Section 11
Cases
Freedom Cannabis Inc (Re), 2025 ABKB 272
The only bid for the shares of assets of a company (“Freedom”), a cannabis-producer in CCAA proceedings, came from a secured creditor (JLL), which proposed that desired assets and contracts of Freedom would be retained and that there would be a vesting out of unwanted liabilities to a newly created company (ResidualCo.) The existing shares of Freedom would be cancelled and new shares issued to a JLL subsidiary.
The only contentious issue before Mah J related to the proposed release of liabilities of the directors of Freedom, which would have the effect of extinguishing their liability pursuant to s. 295(2) of the Excise Act (similar to ETA s. 323(2)) for unremitted excise taxes of Freedom of $4.7 million.
Mah J found that the Court had the jurisdiction pursuant to s. 11 of the CCAA to grant a release of such liabilities in the face of a CRA argument that it was within the exclusive jurisdiction of the Minister of National Revenue or the Tax Court to relieve director liability under the Excise Act. In particular, Mah J found that the wording of s. 11 should not be viewed as meaning that an order thereunder could not affect rights granted by other federal legislation.
In determining that the requested director releases were appropriate, he referred, inter alia, to the JLL position that it would not proceed with the transaction without continuity of management, which depended on the release, and that there was no basis for finding that Freedom and its directors had not in good faith sought to manage the excise liabilities.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 323 - Subsection 323(2) | Court had the discretion under the CCAA to eliminate directors’ personal liability arising under a federal taxing statute | 333 |
Section 21
Cases
Métaux Kitco Inc. v. ARQ and AG, 2016 QCCS 444
The appellant (“Kitco”), a gold refiner, went into protection under the CCAA, after the CRA and ARQ (the “Agencies”) reassessed it for $313 million to deny input tax credits and input tax refunds ("ITCs/ITRs") on its purchases of scrap gold - on the basis that the purchases were fictitious (which Kitco denied). Following its insolvency filings, Kitco continued to operate and claim ITCs/ITRs, whose validity was not challenged. However, the Agencies set off these subsequent claims against the disputed claims (i.e., effected “compensation”), rather than paying them.
After noting (at para. 102) that s. 97(3) of the Bankruptcy and Insolvency Act permitted recourse to compensation in the context of an insolvency, Paquette J quoted from para. 55 of D.I.M.S. Construction Inc. (Trustee of) v Québec (Attorney General), [2005] 2 S.C.R. 564:
Since s. 97(3) BIA is an exception to the rule of equality between creditors, it must be interpreted narrowly. It must therefore be read in conjunction with ss. 121, 136(3) and 141 BIA as implicitly requiring that the mutual debts come into existence before the bankruptcy.
She then stated (at para. 105):
There is no need to distinguish between the compensation mechanism in the context of an insolvency and of a proposal in the context of an arrangement.
She accordingly concluded that the Agencies could not set off the uncontested ITCs/ITRs against the disputed claims under s. 21 of the CCAA.
She also stated (at para. 122) that “the presumptions of validity and exigibility arising under tax statutes in favour of the Agencies are not applicable in the context of insolvency proceedings under the CCAA,” as such presumptions go against the principle of equality among creditors and the Crown's status as an unsecured creditor under the CCAA.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 318 | no set-off of assessment of pre-CCAA filing periods against post CCAA ITC claims | 115 |
| Tax Topics - Excise Tax Act - Section 299 - Subsection 299(3) | no presumption of validity in CCAA proceedings | 121 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) | no presumed validity in CCAA proceedings | 89 |
Section 32
Subsection 32(7)
Cases
Agence du revenu du Québec v. FTI Consulting Canada Inc., 2022 QCCA 1740
The appellants (the “ARQ”) were owed approximately $13.4 million of tax by a corporation (“CQIM”) immediately before it was placed into protection under the CCAA. Over three years later, the monitor for CQIM made interim distributions including the partial payment of damages claims which generated input tax credit claims (the “ITC claims”) of approximately $7.5 million as a result of the deemed supplies occurring to CQIM pursuant to ETA s. 182 and QSTA s. 318 (the “Tax provisions”). Whether the ARQ could set off the ITC claims against the amount of tax owing to it (which clearly was a pre-CCAA filing claim) turned principally on whether the ITC claims were pre-filing claims (set-off available) or post-filing claims (set-off likely unavailable).
In summarizing an ARQ submission, Kalichman JA stated (at para. 24):
The ARQ places particular emphasis on s. 32(7) of the CCAA, which provides that parties, like the Suppliers, who suffer a loss in relation to disclaimed contracts, are considered to have provable claims. Since, according to s. 19(1)(b) of the CCAA, a provable claim is one that relates to debts or liabilities incurred before the initial order (i.e., pre-filing claims) and since CQIM’s contracts with the Suppliers were all entered into before the initial order, the judge erred in concluding that the Damage Claims were post-filing claims.
In rejecting this and other ARQ submissions and in finding that the ITC claims were post-filing claims, Kalichman JA stated (at paras. 29-30):
[I]t was only when the interim distribution was made three years after the initial CCAA filing, that payment for the supply of a taxable service was deemed to have been made and the taxes due in respect of that payment were deemed to have been collected. …
In also finding that the Court below had not erred in declining to exercise its residual discretion to permit the ITC claims (viewed as a post-filing claim) against the tax owing, he stated (at para. 48) that this would have been “inconsistent with the remedial objectives of the CCAA, regardless of whether the focus is on restructuring the debtor’s affairs or on liquidation.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 182 - Subsection 182(1) | an ITC claim arising under ETA s. 182 after a CCAA filing could not be set off by the ARQ against a pre-filing tax debt | 497 |
| Tax Topics - Statutory Interpretation - Similar Statutes/ in pari materia | CCAA not in pari materia with ETA provisions | 173 |