Docket: 1999-5096(IT)G

BETWEEN:

POTASH CORPORATION OF SASKATCHEWAN INC.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Motion heard on February 24, 2003, at Ottawa, Ontario,

By: The Honourable Justice M.A. Mogan
Appearances:
Counsel for the Appellant:	Guy Du Pont and Hugo Gravel
Counsel for the Respondent:	Wendy Burnham and Ifeanyi Nwachukwu

____________________________________________________________________

ORDER

          Upon motion by the Appellant for judgment under Rule 170.1 of the Tax Court of Canada Rules (General Procedure) on the paragraph 12(1)(x) issue;

          And upon reading the pleadings, the affidavit of Hugo Gravel and portions of the transcript of the Appellant's examination for discovery of Janet Catherine Reinhart, filed;

          And upon hearing counsel for the parties;

          It is ordered that the motion for judgment under Rule 170.1 is dismissed, with costs to the Respondent in any event of the cause, payable forthwith.

Signed at Charlottetown, Prince Edward Island, this 26th day of August, 2003.

"M.A. Mogan"

Docket: 2000-1280(IT)G

BETWEEN:

SASKTERRA FERTILIZERS LTD.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Motion heard on February 24, 2003, at Ottawa, Ontario,

By: The Honourable Justice M.A. Mogan
Appearances:
Counsel for the Appellant:	Guy Du Pont and Hugo Gravel
Counsel for the Respondent:	Wendy Burnham and Ifeanyi Nwachukwu

____________________________________________________________________

ORDER

          Upon motion by the Appellant for judgment under Rule 170.1 of the Tax Court of Canada Rules (General Procedure) on the paragraph 12(1)(x) issue;

          And upon reading the pleadings, the affidavit of Hugo Gravel and portions of the transcript of the Appellant's examination for discovery of Janet Catherine Reinhart, filed;

          And upon hearing counsel for the parties;

          It is ordered that the motion for judgment under Rule 170.1 is dismissed.

Signed at Charlottetown, Prince Edward Island, this 26th day of August, 2003.

"M.A. Mogan"

Citation: 2003TCC588

Date: 20030826

Docket: 1999-5096(IT)G

BETWEEN:

POTASH CORPORATION OF SASKATCHEWAN INC.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent,

Docket: 2000-1280(IT)G

AND BETWEEN:

SASKTERRA FERTILIZERS LTD.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR ORDER

Mogan J.

[1]      The Appellants in the above styles of cause are related in the following manner. At all relevant times prior to August 31, 1995, the issued shares of Saskterra Fertilizers Ltd. ("Saskterra") were owned by Potash Corporation of Saskatchewan Inc. ("PCS"). On August 31, 1995, Saskterra was wound-up into its parent, PCS. After certain assessments were issued by the Minister of National Revenue acting through Canada Customs and Revenue Agency ("CCRA" formerly known as "Revenue Canada"), Saskterra was revived on or about November 16, 1999.

[2]      At all relevant times, both Saskterra and PCS owned and operated potash-producing assets (including mines and mills) within the Province of Saskatchewan. The Mineral Taxation Act, 1983, S.S. 1983-84, c.M-17.1 ("MTA") and The Potash Production Tax Schedule, R.R.S. c.M-17.1, Regulation 6 (the "Regulations") provide for the taxation on sales of potash in two components: a base payment and a profit tax. Having regard to certain deductions claimed by Saskterra and PCS under the MTA and the Regulations, CCRA included in computing the income of both Saskterra and PCS certain amounts which CCRA thinks are required to be included under paragraph 12(1)(x) of the Income Tax Act.

[3]      Saskterra and PCS come before the Court on a common motion which is best summarized by an extract from the Notice of Motion itself:

NOTICE OF MOTION FOR JUDGMENTS ON

ADMISSIONS RULE 170.1 OF THE

TAX COURT RULES, SOR/90-688, AS AMENDED

TAKE NOTICE THAT Potash Corporation of Saskatchewan Inc. ("PCS") and Saskterra Fertilizers Ltd. ("Saskterra") (collectively the "Appellants") will make a motion to the Court on 24 February 2003, at 9:30 A.M., or as soon after that time as these motions may be heard, in Ottawa.

