Crown became owner of money required before bankruptcy

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Crown became owner of money required before bankruptcy

Crown sent requirement to pay to appellant bank pursuant to s. 317 of Excise Tax Act (Can.) (“ETA”), in relation to debtor. Debtor then made assignment into bankruptcy. Trustee sent notice to bank to stay requirement to pay, but bank did not comply with requirement to pay. Crown then issued notice of assessment to bank. Reassessment was made, which bank appealed. Tax Court Judge dismissed bank’s appeal, concluding that, according to language of s. 317(3) of ETA money subject to requirement to pay immediately relinquished to Crown on bank’s receipt of requirement. Money was no longer part of tax debtor’s patrimony when notice of stay issued under s. 69 of Bankruptcy and Insolvency Act (Can.) (“BIA”), filed. Tax Court Judge found there was no conflict between BIA and requirement to pay, which remained fully applicable. Federal Court of Appeal held that when Crown issued requirement to pay under s. 317(3) of ETA before notice of stay under s. 69 of BIA filed and, on date of that notice, payment owed in respect of requirement to pay had still not been made, s. 70(1) of BIA did not give priority to assignment of tax debtor’s property over Crown’s requirement to pay. Provisions of any enactment must be construed contextually having regard to statute read as whole. Parliament intended that power under s. 317(3) of ETA only be exercised before bankruptcy. Even if requirement to pay issued at a time that coincided with tax debtor’s bankruptcy, there was no conflict possible between BIA and right of ownership conferred upon Crown under s. 317(3) of ETA. Words “other than the Bankruptcy and Insolvency Act” were not inserted in s. 317(3) of ETA to give precedence to BIA in event of conflict since no conflict possible. Purpose of “other than the Bankruptcy and Insolvency Act” to prevent power set out in s. 317(3) from being exercised after bankruptcy. Requirement to pay received by bank before notice of stay filed. Tax Court Judge correctly concluded Crown became owner of money required before bankruptcy. Money not part of tax debtor’s patrimony at time of bankruptcy and bank had obligation to pay amount required. On further appeal to Supreme Court of Canada, held, appeal dismissed for reasons given by Court of Appeal.

Toronto Dominion Bank v. Canada (Jan. 12, 2012, S.C.C., LeBel, Deschamps, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ., File No. 33878) Decision at 325 D.L.R. (4th) 174, 193 A.C.W.S. (3d) 1073 was affirmed. 209 A.C.W.S. (3d) 495 (2 pp.).