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CaseLawLaw PAGE 16 SUPREME COURT OF CANADA Corporations DEBENTURES Debentureholders did not constitute affected class under s. 192 of Canada Business Corporations Act Consortium of purchasers contem- plated purchase of shares of BCE Inc. by way of leveraged buyout. All offers submitted during auction process contemplated addition of substantial amount of new debt for which Bell Canada, wholly- owned subsidiary of BCE, would be liable. BCE's board of directors found that purchaser's offer, which provided for compulsory acqui- sition of all of BCE's outstand- ing shares, was in best interests of BCE and its shareholders. Plan of arrangement approved by al- most 98% of BCE's shareholders but Bell Canada debenturehold- ers sought relief under oppres- sion remedy pursuant to s. 241 of Canada Business Corporations Act and argued arrangement not "fair and reasonable". Debentureholders complained that upon completion of arrangement, short-term trading value of debentures would decline by average of 20% and could lose investment grade status. Quebec Superior Court approved arrange- ment as fair and dismissed oppres- sion action but Court of Appeal set aside the decision. It held that directors had duty to ensure that debentureholders' rights and reasonable expectations respected and this required consid- eration of whether adverse impact on debentureholders' economic interest could be alleviated. Court found it unnecessary to consider oppression claim because require- ments of s. 192 of the Act not met. BCE and Bell Canada appealed ap- proval of plan of arrangement and debentureholders cross-appealed dismissal of oppression claims. Appeals allowed and cross-appeals dismissed. Plan of arrangement contractual will be fair and reasonable pursu- ant to s. 192 of Act if court satis- fied arrangement has valid business purpose and objections of those whose legal rights being arranged being resolved in fair and balanced way. Fact that group whose legal rights left intact faces reduction in trading value of its securities generally does not, without more, constitute such circumstances jus- tifying consideration of non-legal interests. Debentureholders did not constitute affected class under s. 192. Only their economic inter- ests affected and they did not fall within exception situation where non-legal interests should be con- sidered. Trial judge correctly con- cluded they should not be able to veto almost 98% of shareholders merely because trading value of their securities would be affected. Debentureholders' rights not fundamentally altered. Court of Appeal erroneously combined sub- stance of s. 241 oppression remedy with onus of s. 192 arrangement approval process. Directors' duty to resolve conflicting interests in accordance with their fiduciary duty comprehends duty to treat individual stakeholders equitably. Debentureholders failed to estab- lish they had reasonable expecta- tion that directors would protect their economic interest by putting forth plan of arrangement that would maintain investment grade trading value of debentures. No reasonable expectation could give rise to claim for oppression. BCE Inc. (Arrangement relatif a) (Re); Addenda Capital Inc. v. BCE Inc.; Addenda Capital Inc. v. Bell Canada; Aegon Capital Management Inc. v. BCE inc. (Dec. 19, 2008, S.C.C., McLachlin C.J.C., Bastarache, Binnie, LeBel, Deschamps, Abella and Charron JJ., File No. 32647) Appeal from 168 A.C.W.S. (3d) 535, 43 B.L.R. (4th) 157, 167 A.C.W.S. (3d) 529, 43 B.L.R. (4th) 157, 168 A.C.W.S. (3d) 460, 43 B.L.R. (4th) 157, 169 A.C.W.S. (3d) 560, 43 B.L.R. (4th) 1 allowed. Consolidated Case. Order No. 008/357/044 (97 pp.). March 16, 2009 • Law TiMes COURT DECISIONS ainmaker_LT_June2_08.indd 1 CaseLaw is a weekly summary of notable unreported civil and criminal court decisions by the Supreme Court of Canada, the Federal Court of Canada and all Ontario courts. Single or multiple copies of the full text of any case digested in this issue can be obtained by: 5/28/08 10:43:29 AM i) completing and mailing in the order form in this issue; or ii) calling CaseLaw's photocopy department at (905) 841-6472 in Toronto, (800) 263-3269 in Ontario and Quebec, or (800) 263-2037 in other provinces; or iii) faxing a copy of the completed order form to (905) 841-5085. Taxation INCOME TAX GAAR applied to operation of s. 74.1(1) of Income Tax Act (Can.) that allowed taxpayer to deduct interest to reduce tax payable on dividend income Taxpayer's wife borrowed from bank to finance purchase of shares in family business. Wife gave money to taxpayer who transferred shares to her. Taxpayer and wife obtained mortgage for purchase of family residence and used funds to repay share loan. Taxpayer de- ducted interest on mortgage loan and reported taxable dividends on shares as income. Taxpayer's broth- er conducted similar transactions. Minister of National Revenue dis- allowed deductions and reassessed