ANGLIN, A.M.:—This is an action brought by the plaintiff to enforce the security created by a certain mortgage of lands, which mortgage is held by the plaintiff and was made by the defendant Leroy S. Harron (hereinafter called Harron). Harron is the owner of the ultimate equity of redemption in the mortgaged lands (hereinafter called the mortgaged premises).
In the course of the hearing by me of the reference directed by the judgment in this action certain submissions have been made as to the rates of interest to which the defendant Her Majesty the Queen is entitled and as to priorities as between Her Majesty and the other encumbrancers. I am now dealing with the subject matter of those submissions.
I deal first with the matter of rates of interest.
Amounts assessed against Harron for deductions by him from remuneration, where no writ of execution has been issued on behalf of Her Majesty.
With regard to these amounts, while Her Majesty is entitled to recover from Harron interest at 10% per annum on the amounts deducted by Harron and not remitted by him, but not interest on the penalties imposed (Income Tax Act, R.S.C. 1952, e. 148, Section 123(9)), Her Majesty claims herein no charge upon the mortgaged premises in respect of such interest or in respect of such penalties.
Amounts assessed against Harron for deductions by him from remuneration, where a certificate has been registered in the Exchequer Court of Canada pursuant to Section 119(2) of the Income Tax Act for such amounts with penalties and with interest at 10% per annum on such amounts to the date of the certificate and for additional interest at 10% per annum on such amounts from the date of the certificate to the date of payment, and a writ of execution has been issued and filed with the sheriff for such amounts, penalties, interest and additional interest.
With regard to these amounts, there can be no question that Her Majesty is entitled to simple interest at 10% per annum, to the date of the aforesaid certificate, on the amounts deducted by Harron and not remitted by him, but not to interest on the penalties (Income Tax Act, Section 123(9)), and has, by virtue of the inclusion of that interest on those amounts in the writ of execution, a charge on the mortgaged premises for that interest. As to the rate of interest on those amounts from the date of the aforesaid certificate, but for Section 119(2) of the Income Tax Act it would appear that the rate would be 5% per annum (Exchequer Court Rules 189, 200 and 209 and Form 36 appended to those Rules). However, Section 119(2) provides that the certificate is to be treated as if it ‘‘were a judgment obtained in the [Exchequer] Court for a debt of the amount specified in the certificate plus interest to the day of payment as provided for in this Act’’. (The italics are mine.) The interest “as provided for in this Act’? is 10% per annum (Section 123(9)). I do not see how proper effect can be given to the words “to the day of payment” unless the writ of execution directs (as it does in this case) that interest be levied at 10% per annum, from the date of the certificate, upon the amounts deducted and not remitted. I think that the more specific provision of Section 119(2) applies rather than the more general provisions of the Exchequer Court Rules and Form. In this connection I have been referred to Sections 13 to 15 of the Interest Act, R.S.C. 1952, c. 156, but I think that those sections are, by reason of Section 12 of that Act, quite inapplicable to any of the matters before me on this reference. I think that the writ of execution properly directs the levying of such interest at 10% per annum from the date of the certificate, and that that interest at that rate (simple interest, of course) is, by virtue of the writ of execution, a charge on the mortgaged premises. In view of this conclusion by me, it is not necessary for me to consider whether a writ of execution issued out of the Exchequer Court must be given effect according to its terms unless it is successfully attacked in the Exchequer Court.
Her Majesty does not claim interest, before or after the certificate, upon the penalties imposed in respect of the unremitted deductions from remuneration.
Amounts assessed against Harron for income tax, certificates having been registered in the Exchequer Court of Canada pursuant to Section 119(2) of the Income Tax Act for such amounts with interest at 6% per annum on such amounts to the date of the certificates and for additional interest at 6% per annum on such amounts from the dates of the certificates to the date of payment, and writs of execution having been issued and filed with the sheriff for such amounts, interest and additional interest.
Here again there can be no question that Her Majesty is entitled to simple interest, in this case at 6% per annum, to the dates of the certificates, on the amounts of the tax {Income Tax Act, Section 54(1)), and has, by virtue of the inclusion of that interest in the writs of execution, a charge on the mortgaged premises for that interest. Here again, also, in view of Section 119(2) of the Income Tax Act, the interest 1 ‘as provided for in this Act’’ referred to in Section 54(1) being 6% per annum, and the writs of execution directing that interest at 6% per annum be levied, from the dates of the certificates, on the amounts of the tax, I think that such interest from the dates of the certificates (simple interest again, of course) is, by virtue of the writs of execution, a charge on the mortgaged premises.
Interest on costs incidental to the certificates registered in the Exchequer Court and to the writs of execution issued on behalf of Her Majesty.
Each of these writs of execution provides for interest at 5% per annum on costs of $11 only, and I do not think that Her Majesty is entitled to a charge on the mortgaged premises for interest upon those costs at any higher rate or upon any other costs. I am not, of course, dealing here with any costs of Her Majesty of or incidental to this present mortgage action.
I now come to the matter of priorities.
