Citation: 2010 TCC 318
Date: 20100616
Docket: 2009-1659(IT)G
BETWEEN:
STEPHEN CUDMORE,
Appellant,
(Applicant in the Motion)
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Hershfield J.
The Motion
[1] The Appellant (Applicant
in the Motion) brings a Motion for the Reply to the Notice of Appeal (“Reply”) to
be struck on the basis that it discloses no reasonable grounds for opposing the
appeal.
[2] The Motion is brought
under the Tax Court of Canada Rules (General Procedure) - Rule
58(1)(b).
58. (1) A party may apply to the Court,
[…]
(b) to strike out a pleading because it discloses no
reasonable grounds for appeal or for opposing the appeal,
[…]
[3] Striking the Reply
will have the effect of allowing the appeal. To succeed, the defects in the
Respondent’s pleading must be plain and obvious and the threshold required to
find that it reveals no reasonable grounds for opposing the appeal is well-established
to be high.
The Underlying Transactions,
Factual Assertions and Assumptions
[4] The transactions
that are the subject of the appeal are described in the Notice of Appeal. The
following is a summary of the relevant elements of those transactions as
described by the Appellant:
-
The Appellant and his wife carried on business in common with a view
of profit as members of Pacific North West Business Connections (a “Partnership”
or “PNW”);
-
The
Partnership provided sales and management services to Direct Equipment
West Ltd. (“DEW”), a British Columbia company which carried on
the business of designing, manufacturing, engineering, marketing and
selling certain systems and equipment;
- The Appellant
and his wife had a two-thirds, one-third interest in the Partnership,
respectively;
-
Both
the Appellant and his wife provided services to the Partnership. Mrs. Cudmore
provided administrative, bookkeeping, general office services and a variety
of other services. The Appellant met with customers or potential customers
of DEW, provided sales and marketing ideas and services and completed
other duties required for the Partnership’s overall operation;
-
During
the relevant period, the Partnership earned net income in excess of $200,000
in 2002, $300,000 in 2003 and $400,000 in 2004;
-
For
his 2002, 2003 and 2004 taxation years, the Appellant reported net Partnership
income of two-thirds of the Partnership’s net income; and
- The
Minister reassessed the Appellant’s 2002, 2003 and 2004 taxation years to reduce
the Appellant’s Partnership income to nil for each of 2002, 2003 and 2004 and
for each such year added employment income, allegedly earned from DEW, in the
amounts paid to the Partnership for that year (referred to by the Appellant as the
“Alleged Employment Income”).
[5] The Notice of
Appeal then describes the issue as follows:
The issue to be decided on this appeal is
whether the Appellant earned from an office or employment the Alleged
Employment Income.
[6] In the Reply, the Respondent
admitted that:
-
the
Appellant and his wife agreed to a two-thirds, one-third interest in the
Partnership, respectively;
-
the
Appellant and his wife set up a Partnership called Pacific North West Business Connections;
-
the Appellant
met with customers or potential customers of DEW, provided sales and marketing
ideas and services and completed other duties;
-
the
Appellant reported Partnership income; and
-
the
Minister reassessed the Appellant to reduce his Partnership income to nil for
each of 2002, 2003 and 2004 and for each such year added employment income
earned from DEW in the amounts being referred to as the Alleged Employment
Income.
[7] In the Reply, the
Respondent denied that:
-
the
Partnership provided sales and management services to DEW;
-
the
Partnership earned any income in 2002, 2003 and 2004;
-
the
Partnership set up by the Appellant and his wife called Pacific North West
Business Connections carried on business in common with a view to profit;
-
any of the services
provided by the Appellant were for the Partnership’s overall operation; and
-
the Appellant reported
the net business incomes for 2003 and 2004 as pleaded by the Appellant.
[8] Further, the Reply
sets out the assumptions relied on by the Minister:
14.
