Minister of National Revenue v. National Bank of Canada, (1997) 214 N.R. 348 (FCA)

• Judge: Hugessen and Décary, JJ.A., and Chevalier, D.J.
• Court: Federal Court of Appeal (Canada)
• Case Date: January 15, 1997
• Jurisdiction: Canada (Federal)
• Citations: (1997), 214 N.R. 348 (FCA)

MNR v. Nat. Bk. (1997), 214 N.R. 348 (FCA)

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[French language version follows English language version]

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

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Temp Cite: [1997] N.R. TBEd. AP.010

Sa Majesté la Reine (appelante) v. Banque Nationale du Canada (intimée)

(A-444-93)

Sa Majesté la Reine (appelante) v. Banque Nationale du Canada (intimée)

(A-445-93)

Indexed As: Minister of National Revenue v. National Bank of Canada

Federal Court of Appeal

Hugessen and Décary, JJ.A.,

and Chevalier, D.J.

March 10, 1997.

Summary:

The Minister of National Revenue sued the defendant bank to recover the excise tax component of book debts collected by the bank under assignments of book debts from two debtors who became bankrupt.

The Federal Court of Canada, Trial Di­vision, in a judgment reported 63 F.T.R. 9 (with supplementary reasons reported 65 F.T.R. 51), dismissed the actions, holding that once the bankruptcies occurred, s. 107(1)(j) of the Bankruptcy Act governed the Minister's entitlement. The Minister appealed.

The Federal Court of Appeal, Décary, J.A., dissenting, dismissed the appeals. The court held that the Minister would have to make his claim to the bankruptcy trustee and be given priority as a preferred creditor, based on his ranking, and not seek payment directly from the bank.

Bankruptcy - Topic 440.8

Property of bankrupt - Book debts given as security - The Federal Court of Canada, Trial Division, held that book debts assigned as security by a bankrupt were property of the bankrupt for the purposes of the Bankruptcy Act - The Federal Court of Appeal affirmed the decision - See paragraphs 18 to 26.

Bankruptcy - Topic 3655

Creditors - Priorities - Crown - General -[See Bankruptcy - Topic 3928 ].

Bankruptcy - Topic 3928

Secured creditors - What constitutes a secured creditor - Crown claim for taxes collected by bankrupt - Companies assigned their book debts to their bank - The companies went bankrupt and the bank collected the book debts - The Minister of National Revenue sued the bank to recover the excise tax component of the collections - The Federal Court of Canada, Trial Division, held that once bankruptcy occurred, s. 107(1)(j) of the Bankruptcy Act governed the Minister's entitlement - The Federal Court of Appeal affirmed the decision and stated that the Minister would have to make his claim to the bankruptcy trustee and be given pri­ority as a preferred creditor, based on his ranking, and not seek payment directly from the bank.

Sales and Service Taxes - Topic 19

Sales tax - General principles and defini­tions - Manufacturer or producer - The Federal Court of Canada, Trial Division, held that a bank in realizing on security, such as an assignment of book debts, did not thereby become a "manufacturer or producer" within the meaning of s. 2(1)(a) of the Excise Tax Act - The Federal Court of Appeal affirmed the decision - See paragraphs 27 to 32.

Sales and Service Taxes - Topic 733

Sales tax - Collection and enforcement - Statutory trusts - Priorities - Bankruptcy -[See Bankruptcy - Topic 3928 ].

Cases Noticed:

Canada v. Continental Bank of Canada, [1985] 2 C.T.C. 134 (F.C.T.D.), refd to. [para. 12, footnote 4].

Canada (Attorney General) v. Bank of British Columbia, [1987] 1 C.T.C. 153 (B.C.S.C.), refd to. [para. 12, footnote 4].

Bourgault's Estate v. Deputy Minister of Revenue of Quebec, [1980] 1 S.C.R. 35; 30 N.R. 24, refd to. [para. 13, footnote 5].

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

Jacs Jackets and Crests 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, refd to. [para. 15, footnote 6].

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

Black Forest Restaurant Ltd., Re (1981), 47 N.S.R.(2d) 454; 90 A.P.R. 454; 37 C.B.R.(N.S.) 176 (T.D.), refd to. [para. 15, footnote 7].

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. 16, footnote 8; para. 54, footnote 13].

Minister of National Revenue v. Alberta (Treasury Branches) et al., [1996] 1 S.C.R. 963; 196 N.R. 105; 184 A.R. 1; 122 W.A.C. 1, refd to. [para. 25, foot­note 11; para. 37, footnote 6].

Saugeen Indian Band v. Minister of National Revenue (Customs and Excise), [1990] 1 F.C. 403; 104 N.R. 201 (F.C.A.), refd to. [para. 31, footnote 12].

Bank of Toronto v. Lambe (1887), 12 App. Cas. 575 (P.C.), refd to. [para. 31, footnote 13].

Canadian Imperial Bank of Commerce v. Minister of National Revenue, [1986] 2 C.T.C. 267; 68 N.R. 312 (F.C.A.), affing. [1984] C.T.C. 442; 52 C.B.R.(N.S.) 145 (F.C.T.D.), refd to. [para. 50, footnote 10].

Statutes Noticed:

Bankruptcy Act, R.S.C. 1970, c. B-3, sect. 2 [para. 19]; sect. 47(c), sect. 47(d) [para. 21]; sect. 107(1)(h) [paras. 10, 51]; sect. 107(1)(i) [para. 10]; sect. 107(1)(j) [paras. 10, 51].

Excise Tax Act, R.S.C. 1970, c. E-13, sect. 52(1) [para. 59]; sect. 52(10) [paras. 10, 40]; sect. 52(11), sect. 52(1.4) [para. 40].

Counsel:

Maria Bittichesu, for the appellant;

Michel Legendre, for the respondent.

Solicitors of Record:

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

Desjardins Ducharme Stein Monast, Montréal, Quebec, for the respondent.

These appeals were heard on January 15, 1997, in Montréal, Quebec, before Hugessen and Décary, JJ.A., and Chevalier, D.J., of the Federal Court of Appeal. The decision of the court was delivered on March 10, 1997, and the following opinions were filed:

Chevalier, D.J. (Hugessen, J.A., con­curring) - see paragraphs 1 to 34;

Décary, J.A., dissenting - see paragraphs 35 to 63.