Matheson,
J.:—This
is
an
application
on
behalf
of
the
Attorney
General
of
Canada
(the
"applicant")
for
a
declaration
that
it
has
priority
over
the
Prince
Edward
Island
Development
Agency
("PEIDA")
and
the
Inspector
of
Labour
Standards
("Inspector")
with
respect
to
a
claim
to
the
liquidated
assets
of
Environmental
Security
International
(Canada)
Ltd.
("ESI").
The
facts
are
set
out
in
the
appellant’s
factum
as
follows:
1.
E.S.I.
is
based
in
the
United
States
and
is
engaged
in
the
business
of
manufacturing
and
research
and
development.
E.S.I.
maintained
a
facility
in
Prince
Edward
Island,
located
in
the
West
Royalty
Industrial
Park.
P.E.I.D.A.
was
its
landlord.
2.
On
August
16,
1990,
a
writ
of
fieri
facias
("writ
of
fi
fa")
was
issued
from
the
Federal
Court
of
Canada,
Trial
Division
against
E.S.I.
in
the
amount
of
$23,601.66,
exclusive
of
fees,
poundage,
costs,
interests
and
other
incidental
expenses.
3.
On
October
4,
1990,
a
second
writ
of
fi
fa
was
issued
from
the
Federal
Court
of
Canada,
Trial
Division
against
E.S.I.
in
the
amount
of
$9,472.36,
exclusive
of
fees,
poundage,
costs,
interests
and
other
incidental
expenses.
4.
These
writs
were
issued
as
a
result
of
an
assessment
conducted
by
the
Minister
of
National
Revenue
and
a
determination
that
moneys
were
owing
to
the
Minister
of
National
Revenue
by
E.S.I.
pursuant
to
the
provisions
of
one
or
more
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
“Act’’),
Canada
Pension
Plan,
R.S.C.
1985,
c.
C-8
and
the
Unemployment
Insurance
Act,
R.S.C.
1985,
c.
U-1
for
unremitted
employee
source
deductions.
5.
A
subsequent
reassessment
by
the
Minister
of
National
Revenue
with
respect
to
the
second
writ
of
fi
fa,
dated
October
4,
1990,
decreased
the
amount
owing
from
the
initial
assessment
of
$9,472.36
to
the
sum
of
$5,872.80.
6.
On
September
12,
1990,
the
first
writ
of
fi
fa
in
the
amount
of
$23,601.66,
was
registered
with
the
prothonotary
of
the
Supreme
Court
of
Prince
Edward
Island
as
a
minute
of
certificate.
7.
On
October
26,
1990,
a
second
minute
of
certificate
was
registered
with
the
prothonotary
of
the
Supreme
Court
of
Prince
Edward
Island
with
respect
to
the
second
writ
of
fi
fa
in
the
amount
of
$5,872.80.
8.
On
January
16,
1991,
two
writs
of
Execution
were
issued
by
the
Deputy
prothonotary
of
the
Supreme
Court
of
Prince
Edward
Island,
Trial
Division,
against
E.S.I.
with
respect
to
the
two
minutes
of
certificate
aforementioned.
9.
On
that
same
date,
Roger
Doiron,
Chief
of
Collections
with
Revenue
Canada
Taxation
at
the
Charlottetown
District
Office
directed
the
Sheriff
of
Queens
County
to
act
under
the
writs
of
fi
fa
and
Execution
by
placing
the
assets
of
E.S.I.
under
seizure
without
delay.
10.
On
January
25,
1991,
at
approximately
11:45
a.m.,
the
Sheriff
of
Queens
County
caused
the
assets
of
E.S.I.,
located
at
E.S.I.'s
place
of
business
in
the
West
Royalty
Industrial
Park
to
be
placed
under
seizure.
The
writs
of
Execution
and
fi
fa
were
posted
on
the
premises
at
that
time
and
the
Deputy
Sheriff
caused
locks
on
the
premises
to
be
changed
for
purposes
of
effecting
seizure
of
E.S.I.'s
assets.
