June 18 2019 Charlottetown

Attendees

Tax Court of Canada (TCC)

• The Honourable Eugene Rossiter Chief Justice
• The Honourable Lucie Lamarre Associate Chief Justice

Courts Administration Service (CAS)

• Daniel Gosselin (DG) Chief Administrator
• Cristina Damiani (CD) Executive Director & General Counsel
• Sophie Matte (SM) Executive Legal Counsel
• Donald MacNeil (DM) Registrar

Justice Canada (DOJ)

• Lynn Lovett (LL) Assistant Deputy Minister, Tax Law Services Portfolio
• Daniel Bourgeois (DB) Deputy Assistant Deputy Minister

Canadian Bar Association (CBA)

• Alexandra K. Brown, Chair (AKB) Blake, Cassels & Graydon LLP (Toronto)
• Neil Bass (NB) Aird & Berlis (Toronto)
• D'Arcy Schieman (DS) Osler, Hoskin & Harcourt LLP (Toronto)
• D. Andrew Rouse (DAR) Peters Rouse (Fredericton)
• Nathalie Goyette (NG) PwC Law LLP (Montreal)
• Tamra L. Thomson (TLT) - CBA – Director, Legislation and Law Reform

Minutes

I. Welcomes and approval of agenda

A. Note that November 2018 minutes were approved by email.

II. What’s new at the TCC – by CJ

A. Resignations, Appointments and Vacancies

1. With the recent appointment of Justice David Spiro, who is replacing Justice Brent Paris, the TCC is full for the first time in the past ten years. There are twenty-two (22) judges, three (3) supernumerary judges and five (5) deputy judges. Future vacancies are not known at the moment. A request has been made for the creation of five (5) additional positions, three (3) judges and two (2) prothonotaries.

B. Statistics and Trends / Current Inventory

2. The TCC is scheduled for a year out and cannot schedule more sittings unless it is provided with additional facilities and judges. The scheduled sitting days are steady across the country except in Toronto where they have increased 136% in past six (6) years. The TCC is currently limited to three (3) court rooms in that city, but in 2021, it is hoped there will be six (6) or eight (8) court rooms available in the building where the TCC currently sits.
3. CAS is still waiting for the budget regarding the needed new Court and Registry Management System. The TCC is further proceeding with its project to completely digitize its activities and foresees that with further funding, it will be capable of handling electronic trials in late 2020.
4. The number of group appeals before the TCC has doubled in the past five (5) years: there are presently sixty (60) such group appeals. A “group” includes five (5) or more taxpayers. The TCC estimates that there are 45,965 potential appeals pending.

C. Regional Matters / Issues (if any)

5. The CJ notes that there is nothing outstanding from regional perspectives, but makes the following remarks regarding regional issues:
   • There are fewer appeals in Atlantic Canada;
   • The new facilities in Quebec City are up and running. A few improvements are being made following comments from the legal community;
   • Public Services and Procurement Canada plans to build a single purpose facility in Montreal close to the Court House with a goal of being in operation in 2026;
   • Sittings are scheduled in Hamilton on an almost full-time basis and the TCC is looking for a larger facility;
   • The TCC will move to a new location in Winnipeg;
   • The TCC will continue to sit where it actually sits both in Edmonton and Calgary with a few renovations being made to address security issues;
   • There is a possibility that the TCC will change facilities in Vancouver;
   • Depending on the volume of appeals and budget, the TCC may set up a full-time facility in Saskatoon.

D. Status of Section 174 Issue

6. The mechanism offered by section 174 applications does not appear to produce the intended results. In this connection, the CJ notes that one application was recently withdrawn by the Respondent. The TCC will deal with the applications as they come.

E. Preliminary Ruling Docket

7. This is a pilot project that the TCC will run in Toronto and Vancouver starting September 1, 2019. The TCC expects that it will require some fine tuning and looks forward to seeing how the private Bar and the Department of Justice will respond to the project. A copy of each of the Court’s memoranda (French and English) outlining the project is attached to and forms part of these minutes.

F. Other Issues (if any)

8. The TCC was recently advised that amendments to Bill C-58 were accepted by the Senate. These amendments have the effect of requiring the TCC to disclose its judges’ expenses quarterly on an aggregate rather than on a per judge basis. Parliament is likely to adopt these amendments.

