Walsh,
J:—On
July
31,
1972
a
company
known
as
Canabureau
Ltd
signed
a
form
indicating
its
intention
to
give
security
under
authority
of
section
88
of
the
Bank
Act
to
plaintiff
and
this
was
duly
registered
with
the
Bank
of
Canada
in
Montreal
on
August
10,
1972.
By
notarial
ded
dated
March
23,
1973,
Canabureau
Ltd
transferred
to
the
Bank
all
debts,
claims,
demands
and
choses
in
action
including
all
book
debts
then
due
or
hereafter
to
become
due
together
with
all
judgments
of
other
securities
of
the
said
debts,
claims
demands
and
choses
in
action
and
all
other
rights
and
benefits
which
then
were
or
might
thereafter
become
vested
in
the
company,
authorizing
the
Bank
to
realize
on
them
in
such
manner
as
it
might
in
its
discretion
deem
advisable.
The
company
further
agreed
that
if
the
amounts
of
any
of
the
said
debts,
claims,
demands,
choses
in
action
or
securities
were
paid
to
it
it
would
receive
same
as
agent
of
the
Bank
and
forthwith
pay
over
the
same.
This
general
transfer
of
book
debts
was
duly
registered
in
the
Registry
Office
in
Montreal
on
March
26,
1973,
under
No
2414366.
Notice
of
this
transfer
pursuant
to
Article
1571
(d)
of
the
Civil
Code
was
duly
published
in
French
in
Le
Devoir
on
December
31,
1973
and
in
English
in
the
Montreal
Gazette
on
January
2,
1974.
The
said
article
of
the
Quebec
Civil
Code
reads
as
follows:
The
sale
of
the
whole,
of
a
portion
or
of
a
particular
category
of
debts
or
book
accounts,
present
or
future,
of
a
person,
firm
or
corporation
carrying
on
a
commercial
business,
may
be
registered
in
the
office
of
each
registration
division
where
the
vendor
has
a
place
of
business.
Such
registration
shall
avail,
for
all
purposes,
in
lieu
of
the
signification
and
delivery
required
by
article
1571,
except
as
regards
debts
or
book
accounts
paid
or
otherwise
discharged
before
the
publication
of
a
notice
of
such
registration,
in
French
in
a
daily
newspaper
published
in
that
language
in
the
judicial
district
where
the
vendor
has
his
principal
place
of
business
in
the
Province
of
Quebec
and
in
English
in
a
daily
newspaper
published
in
that
language
in
the
same
district;
if
there
is
no
daily
newspaper
published
in
the
French
or
the
English
language,
as
the
case
may
be,
in
the
said
district,
the
publication
may
be
made
in
a
daily
newspaper
published
in
the
French
or
the
English
language,
as
the
case
may
be,
in
the
locality
nearest
to
such
district
where
such
a
newspaper
is
published.
On
April
9,
1973,
Canabureau
entered
into
an
agreement
with
the
Bank
in
its
standard
form
setting
out
the
powers
of
the
Bank
in
relation
to
all
advances
and
securities
held
therefor.
Clause
5
of
this
agreement
reads
as
follows:
If
the
Customer
shall
sell
the
goods
or
any
part
thereof
the
proceeds
of
any
such
sale,
including
cash,
bills,
notes,
evidences
of
title
and
securities,
and
the
indebtedness
of
any
purchaser
in
connection
with
such
sales
shall
be
the
property
of
the
Bank
to
be
forthwith
paid
or
transferred
to
the
Bank
and
until
so
paid
or
transferred
to
be
held
by
the
Customer
in
trust
for
the
Bank.
Execution
by
the
Customer
and
acceptance
by
the
Bank
of
an
assignment
of
book
debts
shall
be
deemed
to
be
in
furtherance
of
this
declaration
and
not
acknowledgement,
by
the
Bank
of
any
right
or
title
on
the
part
of
the
Customer
to
such
book
debts.
On
September
20,
1973
as
security
for
a
revolving
line
of
credit
Canabureau
Ltd
gave
plaintiff
security
under
section
88
of
the
Bank
Act
on
property
of
which
the
said
Canabureau
was
then
or
might
thereafter
become
the
owner
consisting
of
raw
materials,
work
in
process,
finished
goods
of
every
description,
ie,
wood
office
furniture,
such
as
desks,
chairs
etc
of
all
kinds
and
quality
and
on
the
security
of
warehouse
receipts
and/or
bills
of
lading
covering
all
such
property
which
was
then
or
might
thereafter
be
in
premises
at
1200
Jules
Poitras
Boulevard,
St-Laurent,
Quebec
or
elsewhere.
While
the
security
was
given
on
a
form
used
for
giving
security
by
virtue
of
paragraphs
88(1)(a),
(b),
(c),
or
(e)
of
the
Bank
Act
it
is
only
paragraph
88(1)(b)
which
is
relevant.