11.
A
short
while
later,
James
W.
Gormley,
solicitor
on
behalf
of
E.S.I.'s
landlord,
P.E.I.D.A.,
attended
at
E.S.I.'s
premises
and
posted
a
notice
of
the
landlord’s
claim
for
lien
for
rent
in
arrears.
12.
On
April
30,
1991,
E.S.I.
reduced
its
arrears
to
the
Minister
of
National
Revenue
by
making
a
payment
in
the
amount
of
$8,272.33.
13.
On
September
25,
1991,
the
Inspector
of
Labour
Standards
issued
a
notice
of
determination
on
behalf
of
five
former
employees
of
E.S.I.
for
unpaid
vacation
pay
and
wages,
pursuant
to
the
Labour
Act,
R.S.P.E.I.
1988,
Cap.
L-1,
in
the
amount
of
$1,520.10,
and
$34,045.42,
respectively.
14.
On
September
28,
1991,
the
assets
of
E.S.I.
seized
by
the
Sheriff
were
sold
by
public
auction.
Net
proceeds
of
the
sale
amounted
to
$13,070.50,
which
proceeds
were
paid
into
Court
pending
resolution
of
this
application.
15.
By
Order
of
Chief
Justice
K.
R.
MacDonald
of
the
Supreme
Court
of
Prince
Edward
Island,
Trial
Division,
dated
November
18,
1991,
the
Inspector
of
Labour
Standards
was
added
as
a
party
to
this
proceeding.
16.
E.S.I.,
though
duly
served,
has
chosen
not
to
participate
in
these
proceedings.
The
issue
before
the
Court
as
between
the
applicant
and
the
respondents,
the
Inspector
and
PEIDA,
is
who
has
priority
over
the
$13,070.50
representing
the
net
liquidated
assets
of
ESI.
The
applicant
claims
priority
under
subsections
227(4)
and
(5)
of
the
Income
Tax
Act
for
the
unremitted
employee
deductions
pursuant
to
the
Income
Tax
Act,
and
under
the
Unemployment
Insurance
Act,
supra,
and
the
Canada
Pension
Plan,
supra
for
unremitted
employee
deductions
under
these
statutes.
The
landlord,
PEIDA
claims
priority
as
compensation
for
rent
in
arrears
for
the
period
September
15,
1989
to
January
23,
1991
relying
on
sections
67
and
68
of
the
Landlord
and
Tenant
Act,
R.S.P.E.I.
1988,
c.
L-4
and
the
Inspector,
on
behalf
of
a
group
of
former
ESI
employees,
claims
priority
of
the
moneys
paid
into
Court
for
unpaid
vacation
pay
and
wages
pursuant
to
sections
72
and
91
respectively
of
the
Labour
Act,
R.S.PE.I.
1988,
c.
L-1.
I
will
deal
first
with
the
claim
of
the
applicant.
The
applicant
v.
the
Inspector
The
applicant
relies
on
subsections
227(4)
and
(5)
of
the
Income
Tax
Act
as
well
as
similar
provisions
in
the
Canada
Pension
Plan
and
the
Unemployment
Insurance
Act.
Subsections
227(4)
and
(5)
of
the
Income
Tax
Act
read
as
follows:
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.
(5)
Notwithstanding
any
provision
of
the
Bankruptcy
Act,
in
the
event
of
any
liquidation,
assignment,
receivership
or
bankruptcy
of
or
by
a
person,
an
amount
equal
to
any
amount.
(a)
deemed
by
subsection
(iv)
to
be
held
in
trust
for
Her
Majesty,
or
(b)
deducted
or
withheld
under
an
Act
of
a
province
with
which
the
Minister
of
Finance
has
entered
into
an
agreement
for
the
collection
of
taxes
payable
to
the
province
under
that
Act
that
is
deemed
under
that
Act
to
be
held
in
trust
for
Her
Majesty
in
Right
of
the
Province
shall
be
deemed
to
be
separate
from
and
form
no
part
of
the
estate
in
liquidation,
assignment,
receivership
or
bankruptcy,
whether
or
not
that
amount
has
in
fact
been
kept
separate
and
apart
from
the
person's
own
moneys
or
from
the
assets
of
the
estate.
