http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/108344/index.do 
Gramiak v. Canada (February 6, 2015 – 2015 FCA 40, Nöel CJ (Author), Dawson, Trudel JJA)
Précis: This decision is an appeal from a decision of Rossiter ACJ (as he then was) in which he denied the taxpayer’s motion to strike portions of the Crown’s Reply on the basis that they related to a new basis for assessment and granted the Crown’s motion to permit amendments to its Reply. The Court of Appeal held that Rossiter ACJ correctly applied the “plain and obvious” test for striking pleadings. The taxpayer argued that the Tax Court decision misconstrued the factual basis for the assessment but Nöel CJ found that “the factual basis for the reassessment is best left to be determined at trial based on the fullness of the evidence, including the testimony of the auditor.” There was a dispute about the scope of a waiver given by the taxpayer and whether the taxpayer “induced the Minister to remain on the wrong path and waited until the reassessment period had passed to reveal the true transaction after having ensured that the waiver had been made air-tight”. Nöel CJ held that such determination was also best left to the trial judge. The motions judge’s refusal to strike portions of the Reply and his decision to permit the Crown to amend its Reply were both upheld. The appeal was dismissed with costs.
Decision: The factual background to the reassessment under appeal was somewhat convoluted:
[4] The reassessments which form the subject matter of the underlying proceedings were issued with respect to the appellant’s 2002 and 2003 taxation years. At issue throughout the audit which led to their issuance was whether debentures issued by PI Ventures Inc. (the debentures) were qualified investments for purposes of the appellant’s self-directed registered retirement savings plan (RRSP) and whether they were acquired for an amount in excess of their fair market value.
[5] During the course of the audit, by letter dated January 12, 2006, waivers were sought by the Canada Revenue Agency (CRA). The text as proposed by the CRA waived the normal reassessment period with respect to (Appeal Book, Vol. I at pp. 130 and 132):
Income inclusion relating to the acquisition of non-qualified investment for a registered plan and/or income inclusion relating to the acquisition of investment for a registered plan for an amount in excess of fair market value with respect to PI Ventures Inc. in the amount of $130,500 [amount for 2002 taxation year, for 2003, the amount was $8,500] plus related penalties.
[6] The authorized representative of the appellant asked and obtained that the waivers be modified so as to read (
ibidem):
Income inclusion of $130,500 [for the 2002 taxation year, $8,500 for the 2003 taxation year] relating to the acquisition of non-qualified investments (PI Ventures Corporation convertible debentures) for a RRSP subject to s. 146(9) and/or s. 146(10).
Waivers bearing this language were signed by the appellant on or about March 14, 2006.
[7] The waivers were subsequently revoked by the appellant on October 4, 2006, with effect six months thereafter thereby provoking the issuance of reassessments.
[8] These were issued on January 4, 2007. The effect of the reassessments was to add the above amounts to the appellant’s income for the 2002 and 2003 taxation years pursuant to subsections 146(9), 146(10) and paragraph 56(1)(h) of the Act on the basis that the debentures were non-qualified investments (subsection 146(10)) and were acquired by the appellant’s self-directed RRSP for an amount in excess of their value (subsection 146(9)). Penalties were levied pursuant to subsection 163(2) on the amounts assessed on the basis that the appellant had knowingly made a false statement in filing his tax returns for those years.
[9] The normal reassessment period (3 years from the date of the initial assessment) ended on June 5, 2006 with respect to the appellant’s 2002 taxation year and May 13, 2007 with respect to his 2003 taxation year so that the latter was reassessed within this period and the former was not.
[10] Up to January 12, 2012, when he filed his Notice of Appeal, the appellant maintained that the debentures had been acquired by his RRSP (Appeal Book, Vol. 1 at pp. 140, 141 and 200). In his Notice of Appeal, the appellant took the position, for the first time, that the debentures were not acquired and that as a result no amount could be included in his income pursuant to subsections 146(9) and 146(10) of the Act.
[11] In her initial Reply to the Notice of Appeal filed on March 6, 2012, the respondent raised the alternative argument that if the debentures were not acquired by the appellant, he nevertheless was in constructive receipt of a taxable benefit in the same amounts as those reassessed, pursuant to subsection 146(8).
