Mortgage Broker

Summer 2019

Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.

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invoked by a secured creditor in the context of a deemed trust under the ETA or ITA. e Federal Court acknowledged the harsh consequences against secured lenders stemming from this interpretation but recognized that the judicial system must bow to parliamentary supremacy. Parliament had already carved out an exemption for prescribed security interests under section 222(4) of the ETA and the Court could not go against legislative intent by carving out additional exemptions. PRACTICAL TAKEAWAY: Advise your lender clients about the importance of unremitted GST payments. Consider methods in minimizing this risk. e second case I note is Her Majesty e Queen v. Callidus Capital Corporation, 2017 FCA 162, where the Federal Court of Appeal agreed with the Crown that the GST obligation and, more importantly, priority were not extinguished upon the bankruptcy of a tax debtor. I note this case because the Supreme Court of Canada recently heard an appeal of this case on November 9, 2018. Although, at the time of this paper, a formal judgement has not been released, it appears that the Supreme Court of Canada has reversed the Federal Court of Appeal's decision. As such, I emphasize the dissent from the Federal Court of Appeal decision. In Callidus, the tax debtor collected but failed to remit GST and harmonized sales tax ("HST") to the Receiver General in the amount of $177,299.70. e secured creditor at the time, the Bank of Montreal, assigned the debt to Callidus Capital Corporation ("Callidus"). Callidus agreed to forbear from enforcing the newly assigned debt if the tax debtor marketed some of its owned properties for sale to repay a portion of the debt owed. Callidus received $590,956.62 in sale proceeds and the tax payer also agreed to deposit all future funds received from all sources into blocked accounts for Callidus to reduce the outstanding debt owed. On April 2, 2012 the plaintiff issued a demand letter for unremitted GST and HST. On November 7, 2013, at the request of Callidus, the tax debtor made an assignment in bankruptcy under the Bankruptcy and Insolvency Act. PRACTICAL TAKEAWAY: Currently, bankruptcy does not change the priority of deemed trusts under the Excise Tax Act. However, this decision seems to have been overturned by the Supreme Court of Canada. Perhaps the dissent's views are correct and the subject matter and priority of a deemed trust ceases to exist upon bankruptcy. C. THE CERTIFICATE OF PENDING LITIGATION AND PRIORITY Real estate practitioners are oen aware of the priority issues and concerns surrounding first mortgages, subsequent mortgages, builders' liens and other charges. Lender clients are generally aware of the priority issues and oen attempt to resolve priority issues with priority agreements. However, an area that does not garner the same level of scrutiny is certificates of pending litigation (CPL) and how they affect priority. A hasty read of the law implies a simple explanation that a successful judgement will be granted priority based on the date the CPL was CMB MAGAZINE summer 2019 | 21 newcaselaw

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