Canada: Imposition Of GST On Criminal Defence Legal Fees Does Not Infringe Section 10(B) Of The Charter: Stanley J. Tessmer Law Corporation V The Queen

Last Updated: February 12 2013
Article by Angelo Gentile

Stanley J. Tessmer Law Corporation v The Queen, 2013 TCC 27, Justice Paris of the Tax Court of Canada confirmed that the general GST charging provision in section 165 of the Excise Tax Act, R.S.C. 1985, c. E-15 (the "ETA") does not infringe section 10(b) of the Canadian Charter of Rights and Freedoms (the "Charter"). Section 10(b) of the Charter provides:

Everyone has the right on arrest or detention


to retain and instruct counsel without delay and to be informed of that right;

The Appellant ("Tessmer") provides criminal defence legal services. During the period July 1, 1999 to December 31, 2006, Tessmer did not collect GST (totaling $228,440.97) in respect of legal services for criminal defence work charged to clients who had been arrested or detained and who were either charged with a criminal offence or who had been arrested with criminal charges pending.

Tessmer did not conduct an independent review of the financial circumstances of its clients to determine the ability of its individual clients to afford its fees and any GST exigible on those fees. In addition, no financial records of any of Tessmer's individual clients were produced at the hearing.

The Minister of National Revenue (the "Minister") assessed Tessmer for such GST plus interest and penalty, and Tessmer appealed those assessments to the Tax Court. In the context of those appeals, the parties decided to bring a reference to the Tax Court, pursuant to section 310 of the ETA, to determine the following question raised by Tessmer in its appeals:

Whether, based on the facts set out in the Agreed Statement of Facts filed herewith, the goods and services tax (GST) imposed by s. 165 of the Excise Tax Act infringes or is inconsistent with the rights of the Appellant's clients guaranteed by ss. 7 and ss. 10(b) of the Charter of Rights and Freedoms such that s. 165 of the Excise Tax Act is, to the extent of any such inconsistency and, subject to s.1 of the Charter, of no force and effect by reason of s. 52(1) of the Constitution Act.

Although the question put to the Tax Court referred to both sections 7 and 10(b) of the Charter, Tessmer's counsel advised the Tax Court at the hearing that he was only relying on section 10(b) of the Charter, and the above question was amended accordingly.

Subsection 165(1) of the ETA, the general GST charging provision, read as follows during the periods at issue:

Subject to this Part, every recipient of a taxable supply made in Canada shall pay to Her Majesty in right of Canada tax in respect of the supply calculated at the rate of 7% [note: 6% for the period between July 1, 2006 through December 31, 2006 – Ed.] on the value of the consideration for the supply.

Tessmer argued that a tax on criminal defence legal services provided to a person who has been arrested or detained is inconsistent with that person's right under section 10(b) of the Charter to retain or instruct counsel of choice, on the basis that the tax is an impediment to the exercise of that right and is therefore unconstitutional with respect to both purpose and effect. Relying on a U.S. case (United States v. Stein, SI 05 Crim. 0888 LAK United States District Court, Southern District of New York June 26, 2006), Tessmer argued that a tax on criminal defence legal fees will interfere with the right to counsel since the additional cost of the tax to an accused will interfere with the financial resources available to mount a defence to the charges brought against him or her.

Tessmer also argued that it was not required to provide evidence that any of its clients were denied counsel of their choice as a result of the tax imposed on the services of counsel. Instead, and relying on a series of past Charter cases, Tessmer argued that it only needed to show that the general effect of the tax is unconstitutional under reasonably hypothetical circumstances.

The Tax Court, therefore, was required to determine whether either of the purpose or the effect of subsection 165(1) of the ETA was contrary to section 10(b) of the Charter.

With respect to the purpose of subsection 165(1) of the ETA, the Tax Court readily found that the purpose of that provision was not unconstitutional:

[31] The appellant contends that the general purpose of the GST legislation imposing the tax is to raise revenue but that it also has a specific purpose to tax an accused with respect to the provision of legal services in defence of a State-sponsored prosecution. Its only submission regarding the unconstitutionality of the purpose of the tax was that it is patently inconsistent to prosecute a person and at the same time tax the legal services that the person requires in order to defend against the prosecution.

[32] I am unable to ascribe the specific purpose suggested by the appellant to subsection 165(1) of the ETA, ....

[33] Subsection 165(1) is a provision of general application and covers an infinite variety of transactions. I do not believe that it can be said that a specific purpose of subsection 165(1) is to tax legal services in defence of a State-sponsored prosecution since Parliament has not singled out those particular services for different treatment under that provision. Therefore I find that the appellant has not shown that subsection 165(1) of the ETA has an invalid purpose.

With respect to the effect of subsection 165(1) of the ETA, the Tax Court rejected Tessmer's arguments that no evidence of an impediment to section 10(b) Charter rights was required. The Tax Court stated, in relevant part, as follows:

[54] From my review of the Supreme Court decisions on point, it appears that a party may only rely on hypotheticals to establish a factual foundation for a Charter challenge where actual facts are not available to that party. In such cases, the Court has been willing to consider imaginable circumstances which could easily arise in day-to-day life. ....

[55] A party will also be relieved from presenting any factual foundation at all in cases where the unconstitutionality of the impugned legislation is apparent on the face of the legislation.

[56] Apart from these limited exceptions, a party challenging legislation will be required to bring evidence of the effects of the legislation. Therefore, I reject the appellant's contention that in any Charter challenge the Court may rely on imaginable circumstances to establish the effects of impugned legislation.

[57] Furthermore, since the appellant does not take the position that evidence of the effect of the GST on the ability of its clients who were detained or arrested to afford its services is unavailable, I find that this case does not fall within the exception set out in Mills and implicitly recognized in Seaboyer/Gayme.

[58] It is also obvious that the section 12 Charter standard of review which was applied in Goltz and Ferguson is not relevant to this case.


[64] In response to the appellant's submission that prejudice to a person's section 10(b) rights must be presumed in this case, I can only say that I am unable to easily imagine that a person who has been arrested or detained would be prevented or even deterred from retaining and instructing counsel in that situation by the additional GST payable on counsel fees.

[65] Finally, I do not accept the appellant's contention that the constitutionality of the GST on criminal legal defence services is a question of law alone and therefore that it is not required to produce any evidence because it is apparent on its face that the tax will impede access to counsel.

Therefore, in the absence of evidence that any of Tessmer's clients were unable to retain counsel as a result of the GST payable on legal services, the Tax Court found that the GST imposed under section 165 of the ETA does not infringe section 10(b) of the Charter.

Interestingly, the Tax Court hearing took place on December 15, 2011, and the decision was released on January 28, 2013. Tessmer is still within the time limit to file an appeal with the Federal Court of Appeal, so it remains to be determined whether the Tax Court's judgment remains the final word on this issue.

For more information, visit our Canadian Tax Litigation blog at

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