Crown Priority Under Section 222(3) Of The Excise Tax Act

We have recently profiled conflicting cases (available here and here) dealing with a priority contest between super-priority charges granted pursuant to creditor protection legislation and deemed trusts arising under the Income Tax Act. This is not the only instance where creditors and tax authorities will clash over statutory trusts in the insolvency context. In Canada v Callidus Capital Corporation, the Federal Court of Appeal interpreted section 222(3) of the Excise Tax Act, which creates a trust over GST collected but not remitted to the receiver general. The decision in Canada v Callidus is a win for the CRA as it provides the Crown with priority to sale proceeds paid by a tax debtor to a secured creditor notwithstanding the subsequent bankruptcy of the debtor.