Government Loses its Priority to GST in CCAA Proceedings

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.

The debtor in the case owed the Crown approximately $300,000 in GST that had been collected from third parties but not yet remitted to the Crown. When it became apparent that an attempted restructuring under the CCAA was doomed to fail and the debtor sought leave to assign itself into bankruptcy under the Bankruptcy and Insolvency Act ("BIA"), the Crown sought to lift the CCAA stay of proceedings so it could collect the GST proceeds. Under the BIA, the Crown would