Rather than investing directly in flow-through shares of an Alberta oil and gas company ("Sierra"), for limited liability reasons the taxpayer and six colleagues incorporated an Ontario company to enter into such agreement with Sierra, with the taxpayers, in turn, entering into flow-through agreements with 991 Sierra acquired seismic data. The Minister found in an audit that the seismic data had not been used in a way that would give rise to . The Minister reassessed the taxpayer to deny the deduction by him of Canadian exploration expenses, Canadian development expenses, or Canadian oil and Gas property expenses ("CEE," "CDE," and "COGPE") that 991 had renounced to him and which Sierra had, in turn, renounced to 991. The reassessment was made beyond the normal reassessment period, pursuant to a waiver the taxpayer had filed regarding "expenditures for seismic data pertaining to the taxpayer's participation in the Sierra Joint Venture."
Angers J. found that, because seismic data only pertains to CEE, the waiver did not apply to CDE or COGPE. However, he denied the taxpayer's argument, in respect of CEE, that the taxpayer had not "participated" in Sierra because his dealings instead were with 991. Angers J. stated (at para. 52):
In addition, the phrase "participation in" was used liberally by the appellant, his accounting partner and his counsel and was understood as describing the situation adequately with respect to the 1992 seismic data expense issue....It seems to me that the subject matter of the reassessment was clear to the appellant despite the defective description of the facts [which had implied that the taxpayer's "investment" in Sierra was direct].