Drazin-Bendheim v. The Queen (February 12, 2018 – 2018 TCC 30, Smith J.).
Précis: The taxpayer sought to strike those portions of the Crown’s reply that alleged she had failed to report a gain on the disposition of property in 2005 and in so doing made a misrepresentation attributable to neglect, carelessness or willful default. The taxpayer argued that misrepresentation was not raised during the assessment or objection process and those portions of the pleading should be struck on the basis that they may prejudice or delay the fair hearing of the appeal, are scandalous, frivolous or vexatious, or are otherwise an abuse of process of the Court. The Court denied the taxpayer’s motion on the basis that the motion was brought after the close of pleadings and after the taxpayer had agreed to a timetable Order. In so doing the Court relied upon Section 8 of the Tax Court of Canada Rules (General Procedure) (the “Rules) which provide, in part, that a party cannot, without the leave of the Court, attack a document based on an irregularity where the moving party has taken a fresh step in the proceeding after the impugned document was filed. In an evident expression of the Court’s displeasure the motion was dismissed with costs to the Crown in any event of the cause.
Decision: The appellant argued that the Crown should not be permitted to rely upon subparagraph 152(4)(a)(i) of the Income Tax Act (the “Act”) since it had not raised that provision during the audit or objection process:
 As noted at the outset, the Appellant argues that the impugned paragraphs of the Reply should be struck on the basis that they may prejudice or delay the fair hearing of the appeal, are scandalous, frivolous or vexatious and an abuse of process of the Court since they raise a new basis for the reassessment.
 The Appellant finds support for her argument in paragraph 49(1)(d) of the Rules relating to the preparation of the Reply. One of the requirements is that the Minister must state “the findings or assumptions of fact made by the Minister when making the assessment”.
 The Appellant argues that the Minister explicitly relied on subparagraph 152(4)(b)(iii) of the Act and that the Minister, having accepted the Appellant’s argument that this provision was inapplicable, cannot after the fact take the position that the appropriate provision is subparagraph 152(4)(a)(i) which refers to a situation where a taxpayer has made “a misrepresentation that is attributable to neglect, carelessness or willful default”.
 The Appellant argues that the Minister is precluded from advancing an alternate argument in respect of the Appellant’s 2005 taxation year on the basis of subparagraph 152(4.01)(a)(i) of the Act and that the Minister cannot rely on subsection 152(9) to cure the defect. Both of these provisions are reproduced in the attached Schedule hereto.
The Crown argued that the matter should be left for the trial judge and it was inappropriate to attack the Crown’s pleading after the close of pleading the entering into of a timetable Order:
 The Respondent raises a preliminary objection based on a procedural issue and argues that it is improper to bring a motion to strike at this stage in the proceedings, notably after the close of pleadings and after the Appellant has agreed to a timetable Order.
 The Respondent adds that the Appellant cannot seek to strike provisions of the Reply to which it has already pleaded and addressed in the Answer, portions of which have been reproduced above.
 Moreover, the Respondent argues that whether the Minister exclusively relied on subparagraph 152(4)(b)(iii) of the Act or not, involves a factual determination that is best left to the trial judge. Despite the Appellant’s understanding that the Minister was specifically relying on that provision, the Respondent argues that the evidence is equivocal at best and that counsel for the Appellant had been informed on several occasions that the Minister viewed the Appellant’s failure to report the gain as business income, as a “voluntary omission”.
 Finally, the Respondent argues that the Minister may, in any event, pursuant to subsection 152(9) of the Act, advance an alternate basis for the reassessment at any time up to the confirmation of the reassessment.
The Court relied upon Section 8 of the Rules to decline to exercise its discretion to strike the impugned pleadings:
 It is apparent that the Appellant has not sought leave of the Court pursuant to Section 8. However, if the Court accepts that such a request has implicitly been made within the context of the motion to strike, the Court concludes that there are good reasons to decline to exercise that discretion.
 Having reviewed the test for a motion to amend pleadings, Rossiter C.J. noted that “in contrast, the plain and obvious test applied to striking motions is significantly higher, more stringent, and the courts have ruled that striking pleadings is to be done only in the most exceptional cases” (para. 35).
 The Respondent rightfully argues that the Appellant cannot challenge assertions of fact in a motion to strike. Whether the Appellant has “made a misrepresentation attributable to neglect, carelessness or willful default” or whether she has done so “voluntarily” as set out in the impugned paragraphs, are all questions of fact which must be taken to be true for the purposes of this motion. Moreover, it is not up to this Court, in the context of a motion to strike to make findings of fact as to whether the reassessment was only based on subparagraph 152(4)(b)(iii). The Appellant’s own evidence at the hearing on this issue was inconclusive. As such, it cannot be said that it is plain and obvious that the Respondent’s position, as set out in the impugned paragraphs, has no hope of succeeding. These are all matters that are best left to the trial judge.
 There appears to be no basis to the argument that the impugned paragraphs are “an abuse of process of the court” or that they “may prejudice or delay the fair hearing of the appeal”. Au contraire, the Court is of the view that the evidence needs to be fully fleshed out and heard in its totality before a trial judge.
In the result the motion was dismissed with costs to the Crown in any event of the cause.
Comment: While the fresh step rule is ubiquitous in civil litigation in Canada it is rarely seen in reported Tax Court decisions so this case may become a useful precedent for litigants before the Court.