[12] On February 28, 2013, the appellant brought a motion to strike the paragraphs setting out this alternative argument and related additions.
In response the Crown moved to amend its pleadings:
[13] Before the motion could be heard, the respondent brought a motion of her own seeking to amend her Reply so as to add the following two paragraphs:
19A.
During the years 2004 to 2007, the Appellant received the following funds from foreign source as shown on the statements issued by Syndicated Gold Depository and provided by the Appellant to the CRA:
2004: US$ 5,950.00
2005: US$ 32,351.86
2006: US$ 40,000.00
2007: US$ 40,000.00
TOTAL: US$ 118,301.86 (CND$135,297.60)
19B. These amounts represent a return of capital from the Appellant’s RRSP investment in PI ventures Inc. as stated by the Appellant in a declaration dated June 20, 2008.
[14] On the same occasion, the respondent proposed to complement the contested plea as follows:
28.
Alternatively, if this Court concludes that the Appellants’ RRSP did not acquire the debenture units and/or did not acquire any property during the 2002 and 2003 taxation years, the Respondent submits that by directing Olympia Trust to transfer funds from his RRSP account into Singh Walters Bindal Trust Account, the Appellant constructively received the total amount of the funds transferred.
29.
As a consequence, the amounts of $130,500 and $8,500 received by the Appellant as
constituted a benefit out of or under a RRSP and as such this amount
should be properly included in his income for the 2002 and 2003 taxation years pursuant to subsection 146(8) and paragraph 56(1)(h) of the Act.
Both motions were heard together. The taxpayer argued that the transaction described by the alternative pleadings was not the same transaction upon which the reassessments were founded and therefore subsection 152(9) operated to prohibit the amendment. In addition the taxpayer argued that the reassessment for 2002 exceeded the scope of the waiver given for that year and was therefore statute-barred. Rossiter ACJ dismissed the taxpayer’s motion and allowed the Crown’s motion to amend its Reply.
Nöel CJ rejected the taxpayer’s argument that the motions judge misconstrued the “plain and obvious” test for striking pleadings:
[31] As noted earlier, although paragraph 31 of the Tax Court judge’s reasons, if read in isolation, does suggest that he misunderstood the applicable test, the lengthy reasons that he gave demonstrate unequivocally that his conclusion is based on a full analysis of the issues. It is therefore apparent that although an error could be apprehended, none was in fact committed.
Although the motions judge took a broad view of the original basis for the reassessments that determination was ultimately left for the trial judge:
[38] This admittedly broad view of the factual basis for the reassessments finds support in the language of the letter from the auditor addressed to the appellant outlining the proposed reassessments (reasons at para. 59) which amongst other things refers to RRSP value stripping as well as the notion of sham (Appeal Book, Vol. 1, at p. 82). I note that a sham allegation is particularly supportive of the broad view adopted by the Tax Court judge as it suggests that the true transaction is different from what the appellant made it appear to be.
[39] Counsel for the appellant pointed out during the hearing that the Notice of Confirmation subsequently issued indicates that the sham argument was not cited by the auditor in the audit report as an assessing position (Appeal Book, Vol. 1 at pp. 109 and 110). That is so. However, if anything this calls for further clarification. In my view, the determination of the factual basis for the reassessment is best left to be determined at trial based on the fullness of the evidence, including the testimony of the auditor.
Similarly the determination of the effect of the waiver was something best left to the trial judge:
[47] To the extent that the appellant actively induced the Minister to remain on the wrong path and waited until the reassessment period had passed to reveal the true transaction after having ensured that the waiver had been made air-tight, he may well be precluded from resiling from his initial position and/or relying on the waiver. In this respect, the appellant’s state of mind when these representations were made is obviously crucial. Yet, the extensive affidavits sworn by the appellant and his authorized representative in support of the Motion to Strike are both silent as to when they became aware that the debentures were not acquired (Appeal Book, Vol. 1 at pp. 74 to 77 and 113 to 118). In my view, only the trial judge after having considered the evidence on point will be in position to pronounce on the behaviour of the appellant and its impact on the position which he takes on appeal.
Accordingly the Court of Appeal upheld the motions judge’s decisions on both the motion to strike and the motion to amend the Reply. The taxpayer’s appeal was therefore dismissed with costs.