It
reads:
(1)
The
bank
may
lend
money
and
make
advances
(b)
to
any
person
engaged
in
business
as
a
manufacturer,
upon
the
security
of
goods,
wares
and
merchandise
manufactured
or
produced
by
him
or
procured
for
such
manufacture
or
production
and
of
goods,
wares
and
merchandise
used
in
or
procured
for
the
packing
of
goods,
wares
and
merchandise
so
manufactured
or
produced.
The
amended
statement
of
claim
dated
January
16,
1976
indicates
that
a
sum
of
$151,216.67
in
capital
plus
interest
is
still
due
by
Canabureau
Ltd
to
plaintiff
and
notes
covering
these
loans
were
produced
as
evidence.
Although
the
exact
amount
is
not
pertinent
and
not
admitted
by
defendant
it
is
not
disputed
that
the
Bank
is
still
owed
more
than
the
amount
claimed
from
the
defendant
in
the
present
proceedings.
Plaintiff
further
alleges
that
it
took
possession
of
the
assets
subject
to
the
guarantees
on
March
8,1974,
that
defendant
was
aware
of
this,
and
that
subsequent
to
this
date
plaintiff
on
the
requisition
of
defendant
manufactured,
delivered
and
billed
to
defen-
dant
office
furnishings
to
a
value
of
$49,254.30
which
defendant
has
refused
to
pay
to
plaintiff
although
it
was
duly
required
to
do
so
by
letter
dated
July
14,
1975.
Defendant
for
her
part
claims
that
the
agreements
between
plaintiff
and
Canabureau
Ltd
do
not
bind
defendant
whose
obligation
results
from
a
contract
entered
into
between
Canabureau
Ltd
and
defendant
on
or
about
February
12,
1974,
that
the
transfer
of
accounts
between
Canabureau
Ltd
and
plaintiff
do
not
bind
defendant
because
of
the
provisions
of
the
Financial
Administration
Act*
sections
79
and
following
with
“Assignment
of
Crown
Debts”.
Defendant
further
pleads
that
she
has
no
obligation
to
plaintiff
for
the
amount
claimed
as
the
result
of
compensation
which
by
virtue
of
the
Excise
Tax
Act}
can
be
invoked
against
plaintiff
as
well
as
against
Canabureau
Ltd.
Defendant
admits
that
as
the
result
of
a
contract
dated
February
13,
1974,
made
by
Canabureau
Ltd
with
the
Department
of
Supply
and
Services
merchandise
of
a
value
of
$49,254.30
was
delivered
during
the
month
of
April
and
May
1974.
On
March
18,1974,
the
Director
for
Collection
of
Excise
Tax
for
the
Minister
of
National
Revenue
claimed
from
plaintiff
the
amount
of
excise
tax
due
according
to
the
books
of
Canabureau
Ltd
and
on
March
25,
1974
he
officially
requested
the
Minister
of
Supply
and
Services
to
pay
to
him
whatever
sums
might
become
due
to
Canabureau
Ltd
by
defendant
as
a
result
of
said
contract,
in
order
to
establish
compensation
between
the
two
debts
in
conformity
with
subsection
52(9)
of
the
Excise
Tax
Act
which
reads
as
follows:
Where
a
person
is
indebted
to
Her
Majesty
under
this
Act
the
Minister
may
require
the
retention
by
way
of
deduction
or
set-off
of
such
amount
as
the
Minister
may
specify
out
of
any
amount
that
may
be
or
become
payable
to
such
person
by
Her
Majesty.
Subsequently
on
April
10
and
June
10,1974,
the
Director
of
Collection
of
Excise
Tax
advised
the
Minister
of
Supply
and
Services
that
the
amounts
due
for
excise
tax
by
Canabureau
Ltd
had
increased
to
a
total
of
$49,312.54.
In
late
June
or
early
July
1974
the
Minister
of
Supply
and
Services
paid
to
the
Minister
of
National
Revenue
the
sum
of
$49,254.30
the
amount
due
to
Canabureau
Ltd
as
partial
compensation
for
the
debt
of
that
company
in
the
amount
of
$49,312.54
for
excise
tax.
It
is
contended
that
as
the
result
of
this
compensation
the
debt
of
the
defendant
to
Canabureau
Ltd
or
plaintiff
was
extinguished.
It
was
further
pleaded
that
the
guarantees
and
transfers
effected
by
Canabureau
Ltd
in
favour
of
plaintiff
on
March
23
and
September
30,
1973,
had
the
effect
of
making
plaintiff
liable
and
responsible
to
defendant
for
payment
of
excise
tax
then
due
or
to
become
due
on
merchandise
and
material
already
manufactured,
in
course
of
manufacture
or
which
would
in
future
be
fabricated
and
that
these
guarantees
were
still
in
existence
on
March
8,
1974,
when
plaintiff
took
possession
of
the
assets
subject
to
the
realization
of
these
guarantees.
