Pigeon,
J:—This
is
an
appeal
by
leave
of
this
Court
from
the
judgment
of
the
Court
of
Appeal
for
Manitoba,
[1979]
2
WWR
514
reversing
the
judgment
of
Wright,
J,
[1978]
3
WWR
658
and
directing
that
Dauphin
Plains
Credit
Union
Limited
(the
“Credit
Union”),
the
appellant
in
this
Court,
do
pay
to
Her
Majesty
The
Queen,
the
respondent
in
this
Court,
the
sum
of
$6,278.81.
As
security
for
debts
in
excess
of
a
million
dollars,
the
Credit
Union
had
obtained
from
Xyloid
Industries
Ltd
(the
“Company”)
debentures
whereby
a
first
fixed
and
specific
charge
was
created
on
all
its
real
and
immovable
property
with
a
floating
charge
on
all
its
other
assets.
The
debtor
being
in
default,
the
Credit
Union
instituted
an
action
on
March
30,1977
and,
on
the
following
day,
March
31,
1977,
obtained
a
receiving
order
whereby
the
Clarkson
Company
Limited
was
appointed
receiver.
The
receiver
having
realized
the
assets
of
the
Company
was
authorized
to
pay
the
net
proceeds
of
realization
to
the
secured
creditor,
the
Credit
Union,
subject
to
a
claim
of
the
Department
of
National
Revenue
in
the
amount
of
$7,416.57.
An
application
for
an
order
directing
the
payment
of
this
sum
was
made
on
behalf
of
the
Crown
based
on
assessments
made
up
as
follows:
1.
Pre
March
31,
1977
Income
tax
source
deductions
|
$2,550.78
|
Canada
Pension
Plan,
employee
portion
|
275.43
|
Canada
Pension
Plan,
employer
portion
|
275.43
|
Unemployment
Insurance
deduction
employee
portion
|
244.77
|
Unemployment
Insurance
deduction
employer
portion
|
342.68
|
Interest
and
penalties
|
647.25
|
TOTAL
ASSESSMENT
|
$4,336.34
|
2.
Post
March
31,
1977
|
|
Income
tax
source
deductions
|
2,068.05
|
Canada
Pension
Plan,
employee
portion
|
220.05
|
Canada
Pension
Plan,
employer
portion
|
220.05
|
Unemployment
Insurance
deduction
employee
portion
|
196.16
|
Unemployment
Insurance
deduction
employer
portion
|
274.63
|
Interest
and
penalties
|
495.89
|
|
$3,474.83
|
The
amounts
under
the
heading
“Pre
March
31,
1977”
were
claimed
in
respect
of
wages
paid
by
the
Company
before
the
receiving
order
and
as
to
this
the
trial
judge
made
the
following
finding
(at
660):
.
.
.
Because
of
the
specific
allegation
of
Mr
Johnson
(para
4
of
his
affidavit)
that
an
audit
shows
the
deductions
claimed
were
in
fact
made,
and
because,
in
argument,
counsel
for
the
defendant
made
no
submission
otherwise,
I
accept
as
factual
that
the
required
statutory
amounts
were
deducted
by
the
defendant
before
or
when
the
wage
payments
were
made
by
it
before
the
date
or
receivership.
The
allegation
referred
to
by
the
trial
judge
is
paragraph
2
of
the
affidavit
reading
as
quoted
(at
659):
2.
That
I
am
advised
and
believe
that
the
Minister
of
National
Revenue
caused
an
assessment
to
be
raised
against
Xyloid
Industries
Ltd.
This
assessment
was
raised
pursuant
to
an
audit
that
was
performed
on
the
books
of
Xyloid
Industries
Ltd
in
Receivership
and
represents
unpaid
source
deductions
apparent
on
the
books
of
Xyloid
Industries
Ltd
for
the
months
of
February,
March,
and
April,
1977.
The
assessment
under
the
heading
‘‘Post
March
31,
1977”
was
made
against
the
receiver
but
it
did
not
relate
as
Monnin,
JA
said
(at
517)
to
“wages
earned
in
April
1977,
after
the
receivership”.
It
was
admitted
at
the
hearing
in
this
Court
that
deductions
on
wages
earned
in
the
service
of
the
receiver
had
been
duly
remitted.
The
assessment
related
to
wages
which
were
earned
prior
to
March
31,
1977,
but
were
paid
by
the
receiver
pursuant
to
The
Payment
of
Wages
Act
of
Manitoba.
Counsel
for
the
Credit
Union
admitted
that
when
paying
those
wages
to
the
employees
the
receiver
had
withheld
the
amounts
claimed
as
Income
Tax
source
deductions,
Canada
Pension
Plan,
employee
portion
and
Unemployment
Insurance
deduction,
employee
portion.
In
other
words,
the
receiver
paid
the
employees
the
amount
of
wages
due,
net
of
those
deductions
and
he
was
assessed
under
date
January
25,1978,
“for
failure
to
remit
as
required”
in
this
respect.
I
find
it
convenient
to
deal
with
this
part
of
the
claim
first.
The
Payment
of
Wages
Act
(SM
1970,
c
44)
provides:
1.
In
this
Act,
(h)
“wage”
or
“wages”
includes
salaries,
commissions,
or
any
compensation
for
labour
or
services
measured
by
time,
piece,
or
otherwise,
and
any
pay
which
is
due
and
payable
to
an
employee
including
moneys
payable
under
The
Vacations
With
Pay
Act
or
moneys
payable
in
cases
of
termination
of
employment
under
The
Employment
Standards
Act’,
but
does
not
include
any
deductions
from
wages
that
may
be
lawfully
made
by
an
employer.
7(1)
Notwithstanding
any
other
Act,
the
amount
of
wages
due
and
payable
by
an
employer
to
an
employee
not
exceeding
$2,000
constitutes
a
lien
and
charge
on
the
property
and
assets
of
the
employer
in
favour
of
the
employee,
and
is
payable
in
priority
to
any
other
claim
or
right,
including
those
of
the
Crown
in
right
of
Manitoba,
and
without
limiting
the
generality
of
the
foregoing
that
priority
extends
over
every
assignment,
including
an
assignment
of
book
debts,
whether
absolute
or
otherwise,
every
mortgage
on
real
or
personal
property,
and
every
debenture.
The
relevant
provisions
of
the
Income
Tax
Act
(enacted
1970-71-72,
c
63)
are:
158.(1)
Every
person
paying
(a)
Salary
or
wages
or
other
remuneration
to
an
office
or
employee,
at
any
time
in
a
taxation
year
shall
deduct
or
withhold
therefrom
such
amount
as
may
be
prescribed
and
shall,
at
such
time
as
may
be
prescribed,
remit
that
amount
to
the
Receiver
General
of
Canada
on
account
of
the
payee’s
tax
for
the
year
under
this
Part.
(3)
When
an
amount
has
been
deducted
or
withheld
under
subsection
(1),
it
shall,
for
all
the
purposes
of
this
Act,
be
deemed
to
have
been
received
at
that
time
by
the
person
to
whom
the
remuneration,
benefit,
payment,
fees,
commissions
or
other
amounts
were
paid.
It
is
important
to
consider
the
nature
of
the
deduction
for
income
tax.
It
is
not
a
deduction
for
the
benefit
of
the
employer,
it
is
a
withholding
for
the
benefit
of
the
employee
because
it
is
to
be
remitted
to
the
Receiver
General
of
Canada
on
account
of
the
employee’s
tax
indebtedness.
By
virtue
of
other
provisions
of
the
Income
Tax
Act
if,
as
happens
in
a
large
number
of
cases,
the
withholdings
exceed
the
employee’s
tax
liabilities,
a
refund
will
be
made
to
the
employee
by
the
Department
of
National
Revenue.
Therefore,
the
amount
withheld
remains
a
part
of
the
wages,
and
subsection
153(3)
provides
that
it
is
“deemed
to
have
been
received’’
by
him
at
the
time
the
payment
was
made
less
the
deduction.
Furthermore,
subsection
227(4)
of
the
Income
Tax
Act
provides:
(4)
Every
person
who
deducts
or
withholds
any
amount
under
this
Act
shall
be
deemed
to
hold
the
amount
so
deducted
or
withheld
in
trust
for
Her
Majesty.
In
the
present
case,
the
Credit
Union
is,
in
effect,
contending
that
The
Payment
of
Wages
Act
authorized
the
receiver
to
make
the
income
tax
deduction
for
the
benefit
of
the
debenture
holder.
In
my
view,
this
is
a
complete
subversion
of
the
purpose
of
such
a
deduction.
At
the
hearing,
I
said
to
the
appellant’s
counsel:
“You
contend
that
the
deductions
made
from
the
wages
enure
to
the
benefit
of
the
creditor?
His
answer
was:
“That
is
the
practical,
but
not
the
legal
result’’.
I
just
cannot
see
how
what
is
true
in
fact,
may
be
false
in
law.
In
my
view,
counsel’s
assertion
reveals
the
inherent
contradiction
in
the
Credit
Union’s
position.
Section
153
of
the
Income
Tax
Act
is
the
only
law
under
which
anyone
can
make
a
deduction
for
income
tax,
but
this
section
goes
on
to
provide
in
subsection
4,
that
the
amount
so
deducted
shall
be
held
“in
trust
for
Her
Majesty’’.
No
law
of
Manitoba
can
possibly
change
that.
