Minister of National Revenue v. Alberta (Treasury Branches) et al., (1996) 196 N.R. 105 (SCC)

JudgeIacobucci and Major, JJ.
CourtSupreme Court (Canada)
Case DateOctober 12, 1995
JurisdictionCanada (Federal)
Citations(1996), 196 N.R. 105 (SCC);[1996] SCJ No 45 (QL);122 WAC 1;[1996] 1 CTC 395;133 DLR (4th) 609;184 AR 1;[1996] 5 WWR 153;96 DTC 6245;[1996] 1 SCR 963;39 CBR (3d) 157;196 NR 105;62 ACWS (3d) 799;1996 CanLII 244 (SCC);38 Alta LR (3d) 1;[1996] CarswellAlta 366;27 BLR (2d) 147

MNR v. Alta. (1996), 196 N.R. 105 (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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Her Majesty The Queen (appellant) v. Province of Alberta Treasury Branches (respondent)

Her Majesty The Queen (appellant) v. Province of Alberta Treasury Branches (respondent)

Her Majesty The Queen (appellant) v. The Toronto-Dominion Bank (respondent)

(24056)

Indexed As: Minister of National Revenue v. Alberta (Treasury Branches) et al.

Supreme Court of Canada

La Forest, Cory, McLachlin,

Iacobucci and Major, JJ.

April 25, 1996.

Summary:

Three taxpayers each made a general as­signment of book debts which purported to immediately transfer title to a Treasury Branch or a Bank. The taxpayers each owed money to the Minister of National Revenue for unremitted employee deductions for income tax or for unremitted goods and services taxes. The Minister issued a gar­nishee summons on parties owing money to the taxpayers under s. 224(1.2) of the Income Tax Act or s. 317(3) of the Excise Tax Act. A priority contest arose between the Minister's garnishee summons and the general assignments of book debts to the Treasury Branches and Bank. Two of the three trial decisions are reported at 134 A.R. 124 and 139 A.R. 295.

The Alberta Court of Appeal, in a decision reported 149 A.R. 34; 63 W.A.C. 34, inter­preted ss. 224(1.2) and 224(1.3) of the Income Tax Act and ss. 317(3) and 317(4) of the Excise Tax Act and held that in the circumstances of these cases the Treasury Branches and the Bank had priority over the Minister. The Minister appealed.

The Supreme Court of Canada, Iacobucci and Major, JJ., dissenting, allowed the appeal and held that the Minister had priori­ty.

Choses in Action - Topic 1003

Assignment of book debts - Effect of assignment - Three taxpayers each made a general assignment of book debts (GABD) which purported to immediately transfer title to a Treasury Branch or a Bank (the lending institutions) - The Minister of National Revenue issued a garnishee summons for income or goods and services taxes owed by the taxpayers under s. 224(1.2) of the Income Tax Act and s. 317(3) of the Excise Tax Act - The Supreme Court of Canada held that the GABDs were security interests and not absolute assignments - See paragraphs 19 to 41 - The court stated that "an assign­ment cannot be both absolute and yet leave an equity of redemption in the form of the right to redeem with the assignor. The retention of an equity of redemption is consistent with a security interest and not with an absolute assignment. A GABD simply cannot constitute an absolute trans­fer of property" - See paragraph 35.

Choses in Action - Topic 1183

Assignment of book debts - Priorities - Crown liens - [See all Income Tax - Topic 9231 ].

Income Tax - Topic 3901

Interpretation - General - The Supreme Court of Canada discussed the proper principles to be considered in interpreting taxation legislation - The court stated that "when there is neither any doubt as to the meaning of the legislation nor any am­biguity in its application to the facts then the statutory provision must be applied regardless of its object or purpose. ... Even if the ambiguity were not apparent, it is significant that in order to determine the clear and plain meaning of the statute it is always appropriate to consider the 'scheme of the Act, the object of the Act, and the intention of Parliament'." - See paragraph 15.

Income Tax - Topic 9231

Enforcement - Collection - Garnishment - Third party demand - Priorities - Three taxpayers each made a general assignment of book debts which purported to im­mediately transfer title to a Treasury Branch or a Bank (the lending institutions) - The Minister of National Revenue issued a garnishee summons for income or goods and services taxes owed by the taxpayers - A priority contest arose between the Minister's garnishee summons and the general assignments of book debts to the lending institutions - The Supreme Court of Canada held that the lending institutions were "secured creditors" under ss. 224(1.2) and 224(1.3) of the Income Tax Act and ss. 317(3) and 317(4) of the Excise Tax Act - The court held that the Minister had priority under those sections - See paragraphs 1 to 42.