[Emphasis
added.]
The
wording
in
the
C.P.P.
and
the
Unemployment
Insurance
Act,
similar
to
the
wording
of
subsection
227(5)
of
the
Income
Tax
Act,
was
considered
by
the
Supreme
Court
in
Dauphin
Plains
Credit
Union
Ltd.
v.
Xyloid
Industries
Ltd.,
[1980]
1
S.C.R.
1182,
[1980]
C.T.C.
247,
80
D.T.C.
6123.
Writing
for
the
majority,
Mr.
Justice
Pigeon
stated
at
page
1202
(C.T.C.
256):
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
date
of
the
receiving
order
and
consequently
was
to
be
deemed
to
have
been
realized
by
the
receiver
of
the
assets
subject
to
the
floating
charge.
In
M.N.R.
v.
Advanced
Lobster
Technology
Inc.
(1991),
92
Nfld.
&
P.E.I.R.
244,
41
E.T.R.
8
(P.E.I.C.A.),
the
Appeal
Division
of
the
Supreme
Court
of
Prince
Edward
Island
dealt
with
the
issue
of
priority
where
there
are
two
competing
deemed
statutory
trusts.
The
Inspector
was
claiming
a
deemed
trust
in
relation
to
vacation
pay,
based
on
section
72
of
the
Labour
Act,
regarding
certain
funds
paid
into
Court
from
the
realization
of
assets
of
Advanced
Lobster
Technology
Inc.
The
Minister
of
National
Revenue
was
claiming
a
deemed
trust
under
subsections
227(4)
and
(5)
of
the
Income
Tax
Act.
Section
72
of
the
Labour
Act
reads
as
follows:
72.
Notwithstanding
the
provisions
of
any
other
Act,
every
employer
shall
be
deemed
to
hold
vacation
pay
accruing
due
to
an
employee
in
trust
for
the
employee
and
for
payment
of
the
vacation
pay
over
in
the
manner
and
at
the
time
provided
under
section
71,
and
the
amount
shall
be
a
charge
upon
the
assets
of
the
employer
or
his
estate
in
his
hands
or
the
hands
of
a
trustee
and
shall
have
priority
over
all
other
claims
including
those
of
the
Crown.
The
Court
followed
the
decision
of
the
Manitoba
Court
of
Appeal
in
Manitoba
(Minister
of
Labour)
v.
Omega
Autobody
Ltd.
(Receiver
of),
59
D.L.R.
(4th)
34,
[1989]
5
W.W.R.
313
(Man.
C.A.);
additional
reasons
at
62
D.L.R.
(4th)
574,
[1990]
1
W.W.R.
467
(Man.
C.A.),
which
held
that
the
question
of
priority
is
to
be
determined
by
reference
to
the
time
the
particular
trust
is
impressed
upon
the
property
of
the
trustee.
In
that
case,
Mr.
Justice
Philp
stated
at
page
43
(W.W.R.
323):
In
my
view,
the
question
of
priority
is
to
be
determined,
not
by
reference
to
the
time
the
individual
trusts
are
created,
but
rather,
by
reference
to
the
time
when
the
particular
trust
is
impressed
upon
the
property
of
the
trustee.
At
page
249
(E.T.R.
16)
of
Advanced
Lobster
Technology,
supra,
Chief
Justice
Carruthers
stated:
The
same
situation
exists
on
this
appeal.
The
implied
trust
under
the
Labour
Act
becomes
impressed
upon
the
assets
of
Advanced
Lobster
Technology
Inc.
when
the
vacation
pay
was
earned
by
the
employees.
