JAMES T. GRENON, Appellant, v. HER MAJESTY THE QUEEN,, 2021 TCC 30

Docket: 2014-3401(IT)G BETWEEN: JAMES T. GRENON, Appellant, and HER MAJESTY THE QUEEN, Respondent . Appeal heard on common evidence with the appeal of The RRSP Trust of James T. Grenon (552-53721) by its Trustee CIBC Trust Corporation – 2014-4440(IT)G Appeal heard on February 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 2019 and September 9, 10, 11, 12 13, 2019, at Winnipeg, Manitoba. Before: The Honourable Justice Guy R. Smith Appearances : Counsel for the Appellant: Cy M. Fien Brandon Barnes Trickett Ari M. Hanson Aron W.

Grusko Counsel for the Respondent: Ifeanyi Nwachukwu Tanis Halpape Christopher Kitchen Jeremy Tiger AMENDED JUDGMENT [This Amended Judgment is issued in substitution of the Judgment dated April 9, 2021 to correct and add counsel’s names.] In accordance with the attached Reasons for Judgment, the appeal from Notices of Reassessment made by the Minister of National Revenue on February 28, 2013 in respect of the 2008 and 2009 taxation years, pursuant to subsection 56(2) of the Income Tax Act AND the appeal from the Notices of Assessment made on March 1, 2013 in respect of the 2004 to 2011 taxation years, pursuant to subsection 204.1(2.1) of the Income Tax Act , are hereby allowed.

The parties will have 60 days from the date of hereof to provide written submissions regarding costs. Such submissions shall not exceed 15 pages for each party. Signed at Ottawa, Canada, this 27 th day of April 2021. “Guy R. Smith” Smith J. Docket: 2014-4440(IT)G BETWEEN: THE RRSP OF JAMES T. GRENON (552-53721) BY ITS TRUSTEE CIBC TRUST CORPORATION, Appellant,

and HER MAJESTY THE QUEEN, Respondent. Appeal heard on common evidence with the appeal of James T. Grenon – 2014-3401(IT)G Appeal heard on February 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 2019 and September 9, 10, 11, 12 13, 2019, at Winnipeg, Manitoba. Before: The Honourable Justice Guy R. Smith Appearances : Counsel for the Appellant: John J. Tobin Linda Plumpton James Gotowiec Cy M. Fien Brandon Barnes Trickett Ari M. Hanson Aron W.

Grusko Counsel for the Respondent: Ifeanyi Nwachukwu Tanis Halpape Christopher Kitchen Jeremy Tiger AMENDED JUDGMENT [This Amended Judgment is issued in substitution of the Judgment dated April 9, 2021 to correct and add counsel’s names.] In accordance with the attached Reasons for Judgement, the appeal from Notices of Assessment made by the Minister of National Revenue on March 6, 2013 in respect of the 2004 to 2009 taxation years, pursuant to subsection 146(10.1) of the Income Tax Act is allowed and the appeal is referred the back to the Minister for reconsideration and reassessment on that basis that the income of the RRSP Trust received from the Income Funds (described herein as the Distribution Transactions) during the 2005 taxation year, shall be reduced by $136,654,427; The appeal from Notices of Reassessment dated March 6, 2013 in respect of the 2004 to 2009 taxation years, pursuant to subsection 207.1(1) of the Income Tax Act , is hereby dismissed.

The parties will have 60 days from the date of hereof to provide written submissions regarding costs. Such submissions shall not exceed 15 pages for each party. Signed at Ottawa, Canada, this 27 th day of April 2021. “Guy R. Smith” Smith J Table of Contents I. OVERVIEW 1 II. BACKGROUND FACTS 3

a) The Appellant 3

b) The Income Funds 5

c) The acquisition of units by the RRSP Trust 8

d) The income distributions made by the Income Funds 11

e) Tom 2003-1 Income Fund 12

f) Tom 2003-2 Income Fund 13

g) Tom 2003-3 Income Fund 14

h) Tom 2003-4 Income Fund 15

i) Tom 2006-5 Income Fund 15

j) Tom 2006-8 Income Fund 16

k) The Fact witnesses 16 III. THE ASSESSMENTS 20

a) Grenon Appeal -

Part 1 Reassessments 20

b) Grenon Appeal -

Part X.1 Assessments 20

c) RRSP Trust Appeal -

Part 1 Assessments 21

d) RRSP Trust Appeal -

Part XI.1 Reassessments 21 IV. THE ISSUES 21

a) Grenon Appeal -

Part 1 Reassessments and

Part X.I Assessments 21

b) RRSP Trust Appeal -

Part 1 Assessments and

Part XI.1 Reassessments 22 V. PRELIMINARY ISSUES 22

a) Admissibility of the Affidavit of Helen Little 23

b) Admissibility of certain Read-ins 26 VI. RELEVANT STATUTORY PROVISIONS 27

a) The RRSP legislative framework 27

b) Mutual Fund Trusts 39

c) Indirect Payments 45

d) General Anti-Avoidance Rule (“GAAR”) 45 VII. ANALYSIS 49 A. Whether the Income Funds were “Qualified Investments”? 49

a) Overview – “a lawful distribution…to the public” 49

b) Summary of the Alleged Deficiencies 57

c) The burden of proof in tax appeals 59

d) General principles of statutory

interpretation 62

e) The meaning of “distribution” in subparagraph 4801(a)(i)A 63

f) The meaning of “lawful” in subparagraph 4801(a)(i)A 68

g) Failure to disclose the position held 74

h) The subscription and acquisition of units by minors 76

i) The subscription of units by adults for other adults 86

j) The requirement that units be purchased “as principal” 88

k) The requirements of Regulation 4900(1)(d.2) 94

l) Conclusion 95 B. The Sham Doctrine 96

C. Window Dressing 104 D. The Application of Subsection 56(2) 109 E. The Excess Contributions 117 F. Statute-Barred Years 121

a) The Grenon Appeal 121

b) The RRSP Appeal 125 G. The application of GAAR 138

a) Was there a tax benefit? 140

b) Was there an avoidance transaction? 142

c) If so, was the avoidance transaction ‘abusive’? 145

d) Determination of tax consequences 154

e) Analysis and Conclusion 156 VIII. CONCLUSION 159 Appendix A – The Read-ins 162 Citation: 2021 TCC 30 Date: 2021 0601 Docket: 2014-3401(IT)G BETWEEN: JAMES T. GRENON, Appellant, and HER MAJESTY THE QUEEN, Respondent. Docket: 2014-4440(IT)G THE RRSP OF JAMES T. GRENON (552-53721) BY ITS TRUSTEE CIBC TRUST CORPORATION, Appellant, and HER MAJESTY THE QUEEN Respondent. FURTHER AMENDED REASONS FOR JUDGMENT Smith J. I. OVERVIEW [ 1 ] James T. Grenon (the “Appellant”) was the annuitant of a Registered Retirement Savings Plan (the “RRSP Trust”) in which he had accumulated substantial assets.

CIBC Trust Corporation (“CIBC Trust”) acted as trustee. [ 2 ] The Appellant established and promoted several income funds (the “Income Funds”) each of which raised a relatively modest amount of capital relying on the exempt distribution rules of the provinces of Alberta and British Columbia. The investors in each fund were

essentially the same but the Appellant also participated, acquiring units personally and through investment vehicles he owned or controlled. [ 3 ] Following the closing of the exempt distributions, the Appellant (acting alone or in concert with two other individuals and their respective RRSPs) then arranged for the RRSP Trust to acquire in excess of 99% of the units of the Income Funds. [ 4 ] The Income Funds then invested in flow-through investment vehicles that served as conduits for the acquisition of business ventures or investments controlled directly or indirectly by the Appellant, the profits of which flowed back to the Income Funds and were distributed to unitholders, including the RRSP Trust. [ 5 ] It is not disputed that the Appellant intended from the beginning to structure the Income Funds as qualified investments for RRSP purposes and one of the key issues in this appeal is whether they met the definition of a “mutual fund trust” . [ 6 ] The Minister of National Revenue (the “Minister”) has taken the position that the steps undertaken to establish the Income Funds were not legally effective such that they were not a “qualified investment” for RRSP purposes or alternatively, that they were a sham or mere window dressing intended to allow the Appellant to manipulate the RRSP regime by using the funds in the RRSP Trust to acquire and actively manage businesses or investments, the profits of which flowed back to the RRSP Trust where they continued to accrue on a tax-exempt basis.

The Minister has also relied on the general anti-avoidance rule (“GAAR”). [ 7 ] The appeals herein were heard on common evidence with the appeals in Magren Holdings Ltd. v. Her Majesty the Queen , 2017- 486(IT)G; 2176 Investments Ltd. v. Her Majesty the Queen, 2017-605(IT)G; and Magren Holdings Ltd. v. Her Majesty the Queen , 2017- 606(IT)G (the “Corporate Appeals”). Reasons for Judgment in respect of the Corporate Appeals will be issued separately. [ 8 ] The “Appellant” will refer to Mr. Grenon in his personal capacity and as the annuitant of the RRSP Trust and the “Appellants” will refer to both Mr.

