9083-4185 Québec Inc. (Bankrupt), Re, (2009) 394 N.R. 368 (SCC)

• Judge: McLachlin, C.J.C., Binnie, LeBel, Fish, Abella, Rothstein and Cromwell, JJ.
• Court: Supreme Court (Canada)
• Case Date: March 17, 2009
• Jurisdiction: Canada (Federal)
• Citations: (2009), 394 N.R. 368 (SCC);2009 SCC 49

9083-4185 Qué. Inc. (Bankrupt), Re (2009), 394 N.R. 368 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2009] N.R. TBEd. OC.060

Deputy Minister of Revenue of Quebec and Her Majesty The Queen (appellants) v. Caisse populaire Desjardins de Montmagny and Raymond Chabot Inc., in its capacity as Trustee in bankruptcy of 9083-4185 Québec Inc. (respondents) and Canadian Association of Insolvency and Restructuring Professionals (intervenor)

Deputy Minister of Revenue of Quebec and Her Majesty The Queen (appellants) v. Raymond Chabot Inc., in its capacity as Trustee for the estate of the debtor, Consortium Promecan Inc. (respondent)

Deputy Minister of Revenue of Quebec and Her Majesty The Queen (appellants) v. National Bank of Canada (respondent) and Canadian Association of Insolvency and Restructuring Professionals (intervenor)

(32486, 32489, 32492; 2009 SCC 49; 2009 CSC 49)

Indexed As: 9083-4185 Québec Inc. (Bankrupt), Re

Supreme Court of Canada

McLachlin, C.J.C., Binnie, LeBel, Fish, Abella, Rothstein and Cromwell, JJ.

October 30, 2009.

Summary:

Three companies in Quebec collected GST and the Quebec Sales Tax (QST) but went bankrupt before remitting them to the tax authorities. The tax authorities claimed that they owned the GST and QST amounts and that the trustee in bankruptcy was their mandatary for their recovery. Two secured creditors claimed that they had priority over the tax authorities' claims. The trustee rejected the tax authorities' claims. In one bankruptcy, the trustee indicated that the Quebec tax authority was only an ordinary creditor in the bankruptcy. A judicial resolution of the dispute in the three bankruptcies was sought by way of the tax authorities filing an appeal in one bankruptcy and the trustee and one secured creditor respectively asking the court for directions in the two others.

The Quebec Superior Court, which heard the three proceedings separately, found in favour of the tax authorities. See 34 C.B.R.(5th) 245; 2006 QCCS 2108 (Boisvert J.); 2006 QCCS 6370 (St-Julien J.); 21 C.B.R.(5th) 289; 2006 QCCS 2656 (Bouchard J.). All three judgments were appealed.

The Quebec Court of Appeal, in decisions reported [2008] R.J.Q. 39; 2007 QCCA 1837; 2007 QCCA 1835; 2007 QCCA 1813, allowed the appeals. The tax authorities appealed.

The Supreme Court of Canada dismissed the appeals.

Bankruptcy - Topic 437.2

Property of bankrupt - Particular property - Taxes collected but not remitted to tax authorities (incl. GST, GST credits and sales tax) - [See Bankruptcy - Topic 3642 ].

Bankruptcy - Topic 3642

Creditors - General - Priorities - Precedence of Bankruptcy and Insolvency Act over provincial legislation - Three companies in Quebec collected GST and the Quebec Sales Tax (QST) but went bankrupt before remitting them to the tax authorities - The tax authorities claimed that they owned the GST and QST amounts and that the trustee in bankruptcy was their mandatary for their recovery - Two secured creditors claimed that they had priority over the tax authorities' claims - The Supreme Court of Canada affirmed the rejection of the tax authorities' claims - The GST and the QST were direct taxes payable by the recipient of a good or service - However, as a result of 1992 amendments to the Bankruptcy and Insolvency Act (BIA), the tax authorities had to be treated as an ordinary creditor in such a case - They did not own tax amounts payable by purchasers of goods and services that were subject to the GST and QST - Instead, they had a claim against the supplier - Furthermore, any deemed trust in favour of the tax authorities ended at the time of the bankruptcy - In addition, the federal Parliament's jurisdiction over bankruptcy and insolvency did not allow provincial legislatures to modify the order of priority established in the BIA - The tax amounts in issue were therefore part of the bankrupt's patrimony but remained subject to any security interests that had been validly granted to creditors - See paragraphs 1 to 30.

Bankruptcy - Topic 3655

Creditors - General - Priorities - Crown - General - [See Bankruptcy - Topic 3642 ].

Bankruptcy - Topic 3656

Creditors - General - Priorities - Crown v. secured creditor - [See Bankruptcy - Topic 3642 ].

