Tidman,
J.
[Orally]:—These
are
two
applications
pursuant
to
Civil
Procedure
Rule
50
for
orders
directing
the
Accountant
General
of
Nova
Scotia
to
pay
to
the
applicant
sums
of
money
previously
paid
into
court.
The
respondents
also
claim
entitlement
to
all
or
a
portion
of
the
funds.
Since
the
issues
are
similar
in
both
applications
they
were
heard
at
the
same
time.
The
facts
are
not
in
dispute
and
they
are
outlined
in
detail
in
Mr.
Chiasson's
prehearing
memorandum
as
follows:
Century
21—Crown
Real
Estate
Limited
("Crown")
formerly
carried
on
the
business
of
a
real
estate
broker
in
the
Province
of
Nova
Scotia.
Crown
was
a
subsidiary
company
of
SAYSF
Developments
Ltd.
("SAYSF"),
which
was
placed
in
receivership
in
October
of
1989.
As
a
result
of
Crown's
relationship
with
SAYSF,
it
too
ceased
operations
during
the
month
of
October,
1989.
The
Royal
Bank
of
Canada
(the"Bank")
was
a
significant
creditor
of
Crown.
Its
position
was
secured
by
an
Assignment
of
Book
Debts
(the"Assignment")
given
by
Crown
in
favour
of
the
Bank
on
September
7,
1987.
The
Assignment
was
properly
registered
at
the
Registry
of
Deeds
for
the
County
of
Halifax
pursuant
to
the
Assignment
of
Book
Debts
Act
on
September
23,
1987.
On
October
31,
1989,
the
Bank
appointed
the
applicant
as
its
agent
under
the
Assignment.
A
copy
of
the
letter
of
appointment
is
attached
to
the
affidavit
of
John
S.
McFarlane,
Q.C.,
filed
in
support
of
this
application
as
Exhibit"A".
The
applicant
was
instructed
by
the
Bank
to
collect
all
of
the
accounts
receivable
of
Crown.
In
addition
to
its
liabilities
to
the
Bank,
Crown
also
had
certain
liabilities
to
the
Minister
of
National
Revenue
for
unremitted
source
deductions
relating
to
various
statutes,
including
the
Income
Tax
Act
(the
"Act").
A.
Touche
Ross
Ltd.
v.
The
Minister
of
National
Revenue,
Re/Max
Eastport
Realty
Ltd.,
and
Ellen
Poehler—S.H.
No.
70849
In
October,
1989,
a
property
known
as
260
Lockview
Road
located
in
Fall
River
(the
"Lockview
Property”),
in
the
County
of
Halifax,
was
listed
for
sale
through
Crown.
An
Agreement
of
Purchase
and
Sale
was
concluded
with
respect
to
the
Lockview
Property.
The
Agreement
stipulated
that
a
real
estate
commission
of
$4,770.00
would
be
payable
by
the
vendor
of
the
property
in
respect
of
its
sale.
Half
of
this
commission
($2,385.00)
was
to
be
paid
upon
the
closing
of
the
sale
to
Crown,
while
the
other
half
would
be
paid
to
the
selling
broker,
the
respondent
Re/Max
Eastport
Realty
Ltd.
("Re/
Max"),
in
accordance
with
the
normal
arrangements
between
listing
and
selling
brokers.
Of
this
commission
due
to
Crown,
$2,000.00
had
already
been
paid
as
a
deposit,
leaving
a
total
commission
of
$2,770.00
remaining
to
be
paid
upon
closing.
The
respondent
Ellen
Poehler
was
the
selling
agent
for
Crown
during
the
course
of
this
transaction.
The
law
firm
of
Farwell
&
Hines
was
retained
by
Margaret
Meacher,
the
vendor
of
the
property,
to
effect
the
sale.
On
November
7,
1989,
the
applicant
made
a
demand
on
the
law
firm
of
Farwell
&
Hines
directing
it
to
pay
to
it
any
commissions
owing
to
Crown
in
its
possession,
or
which
were
about
to
come
into
its
possession
after
the
closing
of
the
sale
of
the
Lockview
Property.
The
Minister
of
National
Revenue
made
two
demands
on
the
law
firm
of
Farwell
&
Hines
with
respect
to
the
same
commission
proceeds
pursuant
to
Section
224
of
the
Act.
Following
the
sale
of
the
Lockview
Property,
the
remaining
$2,770.00
was
paid
to
Farwell
&
Hines.
Subsequently,
demands
for
certain
portions
of
the
Commission
funds
were
also
made
against
Farwell
&
Hines
by
Joseph
Chisholm
on
behalf
of
the
respondent
Re/Max
and
by
the
respondent
Ellen
Poehler,
the
listing
agent
on
behalf
of
Crown.
