Case information

Bankruptcy and insolvency — Priority — Source deductions — Priming charges — Employee source deductions not remitted to Crown by companies in receivership — Property of debtor companies subject to deemed trust in favour of Crown for unremitted source deductions under Income Tax Act — Application judge supervising restructuring proceedings under Bankruptcy and Insolvency Act (“BIA”) ordering priming charges and ranking charges over Crown’s deemed trust — Court of Appeal finding application judge had authority to make order — Whether superior courts, in proposal proceedings under BIA, have jurisdiction to rank court-ordered priming charges in priority to Crown’s super-priority deemed trust for unremitted source deductions — Whether Court of Appeal erred in determining that superior courts can use either statutory provisions of BIA or inherent jurisdiction to issue order — Whether Court of Appeal erroneously relied on Canada v. Canada North Group Inc., 2021 SCC 30, decided under different statute, to arrive at similar result under BIA — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 224 — Bankruptcy and Insolvency Act, R.S.C. 1985, ss. 50.6, 60(1.1), 64.1, 64.2, 67 — Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, ss. 11, 11.2, 11.51, 11.52.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Two debtor companies owed over $3.1 million in unremitted source deductions, pursuant to federal and provincial legislation. The federal Crown’s claim for source deductions was protected by the Income Tax Act (“ITA”) through a statutory deemed trust mechanism. Faced with liquidity problems, the debtors sought protection from creditors, including the respondent Canadian Imperial Bank of Commerce (“CIBC”), under the proposal provisions of the Bankruptcy and Insolvency Act (“BIA”), with the respondent Richter Inc. named as proposed trustee. The debtors also filed a motion for relief, including the granting of certain “priming” charges (a charge for interim financing; an administration charge; and a directors’ and officers’ charge). The application judge at the Superior Court of Quebec ordered that the three priming charges ranked in priority over all other interests, including any deemed trust in favour of the Crown pursuant to the ITA. The Court of Appeal dismissed Canada’s and Quebec’s appeals.