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Digest Of The Week | Canada v. Toronto-Dominion Bank

A bank was liable to the CRA where money was owed under the Excise Tax Act by a client of the bank. The bank had given the client a loan secured by real property; the client then sold the property and repaid the loan. Under the ETA, both the property and the proceeds of the property were held in a deemed trust for the Crown; the Court ruled that the ETA prevented the bank from relying on the defence of bona fide purchaser for value: 2018 FC 538
Tax --- Goods and Services Tax — Collection and remittance — GST held in trust
Registrant operated landscaping business — Registrant collected but failed to remit GST of $67,854 — After debt arose, registrant had mortgage on home and borrowed funds from bank — Registrant sold house and used funds to repay loan from bank — Crown brought action against bank for repayment of GST debt — Action allowed — Section 222 of Excise Tax Act created deemed trust and imposed obligation on bank to repay money it received from registrant — Defence of bona fide purchaser for value was not available — Bank did not purchase anything but only received repayment of loan — Payments to bank were proceeds from sale of property subject to deemed trust, as "proceeds" was not limited to forced sales or realization of security interests — Deemed trust does not require triggering event to come into operation — Parliament was fully aware of consequences of amendments to legislation on private property and allocation of financial risk — Crown also entitled to pre-judgment interest — Excise Tax Act, R.S.C. 1985, c. E-15, ss. 222(1), (3).
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