Digests

Entreprises Forestières P.S. Inc. v. Newcourt Financial Ltd.

A-529-02

2004 FCA 91, Noël J.A.

5/3/04

21 pp.

Appeal by Newcourt Financial Ltd. (appellant) from judgment by Martineau J. ((2002), 228 F.T.R. 132 (F.C.T.D.)), dismissing appeal it had filed against earlier decision by Morneau P., which dismissed its objection to seizure in execution made by Crown--Facts underlying case originate with failure of Entreprises Forestières P.S. Inc. (tax debtor) to forward to National Revenue Department deductions made from salaries paid to its employees for period from February 1 to October 31, 1999--Payments had to be made under Income Tax Act (ITA) and Employment Insurance Act (EIA)--In order to recover these amounts, as well as related penalties and interest, respondent registered certificate with Trial Division pursuant to ITA, s. 223(3), setting out amount of respondent's tax debt--Such certificate has effect of judgment--Based on that judgment, Crown on March 17, 2000, by writ of seizure in execution issued ten days earlier, seized from tax debtor 1997 Timberjack grapple skidder (skidder)--In support of objection, appellant relied on Code of Civil Procedure, art. 597 (C.C.P.)--Argued had become owner of skidder as result of debtor's voluntary relinquishment of property and taking of latter in payment-- Maintained it objected to seizure by Crown as owner, rather than hypothecary creditor; C.C.P., art. 604 therefore inapplicable; and Martineau J. erred in law in arriving at contrary conclusion--Argued taking in payment of seized property was enforceable against Crown despite deemed trust and Prothonotary wrongly ruled Crown's right had precedence over its own--Assuming deemed trust was enforceable against it, appelant maintained ITA, ss. 227(4), (4.1) and EIA, ss. 86(2), (2.1) unconstitutional since legislating in exclusively provincial area of jurisdiction, namely that of property and civil rights--Martineau J. properly concluded appellant's objection inadmissible--ITA, s. 227(4.1) did not have effect it was given by Prothonotary--Provision gives Her Majesty absolute priority over "proceeds thereof" subject to deemed trust and to this end provides Her Majesty has ongoing interest in property so long as it is subject to trust--Apart from right conferred on Her Majesty to follow property and receive proceeds thereof in priority, owner continues to have control of his property--Beneficial right relied on by Crown did not allow Prothonotary to dismiss appellant's objection--On judgment of Martineau J., appellant argued it had become owner of skidder on April 16, 2000, that is 20 days after prior notice registered, with effect retroactive to March 27, 2000, date of registration--Accordingly, on March 17, 2000, day of seizure made by respondent, appellant still not owner of property--Based on these facts, and after referring to C.C.P., art. 604 Martineau J. concluded appellant could not rely on C.C.P., art. 597 in claiming property--Inevitable effect of C.C.P., art. 604 to prevent any creditor, including hypothecary creditor, from objecting to seizure--Allowing hypothecary creditor to take in payment property already subject to seizure would deprive provision of all practical effect--Appellant did not establish Martineau J. wrong to conclude it could not object to seizure of skidder--Finally, Trial Judge felt need to question appellant's good faith--Appellant insisted acted in good faith--Appellant could not say it was owner of property in affidavit of April 13, 2000, since not owner at time affidavit signed--Representation not made any more valid by fact appellant subsequently became owner of property seized with effect retroactive to March 27, 2000--At time of oath, statement false and that state of facts remained unchanged-- Appeal dismissed--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 223(3) (as am. by 1994, c. 7, Sch. VIII, s. 129) 227(4) (as am. by S.C. 1998, c. 19, s. 226), (4.1) (as enacted idem)--Employment Insurance Act, S.C. 1996, c. 23, s. 86 (as am. by S.C. 1998, c. 19, s. 266)--Quebec Code of Civil Procedure, R.S.Q. 1977, c. C-25, ss. 597, 604.