The Canada Revenue Agency (CRA) obtained a jeopardy order under the Income Tax Act to collect a tax debt from a corporation on the eve of its receivership.
The CRA garnished funds from the corporation's bank account.
The corporation was subsequently declared bankrupt.
The trustee in bankruptcy brought a motion seeking the return of the garnished funds, arguing the jeopardy order conflicted with the priority scheme in the Bankruptcy and Insolvency Act (BIA).
The Court of Appeal dismissed the trustee's appeal, holding that the motion was an impermissible collateral attack on the Federal Court's jeopardy order.
Furthermore, the garnishment was a completely executed process prior to bankruptcy under s. 70(1) of the BIA, and the CRA's actions did not constitute an improper Crown priority or inequitable conduct.
