The appellant was a secured debentureholder who, following default by the debtor (“Xyloid”), obtained a court order for the appointment of a receiver. Xyloid had paid only the net amount of wages to employees prior to the appointment of the receiver, and did not have the funds to remit the required amount of source deductions. S. 71(3) of the Unemployment Insurance Act, 1971 (and somewhat similarly a CPP provision) provided that “in the event of any liquidation, assignment or bankruptcy of an employer,” there was a deemed trust in favour of the federal Crown equal to the applicable source deduction amount “whether or not that amount has in fact been kept separate and apart… .”
In finding that the process followed by the receiver amounted to a “liquidation” of Xyloid, Pigeon J stated (at pp. 6129-6130):
We are here dealing with a receivership which was completed by the sale and distribution of all the assets of the employer company. In the statutes of Canada as they stood when the two provisions we have to construe were enacted, “liquidation” was not the word used to describe the voluntary or forced distribution of the asset of a company, the word used was “winding-up… . However, the word liquidation was sometimes used to describe this process of dissolution of a company… .
It seems to me that it would not make sense to hold that, because the assets of a company were realized by a receiver appointed at the request of a creditor rather than by a liquidator or a trustee in bankruptcy appointed by a court, the claim for wages should fail. It appears to me that there is no reason not to give the word “liquidation’ its wide meaning in usual language.