H. Priorities

AuthorRoderick J. Wood
ProfessionFaculty of Law. University of Alberta
Pages487-489

Page 487

As a general principle, the occurrence of a receivership does not affect the priority status of a secured creditor in relation to other parties who have competing interests in the debtor’s assets. Unlike bankruptcy, the statutes that govern receiverships do not provide a scheme of distribution and they do not contain priority rules that override the ordinary priority rules that apply in circumstances in which the debtor is not insolvent. If a secured creditor is subordinate to a landlord who has exercised a right of distress under provincial law, this priority is not altered by the fact that a receiver has been appointed. The same holds true for Crown claims that are secured by deemed statutory trusts or by statutory liens, charges, or security interests. The secured creditor’s priority vis-à-vis the competing third party is unaffected by the receivership.

Page 488

There are a number of special provisions contained in the BIA that create special priority rules that operate if the debtor is bankrupt or a receiver has been appointed. A special right of repossession is given to a supplier in respect of thirty-day goods.65A farmer, fisherman, or aqua-culturalist who has sold products to a purchaser within fifteen days of a receivership of the purchaser has a security on all the inventory of the purchaser to secure the unpaid price.66Statutory charges secure claims of unpaid wage-earners67and unpaid pension contributions.68A first-ranking charge is also created in respect of environmental remediation claims.69These provisions give the claimants priority over secured creditors, thereby affording them a different priority from what they would have received if the ordinary priority rules of provincial law were applied.

There are two further qualifications on the general principle that the priorities are unaltered on receivership. The first qualification is that there is currently some uncertainty whether provincial statutory devices that confer priority on wage-earners will be held to be inoperative by virtue of the enactment of the BIA’s statutory charge in favour of wage-earners. Although the matter is not beyond debate, it is likely that the provincial provisions do not conflict with the federal BIA pro-visions, since they simply afford an additional right to employees.70

The second qualification is that a secured creditor may attempt to invoke a bankruptcy in order to obtain a more favourable priority ranking over competing...

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