Lloyds Bank Canada v. International Warranty Co. Ltd., 89 DTC 5279, [1989] 1 CTC 401 (Alta. Q.B.), rev'd (1989), 60 DLR (4th) 272 (Alta CA)

McDonald J.:—This is an application made to determine the entitlement to certain moneys of a debtor, International Warranty Company Ltd. ("I.W."). The contest is between Lloyds Bank ("the bank") the holder of an assignment of book debts made by I.W. dated December 18, 1986, on the one hand, and Revenue Canada on the other. Revenue Canada claims priority and entitlement pursuant to provisions of the Income Tax Act.

The money in question was withheld by I.W. when it paid wages to its employees on December 22, 1987. The money withheld was in amounts intended to satisfy the claims of the Crown for income tax, unemployment insurance premiums and Canada Pension Plan premiums. The claim here by Revenue Canada is that it is entitled to these funds under the Income Tax Act. The account from which I.W. paid wages to its employees was with the Toronto-Dominion Bank. I.W. failed to withhold money from its employees as required by the Income Tax Act, as a result of which Revenue Canada claims $53,870.68. There was some money in the account at the Toronto- Dominion Bank, and it was garnisheed by employees for unpaid wages; the Toronto-Dominion Bank paid the sum garnisheed into court. In June 1988, the sheriff proposed distribution of a total of $15,698.76, and proposed that priority be given to certain wage claimants. (Upon the oral argument of this application, I dismissed the claim of the wage claimants for reasons given orally.)

The claim of Revenue Canada rests upon subsection 224(1.2) of the Income TAx Act, and, factually, upon a written "Requirement to Pay" dated January 28, 1988, delivered to the Toronto-Dominion Bank. It referred to I.W. as a tax debtor, and read as follows:

You are hereby required to pay to the Receiver General on account of the above- named tax debtor's liability under one or more of the Acts cited below.

(1) forthwith, the moneys otherwise and immediately payable to the tax debtor which you are liable to pay.

(2) all other moneys otherwise payable to the tax debtor which you will be, within 90 days, liable to pay, as and when the moneys become payable.

(3) where the moneys referred to in (1) and (2) include interest, rent, remuneration, a dividend, an annuity or other periodic payment, all such payments to be made by you to the tax debtor (at any time during or after the 90 days) until the liability is satisfied, and

(4) if the box on the right is x-ed, the moneys that within 90 days you would otherwise loan or advance to, or pay on behalf of, the tax debtor, and, if you are a bank, credit union, trust company or other similar person, pay in respect of a negotiable instrument issued by the tax debtor,

but do not pay hereunder more than $105,497.33 (the maximum payable).

I have before me neither evidence nor the advice of counsel as to the date the Toronto-Dominion Bank paid the money into court, but it was not argued that, if the payment into court preceded the delivery of the "Requirement to Pay”, that would defeat the claim of Revenue Canada. I could not see any merit in such an argument in any event, for the money in court remained, until it was lawfully disbursed, subject to whatever claims might lawfully be asserted against the Toronto-Dominion Bank in respect of that money, just as if the Toronto-Dominion Bank were still in possession of the money.

There is a separate application before me that was heard at the same time as that involving I.W. The separate application concerned an unrelated company, CTS Western Ltd. (“CTS”). Esso Resources Canada Limited owes money to CTS by virtue of a contract debt. That money remains in the possession of Esso Resources Canada Limited. It is subject to the competing claims of the Province of Alberta Treasury Branches, to which CTS owes money, and Revenue Canada. The Treasury Branches hold various security instruments, including a General Assignment of Book Debts made to it by CTS on May 14, 1987. Revenue Canada's claim is similar in nature to its claim against I.W. On September 8, 1988, Revenue Canada delivered a "Requirement to Pay" to Esso Resources Canada Limited in respect of CTS as a Tax Debtor.

The application to determine rights in the I.W. matter was brought under the provisions of the Execution Creditors Act, R.S.A. 1980, c.E-14, s. 31(9) which provides that a judge may determine a question in dispute in a summary manner as to the distribution of money held by the sheriff. The application in the CTS matter is brought pursuant to section 95 of the Business Corporations Act, S.A. 1981, c. B-15, which empowers the court, upon application by a receiver or receiver-manager, to "make any order it thinks fit". (The Treasury Branches had, on September 6, 1988, appointed Coopers and Lybrand Limited as Receiver and Manager of CTS.)