THE MOTION IS FOR

(a)         Judgment, upon the admissions found in the examination for discovery of Janet Catherine Reinhard ("JCR"), a representative of the Respondent, allowing in part the Appellants' appeals against reassessments issued by the Canada Customs and Revenue Agency ("CCRA") for PCS's 1993 to 1996 taxation years, Saskterra's 1995 taxation year and against a determination of losses made by the CCRA with respect to Saskterra's 1993 taxation year, on the basis that no part of the amounts deducted in calculating the Appellants' profits or profits tax under the Mineral Taxation Act, 1983 chap. M-17.1, S. Sask., 1983-1984, as amended (the "M.T.A."), are to be included in their income for any of their relevant taxation years under paragraph 12(1)(x) ("12(1)(x) of the Income Tax Act, R.S.C. 1985, c. 1 (5th supp.) as amended (the "I.T.A.");

(b)         ...

(c)         for such further and other order as this Court may find just and equitable to grant in the circumstances; and

(d)         costs of these motions on such a scale as this Court deems just but limited to one order as to costs.

THE GROUNDS FOR THE MOTION ARE:

(a)         the sole operative effect of 12(1)(x) is set out in the introductory words of subsection 12(1) I.T.A., which provides that there shall be included, in computing the income of a taxpayer, as income from a business, such of the following amounts (which includes paragraph (x)) as are applicable. 12(1)(x) does not therefore authorize assessment of any amount, that is not otherwise assessable, unless that amount is described in 12(1)(x);

(b)         as has now been revealed by the Appellants' discovery of the Respondent, there is no prima facie case to support the reassessments, that purport to have been made under paragraph 12(1)(x), because the amounts reassessed are not described in 12(1)(x);

(c)         moreover, the Appellants have not been able to discover and the Respondent has not disclosed to the Appellant, by what findings of fact and ruling of law, it has been decided that 12(1)(x) supported the reassessments in question when it did not have that effect by the direct application of its language. Because the information is not disclosed it is not possible for the Appellants to establish what position to take; and

(d)         consequently, the Appellants are entitled to judgment allowing that part of their appeals.

[4]      The relief sought by the Appellants is based on section 170.1 of this Court's Rules of General Procedure:

170.1    A party may, at any stage of a proceeding, apply for judgment in respect of any matter

(a)         upon any admission in the pleadings or other documents filed in the Court, or in the examination of another party, or

(b)         in respect of which the only evidence consists of documents and such affidavits as are necessary to prove the execution or identity of the documents,

without waiting for the determination of any other question between the parties.

Counsel for the Appellants stated clearly in argument that he was relying on only paragraph (a) of section 170.1 and, specifically, upon admissions in the examination for discovery of Janet Catherine Reinhart, an authorized representative of the Respondent.

[5]      In order to understand the admissions made by Ms. Reinhart in the context of the issues raised in the pleadings, it is necessary to know certain parts of the way in which the Province of Saskatchewan imposes taxes on corporations engaged in the business of mining potash. I will rely on the notes of argument of the Appellants' counsel (Mr. Du Pont) to summarize what he submits are the relevant provisions (parts of sections 4, 6, 7, 19 and 20) of The Potash Production Tax Schedule which is the third schedule to The Mineral Taxation Act. These parts of sections 4, 6, 7, 19 and 20 are important to the Appellants' motion.

A.       Summary of Certain Provisions in the

Saskatchewan Mineral Taxation

Legislation Relied on by the Appellants

4.          The mineral production taxes imposed by this Act on the sale or other disposition of potash consist of:

(a)         a base payment calculated in accordance with section 5; and

(b)         a profit tax calculated in accordance with section 6.

In section 4, the "base payment" in (a) is like a minimum tax because it does not depend upon profit; and the "profit tax" in (b) is like an income tax because it depends in part upon a rate of tax applied to the profits for a year as described in section 6.

