Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd. and The Queen, (1980) 31 N.R. 301 (SCC)

JudgeMartland, Ritchie, Pigeon, Beetz, Estey, McIntyre and Chouinard, JJ.
CourtSupreme Court (Canada)
Case DateMarch 18, 1980
JurisdictionCanada (Federal)
Citations(1980), 31 N.R. 301 (SCC);1980 CanLII 165 (SCC);[1980] 1 SCR 431;[1980] CTC 247;33 CBR (ns) 107;108 DLR (3d) 257;28 BCLR 21;1980 CanLII 186 (SCC);[1980] 3 WWR 513;3 Man R (2d) 283;[1980] 1 SCR 1182;31 NR 301;80 DTC 6123

Dauphin Plains Credit v. Xyloid Ind. (1980), 31 N.R. 301 (SCC)

MLB headnote and full text

Dauphin Plains Credit Union Limited v. Xyloid Industries Ltd. and the Queen

Indexed As: Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd. and The Queen

Supreme Court of Canada

Martland, Ritchie, Pigeon, Beetz, Estey, McIntyre and Chouinard, JJ.

March 18, 1980.

Summary:

This case arose out of the claim by the Minister of National Revenue to entitlement to deductions from employees' wages for income tax and Canada Pension Plan and unemployment insurance premiums. Prior to a receivership order obtained by a secured creditor the debtor Xyloid Industries Ltd. paid wages to its employees. Deductions were made from the wages as required by the Income Tax Act, Canada Pension Plan Act and Unemployment Insurance Act, but Xyloid had insufficient funds to set aside the deductions in trust for the Minister of National Revenue as required by the Acts. After the receivership order the receiver paid wages to Xyloid's employees earned prior to the receivership and made the required deductions. The Minister claimed entitlement to the pre-receivership and post-receivership deductions. The Manitoba Court of Queen's Bench in a judgment reported [1978] 3 W.W.R. 658 dismissed the Minister's claim. The Minister appealed. The Manitoba Court of Appeal in a judgment reported [1979] 2 W.W.R. 514 allowed the appeal and held that the Minister was entitled to the deductions. The secured creditor appealed.

The Supreme Court of Canada allowed the appeal in part. The Supreme Court of Canada held that the Minister was entitled to the deductions from the wages paid by the receiver, because the deductions were made pursuant to the requirements of the Income Tax Act, Canada Pension Plan Act and Unemployment Insurance Act, notwithstanding that the receiver made the payments pursuant to s. 7(1) of the Payment of Wages Act, S.M. 1970, c. 44, providing for the priority of wages over payment of other debts - See paragraphs 4 to 17.

The Supreme Court of Canada held that the Minister was entitled to the deductions made by Xyloid prior to the receivership for Canada Pension Plan and unemployment insurance premiums. The Supreme Court held that there was deemed to be a trust in favour of the Crown and the deductions were deemed to be kept separate and apart pursuant to s. 24(4) of the Canada Pension Plan Act and s. 72(3) of the Unemployment Insurance Act, notwithstanding that Xyloid in fact did not keep the deductions separate - See paragraphs 21 to 30.

The Supreme Court of Canada held that the Minister was not entitled to the deductions for income tax made by Xyloid prior to the receivership. The Supreme Court stated that the deductions were not in fact set aside and could not be traced and the Income Tax Act contained no provision, as did the other Acts, deeming that the deductions be held in trust and that they be deemed to be separate and apart from the debtor's estate - See paragraphs 19 to 23.

Estey, J., dissenting, would have allowed the appeal and restored the judgment of the Court of Queen's Bench, being of the opinion that the Minister was entitled to none of the deductions. Estey, J., was of the opinion that regarding the pre-receivership deductions by Xyloid the Income Tax Act, Canada Pension Plan Act and Unemployment Insurance Act were inapplicable in the circumstances, because the activities of the receiver did not constitute a "liquidation" within the meaning of the sections of the Acts providing that such deductions are to be kept separate and apart from other assets of the debtor - see paragraphs 44 to 51. With regard to the payments and deductions made by the receiver, Estey, J., was of the opinion that the payments were not the distribution of wages to the employees but rather the paying off of a statutory lien and charge under the Manitoba Payment of Wages Act. Estey, J., was further of the opinion that the receiver was not a "person paying salary or wages" within s. 227(4) of the Income Tax Act or an "employer" making deductions under s. 24(3) of the Canada Pension Plan Act or s. 71(2) of the Unemployment Insurance Act, and the deductions accordingly did not fall within the terms of those Acts - See paragraphs 26 to 43.