Income Tax - Topic 9231

Enforcement - Collection - Garnishment - Third party demand - Priorities - Sec­tion 224(1.2) of the Income Tax Act and s. 317(3) of the Excise Tax Act permitted the Minister of National Revenue to gar­nish funds owed to a tax debtor or a "secured creditor who has a right to receive a payment that, but for a security interest in favour of the secured creditor, would be payable to the tax debtor" - The sections purported to give the Minister priority for unremitted employee income tax deductions and unremitted goods and services taxes - Security interest was defined by s. 224(1.3) of the Income Tax Act and s. 317(4) of the Excise Tax Act - The Supreme Court of Canada held that the definition of "security interest" was broad enough to include a general assign­ment of book debts even where that as­signment was absolute - See paragraphs 6 and 70 to 72.

Income Tax - Topic 9231

Enforcement - Collection - Garnishment - Third party demand - Priorities - Sec­tion 224(1.2) of the Income Tax Act and s. 317(3) of the Excise Tax Act permitted the Minister of National Revenue to gar­nish funds owed to a tax debtor or a "secured creditor who has a right to receive a payment that, but for a security interest in favour of the secured creditor, would be payable to the tax debtor" - The sections purported to give the Minister priority for unremitted employee income tax deductions and unremitted goods and services taxes - The Supreme Court of Canada held that the wording of the sec­tions was sufficiently clear and non-equivocal to allow a transfer of property in the garnished funds to the Minister and to grant him priority in circumstances where the balance of the sections applied - See paragraphs 6 and 70 to 72.

Sales and Service Taxes - Topic 5205

Goods and services tax - Collection and enforcement - Garnishment - Third party procedure - Priorities - [See all Income Tax - Topic 9231 ].

Words and Phrases

Secured creditor - The Supreme Court of Canada discussed the meaning of "secured creditor" as found in ss. 224(1.2) and 224(1.3) of the Income Tax Act, S.C. 1970-71-72, c. 63 and ss. 317(3) and 317(4) of the Excise Tax Act, R.S.C. 1985, c. E-15 - See paragraphs 19 to 41.

Words and Phrases

Security interest - The Supreme Court of Canada discussed the meaning of "security interest" as found in ss. 224(1.2) and 224(1.3) of the Income Tax Act, S.C. 1970-71-72, c. 63 and ss. 317(3) and 317(4) of the Excise Tax Act, R.S.C. 1985, c. E-15 - See paragraphs 19 to 41.

Cases Noticed:

Friesen v. Minister of National Revenue, [1995] 3 S.C.R. 103; 186 N.R. 243, folld. [paras. 14, 97].

Pembina on the Red Development Corp. v. Triman Industries Ltd., [1991] 6 W.W.R. 481; 75 Man.R.(2d) 175; 6 W.A.C. 175 (C.A.), refd to. [paras. 17, 62].

Provincial Bank of Canada et al. v. Thermo King Corp. (1981), 34 O.R.(2d) 369 (C.A.), leave to appeal refused [1982] 1 S.C.R. xi; 42 N.R. 352, refd to. [para. 24].

Bonavista (Town) v. Atlantic Tech­nologists Ltd. et al. (1994), 117 Nfld. & P.E.I.R. 19; 365 A.P.R. 19 (Nfld. T.D.), refd to. [para. 24].

Bank of Montreal v. Baird (1979), 38 Nfld. & P.E.I.R. 64; 108 A.P.R. 64; 33 C.B.R.(N.S.) 256 (Nfld. C.A.), leave to appeal refused [1980] 1 S.C.R. v; 31 N.R. 539; 24 Nfld. & P.E.I.R. 270; 65 A.P.R. 270, refd to. [para. 25].

Demmings (R.V.) & Co. v. Caldwell Con­struction Co. (1955), 4 D.L.R.(2d) 465 (N.B.C.A.), refd to. [para. 25].

British Columbia v. Federal Business De­velopment Bank (1987), 17 B.C.L.R.(2d) 273 (C.A.), refd to. [para. 27].

Evans, Coleman and Evans Ltd. v. Nelson (R.A.) Construction Ltd. (1958), 27 W.W.R.(N.S.) 38 (B.C.C.A.), refd to. [paras. 29, 76].

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; 50 D.L.R.(4th) 577, refd to. [para. 34].

Minister of National Revenue v. National Bank of Canada, [1993] 2 F.C. 206; 63 F.T.R. 9 (T.D.), refd to. [para. 35].

TransGas Ltd. v. Mid-Plains Contractors Ltd. (1993), 105 Sask.R. 211; 32 W.A.C. 211; 101 D.L.R.(4th) 238 (C.A.), affd. [1994] 3 S.C.R. 753; 187 N.R. 317; 137 Sask.R. 241; 107 W.A.C. 241, refd to. [para. 39].