6(1)       The profit tax for a year is the amount equal to the difference between:

(a)         the total of the products of:

(i)          profits for that year, determined in accordance with the regulations, within each profit bracket that is:

(A)        prescribed pursuant to clause 11(c); and

(B)        expressed in dollars per tonne of potash sold or otherwise disposed of; and

(ii)         the rate of tax that is prescribed for each profit bracket;

and

(b)         the total of any applicable deductions, allowances and credits that are:

(i)          prescribed; or

(ii)         provided for in this Schedule.

Most taxing statutes determine the liability for tax by simply applying a rate or percentage to an amount which might represent profit, sales, cost or individual earnings. Subsection 6(1) is unusual in my experience because it determines the liability for tax, first, by applying in subparagraph (a) a particular rate of tax to each profit bracket, and second, by subtracting in subparagraph (b) the total of prescribed allowances, deductions and credits. In other words, the net tax in subsection 6(1) is not determined by the simple application of a rate or percentage to a particular amount. There are real amounts deducted in the computation of tax.

7(2)       Subject to subsection (3) the following allowances, expenses and deductions may be taken in determining profits pursuant to subsection (1):

(a)         ...

(m)        approved marketing development costs incurred by the producer for the year;

(n)         ...

(o)         approved research and development costs eligible for credit that are incurred by the producer for the year;

Paragraphs 7(2)(m) and (o) are the kind of statutory expenses and costs which one would expect to find deductible in computing profits.

19(1)     For the purposes of clause 6(1)(b) of the Schedule, deductions may be made for the following in calculating the profit tax for a year:

(a)         ...

(b)         an amount not exceeding 40% of the approved marking development costs that:

(i)          are incurred by the producer during the year; and

(ii)         the producer has not deducted in determining its profits for the year;

(c)         an amount not exceeding 40% of the approved research and development costs that:

(i)          are incurred by the producer during the year; and

(ii)         the producer has not deducted in determining its profits for the year;

(d)         ...

It is important to note that the amounts described in paragraphs 7(2)(m) and (o) are primarily deductible in determining profits but, under subsection 19(1), up to 40% of those same amounts (not deducted in determining profits) are deductible in calculating the profit tax under section 6. As I understand the operation of these sections, if a corporation had incurred in year I costs of $1,000,000 described in paragraph 7(2)(m), the corporation could under subsections 7(1) and 7(2) deduct $700,000 of those costs in determining its profits for year I; and the corporation could under paragraphs 19(1)(b) and 6(1)(b) deduct 40% of the remaining $300,000 in computing its profit tax for year I.

20(1)     If the total of the deductions of a producer pursuant to clauses 19(1)(b) and (c) in any year exceeds the amount calculated pursuant to clause 6(1)(a) of the Schedule for the year, the excess may be carried forward and deducted by the producer from the amount, if any, of the base payment that would otherwise be payable by the producer in the months following the receipt by the minister of the statement mentioned in section 25.

This appears to be a carry-forward formula which provides that, if amounts deductible under paragraphs 19(1)(b) and (c) exceed the positive element of the profit tax computation in paragraph 6(1)(a), the excess may be carried forward and deducted from the "base payment" that would otherwise be payable in a future period. The Appellants argue that this is a true tax credit (as distinct from an amount deductible in computing tax) because it is deducted from the base payment "that would otherwise be payable".

B.       The Pleadings and Paragraph 12(1)(x)

[6]      For all practical purposes, the pleadings in the appeal by Potash Corporation of Saskatchewan Inc. ("PCS") are the same as the pleadings in the appeal by Saskterra Fertilizers Ltd. ("Saskterra"). Paragraph 7 of the Saskterra Notice of Appeal is, in substance, the same as paragraph 6 of the PCS Amended Notice of Appeal. In those paragraphs, the Appellants make two basic claims: first, that CCRA included in corporate income for federal income tax purposes certain amounts which the two respective corporations had deducted, pursuant to The Mineral Taxation Act (Saskatchewan), in computing profits, profit tax or base payments as the case may be; and second, that CCRA included such amounts in corporate income pursuant to paragraph 12(1)(x) of the Income Tax Act. In the Reply to each Notice of Appeal, the Respondent admits or confirms the claims summarized above.