In determining the
Appellant’s tax liabilities for the 2002, 2003 and 2004 taxation years, the
Minister made the following assumptions of fact:
a)
at all material
times, the Appellant was married to Marilyn Cudmore (the “Spouse”);
Pacific North West Business Connections
b)
during the 2002, 2003
and 2004 taxation years, the Appellant and the Spouse had a partnership called
Pacific North West Business Connections (“PNW”);
c)
the Appellant had a
2/3 interest in PNW and the Spouse had a 1/3 interest in PNW;
d)
in computing his
income for the 2002, 2003 and 2004 taxation years, the Appellant reported net
business income of $142,900, $218,922 and $260,371, respectively (the “Reported
Amounts”) from PNW;
e)
the Reported Amounts
represented the Appellant’s 2/3 interest in PNW;
f)
the Appellant
reported gross partnership income of $239,822, $406,021 and $472,764 and net
partnership income of $213,284, $347,926 and $411,705 for the 2002, 2003 and
2004 taxation years, respectively, for PNW;
g)
PNW was not set up as
a separate business entity;
h)
at all material
times, PNW’s only client was Direct Equipment West Ltd. (“DEW”);
Direct Equipment West Ltd.
i)
during the 2002, 2003
and 2004 taxation years, DEW was involved in the business of equipment rentals,
sales and manufacturing;
j)
the Appellant was a
25% shareholder of DEW;
k)
Rick Garland was the
other 75% shareholder of DEW;
l)
the Appellant was a
director and officer of DEW and held the position of president;
m)
during the 2002, 2003
and 2004 taxation years, PNW had a contract with DEW for the Appellant to
provide services to DEW;
n)
the Appellant was
responsible for the day to day operations of DEW;
o)
the Appellant
directed that cheques be issued to PNW by DEW;
p)
DEW issued cheques
payable to PNW totalling at least $256,610, $384,850 and $463,808 in the 2002,
2003 and 2004 taxation years, respectively (the “Amounts”);
q)
the Amounts were
given to PNW in respect of services performed by the Appellant;
r)
the Appellant
received the Amounts as employment income from DEW for the 2002, 2003 and 2004
taxation years;
s)
the Appellant was an
employee of DEW during the 2002, 2003 and 2004 taxation years;
t)
the Appellant did not
earn management fees from DEW paid via PNW;
u)
the Appellant did not
incur any expenses or provide any tools in the performance of his services for
DEW;
v)
the Appellant used
DEW staff for work related to PNW;
w)
DEW paid for all of
the Appellant’s travel and business expenses, including a replacement worker
while the Appellant was on vacation;
x)
the Appellant
received benefits that were available to all employees of DEW, such as extended
medical and dental benefits, group pension plan, annual vacations, and bonuses;
y)
any amounts that the
Appellant invested in DEW was due to his shareholdings in DEW and were not
investments in PNW; and
z)
the Spouse did not
perform any services for DEW.
[9] The Reply states
the issue to be decided as follows:
The issue is whether the Appellant
received the Amounts as employment income from DEW.
[10] The Reply states
that the grounds relied on are that the Appellant received the Amounts as
income from an office or employment under subsection 5(1) of the Income Tax
Act (the “Act”).
The Appellant’s Argument
[11] The Appellant
submits that the Reply does not disclose any reasonable grounds for opposing the appeal.
[12] The assumptions of
the Minister, taken to be proven, are:
-
the Appellant
and his wife had a Partnership in which he had a two-thirds interest; assumptions
14(b) and (c)
-
the
Partnership’s net income was reported and the Appellant reported business
income which represented his two-thirds share in the Partnership; assumptions 14(d),(e)
and (f)
-
the
Partnership’s client was DEW; assumption 14(h)
-
during
the subject years the Partnership had a contract with DEW for the Appellant to
provide services to DEW; assumption 14(m)
-
the
Appellant provided services to DEW; assumption 14(q); and
-
DEW
issued cheques to the Partnership in the amounts reported as the Partnership’s
gross income and were given in respect to services provided by the Appellant; assumptions
14(p) and (q).