Defendant
pleads
that
furthermore
after
March
8,1974,
plaintiff
must
be
considered
as
itself
the
manufacturer
in
the
sense
of
Article
27
of
the
Excise
Tax
Act
and
thus
responsible
for
the
payment
to
defendant
of
excise
tax
on
the
merchandise
on
which
it
exercised
its
rights.
Subsection
27(3)
of
the
said
Act
reads
as
follows:
In
case
any
person
other
than
the
manufacturer
or
producer
or
importer
or
transferee
or
licensed
wholesaler
or
jobber
hereinbefore
mentioned
acquires
from
or
against
any
one
of
these
persons
the
right
to
sell
any
goods,
whether
as
a
result
of
the
operation
of
law
or
of
any
transaction
not
taxable
under
this
section,
the
sale
of
such
goods
by
him
shall
be
taxable
as
if
made
by
the
manufacturer
or
producer
or
importer
or
transferee
or
licensed
wholesaler
or
jobber
as
the
case
may
be
and
the
person
so
selling
is
liable
to
pay
the
tax.
It
is
not
disputed
that
defendant
was
aware
of
the
Bank’s
interest
in
the
amounts
payable
by
virtue
of
the
invoices.
The
invoices
were
all
directed
to
the
Department
of
Supply
and
Services
c/o
The
Department
of
National
Revenue,
Regional
Director,
Excise
or
alternatively
to
the
Department
of
Supply
and
Services
c/o
The
Department
of
National
Revenue,
District
Manager,
Montreal,
and
with
one
exception
bore
the
notation
above
the
Signatures
“This
invoice
is
the
property
of
the
Banque
Canadienne
Nationale
under
section
88
of
the
Canadian
Bank
Act”.
However,
it
was
not
until
August
19,1974
that
the
Receiver
General
was
notified
in
the
appropriate
form
that
by
an
assignment
dated
August
14,
1974
Canabureau
Ltd
had
assigned
to
the
Bank
the
sum
of
$107,432.85
being
monies
due
or
becoming
due
by
the
Crown
as
represented
by
the
Minister
of
Supply
and
Services
for
office
furniture
and
that
payment
should
be
made
to
the
Bank.
This
form
bears
the
stamp
“Approved
on
behalf
of
the
Deputy
Receiver
General’’
but
inter
alia
invoices
bearing
the
Nos
66600-3-5059
were
included
in
the
total
these
being
the
invoices
which
had
already
been
set
off
by
defendant
as
the
result
of
compensation.
The
significance
of
this
and
of
the
date
arises
from
the
provisions
of
section
80
of
the
Financial
Administration
Act
which
reads
as
follows:
Except
as
provided
in
this
Act
or
any
other
Act
of
the
Parliament
of
Canada,
(a)
a
Crown
debt
is
not
assignable,
and
(b)
no
transaction
purporting
to
be
an
assignment
of
a
Crown
debt
is
effective
so
as
to
confer
on
any
person
any
rights
or
remedies
in
respect
of
such
debt.
This
general
prohibition
is
modified
by
section
81.
Subsection
81(1)
reads
as
follows:
(1)
Any
absolute
assignment,
in
writing,
under
the
hand
of
the
assignor,
not
purporting
to
be
by
way
of
charge
only,
of
a
Crown
debt
of
any
following
description,
namely,
(a)
a
Crown
debt
that
is
an
amount
due
or
becoming
due
under
a
contract,
or
(b)
any
other
Crown
debt
of
a
class
prescribed
by
regulation,
of
which
notice
has
been
given
to
the
Crown
as
provided
in
section
82,
is
effectual
in
law,
subject
to
all
equities
that
would
have
been
entitled
to
priority
over
the
right
of
the
assignee
if
this
section
had
not
been
enacted,
to
pass
and
transfer
from
the
date
service
of
such
notice
is
effected
(c)
the
legal
right
to
the
Crown
debt,
(d)
all
legal
and
other
remedies
for
the
Crown
debt,
and
(e)
the
power
to
give
a
good
discharge
for
the
Crown
debt
without
the
concurrence
of
the
assignor.
The
manner
and
effect
of
assignment
is
set
out
in
section
82
which
reads
as
follows:
(1)
Notice
of
any
assignment
referred
to
in
subsection
81(1)
shall
be
given
to
the
Crown
by
serving
on
or
sending
by
registered
mail
to
the
Receiver
General
or
a
paying
officer
notice
thereof
in
prescribed
form,
together
with
a
copy
of
the
assignment
accompanied
by
such
other
documents
completed
in
such
manner
as
may
be
prescribed.
(2)
Service
of
the
notice
referred
to
in
subsection
(1)
shall
be
deemed
not
to
have
been
effected
until
acknowledgment
of
the
notice,
in
prescribed
form,
is
sent
to
the
assignee,
by
registered
mail,
under
the
hand
of
the
appropriate
paying
officer.
This
is
the
notice
which
was
given
on
August
19,
1974
and
in
due
course
approved.
