Applicants sought rectification of a restated and amended trust deed governing an employee trust that held voting shares in a Canadian research and development corporation.
The wording of the deed permitted directions to the trustee from the CEO or President of the settlor, which the tax authority interpreted as giving a non-resident effective voting control and disqualifying the corporation from Canadian-controlled private corporation status under the Income Tax Act.
The applicants argued that the clause was mistakenly drafted and that the true intention was that only the board of directors would authorize directions to the trustee.
The court applied the rectification test from Performance Industries Ltd v Sylvan Lake Golf and Tennis Club Ltd and found that the parties had a consistent intention to preserve Canadian-controlled private corporation status to maintain eligibility for research tax credits.
The court concluded that the wording error misexpressed that intention and that the proposed amendment accurately reflected the original agreement.
