British Columbia v. Henfrey Samson Belair Ltd., (1989) 97 N.R. 61 (SCC)

• Judge: Lamer, Wilson, La Forest, L'Heureux-Dubé, Gonthier, Cory and McLachlin, JJ.
• Court: Supreme Court (Canada)
• Case Date: July 13, 1989
• Jurisdiction: Canada (Federal)
• Citations: (1989), 97 N.R. 61 (SCC);[1989] 2 SCR 24;[1989] CarswellBC 351;34 ETR 1;[1989] SCJ No 78 (QL);59 DLR (4th) 726;JE 89-1098;38 BCLR (2d) 145;1989 CanLII 43 (SCC);75 CBR (ns) 1;[1989] 5 WWR 577;97 NR 61

B.C. v. Henfrey Samson Belair Ltd. (1989), 97 N.R. 61 (SCC)

MLB headnote and full text

[French language version follows English language version]

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

.........................

Her Majesty The Queen in Right of the Province of British Columbia (appellant) v. Henfrey Samson Belair Ltd. (respondent) and Attorney General of Canada, Attorney General for Ontario, Attorney General of Quebec, Attorney General for New Brunswick, Attorney General of Manitoba, Attorney General for Alberta and Attorney General of Newfoundland (interveners)

(20515)

Indexed As: British Columbia v. Henfrey Samson Belair Ltd.

Supreme Court of Canada

Lamer, Wilson, La Forest, L'Heureux-Dubé, Gonthier, Cory and McLachlin, JJ.

July 13, 1989.

Summary:

A company placed in receivership by a secured creditor made an assignment in bankruptcy. Provincial sales taxes collected under the Social Service Tax Act were intermingled with other company assets. The receiver applied all assets to reduce indebtedness to the secured creditor. The province submitted that the deemed trust created by s. 18 of the Act constituted a trust within the meaning of s. 47(a) of the Bankruptcy Act, thereby giving the province priority by excluding the sales taxes collected from the bankrupt's divisible property.

The British Columbia Supreme Court held that the Social Service Tax Act did not create a trust and accordingly the province had no priority. The province appealed.

The British Columbia Court of Appeal dismissed the appeal. The court held that the Act did create a trust, but not one to which the Bankruptcy Act gave priority. The province appealed.

The Supreme Court of Canada, Cory, J., dissenting, dismissed the appeal. The court held that the statutory deemed trust under s. 18 was not a "trust" within the meaning of s. 47(a) of the Bankruptcy Act once the sales taxes were intermingled with other assets and were, therefore, not identifiable or traceable. At that time, the province had only a claim secured by a charge or lien and s. 107(1)(j) of the Bankruptcy Act applied to rank the province last in priority.

Bankruptcy - Topic 488

Property of bankrupt - Exemptions or exclusions - Trust property - Section 18 of the Social Service Tax Act deemed that taxes collected were held in trust for the province and were deemed to be held separately from other assets, whether intermingled or not - Section 47(a) of the Bankruptcy Act excluded property held in trust by a bankrupt from the bankrupt's divisible property - Section 107(1)(j) of the Bankruptcy Act ranked Crown claims last in priority - The Supreme Court of Canada held that the trust created by s. 18 lacked an essential characteristic of a common law trust once the taxes were intermingled with other assets (i.e., no longer identifiable or traceable) - Section 47(a) did not apply to provincial statutory trusts that lacked the common law attributes of a trust, because that would permit provincially created priorities under the Bankruptcy Act and a scheme of division that varied from province to province - Accordingly, priority of the province's claim was governed by s. 107(1)(j).

Constitutional Law - Topic 6267

Federal jurisdiction (s. 91) - Bankruptcy and insolvency - Provincial legislation - Statutory trusts - [See Bankruptcy - Topic 488 above].

Sales and Service Taxes - Topic 733

Sales tax - Collection and enforcement - Statutory trusts - Priorities - Bankruptcy - [See Bankruptcy - Topic 488 above].

Cases Noticed:

Bourgault's Estate v. Deputy Minister of Revenue of Quebec, [1980] 1 S.C.R. 35; 30 N.R. 24, consd. [para. 12].

Deputy Minister of Revenue v. Rainville - see Bourgault's Estate v. Deputy Minister of Revenue of Quebec.

Jacs Jackets and Crest Ltd., Re; Workers' Compensation Board (Alta.) v. Deloitte Haskins and Sells Limited, [1985] 1 S.C.R. 785; 60 N.R. 81; 63 A.R. 321, appld. [para. 14].

Deloitte Haskins and Sells Ltd. v. Workers' Compensation Board - see Jacs Jackets and Crest Ltd., Re; Workers' Compensation Board (Alta.) v. Deloitte Haskins and Sells Limited.

Phoenix Paper Products Ltd., Re (1983), 48 C.B.R.(N.S.) 113 (Ont. C.A.), refd to. [para. 23].

Tucker v. Royal Trust Co., [1982] 1 S.C.R. 250; 40 N.R. 361, refd to. [para. 36].

John M.M. Troup Ltd. v. Royal Bank of Canada, [1962] S.C.R. 487, refd to. [para. 38].

