Court File No.:

IN THE (ON APPEAL FROM THE COURT OF APPEAL FOR )

BETWEEN:

THE ATTORNEY GENERAL OF CANADA Applicant (Appellant) and

FAIRMONT HOTELS INC., FHIW HOTEL INVESTMENTS (CANADA) INC. and FHIS HOTEL INVESTMENTS (CANADA) INC. Respondents (Respondents)

APPLICANT’S MEMORANDUM OF ARGUMENT

(Pursuant to Rule 25 of the Rules of the Supreme Court of Canada)

Department of Justice Canada William F. Pentney Q.C. Ontario Regional Office Deputy Attorney General of Canada 130 King Street West, Suite 3400, Box 36 Department of Justice Canada Toronto, ON M5X 1K6 50 O’Connor Street, Suite 500, Room 557 , ON K1A 0H8

Diana Aird Christopher Rupar Tel: 416-952-9630 Tel: 613-670-6290 Fax: 416-973-0810 Fax: 613-954-1920 E-mail: [email protected] E-mail: [email protected]

Counsel for the Applicant Agent for the Applicant

McCarthy Tétrault LLP P.O. Box 48, Suite 5300 Toronto-Dominion Bank Tower Toronto, ON M5K 1E6

Chia-yi Chua Tel: 416-601-7715 Fax: 416-868-0673 E-mail: [email protected]

Counsel for the Respondents

Table of Contents

PART I – STATEMENT OF FACTS ...... 1 A. Overview ...... 1 B. Background ...... 1 C. Decision of the application judge ...... 2 D. Decision of the Court of Appeal for Ontario ...... 3 PART II – QUESTION IN ISSUE ...... 3 PART III – ARGUMENT ...... 4 A. This Court’s guidance on the common law remedy of rectification is needed ...... 4 B. Law of rectification is applied inconsistently across the country ...... 6 1) This Court’s test for rectification applies in limited circumstances ...... 6 2) Test for rectification in Ontario tax cases ignores this Court’s test ...... 7 3) Ontario test is also inconsistent with the scope of the remedy in ...... 8 4) Growing divergence in the approach to rectification across the country...... 9 C. Conclusion ...... 12 PART IV – SUBMISSIONS ON COSTS ...... 12 PART V – ORDER SOUGHT ...... 12 PART VI – TABLE OF AUTHORITIES ...... 13 PART VII – STATUTES RELIED ON ...... 15 PART I – STATEMENT OF FACTS

A. Overview

1. The common law test for rectification has critical implications for the Canadian tax administration. The Judgment of the Court of Appeal for Ontario in this case allows a taxpayer to use the equitable remedy of rectification to undo transactions that it intended to enter into in order to obtain more favourable tax treatment. Using rectification in this manner runs contrary to this Court’s jurisprudence both in the tax context and more generally. As a result of this decision, taxpayers in Ontario need only decide which tax result they intend to achieve to then use the equitable remedy of rectification to do over that which they originally chose to do, potentially on a repeated basis, until they manage to achieve their desired tax result.

2. The Ontario Court of Appeal’s decision in this case cannot be reconciled with the decisions of courts in other provincial jurisdictions. Absent a decision from this Court, the inconsistency in the availability of the remedy of rectification in the tax context amongst the various jurisdictions will continue, resulting in significant uncertainty for both the taxpayers and the fisc.

3. Three years ago, the Crown intervened in Quebec (Agence du Revenu) v Services Environnementaux AES Inc and asked this Court to consider and reject a line of authority from common law provinces which had broadened the scope of the common law remedy of rectification in tax cases. The Court declined to do so in that case as it was governed by Quebec civil law. This latest decision from the Ontario Court of Appeal now provides the ideal platform for this Court to consider the issue in the common law context. The issue is one of public importance that requires consideration by this Court.

B. Background

4. In 2002, Fairmont entered into a series of transactions in US dollars. Because the financing was in a foreign currency, Fairmont had exposure to capital gains due to foreign exchange risk. In order to hedge Fairmont’s exposure to this risk, each of its US dollar denominated assets had a corresponding US dollar denominated liability of equal value.1

1 Decision of the application judge, para 6, Application for Leave to Appeal [ALA], tab 3

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5. In 2006, Fairmont was purchased by two other companies and, as a result, it knew that if nothing was done it would realize certain deemed foreign exchange losses without corresponding foreign exchange gains.2 A plan to deal with this situation was put forward; however, a modified version of this plan was implemented instead. Under the implemented plan, Fairmont knew it was no longer hedged against foreign exchange exposure, but determined it would deal with this problem at a later time.3 It had no specific plan on how to deal with this issue.4

6. In 2007, a further restructuring took place which resulted in a tax liability.5 Fairmont had not reviewed the transactions in great detail or consulted with its tax advisors.6 Its vice-president of tax authorized the redemption of shares on the mistaken belief that a hedge was still in place to offset accrued gains.7

7. Fairmont learned about its tax liability as the result of a Canada Revenue Agency audit.8 In order to avoid these tax consequences, Fairmont sought rectification to replace the share redemptions with loans, as loans were transactions that would not have tax consequences.9

8. The Attorney General of Canada (“AGC”) opposed the application for rectification on the basis that there was no agreement to rectify since Fairmont had not agreed to structure the payments as loans until after the 2007 transactions took place.10

C. Decision of the application judge

9. The application judge followed the Ontario Court of Appeal’s 2000 decision in Juliar v Canada11 and granted rectification because Fairmont had a continuing intention to carry out the

2 Decision of the application judge, para 9, ALA, tab 3 3 Decision of the application judge, paras 12-13, ALA, tab 3 4 Decision of the application judge, para 13, ALA, tab 3 5 Decision of the application judge, para 42, ALA, tab 3 6 Decision of the application judge, para 15, ALA, tab 3 7 Decision of the application judge, para 15, ALA, tab 3 8 Decision of the application judge, para 17, ALA, tab 3 9 Decision of the application judge, paras 19-20, ALA, tab 3 10 Decision of the application judge, para 21, ALA, tab 3 11 Juliar v Canada (2000), 50 O.R. (3d) 728 (CA) [Juliar (CA)], Applicant’s Book of Authorities [ABA], tab 14, aff’g (1999), 46 O.R. (3d) 104 (SCJ) [Juliar (SCJ)], ABA, tab 13, leave to appeal to SCC refused (2001), [2000] SCCA No 621, ABA, tab 15 - 3 -

transactions on what the application judge described as “a tax and accounting neutral basis”, even though Fairmont had made no decision on how it would achieve that intention.12 He held that Fairmont had mistakenly chosen the wrong method to carry out its tax intention and was entitled to use rectification to retroactively implement its new method.13

D. Decision of the Court of Appeal for Ontario

10. In its appeal, the AGC submitted that Juliar was inconsistent with cases decided by this Court14 and, that the Court of Appeal should apply this Court’s test for rectification. Before the hearing, the AGC requested that the appeal be heard by panel of five judges.15 The request was denied without reasons.16

11. The Court of Appeal dismissed the AGC’s appeal. Like the application judge, it determined that it was bound by its decision in Juliar and held that Fairmont’s continuing specific intention to undertake transactions on “a particular tax basis” entitled it to use rectification to replace its original transaction with a different one.17 The Court of Appeal held that the party seeking rectification is not required to determine the precise mechanics to achieve the intended tax result.18

PART II – QUESTION IN ISSUE 12. The proposed appeal raises the following question which is a matter of public importance: whether the equitable remedy of rectification may be used to replace one transaction with another to obtain intended tax consequences.

12 Decision of the application judge, para 42, ALA, tab 3 13 Decision of the application judge, para 43, ALA, tab 3 14 Performance Industries Ltd. v Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 [Performance Industries], ABA, tab 19; Shafron v KRG Insurance Brokers (Western) Inc., 2009 SCC 6 [Shafron], ABA, tab 21 15 Letter from Nancy Arnold to John Kromkamp, March 4, 2015, ALA, tab 6 16 Letter from John Kromkamp to Diana Aird and Chia-yi Chua, April 17, 2015, ALA, tab 7 17 Decision of the Court of Appeal for Ontario, para 10, ALA, tab 4 18 Decision of the Court of Appeal for Ontario, paras 10 and 12, ALA, tab 4 - 4 -

PART III – ARGUMENT

A. This Court’s guidance on the common law remedy of rectification is needed

13. Rectification is an equitable remedy that corrects a written instrument when its terms do not accord with the true agreement between the parties. Outside of the tax context, the law is settled as to the test for rectification and its application.

