SCC Confirms QCA Judgment on Tax Collection in Bankruptcy Cases

On October 30, 2009, the Supreme Court of Canada issued its decision regarding the collection of GST and QST in a bankruptcy context in Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny, 2009 SCC 49.

In its decision, the Supreme Court rejected the Crown's attempt to secure its position on collections of the tax portion of accounts receivable outstanding at the time of bankruptcy. Writing for the court, Justice Louis LeBel found that where a supplier becomes bankrupt, the Crown does not have a property right on the GST and QST amounts that are collectable at the time of the bankruptcy of the supplier. Rather, the Crown has an unsecured claim against the estate of the bankrupt supplier and as such, the Crown's claims were ranked along with all the other unsecured creditors in the bankruptcy.

In concluding as it did, the Supreme Court upheld the Québec Court of Appeal, which had itself overturned three Superior Court decisions that endorsed the Crown's contention that it is the sole owner of the GST and the QST portion of accounts receivable outstanding at the time of bankruptcy.

Christian Boutin, Michel Beauchamp and Jean Yves Bernard represented the appellant, the Deputy Minister of Revenue of Québec.

Pierre Cossette and Guy Laperrière acted for the appellant Her Majesty The Queen.

Reynald Auger and Jean Patrick Dallaire of Langlois Kronström Desjardins, LLP acted for the respondents Caisse populaire Desjardins de Montmagny and Raymond Chabot Inc., in its capacity as trustee in bankruptcy of 9083 4185 Québec Inc. (32486).

Mason Poplaw and Miguel Bourbonnais of McCarthy Tétrault LLP represented the respondent Raymond Chabot Inc., in its capacity as trustee for the estate of the debtor Consortium Promecan Inc. (32489).

Marc Germain of Stein Monast s.e.n.c.r.l. acted for the respondent National Bank of Canada (32492).

Éric Vallières and Sidney Elbaz of McMillan LLP acted as counsel to the intervenors, the Canadian Association of Insolvency and Restructuring Professionals.


Reynald Auger Jean Patrick Dallaire Miguel Bourbonnais Éric Vallières Sidney Elbaz Mason Poplaw Marc Germain