It
is
common
ground
that
as
a
result
of
this
payments
due
by
the
Crown
after
that
date
would
be
payable
to
the
Bank.
The
Bank
for
its
part
does
not
dispute
that
claims
by
the
Crown
for
excise
tax
and
other
current
debts
of
Canabureau
Ltd,
such
as
for
example
unemployment
insurance
and
income
tax
deductions
from
employees’
wages
resulting
from
its
continuing
operations
after
the
assignments
to
the
Bank
would
be
due
and
payable
to
the
Crown.
Defendant
does
not
admit
however
that
this
notification
had
retroactive
effect
so
as
to
negate
the
effect
of
the
compensation
which
Defendant
claims
resulted
as
the
result
of
invoices
which
became
due
and
payable
prior
to
this
notification.
In
this
connection
Defendant
refers
to
the
judgment
of
the
Court
of
Appeal
in
the
as
yet
unreported
case
of
The
Clarkson
Company
Limited,
the
Receiver
and
Manager
of
the
property
and
undertaking
of
Rapid
Data
Systems
&
Equipment
Limited
v
Her
Majesty
The
Queen,
No
A884-77
a
judgment
dated
April
18,
1978,
[1979]
CTC
96.
This
did
not
deal
with
an
assignment
under
the
Bank
Act
but
with
the
effect
of
a
debenture
whereby
Rapid
Data
had
created
a
floating
charge
in
favour
of
the
Bank
of
Montreal,
Clarkson
being
appointed
by
the
Bank
as
a
receiver
of
Rapid
Data’s
undertaking
and
property
and
carrying
on
the
business.
The
claim
was
for
a
duty
drawback
against
which
the
Crown
had
set
off
taxes
owed
to
Her
Majesty
by
the
Company.
Chief
Justice
Jackett
after
concluding
that
the
debenture
was
a
form
of
chose
in
action
which
operated
as
an
equitable
assignment
“by
way
of
charge
only”
stated:
.
.
.
It
follows
that
it
has,
by
virtue
of
section
80,
at
least
between
the
assignee
and
Her
Majesty,
no
validity,
unless
provision
is
made
therefor
by
section
81
or
some
other
statutory
provision.
Our
attention
has
not
been
drawn
to
any
other
statutory
provision
for
this
assignment
of
the
claim
for
drawback
and
provision
is
not
made
therefor
by
section
80
because
section
80
applies
only
to
an
“absolute
assignment
.
.
.
not
purporting
to
be
by
way
of
charge”.
There
remains
for
consideration
the
question
whether,
while
the
result
of
section
80
is
that,
as
between
the
Bank
and
Her
Majesty,
the
equitable
assignment
of
Rapid
Data’s
right
to
be
paid
drawback
does
not
exist,
it
is,
nevertheless,
good
as
between
Rapid
Data
and
the
Bank
with
the
result
that
Rapid
Data’s
action
is
as
trustee
for
the
Bank,
and
not
in
its
own
right
and
there
did
not
exist,
therefore,
the
mutuality
essential
for
the
defence
of
set-off.
The
answer
to
that
question,
in
my
mind,
lies
in
the
fact
that
the
exception
in
section
81
of
an
assignment
“by
way
of
charge
only”
shows
that
section
80
applies
to
an
assignment
“by
way
of
charge
only”.
It
follows
that,
in
my
view,
it
is
not
possible
in
the
action
against
Her
Majesty
to
rely
on
the
assignment
by
way
of
charge
only
to
show
that
Rapid
Data
(assignor)
is
not
claiming
in
its
own
right
but
is
claiming
only
as
trustee.
My
conclusion
is,
therefore,
that
there
was
the
necessary
mutuality
for
the
setoff
defence.
The
question
of
the
effect
of
these
sections
of
the
Financial
Administration
Act
had
previously
been
dealt
with
by
Noël,
J
as
he
then
was
in
the
case
of
Edwin
J
Persons,
Suppliant,
v
Her
Majesty
The
Queen,
Respondent
[1966]
Ex
CR
538.
The
Suppliant
had
executed
a
document
purporting
to
assign
to
the
Royal
Bank
of
Canada
certain
specified
debts
under
a
government
construction
contract
under
which
the
Suppliant
claimed
relief
in
the
proceedings.
The
bank
had
written
the
Chief
Treasury
Officer
of
the
Government
of
Canada
enclosing
the
bank’s
Form
of
Assignment
of
Contract
respecting
this.
After
pointing
out
that
following
the
decision
of
Thorson,
P
in
Bank
of
Nova
Scotia
v
The
Queen
(1967),
27
DLR
(2d)
120
amendments
had
been
made
to
the
Financial
Administration
Act
by
S
of
C
1960-61
c
48,
Noël,
J
then
refers
to
paragraph
88(c)
added
by
the
amendment
(which
is
now
section
80).
