Tracey Telford

The appellant, a self-employed lawyer, filed a proposal to creditors under the Bankruptcy and Insolvency Act.

The Canada Customs and Revenue Agency (CCRA) was an unsecured creditor for unpaid income tax.

After the proposal date, the appellant made installment payments for his current-year tax obligations and subsequently claimed a tax refund.

The CCRA prorated the installment payments over the entire year, applying a portion to the pre-proposal tax debt, which eliminated the refund.

The Court of Appeal held that the CCRA had no statutory basis to apply post-proposal installment payments to pre-proposal tax liability, as doing so would allow the CCRA to recover more than its pro rata share under the proposal.

The appeal was allowed and the CCRA was ordered to pay the refund.

The appellant, a self-employed lawyer, filed a proposal to his creditors under the Bankruptcy and Insolvency Act which was accepted.

Following the proposal, he made income tax installment payments to the CCRA for the 1999 taxation year and subsequently claimed a refund.

The CCRA prorated the installments over the entire year and applied a portion to his pre-proposal tax debt.

The Court of Appeal held that the CCRA had no legal basis to apply post-proposal installment payments to pre-proposal tax debt, as this would allow the CCRA to recover its pre-proposal claim at 100 cents on the dollar contrary to the terms of the proposal.

The appeal was allowed and the CCRA was ordered to pay the refund.