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ARTICLE · 13 FEBRUARY 2019

Creditors Cheer SCC Decision On GST Debts

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Where a supplier has failed to remit GST to the Crown, ETA subsection 222(3) extends a deemed trust over the unremitted GST in favour of the Crown to cover the supplier's property equal in value to the unremitted GST.

CanadaTax
Philip B. Ward
Philip B. Ward
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Where a supplier has failed to remit GST to the Crown, ETA subsection 222(3) extends a deemed trust over the unremitted GST in favour of the Crown to cover the supplier's property equal in value to the unremitted GST. Moreover, a creditor that receives sale proceeds of property subject to this deemed trust may be liable to pay such proceeds to the Crown. This deemed trust is extinguished on the supplier's bankruptcy (ETA subsection 222(1.1); Century Services Inc. v. Canada (Attorney General), 2010 SCC 60), so the Crown ceases at that time to have priority over other creditors. However, uncertainty remained concerning the continuing liability of a creditor, following the supplier's bankruptcy, to pay to the Crown proceeds that it received from the supplier prior to bankruptcy. This has now been resolved: in Callidus Capital Corp. v. Canada ( 2018 SCC 47), the SCC ruled that the creditor's obligation to pay such proceeds to the Crown also ceases on the

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