
academic
interest
since,
on
the
facts,
the
value
of
the
loans
secured
by
the
book
debts
far
exceeds
the
value
of
the
debts
themselves.
Thus
there
is
no
value
in
the
equity
of
redemption
held
by
the
tax
debtors.
While
the
equity
of
redemption
theoretically
exists,
for
practical
purposes
it
is
incapable
of
any
realization.
The
appellant
M.N.R.
argues,
however,
that
Côté
J.A.
erred
by
focusing
his
attention
on
whether
the
value
of
the
loans
exceeds
the
value
of
the
book
debts.
The
M.N.R.
points
out
that
if
the
relative
value
of
the
loan
and
the
security
is
the
only
relevant
factor
then
a
tax
debtor
who
operates
his
business
with
the
assistance
of
a
revolving
line
of
credit
secured
by
an
assignment
of
book
debts
(which
is
a
common
business
arrangement)
would
fluctuate
between
being
and
not
being
a
secured
creditor
on
an
almost
daily
basis
depending
on
the
relative
value
of
the
collectibles
and
the
line
of
credit
of
the
business.
I
share
the
M.N.R.’s
concern
that
the
relative
value
of
the
loan
and
the
book
debts
is
not
the
sole
determining
factor
as
to
whether
the
assignor’s
equity
of
redemption
makes
the
book
debts
his
“property”.
As
a
matter
of
law,
an
absolute
assignment
of
book
debts
makes
those
book
debts
the
property
of
the
assignee.
Those
book
debts
remain
the
property
of
the
assignee
until
the
assignor
actually
exercises
his
equitable
right
to
redeem.
It
is
a
necessary
precondition
to
the
exercise
of
the
equity
of
redemption
that
the
loans
secured
by
the
assignment
be
paid
off
in
full,
along
with
any
accrued
interest
and
costs.
With
respect,
however,
while
it
is
a
necessary
precondition
that
the
value
of
the
security
exceed
the
value
of
the
loan
in
order
to
exercise
the
right
of
redemption,
the
fulfilment
of
this
precondition
is
not
sufficient
to
return
the
book
debts
to
the
property
of
the
assignor.
The
assignor
must
also
choose
to
exercise
the
right
of
redemption
which
will
mean
a
termination
of
the
loan
arrangement
with
the
lending
institution.
At
base,
the
equity
of
redemption
is
no
more
than
a
recognition
that
the
assignment
of
debts
to
the
creditor,
while
immediate
and
absolute,
is
for
a
limited
purpose.
In
equity,
the
creditor
cannot
unjustly
enrich
itself
by
realizing
on
more
security
than
the
value
of
the
loan
which
is
secured.
At
any
given
time
the
value
of
the
security
may
exceed
the
value
of
the
loan,
but
upon
termination
of
the
lending
relationship,
the
assignor
of
the
security
is
entitled,
in
equity,
to
an
accounting.
In
determining
whether
the
book
debts,
once
assigned,
are
the
“property”
of
the
assignor
or
of
the
assignee,
the
Court
must
choose
between
two
competing
definitions
of
“property”.
One
definition
is
the
immediate
legal
title
to
what
had
been
assigned
and
the
other
is
a
potential
interest
enforceable
only
in
equity
to
reacquire
property
which
has
been
assigned
to
another,
contingent
upon
successfully
fulfilling
the
terms
of
the
loan
agreement.
In
Friesen,
supra,
it
was
held
that
the
words
of
the
Income
Tax
Act
are
to
be
read
in
their
plain
and
ordinary
sense.
The
plain
and
ordinary
meaning
of
“property”
is
legal
title
and
not
a
contingent
future
equitable
right
to
reacquire
property
which
one
does
not
presently
hold.
The
very
term
“equity
of
redemption"'
highlights
the
fact
that
property
is
not
presently
held
by
the
assignor,
but
rather
there
is
a
limited
right
to
reacquire
property
at
a
future
date.
The
central
thrust
of
the
M.N.R.’s
submissions
in
this
Court
is
contained
in
para.
45
of
his
factum,
where
he
states
that
where
title
to
property
is
transferred,
the
phrase
“property
of
another
person”
must
be
read
to
mean
“property
that,
absent
the
security
interest,
is
the
property
of
the
person
giving
the
security”.
This
proposition
is
contrary
to
the
traditional
Canadian
jurisprudence
that
the
words
of
a
taxing
statute
are
to
read
strictly
for
their
plain
and
ordinary
meaning
and
that
only
if
there
is
a
true
ambiguity
is
the
intention
of
Parliament
to
be
considered.
In
the
circumstances
of
these
appeals,
a
strict
reading
of
the
taxation
statute
is
appropriate.
As
pointed
out
by
Hunt
J.
at
page
361,
these
appeals
raise
not
only
the
traditional
tax
interpretation
principle
of
resolution
of
ambiguity
in
favour
of
the
taxpayer:
Johns-Mansville
Canada
Inc.
v.
R.
(sub
nom.
Johns-Mansville
Canada
Inc.
v.
Minister
of
National
Revenue;
The
Queen
v.
Johns-Mansville
Inc.),
[1985]
2
S.C.R.
46,
[1985]
2
C.T.C.
Ill,
85
D.T.C.
5373,
at
page
72
(C.T.C.
125-26;
D.T.C.
5383-84).
They
also
raise
the
well-known
principle
that,
in
the
absence
of
clear
and
unequivocal
language,
there
is
a
presumption
that
proprietary
rights
are
not
to
be
taken
away
without
provision
being
made
for
compensation.
In
the
context
of
these
appeals,
the
interpretation
of
s.
