Manning Mercury Sales Ltd. (Bankrupt), Re, (1996) 148 Sask.R. 161 (CA)

• Judge: Bayda, C.J.S., Tallis and Jackson, JJ.A.
• Court: Court of Appeal (Saskatchewan)
• Case Date: May 17, 1995
• Jurisdiction: Saskatchewan
• Citations: (1996), 148 Sask.R. 161 (CA)

Manning Mercury Sales (Bkpt.), Re (1996), 148 Sask.R. 161 (CA);

    134 W.A.C. 161

MLB headnote and full text

Ford Motor Company of Canada Limited (applicant/respondent) v. Coopers & Lybrand Limited, in its representative capacity as the Trustee in Bankruptcy of Manning Mercury Sales Ltd. (respondent/appellant) and Her Majesty The Queen (Canada) as represented by the Minister of the Department of National Revenue (Customs and Excise) (respondent/respondent)

(Appeal File No. 1874)

Indexed As: Manning Mercury Sales Ltd. (Bankrupt), Re

Saskatchewan Court of Appeal

Bayda, C.J.S., Tallis and Jackson, JJ.A.

October 22, 1996.

Summary:

Revenue Canada and a bank each asserted priority to funds realized from the disposi­tion of inventory of a bankrupt. Revenue Canada's claim was based on deemed trusts arising under the Income Tax Act, the Canada Pension Plan and the Unemployment Insurance Act for unremitted employee source deductions. The bank's claim was based on an assignment of inventory under s. 178 (now s. 427) of the Bank Act.

The Saskatchewan Court of Queen's Bench, in a decision reported at 121 Sask.R. 128, held that Revenue Canada's claim for unremitted source deductions took prece­dence over the Bank's security. The trustee in bankruptcy appealed.

The Saskatchewan Court of Appeal dis­missed the appeal.

Bankruptcy - Topic 3645

Creditors - General - Priorities - Statu­tory liens and charges - Force and effect of - [See Bankruptcy - Topic 3656 ].

Bankruptcy - Topic 3656

Creditors - General - Priorities - Crown v. secured creditor - Revenue Canada and a bank each asserted priority to funds realized from the disposition of inventory of a bankrupt - The bank's claim was based on an assignment of inventory under s. 178 (now s. 427) of the Bank Act - Revenue Canada's claim was based on deemed trusts arising under the Income Tax Act, the Canada Pension Plan and the Unemployment Insurance Act for unremitted employee source deductions - The Saskatchewan Court of Appeal affirmed that Revenue Canada's claim took precedence.

Banks and Banking - Topic 5222

Loans - Secured loans - Section 427 loans - Nature of security under s. 427 - The Saskatchewan Court of Appeal discussed the nature of a security interest granted under s. 178 (now s. 427) of the Bank Act - See paragraphs 32 to 59.

Banks and Banking - Topic 5236

Loans - Secured loans - Section 427 loans - Priorities - [See Bankruptcy - Topic 3656 ].

Cases Noticed:

Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd. et al., [1980] 1 S.C.R. 1182; 31 N.R. 301; 3 Man.R.(2d) 283, consd. [para. 8].

Jacs Jackets and Crest Ltd., Re; Workers' Compensation Board (Alta.) v. Deloitte Haskins and Sells Ltd., [1985] 1 S.C.R. 785; 60 N.R. 81; 63 A.R. 321, consd. [para. 9].

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 Ltd.

British Columbia v. Henfrey Samson Belair Ltd., [1989] 2 S.C.R. 24; 97 N.R. 61, consd. [para. 9].

XMCO Canada Ltd., Re (1991), 15 C.B.R.(3d) 92 (Ont. Bktcy.), refd to. [para. 19].

Deslauriers Construction Products Ltd., Re (1971), 14 C.B.R.(N.S.) 197 (Ont. C.A.), consd. [para. 22].

Phoenix Paper Products Ltd. (Bankrupt), Re (1983), 1 O.A.C. 215; 44 O.R.(2d) 225 (C.A.), consd. [para. 22].

Todosichuk et al. v. Marchenski Lumber Co. (1985), 40 Sask.R. 198; 56 C.B.R.(N.S.) 206 (C.A.), refd to. [para. 22].

Abraham v. Canadian Admiral Corp. (Receiver of) (1993), 20 C.B.R.(3d) 257 (Ont. Gen. Div.), not folld. [para. 26].