He
then
deals
at
544
with
the
statutory
procedure
for
assignment
of
such
debts,
and
since
it
was
not
complied
with
he
concludes
at
the
bottom
of
that
page:
In
the
circumstances,
it
is
clear
that
the
assignment
to
the
Royal
Bank
of
Canada
has
not,
as
yet,
become
“effectual
in
law”
by
virtue
of
section
88c
of
the
Financial
Administration
Act
and,
as
far
as
I
am
aware,
there
is
no
other
provision
in
that
Act
or
in
any
other
Act
of
the
Parliament
of
Canada
that
would
give
it
legal
force.
On
page
545
he
states:
Without
venturing
into
the
very
difficult
and
complex
subject
of
the
application
of
provincial
laws
to
the
determination
of
the
rights
and
obligations
of
Her
Majesty
in
Right
of
Canada,
I
feel
confident
that
a
law
such
as
Part
VIIIA
of
the
Financial
Administration
Act,
when
enacted
by
Parliament,
displaces
any
provincial
law
that
might
otherwise
be
applicable
in
the
circumstances,
at
least
to
the
extent
that
it
is
inconsistent
with
such
provincial
law.
Section
88B
therefore
operates
in
accordance
with
its
terms
and
clearly
has
the
effect
that,
until
the
assignment
here
in
question
becomes
effectual
in
law
by
virtue
of
section
88C,
the
claims
of
Persons
against
the
Crown
are
not
assignable
and
the
assignment
is
not
effective
so
as
to
confer
any
rights
or
remedies
on
the
Royal
Bank
of
Canada.
Plaintiff
contends
however
that
these
cases
can
be
distinguished
as
they
do
not
deal
with
assignments
made
by
virtue
of
section
88
of
the
Bank
Act
and
in
support
of
this
refers
to
subsection
89(1)
of
that
Act
which
reads
in
part
as
follows:
All
the
rights
and
powers
of
the
bank
in
respect
of
the
property
mentioned
in
or
covered
by
a
warehouse
receipt
or
bill
of
lading
acquired
and
held
by
the
bank,
and
those
rights
and
powers
of
the
bank
in
respect
of
the
property
covered
by
a
security
given
to
the
bank
under
section
88
that
are
the
same
as
if
the
bank
had
acquired
a
warehouse
receipt
or
bill
of
lading
in
which
such
property
was
described,
have,
subject
to
the
provisions
of
subsection
88(4)
and
of
subsections
(2)
and
(3)
of
this
section,
priority
over
all
rights
subsequently
acquired
in,
on
or
in
respect
of
such
property,
and
also
over
the
claim
of
any
unpaid
vendor.
..
It
is
contended
that
as
the
claims
of
the
bank
resulted
from
such
an
assignment
the
bank
would
rank
even
ahead
of
an
unpaid
vendor,
who
in
turn
ranks
ahead
of
claims
of
the
Crown
(Article
1994
of
the
Quebec
Civil
Code)
so
claim
of
the
Bank
should
prevail.
Two
cases
were
referred
to
by
plaintiff
the
first
being
that
of
Banque
Canadienne
Nationale
v
Lefaivre
and
Others,
trustees
of
Right
Electronics
Co
Ltd,
[1951]
KB
83,
a
dispute
between
the
bank
and
trustees
of
the
bankrupt
company
as
to
payments
due
as
the
result
of
sale
of
merchandise
which
had
been
assigned
to
the
bank
by
virtue
of
section
88
of
the
Bank
Act.
The
judgment
held
that
the
claim
of
the
bank
prevailed
to
the
extent
of
what
was
due
to
it
by
the
bankrupt
company
and
that
the
transfer
of
accounts
which
the
company
had
made
to
the
Bank
by
special
agreement
did
not
even
require
compliance
with
the
formalities
of
Article
1571
and
following
of
the
Quebec
Civil
Code.
Two
dissenting
judgments
held
that
security
under
section
88
of
the
Bank
Act
must
apply
only
to
corporeal
property
and
not
to
accounts
resulting
from
the
sale
of
same,
which
latter
had
to
comply
with
the
requirements
of
Article
1571
and
following
of
the
Quebec
Civil
Code.
The
finding
of
the
dissenting
judgments
is
not
an
issue
in
the
present
case
in
any
event
since
the
Bank
did
comply
with
the
provisions
of
these
articles
by
publishing
the
required
advertisements
at
the
end
of
December
and
early
January,
1974,
before
the
accounts
were
rendered
to
Defendant.
In
rendering
the
majority
judgment
Galipeault,
J
stated
at
88
(translated):
As
to
the
extent
of
the
right
which
the
bank
possesses
by
the
application
of
articles
86,
88
and
89
I
agree
with
the
appellant
that
it
is
a
right
of
ownership
which
must
be
recognized
and
which
cannot
be
outranked
by
a
person
as
the
result
of
an
act
subsequent
to
the
guarantee.
I
agree
also
with
the
argument
of
the
appellant
that
this
right
of
property
created
entirely
by
the
Parliament
of
Canada
is
sui
generis
and
must
only
be
interpreted
in
the
light
of
the
Bank
Act
and
not
with
respect
to
the
Civil
Code.
