The debtor company went into receivership with unremitted payroll deductions owed to the Crown.
The Crown claimed priority over the proceeds of the sale of the debtor's inventory based on the deemed trust provisions of the Income Tax Act.
The respondent bank claimed priority based on a previously executed general security agreement and Bank Act security.
The Supreme Court of Canada held that the bank's fixed and specific charges took priority over the deemed trust.
The Court rejected the argument that the bank's licence to the debtor to sell inventory in the ordinary course of business constituted a consent to subordinate its security interest to the Crown's deemed trust.