Faced
with
these
competing
demands,
the
law
firm
of
Farwell
&
Hines
made
an
application
pursuant
to
Civil
Procedure
Rule
50
to
have
the
real
estate
commission
paid
into
this
Honourable
Court
and
to
relieve
it
of
any
liability
to
the
various
claimants.
By
order
of
the
Honourable
Mr.
Justice
Grant
dated
the
13th
day
of
December,
it
was
ordered
that
the
sum
of
$2,770.00
less
costs
of
$618.00
be
paid
into
this
Honourable
Court.
The
applicant
claims
entitlement
to
these
funds
together
with
any
accrued
interest
thereon
by
virtue
of
the
Assignment.
B.
Touche
Ross
Ltd.
v.
Her
Majesty
the
Queen,
Pat
King
Group
Ltd.,
Finley
Evong,
Century
21
Classic
Realty
Ltd.,
Darrel
Nelson,
and
Dorothy
Milne—S.H.
No.
71499
At
approximately
the
same
time
during
which
the
Lockview
Property
was
listed
for
sale
through
Crown,
three
additional
properties,
Lot
347A
Highrigger
Crescent
("Lot
347A"),
Lot
350B
Highrigger
Crescent
("Lot
350B”),
and
Lot
393A
Highrigger
Crescent
(”
Lot
353A”),
all
located
in
the
County
of
Halifax,
were
also
listed
for
sale
through
Crown.
The
sale
of
Lot
347A
would
produce
a
total
commission
of
$3,405.00.
From
this
amount,
Crown
was
paid
$500.00
as
a
deposit.
A
commission
of
$2,905.00
was
left
to
be
collected
on
the
closing
of
the
sale
of
Lot
347A.
In
this
case,
Crown
was
both
the
listing
and
the
selling
broker.
The
individual
selling
agent
was
the
respondent
Dorothy
Milne.
The
sale
of
Lot
350B
would
produce
a
total
commission
of
$3,375.00,
of
which
$1,000.00
was
held
as
a
deposit
by
Crown,
the
listing
broker.
A
commission
of
$2,375.00
would
remain
to
be
collected
on
closing.
The
respondent
Century
21
Classic
Realty
Ltd.
("Classic")
was
the
selling
broker
in
this
case.
The
individual
selling
broker
on
behalf
of
Classic
was
the
respondent
Darrel
Nelson.
The
sale
of
Lot
353A
would
produce
a
total
commission
of
$3,245.00,
of
which
$1,000.00
was
held
as
a
deposit
by
Crown,
the
listing
broker.
A
commission
of
$2,245.00
would
remain
to
be
collected
on
closing.
Home
Life
Pat
King
Real
Estate
of
the
respondent
Pat
King
Group
Ltd.
(Pat
King”)
was
the
selling
broker.
The
individual
selling
broker
on
behalf
of
the
respondent
Pat
King
was
the
respondent
Finley
Evong.
The
law
firm
of
Crosby/Murtha
was
retained
by
the
vendors
of
each
of
Lot
347A,
Lot
350B,
and
Lot
353A
to
effect
the
sale
of
each
of
the
properties.
All
of
the
transactions
closed
as
scheduled
with
the
remaining
portions
of
the
various
commissions
being
paid
to
Crosby/Murtha.
As
with
the
Lockview
Property,
claims
were
made
against
the
various
commissions
held
by
the
law
firm
of
Crosby/Murtha.
A
claim
was
made
by
the
applicant
on
behalf
of
the
Bank.
A
claim
was
also
advanced
for
all
commission
funds
by
the
Minister
of
National
Revenue,
again
for
unremitted
source
deductions
relating
to
various
statutes,
including
the
Income
Tax
Act.
In
addition
to
the
demands
by
the
Bank
and
by
the
Minister
of
National
Revenue,
several
demands
were
received
by
various
real
estate
agents
involved,
including
the
respondent
Dorothy
Milne,
the
respondent
Darrel
Nelson,
and
the
respondent
Finley
Evong.
Faced
with
these
competing
demands,
the
law
firm
of
Crosby/Murtha
also
made
an
application
pursuant
to
Civil
Procedure
Rule
50
to
have
the
various
real
estate
commissions
paid
into
this
Honourable
Court
to
relieve
it
of
any
liability
with
respect
to
the
various
claimants.
On
February
13,
1990,
the
Honourable
Mr.
Justice
Kelly
ordered
that
the
sum
of
$7,525
less
costs
of
$838
be
paid
into
this
Honourable
Court
pending
the
resolution
of
the
various
claims.
Issues
The
issues
are
twofold:
1.
The
selling
brokers'
and
salespersons’
(to
whom
I
shall
refer
as
sales
respondents)
entitlement
to
sales
commissions;
and
2.
Entitlement
to
the
funds
as
between
the
applicant
and
the
Minister
of
National
Revenue.