Grenon and the CIBC Trust. Unless otherwise indicated, the 2004 to 2011 taxation years will be referred to as the relevant period (the “Relevant Period”). [ 9 ] Unless otherwise indicated, all references to legislative provisions in these Reasons for Judgment are references to the legislative provisions of the Income Tax Act [1] , (the “ Act ”) including Regulations promulgated under the Act , that relate to the assessments or reassessments and the taxation years in question. II.

BACKGROUND FACTS [ 10 ] The Appellant testified on his own behalf but also called four fact witnesses, all of whom had acquired units in the Income Funds. Two other witnesses testified on behalf of the CIBC. Their respective testimony will be reviewed below. [ 11 ] Alan B. Martyszenko testified as an expert witness but his testimony relates primarily to the Corporate Appeals and will not be reviewed herein. [ 12 ] The Minister did not call any witnesses but relied on the affidavit of Helen Little, an auditor with the Canada Revenue Agency (“CRA”).

a) The Appellant [ 13 ] The Appellant completed a law degree at University of Manitoba in 1980 and practiced law in Alberta for a short period of time before pursuing an interest in corporate finance and investments. He resided in Alberta during the Relevant Period but became a non- resident when he emigrated to New Zealand in 2012. [ 14 ] Early in his career, the Appellant became involved with a company known as Tom Capital Associates Inc. (“Tom Capital”) that focused on general corporate finance including loans and distressed lending.

During the Relevant Period, it was controlled by Grencorp Management Inc. (“GMI”), wholly-owned by the Appellant. [ 15 ] The Appellant also owned or controlled numerous other companies or entities that were used in the Income Funds structure including 100% of the shares of 1042946 Alberta Inc. (“1042 Inc.”) and 1019109 Alberta Inc. (“1019 Inc.”) that acted as general partners as well as participating interests in Colborne Capital Corporation (“CCC”) and Landcraft Development Corporation (“Landcraft”). [ 16 ] The Appellant was also involved in the early stages of the Alberta oil and gas industry and as a result of these activities, gained significant personal wealth. [ 17 ] By 2003, the Appellant had accumulated substantial assets in the RRSP Trust including approximately $39 million in cash and cash equivalents and a 58% interest in Foremost Industries Income Fund (“FMO”), a publicly traded mutual fund trust created in 2001, of which he was a trustee. [ 18 ] By March 2004, the units of FMO were valued at $46 million and the total value of the RRSP Trust at that point in time was approximately $90 million. [ 19 ] It was apparent that the Appellant was a sophisticated individual whose knowledge of income tax law surpassed that of ordinary taxpayers.

He readily admitted that he frequently consulted the Act and generally followed developments in income tax law. He described this as one of his hobbies. [ 20 ] With respect to the RRSP Trust, the Appellant explained that he was not interested in passive investments or in a diversified portfolio of publicly traded companies. He wanted to be as actively involved as possible in the management of the investments acquired.

He understood the financial consequences of withdrawing funds from an RRSP which he described as financial “suicide”. [ 21 ] With respect to the structure of his investments or businesses, the Appellant explained that he preferred a flow-through structure using business trusts or limited partnerships that he viewed as more efficient from an income tax point of view. [ 22 ] With respect to the Income Funds, the Appellant’s objective was to broaden his RRSP investment horizon and to provide flexibility in the management of his investments in a way that was not normally possible within an RRSP. [ 23 ] He was also not especially interested in raising large amounts of capital from a wide array of investors.

As will be seen below, he only sought to raise as much capital from as many investors as was needed to meet or exceed the minimum requirements of a “mutual fund trust” as defined by the Act . [ 24 ] Since he had already accumulated substantial assets in the RRSP Trust, what he needed was an appropriate vehicle to invest those funds.

He was of the view that the Income Fund structure was " “best aligned with his investment objectives.” " [ 25 ] With respect to at least two Income Funds, the Appellant collaborated with two other business associates, namely Bruce MacLennan (“MacLennan”) and Angus Sutherland (“Sutherland”). Both individuals acquired units of two Income Funds, accepting a transfer from the Grenon RRSP in exchange for cash from their respective RRSP’s (the “MacLennan RRSP” and “Sutherland RRSP”) and assumed various roles in the Income Fund structure.

They acted as trustee of some funds or as directors of various companies that acted as general partners. As will be seen in greater detail below, the MacLennan RRSP and Sutherland RRSP each held a 49% interest in two Income Funds. [ 26 ] Although the Appellant was the promoter of all the Income Funds, the Minister has described all three individuals as insiders (the “Insiders”) in connection with the Income Fund structure.

According to the Minister’s assumptions [2] " “the structures were crafted so that Insiders could obtain a number of tax related benefits from these non-arm’s length structures” " including the following (the Minister refers to the Income Funds as the “Promoted Funds”): - The reduction and postponement of taxes payable by Grenon and various businesses owned by Grenon, through the payment of interest and management fees to related entities; - The deferral of tax on the distribution of income to the various RRSP Trusts held by the Insiders, including the Grenon RRSP Trust, income that would otherwise be distributed as dividends, or otherwise, subject to tax; - The avoidance of

Part 1 and

Part X1.1 tax on non-qualifying investments held by the Insiders’ RRSP Trusts, including the Grenon RRSP Trust; -The avoidance of

Part X.1 tax on excess amounts contributed to the Grenon RRSP Trust in respect of the amounts that the Grenon RRSP Trust received from the Promoted Funds.

b) The Income Funds [ 27 ] The Income Funds that are relevant to these appeals were established in 2003 and 2006. The 2003 series of Income Funds (described as Tom 2003-1, Tom 2003-2, Tom 2003-3, Tom 2003-4) were established in Alberta by separate deeds of trust dated March 14, 2003.

The 2006 series of Income Funds (known as Tom 2006-5 and Tom 2006-8) were similarly established on June 30, 2006. [ 28 ] Each Income Fund undertook a first distribution of units to 171 Investors (the “First Distribution”) relying on a prospectus exemption pursuant to the securities legislation of the provinces of Alberta and British Columbia (“BC”) known as the " “Offering Memorandum Exemption” " (“OME”). [ 29 ] The units in the 2003 series of Income Funds were distributed pursuant to the OME requirements described in

Part 4 of Multilateral Instrument 45-103 Capital Raising Exemptions. [3] The units in the 2006 Income Funds were issued pursuant to the OME requirements described in

Part 2 of National Instrument 45-106 Prospectus and Registration Exemptions [4] . The OME requirements of Multilateral Instrument 45-103 and National Instrument 45-106 (the “Instruments”) are substantially the same and where there are differences, they are not material in these appeals. [ 30 ] An Offering Memorandum (“OM”) was prepared for each Income Fund indicating that a minimum of 100 units (a “block of units”) valued at $7.50 per unit for a total of $750 would be issued to each investor, subject to a minimum of 160 investors (the “Investors”). All units had the same rights.

The investment process involved delivery of the OM to prospective investors who were then required to sign the risk acknowledgment (the “Risk Acknowledgment”) and subscription agreement (the “Subscription Agreement”) forms. [ 31 ] Each Income Fund allegedly issued units to 171 Investors thus raising approximately $128,250, subject to nominal legal and accounting fees.

As explained by the Appellant, the minimum subscription amount and minimum number of Investors, was established by him with the intention that it meet or exceed the minimum requirements of a “mutual fund trust”, as defined by the Act . [ 32 ] The Appellant participated as an Investor in the First Distribution acquiring a block of units for himself but additional units were acquired by entities owned or controlled by him including Grencorp, Tom Capital, Tom Capital Consulting Corp and Tom Consulting Limited Partnership.

All were included as part of the Investors. [ 33 ] As will be seen in greater detail below, the units were promoted and distributed to the Appellant’s immediate and extended family members, friends, employees, business associates and others with whom he was not as closely connected. In any event, it is not disputed that Investors who acquired units in the 2003 and 2006 series of Income Funds were essentially the same persons. Additionally, I find that all Investors were residents of Alberta or BC.

[ 34 ] The OM indicated that it was a " “blind pool offering” " or " “junior capital pool” " and that the business would be identified by trustees at a later date. It indicated that investors would be " “restricted from selling their units for an indefinite period to time” " but that the Appellant would provide liquidity to those who might wish to redeem their units at cost (though this never occurred).

It also indicated that the Appellant would " “invest at least $1,000,000 in the Fund” " and that he or other trustees would acquire at least 66.66% of the units, thus allowing them " “to substantially control the Fund” " . [ 35 ] Each OM contained a certificate indicating: " “This Offering Memorandum does not contain a misrepresentation” " . It was signed by the Appellant as trustee and promoter and included the following statement: No securities regulatory authority has assessed the merits of the Units or reviewed this offering memorandum. Any representation to the contrary is an offence.