[7]      The amounts are not in dispute. According to the pleadings, CCRA has used paragraph 12(1)(x) of the Income Tax Act to include the following amounts in the computation of income for the years listed below (for Saskterra, there was a loss determination for 1993):

	PCS
1993	$821,094
1994	674,816
1995	1,221,846
1996	1,085,267
	Saskterra
1993	$194,913
1995	404,710

[8]      Paragraph 12(1)(x) of the Income Tax Act is important because CCRA claims that the amounts shown in the table in paragraph 7 above are amounts described by certain words in paragraph 12(1)(x). The relevant portion of paragraph 12(1)(x) is set out below:

12(1)     There shall be included in computing the income of a taxpayer for a taxation year as income from a business or property such of the following amounts as are applicable:

(a)         ...

(x)         any particular amount (other than a prescribed amount) received by the taxpayer in the year, in the course of earning income from a business or property, from

(i)          a person or partnership (in this paragraph referred to as the "payer") who pays the particular amount

(A)        in the course of earning income from a business or property,

(B)        in order to achieve a benefit or advantage for the payer or for persons with whom the payer does not deal at arm's length, or

(C)        in circumstances where it is reasonable to conclude that the payer would not have paid the amount but for the receipt by the payer of amounts from a payer, government, municipality or public authority described in this subparagraph or in subparagraph (ii), or

(ii)         a government, municipality or other public authority,

where the particular amount can reasonably be considered to have been received

(iii)        as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, or

(iv)        as a refund, reimbursement, contribution or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of

(A)        an amount included in, or deducted as, the cost of property, or

(B)        an outlay or expense,

to the extent that the particular amount

(v)         ...

[9]      In the Respondent's Reply to the Saskterra Notice of Appeal, the following statements appear:

7(e)       The amounts by which the tax due under the MTA was reduced are amounts received as an inducement, refund, reimbursement, contribution, or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement or assistance;

10.        ... the Minister correctly included in the Appellant's income for each of the years under appeal the reductions claimed by the Appellant in determining its tax under the MTA for that particular year, ... . The said reductions are amounts received by the Appellant in the year in the course of earning income from a business or property from a government as an inducement, refund, reimbursement, contribution, or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement or assistance within the meaning of paragraph 12(1)(x) of the Act.

The same statements appear in the Reply to the PCS Amended Notice of Appeal. One can easily identify in each Reply certain words which appear to be lifted directly out of subparagraphs 12(1)(x)(iii) and (iv).

C.       Analysis

[10]     In the remainder of these reasons, I shall consider the motion by Saskterra (Court File No. 2000-1280(IT)G) as if Saskterra were the only applicant on this Motion, but everything I decide will apply equally to PCS (Court File No. 1999-5096(IT)G) as the other applicant on the Motion.

[11]     Although Rule 170.1 is set out in paragraph 4 above, for convenience I shall repeat the relevant words:

170.1    A party may, at any stage of a proceeding, apply for judgment in respect of any matter

(a)         upon any admission in the pleadings or other documents filed in the Court, or in the examination of another party, or

(b)         ...

without waiting for the determination of any other question between the parties.

This is a Motion for judgment in respect of the question whether the Minister of National Revenue may use paragraph 12(1)(x) of the Income Tax Act to include in the computation of Saskterra's income certain amounts which were deducted by Saskterra in various computations under the Saskatchewan Mineral Taxation Legislation. The Motion is for judgment upon admissions in the pleadings and in the examination for discovery of Janet Catherine Reinhart, an authorized representative of the Respondent. Counsel for the Appellant, in his notes of argument, relies on four specific admissions by the Respondent. I will consider those admissions in the same order as they appear in the notes of argument.

[12]     First Admission.     There is no dispute as to quantum. This was confirmed by counsel for the Respondent at question 9 of the discovery of Ms. Reinhart. Also, paragraph 7 of the Saskterra Notice of Appeal sets out the amounts added to income under paragraph 12(1)(x); and paragraph 7 is admitted in the Reply.

