No Crown Super-Priority For HST In CCAA Proceedings

In its recent decision in Century Services Inc. v. Canada,¹ the Supreme Court of Canada (the "SCC") held that, in the context of a Companies' Creditors Arrangement Act² (the "CCAA") proceeding, the Crown does not have a superpriority claim over the property of a debtor for unremitted goods and services tax ("GST") amounts. The decision of the SCC majority rejected existing appellate-level case law, and brought the priority of Crown claims in-line with what they are in bankruptcy proceedings.

One of the main issues before the SCC was how to resolve the apparent conflict between Section 18.3 of the CCAA (replaced on September 18, 2009 by the essentially identical new Section 37) and the GST deemed trust provisions of the Excise Tax Act³ (the "ETA"). Section 18.3 (now Section 37) of the CCAA nullifies all provincial or federal statutory deemed trusts in favour of the Crown in a CCAA proceeding (with the exception of trusts in relation to source deductions for income