Executive Summary: Key Legal and Evidentiary Issues

• The court struck portions of the Amended Reply that pleaded assumptions of fact in the alternative, as this is not permitted and would prejudice the appellant, especially given the estate context.

• Alternative penalty paragraphs referencing subsections 162(7) and (10) of the Income Tax Act were struck because the Minister had not originally assessed these penalties, and the court cannot impose new penalties not previously assessed.

• The Minister’s primary and alternative assessing positions regarding beneficial ownership of Ranger Gold Corp. shares led to different potential tax consequences for the estate.

• The court emphasized the importance of clarity in the assumptions of fact, particularly when the appellant is an estate and cannot call the deceased to testify.

• The Respondent was given leave to amend the struck portions of the Amended Reply and deadlines were set for further pleadings.

• Costs were awarded to the appellant, with a process and deadlines established for determining the amount if the parties cannot agree.

Facts of the case

The Estate of the Late Paul Uppal, as appellant, brought a motion to strike portions of the Amended Reply filed by His Majesty the King, the respondent. The case involves, among other things, alleged unreported income from the sale of shares in Ranger Gold Corp. Mr. Uppal held legal title to some Ranger shares, while Chambord Media Inc. held legal title to others. The Minister of National Revenue assumed Mr. Uppal was the sole shareholder of Chambord. The Minister’s primary assessing position was that Mr. Uppal was the beneficial owner of both the shares in his name and those in Chambord’s name. Alternatively, the Minister asserted that Mr. Uppal was the beneficial owner of the shares in his name only, but appropriated proceeds from shares sold by Chambord, which should be included in his income under subsection 15(1) of the Income Tax Act.

Assumptions in the alternative

The court found that subparagraphs XIX(25), (26), and (27) of the Amended Reply contained assumptions of fact in the alternative, such as whether Mr. Uppal purchased Ranger shares “singly or jointly with Chambord” and whether he was a seed investor “either singly or jointly with Chambord.” The court agreed with the appellant that these alternative assumptions were not permitted, as either Mr. Uppal or Chambord was the beneficial owner, but not both. The court found that leaving these alternative assumptions would prejudice the appellant, particularly because different assumptions could lead to different amounts of unreported income and because the appellant, being an estate, could not call Mr. Uppal to testify.

Alternative penalties

The court addressed paragraphs XXII, XXIII, XXXIV, XXXV, subparagraphs XIX(25), (26), (27), subparagraphs XXV(3), (4), and the phrase “162(7), 162(10),” in paragraph XXVI of the Amended Reply, which sought to impose penalties under subsections 162(7) and (10) of the Income Tax Act for failing to file T1134 or T1135 information returns. The court held that it is not permitted to impose new penalties not previously assessed by the Minister, as penalties are imposed by the Minister, not the court. The court found it plain and obvious that the respondent’s alternative argument for these penalties could not succeed.

Court’s order and outcome

Justice David E. Graham ordered that the specified portions of the Amended Reply be struck with leave to amend. The Respondent was given until April 17, 2025, to file and serve a Further Amended Reply, and the Appellant was given until May 23, 2025, to file and serve an Answer. Costs were awarded to the appellant. The parties were given until May 1, 2025, to reach an agreement on costs; if not, the appellant could file written submissions by June 6, 2025, and the respondent could respond by June 20, 2025. If no agreement or submissions are made, costs will be awarded to the appellant as set out in the Tariff. The successful party in this motion was the Estate of the Late Paul Uppal, and no exact amount of costs was determined in the order. All facts, dates, names, and procedural details are directly taken from the decision of Justice David E. Graham, dated March 4, 2025, in Vancouver, British Columbia.