Hanging By A Thread: Rescission In Collins Family Trust v Canada

The British Columbia Supreme Court ("BCSC") decision in Collins Family Trust v Canada (Attorney General)¹ ("Collins") grants at least a temporary reprieve for the equitable remedy of rescission in an income tax context. Although the BCSC granted rescission, the decision was firmly based in the singular factual circumstances and in particular their similarities with those in Pallen Trust, Re² ("Pallen"), a decision of the British Columbia Court of Appeal ("BCCA"). The Collins decision is important because the BCSC acknowledged that the authority of Pallen had been seriously undermined by the majority decision of the Supreme Court of Canada ("SCC") in Fairmont Hotels Inc. v Canada³ ("Fairmont"), a rectification case. Nevertheless, the BCSC's decision threw a lifeline to the equitable remedy of rescission in tax matters. It remains to be seen how long this reprieve will last.