Loblaw Financial – Tax Court of Canada finds that the Crown should not receive a costs award

CRA prevailed in assessing a Loblaw subsidiary for the realization of $473 million of foreign accrual property income between 2001 and 2010 through a wholly-owned Barbados international bank (GBL), but only on the basis that GBL’s business was not conducted principally with arm’s length persons. The taxpayer had made a settlement offer on what C Miller J had described as a principled basis, namely, that CRA would apply GAAR to GBL’s 2006 to 2013 years – but not to the earlier years on the basis that they were not covered by waivers provided. CRA rejected this offer and made its own offer (which was made too close to trial to qualify under Rule 147(3.2), and was also rejected) that provided a concession on the characterization of foreign exchange gains and losses realized by GBL

C Miller J found that no costs should be awarded to CRA, notwithstanding its total success, since it had lost on most of the issues raised by it. Respecting CRA’s submission that it should receive an award of 30% of solicitor-client costs incurred after its counteroffer, he agreed (at para. 19) with the taxpayer that this offer “was neither a compromise nor a good faith attempt to settle, given the relative insignificance of the [FX] issue.”

Neal Armstrong. Summary of Loblaw Financial Holdings Inc. v. The Queen, 2018 TCC 263 under Tax Court Rules, Rule 147(3).