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ARTICLE · 03 SEPTEMBER 2010

Canada Revenue Agency Trumps Unsecured Creditors!

WeirFoulds LLP
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In a sleight-of-hand move dexterously played by the Canada Revenue Agency ("CRA"), it managed to secure advance collection of a disputed corporate income tax debt by obtaining an ex parte jeopardy collection order after the CRA was notified of an application by the taxpayer to appoint a receiver.

CanadaTax
Maralynne Monteith
Maralynne Monteith
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In a sleight-of-hand move dexterously played by the Canada Revenue Agency ("CRA"), it managed to secure advance collection of a disputed corporate income tax debt by obtaining an ex parte jeopardy collection order after the CRA was notified of an application by the taxpayer to appoint a receiver.

The CRA used to be a preferred creditor under bankruptcy and insolvency statutes so that it could collect tax debts in front of unsecured creditors. However, the legislation was amended in 1992 to specifically remove that preferred creditor status and put the CRA on the same footing as other unsecured creditors.

In the decision of the Ontario Court of Appeal in I. Waxman & Sons Ltd. (Re) ((2010) 100 OR (3d) 561), the CRA managed to skate around the Bankruptcy and Insolvency Act ("BIA") to collect the entire amount of a disputed corporate tax debt.

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