The following is a summary of recent legal
developments affecting tax and tax dispute resolution in
On May 29, 2014, the Supreme Court of Canada
(SCC) dismissed with costs the leave application
in TransAlta Corporation v The Queen, a
case concerning the Tax Court of Canada (TCC)
decision to not award costs on a substantial indemnity basis to a
successful litigant. At trial before the TCC, the taxpayer obtained
a better result than the settlement offer that the taxpayer
proposed and the Crown rejected, which outcome would presumably
trigger an enhanced cost award.
On May 15, 2014, the SCC dismissed the leave application in Kossow v The Queen, a case involving
a charitable donation tax program. The TCC upheld the
CRA's denial of the charitable tax credits, as did the Federal
Court of Appeal (FCA).
On May 9, 2014, the SCC released its reasons for judgment in John Doe v Ontario (Minister of
Finance), a case concerning efforts to obtain information
about amendments to the Ontario Corporations Tax Act under
provincial freedom of information legislation. The court held
that policy opinions of public servants constituted advice that was
exempt from disclosure.
On May 8, 2014, the SCC dismissed the leave application in Maureen McLean v Helen McLean, executrix of
the Estate of Wilmur McLean, a rectification
case. The Ontario Court of Appeal (OCA) had
confirmed that the trial judge erred by holding that
"convincing proof" was required in rectification cases:
the court confirmed that the standard of proof in rectification is
the same as any other civil action, namely, "balance of
probabilities." The OCA further confirmed that a court
must seek to confirm the parties' mutual intentions,
objectively determined, based on the evidence available from the
time the contract was formed.
On May 6, 2014, the Auditor General of Canada released his
Spring 2014 report, Chapter 3 of which deals with steps taken by
the Government of Canada to address "aggressive tax
On April 30, 2014, the BC Supreme Court dismissed the
plaintiff's case in Leroux v CRA. Although the taxpayer
did not obtain the remedy he was seeking, the judgment was helpful
to taxpayers because it confirmed that the CRA owes a duty of care
to taxpayers, which is a threshold issue in any civil claim in
tort. The decision has been appealed.
CRA Interpretation Letter 2014-0524191I7, dated
April 25, 2014, confirmed that court costs ordered against a
taxpayer in an unsuccessful tax appeal may be deducted under para.
60(o) of the Income Tax Act (Canada)
(ITA). Paragraph 60(o) allows for the
deduction of fees or expenses incurred in preparing, instituting or
prosecuting an objection or appeal of an assessment of tax,
interest or penalties under the ITA or similar provincial
statute. The paragraph also allows for deductions in relation
to disputes under the Employment Insurance Act and the
Canada Pension Plan. According to the letter, the fees and
expenses are deductible regardless of whether they are paid to a
lawyer or other legal representative.
On April 22, 2014, the SCC dismissed the leave application
in Stanley J Tessmer Law Corporation v The
Queen, a case concerning whether the state may tax legal
fees for criminal defense work. The TCC held that the
imposition of GST on legal services did not infringe citizen's
rights under s. 10(b) of the Charter and the FCA upheld
On April 10, 2014, the CRA issued a revised directors'
liability information circular, IC89-2R3.
On April 3, 2014, the SCC dismissed the leave application in GF Partnership v The Queen, a GST
case concerning the interpretation of purchase and sale
agreements. The FCA decision upholding the TCC's judgment
dismissing the taxpayer's appeal stands.
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