Rothstein,
J.:—This
matter
involves
two
cases
argued
together,
both
between
Her
Majesty
the
Queen
(The
Minister
of
National
Revenue,
Customs
and
Excise
and
referred
to
herein
as
the
Minister)
and
the
National
Bank
of
Canada
(referred
to
herein
as
the
bank).
The
issue
in
both
cases
is
whether
or
not
the
Minister,
under
subsection
52(10)
of
the
Excise
Tax
Act,
R.S.C.
1970,
c.
E-13,
is
entitled
to
federal
sales
tax
associated
with
book
debts
collected
by
the
bank
pursuant
to
security
which
included
general
assignments
of
book
debts.
The
evidence
in
both
cases
was
by
way
of
agreed
statements
of
facts
and
agreed
upon
exhibits.
The
following
summary
of
the
facts
is
taken
from
paragraphs
2
and
3
of
the
defendant's
notes
of
argument
and
the
submissions
of
counsel.
In
action
No.
T-532-89,
the
bank
loaned
funds
to
IHEC
Ltd.
("IHEC"),
a
licensed
manufacturer
for
the
purposes
of
the
Excise
Tax
Act.
The
bank
took
back
security
for
this
loan
which
included
a
general
assignment
of
book
debts.
That
security
interest
was
registered
under
the
Corporations
Securities
Registration
Act,
R.S.O.
1980,
c.
94
and
the
Personal
Property
Security
Act,
R.S.O.
1980,
c.
375.
IHEC
defaulted
upon
its
indebtedness
to
the
bank
and
the
bank
appointed
a
receiver
and
manager
of
IHEC's
property
on
or
about
November
12,
1985.
On
or
about
November
15,
1985,
an
interim
receiver
of
IHEC
was
appointed
by
Order
of
the
Supreme
Court
of
Ontario
pursuant
to
the
provisions
of
the
Bankruptcy
Act,
R.S.C.
1970
c.
B-3.
On
or
about
November
28,
1985,
the
Minister
served
the
bank
with
a
demand
in
respect
of
federal
sales
tax
pursuant
to
subsection
52(10)
of
the
Excise
Tax
Act.
On
or
about
January
28,
1986
a
receiving
order
was
made
against
IHEC
under
the
provisions
of
the
Bankruptcy
Act.
The
bank
collected
the
book
debts
of
IHEC.
In
this
action,
the
Minister
claims
the
amount
of
$79,998.60
as
the
federal
sales
tax
applicable
to
the
transactions
giving
rise
to
the
book
debts
collected
by
the
bank
after
the
date
of
the
Minister's
notice
under
subsection
52(10)
of
the
Excise
Tax
Act.
In
action
No.
T-533-89,
the
bank
loaned
funds
to
Thrush
Incorporated
("Thrush"),
a
licensed
manufacturer
for
the
purposes
of
the
Excise
Tax
Act.
The
bank
took
back
security
for
this
loan
which
included
a
general
assignment
of
book
debts.
That
security
was
registered
under
the
Personal
Property
Security
Act
of
Ontario.
Thrush
defaulted
upon
the
indebtedness
to
the
bank
and
the
bank
appointed
a
receiver
and
manager
of
Thrush's
property
on
or
about
October
18,
1985.
On
or
about
November
1,1985,
the
Minister
served
the
bank
with
a
demand
in
respect
of
federal
sales
tax
pursuant
to
subsection
52(10)
of
the
Excise
Tax
Act.
On
November
22,
1985,
pursuant
to
an
application
by
the
bank
to
the
Supreme
Court
of
Ontario,
a
receiver
and
manager
of
Thrush
was
appointed
by
that
Court.
On
or
about
November
25,
1985
a
receiving
order
was
made
against
Thrush
under
the
provisions
of
the
Bankruptcy
Act.
The
bank
collected
the
book
debts
of
Thrush.
In
this
action,
the
Minister
claims
the
amount
of
$54,877.33
as
the
federal
sales
tax
applicable
to
the
transactions
giving
rise
to
the
book
debts
collected
by
the
bank
after
the
date
of
the
Minister's
notice
under
subsection
52(10)
of
the
Excise
Tax
Act.
The
primary
relevant
statutory
references
in
this
case,
in
effect
at
the
relevant
time,
are
paragraph
2(1)(a),
subparagraph
27(1)(a)(i),
and
subsections
52(10)
and
(11)
of
the
Excise
Tax
Act,
R.S.C.
1970,
c.
E-13,
as
amended,
and
section
107
of
the
Bankruptcy
Act,
R.S.C.
1970,
c.
B-3.
The
Excise
Tax
Act
2.(1)
In
this
Act
"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,
27.(1)
There
shall
be
imposed,
levied
and
collected
a
consumption
or
sales
tax
at
the
rate
specified
in
subsection
(1.1)
on
the
sale
price
of
all
goods
(a)
produced
or
manufactured
in
Canada
(i)
payable,
in
any
case
other
than
a
case
mentioned
in
subparagraph
(ii)
or
(iii),
by
the
producer
or
manufacturer
at
the
time
when
the
goods
are
delivered
to
the
purchaser
or
at
the
time
when
the
property
in
the
goods
passes,
whichever
is
the
earlier,
52.(10)
When
the
Minister
has
knowledge
that
any
person
has
received
from
a
licensee
any
assignment
of
any
book
debt
or
of
any
negotiable
instrument
of
title
to
any
such
debt,
he
may,
by
registered
letter,
demand
that
such
person
pay
over
to
the
Receiver
General
out
of
any
moneys
received
by
him
on
account
of
such
debt
after
the
receipt
of
such
notice,
a
sum
equivalent
to
the
amount
of
any
tax
imposed
by
this
Act
upon
the
transaction
giving
rise
to
the
debt
assigned.
(11)
The
person
receiving
any
such
demand
shall
pay
the
Receiver
General
according
to
the
tenor
thereof,
and
in
default
of
payment
is
liable
to
the
penalties
provided
in
this
Act
for
failure
or
neglect
to
pay
the
taxes
imposed
by
Parts
III
to
V.
