Pembina on the Red Development Corp. v. Triman Industries Ltd., (1991) 75 Man.R.(2d) 175 (CA)

• Judge: Scott, C.J.M., Twaddle and Lyon, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: January 25, 1991
• Jurisdiction: Manitoba
• Citations: (1991), 75 Man.R.(2d) 175 (CA);1991 CanLII 2699 (MB CA);85 DLR (4th) 29;[1991] 6 WWR 481;[1992] 1 CTC 133;10 CBR (3d) 248;29 ACWS (3d) 575;46 DTC 6174;75 Man R (2d) 175

Pembina on the Red v. Triman (1991), 75 Man.R.(2d) 175 (CA);

    6 W.A.C. 175

MLB headnote and full text

Pembina on the Red Development Corporation Limited (applicant) v. Triman Industries Limited and Coopers & Lybrand Limited (respondents) and Attorney General of Canada (respondent/appellant)

(Suit Nos. 364/90, 365/90, 366/90, 367/90 and 368/90)

Indexed As: Pembina on the Red Development Corp. v. Triman Industries Ltd.

Manitoba Court of Appeal

Scott, C.J.M., Twaddle and Lyon, JJ.A.

October 3, 1991.

Summary:

The receiver-manager of Triman Industries applied for a declaration of priority between the Royal Bank of Canada and Revenue Canada to accounts receivable of Triman Industries. The bank claimed priority on the basis of prior registered security agreements and Revenue Canada claimed priority on the basis of its lien under s. 224 of the Income Tax Act.

The Manitoba Court of Queen's Bench, in a decision reported 67 Man.R.(2d) 253, held that the Bank was entitled to priority. Rev­enue Canada appealed.

The Manitoba Court of Appeal, Lyon, J.A., dissenting, dismissed the appeal.

Choses in Action - Topic 1183

Assignment of book debts - Priorities - Crown liens - Triman gave a bank accounts receivable and inventory security agreements and a chattel mortgage, all registered under the Personal Property Security Act - Subsequently, it failed to remit employees' deducted income tax as required under the Income Tax Act - Both the bank and Revenue Canada claimed priority over Triman's accounts receivable - The Manitoba Court of Appeal affirmed that s. 224(1.2) of the Income Tax Act did not give Revenue Canada priority over the prior registered charge of the bank - See paragraphs 21 to 39, 46 to 63.

Constitutional Law - Topic 2950

Determination of validity of statute - Pith and substance - Revenue Canada claimed priority over a bankrupt's accounts receiv­able under s. 224(1.2) of the Income Tax Act for unremitted employee deductions - A bank claimed priority as a secured cred­itor under the Personal Property Security Act - The Manitoba Court of Appeal determined that the pith and substance of s. 224(1.2) was the collection of taxes which fell squarely within the powers authorized by s. 91(3) of the Constitution Act, 1867 - Accordingly, the section was constitutionally valid - See paragraphs 5 to 19.

Income Tax - Topic 9238

Enforcement - Collection - Lien or levy - Priorities - [See Choses in Action - Topic 1183 ].

Personal Property - Topic 6219

Security interests - Priorities - Crown liens - Income tax liens - [See Choses in Action - Topic 1183 ].

Cases Noticed:

Whitbread v. Walley et al., [1990] 3 S.C.R. 1273; 120 N.R. 109, refd to. [para. 8].

Anti-Inflation Act, Re, [1976] 2 S.C.R. 373; 9 N.R. 541, refd to. [para. 9].

Bank of Montreal v. Hall, [1990] 1 S.C.R. 121; 104 N.R. 110; 81 Sask.R. 120, refd to. [para. 12].

R. v. McKinlay Transport Ltd. and C.T. Transport Inc., [1990] 1 S.C.R. 627; 106 N.R. 385, refd to. [para. 13].

Canadian Indemnity Company et al. v. Attorney General of British Columbia, [1977] 2 S.C.R. 504; 11 N.R. 466, refd to. [para. 13].

City National Leasing Ltd. v. General Motors of Canada Ltd., [1989] 1 S.C.R. 641; 93 N.R. 326; 32 O.A.C. 332, refd to. [para. 16].

Upper Churchill Water Rights Reversion Act, Re, [1984] 1 S.C.R. 297; 53 N.R. 268, refd to. [para. 18].

Peel, Regional Municipality of v. Mac­Kenzie et al., [1982] 2 S.C.R. 9; 42 N.R. 572, refd to. [para. 18].

Royal Bank of Canada v. Canada (Attor­ney General), [1979] 1 W.W.R. 479; 13 A.R. 318 (C.A.), refd to. [paras. 21, 48].

Royal Bank of Canada v. R. (1984), 52 C.B.R.(N.S.) 198 (F.C.T.D.), affd. 60 C.B.R.(N.S.) 125 (F.C.A.), refd to. [paras. 21, 49].

