Mariano – Tax Court of Canada makes the promoter of a leveraged donation scheme jointly and severally liable with the unsuccessful test-case taxpayers (whose appeals it had controlled) for the Crown’s costs

After finding that the leveraged donation transactions in Mariano were a sham, Pizzitelli J dealt with the disposition of the Crown’s Bill of Costs for $491,137. Although there had been 27,000 participants in the scheme, there were only seven appellants before him, who argued that they should not be responsible for costs that were incurred on a scale reflecting larger amounts at stake than the credits taken by them personally.

Although he dismissed all their arguments respecting scaling back the bill, Pizzitelli J ultimately was sympathetic. Even though this went beyond the literal wording of the Tax Court Rules, he found that the promoter of the scheme (who had controlled the litigation from its start) should also be liable for the costs, on a joint and several basis with the appellants as a group (with the appellants bearing any costs which the Crown might seek to collect from them amongst themselves on a pro rata basis in accordance with the size of the credits claimed by them respectively). It would not be surprising if the Crown now presents 100% of the bill to the promoter.

Summary of Mariano v. The Queen, 2016 TCC 161 under Tax Court Rules, Rule 147(1).