Canada: Anderson v. Benson Trithardt Noren LLP –Update On Tax Rectification – Toronto Tax Lawyer Case Comment

Last Updated: April 13 2017
Article by David Rotfleisch

Background – Rectification and Taxation

Rectification is a remedy that can be sought when a legal document fails to reflect the intent of the parties to that document. When a court grants a request for rectification, the court will issue an order which retroactively alters the text of the document to reflect the original intentions of the parties. Rectification has been used extensively for the purposes of fixing tax problems by having the court alter the documents which gave rise to the problem. It should also be noted that although the parties to an agreement can agree to amend the agreement, that amendment is not effective retroactively against the CRA unless an order from the court granting rectification is obtained. If you have a tax problem relating to errors in a transaction, please contact one of our experienced Toronto tax lawyers to discuss if rectification may be available to provide you with tax help.

Facts - Anderson v. Benson Trithardt Noren LLP

The Appellant, Lonnie Anderson, was a farmer who ran his business though a corporation, Anderson Farms Ltd, of which he was the sole shareholder. Anderson was the recipient of a large shareholder loan Read More . When a shareholder loan is not repaid within 2 years, the Canadian Income Tax Act will treat the amount of the loan still outstanding at that time to be income for the shareholder under subsection 15(2) of the Canadian Income Tax Act. Mr. Anderson's accountants were concerned about his loan being deemed to be income, so on October 6, 2011 they advised him to transfer farming equipment and land being used by the business but owned by him personally to Anderson Farms Ltd in satisfaction of the loan. The transaction was to be arranged such that it would qualify for rollover treatment under section 85 of the Canadian Income Tax Act Read More. This would allow Mr. Anderson to defer the capital gains that would otherwise have been realized when Mr. Anderson transferred the equipment and land to Anderson Farms Ltd. If you have a shareholder loan and want to know more about the potential tax consequences, please consider consulting one of our top Toronto tax lawyers.

Although Mr. Anderson agreed to the transaction, and his accountants filed the required section 85 rollover form T2057 with the Canada Revenue Agency, neither Mr. Anderson nor his accountants instructed Mr. Anderson's lawyers to prepare the rollover agreement or director's resolution necessary to give legal effect to the transaction. In 2013, the Canada Revenue Agency audited Mr. Anderson and discovered that not all the documentation required to complete the section 85 rollover had been prepared. When this was brought up, Mr. Anderson instructed his lawyers to prepare the necessary documentation. The lawyers prepared the missing documentation, but dated the rollover agreement January 1, 2011 and the dated resolutions of the corporation on June 6, 2013. The Canada Revenue Agency concluded that Mr. Anderson had not successfully accomplished a section 85 rollover and advised him they would be issuing a reassessment that would raise his taxable income for 2011 by $3,414,595. Our expert Toronto Tax Lawyers can help in properly implementing a section 85 rollover which this case shows is critical.

Trial Decision at Saskatchewan Court of Queen's Bench - Anderson v. Benson Trithardt Noren LLP

Mr. Anderson sought to have the rollover documentation prepared in 2013 rectified to match what he intended on October 6, 2011 and for the rectified document to be retroactively effective against CRA to that date. Mr. Anderson also asked the court to exercise its equitable jurisdiction to issue declarations as to what occurred on October 6, 2011.

The Court granted Mr. Anderson's application for rectification, but refused to make the rectified documents retroactively effective. The Court was persuaded by the supporting documentation and affidavit evidence provided by Mr. Anderson that the rollover documentation prepared in 2013 did not correctly capture his intentions as of the meeting in 2011. Included among those changes was correcting the specified effective date on the rollover agreement to October 6, 2011 instead of January 1, 2011. The Court also found that it could rectify the corporate documents necessary to implement the roll over by virtue of section 236 of The Business Corporations Act. However, the Court refused to order that the documentation be made retroactively effective against the CRA. This left Mr. Anderson in the same situation he was before, since the rectified documents still come into effective after the capital gains on the equipment and property were realized. The Court refused Mr. Anderson's request for declaratory relief on the grounds that no declaration was required to resolve any issues between Mr. Anderson and his corporation. The Court was not willing to use its equitable jurisdiction regarding declarations to assist Mr. Anderson in his tax dispute with Canada Revenue Agency.