This is a risky investment (…) [ 36 ] Finally, the OM contained an explanation of the “Tax Status of the Fund” indicating that, subject to certain conditions, it would be a “unit trust” and a “mutual fund trust” and thus a “qualified investment for Exempt Plans”.

It added that if the fund ceased to qualify as a “mutual fund trust”, investors who acquired units in an exempt plan would have to pay a 1% tax on the fair market value of the units and report any income or gains personally. [ 37 ] Upon completion of the First Distribution, the Appellant selected and arranged for the appointment of the trustees of the Income Funds, including Bruce MacLennan and Deborah Nickerson, as well as various legal counsel. [ 38 ] As will be seen in greater detail below, the income fund structure generally included a series of trusts described as fund venture trusts (“FVT’s”) wholly-owned by the Income Funds.

The FVT’s in turn held 99.99% of the units of a master limited partnership (“MLP”) that established a series of limited partnerships, as required, to acquire various investments or businesses. A corporation generally wholly-owned or controlled by the Appellant or other Insiders acted as general partner and held a 0.01% interest. The 2006 series of Income Funds did not use an FVT and investments were held directly.

c) The acquisition of units by the RRSP Trust [ 39 ] Following completion of the First Distribution (including the filing of a report with the Alberta and BC securities commission), the Appellant undertook a second distribution of units in favour of his RRSP Trust which resulted in a substantial dilution of the initial Investors’ aggregate holdings. [ 40 ] The table below provides a detailed breakdown of the subscriptions made by the RRSP Trust in the 2003 and 2006 series of Income Funds, setting out the date of the subscription, the number of units acquired, the value of the units and the subscription amount, collectively referred to as the second distribution (the “Second Distribution”): [5] Subscriptions made by the RRSP Trust in the Income Funds 2003-1 Income Fund Sub.

Date # of Units Value of Units Amount ($) June. 2003 1,575,000 7.50 11,812,500 Jan. 2005 3,400,000 9.06 30,804,000 Dec. 2007 1,390,500 8.99 12,500,595 Total 55,117,095 2003-2 Income Fund Sub Date # of Units Value of Units Amount ($) Sept. 2003 540,000 7.50 4,050,000 Sept. 2006 225,800 15.50 3,499,900 July 2007 60,000 14.94 896,400 May 2008 147,700 15.08 2,227,316 July 2010 41,666 18.00 749,988 Total 11,423,604 2003-3 Income Fund Sub Date # of Units Value of Units Amount ($) Sept. 2003 540,000 7.50 4,050,000 Total 4,050,000 2003-4 Income Fund Sub Date # of Units Value of Units Amount ($) Nov. 2005 3,821,850 40.00 152,874,000 May 2006 4,000,000 5.53 22,120,000 Total 174,994,000 2006-5 Income Fund

Sub Date # of Units Value of Units Amount ($) March 2008 320,000 7.50 2,400,000 July 2008 213,333 7.50 1,599,998 Total 3,999,998 2006-8 Income Fund Sub Date # of Units Value of Units Amount ($) August 2008 5,333,333 7.50 39,999,998 August 2009 3,176,620 7.87 24,999,999 Total 64,999,997 [ 41 ] The total amounts are further summarized in the table below.

The RRSP Trust acquired units of the 2003 Income Funds and the 2006 Income Funds, valued at approximately $245 million and $69 million, respectively: Total number and value of units acquired by the RRSP Trust [6] Subscription Year 2003 Income Funds 2006 Income Funds Number of Units Amount ($) Number of Units Amount ($) 2003 2,655,000 19,912,500 0 0 2004 0 0 0 0 2005 7,221,850 183,678,012 0 0 2006 4,225,800 25,619,900 0 0 2007 1,450,500 13,396,995 0 0 2008 147,700 2,227,316 5,866,666 43,999,996 2009 0 0 3,176,620 24,999,999 Total 15,742,516 $245,584,711 9,043,286.00 $68,999,995 [7] [ 42 ] As a prerequisite to the acquisition of units in the Income Funds (the “Acquisition Transactions”), CIBC Trust required delivery of certain documents including copies of the OM, the subscription documents and a legal opinion from a reputable law firm to confirm that the Income Funds were qualified investments.

The process and documentation required was more fully explained by Kerri Calhoun and Sabrina Tam, employees of the CIBC, whose testimony is summarized below . [ 43 ] A total of twelve legal opinions were issued, one for each Acquisition Transaction (collectively, the “Legal Opinions”). The Legal Opinions were set out on the law firm’s letterhead and addressed to CIBC Trust. They contained four paragraphs including the following: For the purposes of this opinion, we have relied upon the facts represented to us by James T.

Grenon in the form of the Trustee’s Certificate attached hereto and other matters as we have considered necessary or appropriate for the purpose of this opinion. [ 44 ] Four of the Legal Opinions were distinct in that they included a caveat that the facts represented in the Trustee’s Certificate (the “Certificates”) had not been “independently verified” and that if the facts differed " “from those presented (…) this opinion may not be valid.” " All of the Legal Opinions concluded that the Income Funds were " “qualified investments under the Act for the RRSP maintained for the benefit of James T.

Grenon.” " [ 45 ] The Certificates signed by the Appellant contained an acknowledgment that the Legal Opinions would be based in part on the factual information set out in the certificate wherein the Appellant represented that he knew those facts to be true and correct and specifically that: In respect of the Fund, an offering memorandum has been filed with the Alberta Securities Commission and the British Columbia Securities Commission and there has been a lawful distribution in Alberta and British Columbia to the public of Units of the Fund in accordance with the offering memorandum. [ 46 ] When the RRSP Trust acquired units of the Income Funds that were already engaged in business or investment activities, valuation reports prepared by accounting firm Grant Thornton (the “Grant Thornton valuations”) were included with the Legal Opinions.

These valuation reports were intended to support the issuance of units at prices exceeding the initial subscription price of $7.50 per unit. [ 47 ] As will be seen in greater detail below, the Income Funds were required to file a report with the securities commission within 10 days from the completion of the distribution of units. Reports were filed in connection with the First Distribution but no evidence was adduced to demonstrate that reports were filed in connection with the Second Distributions.

d) The income distributions made by the Income Funds [ 48 ] The profits from the various investments or businesses were flowed-up through the various entities, including the FVT’s, to the Income Funds and were then distributed to unitholders, including the RRSP Trust. Trustee resolutions to support the distribution of profits were prepared and reported in the T3 Returns.

[ 49 ] According to the Minister, a total of $186,489,148 was distributed to the RRSP Trust (the “Distribution Transactions”). The table below represents a

summary of all distributions made from the Income Funds to the RRSP Trust during the Relevant Period (the “Distribution Transactions”): Total distributions made by the Income Funds to the RRSP Trust 2003-1 2003-2 2003-3 2003-4 2006-8 Total 2004 4,192,015 1,924,362 6,116,377 2005 6,372,526 3,493,797 4,773,945 136,654,427 151,294,695 2006 4,176,831 861,930 3,232,052 2,636,201 10,907,014 2007 2,513,091 2,194,196 2,838,325 2,554,003 10,099,615 2008 1,381,913 2,050,920 3,432,833* 2009 1,516,445 3,122,169 4,638,614 Total 14,444,361 14,309,303 12,768,594 141,844,631 3,122,169 186,489,148 [8] [ 50 ] As will be seen in greater detail below, there is some dispute as to the actual distributions made in 2005 by the 2003-4 Income Fund.

The Appellant argues that the distributions made in that year resulted from the issuance of new units to the RRSP Trust in exchange for the transfer of the FMO units to the 2003-4 Income Fund and that this did not have the effect of increasing the value of the RRSP Trust.

The Appellant also argues that the Minister failed to account for a loss of $129,876,648 realized by the RRSP Trust on the disposition of those units in 2008. [ 51 ] In any event, the Appellant has acknowledged that the RRSP Trust earned approximately $58 million from the Income Funds during the Relevant Period. [ 52 ] The Appellant as trustee, approved the filing of the respective T3 Trust Income Tax and Information Returns on an annual basis indicating that each fund was a “mutual fund trust”.

Similarly, CIBC as trustee filed a T3GR Return in which it was required to list all “taxable” RRSP’s (meaning RRSPs that held non-qualified investments) with the applicable tax withheld and remitted to the Minister. The RRSP Trust was grouped with others in a specimen plan but was not listed as a taxable RRSP holding non-qualified investments. The annual filing of the T3GR Returns was explained by the CIBC employees and will be addressed below.

e) Tom 2003-1 Income Fund [ 53 ] In June 2003 (shortly after the closing of the First Distribution), the RRSP Trust initially subscribed for 1,575,000 units of the Tom 2003-1 Income Fund at $7.50 per unit for total proceeds of $11,812,500. Additional subscriptions were made at later dates, as detailed above. [ 54 ] As with all Income Funds, a corporation acted as trustee of the FVT to ensure a form of creditor protection, as explained by the Appellant.