Federal Business Development Bank v. Commission de la santé et de la sécurité du travail et al., [1988] 1 S.C.R. 1061; 84 N.R. 308; 14 Q.A.C. 140, refd to. [para. 26].

Board of Industrial Relations v. Avco Financial Services Realty Ltd. and Homeplan Realty Ltd., [1979] 2 S.C.R. 699; 28 N.R. 140, refd to. [para. 30].

National Bank of Canada v. Armstrong et al. (1986), 5 P.P.S.A.C. 296 (Ont. S.C.), affd. (1987), 8 P.P.S.A.C. 7 (C.A.), leave to appeal (1988), 87 N.R. 398 (S.C.C.), refd to. [para. 34].

Bank of Montreal v. Hall, [1990] 1 S.C.R. 121; 104 N.R. 110; 82 Sask.R. 120, refd to. [para. 34].

British Columbia v. Federal Business Development Bank, [1988] 1 W.W.R. 1 (B.C.C.A.), consd. [para. 34].

Royal Bank v. Nova Scotia (Workmen's Compensation Board), [1936] S.C.R. 560, refd to. [para. 35].

Roynat Inc. v. Ja-Sha Trucking & Leas­ing Ltd. (Receivership)(No. 1), [1992] 2 W.W.R. 641; 76 Man.R.(2d) 211; 10 W.A.C. 211 (C.A.), consd. [para. 46].

Bank of Montreal v. Guaranty Silk Dyeing & Finishing Co., [1935] 4 D.L.R. 483 (Ont. C.A.), refd to. [para. 48].

Royal Bank of Canada v. Lions Gate Fish­eries Ltd. (1991), 76 D.L.R.(4th) 289 (B.C.C.A.), refd to. [para. 50].

Minister of National Revenue v. Alberta (Treasury Branches) et al., [1996] 5 W.W.R. 153; 196 N.R. 105; 184 A.R. 1; 122 W.A.C. 1 (S.C.C.), refd to. [para. 52].

Pigott Project Management v. Land-Rock Resources Ltd. - see Minister of Nation­al Revenue v. Alberta (Treasury Branches) et al.

Royal Bank of Canada v. G.M. Homes Inc. et al. (1984), 34 Sask.R. 195; 10 D.L.R.(4th) 439 (C.A.), refd to. [para. 55].

Royal Bank of Canada v. Sparrow Electric Corp. (1995), 165 A.R. 132; 89 W.A.C. 132; 28 Alta. L.R. 153 (C.A.), consd. [para. 56].

Statutes Noticed:

Bank Act, R.S.C. 1985, c. B-1, sect. 178(1)(a) [para. 2].

Bank Act, S.C. 1991, c. 46, sect. 427(1)(a) [para. 2].

Canada Pension Plan, R.S.C. 1985, C-8, sect. 23(3), sect. 23(4) [para. 5].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 227(4), sect. 227(5) [para. 17].

Unemployment Insurance Act, R.S.C. 1985, c. U-1, sect. 57(2), sect. 57(3) [para. 5].

Authors and Works Noticed:

Baxter, The Law of Banking (3rd Ed. 1981), p. 211 [para. 34].

Crawford and Falconbridge, Banking and Bills of Exchange (8th Ed. 1986), p. 427 [para. 49].

Cuming, Ronald C.C. and Wood, Roderick, J., Compatibility of Federal and Provincial Personal Property Secu­rity Law, 65 Can. Bar. Rev. 267, p. 273 [para. 51].

Hardy, Anne E., Crown Priority in Insolvency (1986), p. 110 [para. 19].

Moull, William D., Security Under Sec­tions 177 and 178 of The Bank Act (1986), 65 Can. Bar Rev. 242, pp. 242 to 266 [para. 34]; 247 [para. 53]; 254, 255 [para. 43].

Ogilvie, Canadian Banking Law (1991), p. 356 [para. 34].

Ziegel, Jacob S., Case Comment on Royal Bank of Canada v. Lions Gate Fisheries Ltd. (1992), 71 Can. Bar Rev. 107, p. 115 [para. 50].

Counsel:

Jeffrey M. Lee, for the appellant;

Gordon Berscheid, for Federal Justice.

This appeal was heard on May 17, 1995, before Bayda, C.J.S., Tallis and Jackson, JJ.A., of the Saskatchewan Court of Appeal. On October 22, 1996, Jackson, J.A., delivered the following decision for the Court of Appeal.