Saskatchewan Court of Appeal - Anderson v. Benson Trithardt Noren LLP

The Saskatchewan Court of Appeal dismissed Mr. Anderson's appeal. The Court of Appeal's primary concern was that the essential nature of Mr. Anderson's appeal was an attempt to bind the hands of the Tax Court of Canada. This was improper according to the Court of Appeal because Parliament has given the Tax Court of Canada exclusive original jurisdiction over appeals relating to income tax assessments. A necessary part of that jurisdiction is the power to make any incidental or ancillary findings necessary to resolve the appeal of an income tax assessment. As such, the Court of Appeal agreed with the lower court that the correct approach to Mr. Anderson's situation was to rectify the documentation so that it was backdated to the date of Mr. Anderson's meeting with his accountants, but not to declare that the documentation was legally effective at that date. This frees the hands of the Tax Court of Canada to decide whether the rectified backdated documentation is sufficient to allow Mr. Anderson to qualify for the rollover. Mr. Anderson argued that rectification is an inherently retroactive remedy and that the lower court failed to appreciate that in making its decision. The Court of Appeal was not persuaded by that argument. The Court of Appeal preferred to view the fact that the documentation was not prepared contemporaneously with Mr. Anderson's intention to proceed with the rollover as a distinct issue from whether errors were made in recording a written instrument lead to it failing to reflect the intentions of the parties to it. Rectification is an appropriate remedy for the later, but not the former. The Court of Appeal decided it was not necessary to determine whether courts need to rely on The Business Corporations Act to rectify corporate documents to resolve the case, and therefore did not shed further light on this question.

Supreme Court of Canada - Anderson v. Benson Trithardt Noren LLP

In civil matters like applications for rectification or declaratory relief, litigants must apply to have the Supreme Court of Canada hear their case. The Supreme Court Act establishes that applications for leave should be decided on the basis of public importance of the questions of law or mixed law and fact raised by the case. The Supreme Court of Canada rejects most of these applications for leave.

Mr. Anderson applied for leave to appeal to the Supreme Court of Canada and his application was denied. The Supreme Court of Canada does not provide reasons for its decisions to deny leave, however the denial was unsurprising in light of recent Supreme Court of Canada decision in Canada (Attorney General) v. Fairmont Hotels Inc which also dealt with rectification and significantly narrowed scope for rectification in the Canadian tax context Read More . That case involved a taxpayer who had clear tax objectives they sought to achieve but failed to come up with a definite and ascertainable plan for achieving them. The Fairmount decision emphasized that the role of rectification is to correct errors in the recording of an agreement not to fix any situation were the taxpayer failed to achieve their intended tax objectives. Similarly, in the Anderson case, the court rectified the date that was incorrectly recorded, but failed to provide relief addressing the fact that the documentation was prepared several years late. Our Toronto Tax lawyers can help you determine how the rapidly changing Canadian tax rectification case law will affect your interests.

Lessons for Taxpayers - Anderson v. Benson Trithardt Noren LLP

It is vitally important to make sure a qualified Toronto tax lawyer implements your tax transactions, and without excessive delay. In order to give legal effect to transactions, the proper documentation must be prepared, and errors can have significant tax costs. Proper and timely tax documentation will remove any need to pursue applications for rectification or declaratory relief. The current state of tax rectification law is that if there is a problem, taxpayers cannot rectify mistakes in their written agreements absent a written agreement in place at the right time for the Courts to rectify. Even contemporaneous documentation that needs to be rectified is better than no documentation at all, as in Anderson. If you need assistance planning, implementing, or rectifying a tax motivated transaction, our top Toronto tax lawyers are available to provide you with tax help.

Another lesson to be drawn is that it is important to consider whether applying for rectification is the best approach for recovering from a tax mistake. Given the reduced scope for rectification established by Anderson v. Benson Trithardt Noren LLP and Canada (Attorney General) v. Fairmont Hotels Inc, some taxpayers who would have been able to obtain rectification orders to correct their situations will no longer be able to do so. If these taxpayers discover their mistakes before the Canada Revenue Agency, they may be better off pursuing a voluntary disclosure (VDP or tax amnesty) than applying for rectification Read More. If they meet all of the eligibility requirements for a VDP, they will be able to soften the monetary blow of their mistakes by eliminating penalties and reducing the interest they would otherwise owe.

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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
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