• Leased Assets and Deemed Trust Claims
  • June 28, 2010
  • Law Firm: Aird Berlis LLP - Toronto Office
  • Canada Revenue Agency (“CRA”) has the power, pursuant to sections 224 and 227 of the Income Tax Act (Canada) (the “ITA”), to assert a deemed trust claim on assets held by an insolvent debtor when it has outstanding debts in respect of certain payables owing to CRA. A “super priority” attaches to such deemed trust claims, allowing CRA to collect amounts owing to it ahead of other secured creditors who have a perfected “security interest” under a provincial Personal Property Security Act (collectively, the “PPSA Statutes”). Despite this super priority, Canadian Courts have ruled that such deemed trust claims do not, in appropriate circumstances, attach to certain other assets which are leased to the insolvent debtor.