GST/HST Deemed Trust Loses Priority In CCAA Reorganization

In Century Services Inc. v. Canada (Attorney General),¹, released just before Christmas 2010, the Supreme Court of Canada overturned the prevailing case law that held that the deemed trust created in favour of the Crown under the Excise Tax Act (ETA) for collected but unremitted amounts of Goods and Services Tax/Harmonized Sales Tax (GST/HST) survived in the context of a Companies' Creditors Arrangement Act (CCAA) reorganization. The much-anticipated decision now establishes clearly that the Crown's GST/HST deemed trust priority is lost under the CCAA.

Background

The facts of the case are as follows: In 2007, Ted LeRoy Trucking Ltd. (LeRoy) filed for protection under the CCAA before the B.C. Supreme Court and obtained a stay of proceedings in order to be in a position to reorganize its business. Among Leroy's debts was an amount for GST/HST collected but not remitted to the Crown. Although the CCAA chambers judge approved a $5 million payment to Leroy's major