Stephen Stuart Ruby

The applicants sought to rectify a share exchange agreement and related documents that contained a drafting error regarding the number of shares to be issued.

The error had adverse tax consequences.

The Attorney General did not oppose the application.

The court applied the four-part test for rectification from Fairmont, finding that the parties had a clear prior agreement, the agreement was still effective, the documents failed to record it accurately, and the proposed rectification would carry out the agreement.

The court distinguished the recent Supreme Court decision in Collins, noting this was not retroactive tax planning but correcting an erroneous transcription.

The application was granted.

The appellant, a former bank executive, entered into a cash-settled forward contract with a securities dealer shortly before accessing a credit facility secured by the same shares underlying the forward contract.

The appellant characterized losses from the forward contract as income losses on the basis that the contract was speculative, while the Minister reassessed and characterized them as capital losses on the basis that the contract was a hedge of capital shares.

The majority held that the characterization of a derivative contract turns on its purpose, ascertained objectively through linkage analysis, and that the forward contract's nearly perfect neutralization of price fluctuations in the underlying shares, considered alongside the loan and pledge agreements, demonstrated the requisite linkage to constitute a hedge.

The dissent would have restored the trial judge's findings of fact, holding that intent — assessed through both subjective statements and objective manifestations — is necessary to find a hedge, and that the credit facility and securities pledge agreement entered into with a separate entity were irrelevant to the characterization of the forward contract.

Appeal dismissed, Côté J. dissenting.

The applicant and its affiliates carried out a series of transactions in December 2007 designed to realize a tax loss to offset unrealized foreign exchange gains in the same taxation year.

The Canada Revenue Agency disallowed the claimed loss on the basis that section 98(5) of the Income Tax Act applied, rendering the transaction a tax-deferred rollover.

The applicant sought court orders to retroactively alter the transaction to achieve its intended tax purpose, relying on rectification and equitable jurisdiction to relieve against mistakes.

The application judge granted the order, but the Supreme Court's decision in Fairmont Hotels restricted rectification to written agreements.

The Court of Appeal held that the court will not exercise its equitable jurisdiction to retroactively alter corporate transactions to achieve tax objectives, whether characterized as rectification or relief from mistake.

The court also rejected rescission as an available remedy, finding it was not a voluntary disposition but a commercial contract, and that rescission is an all-or-nothing remedy that cannot be used for partial unwinding to achieve a specific tax outcome.

The applicant sought an order rectifying a series of corporate transactions carried out in December 2007 to allow it to realize a tax loss of approximately $168 million to offset foreign exchange gains.

The Canada Revenue Agency had reassessed the applicant, disallowing the loss on the basis that the dissolution of a partnership was effected on a tax-deferred rollover basis under s. 98(5) of the Income Tax Act.

The court granted the application, finding that the parties had a continuing specific intention to carry out the transactions to create a tax loss, and that the failure to avoid the application of s. 98(5) was a mistake.

A motion by the applicant to amend its notice of application was dismissed as unnecessary.

The appellant corporation financed a plant in the Philippines using foreign currency to comply with Philippine law.

To minimize risks of devaluation and currency controls, the appellant made U.S. dollar deposits with commercial banks, which then made peso loans to the appellant's Philippine branch.

The appellant claimed a dividend refund under the Income Tax Act, including the interest from the U.S. dollar deposits as 'foreign investment income'.

The Minister reassessed the return, characterizing the interest as income from property used or held in the course of carrying on a business.

The Supreme Court of Canada dismissed the appeal, holding that the property was employed and risked in the taxpayer's business to fulfill a mandatory condition precedent to trade, and thus was not foreign investment income.