The Court, having heard the parties and deliberated; Seeing :
The trustee prays for direction as to the nature of the claim of the Department of National Revenue.
The claim is for moneys that would have been retained by debtor out of its employees’ pay under the War Revenue Act.
The parties admit : " 4 That the bankrupt in order to finance its payroll, borrowed from the bank the moneys required to effect payment of the net amount payable to each employee”.
The contention submitted by the trustee is that the debtor under the circumstances, did not collect the taxes for the Crown and that he is not accountable but only subject to a penalty.
The Crown claims that he is and that it is privileged.
The trustee’s contention is not to be sustained.
The fact that a party pays his employees with borrowed funds is immaterial.
In the absence of the income tax law, the debtor would have paid his employees in full and therefore, in paying the wages less the deduction required by law, he retained the amount of the tax.
Most contractors and manufacturers are financed by a bank and obtain money therefrom to pay their employees, which they repay when they are paid themselves for the best part on completion of the job as regards contractor and upon the sale of the manufactured goods in the latter case.
To admit the trustee’s contention would put contractors and manufacturers and their employees outside the operation of the law, whereas the law applies to all employers.
It is true the debtor did not put the money aside as required by law, but he was obliged to retain it or collect for the Crown and so he did and is accordingly accountable thereof, (section 92, paragraph 2).
As to the nature of the claim, these moneys are to be paid in priority to all other debts and consequently the claim is privileged, (section 92, paragraph 7).
WHEREFORE:
DotH ADVISE the trustee that the claim in question, not only should be allowed but collocated as a privileged claim.
(SIGNED) Louis BOYER,
J.S.C.