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.
