Executive Summary: Key Legal and Evidentiary Issues

• The Respondent sought to strike the Appellant's Notice of Appeal under section 53 of the Tax Court of Canada Rules (General Procedure) for lack of material facts.
   
• Whether the pleaded facts amounted to material facts or mere conclusions of law formed the central dispute.
   
• Sections 21 and 48 of the Rules required the Notice of Appeal to conform to Form 21(1)(a) and relate the material facts relied upon.
   
• Established pleadings jurisprudence, including Zelinski v The Queen and Klundert v The Queen, guided the sufficiency analysis.
   
• Leave to amend was considered as an alternative to outright dismissal of the appeal.
   
• Costs on the motion were also at issue.
   

Facts of the case

10038555 Canada Limited, a manufacturer of custom stairs and stair railings, appealed GST/HST assessments to the Tax Court of Canada. His Majesty the King brought a motion under section 53 of the Tax Court of Canada Rules (General Procedure) to strike the Appellant's Notice of Appeal, with leave to amend, on the basis that it lacked specificity in its material facts and would prejudice or delay a fair hearing, or was scandalous, frivolous, or vexatious. Pursuant to section 69 of the Rules, the motion proceeded by written submissions before Justice Ted (Edward) Cook. The Notice of Appeal's facts section stated that the Appellant manufactures custom stairs and stair railings, that the CRA raised the assessments arbitrarily, that the assessments overstated the Appellant's sales and GST/HST collectable, that the assessments understated the Appellant's input tax credits for each period, and that the net tax for each reporting period was overstated. The Appellant argued these statements clearly and concisely conveyed that input tax credits were understated and that sales and net tax were overstated, resulting in arbitrary assessments, and maintained the pleading was neither scandalous, frivolous, vexatious, nor an abuse of process.

Policy and legislative provisions at issue

The motion turned on sections 21, 48, 53, and 69 of the Tax Court of Canada Rules (General Procedure). Sections 21 and 48 required the Notice of Appeal to be in Form 21(1)(a) for a general-procedure appeal of an assessment under the Excise Tax Act, obliging the Appellant to relate the material facts relied on. Section 53 provided the mechanism for the Respondent's motion to strike, while section 69 permitted the motion to be determined on written submissions rather than an oral hearing.

Reasoning and analysis

Justice Cook applied the pleadings principles summarized in Zelinski v The Queen, 2002 DTC 1204, and in Holmsted and Watson, which require that a pleading state material facts rather than conclusions of law, exclude immaterial facts, state facts rather than the evidence proving them, and do so concisely. Drawing on Klundert v The Queen, 2013 TCC 208, and Merchant Law Group v Canada Revenue Agency, 2010 FCA 184, the Court held that a bare assertion of a conclusion is not an allegation of material fact. Reviewing the Notice of Appeal, the Court found it contained only one material fact — the nature of the Appellant's business — while the remaining statements about arbitrary assessments, overstated sales, understated input tax credits, and overstated net tax were conclusions rather than material facts. Citing Mancuso v Canada (Minister of National Health and Welfare), 2015 FCA 227, the Court reasoned that sufficient material facts are essential so the Respondent can prepare its Reply and so the pleadings can properly frame discovery and trial. The Court considered but distinguished Hunt v Carey Canada Inc., [1990] 2 SCR 959, and Sentinel Hill Productions (1999) Corporation v The Queen, 2007 TCC 742, noting those cases addressed dismissal for disclosing no reasonable cause of action rather than deficiency in material facts. Applying Gauthier v The Queen, 2006 TCC 290, the Court concluded a pleading may be struck where it is so deficient in material facts that the Respondent cannot know how to answer, finding that standard met here because the Notice of Appeal was devoid of the material facts needed for the Respondent to respond, thereby risking prejudice or delay to a fair hearing.

Ruling and overall outcome

The Court granted the Respondent's motion, following the approach in Okoroze v The Queen, 2012 TCC 360, and Oddi v The Queen, 2016 TCC 102, that extensive pleading deficiencies warrant setting the pleading aside with leave to file a new one. The Appellant's Notice of Appeal was struck, with leave to file a Fresh as Amended Notice of Appeal relating the material facts relied upon within 60 days of the order, and the Respondent was given 60 days from that filing to deliver its Reply. Costs on the motion were awarded to the Respondent, His Majesty the King, in any event of the cause; no monetary amount was specified in the order.