The Minister imposed over $2 million in penalties against the taxpayer in respect of the sale of partnership units constituting an alleged tax shelter. Webb JA upheld the motion judge's decision to strike the Minister's Reply, finding that it failed to make out the facts necessary to support the conclusion that there was a tax shelter. For property to be considered a tax shelter, there must have been statements or representations made in connection with that property, as described in para. (b) of the definition of "tax shelter." As the Reply did not point to any such statements or representations (para. 19-20), it was obvious that it had no chance of success. The taxpayer's appeal was upheld.
The Reply had also been written as if the partnership itself were the tax shelter rather than its units. This error alone would not have been fatal to the Reply, as a reasonable reading of the Reply in its entirety would lead to the inference that the units, not the partnership, were the alleged tax shelter (para. 13).