The Appellant argues that these facts,
taken to be true, reveal there is no basis for the assessment. The Crown does
not dispute the existence of the Partnership nor does it dispute that the Partnership
was paid compensation by DEW under an agreement for services performed for it
by a member of the Partnership. Everything the Appellant would have been required
to prove has been admitted to be true. Further, it was argued that amendments
to the pleadings could only contradict the factual basis of the assessment and
should not be allowed.
[13] The Appellant
alleged 4 defects in the Reply that alone or together would demonstrate that it
did not reveal a basis, or explain the reasons, for not accepting the plain and
obvious tax result that flowed from the transactions admitted to in the pleadings.
The pleadings simply establish the outcome sought. Without more, the Appellant
does not know what the case is that he must meet.
[14] The first alleged
defect was that the Reply does not provide any explanation of how the Alleged
Employment Income was received by the Appellant as employment income when the
Amounts were paid to the Partnership. An elaboration of this alleged defect was
presented largely as a series of questions with some possible answers which
were not in the Reply and the absence of which is purported to underline the
significance of the defect. A summary of such elaboration is as follows:
- It
appears the assessments were effected as if the Partnership did not exist. Is
the existence of the Partnership being contested?
- What
are the facts and arguments that the Respondent relies on to defend the
correctness of the assessment? The absence of such facts and arguments is a
plain and obvious defect.
- Why
was Partnership income effectively eliminated? Why is the form of the transactions
being ignored?
- The
Appellant needs to know the answer to these questions to advance proper
evidence to challenge the assessment. Possible answers not included in the
Reply are:
a.
The
Reply does not allege that the contract between the Partnership and DEW was
defective, inoperable, a sham, or in any other way legally or factually
ineffective;
b.
The
Reply does not allege that the Partnership was:
i.
a
sham;
ii.
a
simulacrum;
iii.
a
mere puppet of the Appellant;
iv.
the
Appellant’s alter ego;
v.
acting
as the Appellant’s agent;
vi.
receiving
indirect payments for the Appellant;
vii.
receiving
the Amounts for the Appellant in trust; or
viii.
receiving
payments that logistically were received by the Appellant as employment income;
and,
c. The Reply does not
raise or rely upon any re-characterization provisions of the Act such
as subsection 103(1.1) or the general anti-avoidance rule (the “GAAR”)
to support the reassessment of Partnership income.
[15] The second alleged
defect, which purports to illustrate that the Appellant does not know the case
he has to meet, is that the assessment might be taken as resting on the theory that
the Appellant is an employee of the Partnership. Is the Minister challenging
the line of authorities that say payments made by a partnership to a partner cannot
be employment income? That is, the Reply is so defective it does not identify
the underlying basis of the assessment.
[16] The third alleged
defect suggests another possible theory that the Respondent might be relying on
as the basis for the assessment. If the Partnership was not set up as a
business entity (assumption 14(g)), was it a flow-through entity by which the
alleged character of the payment as employment income was maintained? Such an
underlining issue, for which there is no legal authority, has not been
identified.
[17] The last alleged
defect is that a contract between the Appellant and DEW has not been alleged.
The assumption that the Appellant was an employee of DEW (assumption 14(s)) is
a question of law and cannot be pleaded as an assumption. Even where it is a
question of mixed fact and law the Minister can only assume the factual
components relating to the question. Without
an allegation of a contract between the Appellant and DEW (the nature of which
might have been in dispute) there is no case to meet.
[18] The Appellant argued
that saving the Reply by allowing the Respondent to redraft it would not be
appropriate in this case. The Appellant referred to the “Sweet Factors” in suggesting that the defects in the
case at bar did not warrant my allowing amendments to the Reply.
