ATTORNEY GENERAL OF CANADA vs COLLINS FAMILY TRUST Income tax — 2022 SCMR 1958 SUPREME-COURT-OF-CANADABookmark

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ATTORNEY GENERAL OF CANADA VS COLLINS FAMILY TRUST Income tax--- Equity--- Rescission, remedy of---Rescission of transaction on the ground of mistake--- Scope--- Transactions undertaken by taxpayer based in part on the interpretation of provision of law by the government revenue service---Courts subsequently interpreting the provision differently resulting in issuances of notices of reassessment by the revenue service imposing tax liability on the tax payer---Whether equitable remedy of rescission of transaction is available in a case where the taxpayer is mistaken about the tax consequences of transaction freely agreed upon]---[Per Brown J: (Majority view): Transactions that do not call for relief as a matter of conscience or fairness are properly outside equity's domain---Nothing is unconscionable or unfair in the ordinary operation/ application of tax statutes to transactions freely agreed upon---Tax consequences do not flow from parties' motivations or objectives---Rather, they flow from their freely chosen legal relationships, as established by their transactions---Taxpayer should neither be denied nor judicially accorded a benefit based solely on what they would have done had they known better---Proper inquiry is into what the taxpayer agreed to do and not into whether there is a windfall for the public treasury or a taxpayer---Court may not modify an instrument/ transaction merely because a party discovered that its operation generates an adverse and unplanned tax liability]---[Per CÃ´tÃ©, J: (Minority view): Rescission is, in strictly limited circumstances, an available remedy that can be used to unwind transactions that were undertaken on the basis of a mistaken assumption, even if permitting it would effectively relieve the taxpayer from payment of unexpected taxes---Rescission on the ground of mistake is available in a tax context, but should be granted only in rare circumstances---Equity will not intervene to relieve a taxpayer from the consequences of a risk that was knowingly or recklessly accepted---Taxpayers should not engage in bold tax planning on the assumption that it will be possible to rescind their transactions should that planning fail---Since rescission is a remedy of last resort, it can only be granted if no alternative remedies are available; it is not sufficient for an alternative remedy to merely exist; the alternative remedy must be practical and adequate. Head NotesCase Description Citation Name: 2022 SCMR 1958 SUPREME-COURT-OF-CANADABookmark this Case ATTORNEY GENERAL OF CANADA VS COLLINS FAMILY TRUST Remedy---Rescission---Scope---Since rescission is a remedy of last resort, it can only be granted if no alternative remedies are available; it is not sufficient for an alternative remedy to merely exist, the alternative remedy must be practical and adequate. Head NotesCase Description Citation Name: 2022 SCMR 1958 SUPREME-COURT-OF-CANADABookmark this Case ATTORNEY GENERAL OF CANADA VS COLLINS FAMILY TRUST Remedies---Rescission and rectification---Distinction---Rescission and rectification are different remedies with different objectives---Rectification requires a valid antecedent decision to carry out a particular transaction that was incorrectly transcribed on paper---Premise underlying this remedy is that it would be unfair to hold a person to be bound by a transaction they never agreed to---As for rescission, it relieves against a mistake; it presupposes that the transaction was transcribed correctly but was entered into under a mistaken assumption about the facts or the law---If granted, rescission puts the parties in status quo ante and restores things, as between them, to the position in which they stood before the contract was entered into---In other words, the purpose of rectification is to ensure that a written instrument accurately reflects the parties' antecedent agreement, whereas rescission enables a court to retroactively cancel a transaction that was entered into by mistake, thereby restoring the parties to their original position. Head NotesCase Description

ATTORNEY GENERAL OF CANADA vs COLLINS FAMILY TRUST Income tax — 2022 SCMR 1958 SUPREME-COURT-OF-CANADABookmark this Case

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