How
can
the
Credit
Union
claim
that
the
amount
deducted
was
held
for
its
benefit?
It
must
also
be
considered
that,
by
virtue
of
subsection
153(3)
the
employees
are
deemed
to
have
received
their
wages
in
full,
so
that
they
are
liable
for
income
tax
on
that
basis.
But,
the
position
taken
by
the
Credit
Union
means
that
it
would
get
the
benefit
of
the
deductions
so
that
the
employees
would
have
to
pay
income
tax
to
the
Department
of
National
Revenue
on
what
they
have
not
received
and
for
which
they
would
get
no
credit.
With
respect,
it
appears
to
me
that
the
trial
judge
has
failed
to
consider
the
consequences
of
allowing
a
receiver
to
make
deductions
for
income
tax
when
paying
wages
and
then
failing
to
treat
those
deductions
as
withholdings
on
account
of
income
tax.
This
is
not
only
a
contradictory
position
but,
if
upheld,
would
amount
to
an
unfair
diversion
which
the
Legislature
of
Manitoba
cannot
possibly
have
intended
to
authorize
by
the
definition
of
wages
in
The
Payment
of
Wages
Act.
In
view
of
the
purpose
of
The
Payment
of
Wages
Act
it
appears
to
me
that
the
deductions
contemplated
in
the
definition
of
“wages’’
are
only
those
which
may
be
made
for
the
benefit
of
the
employer.
This
appears
not
only
from
the
considerations
above
stated,
but
also
from
the
very
wording
of
the
provision:
“deductions
from
wages
that
may
be
lawfully
made
by
an
employer”.
The
withholdings
directed
by
the
Income
Tax
Act
etc
are
not
deductions
that
may
be
made
by
an
employer,
they
are
deductions
that
shall
be
made.
In
my
view,
the
Legislature
of
Manitoba
when
speaking
of
deductions
that
may
be
made
by
an
employer
had
in
mind
deductions
of
the
same
nature
as
those
which
are
contemplated
in
section
25
of
The
Employment
Standards
Act,
RSM,
c
E110:
A
board
upon
the
written
authorization
of
the
minister
may,
with
respect
to
the
area
for
which
it
is
appointed,
make
recommendations
in
writing
respecting
(a)
standards
of
minimum
wages
to
be
paid
to
employees
(i)
of
different
ages;
or
(ii)
who
are
inexperienced,
handicapped,
or
special
employees;
(b)
the
maximum
proportion
of
employees
classified
under
sub-clause
(ii)
of
clause
(a)
to
other
employees
in
the
same
employment;
and
(c)
the
maximum
amount,
if
any,
that
may
be
deducted
from
the
prescribed
minimum
wage
in
cases
where
the
employer
furnishes
to
the
employee
board,
lodging,
uniforms,
laundry,
or
other
service.
I
have
underlined
the
words
“that
may
be
deducted”
which
appear
in
this
statute
in
pari
materia
of
the
same
province;
they
are
indicative
of
what
was
contemplated.
In
The
Payment
of
Wages
Act
as
in
The
Employment
Standards
Act
the
legislature
was
exclusively
concerned
with
matters
within
its
jurisdiction.
In
respect
of
deductions,
minimum
wage
orders
are
concerned
only
with
those
which
are
under
the
control
of
the
provincial
legislature,
they
make
no
reference
to
the
deductions
required
by
federal
statutes
although
employers
obviously
have
to
make
them.
in
my
view,
the
provision
with
respect
to
deductions
in
The
Payment
of
Wages
Act
is
to
be
similarly
viewed.
It
is
concerned
only
with
matters
under
the
control
of
the
legislature.
It
is
a
well
established
rule
that
provincial
enactments
are
presumed
to
be
intended
to
avoid
interference
with
federal
legislation.
The
recent
judgment
of
this
Court
in
Board
of
Industrial
Relation
v
Avco,
[1979]
2
SCR
699,
affords
an
example
of
a
restricted
meaning
ascribed
to
a
provision
of
the
BC
Payment
of
Wages
Act
to
avoid
untoward
consequences.
The
provision
under
consideration
created
“a
lien
and
charge
..
.
payable
in
priority
over
any
other
claim
or
right
...”.
Giving
the
unanimous
opinion,
Martland,
J
said
(at
796):
..
.
The
property
to
which
a
section
5A
attaches
is
not
defined
nor
identified.
In
the
absence
of
a
specific
statutory
provision
to
that
effect,
in
my
view
it
should
not
be
construed
in
a
manner
which
could
deprive
third
parties
of
their
pre-existing
property
rights.
In
my
view,
the
Manitoba
statute
should
not
be
construed
in
a
manner
which
would
deprive
a
third
party,
the
tax
collector,
of
his
proper
rights.
The
legislature
is
not
presumed
to
have
intended
an
inconsistency
and
I
would
find
it
inconsistent
to
authorize
deductions
to
be
made
for
income
tax
only
to
be
appropriated
to
the
benefit
of
the
employer’s
creditor.
In
R
v
Biron,
[1976]
2
SCR
56,
the
majority
in
this
Court
approved
and
applied
the
decision
in
Wiltshire
v
Barrett,
[1966]
1
QB
312,
where
a
provision
reading:
‘‘A
police
constable
may
arrest
without
warrant
a
person
committing
an
offence
under
this
section.”
was
held
to
mean
“apparently
committing
an
offence”.
In
that
case
Lord
Denning,
dealing
with
the
argument
that
if
the
man
arrested
was
not
prosecuted
then
the
arrest
was
unlawful,
said
(at
325):
.
.
.
The
section
does
not
mention
cases
of
a
third
kind,
namely,
those
cases
where
on
inquiry
at
the
police
station
it
appears
that
there
is
no
sufficient
ground
on
which
to
proceed
further
against
the
man.
Clearly,
in
those
cases,
the
man
should
be
released
forthwith.
There
was
no
need
in
the
statute
to
mention
that
contingency.
It
is
too
obvious
for
words.
(Emphasis
added)
The
trial
judge
held
that
the
receiver
in
this
case
was
not
a
person
within
the
meaning
of
subsection
153(1)
of
the
Income
Tax
Act.
For
this
conclusion
he
relied
on
the
decision
of
the
Ontario
Court
of
Appeal
in
Royal
Trust
Co
v
Montex
Apparel
Industries
Ltd,
[1972]
3
OR
132.
But,
in
that
case
the
question
was
whether
the
receiver
came
within
the
provisions
of
subsection
50(9)
of
the
Excise
Tax
Act
reading:
When
the
Minister
has
knowledge
that
any
person
has
received
from
a
licensee
any
assignment
of
any
book
debt
.
.
.
Here
the
question
is
whether
the
receiver
comes
within
the
words
“Every
person
paying
salary
or
wages
..and
I
fail
to
see
any
reason
for
holding
that
the
receiver
did
not
come
within
the
terms
of
this
provision.
There
is
no
need
to
consider
the
definition
of
“person”
in
the
Act.
In
any
case
this
definition
is
not
a
restrictive
but
an
extensive
definition
due
to
the
word
“includes”.
Assuming
the
receiver
was
not
authorized
to
make
the
deductions,
the
Credit
Union
is
not
entitled
to
that
part
of
the
employees’
wages,
it
should
go
to
them.
By
having
it
remitted
to
the
tax
authorities
the
employees
will
be
given
credit
therefor.
I
will
finally
note
that
no
argument
was
addressed
to
the
Court
urging
that,
by
virtue
of
subsections
152(8)
and
227(10),
the
assessment
on
the
receiver
could
not
be
disputed
otherwise
than
by
appeal
under
the
provisions
of
the
Income
Tax
Act.
Under
the
circumstances,
I
do
not
find
it
necessary
to
consider
the
point
before
coming
to
the
conclusion
that
the
appeal
fails
in
respect
of
the
deductions
made
by
the
receiver
out
of
wages
paid
under
The
Payment
of
Wages
Act.
With
respect
to
the
deductions
made
by
the
receiver
for
the
Canada
Pension
Plan,
employee
portion,
and
the
Unemployment
Insurance,
employee
portion,
the
trial
judge
said
(at
664-665):
Both
acts
speak
in
terms
of
the
obligation
to
deduct
as
lying
with
the
employer
of
the
persons
receiving
the
payments,
and
the
receiver-manager,
not
being
such
an
employer,
therefore
had
no
obligation
to
make
the
deductions
claimed.
In
my
view,
the
question
is
not
whether
the
claim
would
succeed
if
the
receiver
had
not
made
those
deductions.
The
fact
is,
as
appears
from
the
Johnson
affidavit
already
quoted,
that
the
deductions
were
duly
made
and
entered
in
the
books.
In
making
payments
to
the
employees
pursuant
to
The
Payment
of
Wages
Act
the
receiver
actually
withheld
the
proper
amount
for
Pension
Plan
contributions
and
Unemployment
Insurance
premiums.
These
amounts
represented
a
debt
due
by
the
recipients
of
the
wages
under
the
provisions
of
section
8
of
the
Canada
Pension
Plan
and
section
62
of
the
Unemployment
Insurance
Act,
1971.
The
receiver
had
ample
funds
for
paying
the
full
amount
of
wages
due
and
therefore
the
deductions
made
were
true
deductions,
not
mere
book-keeping
entries,
they
were
money
withheld
for
the
purpose
of
satisfying
the
employees’
indebtedness
for
contributions
and
premiums
in
respect
of
those
earnings.
