The taxpayer's shareholders circumvented the rule in s. 87(3), which required that the paid-up capital ("PUC") of a subsidiary corporation disappear on a vertical amalgamation, by arranging for the subsidiary corporation in question (whose shares had a high PUC but a low value) to be first distributed to the shareholder group before it and its previous parent were amalgamated horizontally to continue as a predecessor of the taxpayer. At the time of these transactions, the shareholder group had not yet decided how (or whether) they would utilize the preserved PUC. However, a year later, the taxpayer redeemed a large portion of its shares and utilized the PUC attributable to the redeemed shares through a distribution to its non-resident shareholder, thereby avoiding Part XIII tax.
In finding that the taxpayer should be reassessed under s. 245, the Court found that the series of transactions pertaining to the reorganization, and the subsequent redemption, were part of the same series of transactions. Under Canada Trustco, a transaction is completed "in contemplation of" a series of transactions whenever it is completed "because of" or "in relation to" the series. The finding at trial that the transactions shared a "strong nexus" thus fit the expansive meaning of "series of transactions" under s. 248(10).
The Court also addressed the criticism of its finding in Canada Trustco that the words "in contemplation of" could be retrospective. (The argument was essentially that the plain meaning of "in contemplation of" implies the contemplation only of a future event.) The Oxford English Dictionary definition of "to contemplate" does not require that contemplation be prospective (para. 53). Rothstein J. stated (at para. 56):
The fact that the language of s. 248(10) allows either prospective or retrospective connection of a related transaction to a common law series and that such an interpretation accords with Parliamentary purpose, impels me to conclude that this interpretation should be preferred to the interpretation advanced by Copthorne [that "in contemplation of" is prospective only].