A Federal Court of Appeal judge ruled in 2010 that a trust set up in the Caribbean by the wife of Liberal leadership candidate Paul Antle was a "sham" used to incorrectly shield more than $1 million from capital gains taxes.

That decision went a step further than a previous Tax Court of Canada ruling.

In 2009, Tax Court Judge Campbell Miller found that the trust was not a "sham," but dismissed Antle’s appeal of a tax ruling that went against him.

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Paul Antle, who ran unsuccessfully for the Liberals in the 2006 federal election, is interested in leading the provincial party. (CBC)

Antle appealed the matter all the way to the Supreme Court of Canada, which declined to hear the case last year.

On Friday, Antle jumped into the race for the leadership of Newfoundland and Labrador’s Liberal Party. He becomes the fifth candidate for the job.

Asked about the tax case by CBC News, Antle called the rulings unfair.

"First of all, let's just be clear — I have always paid my taxes," Antle said.

He says he got caught up in red tape caused when tax regulations were changed retroactively.

"In 1999, when we did file, we did file in accordance with the rules," he said.

"Subsequent to 1999, the rules were changed by the government of the day and the changes were made retroactive. It was unfair in my mind, and on principle we decided to fight it."

Antle maintains he did nothing wrong. He says he paid all the taxes he owed before launching his court appeal.

'We lost, but that passion for fighting the injustice of a retroactive law change — that passion I will bring to the Liberal Party of Newfoundland and Labrador, and to the people of Newfoundland and Labrador. When something is unfair and unjust I will fight it.'—Paul Antle

"We lost, but that passion for fighting the injustice of a retroactive law change — that passion I will bring to the Liberal Party of Newfoundland and Labrador, and to the people of Newfoundland and Labrador," he said.

"When something is unfair and unjust I will fight it."

This is not Antle’s first foray into the political realm.

The St. John's businessman — who has made millions in a career that started in the waste management field — unsuccessfully ran for a St. John’s seat for the Liberals in the 2006 federal election.

Trust set up in Barbados

The genesis of the tax matter in question dates back to 1999, when Antle sold his shares in a company to an arm’s length purchaser.

Antle "embarked on a plan known in tax circles as a capital step-up strategy" to shelter the resulting capital gain from tax, according to the 2010 Federal Court of Appeal ruling.

"In summary, the plan was for the appellant (Antle) to settle a Barbados trust in favour of his wife, to convey the subject shares to the trust which would then sell the shares to his wife, who in turn would sell them to the arm’s length purchaser," Federal Court of Appeal Judge Marc Noel wrote in the decision.

"This series of transactions was to take place in sequence in the course of the same day so that the proceeds of disposition would find their way back into the appellant’s newly incorporated business the next day by way of a loan from his wife."

Based on the interplay between the federal Income Tax Act and a tax treaty between Canada and Barbados, Antle took the position that no tax was payable in Canada as a result of the transactions.

According to the judge, both sides agreed that a taxable capital gain of more than $1 million would have otherwise applied to the sale of shares.

'I respectfully conclude that the Tax Court judge was bound to hold that the trust was a sham based on the findings that he made.'—Federal Court of Appeal Judge Marc Noel

"I respectfully conclude that the Tax Court judge was bound to hold that the trust was a sham based on the findings that he made," Noel wrote in the 2010 Federal Court of Appeal decision.

The Tax Court judge did not find the trust to be a "sham," but did not grant Antle’s appeal of a previous tax ruling.

Judge Campbell Miller said the "sole purpose" of the series of transactions was to obtain a tax benefit.

"There was no bona fide purpose of the Barbados Spousal Trust other than to obtain the tax benefit," Miller wrote in his decision.

"I find the only motivation for this trust was to avoid tax, which would result in more money in Mrs. Antle’s hands. There was no element of estate planning. Mr. Antle could give the shares to his wife, pay the tax, leaving his wife $1.1 million, or he could settle a Barbados Spousal Trust, pay no tax, and leave $1.4 million in his wife’s hands. The purpose of the transaction is self-evident."

Antle’s lawyers had argued that rules applying to this type of transaction were not amended until 2000 — after the one in question took place.