Berg v. Parker Pacific Equipment Sales, [1991] 1 C.T.C. 442 (B.C.S.C.), refd to. [para. 39].

Lundrigans Ltd. (Receivership) v. Bank of Montreal et al. (1993), 110 Nfld. & P.E.I.R. 91; 346 A.P.R. 91 (Nfld. T.D.), refd to. [para. 39].

Royal Bank of Canada v. R. (1984), 52 C.B.R.(N.S.) 198 (F.C.T.D.), affd. (1986), 60 C.B.R.(N.S.) 125 (F.C.A.), refd to. [para. 56].

Lloyds Bank Canada v. International War­ranty Co. (1989), 94 A.R. 212; 64 Alta. L.R. 340 (Q.B.), revd. (1989), 97 A.R. 113; 68 Alta. L.R.(2d) 356 (C.A.), refd to. [para. 60].

Morrison v. University of Calgary, [1978] 2 W.W.R. 465; 8 A.R. 533 (C.A.), refd to. [para. 61].

Royal Bank of Canada v. Canada (At­torney General), [1979] 1 W.W.R. 479; 13 A.R. 318; 29 C.B.R.(N.S.) 227 (C.A.), refd to. [paras. 61, 76].

Concorde International Travel Inc. v. T.I. Travel Services (B.C.) Inc. (1990), 72 D.L.R.(4th) 405 (C.A.), refd to. [para. 62].

Royal Bank of Canada v. Saskatchewan Power Corp. et al., [1991] 1 W.W.R. 1; 86 Sask.R. 259 (C.A.), affing. [1990] 2 W.W.R. 655; 82 Sask.R. 173 (Q.B.), refd to. [para. 63].

Century 21 - Crown Real Estate Ltd. (Bankrupt), Re (1990), 99 N.S.R.(2d) 19; 270 A.P.R. 19; 71 D.L.R.(4th) 648 (T.D.), refd to. [para. 63].

Touche Ross Ltd. v. Minister of National Revenue - see Century 21 - Crown Real Estate Ltd. (Bankrupt), Re.

Lettner v. Pioneer Truck Equipment Ltd. (1964), 47 W.W.R.(N.S.) 343 (Man. C.A.), refd to. [para. 76].

Royal Bank of Canada v. Canada (Attor­ney General) (1977), 8 A.R. 225; 25 C.B.R.(N.S.) 233 (T.D.), affd. [1979] 1 W.W.R. 479; 13 A.R. 318; 29 C.B.R. (N.S.) 227 (C.A.), refd to. [para. 76].

Toronto-Dominion Bank v. Minister of National Revenue (1990), 39 F.T.R. 102 (T.D.), refd to. [para. 76].

Johns-Mansville Canada Inc. v. Minister of National Revenue, [1985] 2 S.C.R. 46; 60 N.R. 244, refd to. [para. 100].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 67 [para. 34].

Canada Business Corporations Act, R.S.C. 1985, c. C-44, generally [para. 37].

Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, generally [para. 37].

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 317(3) [paras. 5, 44]; sect. 317(4) [para. 57].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 153 [paras. 5, 44]; sect. 224(1.2), sect. 224(1.3) [paras. 13, 58].

Personal Property Security Act, S.A. 1988, c. P-4.05, sect. 62, sect. 63 [para. 36].

Authors and Works Noticed:

Black's Law Dictionary (6th Ed. 1990), pp. 9 [para. 21]; 1357 [para. 20].

Burgess, Robert, Corporate Finance Law (2nd Ed. 1992), pp. 100, 101 [para. 30].

Halsbury's Laws of England (4th Ed. 1980), vol. 32, paras. 401, 407 [para. 89].

Pearce, R.A., Fixed Charges Over Book Debts, [1987] J.B.L. 18, p. 29 [para. 29].

Counsel:

Edward R. Sojonky, Q.C., and Michael J. Lema, for the appellant;

J. Gary Greenan and Scott Watson, for the respondent, Province of Alberta Treasury Branches;

Jeffery D. Vallis and C. Bryce Code, for the respondent, Toronto-Dominion Bank.

Solicitors of Record:

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

Bruni Greenan Klym, Calgary, Alberta, and Parlee McLaws, Calgary, Alberta, for the respondent, Province of Alberta Treasury Branches;

Howard Mackie, Calgary, Alberta, for the respondent, Toronto-Dominion Bank.

This appeal was heard on October 12, 1995, before La Forest, Cory, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada. The decision of the court was delivered in both official languages on April 25, 1996, including the following opinions:

Cory, J. (La Forest and McLachlin, JJ., concurring) - see paragraphs 1 to 42;

Major, J., dissenting - see paragraphs 43 to 112;

Iacobucci, J., dissenting - see paragraph 113.

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