Is there a real trust or right of ownership in favour of the Crown for the sales and services tax portion of an account receivable owed to a bankrupt supplier by its customer?
And if so, does the statutory tax collection mechanism applicable prior to the bankruptcy of the supplier, and the rules applicable thereafter, preclude or impede the Crown’s ability to enforce its rights: i) when the taxes remain unpaid, directly against the customer/purchaser or (ii) when the taxes have been paid after bankruptcy, against the trustee or receiver who collected the accounts receivable wherein the taxes are charged from the purchaser?
These are the two questions that have recently been answered by the courts with controversial and opposite conclusions, and which are now before the Supreme Court of Canada.
Originally published in Banking & Finance Law Review, Carswell, No 25.1, September 2009, 25 BFLR 193.
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