taxpayers. Tax Court of Canada and Federal Court of Appeal dismissed taxpayers' appeals. Further appeal to Supreme Court of Canada dis- missed. General anti-avoidance rule ("GAAR") denies tax benefit where benefit arises from transac- tion in s. 245(1) and (2) of Income Tax Act (Can.); transaction is avoidance transaction as defined in s. 245(3); and transaction results in abuse and misuse within meaning of s. 245(4). Transactions conceded to result in two tax benefits and to be avoidance transactions. To de- termine whether transaction results in abuse and misuse, court must conduct analysis to determine es- sential object, spirit and purpose of provision; and must determine whether avoidance transaction frustrates object, spirit or purpose of relevant provisions. Tax benefit of interest deductibility associated with s. 20(1)(c) and s. 20(3) and tax benefit arising out of use of attribu- tion rules to reduce income linked with ss. 73(1) and 74.1(1). Section 20(1)(c) and s. 20(3) not misused and abused. Series of transactions did not become problematic until taxpayers relied on ss. 73(1) and 74.1(1) to obtain result contem- plated by transactions which was that taxpayer applied wife's inter- est deduction to his own income. Operation of s. 74.1(1) that al- lowed taxpayer to deduct interest in order to reduce tax payable on dividend income qualified as abu- sive tax avoidance. Did not matter that s. 74.1(1) triggered automati- cally when taxpayer did not elect to opt out of s. 73(1). Lipson v. Canada (Jan. 8, 2009, S.C.C., Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ., File No. 32041) Appeal from 156 A.C.W.S. (3d) 253, 280 D.L.R. (4th) 714, [2007] 3 C.T.C. 110, 2007 D.T.C. 5172, 361 N.R. 191, [2007] 4 F.C.R. 641 dis- missed. Order No. 009/012/005 (80 pp.). FEDERAL COURT OF APPEAL Immigration REFUGEE STATUS Officer did not err in concluding applicant was permanent resident of United States at time of Appellant appealed dismissal of ap- plication for judicial review of re- jection of application for protection by Pre-Removal Risk Assessment ("PRRA") Officer. He entered Canada after residing lawfully in United States for 18 years. His green card, evidencing United States per- manent residency status, due to ex- pire shortly. He applied for refugee status, alleging fear of persecution in United States. Principal basis of claim, however, was well founded fear of persecution as gay Muslim man in Uganda and Pakistan, where he lived with his parents af- ter their expulsion from Uganda. Refugee Protection Division of Immigration and Refugee Board ("RPD") dismissed application for recognition as refugee, finding that he continued to be permanent resi- dent of United States and person referred to in Article 1E of United Nations Convention Relating to the Status of Refugees. As such, he was neither Convention Refugee nor person in need of protection under s. 98 of Immigration and Pre-Removal Risk Assessment Refugee Protection Act (Can.) ("IRPA"). Appellant's application for leave to apply for judicial review of RPD's decision dismissed and removal order issued. Appellant unsuccessfully applied for PRRA. PRRA Officer held that appellant was permanent resident of United States. Appellant's application for judicial review of PRRA decision dismissed. He appealed, arguing that PRRA Officer erred in con- cluding he was permanent resident of United States at time of assess- ment for purposes of Article 1E of Convention and s. 98 of IRPA. Appeal dismissed. Despite new evi- dence expressing doubt as to appel- lant's prospects for readmission to United States as lawful permanent resident PRRA Officer's conclu- sion not unreasonable. Officer's conclusion must be considered within context of RPD finding that appellant continued to be per- manent resident of United States. Appellant did not obtain leave to apply for judicial review of that decision so he had to accept RPD's findings. Refusal of PRRA applica- tion did not put appellant at risk of being sent to country where he re- quired protection. He held letter of consent that would permit his re- turn to U.S. where residence status would ultimately be determined. Parshottam v. Canada (Minister of Citizenship and Immigration) (Nov. 14, 2008, F.C.A., Evans, Sharlow and Ryer JJ.A., File No. A-73-08) Appeal from 164 A.C.W.S. (3d) 840, 68 Imm. L.R. (3d) 288 dis- missed. Order No. 008/338/080 (21 pp.). FEDERAL COURT Aboriginal Peoples BANDS Applicants not validly suspended as elected Councillors Application brought for judi- cial review of Sucker Creek First Nation Band Council's decision to suspend applicants as elected Councillors pending investiga- When the entire firm has the same goal, success comes naturally. Une équipe avec un objectif commun : le succès dans la poche! SMSS.COM CHARLOTTETOWN FREDERICTON HALIFAX MONCTON SAINT JOHN ST. JOHN'S StewartMcK_LT_Jan26_09.indd 1 www.lawtimesnews.com 1/20/09 11:42:32 AM

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