Century Services Inc. v. Canada (Attorney General), 2010 SCC 60

Section 222(3) of the Excise Tax Act creates a deemed trust for unremitted GST, which operates despite any other act of Canada, except the Bankruptcy and Insolvency Act. However section 18.3(1) of the Companies’ Creditors Arrangement Act (the "CCAA") provides that any statutory deemed trust in favour of the Crown does not operate under the CCAA, subject to certain exceptions which do not mention GST.

The Supreme Court of Canada recently ruled in the Century Servicesi case that Goods and Services Tax (“GST”) deemed trusts under the federal Excise Tax Act (“ETA”) are ineffective in proceedings under the Companies’ Creditors Arrangement Act (“CCAA”).

Century Services Inc. v. Canada (Attorney General), [2010] S.C.C.A. No. 259, on appeal from (2009) 319 D.L.R. (4th) 735 (BCCA)

The union on behalf of the unionized employees of Ted Leroy Trucking Ltd., the bankrupt employer, had applied to the B.C.S.C. for directions and obtained a decision of that Court that the “wages” protected under the WEPPA “superpriority” for unpaid employees included amounts paid by the employer to third parties on behalf of the employees.

MARY BUTTERY WINS IMPORTANT CASE FOR CENTURY SERVICES INC.

Introduction

The decision of the Supreme Court of Canada last month in Century Services Inc. v. Canada1 is of striking interest to the tax and insolvency bars. The Court considered Crown priorities, in particular, the various “deemed trust” provisions found in section 227 of the Income Tax Act (Canada),2 section 86 of the Employment Insurance Act,3 section 23 of the Canada Pension Plan (the “CPP”)4 and in particular section 222 of the Excise Tax Act (GST Portions).5

2010 SCC 60 (Released 16 December 2010)

Bankruptcy and Insolvency – Companies’ Creditors Arrangement Act – Priorities

In the first decision of the Supreme Court of Canada considering the Companies’ Creditors Arrangement Act (“CCAA”), the court discusses the principles of interpretation for the CCAA. Apart from its importance in that respect, the decision is also of interest for its discussion of statutory interpretation, particularly with respect to statutory amendments.

SCC Docket No. 33797, Leave granted 25 November 2010

Bankruptcy and Insolvency—Companies' Creditors Arrangements Act—Provincial Obligations

On November 25, 2010, the Supreme Court of Canada granted leave to appeal in Her Majesty the Queen in Right of the Province of Newfoundland and Labrador v. Abitibibowater Inc., et al.

In May of 2010, we reported on the decision of the British Columbia Court of Appeal in Ted Leroy Trucking v. Century Services Inc. In that decision, the Court of Appeal upheld a decision of the B.C.

In the recent decision of Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, the Supreme Court of Canada has, for the first time, interpreted key provisions of the Companies’ Creditors Arrangement Act (“CCAA”).

The judgment of the Court, which was pronounced December 16, 2010, overrules appellate authority from Ontario and British Columbia that previously conferred a priority for unremitted GST on the Crown in CCAA proceedings, and endorses the broad discretionary power of a CCAA court.

On December 16, 2010, the Supreme Court of Canada ( SCC) released its decision in Re Ted Leroy Trucking Ltd. In its decision, the SCC affirmed the importance of the Companies’ Creditors Arrangement Act (CCAA) as a flexible restructuring tool, and clarified the source and limits of the Court’s authority during CCAA proceedings. Furthermore, the Court overruled the judgment of the B.C.