COYNE, J.A.—I agree with Adamson, J.A.
If Sigurdson had complied with sec. 92(7) of the Income War Tax Act, R.S.C. 1927, c. 97, of course no such question as this would have arisen. The trust moneys in the account would belong to the Crown in the right of the Dominion.
The appellant’s claim is one for deductions shown by Sigurd- son’s books to have been made in respect of all his workmen. There is no evidence as to which of these worked on the building here in question, nor, of course, the amount payable to, or deducted from, the pay of workmen on this building.
The Crown’s claim, however, is a broad one, namely, that any deductions and any claim for such income tax are a first charge on all assets of the employer, and that moneys payable by the owner under a building contract to the contractor are such assets of the contractor-employer, under sec. 92(7A).
But any rights to moneys under a building contract and to a lien or charge on the land, and the position of the land owner, are all subject to the provisions of The Builders’ and Workmen’s Act, R.S.M., 1940, e. 24, sees. 3 and 5, and to the Mechanics 9 Lien Act, R.S.M. 1940, c. 129, sees. 4, 9, 11 and 12. If Sigurdson had received these moneys he would be an express trustee for the workmen and materialmen up to the amount of their unpaid claims and could not "appropriate or convert any part thereof to his own use or to any use not authorized by the trust” (c. 24, s. 3) and, until the workmen are paid in full, the proprietor ‘‘shall be liable to them directly for the amounts owing to them, as well as the builder or contractor’’ (ibid, sec. 5 [1]). Workmen and materialmen "‘shall have a lien’’ on the property for such amount (c. 129, sec. 4 [1]) ‘‘from the date of commencement of the work or service, or from the placing of the materials as against purchasers, chargees or mortgagees under instruments, registered or unregistered’’ {ibid, sec. 4[2]). If it were necessary to a decision this might be held to mean all ‘‘purchasers, chargees or mortgagees’’ and to embrace the Crown under an instrument, i.e., a statute. The proprietor ‘‘shall, as the work is done or materials are furnished under any contract, deduct . . . and retain. . . twenty per cent of the value of the work, service and materials. . . The liens. . . shall be a charge . . . in favour of sub-contractors whose liens are derived under’’ such workmen or materialmen.
Sigurdson never had a right to the moneys in question herein or any right in or to them, in himself, for himself. The rights of the workmen and materialmen arose at the very moment they began to work or supplied materials. Sigurdson was only to be a trustee for the lienholders of any of these moneys which he might receive. The owner, too, was liable to the latter. The right to these moneys, and the moneys themselves, could not be and never were assets of Sigurdson. If there had been a surplus over and above the lien claims, that would have been an asset of Sigurdson. But he never received any of these moneys. Also there was no surplus in them over such lien claims. And the Crown never had a charge upon any of these moneys.
The owner took the proper course in paying into court with his defence. The Referee’s judgment is right.
Dysart, J.A.—For the reasons stated by my brothers, Coyne and Adamson, I am satisfied that the moneys which have been paid into court, under The Mechanics’ Lien Act, R.S.M. 1940, c. 129, by the owner of the land affected, to be applied towards the discharge of the mechanics’ liens registered against the land by workmen and supplymen, and which, to the extent that they are needed for that discharge, really belong to the lienholders, and not to the contractor. They are moneys over which the contractor has no control nor right of ownership—moneys which in no circumstances would he ever receive or dispose of. They are, therefore, not ‘‘assets’’ of the contractor upon which the Minister of National Revenue has ‘‘a first charge’’ within the meaning of sec. 92 (7A).
I agree that the application of the Minister of National Revenue should be dismissed.
ADAMSON, J.A.—The defendant Sigurdson contracted to build or repair buildings on the defendant Meurer’s land. In carrying out such contract, he employed the plaintiffs, Sandberg and Topping. These two plaintiffs filed mechanics’ liens under which the learned Referee has adjudged them to be entitled to $1,413.02. The defendant Meurer (the owner) has paid into court the sum of $1,266, being the amount required to be retained by the owner under the provisions of The Mechanics’ Lien Act, R.S.M. 1940, c. 129, though as a matter of fact he only held back $680.
The Minister of National Revenue (claimant), appellant, who has a judgment against the defendant Sigurdson in the sum of $413 and costs for deductions made by him as an employer from his employees under the Income War Tax Act, R.S.C. 1927, e. 97, claims a first charge on the moneys paid into court by the owner, Meurer, as being an asset of Sigurdson under sec. 92(7A), of the Income War Tax Act, which reads as follows:
4 Every person who deducts or witholds an amount under this section is liable to pay to His Majesty on the day fixed by or pursuant to subsection two of this section an amount equal to the amount so deducted or withheld and such liability shall constitute a first charge on the assets of such person and shall, notwithstanding the Bank Act, the Bankruptcy Act or any other statute or law, rank for payment in priority to all other claims, either of His Majesty in right of a province of Canada or any other person, of whatsoever kind heretofore or hereafter arising, save and except only the judicial costs, fees and lawful expenses of an assignee or other public officer charged with the administration or distribution of such assets.”
