MNR v. H&J Restaurant Ltd. (1996), 183 N.B.R.(2d) 387 (CA);
183 R.N.-B.(2e) 387; 465 A.P.R. 387
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[French language version follows English language version]
[La version française vient à la suite de la version anglaise]
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In The Matter Of the Bankruptcy of H & J Restaurant Ltd. and In The Matter Of the Bankruptcy of Lawton’s Limited.
Revenue Canada (appellant) v. Doane Raymond Limited, Trustee in Bankruptcy of H & J Restaurant Ltd. (respondent)
(211/96/CA)
Revenue Canada (appellant) v. Doane Raymond Limited, Trustee in Bankruptcy of Lawton’s Limited (respondent)
(212/96/CA)
Indexed As: Minister of National Revenue v. H & J Restaurant Ltd. (Bankrupt)
New Brunswick Court of Appeal
Hoyt, C.J.N.B., Ayles and Bastarache, JJ.A.
December 10, 1996.
Summary:
Revenue Canada claimed unremitted source deduction in the bankruptcy of the two bankrupts pursuant to s. 81(1) of the Bankruptcy and Insolvency Act. The trustee, who acted as trustee in bankruptcy for both bankrupts, disallowed the claims. Revenue Canada appealed.
The New Brunswick Court of Queen’s Bench, Trial Division, in two decisions not reported in this series of reports, upheld the disallowances. Revenue Canada appealed.
The New Brunswick Court of Appeal allowed the appeals and directed the trustee to allow the claims of Revenue Canada.
Bankruptcy – Topic 3626
Creditors – Claims – General – What constitutes a provable claim – Section 227(4) of the Income Tax Act, s. 57(2) of the Unemployment Insurance Act and s. 23(3) of the Canada Pension Plan Act deemed unremitted source deductions to be held in trust – Revenue Canada, as trust beneficiary, filed claims in two bankruptcies for unremitted source deductions pursuant to s. 81(1) of the Bankruptcy and Insolvency Act – The trustee, who acted as trustee in both bankruptcies, disallowed the claims – The New Brunswick Court of Appeal allowed Revenue Canada’s appeals – Section 67 of the Bankruptcy and Insolvency Act clearly established that the deemed trusts did not constitute property divisible among the bankrupts’ creditors – Section 81(1) was not restricted to claims to the bankrupts’ tangible property and was the appropriate section for Revenue Canada’s claim – See paragraphs 1 to 11.
Bankruptcy – Topic 3626
Creditors – Claims – General – What constitutes a provable claim – Revenue Canada filed claims in two bankruptcies for unremitted source deductions pursuant to s. 81(1) of the Bankruptcy and Insolvency Act – The trustee, who acted as trustee in both bankruptcies, disallowed the claims – The New Brunswick Court of Appeal allowed Revenue Canada’s appeals, rejecting the submission that Revenue Canada’s proof of claim was deficient in that it did not specify the property claimed – The claim was for money and s. 227(4) of the Income Tax Act created a charge on all of the bankrupt’s property – Additionally, s. 187(9) of the Bankruptcy and Insolvency Act provided that claims could not be defeated by formal defect or irregularity unless substantial injustice was caused and could not be remedied by court order – See paragraph 12.
Income Tax – Topic 9228
Enforcement – Collection – Source deductions – [See both
Bankruptcy – Topic 3626
].
Cases Noticed:
Roy v. R. (1995), 33 C.B.R.(3d) 272 (T.C.C.), affd. [1996] F.C.J. No. 573 (F.C.A.), folld. [para. 8].
Statutes Noticed:
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 81(1) [para. 5]; sect. 67 [paras. 7, 11].
Canada Pension Plan Act, R.S.C. 1985, c. C-8, sect. 23(3) [para. 5].
Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 227(4) [para. 5].
Unemployment Insurance Act, R.S.C. 1985, c. U-1, sect. 57(2) [para. 5].
Counsel:
Patrick J.P. Ervin, for the appellant;
Raymond T. French and Elizabeth A. Kelly, for the respondent (File No. 211/96/CA);
Peter T. Zed and James Michael Wirvin, for the respondent (File No. 212/96/CA).
These appeals were heard on November 27, 1996, before Hoyt, C.J.N.B., Ayles and Bastarache, JJ.A., of the New Brunswick Court of Appeal. Hoyt, C.J.N.B., delivered the following judgment for the court on December 10, 1996.
