Callidus Capital has struck back against what some call the evil
empire aka CRA. In a unanimous decision on November 8th the Supreme
Court of Canada allowed Callidus's appeal of a Federal Court of
Appeal ("FCA") decision obliging it to pay the sum of
$177,000 plus years of interest because of the operation of the
deemed trust provisions of the Excise Tax Act (GST/HST).
When the FCA shone a laser on this potential liability, secured
creditors drew breath and retreated to their base. Their contingent
exposure to a CRA deemed trust claim was potentially
unrecoverable.
The Callidus situation is not unusual for the world of secured
lenders. The transaction started with Bank of Montreal lending
money to Cheese Factory Road Holdings Inc. – a real estate
investment company (despite the name). The usual sorts of security
were obtained. Cheese went into default. Callidus then bought the
debt from BMO and entered into a forbearance agreement with Cheese.
It also agreed to
