Case information

None.

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.

Bankruptcy and insolvency - Provincial (QST) and federal (GST) sales taxes in respect of accounts receivable of now bankrupt suppliers - Whether, in case of bankruptcy of supplier of goods and services, Crown entitled to retain GST received directly from customers of supplier that had, at time of bankruptcy, not yet paid GST on prices of goods and services acquired from it and, in addition, to require trustee in bankruptcy and receiver having collected supplier’s accounts receivable to remit GST, which identifiable, that they had collected in so doing - Whether Crown may collect directly from customers of bankrupt supplier sales taxes that supplier had neither collected nor remitted to Crown before going bankrupt and that its customers were still required to pay - Whether trustee in bankruptcy of bankrupt supplier and any secured creditor holding security charged on supplier’s accounts receivable are required to remit to Crown sales taxes collected from recipient.

The bankrupt debtor hypothecated all its claims and accounts receivable in favour of the Respondent Caisse populaire Desjardins de Montmagny. At the time of the bankruptcy, the Deputy Minister of Revenue of Quebec wrote to the Respondent trustee to inform it that he considered the trustee his mandatary in collecting the taxes (GST and QST) in respect of the accounts receivable and that he was claiming ownership of those taxes. He also wrote to the Caisse to inform it that he considered himself the sole owner of the taxes and to direct it to keep those amounts in a separate account in order to remit them to him. Rather than realizing its security, the Caisse gave the trustee a mandate to collect the amounts owed on its behalf, up to the amount of its hypothecary claim.

The trustee brought a motion in the Superior Court for directions and a declaratory judgment. The Caisse applied to intervene. The trustee argued that the taxes owed to the Deputy Minister at the time of the bankruptcy were an unsecured claim within the meaning of the B.I.A. The Superior Court instead found that the Deputy Minister owned the taxes and that the trustee, as mandatary, had to remit them to him. It dismissed the Caisse’s application to intervene. The Court of Appeal reversed the decision.