The applicants, trustees of two family trusts, sought rectification of sections of their trust deeds nunc pro tunc to correct a drafting error.
The error inadvertently prohibited the distribution of dividends from a family operating company (Signature Realty Inc.) to a corporate beneficiary (2267134 Ontario Inc. or "Holdco"), contrary to the parties' original intention for tax-efficient asset reduction.
The Canada Revenue Agency (CRA) had reassessed the trusts based on this prohibition.
The court applied the four-part Fairmont test for rectification, finding that a clear prior agreement existed, the instrument failed to accurately record it, the agreement was still effective, and rectification would carry out the agreement.
The court distinguished this case from situations involving retroactive tax planning, as the parties sought to correct a document that did not reflect their unchanged agreement, rather than to amend the agreement itself to avoid tax consequences.
The Attorney General of Canada did not oppose the application.
