Kennedy,
J.:—
This
matter
comes
before
me
pursuant
to
the
order
of
McDer-
mid,
J.
pronounced
March
4,1993
for
the
following
relief:
A
determination
as
to:
Paragraph
5(ii):
The
priority
of
Revenue
Canada,
Taxation,
over
the
lien
claimants
to
any
amounts
payable
by
Ellis-Don
Construction
Ltd.
in
respect
of
the
notice
holdback
in
respect
of
a
requirement
to
pay
issued
pursuant
to
subsection
224(1.2)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
for
amounts
owing
by
Foster-Ross
Mechanical
Ltd.
to
Revenue
Canada,
Taxation.
Paragraph
5(iii):
The
priority
of
Revenue
Canada,
Taxation,
over
the
lien
claimant
Majestic
Supplies
Ltd.
and
E.H.
Price
Sales
Ltd.
in
respect
of
the
requirement
to
pay
for
amounts
owing
by
666659
Ontario
Inc.
o/a
Canam
Enterprises
to
Revenue
Canada,
Taxation.
The
other
matters
set
forth
in
paragraph
5
of
that
order
were
adjourned
to
a
further
date
to
be
set
by
the
trial
coordinator.
This
application
involves
the
interpretation
and
the
effect
of
service
of
a
requirement
to
pay
unremitted
source
deductions
under
subsection
224(1.2)
of
the
Income
Tax
Act
by
Revenue
Canada
which
is
described
as
an
"Enhanced
Requirement".
Does
the
Crown
have
priority
over
lien
claimants
to
payments
payable
by
the
contractor
in
respect
to
the
contract?
The
section
227
notice
reads
as
follows:
You
are
hereby
required
to
pay
to
the
Receiver
General
on
account
of
the
abovenamed
tax
debtor's
liability
under
subsection
227(10.1)
of
the
Income
Tax
Act.
.
.
forthwith
the
moneys
otherwise
and
immediately
payable
to
the
tax
debtor,
its
legal
representative
or
a
secured
creditor
who
has
a
right
to
receive
the
money
that
but
for
security
interest
in
favour
of
the
secured
creditor
would
be
payable
to
the
tax
debtor
or
his
legal
representative,
and
all
moneys
otherwise
payable
to
the
tax
debtor,
its
legal
representative
or
a
secured
creditor
described
in
(1)
which
you
will
be
within
90
days
liable
to
pay
and
as
when
the
moneys
become
payable.
Facts
Ellis-Don
entered
into
a
construction
contract
called
the
RAM
100
Project
with
London
Life,
the
owner
of
certain
property
in
London,
to
construct
an
improvement
on
the
property.
Ellis-Don
and
Foster-Ross
entered
into
a
contract
whereby
Foster-Ross
was
the
mechanical
sub-contractor
in
respect
to
the
improvement.
The
total
amount
of
the
contract
was
$1,037,661.15
plus
G.S.T.
Eleven
claims
for
lien
were
registered
against
the
title
to
the
property.
The
first
claim
for
lien
was
registered
January
8,
1992
and
the
last
claim
for
lien
was
registered
February
20,
1992.
The
lien
claimants
were
either
subcontractors
of
Foster-Ross
or
subcontractors
of
subcontractors
of
Foster-Ross.
The
claims
for
lien
and
applicable
certificates
of
action
were
vacated
under
section
44
of
the
Construction
Lien
Act,
R.S.O.
1990,
c.
C-30
pursuant
to
my
order
dated
February
22,
1992.
This
order
was
registered
in
the
registry
office
for
the
registry
division
of
Middlesex
East
on
February
27,1992
and
was
in
standard
form.
The
order
simply
directs
that
certain
described
claims
for
lien
be
vacated
and
the
only
certificates
of
action
registered
against
the
property
be
vacated
upon
the
posting
of
a
lien
bond.
On
March
20,
1992
the
Minister
of
National
Revenue
delivered
to
Ellis-Don
a
requirement
to
pay
("enhanced
requirement")
which
had
been
issued
pursuant
to
subsection
224(1.2)
of
the
Income
Tax
Act.
That
notice
required
Ellis-Don
to
pay
to
the
Receiver
General
on
account
of
Foster-Ross'
liability
the
sum
of
$64,921.33
which
would
otherwise
be
payable
to
Foster-Ross.
The
debt
is
in
respect
to
source
deductions
being
amounts
deducted
for
income
taxes,
Canada
Pension
Plan
contributions
and
unemployment
insurance
premiums.
The
enhanced
requirement
was
subsequently
renewed
by
Revenue
Canada.
The
amount
shown
to
be
owing
by
Foster-Ross
to
the
Crown
was
updated
in
subsequent
requirements
to
pay.
As
of
June
16,
1993
unremitted
source
deductions
for
the
1991
and
1992
taxation
years
totalled
$92,086.41.
On
November
30,1992
Revenue
Canada
delivered
to
Ellis-Don
a
requirement
to
pay
in
similar
form
in
respect
to
the
tax
liability
of
Canam.