Issue
1:—Claim
of
Sales
Respondents
I
heard
argument
on
this
issue
from
counsel
present
and
also
from
Joseph
Chisholm,
Dorothy
Milne,
and
Ellen
Poehler,
salespersons
who
were
involved
in
the
transactions
in
issue
and
who
represented
themselves
at
the
hearing.
Ms.
MacDonald,
on
behalf
of
the
respondents,
Classic
Realty
Ltd.
('Classic")
and
Darrel
Nelson,
argues
that
the
funds
her
clients
claim
were
held
in
trust
for
them
and
thus
are
not
now,
nor
were
they
ever
funds
of
the
Royal
Bank's
debtor,
Crown
Real
Estate
Ltd.
('Crown
Realty”).
The
same
argument
is
relied
upon
by
Mr.
Chisholm,
Ms.
Milne
and
Ms.
Poehler.
In
addition,
they
point
out
that
the
real
property
was
liquidated
only
through
their
efforts
and
make
the
compelling
argument
that
they
should
be
entitled
to
compensation
for
those
efforts.
Unfortunately
for
them,
the
law
determining
priority
of
claims
of
this
nature
must
be
applied
in
the
absence
of
an
agreement
by
the
parties
to
pay
real
estate
commission.
The
applicant
submits
that
the
sales
respondents
claim
merely
as
unsecured
creditors
of
Crown
Realty.
Ms.
MacDonald
submits
that
the
deposits
held
by
Crown
Realty
and
the
funds
held
by
the
Crosby/Murtha
law
firm
were
trust
funds
and
under
the
terms
of
the
trust,
her
clients
were
to
be
paid
real
estate
commissions
directly
from
those
funds.
Since
Pat
King
Group
Ltd.
and
Finley
Evong
make
no
claim
against
the
funds,
I
will
deal
only
with
the
claims
of
those
sales
respondents
represented
at
the
hearing.
The
distinction
between
the
real
estate
agents
and
the
real
estate
salespersons
must
be
pointed
out
as
must
the
bearing
such
distinction
has
on
the
claims
of
each
group.
Dorothy
Milne
and
Helen
Poehler
are
salespersons
both
of
whom
were
employed
by
Crown
Realty.
Darrel
Nelson
is
a
salesperson
who
was
employed
by
Classic,
and
Joseph
Chisholm,
a
salesperson
employed
by
Re/Max
Eastport.
No
argument
was
presented
by
Ms.
MacDonald
that
Darrel
Nelson
claimed
against
the
funds
other
than
through
his
agent/employer
Classic.
There
is
nothing
in
the
agreements
or
trust
relationships
which
suggest
to
me
that
the
funds
in
question
were
to
be
held
in
trust
for,
or
paid
directly
to
the
salespersons
as
opposed
to
the
real
estate
agents.
Their
claims,
as
has
been
argued,
must
be
to
or
through
their
respective
agent/employers
and
the
same
situation
would,
of
course,
apply
also
to
Dorothy
Milne
and
Helen
Poehler.
I
find,
therefore,
that
the
salespersons
have
no
prior
claim
to
the
funds.
The
claims
of
the
selling
agents,
Re/Max
Eastport
Realty
and
Classic
remain
to
be
dealt
with.
Ms.
MacDonald
submits
that
the
funds
held
by
both
Crosby/
Murtha
and
Crown
Realty
were
held
upon
a
trust
for
the
selling
agent,
Classic.
There
is
no
evidence
of
an
agreement,
either
express
or
implied,
directly
between
the
selling
agent
Classic
and
Crown
or
the
Crosby/Murtha
firm.
The
funds
held
by
Crosby/Murtha
were
held
in
trust
for
their
client,
the
vendors
of
the
property.
The
funds
held
by
Crown
which
were
paid
by
the
purchaser
were
held
in
trust
for
the
purchaser
until
the
closing
at
which
time,
under
the
terms
of
the
sales
agreement,
they
were
to
be
credited
to
the
purchase
price.
Once
the
property
transaction
closed,
the
ownership
of
the
money,
in
my
view,
passed
to
the
vendor
and
at
that
time
became
moneys
held
in
trust
by
Crown
Realty
for
the
vendor.
If
the
selling
agents,
Classic
and
Re/Max
are
to
succeed
they
must
show
that
Crown
and
Crosby/Murtha
or
either
of
them
declared
themselves
to
hold
funds
as
trustees
for
them
or
that
such
a
trust
was
otherwise
impressed
upon
the
funds.
No
evidence
has
been
submitted
which
suggests
to
me
that
such
a
declaration
was
made
by
either
the
law
firm
or
Crown
Realty.
