The common law doctrine of rectification operates to correct
mistakes in transactions that produce (or may produce) unintended
and adverse tax results. This was established in the landmark case
of Juliar et. al. v A.G. (Canada) (50 O.R.
3d 728) (Ont. C.A.) (Dentons was counsel to the successful
taxpayers).
In Fairmont Hotels Inc. et al. v A.G.
(Canada) (2014 ONSC 7302) the Ontario Superior Court of
Justice has provided another example of the manner in which
rectification can be used to unwind certain impugned steps in a
transaction and substitute the proper steps that accord with the
parties' intention to avoid tax.
Legacy Hotels REIT owned a collection of hotels, which were
purchased from Fairmont in or around 1997. Fairmont continued to
manage these hotels. In 2002 and 2003, Fairmont was involved in the
financing of Legacy's purchase of two hotels in Washington and
Seattle. Through the use of several reciprocal loans between
Legacy, Fairmont and several
