In March 1993 an individual ("Boulle") transferred his shares of a Canadian public junior exploration company ("DFR") to the taxpayer, which was a newly-incorporated Cayman Islands company wholly owned by him. By June 1995 the DFR shares had substantially appreciated in value, at which time the taxpayer exchanged, on a rollover basis pursuant to s. 85.1, a portion of its DFR shares for common shares of a large Canadian public company ("Inco"), with the result that the taxpayer's shareholding in DFR was reduced below 10%.
Bell J concluded that the (final) sale by the taxpayer of DFR shares in August 1996, pursuant to the approval by all the DFR shareholders of the sale of all the DFR shares to Inco, was not part of the series of transactions that included the sale by the taxpayer of DFR shares to Inco in June 1995, and the continuation of the taxpayer to Luxembourg in July 1995. In so concluding, Bell J. found that at and prior to the time of continuation, DFR management, including Boulle, and therefore, the taxpayer, had no intention of selling DFR shares (and that there had been a subsequent change of heart due to the death of a key executive) and stated (at para. 69) that the August 1996 "[s]ale cannot be included in that [previous] series because of a mere possibility of a future potential sale of any shares." He previously stated (at para. 65):
"There must be a strong nexus between transactions in order for them to be included in a series of transactions. In broadening the word 'contemplation' to be read in the sense of 'because of' or 'in relation to the series', the Supreme Court cannot have meant mere possibility, which would include an extreme degree of remoteness. Otherwise, legitimate tax planning would be jeopardized ... ."