Before striking the Reply of the Crown in its entirety pursuant to Rule 53(1) (but with leave to the Crown to file a fresh Reply that complied with the Rules), Lafleur J stated (at para. 34):
Where the deficiencies in a pleading are extensive, lack specificity or are vague, the proper remedy is to set the pleadings aside with leave to file a new pleading that meets the requirements set out in the Rules.
She concluded (at para. 179):
I agree with the Appellant that given the extent of the deficiencies found in the Reply, the Reply cannot be cured by simple amendment. If the Reply were to stand, the scope of discoveries would be unmanageable … . The Reply has to be struck as, for the reasons detailed above, it will either prejudice or delay the fair hearing of the appeal, or is scandalous, frivolous and vexatious, or is an abuse of the process of this Court.
Examples of Crown pleadings which Lafleur J accepted as falling within the scope of deficiencies referred to in Rule 49(1) included:
- Overreaching admissions (i.e., “admitting” facts that were not alleged by the taxpayer);
- Overreaching denials (i.e., denying facts which were not pleaded);
- Stating assumptions of fact made by the Minister in assessing which instead were assumptions of mixed fact and law (i.e., “’applying a legal standard to a set of facts’”, para. 70) such as pleading that specified parties did not deal with each other at arm’s length, that contracts were shams, that specified parties did not have a “valid creditor-debtor” relationship, and that loan agreements were not for “bona fide” loans.
- Making repetitive pleadings (and also adding a Schedule that “did not contain any material facts as it [was] drafted with generic words – para. 108).
- Providing a chart which disclosed confidential information about third parties and a diagram which the appellant could not properly answer (par. 139)_ - and also referring to a third-party partnership without explaining its relevance (para. 146).
- The inclusion of evidence on which the Crown intended to rely (e.g., the inclusion of Schedules which had the look of working papers – para. 166).