Pierre Duquette, Gérard Grenon and Louis Geoffroy v. Her Majesty the Queen, [1993] 1 CTC 2701, 93 DTC 841

Garon, T.C.C.J.:—Each of the appellants filed an application to strike out the reply to the notice of appeal. The texts of each of those applications are, to all intents and purposes, identical. At the hearing of these three applications, for reasons of convenience, counsel for the parties referred only to the file of the appellant Dr. Pierre Duquette. I shall proceed in the same manner in these reasons. It is understood, however, that these reasons shall also apply to the applications to strike out the reply to the notice of appeal of the appellants Dr. Louis Geoffroy and Dr. Gérard Grenon. It should be noted in passing that the hearing of the demands for particulars filed by the three appellants was adjourned sine die on October 27 last.

This is an application filed by the appellant Dr. Duquette under section 53 of the Tax Court of Canada Rules (General Procedure) to strike out the entire reply to the notice of appeal, or alternatively to strike out "paragraphs or allegations which, in the Court's view, should be struck out” [translation].

Paragraph 4 of this application sets out the requests stated therein and the supporting reasons for those requests. Paragraph 4 reads as follows:

The appellant respectfully requests this Court to strike out, in whole, the respondent's reply to the notice of appeal as it may prejudice or delay the fair hearing of the action since:

(a) In a number of paragraphs of her reply to the notice of appeal, the respondent makes allegations based, to all appearances, on hearsay, which renders the facts contained in the said paragraphs, as well as those that follow therefrom, entirely inadmissible;

(b) In subparagraphs 30(k), (I), (q) and (r) of Part II, as well as in subparagraphs 30(a), (b), (e) and (g) of Part III, the respondent bases her remarks on allegations of fact that are, by her own admission, entirely hypothetical;

(c) In subparagraphs 30(f), (g), (h), (i), (j), (k), (n), (0), (p), (q), (r) and (s) of Part I of her reply to the notice of appeal and 30(a) of Part IV, the respondent makes various allegations concerning injunction proceedings brought by the “U.S. government” against a certain Campbell and A.F. Campbell Co.; the respondent is not permitted in law to make note of such foreign proceedings in her pleading, and the sole consequence of the presence of these allegations in the reply to the notice of appeal can only be to prejudice or delay unduly the fair hearing of the instant action and to cause serious prejudice the appellant by depriving him of the right to a fair hearing;

(d) The negation by the respondent of certain allegations contained in the notice of appeal is contrary to the very basis of the assessment;

(e) In her reply to the notice of appeal, the respondent asks this Court to rule

on questions which lie outside the jurisdiction of the Tax Court of Canada;

(f) The reply to the notice of appeal contains serious defects of form and substance as a result of which it may prejudice or delay unduly the fair hearing of the action and cause serious prejudice to the appellant;

(g) At paragraphs 2, 3, 4, 6, 7, 9, 10, 1, 13, 14, 15, 16 and 21 of her reply, the respondent merely denies the allegations contained in the notice of appeal without providing the slightest relevant fact, contrary to the legislative and regulatory provisions applicable in the instant case;

(h) The respondent categorically denies certain allegations of the appellant contained in the notice of appeal, whereas she formally admits them further on; the reply to the notice of appeal therefore contains contradictory allegations;

(i) In the drafting of her reply to the notice of appeal, the respondent uses frivolous and vexatious language, contrary to the legislative and regulatory provisions applicable in the instant case;

(j) In particular, the respondent makes excessive use of terms such as "alleged agreement", “so-called agreement", “so-called deduction”, “so-called loss”, “alleged loss. . .", "agreement supposedly signed. . .”, “so-called laboratories"; such vocabulary is scandalous and seriously prejudices the appellant, when the respondent notes no fact that might justify her denigrating the appellant's conduct or that of the corporations ARMC and ARMC No 2 in this manner;

(k) In her reply to the notice of appeal, the respondent employs a method of organizing her paragraphs and allegations contrary to the legislative and regulatory provisions applicable to such a pleading; it is in the interests of justice and of the appellant's right to a fair hearing that the respondent not be permitted to enter so irregular a pleading into the record of this Court.

[Translation.]

It seems to me helpful to sketch out the background facts of this application in light of the allegations and claims put forward in the notice of appeal and the reply to the notice of appeal.

