A partner in a law firm ("Spackman") suggested to two individual clients (Mr. & Mrs. Maplesden) that Mr. Maplesden finance a home purchase through a loan from one of the operating corporations owned by them, that the home be registered in Mrs. Maplesden's name and the that loan be secured by a non-interest bearing demand promissory note signed by Mrs. Maplesden. The Tax Court of Canada later upheld an assessment of Mrs. Maplesden under s. 15(2) of the Act.
Spackman was found to be negligent because he failed to adequately consider or research the requirements of s. 15(2) and because he breached his duty to advise Mrs. Maplesden, who was clearly inexperienced in business matters, that his view that s. 15(2) was not applicable, might be incorrect. Also, there was no evidence that he ever discussed the option of repayment of the loan by the end of the following taxation year in order to avoid potential liability under s. 15(2).
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