[19] The Appellant also
referred to subsection 152(9) of the Act which allows the Minister to
advance an alternative argument in support of an assessment at any time. It was
submitted that such arguments still need to be expressed in the Reply in order
for the Appellant to know the case he has to meet. Unless the Sweet Factors permit it,
the failure to plead in express terms the case to be met should not be
rectified by allowing the pleadings to be redrafted. The Appellant suggests
that the decisions in Continental Bank of Canada v. Canada and Johnston v. Canada (Minister of National
Revenue - M.N.R.) still carry weight and the
duty to disclose set out in those cases should not be taken as overridden by
subsection 152(9) in all cases.
[20] The Appellant also
points out that the defects in the Reply are not open to being cured by a
demand for particulars. Rule 52 allows such a demand in respect of an
allegation made in a pleading. It does not allow for particulars of allegations
not made. The Appellant is not expected to have to ask for the allegations it
must meet. If they are the basis of the assessment, they must be disclosed to
avoid what has happened here; namely, pleadings that give a notion of the issue
but no idea of the case to meet.
[21] Considering that there has been no request for an Order for Particulars
and that the Respondent did not argue for such an Order as an alternative to my
granting the Appellant’s Motion, I will not deal with the question other than
to say that I am of the view that the Appellant is correct on this point.
Particulars should not be resorted to as a means of discovering the underlying
basis of an assessment. If the basis is missing or unclear, providing it, or even
expounding on it in some cases, better comes under a discussion of amendments
to pleadings.
[22] The Appellant also argued
that the Motion was not being brought too late. However, the Respondent has not
questioned the timeliness of the Motion. Accordingly, I will not deal with the
Appellant’s argument on this point although I see no compelling reason, in any
event, in this case, to think the Motion should fail simply because it was
brought after the close of pleadings.
The
Respondent’s Argument
[23] The Respondent
argued that the Reply was not deficient and submitted that the Appellant is
simply arguing the strength of his case, which is a matter for the trial judge
to determine.
[24] As well, the
Respondent argues:
1.
Rule
58(1)(b) should not be used unless allowing the case to go forward
amounts to an abuse of process.
2.
The
Appellant wants the Respondent to plead arguments and evidence as assumptions,
which the Respondent argues is not the purpose of the pleadings. As well, it was observed that evidence
that supports the Minister’s position that the services purportedly performed
by the Partnership were not, in fact, performed by it, may yet be obtained
during discoveries or otherwise and can be brought at trial.
3.
The
Minister has pled as assumptions the factual components concerning the
relationship between the Appellant and DEW that were relied on. Based on these
assumptions (for example, assumptions 14(l), (n) and (u) through (x)) it is
open for the trial judge to make a finding that the Appellant was an employee
of DEW.
4.
The
Respondent alleges that it is improper to strike an entire pleading on the
basis of essentially one defect. There is a valid and justiciable issue raised
in the Reply; namely, whether the Appellant received the Alleged Employment
Income as employment income from DEW. The Respondent’s ability to seek
adjudication of this issue should not taken away merely because more
information could have been provided.
5.
The
Respondent submitted that the Appellant has not met the high threshold required
to succeed on the Motion.
[25] The Respondent also made
an alternative request in the event I agreed with the Appellant that the Reply
did not identify the case to be met. As an alternative to allowing the Motion,
the Respondent sought an Order that the Respondent be allowed to amend the
Reply. As noted, the Appellant opposed the appropriateness of such an Order.
Analysis
[26] The Respondent is
correct. The Motion seeks to have me decide the case based on the strength of the
Appellant’s arguments which are aimed at defeating the assessments.
[27] While I acknowledge
that the Reply is not without its weaknesses, that is not to say that it is so deficient
that it discloses no
reasonable grounds for opposing the appeal.
[28] It is clear that the
form of the transactions as documented is not being recognized by the
Respondent. The case I draw from the Reply is that the Appellant is being
treated as the constructive recipient of the Amounts. While I cannot bind the
trial judge as to the issue to be addressed, I feel sufficiently comfortable
with that finding to at least say that it is not plain and obvious to me that the
Minister will inevitably fail in upholding the assessments. It remains open for
the Appellant to prove that the transactions were carried out in accordance
with and pursuant to the documented arrangements and argue that the generally accepted
law governing the tax consequences arising from those transactions should thereby
be recognized.