This
requirement
to
pay
was
subsequently
renewed.
This
requirement
to
pay
was
subsequently
renewed
as
well
and
as
of
June
16,1993
was
in
the
amount
of
$35,542.77.
The
issue
Revenue
Canada,
Taxation
claims
priority
over
the
lien
claimants
pursuant
to
subsection
224(1.2)
of
the
Income
Tax
Act.
The
lien
claimants
had
a
charge
upon
holdbacks
required
to
be
retained
and
subject
to
valid
set-off
under
section
21
of
the
Construction
Lien
Act,
supra.
Ellis-Don
pursuant
to
subsection
44(1)
of
the
Construction
Lien
Act
obtained
an
ex
parte
order
vacating
liens
upon
the
posting
of
security.
Does
the
effect
of
the
order
of
February
27,
1992
expunge
the
liability
of
Ellis-
Don
and
hence
its
responsibility
to
Revenue
Canada
for
any
obligation
under
the
notice
to
pay?
Is
the
effect
of
the
February
27,
1992
order
to
grant
release
of
the
obligation
to
protect
moneys
owing
to
the
Receiver
General
from
holdback?
Following
argument
I
afforded
the
parties
further
opportunity
to
file
written
submissions,
and
these
have
now
been
received.
The
positions
of
the
parties
The
Crown's
position
Ellis-Don
is
advancing
a
set-off
against
the
balance
of
the
moneys
due
and
owing
to
Foster-Ross
after
ten
per
cent
statutory
holdback.
The
facts
are
somewhat
peculiar
to
the
circumstances
in
this
case.
The
total
contract
price
between
Ellis-Don
and
Foster-Ross
is
$1,037,661.15
plus
G.S.T.
Ellis-Don
has
paid
Foster-Ross
$814,015.90
plus
G.S.T.
The
lien
bond
posted
pursuant
to
the
February
27,
1992
order
was
$587,650.07
and
was
in
the
form
of
joint
and
several
liability
by
Seaboard
and
Ellis-Don
to
the
accountant.
Ellis-Don
has
not
discharged
this
liability
both
to
Foster-Ross
and
the
lien
claimants
by
posting
the
lien
bond.
Ellis-Don's
liability,
if
any,
will
be
determined
once
the
validity
of
Ellis-Don’s
claim
for
set-off
is
determined.
By
virtue
of
the
operation
of
the
Construction
Lien
Act,
supra,
any
moneys
owing
by
Ellis-Don
will
be
distributed
amongst
the
lien
claimants.
A
lien
bond
is
in
essence
a
guarantee
by
Seaboard
to
the
accountant
that
if
a
judgment
is
rendered
binding
lien
claimants
entitled
to
a
lien
and
Ellis-Don
fails
to
make
payment
into
court
of
the
amount
so
found,
then
Seaboard
is
jointly
and
severally
liable
to
make
such
payments.
Ellis-Don’s
potential
liability
has
not
been
discharged
by
the
posting
of
the
lien
bond.
A
lien
bond
simply
constitutes
security
to
ensure
that
once
Ellis-Don's
liability
pursuant
to
the
contract
is
established,
lien
claimants
shall
receive
any
amount
that
would
be
otherwise
payable
to
FosterRoss
pursuant
to
the
contract.
Section
44
makes
no
reference
to
the
discharge
of
liability
upon
payment
into
court
or
the
posting
of
the
bond.
The
purpose
of
section
44
is
simply
to
allow
any
person
to
post
security
which
will
take
the
place
of
the
premises
so
that
the
premises
may
be
freely
dealt
with.
Position
of
Ellis-Don
Ellis-Don
argues
that
by
the
time
the
first
enhanced
requirement
to
pay
was
delivered
by
Revenue
Canada
to
Ellis-Don
it
had
no
liability
to
Foster-Ross
because
it
had
already
posted
the
lien
bond
pursuant
to
the
Kennedy,
J.
order
with
the
accountant
and
the
liens
had
been
vacated
from
title.
Position
of
6666659
Ontario
Inc.
o/a
Canam
Enterprises
Where
an
order
is
made
under
subsection
44(1)
of
the
Construction
Lien
Act,
the
lien
ceases
to
attach
to
the
premises
and
ceases
to
attach
to
the
holdbacks
and
other
amounts
subject
to
a
charge
under
section
21
and
becomes
instead
a
charge
upon
the
amount
paid
into
Court
or
the
security
posted.
After
the
order
was
made,
the
liability
of
Ellis-Don
to
the
lien
claimants
in
the
respective
amounts
otherwise
payable
to
Foster-Ross
becomes
expunged.
The
charge
on
the
holdbacks
is
the
only
basis
upon
which
Ellis-Don
would
be
liable
to
the
lien
claimants
since
there
is
no
privy
of
contract
between
Ellis-Don
and
the
lien
claimants.