The
Bankruptcy
Act
107.(1)
Subject
to
the
rights
of
secured
creditors,
the
proceeds
realized
from
the
property
of
a
bankrupt
shall
be
applied
in
priority
of
payment
as
follows:
(a)
in
the
case
of
a
deceased
bankrupt,
the
reasonable
funeral
and
testamentary
expenses
incurred
by
the
legal
personal
representative
of
the
deceased
bankrupt;
(b)
the
costs
of
administration,
in
the
following
order,
(i)
the
expenses
and
fees
of
the
trustee,
(ii)
legal
costs;
(c)
the
levy
payable
under
section
118;
(d)
wages,
salaries,
commissions
or
compensation
of
any
clerk,
servant,
travelling
salesman,
labourer
or
workman
for
services
rendered
during
three
months
next
preceding
the
bankruptcy
to
the
extent
of
five
hundred
dollars
in
each
case;
together
with
in
the
case
of
a
travelling
salesman,
disbursements
properly
incurred
by
him
in
and
about
the
bankrupt's
business,
to
the
extent
of
an
additional
three
hundred
dollars
in
each
case,
during
the
same
period;
and
for
the
purposes
of
this
paragraph
commissions
payable
when
goods
are
shipped,
delivered
or
paid
for,
if
shipped,
delivered
or
paid
for
within
the
three-month
period,
shall
be
deemed
to
have
been
earned
therein;
(e)
municipal
taxes
assessed
or
levied
against
the
bankrupt
within
two
years
next
preceding
his
bankruptcy
and
that
do
not
constitute
a
preferential
lien
or
charge
against
the
real
property
of
the
bankrupt,
but
not
exceeding
the
value
of
the
interest
of
the
bankrupt
in
the
property
in
respect
of
which
the
taxes
were
imposed
as
declared
by
the
trustee;
(f)
the
landlord
for
arrears
of
rent
for
a
period
of
three
months
next
preceding
the
bankruptcy
and
accelerated
rent
for
a
period
not
exceeding
three
months
following
the
bankruptcy
if
entitled
thereto
under
the
lease,
but
the
total
amount
so
payable
shall
not
exceed
the
realization
from
the
property
on
the
premises
under
lease,
and
any
payment
made
on
account
of
accelerated
rent
shall
be
credited
against
the
amount
payable
by
the
trustee
for
occupation
rent;
(g)
the
fees
and
costs
referred
to
in
subsection
50(2)
but
only
to
the
extent
of
the
realization
from
the
property
exigible
thereunder;
(h)
all
indebtedness
of
the
bankrupt
under
any
Workmen's
Compensation
Act,
under
any
Unemployment
Insurance
Act,
under
any
provision
of
the
Income
Tax
Act
or
the
Income
War
Tax
Act
creating
an
obligation
to
pay
to
Her
Majesty
amounts
that
have
been
deducted
or
withheld,
pari
passu;
(i)
claims
resulting
from
injuries
to
employees
of
the
bankrupt
to
which
the
provisions
of
any
Workmen's
Compensation
Act
do
not
apply,
but
only
to
the
extent
of
moneys
received
from
persons
or
companies
guaranteeing
the
bankrupt
against
damages
resulting
from
such
injuries;
(j)
claims
of
the
Crown
not
previously
mentioned
in
this
section,
in
right
of
Canada
or
of
any
province,
pari
passu
notwithstanding
any
statutory
preference
to
the
contrary.
(2)
Subject
to
the
retention
of
such
sums
as
may
be
necessary
for
the
costs
of
administration
or
otherwise,
payment
in
accordance
with
subsection
(1)
shall
be
made
as
soon
as
funds
are
available
for
the
purpose.
(3)
A
creditor
whose
rights
are
restricted
by
this
section
is
entitled
to
rank
as
an
unsecured
creditor
for
any
balance
of
claim
due
him.
Position
of
the
parties
Counsel
for
the
Minister
made
two
arguments.
The
primary
argument
based
on
subsections
52(10)
and
(11),
while
the
alternative
argument
based
on
paragraph
2(1)(a)
and
subsection
27(1)
of
the
Excise
Tax
Act.
The
gist
of
the
primary
argument
made
by
counsel
for
the
Minister
was
that
the
express
words
of
subsection
52(10)
of
the
Excise
Tax
Act
provide
that
when
an
assignment
of
book
debts
is
taken
by
a
creditor
as
security,
the
sales
tax
associated
with
the
collections
made
by
the
creditor
pursuant
to
the
assignment
must
be
paid
to
the
Minister
by
the
creditor.
The
fact
that
a
bankruptcy
takes
place
is
irrelevant
since
the
creditor
is
secured
and
the
claim
of
the
Minister
attaches
to
collection
under
the
security.
The
alternative
argument
made
by
counsel
for
the
Minister
was
that
the
bank
fell
within
the
definition
of"
manufacturer
or
producer"
under
paragraph
2(1)(a)
of
the
Excise
Tax
Act
and
as
such
was
subject
to
subsection
27(1)
of
that
Act
which
imposed
upon
producers
and
manufacturers,
the
requirement
to
pay
a
tax
on
the
sale
price
of
all
goods.
Counsel
for
the
bank
submitted
that
subsection
52(10)
of
the
Excise
Tax
Act
should
be
construed
to
entitle
the
Minister
to
sales
tax
only
on
sales
made
after
the
Minister
issues
a
notice
pursuant
to
that
subsection,
i.e.,
on
sales
made
by
the
bank
once
it
takes
over
the
operation
of
its
customer.
It
was
submitted
that
pursuant
to
its
security,
the
bank
was
the
legal
owner
of
the
receivables
and
had
an
absolute
right
to
them.
To
allow
the
Minister
to
enforce
a
claim
for
amounts
collected
by
the
bank
on
sales
which
were
made
by
the
bank’s
customer,
would
amount
to
confiscation
of
the
bank’s
property
without
compensation.
For
the
Excise
Tax
Act
to
have
such
an
effect,
the
intention
would
have
to
be
stated
clearly
and
beyond
reasonable
doubt.
It
was
submitted
that
no
such
clear
intention
could
be
deduced
from
the
Excise
Tax
Act.
It
was
also
asserted
by
the
bank’s
counsel
that
the
sales
tax
obligation
falls
upon
the
manufacturer
or
producer
and
not
on
the
customer
of
the
manufacturer
or
producer.
The
manufacturer
or
producer
is
not
acting
as
a
trustee
or
agent
for
the
Minister
in
the
collection
of
sales
tax
from
others.
The
sales
tax
is
not
a
discreet
or
identified
portion
of
a
receivable.
The
sales
tax
obligation
is
a
simple
debt
of
the
manufacturer
or
producer
to
the
Minister.
As
such,
there
is
no
legal
basis
for
the
bank
to
be
obligated
to
pay
sales
tax
on
amounts
it
recovers
under
a
general
assignment
of
book
debts.
Alternatively,
the
bank's
counsel
argued
that
because
a
bankruptcy
occurred
in
each
of
the
two
cases
here,
the
scheme
of
distribution
of
property
under
section
107
of
the
Bankruptcy
Act
governed,
and
that
rights
in
other
legislation
such
as
subsection
52(10)
of
the
Excise
Tax
Act
were
displaced
by
the
Bankruptcy
Act.
