Words and Phrases - "Crown prerogative"

The personal representatives of an insolvent estate proposed to distribute its remaining assets pro rata to all the unsecured creditors in accordance with s. 27 of the Estate Administration Act (Alberta), which provided:

27(1) Except as otherwise provided in an enactment, if there is a deficiency of assets necessary to satisfy the valid money claims against the estate, the claims must be paid proportionately and without any preference or priority.

(2) Nothing in this section prejudices

(a) a mortgage existing during the lifetime of the deceased person on the deceased person’s property … .

CRA argued that ITA s. 159 created a priority of payment for its claims "because a clearance certificate is only granted if outstanding balances owing to the CRA have been paid or secured and there are no other outstanding adjustment requests, objections, taxpayer relief, or appeal requested as a clearance certificate had not been obtained" (para. 3). In rejecting this position, Leonard J stated (at para. 6):

[I]n order to consider the interpretation of s 159 … and whether it creates a priority in favour of the CRA, I must decide if it overrides the provincial legislation and the provisions dealing with the payment of unsecured debts. In other words, this analysis requires me to consider the doctrine of paramountcy. I am unable to consider this issue unless the parties have given notice of a constitutional question to the province of Alberta, as required by the Judicature Act, RSA 2000, c J-2, s 24. This has not occurred.

However, she accepted CRA’s alternative submission that “the Crown’s debt takes priority over other creditors of equal degree by virtue of the common law prerogative of the Crown to be paid first among claims of equal degree” (para. 6), stating (at para. 29):

[T]he Crown prerogative of the Crown to be paid first among claims of equal degree is in effect in Alberta and that there is nothing in the Estate Administration Act that limits the Crown prerogative.