[29] That is, it is open
for the Appellant to argue that the form of the transactions in this case
should mean that the taxpayer will not be regarded as an employee of DEW simply
because he would be so regarded if the form were different.
[30] Further, while I have
suggested the case the Appellant might have to meet, it is open for the
Respondent to argue that the Reply raises a different basis for the assessment
and that, in any event, subsection 152(9) should permit an alternate basis to
be raised at any time. In such circumstances it is pre-mature for me to strike
the Reply.
[31] As well, an action
should not be struck simply because it might be novel in terms of there being
no previous authority to support it. It
is always open for a court to allow an appeal to proceed simply as a means to
test whether a fresh approach to this type of arrangement is possible. That, in
this case, may be sufficient reason alone to allow the appeal to proceed.
[32] Still, I feel
compelled to elaborate on my suggestion that the Appellant is being treated as
the constructive recipient of the Amounts. As I have said, I appreciate that,
as the Motion’s Judge in this matter, I can neither dictate the issue to be
resolved nor bind the hands of a trial judge who might hear this appeal. On the
other hand, given that I have relied to some extent on this view of the
Respondent’s case, I feel it is appropriate to elaborate somewhat on my reasons
for arriving at this understanding.
[33] Consider the
following facts that are taken to be true:
-
the Partnership
was not set up as a separate business entity; assumption 14(g)
-
the
Appellant directed that cheques be issued to the Partnership by DEW; assumption
14(o)
-
the
Amounts were given to the Partnership in respect of services performed by the
Appellant; assumption 14(q)
-
the Appellant
received the Amounts; assumption 14(r)
[34] If the assumptions
said nothing more, would the Appellant be able to suggest that those facts do
not disclose the basis for the assessment? I think not.
[35] To defeat the
assessment, the Appellant’s evidentiary task would be:
-
to
establish the existence of the Partnership as a separate business entity; and
-
to
refute that the cheques were merely “directed” to the Partnership but rather were
paid to the Partnership as consideration for services provided by it pursuant
to the contract.
[36] The question then is
whether other assumptions of the Minister sufficiently relieve the
Appellant of these evidentiary burdens so as to make the Respondent’s case
clearly futile; for example, the assumption that DEW was a client of the
Partnership (assumption 14(h)).
[37] It is not plain and
obvious to me that any such other assumptions of the Minister are
sufficient to make the Respondent’s case clearly futile. Further, even if such other
assumptions assist the Appellant, it is not certain that the Respondent will
not be able to bring evidence, if it exists, to support new damaging assertions,
even ones contradicting those assumptions.
[38] As well I note,
looking beyond the assumptions, that the denials in the Reply set out in
paragraph 7 of these Reasons, deny that the Partnership provided services to
DEW, that it earned any income from DEW or that the Appellant provided services
to the Partnership. These are assertions that support the view that the
Appellant earned the income in question and, having directed how it was to be paid,
is properly treated as the constructive recipient. They might also be
assertions in respect of which the Appellant will argue the burden of proof
rests with the Respondent.
[39] Indeed, much of the
challenge in this appeal may turn on issues in respect of the burden of proof
considering that the Appellant may simply rely, at his risk, on the position
that the Minister’s own assumptions have prima facie demolished any
factual basis for supporting the assessment thereby shifting the entire burden of
proof in the appeal on the Respondent. This remains to be seen as that issue
cannot be resolved by me.
[40] Before concluding
these Reasons it is necessary that I deal with the issue of the Respondent still
being able to raise fresh arguments in support of the assessment. I have noted that
it is open for the Respondent to argue that this can still be done pursuant to subsection
152(9) which was added in response to an issue raised in Continental Bank of Canada.
