Citation: 2006TCC16
Date: 20060111
Docket: 2005-1474(IT)G
BETWEEN:
GLOBTEK INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard on January 10, 2006, at Toronto, Ontario
By: The Honourable Justice D.W. Beaubier
Appearances:
|
Counsel for the Appellant:
|
Richard G. Fitzsimmons
|
|
Counsel for the Respondent:
|
André LeBlanc
|
____________________________________________________________________
REASONS FOR ORDER AND ORDER
Beaubier, J.
[1] This Notice of Motion dated December 9, 2005, was heard in Toronto, Ontario, on January 10, 2006. It states:
THE MOTION IS FOR an Order:
(1) striking paragraphs 10(j), 11.1 and 12 (g) and (h) from the Respondent's Further Amended Reply filed November 22, 2005;
(2) allowing the appeal in respect of the appellant's 1998 taxation year and vacating the reassessment thereof;
(3) allowing the appeal in respect of the penalties assessed under subsection 163(2) of the Income Tax Act in the appellant's 1998 and 1999 taxation years and deleting those penalties;
(4) costs of this motion on a substantial indemnity scale, plus GST; and
(5) such other relief as this Honourable Court deems just.
THE GROUNDS OF THE MOTION ARE:
(1) the paragraphs and subparagraphs the appellant asks to be struck from the Further Amended Reply are improperly pleaded, in that:
(a) subparagraph 10(j) alleges a ministerial assumption of a conclusion of law as it if it were an assumption of fact;
(b) paragraph 11.1 pleads evidence, not material fact, and was added as an amendment to the Amended Reply after the November 8, 2005 Order of the Honourable Justice Bowie, though not allowed by the Order;
(c) subparagraphs 12(g) and (h) plead conclusions of law with no material fact to support them, the allegations therein are scandalous, frivolous or vexatious and may prejudice or delay the fair hearing of this appeal;
(2) the Further Amended Reply discloses no ground for opposing the appeal for the appellant's 1998 taxation year, in that it admits that year was statute barred but does not allege any misrepresentation attributable to neglect, carelessness or wilful default or fraud;
(3) the Further Amended Reply discloses no ground for opposing the appeal in respect of the subsection 163(2) penalties, in that it alleges no fact that could support a finding that the Appellant knowingly, or under circumstances amounting to gross negligence, made a false statement or omission in its returns for its 1998 or 1999 taxation years; ...
[2] The "Further Amended Reply" dated November 22, 2005 was filed pursuant to an Order of Bowie, J. dated November 8, 2005, in which he struck out various subparagraphs of the Amended Reply. Respecting subparagraphs 10(e) and (f), he granted the Respondent leave to plead the facts that the Minister actually relied on that these subparagraphs address.
[3] The subparagraphs in questions, with their leads, read as follows:
...
10. In so reassessing the Appellant for its 1998 and 1999 taxation years and in confirming the reassessments, the Minister relied on the following assumptions: ...
j) The appellant failed to declare the income of $85,301 and $221,106 earned under the contracts during its 1998 and 1999 taxation years respectively; ...
11.1 On August 29, 2002, the Appellant advised the Minister:
a) That it had only one contract in 1997 and 1998;
b) That the contract was with CMC, a United States
company operating in Germany;
c) That it had no contract and was inactive in 1999; and
d) That it only had two bank accounts namely Bank of Montreal accounts #1253-971 and #4638-913 and denied the existence of any Belgium bank account.
12. The issues are ...
g) If the answer to 12(f) is affirmative, whether the Appellant can claim its own turpitude in order to contradict written contracts and invoices attesting of business being carried on by the Appellant and avoid tax consequences in Canada;
h) Whether the Appellant's appeal rest upon and is tainted with illegality, and if so, whether this Honourable Court may lend its aid to a person who rests its case on an illegal act?
[4] To first deal with the motion to strike:
10(j) - This is an assumption of fact. Either the Appellant did or did not declare the alleged income as specified. It is a proper assumption as pleaded and it was pleaded in the same way in the Reply and, later, in the Amended Reply which were before Bowie, J. If there was an error at that time, it should have been appealed. It was not. This motion is dismissed.
11.1 - This motion is dismissed. Bowie, J. removed assumptions 10(e) and (f) in paragraph [10] of his Reasons for Order. At the same time he granted leave to the Respondent to further amend the Reply within 15 days he plead the facts that the Minister relied on that these subparagraphs address, and to delete the evidence. That is what paragraph 11.1 does.
12(g) and (h) - This motion is dismissed. These paragraphs were in the Amended Reply at the time the Appellant's motion was heard before Bowie, J. and, in this Court's view, that should have been brought before him as part of that motion then so that Bowie J. could have dealt with these paragraphs in that context.
[5] The motion for Order (2) is denied because the facts are assumed within the entire context of the remaining Further Amended Reply to justify the reassessment for 1998.
[6] The motion for Order (3) is denied because there are sufficient facts assumed in the remaining Further Amended Reply to warrant this Appeal proceeding for a Hearing in which the Respondent may establish the necessary facts to justify the penalties assessed.
[7] Respecting the motion for Orders (4) and (5), costs are in the cause.
[8] The Appellant is granted 30 days from the date of this Order in which to file an Answer.
[9] This Court orders that the costs ordered by Bowie, J. to be paid "forthwith" which were agreed upon on December 8, 2005, must be paid to Appellant's counsel on or before 5 days from the date of this Order.
Signed at Toronto, Ontario, this 11th day of January, 2006.
"D.W. Beaubier"
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