[13]     Second Admission.          The Reply to the Notice of Appeal sets out all of the "facts relied upon in support of the assessments under appeal". The Appellant relies on the Respondent's Undertaking #1 for this admission but the undertaking stated "The Reply to the Notice of Appeal accurately reflects the Minister's position". There is a difference between the admission which the Appellant thinks it obtained and the statement delivered in satisfaction of Respondent's Undertaking #1.

[14]     Third Admission. PCS had the option to deduct the "Approval Costs" either as a deduction in the computation of profits or of profit tax. The Appellant relies on question 145 in the discovery of Ms. Reinhart to support his admission. In order to see question 145 in context, I will set out questions 142 to 146 inclusive:

142       Q.       Are you familiar with the way the mineral tax of Saskatchewan operates, Ms. Reinhart?

A.         I am some.

143       Q.         You have canvassed the way the forms and the way the Act operates?

A.         I've gone through the form, yes.

144       Q.         Would you tell me in general terms what you understanding is?

A.         As far as this issue?

145       Q.         Yes, obviously this.

A.         My understanding is that the taxpayer can choose, with those marketing and R and D expenses, these specific types of items that qualify, they can either take a 40 per cent tax credit against the taxes that are owing for the potash production tax, or they can take it as a deduction in the calculation of the profits which are subject to the tax, profit tax rate.

146       Q.         All right. Now let's go back to basics, then. First of all, I gather we have to establish profits under that tax or that taxing system, that tax scheme?

         

MS. BURNHAM:         Mr. Du Pont, I'm not sure that this is proper questions; what you're asking for is her opinion. The Act is there, it sets out a procedure, perhaps you could explain how you think this is relevant to -

MR. DU PONT:           Well, you're right as always, Mrs. Burnham, let me perhaps cut to the chase here. My position is very simple. ...

Mr. Du Pont proceeds in Question 146 to state his understanding of the way that the mineral tax system operates. Questions 143 to 145 concerning Ms. Reinhart's understanding of the way that the Saskatchewan Mineral Taxation Act operates may be questions of fact with respect to her understanding but the manner in which that provincial taxing statute actually operates is a question of law. What the Appellant puts forward as the third admission is a conclusion of law and not an admission of a material fact.

[15]     Fourth Admission. The "Approved Costs" which were in fact deducted were deducted (i) in computing the Mineral Taxation Act profit; or (ii) in computing the Mineral Taxation Act profit tax; or (iii) in computing the Mineral Taxation Act profit and carried forward against tax for a subsequent taxation year. The Appellant relies on the following questions to support this fourth admission: Questions 164 to 167 and 174; Questions 147 to 150; and Questions 218 to 237, 238 to 246, and 247 to 252. I have read those questions and answers (except for questions 218 to 232 which were omitted from the Motion Record).

(i)       Deductions in computing the Mineral Taxation Act profit. Questions 164 to 167 and 174 are part of a series of questions which begin at Question 156 attempting to explain certain amounts entered upon a document entitled "Potash Production Tax Annual Base payment return for Allan Mine for 1996" (Exhibit A-5 to the discovery of Ms. Reinhart). Exhibit A-5 is a complicated 15-page return for the Allan Mine required to be filed under the Saskatchewan Mineral Taxation Act. Mr. Du Pont acknowledged in Question 157 that Mr. Arnason (a representative of the Appellant in attendance at the discovery of Ms. Reinhart) "will be much more clever in explaining this than I will be". I assume that Mr. Aranson is a senior employee or officer of PCS responsible for the preparation of Exhibit A-5. If Ms. Reinhart is being examined on one of the Appellant's own documents (i.e. a Saskatchewan tax return for the Allan Mine),she could state her understanding as to what the document means or what the Appellant did when completing the tax return but her statement (or "admission" for Rule 170.1) is an admission only of her understanding. Ms. Reinhart's statement is not the best evidence of what the Appellant did when completing the tax return. The best evidence on that point would come from the Appellant. Also, Ms. Reinhart would not be able to state whether the tax return for the Allan Mine (Exhibit A-5 for discovery) was filed with the Saskatchewan taxing authority in the same form as Exhibit A-5, or whether it was accepted without challenge by the Saskatchewan taxing authority. I do not attach much weight to Ms. Reinhart's answers to Questions 164 to 167 and 174 because those answers were only her understanding of the Appellant's own document (tax return for the Allan Mine).

