Jeremy Comeau

The applicants moved for an order compelling the respondent to answer certain discovery examination questions it had declined to answer.

The underlying appeals concerned reassessments based on the assertion that foreign currency forward contracts were sham agreements.

The Tax Court of Canada ordered the respondent to answer questions 1 through 7, finding them relevant to the matters in issue, but held that question 8 was not appropriate.

The Crown brought a motion for leave to amend its Reply to the Notice of Appeal to add arguments that a transaction was a sham and that the valuation of shares should account for latent tax liability.

The Tax Court of Canada dismissed the motion, finding that the proposed amendments were not vital to the Crown's case, as the existing pleadings already allowed the Crown to challenge the nature of the transaction and the valuation.

Furthermore, allowing the sham argument would cause non-compensable prejudice to the appellant because its key witness, who controlled the relevant entities, had recently died and could not instruct counsel or testify regarding the new allegations.