It
obviously
was
earned
by
the
employees
before
the
liquidation
of
the
assets
of
Advanced
Lobster
Technology
Inc.
which
was
the
earliest
point
in
time
the
assets
of
Advanced
Lobster
Technology
Inc.
could
have
been
pressed
with
the
implied
trust
created
under
the
Federal
legislation.
I,
therefore,
conclude
that
the
employees
claim
for
vacation
pay
takes
priority
over
the
respondent's
claim.
It
is
not
necessary
to
decide
the
priority
of
the
employees’
claim
for
wages
as
there
is
insufficient
onus
to
meet
their
claim
for
vacation
pay.
The
affidavit
of
William
Monteith,
Inspector
of
Labour
Standards,
was
filed
with
the
Court
as
part
of
the
motion
record
of
the
Inspector
on
November
18,
1991.
In
that
affidavit,
Mr.
Monteith
states
that
on
February
4,
1991,
he
received
a
complaint
from
Barbara
MacDonald,
a
former
employee
of
ESI
that
she
and
four
other
employees
were
owed
wages
and
vacation
pay
by
that
company
for
the
period
July
2,
1990
to
November
30,
1990.
Mr.
Monteith
further
states
that
he
conducted
an
audit
of
the
payroll
records
of
ESI
which
revealed
that
total
wages
owing
to
the
five
employees
was
in
the
amount
of
$34,045.42
and
the
total
vacation
pay
owing
was
in
the
amount
of
$1,520.10.
Accordingly,
based
on
the
decision
of
the
Appeal
Division
in
Advanced
Lobster
Technology,
supra,
I
find
that
the
claim
of
the
Inspector
for
vacation
pay
takes
priority
over
the
claim
of
the
applicant
in
the
total
amount
of
$1,520.10
vacation
pay.
With
respect
to
the
claim
of
the
applicant
for
priority
over
the
Inspector
for
wages,
section
91
of
the
Labour
Act
1990,
s.
5
am.
S.P.E.I.
reads
as
follows:
91.
(1)
Unpaid
wages
set
out
in
a
determination
constitute
a
lien,
charge
and
secured
debt
in
favour
of
the
Inspector
against
all
the
real
and
personal
property
of
the
obligator
including
money
due
or
accruing
due
to
the
obligator
from
any
source.
(2)
Notwithstanding
any
other
Act,
the
amount
of
a
lien
and
charge
of
secured
debt
referred
to
in
subsection
(1)
is
payable
and
enforceable
in
priority
over
all
liens,
judgments,
charges
or
any
other
claims
or
rights
including
those
of
the
Crown
in
the
Right
of
the
Province
and,
without
limiting
the
generality
of
the
foregoing,
the
amount
has
priority
over
(a)
an
assignment,
including
an
assignment
of
book
debts
whether
absolute
or
otherwise
and
whether
crystallized
or
not;
(b)
a
mortgage
of
real
or
personal
property;
(c)
a
debenture
charging
personal
property,
whether
crystallized
or
not;
and
(d)
a
contract,
account
receivable,
insurance
claim
or
proceeds
of
a
sale
of
goods;
whether
made
or
created
before
or
after
the
date
the
wages
were
earned
or
the
date
of
payment
for
the
benefit
an
employee
became
due.
Wages
are
defined
in
paragraph
61(1)(f)
of
the
Labour
Act
as
follows:
(f)
“wage”
or
"wages"
means
compensation
paid
or
payable
by
an
employer
to
an
employee
for
labour
or
services
measured
by
time,
piece
or
otherwise
but
does
not
include
tips
and
other
gratuities.
In
his
affidavit
of
November
15,1991,
William
Monteith
stated
he
prepared
a
notice
of
determination
dated
September
25,
1991,
containing
the
particulars
of
the
amounts
owing
in
respect
of
wages,
including
vacation
pay.
A
copy
of
this
determination
is
attached
to
his
affidavit.
Mr.