(ii)       Deductions in computing the Mineral Taxation Act profit tax. In Questions 147 to 150, Ms. Reinhart is asked to confirm the amounts in the table which is part of paragraph 6 in the PCS Amended Notice of Appeal, but that table and the substance of paragraph 6 were already admitted in paragraph 5 of the Respondent's Reply to the PCS Amended Notice of Appeal.

(iii)      Deductions in computing the Mineral Taxation Act profit and carried forward against tax for a subsequent taxation year. Questions 218 to 252 appear to be part of a series of questions attempting to explain certain amounts entered upon a document entitled "Potash Production Tax Annual Base payment return for Cory Mine for 1996" (Exhibit A-7 to the discovery of Ms. Reinhart). Exhibit A-7 is a complicated 15-page return for the Cory Mine similar to Exhibit A-5 for the Allan Mine described above. Counsel for the Respondent (Ms. Burnham) made the following observation at question 237:

Mr. Du Pont, I think this is a little unfair. These documents are your client's documents and what we're saying here is that according to your own documents your client got a credit of $94,473 with respect to Cory and all we're saying now is because your documents show that, we have included that as a 12(1)(x) incentive.

[16]     The four specific admissions relied on by the Appellant are described in paragraphs 12, 13, 14 and 15 above. Having regard to the first admission, I am satisfied that there is no dispute concerning the amounts which the Minister included in income under paragraph 12(1)(x). The second admission is not established in the words adopted by the Appellant; and the Respondent's Undertaking #1 speaks for itself as described in paragraph 13 above. The third purported admission is not an admission of fact at all but a conclusion of law for the reason stated in paragraph 14 above.

[17]     I am troubled by what the Appellant claims to be a fourth admission concerning amounts in fact deducted in computing profit or profit tax under the Saskatchewan Mineral Taxation Legislation. Most of the questions put to Ms. Reinhart with respect to this fourth admission were based on her understanding of what the Appellant was doing when it completed long 15-page complicated tax returns required under the Saskatchewan Mineral Taxation Act. Those returns were Exhibits A-5, A-6 and A-7 to the discovery for the Allan Mine, the Esterhazy Mine and the Cory Mine, respectively. Those returns were in fact prepared by the Appellant. In other words, the Appellant should know more about those provincial mineral tax returns than any employee of Revenue Canada whose primary responsibility is the administration and enforcement of the federal Income Tax Act.

[18]     The answers which the Appellant obtained from Ms. Reinhart with respect to the fourth admission were only her understanding as to what amounts the Appellant was deducting in a particular computation when it completed the returns in Exhibits A-5, A-6 and A-7. Ms. Reinhart frequently qualified her answers by saying "for this mine, for this year". The best evidence concerning what amounts the Appellant was deducting in a particular computation would come from a senior employee or officer of the Appellant who was responsible for completing the returns like Exhibits A-5, A-6 and A-7 required under the Saskatchewan Mineral Taxation Act.

[19]     Any judge attempting to deliver the judgment which the Appellant seeks on this motion would want to hear the best evidence, preferably viva voce, from a knowledgeable witness for the Appellant describing the various computations (in which relevant amounts were deducted) in the tax returns which the Appellant filed with the Province of Saskatchewan in order to comply with the Mineral Taxation Act. In particular, the judge would want to hear evidence with respect to each amount included in income by the Minister of National Revenue under paragraph 12(1)(x) as to whether such amount was deducted (for Saskatchewan Mineral Tax purposes) in computing profit, in computing tax, or from tax otherwise payable. The judge would also want to know whether the various returns were accepted without change or were challenged by the Saskatchewan taxing authority. After hearing such evidence, the judge would want to hear submissions from counsel for both parties with respect to the operation of the Mineral Taxation Act. At that point, the judge would be in a position to hear further submissions concerning the interpretation and application of paragraph 12(1)(x).

