T-1192-74
Chrysler Canada Ltd.-Chrysler Canada Ltée
(Plaintiff)
v.
The Queen (Defendant)
Trial Division, Mahoney J.—Toronto, April 25;
Ottawa, April 28, 1977.
Practice — Amendment of pleadings — Application to
amend statement of defence — Plaintiff opposes one amend
ment — Federal Court Rule 419(1).
In an appeal by the plaintiff against income tax assessment,
the defendant seeks leave to amend its statement of defence.
One amendment is opposed by the plaintiff.
Held, the application is granted, except for the subparagraph
opposed by the plaintiff. If the subparagraph were already
contained in the statement of defence, ought the plaintiff
succeed in a motion to strike it out? If not, there is no good
reason for refusing to allow it. 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(1)(a) as disclosing no reasonable defence; under 419(1)(b)
as immaterial and under 419(1)(d) as tending to delay substan
tially the fair trial of the action.
APPLICATION.
COUNSEL:
M. A. Mogan for plaintiff.
C. T. A. MacNab for defendant.
SOLICITORS:
Miller, Thomson, Sedgewick, Lewis & Healy,
Toronto, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for order ren
dered in English by
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 state
ment 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 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 Compa
nies" 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 exami
nation 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(1)(a) as disclosing no reasonable
defence; under 419(1)(b) as immaterial and under
419(1)(d) as tending, at the very least, to delay
substantially the fair trial of the action.
ORDER
The application is granted except as to subpara-
graph 7(c.1). Costs shall be in the cause.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.