Vancise,
J.A.:—
Introduction
The
Royal
Bank
of
Canada
and
Revenue
Canada
both
claim
moneys
owed
by
the
Saskatchewan
Power
Corporation
to
Linnvale
Steel
Ltd.
The
Royal
Bank
claims
priority
under
a
prior
perfected
security
interest
in
the
property
of
Linnvale,
including
accounts
receivable.
Revenue
Canada
claims
priority
under
a
form
of
garnishment
pursuant
to
subsection
224(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the"Act").
A
number
of
suppliers
claim
entitlement
in
priority
to
both
the
Bank
and
the
Receiver
General
under
The
Builders'
Lien
Act,
S.S.
1984-85-86,
c.
B-7.1.
The
issues
are
thus
reduced
to
a
determination
of
priorities
under
The
Personal
Property
Security
Act,
S.S.
1979-80,
c.
P-
6.1,
the
Income
Tax
Act,
and
The
Builders'
Lien
Act.
There
are
two
broad
issues:
(1)
Are
the
transmission
lines
supplied
and
erected
by
Linnvale
on
easements
granted
to
Sask.
Power
an"
improvement”
under
The
Builders'
Lien
Act,
which
would
entitle
the
suppliers
to
a
claim
against
the
holdback?
(2)
Is
the
Royal
Bank
entitled
under
its
perfected
security
interest
in
all
present
and
after-acquired
property
to
the
funds
in
priority
to
Revenue
Canada?
Those
issues
were
decided
in
two
separate
applications.
In
the
first,
Mac-
Lean,
J.
found
that
the
transmission
lines
constructed
on
easements
granted
to
Sask.
Power
were
an“
improvement"
as
defined
by
The
Builders'
Lien
Act
and
that
lien
claimants
"may
be
able
to
bring
themselves
within
the
scope
of
the
Act
and
obtain
access
to
the
holdback”.
In
the
second,
Wright,
J.
found
the
Minister
of
National
Revenue
entitled
to
the
funds
in
priority
to
the
Royal
Bank's
perfected
security
interests.
The
Bank
appeals
both
decisions.
At
the
conclusion
of
oral
argument,
the
first
issue
was
resolved.
The
appeal
from
the
judgment
of
MacLean,
J.
was
dismissed.
I
stated
on
behalf
of
the
Court
that
we
were
in
general
agreement
with
the
reasons
of
the
chambers
judge
and
for
the
reasons
given
by
him
dismissed
the
appeal
with
costs
on
double
Column
V.
It
is
necessary
to
deal
only
with
the
Bank's
claim
to
the
money
under
its
perfected
security
interest
to
all
present
and
after-acquired
property
in
priority
to
Revenue
Canada.
The
facts
are
restricted
to
that
issue.
Facts
The
Bank
advanced
in
excess
of
$1,000,000
to
Linnvale,
a
manufacturer
of
steel
products,
pursuant
to
certain
security
agreements,
including,
a
debenture
in
all
present
and
after-acquired
property
dated
January
4,
1985,
and
a
supplemental
debenture
dated
May
30,
1980;
a
general
assignment
of
book
debts;
and,
section
178
Bank
Act
security.
Those
security
interests
were
perfected
by
registration
under
The
Personal
Property
Security
Act
and
registered
under
the
Bank
Act.
In
1989,
Linnvale
entered
into
two
contracts
with
Sask.
Power
to
supply
and
install
steel
transmission
poles
and
towers
for
the
Riverhurst
transmission
line
for
$279,570,
and
the
Lashburn
transmission
line,
for
$152,130.
Before
those
contracts
were
completed,
Linnvale
defaulted
under
its
loan
agreement
with
the
Bank.
On
October
22,
1989,
the
Bank
appointed
Clarkson-Gordon
receiver/
manager
of
Linnvale
pursuant
to
the
debenture
and
subsequently
petitioned
Linnvale
into
bankruptcy.
Prior
to
the
receivership
and
bankruptcy,
Linnvale
owed
substantial
sums
to
the
Minister
of
National
Revenue
for
deductions
withheld
under
the
Income
Tax
Act,
the
Canada
Pension
Plan,
and
Unemployment
Insurance
Act.
On
August
1,
1989,
Revenue
Canada
served
a"
requirement
to
pay"
on
Sask.
