The Crown argued that CP's act of denominating the debentures in Australian dollars was in and of itself a transaction and that it amounted to an “arrangement” under the s. 245(1) definition of "transaction" - and then argued that such "separate transaction", namely the designation of borrowing in Australian dollars, was entered into solely for tax purposes. In rejecting this submission, Sexton JA stated (at paras. 24-26):
…[T]hat extended definition [of transaction] cannot be interpreted to justify taking apart a transaction in order to isolate its business and tax purposes. The necessity to determine primary purpose implies that there is more than one purpose and that the transaction is to be considered as a whole.
…If this argument was correct, the Crown could allege that the tax planning component of any transaction amounted to an event or arrangement constituting a "separate transaction". … In other words, any action taken to obtain a tax benefit would be an avoidance transaction and there would never be an occasion to determine the primary purpose of a transaction. …
The words of the Act require consideration of a transaction in its entirety and it is not open to the Crown artificially to split off various aspects of it in order to create an avoidance transaction. In the present case, the Australian dollar borrowing was one complete transaction and cannot be separated into two transactions by labelling the designation in Australian dollars as a separate transaction.