Mahoney,
J:—By
a
Statement
of
Claim
filed
herein
March
21,
1974
the
plaintiff
appeals
against
income
tax
assessments
for
its
1967
and
1968
taxation
years.
It
raises
a
number
of
issues.
The
only
one
in
contention
in
this
application
arises
out
of
the
sale,
on
March
1,
1967
of
the
plaintiff’s
parts
division
to
Walker
Metal
Products
Limited
(hereafter
called
“Walker”),
its
wholly
owned
subsidiary,
the
setoff
of
substantial
past
and
current
losses
in
Walker’s
original
business
by
current
profits
from
the
parts
business
during
1967
and
1968
and
the
winding-up
of
Walker
effective
December
31,
1968.
Examination
for
discovery
was
conducted,
but
not
concluded,
on
behalf
of
the
defendant,
prior
to
filing
the
Statement
of
Defence
on
February
10,
1977.
The
defence
is
that
the
Walker
transactions
were
a
sham.
The
defendant
seeks,
by
this
application,
leave
to
amend
the
Statement
of
Defence
in
a
number
of
particulars,
some
of
which
the
plaintiff
consents
to
and
others,
in
the
prayer
for
relief,
which
it
does
not
oppose.
The
only
amendment
opposed
is
that
which
would
add
subparagraph
7(c.1).
7.
With
respect
to
paragraphs
6,
7,
10,
11,
12
and
13
generally,
of
the
Statement
of
Claim,
he
states
as
follows:
(c.1)
during
the
period
from
the
end
of
1966
to
the
middle
of
1968,
the
Plaintiff
temporarily
halted
the
portion
of
its
overall
scheme
of
tax
loss
absorption
that
related
to
its
Dealership
Companies
and
which
had
been
in
effect
from
September
1,
1963,
and
it
later
resumed
that
portion
of
the
said
scheme
on
July
1,
1968,
after
the
absorption
of
the
Walker
losses;
Paragraphs
6,
7,
10,
11,
12
and
13
of
the
Statement
of
Claim
contain
nothing
that
would
render
proposed
subparagraph
7(c.1)
of
the
Statement
of
Defence
obviously
relevant
or
material.
If
it
is
relevant
or
material,
it
can
only
be
so
to
the
allegation
of
sham.
In
the
circumstances,
it
seems
proper
to
approach
this
application
on
the
following
basis:
if
the
subparagraph
were
already
contained
in
the
Statement
of
Defence,
ought
the
plaintiff
to
succeed
in
a
motion
to
strike
it
out?
If
not,
I
see
no
good
reason
for
refusing
to
allow
it.
Rule
419.
(1)
The
Court
may
at
any
stage
of
an
action
order
any
pleading
or
anything
in
any
pleading
to
be
struck
out,
with
or
without
leave
to
amend,
on
the
ground
that
(a)
it
discloses
no
reasonable
cause
of
action
or
defence,
as
the
case
may
be,
(b)
it
is
immaterial
or
redundant,
(c)
it
is
scandalous,
frivolous
or
vexatious,
(d)
it
may
prejudice,
embarrass
or
delay
the
fair
trial
of
the
action,
(e)
it
constitutes
a
departure
from
a
previous
pleading,
or
(f)
it
is
otherwise
an
abuse
of
the
process
of
the
Court;
and
may
order
the
action
to
be
stayed
or
dismissed
or
judgment
to
be
entered
accordingly.
This
is
no
occasion
for
yet
another
homily
on
the
legality
of
a
taxpayer
arranging
his
affairs
to
avoid
taxation
and
the
illegality
of
his
arranging
them
to
evade
it.
However,
I
fail
to
see
that
the
legality
or
illegality
of
one
set
of
transactions,
namely
the
portion
of
the
plaintiff’s
“overall
scheme
of
tax
loss
absorption’’
vis
à
vis
its
“Dealership
Companies’’
can
have
any
bearing
at
all
on
whether
or
not
another
set
of
transactions
was
a
sham.
On
the
other
hand,
if
the
amendment
were
allowed,
the
defendant
would
be
entitled
to
an
extensive
examination
for
discovery
on
matters
that,
on
the
face
of
its
own
pleading,
occurred
both
before
the
alleged
sham
was
effected
and
after
such
of
its
results
as
are
material
in
this
action
had
been
achieved.
In
my
view,
if
the
Statement
of
Defence
already
contained
such
a
pleading,
the
plaintiff
would
be
entitled
to
succeed
in
an
application
to
strike
it
out
under
Rule
419(a)
as
disclosing
no
reasonable
defence;
under
419(b)
as
immaterial;
and
under
419(d)
as
tending,
at
the
very
least,
to
delay
substantially
the
fair
trial
of
the
action.
Order
The
application
is
granted
except
as
to
subparagraph
7(c.1).
Costs
shall
be
in
the
cause.
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