Cases Noticed:

Renvoi relatif à la taxe de vente du Québec, [1994] 2 S.C.R. 715; 169 N.R. 1; 62 Q.A.C. 81, refd to. [para. 9].

Reference Re Quebec Sales Tax - see Renvoi relatif à la taxe de vente du Québec.

Reference Re Goods and Services Tax, [1992] 2 S.C.R. 445; 138 N.R. 247; 127 A.R. 161; 20 W.A.C. 161, refd to. [para. 10].

D.I.M.S. Construction Inc. (Bankrupt) v. Quebec (Attorney General), [2005] 2 S.C.R. 564; 2005 SCC 52, refd to. [para. 17].

Victuni Aktiengesellschaft v. Quebec, [1980] 1 S.C.R. 580; 32 N.R. 91, refd to. [para. 20].

Lefebvre (Bankrupt), Re, [2004] 3 S.C.R. 326; 326 N.R. 353; 2004 SCC 63, refd to. [para. 22].

DaimlerChrysler Services Canada Inc. v. Lebel - see Lefebvre (Bankrupt), Re.

GMAC Leaseco Ltd. v. Chabot (Raymond) Inc. - see Lefebvre (Bankrupt), Re.

British Columbia v. Henfrey Samson Belair Ltd., [1989] 2 S.C.R. 24; 97 N.R. 61, refd to. [para. 27].

Minister of National Revenue v. Caisse populaire du Bon Conseil, [2009] 2 S.C.R. 94; 389 N.R. 199; 2009 SCC 29, refd to. [para. 28].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 86(1) [para. 15].

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 222(1.1) [para. 16].

Authors and Works Noticed:

Brakel (Robert) & Associates Ltd., Value-Added Taxation in Canada: GST, HST, and QST (2nd Ed. 2003), pp. 2 [para. 10]; 3 [paras. 10, 11]; 4 [para. 11].

Canada, Hansard, House of Commons Debates, vol. 2, 3rd Sess., 34th Parliament (June 19, 1991), p. 2106 [para. 12].

Canada, Hansard, House of Commons Debates, vol. 4, 3rd Sess., 34th Parliament (November 1, 1991), p. 4354 [para. 14].

Canada, House of Commons, Minutes of Proceedings and Evidence of the Standing Committee on Consumer and Corporate Affairs and Government Operations, Issue No. 9 (September 5, 1991), p. 9:5 [para. 13].

Canada, House of Commons, Minutes of Proceedings and Evidence of the Standing Committee on Consumer and Corporate Affairs and Government Operations, Issue No. 10 (September 5, 1991), p. 10:18 [para. 14].

Hansard - see Canada, Hansard, House of Commons Debates.

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), p. 276 [para. 19].

Counsel:

Christian Boutin, Michel Beauchamp and Jean-Yves Bernard, for the appellant the Deputy Minister of Revenue of Quebec;

Pierre Cossette and Guy Laperrière, for the appellant Her Majesty The Queen;

Reynald Auger and Jean-Patrick Dallaire, for the respondents Caisse populaire Desjardins de Montmagny and Raymond Chabot Inc., in its capacity as Trustee in bankruptcy of 9083-4185 Québec Inc. (32486);

Mason Poplaw and Miguel Bourbonnais, for the respondent Raymond Chabot Inc., in its capacity as Trustee for the estate of the debtor Consortium Promecan Inc. (32489);

Marc Germain, for the respondent National Bank of Canada (32492);

Éric Vallières and Sidney Elbaz, for the intervenor.

Solicitors of Record :

Department of Justice, Montréal, Québec, for the appellant, the Deputy Minister of Revenue of Quebec;

Attorney General of Canada, Montréal, Québec, for the appellant, Her Majesty The Queen;

Langlois Kronström Desjardins, Lévis, Québec, for the respondents, Caisse populaire Desjardins de Montmagny and Raymond Chabot Inc., in its capacity as trustee in bankruptcy of 9083-4185 Québec Inc. (32486);

McCarthy Tétrault, Montréal, Québec, for the respondent, Raymond Chabot Inc., in its capacity as Trustee for the estate of the debtor Consortium Promecan Inc. (32489);

Stein, Monast, Québec, Québec, for the respondent, National Bank of Canada (32492);

McMillan, Montréal, Québec, for the intervenor.

These appeals were heard on March 17, 2009, by McLachlin, C.J.C., Binnie, LeBel, Fish, Abella, Rothstein and Cromwell, JJ., of the Supreme Court of Canada. The following decision of the Supreme Court was delivered in both official languages by LeBel, J., on October 30, 2009.