III. Courts administration service by DG

A. Update from CAS

9. In its 2019 budget, CAS obtained funding for a new facility in Montreal. Originally, it was expected that the new facility would be available in 2024, but this has been postponed to 2026. In this context, CAS is securing the lease of the premises where the TCC currently sits until 2027.
10. CAS has seen its budget for translation increased by $700,000, but this increase must be shared among the four (4) courts to which CAS provides services.
11. CAS trusts that it will soon get funding for the new Court and Registry Management System.
12. With respect to facilities in Toronto, as mentioned by CJ, the plan is to acquire two (2) additional floors. CAS received funding for one additional floor and is pursuing funding for the additional floor.
13. The TCC’s facilities in Winnipeg will be relocated in 2020 or 2021.
14. CAS has equipped six (6) court rooms in the country with the necessary equipment to conduct electronic trials. The TCC judges are invited to use these court rooms on a “pilot basis” to test their efficiency. These court rooms are in Toronto (3) (one (1) of which has been made available for the TCC), Montreal (1), Quebec City (1) and Ottawa (1). CAS plans to equip six (6) more court rooms in the upcoming year, including in Vancouver and Ottawa (one more). The technology is used via a digital application that has been adapted to the TCC’s needs.
15. There is a project to renew the TCC’s website, but it has not been launched yet.
16. In the last twelve (12) months, CAS has proceeded with a review of the registry services’ efficiency. Few areas were identified are requiring improvement. That said, the TCC registrar provides regional training to its staff to ensure the quality of services provided. The Federal Court will also make some improvements.

IV. TCC rules committee

A. Update from Rules Committee

17. Members of the Rules Committee met on May 28, 2019 (the “Meeting”).
18. The CJ notes that the DOJ has not completed its review of the consolidated and revised General Procedure rules which it undertook almost three (3) years ago. This delay negatively impacts the TCC’s functioning. In this context, the Rules Committee has advised the DOJ that henceforth, the TCC will issue practice notes to deal with issues that should be addressed in the pending rules.
19. The Review of the consolidated and revised Informal Procedure rules is complete. The next step will be to initiate the regulatory amendment process.
20. At the Meeting, the Rules Committee had a discussion of section 174 applications and ways to deal effectively with group appeals, but no decision was made as to how to deal with the issues surrounding group appeals.
21. The Rules Committee is considering various options regarding modifications to be made to the Tariff and/or section 147 of the General Procedure rules. A question was raised as to whether DOJ had changed its practice of charging a relatively low hourly rate as a component of substantial indemnity or solicitor-client costs. DB advises that the DOJ has not changed its practice.
22. At the Meeting, the Rules Committee also discussed the rules regarding electronic filing, summary judgments, time limits for delivery of Reply to Notice of Appeal and Application pleadings, as well as the determination of the class of proceedings under Tariffs A and B.
23. The Rules Committee’s next meeting when drafts of new rules will be presented for discussion is expected to be held in October.

V. Issues raised by justice Canada

A. Response to Proposal regarding Section 174 Applications

24. The DOJ’s response regarding the confidential Section 174 Process discussion paper was circulated to the members of the Committee.

B. Response to Preliminary Ruling Docket Proposal

25. The DOJ’s comments regarding the Preliminary Ruling Docket Proposal were expressed in a letter dated June 18, 2019 which was circulated to the members of the Bench & Bar Committee. DB summarized orally the position of the DOJ outlined in that letter. A copy of the letter is attached to and forms part of these minutes.

C. Litigation Timetables proposed by the Parties

26. The DOJ is concerned that mutually suggested timetables are being abridged and that some matters are set for trial before all the litigation steps are completed. It would be preferable to have an approach which allows the parties to manage the steps in the litigation in a manner that meets their availability and workload.
27. The TCC responds that it abridges few mutually accepted litigation schedules and that it only does so when valid reasons support the amendment. Otherwise, parties must abide with the timeline. Furthermore, the TCC imposes a timeline to ensure that parties move the appeals. The TCC sets a trial date prior to completion of the normal litigation steps only in exceptional circumstances.