14. In the tax context, the law is unsettled and is applied inconsistently. To the extent there was previously any doubt, the Ontario Court of Appeal’s decision in this case confirms that there are two tests for tax-motivated rectification in Canada: the results-oriented Ontario test that awards rectification in any situation where the tax results were not achieved (which has also been adopted by British Columbia19 and Newfoundland20) and the stricter test used in Québec,21 Alberta22 and Nova Scotia,23 which limits rectification to situations where taxpayers made an error in implementing their plan.

15. This case represents the first opportunity for this Court to consider the divergent case law from across the country. This Court has yet to pronounce on the parameters of the remedy of rectification in tax cases in the common law provinces. In two Quebec appeals decided in 2013, this Court declined to address the common law remedy in those cases, confining its decision to the availability of the remedy under the Québec Civil Code.24 The Ontario Court of Appeal’s decision in this case now provides this Court with the appropriate platform on which to consider this issue.

16. The impact of this decision on the application and administration of the Income Tax Act raises an issue of public importance. In effect, the Ontario test allows applicants to rewrite history

19 See e.g. McPeake Family Trust (Trustee of) v Canada, 2012 BCSC 132 [McPeake], ABA, tab 18 20 See e.g. Amalgamation of Aylwards (1975) Ltd., Re, [2001] 203 Nfld & PEIR 181 (NL SCTD) [Aylwards], ABA, tab 2 21 Canada (Attorney General) v Groupe Jean Coutu (PJC) inc., 2015 QCCA 838 [Jean Coutu], ABA, tab 12; Mac's Convenience Stores Inc. v Canada (Procureur général), 2015 QCCA 837 [Mac’s], ABA, tab 17 22 Graymar Equipment (2008) Inc. v Canada (Attorney General), 2014 ABQB 154 [Graymar], ABA, tab 6; Harvest Operations Corp v Canada (Attorney General), 2015 ABQB 327 [Harvest], ABA, tab 9 23 FNF Canada Co. v. Canada (Attorney General), 2012 NSSC 217 [FNF], ABA, tab 3 24 Quebec (Agence du Revenu) v Services Environnementaux AES Inc, 2013 SCC 65 [AES], para 55, ABA, tab 20 - 5 -

in order to obtain more favourable tax treatment, depriving governments of tax revenues they would otherwise receive. The low threshold for rectification adopted by the Ontario Court of Appeal could result in numerous additional requests for rectification, with attendant uncertainty and additional costs flowing from a two-phased administration of the Income Tax Act: an initial assessment based on what actually happened and a partial or complete reversal of that assessment after rectification is used to retroactively change the transactions.

17. There is no principled reason for a lower standard to apply to tax rectification cases in Ontario than in Quebec or Alberta or any of the other provinces nor is there a principled reason for a lower standard in tax rectification cases compared to non-tax rectification cases. Having regard to the frequency with which the parties in tax motivated rectification cases are not acting at arm’s length, added rigour is warranted to ensure that the preconditions for the remedy are met, particularly given the potential impact on government revenues. The capital gains at issue in this case were $35.5 million.25 Given the low standard set by the Ontario Court of Appeal, further applications of the same nature can be expected and the impact on tax revenues is virtually limitless.

18. If the Ontario Court of Appeal decision stands, taxpayers in Ontario will be able to use the remedy of rectification to fix mistakes so long as they can demonstrate that they were cognizant of a possible tax implication in a transaction and had wanted to avoid it. In light of this decision, it is difficult to foresee a situation where rectification could not be used to fix tax planning mistakes so long as the taxpayer turned its mind to tax at the time of the original transaction. If taxpayers are permitted to change their affairs every time they identify a more tax effective transaction, the courts will engage in “endless exercises to determine the true intention behind certain transactions.”26 Using rectification in such a way “would effectively render the CRA (and, by extension, Canadian taxpayers) the insurer of tax advice providers”27 and “would fly in the face of a long line of authority based upon the need for finality and consistency in matters of taxation.”28

25 Cross-examination of Terence P. Badour held on February 26, 2013, p 51, lines 21-25; p 52, lines 1-25, p 105, lines 8-16, ALA, tab 5 26 R v Friedberg, 92 DTC 6031 (FCA) para 5, aff’d [1993] 4 S.C.R. 285, ABA, tab 4 27 Graymar, supra para 72, ABA, tab 6 28 771225 Ontario Inc. v Bramco Holdings Co. (1995), 21 O.R. (3d) 739 (CA), para 13, ABA, tab 1, cited in Juliar (SCJ), supra para 42, ABA, tab 13 - 6 -

