Canada: 378 Days To Victory: The Conduct Of A Ground-Breaking Tax Treaty Case, Knights Of Columbus v. R.

On Friday June 13, 2008, multinational enterprises doing business in Canada finally received greater tax certainty in respect of their cross-border operations. On that day, the Crown informed the Knights of Columbus that the government would not appeal the Tax Court decision in Knights of Columbus v. R. (2008 D.T.C. 3648), a ground-breaking case that had established a precedent for the definition of "permanent establishment" under the Canada-U.S. tax treaty.

This was a significant victory for the Knights of Columbus for two reasons: first, the Tax Court found that the Knights did not have a "permanent establishment" under the treaty and was not taxable on its insurance operations in Canada; second, the Knights and its Fraser Milner Casgrain LLP (FMC) tax litigation counsel – Bill Innes, Chia-yi Chua, and Brendan Bissell – went from Notice of Appeal to court judgment in only 378 days.

In September 2006, the Canada Revenue Agency issued Notices of Reassessment in respect of the Knights' 1999-2002 taxation years. The CRA alleged the Knights was taxable on its Canadian insurance operations on the basis that it had a "permanent establishment" in Canada. In December 2006, the Knights filed Notices of Objection for those years. As with most objections, there was no indication that the Minister would issue a swift decision on the objections, and the Knights was prepared for a prolonged waiting period.

However, that changed on April 24, 2007 when the Knights discovered that the CRA was on the eve of commencing a hearing with another taxpayer, American Income Life Insurance Company ("AILIC"), on exactly the same point that was at issue in the Knights' objection. Recognizing the possible significance of a court decision in AILIC, FMC counsel filed a Notice of Appeal on May 4. Also on that date, FMC counsel made a motion to the Tax Court to have the AILIC and Knights appeals heard together, or alternatively for the Court to reserve judgment in AILIC pending the hearing of the Knights' appeal, at which the Knights intended to introduce expert evidence on the issue of the definition of "permanent establishment" under the Canada-U.S. tax treaty. The motion was argued on May 9, and the Tax Court granted the requested relief. The Tax Court would hear the AILIC appeal but would reserve judgment pending the completion of the Knights appeal, which was ordered to be heard commencing January 14, 2008 – a mere eight months in the future.

At this point, the Knights and FMC went into "real time" tax litigation. A matter that might normally require 24 months or more to successfully conclude was to be completed in approximately 240 days. The Knights and FMC counsel would require an airtight plan, the right team members, and the foresight and flexibility to respond quickly to the exigencies of the tax appeal process. Under normal circumstances, contingencies could be easily addressed because of the surplus time in the schedule; in the Knights appeal, there was no room for error.

Shortly after the May 2007 order, FMC counsel retained several internationally-renowned tax experts to participate in the hearing. On July 30, FMC counsel filed the Knights' List of Documents (partial disclosure), and examinations for discovery were conducted on October 2. In the meantime, FMC counsel had successfully prepared for and argued the appeal of Prévost Car Inc. v. R. (2008 D.T.C. 3080 (T.C.C.)) in the first week of September 2007.

On October 31, FMC counsel sent the Knights' answers to undertaking arising from examinations for discovery. In November, FMC commenced intensive trial preparation, which including interviewing the seven lay witnesses and three expert witnesses. On November 27, FMC counsel filed the expert reports to be used at trial. On December 11, FMC counsel filed a Request to Admit certain facts. On December 12, FMC counsel sent the Knights' answers to the Crown's questions arising from the answers to undertakings.

And over the December holidays, as much as was possible, FMC counsel rested.

On January 7, 2008, FMC counsel filed a Notice of Intention to read-in certain portions of the examination for discovery transcript. On January 8, FMC counsel sent the Knights' additional answers in response to the Crown's additional questions arising from the answers to undertakings.

And, finally, on Monday January 14, 2008 – exactly on schedule – FMC counsel rose in courtroom 6C and addressed the Tax Court: "What is novel about this case ...". On May 16, the Tax Court allowed the Knights appeal.

This decision is extremely important from both a Canadian and international perspective due to the significance of the term "permanent establishment" to the international taxation of multinational enterprises. In its decision, the Court provided clear guidance on the circumstances in which an agent may give rise to a taxable presence of a non-resident as well as the criteria that must be satisfied before a fixed place may be considered a geographical permanent establishment of a non-resident. Non-residents will undoubtedly benefit from these guidelines in structuring the administration and operation of their international business activities.

Additionally, another significant aspect of the case is the use of expert witnesses, which provided the Court with a wealth of relevant and necessary knowledge and background to the issues under consideration. It is anticipated that this type of evidence will become increasingly important in tax treaty litigation in the coming years.

The Knights, with FMC as counsel, successfully concluded this litigation in an extraordinarily compressed timetable. It is a good example of the remarkable results that can be achieved in the Canadian tax appeal system when a taxpayer and counsel work together to move a matter forward on an expedited basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
17 Oct 2018, Webinar, Toronto, Canada

Dentons and SheEO are coming together for an evening of #radicalgenerosity on October 17, 2018. Meet Vicki Saunders, Founder of SheEO, and learn about how SheEO is changing the landscape for female entrepreneurs.

17 Oct 2018, Webinar, Toronto, Canada

With the continued focus on Bill 148’s significant changes to the Employment Standards Act, Dentons’ Toronto Employment and Labour group is pleased to launch a new webinar series focusing on Bill 148.

17 Oct 2018, Seminar, Québec, Canada

Dentons is pleased to invite you to join us for a breakfast seminar as part of the Les Matinées Dentons series on issues relevant to you and your business.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions