| From: | Enrichment - Restitution & Unjust Enrichment Legal Issues <ENRICHMENT@LISTS.MCGILL.CA> |
| To: | ENRICHMENT@LISTS.MCGILL.CA |
| Date: | 17/09/2015 15:48:49 UTC |
| Subject: | Re: [RDG] Rescission of dividends |
Having had a look at this now, the case seems to have parallels with
Kleinwort Benson v Lincoln City Council in that the mistake is a retrospective mistake. If I read this aright, everyone thought section 75(2) Income Tax Act applied (just as everyone thought the swaps were valid under the UK Local Government Act), but
“everyone” was wrong because in 2012 Sommerer said so, and therefore to have thought in 2008 that the section applied was a mistake even though it was only decided it did not do so in 2012.
I also cannot help but think the CRA was guilty of trying to have its cake and eat it by reassessing the tax and then saying “a taxpayer’s
liability is based on what happened and not what in retrospect they wished had happened” as a reason not to allow rescission. What happened was they were liable to tax (or why is the CRA reassessing it?), but didn’t think they were and so made a mistake.
How this fits with “absence of juristic reason” which never got a look in is anyone’s guess though.
Duncan
From: Enrichment - Restitution & Unjust Enrichment Legal Issues [mailto:ENRICHMENT@LISTS.MCGILL.CA]
On Behalf Of Lionel Smith, Prof.
Sent: Tuesday, September 01, 2015 8:31 PM
To: ENRICHMENT@LISTS.MCGILL.CA
Subject: [RDG] Rescission of dividends
In Re Pallen Trust 2015 BCCA 222, <http://canlii.ca/t/gj1fq>, the B.C. Court of Appeal applied Pitt v Holt to allow rescission
of a corporate dividend that had been paid to trustees of a trust. The 2008 transaction was based in part on the general understanding of the effect of an attribution rule in s. 75(2) of the Income Tax Act, an understanding that was shared by the Canada Revenue
Agency. However, four years after the dividend was paid, the Federal Court of Appeal interpreted s. 75(2) in such a way that it did not apply to this case. This led the CRA to re-assess the trust's 2008 income tax bill upwards by about half a million dollars
(in Canada a trust is a taxpayer). Rescission of the dividend for mistake was allowed.
May I wish everyone whose academic year is beginning a
bonne rentrée!
Lionel
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This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to <listserv@lists.mcgill.ca>. To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to <enrichment@lists.mcgill.ca>. The list is run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.