LACOURCIÈRE, J.:—This application is an appeal from the report of G. W. Dunn, Master, dated October 20, 1969, on a reference herein directed by the Senior Master, as a result of interpleader proceedings instituted by the garnishee herein. The learned Master gave reasons determining the validity of various claims and their respective priority against the fund in Court.
There is no question in the present appeal as to the priority of W. L. Harvey Paving Limited and Pedlar People Limited who were properly held to be first in priority by virtue of the trust fund under the provisions of Section 3 of The Mechanics’ Lien Act, R.S.O. 1960, c. 233. The only dispute concerns the priority as between the claimant, the Attorney-General of Canada, found to be second in priority in the report, and the Royal Bank of Canada, the applicant herein, found to be third in priority.
The bank’s claim rests on a general assignment of debts made by the judgment debtor in favour of the bank applicant dated October 1, 1965. The form of assignment was registered on October 4, 1965, as #2712 for the County of York. Notice of the assignment was given to the garnishee by the bank by letter dated June 21, 1968.
The form of the assignment need not be set out here but is admittedly a valid assignment of all debts to be held by the bank as a general and continuing collateral security for the fulfilment of all obligations, present or future, absolute or contingent, matured or not. The judgment debtor has at all material times been indebted to the bank by virtue of an overdraft on its account. In addition, the judgment debtor executed a guarantee and postponement of claim agreement under seal dated August 2, 1966, guaranteeing any and all indebtedness of Mario Vespi Construction to the bank up to $15,000 and interest. By registered letter of January 9, 1969, the bank demanded payment from the judgment debtor of the said amount of $15,000 plus interest at 834%. It will be noted that the demand of this amount was subsequent to the notification of the garnishee by the bank.
The indebtedness of the judgment debtor to Her Majesty the Queen in Right of Canada represented by the Attorney- General is for employee deductions under the provisions of the Income Tax Act, R.S.C. 19.52, c. 148, and the Canada Pension Plan, 1964-65 (Can.), c. 51. The Attorney-General of Canada claims priority by virtue of three demands on third parties which were served on the garnishee as follows:
(a) a demand on third parties dated February 27, 1968, in the amount of $3,310.40 ;
(b) a demand dated March 27, 1968, in the amount of $214.76 ;
(c) a demand dated October 16, 1968, in the amount of $8,206.84.
All the said demands were in similar form, and. required the garnishee to deduct from moneys payable to the debtor Kipling Paving Company Limited and pay over to the Receiver-General of Canada the amounts for which the third party was indebted “until the aforesaid liability has been paid in full’’. Each subsequent demand was accompanied by a letter from the director of the accounts section stating that the enclosed demand setting out the amount was-' in addition to the demand forwarded on the previous date.
Both parties rely on the decision in Bank of Montreal v. Union Gas ( o. of Canada Ltd., [1969] 2 OR. 776; 7 D.L.R. (3d) 25; [1969] C.T.C. 686. In his reasons the Master also relied on this judgment as authority for holding that the claims of the Attorney-General of Canada stood in priority to the claims of the bank. The Master could see no way that that case could be fairly distinguished from the case then before him. The Master appears to have treated the three demands, although given on different dates and for separate amounts, on an equal footing.
It is submitted by the present applicant that this decision establishes that the rights arising under a demand on third parties are by way of equitable charge crystallized by the state of affairs at the time of the delivery of the demand. In my opinion it makes no difference whether the demand is delivered pursuant to the Income Tax Act or, as here, for contributions under the Canada Pension Plan. By virtue of Section 24(2) of the Canada Pension Plan, the provisions of Section 120, inter alia, of the Income Tax Act apply mutatis mutandis in relation to all contributions payable by an employer under the Act. A charge is therefore created, but in my opinion the charge extends only to the amounts owing at the time when the demand is delivered. There can be no question that a charge was created in favour of the Attorney-General for the amounts mentioned in the demands dated February 27 and March 27, 1968. I say this notwithstanding Mr. Weislo’s argument that the three demands are not separate demands but one continual claim for which notice was given to the garnishee. I cannot accept the submission that the three demands formed part of one transaction: the situation is thus different from the situation which obtained in Bank of Montreal v. Union Gas of Canada Ltd. (supra) where a second demand, for the undischarged balance of the amount mentioned in the first demand, was regarded as having been delivered ex abundanti cautela. I am satisfied that the rights of the bank were perfected by service of its notice of assignment of book debts on the garnishee on June 21, 1968; from that time on, the garnishee could not pay over to the judgment debtor the amount owing by it. In other words, title to the book debt as a chose in action was in the bank, subject only to the two demands of prior date and the trust created under The Mechanics’ Lien Act.
We therefore have an equitable charge created by the. judgment debtor’s assignment, and an equitable charge created by the demand on third parties. I read the Court of Appeal decision referred to as authority for the proposition that as between two claims founded in equity, priority goes to him who first gives notice. This rests on the authority of Tailby v. Official Receiver (1888), 13 App. Cas. 523.
The bank’s notice having been given before October 16, 1968, it follows that the bank is prior in time and consequently prior in right to the third demand of the Attorney-General. I cannot accept as applicable the authorities relied upon by counsel for the respondent dealing with the Crown’s prerogative. I am satisfied that with respect to equitable claims of the Crown and of the subject company the rule of priority in time must apply. Neither in my opinion does it make a difference that the request for payment by the judgment debtor to the bank with respect to the Mario Vespi Construction guarantee only came on January 9, 1969; it is true that as of June 21, 1968, the judgment debtor’s indebtedness to the bank was limited to the amount of overdraft. However, the notice of assignment served by the bank upon the garnishee referred to an assignment covering ‘‘all monies owing or to become owing”. The latter expression would no doubt take care of the judgment debtor’s contingent liability under the guarantee and postponement of claim.
I would therefore allow the appeal and vary the order of Master Dunn to provide that the Attorney-General of Canada is second in priority as to the sum of $3,525.16 plus interest accruing. thereon, from February 4, 1969 ; that the Royal Bank of Canada is third in priority for the total mentioned in para. 3 of the Master’s order of October 20, 1969, namely, $17,799.94 and interest from the said date; that the Attorney-General of Canada is fourth in priority with respect to the amount of $8,206.84 the subject of its third demand, and that all other priorities in the Master’s order of October 20, 1969, remain undisturbed and are hereby confirmed.
In the circumstances I do not think there should be any costs of this appeal.