At
89
he
states
(translated):
It
also
appears,
as
the
appellant
claims,
to
recognize
the
purpose
of
article
88
which
permits
the
wholesaler
or
manufacturer
obliged
to
obtain
advances
for
his
business
to
give
up
his
rights
to
the
merchandise
which
he
transfers
to
the
bank
without
at
the
same
time
dispossessing
himself
of
it
in
order
not
to
paralyze
his
business.
This
possession
of
the
merchandise
which
he
continues
to
use
and
which
he
disposes
of
with
the
consent
of
the
bank
is
done
for
the
account
of
the
latter
by
him
acting
as
the
agent,
mandatary,
or
representative
of
the
latter,
the
proprietor.
Reference
was
also
made
by
Plaintiff
to
the
Supreme
Court
case
of
Christopher
Henry
Flintoft
as
Trustee
in
Bankruptcy
of
Canadian
Western
WiI/work
Ltd
v
The
Royal
Bank
of
Canada,
[1964]
SCR
631
again
a
dispute
between
the
respondent
bank
holding
security
under
paragraph
88(1)(b)
of
the
Bank
Act,
and
the
trustee
in
bankruptcy
of
the
bank’s
customer
concerning
the
ownership
of
certain
uncollected
debts
owing
to
the
customer
at
the
date
of
bankruptcy.
The
trustee
claimed
that
he
was
entitled
to
claim
these
debts
because
an
assignment
of
book
debts
held
by
the
bank
was
void
for
lack
of
timely
registration.
In
rendering
judgment
Judson,
J
stated
at
634:
Section
88
is
a
unique
form
of
security.
I
know
of
no
other
jurisdiction
where
it
exists.
It
permits
certain
classes
of
persons
not
of
a
custodier
character,
in
this
case
a
manufacturer,
to
give
security
on
their
own
goods
with
the
consequences
above
defined.
Notwithstanding
this,
with
the
consent
of
the
bank,
the
one
who
gives
the
security
sells
in
the
ordinary
course
of
business
and
gives
a
good
title
to
purchasers
from
him.
But
this
does
not
mean
that
he
owns
the
book
debts
when
he
has
sold
the
goods.
To
me
the
fallacy
in
the
dissenting
reasons
is
the
assumption
that
there
is
ownership
of
the
book
debts
in
the
bank’s
customer
once
the
goods
have
been
sold
and
that
the
bank
can
only
recover
these
book
debts
if
it
is
the
assignee
of
them.
After
reviewing
the
jurisprudence
including
the
case
of
Banque
Canadienne
Nationale
v
LeFaivre
(supra)
and
finding
that
on
the
facts
it
cannot
be
distinguished
from
those
in
the
case
before
him
he
states:
..
The
majority
judgment
is
founded
squarely
on
the
ground
that
the
claims
against
the
buyers
of
the
goods
became
the
property
of
the
bank
by
virtue
of
its
section
88
security
and
never
were
the
property
of
the
customer
so
as
to
be
affected
by
the
assignment
in
bankruptcy.
These
latter
two
cases
deal
with
disputes
between
the
bank
as
owner
of
accounts
receivable
of
its
customer
duly
assigned
to
it
under
the
provisions
of
the
Bank
Act
and
the
trustee
in
bankruptcy
of
the
customer
and
in
neither
was
the
Crown
involved
as
debtor
of
any
of
these
accounts
receivable
and
accordingly
they
are
not
directly
pertinent.
They
are
authority
for
two
propositions
however.
1.
In
dealing
with
claims
arising
from
assignments
by
virtue
of
section
88
of
the
Bank
Act
it
is
to
federal
law
alone
which
we
must
look
in
determining
priority
and
this
is
not
affected
by
provincial
law
(see
also
the
judgment
of
Noël,
J
in
the
Persons
case
(supra)
in
this
connection).
2.
The
bank
is
itself
owner
of
the
right
to
claim
payment
of
the
account
receivable
even
if
the
claim
is
actually
invoiced
by
the
customer.
It
follows
that
there
cannot
be
any
set
off
or
compensation
which
the
purchaser
of
goods
from
the
bank’s
customer
may
have
against
the
said
customer.
The
bank
has
become
the
real
creditor
of
the
account
receivable
as
a
result
of
the
assignment
but
has
not
assumed
any
liability
for
the
debts
of
the
customer
which
claim
can
only
be
invoked
against
the
customer
itself.
In
dealing
with
assigned
claims
against
the
Crown
however
the
situation
is
quite
different
due
to
the
provisions
of
the
Financial
Administration
Act
(supra).
The
judgment
of
Jackett,
CJ
in
the
Court
of
Appeal
in
the
Clarkson
case
(supra)
is
authority
for
the
proposition
that
sections
80
and
81
of
the
Financial
Administration
Act
read
in
the
light
of
each
other
must
be
interpreted
as
stating
that
the
absolute
prohibition
of
assignments
in
section
80
only
applies
to
assignments
“by
way
of
charge
only”.
