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CREDITORS AND CLAIMS - Secured creditors - Tax liens - Claims - Disallowance of

Wednesday, September 08, 2021 @ 5:43 AM  


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Appeal by the Trustee in Bankruptcy from a Registrar’s decision that set aside the Trustee’s disallowance of a secured portion of a proof of claim filed by the Crown on behalf of the Canada Revenue Agency (CRA) and the costs award against it. The CRA registered three judgments totalling over $1 million for unremitted income tax and GST against title to the property of the bankrupt prior to his voluntary assignment into bankruptcy in 2016. Other judgments were registered against title to the property prior to the Crown’s registration. None of the unsecured creditors who registered the other judgments filed a proof of loss.

HELD: Appeal allowed in part. Read together, s. 223 of the Income Tax Act (ITA) and s. 87 of the Bankruptcy and Insolvency Act (BIA) clearly provided that if the Crown registered a memorial against a property in the land title office, it was an ordinary judgment creditor by statute but s. 223(11.1) of the ITA deemed the memorial to be a secured claim in bankruptcy, provided that the requirements of s. 87(1) of the BIA were met. The other judgment creditors were not secured creditors under the BIA. The Master’s interpretation of the legislation was correct. There was no evidence the Trustee’s disallowance was made in bad faith. It appeared the Master based his decision to award costs against the Trustee personally based on a misapprehension of the facts regarding whether a costs award against the estate would reduce the Crown’s security. The costs award against the Trustee personally was clearly wrong and was set aside. Costs were payable by the estate.

Gidda (Re), [2021] B.C.J. No. 1648, British Columbia Supreme Court, G.C. Weatherill J., July 29, 2021. Digest No. TLD-September62021003