Monteith
further
stated
in
his
affidavit
that
the
notice
of
determination
has
not
been
served
upon
the
employer
because
he
was
not
aware
of
any
representative
of
the
employer
who
was
in
Canada
nor
of
an
address
of
a
representative
elsewhere
of
the
company.
In
the
present
case,
the
dispute
over
priority
is
between
a
deemed
trust
under
subsection
227(5)
of
the
Income
Tax
Act,
supra,
and
a
statutory
lien
under
subsection
91(1)
of
the
Labour
Act,
supra.
The
issue
of
timing
again
arises
as
to
when
does
the
security
become
impressed
upon
the
assets
of
ESI.
In
Omega
Auto
Body,
supra,
a
deemed
provincial
statutory
trust
was
created
under
subsection
3(4)
of
the
Payment
of
Wages
Act,
R.S.M.
1987,
c.
P31
which
reads
as
follows:
3
(4)
Every
employer
shall
be
deemed
to
hold
the
wages
due
or
accruing
due
to
an
employee
in
trust
for
the
employee
for
the
payment
of
the
wages
over
to
the
employee
in
the
manner
and
at
the
time
provided
by
law
and
the
employee
has
a
lien
and
charge
on
the
property
and
assets
of
the
employer
whether
or
not
the
amount
of
wages
has
been
kept
separate
and
apart
by
the
employer
and
whether
or
not
the
employer
is
in
receivership.
Mr.
Justice
Philp
went
on
to
hold
that
the
trust
arises
when
the
wages
had
been
earned,
regardless
of
the
fact
they
may
not
be
payable
until
some
future
time,
based
on
the
wording
of
subsection
3(4)
which
referred
to
"wages
due
or
accruing
due".
However,
subsection
91(1)
of
the
P.E.I.
Labour
Act
refers
to
"unpaid
wages”,
so
the
wages
would
have
to
have
been
earned,
payable
and
unpaid
before
the
lien
could
arise.
On
the
basis
of
Mr.
Monteith's
affidavit,
it
appears
these
wages
were
unpaid
as
of
November
30,
1990.
In
Advanced
Lobster
Technology,
supra,
the
Appeal
Division
held
that
the
trust
regarding
vacation
pay
was
impressed
upon
the
assets
of
the
company
when
it
was
earned
by
the
employees,
although
there
is
no
specific
reference
to
the
time
when
the
trust
attaches
in
the
wording
of
section
72
itself.
Subsection
91(1)
of
the
Labour
Act
states,
in
part:
Unpaid
wages
set
out
in
a
determination
.
.
.
constitute
a
lien,
charge
and
secured
debt
in
favour
of
the
inspector.
.
.
including
money
due
or
accruing
due.
.
.
.
Again
there
is
no
specific
reference
to
the
time
when
the
lien
attaches.
However,
the
references
to
money
accruing
due”
and".
.
.
whether
made
or
created
before
or
after
the
date
the
wages
were
earned
or
the
date
the
payment
for
the
benefit
of
an
employee
became
due”
suggests
the
lien
attaches
when
the
wages
are
earned
and
unpaid
rather
than
at
some
future
date.
By
giving
priority
to
unpaid
wages,
regardless
of
when
another
charge
was
placed
on
the
employer's
property,
the
statute
requires
one
to
look
at
the
time
the
debt
for
wages
was
incurred,
as
opposed
to
when
action
is
taken
to
collect
the
wages.
Subsections
90(1)
and
(2)
as
am.
by
S.P.E.I.,
1990,
c.
27
read
as
follows:
90
(1)
Where
an
employer
has
failed
to
pay
an
employee
(a)
the
amount
of
wages
due
such
employee;
and
(b)
any
vacation
pay
to
which
the
employee
is
entitled,
the
inspector
shall
determine
the
difference
between
the
amount
paid
to
the
employee
and
the
amount
to
which
the
employee
is
entitled.
