Bonner,
T.C.C.J.:—The
appellant
Brian
Morris
seeks
an
order
striking
out
paragraph
6(k)
of
the
reply
to
the
notice
of
appeal
filed
by
the
respondent.
He
appeals
from
an
assessment
of
income
tax
for
the
1988
taxation
year.
On
assessment,
the
Minister
of
National
Revenue
including
in
income
a
gain
realized
on
the
disposition
of
certain
options.
The
issue
is
whether
the
gain
is
income
or
is
on
capital
account.
In
the
reply,
the
respondent
pleaded
that
the
Minister
of
National
Revenue
assumed
in
making
the
assessment
that
at
the
time
of
acquisition
of
the
options
the
appellant
had
in
mind
the
possibility
of
resale
at
a
profit
and
that
possibility
was
an
operating
motivation
which
induced
the
acquisition
of
the
options.
That
is
paragraph
6(k).
The
notice
of
motion
states
that
the
grounds
for
the
motion
are
Rules
4
and
53
of
the
Rules
of
this
Court.
It
is
Rule
53
that
is
of
immediate
concern.
It
reads:
53.
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,
(a)
may
prejudice
or
delay
the
fair
hearing
of
the
action,
(b)
is
scandalous,
frivolous
or
vexatious,
or
(c)
is
an
abuse
of
the
process
of
the
Court.
The
appellant
relied
on
the
affidavit
of
Brian
Morris
which
reads,
in
part,
as
follows:
In
the
course
of
the
examination
for
discovery
of
Mr.
Edgar
(the
assessor).
Mr.
Morris
asked
the
following
questions
and
received
the
following
responses
in
connection
with
paragraph
6(k)
of
the
respondent's
reply:
167.
Q.
Do
you
have
any
evidence
that
the
investors
had
in
mind
when
they
received
these
options
that
they
would
be
able
to
resell
the
options?
A.
No.
168.
Q.
Do
you
have
any
evidence
that
the
investors
had
in
mind
at
the
time
they
received
the
options
that
they
would
be
able
to
resell
the
options
at
a
profit?
A.
No.
It
is
relevant
to
note
that
following
the
discovery
in
which
those
answers
were
given
the
respondent's
counsel
provided
further
information
as
follows.
To
the
initial
"no"
in
the
first
question,
number
167,
he
added:
Direct
evidence
of
the
investors'
state
of
mind
could
only
come
from
the
investors.
The
Minister
assumed
that
at
the
time
of
the
acquisition
of
the
options
the
appellant
had
in
mind
the
possibility
of
resale
at
a
profit
and
that
possibility
was
an
operating
motivation
which
induced
the
acquisition
of
the
options.
The
bases
for
this
assumption
are
the
answers
to
questions
97
to
114,
128
to
130,
151
to
153,
260
to
265,
292,
and
306.
To
question
168
he
added:
Same
as
corrected
answer
to
question
167.
It
was
the
position
of
counsel
for
the
appellant
that
it
is
only
an
assumption
made
on
assessment
which
has
the
effect
of
placing
the
onus
on
the
taxpayer
in
accordance
with
the
law
referred
to
in
M.N.R.
v.
Pillsbury
Holdings
Ltd.,
[1965]
1
Ex.
C.R.
676,
[1964]
C.T.C.
294,
64
D.T.C.
5184.
Counsel
asserted
that
the
assumption
pleaded
in
paragraph
6(k)
of
the
reply
was
not
made
on
assessment
but
rather
was
made
subsequently,
and
in
this
regard
referred
to
Exhibit
A-2,
a
letter
dated
October
24,
1990,
to
the
taxpayer
from
the
assessor
who
was
examined
for
discovery.
It
was
conceded
by
the
respondent
that
at
the
time
the
letter
was
written
the
assessor
was
of
the
view
that
the
developer
which
granted
the
option
and
the
appellant
were
associated
in
some
way
and
that
such
view
of
the
facts
was
erroneous.
That
concession,
taken
with
the
letter,
established,
according
to
the
appellant's
counsel,
that
the
paragraph
6(k)
assumption
was
not
made
or
was
not
made
at
the
time
of
assessment.
Certain
principles
emerge
from
the
cases
dealing
with
applications
to
strike
out
pleadings
or
parts
thereof.
1.
Generally
speaking,
allegations
of
fact
in
a
statement
of
claim
should
be
taken
as
being
true
or
capable
of
being
proven.
The
reference
for
that
is
Unterreiner
v.
Wilson
(1982),
40
O.R.
(2d)
197,
142
D.L.R.
(3d)
588
(H.C.),
which
was
later
affirmed
by
the
Court
of
Appeal
((1983),
41
O.R.
(2d)
472).
2.
There
is
a
heavy
burden
on
the
attacking
party
to
show
that
it
is
clear
and
obvious
that
the
pleading
is
scandalous,
frivolous
or
vexatious,
or
that
it
is
otherwise
an
abuse
of
the
process
of
the
Court.
The
authority
for
that
proposition
is
Erasmus
v.
Canada,
[1991]
1
C.T.C.
337,
91
D.T.C.
5415
(F.C.T.D.).
3.
"Embarrassing"
means
that
the
allegations
are
so
irrelevant
that
to
allow
them
to
stand
would
involve
useless
expense
and
would
also
prejudice
the
trial
of
the
action
by
involving
the
parties
in
a
dispute
that
is
wholly
apart
from
the
issues.
“In
order
that
allegations
should
be
struck
out
from
the
defence
upon
that
ground,
it
seems
to
me
that
their
irrelevancy
must
be
quite
clear
and,
so
to
speak,
apparent
at
the
first
glance.
It
is
not
enough
that
on
considerable
argument
it
may
appear
that
they
do
not
afford
a
defence."
That
is
a
quotation
from
City
of
London
v.
Horner
(1914),
111
L.T.
Rep.
512
(C.A.)
at
514,
a
decision
of
Pickford,
L.J.
I
cannot
find
on
the
material
before
me
that
the
respondent
has
no
ground
for
asserting
that
he
made
the
assumption
now
under
attack
at
the
time
of
the
assessment.
The
original
answers
do
not
show
that,
the
letter
Exhibit
A-2
does
not
show
that,
and
finally
the
amended
or
amplified
answers
do
not
show
that.
It
is
entirely
possible
that
the
assessor
reached
the
conclusion
expressed
in
paragraph
6(k)
but
when
writing
Exhibit
A-2
simply
refrained
from
preparing
a
complete
dissertation
on
everything
that
went
through
his
mind
at
the
time
of
assessment.
I
am
of
the
opinion
that
the
question
whether
the
6(k)
assumption
was
made
on
assessment
and
the
question
whether
that
assumption
is
factually
correct
are
relevant
and
ought
to
be
addressed
should
it
become
necessary
to
do
so
by
the
trial
judge.
They
cannot,
in
my
view,
be
dealt
with
adequately
on
an
interlocutory
motion.
I
decline
to
order
further
discovery
as
requested
by
counsel
for
the
appellant
and
to
decide
at
this
time
as
to
who
should
pay
the
costs
of
further
discovery.
Quite
apart
from
the
fact
that
such
points
were
not
raised
in
the
notice
of
motion,
I
observe
that
counsel
for
the
respondent
concedes
and
states
that
he
had
conceded
all
along
that
the
appellant
is
entitled
to
such
further
discovery
under
the
Rules.
As
to
costs,
I
can
see
no
reason
to
interfere
with
or
attempt
to
fetter
the
discretion
of
the
trial
judge.
The
motion
will
therefore
be
dismissed
and
with
costs
in
the
cause.
Thank
you.
Motion
dismissed.
Email this Content