The expanded reportable transaction rules should not impose reporting obligations on lawyers who negotiate contractual protection for a conventional fee

The revised reportable transaction rules in s. 237.3 raise the familiar issue of “lines” demarcating problematic and non-problematic transactions in fact being blurry. Suppose that a lawyer assisted in negotiating and drafting terms providing for contractual protection as contemplated by the contractual protection hallmark in s. 237.3(1) – reportable transaction – (c), and charged a fee based on hours of work, is the lawyer obligated to report on the basis that this “is a fee … in respect of any … transaction … that is in respect of contractual protection,” as set out in s. s. 237.3(2)(c)(ii)?

The broadest interpretation of s. 237.3(2)(c)(ii), that the adviser is required to report in these circumstances, “seems absurd and runs counter to the 2023 explanatory notes’ clearly expressed intention that the rules do not impose an undue compliance burden.”

It would be inappropriate to give the phrase “in respect of” its widest possible meaning (which Nowegijick described as “words of the widest possible scope”) and, instead, a narrower interpretation of s. 237.3(2)(c)(ii), according with the context and purpose of the reportable transaction rules, is required.

The 2012 Explanatory Notes, which clarify that Parliament intended advisers only to have a reporting obligation in respect of contractual protection hallmark where the adviser was providing the contractual protection, suggest that if a party to a transaction receives contractual protection, the adviser should have a reporting obligation only where the adviser receives a fee for providing the contractual protection.

Neal Armstrong. Summary of Jack Silverson, Matias Milet, Christopher Anderson and Andrew Spiro, “Canada’s Reportable Transaction Rules: A Measured Approach to Adviser Reporting,” Tax Notes International, Vol. 111, No. 29, July 15, 2023 under s. 237.3(2)(c)(ii).