Markou – Tax Court of Canada finds that it has jurisdiction, in considering an assessment’s correctness, to determine the existence of equitable remedies

A Quistclose trust (as described by C. Miller J) provides an equitable remedy to a lender where it has lent to a borrower for a specific purpose and it is exposed to the risk of other creditors snatching the advanced funds before the borrower uses them for the intended purpose.

C. Miller J rejected a Crown submission that he lacked the jurisdiction to determine whether a Quistclose trust attached to funds lent to help fund leveraged donations. Although the Tax Court lacks jurisdiction to declare that there is a Quistclose trust, it has the jurisdiction to figure out whether taxpayer assessments are correct, and this requires that the “Tax Court… look at a taxpayer’s circumstances and make a determination as to what facts are true and what legal and equitable rights are available to the taxpayer.”

He went on to make a Rule 58(1) determination that no Quistclose trust attached to the funds advanced by the lender because, under his interpretation of the partially agreed statement of facts, the funds essentially were advanced by the lender directly to the charity so that, on a realistic view, they did not pass first through the hands of the borrower taxpayers.

Neal Armstrong. Summaries of Markou v. The Queen, 2016 TCC 137 under s. 104(1) and Statutory Interpretation – Interpretation Act, s. 8.1.