[41] In that case Bastarache J. wrote:
10 The applicable limitation period under
the Act for assessing a taxpayer is four years from the date of issuance of
Revenue Canada’s Notice of Reassessment (ss. 152(3.1) and 152(4) of the
Act). As a result, the latest that the Minister could have reassessed the
Bank for the recapture of cost allowance was October 12, 1993. The Crown
is not permitted to advance a new basis for reassessment after the limitation
period has expired. The proper approach was expressed in The Queen v.
McLeod, 90 D.T.C. 6281 (F.C.T.D.), at p. 6286. In that case, the
court rejected the Crown’s motion for leave to amend its pleadings to include a
new statutory basis for Revenue Canada’s
assessment. The court refused leave on the basis that the Crown’s attempt
to plead a new section of the Act was, in effect, an attempt to change the
basis of the assessment appealed from, and “tantamount to allowing the Minister
to appeal his own assessment, a notion which has specifically been rejected by
the courts”. Similarly, the Federal Court of Appeal has described such
attempts by the Crown as “a belated attempt to put the appellant’s case on a
new footing” (British Columbia Telephone Co. v. Minister of National Revenue
(1994), 167 N.R. 112, at p. 116).
[42] Subsection 152(9)
was enacted to ensure that the basis of an assessment could be changed by
adding new or alternative arguments at any time, even beyond the normal
assessing period:
152(9) Alternative basis for assessment -- The Minister may advance an alternative
argument in support of an assessment at any time
after the normal reassessment period
unless, on an appeal under this Act
(a)
there is relevant evidence that the taxpayer is no longer able
to adduce without the leave of the court; and
(b)
it is not appropriate in the circumstances for the court to order that the
evidence be adduced.
[43] While this provision seems quite broad, the Appellant
argued that limitations on its use have been imposed that would prevent the
Respondent from changing the basis of the assessment in the present case.
[44] I agree there are circumstances in which an alternate
argument could not be appropriately raised. Such limitations were set out in Anchor Pointe Energy Ltd..
[39] [ …] This case is unlike cases
such as Pedwell v. The Queen, 2000 D.T.C. 6405 (F.C.A.), where the
Minister sought to take into account different transactions than the ones that
formed the basis of the reassessments that were made within the normal
reassessment period. I do not say that taking into account other transactions
is the only thing the Minister cannot do after expiry of the normal
reassessment period. Anything that increases tax payable from what would have
been the case prior to expiry of the normal reassessment period would be
objectionable.
[45] There is no suggestion in the case at bar that any new
basis for the assessment would either take into account other transactions or
increase tax payable relative to the assessments in issue. Time sensitivity to
raising a new basis for the assessments therefore does not seem to be an issue.
[46] That being the case, it might be suggested that this Court
allow or require as early advance notice as possible of a change on the basis
of an assessment so as to inform an appellant of the case to meet and thereby minimize
the prejudice imposed by such a permissive regime.
[47] However, I tend to agree with the Appellant in this
case. I do not agree that subsection 152(9) can be given such scope as to give
the Minister a free hand to amend pleadings after pleadings have closed. Considerations
for allowing amendments to pleadings have been considered by this Court and
have not been necessarily altered by the introduction of subsection 152(9).
[48] The leading authority on whether or not an amendment
should be allowed to save a defective pleading is Sweet.
In that case Justice Décary set out
considerations for allowing amendments that have, as noted above, become known
as the Sweet Factors. The question posed was whether the pleading was "so
defective that it cannot be cured by simple amendment". On this question
he wrote:
[21] It is not
the duty of a judge to redraft pleadings. It is his or her duty, however, to
closely examine a proceeding before determining that it cannot be saved through
proper amendments. To use the words of my brother Stone in Krause (supra at
493), the judge seized with a motion under rule 419(1)(b) and (c) must decide
whether the document is “so defective that it cannot be cured by simple
amendment”. This determination requires a balancing act which cannot be subject
to any definite norms. Each proceeding is to be assessed on its own merits,
with consideration being given to, inter alia, the personal situation of the
party, the issues and arguments raised, the manner and tone in which they are
raised, the number and proportion of allegations that are defective and the
readiness of the amendments needed.