(2)
The
inspector
shall
notify
an
employer
of
any
determination
made
under
subsection
(1),
and
may
require
the
employer
to
pay
to
him
in
trust
not
later
than
a
date
designated
in
such
notice,
any
unpaid
wages,
overtime
pay
or
vacation
pay,
not
exceeding
$5,000
owing
to
an
employee
as
determined
under
subsection
(1).
The
date
designated
in
the
notice
is
specified
as
a
date
for
payment
to
the
inspector.
Accordingly,
the
wages
must
have
been
due
prior
to
this
and
based
on
the
reasoning
in
Advanced
Lobster
Technology,
supra,
the
lien
must
have
arisen
at
the
time
the
wages
were
unpaid
as
well,
which,
at
the
latest,
would
be
November
30,
1990.
In
my
view,
the
words
"set
out
in
a
determination”
in
subsection
91(1)
merely
refer
to
the
mechanism
by
which
the
Inspector
of
Labour
Standards
calculates
the
amount
owing
to
an
employee
as
provided
for
in
section
90
of
the
Labour
Act,
supra,
and
not
to
the
date
the
lien
attaches
to
the
employer's
property.
Prior
to
November
30,
1990,
the
applicant
had
registered
two
judgments
against
ESI.
As
of
that
date,
the
competing
claims
were
between
a
registered
judgment
and
a
statutory
lien,
which
by
the
specific
wording
of
subsection
91(2)
gave
it
priority
over
”.
.
.
all
liens,
judgments
and
other
claims.
.
.
.”
However,
the
Appeal
Division
has
held
in
Advanced
Lobster
Technology,
supra,
that
priority
is
to
be
determined
at
the
time,
not
when
the
trust
is
created,
but
when
the
particular
trust
is
impressed
upon
the
property
of
the
trustee.
On
January
25,
1991,
the
Sheriff
of
Queens
County
seized
the
assets
of
ESI
under
writs
of
execution
and
fi
fa
issued
in
favour
of
the
applicant.
The
assets
were
sold
by
public
auction
on
September
28,1991
and
realized
net
proceeds
of
$13,070.50.
The
issue
is
again,
when
did
the
deemed
trust
under
the
federal
legislation
become
impressed
upon
the
property
of
the
trustee?
The
evidence
does
not
disclose
a
receivership
or
bankruptcy
or
an
assignment.
The
only
remaining
event
which
would
trigger
subsection
227(5)
is
liquidation.
In
Dauphin
Plains
Credit
Union,
supra,
the
meaning
of
the
word
“liquidation”
in
subsection
24(4)
of
the
Canada
Pension
Plan
and
subsection
71(3)
of
the
Unemployment
Insurance
Act
was
discussed
by
Mr.
Justice
Pigeon.
These
two
statutes
contain
wording
which
is
similar
to
the
provisions
of
the
Income
Tax
Act.
Mr.
Justice
Pigeon
said
at
1201-02
(C.T.C.
256):
It
appears
to
me
that
there
is
no
reason
not
to
give
the
word
liquidation”
its
wide
meaning
and
usual
language.
I
would
follow
the
reasoning
made
by
Middleton,
J.A.
in
Davey
v.
Gibson
(1930),
65
O.L.R.
379,
[1930]
3
D.L.R.
606
(Ont.
C.A.)
at
page
381
(D.L.R.)
607-608):
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
(Ontario),
R.S.O.
1927,
c.
218
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
date
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.
On
the
basis
of
this
reasoning,
it
appears
the
assets
of
ESI
were
in
the
process
of
being
liquidated
once
they
were
seized
by
the
Sheriff
under
a
writ
of
execution
issued
in
favour
of
the
applicant.
Accordingly,
the
trust
in
favour
of
the
applicant
was
impressed
on
these
assets
as
of
January
25,1991.
However,
a
prior
lien
had
been
already
attached
to
the
property
of
ESI
for
unpaid
wages
on
November
30,
1990.
This
interpretation
is,
in
my
view,
supported
by
the
reasoning
of
the
Manitoba
Court
of
Appeal
in
RoyNat
Inc.
v.
Ja-
Sha
Trucking
and
Leasing
Ltd.
(1992),
89
D.L.R.
(4th)
405,
[1992]
2
W.W.R.
641
(Man.
C.A.).
In
this
case
a
receiver
collected
accounts
receivable
and
the
Crown
claimed
priority
to
the
cash
excess
up
to
the
amount
due
to
her
under
the
Income
Tax
Act,
the
Canada
Pension
Plan,
supra,
and
the
Unemployment
Insurance
Act.
RoyNat,
the
secured
creditor,
maintained
its
claim
to
priority
by
reason
of
its
earlier
perfected
security
interest
under
the
Personal
Property
Security
Act
(Manitoba),
R.S.M.
1987,
c.
P35.
In
discussing
the
federal
legislation
in
question,
Mr.
Justice
Twaddle,
speaking
for
the
Court,
stated
at
page
409
(W.W.R.
646):
There
is
no
difficulty
understanding
the
first
quoted
of
the
subsections
under
each
statute
(including
subsection
227(4)).
Although
each
statute
calls
the
trust
created
by
it
a
deemed
one,
the
trust
is
in
truth
a
real
one.
The
employer
is
required
to
deduct
from
his
employees’
wages
the
amounts
due
by
the
employees
under
the
statute.
This
money
does
not
belong
to
the
employer
any
more.
It
belongs
to
the
employees.
The
employer
holds
it
in
a
statutory
trust
to
satisfy
their
obligations.
In
the
event
of
a
receiver
being
appointed
whether
to
manage
the
employer's
business
or
to
realize
the
assets,
the
receiver
acquires
no
beneficial
interest
in
the
trust
fund
either
on
its
own
behalf
or
on
behalf
of
those
entitled
to
the
assets.
The
money
held
in
trust
or
merely
transferred
to
it
as
trustee
bound
by
the
same
statutory
trust.
.
.
.
Under
the
second
quoted
subsection
of
each
statute
the
receiver's
appointment
triggers
what
appears
to
be
a
second
trust,
this
is
a
deemed
one.
The
subject
of
this
trust
is
said
to
be
an
amount
equal
to
the
amount
which
was
held
in
trust
by
the
employer
previously.
There
is
thus
certainty
as
to
the
amount
due
to
the
beneficiary
of
the
trust,
but
no
certainty
as
to
which
of
the
employer's
assets
are
subject
to
it.
[Emphasis
added.]
In
discussing
the
second
part
of
the
legislation
(subsection
227(5)),
Mr.
Justice
Twaddle
continued
at
page
410
(W.W.R.
647):
The
deemed
trust
arising
on
the
appointment
of
a
receiver
is
not
a
trust
at
all.
It
is
a
mechanism
for
tracing.
Her
Majesty
has
a
statutory
right
of
access
to
whatever
assets
the
employer
then
has,
out
of
which
to
realize
the
original
trust
debt
due
to
Her.
As
my
brother
Philp
pointed
out
in
Omega,
supra,
the
statutory
deemed
trusts
of
the
kind
we
are
dealing
with
here
have
previously
been
recognized
as
effective
by
this
Court
and
the
Supreme
Court
of
Canada:
see
Dauphin
Plains
Credit
Union
Ltd.
v.
Xyloid
Industries,
[1979]
2
W.W.R.
514,
96
D.L.R.
(3d)
65
(Man.
C.A.);
revd
in
part
[1980]
1
S.C.R.
1182,
[1980]
C.T.C.
247.
.
.
They
were
viewed
in
that
case
as
fictional
trusts
rather
than
a
means
of
tracing
but
the
result
is
the
same.
All
that
we
are
doing
is
explaining
the
operation
of
the
fiction.
[Emphasis
added.]
As
Mr.
Justice
Twaddle
stated
in
RoyNat,
supra,
at
the
time
of
liquidation
the
applicant
had
a
statutory
right
of
access
to
whatever
assets
the
employer
then
has
out
of
which
to
realize
the
original
trust
debt
due
to
her.
