Hughes,
CJNB:—The
question
raised
by
this
appeal
concerns
the
priority,
if
any,
of
the
claim
of
Her
Majesty
in
right
of
the
Province
of
New
Brunswick
as
represented
by
the
Provincial
Tax
Commissioner
(herein
referred
to
as
“the
Crown”),
in
respect
of
amounts
of
tax
collected
by
the
bankrupt
pursuant
to
the
provisions
of
the
Social
Services
and
Education
Tax
Act,
RSNB
1973,
c
S-10
(herein
referred
to
as
“the
Tax
Act’’),
on
the
distribution
of
the
assets
of
the
bankrupt.
The
appeal
was
brought
by
the
Crown
against
the
decision
of
the
Judge
of
first
instance
filed
July
10,
1978,
which
held
that
the
Crown
ranked
only
as
a
preferred
creditor
in
respect
of
amounts
owing
by
the
bankrupt
under
the
Tax
Act.
In
so
deciding
the
learned
Judge
held
he
was
bound
by
the
decision
of
this
Court,
differently
constituted,
in
Moore
v
The
Queen
(1957),
15
DLR
(2d)
681;
37
CBR
112;
42
MPR
86,
wherein
it
was
held
that
s
17A
of
the
Social
Services
and
Education
Tax
Act,
RSNB
1952,
c
213,
as
amended
by
1955,
c
75,
section
3
(now
section
19
of
the
Tax
Act),
which
provides:
Every
vendor
who
collects
any
tax
under
this
Act
is
deemed
to
hold
the
same
in
trust
for
Her
Majesty
in
right
of
the
Province
and
for
the
payment
over
of
the
same
in
the
manner
and
at
the
time
provided
under
this
Act,
and
the
amount
shall,
until
paid,
form
a
lien
and
charge
on
his
entire
estate
or
on
the
entire
assets
of
his
estate
in
the
hands
of
any
trustee,
and
such
lien
or
charge
had
priority
over
all
other
claims
of
any
person.
merely
created
a
fiduciary
relationship
in
which
the
Crown
as
a
cestui
que
trust
was
entitled,
as
beneficial
owner,
to
the
tax
moneys
in
the
hands
of
the
vendor,
with
the
right
in
the
Crown
to
an
accounting
and,
upon
the
bankruptcy
of
the
vendor,
to
follow
the
funds
in
the
hands
of
the
trustee
in
bankruptcy
as
far
as
they
could
be
traced.
In
reaching
that
conclusion,
the
Court
held
that
the
Crown
was
not
a
“secured
creditor”
as
that
term
is
defined
in
paragraph
2(r)
of
the
Bankruptcy
Act,
namely:
“secured
creditor”
means
a
person
holding
a
mortgage,
hypothec,
pledge,
charge,
lien
or
privilege
on
or
against
the
property
of
the
debtor
or
any
part
thereof
as
security
for
a
debt
due
or
accruing
due
to
him
from
the
debtor
.
.
.
(emphasis
added)
because
the
relationship
of
creditor
and
debtor
did
not
exist
between
the
Crown
and
the
bankrupt
with
respect
to
taxes
collected
by
him.
It
is
to
be
observed
that
when
the
claim
on
behalf
of
the
Crown
in
the
case
of
Moore
v
The
Queen
was
filed
on
September
26,1956,
the
Tax
Act
did
not
expressly
create
a
creditor-debtor
relationship
between
the
Crown
and
a
vendor
who
had
collected
a
tax
under
the
Act,
although
it
provided
a
remedy
to
the
Crown
by
an
action
“as
for
a
debt
due”.
Section
37
of
the
Act,
at
that
time,
read:
The
amount
of
any
taxes
that
are
due
and
payable
under
this
Act
or
of
any
taxes
collected
or
deposits
received
by
a
vendor
on
behalf
of
Her
Majesty
in
right
of
the
Province
may
be
recovered
by
action
in
any
court
of
competent
jurisdiction
as
for
a
debt
due
to
Her
Majesty
in
the
right
of
the
Province,
and
the
court
may
make
an
order
as
to
the
costs
of
such
action
in
favour
of
or
against
Her
Majesty.
(Emphasis
added.)
