Anita C. Veiga

Following a successful appeal in a complex tax case, the appellant sought costs of the trial and appeal totaling over $1.3 million.

The respondent agreed costs should follow the event but argued the amounts were excessive.

The Court of Appeal declined to apply a 25% bump-up for a non-Rule 49 settlement offer, noting the respondent's obligation to protect the public purse in a test case.

The Court awarded the appellant costs of the appeal and trial fixed at $925,000 inclusive of disbursements and HST.

A corporation incorporated in the British Virgin Islands appealed Ontario tax reassessments requiring it to include interest received from a related Canadian company as taxable corporate income under the Corporations Tax Act.

The interest arose from specialty debt instruments issued as part of a corporate tax planning structure intended to replace retained earnings with intercompany borrowings.

The court considered whether the interest constituted income from a business carried on in Canada, whether the Ontario General Anti-Avoidance Rule applied, and whether the income triggered corporate minimum tax.

Relying on the Court of Appeal’s decision in Inter-Leasing, the court held the interest was income from property rather than business income and therefore not taxable under the applicable provisions.

The GAAR did not apply and the corporate minimum tax regime was also inapplicable.

The appellant challenged reassessments imposing Ontario corporate income tax and corporate minimum tax on interest received under specialty debt instruments created through an inter-corporate refinancing designed to reduce provincial tax.

The court held the interest was income from property, not income from business, because the appellant's activity was minimal and the debt instruments were not employed or risked in any separate business.

Applying GAAR principles, the court found that even if the transactions generated a tax benefit or constituted avoidance transactions, they were not abusive because the statutory scheme deliberately distinguished between business income and property income for foreign-incorporated corporations with an Ontario permanent establishment.

The court also held the specialty debt instruments were not property situated in Canada because, under the settled common law situs rule, specialty debts are located where the instruments are physically found, here the British Virgin Islands.

The appeal was allowed and the reassessments were to be vacated.

Following an appeal involving a dispute between a corporate appellant and the provincial Minister of Revenue, the court addressed the issue of costs.

The parties agreed on a fixed amount for legal fees and disbursements payable to the respondent.

The court endorsed the agreement and ordered that the respondent recover the agreed costs.

The decision reflects the court’s approval of negotiated costs following the disposition of the appeal.

The appellant corporation appealed Ontario corporate tax assessments arising from interest income earned through refinancing transactions within a corporate group.

The appellant argued the interest constituted income from property and therefore fell outside the scope of Ontario taxation under the pre‑2005 Corporations Tax Act regime applicable to non‑Canadian incorporated corporations.

The court held that the interest income formed part of a business carried on in Canada because the corporation’s core purpose was to facilitate financing transactions within the corporate group and administer the resulting debt instruments in Canada.

As a result, the interest income constituted income from a business carried on in Canada within the meaning of s. 115 of the Income Tax Act and was taxable in Ontario.

The court upheld the Minister’s assessments and found it unnecessary to conduct a full GAAR analysis.

The respondents brought a motion to a panel of the Divisional Court to vary an order that refused to strike certain material from the applicant's application record.

The material in question referenced a 'without prejudice' settlement offer made during a tax dispute.

The Divisional Court granted the motion, finding that the motions judge erred in his application of the test for settlement privilege.

The court held that the communications met the three-part test for settlement privilege and that the applicant failed to demonstrate a compelling or overriding interest of justice to justify an exception to the privilege.

The Minister of Finance appealed a decision of the Court of Appeal for Ontario which held that the definition of 'hedging' in the Mining Tax Act was restricted to contracts settled by physical delivery of gold from an Ontario mine.

The respondent, a mining company, had realized significant gains from financial hedging transactions that did not result in physical delivery, and excluded these gains from its profit computation based on the Minister's former administrative practice.

The Supreme Court of Canada allowed the appeal, holding that the statutory definition of 'hedging' extends to transactions that do not result in physical delivery.

The Court applied the modern approach to statutory interpretation, finding that the narrower interpretation would render parts of the statutory definition redundant.