Rosedale Farms Ltd. (Re)

Rosedale Farms Ltd. (Re)

The deemed trust for unremitted employee source deductions under Income Tax Act ss.227(4) and 227(4.1) takes priority over debtor-in-possession financing security; First Vancouver and Century Services compel that s.227(4.1)'s 'notwithstanding' language overrides BIA s.50.6, and because CRA received no notice the DIP...

Source-derived case information.

Citation
2017 NSSC 160
Parties
Debtor (bankrupt): Rosedale Farms Limited; Debtor (bankrupt): Hassett Holdings Inc.; Debtor (bankrupt): Resurgam Resources Inc.; Trustee: Grant Thornton Limited; Secured Creditor: Nova Scotia Farm Loan Board; Claimant (canada Revenue Agency): Minister of National Revenue; DIP Lender / Interim Receiver Proponent: TEC Capital Incorporated
Court
Supreme Court of Nova Scotia
Jurisdiction
Canada
Judgment Date
9 June 2017
Procedural Posture
Bankruptcy and Insolvency / Decision
Outcome
Court held that the deemed trust for unremitted employee withholdings has priority over the DIP financing security; CRA has first claim to proceeds of Rosedale Farms Limited assets; interim distribution and trustee and counsel fees approved.
Legal Topics
Deemed Trust, Debtor in Possession Financing, Priority of Claims, Interim Distribution, Trustee Fees
Source Language
english
Bankruptcy and Insolvency Tax Law Insolvency Financing Deemed Trust Debtor in Possession Financing Priority of Claims Interim Distribution Trustee Fees

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Parties

Rosedale Farms Limited

Debtor (bankrupt)

Hassett Holdings Inc.

Debtor (bankrupt)

Resurgam Resources Inc.

Debtor (bankrupt)

Grant Thornton Limited

Trustee

Nova Scotia Farm Loan Board

Secured Creditor

Minister of National Revenue

Claimant (canada Revenue Agency)

TEC Capital Incorporated

DIP Lender / Interim Receiver Proponent

Procedural Posture

Bankruptcy and Insolvency / Decision

Legal Issues

  1. 1 Whether the deemed trust for unremitted employee source deductions under Income Tax Act ss.227(4) and 227(4.1) has priority over debtor-in-possession financing security granted under the Bankruptcy and Insolvency Act s.50.6
  2. 2 Whether a court order granting priority to DIP financing can supersede the statutory deemed trust where the Canada Revenue Agency received no notice
  3. 3 Whether the proposed interim distribution and trustees' fees and counsel fees are allowable

Ratio Decidendi

The deemed trust for unremitted employee source deductions under Income Tax Act ss.227(4) and 227(4.1) takes priority over debtor-in-possession financing security; First Vancouver and Century Services compel that s.227(4.1)'s 'notwithstanding' language overrides BIA s.50.6, and because CRA received no notice the DIP charging order cannot bind CRA as to the Rosedale Farms assets. Consequently CRA has first claim to the proceeds of Rosedale Farms Limited assets.

Court Disposition

Court held that the deemed trust for unremitted employee withholdings has priority over the DIP financing security; CRA has first claim to proceeds of Rosedale Farms Limited assets; interim distribution and trustee and counsel fees approved.

Orders

  • Canada Revenue Agency's claim for unremitted withholdings has priority over the DIP charge on proceeds of Rosedale Farms Limited assets.
  • Interim distribution proposed by the trustee for the proceeds of Hassett Holdings Inc. and Resurgam Resources Inc. is approved.