Pyxis Real Estate Equities Inc. v. Canada (Attorney General)
Attorney General of Canada
Pyxis Real Estate Equities Inc. (as successor by two amalgamations to Edgecombe Inc., Edgefund Equities Inc. and Pyxis Real Estate Equities Inc.)
Law Firm / Organization
Stikeman Elliott LLP
Lawyer(s)

Margaret Nixon

Background

  • In 2017, David Jubb, sole shareholder of Pyxis’s predecessor corporations, sought a tax-free capital dividend strategy to pay off a shareholder loan.
  • The plan required a $1.4M dividend through a corporate chain, assuming sufficient Capital Dividend Account (CDA) balances.
  • Accountants failed to review prior tax records, missing a $323,893 CDA deficit in Edgecombe Inc., making the dividend partially taxable.
  • CRA issued a 60% tax penalty on the excess amount. Pyxis sought rectification of corporate records to reflect a $1,723,893 dividend, claiming it aligned with their intent.

Superior Court Decision

  • The judge granted rectification, citing Fairmont Hotels (2016 SCC 56), interpreting the intent as ensuring Jubb received $1.4M tax-free.

Court of Appeal Decision

  • Appeal Allowed – Rectification Denied.
  • Reasons:
    • Rectification applies only when a document fails to reflect an actual agreement, not to correct tax mistakes.
    • The corporate resolutions accurately recorded the agreed-upon transactions.
    • Fairmont Hotels and Collins Family Trust (2022 SCC 26) confirm rectification cannot be used to reverse tax consequences.
  • Result: CRA tax assessment upheld; Pyxis liable. Attorney General awarded $25,000 in costs.
Court of Appeal for Ontario
COA-24-CV-0464
Corporate & commercial law
$ 25,000
Appellant