Tax Law

The appellant, a Muslim charity, appealed the dismissal of its application challenging a Canadian Revenue Agency (CRA) audit process, alleging violations of its Charter rights due to discriminatory targeting and Islamophobic attitudes.

The application judge dismissed the challenge as premature, citing an insufficient factual record and the availability of administrative appeal processes under the Income Tax Act.

The Court of Appeal upheld the dismissal, affirming the court's discretion to refuse to decide a case based on a preliminary and incomplete factual record, even for Charter relief.

While disagreeing with the lower court's suggestion that the Tax Court's jurisdiction would necessarily bar a subsequent Superior Court Charter challenge, the appellate court found the prematurity finding to be correct given the ongoing administrative process.

The applicant mother sought an advance on equalization of $10,505,000 to address significant income tax liabilities related to corporate assets managed by the respondent father in her name.

The respondent father brought a cross-motion to set aside or vary existing preservation orders, arguing financial transparency and hardship.

The court granted the applicant an advance on equalization of $7,975,007.60, finding a clear need for the funds to discharge tax liabilities created by the respondent and that the advance would not exceed the likely final equalization payment.

The court dismissed the respondent's cross-motion, finding his financial disclosure lacked transparency and his claims of hardship were unsubstantiated.

The appellant, a mining services corporation, appealed reassessments disallowing its claim for the Ontario Manufacturing and Processing Profits (MPP) tax credit for the 2007 and 2008 taxation years.

The central issue was whether the appellant had "mining profits" as defined by the Corporations Tax Act, specifically whether its income was from a mineral resource "operated by it" or from "processing of ore." The court applied a textual, contextual, and purposive analysis to the terms "operated" and "processing." It found that the appellant, as a contractor providing mine infrastructure services, did not "operate" the mineral resources (which were controlled by Vale) nor did its income derive from "processing" ore, as its work was related to the production of ore rather than its transformation.

Consequently, the appellant did not qualify for the tax credit, and its appeal was dismissed.

The plaintiff, a CPA, sued his former lawyer for breach of contract and solicitor negligence, alleging improper advice regarding tax liability on a forgiven employment loan.

The plaintiff claimed the lawyer failed to advise him that he would be responsible for taxes on a $125,000 loan forgiveness from his former employer, Gemstar, and that Gemstar had agreed to pay these taxes.

The defendant lawyer asserted he advised the plaintiff that the documents did not obligate Gemstar to pay taxes and that the plaintiff, as a CPA, was aware of the tax implications of loan forgiveness.

The court found the plaintiff's evidence unreliable and preferred the defendant's, concluding that Gemstar never agreed to pay the taxes and that the lawyer provided correct advice regarding the loan forgiveness extinguishing the debt.

The court dismissed the action, finding no breach of the standard of care or compensable damages, and no loss of a real chance to sue Gemstar or negotiate a better deal.

The defendant was tried on eight counts of improperly claiming or obtaining refunds under section 239(1.1) of the Income Tax Act.

The Crown alleged that the defendant prepared and filed false T2 Corporate Income Tax Returns containing false claims for taxes withheld at source in order to fraudulently obtain refunds.

The defendant, representing himself, raised various arguments including that he was not an OPCA litigant, that the court lacked jurisdiction, and that he was a natural person not obliged to pay taxes.

The trial judge found the defendant guilty on all eight counts, determining that the Crown had proven beyond a reasonable doubt that false statements were made in the T2 Returns, that the defendant participated in making those statements, that refunds were claimed, and that the defendant knew the statements were false and intended to obtain unwarranted refunds.

The applicants sought an urgent interlocutory injunction or stay to prohibit an arbitrator from hearing further proceedings related to HST issues, pending the determination of an application for leave to appeal the arbitrator's award.

The court dismissed the motion, finding that the applicants failed to establish a serious issue to be tried, irreparable harm, or that the balance of convenience favored granting the injunction.

The court emphasized deference to the arbitrator's scheduling decisions and the limited scope for judicial intervention in arbitration matters, particularly when a party attempts to re-litigate issues or change positions taken during the arbitration.