Neither
has
any
statute
or
case
law
been
cited
suggesting
that
a
trust
relationship
existed
between
either
the
selling
agent
Classic
Realty
and
Crown
or
Classic
and
the
Crosby
firm,
as
holding
or
implying
that
the
funds
were
held
"in
trust"
for
the
selling
agents.
However,
in
order
to
decide
whether
the
selling
agents
have
a
prior
claim
to
the
funds
in
question,
it
is
necessary
also
to
examine
the
provisions
of
paragraph
14
of
the
agreements
of
sale
to
determine
whether
by
its
provisions
the
selling
agents
have
a
prior
right
to
the
funds.
One
of
the
agreements
of
sale,
which
were
submitted
as
exhibits,
involves
Classic
and
the
other
Re/Max.
They
are
both
in
the
standard
form
used
by
real
estate
agents
in
Nova
Scotia.
They
are
printed
forms
containing
several
blank
spaces
for
the
insertion
of
appropriate
information.
The
form
of
the
agreement
is
by
way
of
an
offer
and
acceptance.
The
first
13
paragraphs
on
the
form
contain
the
offer
which
is
signed
by
the
purchaser
and
paragraph
14
contains
the
words
of
acceptance
of
the
offer
and
immediately
following
the
paragraph
are
lines
provided
for
the
vendor's
signature.
Paragraph
14,
however,
also
deals
with
the
vendor's
relationship
with
the
vendor's
real
estate
agent
and
solicitor.
Paragraph
14
provides
in
whole:
I
hereby
accept
the
above
offer
and
agree
to
sell
on
the
terms
as
therein
set
forth
and
I
agree
to
pay
the
Agent
a
commission
of
$
or
%
of
the
sale
price,
for
having
procured
this
offer,
said
commissions
to
be
deducted
from
the
deposit,
and
I
irrevocably
instruct
my
solicitor
to
pay
direct
to
the
said
agent
any
balance
of
commission
from
the
process
[sic]
of
the
sale
and
further
instruct
the
agent
to
remit
any
balance
of
moneys
to
my
solicitor
herein.
Paragra
h‘14
of
the
agreement
involving
Re/Max
Eastport
Realty
was
neither
completed
nor
signed.
Re/Max
therefore
cannot
rely
on
that
paragraph
as
authority
for
payment
of
its
claim
and
I
would
thus,
at
this
point,
deny
its
claim.
Paragraph
14
of
the
agreement
in
which
Classic
is
involved
provides
as
follows:
I
hereby
accept
the
above
offer
and
agree
to
sell
on
the
terms
as
therein
set
forth
and
I
agree
to
pay
the
Agent,
Denise
Arsenault
a
commission
of
$
or
5%
of
the
sale
price,
for
having
procured
this
offer,
said
commission
to
be
deducted
from
the
deposit,
and
I
irrevocably
instruct
my
solicitor
to
pay
direct
to
the
said
agent
any
balance
of
commission
from
the
proceeds
of
the
sale
and
further
instruct
the
agent
to
remit
any
balance
of
moneys
to
my
solicitor
herein.
Dated
at
Halifax,
in
the
Province
of
Nova
Scotia,
this
10th
day
of
October,
A.D.
1989,
signed
by
the
Vendor
Florence
Developments
Ltd.
and
Witnessed
by
Dorothy
Milne.
Denise
Arsenault
is
one
of
the
purchasers,
and
her
name
was
obviously
inserted
in
error
after
the
word
agent,
she
having
signed
on
the
line
below
that
which
is
indicated
for
her
signature.
I
will
thus
consider
the
line
after
the
word
"agent"
as
remaining
blank.
Dealing
first
with
funds
held
by
the
Crosby
firm,
that
clause
instructs
the
firm
to
pay
the
real
estate
commission
directly
to
the
agent.
If
Classic
can
satisfy
the
court
that
it
comes
within
the
definition
of
"the
agent"
as
described
in
paragraph
14,
it
will
succeed
in
its
claim
to
those
funds.
Although
there
is
space
provided
in
the
paragraph
for
insertion
of
the
name
of
the
agent,
it
was
not
filled
in.
Where
then,
can
one
look
for
assistance
in
determining
what
was
meant
by
the
vendor
in
referring
therein
to"
the
agent”?
If
arguing
that
Classic
was
included
in
the
term
“the
agent"
one
might
point
out
that
in
paragraph
one
of
the
agreement
of
sale,
after
the
word
"agent"
the
words"
Century
21
Classic
Realty
Ltd.
and
Century
21
Crown"
were
inserted
so,
therefore,
it
was
the
intention
of
the
vendor
to
insert
those
same
words
in
the
blank
space
provided
in
paragraph
14.
If
such
was
the
case,
however,
why
then
would
it
again
be
necessary
to
specifically
describe
to
whom
the
commission
was
to
be
paid
if
it
was
to
be
paid
to
the
same
"agent"
as
described
in
paragraph
one?
Are
both
listing
and
selling
agents
to
receive
5
per
cent
of
the
sale
price?
I
think
not,
and
if
not,
what
share
of
the
5
per
cent
commission
is
each
to
receive?
There
is
nothing
in
the
agreement
or
anywhere
else
in
the
evidence
which
assists
in
solving
those
dilemmas
for
the
vendor's
lawyer
as
to
whom
he
is
to
pay
the
commission
funds.
If
both
agents
demand
the
funds
on
the
authority
of
paragraph
14,
with
whose
demand
does
the
solicitor
comply?
In
this
case,
although
the
selling
agent
Classic
found
the
purchaser,
the
purchaser,
according
to
the
evidence,
made
the
deposit
cheque
payable
to
Crown
Realty,
the
original
or
first
agent
of
the
vendor,
and
the
cheque
was
also
delivered
to
and
held
in
trust
by
Crown
Realty.
The
agreement
says
that
the
deposit
cheque
is
to
be
paid
to
the
vendor's
agent.
Apparently
Classic
did
not
dispute
that
Crown
was
the
vendor's
agent
by
insisting
that
the
deposit
cheque
be
made
payable
to
Classic
rather
than
Crown
Realty
or
jointly
to
Classic
and
Crown
Realty
or
that
it
not
be
held
by
Crown
Realty
as
it
was.
One
might
thereby
argue
that
Classic
acknowledged
that
Crown
Realty
alone
was
the
vendor's
agent.
To
assist
further
in
determining
what
the
vendor
meant
by
the
term
"agent"
in
paragraph
14
one
may
also
examine
the
listing
agreement
made
between
Crown
Realty
and
the
vendor
when
the
property
was
listed
for
sale.
One
may
also
examine
that
agreement
in
determining
whether
Crown
Realty
held
the
deposit
funds
upon
a
trust
for
the
selling
agent
Classic.
Although
the
specific
listing
agreement
made
between
the
vendor
and
Crown
Realty
was
not
submitted
as
evidence,
a
form
of
listing
agreement
was
so
submitted
and
the
parties
agreed
that
the
listing
agreement
entered
into
between
the
vendor
and
Crown
Realty
was
in
form
identical
to
it
and
that
I
could
so
consider.
The
form
of
the
listing
agreement
is
set
out
as
follows:
To
(name
of
listing
broker)in
consideration
of
your
listing
and
agreeing
to
offer
for
sale
my
property
known
as
I
hereby
give
you
full
and
exclusive
authority,
irrevocable
until
the
expiration
hereof,
to
offer
for
sale
my
said
property
at
a
price
of
$
,
on
terms
as
follows:
or
at
such
other
price
and
terms
as
I
may
agree
to
in
writing.
Should
I
request
multiple
listing
service
and
you
are
authorized
to
distribute
this
listing
through
the
multiple
listing
service
(M.L.S.)
and
to
send
it
to
all
active
members
(broker
members)
in
good
standing
of
the
Halifax
Dartmouth
Real
Estate
Board,
who
will
act
as
your
sub-agent
to
offer
my
said
property
for
sale.
I
agree
to
pay
you
a
commission
of%
of
the
sale
price
on
any
offer
to
purchase
received
from
any
source
whatsoever
during
the
currency
of
this
listing
agreement
and
accepted
by
me
at
any
time
thereafter.
I
further
agree
to
pay
you
the
said
commission
if
within
days
of
the
expiry
of
this
listing
I
shall
sell
or
agree
to
sell
my
said
property
to
any
person
introduced
by
you,
or
one
of
your
said
sub-agents,
to
me
or
to
the
property
during
the
currency
of
this
listing
agreement,
provided
however
that
no
such
commission
is
payable
if
my
said
property
is
re-listed
with
another
real
estate
broker.
All
enquiries
from
any
source
whatsoever,
prior
to
the
expiry
of
this
listing
agreement,
shall
be
referred
to
you
and
all
offers
submitted
to
me
shall
be
brought
to
your
attention
before
acceptance
or
rejection.
I
will
allow
you
and
the
said
sub-agents
to
show
the
said
property
to
prospective
purchasers
during
all
reasonable
hours.
I
do
do
not
give
you
the
exclusive
right
to
advertise
and
place
a
sign
upon
my
property.
This
listing
agreement
shall
expire
at
one
minute
before
midnight
of
the
day
of
19
I
have
read
and
I
clearly
understand
this
agreement
and
I
acknowledge
this
date
having
received
a
copy.
Witness
Owner
Owner's
Address:Owner:
Under
the
terms
of
that
agreement
the
listing
broker
is
Crown
Realty
and
the
fourth
paragraph
provides
that
the
vendor
will
pay
the
commission
to
the
listing
broker.
