http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/107819/index.do 
Lancan Investments Inc. v. The Queen (February 3, 2015 – 2015 TCC 27, Pizzitelli J.).
Précis: The taxpayer was assessed Part XIII withholding tax in connection with the repurchase of shares of a foreign entity assumed to be a resident of the Netherlands. It had paid 5% withholding on the basis that the foreign entity was a corporation but CRA assessed 15% withholding on the basis that the foreign entity was a trust. In the Tax Court of Canada the Crown argued, in the alternative, that the foreign entity was resident in Liechtenstein where the applicable withholding rate would be 25%. The taxpayer unsuccessfully moved to strike the Crown’s alternative pleading. However it was successful in obtaining an order directing the Crown to provide answers to particulars concerning its position in the litigation. The Court held that the Crown’s original response (to 2 of 3 questions asked) were unresponsive. The Crown (Luther P. Chambers, Q.C.) claimed, unsuccessfully, that he had a “licence to fish”. The Crown was directed to pay costs of $8,000 in any event of the cause because the Crown’s argument was “very unconvincing” and it had no “reasonable justification” for its failure to answer the two questions involved.
Decision: This case concerned the rate of withholding tax payable on the repurchase of shares from a foreign entity.
[1] The Appellant has appealed a reassessment that effectively increased its obligations to withhold and remit required Part XIII of the Income Tax Act (the “Act”) withholding taxes from 5% to 15% in connection with its repurchase of shares from a foreign entity assumed to reside in the Netherlands. The Respondent takes the position that the foreign entity was a trust instead of a corporation and hence under the applicable Treaty is subject to the higher withholding taxes. In the alternative, the Respondent has pleaded that the foreign entity is a resident of Liechtenstein that is subject to a 25% withholding tax the Appellant would be responsible for remitting to the tax authorities and so the appeal should be dismissed as such obligation is in effect greater than the reassessed amount, notwithstanding that the Respondent is not seeking the extra amount. It is the alternative pleading that is in issue in this motion.
The taxpayer brought a motion to strike the Crown’s alternative pleading. In the alternative, the taxpayer sought an order that the Crown provide answers to its Demand for Particulars in respect of its alternative pleading (the “Residency Allegation”), asserting that the Crown’s original answers were non-responsive:
[5] Pursuant to the above Demand for Particulars in relation to the Residency Allegation, the Appellant posed three questions which were answered by the Respondent, all as follows:
Q1. Which are the “material times” to which the respondent refers?
The “material times” referred to in paragraph 9 of the Respondent’s Reply are all times that are relevant to the redemption of the Appellant’s shares held by Palfinvest Reg. Trust.
Q2. Who exercised management and control of Palfinvest Reg. Trust (“Palfinvest”) during the material times?
The person or persons who exercised management and control of Palfinvest Reg. Trust during the material times is a matter of evidence to be adduced at trial, in respect of which no particulars can be demanded for the purposes of pleading.
Q3. How was management and control of Palfinvest exercised during the material times?
The manner in which the management and control of Palfinvest Reg. Trust was exercised during the material times is a matter of evidence to be adduced at trial, in respect of which no particulars can be demanded for the purpose of pleading.
[6] The Appellant also seeks costs of $9,000.00 in any event of the cause and such other relief as is just and equitable in the circumstances.
The Court declined to strike the alternative pleading:
[12] In the case at hand, I am not satisfied the Appellant has met the high standard of demonstrating the Residency Allegation would have no prospect of success, nor can I find failure to strike it would lead to any prejudice to the Appellant at this early stage in the proceedings that could not be compensated for by costs and that could not be remedied by less drastic means. The matter is at an early stage of litigation and I have no evidence before me that failure to strike the provision would result in any substantial delays. Frankly, as referenced in Cameco above, the approach to grant leave to amend if particulars are in order would be the preferred relief in an application of first instance like in this matter and in fact an order for particulars is the alternative relief requested by the Appellant, which I address next.
As to Question 1, the Court concluded that the answer was responsive:
[30] With respect to Question 1, I find the Respondent has answered such question by effectively stating that the “material times” were the times relevant to the repurchase of shares, the latter of course which gives rise to a deemed dividend under the Act that triggers the Appellant’s withholding obligation in issue. It is clear to me that the relevant time triggering the deemed dividend is the time of repurchase of shares.
However as to Questions 1 and 2 the Court held that the answers were not responsive and the respondent was not entitled to embark on a fishing expedition:
[27] I should also like to comment on the Respondent’s suggestion that the Appellant’s concerns about the Respondent setting herself up for a “fishing expedition” due to her failure to plead material facts was not well founded. The Respondent argued that since its pleading was clear and ambiguous
[Ed. – Presumably this is a typo and should read “unambiguous”], then it in fact “had a licence to fish”. In light of the above, it is clear to me that the parameters of the “fishing licence” are and must be set within the issues properly pleaded with their material facts. In other words, with sufficient particulars that clearly and precisely define the issues. It is for this reason that “They tie the hands of the party, and he cannot without leave go into any matters not included”, as stated by Campbell J. in
Mastronardi above at paragraph 10. I strongly agree with the Appellant’s position on this matter as the Residency Allegation is too wide and imprecise, capable of different meanings and of encompassing different factual elements necessary to meet possibly different legal tests. To let it stand without particulars would be to declare “open season” rather than set parameters of a licence.
[28] In my opinion the Appellant’s Demand for Particulars was not premature as the Respondent has contended and the Appellant is entitled to know the particulars of what the Respondent means when she states the management and control of Palfinvest resides in Liechtenstein.
While the Court did not award the full $9,000 sought by the taxpayer it did slam the Crown with a cost award of $8,000 which was payable in any event of the cause:
[31] With respect to costs on this matter, the Appellant seeks the sum of $9,000.00 in any event of the cause although in argument suggested its costs on this motion to date totalled approximately $20,000.00. The Respondent did not take issue with that specific amount requested in argument. While I totally agree with the Appellant’s argument that this motion would not have been necessary had the Respondent properly provided the particulars requested, the Appellant also sought and argued for the extreme relief of striking the Respondent’s alternative pleading in issue without success. While the Appellant had in the end mixed success, I take note of the fact that the Appellant made it clear at the beginning of this motion that he would not proceed if the Minister agreed to provide the requested particulars which the Respondent refused to do, in my opinion, without any reasonable justification, thus making this motion necessary. The Appellant was clear that all it really wanted were the requested particulars. The law on particulars is quite established and clear and the Respondent’s arguments to the contrary were, to speak frankly, very unconvincing. Accordingly, I am ordering that the Respondent pay the Appellant costs in the fixed amount of $8,000.00 in any event of the cause.