Date: 20070515
Docket: A-37-06
Citation: 2007 FCA 193
CORAM: LÉTOURNEAU
J.A.
NOËL
J.A.
PELLETIER
J.A.
BETWEEN:
STATUS-ONE
INVESTMENTS INC.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1]
This is an
appeal from an interlocutory decision of Mr. Justice Rip of the Tax Court of
Canada (2005 TCC 766), which granted leave to the Crown to file a second
amended reply to the notice of appeal.
(uu) During the years 1993 to 1998,
Equicap promoted and marketed several limited partnership arrangements by means
of offering memoranda;
(ww) The important aspects of
these limited partnership arrangements were identical to AFS No. 11, notably in
terms of structure, operating method, agreements signed, parties involved,
actions taken, objectives pursued and financial and tax results obtained.
[3]
In that
first decision, Rip J. determined that even though the actions of third
parties, in this case Equicap, could be relevant to a tax appeal in some cases,
relevancy had not been demonstrated (reasons for first decision, paragraph 30).
[4]
The
decision of Rip J. was confirmed on appeal (2005 FCA 119). In its reasons, the
Court of Appeal pointed out that if the Minister wants
to base an assessment on the actions of third parties, it is his responsibility
to specify the link between these actions and those of the taxpayer in
question, so that the taxpayer knows the case it has to meet (reasons for appeal,
paragraph 24).
[5]
On June 7,
2005, the Crown brought a second motion for leave to add paragraphs 11oo.(1) to
11oo.(10) to its reply to the notice of appeal. It is not necessary to
reproduce these paragraphs for purposes of this appeal. Suffice it to say that
they add details to the amendment as it was presented in its original form.
[6]
After
stating that the paragraphs in question meet the requirement set out by the
Court of Appeal and that these new allegations could be relevant for purposes
of the appeal, Rip J. granted the amendment.
[7]
This is an
appeal of that decision.
DECISION
[8]
The
appellant criticizes Rip J. for not following his first decision. According to
the appellant, after Rip J acknowledged that the allegations in the second
amended reply merely provided more details about the previous amendment, he
should have found that the allegations were not relevant.
[9]
I do not
agree with this argument. In its decision of April 6, 2005, our Court approved
Rip J.’s approach and stated:
In our opinion, the Crown has failed to
demonstrate, on the basis of the pleadings, how the allegations in
subparagraphs 11(uu) and 11(ww) are relevant. As Mr. Justice Rip indicates, in
some cases, it is quite possible that relationships or ties between an
appellant and third parties will be relevant to the determination of its tax
payable. But it is still necessary for the pleadings to indicate precisely how
those ties or relationships could serve that purpose.
[10]
On this
point, Rip J. specified in his reasons that (paragraph. 15):
. . . ,paragraphs 11oo.1) to 11oo.10)
of the second amended Reply contain sufficient particulars for the appellant to
be able to understand the possible links and relations between it and the third
parties, which are not contained in paragraphs 11 uu)and 11ww) of the amended
Reply.
[11]
He added
that at this stage of the proceedings, he could not make a finding as to the
relevancy of the proposed amendment (paragraph 17):
The facts in paragraph 5 of these reasons
suggest that there may be a relationship between the appellant and the third
parties that influenced the appellant's decision to invest in AFS No. 11.
Up to this point, these allegations are merely allegations since the Minister
assumed that most of these allegations were true in issuing the assessment and
that they could be rebutted. It is possible that evidence that will not
be available until the hearing is necessary to determine the relevance of the
contested allegations. Only the trial judge will be able to decide
whether the allegations in paragraphs 11oo.1) to 11oo.10) are relevant in whole
or in part or whether they are not relevant at all in determining the intention
of the appellant when it acquired shares of AFS No. 11.
[12]
Bearing in
mind that the impugned decision is discretionary in nature, I cannot find an
error in the decision of the motions judge to allow the amendment proposed by
the Crown.
[13]
I would
dismiss the appeal with costs both before this Court and the Tax Court of
Canada.
“Marc Noël”
“I
concur.
Gilles
Létourneau, J.A.”
“I
concur.
J.D.
Denis Pelletier, J.A. ”
Certified
true translation
Mary
Jo Egan, LLB
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-37-06
(APPEAL FROM AN ORDER OF MR. JUSTICE RIP
OF THE TAX COURT OF CANADA DATED DECEMBER 23, 2005, DOCKET NO. 2002-2867(IT)G).
STYLE OF CAUSE: Status-One
Investments Inc. v.
Her
Majesty the Queen
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: May 14, 2007
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: LÉTOURNEAU J.A.
PELLETIER J.A.
DATED: May 15, 2007
APPEARANCES:
|
Manon Thivierge
Mark
Jadd
|
FOR THE APPELLANT
|
|
Daniel Bourgeois
Gatien
Fournier
|
FOR THE RESPONDENT
|
SOLICITORS
OF RECORD:
|
Heenan Blaikie
Montréal,
Quebec
|
FOR THE APPELLANT
|
|
John H. Sims, Q.C.
Deputy
Attorney General of Canada
Montréal, Quebec
|
FOR THE RESPONDENT
|
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