The taxpayer’s foreign affiliate had acted as the taxpayer’s agent for the purpose of carrying on business (and deducting the losses). Among other things, the taxpayer relied upon a retroactive agency agreement that was executed in early 1996 but “made effective as of the 20th day of July, 1994” (para. 13). The Court noted that the Minister had neither pleaded nor argued that the agreement was a sham; consequently, the Minister was deemed to have accepted the validity of the agreement (paras. 52-53). On the strength of the written agency agreement, the Court ruled in favour of the taxpayer.
The decision implicitly approves the validity of late-executed agreements, but the Court did not expressly comment further on that issue.