However,
these
assets
are
already
encumbered
by
the
lien
in
favour
of
the
Inspector
which
arose
and
attached
by
November
30,
1990
at
the
latest.
Accordingly,
as
between
the
Inspector
and
the
applicant,
the
Inspector
has
priority.
The
inspector
v.
P.E.I.D.A.
With
regard
to
the
claim
of
P.E.I.D.A.,
it
arises
pursuant
to
sections
67
and
68
of
the
Landlord
and
Tenant
Act,
supra,
which
read
as
follows:
67
(1)
Subject
to
section
68,
no
property
liable
to
be
taken
under
a
distress
for
rent
lying
or
being
in
or
upon
any
messuage,
lands
or
tenements
that
are
leased
is
liable
to
be
taken
by
virtue
of
any
execution
unless
the
party
at
whose
suit
the
execution
is
sued
out,
before
the
removal
of
the
property
from
off
the
premises
by
virtue
of
the
execution,
pays
to
the
landlord
of
the
premises
or
his
agent,
all
moneys
due
for
rent
for
the
premises
at
the
time
of
the
taking
of
the
property
by
virtue
of
the
execution,
if
the
arrears
of
rent
do
not
amount
to
more
than
the
rent
for
a
period
of
one
year,
in
the
case
of
rental
terms
of
less
than
one
year,
and
to
the
rental
due
for
a
period
of
two
years
in
all
other
cases.
(2)
The
party
at
whose
suit
the
execution
is
sued
out
having
paid
the
landlord
or
his
agent
the
rent
as
aforesaid,
may
proceed
to
execute
his
judgment
as
in
other
cases,
and
the
sheriff
or
other
officer
is
required
and
empowered
to
levy
and
pay
to
the
execution
creditor,
as
well
the
moneys
so
paid
for
rent
as
the
execution
money.
68.
Every
landlord
claiming
a
lien
for
rent
in
arrears
upon
any
property
taken
in
execution,
shall
deliver
to
the
sheriff
or
other
officer
making
the
levy
a
written
statement
signed
by
himself
or
his
agent,
that
sets
forth
the
amount
of
rent
claimed
to
be
in
arrears,
and
the
time
for
and
in
respect
of
which
such
rent
is
due,
otherwise
the
sheriff
or
other
officer
making
the
levy
shall
proceed
to
realize
under
such
execution
such
levy
as
if
no
rent
were
in
arrears;
but,
if,
after
the
landlord
has
complied
with
the
requirements
of
this
section,
the
provisions
of
section
67
as
to
the
payment
of
rent
are
not
complied
with
within
a
reasonable
time,
the
sheriff
or
other
officer
as
aforesaid
shall
withdraw
from
such
levy.
Under
these
sections,
an
execution
creditor
must
pay
arrears
of
rent
before
taking
over
property
subject
to
the
execution
order.
However,
section
72
and
subsection
91(2)
of
the
Labour
Act,
supra,
give
a
priority
to
a
claim
for
favour
of
vacation
pay
and
unpaid
wages
over
other
claims,
and
these
liens
attached
prior
to
either
the
notice
of
distress
or
execution
order.
In
addition,
section
67
of
the
Landlord
and
Tenant
Act,
supra,
refers
to
"property
liable
to
be
taken
under
a
distress
for
rent".
This
property
was
not
liable
to
be
taken
under
distress
for
rent
because
it
was
subject
to
a
prior
charge
in
favour
of
the
Inspector.
Accordingly,
the
claim
of
tne
PEIDA
is
dismissed.
In
summary,
the
Inspector
has
first
claim
to
the
funds
paid
into
Court
from
the
realization
of
the
assets
of
ESI
up
to
the
amount
of:
(a)
unpaid
vacation
pay,
and
(b)
unpaid
wages.
The
inspector
shall
have
one
set
of
costs
to
be
taxed,
to
be
divided
equally
between
the
applicant
and
the
PEIDA.
Order
accordingly.
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