Cost Awards in the Tax Court of Canada

Henco Industries Limited v The Queen, 2014 TCC 278

Justice Campbell J Miller granted the successful taxpayer lump sum costs in the amount $576,673  (45% of the actual costs incurred of $1,203,770).  The taxpayer was seeing 75% of actual costs ($959,345) while the crown argued either for costs based on tariffs ($27,550) or 20-25% of actual costs.

The court referred to the recent jurisprudence on cost awards in the TCC – Spruce Credit Union v The Queen, 2014 TCC 42, Velcro Canada Inc. v The Queen, 2012 TCC 273, Peter Sommerer v The Queen, 2011 TCC 212, Jolly Farmer Products Inc. v Canada, 2008 TCC 693, General Electric Capital Canada Inc. v Canada, 2010 TCC 490, and Dickie v The Queen), 2012 TCC 327 – and stated that Spruce provides a very good summary of the recent trends.

The court is “quite prepared to put side Tariff in favour of a more detailed analysis based on the factors set forth in Rule 147(1)” (para 2), in order to arrive at the estimate the court considers appropriate as a contribution towards a successful party’s solicitor-client costs: Consorzio del Prosciutto di Parma v Maple Leaf Meats Inc., 2002 FCA 417.

In reviewing the factors in Rule 147 the court noted:

• The taxpayer, though not successful on all issues, was wholly successful on the major substantive issues;
• The taxpayer had mixed success on the procedural issues, though wholly successful on the major procedural issue;
• The amount of tax was significant;
• The issues decided will have relevance beyond the taxpayer’s appeal;
• The substantive and procedural issues were well-researched, well-presented, and well-argued by the parties;
• Though not applicable here, a settlement offer is to be given significant weight in a cost award;
• There was considerable volume of work involved, though not a driving factor in this cost award;
• There were a number of issues and, though not overly complicated, they were not exactly straightforward;
• Conduct of the party shortening or lengthening the litigation is only a factor where one party has acted unreasonably in its conduct.

Justice Campell J Miller, in looking at the conduct of the parties, made this observation at paragraph 20:

[20]        With respect to both Parties, they both chose to conduct their litigation in a manner to represent their respective client’s best interest as keenly as possible. None of these accusations flying both ways do either side credit. It smacks more of schoolyard haggling than respectful acknowledgment of how an opponent chooses to run his or her case. For this factor to be determinative, it must be clear, I would respectfully suggest, that a party has acted unreasonably in its conduct. I have not been convinced that either side has so acted. This factor plays no role in my deliberations.

In dealing with disbursements, the court:

• Thought it appropriate that both parties share equally the cost of the Freedom of Information costs and transcript costs
• Denied a Canadian Real Estate lawyer’s costs for expert advice, noting that “the Court is not in the habit of receiving a Canadian lawyer’s advice in an expert report with respect to Canadian law” (para 24).

– Sas Ansari, JD LLM PhD (exp)

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