It
states:
”.
.
.
I
further
agree
to
pay
you
a
commission
.
.
.”.
There
is
no
obligation
elsewhere
in
the
agreement
to
pay
a
commission
to
anyone
other
than
Crown
Realty.
The
evidence
thus
leads
me
to
believe
that
the
agent
referred
to
by
the
vendor
in
paragraph
14
of
the
agreement
of
sale,
is
Crown
Realty
and
only
Crown
Realty
and
does
not
include
Classic.
I
conclude
therefore
that
Classic
does
not
have
a
proprietary
interest
in
the
funds
held
by
the
Crosby
firm;
neither
does
the
listing
agreement
or
the
agreement
of
sale
provide
that
Crown
Realty
holds
the
deposit
upon
a
trust
for
Classic.
I,
therefore,
conclude
that
the
sales
respondents
are
unsecured
creditors
of
Crown
and
their
claims
are
therefore
subordinate
to
the
claim
of
The
Royal
Bank
as
secured
creditor.
Mr.
Donovan
on
behalf
of
the
Minister
of
National
Revenue
refers
to
McCulloch
&
Co.
v.
A.-G.
Canada
(1979),
29
N.R.
174
(S.C.C.)
as
authority
for
the
proposition
that
in
claims
of
an
equal
degree,
the
Crown
or
Minister
of
National
Revenue,
has
priority.
In
the
absence
of
an
argument
that
the
claims
of
the
selling
agents
are
of
a
higher
degree
than
that
of
the
Minister,
I
find
that
the
claims
of
the
selling
agents
are
also
subordinate
to
the
claim
of
the
Minister
of
National
Revenue.
Issue
2:—Priority
of
Claim
Between
the
Applicant
and
the
Minister
of
National
Revenue
The
facts
relating
to
the
second
issue
are
not
as
complicated
as
those
of
the
first
issue
but
there
is
no
shortage
of
previous
litigation
dealing
with
competing
claims
of
the
Minister
of
National
Revenue
and
secured
creditors.
The
Minister's
claim
is
founded
upon
subsection
224(1.2)
of
the
Income
Tax
Act
which
provides:
.
.
.
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
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.
The
parties
agree
that
the
term
“secured
creditor"
in
subparagraph
(b)
includes
the
claimant,
Touche
Ross,
and
that
Crown
Realty’s
liability
to
the
Minister
is
incurred
under
subsection
227(10.1)
and
that
the
law
firms
who
held
funds
prior
to
paying
them
into
court,
come
within
the
definition
of
"a
particular
person
who
is
or
will
become
within
90
days,
liable
to
make
a
payment"
to
Crown
Realty
or
Touche
Ross.
The
sole
issue
in
dispute
then,
is
whether
that
subsection
of
the
Income
Tax
Act
gives
priority
to
the
Minister's
claim
over
that
of
the
Royal
Bank,
as
secured
creditor.
That
priority
issue
has
not
yet
been
decided
by
this
court
nor
by
the
Supreme
Court
of
Canada.
It
has
been
decided
in
favour
of
the
secured
creditor,
by
the
Alberta
Court
of
Appeal,
in
Lloyd's
Bank
of
Canada
v.
International
Warranty
Co.,
[1990]
2
C.T.C.
360;
76
C.B.R.
(N.S.)
54.
Although
the
Minister
sought
leave
to
appeal
that
decision
the
Supreme
Court
of
Canada
refused
leave
to
appeal.
I
agree
with
Mr.
Donovan,
counsel
for
the
Minister,
that
refusal
of
leave
to
appeal
should
not
be
interpreted
as
being
tantamount
to
a
dismissal
of
the
appeal
on
its
merits.
(See
Paul
v.
The
Queen,
[1960]
S.C.R.
452;
127
C.C.C.
129
at
S.C.R.
457).
Accordingly,
I
shall
not
so
regard
the
Supreme
Court's
refusal
of
leave
to
appeal,
nor
shall
I
regard
refusal
of
leave
as
the
Supreme
Courts
approval
of
the
decision
of
the
Alberta
Court
of
Appeal
in
the
Lloyd's
Bank
case,
supra.
In
the
Lloyd's
Bank
case,
Stratton,
J.A.
states
at
page
362
(C.B.R.
58):
In
particular
we
do
not
agree
that
the
section
[224(1.2)]
has
the
"plain
meaning
that
is
unambiguous”
attributed
to
it
by
the
learned
chambers
judge.
For
Revenue
Canada
to
succeed
the
plain
and
unambiguous
meaning
of
the
section
must
be
that
it
deprives
a
properly
secured
creditor,
in
this
case,
Lloyd's,
of
all
or
part
of
its
security
without
compensation,
for
the
purpose
of
paying
another
debt
entirely
unrelated
to
the
security.
/t
is
surely
equivalent
to
the
transfer
of
proprietary
rights
without
compensation.
Mr.
Justice
Stratton
then
went
on
to
review
various
cases
which
supported
the
court's
decision
to
find
against
the
Crown
(See
Homeplan
Realty
Ltd
v.
AVCO
Financial
Services
Realty
Ltd.
(1977),
81
D.L.R.
(3d)
289;
5
B.C.L.R.
289;
Re
Lamarre
(1978),
85
D.L.R.
(3d)
392;
2
W.W.R.
465;
27
C.B.R.
(N.S.)
41;
78
D.T.C.
6155;
8
A.R.
533
(sub
nom
University
of
Calgary
v.
Receiver
General
of
Canada
(C.A.)
N.A.G.),
A.-G.
Canada
v.
Royal
Bank
(1978),
105
D.L.R.
(3d)
648;
[1979]
1
W.W.R.
479;
29
C.B.R.
(N.S.)
227;
13
A.R.
318
(C.A.)).
In
my
view,
the
factual
situation
in
the
Homeplan
Realty
case,
supra,
differed
from
that
in
the
Lloyd's
Bank
case,
supra,
in
that
there
was
a
more
obvious
ambiguity
in
the
plain
meaning
of
the
section
of
the
statute
being
considered
in
the
Homeplan
Realty
case.
Since
the
decisions
in
the
Lamarre,
supra,
and
Attorney
General
of
Canada
cases,
supra,
there
have
been
amendments
to
the
Income
Tax
Act
changing
the
wording
of
the
sections
in
issue
which,
in
my
view,
remedy
the
Act's
shortcomings
as
expressed
in
those
two
cases.
In
the
Attorney
General
of
Canada
case,
the
trial
judge
found
that"
moneys
otherwise
payable
to
the
debtor"
as
referred
to
in
subsection
224(1)
included
only
moneys
that
were
the
property
of
the
debtor.
Since
in
that
case,
the
moneys
had
been
assigned
to
a
third
party
at
the
time
of
the
Crown's
demand,
he
found
that
the
demand
failed
as
against
the
assignee.
On
appeal
of
that
decision
the
Court
of
Appeal
agreed
with
the
trial
judge
and
upheld
his
decision
although
they
added
to
their
decision
their
agreement
with
the
Alberta
Court
of
Appeal
decision
in
Lamarre
that
section
224
of
the
Income
Tax
Act
did
not
convey
the
indebtedness
to
the
Minister
nor
did
it
impress
a
trust
upon
the
funds
in
favour
of
the
Minister
and,
secondly,
that
the
Minister
does
not
by
virtue
of
the
demand
become
a
holder
of
the
security.
Since
those
decisions
the
Income
Tax
Act
has
been
amended
by
the
addition
of
subsection
224(1.2)
which
clarifies
the
term
“moneys
otherwise
payable
to
the
debtor”
by
expressly
stating
that
the
demand
includes
moneys
payable
to
a
secured
creditor
of
the
debtor.
In
this
case,
the
Royal
Bank
is
such
a
secured
creditor
of
the
debtor.
Mr.
Justice
Stratton
in
Lamarre,
supra,
did
not
rely
on
the
"moneys
otherwise
payable”
argument
for
his
court's
decision,
but
rather
on
the
ending
words
of
the
former
subsection
224(1)
of
the
Income
Tax
Act,
i.e.,
"on
account
of
the
liability
under
this
Act".
At
the
time
of
the
Lloyd's
Bank
decision,
however,
the
words
then
ending
section
224(1)
had
been
changed
to
read
as
they,
as
well,
do
now,
i.e.,
“on
account
of
the
tax
debtor's
liability
under
this
Act".
The
new
subsection
224(1.2)
ends
with
the
words
"on
account
of
the
tax
debtor's
liability
under
subsection
227(10.1)
or
a
similar
provision”.
Mr.
justice
Stratton
states
that
the
former
section
ending
words
were
for
all
practical
purposes,
identical
to
the
then
present
section
ending
words.
I
cannot
agree
as
it
seems
to
me
that
the
addition
of
the
words
"tax
debtors”
to
the
ending
words
clarifies
what
the
Receiver
General
is
to
do
with
the
moneys
paid
to
it,
that
is,
to
apply
them
on
account
of
the
tax
debtors'
liability
under
the
Income
Tax
Act.
Although
the
specific
direction
to
so
apply
the
funds
is
not
set
out
in
the
subsection,
that
to
me
is
the
obvious
and
clear
implication
of
the
other
words
of
the
subsection.
Mr.
Justice
Stratton
in
Lloyd's
Bank
then
goes
on
to
support
his
court's
decision
by
referring
to
the
following
passage
from
page
395
(W.W.R.
