An offshore fund ("SLT"), in which the taxpayer had an interest, invested in instruments (styled as "Notes") of non-resident subsidiaries of Canadian banks. The Notes did not bear interest and provided for a payment on maturity that reflected the performance of a matching actively-managed portfolio of assets held by affiliates of the obligors. If the Notes constituted "debt obligations" under s. 95(1) or "debt" under s. 94.1, the taxpayer (a unitholder of SLT) would be required to recognize its share of resulting foreign accrual property income of SLT.
Before finding that the Notes were debt for ITA purposes, Boyle J stated (at paras. 10, 12):
It is not clear that there is a federal meaning of the concept of debt, and neither of the parties asked the Court to adopt one. There is arguably some support in the Supreme Court of Canada decision in Vancouver Society of Immigrant and Visible Minority Women v. M.N.R. [1999] 1 S.C.R. 10 for the proposition that a common-law term used in the Act, like "charity" in that case, could or should perhaps be recognized to have a uniform federal meaning that may not accord precisely with provincial meanings. I was not asked to and do not propose to take that route in this reference.
… the Notes themselves are expressly to be governed by and interpreted and enforced in accordance with the laws of England… . No expert evidence was provided to the Court on the English law applicable to the Notes… . This generally means that the Court is to assume that English law thereon is the same as Canadian law. [F.n. To the extent that applicable Canadian law might be Quebec provincial law, it can be noted that Article 1425 of the Civil Code of Quebec suggests that in interpreting a contract, the common intention of the parties may be more significant than adherence to the literal meaning of the words of the contract chosen by the parties.]