The appellant is a medical doctor specialized in neurology, a member in good standing of the Corporation professionnelle des médecins du Québec. He resides in Montréal. In 1985, the appellant became a partner in the corporation Les Associés de Recherche Médicale Canadienne ("ARMC"), incorporated under the laws of Ontario. The following year, in 1986, he became a partner in the corporation Les Associés de Recherche Médicale Canadienne No. 2 ("ARMC No. 2”), also incorporated under the laws of Ontario. The appellant claimed that the purpose of ARMC and ARMC No. 2 was to have Canadian or foreign laboratories carry on various scientific research activities in the area of monoclonal antibodies. The appellant alleged that he hoped to earn a profit from his investments in both those corporations. The appellant also argued that, in order to achieve the scientific objective just described, ARMC and ARMC No. 2 assigned responsibility for planning, directing and organizing a vast scientific research project on monoclonal antibodies to the Brazilian corporation "Coral Sociedade Brasileira de Pesquisas e Desenvolvimento Ltda" ("Coral").

During 1985 and 1986, ARMC and ARMC No. 2 incurred substantial losses. The appellants share in the non-capital loss suffered by ARMC during the fiscal year ending during the 1985 taxation year and claimed as a deduction by the appellant in the computation of his income for the 1985 taxation year apparently amounted to $215,148, according to paragraph 16 of the notice of appeal. The appellant also deducted $300,094 from his income as a non-capital loss for the 1986 taxation year, according to paragraph 21 of the notice of appeal.

After notices of objection to each of the assessments for the taxation years from 1983 to 1990 inclusive were served within the appropriate time limit to the Minister of National Revenue, the appellant instituted an appeal in this Court from these assessments by the Minister of National Revenue. The reply to the notice of appeal was filed in this Court within the time period authorized by it. Paragraphs 33, 35, 37, 40 and 42 contain the most general claims put forward for the respondent in support of those assessments by the Deputy Attorney General of Canada:

33. He claims that the so-called research activities which ARMC and ARMC No. 2 claimed to have carried on did not, in the circumstances, justify any reasonable expectation of profit, so that ARMC and ARMC No. 2 do not, in this respect, operate a business.

35. He contends that the amounts that ARMC and ARMC No. 2 claim to have deducted as research expenses, having regard to the promissory notes issued to Coral and to the alleged debts which those notes establish, were not paid out, nor are they expenses actually incurred.

37. He contends that ARMC and ARMC No. 2 incurred no expenses in respect of scientific research and experimental development during the relevant fiscal years.

40. He contends that the deduction of the alleged research expenses of ARMC and ARMC No. 2, if allowed, would unduly or artificially reduce the income of ARMC, ARMC No. 2 and of the members of both corporations.

42. Furthermore, the Deputy Attorney General respectfully contends that all the facts related above authorize this Court to find that the so-called tax shelters here in issue are a sham providing no entitlement to any of the deductions claimed.

[Translation.]

It should be noted that the application does not rely on section 58 of the Rules, which enables the Court to strike out a pleading because it discloses no reasonable grounds for appeal or for opposing the appeal. The appellants application is rather based on section 53 of the Rules. That section reads as follows:

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 objections which the appellant makes to the reply to the notice of appeal are of three kinds. First, he objects to those allegations in the reply to the notice of appeal which relate to the U.S. government's proceedings before a foreign jurisdiction. Second, he attacks the allegations which, he claims, rely on hearsay, and, lastly, he objects to the use of certain expressions in various allegations contained in that reply or to the wording of certain paragraphs of that same pleading.

The first type of objection made by the appellant relates to "various allegations concerning injunction proceedings instituted by the'U.S. Government’ against a certain Campbell and A.F. Campbell Co."[translation]. The appellant claims that “the respondent is not permitted in law to make note of such foreign proceedings in her pleading, and the sole consequence of the presence of these allegations in the reply to the notice of appeal can only be to prejudice or delay unduly the fair hearing of the instant action and to cause serious prejudice to the appellant by depriving him of the right to a fair hearing" [translation], as mentioned in subparagraph 4(c) of this application. On this subject, the appellant refers to subparagraphs 30(f), (g), (h), (i), (j), (k), (n), (o), (p), (q), (r) and (s) of Part I of her reply to the notice of appeal and 30(a) of Part IV of that same pleading. The text of these subparagraphs is reproduced below:

(f) The so-called“ tax shelter” described above was initially marketed in the United States from 1982 to 1985, more specifically by a certain Allen F. Campbell (hereinafter called "Campbell") and by an American company by the name of A.F Campbell & Co.;

(g) Campbell is a U.S. citizen and resident of Texas;

(h) Campbell is the sole shareholder of A.F. Campbell & Co.;

(i) Campbell is also the senior officer of Coral;

(j) In 1985, 1986 and 1987, the Canadian brokerage firm mentioned above was in continuous communication with Campbell concerning the marketing of the so- called tax shelter described above in Canada. That communication was conducted, more specifically, through a senior underwriter of that firm;

(k) ARMC was formed on July 16, 1985 following a meeting between the promoters and certain representatives of Coral, including, in particular, Campbell, held at the Montreal office of the Canadian brokerage firm;

(n) On September 3, 1985, the U.S. government filed an injunction proceeding against Campbell and A.F. Campbell & Co. in the United States District Court in Dallas, Texas. The purpose of this injunction proceeding was more particularly to prohibit Campbell and A.F. Campbell & Co. from marketing the "tax shelter" described above, and which, as mentioned, was characterized by (i) the formation of a corporation, (ii) the signing of a“ research contract" with Coral and (iii) the use of the Brazilian currency in the context of the" research contract".

(o) In that proceeding, the U.S. government alleged that Campbell and A.F. Campbell & Co. had made and were continuing to make representations which they knew or should have known to be false or misleading concerning the so- called tax shelter described above, in particular in the following respects:

(i) The purpose of the services provided by Coral was to develop monoclonal antibodies of virtually no practical use in the provision of diagnoses made in a clinical context;

(ii) The services provided by Coral were grossly overvalued;

(iii) The promissory notes underwritten for Coral by the corporations contracting with the latter were devoid of any economic substance because they were payable in Brazilian cruzeiros starting in the seventh year until the tenth year following their issue, whereas the Brazilian currency has had an extended history of precipitous depreciation and because these notes were subject to no monetary adjustment mechanism contrary to business practices normally employed in transactions in Brazilian currency;

(iv) The promissory notes in question were used solely to increase certain tax benefits unduly, without regard to the real value of the work performed by Coral;

(p) Campbell and A.F. Campbell & Co. disputed the injunction proceeding of the U.S. tax authorities;

(q) In the fall of 1985, the Canadian brokerage firm learned of this injunction proceeding against Campbell and A.F. Campbell & Co. and of the nature of the questions at issue through the senior underwriter;

(r) In the fall of 1985, the promoters of ARMC and ARMC No. 2 also learned of this injunction proceeding directed against Campbell and A.F. Campbell Co. and of the nature of the questions at issue;

(s) The promoters of ARMC continued to sell the investment units of ARMC until the end of 1985.

PART IV

(a) The promoters of ARMC and ARMC No. 2 marketed in Canada a so-called tax shelter initially sold in the United States which, on September 3, 1985 was the subject of an injunction proceeding by the U.S. government.

[Translation.]

This mention of a proceeding instituted by the U.S. government against Mr. Campbell and A.F. Campbell Co. must be assessed in the context of appeals in which one of the main issues concerns the question whether the appellant had any reasonable expectation of profit. In Taillefer v. M.N.R., [1987] 2 C.T.C. 2137, 87 D.T.C. 418, Judge Rip of this Court made the following comments on the concept of reasonable expectation of profit at pages 2141-42 (D.T.C. 421):

The expectation of profit, therefore, is not a mere hopeful or wishful expectation; it is what a person having abasic knowledge of the undertaking would normally expect having regard to the various factors involved in the undertaking. If the undertaking is susceptible to the vagaries of weather (e.g., drought), disease, economics (e.g., fluctuating prices and costs) or other adversities beyond the taxpayer's control, that potential adversity must be taken into account in appreciating the meaning of reasonable”. Many of the adversities, beyond the control of the taxpayer, may be expected and are normal risks of farming but others are unusual and exceptional occurrences; the taxpayer ought to allow for the former in determining his expectation of profit. The term reasonable expectation” is not analogous to "expectation under ideal conditions”.

In the reply to the notice of appeal, the respondent also advanced the argument — based on subsection 245(1) of the Income Tax Act — that deductions in respect of certain disbursements or expenses, if allowed, would unduly or artificially reduce the appellant's income. The respondent also argued that the tax shelters in question were a sham.

Whether one views the matter in the context of the reasonable expectation of profit or that of subsection 245(1) of the Income Tax Act or that of a sham, the intention of the appellant and the other participants at the relevant time in the transactions mentioned in the reply to the notice of appeal are a material factor which may or may not have been brought to the appellant's knowledge. The appellant's reaction as an investor, having regard to this proceeding undertaken by the U.S. government, is without any doubt a material fact. I share the view of counsel for the respondent that this legal action of the U.S. government was part of a chain of events which may shed light on the appellant's intentions. The appellant, who had invested his money in research businesses, naturally had an interest in knowing the impact of this proceeding instituted by the U.S. government on the profit that he could earn from the research businesses in question. I am therefore of the view that the application for dismissal of the allegations contained in subparagraphs 30(f), (g), (h), (i), (j), (k), (n), (o), (p), (q), (r) and (s) of Part I of the reply to the notice of appeal and in subparagraph 30(a) of Part IV is without foundation.

Even if I had any doubt as to the materiality of these allegations, it is well established that allegations in a pleading must not be struck out at this preliminary stage unless they clearly bear no reasonable relation to the questions at issue in an action. I refer on this subject to the judgment of the Federal Court-Trial Division in Burnaby Machine & Mill Equipment Ltd. v. Berglund Industrial Supply Co. (1982), 64 C.P.R. (2d) 206. The following passage in that judgment is interesting (pages 209-10):

The strike out rule, of course, applies to a counterclaim as well as to a statement of claim, as both are pleadings. It is also trite law that the court will not strike out a pleading under Rule 419(1)(a) unless it is“ plain and obvious" that there is no cause of action: see The Queen v. Wilfrid Nadeau Inc., [1973] F.C. 1045, 1 N.R. 67, the classic reference, and a more recent decision, Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735, 115 D.L.R. (3d) 1, 33 N.R. 304. The jurisprudence is also well established that in order to succeed on a motion to strike out under Rule 419(1)(b), (c), (d), (e) and (f), the applicant must show that the pleading attacked is so clearly immaterial, frivolous, embarrassing, abusive, etc., that it is obviously forlorn and futile.

Paragraphs 419(1)(c), (d) and (f) of the Federal Court Rules are virtually identical to section 53 of the Tax Court of Canada Rules (General Procedure).

I now come to the question concerning hearsay. On this point, subparagraphs 4(a) and 4(b) of the application read as follows:

(a) In a number of paragraphs of her reply to the notice of appeal, the respondent makes allegations based, to all appearances, on hearsay, which renders the facts contained in the said paragraphs, as well as those that follow therefrom, entirely inadmissible;

(b) In subparagraphs 30(k), (I), (q) and (r) of Part Il, as well as in subparagraphs 30(a), (b), (e) and (g) of Part III, the respondent bases her remarks on allegations of fact that are, by her own admission, entirely hypothetical;

[Translation.]

The text of subparagraphs 30(k), (I), (q) and (r) of Part II and subparagraphs 30(a), (b), (e) and (g) of Part III of the reply to the notice of appeal read as follows:

PART Il

(k) ARMC apparently sold fewer investment units than expected, as a result of which, it was said, ARMC and Coral apparently reduced the number of products in respect of which Coral was allegedly to undertake research work from 57 to 40;

(l) ARMC and Coral then apparently agreed to reduce the amount of the alleged payments to Coral, while the terms and conditions of those alleged payments, however, apparently remained the same;

(q) ARMC No. 2 also apparently sold fewer participation units than expected, as a result of which, it was said, ARMC No. 2 and Coral apparently reduced the number of products in respect of which Coral was allegedly to undertake research work from 120 to 42;

(r) ARMC No. 2 and Coral apparently agreed, in turn, to reduce the amount of the alleged payments to Coral, while the terms and conditions of those alleged payments, once again, apparently remained the same;

PART III

(a) In its financial statements for the fiscal period from July 16, 1985 to December 31, 1985, ARMC deducted, in particular, the sum of $70,000,781 in research expenses;

(b) This sum of $70,000,781 represents the Canadian dollar equivalent, at July 16, 1985, of the Brazilian cruzeiros which ARMC must supposedly to pay to Coral under the alleged research agreement which they apparently signed on July 16, 1985;

(e) This sum of $73,272,012 represents the Canadian dollar equivalent, at February 25, 1986, of the Brazilian cruzeiros which ARMC No. 2 must supposedly pay to Coral under the alleged research agreement which they apparently signed on February 25, 1986;

(g) In computing his income for the 1985 and 1986 taxation years, the appellant deducted his share of the alleged losses which ARMC and ARMC No. 2 allegedly incurred, the whole as follows:

1985	—	$215,148
1986	—	$300,613
		[Translation.]