This
money
withheld
for
such
purpose
became
held
in
trust
in
favour
of
the
tax
collector
who
is
therefore
entitled
to
claim
it
from
the
receiver.
The
Credit
Union
cannot
justify
the
judgment
at
trial
directing
the
receiver
to
give
it
those
moneys
and
it
was
therefore
properly
ordered
by
the
judgment
of
the
Court
of
Appeal
to
turn
them
over
to
the
Department
of
National
Revenue
so
that
they
may
be
credited
against
the
employees’
indebtedness.
I
find
it
clear
that
the
Court
of
Appeal
was
correct
in
holding
that
there
was
no
legal
basis
for
the
claims
for
the
Canada
Pension
Plan,
employer
portion,
and
the
Unemployment
Insurance
deduction,
employer
portion.This
conclusion
was
not
challenged
on
the
appeal
to
this
Court
and
no
question
has
been
raised
as
to
the
correctness
of
the
adjustments
which
were
made
for
those
sums
with
interest
and
penalties
and
resulted
in
the
amount
fixed
by
the
judgment.
The
asessment
entitled
"Pre
March
31,
1977”
involves
entirely
different
considerations.
The
claim
is
for
deductions
which
were
made
by
the
employer
when
paying
wages
prior
to
the
making
of
the
receiving
order.
The
sums
withheld
were
merely
deducted
from
the
wages
paid,
they
were
not
set
apart.
In
fact,
the
company
was
short
of
funds
and
did
not
have
funds
available
to
be
set
aside
as
required
by
law.
It
was
not
disputed
that
the
funds
corresponding
to
the
deductions
could
not
be
traced.
These
withholdings
merely
represented
deductions
from
the
wages
paid,
not
money
set
aside
at
the
time.
The
material
statutory
provisions
of
the
Income
Tax
Act
are
subsections
227(4)
and
(5):
(4)
Every
person
who
deducts
or
withholds
any
amount
under
this
Act
shall
be
deemed
to
hold
the
amount
so
deducted
or
withheld
in
trust
for
Her
Majesty.
(5)
All
amounts
deducted
or
withheld
by
a
person
under
this
Act
shall
be
kept
separate
and
apart
from
his
own
moneys
and
in
the
event
of
any
liquidation,
assignment
or
bankruptcy
the
said
amounts
shall
remain
apart
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy.
The
trial
judge
said
on
this
point
(at
662):
Insofar
as
the
claim
for
income
tax
deductions
from
wages
paid
before
the
receivership
is
concerned,
under
the
above
provisions
the
employer
must
first
deduct
or
withhold
the
requisite
moneys,
which
then
must
be
kept
separate.
If
they
are
not
kept
separate
they
must
be
traceable
as
trust
moneys
in
order
to
be
recovered
by
the
Crown:
Re
Hallett’s
Estate;
Knatchbull
v
Hallett
(1880),
13
Ch
D
696;
Re
Craftsman
Painting
Contractors
Ltd,
[1968]
1
OR
at
522,11
CBR
91,67
DLR
(2d)
37,
leave
to
appeal
refused
11
CBR
91
n,
and
cases
cited
there.
In
the
present
circumstances
the
Crown
has
not
established
that
the
moneys
purported
to
be
deducted
actually
existed,
or,
if
they
did,
that
the
moneys
were
kept
in
such
a
way
as
to
be
traceable
Thus
the
Crown’s
claim
here
cannot
succeed.
The
majority
opinion
in
the
Court
of
Appeal
was
based
on
the
overruling
of
the
Craftsmen’s
case
by
the
Ontario
Court
of
Appeal
in
Re
Deslauriers
Construction
Products
Ltd,
[1970]
3
OR
599.
That
case,
like
Craftsmen’s,
dealt
with
the
Canada
Pension
Plan,
SC
1964-65,
c
51
(now
RSC
1970,
c
C-5).
The
relevant
provisions
are
subsections
24(3)
and
(4)
as
follows:
(3)
Where
an
employer
has
deducted
an
amount
from
the
remuneration
of
an
employee
as
or
on
account
of
any
contribution
required
to
be
made
by
the
employee
but
has
not
remitted
such
amount
to
the
Receiver
General,
the
employer
shall
keep
such
amount
separate
and
apart
from
his
own
moneys
and
shall
be
deemed
to
hold
the
amount
so
deducted
in
trust
for
Her
Majesty.
(4)
In
the
event
of
any
liquidation,
assignment
or
bankruptcy
of
an
employer,
an
amount
equal
to
the
amount
that
by
subsection
(3)
is
deemed
to
be
held
in
trust
for
Her
Majesty
shall
be
deemed
to
be
separate
from
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy,
whether
or
not
that
amount
has
in
fact
been
kept
separate
and
apart
from
the
employer’s
own
moneys
or
from
the
assets
of
the
estate.
It
will
be
noted
that
after
providing
in
subsection
24(3)
as
in
subsection
227(4)
of
the
Income
Tax
Act,
that
the
employer
who
has
deducted
an
amount
“shall
be
deemed
to
hold
the
amount
so
deducted
in
trust
for
Her
Majesty’’,
subsection
24(4)
goes
on
to
provide
that
“In
the
event
of
any
liquidation’’
an
equal
amount
“shall
be
deemed
to
be
separate
from
...
the
estate
in
liquidation
.
.
.
whether
or
not
that
amount
has
in
fact
been
kept
separate”.
It
is
clear
from
the
following
passage
of
the
judgment
delivered
by
Gale,
CJO
(at
601-602)
that
the
claim
for
the
pension
plan
deductions
was
upheld
in
Deslauriers
by
reason
only
of
those
words
which
are
not
in
the
Income
Tax
Act:
On
the
facts
of
the
instant
case
again,
only
notional
deductions
appearing
on
the
payroll
records
had
been
made
as
the
company
could
meet
only
its
net
payroll
and
its
operational
expenses.
On
behalf
of
the
Attorney-General
it
was
submitted
that,
while
the
Minister
would
have
no
claim
such
as
is
asserted
in
this
case
under
subsection
(3)
if
section
24
ended
there,
none
the
less,
in
the
light
of
subsection
(4),
the
Minister
did
have
the
right
to
receive
out
of
the
realization
of
the
assets
a
sum
representing
the
amount
which
was
deducted
from
the
employees’
salaries,
totalling
$1,068.82.
We
agree
with
that
interpretation
of
subsection
(4).
It
seems
to
us
that
subsection
(4),
and
particularly
the
concluding
six
words
thereof,
were
inserted
in
the
Act
specifically
for
the
purpose
of
taking
the
moneys
equivalent
to
the
deductions
out
of
the
estate
of
the
bankrupt
by
the
creation
of
a
trust
and
making
those
moneys
the
property
of
the
Minister.
We
agree
with
Mr
Olsson
on
behalf
of
the
Attorney-General
that
the
word
“deemed”
in
the
fourth
line
of
subsection
(4)
must
be
used
in
the
sense
of
a
conclusive
rather
than
a
rebuttable
presumption
since
the
contrary
case,
where
the
amount
has
not
in
fact
been
kept
separate
and
apart,
is
specifically
dealt
with
in
the
concluding
part
of
that
very
subsection.
I
find
the
reasoning
in
Deslauriers
wholly
persuasive
and
would
note
that
in
1956,
(c
39,
s
27)
Parliament
repealed
subsection
6
of
section
123
of
the
Income
Tax
Act
(RSC
1952,
c
148)
whereby
a
first
charge
was
created
on
the
property
of
an
employer
for
income
tax
deductions.
I
must
therefore
hold
that
the
claim
for
the
income
tax
deductions
on
wages
paid
by
the
employer
itself
before
the
receiving
order
cannot
be
supported.
There
remains
for
consideration
the
further
question
whether
the
quoted
provisions
of
the
Canada
Pension
Plan
and
the
similar
provisions
of
the
Unemployment
Insurance
Act
are
applicable
to
a
receiver
appointed
by
the
Court
pursuant
to
fixed
and
floating
charges
covering
all
assets
of
an
employer
company.
Subsections
71(2)
and
(3)
of
the
Unemployment
Insurance
Act,
1971
(enacted
1970-71-72,
c
48)
read:
(2)
Where
an
employer
has
deducted
an
amount
from
the
remuneration
of
an
insured
person
as
or
on
account
of
any
employee’s
premium
required
to
be
made
by
the
insured
person
but
has
not
remitted
such
amount
to
the
Receiver
General,
the
employer
shall
keep
such
amount
separate
and
apart
from
his
own
monies
and
shall
be
deemed
to
hold
the
amount
so
deducted
in
trust
for
Her
Majesty.
(3)
In
the
event
of
any
liquidation,
assignment
or
bankruptcy
of
an
employer,
an
amount
equal
to
the
amount
that
by
subsection
(2)
is
deemed
to
be
held
in
trust
for
Her
Majesty
shall
be
deemed
to
be
separate
from
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy,
whether
or
not
that
amount
has
in
fact
been
kept
separate
and
apart
from
the
employer’s
own
monies
or
from
the
assets
of
the
estate.
It
should
first
be
observed
that,
for
reasons
similar
to
those
on
which
the
decision
in
the
Avco
case
“supra"
was
based,
the
claim
for
pension
plan
and
unemployment
insurance
deductions
cannot
affect
the
proceeds
of
realization
of
property
subject
to
a
fixed
and
specific
charge.