By
“An
Act
to
Amend
the
Social
Services
and
Education
Tax
Act”,
1957
(NB),
c
59,
which
received
Royal
Assent
on
April
12,
1957,
the
above-quoted
section
37
of
the
Act
was
repealed
and
a
new
section
37
(now
section
39
of
the
Tax
Act),
was
substituted
therefor,
reading:
(1)
The
amount
of
any
tax
that
has
been
assessed
against
a
consumer
and
is
due
and
payable
under
this
Act,
and
the
amount
of
any
tax
collected
or
deposits
received
by
a
vendor
under
this
Act,
shall
constitute
a
debt
due
to
Her
Majesty
in
right
of
the
Province
and
may
be
recovered
by
action
in
Her
Name
in
any
Court
of
competent
jurisdiction.
(2)
The
Court
may
make
an
order
as
to
the
costs
of
such
action
in
favour
of
or
against
Her
Majesty.
On
this
appeal,
counsel
for
the
Crown
submitted
that
the
new
section
37
(now
section
39
of
the
Tax
Act)
created
a
creditor-debtor
relationship
between
the
Crown
and
the
vendor
and
thereby
gave
the
Crown
the
position
of
a
“secured
creditor”
under
the
Bankruptcy
Act
which
it
did
not
previously
have.
The
learned
Judge
of
first
instance
considered
this
submission
but
rejected
it
on
the
ground
that
the
Moore
case
was
only
“concerned
with
the
debtor-creditor
ralationship
as
defined
by
paragraph
2(r)
of
the
Bankruptcy
Act,
the
substance
of
which
has
not
been
changed”.
Counsel
for
the
trustee
in
bankruptcy,
on
the
other
hand,
submitted
that
subsection
39(1)
of
the
Tax
Act
merely
provides
the
Crown
with
a
right
to
claim
and
recover
any
action
the
amount
of
any
tax
that
has
been
assessed
against
a
consumer
and
is
due
and
payable,
and
the
amount
of
any
tax
collected
or
deposits
received
by
a
vendor
under
the
Act,
but
did
not
change
the
trustee-cestui
que
trust
relationship
provided
in
section
19
of
the
Tax
Act.
With
the
greatest
respect,
I
cannot
agree
with
the
opinion
expressed
by
the
learned
Judge
of
first
instance
as
I
have
reached
the
conclusion
that
subsection
39(1)
of
the
Tax
Act
does
more
than
give
a
right
to
the
Crown
to
recover
the
amount
of
any
tax
colleced
by
a
vendor
under
the
Act
since
the
subsection
declares
“the
amount
of
any
tax
collected
.
.
.
by
a
vendor
under
this
Act
shall
constitute
a
debt
due
to
Her
Majesty”.
The
Legislature,
in
the
exercise
of
its
legislative
jurisdiction
over
property
and
civil
rights,
unquestionably
has
the
power
to
declare
the
relationship
which
arises
between
the
Crown
and
a
vendor
with
respect
to
taxes
collected
by
him
under
the
Act
notwithstanding
the
relationship
so
declared
may
result
in
bringing
the
Crown
within
the
definition
of
a
“secured
creditor”
under
the
Bankruptcy
Act.
I
am
unable
to
see
any
repugnancy
in
a
vendor
being
deemed
to
hold
tax
moneys
which
he
has
collected
as
a
trustee
for
the
Crown
and
at
the
same
time
being
a
debtor
to
the
Crown
for
the
amount
of
tax
collected,
as
declared
by
section
39
of
the
Tax
Act.
In
my
opinion
the
basis
for
the
decision
in
the
Moore
case
disappeared
with
the
amendment
of
the
Act
by
1957,
c
59.
I
would
accordingly
allow
the
appeal
and
hold
that
Her
Majesty
in
right
of
the
Province
is
entitled
to
rank
as
a
“secured
creditor’’
for
the
amount
of
the
tax
collected
by
the
bankrupt
under
the
Tax
Act,
and
would
award
costs
of
this
appeal
to
Her
Majesty
the
Queen
in
right
of
the
Province
of
New
Brunswick,
to
the
trustee
in
bankruptcy,
and
to
the
post-proposal
creditors,
taxed
on
a
party-and-party
basis,
to
be
paid
out
of
the
general
assets
of
the
estate
of
the
bankrupt.
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