Paletta Estate – Tax Court of Canada states that there is no “buy Canadian" requirement regarding use of expert witnesses
The taxpayer was substantially successful in its appeals for eight taxation years of denials of around $49 million in net losses from “straddle trading.”
Spiro J otherwise would have allowed 55% of the taxpayer’s legal fees of $3,365,500 in light inter alia of the amounts at stake, the taxpayer’s complete success for all but one year, challenges in displacing the Crown’s allegations of sham and legally ineffective transactions, the complexity of the straddle trading transactions, and the novelty and complexity of the issues. However, he reduced that percentage by 5% to reflect some wasting of trial time attributable to failure to concede at trial that the taxpayer had failed to report $8 million of income for one of the years, and seeking to qualify an irrelevant expert. The percentage was reduced by a further 5%, to 45%, to reflect the partial success of the Crown (regarding that same $8 million) for one of the taxation years.
Spiro J found the taxpayer’s total disbursements of $996,550 were reasonable given that the Crown’s disbursements were only somewhat lower ($710,000) notwithstanding “the significant burden that rested on the Appellant to demolish the Minister’s assumptions of fact in respect of sham, ineffective transactions, etc” - although this figure was adjusted downward somewhat to reflect that only 25% of the opinion evidence of one of the experts was useful.
Regarding the experts being foreign experts, he noted:
[T]he global centres of forward foreign exchange trading are all located outside Canada. There is no "“buy Canadian”" requirement when it comes to expert witnesses.
Neal Armstrong. Summary of Paletta Estate v. The Queen 2021 TCC 41 under Tax Court Rules, s. 147(3).