The applications to determine the rights to the moneys in the I.W. and CTS proceedings having raised the same issues, and counsel for Lloyds Bank and the Treasury Branches having decided to present arguments to the same effect, the two applications were heard together. The reasons now to be given, while they are framed in terms of the I.W. matter, apply mutatis mutandis to the CTS matter.

The following are the relevant provisions of the Income Tax Act that were effective in December 1987. First, there were the provisions that dealt with deductions:

s. 153(1) Every person paying at any time in a taxation year

(a) salary or wages or other remuneration

shall deduct or withhold therefrom such amount as may be determined in accordance with prescribed rules and shall, at such time as may be prescribed, remit that amount to the Receiver General on account of the payee's tax for the year under this Part or Part X1.3, as the case may be.

153.(3) When an amount has been deducted or withheld under subsection (1), it shall, for all the purposes of the 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.

[This provision in s. 153.(3) has no bearing on the issue. Its purpose, as the editor of Canadian Tax Reports 1988 says at s. 22, 400, "is to ensure that the payee cannot claim that he did not receive his full remuneration". It does not affect the entitlement to such money as between such parties as the present claimants.]

227(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.

Of more direct relevance to the issue before the court are the following provisions found in section 224. Of these, subsection (1) has been worded as shown since S.C. 1980-81-82-83, c. 140, s. 121(1), and subsecs. (1.2) and (1.3) have been worded as shown since S.C. 1987, c. 46, s. 66(1) (which received Royal Assent on December 17, 1987).

224.(1) Where the Minister has knowledge or suspects that a person is or will be, within 90 days, liable to make a payment to another person who is liable to make a payment under this Act (in this section referred to as the “tax debtor"), he may, by registered letter or by a letter served personally, require that person to pay forthwith, where the moneys are immediately payable, and, in any other case, as and when the moneys become payable, the moneys otherwise payable to the tax debtor in whole or in part to the Receiver General on account of the tax debtor's liability under this Act.

(1.2) Notwithstanding any other provision of this Act, the Bankruptcy Act, any other enactment of Canada, any enactment of a province or any law, where the Minister has knowledge or suspects that a particular person is or will become, within 90 days, liable to make a payment

(a) to another person who is liable to pay an amount assessed under subsection 227(10.1) or a similar provision, or to a legal representative of that other person (each of whom is in this subsection referred to as the “tax debtor"), or

(b) to a secured creditor who has a right to receive the payment that, but for a security interest in favour of the secured creditor, would be payable to the tax debtor, the Minister may, by registered letter or by a letter served personally, require the particular person to pay forthwith, where the moneys are immediately payable, and in any other case, as and when the moneys become payable, the moneys otherwise payable to the tax debtor or the secured creditor in whole or in part to the Receiver General on account of the tax debtor's liability under subsection 227(10.1) or a similar provision.

(1.3) In subsection (1.2),

'secured creditor’ means a person who has a security interest in the property of another person or who acts for or on behalf of that person with respect to the seucrity interest and includes a trustee appointed under a trust deed relating to a security interest, a receiver or receiver-manager appointed by a secured creditor or by a court on the application of a secured creditor, a sequestrator, or any other person performing a similar function;

security interest' means any interest in property that secures payment or performance of an obligation and includes an interest created by or arising out of a debenture, mortgage, hypothec, lien, pledge, charge, deemed or actual trust, assignment or encumbrance of any kind whatever, however or whenever arising, created, deemed to arise or otherwise provided for;

(4) Subsections (1) to (3) are applicable to assessments in respect of amounts

that are deducted or withheld after the day on which this Act is assented to.

[As assent was given on December 17, 1987, the provisions of s. 224(1) therefore applied to the deductions made in this case.]

Subsection 224(1.2) does not purport to create a charge or security interest in favour of Revenue Canada or even, in so many words, to give its claim a priority over other claimants. In 1986 (S.C. 1986, c. 6) there was an amendment to the Income Tax Act that was passed but has never been proclaimed. If it had been proclaimed it is conceded by counsel for the assignees of book debts in the present case that it would have made the Crown's position impregnable. The unproclaimed provision is part of section 227 and reads as follows:

(10.2) Notwithstanding any other provision of this Act, any other enactment of Canada, any enactment of a Province or any law where a person has been assessed under subsection (10.1) or a similar provision the amount determined under subsection (10.3) is secured by a charge upon the property referred to in subsection (10.4) and the charge has priority over all other claims and all other security interests.

