Citation: 2011 TCC 356
Date: 20110720
Docket: 2009-2430(IT)G
BETWEEN:
CAMECO CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Rip C.J.
[1]
On December 10,
2010 I ordered that subparagraphs 14(bbb) and (fff) of the Crown’s reply
to the notice of appeal be struck with leave for Her Majesty, the respondent, to
amend her reply to the notice of appeal. There was no appeal from the Order.
[2]
Subparagraphs 14(bbb)
and (fff) of the respondent’s reply read as follows:
(bbb) the transfer prices for uranium on the sales
by Canco to Swissco and the purchases by Canco from Swissco were not consistent
with an arm’s length price;
(fff) the terms and conditions made or imposed
in respect of the sale and purchase of uranium between Canco and Swissco differ
from those that would have been made between persons dealing at arm’s length;
[3]
The respondent prepared
and filed an amended reply to the notice of appeal. Subparagraphs 14(eee)
and (lll) of the amended reply read as follows:
(eee) the transfer prices for uranium on the sales
by Canco to Swissco and the purchases by Canco from Swissco were not consistent
with an arm’s length price;
(lll) the terms and conditions made or imposed
in respect of the sale and purchase of uranium between Canco and Swissco differ
from those that would have been made between persons dealing at arm’s length;
[4]
As the reader may
observe subparagraph 14(eee) of the amended reply is identical to
subparagraph 14(bbb) of the original reply and subparagraph 14(lll)
of the amended reply is identical to subparagraph 14(fff) of the original reply.
[5]
The appellant has filed
a motion for an order striking subparagraphs 14(eee) and (lll) (“Subject Paragraphs”)
of the amended reply to the notice of appeal filed by the respondent in “order
to make the pleading comply with the Order of the Court dated December 30,
2010”.
[6]
The grounds for the
motion are that subparagraphs 14(bbb) and (fff) of the reply and the
Subject Paragraphs are identical and therefore the Subject Paragraphs:
a) fail to comply to
the Order; and
b) offend
section 53 of the Tax Court of Canada Rules (General Procedure)
(“Rules”).
[7]
Section 53 of the Rules
state:
|
The
Court may strike out or expunge all or part of a pleading or other document,
with or without leave to amend, on the ground that the pleading or other
document,
|
La Cour peut radier un acte de procédure ou un autre document ou
en supprimer des passages, en tout ou en partie, avec ou sans autorisation de
le modifier parce que l'acte ou le document :
|
|
(a) may prejudice or
delay the fair hearing of the action,
|
a) peut
compromettre ou retarder l'instruction équitable de l'appel;
|
|
(b) is scandalous,
frivolous or vexatious, or
|
b) est
scandaleux, frivole ou vexatoire;
|
|
(c) is an abuse of the
process of the Court.
|
c) constitue un recours abusif à la Cour.
|
[8]
The operating words of Rule 53
are “strike out” and “expunge” in English and “radier”
and “supprimer” in French. These are not “wishy washy”
words.
[9]
The definition of the
word “strike” takes five columns in the The Shorter Oxford English
Dictionary and amongst many definitions is the following:
III … 2. To cancel or expunge with or as with a stroke of the pen …
[10]
The Canadian Oxford
Dictionary defines the phrase “strike out” as
3. delete (an item or name, etc.)
[11]
The Random House
Dictionary of the English Language defines “strike out” not only in
baseball parlance, as an American text may wont to do, but also as
“to erase, cross out”.
[12]
Black’s Law Dictionary offers the following definitions of
“strike out”:
… 4. Parliamentary law. To amend by deleting one or more
words. See amendment by striking out under AMENDMENT (3). – Also termed
(in sense 4) strike out.
Amendment or ... 3. ... amendment by striking out. An
amendment that removes wording from a motion’s current wording.
[13]
Black’s Dictionary also defines “expunge”:
1. To erase or destroy. 2. Parliamentary law. To declare (a
vote or other action) null and outside the record, so that it is noted in the
original record as expunged, and redacted from all future copies.
[14]
Le Petit Robert
defines “radier” and “supprimer” as follows:
radier : Faire
disparaître (un nom, une mention) d’une liste, d’un registre, d’un compte, … V.
effacer, rayer.
supprimer : 2. Rendre sans effet légal; enlever de l’usage.
V. abolir, abroger, annuler, cesser. 3. Faire disparaître, supprimer
(d’une œuvre, dans une œuvre).
[15]
These definitions make
it quite clear that when a court orders a pleading or part of a pleading be
struck, the pleading, or part of the pleading must be deleted, removed, erased
or made to disappear.