VI. Issues raised by CBA members

A. Response to Preliminary Ruling Docket Proposal

28. AB circulated comments from CBA members regarding the PRD Proposal which have been labelled “Comment #1” and “Comment #2”, respectively. A copy of each of these submissions is attached to and forms part of these minutes.
29. NG makes one suggestion regarding the PRD. To ensure that the PRD does not slow the litigation process, the parties should agree to a timeline that includes the PRD. This way, if the parties do not accept the preliminary ruling, the matter will proceed without further delays.
30. The TCC will consider all comments received regarding the PRD and appreciates all the thoughtful input from both the private bar and the DOJ. The CJ reminds the members of the Bench & Bar Committee that the PRD is a pilot project and that adjustments will need to be made. The objective is to limit litigation costs and, where possible, incite settlements. During the pilot project period, a panel of three (3) judges will consider each written application to ensure consistency.

B. Online Resources regarding Judicial Independence

31. TLT informs the Bench & Bar Committee that, as part of its commitment to promote judicial independence, the CBA has produced a video and educational materials for the public explaining the concepts of judicial independence. They are available at the website.

C. Time Limits on Oral Discovery

32. AB reports that some CBA members have raised again the possibility of the TCC putting a time limit on oral discovery.
33. The CJ explains that from the TCC’s perspective, there is a concern that if a time limit is imposed, the TCC will receive many requests for permission to exceed the time limit. This would result in an inefficient use of the TCC’s time. The TCC suggests that parties may deal with this issue through Discovery Plans.

VII. Other business

34. NG reports the comment received from a litigator that in Montreal, it is now faster to obtain a trial date from the provincial court (Quebec Court) than from the TCC. The CJ explains that there is a limited number of judges hearing cases in the province of Quebec. However, the TCC will look into this matter.
35. The TCC expresses its heartfelt thanks to AB for her contribution to the Bench & Bar Committee and wishes her the best in her future endeavors.

VIII. Next meeting

36. The next meeting will take place in Montreal, on December 1, 2019.

Preliminary Ruling Docket

Problem:

Many taxpayers find it too expensive to litigate their tax issue fully because of the cost of litigation and would like some relief on a more expeditious, cost-effective basis by obtaining a preliminary ruling from the Tax Court of Canada - an opinion only which is not binding on the parties.

Target in Terms of Quantum:

Any appeal where the amount in dispute is $25,000 or more up to $300,000 per taxation year.

Rule/Direction:

The following are the principles which will be used for a preliminary ruling docket:

1. Parties will receive a preliminary ruling from a Tax Court of Canada Judge which will be non-binding.
2. The parties must apply to the Court to be added to preliminary ruling docket within 90 days of the close of pleadings. The application must be a joint consent application. The Court shall have absolute discretion to determine whether or not the appeal is an appropriate appeal to participate in the preliminary ruling docket based upon such factors as the Court deems appropriate from time to time.
3. Any ruling would come from a hearing which would have a maximum duration of two (2) days.
4. There would be no discovery or documentation production for the preliminary ruling. Neither party may rely upon any documentation at the preliminary ruling hearing that has not been produced to the other party at least thirty (30) days prior to the hearing, unless the Court otherwise directs.
5. No experts would be heard except in rare circumstances.
6. Both parties seeking the preliminary ruling must be represented by legal counsel.
7. Both parties must present a pre-hearing brief with respect to the facts, the issues, the law and analysis, no longer than twenty (20) pages, thirty (30) days prior to hearing.
8. The preliminary ruling will be limited:
   1. to appeals which are expected to last longer than two (2) days;
   2. are general procedure appeals only; and
   3. have an amount in dispute of between $25,000 to $300,000 per taxation year.
9. The Rules of Evidence shall be those applicable to informal appeals.
10. Preliminary rulings shall be limited to dealing with questions of fact or mixed questions of fact and law and for clarity are not intended as a substitute for motions under Rule 58 of the General Procedure Rules or Section 171 of the Income Tax Act.
11. Any decision on the preliminary ruling must be rendered within sixty (60) days from the completion of the preliminary ruling hearing, and such decision may be rendered orally or in writing by the Judge.
12. After a preliminary ruling has been given, the parties may agree or disagree to be bound by the preliminary ruling but must do so in writing and within a period of thirty (30) days from the rendering of the preliminary ruling.
13. If the parties agree in writing to the preliminary ruling, then the preliminary ruling will become a Judgment of the Court by way of consent of the parties.
14. If either party fails to agree to accept the preliminary ruling then the Judge may award costs considering the rules on costs under the General Procedure Rules.
15. If either party does not agree with the preliminary ruling, the parties shall proceed with the litigation in the normal course of events with a litigation schedule.
16. If the parties agree in writing to the preliminary ruling, then there shall be no costs awarded by the Court.
17. If the preliminary ruling is not agreed to by the parties and the matter continues to trial in the normal course of events, the trial Judge can consider the preliminary ruling in awarding substantial indemnity costs at the conclusion of the trial. The preliminary ruling shall be considered by the trial Judge as a written offer of settlement pursuant to the General Procedure Rule 147.
17. At the conclusion of the preliminary hearing, the file and all file materials associated with the preliminary hearing shall be sealed and shall not be available to anyone without an Order of the Court. The Judge who presided over the preliminary ruling cannot be the trial Judge and cannot participate in the file in any fashion in the future.