In this instance, 1019 Inc., a corporation wholly owned by the Appellant, acted as general partner. [ 55 ] This fund held 100% of the units of the Tom 2003-1 FVT that owned 99.99% of the units of the Tom 2003-1 Master Limited Partnership. (“MLP-1”). 1042 Inc., another corporation wholly owned by the Appellant, acted as general partner.

Beginning in 2005, MLP-1 acquired a 99.99% in both the Raywal Limited Partnership and the Tom 2003-1 Limited Partnership-1 that held 100% of the units or shares in 1213321 Alberta Ltd., Raywal Kitchens Inc. and 2037629 Ontario Inc. [ 56 ] In 2006, the Tom 2003-1 Income Fund acquired a 99.99% interest in Can-Am Kitchens Limited Partnership and a 75% participating interest in Landcraft Limited Partnership with Landraft as the general partner. Prior to these transactions, 75% of the shares in Landcraft were owned by the Appellant.

The Appellant also owned or controlled several of the companies that acted as general partners. [ 57 ] The Tom 2003-1 Income Fund also entered into several loan transactions. On August 1, 2003, it entered into a loan agreement for $10 million with CCC, owned in part by Grencorp, the Appellant’s management company.

Security for the loan in the form of a general security agreement securing the assets and undertakings of CCC, was signed by the Appellant on behalf of the borrower. [ 58 ] As noted in the table above, the 2003-1 Income Fund distributed a total of $14,444,361 to the RRSP Trust during the Relevant Period.

f) Tom 2003-2 Income Fund [ 59 ] In September 2003, the RRSP Trust initially subscribed for 540,000 units of the Tom 2003-2 Income Fund at $7.50 per unit for total proceeds of $4,050,000. The MacLennan RRSP owned 49% of the units in this fund. MacLennan owned 100% of the shares in Century Services Inc. (“Century Services”) that was involved in the business of distressed lending. [ 60 ] The Tom 2003-2 Income Fund held 100% of the units in a FVT whose primary investment was a 99.99% interest in the Century Services Limited Partnership (“CSLP”) established on November 15, 2003.

Century Services held the remaining interest and acted as general partner. [ 61 ] In December 2003, CSLP purchased the assets and liabilities of Century Services Partnership for $12.6 million. The only assets of that partnership were the shares of Century Services. In 2005, Century Services paid management fees of $5,692,000 to CSLP. The net income of CSLP was paid to the 2003-2 FVT and then to the Tom 2003-2 Income Fund.

[ 62 ] As noted above, this fund distributed a total of $14,309,303 to the RRSP Trust during the Relevant Period, excluding the amounts distributed to the MacLennan RRSP.

g) Tom 2003-3 Income Fund [ 63 ] In September 2003, the RRSP Trust subscribed for 540,000 units of the 2003-3 Income Fund at $7.50 per unit for total proceeds of $4,050,000. The RRSP Trust and Sutherland RRSP each owned 49% of the units and the remaining units were held by the Investors. This fund owned 100% of the units in the Tom 2003-3 FVT which owned 99.99% of the units in MLP-3 formed in January 2004. The general partner was 661314 B.C.

Ltd. (“661 Ltd.”), a company controlled by Sutherland. [ 64 ] Sutherland had a controlling interest in Silvercreek Development Corporation and was involved in the development, subdivision and sale of commercial and residential properties in Alberta and British Columbia. [ 65 ] MLP-3 owned 99.99% of the units in Silvercreek Abbortsford Limited Partnership (“SALP”), formed in February 2004. Several other limited partnerships were later created but in all instances 661 Ltd. was the general partner. [ 66 ] Properties were identified for development and a corporation owned by Sutherland would acquire the property.

SALP or other limited partnerships in which MLP-3 owned 99.99% of the units, acted as limited partners while 661 acted as general partner. These properties were developed and sold to third parties. The net income was paid by the limited partnerships to MLP-3 and then to the 2003- 3 FVT, followed by distributions to the 2003-3 Income Fund. [ 67 ] As appears from the table above, the Tom 2003-3 Income Fund distributed a total of $12,768,594 to the RRSP Trust during the Relevant Period, excluding amounts paid to the Sutherland RRSP.

h) Tom 2003-4 Income Fund [ 68 ] The Tom 2003-4 Income Fund was not directly involved in any business and its income was generated from loans made to related parties including other Income Funds. It was referred to by the Appellant as the " “fund of funds” " . [ 69 ] As noted above, the Tom 2003-4 Income Fund acquired the units of FMO, a publicly traded mutual fund trust, held by the RRSP Trust.

As long as the units of FMO were actually held by the RRSP Trust, the Minister has acknowledged that they were a qualified investment for RRSP purposes. [ 70 ] This transaction took place on November 14, 2005, and involved, inter alia , a transfer by the RRSP Trust of its 58% interest in FMO to the 2003-4 Income fund, in exchange for units.

As part of that transaction, the RRSP Trust submitted a subscription for 3,821,850 units valued at $40 per unit for a total $152,874,012. [ 71 ] In May 2006, the RRSP Trust submitted a further subscription for 4 million units valued at $5.53 per unit for net proceeds of $22,120,000. No explanation was provided to the Court as to why the value of the units had decreased in value between November 2005 and May 2006. [ 72 ] As noted in paragraph k) of the Reply to the Fresh as Further Amended Reply, the transaction involving the transfer of the FMO units is more particularly described in the Corporate Appeals.

i) Tom 2006-5 Income Fund [ 73 ] The Tom 2006-5 Income Fund was settled in 2006. [ 74 ] In March 2008, the RRSP Trust subscribed for 320,000 units at $7.50 per units for net proceeds of $2,400,000 and in July 2008, it subscribed for an additional 213,333 units at $7.50 per unit for net proceeds of $1,599,998. [ 75 ] As a result of these subscriptions, the RRSP Trust controlled more than 99% of the outstanding units but no distributions were made during the Relevant Period. The proposed acquisition was never completed and all units were eventually redeemed at cost.

j) Tom 2006-8 Income Fund [ 76 ] The 2006-8 Income Fund was also settled in 2006. [ 77 ] In March 2008, the RRSP Trust subscribed for 5,333,333 units at $7.50 per unit for net proceeds of $39,999,998 and in August 2009, it subscribed for a further 3,176,620 units at $7.87 per unit for net proceeds of $24,999,999. [ 78 ] On August 12, 2008, the Tom 2006-8 Income Fund entered into a loan transaction with the Appellant extending a loan of $18,000,000 at 9%per annum.

The loan proceeds were used for investment purposes and the Appellant acknowledged in oral testimony that he claimed the interest charges as a deduction on his personal tax return. Several other loans were made to related corporations. [ 79 ] As noted in the table above, the 2006-8 Income Fund made distributions of $3,122,169 to the RRSP Trust during the Relevant Period.

k) The Fact witnesses

Geoffrey Merritt [ 80 ] The Appellant called Geoffrey Merritt, a chemical engineer with extensive experience in the oil and gas industry. He invested in both the 2003 and 2006 series of Income Funds with his spouse and 2 children, aged 15 and 18 in 2003. [ 81 ] Mr. Merritt was made aware of the funds through the Appellant’s brother and since he knew that the Appellant would be investing his own money, he did not feel the need to conduct any further due diligence. He confirmed signing the subscription documents on behalf of his spouse and children and receiving income distributions and T3’s over the years.

He stated that his children held investments in other securities from a young age but no corroborating evidence was adduced.

Mary Yee [ 82 ] Mary Yee was employed as a legal assistant with Tom Capital for 14 years and provided administrative assistance for the Income Funds, including up-dates to unitholders, distributions, tax slips and notices of annual meetings. [ 83 ] She testified that all the investors in the Income Funds were residents of Alberta or BC and that while minors had subscribed for units, none had ever refuted the subscription or refused or returned a distribution cheque, even upon reaching the age of majority.

She and her spouse had subscribed for units in the 2006 series of Income Funds based on the success of the 2003 series. Deborah Nickerson [ 84 ] Deborah Nickerson joined the accounting team of Tom Capital in 2005 and eventually assumed a leadership role. She also provided accounting services for both Tom Capital and the Income Funds and served as trustee for several funds. She provided those services through a numbered company. [ 85 ] Ms. Nickernon also provided advice as to the appropriate interest rate and security to be provided for loans from the Income Funds to related parties such as the Appellant.

She felt that the terms were commercially reasonable but acknowledged that she had no formal training or credentials in this area. She also indicated that the Income Funds were regularly reviewed by external accountants, that clarifications were provided where needed and that if any issues arose, they were always resolved. [ 86 ] In connection with the Income Funds, she too confirmed that all Investors were residents of either Alberta or BC and that units had been issued to minors.

In fact, she testified that she had signed the Subscription Agreement and Risk Acknowledgment forms for her two children, aged 10 And 13 at the time of the subscriptions in 2003. She also indicated that the subscription funds for her children were intended as loans to be reimbursed once the units were redeemed. She acknowledged that she had no documentation to support this. Bruce MacLennan [ 87 ] Bruce MacLennan was the president of Century Services whose core business was appraising real estate or other assets for institutional and private lenders.