[16]
Counsel for the
respondent argued that “the Crown amended its pleading and made every effort to
address the concerns raised” by the Court. With regard to subparagraph 14(bbb)
of the reply (now subparagraph 14(eee) of the amended reply), counsel
understood these concerns to relate to the vagueness of the assumption as
stated, specifically with regard to the particularity regarding the assumed
quantum of the arm’s length transfer price. Counsel explained that the Minister
of National Revenue (“Minister”) did not, in fact, make any assumption
regarding the transfer price per kilogram of uranium. She explained that the
Minister rejected the methodology employed by the appellant, that is the
“comparable uncontrolled price” (“CUP”). In her argument she stated:
… what (eee) says is
that the transfer prices were not consistent with an arm’s length price because
they were based on a CUP method, which is an inappropriate method.
But what does the
Minister do? The Minister then went and employed another accepted OECD
methodology known as the transactional net margin method. And the Minister
applied that methodology.
And that
methodology’s a profit-split methodology. … And that methodology then provides
you with what the percentages of profit should be allocated to the parties. And
what the Minister concluded, and this has been added as an amendment, that no
profit would be realized by Swissco. So if my friend wants a number or a
quantum, we’ve provided it.
[17]
In effect, the Minister
had assumed a zero profit for Swissco and a 100 per cent profit to Canco.
Counsel declared that the appellant knew the case it had to meet.
[18]
With regard to subparagraph 14(fff)
of the reply (subparagraph 14(lll) of the amended reply), counsel argued
that this assumption was indeed a factual assumption and not an assumption of
mixed fact and law. She stated that new subparagraphs were added to the reply
in order to “address those concerns” and “provide those factual details”.
[19]
Counsel further argued:
In addition, we’ve
added further facts which appear at paragraphs 21, 22 and 23 of the
amended pleading, which provides additional factual underpinnings for that
assertion. And the assertion is the terms and conditions are different. That’s
a factual conclusion.
…
But the difficulty
is we don’t want to over – of course, we’re not overstating assumptions of
fact actually made. These are the assumptions of fact actually made.
So we can’t, we
don’t want to be criticized for leaving out material assumptions, so we’ve put
in (mmm), which was an assumption made that underlies the factual statement
that the terms and conditions are different. And then we’ve added additional
facts.
So some facts, the
onus is on the taxpayer, some facts, the onus is on the Crown.
[20]
Subparagraph 14(bbb)
was ordered struck from the reply because the appellant was entitled to know how
the prices for uranium transferred between Canco and Swissco differed from those
that would have been agreed upon by arm’s length parties. If the Minister had
in fact assumed that the CUP methodology was inappropriate and that the
transactional net margin method was more suited to the appellant’s situation,
the Minister was free to make that assumption. However, once the Minister
assumed that the transfer prices for uranium contracts differed from those that
would have been made between persons dealing at arm’s length, the appellant was
entitled to know exactly how they differed. In principle, this may apply to
subparagraph 14(fff) of the reply as well.
[21]
Subparagraph 14(fff)
was struck from the reply for parroting the text of the Income Tax Act
(“Act”) and for making an assumption of mixed fact and law. The Crown has
left that assumption in the amended reply but has provided further details of
the facts that underpin the assumption under “additional facts” in
paragraphs 21 to 23 of the amended reply. Counsel acknowledges that the
Minister did not actually assume these additional facts in assessing the appellant
and therefore were not included among the assumptions of fact. I find it strange
that the Minister was able to assume a conclusion of fact and law in accordance
with subparagraph 247(2)(a) of the Act but, at the same time,
did not assume the facts underpinning that conclusion.
[22]
In any event any
discussions regarding transfer pricing methodologies are not before me at this stage
of the litigation. The fact remains that I ordered paragraphs struck from the
pleadings and the Crown did not strike them. Nor did counsel even amend the
paragraphs in question beyond changing their numbering. That the Crown has now
added clarification to these struck paragraphs by adding assumptions and
factual assertions does not alter this reality.
[23]
When a court orders a provision
of a pleading to be struck the provision in question must be struck. If leave
to amend is granted, the struck provisions may be replaced by amendment. In
principle, leave to amend does not anticipate the struck provisions will remain
in the pleadings even if, on amendment, further provisions are inserted to
clarify or address the concerns of the Court in the first place. There may be
exceptions but, on the facts before me, I cannot recognize an exception arising
from the amended pleadings.
[24]
The Subject Paragraphs
are struck from the amended reply without leave to amend. Costs of this motion
to the appellant.
Signed at Ottawa, Canada, this 20th day of July 2011.
“Gerald J. Rip”
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