Deslauriers Construction Products Ltd., Re, [1970] 3 O.R. 599 (C.A.), refd to. [para. 39].

Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd., [1980] 1 S.C.R. 1182; 31 N.R. 301, refd to. [para. 39].

Multiple Access Ltd. v. McCutcheon et al., [1982] 2 S.C.R. 161; 44 N.R. 181, refd to. [para. 41].

Diplock's Estate, Re, [1948] Ch. 465; [1948] 2 All E.R. 318 (C.A.), refd to. [para. 48].

Minister of Health v. Simpson, [1951] A.C. 251; [1950] 2 All E.R. 1137 (H.L.), refd to. [para. 48].

Federal Business Development Bank v. Commission de la sante et de la sécurité du travail, [1988] 1 S.C.R. 1061; 84 N.R. 308; 14 Q.A.C. 140, refd to. [para. 48].

Statutes Noticed:

Bankruptcy Act, R.S.C. 1970, c. B-3, sect. 47 [paras. 6, 40]; sect. 107(1)(j) [paras. 7, 40].

Builders' Lien Act, R.S.A. 1980, c. B-12, sect. 16.1 [para. 37].

Business Corporations Act, S.A. 1981, c. B-15, sect. 191(1) [para. 37].

Construction Lien Act, S.O. 1983, c. 6, sect. 7 [para. 37].

Employment Standards Act, R.S.A. 1980, c. E-10.1, sect. 113 [para. 37].

Health Insurance Act, R.S.O. 1980, c. 197, sect. 18 [para. 37].

Health Insurance Premiums Regulations, Alta. Reg. 217/81 [para. 37].

Insurance Act, R.S.A. 1980, c. I-5, sect. 123(1) [para. 37].

Insurance Act, R.S.O. 1980, c. 218, sect. 359 [para. 37].

Pension Benefits Act, S.O. 1987, c. 35, sect. 58 [para. 37].

Real Estate Agents' Licensing Act, R.S.A. 1980, c. R-5, sect. 14 [para. 37].

Social Service Tax Act, R.S.B.C. 1979, c. 388, sect. 5, sect. 8 [para. 29]; sect. 9, sect. 10 [para. 30]; sect. 18(1), sect. 18(2) [paras. 5, 32]; sect. 22, sect. 23, sect. 24, sect. 25, sect. 26, sect. 27, sect. 28 [para. 29].

Social Service Tax Act Regulations, B.C. Reg. 84/58, Division 5 [para. 30].

Authors and Works Noticed:

Driedger, E.A., Construction of Statutes (2nd Ed. 1983), p. 105 [para. 10].

Hardy, Anne E., Crown Priority in Insolvency (1986), p. 107 [para. 44].

Waters, D.W.M., Law of Trusts in Canada (2nd Ed. 1984), pp. 119-122 [para. 45].

Counsel:

William A. Pearce and J.G. Pottinger, for the appellant, Province of British Columbia;

Wendy G. Baker, Q.C., and Gillian E. Parson, for the respondent, Henfrey Samson Belair Ltd.;

James M. Mabbutt, Q.C., for the Attorney General of Canada;

Janet E. Minor and Timothy Macklem, for the Attorney General for Ontario;

Yves de Montigny and Madeleine Aube, for the Attorney General of Quebec;

Reinhold M. Endres, for the Attorney General of Nova Scotia;

Richard Burns, for the Attorney General for New Brunswick;

W. Glenn McFetridge and Dirk D. Blevins, for the Attorney General of Manitoba;

Robert C. Maybank, for the Attorney General for Alberta;

W.G. Burke-Robertson, Q.C., for the Attorney General of Newfoundland.

Solicitors of Record:

Ministry of Attorney General of British Columbia, Victoria, British Columbia, for the appellant;

Davis & Company, Vancouver, British Columbia, for the respondent;

Deputy Attorney General of Canada, Ottawa, Ontario, for intervener, the Attorney General of Canada;

Ministry of the Attorney General of Ontario, Toronto, Ontario, for the intervener, the Attorney General for Ontario;

Attorney General of Quebec, Ste-Foy, Quebec, for the intervener, the Attorney General of Quebec;

Department of the Attorney General of Nova Scotia, Halifax, Nova Scotia, for the intervener, the Attorney General of Nova Scotia;

Attorney General for New Brunswick, Fredericton, New Brunswick, for the intervener, the Attorney General for New Brunswick;

Gordon E. Pilkey, Winnipeg, Manitoba, for the intervener, the Attorney General of Manitoba;

Attorney General of Alberta, Edmonton, Alberta, for the intervener, the Attorney General of Alberta;

Attorney General of Newfoundland, St. John's, Newfoundland, for the intervener, the Attorney General of Newfoundland.

This appeal was heard on April 21, 1989, before Lamer, Wilson, La Forest, L'Heureux-Dubé, Gonthier, Cory and McLachlin, JJ., of the Supreme Court of Canada.

On July 13, 1989, the judgment of the Supreme Court of Canada was delivered in both official languages and the following opinions were filed:

McLachlin, J. (Lamer, Wilson, La Forest, L'Heureux-Dubé and Gonthier, JJ., concurring) - see paragraphs 1 to 26;

Cory, J., dissenting - see paragraphs 27 to 53.