Justice Rothstein on Tax Cases in Generalist Court – The Leave Granting Process at the Supreme Court of Canada

Published by Jennifer Flood

The Honourable Marshall Rothstein, Q.C., who served on the Supreme Court of Canada from March 2006 to April 2015, spoke at a special meeting of the CBA Tax Section (BC Branch) on April 14, 2016. During his time on the bench, Justice Rothstein was well-known in the tax community as a judge with significant expertise – and interest – in tax cases. In his talk, he gave his insights into the interaction between complex tax matters and generalist courts, and more specifically, obtaining leave to appeal to the Supreme Court of Canada on a tax issue. In this blog, I hope to convey some of his advice for counsel in tax cases and in seeking leave to the Supreme Court.

Tax cases often involve extremely technical issues, but as a case moves forward, counsel faces increasingly generalist decision makers – from the Canada Revenue Agency personnel who may be experts in the particular area of tax, to the Tax Court of Canada, which is a specialist court but with jurisdiction over a wide range of tax matters. From there, the case may go to the Federal Court of Appeal, a generalist court with broad jurisdiction over federal law, and finally to the Supreme Court of Canada, the highest and most generalist court in the country, which only hears cases of significant public importance in any area of law.

Despite the complex and technical nature of tax law, the rationale for generalist courts at the appellate levels remains. Appellate courts give deference to lower courts on factual matters in light of their proximity to the evidence, perhaps even more so for specialist courts. With respect to legal determinations, the rationale for increasingly generalist decision makers flows from the broad perspective they bring to bear. Regardless of the technical nature of an issue, the overarching legal principles remain constant. Generalist judges ensure that the interpretation of technical provisions is in accordance with the broad principles applicable to all statutes.

What should tax counsel do when faced with a generalist appellate court? Justice Rothstein had two concrete pieces of advice:

  1. Use “point first” writing. State your point as the first sentence of a paragraph, and then provide explanation and justification in the sentences and paragraphs that follow. Do not leave the judge to guess what point you are going to make. What a tax lawyer considers to be an obvious inference may not be so clear to a judge without tax expertise. (For an excellent discussion on point first writing, see Forget the Wind-Up and Make the Pitch: Some Suggestions for Writing More Persuasive Factums).
  1. The art of persuasion involves making the factum easy to read and understand. Include as the first page of the factum and as a loose page a glossary of any technical terms and acronyms used in the factum, so that the judge does not have to flip through pages searching for where a particular term was defined.

When it comes to leave applications at the Supreme Court, section 40 of the Supreme Court Act allows leave to be granted where:

the Supreme Court is of the opinion that any question involved therein is, by reason of its public importance or the importance of any issue of law or any issue of mixed law and fact involved in that question, one that ought to be decided by the Supreme Court or is, for any other reason, of such a nature or significance as to warrant decision by it.

These criteria are very broad, but given the nature of tax cases, leave applications are an uphill battle and typically only 1-2 per year will be granted leave. Adopting an appropriate perspective in a leave application may increase the probability of leave being obtained.

The Supreme Court considers itself a jurisprudential court as opposed to a mere error-correcting court. The Court places higher importance on cases where broad issues are at stake, where there have been differences of opinion in lower courts, or where the decision will have a widespread impact. These are the types of circumstances in which guidance from the Supreme Court is considered warranted. It is not enough to persuasively show that the Federal Court of Appeal made a mistake.

For example, the leave application in Daishowa, [2013] 2 SCR 336, contained affidavits from members of a broad range of resource industries attesting to the significant effects the decision would have on them. This evidence of the broad implications of the issue was a factor in the Court’s decision to grant leave in the case.

Leave is unlikely to be granted in cases concerning factual or narrow issues, new provisions with little history of judicial consideration, or issues that are moot. That said, leave was granted in GlaxoSmithKline, [2012] 3 SCR 3, despite involving a repealed provision because it presented an interesting and novel issue for the Court, the Court’s decision would have continuing relevance in relation to section 247 of the Act, and it could be years before another transfer pricing case would make its way to the Court.

Justice Rothstein suggested that when addressing a generalist court, counsel should cast the issues in light of general legal issues at play – whether in relation to statutory interpretation, procedural rules or other legal principles – rather than delving into technical minutiae. In addition, focusing on the single most salient issue in the case is generally more persuasive than the “kitchen sink” approach.

Having retired from the Supreme Court of Canada, Justice Rothstein is currently practicing at Hunter Litigation Chambers.