B. Law of rectification is applied inconsistently across the country

1) This Court’s test for rectification applies in limited circumstances

19. In Performance Industries, a case decided after Juliar, this Court described the “demanding preconditions” or “hurdles” necessary to support an order for rectification:

a. rectification is predicated on the existence and content of a prior oral agreement whose terms are definite and ascertainable;29 and,

b. the party seeking rectification must establish that the terms agreed to orally were not written down properly.30

20. This Court, citing its prior decision in Hart v Boutiler, stressed that the remedy of rectification must be used with great caution.31 It said that “high hurdles are placed in the way of a businessperson who relies on his or her own unilateral mistake to resile from the written terms of a document.”32 This cautious approach to awarding rectification was maintained in this Court’s 2009 decision, Shafron.33

21. Several principles emerge from the decisions in Performance Industries and Shafron:

a. “Rectification cannot be invoked to rewrite the bargain between the parties.”34 The court's task in a rectification case is to “restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other.” 35

b. Rectification is limited to “putting into words that – and only that – which the parties had already orally agreed to.”36

29 Performance Industries, supra para 31, ABA, tab 19 30 Performance Industries, supra para 31, ABA, tab 19 31 Performance Industries, supra para 31, ABA, tab 19, citing Hart v. Boutilier (1916), 56 DLR 620 (SCC) at 630, ABA, tab 8 32 Performance Industries, supra para 35, ABA, tab 19 33 Shafron, supra para 11, ABA, tab 21 34 Shafron, supra paras 3 and 58, ABA, tab 21 35 Performance Industries, supra para 31, ABA, tab 19 36 Performance Industries, supra para 40, ABA, tab 19 - 7 -

c. The court should not resort to speculation or a hindsight analysis to substitute a party’s agreement with “a sensible arrangement that the parties might have made but did not.”37

d. Rectification should not be used as a substitute for due diligence because this would “undermine the confidence of the commercial world in written contracts.”38

2) Test for rectification in Ontario tax cases ignores this Court’s test

22. In the present case, the Ontario Court of Appeal did not consider this Court’s test for rectification. The sole decision it cited was its own “binding” decision in Juliar (having rejected the AGC’s request in advance of hearing for a five-judge panel).39 Based on Juliar, it confirmed that Ontario taxpayers can restructure their transactions to avoid adverse tax consequences as long as they can establish that they had a continuing specific intention to achieve a particular tax result.40

23. While Juliar did not purport to relax this Court’s stringent requirements for rectification, the cases which have followed, including this case, confirm that the test for rectification in Ontario has been greatly expanded.41 Rather than looking for an agreement which could be the subject of rectification, the Ontario Court of Appeal granted rectification in this case (as well as in Juliar), based on the parties’ desire for tax neutrality. The Court of Appeal effectively erased the requirement for the parties to show an agreement with definite and ascertainable terms and opened the door for the use of rectification as a tool for retroactive tax planning. The Ontario rectification test allows taxpayers virtually unrestricted scope to restructure their affairs to achieve the intended tax results when a first attempt fails.

37 Performance Industries, supra para 40, ABA, tab 19, cited in Shafron, supra para. 55, ABA, tab 21 38 Performance Industries, supra para 31, ABA, tab 19, cited in Shafron, supra para 56, ABA, tab 21 39 Decision of the Court of Appeal for Ontario, paras 9 and 13, ALA, tab 4 40 Decision of the Court of Appeal for Ontario, para 10, ALA, tab 4 41 See e.g., McPeake, supra paras 34-38, ABA, tab 18; GT Group Telecom Inc. (Re), [2004] O.J. No. 4289, para 5, ABA, tab 7; Aylwards, supra paras 38-41, ABA, tab 2; J Berryman, chapter 19 “Rectification” in The Law of Equitable Remedies, 2d ed, (Toronto: Irwin Law, 2013) [Berryman], p 507-511, ABA, tab 25 - 8 -

3) Ontario test is also inconsistent with the scope of the remedy in Quebec

24. The results-oriented Ontario test is also inconsistent with two recent decisions of this Court under the Québec Civil Code. In 2013, in AES and Riopel, the Supreme Court confirmed the availability of the remedy of rectification in the province of Quebec, but held that a mere intention to achieve a specific tax result is not a sufficient basis for the granting of this relief.42