It was also involved in distressed lending which is how he came into contact with the Appellant and Tom Capital. [ 88 ] Mr. MacLennan served as trustee of the 2003 series of Income Funds. He testified that he signed the subscription and risk acknowledgement forms for his two children (both aged 5 in 2003) who acquired units in the 2003 series of Income Funds. Both children signed their own documents for the 2006 series of Income Funds but he witnessed their signature.

During cross-examination, he acknowledged that he had actually paid the subscription price for his spouse and two children and, on re-examination, indicated that the amounts paid on their behalf were intended as gifts. All distribution cheques were deposited in their respective bank accounts. Kerri Calhoun [ 89 ] Kerri Calhoun joined CIBC Trust Corporation in 1988 and at the time of her testimony was Executive Director. She explained that only trust companies could act as trustees of an RRSP and as a result, CIBC, being a Canadian chartered bank, had appointed CIBC Trust as trustee for all its RRSP’s.

That said, CIBC Wood Gundy, and later CIBC Capital Markets Inc., were appointed as agents to manage the day-to-day administration and ensure that assets were qualified investments. [ 90 ] Ms.

Calhoun also explained that in a self-directed plan, the annuitant made all investment decisions and the role of CIBC Wood Gundy, as agent for CIBC Trust, was to ensure that investments were qualified investments under the Act . [ 91 ] Other investments, described as non-public offerings or private placements, required additional documentation including the OM, Subscription Agreement as well as a legal opinion from a reputable law firm confirming that the investment was a qualified investment.

The team tasked with the review of the documents would have been familiar with the requirements of the Act and Regulations . [ 92 ] From CIBC’s perspective, they relied on the legal opinions provided as to the status of the investment though it understood that the law firm itself would be relying on the statements made in a trustee certificate. If the investment was an initial offering, the value of the securities was determined with reference to the OM but for a secondary or subsequent offering, a valuation report prepared by a reputable accounting firm might be required.

On cross-examination, she indicated that there was no obligation to obtain a comprehensive valuation report. They were only required to make reasonable efforts to obtain a fair market value of the proposed investment. She also indicated that for self-directed plans, in accordance with the contractual documentation required to open such a plan, it was ultimately up to the annuitant to ensure that the acquired assets were qualified investments. [ 93 ] With respect to the CIBC Trust’s filing obligations with the CRA, Ms. Calhoun indicated that CIBC would submit an application and declaration of trust.

If the documentation was approved, CRA would assign a specimen plan number that could reference hundred of thousand of RRSP plans. On an annual basis, CIBC would then submit a T3GR – Group Income Tax and Information Return for RRSP, RRIF, RESP, or RDSP Trusts , being the prescribed form that included the fair market value of all RRSP’s listed under that specimen plan.

[ 94 ] The T3GR included a listing of all RRSPs within the specimen plan that held non-qualified investments, described as taxable RRSP’s, in which case taxes were deducted from the RRSP and paid to the CRA. In this instance, the RRSP Trust was not listed on any of the T3GR forms filed during the Relevant Period because, according to Ms.

Calhoun, it did not hold any non-qualified investments. [ 95 ] With respect to the documentation submitted by the Appellant or his agents, she was not aware and could not comment as to whether minors had acquired units in the Income Funds or who had actually paid the subscription amounts.

Such enquiries were not made given the reliance on legal opinions. [ 96 ] On cross-examination, she acknowledged her understanding that the T3GR was both an income tax return and information return but that if an RRSP trust had taxable income, a T3 Trust and Information Return was required to be filed. [ 97 ] She indicated that a T3 Return was not filed for RRSPs that held only qualified investments as CRA did not require it to do so. She acknowledged that a T3 return had not been filed with the CRA in connection with the RRSP Trust.

Sabrina Tam [ 98 ] Sabrina Tam was a director of business risk effectiveness at CIBC World Markets Inc. She commenced her employment with CIBC in 1999 as a compliance officer moving on in 2005 to the business risk and sales supervision group (“BBRS Group”) tasked with reviewing and approving private-placement transactions. [ 99 ] The BBRS Group reviewed all private placement documentation. If concerns arose, they consulted with the CIBC compliance or legal departments.

She confirmed that the required documents included a subscription agreement to confirm both the value and number of securities being purchased as well as a risk acknowledgement and legal opinion from a reputable law firm confirming that the investment was a qualified investment for RRSP purposes. On cross-examination, she stated that they would typically rely on the legal opinion provided and would not parse the representations or certificates contained in the OM. III.

THE ASSESSMENTS [ 100 ] The Minister has issued a number of assessments or reassessments (the “Reassessments”) as described below but has acknowledged that the

Part 1 assessments in both appeals seek to tax the same amounts for the 2008 and 2009 taxation years and that she can only be successful in one or the other:

a) Grenon Appeal -

Part 1 Reassessments [ 101 ] The Appellant appeals from Notices of Reassessment made by the Minister on February 28, 2013, on the basis that the payments of $3,432,833 and $4,638,614 made by the Income Funds to the RRSP Trust during the 2008 and 2009 taxation years, respectively, (the “Grenon

Part 1 Reassessments”), should be assessed as indirect payments taxable in the hands of the Appellant on the basis of subsection 56(2) [9] or in the alternative on the basis of sham, window dressing or GAAR. The 2009 taxation year gave rise to a nil assessment, such that it is not under appeal, but the Appellant claimed a non-capital loss for that year, the amount of which is not in dispute, which he carried back to the 2006 taxation year. The Minister reduced the non-capital loss by $4,638,614, thus resulting in a consequential increase of the Appellant’s taxable income for the 2006 taxation year.

b) Grenon Appeal -

Part X.1 Assessments [ 102 ] The Appellant also appeals from Notices of Assessment (T1-OVP) made by the Minister on March 1, 2013 (late filing penalties were later deleted by Notice of Reassessment dated August 13, 2014) in respect of the 2004 to 2011 taxation years (the “Grenon

Part X.1 Assessments”) on the basis that payments made by the Income Funds to the RRSP Trust (described herein as the Distribution Transactions) should be re-characterized as excess contributions to the RRSP Trust and subject to a tax of 1 % calculated monthly pursuant to subsection 204.1(2.1) , or in the alternative, on the basis of sham, window dressing or GAAR.

c) RRSP Trust Appeal -

Part 1 Assessments [ 103 ] The RRSP Trust appeals from Notices of Assessment made by the Minister on March 6, 2013, served on CIBC as trustee, in respect of the 2004 to 2009 taxation years (the “ RRSP Trust

Part 1 Assessments”) assessing taxes and late filing penalties on the payments made by the Income Funds to the RRSP Trust (described herein as the Distribution Transactions), pursuant to subsection 146(10.1) or in the alternative, on the basis of sham, window dressing or GAAR.

d) RRSP Trust Appeal -

Part XI.1 Reassessments [ 104 ] The RRSP Trust also appeals from Notices of Reassessment made by the Minister on March 6, 2013, served on CIBC as trustee, in respect of the 2004 to 2009 taxation years (the “RRSP Trust

Part XI.1 Reassessments”), assessing a tax of 1% on the fair market value of the units of the Income Funds acquired by the RRSP Trust, pursuant to subsection 207.1(1) or, in the alternative, on the basis of sham, window dressing or GAAR. Late filing penalties were also assessed. IV. THE ISSUES [ 105 ] The issues in this appeal may be described as follows:

a) Grenon Appeal -

Part 1 Reassessments and

Part X.I Assessments i. Whether the Income Funds were a “qualified investment” for RRSP purposes, as that term is defined in subsection 146(1) of the Act and Regulation 4900(1) and, more particularly, whether the Income Funds were properly constituted as a “mutual fund trust” as defined in subsection 132(6) and met the prescribed conditions set out in Regulation 4801, or alternatively qualified as a unit trust as described in Regulation 4900(1)(d.2); ii. Whether the Income Funds were shams or mere window dressing; iii.

Whether the Minister was entitled to include the Income Fund payments made in respect of the 2008 and 2009 taxation years to the Appellant’s personal income on the basis that they were “indirect payments” relying on subsection 56(2) or, in the alternative, whether the Minister was entitled to do so relying on sham, window dressing or GAAR, as a basis for the application of subsection 56(2); iv.

Whether the Minister was entitled to re-characterize the payments made by the Income Funds to the RRSP Trust, described herein as the Distribution Transactions, as “excess contributions” to the RRSP Trust, relying on sham or window dressing or alternatively on GAAR, and if so, whether the Appellant was entitled to a credit of $152,874,000 (or at least $136,654,427, being the lesser amount used by the Minister), being the value of the units issued to the RRSP Trust in exchange for the FMO units and/or to a further credit of $129,876,648 as a result of a loss suffered by the RRSP Trust from the disposition in 2008 of the units held in the 2003-4 Income Fund; v.

