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Priority

Posted on November 1, 2009 | Posted in Construction

The long arm of the federal government is again thrusting its revenue hand between payors and payees in the construction chain. We speak of the super priorities regarding employee deductions and GST.

InĀ Ledcor Construction Ltd. v. 54033 B.C. Ltd., a 2006 British Columbia Supreme Court decision, the court held that the deemed trust to CRA for GST had priority over subsubs who were claiming against holdback funds that the general paid into court. The court held that the GST legislation created a super priority that took effect regardless of any other Act (which includes provincial Construction Lien Acts). Accordingly, CRA scooped the money paid into court and the subsubs got nothing for their liens.

Twist

In PCL Constructors Westcoast Inc. v. Norex Civil Contractors Inc. & CRA, a 2009 British Columbia Supreme Court decision, the facts were similar. Two subsubs liened the project and the general paid money into court to vacate the liens. CRA claimed that the sub failed to remit employee deductions.

In this case, however, the general claimed that it did not owe anything to the sub because of setoff. Accordingly, it argued, there was nothing to garnish. The subsubs claimed that because the general owed no money to the sub, then they should get the money paid into court (i.e. if the sub could not claim the money, then neither could CRA).

The judge agreed with the general and the subsubs, but gave CRA leave to dispute whether the general had proper setoffs.

Since the B.C. legislation differs from Ontario, we would not read too much into this decision, other than the fact that setoff is often a major factor in priority disputes.

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