{"id":1520,"date":"2015-07-31T20:34:58","date_gmt":"2015-07-31T20:34:58","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=1520"},"modified":"2025-02-12T13:31:01","modified_gmt":"2025-02-12T21:31:01","slug":"the-tax-courts-use-of-costs-awards-as-a-tool-to-control-the-parties-conduct","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2015\/07\/the-tax-courts-use-of-costs-awards-as-a-tool-to-control-the-parties-conduct\/","title":{"rendered":"The Tax Court\u2019s Use of Costs Awards as a Tool to Control the Parties\u2019 Conduct"},"content":{"rendered":"

Traditionally, the Tax Court only awarded costs that deviated from the Tariff annexed to the Tax Court of Canada Rules (General Procedure)<\/em> (the \u201cRules\u201d) in the presence of reprehensible, scandalous or outrageous conduct on the part of one of the parties. \u00a0The Tax Court\u2019s new approach to costs, as articulated by the now Chief Justice of the Court in Velcro Canada Inc. v. R.<\/em>, 2012 TCC 273, allows the judges to fix costs on a principled basis in accordance with the factors enumerated in Rule 147(3) instead of by reference to the Tariff.\u00a0 A review of the Court\u2019s recent costs awards shows that among the various factors taken into account by the judges in the exercise of their discretionary power to award costs in excess of the Tariff, considerable weight is given to the conduct of the parties.<\/p>\n

In Ford Motor Company of Canada, Limited v. R<\/em>., 2015 TCC 185, the Court awarded the taxpayer a lump-sum of $40,000, which represented about 63% of the taxpayer\u2019s estimated aggregate costs incurred in successfully defending the Crown\u2019s motion to strike very substantial portions of its amended notice of appeal pursuant to the specified corporation rules under the Excise Tax Act<\/em> (Canada).\u00a0 The Court justified its costs award by relying on its finding that the Crown had tried to \u201cuse the specified corporation rules opportunistically, as a sword against a taxpayer appellant, notwithstanding that the clear purpose and design of the rules are to protect and shield the fisc.\u201d\u00a0 The Court also qualified the Crown\u2019s failure to file any written submissions or other advance notice of its arguments (even though it had committed at least twice to do so) as \u201cdisappointing\u201d.<\/p>\n

The Court further criticized the Crown for adopting the position that there was no basis for enhanced costs in excess of the Tariff as there was no reprehensible, scandalous or outrageous conduct on its part.\u00a0 The Court held that it is \u201cnot acceptable for the Crown to simply recite that tired old phrase, clearly taken out of context upon a proper review, without even acknowledging the considerable jurisprudence to the contrary, much less actually seeking to challenge it.\u201d\u00a0 In addition to the lump-sum of $40,000, the taxpayer was awarded 75% of its reasonable actual costs incurred in seeking to resolve the issue of costs.<\/p>\n

In The Standard Life Assurance Company of Canada. v. R.<\/em>, 2015 TCC 138, the Court deviated from the Tariff in part because it determined that although the trial itself had been conducted in an efficient and professional manner by both sides, the taxpayer had engaged in window dressing throughout the proceeding to enable it to argue that it met the factual criteria of the judicial tests for carrying on business when it did not.\u00a0 The Court held that the taxpayer\u2019s actions to create and rely on an illusion to obtain a tax benefit was \u201creprehensible and should be discouraged.\u201d<\/p>\n

The Court\u2019s propensity to use costs awards to express disapproval of a party\u2019s conduct is further illustrated by the Court\u2019s decision in Martin v. R.<\/em>, 2014 TCC 50, where the Court found evidence that the auditor had deliberately misled the taxpayer in the course of the audit.\u00a0 Being critical of the conduct of the Canada Revenue Agency (the \u201cCRA\u201d), the Court included in the costs award an allowance for costs the taxpayer incurred during the audit and objection stages of her dispute with the CRA.\u00a0 The inclusion of the costs allowance was overturned in 2015 FCA 95, where the Federal Court of Appeal held that conduct that occurs prior to a proceeding may only be taken into account in a costs awards if that conduct impacts on the \u201cproceeding\u201d, defined to mean \u201can appeal or reference\u201d.\u00a0 The taxpayer sought leave to appeal to the Supreme Court on June 15, 2015.<\/p>\n

These cases, however, must be contrasted with the decision in Invesco Canada Ltd. v. R.,<\/em> 2015 TCC 92, where the Court rejected the taxpayer\u2019s argument that because the taxpayer had been cooperative throughout and was ultimately successful in the appeal, the Crown should have known the frailties of its own case and allowed the taxpayer\u2019s objection. \u00a0The Court held that the finding that a party\u2019s legal position was erroneous should not amount to misconduct on the party\u2019s part or mean that its position was frivolous or vexatious.<\/p>\n

Since the new costs approach is relatively recent, it remains to be seen to what extent the significant weight given to the conduct of the parties by the Tax Court judges in the exercise of their discretion to award costs in excess of the Tariff may influence the conduct of the parties in future proceedings.<\/p>\n","protected":false},"excerpt":{"rendered":"

Traditionally, the Tax Court only awarded costs that deviated from the Tariff annexed to the Tax Court of Canada Rules (General Procedure)<\/em> (the \u201cRules\u201d) in the presence of reprehensible, scandalous or outrageous conduct on the part of one of the…<\/p>\n","protected":false},"author":31,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[52],"tags":[],"class_list":["post-1520","post","type-post","status-publish","format-standard","hentry","category-tax-blog-general"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1520","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/31"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=1520"}],"version-history":[{"count":1,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1520\/revisions"}],"predecessor-version":[{"id":2695,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1520\/revisions\/2695"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=1520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=1520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=1520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}