25. In AES, this Court said the following about rectification under the civil law:

a. The parties were entitled to rectification because they had agreed on tax plans, the contents of which were “determinate or determinable”.43

b. The tax planning agreements provided for the “establishment of determinate structures that would, had they been drawn up properly, have made it possible to meet the objectives being pursued by the parties”.44

c. Rectification did “not alter the nature of the structures contemplated at the outset”; 45

d. An intention to reduce a tax liability would not on its own be sufficient for rectification.46

e. Taxpayers should not rely on rectification as a way “for them to redo their contracts retroactively should that [tax] planning fail.” 47

26. In both Quebec cases, rectification was upheld because the parties did not implement their agreements properly: in AES, the parties made a calculation error;48 in Riopel, the parties’ advisors made a sequencing error and conducted two transactions out of the order they had agreed to use.49

27. The test for rectification this Court adopted in AES is consistent with the dictum from Performance Industries and Shafron. The requirement in AES for the existence and content of a

42 AES, supra para 54, ABA, tab 20 43 AES, supra paras 30 and 54, ABA, tab 20 44 AES, supra para 54, ABA, tab 20 45 AES, supra para 54, ABA, tab 20 46 AES, supra para 54, ABA, tab 20 47 AES, supra para 54, ABA, tab 20 48 AES, supra para 39, ABA, tab 20 49 AES, supra para 37, ABA, tab 20 - 9 -

tax planning agreement that is “determinate or determinable” is consistent with the first hurdle of the Performance Industries test that requires the agreement to be “definite and ascertainable.”50 The requirement in AES that rectification “not alter the nature of the structures contemplated at the outset” is consistent with the second hurdle of the Performance Industries test that the party must establish that an agreed upon term was not written down properly.51 Unlike the Ontario test, the test in AES would not grant rectification to impose a sensible tax plan the parties might have made, but did not.

28. The Quebec Court of Appeal (“QCA”) has considered rectification in two cases since this Court decided AES: Mac's Convenience Stores Inc. v. Canada and Canada v. Groupe Jean Coutu (PJC) inc. In stark contrast to the Ontario Court of Appeal’s decision in this case, the QCA confirmed that rectification is not available to “travel back through time with the benefit of hindsight to reverse or correct unintended tax consequences of commercial dealings.”52 A recent article about the QCA decisions notes that unlike common law tax rectification decisions, the QCA decisions would not allow “the possibility of substituting a transaction with another.”53

4) Growing divergence in the approach to rectification across the country

29. The Alberta Court of Queen’s Bench has noted the “growing divergence” in the approach to rectification amongst the courts and has said that “the confusion stems from the inconsistent application of rectification where the tax objective at issue is only expressed as a general intent, rather than a specific plan to implement the same.”54 Two recent Alberta decisions have struggled to reconcile the Ontario test with this Court’s test for rectification.55 In 2014, Brown J. (as he was then) said, “Juliar sits uneasily with Supreme Court’s direction in Performance Industries and Shafron.”56 He went on to say:

50 Performance Industries, supra para 31, ABA, tab 19 51 Performance Industries, supra para 31, ABA, tab 19 52 Jean Coutu, supra para 30, ABA, tab 12; Mac’s, supra para 36, ABA, tab 17 53 Luis Millan, “Quebec court limits application of rectification”, Aug 14, 2015, The Lawyers Weekly, p 10, ABA, tab 28 54 Harvest, supra para 37, ABA, tab 9 55 Graymar, supra paras 56 – 66, ABA, tab 6; Harvest, supra para 41, ABA, tab 9 56 Graymar, supra para 66, ABA, tab 6 - 10 -

Here lies the problem with equating the questions “what did the parties originally intend to do?” and “what would they have done had they known about this unanticipated tax outcome?” The first question is that which, as a matter of Canadian law, the Applicants need to answer. It goes to the heart of whether they are entitled to rectification, as its availability has been circumscribed at the Supreme Court. By substituting the second question for the first, this central inquiry into intention is effectively eliminated. This is because the second question might as well not even be posed, since the answer, as S&D International correctly observes, will “clearly be ‘something else’”. Nobody will answer the latter question by saying “I would still have taken the tax hit”. This is particularly so in the Applicants’ circumstances, where the tax disadvantage was incurred unnecessarily[…]57

