CRA reassessed the taxpayer (ACI) on the basis that a receipt of $1.95 million which another company (AFT) had treated as a deductible management fee but which ACI had treated as a capital receipt from the disposition of a joint venture interest, was fee income to ACI. Following ACI's appeal of the reassessment, the Minister brought an application under s. 174 to determine which of the two characterizations was correct.
ACI was concerned that distinct s. 174 proceedings would cause it to lose a tactical advantage relating to the particular assumptions previously made (and pleaded) by the Minister. After noting (at para. 25) that "the fact that steps taken by the Minister…deprive the appellant of a tactical advantage is not, in and of itself, an abuse of process," Pelletier JA indicated that while s. 174(3)(a) appeared to contemplate such a distinct proceeding, this case instead was acknowledged to fall under s. 174(3)(b). This would permit "having ACI's appeal proceed in the normal course" (para. 29) with AFT being "added as a party to ACI's appeal, subject to such directions as the court may make as to the conduct of the appeal in light of AFT's joinder" (para. 30).