From
the
moment
such
charge
was
created,
the
assets
subject
thereto,
were
no
longer
the
property
of
the
debtor
except
subject
to
that
charge.
The
claim
for
the
deductions
arose
subsequently
and
thus
cannot
affect
this
charge
in
the
absence
of
a
statute
specifically
so
providing.
However,
the
floating
charge
did
not
crystallize
prior
to
the
issue
of
the
writ
and
the
appointment
of
the
receiver.
In
the
present
case
it
makes
no
difference
which
of
the
two
dates
is
selected,
both
are
subsequent
to
the
deductions.
The
remaining
question
is
whether
the
realization
by
the
receiver
is
a
‘liquidation,
assignment
or
bankruptcy”
within
the
meaning
of
the
provisions
under
consideration.
This
question
was
considered
by
Osler,
J
in
Royal
Trust
Company
v
Montex
Apparel
Industries
Ltd,
[1972]
2
OR
673.
His
conclusion
denying
the
claim
for
unemployment
insurance
deductions
was
affirmed
on
appeal,
[1972]
3
OR
132.
However,
it
is
important
to
note
that
the
provision
in
force
at
the
material
time
(RSC
c
U-2,
subsection
40(2))
did
not
include
the
words
“whether
or
not
the
amount
thereof
has
in
fact
been
kept
separate
and
apart
from
the
employer’s
own
assets
or
from
the
assets
of
the
bankrupt
estate”.
At
that
time
those
words
which
are
now
in
subsection
71(3)
of
the
Unemployment
Insurance
Act,
1971,
were
found
only
in
subsection
24(4)
of
the
pension
plan
and,
as
we
have
seen,
it
is
only
by
reason
of
those
additional
words
that
the
claim
was
allowed
in
Deslauriers.
Consequently,
in
their
absence
the
claim
failed
on
the
basis
of
the
reasoning
made
by
Gale,
CJO
which
I
have
already
quoted
and
on
which
Osler,
J
relied.
This
was
clearly
sufficient
to
dispose
of
the
point
but
he
went
on
to
say
obiter
(at
681):
Although
no
authority
on
this
branch
of
the
case
was
cited
to
me,
it
is
trite
law
that
taxing
statutes
are
to
be
strictly
construed
and,
in
my
view,
a
receivership
by
order
of
the
Court
is
not
a
liquidation,
assignment
or
bankruptcy
and
hence,
neither
section
40
of
the
Unemployment
Insurance
Act
nor
section
24
of
the
Canada
Pension
Plan
have
application,
regardless
of
the
above
reasons.
On
the
facts
of
the
present
case,
it
appears
that
the
receiver
has
in
reality
been
engaged
in
liquidating
the
defendant’s
enterprise.
However,
as
was
pointed
out
by
counsel
for
the
trustee,
liquidation
is
not
the
inevitable
result
of
a
receivership
and
indeed,
there
have
been
many
successful
receiverships
which
have
resulted
in
the
enterprise
being
handed
back
to
its
owner
as
a
going
concern.
It
cannot
be
known
with
any
degree
of
certainty
at
the
moment
of
the
appointment
of
a
receiver
whether
in
fact
liquidation
is
inevitable
and
the
effect
of
the
various
statutes
must
be
assessed
as
at
that
moment.
The
task
of
the
receiver
might
well
be
made
an
impossible
one
if
the
application
of
these
statutes
were
made
to
await
the
outcome
of
his
endeavours
rather
than
being
ascertainable
upon
his
appointment.
With
respect,
I
am
unable
to
agree.
We
are
not
concerned
with
a
situation
where
the
receivership
does
not
end
up
in
a
liquidation,
just
as
when
considering
a
distribution
in
bankruptcy
one
is
not
concerned
with
the
situation
where
the
receiving
order
is
discharged.
We
are
here
dealing
with
a
receivership
which
was
completed
by
the
sale
and
distribution
of
all
the
assets
of
the
employer
company.
In
the
statutes
of
Canada
as
they
stood
when
the
two
provisions
we
have
to
construe
were
enacted,
“liquidation”
was
not
the
word
used
to
describe
the
voluntary
or
forced
distribution
of
the
assets
of
a
company,
the
word
used
was
“winding-up”,
see
the
Winding-up
Act
(RSC
cW-10).
However,
the
word
liquidation
was
sometimes
used
to
describe
this
process
of
dissolution
of
a
company,
for
instance,
in
section
6,
paragraph
(b)
providing
for
the
application
of
the
Act
to
Canadian
companies:
(b)
that
are
in
liquidation
or
in
process
of
being
wound
up,
and,
on
petition
by
any
of
their
shareholders
or
creditors,
assignees
or
liquidators
ask
to
be
brought
under
the
Act.
The
word
is
also
found
in
section
166
with
reference
to
a
British
or
foreign
company
that
“is
in
liquidation
in
the
country
in
which
its
head
office
is
situated”.
In
the
Canada
Cooperative
Associations
Act,
1972-72,
c
6,
the
word
“liquidation”
is
found
in
section
74
making
the
directors
liable
for
employees’
wages
when,
among
other
cases,
the
association
has
(ii)
gone
into
liquidation
or
been
ordered
to
be
wound
up
under
the
winding-
Up
Act,
or
has
made
an
assignment
under
the
Bankruptcy
Act
or
a
receiving
order
under
the
Bankruptcy
Act
has
been
made
against
it
.
.
.
It
seems
to
me
that
it
would
not
make
sense
to
hold
that,
because
the
assets
of
a
company
were
realized
by
a
receiver
appointed
at
the
request
of
a
creditor
rather
than
by
a
liquidator
or
a
trustee
in
bankruptcy
appointed
by
a
court,
the
claim
for
wages
should
fail.
It
appears
to
me
that
there
is
no
reason
not
to
give
the
word
“liquidation”
its
wide
meaning
in
usual
language.
I
would
follow
the
reasoning
made
by
Middleton,
JA
in
Davey
v
Gibson,
[1930]
65
OLR
379,
at
381:
The
argument
before
us
turned
rather
upon
a
discussion
of
the
question
whether
the
Act
should
be
strictly
or
liberally
construed.
It
is
not,
in
my
view,
necessary
to
enter
upon
any
such
discussion.
The
term
“gone
into
liquidation”
is
not
anywhere
defined;
the
language
is
more
or
less
colloquial,
for
there
is
not,
at
the
present
time,
any
legal
proceeding
known
as
liquidation.
At
one
time
there
was,
but
it
has
long
since
been
obsolete.
The
technical
term
used
in
the
Companies
Act
is
“wind-up,”
although
the
officer
appointed
to
conduct
the
winding-up
is
designated
a
liquidator.
If
one
searches
dictionaries,
it
is
not
hard
to
find
a
definition
of
liquidation
wide
enough
to
include
bankruptcy.
In
the
Century
Dictionary
this
is
given:
“Liquidation:
the
act
or
operation
of
winding
up
the
affairs
of
a
firm
or
company
by
getting
in
the
assets,
settling
with
its
debtors
and
creditors,
and
apportioning
the
amount
of
each
partner’s
or
shareholder’s
profit
or
loss,
etc.”
In
the
Oxford
Dictionary
is
the
following:
“Liquidate:
Law
and
commerce:
To
ascertain
and
set
out
clearly
the
liabilities
of
(a
company
or
firm)
and
to
arrange
the
apportioning
of
the
assets;
to
wind
up.”
In
Corpus
Juris,
that
mine
of
information,
is
this
definition:
“Liquidation,
a
word
of
French
origin,
is
not
a
technical
term,
and,
therefore,
can
have
no
fixed
legal
meaning;
but
it
has
a
fairly
defined
legal
meaning,
and
it
is
said
to
be
a
term
of
jurisprudence,
of
finance,
and
of
commerce.
It
is
defined
as
the
act
of
settling,
adjusting
debts,
or
ascertaining
their
amounts
or
balance
due;
settlement
or
adjustment
of
an
unsettled
account.
.
.
.
Applied
to
a
partnership
or
company,
the
act
or
operation
of
winding
up
the
affairs
of
a
firm
or
company
by
getting
in
the
assets,
settling
with
its
debtors
and
creditors,
and
appropriating
the
amount
of
profit
or
loss.”
.
..
In
my
opinion
the
majority
in
the
Court
of
Appeal
of
Manitoba
properly
held
that
the
amount
deducted
by
the
employer
from
employees’
wages
for
pension
plan
and
unemployment
insurance
contributions
was
to
be
deemed
to
have
been
held
in
trust
for
Her
Majesty
at
the
rate
of
the
receiving
order
and
consequently
was
to
be
deemed
to
have
been
realized
by
the
receiver
out
of
the
assets
subject
to
the
floating
charge.
The
exact
amount
of
such
assets
was
not
established,
but
one
of
the
exhibits
shows
that
more
than
$100,000
were
realized
from
inventory.
It
is
therefore
clear
that
the
receiver
had
ample
funds
to
cover
those
two
small
claims.
For
those
reasons
I
would
allow
the
appeal
only
to
the
extent
of
deducting
from
the
amount
allowed
by
the
judgment
of
the
Court
of
Appeal
the
sum
claimed
for
income
tax
deductions
made
prior
to
the
date
of
the
receiving
order,
that
is,
$2,550.78,
with
the
appropriate
adjustment
for
interest
and
penalties
as
directed
by
the
Court
of
Appeal
(per
Monnin,
JA
at
523).