The question, therefore, is whether or not these moneys were assets of the defendant Sigurdson within the meaning of this section. It should be noted that the appellant’s judgment is not for moneys deducted by him on this particular contract. So far as is Shown, they were never in a special account as provided for in sec. 92(7) of the above-mentioned Act. It should be observed, too, that under The Mechanics 9 Lien Act a special lien for payment of wages and materials is created. When the moneys were paid into court under this Act, they became subject to the lienholder’s claims. As assets they are in the same legal position as property which has been mortgaged or hypothecated as security.
What are ‘‘assets’’ within the meaning of this sec. 92(7A) and similar statutes has been adjudicated upon in a number of cases.
Rex v. Hyde, [1928] 2 W.W.R. 253, Kalgour, J., in dealing with a similar provision under The Special War Revenue Act, 1915, c. 8, which gave the Crown a first charge on the assets of a person indebted for sales tax, held that the word "‘assets’’ was not intended to include any other assets than such as were the property of the debtor at the time his assets were sought to be administered. In that case the learned judge adopted the view of Rose, J. in Goodman v. Bank of Toronto (1925), 56 O.L.R. 318, 5 C.B.R. 473.
In Rex v. Jack Pine Lbr. Co. and Can. Bank of Commerce, [1928] 3 W.W.R. 419, Frank Ford, J., held that the Crown could not claim a sales tax debt from a chattel mortgagee who has seized and sold goods which were the property of the debtor while sec. 17 of An Act to Amend The Special War Revenue Act, 1922, c. 47, was in force.
The same Act was considered in Rex v. Bank of Nova Scotia (1925), 58 O.L.R. 255, by the Ontario Court of Appeal. In that ease the defendant made advances of money to a manufacturing company on the security of goods hypothecated by assignments. The bank insured the goods, which were later destroyed by fire, and the insurance moneys were paid to the bank. At and before the destruction of the goods the company was indebted to the Crown for unpaid sales and excise taxes, and the Crown claimed to be entitled to a charge on the insurance moneys in priority to the bank. After going into the question of the meaning of “assets” quite extensively, Mulock, C.J.O., speaking for the court, said:
“ " It is clear from the foregoing definitions of the word ‘assets’ that nothing is an asset of a debtor within the meaning of sec. 17 unless it is ‘the property’. . . of the debtor and is applicable in payment of his debts.”
And Smith, J.A. said :
“ . . . the word ‘assets’. . . includes only the debtor’s own interest in property, and not the interest he has conveyed away in good faith to others.”
Rex v. Banque Canadienne Nationale, [1930] 2 W.W.R. 586, 39 Man. R. 108, is a decision of this court and it was there held by Dennistoun, J.A. (with whom Prendergast, C.J.M., Fullerton and Trueman, J J. A. agreed; Robson, J.A. dissenting) that:
“The short answer is that this sec. 17 was never intended to create a general lien on all the property of the debtor which would follow and adhere to that property after he had alienated it . . .””
Workmen’s Compensation Board v. Graham and Barrow [1944] C.T.C. 255, is a case in which Farris, C.J.S.C. deals with the above recited section. He held that "‘the Dominion Government has not a general priority for the payment of the income tax due it, except as against the funds in the trust account, or which can be followed as having come from the funds, either which should have been paid into the trust account or which had been improperly paid out of the trust account,’’ and therefore was not entitled to priority for the amount brought into court.
The most recent case is In re Rosenberg, [1948] O.W.N. 637, 29 C.B.R. 103, which judgment was given by Urquhart, J., in the Supreme Court of Ontario. He held that :
" " The trustee is entitled to distribute only assets of the estate among the unsecured creditors, and the assets are determined after the encumbrances, such as chattel mortgage, or a lien under sec. 88 of The Bank Act, 1944 (Dom.), c. 30, are paid.”
He goes on to say :
éé . . it is well settled that * assets’ include what is left after such claims have been taken care of.’’
It must, therefore, be held that assets include only such properties of the debtor as are available for payment of his debts, and the claim of the appellant to the moneys in court under The Mechanics’ Lien Act is subject to the payment of such liens as have been found by the Referee to be payable. As there are not sufficient moneys to satisfy those lens, the application of the claimant should be dismissed with costs.
The rights of the Crown have been so clearly and frequently settled under the above and similar provisions that one cannot but wonder why the parties were put to the expense of these proceedings.
Appeal dismissed.