30. In another case from Alberta, Dario J. specifically noted her disagreement with the application judge’s conclusion in Fairmont that an intention to carry out transactions on a tax and accounting neutral basis entitles the parties to rectification. Dario J. held the opposite: “Thus, the general objective of completing a transaction in a tax efficient manner, or with a goal of tax minimization or avoidance of some other tax disadvantage, is not sufficient; the parties must have intended to achieve that objective in a particular way.”58 Dario J. noted that the application judge’s decision ran “contrary” to this Court’s views in Performance Industries:

The court’s remedy [in Fairmont] was to implement something that the parties had not agreed to at the time, but that they now argue they should have implemented given their general tax objective. This runs afoul of the strict requirements as set out in Performance Industries and other cases as described above, and the “well-established rule in tax cases that the courts do not look with favour upon attempts to rewrite history in order to obtain more favourable tax treatment.59

31. She concluded that the failure of a party to take steps to bring into effect its tax objectives, is not an appropriate basis for the court to grant rectification. Granting rectification in such a situation would not achieve the goal of rectification: “to bring into effect the parties' [original] agreement …”60

57 Graymar, supra para 71, ABA, tab 6 58 Harvest, supra para 45 [emphasis in original], ABA, tab 9 59 Harvest, supra para 49, ABA, tab 9 60 Harvest, supra para 87, ABA, tab 9 - 11 -

32. Rectification decisions from tax motivated cases in other provinces further illustrate that the law is unsettled and requires clarification. A recent decision from the Supreme Court of Nova Scotia applied a limited test consistent with this Court’s decisions and denied rectification where parties wanted to make a payment without attracting tax.61 In contrast, the results-oriented Ontario test has been adopted in several decisions from British Columbia.62 In more recent decisions, the courts generally cite the test from Performance Industries, then proceed to apply the test from Ontario without acknowledging the differences between the two.63

33. The conflict between this Court’s rectification decisions and the tax motivated cases from the provinces has been commented on by the legal community. Professors Brown and Cockfield stated that the provincial courts “pay lip service to [this Court’s] two decisions and the principles on which they rely.”64 The article notes that “case law is developing independently in tax-driven rectification applications” and provincial courts are not following this Court’s instructions to take a “cautious and narrow approach.”65 Professor Berryman notes that tax motivated rectification differentiates itself from traditional rectification and that “it is difficult to support claims for rectification in these [tax] cases.”66 Professor Berryman’s comments were cited with approval by the Manitoba Court of Queen’s Bench.67 That decision also commented briefly on the availability of rectification in tax matters in England, noting that the law is more limited now than it was when the Ontario Court of Appeal unduly expanded the law in Juliar.68

61 FNF, supra para 21, ABA, tab 3 62 Snow White Productions Inc v PMP Entertainment, Inc, 2004 BCSC 604, para 26, ABA, tab 22; McPeake, supra para 21, ABA, tab 18 63 See e.g. Zhang v. Canada, 2015 BCSC 1256, paras 18 and 21, ABA, tab 23; Lau v. Canada (Attorney General), 2014 BCSC 2384, paras 89-94 and 125, ABA, tab 16 64 Catherine Brown and Arthur J. Cockfield, “Rectification of Tax Mistakes versus Retroactive Tax Laws: Reconciling Competing Visions of the Rule of Law” (2013) 61:3 Cdn Tax Journal 563 at 576 [Brown and Cockfield], ABA, tab 26; See also Janke-Curliss et al., “Rectification in Tax Law: An Overview of Current Cases” in 2012 Tax Dispute Resolution, Compliance and Administration Conference Report (Toronto: Canadian Tax Foundation, 2013) 21:1 at 21:8- 21:14, ABA, tab 27 65 Brown and Cockfield, supra at 577-578, ABA, tab 26 66 Berryman, supra at 510, ABA, tab 24 67 JAFT Corp. v. Canada (A.G.), 2014 MBQB 59, para 32, ABA, tab 10, aff’d 2015 MBCA 77, ABA, tab 11 68 JAFT Corp, supra para 31, ABA, tab 10, citing Ashcroft v. Barnsdale, [2010] EWHC 1948 (Ch), para 11, ABA, tab 24 - 12 -

C. Conclusion

34. Granting leave is necessary to provide clarity in the law and to ensure consistency in the application of the law on an issue of public importance – the test for rectification in tax-motivated cases. There is currently a clear and obvious divergence between the courts in Ontario, Alberta and Quebec regarding what the test is and how it should be applied. A decision from this Court would provide needed guidance concerning the scope of the equitable jurisdiction of the superior courts in the common law provinces and ensure consistency between the remedy available in Quebec and the remedy available in the common law provinces.