(An assessment under subsec. (10.1) includes an assessment of any person for a penalty, interest and amounts deducted or withheld as required by the Act but not remitted to Revenue Canada).

Counsel for the two assignees of book debts rely heavily upon the reasoning found in Board of of Industrial Relations v. Avco Financial Services Realty Ltd. (1977), 81 D.L.R. (3d) 289, aff'd. [1979] 2 S.C.R. 699. The case turned upon the interpretation of subsection 5A(1) of the Payment of Wages Act, which was added to that statute (S.B.C. 1962, c. 45) by S.B.C. 1970, c. 35 and amended by S.B.C. 1973, c. 68. The section reads as follows:

5A.(1) Notwithstanding any other Act, the amount of wages set forth in a certificate issued under section (5) constitutes a lien and charge in favour of the Board payable in priority over any other claim or right, including those of the Crown in the right of the Province, and, without limiting the generality of the foregoing, such priority shall extend over every assignment, including an assignment of book debts, whether absolute or otherwise, every mortgage of real or personal property, and every debenture.

At page 292, Robertson, J.A., speaking for the majority in the Court of Appeal, said:

If the Legislative Assembly intends to produce by statute results that are so brutal and piratical, it has the power to do so, but the Courts will hold that that was its intention only if the language of the statute compels that interpretation.

In Craies on Statute Law, 6th ed. (1963), this is said at p. 118:

“As Brett M.R. said in A.G. v. Horner (1884), 14 Q.B.D. 245 at 257:

It is a proper rule of construction not to construe an Act of Parliament as interfering with or injuring persons' rights without compensation unless one is obliged to so construe it. Therefore rights, whether public or private, are not to be taken away, or even hampered, by mere implication from the language used in a statute, unless as Fry J. said in Yarmouth Corpn. v. Simmons (1878), 10 Ch. D. 518 at 527, 'the legislature clearly and distinctly authorise the doing of something which is physically inconsistent with the continuance of an existing right.’

In the Avco case, the courts had to determine the respective priorities of the Board of Industrial Relations and two mortgagees of the land of one Good- ine, an employer who owed wages to seven employees in sums totalling $8,804.80. There were not sufficient funds to pay the Board and the mortgagees and the issue was whether the statutory lien and charge of the Board had priority over the pre-existing mortgages of real property. The Court found that section 5A was not sufficiently clear to have that effect, that it attached only Goodine's equity of redemption in the land, and that it did not have priority over the mortgagees.

In the Supreme Court of Canada, the decision of the British Columbia Court of Appeal was upheld. Martland, J., delivering the judgment of the court, stated the argument of the Board as follows:

In essence, the Board's submission is that the statutory lien created by s. 5A applies to any property in which the employer has an interest and that it overrides rights acquired by third parties in such property at any time, even though such rights were acquired prior to the time when the lien comes into existence.

However, Martland, J. held (at page 706) as follows:

The property to which a s. 5A lien attaches is not defined or 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.

He concluded that the statutory lien did not affect a mortgage made prior to the lien attaching, and that the lien attached only to the employer's equity in the property.

The Avco case has been followed and applied in later cases. For example, in Royal Bank of Canada v. Ponderay Mechanical Services Ltd. (1984), 52 C.B.R. (N.S.) 82 (Alta. Q.B.), Crossley, J. held that section 100 of the Employment Standards Act should not be construed so as to deprive third parties of their pre-existing property rights. The section gave an employee "a priority over the claims and rights of (a) preferred, ordinary or general creditors . . .”

The court held this to give priority to an employee's claim over the claim of a secured creditor such as a debenture holder. Relying upon the Avco decision in the Supreme Court of Canada, Crossley, J. noted that the section failed to define the property to which the lien should attach.

Another case in which Avco was relied upon was British Columbia Development Corporation v. Spuncast Industries Inc. (1980), 38 C.B.R. (N.S.) 54 (B.C.S.C.). Wallace, J. considered section 93 of the Companies Act of B.C., which provided that "the wages or salary of any employee" shall be paid out of any assets coming into the hands of a receiver appointed under a debenture secured by a charge upon all or substantially all of the assets of a company, “in priority to any claim for principal or interest in respect of the debentures". Wallace, J. held that this provision did not give the employee priority for his wages over the principal and interest owed under a debenture. However, the case is of limited general value because subsection 93(2) of the Companies Act provided that "Payments made under this section shall be recovered out of assets of the company available for payments of general creditors to the extent of those assets"; Wallace J. held that this clearly restricted the priority of wage payments to those assets available for payment to general creditors.

