Fixed Cost Awards in the Tax Court of Canada – Spruce Credit

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Fixed Cost Awards in the Tax Court of Canada

Spruce Credit Union v The Queen, 2014 TCC 42

This cost decision was in relation to Spruce Credit Union v The Queen, 2012 TCC 357, which was decided wholly in favour of the taxpayer (Minister’s appeal to the FCA not yet decided).  The TCC, following Rule 147, determined that the tariff amounts were “inappropriate, insufficient, and unsatisfactory” (para 51), and ordered fixed costs (50% of fees of $820,000), disbursements, and $2,500 fixed costs for submission and hearing on costs.

In this decision, Mr Justice Patrick Boyle thoroughly reviewed the law in relation to cost awards at the TCC.

The appeal involved 4 days of hearing, the involvement of 3-4 counsel, two rounds of submissions, several examinations for discovery, and two contested motions.  This was also a lead case on behalf of all BC credit union hat elected to pursue their objection and appeal rights.  The Appellant asked for lump sum costs equal to 75% of its actual legal costs, while the Respondent supported tariff costs at the highest tariff.  The TCC wondered by the Appellant was not seeking costs for preparing and filing a Notice of Appeal.

The TCC reviewed the relevant words of Rule 147 (General Procedure) and noted that it “may fix all or part of the costs with or without reference to” the tariff schedule.  Next, the TCC referred to the FCA decision in  Lau v. The Queen, 2004 FCA 10, where it was stated that the TCC has full discretionary power over the payment of costs – though the power must be exercised on a principled basis (see also Landry v. The Queen, 2010 FCA 135).  The court then referred to the FCA decision in Consorzio Del Prosciutto Di Parma v. Maple Leaf Meats Inc., 2002 FCA 417, where some circumstances justifying increased cost awards were outlined:

  • there were numerous issues raised on appeal
  • the issues involved complex facts
  • the issues involved expert evidence

In Consorzio, the court awarded party-party costs which do not indemnify the successfully party (as solicitor-client costs would) and are not intended to punish the unsuccessful party for inappropriate conduct.  A cost awards is what the court considered to be an appropriate contribution towards the successful party’s solicitor-client costs, and not adherence to the arbitrary tariff amounts.  When the Court doesn’t make a specific order, costs will be assessed in accordance with Column III of Tariff B.  When tariff amounts are seen by the court as unsatisfactory, a different amount may be ordered.  The actual solicitor-client costs may be taken into account if the court considers it appropriate.

The TCC then referred to the TCC’s own decisions in relation to costs, including:

The TCC then reviewed the considerations in Rule 147(3):

  • The Result of the proceeding – the outcome including the likelihood of success of the losing party’s position are relevant;
  • The amounts in issue – is the amount, in aggregate, significant enough that it requires a thorough and well prepared defence? In lead cases its appropriate to consider the aggregate amounts at issue;
  • The importance of the issue – the level of importance to the taxpayer, the number of persons to whom it is important, and the importance of the issues to future litigants are relevant
  • Any offer of settlement made in writing – none in this case
  • The volume of work – work needed in preparation for hearings, in communication with the opposing party, in keeping other parties informed, and in creating submissions are relevant;
  • The complexity of the issues – both the complexity of the facts and the law are relevant;
  • The conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding
  • The denial or the Neglect or Refusal of any party to admit anything that should have been admitted
  • whether any stage in the proceedings was improper, vexatious or unnecessary, or was taken through negligence, mistake or excessive caution

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