As
I
understand
it
the
present
claim
on
accounts
receivable
is
a
chose
in
action
but
the
Bank’s
claim
is
not
one
arising
‘‘by
way
of
charge
only”
so
that
it
was
capable
of
being
assigned,
but
to
give
effect
to
this
assignment
against
Defendant
the
strict
provisions
of
section
82
of
the
Financial
Administration
Act
have
to
be
complied
with.
This
conclusion
is
in
conformity
with
the
conclusion
of
Noël,
J
in
the
Persons
case
(supra).
Defendant’s
indebtedness
arose
out
of
a
contract
dated
February
13,
1974
with
Canabureau
for
the
purchase
of
merchandise
which
was
delivered
during
April
and
May
1974
and
therefore
preceded
the
notification
of
the
assignment
of
account
by
Canabureau
Ltd
to
the
bank
in
the
form
required
by
section
82
of
the
Financial
Administration
Act,
and
the
fact
that
the
defendant
was
aware
as
a
result
of
a
notation
on
the
invoices
of
the
assignment
to
the
bank
cannot
affect
this
as
the
Act
must
be
strictly
interpreted.
There
is
nothing
in
the
record
to
indicate
the
origin
of
the
claims
for
excise
tax,
but
it
is
evident
that
they
did
not
specifically
arise
from,
or
certainly
not
entirely
from,
sales
tax
on
the
manufacture
of
the
merchandise
sold
to
defendant,
but
rather
anteceded
this.
In
fact
plaintiff
concedes
that
in
permitting
its
customer
Canabureau
Ltd
to
carry
on
business
in
the
usual
way
despite
the
assignment
of
accounts
receivable
to
it,
it
has
to
provide
for
the
payment
of
taxes
and
other
accounts
payable
as
a
direct
result
of
the
continuation
of
the
business.
The
first
letter
from
the
Director
General
of
Headquarters
Operations
of
the
Department
of
National
Revenue
to
the
Department
of
Supply
and
Services
Accounts
Section
dated
March
25,1974
refers
to
the
amount
of
$29,000
due
as
sales
tax,
and
directs
attention
to
the
contract
entered
into
with
Canabureau
Ltd
and
requires
that
when
the
invoices
are
approved
for
payment
cheques
be
made
payable
to
the
Receiver
General
for
Canada.
A
following
letter
to
the
same
effect
on
April
10,
1974
now
states
that
the
amount
due
is
$40,000.
The
last
letter
on
June
10,
1974
gives
the
final
figure
of
$49,312.54
Reference
is
made
to
subsection
52(9)
of
the
Excise
Tax
Act
(supra)
which
provides
for
set-off
and
it
appears
to
me
that
this
section
can
and
must
be
invoked
against
Plaintiff.
Whether
it
could
still
be
invoked
following
notice
of
assignment
of
a
claim
against
the
Crown
duly
given
and
accepted
by
virtue
of
the
provisions
of
section
82
of
the
Financial
Administration
Act
is
not
a
question
which
I
am
called
upon
to
decide
in
the
present
proceedings.
Plaintiff
contends
in
answer
to
this
that
there
can
be
no
such
set-off
since
it
is
Canabureau
Ltd
which
was
indebted
to
the
Crown
under
the
provisions
of
the
Excise
Tax
Act,
while
it
is
the
bank
which
is
the
creditor
of
the
Crown
for
the
amounts
payable
by
vir-
tue
of
the
sale
contract.
I
believe
that
the
simple
answer
to
this
is
that
while
by
virtue
of
the
Flintoft
case
in
the
Supreme
Court
(supra)
the
claim
made
against
the
Crown
is
certainly
that
of
the
bank
and
not
of
Canabureau
Ltd,
this
must
be
read
in
the
light
of
the
provisions
of
section
82
of
the
Financial
Administration
Act
which
must
be
complied
with
in
order
to
affect
the
Crown
with
the
assignment
by
Canabureau
Ltd
to
the
bank.
While
the
claim
was
undoubtedly
validly
assigned
by
Canabureau
to
the
bank,
as
between
the
bank
and
the
Crown
the
Crown
was
not
affected
by
this
assignment
until
the
notice
was
given,
which
was
subsequent
to
the
date
at
which
compensation
had
taken
place.
Until
this
notice
was
given
Canabureau
must
be
considered
insofar
as
the
Crown
is
concerned
as
the
creditor
of
the
amounts
due
arising
from
the
furniture
sale,
notwithstanding
prior
assignment
of
these
accounts
by
Canabureau
to
the
bank,
and
hence
Canabureau
Ltd
was
the
Crown’s
creditor
as
well
as
debtor
at
the
same
time
to
the
extent
of
the
amounts
due
under
the
provisions
of
the
Excise
Tax
Act,
so
that
the
provisions
of
subsection
52(9)
thereof
were
properly
applied
in
order
to
set
same
off
by
way
of
compensation.
