Summary

Keywords

Bankruptcy and insolvency - Priority - Priming charges - Source deductions - Order granting protection under the Companies’ Creditors Arrangement Act gave priority over claims of secured creditors to charges of Monitor, interim lender and corporate directors - Order provided that subject charges were not to be limited or impaired by federal or provincial statutes - Federal statutes provide Crown’s claims for unremitted source deductions with priority over all other creditors’ claims - Whether the Crown’s deemed trust claim for unremitted source deductions under Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 227(4) and (4.1), Canada Pension Plan Act, R.S.C. 1985, c. C-8, s. 23(3) and (4), and Employment Insurance Act, S.C. 1996, c. 23, s. 86(2) and (2.1), has priority over court-ordered priming chares under the CCAA.

Summary

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The Court of Queen’s Bench issued an order granting several insolvent corporations protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36. The Court provided charges in favour of the court-appointed Monitor, the interim financier and the corporate directors were to take priority over the claims of secured creditors and provided that they were not to be limited or impaired by the federal or provincial statutes. The Crown applied to vary the order, arguing that, notwithstanding any other federal statute, the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 227(4.1), among other statutes, provide the Crown’s claims for unremitted source deductions with priority over all other creditors’ claims.

The chambers judge found that the Companies’ Creditors Arrangement Act gives the court the ability to rank court-ordered priority charges ahead of the Crown’s interest in deemed trusts created by the Income Tax Act. The Court of Appeal dismissed the appeal. Leave to appeal was granted.

Lower Court Rulings