The
appellant
succeeds
on
a
major
point
and,
in
the
circumstances
of
the
case
where
no
costs
have
been
allowed
below,
I
think
it
is
entitled
to
costs
in
this
Court.
Estey,
J:—The
issue
arising
in
these
proceedings
is
whether
or
not
a
receiver
appointed
by
the
Court
to
enforce
security
granted
by
the
defen-
dant/debtor
to
the
plaintiff/appellant
is
obligated
to
pay
to
the
respondent,
in
priority
to
the
claims
of
the
appellant
as
a
secured
creditor,
certain
moneys
with
reference
to
deductions
made
(or
which,
in
the
view
of
the
respondent,
should
have
been
made)
from
wages
paid
or
payable
by
the
defendant
under
three
federal
statutes.
For
simplicity,
the
plaintiff/appellant
will
be
referred
to
as
Dauphin,
the
debtor/defendant
and
the
employer
in
question
as
Xyloid,
and
Her
Majesty
the
Queen
in
the
Right
of
Canada
as
the
respondent.
On
March
31,
1977
Dauphin
obtained
the
appointment
by
the
Court
of
Queen’s
Bench
of
the
Province
of
Manitoba
of
a
receiver
and
manager
(the
Clarkson
Company
Ltd)
of
‘‘all
the
undertaking,
property
and
assets
of’’
Xyloid.
In
due
course,
the
receiver/manager
(hereinafter
referred
to
as
the
“Receiver”)
realised
the
assets
secured
by
a
debenture,
a
floating
charge
and
a
chattel
mortgage
and
distributed
the
net
proceeds
of
such
realizations,
less
the
sum
of
$7,416.57,
which
upon
the
discharge
of
the
receiver
by
Deniset,
J
was
directed
to
be
held
until
the
validity
and
priority
of
the
claims
of
the
respondent
under
certain
federal
statutes
was
determined
by
the
Court.
We
are
not
here
concerned
with
the
events
leading
up
to
the
discharge
of
the
receiver
and
indeed
the
record
does
not
reveal
whether
the
aforementioned
sum
of
$7,416.57
was
the
product
of
realization
of
the
fixed
charge
in
the
debenture,
the
assets
secured
by
the
chattel
mortgage,
or
the
floating
charge
embodied
in
the
debenture.
Nothing
appears
to
turn
upon
the
origin
of
these
funds.
It
is
important,
however,
to
appreciate
that
prior
to
the
appointment
of
the
receiver
(which
I
shall
refer
to
for
convenience
as
the
pre-appointment
period),
Xyloid
paid
certain
wages
to
its
employees
and
effected
the
deductions
prescribed
by
the
Income
Tax
Act
of
Canada,
the
Canada
Pension
Plan
Act
and
the
Unemployment
Insurance
Act.
With
reference
to
these
payments,
the
learned
trial
judge
found
that
Xyloid
made
the
statutory
deductions.
He
stated:
I
accept
as
factual
that
the
required
statutory
amounts
were
deducted
by
the
defendant
before
or
when
the
wage
payments
were
made
by
it
before
the
date
of
the
receivership.
However,
Xyloid
did
not
remit
the
funds
so
withheld
to
the
respondent
nor
did
it
keep
such
deductions
or
withholdings
separate
and
apart
from
its
“own
moneys
or
from
the
assets
of..Xyloid.
After
the
appointment
of
the
receiver
(and
this
period
I
shall
for
convenience
refer
to
as
the
postappointment
period),
the
receiver
paid
to
the
employees
of
Xyloid
wages
accruing
in
the
pre-appointment
period,
allegedly
pursuant
to
The
Payment
of
Wages
Act
of
Manitoba.
When
doing
so,
the
receiver
made
no
remittance
to
the
respondent
(and
by
this,
I
mean
to
include
all
agencies
and
departments
of
the
respondents)
in
respect
of
the
three
federal
statutes.
It
is
sufficient
to
observe
in
passing
that
in
the
post-appointment
period
the
receiver
carried
on
some
operations
of
Xyloid
and
engaged
in
that
connection
some
former
employees
of
Xyloid
to
whom
wages
were
paid
by
the
receiver
and
remittances
were
forwarded
to
the
respondent
pursuant
to
the
three
above-mentioned
federal
statutes.
No
issue
arises
with
respect
to
this
phase
of
the
receiver’s
activities.
The
only
issue
therefore
arising
is
what
priority,
if
any,
did
the
respondent
enjoy
by
virtue
of
these
federal
statutes
over
the
claims
of
Dauphin
as
the
secured
creditor
of
Xyloid
with
reference
to
the
moneys
held
by
the
receiver
in
the
amount
of
$7,416.57.
1.
Payments
made
by
the
receiver
in
the
post-appointment
period
It
is
convenient
to
commence
with
the
position
taken
by
the
appellant
with
reference
to
the
payment
by
the
receiver
in
the
post-appointment
period
to
the
former
employees
of
Xyloid
of
certain
moneys
accruing
to
them
as
wages
in
the
pre-appointment
period.
The
appellant
states
that
these
payments
were
made
by
the
receiver
pursuant
to
The
Payment
of
Wages
Act
of
Manitoba,
the
relevent
terms
of
which
are
as
follows:
7(1)
Notwithstanding
any
other
Act,
the
amount
of
wages
due
and
payable
by
an
employer
to
an
employee
not
exceeding
$2,000
constitutes
a
lien
and
charge
on
the
property
and
assets
of
the
employer
in
favour
of
the
employee,
and
is
payable
in
priority
to
any
other
claim
or
right,
including
those
of
the
Crown
In
Right
of
Manitoba,
and
without
limiting
the
generality
of
the
foregoing
that
priority
extends
over
every
assignment,
including
an
assignment
of
book
debts,
whether
absolute
or
otherwise,
every
mortgage
on
real
or
personal
property,
debenture
and
security,
whether
registered
or
not,
made,
given,
accepted
or
issued
before
or
after
the
coming
into
force
of
this
Act.
3(4)
Every
employer
shall
be
deemed
to
hold
the
wages
accruing
due
to
an
employee
in
trust
for
the
employee
whether
or
not
the
amount
thereof
has
been
kept
separate
and
apart
from
the
employer
and
the
employee
has
a
lien
and
charge
in
the
amount
of
wages
on
the
assets
of
the
employer
that
in
the
ordinary
course
of
business
would
be
entered
in
the
accounts
of
the
business
of
the
employer
whether
so
entered
or
not.
1(h)
“wage”
or
“wages”
includes
salaries,
commissions,
or
any
compensation
for
labour
or
services
measured
by
time,
piece,
or
otherwise,
and
any
pay
which
is
due
and
payable
to
an
employee
including
moneys
payable
under
The
Vacations
With
Pay
Act
or
moneys
payable
in
cases
of
termination
of
employment
under
The
Employment
Standards
Act;
but
does
not
include
any
deductions
from
wages
that
may
be
lawfully
made
by
an
employer.
24
Where
there
is
a
conflict
between
the
provisions
of
this
Act
and
those
of
any
other
Act
of
the
Legislature,
the
provisions
of
this
Act
prevail.
The
appellant
submits
that
the
Manitoba
statute
constitutes
a
statutory
lien
against
the
assets
of
Xyloid
in
favour
of
the
latter’s
employees,
and
is
payable
in
priority
to
“any
other
claim
or
right
.
.
.
whether
registered
or
not,
made,
given
.
.
.
or
issued
before
or
after
the
coming
into
force
of
this
Act’’.
Furthermore,
the
statute
provides
that
the
employer
shall
“be
deemed
to
hold
the
wages
accruing
.
.
in
trust
for
the
employee
“whether
or
not
the
amount
thereof
has
been
kept
separate
and
apart
by’’
Xyloid.
By
reason
of
the
definition
of
“wage”
in
paragraph
1(h),
the
receiver,
in
the
submission
of
the
appellant,
properly
paid
off
this
lien
in
the
statutory
amount,
being
the
wages
accruing
but
not
including
any
deductions
therefrom
“that
may
be
lawfully
made
by
an
employer”.
In
the
result,
according
to
this
line
of
argument,
the
receiver
applied
the
net
realizations
from
the
assets
secured
by
the
aforementioned
debenture,
chattel
mortgage
and
floating
charge
to
the
extent
necessary
to
pay
off
the
statutory
lien
arising
under
the
Manitoba
Statute.
In
determining
the
consequences
in
law
of
the
payment
by
the
receiver
in
response
to
the
Manitoba
Act
in
the
post-appointment
period,
one
must
determine
whether
the
payments
were
in
fact
and
in
law
the
payment
of
wages,
or
whether
the
effect
of
the
Act
is
that
the
payment
in
question
was
a
payment
of
debt.
I
have
concluded
that
the
Manitoba
statute
has
created
a
charge
secured
by
a
statutory
lien
against
the
assets
of
Xyloid,
in
an
amount
equal
to
the
wages
owing
as
defined
in
the
Act,
which
means
those
wages
owing
less
an
amount
equal
to
lawful
deductions
that
may
be
made
by
an
employer.
The
portion
of
the
pool
assets
of
the
employer’s
estate
so
charged
(and
which
here
is
included
in
the
security
being
enforced
by
the
court
through
a
receivership)
is
limited
to
a
defined
portion
of
the
accrued
wages
which
remained
unpaid
at
the
time
of
the
appointment
of
the
receiver
and
the
receipt
by
him
of
the
assets
of
the
employer.