[20]     On this motion, the Appellant has not come even close to obtaining the kind of admissions which would permit a judgment to be given on the issue concerning paragraph 12(1)(x). The motion will have to be dismissed.

[21]     Counsel for the Respondent relied on a decision of the Ontario Superior Court of Justice in which Kiteley J. considered a rule similar to our Rule 170.1: Treats Inc. v. Richter, Usher et al, [2001] O.J. No. 1188. Justice Kiteley referred to two earlier decisions (Sigroum, 1985 and Plainsman Developments, 1982) as establishing seven principles which are applicable to a motion for judgment on admissions. The seven principles were summarized by Justice Kiteley as follows:

1.          the admission must be clear and definite (Landergan v. Feast (1886) 55 L.T. Ch. 505);

2.          the admission must be of such facts as show that the party is clearly entitled to the order asked for (Gilbert v. Smith (1876), 2 Ch. D.686);

3.          The rule does not apply where there is any serious question of law to be argued (Adcock v. Algoma Steel Corporation, [1968] 2 O.R. 647);

4.          The rule does not apply where there is a serious question of fact outstanding (Ellis v McQueen [1967] 2 O.R. 399);

5.          The motion is based on admissions and proof of facts is not permitted (Toronto v. Schein (1980), 19 C.P.C. 195);

6.          The motion should be granted only on a clear case and much care must be taken not to take away the right of trial on viva voce evidence (Cook v. Lemieu (1885) 10 P.R. 577);

7.          To succeed on this application, the applicant must show that there is a clear admission on the face of which it is impossible for the defendants to succeed.

Ms. Burnham relied, in particular, on the principles numbered 1 and 3. Those are the two principles which would give me the most concern if the Appellant had otherwise established the many admissions of fact necessary for a motion of this kind. As stated above, the necessary admissions were not obtained.

[22]     There are so many complex issues of law concerning the interpretation and application of both the Saskatchewan Mineral Taxation Act and paragraph 12(1)(x) of the federal Income Tax Act that it is not appropriate to seek a judgment under Rule 170.1. It seems to me that Rule 170.1 is better saved for a case in which there is one (or more) simple question of fact which might be answered by admissions in the pleadings or on discovery which, in turn, might permit a final disposition through hearing argument on the applicable law.

[23]     Having regard to the complexity of the Saskatchewan Mineral Tax Act; and considering the difficulty in obtaining admissions from the Respondent on discovery with respect to deductions taken by the Appellant corporations in various computations under that Act; and considering the near impossibility of obtaining admissions from the Respondent on discovery as to whether those deductions taken by the Appellant corporations were accepted or challenged by the Saskatchewan taxation authority; it was, in my opinion, truly not reasonable for the Appellant corporations to seek judgment on the paragraph 12(1)(x) issue using Rule 170.1. The motions are dismissed with one set of costs to the Respondent in any event of the cause, payable forthwith.

Signed at Charlottetown, Prince Edward Island, this 26th day of August, 2003.

"M.A. Mogan"

CITATION:

2003TCC588

COURT FILE NOS.:

1999-5096(IT)G and 2000-1280(IT)G

STYLE OF CAUSE:

Potash Corporation of Saskatchewan Inc. and Saskterra Fertilizers Ltd. and Her Majesty the Queen

PLACE OF HEARING:

Ottawa, Ontario

DATE OF HEARING:

February 24, 2003

REASONS FOR ORDER BY:

The Honourable Justice M.A. Mogan

DATE OF ORDER:

August 26, 2003

APPEARANCES:

Counsel for the Appellants:

Guy Du Pont and Hugo Gravel

Counsel for the Respondent:

Wendy Burnahm and Ifeanyi Nwachukwu

COUNSEL OF RECORD:

For the Appellants:

Name:

Guy Du Pont

Firm:

Davies Ward Phillips & Vineberg

For the Respondent:

Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada