Canada: A Non-Retroactive Rectification Order? Anderson Rectifies Agreement But Not Agreed Transaction

Last Updated: November 1 2016
Article by Darryl Antel and Lauchlin MacEachern

Taxpayers who erroneously record an agreement in a manner that (per the erroneous documentation) would cause unintended tax consequences to arise may find relief in the equitable remedy of rectification. Rectification is discretionary; when it is awarded, a rectification order is granted by a court on the basis that a document inaccurately reflects the true original agreement of the parties with the order having effect nunc pro tunc (i.e. retrospectively or retroactively) as of the date of the original agreement. The retrospective effect of a rectification order is binding for tax purposes. However, in Anderson v. Benson Trithardt Noren LLP 2015 SKQB 123, affirmed by 2016 SKCA 120, (Anderson)1 while the Court rectified documents recording a section 85 rollover, the Court refused to declare that its order was retrospectively binding for tax purposes. Confused? Anderson provides both a cautionary tale of the importance of diligently implementing even the most vanilla tax planning and a thought-provoking discussion of rectification in the tax context.

Anderson owned farm equipment and land used in the farming business of his wholly-owned corporation (FarmCo). Anderson had outstanding shareholder loans owing to FarmCo which needed to be repaid to avert being deemed income for his 2011 year [i.e. to meet the 'repaid within one year of year-end' subsection 15(2.6) exception to the subsection 15(2) shareholder loan income inclusion]. On the advice of his accountant, Anderson and FarmCo agreed that in October 2011 Anderson would transfer his farm equipment and land to FarmCo, by section 85 rollover, in exchange for settlement of the shareholder debt and the issuance of shares. The accountant took notes of the tax plan, recorded the agreed upon transactions in FarmCo's financial records, and filed a form T2057 election with the Canada Revenue Agency (CRA). However, instructions were not given to Anderson's lawyer to prepare legal documentation; no transfer agreement was executed, no land titles registrations were made, no share issuance was recorded, etc.

In 2013, CRA advised Anderson and his accountant that it would audit his 2011 taxation year. At this point, Anderson's accountant realized that no legal documentation had been prepared to record the transfer of assets pursuant to section 85. Anderson's lawyer was instructed accordingly and the documentation was drafted and executed in 2013. However, the documentation inadvertently referenced a January 2011 effective date, as opposed to an October 2011 effective date, as intended.

Often, the precise details of a transaction are not yet known or confirmed as of the closing date and such documentation must be backdated as a practical necessity. However, in Anderson, the time between closing and the preparation of legal documentation was long enough that CRA challenged whether the transfers of property required for the section 85 rollover and repayment of shareholder debt actually occurred in 2011.

To remedy the situation, Anderson made an application to the Saskatchewan Court of Queen's Bench (the SKQB) to:

  1. rectify the documents to reference October 2011 (as opposed to January 2011), and
  2. declare the rectified documents to be valid, binding and effective as of October 2011.

Despite the Courts rectifying the written agreement and related legal documents to read October 2011, the SKQB and SKCA in Anderson refused to make a declaration that the documents are legally effective as of October 2011, thus leaving unresolved the question of whether the agreed upon transactions actually happened in 2011. The Courts were keenly aware that declaring the rectified documents to be retrospectively binding would effectively predetermine the outcome of any appeal to the Tax Court regarding the effectiveness of the section 85 transaction (of course, this is the objective of any tax- motivated rectification application), but were reluctant to do so because the Tax Court could make its own determination as to whether the section 85 transactions occurred in 2011. The SKCA explained at paragraph 31 of Anderson:

The Tax Court has exclusive original jurisdiction to hear appeals relating to federal income tax assessments (Tax Court of Canada Act, RSC 1985, c T-2, s. 12). It can make any incidental and ancillary findings necessary to fulfill its mandate and, in doing so, may consider the effect of any backdated documents (see R v. Avotus Corp., 2006 TCC 505 (CanLII) at paragraphs 13 and 52-55, [2007] 2 CTC 2001).

Anderson can be contrasted with Dale v. The Queen, 94 D.T.C. 1100 (TCC); 97 D.T.C. 5252 (FCA) (Dale) and Juliar v. A.G. Canada, 1999 O.J. No. 3554 (ONSCJ); 2000 O.J. No. 3706 (ONCA); 2000 S.C.C.A. No. 621 (SCC) (Juliar) where section 85 rollover transactions were rectified by retroactively amending a corporation's articles to allow preferred shares to be issued (Dale), and by retroactively varying the share and non-share consideration issued to avoid unintended tax consequences (Juliar). In Dale, the FCA held that the rectification order caused the preferred shares to be authorized and issued retroactively and that the CRA was bound by that order.

So, why is the result in Anderson different from Dale and Juliar? The result in Anderson would have been unsurprising if the documents had correctly recorded the agreed upon transaction date from the outset (i.e. if this was not a rectification case), simplifying the relief sought to an application for a declaration by the SKQB that the transactions occurred in 2011. However, these were not the facts of Anderson. Instead, the SKQB and SKCA distinguished the agreement of the parties to implement a section 85 rollover in 2011 from whether the agreed upon transactions ever occurred on the agreed upon date. Thus, the courts could rectify the documents recording the agreement without deciding whether the agreed transactions were implemented in 2011. While rectification is a discretionary remedy, we are not aware of any other reported decision that has distinguished rectification of the agreement of the parties from the implementation of the agreed upon transactions in a manner comparable to Anderson. This distinction allowed the courts in Anderson to reach a different result from Dale and Juliar.

Consequently, unless reversed by the Supreme Court of Canada, Anderson presents a new risk to taxpayers applying for rectification. Even if successful, according to Anderson, taxpayers may be left with a remedy that leaves unanswered the fundamental issue of whether the rectified documents are retrospectively binding for tax purposes. Such taxpayers (like Anderson) would then face re-litigation of this unanswered question before the Tax Court. This new uncertainty may discourage taxpayers from seeking equitable relief, particularly where the Canada Revenue Agency frame their assumptions of fact to focus on an error or omission in the implementation of a transaction rather than an error in the recording of such transaction.


[1] The authors have been advised that the taxpayer in Anderson is applying for leave to appeal the decision of the Court of Appeal for Saskatchewan (SKCA) to the Supreme Court of Canada.

Moodys Gartner Tax Law is only about tax. It is not an add-on service, it is our singular focus. Our Canadian and US lawyers and Chartered Accountants work together to develop effective tax strategies that get results, for individuals and corporate clients with interests in Canada, the US or both. Our strengths lie in Canadian and US cross-border tax advisory services, estateplanning, and tax litigation/dispute resolution. We identify areas of risk and opportunity, and create plans that yield the right balance of protection, optimization and compliance for each of our clients' special circumstances.

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.

Darryl Antel
Lauchlin MacEachern
Events from this Firm
20 Jan 2018, Seminar, Edmonton, Canada

On July 1, 2014, the US’s Foreign Account Tax Compliance Act (FATCA) went into effect, and as a result, it will become increasingly difficult to renounce your US citizenship for the “right reasons” and avoid any negative consequences.

27 Jan 2018, Seminar, Toronto, Canada

On Saturday, January 27, 2018, Moodys Gartner Tax Law will present a complimentary seminar on the main topics of interest concerning the renunciation of your US citizenship and how your decision might affect you.

2 Feb 2018, Seminar, Calgary, Canada

On December 22, 2017, the United States passed into law the Tax Cuts and Jobs Act. The new law is incredibly complex and will have a dramatic impact on Americans who reside in Canada and for Canadians who have direct or indirect investments or other ties to the US.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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