Reference should also be made to the judgment of La Forest, J.A. [as he then was] in R. v. Estabrooks Pontiac Buick Ltd. (1983), 144 D.L.R. (3d) 21 (N.B.C.A.), which cited the Avco case. He held that the "presumption against interference with common law rights” is a "fundamental principle” of a constitutional nature which imposes upon a court, that is asked to construe a statute as taking the property of one person to pay the debts of another, a "duty to scrutinize the legislation with great care to see whether the legislature really intended to do this" (at page 31). He stated that the provincial Interpretation Act's equivalent of section 11 of the federal Interpretation Act, discussed below, "has nothing to do with this principle”. He continued (at page 33):

That provision was enacted to correct an earlier but vanishing distinction between the "strict" approach of the courts to penal and taxation statutes and the “liberal” construction given other statutes: see Driedger, p. 148 et seq. The courts, be it noted, still require that a penal or taxation statute clearly bring within their ambits those made subject to a penalty or tax either on the theory that Parliament intends to act reasonably or because it is difficult to determine a purpose beyond the words of the statute. In any event, the former dichotomy between strict and liberal construction was something quite separate from the presumption referred to earlier.

Maxwell on the Interpretation of Statutes, 11th ed. (1962) at page 276 stated :

Proprietary rights should not be held to be taken away by Parliament without provisions for compensation unless the legislature has so provided in clear terms. It is presumed, where the objects of the Act do not obviously imply such an intention, that the legislature does not desire to confiscate the property or to encroach upon the right of persons, and it is therefore expected that, if such be its intention, it will manifest it plainly if not in express words at least by clear implication and beyond reasonable doubt.

See also Craies on Statute Law, 7th ed. (1971), pp. 120-1.

Mr. Moen, on behalf of the Crown, relied heavily upon the reasoning of Christie, C.J.T.C. in Bracken v. M.N.R., [1984] C.T.C. 2922; 84 D.T.C. 1813 (Tax Court of Canada). In that case the issue was whether a taxpayer was entitled to deduct moving expenses from her taxable income. The court held that the provision in the Income Tax Act did not apply in the circumstances. The reasoning leading to that conclusion does not appear to have depended upon Christie C.J.T.C.'s lengthy analysis of the proper approach to be taken to the interpretation of the Income Tax Act. His comments in that regard may be regarded, therefore, as obiter dicta. Nevertheless they deserve careful attention. He described section 11 of the Interpretation Act, R.S.C. 1970, c. I-23, as "the foundation stone upon which the interpretative approach to the Income Tax Act rests". Section 11 reads as follows:

11. Every enactment shall be deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

He asserted that the application of section 11 to the Income Tax Act is inconsistent with the common law principle that requires strict interpretation of a penal or taxing statute. In reaching this conclusion he relied upon the judgment of Estey, J. in Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536; [1984] C.T.C. 294; 84 D.T.C. 6305. Part of the extracts quoted from Estey, J.'s judgment, found at pp. 575-8 [page 315 C.T.C.] is as follows:

Income tax legislation, such as the federal Act in our country, is no longer a simple device to raise revenue to meet the cost of governing the community. Income taxation is also employed by government to attain selected economic policy objectives. Thus, the statute is a mix of fiscal and economic policy.

In all this, one must keep in mind the rules of statutory interpretation, for many years called a strict interpretation, whereby any ambiguities in the charging provisions of a tax statute were to be resolved in favour of the taxpayer; the taxing statute was classified as a penal statute. See Grover & lacobucci, Materials on Canadian Income Tax (5th ed., 1983, pp. 62-65).

At one time, the House of Lords, as interpreted by Professor John Willis, had ruled that it was "not only legal but moral to dodge the Inland Revenue" ((1938), 16 Can. Bar Rev. 1, at p. 26), referring to Levene v. Inland Revenue Commissioners [1928] A.C. 217, at p. 227. This was the high water mark reached in the application of Lord Cairns’ pronouncement in Partington v. Attorney-General (1869), L.R. 4 H.L. 100, at p. 122-

'I am not at all sure that, in a case of this kind—a fiscal case—form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this: if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called equitable construction, certainly such a construction is not admissible in a taxing statute where you simply adhere to the words of the statute.'

— cited with approval in this Court in The King v. Crabbs, [1934] S.C.R. 523 at p. 525.

Professor Willis, in his article, supra, accurately forecast the demise of the strict interpretation rule for the construction of taxing statutes. Gradually, the role of the tax statute in the community changed, as we have seen and the application of strict construction to it receded. Courts today apply to this statute the plain meaning rule, but in a substantive sense so that if a taxpayer is within the spirit of the charge, he may be held liable . . .

While not directing his observations exclusively to taxing statutes, the learned author of "Construction of Statutes" (2nd ed. 1983) at p. 87, E.A. Driedger, put the modern rule succinctly:

'Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’.

Even though all that is true, it is to be observed that Christie, C.J.T.C. , at page 1818 of the Bracken case, uttered the following cautionary note:

To conclude that section 11 of the Interpretation Act is the approach to be followed in construing the Income Tax Act is not to say that the fundamental rules of interpretation are to be thrown to the wind and replaced by interpretive contortionism designed to arrive at a subjective or quasi-subjective notion regarding the objective or purpose of provisions of the Income Tax Act and regulations made thereunder. For example, what was said in Goweth v. M.N.R., 84 D.T.C. 1257 at 1258 applies in relation to section 11 :

'Words, phrases, sentences, etc. which appear in legislation cannot be constructed in isolation. They must be viewed in their entire context and their import may well differ depending on the nature of that environment.'

Also by way of further example the fundamental principle that prima facie the grammatical and ordinary sense of the words used in a statute is to be adhered to is unaffected. The key word in section 11 is “objects”. A search for and giving effect to the object or purpose of an enactment is what the interpretation of statutes is about. That is not always easy and is not necessarily made easier by applying section 11. . . .

There has been no suggestion that subsection 224(1.2) has as its object the achievement of some social or economic policy as compared with fiscal policy. It is a provision designed to maximize fiscal recovery. It therefore becomes unnecessary to explore the uncharted territory which is opened up by Estey, J.'s statement that a taxpayer may be held liable if he “is within the spirit of the charge".

As will become apparent, in my view subsection 224(1.2) has a plain meaning that is unambiguous, and therefore the implications of the reasoning of Christie, C.J.T.C. and of the authorities quoted by him do not pose any problems that require resolution in this case.

Before turning to the interpretation of subsection 224(1.2), it must be made clear that this court fully understands that an assignee of book debts acquires ownership of the property in equity even if the assignee has not given notice to the creditor and has not taken possession: Royal Bank of Canada v. A.G. Canada, [1977] 6 W.W.R. 170 (Alta. S.C.T.D., H.J. MacDonald J.), aff'd. [1979] 1 W.W.R. 479 (C.A.). In that case, a demand was made by the Minister of National Revenue pursuant to section 224 of the Income Tax Act as it then stood. The section (R.S.C. 1952, c. 148) then read as follows:

224.(1) When the Minister has knowledge or suspects that a person is or is about to become indebted or liable to make any payment to a person liable to make a payment under this Act, he may, by registered letter or by a letter served personally, require him to pay the moneys otherwise payable to that person in whole or in part to the Receiver General of Canada on account of the liability under this Act.

(2) The receipt of the Minister for moneys paid as required under this section is a good and sufficient discharge of the original liability to the extent of the payment. H.J. MacDonald, J., with whose reasons the Court of Appeal agreed, held that the only interest which the Minister could attach would be the interest of the taxpayer. At page 180, MacDonald, J. said that the Minister “could not attach that over which [the taxpayer] had no right of disposition”, and he added: “In other words, the provision does not enable the Crown to attach A's property to pay a debt of B.” As the taxpayer had given an assignment of book debts to the bank, the bank had become equitable owner of the debts of debtors owed to the taxpayer. MacDonald, J. held, at page 184, that subsection 224(1) "does not give the receiver general power to take the property of one to pay the debt of another".

