Tedesco v. Canada: The FCA clarifies that partners can continue appeals on issues that had been raised, but discontinued by the partnership

Section 16.2 of the Tax Court of Canada Act (the “TCC Act”) states that where a party discontinues a proceeding, the proceeding is deemed to be dismissed. A dismissed proceeding, barring exceptional circumstances, cannot be reinstated under the TCC Act. But what if a partnership is the party that discontinues an appeal? Can the partners of that partnership pursue separate appeals on the same issue? In Tedesco v. Canada, 2019 FCA 235, the Federal Court of Appeal (“FCA”) ruled that they can, thus restricting the impact of section 16.2 in certain circumstances.

In 2012, a limited partnership (“TSI”) filed an appeal with the Tax Court of Canada (“TCC”), disputing the Minister of National Revenue’s (the “Minister”) Notices of Determination that disallowed the partnership’s losses on the grounds that the determinations were statute-barred. The individual partners filed similar appeals with the same issue as well. On the day of its hearing, TSI filed a Notice of Discontinuance under section 16.2 of the TCC Act. Following the discontinuance, the Crown brought a motion to strike the partners’ Notices of Appeal, without leave to amend (these appeals had previously been placed in abeyance pending the outcome of TSI’s appeal). The Crown argued that it would be an abuse of the Court’s process to allow the partners to litigate the same issue that the partnership had discontinued.