PART IV – SUBMISSIONS ON COSTS 35. There is no reason to depart from the ordinary rule that costs should follow the event.

PART V – ORDER SOUGHT 36. The applicant requests that this application for leave to appeal be granted with costs.

ALL OF WHICH IS RESPECTFULLY SUBMITTED

Dated at Toronto, this 11th day of September, 2015.

______Diana Aird Counsel for the applicant - 13 -

PART VI – TABLE OF AUTHORITIES

Tab Authority Cited at Paras

Canadian Jurisprudence

1. 771225 Ontario Inc v Bramco Holdings Co, [1995], 21 OR (3d) 739 (CA) 18

2. Aylwards (1975) Ltd (Re), [2001] 203 Nfld & PEIR 181 (NL SCTD) 14, 23

3. FNF Canada Co v Canada (Attorney General), 2012 NSSC 217 14, 32

4. R v Friedberg, 92 DTC 6031 (FCA) 18

5. R v Friedberg, [1992] SCCA No 190 18

6. Graymar Equipment (2008) Inc v Canada (Attorney General), 2014 14, 18, 29 ABQB 154

7. GT Group Telecom Inc (Re), [2004] O.J. No. 4289 (SCJ), 5 CBR (5th) 23 230

8. Hart v Boutilier, (1916) 56 DLR 620 (SCC) 20

9. Harvest Operations Corp v Canada (Attorney General), 2015 ABQB 327 14, 29-31

10. JAFT Corp v Jones, 2014 MBQB 59 33

11. JAFT Corp v Jones, 2015 MBCA 77 33

12. Canada (Attorney General) v Groupe Jean Coutu (PJC) inc, 2015 QCCA 14, 28 838

13. Juliar v Canada, (1999) 46 OR (3d) 104 (SCJ) 9, 18

14. Canada (AG) v Juliar, [2000] 50 OR (3d) 728 (CA) 9-12, 22, 23, 29

15. Canada (AG) v Juliar (2001), [2000] SCCA No 621 9

16. Lau v. Canada (Attorney General), 2014 BCSC 2384 32

17. Mac's Convenience Stores Inc v Canada (Procureur général), 2015 14, 28 QCCA 837

18. McPeake Family Trust (Trustee of) v Canada, 2012 BCSC 132 14, 23, 32

19. Performance Industries Ltd v Sylvan Lake Golf & Tennis Club Ltd, 2002 10, 19-21, 27, 29, SCC 19 30, 32 - 14 -

Tab Authority Cited at Paras

20. Quebec (Agence du Revenu) v Services Environnementaux AES Inc, 2013 3, 15, 25-28 SCC 65

21. Shafron v KRG Insurance Brokers (Western) Inc, 2009 SCC 6 10, 20, 21, 27, 29

22. Snow White Productions Inc v PMP Entertainment Inc, 2004 BCSC 604 32

23. Zhang v Canada, 2015 BCSC 1256 32

Non-Canadian Jurisprudence

24. Ashcroft v Barnsdale, [2010] EWHC 1948 (Ch) 33

Secondary Sources

25. J Berryman, chapter 19 “Rectification” in The Law of Equitable 23, 33 Remedies, 2d ed, (Toronto: Irwin Law, 2013)

26. Catherine Brown and Arthur J. Cockfield, “Rectification of Tax Mistakes 33 versus Retroactive Tax Laws: Reconciling Competing Visions of the Rule of Law” (2013) 61:3 Cdn Tax Journal 563 at 568-575;

27. Janke -Curliss et al., “Rectification in Tax Law: An Overview of Current 33 Cases” in 2012 Tax Dispute Resolution, Compliance and Administration Conference Report (Toronto: Canadian Tax Foundation, 2013) 21:1

28. Luis Millan, “Quebec court limits application of rectification”, Aug 14, 28 2015, The Lawyers Weekly

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PART VII – STATUTES RELIED ON n/a