Now, however, subsection 224(1.2) reads differently. Does it enable Revenue Canada to take the property of one to pay the debt of another? Mr. McCabe, counsel for the bank, argued as follows in his written submission:

Section 224(1.2) is capable of being interpreted as requiring only that a person owing money to a tax debtor or his secured creditor make the payment in care of the Receiver-General so that entitlement thereto may later be determined. This would allow Revenue Canada to determine what monies are payable and to whom. It would allow Revenue Canada a procedure whereby it could prevent funds from being payable to parties not entitled to a priority thereto, such as, for example, unsecured creditors, or the recipients of fraudulent preferences or conveyances. That Section might also be interpreted as giving Revenue Canada a floating charge upon the proprietary interests of the tax debtor.

As noted above, if it was intended that Revenue Canada was to deprive Lloyds Bank or the Treasury Branch of its pre-existing property rights, the legislation must be clear and specific to that purpose. Section 227(10.2) is clear and specific to that purpose, giving a charge and giving that charge priority, but Section 227(10.2) has not been proclaimed. Section 224(1.2) is not clear and specific; it does not give either a charge or a priority, and it cannot have been intended to accomplish such a taking of pre-existing property rights.

The answer to that argument, in my view, is found in a reading of the plain words of subsection 224(1.2). It empowers the Minister by letter to require a person (here, the Toronto-Dominion Bank) to pay "moneys otherwise payable to . . . the secured creditor . . . to the Receiver General on account of the tax debtor's liability . . .” If there are moneys that are otherwise payable to a secured creditor, it is clear that those moneys must be paid not to the secured creditor but to the Receiver General, and that the moneys are not to be held for some such purpose as safekeeping while entitlement is decided, but "on account of the tax debtor's liability”. In other words, the section clearly provides by implication that the moneys so paid become the property of the Crown; there is no other way that the tax debtor's liability could be satisfied.

It remains to be considered whether the assignee of book debts is a "secured creditor" as that phrase is used in subsection 224(1.2) and defined in subsection 224(1.3). Mr. McCabe argues that the bank (and Mr. Reeson says the same for the Treasury Branches), by virtue of its absolute assignment by I.W., is the owner of the accounts assigned, including the funds held by the Toronto-Dominion Bank. Thus, he argues, the bank is not a "secured creditor” because it does not hold a "security interest in the property of" I.W. but rather owns the property in question. The expression “a person who has a security interest in the property of another person" would ordinarily have to be interpreted as Mr. McCabe contends. However, the definition of "security interest" is so broad as to include moneys which have been equitably assigned by the tax debtor to, for example, a bank. The ownership by the bank of the funds that are the subject of the assignment constitutes an "interest in property". That interest in property is one which "secures payment" of the “obligation” of the tax debtor (I.W.). The provision of such security is the very purpose of the assignment of book debts. Moreover, the bank's interest is one "created by or arising out of [an] assignment. . . of any kind whatever, however or whenever arising . . .".

The statutory requirement of payment, and the prescribed effect of the payment, achieve the effect of clearly giving the claim of Revenue Canada rights to the moneys attached that override the existing rights of third persons such as the holders of assignments of book debts. This effect, "so brutal and piratical” to use the words of Robertson, J.A. in the Avco case, is achieved without creating a "charge" in favour of Revenue Canada. The technique employed by the draftsman of subsections 224(1.2) and (1.3) renders it unnecessary to consider the reasons in the Avco case as to lack of clarity of the subject-matter of the charge.

Because of the view I have taken of the plain meaning of subsection 224(1.2), it is unnecessary to deal with the argument advanced by counsel for the bank and the Treasury Branches, that the claim of Revenue Canada is in the nature of a floating charge that does not crystallize until the letter ("Requirement to Pay") is served, and that as between Revenue Canada and an assignee of book debts the claim of the assignee prevails if, as in these two cases, the assignee has given notice of its assignment to the debtor before Revenue Canada has served such a letter.

For these reasons, in the I.W. matter the money held by the Sheriff shall be paid to the Receiver General for Canada, and in the CTS matter the money held by Esso Resources Canada Limited shall be paid by it to the Receiver General for Canada.

In the written argument an issue was raised as to whether, if that should prove to be the result of my decision, the amount payable to Revenue Canada is limited to the amount of penalty involved. This issue involves interpretation of other provisions of the Income Tax Act than those I have referred to. The issue does not appear to have been gone into during oral argument, as far as my notes indicate. If this is an issue which must still be decided counsel should arrange a time when I may hear oral argument as to that issue.

Counsel may speak to costs, if costs are sought by the Crown.