Reversing the Crown's GST/HST trust

The two office towers at 95 to 105 Moatfield Drive in Toronto sold on June 4, 2026, and after closing adjustments the receiver, Ernst & Young Inc., took in $39,683,728, per the Fourth Report of the Receiver, July 14, 2026, paras. 2, 27. Bank of China (Canada), which had advanced $60,000,000 in September 2022 to buy the property, put its debt at approximately $66,000,000 plus interest, more than $26,000,000 above the proceeds, per its Factum, July 20, 2026, paras. 5, 7, 14. The Canada Revenue Agency had registered a lien on title on March 18, 2024 for $1,182,173.35 of unremitted HST, and by January 28, 2026 put the claim, with interest, at $1,233,710.79, per the Fourth Report, para. 38.

The bank's factum said that lien, being for unremitted HST, carried "a presumptive superpriority," and stated the cure: "Without the Bankruptcy Assignment Order being made, the priority scheme will see the CRA Lien paid out in full ahead of amounts owed to BOCC. The Bankruptcy Assignment Order will cause that priority to be flipped," per the Factum, paras. 15, 25. The receiver, which thought the order appropriate, understood its primary purpose to be addressing "the treatment and priority of the CRA claim in respect of unremitted HST, including any deemed trust component," and until the order issued it would hold back the full lien amount from its distributions to the bank, per the Fourth Report, paras. 40, 47–48.

On July 23, 2026, Justice Dietrich of the Ontario Superior Court of Justice (Commercial List) adjudged the company that had owned the towers, 13995291 Canada Inc., bankrupt, with EY as trustee; no one appeared but counsel for the bank and the receiver, per the Bankruptcy Assignment Order, July 23, 2026, recitals, paras. 2–4. The statement of affairs EY signed on August 21 lists the CRA for $1,286,777.56, all of it in the unsecured column, per the Creditors' Package, Aug. 26, 2026, p. 5.

The Crown's two trusts

Under s. 222 of the Excise Tax Act, GST/HST that a business collects and does not remit is deemed held in trust for the Crown, and outside insolvency the trust reaches property a lender holds as security. A mortgage that qualifies as a "prescribed security interest" has what the Attorney General of Canada, in a 2025 filing, called "partial priority" over it, per the AGC Application Response, Jan. 24, 2025, Part 5, para. 11. Subsection 222(1.1) switches it off, for amounts collected before the bankruptcy, once the debtor is bankrupt. MNP Ltd., as receiver of an Ontario funeral home company, put the consequence in August: "upon the Company's bankruptcy, the CRA's ETA Deemed Trust Claim becomes unsecured and subordinate in priority to the secured claims of the Bank," per its Second Report, Aug. 5, 2026, paras. 68–69. Section 37(1) of the CCAA does the same inside a CCAA.

Neither a bankruptcy nor a CCAA extinguishes the Crown's other trust, for the income tax, Canada Pension Plan contributions and employment insurance premiums an employer withholds from wages. "The Company's bankruptcy does not extinguish the CRA's Source Deemed Trust Claim," the same report continues, per the Second Report, para. 70; s. 37(2) of the CCAA preserves those trusts too.

Seven proceedings in Ontario and British Columbia show secured lenders using the first rule this year, by three routes: their own bankruptcy application, an order directing the receiver to make an assignment, or a CCAA. Three of the same files, and a debtors' CCAA in Nova Scotia, show the second rule holding.

Bankruptcy on the lender's application

Royal Bank of Canada applied for bankruptcy orders twice in the British Columbia receivership of the Whitewater companies, where Deloitte Restructuring Inc. had been receiver since July 2024 of a contractor that rented tower cranes and supplied concrete forming to multi-storey projects, per the Trustee's Preliminary Report, July 27, 2026, paras. 1, 15. The first order, on December 23, 2025, bankrupted 145 Golden Drive Ltd., whose $26,729 of pre-receivership GST, the receiver reported, "no longer retains its deemed trust status," per the Receiver's Third Report, Mar. 18, 2026, paras. 16, 29–30. The second, on July 8, 2026, adjudged Whitewater Concrete Ltd. bankrupt, with no one but the bank's counsel appearing, per the Bankruptcy Order, July 8, 2026, recital, para. 3.

Deloitte, as trustee, then set out the effect on two CRA proofs of claim. Of a GST claim of $189,538, $161,726 had been claimed as deemed trust; the whole claim now ranks as unsecured. Of a source deduction claim of $776,725, $467,410 had been claimed as deemed trust, and the receiver had paid it, per the Trustee's Preliminary Report, paras. 7, 26–28.

Bankruptcy by the receiver's hand

Royal Bank of Canada moved on March 27, 2026 to lift the receivership stay over R & N Turna Holdings Incorporated, one of two companies in a Thornbury receivership, and have the receiver, The Fuller Landau Group Inc., assign it into bankruptcy. The order issued on April 10 and the assignment was filed on June 4. "Accordingly, amounts due for Holdings' HST are no longer a priority claim in the receivership," the receiver reported, per its Second Report, Sept. 16, 2026, paras. 1, 4–5, 17. On the CRA's figures, the receiver had put those amounts at approximately $55,274, per its First Report, Jan. 21, 2026, para. 43.

Roynat Inc. obtained the same form of order over the funeral home company, Brock & Visser, on July 10, 2026, on notice to the CRA. MNP's report set out the effect on the CRA's two claims: $202,571.50 of unremitted HST would become unsecured, while $128,278.37 of source deductions would survive, and MNP asked for authority to pay that sum from the sale proceeds, per the Second Report, paras. 9, 10(b)(vi), 19, 49, 68–70. The assignment was filed on September 3, per the Preliminary Report of the Trustee, Sept. 23, 2026, p. 2.