On January 30 2025, the University of Toronto Faculty of Law hosted the inaugural John A. Tory Lecture—the lecture captivated the attendees with a thoughtful exploration of recent changes in the area of tax law. Distinguished speaker, former Supreme Court of Canada Justice and Dean Emeritus the Honourable Frank Iacobucci, addressed the significance of the new preamble to the general anti-avoidance rule (GAAR) introduced through Bill C-59 in June of 2024. The event was moderated by U of T Law Professor and Osler Chair in Business Law Benjamin Alarie and the dialogue underscored the dynamic interplay between statutory interpretation and tax policy.
The lecture took us on an intriguing exploration of the history of GAAR since its inception in 1988 through Section 245 of the Canadian Income Tax Act. Originally intended to prevent abusive tax avoidance while protecting legitimate transactions and their tax consequences, the role of the GAAR’s has evolved over time—a shift highlighted by Iacobucci during the lecture. Iacobucci pointed out the broadened scope of the new GAAR rules. Under the new framework, a transaction will be deemed an avoidance transaction if “one of the main purposes” is to secure a tax benefit regardless of whether the transaction is primarily legitimate. This presents a marked departure from the old rule, which permitted transactions to avoid GAAR if they were primarily for bona fide purposes, even if they produced a tax benefit. Iacobucci indicated that the new rule facilitates the application of GAAR to a wider range of transactions, thereby diminishing the likelihood that taxpayers will successfully contest GAAR assessments. The cases of Canada Trustco Mortgage Co. v. Canada (2005) and Deans Knight Income Corp. v. Canada (2023) were reviewed, demonstrating how the GAAR has been implemented in practice to strike a balance between tax fairness and commercial reasons.
The lecture then shifted focus to the 2024 update of the GAAR preamble, and its propensity to initiate new conversations about its impact on statutory interpretation and future case law. Iacobucci referenced a paper by U of T Law Professor Kent Roach titled “The Uses and Audiences of Preambles in Legislation” in which Professor Roach argues that preambles are essential for understanding legislative intent and informing judicial interpretation. Echoing the same points, Iacobucci contended that preambles create a link between the legislature and judiciary, offering insight into the underlying purpose of a law.
A light-hearted and engaging moment occurred during the 15-minute Q&A session. Professor Alarie jokingly mentioned that during his time on the bench, former Justice Iacobucci had never in fact decided a GAAR case. One of the audience members playfully inquired about how Iacobucci would have handled the new preamble if he had been a sitting judge at the time. Iacobucci pondered thoughtfully,suggesting that, as a judge, he would have likely taken into account the preamble in his judicial interpretation, in line with Professor Kent Roach’s astute assertions in his paper.
The evening concluded on a positive note, with attendees gaining a greater understanding of the intricacies of GAAR and the significant impact that even minor shifts in legislative language, like the preamble, can have on the interpretation of statutes.