Where there is a bankruptcy, there is no personal liability of a secured creditor to the Crown for funds received prior to the bankruptcy from a realization of assets that were subject to the deemed trust under the Excise Tax Act (Canada) (“ETA”).

Factual Background

We previously wrote about the decision in The Queen v. Callidus Capital Corporation of the Federal Court of Appeal in our Restructuring and Tax Bulletin, here. The decision, released in July 2017, was overturned on November 8, 2018 by the Supreme Court of Canada, offering sought-after certainty for secured lenders. Access the ruling here.

In a unanimous decision issued November 8, 2018, the Supreme Court of Canada granted the appeal of the decision of the Federal Court of Appeal in Canada v Callidus Capital Corp, 2017 FCA 162.

In a unanimous decision issued November 8, 2018, the Supreme Court of Canada granted the appeal of the decision of the Federal Court of Appeal in Canada v Callidus Capital Corp, 2017 FCA 162.

The Supreme Court of Canada (the SCC) has overturned the decision rendered by a majority of the Federal Court of Appeal (the FCA) in Callidus Capital Corporation v Her Majesty the Queen.

The case originated out of a motion filed in the Federal Court (the FC) by Callidus Capital Corporation (Callidus) to determine the following question of law:

On November 8, 2018, in a decision delivered unanimously from the bench, the Supreme Court of Canada confirmed that the Crown’s superpriority over unremitted Goods and Services Tax/Harmonized Sales Tax (GST/HST) is ineffective against a secured creditor who received, prior to a tax debtor’s bankruptcy, proceeds from that taxpayer’s assets.1

On March 22, 2018, the Supreme Court of Canada granted Callidus Capital Corporation (the “Secured Creditor”) leave to appeal the Federal Court of Appeal decision that interpreted subsection 222(3) of the Excise Tax Act (Canada) (the “ETA”) as giving the Crown super priority to property received by a secured creditor from a tax debtor before bankruptcy.

Jurisprudence canadienne récente en matière d’insolvabilité : ce que les prêteurs doivent savoir Linc Rogers, Caitlin McIntyre et Ilia Kravtsov L’issue d’un certain nombre de dossiers d’insolvabilité portés devant les tribunaux de diverses provinces du Canada en 2017 pourrait avoir une incidence importante sur les droits de réalisation et de recouvrement des prêteurs commerciaux dans le cadre de procédures de restructuration et d’insolvabilité.

When negotiating a commercial lease, it is in the landlord’s best interest to require that securities be provided by the prospective tenant in order to protect the landlord against the tenant’s failure to perform its obligations under the lease. A frequent cause of a tenant’s inability to perform its obligations is its insolvency or financial difficulties.

2017 saw a number of interesting and important developments in Canadian insolvency and restructuring matters. Some of the highlights (which, in certain instances, will continue as issues in 2018 and beyond) are set forth below:

1) Trends: Fewer CCAA Filings and Retail Insolvencies in the News