0742443 B.C. Ltd. v. R.
(October 8, 2014 – 2014 TCC 301) was a single issue case. Was the income earned by a mini-storage company income from property or was it income from business:
 0742443 B.C. Ltd., formerly R–Xtra Storage Centre Ltd. (“R-Xtra Co.”), carried on a business throughout 2006, 2007, 2008 and 2009 primarily through the efforts of its owner, Mr. David Claeys. The Respondent assessed R-Xtra Co. on the basis it was carrying on a specified investment business, as its principal purpose was to derive income from property (section 125(7) of the Income Tax Act (the “Act”)), being a mini-storage business. The Respondent consequently denied R-Xtra Co. the small business deduction. Mr. Claeys maintains R‑Xtra Co. carried on active business providing a bundle of services not simply storage space, and was therefore not caught within the definition of a specified investment business.
Mr. Claeys testified that he provided a number of additional services, not just the provision of storage. These included snow removal, loading, unloading, shuttle service and relocation advice. Ultimately the court was not convinced that this changed the nature of the operation:
 In summary, all of R-Xtra Co.’s customers were buying storage space: that is what they paid for. Mr. Claeys provided services that anyone acquiring storage space would expect. He did also, however, go the extra mile and provide additional services, though has not provided sufficient evidence to in any way quantify the level of such customer service. Not every customer got loading, unloading, shuttle service or relocation advice for example. Every customer got top quality storage space. R-Xtra Co. carried on a business, the principal purpose of which was to derive income from renting storage space and that is deriving income from property.
One interesting procedural aspect of this case was that the appellant argued that the Crown’s pleading was improper since it included assumptions of law, as opposed to assumptions of fact:
 Because the Appellant’s counsel founded a major part of his argument on the basis the Respondent’s assumptions were fundamentally misguided, I repeat those assumptions as follows:
8. In determining the Appellant’s tax liability for the 2006, 2007, 2008 and 2009 taxation years, the Minister made the following assumptions of fact:
a) at all material times, the Appellant operated a mini-storage rental business;
b) at all material times, the Appellant’s principal business activity was the rental of mini-storage units to customers on a monthly basis;
c) at all material times, the Appellant owned a large warehouse-type building and the land the building was situated;
d) at all material times, the mini-storage units were located inside the large warehouse-type building;
e) at all material times, the value of the large warehouse-type building and the land the building was situated was more than 90% of the Appellant’s total assets;
f) at all material times, more than 90% of the Appellant’s income was derived from the rents from the rental of the mini-storage units;
g) at all material times, any services provided by the Appellant’s business was to derive rents from the rental of the mini-storage units; and
h) at all material times, the Appellant employed no more than one full-time employee.
It is not entirely clear which of these assumptions the appellant believed to be tainted. Nevertheless the court rejected this line of argument:
 As I have found no ambiguity in the legislation, as applied to the circumstances before me, but found that R-Xtra Co. clearly is a specified investment business, there is no need to address the Appellant’s alternative arguments, but I do want to comment briefly on the suggestion that a purported faulty Reply is sufficient to find in favour of the Appellant. I was not referred to any authority directly on point. Yes, there are cases suggesting assumptions should not state law but simply the facts assumed. But my role is to determine the correctness of an assessment based on the evidence put before me. An Appellant has ample opportunity through pleadings, including requests for particulars, document exchange and examinations for discovery to know the case to meet. The Appellant had earlier moved to strike some of the assumptions and was unsuccessful. The Reply was not so inadequate that the Appellant was not aware of the case to meet: the Appellant knew the case to meet.
 I do not accept the Appellant’s position it has been treated very unfairly by the Respondent’s bad and misleading pleadings. Pleadings are often, regrettably, not perfect. They are intended to set the parameters within which the litigation is to proceed, but with some qualifications: section 152(9) of the Act comes to mind. If a reply is faulty by pleading law as an assumption, that does not somehow relieve me of my responsibility to consider evidence upon which I am to reach my own conclusion with respect to the law. It does, however, relieve the Appellant from having to demolish that assumption, but it does not allow the Appellant to simply step back and not enter a case. Perhaps this could be an approach where the only assumptions made by the Respondent are assumptions of law. I would hope in such an instance a blatantly improper reply would never get to trial. There would be opportunities to challenge and to amend.
 The rules of litigation in our adversarial system are to ensure a fair fight at trial – no surprise, no ambush, a presentation of relevant facts properly examined and cross-examined and thoughtful argument applying the law to those facts.
 In these Appeals I find, notwithstanding some concerns with some assumptions, the issue is clear, the Parties knew what the case was about, evidence was properly led and it is up to me to make a decision. I have. R‑Xtra Co. was a specified investment business.
In the result the appeals were dismissed with costs.
Comment: This decision illustrates that it is often too late to object to faulty assumptions at trial; if assumptions are improper it is normally best to move to strike them well before trial. A motions judge might decide to reserve the matter to the trial judge but at least then the issues are clearly drawn and the trial judge will have to act on the motion to strike.