Whether the

Part 1 and

Part X.1 Reassessments are statute-barred and in particular, whether the Appellant was required to file a separate T1-OVP Return to report and pay tax on the excess contributions;

b) RRSP Trust Appeal -

Part 1 Assessments and

Part XI.1 Reassessments i. Whether the Minister was entitled to assess the RRSP Trust on the basis that the Income Fund payments, described herein as the Distribution Transactions, were income derived from non-qualified investments, taxable pursuant to subsection 146(10.1) of the Act or alternatively, on the basis of sham, window dressing or GAAR and if so, whether the Appellant was entitled to a credit of $129,876,648 resulting from a loss suffered by the RRSP Trust from the disposition in 2008 of the units held in the 2003-4 Income Fund; ii.

Whether the Minister was entitled to assess the RRSP Trust for a tax equal to 1% calculated monthly on the fair market value of the units in the Income Funds at the time they were acquired, pursuant to subsection 207.1(1) of

Part XI.1 of the Act or alternatively, on the basis of sham, window dressing or GAAR; iii. Whether the

Part 1 and

Part XI.1 assessments are statute-barred on the basis that CIBC filed the T3GR form within 90 days from the end of each applicable year, as required by subsection 207.2(1) and was assessed accordingly; V. PRELIMINARY ISSUES [ 106 ] The Court reserved on two issues at the conclusion of the hearing and what follows is the final disposition forming part of these Reasons for Judgment.

a) Admissibility of the Affidavit of Helen Little [ 107 ] As noted above, the Respondent did not call any witnesses but on the final day of the hearing, tendered the affidavit of Helen Little (the “Affidavit”), an auditor with the CRA, relying on the following provision of the Act : 244(9) Proof of Documents – An affidavit of an officer of the Canada Revenue Agency, sworn before a commissioner or other person authorized to take affidavits, setting out that the officer has charge of the appropriate records and that a document annexed to the affidavit is a document or true copy of a document, or a print-out of an electronic document, made by or on behalf of the Minister or a person exercising a power of the Minister or by or on behalf of a taxpayer, is evidence of the nature and contents of the document. [ 108 ] Appended to the Affidavit, was a computer screen shot of the name and birthdate of all minors who had acquired units in the Income Funds.

The Appellant was aware of its contents since it had been in the possession of counsel for several months prior to the actual hearing of the appeals. [ 109 ] Helen Little’s name had been included in the Respondent’s list of potential witnesses with a short

summary of her proposed testimony but she was not called to testify. When the Affidavit was tendered as evidence as the Respondent closed its case, the Appellant requested a sealing order given the confidential nature of the information pertaining to minors. The Court issued the Order, restricting access to Court officials, the parties to these proceedings and their authorized agents. [ 110 ] The Appellant also reserved the right to make further written submissions as to the admissibility or weight of the Affidavit.

There were no further objections. [ 111 ] Aside from the sealing Order, no further ruling was made at that time and the intention of the Court, though not clearly expressed as appears from the transcript of the hearing, was to mark the Affidavit for identification purposes and to reserve on its admissibility, subject to written submissions to be delivered at a later date. [ 112 ] The Appellant indicates in written submission that Helen Little was to be cross-examined at the hearing.

It is argued that although she was present in court for most of the hearing, she was not present when the Respondent closed its case and this has deprived him of

the fundamental right of cross-examination. [113] There is little doubt that the facts that the Affidavit seeks to establish are relevant to the Minister’s position i.e. whether minorsacquired units of the Income Funds. It had been established that "“the presumption is that relevant evidence is admissible and that allthose called to testify with respect to relevant evidence are compellable”": Globe and mail v.

Canada (AG), (2010) 2010 SCC 41, 2 SCR 592, (para 56). [114] Thus, although Hellen Little was “compellable”, the Appellant did not indicate to the Court that he wished to cross-examine her norrequest an adjournment to secure her presence.

Given that 5-6 days remained in the scheduled time allotted for the hearing of the appeals,there was still ample time to do so. [115] As excerpted above, subsection 244(9) indicates that an "“affidavit of an officer of the Canada Revenue Agency (…) setting outthat the officer has charge of the appropriate records and that a document annexed” is a true copy of “a print-out of an electronicdocument (…) is evidence of the nature and contents of the document”".

Similarly, subsection 25(1) of the Canada Evidence Act, RSC,1985, c C-5 provides that "“[w]here an enactment provides that a document is evidence of a fact (…) that document is admissible inevidence and the fact is deemed to be established in the absence of any evidence to the contrary”". [116] The Minister submits that the Appellant failed to introduce "“any evidence to the contrary”" by way of documentary or viva voceevidence as to the age of unit-holders in the Income Fund.

As will be reviewed in greater detail below, the Appellant confirmed in oraltestimony that subscription documents signed by minors or their guardian, had been accepted and units issued accordingly. This was alsoconfirmed by several fact witnesses, as noted above. [117] As noted by the Court at the hearing, the fact that minors had signed subscription documents was relatively uncontroversial. Infact, CIBC Trust has since indicated in written submissions (para. 44) that "“[b]etween 35 and 40 unitholders were under the age of 18years old when they subscribed”". [118] In James Scott et al. vs.

HMTQ, 2017 TCC 224 (“James Scott”) (paras 36-64), Sommerfeldt J. conducted a review of the applicablelaw on the admissibility of an affidavit under subsection 244(9). In that instance, the appellant had objected to the filing of an affidavitwithout prior notice arguing that it "“constituted prejudicial ‘last-minute trial-by-ambush type tactics”" and that the affidavit "“shouldnot be admitted into evidence”". [119] Justice Sommerfeldt reserved on its admissibility and later reviewed subsection 89(1) of the Tax Court of Canada Rules (GeneralProcedure) SOR/90-688a (the “Rules”) which provides as follows: 89

(1) Unless the Court otherwise directs, except with the consent in writing of the other party or where discovery ofdocuments has been waived by the other party, no document shall be used in evidence by a party unless (

a) reference to it appears in the pleadings, or in a list or an affidavit filed and served by a party to the proceeding, (

b) it has been produced by one of the parties, or some person being examined on behalf of one of the parties, at theexamination for discovery, or (

c) it has been produced by a witness who is not, in the opinion of the Court, under the control of the party.

(2) Unless the Court otherwise directs, subsection (1) does not apply to a document that is used solely as a foundation for oras part of a question in cross-examination or re-examination. [120] Justice Sommerfeldt noted (para 47) that "“the opening words of subsection 89(1) (…) provide the Court with a discretion to allowa document into evidence even if the requirements of that provision have not been met”" and that: (47) “(…) The Court must exercise its discretion judicially, according to the rules of reason and justice, and not arbitrarily.In determining whether to admit a previously undisclosed document, there must be a balancing of the competing interest ofjustice and the overriding importance of having all of the relevant information before the Court to enable it to arrive at aproper and just disposition of the particular appeal (…).” [121] In this instance, as noted above, the Appellant reserved the right to make written submissions as to the admissibility of theAffidavit but did not indicate that he wished to conduct cross-examinations nor request an adjournment for that purpose. [122] The contents of the Affidavit are relevant to these proceedings and are relatively uncontroversial (as noted above) since theMinister had made an assumption that minors had acquired units in the Income Funds.

The Appellant has not seriously disputed theMinister’s position on this issue but has not outright admitted the actual number of minors (except as noted above by the CIBC Trust)indicating in response to a request to admit that there was no reason to conclude that the listed minors were not minors, arguing in anyevent that the issue was not relevant since minors could acquire units in the Income Funds. [123] In the end, I find that the information appended to the Affidavit was readily available or would have been readily available to theAppellant had he taken the time to obtain it in order to contradict the Minister’s assumption.

He chose not to do so despite having theevidentiary burden of rebutting the assumption. [124] I conclude that the Court should exercise its discretion pursuant to subsection 89(1) of the Rules and that rejecting the Affidavit atthis time, would be procedurally unfair to the Minister. Having considered the written and oral submissions of the respective parties andhaving considered the requirements of subsection 89(1) of the Rules, the Court hereby rules that the Affidavit of Helen Little isadmissible. [125] It establishes the birthdates of the minor Investors in the 2003 and 2006 series of Income fund.

The relevance of this information

will be discussed below.

b) Admissibility of certain Read-ins [ 126 ] Parties are permitted to read into evidence examination for discovery materials pursuant to the operation of

section 100 of the Rules and Tax Court of Canada Practice Note 8 , titled " “Use of Discovery/Undertakings” " , July 19, 2001 (“ Practice Note 8 ”) which governs the use of examinations for discovery and undertakings as evidence at trial. An adverse party may request that other parts of the evidence be introduced to qualify or provide some context concerning the proposed read-ins. [ 127 ] Before the scheduled date for the hearing of theses appeals, the parties had exchanged their list of read-ins from examination for discovery.

