Thinking of Challenging CRA in Court? Think About Costs

Thinking of challenging the CRA in court? Legal costs could be one important factor to consider.

Many people, in fact, overlook this entirely when deciding whether to pursue an appeal, and that can be very expensive, especially because appeals are usually cumbersome and lengthy. Hefty legal fees associated with them, can be tax deductible in some cases, but obviously there is no guarantee of success either. The Tax Court of Canada (TCC) also has a very wide discretion to award costs of trial against unsuccessful appellants, under Rule 147(3). The process used to settle an appeal is also important. Both are described below. 

Rule 147(3) of the Tax Court of Canada Rules (General Procedure) sets out the following factors that the Court may consider in awarding costs:

(a) the result of the proceeding,

(b) the amounts in issue,

(c) the importance of the issues,

(d) any offer of settlement made in writing,

(e) the volume of work,

(f) the complexity of the issues,

(g) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding,

(h) the denial or the neglect or refusal of any party to admit anything that should have been admitted,

(i) whether any stage in the proceedings was,

(i) improper, vexatious, or unnecessary, or

(ii) taken through negligence, mistake or excessive caution,

(j) any other matter relevant to the question of costs.

However, a common factor that plays into a judge’s consideration of costs at the TCC is sub rule 147(3)(d), which is aimed at encouraging parties to make offers of settlement. Such offers are to be taken seriously, because an unaccepted offer can trigger adverse costs consequences if, in light of the Court's decision, it turns out that the offer should have been accepted.

Offers can be accepted at any time until revoked, and many remain open for acceptance throughout the duration of the trial, making this an ongoing consideration. If the list above is reconsidered, you will notice that in fact most of these cost considerations are ongoing as well. Therefore, if you are in the midst of an appeal with the CRA, or are considering one, don’t forget to consider Rule 147(3) before and throughout. It’s also a great idea to ask your legal help for a walk through the processes to settlement and to provide an estimate of legal costs throughout that process before beginning.

For recent examples of costs analysis by the TCC see:

Harvey v. The Queen and Spruce Credit Union v. The Queen.