Power
pursuant
to
subsection
224(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
requiring
it
to
pay
on
account
of
Linnvale's
tax
liability
under
subsection
277(10.1)
of
the
Income
Tax
Act,
all
moneys
owing
to
Linnvale
up
to
the
amount
of
$75,808.
On
August
18,
1989,
Sask.
Power
paid
Revenue
Canada
$69,459
of
the
funds
owing
to
Linnvale
on
the
Riverhurst
contract.
Sask.
Power
subsequently
paid
an
additional
$6,349
pursuant
to
that
"requirement
to
pay".
On
August
20,
1989,
Revenue
Canada
made
a
second
demand
in
the
same
terms
pursuant
to
subsection
224(1)
of
the
Act,
claiming
an
additional
$35,180.
As
at
November
8,
1989,
Sask.
Power
owed
Linnvale,
or
the
trustee
in
bankruptcy,
$178,473.32
on
the
Riverhurst
contract
and
$35,428.45
on
the
Lashburn
contract.
The
solicitors
for
Revenue
Canada
concede
that
the
Court
of
Queen's
Bench
has
jurisdiction
to
resolve
the
claims
for
priority
to
the
funds
which
remain
in
the
hands
of
Sask.
Power.
All
appeals
concerning
the
jurisdiction
of
the
Court
were
abandoned.
Trial
Judge's
Decision
Wright,
J.,
after
carefully
analyzing
the
controlling
sections
of
the
income
tax
and
case
law,
including
Lloyd's
Bank
v.
International
Warranty
Co.,
[1990]
2
C.T.C.
360;
60
D.L.R.
(4th)
272;
76
C.B.R.
(N.S.)
54
(Alta.
C.A.),
decided
that
the
Minister
of
National
Revenue
"is
entitled
to
the
funds
.
.
.in
preference
to
the
Royal
Bank."
Disposition
The
simple
issue
is
whether
the
power
granted
to
the
Minister
of
National
Revenue
under
subsection
224(1)
of
the
Income
Tax
Act
to
require
payment
of
a
debt
owed
to
a
taxpayer
to
the
Minister
of
National
Revenue
takes
priority
over
a
prior
perfected
security
interest
and
deprives
the
secured
creditor
of
the
secured
position.
The
relevant
provisions
of
the
Income
Tax
Act
are
as
follows:
224.(1)
Garnishment.—Where
the
Minister
has
knowledge
or
suspects
that
a
person
is
or
will
be,
within
90
days,
liable
to
make
a
payment
to
another
person
who
is
liable
to
make
a
payment
under
this
Act
(in
this
section
referred
to
as
the
“tax
debtor"),
he
may,
by
registered
letter
or
by
a
letter
served
personally,
require
that
person
to
pay
forthwith,
where
the
moneys
are
immediately
payable,
and,
in
any
other
case,
as
and
when
the
moneys
become
payable,
the
moneys
otherwise
payable
to
the
tax
debtor
in
whole
or
in
part
to
the
Receiver
General
on
account
of
the
tax
debtor's
liability
under
this
Act.
224.(1.1)
Without
limiting
the
generality
of
subsection
(1),
where
the
Minister
has
knowledge
or
suspects
that
within
90
days
(a)
a
bank,
credit
union,
trust
company
or
other
similar
person
(in
this
section
referred
to
as
the
"institution")
will
loan
or
advance
moneys
to,
or
make
a
payment
on
behalf
of,
or
make
a
payment
in
respect
of
a
negotiable
instrument
issued
by,
a
tax
debtor
who
is
indebted
to
the
institution
and
who
has
granted
security
in
respect
of
the
indebtedness,
or
(b)
a
person,
other
than
an
institution,
will
loan
or
advance
moneys
to,
or
make
a
payment
on
behalf
of,
a
tax
debtor
who
the
Minister
knows
or
suspects
(i)
is
employed
by,
or
is
engaged
in
providing
services
or
property
to,
that
person
or
was
or
will
be,
within
90
days,
so
employed
or
engaged,
or
(ii)
where
that
person
is
a
corporation,
is
not
dealing
at
arm's
length
with
that
person,
he
may,
by
registered
letter
or
by
a
letter
served
personally,
require
the
institution
or
person,
as
the
case
may
be,
to
pay
in
whole
or
in
part
to
the
Receiver
General
on
account
of
the
tax
debtor's
liability
under
this
Act
the
moneys
that
would
otherwise
be
so
loaned,
advanced
or
paid
and
any
moneys
so
paid
to
the
Receiver
General
shall
be
deemed
to
have
been
loaned,
advanced
or
paid,
as
the
case
may
be,
to
the
tax
debtor.