The
effect
in
this
case
would
be
to
leave
the
book
debts
entirely
to
the
bank
with
the
ranking
of
the
Minister's
claim
for
sales
tax
established
under
paragraph
107(1)(j)
of
the
Bankruptcy
Act.
Analysis
In
my
view,
resolution
of
the
relationship
between
the
Excise
Tax
Act
and
the
Bankruptcy
Act
is
determinative
of
the
issue
in
this
case.
The
contest
between
subsection
52(10)
of
the
Excise
Tax
Act
and
section
107
of
the
Bankruptcy
Act
has
been
dealt
with
in
two
cases
to
which
I
was
referred
at
trial.
In
The
Queen
v.
Continental
Bank
of
Canada,
[1985]
2
C.T.C.
134,
85
D.T.C.
5332
(F.C.T.D.),
the
bank's
customer
made
an
assignment
in
bankruptcy.
The
bank
had
an
assignment
of
book
debts.
The
Minister
served
a
demand
on
the
bank
pursuant
to
subsection
52(10)
of
the
Excise
Tax
Act.
The
bank
subsequently
received
proceeds
of
sales
of
its
customer
pursuant
to
its
assignment
of
book
debts.
Cullen,
J.
found
at
page
137
(D.T.C.
5335):
In
this
case,
it
is
clear
that
at
the
date
of
the
assignment
in
bankruptcy,
namely
November
24,
1982,
the
book
debts
were
the
property
of
the
defendant,
and
not
the
property
of
the
bankrupt,
and
so
the
assignment
in
bankruptcy
did
not
affect
the
book
debts
in
question.
He
concluded
that
the
provisions
of
the
Bankruptcy
Act
did
not
defeat
the
claim
of
the
Minister
under
the
Excise
Tax
Act.
The
bank,
in
receipt
of
funds
pursuant
to
security
which
entitled
it
to
the
book
debts
of
the
bankrupt,
had
to
pay
over
to
the
Minister
the
sales
tax
associated
with
those
book
debts
pursuant
to
subsection
52(10).
In
A.-G.
of
Canada
v.
Bank
of
British
Columbia,
[1987]
1
C.T.C.
153,
Davies,
J.
of
the
Supreme
Court
of
British
Columbia
dealt
with
the
same
contest
between
the
Bankruptcy
Act
and
the
Excise
Tax
Act.
He
stated
at
pages
154-55:
This
matter
is
a
question
of
interpretation
of
the
two
Acts,
the
Bankruptcy
Act
and
the
Excise
Tax
Act,
and
further,
how
they
are
to
be
applied
in
this
particular
situation.
I
find
that
the
Bankruptcy
Act
should
apply
to
these
funds
paid
to
the
Bank
by
the
trustee,
as
Parliament
must
have
intended
that
Act
to
govern
the
affairs
of
Oxford
once
it
was
in
bankruptcy.
After
determining
the
rights
of
secured
creditors,
one
then
considers
the
priorities
listed
in
subsections
(a)
to
(j)
[of
section
107
of
the
Bankruptcy
Act].
By
paragraph
7
of
the
agreed
statement
of
facts,
the
parties
agree
that
the
Bank
received
payment
from
the
trustee
as
a
secured
creditor.
The
amount
paid
was
pursuant
to
an
assignment
and
included
accounts
receivable
of
Oxford
in
respect
of
which
excise
tax
had
become
payable.
In
my
judgment,
the
prerequisites
of
subsection
52(10)
of
the
Excise
Tax
Act
have
been
met
and
Her
Majesty
is
entitled
to
the
tax
claimed.
Thus,
Davies,
J.
found
that
in
a
contest
between
subsection
52(10)
of
the
Excise
Tax
Act
and
subsection
107(1)
of
the
Bankruptcy
Act,
the
provisions
of
the
Excise
Tax
Act
prevailed
and
the
Minister
was
entitled
to
sales
tax
on
monies
collected
by
the
bank
pursuant
to
an
assignment
of
book
debts.
In
both
decisions
it
appears
that
the
Minister’s
claims
under
subsection
52(10)
of
the
Excise
Tax
Act
were
treated
as
claims
against
a
secured
creditor
related
to
proceeds
received
by
the
secured
creditor
under
its
security.
Notwithstanding
these
two
decisions,
counsel
for
the
bank
drew
to
my
attention
a
line
of
authorities
which
he
submitted
would
have
me
reach
the
opposite
conclusion.
Deputy
Minister
of
Revenue
(Quebec)
v.
Rainville,
[1980]
1
S.C.R.
35,
105
D.L.R.
(3d)
270,
dealt
with
claims
of
the
Crown
under
the
Quebec
Retail
Sales
Tax
Act,
R.S.Q.
1964,
c.
71.
Section
30
of
this
Quebec
statute
states
that
claims
of
the
Crown
under
that
Act
constitute
"a
privileged
debt
ranking
immediately
after
law
costs".
In
that
case
it
was
found
that
provincial
legislation
purporting
to
grant
security
to
the
Government
of
Quebec
relating
to
the
proceeds
of
the
sale
of
immoveable
property
was
contrary
to
the
scheme
of
distribution
in
the
Bankruptcy
Act
and
could
not
be
effective.
Pigeon,
J.
found
that
because
a
bankruptcy
had
taken
place,
the
decision
in
the
case
turned
upon
the
interpretation
of
paragraph
107(1)(j)
of
the
Bankruptcy
Act.
With
reference
to
paragraph
107(1)(j)
Pigeon,
J.
stated
at
pages
44-45
(D.L.R.
277):
It
is
abundantly
clear
that
this
was
intended
to
put
on
an
equal
footing
all
claims
by
Her
Majesty
in
right
of
Canada
or
of
a
province
except
in
cases
where
it
was
provided
otherwise,
.
.
.
.
Paragraph
(j)
ends
with
the
following
words:
"notwithstanding
any
statutory
preference
to
the
contrary".
The
purpose
of
this
part
of
the
provision
is
obvious.
Parliament
intended
to
put
all
debts
to
a
government
on
an
equal
footing.
.
.
.
As
the
provision
in
question
is
federal
law
intended
to
override
provincial
law
throughout
Canada,
this
is
not
a
case
for
interpretation
on
the
basis
of
technical
meaning.
However,
even
on
a
literal
construction,
I
see
no
insurmountable
difficulty.
There
is
of
course
a
contradiction
between
the
reservation
at
the
outset
of
the
rights
of
secured
creditors
which
include
privileges
and
notwithstanding
any
statutory
preference.
.
.
."
However,
it
is
certainly
clear
that
the
reservation
is
a
general
rule
and
the
"notwithstanding"
an
exception
which
takes
precedence
wherever
applicable.
