DaimlerChrysler Financial Services (Debis) Canada Inc. v. Mega Pets Ltd. et al., 2002 BCCA 242

• Judge: Donald, Newbury and Mackenzie, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: March 11, 2002
• Jurisdiction: British Columbia
• Citations: 2002 BCCA 242;(2002), 166 B.C.A.C. 298 (CA)

DaimlerChrysler v. Mega Pets (2002), 166 B.C.A.C. 298 (CA);

    271 W.A.C. 298

MLB headnote and full text

Temp. Cite: [2002] B.C.A.C. TBEd. AP.041

DaimlerChrysler Financial Services (Debis) Canada Inc. (appellant/plaintiff) v. Mega Pets Ltd., Walter Edwards Kenal, Comox Valley Bailiffs Ltd. and Canada Customs & Revenue Agency (respondents/defendants)

(CA028129; 2002 BCCA 242)

Indexed As: DaimlerChrysler Financial Services (Debis) Canada Inc. v. Mega Pets Ltd. et al.

British Columbia Court of Appeal

Donald, Newbury and Mackenzie, JJ.A.

April 18, 2002.

Summary:

Kenal and Mega Pets signed a conditional sales contract for purchase of a motor vehicle. The seller immediately assigned the contract to the plaintiff finance company. The plaintiff perfected a purchase money security interest by filing a financing state­ment under the Personal Property Security Act. Mega Pets failed to remit to the federal Crown deductions from its employees' wages for income tax, Canada Pension Plan and Employment Insurance. The Crown seized the vehicle and sold it. The proceeds were held in trust to determine the priorities as between the plaintiff and the Crown.

The British Columbia Supreme Court, in a decision reported at [2000] B.C.T.C. 964, held that the "super-priority" granted to the Crown under ss. 227(4) and 227(4.1) of the Income Tax Act entitled the Crown to the entire proceeds of sale. The finance com­pany appealed.

The British Columbia Court of Appeal allowed the appeal, set aside the trial judg­ment and remitted the question of the dis­tribution of the sale proceeds to the court below.

Income Tax - Topic 9238.1

Enforcement - Collection - Statutory deemed trust - Priorities - Mega Pets and Kenal signed a conditional sales contract on a vehicle - The seller assigned the contract to the plaintiff - Mega failed to remit to the federal Crown deductions from employees' wages for income tax, CPP and EI - The Crown seized the vehicle and sold it - A trial judge found that Mega was the "sole owner" of the vehicle, and that the Crown was entitled to the sale pro­ceeds, because of the priorities created by the Income Tax Act, ss. 227(4) and (4.1) - The British Columbia Court of Appeal allowed the plaintiff's appeal on both conclusions - See paragraphs 20 to 44.

Personal Property - Topic 1566

Ownership - Acquisition by purchase - Joint purchase - A company (Mega Pets Ltd.) needed a business vehicle - The seller agreed to a conditional sales contract only if Kenal would become a joint owner of the vehicle and joint obligor of the contract - Kenal and Mega Pets signed the contract - The British Columbia Court of Appeal disagreed with the trial judge's ruling that Mega Pets was the "sole owner" of the vehicle, and that Kenal was a guar­antor - The court held that Kenal and Mega Pets were joint tenants of the vehicle, and that the joint tenancy was not severed - See paragraphs 18 to 30.

Words and Phrases

Security interest - The British Columbia Court of Appeal held that the words "se­curity interest" in s. 224(1.3) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, should not be construed with refer­ence to the Personal Property Security Act, R.S.B.C. 1996, c. 359 - The defini­tion in the Income Tax Act was the only one properly considered in determining the meaning of the term for purposes of s. 227 of the Income Tax Act - The court further held that a conditional sales agreement was not a "security interest" for purposes of s. 224 of the Income Tax Act - See para­graphs 31, 36 to 38.

Cases Noticed:

Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; 208 N.R. 161; 193 A.R. 321; 135 W.A.C. 321, consd. [para. 12].

Royal Bank of Canada v. Tuxedo Trans­port Ltd. (2000), 140 B.C.A.C. 133; 229 W.A.C. 133; 190 D.L.R.(4th) 139 (C.A.), reving. (1999), 8 B.C.T.C. 119; 6 C.B.R.(4th) 285 (S.C.), consd. [paras. 14, 15].

First Vancouver Finance v. Minister of National Revenue et al., [2000] 1 W.W.R. 713; 190 Sask.R. 286 (Q.B.), affd. [2000] 8 W.W.R. 386; 199 Sask.R. 9; 232 W.A.C. 9 (C.A.), affd. (2002), 288 N.R. 347; 219 Sask.R. 185; 272 W.A.C. 185 (S.C.C.), refd to. [para. 15].

United Used Auto & Truck Parts Ltd. et al., Re, [2000] B.C.T.C. 922; 83 B.C.L.R.(3d) 191 (S.C.), consd. [para. 16].

Jaroszuk v. Quewezance et al. (1992), 12 B.C.A.C. 219; 23 W.A.C. 219; 66 B.C.L.R.(2d) 171 (C.A.), consd. [para. 18].

Anson v. Anson, [1953] 1 Q.B. 636, refd to. [para. 22].

Husky Oil Operations Ltd. v. Minis­ter of National Revenue et al., [1995] 3 S.C.R 453; 188 N.R. 1; 137 Sask.R. 81; 107 W.A.C. 81, refd to. [para. 22].

Black Swan Gold Mines Ltd. v. Goldbelt Resources Ltd. (1996), 78 B.C.A.C. 193; 128 W.A.C. 193; 25 B.C.L.R.(3d) 285 (C.A.), refd to. [para. 23].

Simpson v. R. (1979), 79 D.T.C. 5336 (F.C.T.D.), consd. [para. 24].

Singh v. Brar et al., [1998] B.C.T.C. Uned. 191; 55 B.C.L.R.(3d) 82 (S.C.), consd. [para. 24].

Graham v. Canadian Western Bank (1999), 251 A.R. 140 (Q.B. Master), refd to. [para. 26].

Reeder, Re (1995), 37 C.B.R.(3d) 228 (B.C.S.C.), refd to. [para. 26].

Nissan Canada Finance Inc. v. Gletsu, [1998] A.R. Uned. 66; 5 C.B.R.(4th) 89 (Q.B. Master), refd to. [para. 26].

Minister of National Revenue v. Schwab Construction Ltd. et al. (2001), 206 Sask.R. 95; 25 C.B.R.(4th) 289 (Q.B.), affd. (2002), 213 Sask.R. 278; 260 W.A.C. 278 (C.A.), consd. [para. 33].

Haibeck v. No. 40 Taurus Ventures Ltd. (1991), 59 B.C.L.R.(2d) 229 (S.C.), refd to. [para. 41].

Euroclean Canada Inc. v. Forest Glade Investments Ltd. and Mady (1985), 8 O.A.C. 1; 49 O.R.(2d) 769 (C.A.), refd to. [para. 41].

Ottaway, Re (1980), 110 D.L.R.(3d) 231 (B.C.C.A.), refd to. [para. 41].

C.C. Motor Sales Ltd. v. Chan, [1926] S.C.R. 485, refd to. [para. 42].

Commercial Credit Corp. of Canada Ltd. v. Niagara Finance Co., [1940] S.C.R. 420, refd to. [para. 42].

Hendrickson v. Mid-City Motors Ltd. (1951), 1 W.W.R.(N.S.) 609 (Alta. T.D.), refd to. [para. 42].

Paccar Financial Services Ltd. v. Win-Storm Trucking Inc. et al. (2001), 295 A.R. 193 (Q.B. Master), refd to. [para. 42].

Statutes Noticed:

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 224(1.3), sect. 227(4), sect. 227(4.1) [para. 6].

Personal Property Security Act, R.S.B.C. 1996, c. 359, sect. 1(1), sect. 2(1) [para. 7].

Authors and Works Noticed:

Crossley-Vaines, Personal Property (5th Ed. 1973), p. 56 [para. 28].

Cuming, Ronald C.C., and Wood, Roderick J., British Columbia Personal Property Secur­ity Act Handbook (4th Ed. 1989), generally [para. 41]; pp. 31, 32 [para. 8].

Halsbury's Laws of England (4th Ed. 1976), vol. 35, pp. 753, 754 [para. 28].

Hill and Bowers-Smith, Joint-Ownership of Chattels - see Palmer and McKendrick, Interest in Goods.

Palmer and McKendrick, Inter­est in Goods (2nd Ed. 1998), pp. 251 [para. 27]; 256 [paras. 29, 30].

Waters, Donovan W.M., The Law of Trusts in Canada (2nd Ed. 1984), pp. 1035, 1036 [para. 26]; 1043 [para. 30].

Counsel:

J.G. Howard, for the appellant;

D. Nygard, for the respondent, Canada Customs and Revenue Agency.

This appeal was heard on March 11, 2002, at Vancouver British Columbia, before Donald, Newbury and Mackenzie, JJ.A., of the British Columbia Court of Appeal. Newbury, J.A., delivered the following decision for the court on April 18, 2002.