Canada: Rectification: Current Developments Regarding This Useful Judicial Remedy

Rectification is an equitable remedy that allows for judicial corrections of a document that, due to errors in drafting, does not reflect the true intentions of the parties. Rectification changes a document's mistaken expression of that intention. Rectification is restorative, rather than "retroactive". In terms of timing, it acts from the creation of an instrument forward. Rectification applications are becoming more common as a means of taxpayers' defence against the Canada Revenue Agency ("CRA").  This trend has been growing since the year 2000, in large part due to the leading case of Juliar v. Canada, (2000) 50 OR (3d) 728 (CA) ("Juliar").

In Juliar, shares in a company were transferred by its owners to their daughters and the daughters' husbands on a tax-deferred basis.  One couple decided to transfer shares to a family holding company.  The couple received promissory notes from the holding company rather than shares, as the tax advisor mistakenly believed the initial transfer from the father to the daughter involved payment of tax on a capital gain, so that no tax consequences would result irrespective of whether cash, promissory notes, or shares were used.  CRA advised the couple that the transactions brought the shares under the umbrella of section 84.1 of Income Tax Act, that being a disposition of property resulting in a deemed dividend.  CRA consequently assessed the couple for the resulting tax liability.  The couple brought an application for rectification, which was allowed on the basis that the intention to defer tax liability was a fundamental aspect of the transaction from its inception.   The Minister of National Revenue appealed to the Ontario Court of Appeal, which found that the trial judge did not err in concluding the primary intention was that of deferring tax liability on the transaction.  The Court of Appeal concluded that rectification was the appropriate remedy, because in the absence of the error, the transaction would have been effected under section 85 of the Income Tax Act rather than 84.1 of the Income Tax Act.  The Court highlighted that rectification should not be refused simply because the purpose of seeking it is to enable the parties to obtain a legitimate tax advantage, which was their intention at time of executing the instrument.   

In terms of substantive requirements, the party seeking rectification bears the onus. The petitioner must establish that: 1) the written document does not reflect the true intention of the parties; and 2) the parties share a common and continuing intention up to the time of signature, in that the provision in question stands as agreed, versus what is reflected in the written instrument.  Procedurally, rectification applications are done by an Originating Application in the Court of Queen's Bench, or applicable superior court, typically with affidavit evidence, demonstrating the factual grounds for the application. The affidavit must: 1) be based on personal knowledge, versus information and belief; and 2) include a clear explanation of the facts illustrating the common intention of the parties.   In terms of a practice point, it is recommended that you provide notice to CRA and the Department of Justice, given CRA's interest in such matters.  

Recent case law has commented on the evidential requirements of rectification: see McPeake Family Trust, 2012 BCSC 132 ("McPeake"), where sufficient evidence of common intention was demonstrated.  In that case, the Court placed particular emphasis on the corroborative evidence presented, as more than one source confirmed the common intention of the parties to avoid the payment of tax at the time the trust's creation.  Conversely, in the case of the Kanji Family Trust, 2013 ONSC 781 ("Kanji"), the Court held that there was insufficient evidence of common intention.  In Kanji, the Court voiced concerns that the only evidence presented was that of the petitioner, and no expert evidence was adduced, specifically in the form of the lawyer who created the trust in question. Thus, the McPeake and Kanji cases stand for the proposition that Courts prefer to see corroborative and expert evidence, speaking to the intention of the parties, when presented with rectification applications.

In November of 2013, the Supreme Court of Canada rendered decisions in Agence du Revenu du Quebec v. Services Enviornnementaux AES Inc., et al. and in Agence du Revenu du Quebec v. Jean Riopel, et al. 2013 SCC 65.  These companion cases dealt with the nature and scope of agreements between taxpayers involving corporate reorganizations, tax planning, and tax consequences.  In each case, the shareholders of the respective companies engaged in various transactions to reorganize corporations and transfer interests therein.  The parties intended that their agreements would have no tax consequences; however due to errors made by the shareholders' tax advisors, Revenue Quebec and CRA issued notices of assessment in which the tax authorities claimed tax amounts that the taxpayers had not anticipated paying.  In the decision, the Supreme Court upheld the lower Court's decisions that rectification was available to correct documents under Quebec civil law.  In addition, the Supreme Court declined the request of the Attorney General of Canada to consider and reject the rectification line of authority established in Juliar.   That said, the Supreme Court cautioned taxpayers to not view its conclusions as an invitation to engage in bold tax planning on the assumption that it will always be possible to redo contracts retroactively should that planning fail.

Over a decade after Juliar, rectification continues to be recognized by the Courts as means of correcting instruments that do not reflect the intentions of the parties as it relates to tax matters. Further evolution of what qualifies as rectification will no doubt occur, as the Courts consider this equity based remedy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions