The Minister of National Revenue sought to garnish funds owed to tax debtors who had failed to remit GST and employee source deductions.
The tax debtors had previously granted general assignments of book debts (GABDs) to lending institutions.
The lending institutions argued that the GABDs were absolute assignments, meaning the tax debtors no longer had an interest in the property, and thus the Minister could not garnish the funds.
The Supreme Court of Canada held that a GABD is a security interest, not an absolute assignment, because the debtor retains an equity of redemption.
Therefore, the clear wording of the Income Tax Act and Excise Tax Act gives the Minister priority over the lending institutions' security interests.
