Tuesday, February 21, 2012

On Friday, January 6, 2012, the Faculty of Law at the University of Toronto and the National Centre for Business Law at the University of British Columbia jointly sponsored a conference on the Supreme Court of Canada's unanimous judgment of December 16, 2011 in Copthorne Holdings Ltd. v. The Queen. The conference, entitled "Copthorne Holdings and the Future of the GAAR," drew upon the expertise of three legal academics (Benjamin Alarie (Toronto), David Duff (UBC), and Tim Edgar (Osgoode)), two leading practitioners (Mark Brender (Osler, Hoskin & Harcourt LLP) and Robert Couzin (Couzin Taylor LLP)), and representatives of the Canada Revenue Agency (Phil Jolie) and the Department of Justice (Deen Olsen). The attendees were treated with concluding remarks by the former Chief Justice of the Tax Court of Canada, the Honourable Donald G.H. Bowman.

Professor Benjamin Alarie of the University of Toronto opened the conference with an overview of the Court's judgment, including the renewed guidance the Court gave with respect to the three aspects of the application of the general anti-avoidance rule: (1) the presence of a "tax benefit," (2) the identification of an "avoidance transaction," and (3) a finding of "misuse or abuse" of relevant legislation. Following Professor Alarie's introduction was a panel on the Court's treatment of the concept of "series of transactions" in subsection 248(10) of the Income Tax Act involving Professor David Duff, Mark Brender, and Deen Olsen. Among other things, the panel discussed the finding by the Supreme Court of Canada that the word "contemplation" in that provision encompasses both prospective and retrospective aspects. Professor David Duff took good-natured issue with the Court's suggestion that he had changed his mind about whether the best interpretation of the provision should be prospective only or whether it should be considered to have both prospective and retrospective elements. He clarified that he has always believed that the most defensible interpretation of 248(10) is that "contemplation" should be given just a prospective interpretation, but that Parliament ought to amend the language of 248(10) to give the definition of "series of transactions" unambiguously both retrospective and prospective interpretation. Deen Olsen from the Department of Justice suggested that the phrase "series of transactions" in subsection 248(10) will be interpreted expansively in future. Mark Brender of Osler, Hoskin & Harcourt LLP noted that this expansive interpretation may have unintended consequences for other provisions that make use of the "series of transactions" definition, citing as an example transactions that rely on subsection 55(3).

A second panel, featuring Robert Couzin, Tim Edgar, and Phil Jolie, focused on the "misuse or abuse" analysis of the Court. Robert Couzin emphasized that he found the judgment to be cogent, well-written, and to reach an appropriate result. He went on to say that in GAAR cases it is appropriate that most of the analysis focus on whether there has been a misuse or abuse, since this is typically the most contentious aspect of GAAR litigation. With respect to the administrative reception of the decision, Phil Jolie stated that it will be "business as usual" for the CRA with respect to its approach to the application of the GAAR, and that the decision did not alter in any material way the CRA's view of the merits of the Crown's position in the appeal. In wrapping up the panel, Tim Edgar offered his taxonomy of type tax avoidance cases, suggesting that it is possible to identify three such types: (1) tax attribute creation cases; (2) tax attribute trading cases; and (3) transactional substitute cases. He suggested that this taxonomy allows for a much more tailored GAAR, and urged the Department of Finance to consider using this result to side-step much of the arbitrariness of the current misuse or abuse approach.

The afternoon concluded with entertaining remarks-"I write my will in contemplation of my death, but I don't die in contemplation of my will"-by the former Chief Justice of the Tax Court of Canada, Donald G.H. Bowman. He noted that the unanimous 9-0 decision was a credit to Chief Justice Beverley McLachlin as the Court produced a well-written and sensible decision, which many in the tax community had wished for following Lipson v. The Queen.

The slides from the conference are available on SSRN.