The taxpayer, a family trust, made a non-arm's-length sale of shares to a numbered corporation ("4041763 or "404") for a promissory note of approximately $2.6 million. 404 then immediately sold the shares at arm's length to a third party ("Keolis") for approximately $2.8 million. The lower sale price on the first transfer reflected that it had been determined that 404 would bear the cost of professional fees, relating to the structuring of the sale to Keolis, of $233,786.
Archambault J. affirmed the Minister's position that the amount of these professional fees was "consideration" received by the taxpayer. That amount was therefore added to variable D in s. 84.1(1)(b), resulting in an increase in the dividend deemed to be received by the taxpayer. Archambault J. stated (at para. 16):
I accept the definition of consideration laid down in Currie and referred to by Judge Lamarre in Republic National Bank, above, and the definition in Black's Law Dictionary, according to which "consideration" can encompass "[t]he inducement to a contract... [s]ome right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other." By agreeing to be billed for the fees related to the sale of the shares in the place of Fiducie, 404 was, in a sense, undertaking Fiducie's responsibility. A benefit therefore accrued to Fiducie.
The Court of Appeal dismissed the appeal on the basis that the question of who was responsible for the fees, between the taxpayer and 404, was a question of fact. Noël J.A. stated (at para. 15):
Nothing would have prevented the parties from allocating the fee charges differently if that had been their agreement. However, given the evidence, the onus was on the appellant to show that the reduction of the share price, as explained by the tax professional, was not intended to reflect the fact that 4041763 had made the payment on its behalf. This the appellant has not done.