224.(1.2)
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
any
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.
224.(1.3)
In
subsection
(1.2),
"secured
creditor’”—‘
secured
creditor”
means
a
person
who
has
a
security
interest
in
the
property
of
another
person
or
who
acts
for
or
on
behalf
of
that
person
with
respect
to
the
security
interest
and
includes
a
trustee
appointed
under
a
trust
deed
relating
to
a
security
interest,
a
receiver
or
receiver-manager
appointed
by
a
secured
creditor
or
by
a
court
on
the
application
of
a
secured
creditor,
a
sequestrator,
or
any
other
person
performing
a
similar
function;
"security
interest"—'security
interest"
means
any
interest
in
property
that
secures
payment
or
performance
of
an
obligation
and
includes
an
interest
created
by
or
arising
out
of
a
debenture,
mortgage,
hypothec,
lien,
pledge,
charge,
deemed
or
actual
trust,
assignment
or
encumbrance
of
any
kind
whatever,
however
or
whenever
arising,
created,
deemed
to
arise
or
otherwise
provided
for;
“similar
provision"—"similar
provision”
means
a
provision,
similar
to
subsection
227(10.1),
of
any
Act
of
a
province
that
imposes
a
tax
similar
to
the
tax
imposed
under
this
Act,
where
the
province
has
entered
into
an
agreement
with
the
Minister
of
Finance
for
the
collection
of
the
taxes
payable
to
the
province
under
that
Act.
To
answer
the
broad
issue
of
priority,
two
sub-issues
need
to
be
resolved:
(1)
What
principles
of
interpretation
apply
to
a
revenue
statute;
and,
(2)
Whether,
having
regard
to
those
principles,
the
controlling
provisions
of
the
Act
are
so
unambiguous
as
to
prevent
Revenue
Canada
from
interfering
with
the
secured
party's
proprietary
rights.
Principles
of
Interpretation
Revenue
Canada
relies
on
subsection
224(1.2)
of
the
Income
Tax
Act
to
establish
entitlement
to
the
funds
in
priority
to
the
Bank.
The
Bank
contends
that
a
strict
interpretation
of
subsection
224(1.2)
does
not
grant
Revenue
Canada
the
rights
and
entitlements
it
claims.
It
argues
that
the
Income
Tax
Act,
a
revenue
statute,
has
a
special
construction
status,
and
must
be
strictly
and
literally
interpreted.
Historically,
the
courts
took
a
literal
approach
to
revenue
statutes
to
determine
legislative
intent.
The
written
expression
almost
exclusively
prevailed
over
legislative
content
and
purpose.
The
literal
interpretation,
coupled
with
the
restrictive
interpretation,
placed
the
onus
on
Parliament
to
express
itself
clearly,
and
if
it
did
not
the
benefit
of
the
doubt
went
to
the
taxpayer.
The
rationale
for
the
traditional
approach
is
that
taxing
statutes
have
no
objective
or
purpose
other
than
the
raising
of
revenue
and
interference
with
proprietary
interests
in
such
a
narrow
economic
objective
is
justified
only
if
expressed
in
clear
and
specific
terms.
One
must
ask
whether
there
is
any
justification
for
not
interpreting
taxing
statutes
today
in
the
same
way
as
other
legislation.
In
my
opinion,
there
are
a
number
of
reasons
why
the
literal
and
traditional
approach
should
be
abandoned.
First,
it
is
doubtful
whether
there
ever
was
any
justification
for
applying
special
canons
of
construction
to
revenue
cases.
As
early
as
1899,
Lord
Russell
in
Attorney-General
v.
Carlton
Bank,
[1899]
2
Q.B.
158
at
164,
doubted
the
authority
for
construing
a
taxing
statute
differently
from
any
other
Act.
In
his
opinion,
regardless
of
the
subject
of
the
Act,
effect
is
to
be
given
to
the
intention
of
the
Legislature
"as
that
intention
is
to
be
gathered
from
the
language
employed
having
regard
to
the
context
in
connection
with
which
it
is
employed".
Taxing
statutes
or
revenue
statutes
were
to
be
interpreted
using
the
same
principles
as
applicable
to
any
other
statute.
Second,
the
purposes
and
objectives
of
taxing
statutes
have
changed
from
simply
raising
revenue
to
playing
an
important
role
in
encouraging
economic
growth
and
directing
economic
and
fiscal
policy.
An
examination
of
the
Act
reveals
a
range
of
non-revenue
provisions.
These
are
as
varied
as
providing
incentives
for
personal
savings
in
the
form
of
registered
retirement
savings
plans,
to
influencing
business
decisions
made
in
the
marketplace
under
the
guise
of
investment
tax
credits.
The
theory
that
revenue
statutes
are
solely
for
the
purpose
of
collecting
revenue
is
obsolete.
As
Estey,
J.
noted
(in
dissent),
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
at
264
(D.T.C.
6136;
S.C.R.
1215):
Such
a
canon
of
statutory
interpretation
has,
in
recent
years,
lost
a
great
deal
of
its
force,
perhaps
due
in
part
to
the
position
of
taxing
statutes
in
the
scheme
of
government
regulation
of
the
economic
affairs
of
the
community
or
indeed
to
the
practice
of
including
in
the
ITA
what
might
generally
be
described
as
rights
to
deductions,
to
special
rates
of
taxation,
to
postpone
liability,
and
other
affirmative
rights
in
the
taxpaying
sector
of
society.
The
application
of
the
old
rules
of
strict
and
beneficial
construction
no
longer
fit
such
statutes
in
toto,
and
sometimes
not
at
all.
Returning
to
the
subject
in
Stubart
Investments
Ltd.
v.
The
Queen,
[1984]
1
S.C.R.
536;
[1984]
C.T.C.
294;
84
D.T.C.
6305
at
316
(D.T.C.
6323;
S.C.R.
578),
Estey,
J.
stated:
Gradually,
the
role
of
the
tax
statute
in
the
community
changed,
as
we
have
seen,
and
the
application
of
strict
construction
to
it
receded.
Courts
today
apply
to
this
statute
the
plain
meaning
rule,
but
in
a
substantive
sense
so
that
if
a
taxpayer
is
within
the
spirit
of
the
charge,
he
may
be
held
liable.
He
continued
in
The
Queen
v.
Golden,
[1986]
1
S.C.R.
209;
[1986]
1
C.T.C.
274;
86
D.T.C.
6138
at
277
(D.T.C.
6140;
S.C.R.
214):
[l]n
the
construction
of
taxation
statutes
the
law
is
not
confined
to
a
literal
and
virtually
meaningless
interpretation
of
the
Act
where
the
words
will
support
on
a
broader
construction
a
conclusion
which
is
workable
and
in
harmony
with
the
evident
purposes
of
the
Act
in
question.
Strict
construction
in
the
historic
sense
no
longer
finds
a
place
in
the
canons
of
interpretation
applicable
to
taxation
statutes
in
an
era
such
as
the
present,
where
taxation
serves
many
purposes
in
addition
to
the
old
and
traditional
object
of
raising
the
cost
of
government
from
a
somewhat
unenthusiastic
public.
The
reasons
of
Christie,
C.J.T.C.
in
Bracken
v.
M.N.R.,
[1984]
C.T.C.
2922;
84
D.T.C.
1813
(T.C.C.),
are
also
instructive.
He
asserts
that
the
approach
to
be
used
in
interpreting
the
Act
must
be
based
on
section
11
[now
section
12]
of
the
Interpretation
Act,
R.S.C.
1970,
c.
23
[now
R.S.C.
1985,
c.
I-21]
which
reads:
11.
Every
enactment
shall
be
deemed
remedial,
and
shall
be
given
such
fair,
large
and
liberal
construction
and
interpretation
as
best
ensures
the
attainment
of
its
objects.
The
application
of
this
section
is
inconsistent
with
the
common
law
principle
which
requires
strict
interpretation
of
a
taxing
statute.
Chief
Justice
Christie
does,
however,
caution
that
one
cannot,
under
the
guise
of
interpreting
the
statute
by
normal
methods
of
construction,
"arrive
at
a
subjective
or
quasi-
subjective
notion
regarding
the
objection
or
purpose
of
provisions
of
the
Income
Tax
Act.
