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Equity - General. Canada (Attorney General) v. Collins Family Trust
In Canada (Attorney General) v. Collins Family Trust (SCC, 2022) the Supreme Court of Canada held that equitable devices to assist taxpayers in avoiding paying income tax were not to be respected, and in the course of this stated basics principles of equity:[9] I turn first to a limiting principle of equity ⸺ indeed, the most fundamental premise of that domain, found in its origins. Equity developed to alleviate results under “an unyielding common law” that called for the relief as a matter of “conscience” and “greater fairness” (J. Berryman, The Law of Equitable Remedies (2nd ed. 2013), at p. 2). Equitable principles “have above all a distinctive ethical quality, reflecting as they do the prevention of unconscionable conduct” (I. C. F. Spry, The Principles of Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages (9th ed. 2014), at p. 1).
[10] This broad scope for courts of equity to give relief also defines its own limits (hence a “limiting” principle): transactions that do not call for relief as a matter of conscience or fairness are properly outside equity’s domain. This is reflected in some of equity’s maxims, including that a person who comes to equity must come with “clean hands” and “he who seeks equity must do equity” (Spry, at pp. 5-6; Berryman, at pp. 16 and 18; Snell’s Equity (34th ed. 2020), by J. McGhee and S. Elliott, at paras. 5‑009 to 5‑010).
[11] The jurisdiction of equity to protect against fraud, undue influence, and unconscionable transactions is well settled (McGhee and Elliott, at para. 8‑001; see also G. H. L. Fridman, The Law of Contract in Canada (6th ed. 2011), at p. 762; M. McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014), at p. 1402). Generally speaking, a court of equity may grant relief where it would be unconscionable or unfair to allow the common law to operate in favour of the party seeking enforcement of the transaction. But there is nothing unconscionable or unfair in the ordinary operation of tax statutes to transactions freely agreed upon. As the Court of Appeal for Ontario recognized in Canada Life Insurance Co. of Canada v. Canada (Attorney General), 2018 ONCA 562, 141 O.R. (3d) 321, at para. 93, “[t]here is nothing inequitable about [Canada Life] being taxed on ‘what it did’ rather than on what it intended to achieve.” If there is to be a remedy, it lies with Parliament, not a court of equity. On this ground alone, Pitt v. Holt and Re Pallen Trust cannot, in my respectful view, be taken as stating the law of British Columbia.
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