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Docket: 2005-1804(IT)G
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BETWEEN:
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JOLLY FARMER PRODUCTS INC.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Motion heard by conference call on February 25,
2008 at Ottawa, Ontario.
Before: The Honourable D.G.H. Bowman, Chief
Justice
Appearances:
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Counsel for the
Appellant:
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John Townsend
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Counsel for the
Respondent:
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Cecil Woon
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____________________________________________________________________
AMENDED REASONS FOR ORDER
These reasons for order signed on February 27,
2008 should be amended as follows:
At
page 4 of the Reasons for Order, paragraph 11, the citation order should
read as follows: “See Orly Automobiles Inc. v. R., [2004]
G.S.T.C. 57 (T.C.C.), aff’d. [2005] G.S.T.C. 200 (F.C.A.).”
Signed at Ottawa, Canada, this 19th
day of March 2008.
Bowman, C.J.
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Citation: 2008TCC124
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Date: 20080319
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Docket: 2005-1804(IT)G
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BETWEEN:
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JOLLY FARMER PRODUCTS INC.,
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Appellant,
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And
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HER MAJESTY THE QUEEN,
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Respondent.
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AMENDED REASONS FOR ORDER
Bowman,
C.J.
[1] This motion was heard by conference call. Lengthy
affidavits and authorities were submitted.
[2] The appellant seeks
to have certain assumptions in the Reply to the Notice of Appeal struck out.
The facts as stated in the pleadings (and they may differ from those proved at
trial) are that the appellant owned land in Northampton in New Brunswick. It carried on a
farming and greenhouse operation. It had about 80 shareholders and upwards of 200
non-shareholder employees.
[3] On the appellant’s
property was, apparently, a “Village” and a building called the “Commons” which
contained a number of amenities. The principal issue is whether the appellant
is entitled to deduct capital cost allowance on the Village, the Commons and
the equipment in the Commons as well as certain land clearing costs.
[4] The Crown’s
position is that the property was not acquired for the purpose of gaining and
producing income, and that the cost of land clearing was not an expense laid
out for income earning purposes. This is strictly a factual issue.
[5] The paragraphs that
the appellant wants to strike out are the following:
(m) all shareholders of the
Appellant are required to be members of a Christian community who lead a strict
spiritual and temporal life (the “Church”);
(n) all shareholders of the
Appellant are required to follow the rules/teachings of the Church;
(p) all shareholders of the
Appellant are required to live a simple, basic life and to be as self-sufficient
as possible;
(q) a shareholder of the Appellant
can be dismissed and the Appellant has the right to redeem the shares of a
shareholder of the Appellant who does not follow the rules/teachings of the
Church or live on the Appellant’s premises;
(r) at all relevant times,
George Eversfield was the leader of the Church;
(ddd) at all relevant times, the
Village, the Farmhouse, the Commons and the outdoor farm operation enabled the
shareholders of the Appellant to live in accordance with the rules/teachings of
the Church; and
(eee) at all relevant times, the
Village, the Farmhouse, the Commons and the outdoor farm operation enabled the
shareholders of the Appellant to live in a community based on a set of common
religious values including the values referred to in paragraph (p);
[6] The grounds for the motion for striking out the
subparagraphs are:
a. The assumptions in the
subparagraphs may prejudice or delay the fair hearing of the appeal;
b. The assumptions in the
subparagraphs are scandalous, frivolous and vexatious;
c. The assumptions in the
subparagraphs are an abuse of the process of the Court;
d. The assumptions in the
subparagraphs are neither material nor relevant to the matters in issue;
e. The assumptions in the
subparagraphs are the opinion of an assessor;
f. The assumptions in the
subparagraphs are so irrelevant that to allow them to stand would involve
useless expense and would prejudice the appeal by involving the parties in a
dispute that is wholly apart from the issues;
g. Such further and other
grounds as Counsel may advise; and
h. The Appellant will rely on
Rule 53 of the Tax Court of Canada Rules (General Procedure) (the Rules).
[7] Mr. Woon
opposed the motion on behalf of the respondent. He argued that the appellant
had taken a fresh step after the Reply was filed and that under section 8
of the Tax Court of
Canada Rules (General Procedure) the appellant could not attack the pleading without leave of the Court.
There is merit in this position but I prefer not to base my decision on this
ground.
[8] Mr. Townsend argues that if the impugned
paragraphs stand it will add substantially to the length of the case as he
would have to put in evidence of the religious beliefs and practices of the
shareholders of the appellant. Frankly, I doubt it. The assumptions in question
strike me as somewhat innocuous. Even if they were admitted it would seem that
they neither detracted from the appellant’s case nor enhanced the respondent’s.
[9] Having said in a number of cases that it is wrong for
the Crown to fail fully to plead all assumptions made on assessing, I would be
reluctant to strike out assumptions on a preliminary motion on the basis that
they are irrelevant. Indeed, it would be unfortunate if the Crown were to
decide, unilaterally, to fail to disclose an assumption because they considered
it irrelevant. What may seem irrelevant to the drafter of the Crown’s reply may
be highly relevant to an appellant. Moreover, if the Minister bases an
assessment upon an irrelevant fact an appellant may wish to argue that this in
itself is a relevant fact in considering the correctness of the assessment. In
other words, if an important basis of an assessment is an irrelevancy this may
go a considerable way in casting doubt on the assessment itself.
[10] Mr. Woon argues that the religious practices and
beliefs of the shareholders are a relevant consideration in the context of the
assumptions considered in their entirety. I am not at present persuaded of
their relevancy. How the religious beliefs of the shareholders of the appellant
can affect the determination whether the cost of building or acquiring a piece
of property or of clearing land has an income earning purpose is not readily
apparent to me on the material filed on this motion. However, the relevance may
emerge in the context of the evidence as a whole and I prefer to leave the
question of relevancy to the trial.
[11] Mr. Townsend also argued that the “religious
assumptions” as he described them were not disclosed to the appellant before the
assessment was made. I do not think that this justifies their being struck out
or results in the respondent having cast upon her the onus of proving something
that is peculiarly within the knowledge of the appellant. See Orly
Automobiles Inc. v. R., [2004] G.S.T.C. 57 (T.C.C.),
aff’d. [2005] G.S.T.C. 200 (F.C.A.).
[12] The motion is
therefore dismissed. The matter of costs will be left for determination after
the trial, which is set for hearing at 9:30 a.m. on Monday, June 23, 2008
at the Tax Court of Canada, Westmorland Place, 82 Westmorland Street, Fredericton, New Brunswick.
Signed at Ottawa, Canada, this 19th
day of March 2008.
Bowman,
C.J.
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