Letter to the Department of Justice Canada

Comment# 1 on TCC Proposal

Alexandra Brown Senior Counsel

Chair of the Tax Court Bench and Bar Committee
Blake, Cassels & Graydon LLP

199 Bay Street

Suite 4000, Commerce Court West Toronto ON M5L 1A9

Canada

Dear Madam:

Re: Tax Court of Canada• Preliminary Ruling Docket

We write to you in response to your invitation to share comments with the Bench and Bar Committee on the Tax Court of Canada's efforts to advance a pilot project for a Preliminary Ruling Docket.

We have reviewed the fundamentals for the pilot project in the Court's memorandum of March 27. 2019, and tracking its outline, remark as follows.

Problem:

We agree that cost and delay are problems in tax litigation.

Target in Terms of Quantum:

The target amounts of $25,000 or more up to $300,000 per taxation year are referred to as the "amount in dispute". That phrase is defined in subsection 2.2(2) of the Tax Court of Canada Act in relation to appeals under Part V.1 of the Customs Act, the Excise Act, 2001 and Part IX of the Excise Tax Act. In income tax appeals, the "aggregate of all amounts" referred to in section 2.1 of the Tax Court of Canada Act does not include any amount of loss determined by the Minister. In Schedule II - Tariff A of the Tax Court of Canada Act, loss determinations are referred to as "amounts in issue".

We think that the Practice Direction should provide guidance on whether the target amounts include penalties and interest and clarify what happens when a number of assessments are under appeal in a notice of appeal and one of those assessments is for an amount less than $25,000.

We suggest that the target amounts be referred to as "amounts under appear and that the Practice Direction make it clear that the Preliminary Ruling Docket applies to all appeals over which the Court has jurisdiction.

Rule/Direction:

1. No comment.
2. We would prefer to see that a joint application for a preliminary ruling be required within 60 days rather than 90 days but assume the delay of 90 days from the close of pleadings reflects that a status hearing under Rule 125 cannot be held until 90 days after the filing of the reply.
3. We think that a hearing with a maximum duration of one day, with an additional day available at the discretion of the Court, is more consistent with the goal of obtaining a concise, expeditious and cost effective preliminary ruling.
4. Saying that there would be no discovery or documentation production for the preliminary ruling could cause confusion as Rule 81 requires the parties to file and serve a list of documents within 30 days following the close of pleadings. We suggest that filing and serving a Rule 81 list accompanied by the exchange of the documents in those lists be conditions precedent to a preliminary ruling application.
5. We agree that no experts should be heard when a preliminary ruling is sought except in exceptional circumstances.
6. We disagree that both parties seeking the preliminary ruling must be represented by legal counsel. Under subsection 17.1(1) of the Tax Court of Canada Act a party has the right to appear in person. The Court has identified the problem that the preliminary ruling docket is meant to address is that many taxpayers find it too expensive to litigate their tax issue fully. Self-represented parties should be able to take advantage of a means to reduce the cost of litigation.
7. A 20 page pre-hearing brief defeats the goal of reducing the cost of litigation. We recommend that the requirement for a pre-hearing brief mirror that in Rule 126.2{4) & (5). The Practice Direction should set out what the brief must contain, limit its length to 10 pages and provide for the advance filing of a book of documents to be referred to by a party at the preliminary ruling hearing.
8. See our comments above about the "amount in dispute". We think that paragraph 8 should be moved up to follow paragraph 1.
9. For avoidance of doubt, if the rules of evidence are those applicable to informal appeals, should the Practice Direction refer to subsection 18.15(3) of the Tax Court of Canada Act? Whether informal or not, several important questions need to be addressed concerning the taking of evidence:
   1. Can a witness be subpoenaed to attend a preliminary ruling hearing?
   2. Will a witness affirm or swear to tell the truth before giving evidence?
   3. Could a transcript of a witness' evidence at a preliminary ruling hearing be used if the appeal goes to trial? Would a procedure similar to that for the use of discovery transcripts in another matter have to be adopted?
10. If a preliminary ruling is not intended as a substitute for section 171 of the Income Tax Act, then the partial disposition of an appeal provided for in subsection 171(2) of that Act is unavailable. In other words, a preliminary ruling is only available where an appeal does not raise more than one issue. If that is the intention, then that should be made clear. However, we see advantages to having the Court deliver a preliminary ruling on a particular issue and encourage the Court to build that opportunity into its pilot project.
11. If a preliminary ruling is to be delivered orally, then the parties and their counsel, if represented by counsel, should attend.
12. No comment.
13. No comment.
14. We disagree that the Court could award costs at the end of the preliminary ruling hearing if either party fails to accept a non-binding preliminary ruling. We think that the failure to accept the ruling is a factor that can be considered under Rule 147(3)U) as "any other matter relevant to the question of costs" after the trial.
15. No comment.
16. No comment.
17. We disagree. We think that if the matter continues to trial, then the trial judge can consider the preliminary ruling under Rule 147(3)G) as "any other matter relevant to the question of costs" after the trial.
18. Sealing the file and all file materials associated with the preliminary hearing ruling is problematic. There is no need to seal the file and the file materials if the parties have agreed to the preliminary ruling and a Judge has made a decision following the preliminary ruling hearing. If there is no agreement after a non-binding procedure then the file materials should be returned to the parties and the preliminary ruling, which is not a judgment, should be treated in the same way as settlement conference communications under Rules 126.2(2) and 128.
19. Also it should be considered whether evidence given at a preliminary ruling hearing may be used tater on in the litigation. If the appeal goes to trial and a party or witness testifies inconsistently with evidence given at the preliminary ruling hearing, can the prior statement be used to impeach the witness? Would an application to the preliminary ruling hearing judge be required?

We hope that the Bench and Bar Committee will find our comments helpful.

Comment # 2 on TCC Proposal

• Preamble, Quantum in dispute: you may want to clarify that the quantum is in terms of tax and penalties (excluding interest). Consider also providing a quantum range where the litigation concerns a loss or other determination (where there is no tax, but material "balances" at issue). For example, that range could be $50,000 to $600,000 of losses. I believe that there is a similar rule for informal procedure appeals (where the 25,000$ tax limit is equated to $50,000 of losses).
• Joint consent required: This may be my only controversial comment, but if the very basis for the project is the reduction of litigation costs, I would think that the party most directly affected by the costs of litigation is the taxpayer. While the Crown incurs costs of course, it is its duty to act and the costs are budgeted yearly. For taxpayers, tax litigation costs are rarely budgeted. Therefore, given the broad discretion of the Court to accept to hear a case under the preliminary ruling track (which I read as being similar to the Court's discretion to hear a Rule 58 motion), perhaps the preliminary ruling track could be requested by either party and the Court would exercise its discretion to hear it under the preliminary ruling program or not.
• Paragraph 10: I wondered if the reference to s. 171 ITA should instead be to 173 ITA. It is clear that the preliminary ruling is not a 171 disposal of the appeal, but would think that what is meant here is the it is not a substitute for Rule 58 motions and s. 173 references on discrete issues.
• Paragraph 17: I believe the reference should be to Rule 147, not 14 . Maybe the "3" was an intended reference to 147(3) but a general reference to Rule 147 as a whole is perhaps more in line with the spirit of broad judicial discretion.
• Paragraph 14: It would be interesting to elaborate on how and what costs would be awarded and in what circumstances. Presumably what is meant here is tariff costs of the preliminary ruling.