The
requirement
to
pay
section
of
the
Income
Tax
Act
is
inoperative.
In
order
for
the
requirement
to
pay
section
to
operate,
there
must
be
liability.
Liability
has
been
expunged
because
of
the
posting
of
the
security.
The
case
of
TransCas
Ltd.
v.
Mid-Plains
Contractors
Ltd.,
[1993]
1
C.T.C.
280,
93
D.T.C.
5391
(Sask.
C.A.),
is
authority
for
the
proposition
that
upon
the
making
of
an
order
and
the
posting
of
security
by
payment
into
the
Court,
the
contractual
liability
of
the
contractor
to
the
subcontractor
as
well
as
the
statutory
liability
to
the
lien
claimants
has
been
discharged.
The
discharge
of
that
liability
is
the
only
way
in
which
section
44
of
the
Construction
Lien
Act,
supra,
can
effectively
operate
to
allow
liens
to
be
vacated
to
permit
construction
projects
to
continue.
Position
of
Trane
Canada
The
position
of
Trane
Canada
supports
that
taken
by
Canam
Enterprises
—
the
effect
in
law
of
the
order
is
as
if
the
lien
had
not
been
preserved
or
written
notice
of
the
lien
had
not
been
given.
In
essence
the
liability
for
all
lien
claimants
either
for
statutory
holdback
or
for
notice
holdback
is
extinguished
upon
payment
into
court
either
by
way
of
cash
or
by
way
of
lien
bond.
The
payment
into
court
has
the
effect
of
not
only
vacating
liens
but
also
discharging
the
contractual
liability
to
the
contracting
party
as
well
as
a
statutory
liability
to
the
lien
claimants
in
relation
to
the
amounts
paid
in.
Therefore,
a
requirement
to
pay
received
from
Revenue
Canada
after
moneys
have
been
paid
into
court
pursuant
to
the
February
27,
1992
order
disentitles
Revenue
Canada
to
receive
any
moneys.
Moneys
held
in
trust
cannot
be
attached
by
garnishment
which
is
the
de
facto
effect
of
the
notice
served
by
Revenue
Canada.
Discussion
and
decision
The
effect
of
my
previous
order
of
February
27,
1992
is
found
in
subsection
44(6)
of
the
Construction
Lien
Act
which
reads
as
follows:
Where
an
order
is
made.
.
.
the
lien
ceases
to
attach
to
the
premises
and
ceases
to
attach
to
the
holdbacks
and
other
amounts
subject
to
a
charge
under
section
21
and
becomes
instead
a
charge
upon
the
amount
paid
into
court
or
security
posted,
and
the
owner
or
payer
shall,
in
respect
of
the
operation
of
sections
21,
23
and
24,
be
in
the
same
position
as
if
the
lien
had
not
been
preserved
or
written
notice
of
the
lien
had
not
been
given.
The
section
refers,
however,
to
lien
and
not
debt,
not
moneys
owing
nor
moneys
payable.
The
facts
in
the
TransGas,
supra,
case
are
somewhat
different.
The
effect
of
the
order
of
the
learned
Chambers
judge
cited
in
the
reasons
on
pages
284-94
(D.T.C.
5401-02)
was
to
discharge
the
contractual
liability
of
the
sub-contractor
MidPlains
as
well
as
a
statutory
liability
to
the
lien
claimants
in
relation
to
the
amounts
paid
in.
Here,
on
the
facts
at
hand
in
this
case,
the
payment
into
court
had
the
effect
of
releasing
Ellis-Don
to
the
extent
of
its
statutory
liability
but
not
its
contractual
liability.
The
bond
stands
as
security
or
in
lieu
of
and
in
place
of
the
property
described
in
the
claim
for
lien.
It
does
not
therefore
follow
that
Ellis-Don's
potential
contractual
liability
either
to
Foster-Ross
or
the
lien
claimants
has
been
discharged
by
posting
the
lien
bond.
Its
liability
will
be
determined,
if
any,
following
trial.
I
accept
the
submissions
made
by
counsel
for
Revenue
Canada
that
the
effect
of
posting
security
pursuant
to
section
44
does
not
acknowledge
the
validity
of
lien.
The
purpose
of
section
44
is
simply
to
post
security
which
will
take
the
place
of
the
premises
so
that
the
premises
can
be
freely
dealt
with
in
the
litigation.
In
the
result
then,
I
consider
the
enhanced
requirement
to
pay
as
an
undetermined
prior
claim
which
will
be
effective
and
will
be
given
priority
if
any
payment
is
found
to
be
owing
to
Ellis-Don
at
trial
with
respect
to
the
contract.
If
as
a
result
of
trial
it
is
determined
that
further
sums
are
properly
owing
to
Ellis-Don
by
the
tax
debtor
then
Revenue
Canada
will
have
the
right
to
intercede
and
collect
sums
owing
to
the
extent
of
the
indebtedness.
Order
to
issue
accordingly.
Costs
reserved
to
the
trial
judge.
Order
accordingly.
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