469)
of
the
Appeal
Court's
decision
in
Lamarre
given
by
Mr.
Justice
Prowse,
i.e.:
The
distinction
between
garnishee
proceedings
and
the
remedy
afforded
the
minister
is
that
the
demand
need
not
be
issued
in
judicial
proceedings
and,
further,
the
demand
is
broader
in
scope
as
it
attaches
payments
arising
out
of
a
debt
or
a
liability.
The
property
in
the
debt
or
liability
when
due
or
determined
is
not
impressed
with
a
trust
nor
is
it
transferred
to
the
Minister.
Mr.
Justice
Prowse
goes
on
however
to
add
immediately
following
the
above-quoted
passage:
"This
conclusion
is
supported
by
subsection
224(4)
which
provides
that
in
the
event
of
non
payment
to
the
Minister
by
the
third
party,
the
third
party
becomes
liable
in
“an
amount
equal
to
the
liability
discharged”.
The
then
section
224(4)
read:
Every
person
who
has
discharged
any
liability
to
a
person
liable
to
make
a
payment
under
this
Act
without
complying
with
a
requirement
under
this
section
is
liable
to
pay
to
her
Majesty
an
amount
equal
to
the
liability
discharged
or
the
amount
which
he
was
required
under
this
section
to
pay
to
the
Receiver
General
of
Canada,
whichever
is
the
lesser.
.
.
The
present
section
224(4)
has
been
substantially
altered
and
now
reads:
Failure
to
comply
Every
person
who
fails
to
comply
with
requirement
under
subsection
(1),
(1.2),
or
(3)
is
liable
to
pay
to
Her
Majesty
an
amount
equal
to
the
amount
that
he
was
required
under
subsection
(1),
(1.2),
or
(3),
as
the
case
may
be,
to
pay
the
Receiver
General
.
.
.
Although
I
agree
that
the
property
in
the
debt
or
liability
is
not
by
virtue
of
subsection
224(1.2)
transferred
to
the
minister
or
Receiver
General,
it
seems
to
me
that
it
is
impressed
with
a
trust
in
that
it
is
declared
to
be
held
by
the
Receiver
General
for
the
specific
purpose
of
applying
it
on
account
of
the
then
tax
debtors’
liability
under
the
Income
Tax
Act.
I
would
therefore
respectfully
disagree
with
the
decision
of
the
Court
in
Lloyd's
Bank,
supra,
partly
because
it
is
based
on
the
court's
decision
in
Lamarre,
supra,
which
was
based
on
sections
of
the
Income
Tax
Act
which
are
not
now,
nor
were
they
at
the
pertinent
time
in
the
Lloyd's
Bank
case,
part
of
the
Income
Tax
Act.
The
conclusion
I
have
reached
is
supported
by
the
judgments
of
Wright,
J.
of
the
Saskatchewan
Court
of
Queen's
Bench
in
The
Royal
Bank
of
Canada
v.
Saskatchewan
Power
Corp.,
Sask.
Q.B.,
January
22,
1990,
No.
5071
(unreported)),
and
MacDonald,
J.
the
trial
judge
who
first
heard
the
Lloyd's
Bank
case
([1990]
2
C.T.C.
357;
[1989]
3
W.W.R.
152)
and
whose
decision
was
reversed
on
appeal.
The
manner
of
interpreting
taxing
statutes
was
extensively
dealt
with
by
our
Court
of
Appeal
in
MacKeen
Estate
v.
Nova
Scotia
(1978),
28
N.S.R.
(2d)
3
wherein
at
page
9
then
Chief
Justice
MacKeigan
stated:
The
plain
or
natural
meaning
of
the
legislation
must
be
sought,
uninfluenced
by
ethical
or
political
biases
or
presumptions
and
unaffected
by
either
the
legislator’s
wish
to
ensure
fair
taxation
of
estates
acquired
in
Nova
Scotia
or
by
the
testator's
wish
to
escape
such
taxation.
Moral
obligations
are
irrelevant
in
the
face
of
the
amorality
of
a
taxing
statute.
The
issue
is
simple:
has
the
legislature
used
words
which
in
their
plain
meaning
embrace
the
bequests?
I
subscribe
to
those
views
of
Chief
Justice
MacKeigan.
Although
it
may
be
feasible
to
attack
the
validity
of
the
section
of
the
Act
in
question
on
other
grounds
not
argued
before
me
it
cannot,
in
my
view,
be
attacked
on
the
grounds
that
the
words
of
the
section
are
either
unclear
or
ambiguous.
I
find,
inaccordance
with
the
plain
meaning,
as
expressed
by
the
words
of
subsection
224(1.2),
that
the
Crown's
claim
to
the
funds
in
question
has
priority
over
that
of
the
applicant
and
I
will
so
order.
Email this Content