(Emphasis added.)
[49] The Respondent in the case at bar was not ready to put
forward an amended Reply. After being
served with the Motion to strike the Reply, no motion was filed or served
seeking an Order to permit the Minister to amend the Reply in order to advance
a specific basis to support the assessment that would answer the Appellant’s
concerns. No such
Order was believed to be necessary. Indeed, no attempt was even made at the
hearing to suggest an alternate basis to
support the assessment. What was requested at the hearing of the Appellant’s
Motion was only that I allow the Respondent to amend the Reply as an
alternative to my simply allowing the Motion if I agreed that the Reply was
that deficient. That is, if I thought the Minister needed help to save the
assessment, I should give counsel for the Respondent the opportunity to review
her client’s files and see what assertions, and possibly fresh assumptions,
might now be made.
To allow this as a response to the Motion would be an abuse of process and violate
the requirement of procedural fairness. Indeed, the requirement of procedural
fairness, in my view, goes to the heart of the “appropriateness” limitation on
the use of subsection 152(9) as prescribed in paragraph 152(9)(b). One cannot use an amendment
to a pleading, obtained under the umbrella of that subsection, where its
application would otherwise be inappropriate.
[50] Further, in this case, where some assumptions actually assist
the Appellant, it is, in my view, best left to the trial judge to assess the
wiggle room the Respondent should be allowed as it relates to burden and evidentiary
onus issues in respect of new assertions that contradict those assumptions. That is, where
the Reply by express admissions narrows the grounds upon which the appeal need
be opposed, any leeway to expressly broaden the basis for the assessment should
be left with the trial judge.
[51] Put another way, I
see no compelling reason to afford the Minister any opportunity to attempt to cooper-up its case with amendments after
having the benefit of seeing the Appellant’s argument on the Motion. The Reply
must be taken as accurately setting out the Minister’s assessing position. Indeed,
as noted, it was the Respondent’s position that the Reply was not defective.
Accordingly, if, in fact, the Reply assists the Appellant’s cause, that will
remain the case at least for the time being.
[52] Having added “for
the time being”, I again recognize that I cannot bind the hands of the trial
Judge or this Court should a Motion to amend the Reply be forthcoming at a
future date. The authorities that speak of costs as remedying the prejudice of
amending pleadings might, for example, be followed as opposed to the views I
have just expressed.
[53] Lastly, I note that in not allowing the Motion, I am recognizing
the height of the bar that must be met to allow striking an entire pleading so
as to award one party a victory before the evidence is in and final arguments
are made. The height of the
bar was confirmed by the Federal Court of Appeal in Sweet as that laid
out in Creaghan
Estate:
[…] a presiding judge should not make such an order unless it
be obvious that the plaintiff's action is so clearly futile that it has not the
slightest chance of succeeding […]
[54] Such high threshold was also
expressed by the Supreme Court of Canada in Canada (Attorney
General) v. Inuit Tapirisat of Canada where Estey J. wrote:
[…] On a
motion such as this a court should, of course, dismiss the action or strike out
any claim made by the plaintiff only in plain and obvious cases and where the
court is satisfied that ‘the case is beyond doubt.’[…]
[55] As I have said, the Respondent’s case is not clearly futile and its outcome is not
beyond doubt. Striking
a pleading so as to award one party a victory at this stage of an appeal is a
severe measure only to be taken in circumstances that speak loudly for its
invocation such as, for example, the case in Hovey Ventures Inc. v. Canada. In that case the appellant raised a “natural person”
argument presented in a “manner and tone” more in keeping with the advancement
of an anti‑tax campaign than an assertion of the incorrectness of the
assessment. There, the striking of the appeal was warranted as the outcome was
“beyond doubt”.
[56] Accordingly, for all
these reasons, the Motion is dismissed. Costs shall be in the cause.
Signed at Ottawa, Canada
this 16th day of June 2010.
"J.E. Hershfield"
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