Furthermore,
section
3
shows
that
section
107
does
derogate
from
the
rights
of
some
secured
creditors
by
providing
that
a
secured
creditor
whose
"rights
are
restricted”
ranks
as
an
"unsecured
creditor”.
These
words
of
Pigeon,
J.,
which
are
not
restricted
to
debts
owing
to
provincial
governments
but
which
also
apply
to
claims
of
the
federal
government,
indicate
that
in
the
event
of
a
bankruptcy,
subsection
107(1)
must
be
considered
to
determine
relative
priorities.
As
he
construed
paragraph
107(1)(j),
it
would
take
precedence
even
over
federal
legislation
which
created
a
security
interest
covering
a
claim
of
the
federal
government.
In
Deloitte,
Haskins
&
Sells
Ltd.
v.
Workers'
Compensation
Board
et
al.,
[1985]
1
S.C.R.
785,
19
D.L.R.
(4th)
577,
55
C.B.R.
(N.S.)
241,
the
contest
was
between
a
claim
of
the
Alberta
Workers'
Compensation
Board
under
subsection
78(4)
of
the
Alberta
Workers'
Compensation
Act,
1973
(Alta.)
c.
87
[now
1981
(Alta.)
c.
W-16],
and
subsection
107(1)
of
the
Bankruptcy
Act,
supra.
Paragraph
78(4)(a)
of
the
Alberta
Act
provided
that
the
amount
due
to
the
Workers'
Compensation
Board
was
"a
charge
upon
the
property
or
proceeds
of
property
of
the
employer.
.
.
.”
Paragraph
107(1)(h)
of
the
Bankruptcy
Act
established
a
ranking
for
indebtedness
under
any
Workers'
Compensation
Act
creating
an
obligation
to
pay
to
Her
Majesty
amounts
that
had
been
deducted
or
withheld.
Wilson,
J.,
in
her
reasons
for
the
majority,
notes
a
concession
made
by
counsel
for
the
Workers'
Compensation
Board
of
interest
in
the
case
at
bar.
At
page
803
(D.L.R.
590,
C.B.R.
256)
she
states:
Counsel
for
the
appellant
submits
that
Rainville
is
a
judgment
of
the
court
directly
in
its
favour.
Counsel
for
the
board
distinguishes
Rainville
on
the
basis
it
was
dealing
with
a
claim
under
paragraph
(j)
of
subsection
107(1)
as
opposed
to
paragraph
(h),
and
paragraph
(j)
ends
with
the
phrase
"notwithstanding
any
statutory
preference
to
the
contrary".
This,
he
submits,
makes
it
clear
that
the
provincial
legislation
yields
to
the
scheme
of
distribution
under
subsection
107(1)
as
far
as
claims
under
paragraph
(j)
are
concerned.
No
such
overriding
language
appears
in
paragraph
(h).
In
the
case
at
bar,
we
are
dealing
with
paragraph
107(1)(j)
and
the
"overriding
language”
appearing
in
that
paragraph.
In
Deloitte,
Haskins
&
Sells,
supra,
Wilson,
J.
found
that
section
107
applied
to
determine
priorities
in
a
bankruptcy
and
in
such
a
case
subsection
78(4)
of
the
Alberta
Workers'
Compensation
Act
had
no
application.
In
her
reasons
in
Deloitte
at
pages
803-04
(D.L.R.
590,
C.B.R.
256),
Wilson,
J.
cites
with
approval
an
excerpt
of
the
decision
of
Cowan,
C.J.T.D.
in
Re
Black
Forest
Restaurant
Ltd.
(1981),
121
D.L.R.
(3d)
435,
37
C.B.R.
(N.S.)
176,
at
pages
447-48
(C.B.R.
191-92)
which
I
have
found
useful:
The
claim
of
the
Workers’
Compensation
Board
is
specifically
referred
to
in
paragraph
107(1)(h)
and
is
not
removed
from
the
scope
of
that
paragraph
by
the
opening
words
of
subsection
107(1)
preserving
the
rights
of
secured
creditors.
It
is
entitled
to
the
priority
provided
for
by
paragraph
107(1)(h)
and
is
not
entitled
to
the
statutory
security
or
priority
which
section
125
of
the
Workers’
Compensation
Act
purports
to
create,
and
which
would
be
valid
and
effective
in
the
absence
of
bankruptcy
of
the
employer.
The
result,
in
my
opinion,
is
that
so
long
as
there
is
no
bankruptcy,
full
effect
must
be
given
to
statutory
provisions
such
as
those
contained
in
the
Labour
Standards
Code
of
this
province
and
in
the
Workers’
Compensation
Act
of
this
province,
which
create
liens
and
charges
on
property
ranking
ahead
of
preexisting
interests
such
as
those
created
by
mortgages
or
assignments
of
book
debts,
affecting
the
property
said
to
be
subject
to
the
statutory
liens
and
charges.
However,
when
bankruptcy
occurs,
the
provisions
of
section
107
of
the
Bankruptcy
Act
take
effect
and
the
scheme
of
distribution
of
the
property
of
the
bankrupt
coming
into
the
hands
of
the
trustee
must
be
followed.
The
statutory
liens
and
charges,
to
the
extent
to
which
they
are
affected
by
the
provisions
of
section
107,
cease
to
be
of
any
force
and
effect.
The
rights
of
secured
creditors,
whose
security
arises
apart
from
such
statutes,
are
preserved
and
may
be
enforced
against
the
property
charged
by
way
of
security.
The
creditors
for
whose
benefit
the
statutory
liens
and
charges
were
created
are
no
longer
entitled
to
enforce
those
statutory
liens
and
charges,
except
to
the
extent
permitted
by
section
107,
and
their
claims
are
dealt
with
in
the
priority
set
out
in
section
107.
These
excerpts
indicate
that
statutory
priorities
or
statutorily
created
security
in
favour
of
a
provincial
government
purporting
to
rank
its
claims
ahead
of
other
interests,
while
valid
and
effective
in
the
absence
of
bankruptcy,
must
yield
to
the
scheme
of
distribution
in
section
107
of
the
Bankruptcy
Act
in
the
case
of
bankruptcy.
Of
course,
Deloitte
and
Black
Forest,
supra,
were
dealing
with
provincial
statutes
creating
priority
and
security
for
provincial
government
claims
and
the
focus
of
the
observations
of
Wilson,
J.
appear
to
be
directed
to
the
constitutional
question
in
that
case.
However,
in
the
extext
of
conflicting
federal
legislation,
in
the
case
of
bankruptcy,
section
107
must
still
be
given
meaning.
The
focus
here
is
on
statutory
interpretation.
Parliament
can
override
the
scheme
of
distribution
in
section
107,
which
a
provincial
legislature
cannot
do.
