In the course of the debtor's attempted reorganization under CCAA proceedings, the British Columbia Supreme Court ordered that unremitted GST be placed in the monitor's trust account until the outcome of the reorganization was known. When the debtor concluded a successful reorganization was not possible and sought leave from the court to make an assignment in bankruptcy under the BIA, the Crown moved for immediate payment of the unremitted GST.
There was an apparent conflict between the ETA and the CCAA: the ETA provided in s. 222(3) for a deemed trust in favour of the Crown in respect of GST, but created an exception only where the Bankruptcy and Insolvency Act applied; s. 18.3 of the CCAA provided that statutory deemed trusts do not apply in CCAA proceedings. In finding that Section 18.3(1) of the Companies' Creditors Arrangement Act (now reformulated in s. 37) overrode the deemed trust in s. 222(3) of the ETA, even though s. 222(3) purports to apply despite any enactment other than the BIA, Deschamps J. indicated (at paras. 45-53) that to hold otherwise would undermine Parliament's intent. In particular, at para. 48: "creditors' incentives would lie overwhelmingly with avoiding proceedings under the CCAA [rather than the BIA] and not risking a failed reorganization. Giving a key player in any insolvency such skewed incentives against reorganizing under the CCAA can only undermine that statute's remedial objectives and risk inviting the very social ills that it was enacted to avert."