The applicant ("K-Can") was intended to qualify as a Canadian-controlled private corporation. Its outstanding shares consisted of 100 Class A non-voting common shares and 100 Class B voting common shares held by a Delaware corporation ("K-US"), and 100 Class C special voting shares held by a trust for K-Can employees whose trustee was a trust company (Computershare) and whose named settlor was K-Can. A unanimous shareholders' agreement ("USA") conferred the powers of the directors on the K-Can shareholders. The Declaration of Trust provided:
5.2 ...Upon the direction of the Settlor, the Trustee shall...exercise any voting rights...
5.9 Where this Deed of Trust requires or authorizes the Settlor to give directions to the Trustee, the Trustee shall accept only a direction in writing from the CEO or President of the Settlor.
CRA concluded that these two provisions gave the non-resident CEO of K-Can the authority to direct Computershare how to vote the Class C shares of K-Can, so that K-US had de jure control of K-Can.
K-Can and Computershare then signed a Deed of Rectification, amending the Deed of Trust, which recited that paragraph 5.9 might "be misinterpreted as that the CEO or the President…has the power to change …the Board of Directors," and amended it to provide that the Trustee shall accept only a direction in writing "in the form of a certified copy of a resolution from the Board of Directors of the Settlor." The amendment was stated to be effective from the date of settlement of the trust subject to approval of the Ontario Superior Court of Justice (and otherwise was effective on the date of the amendment).
The Crown argued inter alia that the amendment would have no effect on the de jure control of K-Can: due to the USA, the Board of K-Can had no right to instruct the Trustee and, as the Trustee was unwilling to vote without instruction, K-US controlled the Class C shares.
In granting the requested rectification order to retroactively confirm the amendment, Carole Brown J stated (at paras. 28-30) that she was satisfied that "the intention throughout was to ensure that K-Can…qualified for CCPC status and for the tax credits available," "that the wording chosen was chosen by mistake and not to intentionally give K-US de jure control over K-Can," and (respecting the above argument) "the Deed makes it clear that the decision-making body is the Board of Directors."