In
the
interpretation
and
the
application
of
the
Manitoba
statute
to
these
circumstances,
it
is
important
to
note
that
the
lien
and
charge
on
the
assets
of
Xyloid
in
favour
of
the
employees
arose
when
the
wages
became
“due
and
payable’’
and
hence
the
charge
in
respect
of
such
accrued
wages
came
into
being
on
their
accrual.
This
was
prior
to
the
appointment
of
the
receiver
and
prior
to
any
deductions
made
by
Xyloid
under
the
federal
statutes.
But
even
if
this
be
so,
the
application
of
the
federal
statutes
still
must
be
determined
by
an
interpretation
thereof
to
ascertain
their
intended
reach.
The
three
federal
statutes
provide
as
follows:
The
Income
Tax
Act
(hereafter
referred
to
as
ITA)
Section
227
Withholding
Taxes
(4)
Every
person
who
deducts
or
withholds
any
amount
under
this
Act
shall
be
deemed
to
hold
the
amount
so
deducted
or
withheld
in
trust
for
Her
Majesty.
(5)
All
amounts
deducted
or
withheld
by
a
person
under
this
Act
shall
be
kept
Separate
and
apart
from
his
own
moneys
and
in
the
event
of
any
liquidation,
assignment
or
bankruptcy
[of
an
employer]
the
said
amounts
shall
remain
apart
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy.
The
Canada
Pension
Plan
Act
(hereafter
referred
to
as
CPPA)
Subsection
24(3)
Where
an
employer
has
deducted
an
amount
from
the
remuneration
of
an
employee
as
or
on
account
of
any
contribution
required
to
be
made
by
the
employee
but
has
not
remitted
such
amount
to
the
Receiver
General,
the
employer
shall
keep
such
amount
separate
and
apart
from
his
own
moneys
and
shall
be
deemed
to
hold
the
amount
so
deducted
in
trust
for
Her
Majesty.
Subsection
24(4)
In
the
event
of
any
liquidation,
assignment
or
bankruptcy
of
an
employer,
an
amount
equal
to
the
amount
that
by
subsection
(3)
is
deemed
to
be
held
in
trust
for
Her
Majesty
shall
be
deemed
to
be
separate
from
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy,
whether
or
not
that
amount
has
in
fact
been
kept
separate
and
apart
from
the
employer’s
own
moneys
or
from
the
assets
of
the
estate.
The
Unemployment
Insurance
Act
(hereafter
referred
to
as
UIA)
Subsection
71(2)
Where
an
employer
has
deducted
an
amount
from
the
remuneration
of
an
insured
person
as
or
on
account
of
any
employee’s
premium
required
to
be
made
by
the
insured
person
but
has
not
remitted
such
amount
to
the
Receiver
General,
the
employer
shall
keep
such
amount
separate
and
apart
from
his
own
monies
and
shall
be
deemed
to
hold
the
amount
so
deducted
in
trust
for
Her
Majesty.
Subsection
71(3)
In
the
event
of
any
liquidation,
assignment
or
bankruptcy
of
an
employer,
an
amount
equal
to
the
amount
that
by
subsection
(2)
is
deemed
to
be
held
in
trust
for
Her
Majesty
shall
be
deemed
to
be
separate
from
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy,
whether
or
not
that
amount
has
in
fact
been
kept
separate
and
apart
from
the
employer’s
own
monies
or
from
the
assets
of
the
estate,
(emphasis
added)
The
ITA,
for
example,
requires
that
“every
person
paying
salary
or
wages
or
other
remuneration
to
an
employee
shall
deduct.
..Assuming
for
the
moment
that
the
definition
of
“person”
includes
a
receiver,*
is
that
person
liable
to
make
deductions
from
payments
which
in
law
at
the
moment
of
payment
were
not
wages
but
amounts
paid
to
satisfy
a
statutory
lien?
I
do
not
think
the
statute
can
be
so
read,
for
the
reasons
stated
above.
As
regards
the
other
federal
statutes,
apart
altogether
from
the
other
reasons
I
have
discussed.
I
reach
the
same
conclusion
as
regards
the
taxation
statute
for
the
additional
reason
that
both
the
UIA
and
the
CPPA
by
their
express
terminology
contemplate
a
payment
by
an
employer,
and
the
receiver
here
is
neither
employer
nor
the
agent
of
the
employer.
In
my
view,
then,
the
result
is
that
the
lien
against
the
assets
of
Xyloid
as
subsequently
received
by
the
receiver
on
its
appointment
was
in
existence
at
the
time
of
that
appointment,
and
attached
to
and
continued
to
exist
as
a
lien
and
charge
on
those
assets
into
the
post-appointment
period.
The
receiver,
in
making
the
payments
it
did
to
the
former
employees
of
Xyloid,
was
not
distributing
wages
to
those
employees
but
was
rather
simply
paying
off
the
statutory
lien
and
charge.
In
doing
so,
it
clearly
did
not
act
as
the
agent
of
Xyloid
but
simply
as
an
officer
of
the
Court
in
the
discharge
of
its
responsibilities
under
the
order
of
appointment.
See
Falconbridge
on
Mortgages,
4th
ed
(1977)
pp
759-60,
quoted
with
approval
by
the
Manitoba
Court
of
Appeal
in
International
Woodworkers
of
America,
Local
1-324
v
Wescana
Inn
Ltd
and
Clarkson
Company
Limited
(1977),
27
CBR
201,
at
204.
See
also
R
W
S
Johnston,
“Receivers”,
LSUC
Special
Lectures
(1961)
101,
at
105.
This
comment
in
the
Wescana
judgment,
supra,
at
204
seems
at
odds
on
this
point
with
the
judgment
of
the
Court
of
Appeal
in
this
case:
see
(1979)
29
CBR
276
at
283.
Therefore,
I
conclude
that
Dauphin
succeeds
and
is
entitled
as
against
the
respondent
to
retain
the
sum
of
$3,474.83
claimed
by
the
respondent
with
reference
to
the
post-appointment
period.
2.
The
pre-appointment
period
I
turn
now
to
the
pre-appointment
period
in
respect
of
which
additional
conditions
arise.
From
the
record
in
these
proceedings
it
is
clear
that
Xyloid,
contrary
to
the
direction
contained
in
each
of
the
CPPA,
the
UIA
and
the
ITA
failed
to
keep
“separate
and
apart
from
his
own
moneys
.
.
any
amount
so
deducted
or
withheld
upon
the
payment
of
wages
to
its
then
employees.
Each
of
the
three
sections,
after
giving
such
a
direction,
provides
in
different
ways
that
the
moneys
deducted
or
withheld
are
“in
trust
for
Her
Majesty”.
The
terms
of
the
CPPA
and
the
UIA
are
identical
and
provide
that
these
moneys
shall
be
deemed
to
be
held
in
trust;
and
furthermore
“in
the
event
of
any
liquidation,
assignment
or
bankruptcy
of
an
employer
.
.
.
shall
be
deemed
to
be
separate
from
and
form
no
part
of
the
estate
in
liquidation,
assignment
or
bankruptcy,
whether
or
not
that
amount
has
in
fact
been
kept
separate
and
apart
from
the
employers
own
moneys
or
from
the
assets
of
the
estate’’.
Whether
this
provision,
which
is
found
in
subsection
24(4)
of
the
CPPA
and
subsection
71(3)
of
the
UIA,
is
applicable
turns
upon
the
interpretation
of
the
expression
“liquidation,
assignment
or
bankruptcy
of
an
employer”.
Clearly,
there
has
been
no
assignment
or
bankruptcy
of
Xyloid
and
the
question
therefore
is,
has
there
been
a
liquidation
of
Xyloid.
The
term
has
been
variously
defined
in
legal
and
other
dictionaries
and
the
following
are
illustrative:
Stroud’s
Judicial
Dictionary,
fourth
edition,
V
3
at
1555:
Liquidation.
Voluntary
liquidation
of
a
company,
though
merely
for
the
purpose
of
reconstruction,
is
none
the
less
a
“liquidation”
within
a
clause
of
forfeiture
in
a
lease
to
the
company
(Horsey
v
Steiger,
[1898]
2
QB
259).
But
a
voluntary
liquidation
is
equivalent
to
“bankruptcy”,
as
that
latter
word
was
used
in
Conveyancing
and
Law
of
Property
Act
1881
(c
41),
s
14(6,
i),
and
Conveyancing
and
Law
of
Property
Act
1892
(c
13),
s
2(2);
.
.
.
Shorter
Oxford
English
Dictionary,
1959,
at
1150:
Liquidation
.
.
.
1.
Law.
The
action
or
process
of
ascertaining
and
apportioning
the
amounts
of
a
debt,
etc.
2.
The
clearing
off
or
settling
(of
a
debt)
1786.
3.
The
action
or
process
of
winding
up
a
company;
the
state
or
condition
of
being
wound
up;
esp
in
phr
to
go
into
I
1869.
Black’s
Legal
Dictionary
Liquidation.
The
act
or
process
of
settling
or
making
clear,
fixed,
and
determinate
that
which
before
was
uncertain
or
unascertained.
Payment,
satisfaction,
or
collection;
realization
on
assets
and
discharge
of
habilites.
To
clear
away
(to
lessen)
a
debt.