.
.".
As
Professor
Côté
has
noted
in
The
Interpretation
of
Legislation
in
Canada:
Modern
authorities
generally
agree
that
fiscal
statutes
should
not
be
construed
by
a
strictly
literal
method,
but
rather
by
the
normal
methods
that
apply
to
all
legislation.
The
task
is
to
discern
the
legislator's
intent
by
studying
the
words
in
the
context
of
their
enactment.
In
particular,
this
implies
that
the
enactment's
object
must
be
considered.
Driedger
reaches
the
same
conclusion
in
Construction
of
Statutes
(2d
ed.).
A
judge
when
construing
a
fiscal
statute
must
assign
a
meaning
consistent
with
its
apparent
purpose
and
that
"the
words
are
to
be
read
in
their
entire
context
in
their
grammatical
and
ordinary
sense,
harmoniously
with
the
scheme
of
the
Act,
the
object
of
the
Act
and
the
intention
of
Parliament”.
Driedger
(2d
ed.),
page
87.
Ambiguity
The
Bank
contends
that
as
secured
creditor
it
has
priority
over
the
claim
of
Revenue
Canada
and
can
only
be
deprived
of
that
prior
proprietary
right
by
specific
clear
and
unambiguous
language.
It
contends
that
Revenue
Canada
cannot
deprive
secured
third
parties
of
pre-existing
property
rights
in
the
absence
of
clear
and
unambiguous
statutory
provisions.
It
contends
that
subsection
224(1.2)
is
not
clear
and
specific
in
that
it
does
not
either
grant
a
charge
or
a
priority
to
Revenue
Canada
and
falls
short
of
effecting
a
transfer
of
property
in
the
fund.
It
relies
on
Homeplan
Realty
Inc.
v.
Avco
Financial
Services
Realty
Ltd.
(1979),
33
C.B.R.
34
at
p.
40:
“In
the
absence
of
a
specific
statutory
provision
to
that
effect,
in
my
view
it
should
not
be
construed
in
a
manner
which
could
deprive
third
parties
of
their
pre-existing
property
rights.”
It
relies
heavily
on
Lloyd's
Bank,
supra.
The
decision
was
followed
by
the
British
Columbia
Court
of
Appeal
in
Concorde
International
Travel
Inc.
v.
T.I.
Travel
Services
(B.C.)
Inc.
(1990),
47
B.C.L.R.
(2d)
188.
Stratton,
J.A.
in
finding
this
section
was
not
clear
and
unambiguous
as
found
by
the
chambers
judge,
stated
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.
It
is
surely
equivalent
to
the
transfer
of
proprietary
rights
without
compensation.
Mr.
Justice
Stratton
held
the
finding
by
the
trial
judge
that
subsection
224(1.2)
provided
by
implication
that
money
paid
in
response
to
Revenue
Canada's
"
requirement
to
pay"
becomes
the
property
of
the
Crown
did
not
accord
with
previous
decisions
of
that
Court.
He
referred
and
relied
specifically
on
Re
Lamarre,
[1978]
2
W.W.R.
465;
27
C.B.R.
(N.S.)
41;
85
D.L.R.
(3d)
392;
78
D.T.C.
6155;
8
A.R.
533,
where
the
Minister
of
National
Revenue
made
a
demand,
similar
to
the
one
given
in
the
Lloyd's
Bank
case,
supra,
under
the
then
subsection
224(1).
The
section
then
read
as
follows:
224
.(1)
When
the
Minister
has
knowledge
or
suspects
that
a
person
is
or
is
about
to
become
indebted
or
liable
to
make
any
payment
to
a
person
liable
to
make
a
payment
under
this
Act,
he
may,
by
registered
letter
or
by
a
letter
served
personally,
require
him
to
pay
the
moneys
otherwise
payable
to
that
person
in
whole
or
in
part
to
the
Receiver
General
of
Canada
on
account
of
the
liability
under
this
Act.
[Emphasis
added.]
After
finding
that
the
words
in
subsection
224(1)
are
for
all
practical
purposes
identical
to
the
words
under
review
and
the
difference
between
the
sections
not
significant,
he
relied
on
the
following
passage
of
Prowse,
J.A.
at
page
469
(D.L.R.
395):
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.
It
should
be
noted,
however,
that
Mr.
Justice
Prowse
goes
on
to
add:
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
sanctioned
subsection
224(4)
read:
224
.(4)
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.
[Emphasis
added.]
The
present
section
224(4)
has
been
substantially
changed.
It
reads:
Failure
to
comply.—Every
person
who
fails
to
comply
with
a
requirement
under
subsection
(1),
(1.2)
or
(3)
is
liable
to
pay
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.
Prowse,
J.A.
relied
upon
a
number
of
cases
to
support
the
position
that
garnishment
proceedings
are
an
attachment
process
only
and
do
not
involve
a
transfer
of
debt
or
the
creation
of
a
creditor
out
of
the
garnishor.
Garnishment
proceedings
involve
the
attaching
of
the
debtor's
property
and
do
not
affect
the
interests
of
third
parties.
He
does,
however,
recognize
that
the
Act
establishes
a
special
garnishment
process
which
does
not
have
to
be
commenced
by
judicial
proceedings
and
is
broad
in
scope.
What
he
does
not
say,
and
in
my
opinion
is
important,
is
that
if
the
traditional
garnishment
procedure
can
be
varied
by
statute,
the
rights
and
interests
affected
by
the
procedures
can
also
be
varied
by
statute.
For
example,
it
is
possible
to
have
a
statute
based
garnishment
proceeding
which
also
involves
a
transfer
of
property
rights
rather
than
simply
an
attachment
of
property.
Whether
or
not
such
transfer
of
property
occurs
depends
upon
the
wording
of
the
statute.
One
cannot
merely
assume
that
a
statutory
garnishment
proceeding
automatically
involves
only
an
attachment
and
not
a
transfer.
The
intention
must
be
determined
on
a
clear
meaning
of
the
words
in
the
statute.
In
the
Attorney
General
of
Canada,
supra,
the
Court
held
that
"the
money
otherwise
payable
to
the
debtor"
in
the
then
subsection
224(1)
referred
to
moneys
that
were
the
property
of
the
debtor.
As
the
moneys
had
been
assigned
to
a
third
party
at
the
time
of
the
Revenue
Canada
demand,
the
demand
failed
as
against
the
assignee.
That
section,
as
noted,
no
longer
applies.
The
Act
does
not
state
that
the
special
garnishment
process
is
an
extrajudicial
attachment.
The
nature
of
an
attachment
in
relation
to
garnishee
proceedings
is
set
forth
in
Re
Combined
Weighing
and
Advertising
Machine
Co.
(1889),
43
Ch.
D.
99
at
105:
.
.
.the
Rules
of
the
Supreme
Court
provides
that
the
service
of
the
garnishee
order
on
the
garnishee
shall
bind
the
debt"
in
his
hands.
The
question,
I
take
it,
is,
what
is
the
meaning
of
the
words”
bind
the
debt
in
his
hands"
?
Now
it
has
been
argued
that
it
amounts
to
a
transfer
of
the
debt.
If
that
was
the
meaning,
it
is
remarkable
that
that
word
was
not
used
and
that
the
order
does
not
say
"transfer"
the
debt:
but,
further
than
that,
the
whole
scheme
of
the
order
is
inconsistent
with
its
being
a
transfer
of
the
debt.
It
is
plain
to
my
mind
that
there
is
no
transfer
of
the
debt.
It
is
equally
plain
to
my
mind
that
the
garnishee
order
therefore
does
not
make
the
garnishor
a
creditor
of
the
garnishee.
What
the
order
does
is
this,
it
gives
the
garnishor
certain
statutory
rights;
it
enables
the
garnishor
to
say
to
the
garnishee,
"You
shall
not
pay
to
your
creditor
the
money
which
you
owe
him."
It
enables
him
to
give
a
valid
receipt
and
discharge
for
the
money.
It
enables
him
in
the
event
of
the
money
not
being
paid
to
obtain
execution.
He
has
all
those
rights
but
there
is
no
transfer
of
the
debt,
and
he
is
not
created
a
creditor.
An
attachment
for
garnishment
purposes
enables
a
garnishor
to
obtain
custody
or
possession
of
money
owing
until
entitlement
to
the
money
is
decided.
This
is
not
the
situation
which
is
created
under
the
present
section
224
of
the
Income
Tax
Act.
In
Lamarre,
supra,
the
Alberta
Court
of
Appeal
found
that
the
moneys
were
not
impressed
with
a
trust
or
transferred
to
the
Minister.
One
must,
however,
read
those
sections
in
light
of
the
amendments
and
the
addition
of
subsection
224(1.2).
The
section
significantly
altered
the
term
"moneys
otherwise
payable
to
the
debtor”
by
expressly
stating
that
the
demand
included
moneys
payable
to
a
secured
creditor
of
the
debtor.
The
addition
of
the
words
in
subsection
224(1.2),"on
account
of
the
tax
debtor's
liability
under
subsection
227(10.1)
or
a
similar
provision”
makes
it
clear
what
Revenue
Canada
is
to
do
with
the
money
paid
to
it.
It
is
to
apply
it
on
account
of
the
tax
debtor's
liability.
One
must
ask
how
it
can
do
so
if
the
title
to
the
money
has
not
been
assigned
to
it
under
the
section.
There
is
nothing
in
the
Act
which
states
that
the
redirected
funds
are
to
be
held
by
the
Minister
pending
a
determination
of
entitlement.
Rather,
the
funds
in
question
are
to
be
applied
as
they
are
payable
on
account
of
the
debtor's
liability.
Lloyd's
Bank,
supra,
is
decided
by
reliance
on
cases
which
dealt
with
taxpayers'
liability
under
a
section
or
sections
of
the
Act
which
have
been
repealed
and
which
are
not
now
relevant,
nor
were
they
at
the
time
of
the
Lloyd's
Bank
decision
relevant
for
the
disposition
of
the
appeal.
Subsection
224(1)
is
a
garnishment
provision
which
sets
out
the
procedure
involved
in
the
garnishment
process.
The
garnishor
is
the
Minister
of
Finance,
the
garnishee
is
the
person
liable
to
make
payment
to
a
tax
debtor
under
the
Act
and
the
party
to
be
paid
is
the
Receiver
General.
The
garnishment
power
consists
of
the
Minister's
ability
to
make
a
demand
for
payment
when
he
knows
or
suspects
payment
will
be
made
to
a
tax
debtor
by
personal
service
or
registered
letter
notifying
the
garnishee
that
funds
otherwise
payable
to
the
tax
debtor
are
to
be
redirected
to
the
Receiver
General.
The
reason
advanced
for
garnishment
under
the
section
is
the
tax
debtor's
liability
under
the
Act.
Payment
recovered
is
payment
on
account
of
the
tax
debtor's
liability.
The
scope
of
the
applicability
of
section
224
is
clear.
Secured
creditors
fall
within
the
general
class
of
stated
garnishees
as
persons
potentially
liable
to
make
payment
to
tax
debtors
under
the
Act.
Subsection
(1.2)
makes
specific
reference
to
garnishment
applicability
to
secured
creditors,
and
the
garnishment
section
encompasses
third
parties.
There
are
no
listed
or
implied
exceptions.
Revenue
Canada's
power
to
receive
funds
on
account
of
the
tax
debtor's
liability
is
equally
clear.
The
power
granted
is
not
merely
custody
of
the
funds
pending
a
determination
of
priority
status.
The
redirected
funds
are
to
be
applied
to
the
tax
debtor's
account.
The
words
"on
account
of
the
tax
debtor's
liability"
mean
something
more
than
the
limited
extra
judicial
attachment
interpretation
contended
by
the
Bank.
A
transfer
of
property
in
the
funds
is
the
logical
implication,
otherwise
the
Minister
lacks
the
ability
to
apply
the
funds
to
the
taxpayer's
account
and
to
subsequently
use
the
funds
in
furtherance
of
income
tax
objectives.
Nowhere
in
subsection
224(1.2)
is
there
a
provision
that
Revenue
Canada
is
to
receive
a
charge
on
property
or
priority
status.
However,
subsection
(1.2)
makes
it
clear
that
when
the
stated
procedure
is
complied
with,
Revenue
Canada
is
to
receive
the
funds
in
preference
to
a
secured
creditor,
notwithstanding
other
enactments.
Priority
and
a
corresponding
charge
upon
property
are
thus
clearly
intended
if
not
specifically
stated.
This
section
did
not
exist
at
the
time
of
the
Lamarre
decision,
supra.
It
gives
primacy
to
the
provisions
of
the
Income
Tax
Act
and
clearly
takes
precedence
over
all
other
laws.
Thus
the
Act
takes
precedence
over
the
assignment
sections
in
the
Bankruptcy
Act
which
state
that
attachments
do
not
have
primacy
over
the
rights
of
a
secured
creditor.
The
assignment
provisions
in
the
Bankruptcy
Act
were
a
major
underpinning
of
Lamarre
and
subsection
224(1.2)
fundamentally
changed
the
rights
between
the
competing
parties.
The
Concorde
Travel
decision,
supra,
relies
mainly
upon
Lamarre
and
Lloyd's
Bank,
supra,
which
are
based
on
provisions
of
the
Act
that
have
since
changed
in
form
and
substance.
I
am
not
persuaded
that
the
result
reached
in
this
case
is
correct
for
the
reasons
previously
stated.
Professor
Pierre
Côté,
in
The
Interpretation
of
Legislation
in
Canada,
states
at
page
69
that
unproclaimed
Acts
are
an
expression
of
parliamentary
intent
and
can
be
examined
in
order
to
clarify
uncertainty
of
meaning.
It
is
contended
that
as
the
relevant
sections
of
the
Act
that
are
in
force
do
not
adequately
define
the
nature
of
the
garnishment
procedure
(i.e.,
is
it
an
extra-
judicial
attachment
or
does
it
involve
the
creation
of
a
secured
creditor
with
priority
status),
the
unproclaimed
section
can
be
used
to
determine
the
correct
interpretation.
An
analysis
of
the
unproclaimed
subsection
227(10.2)
clearly
indicates
that
the
Crown
becomes
a
secured
creditor
with
priority
status,
a
finding
contrary
to
that
in
Lamarre,
Thus
the
unproclaimed
section
becomes
confirmatory
of
the
position
contended
for
by
Revenue
Canada.
In
my
opinion,
the
interpretation
placed
on
the
section
by
D.C.
McDonald,
J.
of
the
Court
of
Queen's
Bench
in
Alberta
in
Lloyd's
Bank
([1989]
1
C.T.C.
401),
and
Wright,
J.,
is
the
correct
one.
An
examination
of
the
sections
clearly
supports
the
position
that
there
is
no
ambiguity.
Section
224(1.2)
empowers
the
Minister,
by
letter
to
require
a
person
(the
Saskatchewan
Power
Corporation)
to
pay
moneys
otherwise
payable
to
the
secured
creditor
(the
Royal
Bank)
to
the
Receiver
General
on
account
of
the
tax
debtor's
liability
(Linnvale).
As
D.C.
McDonald,
J.
stated
at
page
410:
If
there
are
moneys
that
are
otherwise
payable
to
a
secured
creditor,
it
is
clear
that
those
moneys
must
be
paid
not
to
the
secured
creditor
but
to
the
Receiver
General,
and
that
the
moneys
are
not
to
be
held
for
some
such
purpose
as
safekeeping
while
entitlement
is
decided,
but,
on
account
of
the
tax
debtor's
liability”.
In
other
words,
the
section
clearly
provides
by
implication
that
the
moneys
so
paid
become
the
property
of
the
Crown;
there
is
no
other
way
that
the
tax
debtor's
liability
could
be
satisfied.
Mr.
Justice
Tidman
of
the
Supreme
Court
of
Nova
Scotia
reached
a
similar
conclusion
in
Touche
Ross
Ltd.
v.
Canada,
[1991]
1
C.T.C.
505.
Thus
the
money
is,
not
in
express
terms
but
by
implication,
declared
to
be
held
in
trust
to
apply
on
account
of
the
tax
debtor's
liability.
Section
224(1.2)
does
not
transfer
the
property
and
the
debt
to
the
Minister
or
to
the
Receiver
General.
It
is
impressed
with
a
trust
which
requires
that
the
money
be
held
by
the
Receiver
General
for
the
specific
purpose
of
applying
it
on
account
of
the
tax
debtor's
liability
under
the
Act.
As
between
the
Royal
Bank
and
Revenue
Canada,
Revenue
Canada
has
priority
to
the
funds
claimed
up
to
the
extent
of
the
taxpayers’
liability.
The
parties
are
now
free
to
dispose
of
the
claims
under
The
Builders'
Lien
Act.
The
appeal
is
dismissed
with
costs
on
double
Column
V.
Appeal
dismissed.
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