|
Supreme Court Victory for Langlois Kronström Desjardins |
Lawyers Reynald Auger and Jean Patrick Dallaire of Langlois Kronström Desjardins, representing both the Caisse Populaire Desjardins de Montmagny and bankruptcy-trustee firm Raymond Chabot Inc., have won an important case before the Supreme Court of Canada in the matter of Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny, 2009 SCC 49.
In a unanimous decision, the Supreme Court of Canada effectively recognized once and for all that the federal and provincial governments cannot claim ownership of GST and QST taxes collected or collectible by merchants or suppliers but not remitted by them at the time of their bankruptcy. Thus, in a bankruptcy context, governments are to be considered ordinary creditors with respect to amounts owed them on account of GST and QST.
In its decision, the Court affirmed that for purposes of characterizing the legal relationships between the tax authorities and the suppliers and recipients of taxable goods and services, the overall context of the system for the collection and remittance of the taxes and the provisions of the Bankruptcy and Insolvency Act must be taken into account. The governments' characterization, in support of their claimed right of ownership, of suppliers as collection agents for the Crown did not stand up to the Court's analysis. In the Court's view, the supplier's obligation consists of remitting, not the amounts collected as GST and QST, but the balance resulting from offsetting the claims of the Crown and the supplier. Borrowing a phrase from the Quebec Court of Appeal's decision, the Supreme Court reiterated that in this context "the dollar collected is not the dollar remitted” [TRANSLATION].
Thus, while a trustee is responsible for liquidating patrimonies that include GST and QST amounts, the Court specified that the trustee will be personally responsible for paying the GST or QST in respect of its own activities only.
In light of this decision, it can be concluded that in performing its mandate, a trustee-in-bankruptcy cannot be held responsible for amounts owed by the bankrupt debtor on account of GST and QST at the time of the bankruptcy. By the same token, secured creditors are unaffected by tax amounts included in accounts receivable in which the bankrupt debtor has given them a security interest.
For the full text of the Court's decision, click on the following link: http://csc.lexum.umontreal.ca/en/2009/2009scc49/2009scc49.html.
|
To download this legal buletin, click here