University of Calgary v. Receiver General of Canada and Lamarre's Estate (Bank­rupt), [1978] 2 W.W.R. 465; 8 A.R. 533 (C.A.), refd to. [paras. 21, 78].

Multiform Manufacturing Co. et al. v. R. et al., [1990] 2 S.C.R. 624; 113 N.R. 373, refd to. [para. 23].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241, refd to. [paras. 24, 76].

Lor-Wes Contracting Ltd. v. Minister of National Revenue, [1986] 1 F.C.R. 346; 60 N.R. 321 (C.A.), refd to. [para. 24].

Shaw v. Minister of National Revenue, [1939] S.C.R. 338, refd to. [para. 25].

Manitoba Government Employees Associ­ation v. Province of Manitoba, [1977] 6 W.W.R. 247; 17 N.R. 506 (S.C.C.), refd to. [para. 26].

Johns-Manville Canada Inc. v. Minister of National Revenue, [1985] 2 S.C.R. 46; 60 N.R. 244, refd to. [para. 28].

Lloyds Bank Canada v. International War­ranty Co. Ltd. (1989), 97 A.R. 113; 60 D.L.R.(4th) 272 (C.A.), refd to. [paras. 29, 55, 79].

Royal Bank of Canada v. Saskatchewan Power Corp. et al. (1990), 86 Sask.R. 259, refd to. [paras. 30, 57, 77].

Federal Business Development Bank v. Perron et al., [1980] 4 W.W.R. 607; 4 Man.R.(2d) 439 (C.A.), refd to. [para. 34].

Concorde International Travel Inc. v. T.I. Travel Service (1990), 72 D.L.R.(4th) 405 (B.C.C.A.), refd to. [paras. 35, 56].

Ontario Development Corp. v. Minister of National Revenue (1989), 25 F.T.R. 250; 9 P.P.S.A.C. 122, refd to. [para. 53].

Toronto-Dominion Bank v. Minister of National Revenue (1990), 39 F.T.R. 102, refd to. [para. 54].

Century 21 - Crown Real Estate Ltd. (Bankrupt), Re (1990), 99 N.S.R.(2d) 19; 270 A.P.R. 19, refd to. [para. 57].

Earl of Shaftesbury v. Russell (1823), 1 B. & C. 666; 107 E.R. 244, refd to. [para. 59].

Lloyds Bank Canada v. International War­ranty Co., [1989] 3 W.W.R. 152; 94 A.R. 212 (Q.B.), refd to. [para. 80].

Dauphin Plains Credit Union Ltd. v. Xyloid Industries Ltd. and The Queen, [1980] 1 S.C.R. 1182; 31 N.R. 301, refd to. [para. 83].

Attorney General v. Exeter Corporation, [1911] 1 K.B. 1092, refd to. [para. 88].

Estabrooks Pontiac Buick Ltd., Re (1982), 44 N.B.R.(2d) 201; 116 A.P.R. 201; 144 D.L.R.(3d) 21 (C.A.), refd to. [para. 89].

Goodman Estate v. Geffen (1991), 127 N.R. 241, refd to. [para. 92].

Statutes Noticed:

Bank Act, R.S.C. 1985, c. B-1, sect. 178, sect. 179 [para. 12].

Constitution Act, 1867, sect. 91(3), sect. 92(13) [para. 5].

Income Tax Act, R.S.C. 1952, c. 148, sect. 153(3), sect. 157 [para. 68]; sect. 224(1) [paras. 1, 47, 64]; sect. 224(1.2) [paras. 1, 45, 64]; sect. 224(1.3) [para. 45]; sect. 224(4), sect. 224(5), sect. 227(5) [para. 35].

Juvenile Delinquents Act, R.S.C. 1970, c. J-3, sect. 20 [para. 18].

Personal Property Security Act, R.S.M. 1987, c. P-35; C.C.S.M., c. P-35, gen­erally [paras. 3, 42].

Authors and Works Noticed:

Cross, Statutory Interpretation (1987), p. 180 [para. 26].

Driedger, E.A., Construction of Statutes (2nd Ed. 1983), pp. 87 [para. 76]; 105 [para. 23].

La Forest, The Allocation of Taxing Power under the Canadian Constitution (2nd Ed. 1981), c. 2, p. 39 [para. 9].

Revenue Canada Taxation, Taxation Sta­tistics, 1987 [para. 84].

Counsel:

G.L. Chartier and C.J. Henderson, for the appellant;

J.M.J. Dow, for the respondent.

This appeal was heard on January 25, 1991, before Scott, C.J.M., Twaddle and Lyon, JJ.A., of the Manitoba Court of Appeal. On October 3, 1991, the decision of the Court of Appeal was delivered and the following opinions were filed:

Scott, C.J.M. - see paragraphs 1 to 40;

Twaddle, J.A., concurring - see paragraphs 41 to 63;

Lyon, J.A., dissenting - see paragraphs 64 to 94.