As established in Johnston v. M.N.R., [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182, the onus is on the respondent to inform the taxpayer of the assumptions on which the Minister of National Revenue relied in making his assessment. This is precisely what is stated in the subparagraphs cited immediately above. The respondent therefore discharged herself of her obligation. This question was considered by the former Chief Justice Cardin of this Court, when he was chairman of the Tax Review Board, in Paolo Violi v. M.N.R., [1980] C.T.C. 2228, 80 D.T.C. 1191, at page 2229 (D.T.C. 1192):

The issue centres essentially on whether the presumptions on which the assessment was based were well founded. The appellant maintained generally that the presumptions were based only on hearsay and that they were erroneous, and more specifically, that the allegations that the appellant admitted having received certain amounts as described in paragraphs 5(d), 5(f), 5(g), 5(h), 5(i), 5(l), and 5(n) of the respondent's amended reply did not constitute extrajudicial admissions under Article 1244 of the Civil Code of the Province of Quebec and that the respondent's presumptions were unfounded in law.

At page 2233 (D.T.C. 1195):

Counsel for the appellant objected to Mr. Crevier's testimony, alleging it was merely hearsay. Mr. Crevier was the special investigator who had been given the appellant's file by the Minister of National Revenue for reassessment. In carrying out his duties he attended certain CIOC hearings, read the transcripts of the public and in camera hearings in the reports of the inquiry into organized crime and heard the wiretaps and read the transcripts of the appellant's conversations on which the presumptions in paragraph 5 were based. At the hearing Mr. Crevier stated what he had himself heard, seen and read concerning the appellant's possible income. In my view the testimony of Mr. Crevier in his capacity as an assessor cannot be characterized as hearsay.

At pages 2233-34 (D.T.C. 1195):

Since the respondent's presumptions have been found to be reasonable it is up to the appellant to prove to the Board's satisfaction that they are erroneous. Counsel for the appellant maintained, wrongly in my view, that the respondent's allegations are unfounded in law, but he did not offer any evidence to establish that the presumptions were in fact erroneous. The steps which counsel for the appellant suggested should have been taken by Mr. Crevier in establishing the basis for his assessment, namely verifying the allegations with those who allegedly paid the sums to the appellant, were not necessary to establish his presumptions. However, the testimony of these persons denying they had paid the appellant the alleged amounts would have had to have been considered by the Board if counsel for the appellant had seen fit to call them as witnesses to rebut the respondent's presumptions and discharge the onus of proof on him.

I see no merit in this objection of the appellant. This judgment clearly indicates that the Minister may rely on statements by third parties and on the report of a commission of inquiry and take for granted that what it advances is true. The onus is on the appellant to demolish those presumptions.

I now come to the part of the application which addresses the questions of form. Subparagraphs 4(g), (h), (i), (j) and (k) of the application deal with certain questions of form. These subparagraphs are therefore cited again for reasons of convenience:

(g) At paragraphs 2, 3, 4, 6, 7, 9, 10, 11, 13, 14, 15, 16 and 21 of her reply, the respondent merely denies the allegations contained in the notice of appeal, without providing the slightest relevant fact, contrary to the legislative and regulatory provisions applicable in the instant case;

(h) The respondent categorically denies certain allegations of the appellant contained in the notice of appeal, whereas she formally admits them further on; the reply to the notice of appeal therefore contains contradictory allegations;

(i) In the drafting of her reply to the notice of appeal, the respondent uses frivolous and vexatious language, contrary to the legislative and regulatory provisions applicable in the instant case;

(j) In particular, the respondent makes excessive use of terms such as "alleged agreement”, “so-called agreement", “so-called deduction”, “so-called loss", alleged loss. . .”, “agreement supposedly signed. . .”, “so-called laboratories"; such vocabulary is scandalous and seriously prejudices the appellant, when the respondent notes no fact that might justify her denigrating the appellant’s conduct or that of the corporations ARMC and ARMC No. 2 in this manner;

(k) In her reply to the notice of appeal, the respondent employs a method of organizing her paragraphs and allegations contrary to the legislative and regulatory provisions applicable to such a pleading; it is in the interests of justice and of the appellant's right to a fair hearing that the respondent not be permitted to enter so irregular a pleading into the record of this Court.

[Translation.]

The appellant claimed that the numbering of the paragraphs in the reply to the notice of appeal did not meet the requirements of subsection 47(1) of the Tax Court of Canada Rules, which reads as follows:

47(1) Pleadings shall be divided into paragraphs, numbered consecutively, and each allegation shall, so far as is practical, be contained in a separate paragraph.