The solicitors for all parties to this action (though the point may not concern all of them) have on the hearing of this reference consented to its being taken for the purpose of this reference that the plaintiff, in respect of his mortgage in question in this action, is, to the extent of $11,000, subrogated to the position of two earlier mortgagees (William T. Sloan and Coupland Acceptance Limited) under their registered mortgages (both dated January 29, 1951, and registered on January 31, 1951) of the mortgaged premises in question herein. The solicitor for the plaintiff consented to having it so taken that this subrogation is to the extent of $11,000 only.
The solicitor for Her Majesty concedes that Her Majesty now has no claim for unremitted deductions by Harron from remuneration which became due to Her Majesty prior to the taking of those two earlier mortgages and therefore that, to the extent of the plaintiff’s above-mentioned subrogation, the plaintiff’s claim under his mortgage is prior to any claim of Her Majesty for unremitted deductions by Harron. The solicitor for Her Majesty also concedes that any charge in favour of Her Majesty upon the mortgaged premises by virtue of the writs of execution issued in respect of income tax due from Harron is subsequent to all and every part of the amount of the encumbrance of the plaintiff by virtue of his mortgage. I think that it follows that the plaintiff is first in priority in respect of $11,000 of the principal now owing on his mortgage and in respect of that portion of unpaid interest which has accrued or will accrue upon the $11,000 portion of the principal.
The solicitor for Her Majesty submits that, subject to the plaintiff’s rights by virtue of his above-mentioned subrogation, Her Majesty takes priority over the plaintiff for the amounts of unremitted and unpaid deductions by Harron from remuneration which should have been remitted by him to Her Majesty after January 29, 1951, and before June 29, 1954 (the date of the plaintiff’s mortgage). The solicitor for the plaintiff denies that Her Majesty is entitled to such priority. I think that Section 123(6) of the Income Tax Act gives Her Majesty such priority, and that Her Majesty retains that priority notwithstanding the registration in the Exchequer Court, pursuant to Section 119(2), of a certificate in respect of the unremitted deductions and the issuing and filing with the sheriff of a writ of execution under that certificate. In this connection I have considered the following cases cited:
(a) by the solicitor for Her Majesty—Commissioners of Taxation for the State of New South Wales v. Palmer et al., [1907] A.C. 179; The King v. Wells and Allnutt (1807), 16 East 278%; Re Rosenberg et al., [1948] O.W.N. 637; [1948] 4 D.L.R. 205; 29 C.B.R. 103; Industrial Development Bank v. Valley Dairy Limited et al., [1953] O.R. 70; [1953] C.T.C. 132; [1953] 1 D.L.R. 788; The Trusts and Guarantee Company Limited +. The Lake Shore Country Club Limited, [1945] O.W.N. 3;
(b) by the solicitor for the plaintiff—Sandberg et al. v. Meurer et al. and The Minister of National Revenue, 56 Man. R. 391, [1949] C.T.C. 35; [1949] 1 W.W.R. 117; [1949] 1 D.L.R. 422 ; and In re Reid and Canadian Farm Loan Board, 45 Man. R. 357; [1937] 3 W.W.R. 1; [1937] 4 D.L.R. 248.
The charge created by Section 123(6) does not, however, extend to penalties in respect of or to interest upon unremitted deductions from remuneration, and I think that the plaintiff has complete priority over Her Majesty in respect of such penalties and interest.
As between Her Majesty and the other execution creditors claiming herein I think that the position is as follows:
(a) With regard to the amounts assessed against Harron for unremitted deductions by him from remuneration, but with respect to which no writ of execution has been issued on behalf of Her Majesty—by virtue of Section 123(6) of the Income Tax Act these amounts are a charge on the mortgaged premises in priority to the executions of the other execution creditors, but Her Majesty claims herein no charge upon the mortgaged premises for penalties respecting or interest upon such unremitted deductions.
(b) With regard to amounts assessed against Harron for unremitted deductions by him from remuneration, with respect to which a certificate has been registered in the Exchequer Court and a writ of execution has been issued and filed with the sheriff, these amounts (so far as they are still unpaid) are a charge on the mortgaged premises in priority to the executions of the other execution creditors. This follows from Section 123(6) and from the priority which an execution issued on behalf of Her Majesty generally enjoys over competing executions. As to this priority as between executions issued on behalf of Her Majesty and other competing executions, see The King v. Wells and Allnutt, supra; Commissioners of Taxation for the State of New South Wales v. Palmer et al., supra, and In re General Fireproofing Company of Canada, Ltd., [1937] S.C.R. 150; [1937] 2 D.L.R. 30; 18 C.B.R. 159, and The King v. Star Kosher Sausage Manufacturing Company Limited, 48 Man. R. 147; [1940] 3 W.W.R. 127 ; [1940] 4 D.L.R. 365. Because of this priority as between such executions, Her Majesty also has priority over all the other execution creditors in respect of the unpaid penalties and interest included in the writ of execution issued in respect of the unremitted deductions by Harron from remuneration.
(c) Because of the above-mentioned priority as between executions issued on behalf of Her Majesty and other competing executions, Her Majesty has priority over all the other execution creditors in respect of, and for the full unpaid amounts of, the executions issued on behalf of Her Majesty in respect of income tax assessed against Harron.
Judgment accordingly.