The appellant ("Prescient") made a gift of $500,000 to a US charity ("DATA") that was alleged by the Minister to be a non-qualified donee , and participated in a series of transactions effecting the sale of a farm business of a private B.C. company ("Vision Poultry") in a manner that provided tax advantages to Vison Poultry and its individual shareholders. The Court found that the DATA donation was not grounds for revoking Prescient's registration as a charitable public foundation, but that the Vision Poultry transactions were.
Respecting the DATA donation, Mainville, JA first noted (at para. 12) that the applicable standard under s. 172(3) for "extricable question of law" was one of correctness rather than reasonableness. Although the s. 149.1(1) definition of "charitable purposes" includes the disbursement of funds to a qualified donee, the "charitable purposes recognized under the Act extend beyond disbursements to qualified donees" (para. 25). As it was not disputed "that a gift to a foreign charity is a charitable purpose under the common law" (para. 26), the charitable purpose test was satisfied. There was no authority offered by the Minister for the proposition that "to qualify as charitable, a charitable public foundation must…only disburse funds to a qualified donee" (para. 30). (Mainville JA noted that proposed paragraphs 149.1(2)(c), 149.1(3)(b.1) and 149.2(4)(b.1) would have led to a different conclusion if they were in force.)
The Vision Poultry transactions are briefly summarized in the chart immediately below, but are not described in detail as they were lacking in legal and tax logic:
Mainville, JA accepted (at para. 37-39) the Minister's position "that these transactions amounted to [Prescient] participating in a tax planning arrangement for the private benefit of others and, as such, were not entered into for charitable purposes" (para. 36). Furthermore, the investment in shares of Vision Poultry (which became worthless as part of the transactions) did not qualify as a "related business activity," as "it was known, at the outset of the activity, that its outcome would be a major loss" (para. 40).