Paul Payette- v. Her Majesty the Queen-, [1977] CTC 551, 77 DTC 5368

Walsh, J:—This is a petition to strike paragraphs 2 to 6 inclusive and paragraphs 14 and 16 of plaintiff's statement of claim pursuant to Rule 419 of the Federal Court Rules. The proceedings concern reassessments made on January 14, 1974 of plaintiff’s income tax for the years 1947 to 1954 inclusive resulting in a deduction from the taxable revenue in each of the said years. Assessments had originally been made on January 21, 1955, which led to notices of opposition by the taxpayer. On January 10, 1958 the Minister issued new assessments which assessments were appealed to the Tax Review Board. By decision dated June 14, 1972, the appeals were maintained in part and the assessments were referred back to the Minister for further examination and reassessment. No appeal was made by either the plaintiff taxpayer or the Minister from this decision and in due course the reassessments referred to above were made on January 14, 1974. These in turn were opposed by plaintiff and confirmed by the Minister, following which plaintiff brought the present proceedings disputing these assessments of January 14, 1974. It is important to note that in the present proceedings no allegations can be made nor evidence introduced dealing with the merits of the original assessments since the decision of the Tax Review Board from which no appeal was brought has the effect of res judicata. The only question which can be raised in the present appeal therefore is whether in making the reassessments for the years in question the Minister has correctly in- terpreted and applied the provisions of that decision. It is in this light that the present motion to strike must be considered.

I find no serious objection to paragraphs 2 to 6 remaining in the Statement of claim since they merely give the historical background to the litigation before the Tax Review Board and cannot lead to the reopening of the arguments made and disposed of before it. It is true that plaintiff in these paragraphs describes himself as an executive and states that he has prospected and explored properties for petroleum, natural gas and minerals and has developed same and that he at all times considered himself an investor. The decision of the Tax Review Board, and in particular page 9 thereof states very clearly that he is no more than a promoter and speculator. This is not an issue which is open for further argument so the question of what plaintiff considers himself to be or how he describes himself is of no further interest. However, these paragraphs merely lead up to subsequent paragraphs 7, 8, 9, 10, 11, 12 and 13 which deal with the assessments which were made, the objections, the reassessments, the appeal to the Tax Review Board, its decision, the action taken by the Minister and the reassessments of January 14, 1974 as a result of this, and the objection to and subsequent confirmation of same, which historical background would be incomplete without the preceding paragraphs 2 to 6 outlining the basis on which the dispute before the Tax Review Board arose. I do not find therefore that paragraphs 2 to 6 should be struck, nor that they can in any way open the way for a reconsideration of the arguments made before the Tax Review Board.

When we come to pargraphs 14 and 16 however the argument is more serious. These paragraphs read respectively as follows:

14. In assessing the Plaintiff by notices of reassessment dated 14 January 1974, the Minister of National Revenue, as directed per judgment of the Tax Review Board, did not take into consideration an amount of $336,858 expended in repurchasing certain shares previously sold by the Plaintiff.

16. In assessing the Plaintiff by notice of reassessment dated 14 January 1974, the Minister of National Revenue wrongfully included in his income for the Plaintiff’s taxation years 1953 and 1954 an amount of $468,643.31 realized on the sales of shares in the capital stock of Miller Copper Mines Limited.

and really should be read in the light of paragraphs 18 and 20 which read respectively:

18. Plaintiff submits that an amount of $336,858 expended in repurchasing certain shares previously sold by the Plaintiff should be allowed in accordance with the judgment of the Tax Review Board, delivered on 14 June 1972.

20. Plaintiff in addition submits that with respect to the shares of Miller Copper Mines Limited an amount of $468,643.31 should not be included in his income in respect of his 1953 and 1954 taxation years pursuant to section 83 of the Income Tax Act.

Plaintiff-respondent recognized this during the hearing, stating that he did not ask for the striking of paragraphs 18 and 20 in the original motion since he considers them as merely conclusions arising from paragraphs 14 and 16 so that if these latter paragraphs were struck there would be no allegations of fact to support paragraphs 18 and 20. Counsel for plaintiff-respondent argued conversely that if paragraphs 18 and 20 were to remain in the statement of claim then certainly plaintiff should be allowed to retain paragraphs 14 and 16 as the factual basis on which paragraphs 18 and 20 are pleaded.

I am by no means satisfied however on the reading of paragraphs 18 and 20 that they could not stand by themselves to permit the proof to be made of the allegations therein so that I therefore find that if paragraph 14 is struck paragraph 18 should also be and Similarly if paragraph 16 is struck so should paragraph 20. On this basis defendant-petitioner submitted a verbal amendment to his motion so as to ask for the striking of paragraphs 18 and 20, and as the making of this amendment was not objected to by counsel for plaintiffrespondent this amendment was permitted and the present motion to strike will be dealt with accordingly.

In objecting to paragraphs 14 and 18 taken together and 16 and 20 taken together counsel for defendant-petitioner states that the reassessments for 1953 and 1954 and adjustment sheets for those years filed as exhibits indicate clearly that in both years additional expenses were allowed, nothing being added to income. This does not mean however that plaintiff has no right to appeal against these reassessments if the amounts allowed as deductions were not the correct amounts which should have been allowed pursuant to the decision of the Tax Review Board.

Defendant-petitioner further contends that the figures of $336,858 referred to in paragraphs 14 and 18 and $468,643.31 referred to in paragraphs 16 and 20 appear in the details given by plaintiff-respondent in a request to a demand for particulars, on the fourth page thereof. Without going into the merits, it would appear however that this does not necessarily estop plaintiff from disputing the sufficiency of these figures. The amount of $468,643.31 referred to in paragraphs 16 and 20 had appeared as a non-taxable surplus in Schedule A which was produced by consent as an exhibit, and the Tax Review Board decided that this was not capital but income. Paragraphs 16 and 20 therefore stating that this amount was wrongfully included in income when it should not have been should be struck. The actual figure is not found in the decision of the Tax Review Board however, but the correctness of it should not be gone into on this motion. Plaintiffrespondent therefore may amend paragraphs 16 and 20 if it is his contention that the amount in question is not correct, or if it is his contention that the Tax Review Board did not decide that the amount realized on the sale of shares of the capital stock of Miller Copper Mines Limited was in fact taxable as income. Such an amendment would be unacceptable however if it in any way stated or inferred that the Tax Review Board was wrong in reaching such a decision, if it did so decide.

With respect to paragraphs 14 and 18, both allege that the Minister of National Revenue did not follow the directions of the decision of the Tax Review Board so as to take into consideration the amount of $336,858 in question. This is an issue which should be left for the trial judge. Defendant-petitioner raises an additional argument in connection with this however namely that these expenses were made in 1955 whereas the judgment of the Tax Review Board allowed expenses only during the period in question which ended with the 1954 taxation year. This is clearly a question which should be left for the trial judge.

Counsel for plaintiff-respondent objected to the form of the motion to strike which does not spell out any of the grounds set out in Ruie 419. While it would have been preferable if these had been specified since various alternative grounds are set out in the said rule, reference to the rule is I believe sufficient and failure to spell out which of the grounds is relied on is not a sufficiently fatal defect to justify the dismissal of the motion.

ORDER

Paragraphs 16 and 20 of plaintiff’s statement of claim are struck out with permission to amend only if it is plaintiff’s contention that the decision of the Tax Review Board of June 14, 1972 found that the amount referred to therein or some greater amount should have been deducted from his taxable income for the years 1953 and 1954.

Costs in the cause.