Guy Laperrière

Several businesses went bankrupt while holding unremitted federal and provincial sales tax (GST and QST).

The federal and provincial tax authorities claimed ownership of these amounts, arguing they were held in a deemed trust and did not form part of the bankrupts' estates.

The trustees in bankruptcy and secured creditors argued that under the Bankruptcy and Insolvency Act, the Crown ranks only as an ordinary unsecured creditor.

The Supreme Court of Canada dismissed the Crown's appeals, holding that the 1992 amendments to the Bankruptcy and Insolvency Act rendered the statutory deemed trusts ineffective upon bankruptcy.

Consequently, the tax authorities are ordinary creditors, and the unremitted tax amounts remain part of the bankrupts' estates subject to the priority scheme of the bankruptcy legislation.

The employer, Camvrac, defaulted on a line of credit with the Caisse.

The Caisse exercised its right of compensation on Camvrac's term deposit pursuant to an agreement.

The Crown sought to collect unremitted source deductions from the proceeds of the term deposit, arguing that the compensation agreement created a 'security interest' under s. 224(1.3) of the Income Tax Act, making the property subject to a deemed trust in favour of the Crown.

The Supreme Court of Canada held that the agreement did create a security interest, and the proceeds of the term deposit were subject to the Crown's deemed trust.

The appeal concerned a Charter challenge to the child support taxation regime requiring a custodial parent to include support payments in income while permitting the payor to deduct them.

The respondent argued that the regime imposed an unequal tax burden on separated or divorced custodial parents, most of whom were women, contrary to s. 15(1) of the Charter.

A majority of the Court held that the impugned provision did not impose a burden or deny a benefit within the meaning of s. 15(1), particularly when read with the family law system that fixes support and accounts for tax consequences.

The appeal was allowed, the constitutional challenge failed, and costs were awarded to the respondent throughout.