224
urged
by
the
M.N.R.
would
have
the
effect
of
expropriating
property
to
which
the
lender
is
legally
entitled
under
its
security
agreement
with
the
tax
debtor.
The
taxes
which
would
be
garnished
and
withheld
from
the
lending
institution
are
not
taxes
owed
by
the
lender
but
rather
taxes
owed
by
its
debtor.
The
lending
institutions
are
innocent
third
parties
whose
proprietary
rights
would
be
expropriated
by
the
provisions
of
s.
224
and
accordingly
those
provisions
must
be
read
strictly
to
determine
whether
the
ex-
propriatory
language
is
clear
and
unequivocal.
However,
it
is
not
necessary
to
resort
to
strict
interpretation
to
resolve
these
appeals.
In
this
case
the
plain
and
ordinary
meaning
of
the
phrase
“property
of
another
person”
is
property
now
held
by
another
person.
This
interpretation
makes
sense
of
the
words
without
reading
anything
into
the
statute
and
respects
the
well-established
principle
of
interpretation
that
statutes
are
to
be
read
as
though
presently
speaking.
One
of
the
cardinal
principles
of
the
plain
and
ordinary
meaning
approach
is
that
nothing
be
read
into
a
section
unless
no
sense
can
be
made
of
that
section
without
the
addition
of
the
extra
words.
The
plain
and
ordinary
meaning
of
the
statutory
words
simply
does
not
bear
the
strained
interpretation
urged
by
the
M.N.R.
of
“property
that,
absent
the
security
interest,
is
the
property
of
the
person
giving
the
security”.
In
addition
to
offending
the
principle
that
extra
words
should
not
be
read
into
a
section
unless
absolutely
necessary,
this
proposed
reading
attempts
to
read
in
wording
which
can
be
expressly
found
in
another
part
of
the
same
section.
Section
224(1.2)(b)
applies
to
“a
secured
creditor
who
has
a
right
to
receive
the
payment
that,
but
for
a
security
interest
in
favour
of
the
secured
creditor,
would
be
payable
to
the
tax
debtor”.
The
emphasized
words
in
s.
224(1.2)(b)
are
identical
in
effect
to
the
words
which
the
M.N.R.
seeks
to
introduce
into
the
definition
of
secured
creditor.
The
use
of
a
particular
phrase
in
other
parts
of
the
Income
Tax
Act
militates
against
reading
that
same
phrase
into
a
section
of
the
Act
where
it
is
not
found.
This
is
particularly
so
where
the
phrase
is
found
in
the
very
same
section
as
the
disputed
wording,
and
the
section
in
question
has
been
the
subject
of
amendments
twice
within
the
last
decade.
If
Parliament
had
intended
that
s.
224(1.2)
should
cover
all
persons
who
hold
a
security
interest,
it
could
have
defined
secured
creditor
as
any
person
who
holds
a
security
interest
without
the
deliberately
limiting
words
“in
the
property
of
another
person”.
Alternatively,
it
could
have
expressly
provided
“property
that
but
for
a
security
interest
in
favour
of
the
secured
creditor
would
be
the
property
of
another
person”,
thus
echoing
the
phrasing
found
in
the
rest
of
the
section.
In
spite
of
two
recent
amendments
to
this
section,
Parliament
chose
not
to
define
secured
creditor
in
the
manner
urged
by
the
appellant
M.N.R.
To
read
into
the
section
the
words
suggested
by
the
M.N.R.
would
be
an
unwarranted
judicial
usurpation
of
the
legislative
function.
The
only
conclusion
which
can
be
drawn
from
the
plain
and
ordinary
meaning
of
the
words
which
do
appear
in
the
Act
is
that
Parliament
did
not
intend
to
bring
creditors
who
actually
owned
the
title
to
the
security
interest
within
the
purview
of
the
section.
It
is
my
conclusion
that
these
appeals
can
be
resolved
without
resort
to
any
special
principles
of
interpretation
tailored
to
the
expropriatory
nature
of
this
particular
provision.
If
I
am
mistaken
in
this
conclusion,
and
there
is
an
ambiguity
in
the
meaning
of
the
word
“property”
then
I
would
hold
that
the
specific
effect
of
this
section,
warrants
a
strict
resolution
of
any
ambiguity
in
favour
of
the
respondents.
Such
an
interpretation
requires
that
“property”
be
read
to
mean
present
legal
title
in
preference
to
a
future
contingent
equitable
right
to
reacquire
property
not
currently
held.
It
also
requires
that
words
expressly
found
in
another
part
of
the
same
section
not
be
read
without
cause
into
the
definition
of
secured
creditor.
In
summary,
these
appeals
should
be
resolved
as
follows:
1.
The
definition
of
“security
interest”
is
broad
enough
to
include
a
general
assignment
of
book
debts
even
where
that
assignment
is
absolute.
2.
The
wording
of
s.
224(1.2),
as
amended
in
1990,
is
sufficiently
clear
and
unequivocal
to
allow
a
transfer
of
property
in
the
garnished
funds
to
the
M.N.R.
and
to
grant
him
a
priority
in
circumstances
where
the
rest
of
that
section
applies.
3.
An
assignee
of
an
absolute
assignment
of
book
debts
is
not
a
“secured
creditor”
within
the
meaning
of
s.
224(1.3)
because
he
does
not
hold
a
security
interest
“in
the
property
of
another
person”.
4.
Therefore,
s.
224(1.2)
of
the
Income
Tax
Act
and
s.
317(3)
of
the
Excise
Tax
Act
are
not
effective
to
grant
the
appellant
M.N.R.
an
interest
in
or
priority
over
debts
owed
to
the
assignee
of
a
GABD.
IV.
Disposition
All
three
appeals
should
be
dismissed
with
costs
to
the
respondents.
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