The Appellant gave notice of his proposed read-ins on February 1, 2019 and the Minister did not request any contextual read- ins in respect of those read-ins. [ 128 ] The Minister served a notice of proposed read-ins on February 6, 2019, exactly four days before the hearing was scheduled to commence. They consisted of approximately 850 pages of discovery transcript, representing a substantial majority of the discovery.

The Appellants reviewed the Minister’s proposed read-ins within the two days contemplated by Practice Note 8 and served their notice of proposed contextual read-ins on February 7th and 8th, 2019. [ 129 ] On the last day of trial, the Minister tendered on the Appellant and the Court her list of read-ins from examinations for discovery but the list was a significantly abridged selection of the read-ins which the Minister had identified in her pre-trial notice, constituting about one-third of that original list.

The Appellants requested time to perform a new contextual review of the Minister’s actual read-ins as the previously identified contextual read-ins were rendered moot by the significant reduction in the Minister’s read-ins. The Minister challenged the appellants’ request for time to complete a contextual review of the read-ins. [ 130 ] The Court ordered that the parties provide written submissions on the matter and the parties did so later in March of 2019.

The Minister challenged certain of the Appellant’s requests to read-in additional portions of the discovery evidence in order to qualify or explain the Minister’s read-ins pursuant to subsection 100(3) of the Rules . The Minister challenged these requests on the basis that

section 100 and Practice Note 8 did not allow additional read-ins at or following trial. [ 131 ] Only four contextual read-ins are at issue. For reasons set out in the attached Appendix A, I find that the contextual read-ins #8, #10 and #18 are admissible and that contextual read-ins #16 is also admissible but subject to certain limits. VI. RELEVANT STATUTORY PROVISIONS

a) The RRSP legislative framework [ 132 ] The basic legislative framework for RRSP’s is set out in Division G, entitled " “Deferred & Special Income Arrangements” " and is governed by

section 146 and various other provisions of the Act in addition to certain regulations under the Income Tax Regulations, CRC, c 945 (the “ Regulations ”).

Definitions 146(1) In this section, annuitant means (

a) until such time after maturity of the plan as an individual’s spouse or common-law partner becomes entitled, as a consequence of the individual’s death, to receive benefits to be paid out of or under the plan, the individual referred to in paragraph (

a) or (

b) of the definition retirement savings plan in this subsection for whom, under a retirement savings plan, a retirement income is to be provided, and (

b) thereafter, the spouse or common-law partner referred to in paragraph (a); (rentier) benefit includes any amount received out of or under a retirement savings plan other than Définitions 146(1) Les définitions qui suivent s’appliquent au présent article. déductions inutilisées au

titre des REER

a) Jusqu’au moment, après l’échéance du régime, où son conjoint acquiert le droit, par suite du décès du rentier, de recevoir des prestations qui doivent être versées sur ce régime ou en vertu de ce régime, le particulier visé aux alinéas

a) ou

b) de la définition de régime d’épargne-retraite au présent paragraphe pour lequel est prévu, en vertu d’un régime d’épargne-retraite, un revenu de retraite;

b) après ce moment, son conjoint. (annuitant) prestation est comprise dans une prestation toute somme reçue dans le cadre d’un

(

a) the portion thereof received by a person other than the annuitant that can reasonably be regarded as part of the amount included in computing the income of an annuitant by virtue of subsections 146(8.8) and 146(8.9), (

b) an amount received by the person with whom the annuitant has the contract or arrangement described in the definition retirement savings plan in this subsection as a premium under the plan, (

c) an amount, or part thereof, received in respect of the income of the trust under the plan for a taxation year for which the trust was not exempt from tax by virtue of paragraph 146(4)(c), and (c.1) a tax-paid amount described in paragraph (

b) of the definition tax-paid amount in this subsection that relates to interest or another amount included in computing income otherwise than because of this

section and without restricting the generality of the foregoing includes any amount paid to an annuitant under the plan (

d) in accordance with the terms of the plan, (

e) resulting from an amendment to or modification of the plan, or (

f) resulting from the termination of the plan; (prestation) (…) issuer means the person referred to in the definition retirement savings plan in this subsection with whom an annuitant has a contract or arrangement that is a retirement savings plan; (émetteur) (…) non-qualified investment , in relation to a trust governed by a registered retirement savings plan, means property acquired by the trust after 1971 that is not a qualified investment for the trust; (placement non admissible) (…) régime d’épargne-retraite, à l’exception

a) de la fraction de cette somme reçue par une personne autre que le rentier et qu’il est raisonnable de considérer comme faisant

partie de la somme incluse dans le calcul du revenu d’un rentier en vertu des paragraphes (8.8) et (8.9);

b) d’une somme reçue à

titre de prime en vertu du régime par la personne avec laquelle le rentier a conclu le contrat ou l’arrangement visé à la définition de régime d’épargne-retraite au présent paragraphe;

c) d’une somme, ou d’une

partie de cette somme, reçue relativement au revenu de la fiducie en vertu du régime, pour une année d’imposition, à l’égard de laquelle la fiducie n’était pas exonérée d’impôt en vertu de l’alinéa (4)c); c.1) d’un montant libéré d’impôt, visé à l’alinéa b) de la définition de cette expression au présent paragraphe, qui se rapporte à des intérêts ou à un montant inclus dans le calcul du revenu autrement que par l’effet du présent article. Sans préjudice de la portée générale de ce qui précède, le terme vise toute somme versée à un rentier en vertu du régime :

d) soit conformément aux conditions du régime;

e) soit à la suite d’une modification du régime;

f) soit à la suite de l’expiration du régime. (benefit) (…) émetteur la personne visée à la définition de régime d’épargne-retraite au présent paragraphe et avec laquelle un rentier a conclu un contrat ou un arrangement qui constitue un régime d’épargne-retraite. (issuer) (…) placement non admissible dans le cas d’une fiducie régie par un régime enregistré d’épargne-retraite, s’entend

qualified investment for a trust governed by a registered retirement savings plan means (

a) an investment that would be described in any of paragraphs (a), (b), (

d) and (

f) to (

h) of the definition qualified investment in

section 204 if the references in that definition to a trust were read as references to the trust governed by the registered retirement savings plan, (

b) a bond, debenture, note or similar obligation (

i) issued by a corporation the shares of which are listed on a prescribed stock exchange in Canada, or (ii) issued by an authorized foreign bank and payable at a branch in Canada of the bank, (

c) an annuity described in the definition retirement income in respect of the annuitant under the plan, if purchased from a licensed annuities provider, (…) (

d) such other investments as may be prescribed by regulations of the Governor in Council made on the recommendation of the Minister of Finance; (placement admissible) (…) No tax while trust governed by plan 146(4) Except as provided in subsection 146(10.1) , no tax is payable under this Part by a trust on the taxable income of the trust for a taxation year if, throughout the period in the year during which the trust was in existence, the trust was governed by a registered retirement savings plan, except that (

a) if the trust has borrowed money (other than money used in carrying on a business) in the year or has, after June 18, 1971, borrowed money (other than money used in carrying on a business) that it has not repaid before the commencement of the year, tax is payable under this Part by the trust on its taxable income for the year; (

b) in any case not described in paragraph 146(4)(a), if the trust des biens acquis par la fiducie après 1971 et qui ne constituent pas un placement admissible pour cette fiducie. (non-qualified investment) (…) placement admissible « placement admissible » Dans le cas d’une fiducie régie par un régime enregistré d’épargne-retraite

a) placement qui serait visé aux alinéas a), b),

d) et

f) à

h) de la définition de placement admissible à l’article 204 si la mention « fiducie » y était remplacée par la mention de la fiducie régie par le régime enregistré d’épargne-retraite;

b) obligation, billet ou

titre semblable qui, selon le cas : (

i) est émis par une société dont les actions sont inscrites à la cote d’une bourse de valeurs au Canada visée par règlement, (ii) est émis par une banque étrangère autorisée et payable à sa succursale au Canada;

c) rente visée à la définition de revenu de retraite relativement au rentier en vertu du régime, si elle a été achetée d’un fournisseur de rentes autorisé;

d) tout autre placement qui peut être prévu par règlement pris par le gouverneur en conseil, sur recommandation du ministre des Finances. (qualified investment) (…) Exonération d’impôt d’une fiducie régie par le régime 146(4)