Self-represented appellants appealed the dismissal of their application in which they claimed a right under section 7 of the Canadian Charter of Rights and Freedoms to choose their relationship with Canada and to be exempt from federal and provincial laws without their consent.

The appellants argued they could distinguish between the geographic landmass of Canada and the "Juristic Federal Unit Canada" and that they were not bound by tax legislation or other laws of general application.

The Court of Appeal dismissed the appeal, holding that residents of Canada are subject to federal and provincial laws that apply to residents, and that the appellants' arguments were based on selective and improper interpretations of the Charter and international covenants.

The defendants, a law firm and lawyer, brought a motion to temporarily stay a negligence action against them.

The plaintiffs, estate trustees, had sued the defendants for allegedly negligent advice regarding a share transfer to a charitable foundation, which led to a significant tax liability after a Canada Revenue Agency reassessment.

The plaintiffs had also appealed this reassessment to the Tax Court of Canada.

The court granted the temporary stay, finding a substantial overlap of issues and factual background between the negligence action and the tax appeal.

It concluded that the outcome of the tax appeal would significantly influence, if not be determinative of, the negligence claim, and that a stay would avoid unnecessary and costly duplication of judicial and legal resources without causing significant prejudice to the plaintiffs' access to justice.

The Gordin Family Members, defendants by counterclaim, brought a Rule 21 motion to strike portions of the counterclaim and dismiss it against them.

The counterclaim by Residences of Springhill Inc. (RSH) alleged fraudulent misrepresentation, civil fraud, and breach of contract related to an underpayment of HST on a condominium unit sale.

The court found no reasonable cause of action against the Gordin Family Members, as the pleadings failed to establish causation for the alleged torts and the breach of contract claim was negated by RSH's admission of receiving the full purchase price including HST.

The motion was granted, and the counterclaim was dismissed against the Gordin Family Members.

The defendants brought a motion for summary judgment, arguing the plaintiff's claim for negligent financial advice and misrepresentation was statute-barred under the Limitations Act, 2002.

They contended the plaintiff discovered her claim by August 2009 when she had concerns about her Individual Pension Plan (IPP) and sought legal advice.

The plaintiff argued the limitation period did not begin until September 28, 2011, when the Canada Revenue Agency (CRA) officially deregistered her IPP, as she could not have known of her loss or that a legal proceeding was appropriate before this final determination, especially given the defendants' prior reassurances.

The court dismissed the defendants' motion, finding the claim was timely.

The Ontario Media Development Corporation (OMDC) denied Pong Marketing and Promotions Inc.'s application for a digital media tax credit on the grounds that its sweepstakes games were developed primarily to promote the sale of phone cards rather than to educate, inform, or entertain users.

The Divisional Court majority found the OMDC's decision unreasonable, holding that "primary purpose" must be assessed from the user's perspective rather than the developer's motivation.

The Court of Appeal allowed the OMDC's appeal, finding that the OMDC's interpretation was reasonable and that the Divisional Court erred in applying a residual presumption in favour of the taxpayer.

Capcorp Planning (2003) Inc. sold a health and welfare plan (HWP) that provided coverage for health, dental, vision, and hearing care, as well as protection against income loss due to illness or accident.

The plan was particularly attractive to owner-managers of small businesses who could not obtain equivalent coverage through traditional insurance due to pre-existing medical conditions.

The Minister of Revenue assessed Capcorp for failure to collect and remit retail sales tax (RST) on amounts paid by employers under the HWP, imposing a penalty of $278,625.31 including interest.

The Superior Court of Justice quashed the assessment, finding that the HWP was not subject to RST because participants could not obtain equivalent insurance coverage.

The Court of Appeal reversed, holding that the HWP constitutes an "unfunded benefits plan" under the Retail Sales Tax Act and is therefore subject to RST.

The court found that the statutory definition focuses on whether protection against risk "could otherwise be obtained" through insurance generally, not whether specific individuals could obtain such coverage.

The respondent purchased the appellant's business in exchange for securities, with the appellant becoming a minority shareholder.

