In a spate of cases at the end of 2018, the Tax Court of Canada continued the recent trend in making large cost awards to taxpayers who were successful in their appeal. Moreover, in an interesting twist to this trend, the Tax Court denied costs to the Crown upon success achieved by the Minister of National Revenue where several unsuccessful alternative arguments were raised by the Minister. This confirms and develops the approach that emphasizes a contextual analysis based on the factors in subrule 147(3) of the Tax Court of Canada Rules,[1] and downplays the importance of the cost awards suggested by the Tax Court’s Tariff.[2]
The Tariff recommends cost awards in proceedings at the Tax Court. Under the Tariff, a taxpayer might receive approximately $10,000 in costs (plus disbursements) for a two-day hearing involving experienced counsel, assuming the matter is a Class “C” appeal under the General Procedure.[3] For that same proceeding, the taxpayer would likely have incurred between $200,000 and $400,000 in legal fees.
However, pursuant to subrule 147(4),[4] the Tax Court is permitted to depart from the Tariff. In fact, under this provision, the Tax Court need not even reference the Tariff. The Tax Court treats this subrule as an open invitation to contextually evaluate the conduct of the taxpayer and of the Crown, and award costs accordingly. Citing the now Chief Justice Rossiter with approval, Justice D’Auray described in Jayco, Inc. v R (“Jayco”), the Court’s “broad discretionary powers in awarding costs … [as] ‘So broad that the Tariff is an item for referral only’”.[5]
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