The
question
is
whether,
in
a
given
case,
such
as
the
case
at
bar,
it
did
so.
In
considering
statutory
interpretation
it
should
be
noted
that
an
expansive
or
pervasive
interpretation
has
been
given
to
section
107
of
the
Bankruptcy
Act
in
Federal
Business
Development
Bank
v.
Commission
de
la
santé
et
de
la
sécurité
du
travail
et
al.,
[1988]
1
S.C.R.
1061,
50
D.L.R.
(4th)
577,
68
C.B.R.
(N.S.)
209.
At
pages
1071-72
(D.L.R.
585-86,
C.B.R.
218-19),
Lamer,
J.
(as
he
then
was)
stated:
In
any
event,
I
feel
that
the
decisions
in
Re
Bourgault
[Rainville]
and
Deloitte
are
conclusive
as
to
the
fate
of
the
appeal.
These
cases
stand
for
the
following
proposition:
in
a
bankruptcy
matter,
it
is
the
Bankrupcty
Act
which
must
be
applied.
If
a
bankruptcy
occurs,
the
order
of
priority
is
determined
by
the
ranking
in
section
107
of
the
Act
and
any
debt
mentioned
in
that
provision
must
therefore
be
given
the
specified
priority.
.
.
.
As
soon
as
the
bankruptcy
occurs
the
Bankrupcty
Act
will
be
applied:
the
mere
fact
that
a
creditor
is
mentioned
in
section
107
of
the
Act
suffices
for
such
creditor
to
be
ranked
as
a
preferred
creditor
and
in
the
position
indicated
in
that
provision.
Again
in
this
case,
the
contest
was
between
security
created
by
a
Quebec
statute
and
section
107
of
the
Bankrupcty
Act.
However,
the
words
of
Lamer,
J.
appear
to
be
encompassing
of
all
legislation
—
provincial
and
federal.
They
indicate
that
once
bankruptcy
occurs,
ranking
is
determined
by
section
107.
Of
course,
Parliament
would
have
the
jurisdiction
to
override
section
107
of
the
Bankrupcty
Act.
But
where
it
does
not
do
so,
section
107
would
appear
to
govern
the
ranking
and
priority
of
creditors'
claims
including
claims
of
the
federal
government.
In
British
Columbia
v.
Henfrey
Samson
Belair
Ltd.,
[1989]
2
S.C.R.
27,
59
D.L.R.
(4th)
726,
75
C.B.R.
(N.S.)
24,
the
issue
was
whether
a
statutory
trust
established
under
the
British
Columbia
Social
Service
Tax
Act,
R.S.B.C.
1979,
c.
388,
was
outside
the
scheme
of
distribution
of
section
107
of
the
Bankrupcty
Act.
McLachlin,
J.
summarized
the
issue
at
page
30
(D.L.R.
738,
C.B.R.
17):
The
issue
may
be
characterized
as
follows.
Subsection
47(a)
of
the
Bankrupcty
Act
exempts
trust
property
in
the
hands
of
the
bankrupt
from
distribution
to
creditors,
giving
trust
claimants
absolute
priority.
Section
107(1)
establishes
priorities
between
creditors
on
distribution;
s.
107(1)(j)
ranks
Crown
claims
last.
Section
18
of
the
Social
Service
Tax
Act
creates
a
statutory
trust
which
lacks
the
essential
characteristics
of
a
trust,
namely,
that
the
property
impressed
with
the
trust
be
identifiable
or
traceable.
The
question
is
whether
the
statutory
trust
created
by
the
provincial
legislation
is
a
trust
within
paragraph
47(a)
of
the
Bankrupcty
Act
or
a
mere
Crown
claim
under
paragraph
107(1)(j).
At
page
34
(D.L.R.
741,
C.B.R.
19)
she
concluded:
In
summary,
I
am
of
the
view
that
paragraph
47(a)
should
be
confined
to
trusts
arising
under
general
principles
of
law,
while
paragraph
107(1)(j)
should
be
confined
to
claims
such
as
tax
claims
not
established
by
general
law
but
secured
"by
Her
Majesty's
personal
preference"
through
legislation.
This
conclusion,
in
my
opinion,
is
supported
by
the
wording
of
the
sections
in
question,
by
the
jurisprudence
of
this
Court,
and
by
the
policy
considerations
to
which
I
have
alluded.
Henfrey
Samson
Belair
again
indicates
the
view
of
the
Supreme
Court,
albeit
in
the
area
of
trust,
that
section
107
of
the
Bankruptcy
Act
should
be
given
a
pervasive
interpretation
and
exceptions
be
subject
to
narrow
construction.
I
have
referred
to
the
foregoing
four
Supreme
Court
of
Canada
decisions
in
support
of
the
following
conclusions:
(a)
in
the
case
of
bankruptcy
regard
must
be
had
to
section
107
of
the
Bankruptcy
Act;
(b)
section
107
is
to
be
interpreted
broadly;
(c)
under
paragraph
107(1)(j),
Parliament
intended
to
treat
claims
of
the
Crown,
whether
provincial
or
federal,
on
an
equal
footing;
and
(d)
provincial
and
federal
legislation
purporting
to
create
priority
or
security
for
a
government
claim
or
to
establish
a
trust
in
favour
of
a
government
must
yield
to
the
scheme
of
distribution
in
section
107
of
the
Bankruptcy
Act
unless,
in
the
case
of
conflicting
federal
legislation,
such
legislation
contains
a
clear
override.
I
have
had
regard
to
the
case
of
Re
X.M.C.O.
Canada
Ltd.
(1991),
3
O.R.
(3d)
148,
15
C.B.R.
(3d)
92
(Bktcy),
in
which
amounts
deducted
from
employees'
wages
were
held
to
be
a
special
form
of
statutory
trust
exempt
from
the
distribution
scheme
in
subsection
107(1)
of
the
Bankruptcy
Act.
In
that
case
the
relevant
provisions
of
the
Income
Tax
Act,
subsection
227(5),
commenced
with
the
words:
"Notwithstanding
any
provision
of
the
Bankruptcy
Act.
.
.
.”
Killeen,
J.
states
at
page
154
(C.B.R.
99):
Rather,
the
opening
"notwithstanding"
clause
of
subsection
227(5)
—
"Notwithstanding
any
provision
of
the
Bankruptcy
Act”
—
is
sweepingly
clear
in
that
it
calls
for
an
override
over
any
and
every
provision
of
that
Act.
Thus
there
can
be
nothing
in
the
Bankruptcy
Act
which
constitutes
an
impediment
to
the
reach
and
application
of
subsection
227(5).
In
the
case
at
bar,
subsection
52(10)
of
the
Excise
Tax
Act
does
not
contain
a
"notwithstanding"
provision.
On
the
contrary,
it
is
paragraph
107(1)(j)
of
the
Bankruptcy
Act
that
contains
such
a
"notwithstanding"
provision.
I
see
no
words
in
the
Excise
Tax
Act
that
indicate
that
in
respect
of
federal
sales
tax,
the
scheme
of
distribution
of
the
Bankruptcy
Act
should
be
ignored,
let
alone
overridden.
Counsel
for
the
Minister
urged
that
subsection
52(10)
of
the
Excise
Tax
Act
takes
the
issue
outside
the
Bankruptcy
Act
with
the
contest
being
only
between
the
Minister
and
the
bank.
This
is
based
on
the
notion
that
the
claim
by
the
Minister
under
subsection
52(10)
is
a
claim
against
the
book
debts
assigned
to
the
bank
and
not
a
claim
against
the
property
of
the
bankrupt.
I
cannot
agree
with
this
proposition.
In
F.B.D.B.,
supra,
Lamer,
J.
expressly
addressed
the
question
of
what
property
constituted
"property
of
the
bankrupt”
for
purposes
of
the
Bankruptcy
Act.
There
he
was
dealing
with
an
immoveable
in
Quebec
that
was
the
subject
of
a
trust
deed
in
favour
of
a
creditor.
Upon
default
by
the
debtor,
a
trustee
for
the
creditor
took
possession
of
the
immoveable.
The
debtor
next
made
an
assignment
in
bankruptcy.
Before
the
immoveable
could
be
sold,
the
Commission
de
la
santé
et
de
la
sécurité
du
travail
registered
a
privilege
under
the
Quebec
Workers'
Compensation
Act
which
purported
to
give
the
commission
priority
over
the
secured
creditor.
In
that
case,
the
commission
argued
that
subsection
107(1)
of
the
Bankruptcy
Act
had
no
application
since
the
immoveable
was
not
property
of
the
bankrupt.
Lamer,
J.
rejected
this
argument.
At
pages
1067-68
(D.L.R.
581-82,
C.B.R.
215-16)
he
stated:
The
immovable,
encumbered
to
the
appellant
and
seized
by
the
trustee,
is
part
of
the
"property
of
the
bankrupt”
mentioned
in
section
107
of
the
Bankruptcy
Act.
Under
section
2
of
the
Act,
the
word
"property"
includes
immoveables
situated
in
Canada
or
elsewhere.
The
phrase
"property
of
a
bankrupt”
is
also
defined
in
section
47
of
the
Bankruptcy
Act:
47.
The
property
of
a
bankrupt
divisible
among
his
creditors
shall
not
comprise
(a)
property
held
by
the
bankrupt
in
trust
for
any
person
(b)
any
property
that
as
against
the
bankrupt
is
exempt
from
execution
or
seizure
under
the
laws
of
the
province
within
which
the
property
is
situated
and
within
which
the
bankrupt
resides,
but
it
shall
comprise
(c)
all
property
wherever
situated
of
the
bankrupt
at
the
date
of
his
bankruptcy
or
that
may
be
acquired
by
or
devolve
on
him
before
his
discharge;
and
(d)
such
powers
in
or
over
or
in
respect
of
the
property
as
might
have
been
exercised
by
the
bankrupt
for
his
own
benefit.
These
two
definitions
clearly
show
that
the
immovable
in
the
case
at
bar
is
property
of
the
bankrupt
within
the
meaning
of
the
Bankruptcy
Act.
Even
if
the
trustee
takes
possession
of
the
immovable
before
the
bankruptcy,
the
bankrupt
remains
owner
of
his
property.
The
trustee
who
has
seized
an
encumbered
immovable
cannot
claim
to
have
a
right
of
ownership
over
that
property;
he
has
only
the
rights
of
a
creditor
under
a
pledge
or
hypothec.
Counsel
for
the
Minister
argued
that
the
reasoning
of
Lamer,
J.
in
EB.D.B.,
supra,
was
particular
to
security
in
the
province
of
Quebec
where
title
remained
with
an
owner
and
the
security
constituted
an
encumbrance
on
title.
However,
in
support
of
a
broad
interpretation
of
the
words
"property
of
the
bankrupt”
Lamer,
J.
also
made
reference
with
approval
to
Re
Broydon
Printers
Ltd.
[Ont.]
(1974),
47
D.L.R.
(3d)
43,19
C.B.R.
(N.S.)
226
(Ont.
S.C.).
At
pages
1068-69
(D.L.R.
583,
C.B.R.
216-17)
of
FB.D.B.,
supra,
he
states:
In
another
case,
Re
Broydon
Printers
Ltd.
(1974),
47
D.L.R.
(3d)
43,
19
C.B.R.
(N.S.)
226
(Ont.
S.C.),
the
trustee
in
bankruptcy
informed
the
secured
creditor
of
his
intention
to
inspect
the
property
held
by
the
latter.
Section
57
of
the
Bankruptcy
Act
authorizes
the
trustee
in
bankruptcy
to
proceed
with
the
inspection
of
the
"property
of
a
bankrupt”
held
as
a
pledge,
pawn
or
other
security,
in
order
to
determine
whether
such
property
represents
an
interest
that
my
be
realized
for
the
creditors
as
a
whole.
The
secured
creditor
denied
the
trustee
in
bankruptcy
permission
to
inspect
the
said
property.
The
court
defined
the
phrase
"property
of
a
bankrupt
held
as
other
security”
(at
pages
45-46
(C.B.R.
228-29)):
.
.
.
I
do
not
think
section
57
is
intended
to
be
restricted
to
property
in
the
nature
of
a
pledge
or
pawn.
Rather,
I
believe
the
section
is
wide
enough
to
include
property
of
the
bankrupt
which
is
in
the
possession
of
a
secured
creditor
at
the
date
of
bankruptcy.
If
this
were
not
so,
the
trustee
would
be
unable
to
protect
the
rights
of
creditors
in
respect
of
such
property.
In
Re
Broydon
Printers,
supra,
the
security
in
question
was
conditional
sales
contracts.
Under
conditional
sales
contracts
title
to
the
property
remains
with
the
vendor
until
the
full
purchase
price
is
paid,
although
the
purchaser
will
normally
have
possession
of
the
property.
However,
even
where
the
property
has
been
repossessed,
the
purchaser
has
an
equity
of
redemption.
Houlden,
J.
found
that
the
equity
of
redemption
in
goods
repossessed
by
a
conditional
vendor
came
within
the
definition
of"
property”
in
the
Bankruptcy
Act
(at
page
46
(C.B.R.
229)):
"Property"
is
defined
in
section
2
of
the
Bankruptcy
Act
to
include
"money,
goods,
things
in
action,
land,
and
every
description
of
property,
whether
real
or
personal,
movable
or
immovable,
legal
or
equitable,
and
whether
situated
in
Canada
or
elsewhere
and
includes
obligations,
easements
and
every
description
of
estate,
interest
and
profit,
present
or
future,
vested
or
contingent,
in,
arising
out
of,
or
incident
to
property.”
It
seems
to
me
that
F.B.D.B.,
supra,
stands
for
the
proposition
that
the
term
"property
of
the
bankrupt”
in
the
Bankruptcy
Act
covers
property
which
is
the
subject
of
security
in
favour
of
a
secured
creditor,
irrespective
of
the
form
in
which
the
security
is
taken.
Whether
or
not
legal
title
to
the
property
remains
with
the
bankrupt
or
has
been
transferred
to
the
security
holder
is
not
of
importance
as
long
as
an
equity
of
redemption
remains
with
the
bankrupt
or
his
trustee.
With
respect
to
security
registered
pursuant
to
the
Personal
Property
Security
Act,
R.S.O.
1980,
c.
375,
which
was
applicable
in
the
case
of
the
assignments
of
book
debts
in
the
case
at
bar,
subsection
56(2)
stated:
56.(2)
Where
the
debtor
is
in
default
under
a
security
agreement,
the
secured
party
has,
in
addition
to
any
other
rights
and
remedies,
the
rights
and
remedies
pro-
vided
in
the
security
agreement
except
as
limited
by
subsection
(5),
the
rights
and
remedies
provided
in
this
Part
and,
when
in
possession,
the
rights,
remedies
and
duties
provided
in
section
19.
Section
62
provided:
62.
At
any
time
before
the
secured
party
has
disposed
of
the
collateral
by
sale
or
exchange
or
contracted
for
such
disposition
under
section
59
or
before
the
secured
party
shall
be
deemed
to
have
irrevocably
elected
to
retain
the
collateral
in
satisfaction
of
the
obligation
under
subsection
61(2),
the
debtor,
or
any
person
other
than
the
debtor
who
is
the
owner
of
the
collateral,
or
any
secured
party
other
than
the
secured
party
in
possession,
may,
unless
he
has
otherwise
agreed
in
writing
after
default,
redeem
the
collateral
by
tendering
fulfilment
of
all
obligations
secured
by
the
collateral
together
with
a
sum
equal
to
the
reasonable
expenses
of
retaking,
holding,
repairing,
processing,
preparing
the
collateral
for
disposition
and
in
arranging
for
its
disposition,
and,
to
the
extent
provided
for
in
the
security
agreement,
the
reasonable
solicitor’s
costs
and
legal
expenses.
As
in
Re
Broydon
Printers,
supra,
it
appears
in
the
case
at
bar
that
IHEC
and
Thrush
would
have
had
the
rights
of
redemption
of
the
security
they
gave
to
the
bank.
This
right,
in
the
cases
of
IHEC
and
Thrush,
would
have
arisen
under
section
62
of
the
Personal
Property
Security
Act.
Based
on
the
reasoning
of
Houlden,
J.
in
Re
Broydon
Printers,
supra,
as
approved
by
Lamer,
J.
in
F.B.D.B.,
supra,
the
right
of
redemption
of
the
book
debts,
in
my
view,
comes
within
the
definition
of
"property"
in
the
Bankruptcy
Act.
As
such,
the
reasoning
of
Lamer,
J.
in
F.B.D.B.
would
apply
and
the
book
debts
would
constitute
"property
of
the
bankrupt"
for
purposes
of
subsection
107(1)
of
the
Bankruptcy
Act.
In
my
opinion,
this
interpretation
leads
to
logical
result
and
permits
subsection
107(1)
to
achieve
its
object
and
purpose
—
a
prescribed
scheme
of
distribution
in
the
event
of
bankruptcy.
This
object
and
purpose
may
be
somewhat
obscured
when
it
is
not
apparent
that
the
trustee
in
bankruptcy
has
any
interest
in,
or
in
the
proceeds
realized
from,
security,
as
appears
to
be
the
situation
in
the
case
at
bar.
However,
where
there
is
a
surplus,
I
believe
the
situation
is
clearer.
In
the
absence
of
the
Minister’s
claim,
the
bank
would
recover
up
to
the
amount
owed
to
it
from
its
security.
Any
surplus
(and
assuming
no
other
secured
creditor
entitled
after
the
bank)
would
be
turned
over
to
the
trustee
in
bankruptcy
for
distribution
among
creditors
in
accordance
with
the
Bankruptcy
Act
and
in
accordance
with
section
60
of
the
Personal
Property
and
Security
Act
which
states:
60.
Where
a
security
agreement
secures
an
indebtedness
and
the
secured
party
has
dealt
with
the
collateral
under
section
57
or
has
disposed
of
it
in
accordance
with
section
59
or
otherwise,
he
shall
account
for
any
surplus
to
any
person,
other
than
the
debtor,
whom
the
secured
party
knows
to
be
the
owner
of
the
collateral,
and,
in
the
absence
of
such
knowledge,
he
shall
account
to
the
debtor
for
any
Surplus.
Where
the
Minister
has
a
claim,
if
he
would
be
entitled
to
rely
upon
subsection
52(10)
of
the
Excise
Tax
Act
in
the
case
of
a
bankruptcy,
it
would,
in
the
case
of
a
surplus,
clearly
be
at
the
expense
of
other
creditors.
It
is
this
type
of
"queue
jumping"
that
the
scheme
of
distribution
prescribed
by
subsection
107(1)
of
the
Bankruptcy
Act
was
enacted
to
preclude.
Of
course,
subsection
107(1)
must
be
applied
whether
or
not
there
is
a
surplus.
In
the
result,
I
am
of
the
opinion
that
paragraph
107(1)(j)
of
the
Bankruptcy
Act
and
not
subsection
52(10)
of
the
Excise
Tax
Act
governs
the
Minister's
entitlement
in
the
case
of
a
bankruptcy.
While
I
realize
that
my
conclusion
on
this
issue
is
different
than
those
in
Continental
Bank
and
Bank
of
British
Columbia,
supra,
those
decisions
were
rendered
before
the
Supreme
Court's
decisions
in
F.B.D.B.
and
Henfrey
Samson
Belair,
supra.
The
alternative
argument
of
counsel
for
the
Minister
—
that
the
bank
was
indebted
for
sales
tax
to
the
Minister
directly
under
paragraph
27(1)(a)
of
the
Excise
Tax
Act
as
it
was
a"
manufacturer
or
producer"
within
the
definition
of
that
term
in
paragraph
2(1)(a)
of
the
Excise
Tax
Act
—
is
not
persuasive.
In
my
view,
definitions
by
their
nature,
must
be
worded
broadly.
Their
application
must
always
be
construed
having
regard
to
the
context
and
circumstances
in
which
words
are
used.
See,
for
example,
North
West
Line
Elevators
Association
et
al.
v.
Canadian
Car
Demurrage
Bureau,
[1959]
S.C.R.
239,
17
D.L.R.
(2d)
241,
at
pages
244-44
(D.L.R.
245).
Taken
out
of
context,
as
soon
as
a
bank
takes
an
assignment
of
book
debts,
it
is
included
in
the
definition
of
"manufacturer
or
producer"
and
would
be
liable
to
pay
sales
tax
pursuant
to
paragraph
27(1)(a)
of
the
Excise
Tax
Act.
However,
it
is
obvious
that
the
Excise
Tax
Act
was
not
intended
to
create
duplicate
or
triplicate
obligees
for
the
same
transaction
or
render
security
holders
guarantors
to
the
Minister
of
a
debtor's
obligation
to
pay
sales
tax.
Thus,
in
Canadian
Imperial
Bank
of
Commerce
v.
The
Queen,
[1984]
C.T.C.
442,
84
D.T.C.
6426
(F.C.T.D.),
aff'd
at
[1986]
2
C.T.C.
267,
86
D.T.C.
6390
(F.C.A.),
it
was
determined
that
a
bank
does
not
become
a
manufacturer
or
producer
until
it
exercises
its
security.
Under
subsection
52(10)
of
the
Excise
Tax
Act,
the
Minister
may
look
to
an
assignee
of
book
debts
for
payment
of
the
equivalent
of
the
sales
tax
on
the
book
debts
collected
by
the
assignee.
The
definition
of
manufacturer
or
producer
in
paragraph
2(1)(a)
and
the
obligation
to
pay
sales
tax
under
paragraph
27(1)(a)
must
be
construed
in
a
manner
consistent
with
subsection
52(10).
Otherwise,
the
assignee
would
be
assuming
an
obligation
to
the
Minister
for
sales
tax
over
and
above
what
would
be
applicable
to
amounts
it
actually
collected.
Indeed,
if
an
assignee
were
directly
liable
as
a
manufacturer
or
producer
pursuant
to
paragraph
27(1)(a)
in
all
cases,
such
wide
interpretation
would
render
subsection
52(10)
redundant.
The
sales
tax
that
a
bank
would
be
required
to
pay
to
the
Minister
in
the
capacity
of
a
manufacturer
or
producer
by
way
of
a
direct
obligation
under
paragraph
27(1)(a)
may
be
sales
tax
arising
when
the
bank
itself
delivered
goods
to
a
purchaser
or
when
property
in
such
goods
passed
to
the
purchaser.
This
would
envision
the
bank
having
taken
over
the
business
of
its
customer.
This
is
not
the
case
when
the
bank
simply
is
collecting
amounts
owed
to
it
pursuant
to
its
security.
I
observe
that
in
the
absence
of
a
bankruptcy,
I
see
no
reason
why
subsection
52(10)
of
the
Excise
Tax
Act
should
not
have
the
effect
argued
for
by
counsel
for
the
Minister.
Counsel
for
the
bank
argued
that
this
would
amount
to
confiscation
of
the
bank's
property.
However,
subsection
52(10)
has
been
found
to
be
sufficiently
clear
to
be
effective
to
achieve
its
purpose
in
Continental
Bank
and
Bank
of
British
Columbia,
both
supra,
and
in
Prowest
Fabrications
Ltd.
v.
The
Queen
(1983),
50
C.B.R.
(N.S.)
102,
31
Sask.
R.
150
(Q.B.).
In
the
notes
of
argument
supplied
by
counsel
for
the
bank,
an
excerpt
from
the
debates
of
the
House
of
Commons
of
June
2,
1936,
page
3344
was
provided.
This
appears
to
have
been
the
time
at
which
subsection
52(10)
was
first
enacted.
The
Honourable
J.T.
I
Isley
stated:
MR.
ILSLEY:
This
is
an
administrative
change.
This
section
is
designed
to
make
it
incumbent
upon
persons
who
receive
assignments
of
book
debts
or
trade
papers,
which
include
sales
tax,
to
pay
the
amount
of
such
tax
to
the
public
revenues.
In
the
past,
there
has
been
no
authority
in
the
act
to
collect
the
tax
in
such
cases,
and
if
the
taxpayer
were
in
a
precarious
financial
position
or
about
to
go
into
liquidation
the
amounts
represented
by
the
tax
were
collected
by
the
person
holding
the
collateral
for
his
own
account,
and
became
a
non-collectible
account
as
far
as
the
public
revenues
were
concerned.
MR.
FACTOR:
Does
that
include
banks
as
well
MR.
ILSLEY:
Yes.
I
am
of
the
opinion
that
the
words
of
subsection
52(10)
are
clear
and
unambiguous
and
are
effective
in
carrying
out
their
stated
purpose,
except
in
the
case
of
bankruptcy.
In
the
case
of
IHEC,
it
appears
that
the
bankruptcy
proceedings
were
commenced
prior
to
the
Minister’s
notice
under
subsection
52(10).
With
respect
to
this
action,
the
Minister’s
claim
is
dismissed
with
costs.
In
the
case
of
Thrush,
the
Minister's
notice
was
given
on
November
1,
1985,
a
petition
for
receiving
order
was
made
on
November
13,
1985,
and
the
receiving
order
was
made
on
November
25,
1985.
It
was
not
made
absolutely
clear
during
the
trial
whether
the
bankruptcy
in
the
case
of
Thrush
would
affect
all
receivables
collected
by
the
bank
or
whether
the
Minister
was
entitled
to
sales
tax
on
receivables
collected
between
November
1
and
November
12,
1985.
To
the
extent
that
the
receivables
in
question
were
collected
on
or
after
November
13,
1985,
the
Minister’s
claim
is
dismissed
with
costs.
For
those
receivables
collected
by
the
bank
between
November
1
and
November
12,
1985,
counsel
may
make
further
submissions
should
either
of
them
deem
it
necessary.
A
conference
call
will
be
arranged
by
the
Court
upon
the
application
of
counsel
for
either
of
the
parties.
Counsel
for
the
defendant,
having
been
substantially
successful,
is
ordered
to
prepare
the
order
for
judgment,
carrying
out
the
effect
of
these
reasons,
submit
it
for
approval
as
to
form
and
content
to
counsel
for
the
defendant,
and
provide
it
to
the
Court
within
21
days
of
the
date
of
these
reasons.
Appeals
dismissed.
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