Craddock-Terry
Co
v
Powell,
180
Va
242,
22
SE
2d
30,
34.
To
pay
or
settle.
In
re
Klink’s
Estate,
310
III
App
609,
35
NE
2d
684,
687.
To
take
over
for
collection.
Belden
v
Modern
Finance
Co,
Ohio
App,
61
NE
2d
801,804,
44
OLA
163.
Winding
up
or
settling
with
creditors
and
debtors.
Wilson
v
Superior
Court
in
and
for
Santa
Clara
County,
2
Cal
2d
632,
43
P
2d
286,
288.
Winding
up
of
corporation
so
that
assets
are
distributed
to
those
entitled
to
receive
them.
Process
of
reducing
assets
to
cash,
discharging
liabilities
and
dividing
surplus
or
loss.
The
term
as
employed
in
our
law
generally,
whether
or
not
it
be
qualified
by
the
presence
of
the
words
‘assignment’
or
‘bankruptcy’,
relates
either
to
the
realization
of
assets
to
pay
debts
or
to
the
total
disposition
of
the
undertaking
of
an
entity
including
not
only
the
realization
of
assets
to
pay
debts
but
for
the
distribution
of
any
net
surplus'to
the
owners
of
the
entity
prior
to
its
termination.
Where
the
term
is
used
as
in
the
pension
and
unemployment
statutes
with
reference
to
the
liquidation
“of
an
employer”,
it
is
clear,
in
my
view,
that
the
term
carries
its
broad
and
general
meaning,
that
is
the
process
of
disposing
of
an
undertaking
and
terminating
the
existence
of
the
entity.
As
that
has
not
happened
here,
the
provisions
of
subsection
(4)
of
the
CPPA
and
subsection
(3)
of
the
UIA
are
not
applicable.
Osler,
J,
sitting
at
trial
in
Royal
Trust
Co
v
Montex
Apparel
Industries
Ltd,
[1972]
2
OR
673,
reaches
the
same
conclusion
by
still
another
avenue
when
he
states:
On
the
facts
of
the
present
case,
it
appears
that
the
receiver
has
in
reality
been
engaged
in
liquidating
the
defendant’s
enterprise.
However,
as
was
pointed
out
by
counsel
for
the
trustee,
liquidation
is
not
the
inevitable
result
of
a
receivership
and
indeed,
there
have
been
many
successful
receiverships
which
have
resulted
in
the
enterprise
being
handed
back
to
its
owner
as
a
going
concern.
It
cannot
be
known
with
any
degree
of
certainty
at
the
moment
of
the
appointment
of
a
receiver
whether
in
fact
liquidation
is
inevitable
and
the
effect
of
the
various
statutes
must
be
assessed
as
at
that
moment.
The
task
of
the
receiver
might
well
be
made
an
impossible
on
if
the
application
of
these
statutes
were
made
to
await
the
outcome
of
his
endeavours
rather
than
being
ascertainable
upon
his
appointment.
It
may
be
argued
that
the
term
‘liquidation’
would
apply
to
the
lesser
project,
that
is
to
say
realization
of
assets
for
the
purpose
of
paying
a
debt,
where
the
debt
in
question
was
secured
by
an
all-embracing
charge
reaching,
as
is
apparently
the
case
here,
100%
of
the
assets.
The
argument
would
be
that
since
the
process
of
realization
reduces
the
undertaking
to
zero,
the
entity
has,
in
one
sense
at
least,
been
put
in
liquidation.
As
a
legal
proposition,
however,
it
is
not
sound
because
even
in
that
circumstance,
the
charter
still
remains
in
existence,
and
upon
the
discharge
of
the
receiver,
the
entity
remains
under
the
control
of
its
owners
and
although
its
assets
may
be
nil
and
although
some
of
its
liabilities
may
still
Survive
in
law,
it
cannot
be
said
that
the
entity
has
either
been
liquidated
or
placed
in
liquidation.
The
appropriate
definition
of
the
word
as
employed
in
the
relevant
sections
is
that
relating
to
the
liquidation
of
an
entity
inasmuch
as
the
term
is
used
in
the
CPPA
and
UIA
with
reference
to
“the
liquidation
...
of
an
employer”.
In
subsection
227(5)
of
the
Income
Tax
Act
the
term
is
used
in
company
with
“assignment”
or
“bankruptcy”
but
without
express
reference
to
an
entity,
such
as
an
employer.
The
subsection
goes
on
to
refer,
however,
to
“the
estate
in
liquidation”
which
plainly
refers
to
the
‘liquidation’
of
the
entity
and
not
simply
to
the
liquidation
of
a
part
of
its
assets
in
the
process
of
payment
of
a
particular
secured
debt.
Furthermore,
the
three
words
‘liquidation,
assignment
or
bankruptcy’
together
all
pertain
to
an
entity
which
has
either
gone
into
liquidation,
made
an
assignment,
or
been
placed
in
bankruptcy.
This
is
particulary
the
case
where,
as
here,
the
subsection
requires
that
the
amounts
so
withheld
be
kept
separate
and
apart
from
the
moneys
of
a
person
effecting
the
withholding,
and
hence
the
‘liquidation,
assignment
or
bankruptcy’
relates
to
that
person
as
an
entity
and
not
only
to
the
assets
of
that
entity.
Hence
the
meaning
to
be
properly
applied
to
the
word
“liquidation”
in
each
of
these
three
statutes
is
liquidation
of
the
employer
entity.
In
legal
matters,
such
a
term
connotes
the
winding
up
of
the
entity
by
realising
upon
its
assets,
paying
off
its
liabilities,
and
distributing
the
surplus,
if
any,
rateably
amongst
shareholders
according
to
their
precedence.
There
is
here,
of
course,
no
such
proceeding
with
reference
to
Xyloid
and
hence
the
provisions
of
subsection
4
of
section
24
of
the
CPPA,
subsection
3
of
section
71
of
the
UIA
and
subsections
227(4)
and
(5)
of
the
Income
Tax
Act
have
no
application.
In
each
of
those
two
subsections
there
is
the
further
term
of
the
trustestablishing
provision
that
deductions
shall
be
deemed
to
be
separate
and
apart
from
the
estate
in
liquidation
whether
or
not
in
fact
the
deduction
has
been
kept
separate
from
the
employer’s
own
money.
This
term
might
well
reach
the
circumstances
here
where
Xyloid
made
no
such
segregation
of
funds,
but
these
provisions
are
not
here
applicable.
The
Income
Tax
Act
provision
(subsection
227(5))
does
not
include
the
extended
provision
with
reference
to
a
deeming
of
separation
in
the
event
of
liquidation
and
hence
the
respondent,
even
if
the
event
of
liquidation
had
occurred,
would
have
no
assistance
from
the
statute
in
determining
a
segregation
of
accounts.
This
may
be
of
considerable
significance
in
the
law
of
trusts
in
that
trust
property
must
ordinarily
be
identifiable,
and
the
specific
res
of
a
trust
set
aside
before
it
can
be
said
that
the
trust
has
come
into
being.
(Vide
Waters,
The
Law
of
Trusts
in
Canada,
1974,
p
64
et
seq,
Mussoorie
Bank
v
Raynor
(1882),
7
App
Cas
321,
Perry
v
Perry,
[1918]
2
WWR
485.
We
of
course
are
not
here
concerned
with
the
general
law
of
trusts
but
rather
with
the
operation
of
the
cited
statutes.
The
payments
of
Xyloid,
therefore,
in
the
pre-appointment
period
postdate
the
accrual
of
the
wage
entitlement.
Xyloid
failed
to
maintain
the
deductions
separate
and
apart
from
its
own
moneys
and
assets,
and
Xyloid
was
not
in
liquidation,
was
not
in
bankruptcy,
and
had
made
no
assignment,
and
therefore
the
express
waiver
of
the
requirement
of
separation
legislated
in
two
of
the
three
statutes
does
not
avail
the
respondent.
Therefore,
I
conclude
that,
as
in
the
case
of
the
post-appointment
period,
the
appellant
is
entitled
to
those
moneys
withheld
by
the
receiver
and
with
reference
to
deductions
made
in
this
period
as
well.
To
the
same
effect,
Bank
of
Nova
Scotia
v
Middleton
Motors
Limited,
78
DTC
6307.
While
the
issues
with
which
we
are
here
concerned
have
not
come
directly
to
this
Court
before,
I
find
the
reasoning
followed
by
other
Courts
supportive
of
the
conclusion
I
have
reached.
For
example,
the
Supreme
Court
of
Ontario
in
Royal
Trust
Company
v
Montex
Apparel
Industries
Limited,
[1972]
2
OR
673;
and
[1972]
3
OR
132,
concluded,
with
reference
to
the
UIA,
that
a
corporation
under
the
administration
of
a
receiver
and
manager
appointed
under
a
bond
mortgage
is
not
in
liquidation,
assignment
or
bankruptcy
and
accordingly,
what
is
now
subsection
71(3)
did
not
apply.
Similar
issues
arose
in
the
courts
in
Nova
Scotia
in
Re
KRA
Restaurants
Ltd
v
Toronto
Dominion
Bank
et
al
(1977),
74
DLR
(3d)
272.
The
Court
was
there
concerned
with
the
identical
problem
as
here
with
reference
to
the
CPPA
and
the
UIA.