Sous réserve du paragraphe (10.1), aucun impôt n’est payable en vertu de la présente

partie par une fiducie sur son revenu imposable pour une année d’imposition si, tout au long de la période de l’année où la fiducie existait, elle était régie par un régime enregistré d’épargne-retraite; toutefois :

a) si la fiducie a emprunté de l’argent (autre que de l’argent utilisé pour l’exploitation d’une entreprise) au cours de l’année ou a emprunté, après le 18 juin 1971, de l’argent

has carried on any business or businesses in the year, tax is payable under this Part by the trust on the amount, if any, by which (

i) the amount that its taxable income for the year would be if it had no incomes or losses from sources other than from that business or those businesses, as the case may be, exceeds (ii) such portion of the amount determined under subparagraph 146(4)(b)(

i) in respect of the trust for the year as can reasonably be considered to be income from, or from the disposition of, qualified investments for the trust; and (

c) if the last annuitant under the plan has died, tax is payable under this Part by the trust on its taxable income for each year after the year following the year in which the last annuitant died. (…) Disposition of non-qualified investment 146(6) Where in a taxation year a trust governed by a registered retirement savings plan disposes of a property that, when acquired, was a non- qualified investment, there may be deducted, in computing the income for the taxation year of the taxpayer who is the annuitant under the plan, an amount equal to the lesser of (

a) the amount that, by virtue of subsection 146(10), was included in computing the income of that taxpayer in respect of the acquisition of that property, and (

b) the proceeds of disposition of the property. (…) Benefits taxable 146(8) There shall be included in computing a taxpayer’s income for a taxation year the total of all amounts received by the taxpayer in the year as benefits out of or under registered retirement savings plans, other than excluded withdrawals (as defined in subsection 146.01(1) or 146.02(1)) of the taxpayer and (autre que de l’argent utilisé pour l’exploitation d’une entreprise) qu’elle n’a pas remboursé avant le début de l’année, un impôt est payable par la fiducie, en vertu de la présente partie, sur son revenu imposable pour l’année;

b) dans tout cas non visé à l’alinéa a), si la fiducie a exploité une ou plusieurs entreprises au cours de l’année, un impôt est payable par elle en vertu de la présente

partie sur l’excédent éventuel du montant visé au sous-alinéa (

i) sur le montant visé au sous-alinéa (ii): (

i) le montant qui constituerait le revenu imposable de la fiducie pour l’année si elle n’avait pas tiré de revenu, ni subi de pertes de sources autres que l’entreprise ou les entreprises en question, (ii) la

partie du montant déterminé selon le sous-alinéa (

i) à l’égard de la fiducie pour l’année, qu’il est raisonnable de considérer comme un revenu provenant soit de placements admissibles pour elle, soit de la disposition de tels placements;

c) si le dernier rentier en vertu du régime est décédé, un impôt est payable par la fiducie en vertu de la présente

partie sur son revenu imposable pour chaque année postérieure à l’année suivant l’année du décès de ce rentier. (…) Disposition d’un placement non admissible 146(6) Lorsque, au cours d’une année d’imposition, une fiducie régie par un régime enregistré d’épargne-retraite dispose d’un bien qui, au moment où il a été acquis, était un placement non admissible, il est permis de déduire, dans le calcul du revenu du contribuable qui est le rentier du régime, pour l’année d’imposition, une somme égale au moins élevé des montants suivants :

a) le montant qui était, en vertu du paragraphe (10), inclus dans le calcul du revenu de ce contribuable à l’égard de l’acquisition de ce

amounts that are included under paragraph (12)(

b) in computing the taxpayer’s income. (…) Where acquisition of non- qualified investment by trust 146(10) Where at any time in a taxation year a trust governed by a registered retirement savings plan (

a) acquires a non-qualified investment, or (

b) uses or permits to be used any property of the trust as security for a loan, the fair market value of (

c) the non-qualified investment at the time it was acquired by the trust, or (

d) the property used as security at the time it commenced to be so used, as the case may be, shall be included in computing the income for the year of the taxpayer who is the annuitant under the plan at that time. bien;

b) le produit de disposition du bien. (…) Prestations imposables 146(8) Est inclus dans le calcul du revenu d’un contribuable pour une année d’imposition le total des montants qu’il a reçus au cours de l’année à

titre de prestations dans le cadre de régimes enregistrés d’épargne-retraite, à l’exception des retraits exclus au sens des paragraphes 146.01(1) ou 146.02(1), et des montants qui sont inclus, en application de l’alinéa (12)b), dans le calcul de son revenu. (…) Acquisition d’un placement non admissible par une fiducie 146(10) Lorsque, à un moment donné d’une année d’imposition, une fiducie régie par un régime enregistré d’épargne-retraite :

a) acquiert un placement non admissible;

b) utilise à

titre de garantie d’un prêt un bien quelconque de la fiducie ou en permet l’utilisation, la juste valeur marchande :

c) du placement non admissible au moment de son acquisition par la fiducie;

d) du bien utilisé à

titre de garantie, au moment où il a commencé à être ainsi utilisé, selon le cas, doit être incluse dans le calcul du revenu, pour l’année, du contribuable qui est le rentier en vertu du régime à ce moment. [ 133 ] Subsection 146(10) was amended in 2011 ( Keeping Canada’s Economy and Jobs Growing Act, SC 2011, c. 24 at s.65 ) to introduce the concept of a “controlling individual” for Registered Retirement Savings Plans in

section 207.04 of

Part XI.01 of the Act and impose a tax of 50% on the fair market value of non-qualified investments held by the controlling individual in the calendar year. Those amendments only apply to non-qualified investments acquired after March 22, 2011 such that they are not at issue in this appeal. [ 134 ] In any event, the Appellant, being “the taxpayer” who is the annuitant under the plan, was not assessed by the Minister pursuant to subsection 146(10) and the Minister assessed the RRSP Trust pursuant to subsection 146(10.1) which provides as follows:

Where tax payable 146(10.1) Where in a taxation year a trust governed by a registered retirement savings plan holds a property that is a non-qualified investment, (

a) tax is payable under this Part by the trust on the amount that its taxable income for the year would be if it had no incomes or losses from sources other than non-qualified investments and no capital gains or losses other than from dispositions of non-qualified investments; and (

b) for the purposes of paragraph 146(10.1)(a), (

i) income includes dividends described in

section 83, and (ii) paragraphs 38(

a) and 38(

b) shall be read without reference to the fractions set out in those paragraphs (…) Impôt payable 146(10.1) Lorsqu’une fiducie régie par un régime enregistré d’épargne-retraite détient, au cours d’une année d’imposition, un bien qui est un placement non admissible :

a) la fiducie doit payer un impôt en vertu de la présente

partie sur le montant qui serait son revenu imposable pour l’année si les sources de ses revenus et pertes n’étaient que des placements non admissibles et si ses gains en capital et pertes en capital ne résultaient que de la disposition de tels placements;

b) pour l’application de l’alinéa a): (

i) sont compris dans le revenu les dividendes visés à l’article 83, (ii) aux alinéas 38a) et

b) il n’est pas tenu compte des fractions qui y figurent.

PART X.I - Tax in Respect of Over-contributions to Deferred Income Plans Tax payable by individuals 204.1 (1) (…) Tax payable by individuals -- contributions after 1990 204(2.1) Where, at the end of any month after December, 1990, an individual has a cumulative excess amount in respect of registered retirement savings plans, the individual shall, in respect of that month, pay a tax under this Part equal to 1% of that cumulative excess amount. (…) Waiver of tax 204.1(4) Where an individual would, but for this subsection, be required to pay a tax under subsection 204.1(1) or 204.1(2.1) in respect of a month and the individual establishes to the satisfaction of the Minister that (

a) the excess amount or cumulative excess amount on which the tax is based arose as a consequence of reasonable error, and Impôt payable par les particuliers 204.1(1) (…) Impôt payable par les particuliers — cotisations postérieures à 1990 204(2.1) Le particulier qui, à la fin d’un mois donné postérieur au mois de décembre 1990, a un excédent cumulatif au

titre de régimes enregistrés d’épargne-retraite doit, pour ce mois, payer un impôt selon la présente

partie égal à 1 % de cet excédent. (…) Renonciation 204.1(4) Le ministre peut renoncer à l’impôt dont un particulier serait, compte non tenu du présent paragraphe, redevable pour un mois selon le paragraphe (1) ou (2.1), si celui-ci établit à la satisfaction du ministre que l’excédent ou l’excédent cumulatif qui est frappé de l’impôt fait suite à une erreur acceptable et que les mesures indiquées pour éliminer l’excédent ont été prises.

(

b) reasonable steps are being taken to eliminate the excess, the Minister may waive the tax. (…) Cumulative excess amount in respect of RRSPs 204.2(1.1) The cumulative excess amount of an individual in respect of registered retirement savings plans at any time in a taxation year is the amount, if any, by which (

a) the amount of the individual’s undeducted RRSP premiums at that time exceeds (

b) the amount determined by the formula A + B + R + C + D + E where A is the individual’s unused RRSP deduction room at the end of the preceding taxation year, B is the amount, if any, by which (

i) the lesser of the RRSP dollar limit for the year and 18% of the individual’s earned income (as defined in subsection 146(1)) for the preceding taxation year exceeds the total of all amounts each of which is (ii) the individual’s pension adjustment for the preceding taxation year in respect of an employer, or (iii) a prescribed amount in respect of the individual for the year, C is, where the individual attained 18 years of age in a preceding taxation year, $2,000, and in any other case, nil, D is the group RRSP amount in respect of the individual at that time, E is, where the individual attained 18 years of age before 1995, the individual’s transitional amount at that time, and in any other case, nil, and R is the individual’s total pension adjustment reversal

[…]