Receivers - Topic 3586

Claims - Priorities - Secured creditors v. Crown - After a receiver was appointed for Xyloid Industries Ltd. the receiver paid pursuant to the Payment of Wages Act, S.M. 1970, c. 44, s. 7(1), wages of employees of Xyloid earned before the receivership - The Minister of National Revenue claimed entitlement to the deductions made by the receiver from the wages for income tax, Canada pension and unemployment insurance - The Supreme Court of Canada held that the Minister of National Revenue was entitled to the employee portion of the deductions in priority to a secured creditor - The Supreme Court of Canada held that, although the receiver made the payments under the Payment of Wages Act, the Act did not interfere with the trust in favour of the Minister of National Revenue imposed on the withheld deductions by the Income Tax Act, Canada Pension Plan Act and Unemployment Insurance Act - See paragraphs 4 to 17.

Receivers - Topic 3586

Claims - Priorities - Secured creditors v. Crown - Prior to going into receivership Xyloid Industries Ltd. paid wages to its employees, deducting income tax and Canada Pension Plan and unemployment insurance premiums - However, Xyloid had insufficient funds to set aside the amounts deducted as required by the Income Tax Act, Canada Pension Plan Act and Unemployment Insurance Act - The Canada Pension Plan Act and Unemployment Insurance Act both provided that in the event of liquidation the amounts deducted were deemed to be held in trust for the Crown and were deemed to be separate and apart from the estate in liquidation, whether in fact kept separate or not - The Income Tax Act had no such provision - The Minister of National Revenue claimed to be entitled to the amounts deducted - The Supreme Court of Canada held that the Minister of National Revenue was entitled to the Canada Pension Plan and unemployment insurance deductions by virtue of the provision in the Acts that the amounts were deemed to be held in trust and kept separate - See paragraphs 21 to 30 - The Supreme Court of Canada held that the Minister was not entitled to the income tax deductions, where there was no such provision in the Income Tax Act and the deductions were not in fact kept separate and could not be traced - See paragraphs 19 to 23.

Statutes - Topic 1569

Interpretation - Construction where meaning is not plain - Implied meaning - Express language necessary to infringe upon property rights - The Supreme Court of Canada stated that, in the absence of a specific provision, a statute should not be construed to deprive persons of property rights - The Supreme Court of Canada held that the Manitoba Payment of Wages Act did not have the effect of depriving the Minister of National Revenue of entitlement to deductions for income tax and Canada Pension Plan and unemployment insurance premiums from employees' wages and appropriating them to the employer's creditor - See paragraph 13.

Statutes - Topic 2456

Interpretation - Words and phrases - Interpretation and definitions - "Includes" - Meaning of - The Supreme Court of Canada held that the use of the word "includes" in the definition of "person" in s. 248(1) of the Income Tax Act, S.C. 1970-71-72, c. 63, meant that the definition was extensive and not restrictive - See paragraph 15.

Words and Phrases

Liquidation - The Supreme Court of Canada held that the word "liquidation" in s. 24(4) of the Canada Pension Plan Act, R.S.C. 1970, c. C-5 and s. 71(3) of the Unemployment Insurance Act, S.C. 1970-71-72, c. 48, included a realization of assets by a receiver completed by sale and distribution of the assets without bankruptcy - The Supreme Court of Canada noted that the word "liquidation" is not a technical term and has no fixed legal meaning - See paragraphs 26 to 28, 44 to 47 and 53.

Cases Noticed:

Board of Industrial Relations v. Avco, [1979] 2 S.C.R. 699; 28 N.R. 140, appld. [para. 13].

