Marine Atlantic – Tax Court substantially increases a cost award to the taxpayer to punish for “improper” and “offensive” conduct of Crown counsel

The Appellant had complete success at trial regarding the ITC methodology it used for its ferry operation. D’Arcy J now made a costs award to the Appellant (of 60% of its counsel’s fees of $1.3 million, plus disbursements and a gross-up for unrecoverable HST) that reflected a substantial enhancement for the improper conduct of Crown counsel.

First, the Crown had resiled from an agreement to follow the decision on two relevant issues in BC Ferries which, when later decided in 2014, favoured the Appellant’s position. The Crown did not agree to be bound by those findings until the eve of trial – and this delay in following BC Ferries caused the Appellant to incur substantial costs.

Second, the Crown had improperly sought to introduce evidence of a CRA auditor through an affidavit rather than through court testimony. Furthermore, the use of the affidavit in this instance had been found by D’Arcy J in his prior decision to be “trial by ambush” and resulted in “trial days being thrown away.”

Third, the Crown submission on costs challenged the above “trial by ambush” finding. D’Arcy J stated:

This is improper; a party should never use cost submissions to question a finding made by the Court in the related appeal.

Further, the Respondent’s submissions indicate that he is prepared to engage in similar offensive behaviour in the future.

Similarly, the Crown submissions improperly and falsely challenged D'Arcy J’s findings that CRA had inappropriately threatened to impose gross negligence penalties on the Appellant.

Neal Armstrong. Summary of Marine Atlantic Inc. v. The King, 2024 TCC 51 under Rule 147(3).