Hart,
J
concluded
that
these
provisions
do
not
create
in
the
Crown
in
the
Right
of
Canada
any
priority
as
regards
moneys
withheld
in
a
period
analogous
to
the
pre-appointment
period
hereunder,
over
secured
creditors,
In
the
end,
the
Court
interpreted
these
provisions
as
creating
a
trust
which
impresses
only
those
funds
realized
from
assets
which
remain
after
the
trustee
in
bankruptcy
has
satisfied
the
secured
creditors.
The
position
of
the
respondent
under
the
ITA
is
more
difficult
to
establish
in
competition
with
the
claims
of
the
appellant
because
the
ITA
does
not
include
the
deeming
provision
found
in
the
other
two
statutes,
but
simply
leaves
the
matter
to
be
decided
on
two
simple
provisions
in
section
227,
the
first
being
a
deeming
provision
that
amounts
deducted
are
held
in
trust
for
Her
Majesty
and
the
second
being
a
directive
that
moneys
so
deducted
Shall
be
kept
separate
from
the
moneys
of
the
person
making
the
deduction
and
the
further
direction
that
in
the
event
of
any
liquidation,
the
amounts
shall
remain
separate
and
apart
from
the
estate
in
liquidation.
The
provision
of
the
ITA,
at
least
in
one
respect,
however,
is
more
helpful
to
the
respondent
than
the
provisions
of
the
other
two
statutes
because
the
reference
to
liquidation
does
not
specify
that
it
be
the
liquidation
“of
an
employer,’’
not
does
it
direct
that
moneys
withheld
shall
remain
apart
from
the
estate
in
liquidation
on
the
liquidation
of
an
employer,
etc;
rather
the
provision
simply
states
“and
in
the
event
of
any
liquidation
.
..
the
said
amount
shall
remain
apart
.
.
It
may
be
argued
that
“any
liquidation’’
is
broader
than
“liquidation
of
an
employer’’
in
the
sense
that
the
former,
unlike
the
latter,
would
include
the
liquidation
of
the
assets
of
a
debtor
without
amounting
to
a
formal
liquidation
of
the
undertaking
of
the
debtor
or
the
existence
in
law
of
the
debtor.
I
do
not
so
interpret
subsection
5.
The
word
“liquidation”
is
again
used
in
association
with
assignment
or
bankruptcy
and
refers
to
an
estate
in
liquidation.
In
the
context
of
the
subparagraph,
liquidation,
in
my
view,
relates
to
the
winding
up
of
the
legal
entity
and
the
consequential
retirement
of
indebtedness
and
distribution
of
the
net
residue
to
the
ultimate
owners
thereof
as,
for
example,
the
shareholders.
It
was
argued
by
the
appellant
that
the
ITA
should
fall
into
the
category
of
Statutes
which
receive
a
strict
or
penal
interpretation
by
the
courts.
Such
a
canon
of
statutory
interpretation
has,
in
recent
years,
lost
a
great
deal
of
its
force,
perhaps
due
in
part
to
the
position
of
taxing
statutes
in
the
scheme
of
government
regulation
of
the
economic
affairs
of
the
community
or
indeed
to
the
practice
of
including
in
the
ITA
what
might
generally
be
described
as
rights
to
deductions,
to
special
rates
of
taxation,
to
postpone
liability,
and
other
affirmative
rights
in
the
taxpaying
sector
of
society.
The
application
of
the
old
rules
of
strict
and
beneficial
construction
no
longer
fit
such
statutes
in
toto,
and
sometimes
not
at
all.
Vide
W
A
Sheaffer
Pen
Company
of
Canada
Limited
v
MNR,
[1953]
CTC
345;
53
DTC
1223;
Lumbers
v
MNR,
[1943]
Ex
CR
202;
[1944]
SCR
167;
[1943]
CTC
281;
[1944]
CTC
67;
2
DTC
631,652.
In
any
case,
in
the
context
of
these
proceedings,
it
is
difficult
to
classify
subsections
4
and
5
of
section
227,
being
as
they
are
mechanical
provisions
with
reference
to
the
disposition
of
funds
withheld
from
taxpayers
pursuant
to
the
statute,
and
being
taxing
provisions
calling
for
strict
interpretation
in
the
historic
sense
of
that
term
in
the
field
of
statutory
interpretation.
It
is
readily
apparent
that
the
direct
result
of
the
interpretation
of
these
three
statutes
in
the
manner
I
have
done
produces
an
anomaly.
The
taxpayer
and
the
insured,
who
are
here
one
and
the
same
person,
under
the
three
statutory
patterns
loses
the
benefit
of
part
of
the
wages
which
he
has
earned
from
the
third
party
employer.
Under
the
pension
plan,
he
does
not
receive
credit
which,
but
for
the
default
of
his
employer,
he
would
have
received
in
the
pension
plan
established
by
the
CPPA.
Similarly,
his
account
under
the
UIA
will
not
reflect
any
contribution
as
a
result
of
moneys
which
were
diverted
from
his
earnings
in
the
manner
detailed
above
before
those
earnings
reached
the
employee.
Under
the
ITA,
his
tax
position
is
clouded,
to
say
the
least,
by
the
collapse
of
the
employer.
A
deduction
in
the
result
having
been
effected
at
source
one
way
or
another
does
not
find
itself
as
a
credit
to
the
tax
account
of
the
employee.
It
may
be
that
his
taxable
income
will,
under
the
taxing
statute,
be
limited
to
the
proceeds
paid
over
by
the
receiver
on
the
retirement
of
the
wage
lien
and
to
the
cash
amount
paid
over
by
the
employer
in
the
pre-appointment
period
to
the
employee.
In
either
or
both
of
these
events,
the
tax
impact
will
be
less
than
the
impact
of
taxation
would
be
were
the
gross
wages
channelled
through
the
tax
screen.
Nevertheless,
the
employee
will
receive
a
lesser
proportionate
credit,
at
least
in
theory,
than
would
have
been
the
case
had
the
employer
not
fallen
into
default
on
its
secured
debt.
I
use
the
word
“theoretical”
because
the
actual
dollar
impact
will
vary
according
to
the
amount
of
outside
earnings,
if
any,
in
the
taxation
year
in
question
of
the
employee,
which
is
of
course
unknown
in
these
proceedings.
I
adverted
at
the
outset
to
the
difficulty
arising
in
the
disposition
of
this
appeal
because
of
the
fact
that
the
record
does
not
disclose
whether
the
distribution
by
the
receiver
of
moneys
to
the
employees
in
the
two
periods
Originated
in
whole
or
in
part
from
realizations
by
the
receiver
under
the
specific
charge
included
in
the
debenture
or
under
the
chattel
mortgage
registered
against
the
personal
property
of
Xyloid
or
under
the
floating
charge
contained
in
the
debenture.
The
Court
was
informed
by
counsel
in
the
course
of
the
hearing
that
the
case
has
proceeded
at
all
levels
on
the
basis
that
the
moneys
employed
by
the
receiver
in
making
the
two
payments
to
the
employees
came
from
realizations
on
the
assets
of
Xyloid
on
the
enforcement
of
the
floating
charge.
This
floating
charge,
of
course,
crystallized
and
came
into
effect
in
law
as
against
the
assets
of
Xyloid
upon
the
appointment
of
the
receiver/manager
by
the
Court
on
March
31,
1977.
Up
to
that
date,
there
had
been
no
allocation
or
separation
by
Xyloid
of
the
deductions
effected
by
it
under
these
statutes.
The
cash
on
hand
of
Xyloid
at
that
date
was
$137.
There
had
been
at
that
date
no
proceedings
in
the
nature
of
liquidation
proceedings,
no
bankruptcy
proceedings,
and
no
assignment
of
Xyloid.
In
the
result,
therefore,
it
matters
not
whether
the
funds
came
from
the
enforcement
of
one
security
or
the
other.
There
was
no
deemed
separation
of
deductions
or
withholdings
from
the
assets
or
estate
of
the
estate
of
Xyloid;
and
under
the
ITA
there
could
be
no
statutory
deeming
of
such
separation
in
any
cases;
and
finally,
the
receiver
was
not
a
person
within
the
meaning
of
subsection
4
of
section
227
who
deducted
anything
“under
this
Act”
inasmuch
as
the
receiver,
as
I
have
said,
simply
made
a
payment
in
retirement
of
a
provincial
statutory
lien.
Xyloid
is
the
person
contemplated
in
subsection
4,
and
for
reasons
already
set
forth,
deductions
by
Xyloid
were
not
constituted
a
trust
of
property
separate
and
apart
from
the
estate
of
Xyloid
when
the
assets
of
Xyloid
passed
upon
the
enforcement
of
security
into
the
hands
of
the
receiver.
Courts
elsewhere
and
before
this
have
bemoaned
the
results
thrust
upon
them
by
the
interaction
of
federal
and
provincial
laws
with
reference
to
debtor-creditor
priorities.
The
resolution
of
anomalies
in
this
complex
field
is
a
legislative
process.
The
duty
of
the
Court
is
to
interpret
the
legislation
as
it
finds
it.
The
result
must
follow,
and
if
it
is
a
result
with
which
the
community
interests
do
not
coincide,
it
is
a
matter
for
the
Legislature.
For
these
reasons,
I
would
allow
the
appeal,
set
aside
the
order
of
the
Manitoba
Court
of
Appeal,
and
restore
the
order
entered
at
trial,
with
costs
throughout
to
the
appellant,
Dauphin
Plains
Credit
Union
Limited.