Defendant
raised
another
argument
to
the
effect
that
the
Crown
is
not
bound
in
any
event
by
the
provisions
of
section
88
and
following
of
the
Bank
Act.
In
support
of
this
reference
was
made
to
Section
16
of
the
Interpretation
Act
RSC
1970,
c
I-23
which
reads
as
follows:
16.
No
enactment
is
binding
on
Her
Majesty
or
affects
Her
Majesty
or
Her
Majesty’s
rights
or
prerogatives
in
any
manner,
except
only
as
therein
mentioned
or
referred
to.
and
defendant
contends
that
there
is
no
provision
to
be
found
anywhere
in
the
Bank
Act
specifically
making
it
binding
on
Her
Majesty
unlike
the
Bankruptcy
Act
RSC
1970,
c
B-3,
for
example
in
which
section
183
specifically
states:
183.
Nothing
in
this
Act
shall
interfere
with
or
restrict
the
rights
and
privileges
conferred
on
banks
and
banking
corporations
by
the
Bank
Act.
There
may
be
some
force
to
this
argument
but
I
will
not
make
any
definitive
finding
in
connection
therewith
in
view
of
the
far-reaching
consequences.
If
section
88
is
not
binding
on
the
Crown
in
any
circumstances
then
this
would
include
claims
for
income
tax,
unemployment
insurance
and
Canada
Pension
Plan
remittances
and
so
forth,
and
not
be
limited
to
excise
tax
claims
which
is
what
the
Court
is
dealing
with
in
the
present
case,
and
would,
as
plaintiff
points
out
seriously
hinder
commercial
banking
if
a
bank
upon
making
a
loan
guaranteed
by
a
section
88
assignment
had
to
investigate
to
see
whether
there
were
any
outstanding
tax
claims
of
any
sort
due
to
the
Crown,
the
amount
of
which
might
well
exceed
the
value
of
the
security
obtained
under
section
88
of
the
Bank
Act.
Defendant
raises
a
further
argument
based
on
subsection
27(3)
of
the
Excise
Tax
Act
(supra)
which
is
to
the
effect
that
a
person
other
than
the
manufacturer
or
producer
(such
as
the
Bank
in
this
case)
who
acquires
from
or
against
any
one
of
these
persons
the
right
to
sell
goods
whether
as
a
result
of
the
operation
of
law
or
of
a
transaction
not
otherwise
taxable,
himself
becomes
taxable
upon
the
sale
of
such
merchandise.
The
definition
section
of
the
said
Act
2.
(1)
reads
as
follows:
“manufacturer
or
producer’’
includes
(a)
the
assignee,
trustee
in
bankruptcy,
liquidator,
executor,
or
curator
of
any
manufacturer
or
producer
and,
generally,
any
person
who
continues
the
business
of
a
manufacturer
or
producer
or
disposes
of
his
assets
in
any
fiduciary
capacity,
including
a
bank
exercising
any
powers
conferred
upon
it
by
the
Bank
Act
and
a
trustee
for
bondholders,
(emphasis
mine).
By
virtue
of
this
argument
the
Bank
by
continuing
the
business
of
the
manufacturer
Canabureau
and
selling
the
goods
for
its
own
account
itself
became
liable
to
payment
of
the
tax.
If
this
argument
is
upheld
then
there
would
be
a
clear
right
of
compensation
or
set
off
between
the
Crown
and
the
Bank.
Plaintiff
contends
that
this
definition,
read
together
with
subsection
27(3)
and
subsection
52(9)
merely
means
that
the
Bank,
if
it
carries
on
or
permits
the
business
of
the
customer
to
be
carried
on
following
the
assignment
of
the
customer’s
accounts
to
it,
is
liable
for
any
taxation
resulting
from
sales
made
by
the
customer
and
that
such
taxes
can
of
course
be
set
off
against
amounts
due
by
the
Crown.
The
wording
of
subsection
52(9)
would
not
seem
to
limit
the
Crown’s
claim
for
Excise
Tax
to
taxes
due
on
that
specific
sale,
however,
and
in
the
present
case,
it
is
evident
that
the
claim
is
for
excise
tax
due
on
other
sales,
and,
from
the
amount
it
is
a
reasonable
conclusion
that
the
taxes
claimed
arose
after
the
assignment
to
the
Bank
under
section
88
which
took
place
in
1973.
It
appears
to
be
of
academic
interest
only
however
whether
the
set-off
takes
place
between
the
Crown
and
Canabureau
Ltd
in
accordance
with
my
first
conclusion,
or
whether
it
takes
effect
between
the
Crown
and
the
Bank
in
accordance
with
this
last
contention
of
defendant,
since
in
either
event
plaintiff’s
claim
was
properly
extinguished
by
compensation
and
cannot
be
sustained.
Plaintiff’s
action
will
therefore
be
dismissed
with
costs.
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