The acquisition agreement contained a representation and warranty regarding tax pools.

Years later, the Canada Revenue Agency disallowed the respondent's use of the tax pools and assessed approximately $11.8 million in additional taxes, interest, and penalties.

The respondent invoked an indemnity from the appellant, who argued the respondent had breached the tax pools representation and warranty.

The motion judge granted summary judgment for the respondent, interpreting the representation and warranty as directed solely to the accurate identification of tax pools and their values at closing, not as a guarantee of future tax utilization.

The appeal was dismissed.

These consolidated appeals arise from related class actions certified in 2012 concerning bingo license and administration fees charged by two municipalities.

The appellants, charitable organizations, sought to amend their pleadings after the opt-out period expired to claim disgorgement of all allegedly illegal fees received by the municipalities, including those paid by persons who had opted out of the class.

The Court of Appeal quashed appeals of interlocutory orders lifting protective orders that had shielded the identities of opt-outs during a reconsideration period, and dismissed appeals of orders refusing leave to amend the statements of claim.

The court held that the proposed amendments would fundamentally alter the nature of the certified claims and lacked reasonable prospect of success.

The Cetero Group brought a motion seeking entitlement to a $298,243 tax refund (carry-back refund) held by PricewaterhouseCoopers Inc. (PWC), as receiver of PRACS Institute Canada B.C. Ltd. The Cetero Group argued the refund was not validly assigned to PRACS, that PWC would be unjustly enriched, and that they were entitled to the refund through legal or equitable set-off due to PRACS's failure to pay under an operation support agreement.

The court found the carry-back refund was validly assigned to PRACS under an asset purchase agreement, providing a juristic reason for PWC's retention, thus defeating the unjust enrichment claim.

Furthermore, the court determined that neither legal nor equitable set-off applied, as the refund was not a debt owing by BA to PRACS, and the cross-claim for unpaid invoices was not sufficiently connected to the refund to warrant equitable set-off.

The motion was dismissed.

The defendants, an accounting firm and an individual accountant, brought a motion for summary judgment to dismiss the plaintiff's professional negligence claim based on the Limitations Act, 2002.

The plaintiff alleged that the defendants' failure to timely file tax returns resulted in the loss of refundable dividend tax on hand (RDTOH) and associated penalties and interest.

The court considered whether the plaintiff's claim was discoverable more than two years prior to its commencement on August 1, 2012.

The court found that the plaintiff had sufficient knowledge of the injury, its cause, and the identity of the wrongdoers by June 2010 at the latest, and that a proceeding would have been a legally appropriate means to seek a remedy at that time, despite ongoing mitigation efforts and the defendants' failure to advise of a potential claim against them.

The court dismissed the plaintiff's arguments regarding prematurity, fraudulent concealment, and estoppel.

This application sought a rectification order for a corporate amalgamation intended to achieve specific tax outcomes under the Income Tax Act's "tax bump rules." Due to an error, the amalgamation was performed in a single step instead of the required two steps, defeating the intended tax benefit.

The court applied the test for rectification, requiring proof of a continuing specific intention to undertake the transaction on a particular tax basis.

The court found, on a balance of probabilities, that the applicant had a continuing specific intention to utilize the tax bump rules, supported by various documents and witness testimony.

The application for rectification was granted, and costs were awarded to the applicant.

The defendant brought a Jarvis application seeking to exclude evidence obtained through search warrants on the grounds that the CRA's audit function had improperly transitioned into a criminal investigation, thereby breaching his Charter rights under sections 7 and 8.

The defendant was charged with two counts of fraud and four counts of tax evasion related to a GST refund scheme involving a dormant company.

The court found that the defendant lacked standing to bring the application, as he had no legitimate privacy interest in the mail box or bank account that were the subject of the search warrants, having fraudulently misappropriated the identity of the company.

Alternatively, the court found no breach of the Jarvis doctrine, as the predominant purpose of the inquiry remained audit-focused until after November 4, 2005, when the bank requirement revealed the connection between the defendant and the fraudulent refunds.

The court admitted all evidence.