R. v. Biron, [1976] 2 S.C.R. 56; 4 N.R. 45, consd. [para. 14].

Wiltshire v. Barrett, [1966] 1 Q.B. 312, consd. [para. 14].

Royal Trust Co. v. Montex Apparel Industries Ltd., [1972] 3 O.R. 132; 27 D.L.R.(3d) 551; 17 C.B.R.(N.S.) 45, reversing [1972] 2 O.R. 673; 26 D.L.R.(3d) 405, consd. [paras. 15, 26].

Craftsman Painting Contractors Ltd., Re, [1968] 1 O.R. 522; 11 C.B.R. (N.S.) 91; 67 D.L.R.(2d) 37, not folld. [para. 21].

Deslauriers Construction Products Ltd., Re, [1970] 3 O.R. 599, appld. [para. 21].

Davey v. Gibson (1930), 65 O.L.R. 379, appld. [para. 28].

International Woodworkers of America, Local 1-324 v. Wescana Inn Ltd. and Clarkson Company Limited (1977), 27 C.B.R. 201, consd. [para. 42].

Mussoorie Bank v. Raynor (1882), 7 App. Cas. 321, consd. [para. 50].

Perry v. Perry, [1918] 2 W.W.R. 485 (Man. C.A.), consd. [para. 50].

Bank of Nova Scotia v. Middleton Motors Limited (1978), 29 N.S.R.(2d) 561; 45 A.P.R. 561; 78 D.T.C. 6307, consd. [para. 51].

KRA Restaurants Ltd., Re v. Toronto Dominion Bank et al. (1977), 25 N.S.R.(2d) 605; 36 A.P.R. 605; 74 D.L.R. 272, consd. [para. 52].

W.A. Sheaffer Pen Company of Canada Limited v. M.N.R., 53 D.T.C. 1223, consd. [para. 54].

Lumbers v. M.N.R., [1943] Ex. C.R. 202; [1944] S.C.R. 167, consd. [para. 54].

Statutes Noticed:

Canada Co-Operative Association's Act, S.C. 1970-71-72, c. 6, sect. 74 [para. 28].

Canada Pension Plan Act, R.S.C. 1970, c. C-5, sect. 24(3), sect. 24(4) [paras. 21, 40].

Employment Standards Act, R.S.M. 1970, c. E-110, sect. 25 [para. 11].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 153(1), sect. 153(3) [para. 6]; sect. 227(4) [paras. 7, 19, 40]; sect. 227(5) [paras. 19, 40].

Payment of Wages Act, S.M. 1970, c. 44, sect. 1(h) [paras. 5, 36]; sect. 3(4) [para. 36]; sect. 7(1) [paras. 5, 36]; sect. 24 [para. 36].

Unemployment Insurance Act, S.C. 1970-71-72, c. 48, sect. 71(2), sect. 71(3) [paras. 24, 40].

Winding-up Act, R.S.C. 1970, c. W-10 [para. 27].

Authors and Works Noticed:

Black's Legal Dictionary [para. 44].

Falconbridge on Mortgages (4th Ed. 1977), pp. 759-760 [para. 42].

Johnston, R.W.S., Receivers, [1961] L.S.U.C. Special Lectures, pp. 101, 105 [para. 42].

Shorter Oxford English Dictionary [para. 44].

Stroud's Judicial Dictionary (4th Ed.) [para. 44].

Waters, The Law of Trusts in Canada (1974), p. 64 et seq. [para. 50].

Counsel:

John Lamont and R.T. Willis, for the appellant;

T.B. Smith, Q.C. and Craig Henderson, for the respondent.

This case was heard on November 7, 1979, at Ottawa, Ontario, before MARTLAND, RITCHIE, PIGEON, BEETZ, ESTEY, McINTYRE and CHOUINARD, JJ., of the Supreme Court of Canada.

On March 18, 1980, the judgment of the Supreme Court of Canada was delivered:

PIGEON, J. - see paragraphs 1 to 30;

ESTEY, J., dissenting - see paragraphs 31 to 57.

MARTLAND, RITCHIE, BEETZ and McINTYRE, JJ., concurred with PIGEON, J.

CHOUINARD, J., concurred with ESTEY, J.

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