Rectification Is Not a Safety Net: A Post-Pyxis Reminder on Drafting Discipline and Due Diligence
“Wait – we’ll just fix it with a rectification order, right?”
That line, often said too casually in the back-and-forth between corporate clients, tax advisors, and counsel, was exactly what made me revisit the Pyxis Real Estate Equities Inc. v. Canada (Attorney General), 2025 ONCA 65 (“Pyxis”) decision.
In the months since that case came down, I’ve seen a troubling pattern crop up again: clients leaning heavily on rectification as a fallback plan for poor drafting, misaligned tax planning, or hastily prepared resolutions. In some cases, advisors even recommend rectification pre-emptively, as if it were a routine cleanup tool rather than a remedy of last resort. It’s worth revisiting Pyxis as a wake-up call, not just legally, but culturally, to remind us all that sloppiness is not salvageable by wishful filings.
The Pyxis Case: A Brief Recap
In Pyxis, the Ontario Court of Appeal dismissed the taxpayer’s appeal and upheld the decision that rectification could not be granted to change a share transfer agreement that had adverse tax consequences. The core issue? The parties sought to amend their written agreement to reflect a different tax outcome – one they intended, but failed to document properly.
The Court was clear: rectification is not a mechanism to fix poor drafting or plug gaps in tax planning. It is meant to reflect a definite and ascertainable prior agreement – not to manufacture one after the fact.
The Real Problem: “Intent” Isn’t Enough
What Pyxis underscores is that good intentions don’t excuse bad execution. Too often, I’ve seen:
- Share transfer agreements that don’t align with underlying tax plans
- Corporate reorganizations rushed through year-end with only verbal direction and patchy documentation
- Advisors relying on unsigned memos or vague instructions instead of clear, contemporaneous agreements
The belief that courts will “understand what we meant” and bless a retroactive fix is not just flawed, it’s legally risky and increasingly unsympathetic under post-Fairmont[1] and Jean Coutu[2] jurisprudence.
Pyxis reaffirms that:
- Rectification is not a backup plan. It is an equitable remedy with narrow scope.
- You need concrete, contemporaneous evidence of the true agreement. That includes signed resolutions, emails, or detailed planning memos.
- Courts will not bail out negligence. If the parties could have caught the issue with basic diligence or proper review, rectification will not apply.
In Pyxis, the taxpayer could not demonstrate that the written agreement mistakenly failed to reflect a specific and agreed-upon intent. Instead, they sought to recharacterize the transaction retroactively to align with better tax treatment. The Court was not buying it and neither should we in practice.
The Takeaway: Draft Carefully. Review Diligently. Document Everything.
As lawyers and advisors, we owe it to our clients not just to chase outcomes but to build processes that stand up under legal scrutiny. The Pyxis decision is not just a technical ruling; it’s a broader indictment of “fix-it-later” culture.
So the next time you are told, “We’ll just clean it up with rectification,” remember: unless your evidence is airtight and your intent provable beyond doubt, there’s no lifeboat waiting.
If you need help reviewing corporate structures or share transactions before they’re finalized? Let’s talk.
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.
Ghazal Hamedani, Hons. B.A. , LL.B, Partner
Ghazal Hamedani is a partner at Kalfa Law Firm. Ghazal’s practice is focused in corporate-commercial and private M&A law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law.
© Kalfa Law 2025
The above provides information of a general nature only. This does not constitute legal or accounting advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.
[1] Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56
[2] Jean Coutu Group (PJC) Inc. v. Canada (Attorney General) 2016 SCC 55
