Words and Phrases - "specific shares"

The taxpayer (“Alcan”), a Canadian public company listed on the TSX and NYSE and in Europe, incurred fees (mostly of investment dealers, law firms and a French lobbying and public relations firm in connection with its decision to make a hostile bid for a French public company (“Pechiney”) and the subsequent making and completion of that bid late in 2003. In 2004, the taxpayer determined to effect a butterfly spin-off of a portion of its (laminated products) assets, which resulted in the receipt by its shareholders of shares of a new public company (“Novelis”) in January 2005.

Pelletier JA confirmed the distinction between fees relating to acquisition and divestiture transactions of Alcan that were “incurred as part of Alcan’s decision-making process” (“oversight expenses”) and fees that “were incurred in the course of putting into effect Alcan’s decision once it had been made” (“implementation costs”) (para. 105). Accordingly, he confirmed Hogan J’s finding that the substantial portion of investment dealer fees incurred by the Alcan board that represented input to its decision to launch a hostile bid for a French public company (i.e., 65% of the Morgan Stanley fee and 35% of the Lazard Frères fee) was currently deductible, whereas the balance of the fees relating to assistance in the bid was a capital expenditure (and, thus, an addition to the adjusted cost base of the acquired shares).

In finding that the oversight expenses paid to the investment dealers would also have been deductible under s. 20(1)(bb), he rejected the Crown’s submissions that such fees were “commissions” and that they were not in respect of a “specific security” because they were in respect of all the Pechiny or Novartis shares, stating (at paras 89-90, and 96-97):

… In my view, neither “specific shares” nor “certaines actions” excludes the possibility that the provision applies to a sale of all of the shares of a particular issuer. Within the universe of all securities available to be purchased by an investor, all of the shares of particular issuer are “certaines actions” or “some shares” to the extent that they are less than the whole of all shares which an investor might purchase. They are also “specific shares” in the sense that they can be identified with precision.

To the extent that the Minister argues that paragraph 20(1)(bb) only applies to a purchase of some shares of an issuer, she should be able to identify some statutory purpose which would justify a distinction between advice related to the purchase of some shares of an issuer as opposed to advice with respect to the purchase of all the shares of that issuer. She has not done so. …

He also rejected the Crown's submission that s. 40(1)(a) should prevail over s. 20(1)(bb) as the more specific provision, stating (at para. 97) that "paragraph 40(1)(a) is no more specific than paragraph 20(1)(bb)."