Although this question of numbering of paragraphs is a secondary question, I am inclined to share the appellant's view. The numbering system adopted by the respondent is confusing. It would be better to eliminate the subdivisions into various parts from paragraph 30 of the reply to the notice of appeal. The subdivision of this paragraph should at least constitute a separate paragraph bearing a different number. The appellant also criticized the use of certain expressions such as "alleged agreement”, so- called agreement"," so- called deduction", “so-called loss", "alleged loss”, "agreement supposedly signed", “so-called laboratories", “so-called tax shelter”, “so-called research projects”, etc. [translation]. During the hearings of these applications, I realized that the use of these expressions mentioned above and other similar expressions betrayed a certain ambiguity or reluctance on the respondent's part to adopt a specific position on a given question. The appellant also rightly attacked the use of the conditional tense in many allegations in the reply to the notice of appeal.

During the hearing, counsel for the respondent acknowledged that the reply to the notice of appeal contained defects of form such as those just indicated and said he was prepared to amend the reply to the notice of appeal accordingly. The Court takes note of the respondent's position on this point and orders that the reply to the notice of appeal be amended accordingly. In this amended reply, the respondent should also take into account subparagraph 4(h) of the application and ensure that her positions described in the paragraphs in which he [sic] admits and denies certain allegations is logically consistent with those described in paragraph 30, in which he [sic] takes certain facts for granted.

I consider that subparagraph 4(e) of the application substantially addresses questions of form, although from the appellant's point of view the question appears to be a question of the jurisdiction of this Court. Paragraph 4(e) reads as follows:

(e) In her reply to the notice of appeal, the respondent asks this Court to rule on questions which lie outside the jurisdiction of the Tax Court of Canada;

[Translation.]

On this point, the appellant referred to paragraph 30 of Part XIII of the reply entitled "Adjustments" [translation]. This Part XIII reads as follows:

(a) The deduction of $70,000,781 for research expenses in ARMC's financial statements for its 1985 fiscal year must be reduced to nil, as a result of which the loss posted by ARMC for the fiscal year in question must be reduced by $70,000,781;

(b) The deduction of $215,148 claimed by the appellant in computing his income for the 1985 taxation year as a loss sustained by ARMC must accordingly be lowered by $202,915 to stand instead at $12,233;

(c) The deduction of $73,272,012 for research expenses in ARMC No. 2's financial statements for its 1986 fiscal year must also be reduced to nil, as a result of which the loss posted by ARMC No. 2 for the fiscal year in question must be reduced by $73,272,012;

(d) The deduction of $300,613 claimed by the appellant in computing his income for the 1986 taxation year as a loss sustained by ARMC No. 2 must accordingly be lowered by $283,020 and stand instead at $17,593.

[Translation.]

It is true that the use of the words "must be reduced to nil”, “must be reduced”, “must be lowered” [translation] in this Part XIII of the reply to the notice of appeal appears to suggest, as the appellant pointed out, that the respondent was asking the Court to make adjustments. Under the terms of section 171 of the Income Tax Act, dismissal of the appeal is the only remedy which the Court can grant if it finds that the assessments under appeal are correct. Furthermore, in the conclusion of this pleading, the respondent asked only that the appeal be dismissed, nothing more. In addition, it should not be forgotten that these allegations in Part XIII are part of paragraph 30, which begins as follows: “In assessing the appellant for the taxation years 1983 to 1990 inclusive, the Minister of National Revenue took for granted, inter alia, the following facts. . .” [translation]. It may be that these allegations do not, strictly speaking, constitute assumptions. The appellants suffered no prejudice by the mere fact that these allegations were made. Consequently, with regard to paragraph 4(e) of the application, the Court orders the respondent to amend the reply to the notice of appeal if those allegations merely present, as I think they do, what was already done by the Minister of National Revenue when he made the computations which led to the assessments under appeal. Otherwise, these allegations should be struck out.

As for paragraph 4(g) of the application, it does not appear to me to have any foundation. The Rules, in particular section 49 thereof, do not, in principle, oblige the respondent to provide explanations when she denies a fact.

The appellants applications are therefore granted to the extent indicated in these reasons and dismissed in all other aspects. The reply to the notice of appeal in each of the files must therefore be amended to take these reasons into account. This amended reply shall be filed and served no later than January 29, 1993.

Costs in the matter of these applications will follow the fate of the appeals.

Order accordingly.