Costs Awards in the TCC since Bowker v. Canada

Introduction

In June 2023, the Federal Court of Appeal (the “Court”) in Bowker v. Canada provided guidance on the appropriate amount of costs that an unsuccessful party should pay in an appeal to the Tax Court of Canada (“Tax Court”).[1] This article will review the range of costs awarded by the Tax Court since the decision in Bowker and will briefly review whether two factors in particular correlate to higher costs awards: the litigation conduct of the losing party and the amounts at issue in the appeal.

Decision in Bowker v. Canada

In Bowker v. Canada (“Bowker”), the Court overturned a costs award of the Tax Court. The Tax Court had held that, for consistency purposes, the degree of indemnification for partial indemnity costs should be 50-75% of solicitor-client or substantial indemnity costs.[2]

The Court found this was an error. The range selected by the Tax Court did not address the Tax Court’s own jurisprudence.[3] Furthermore, the Tax Court had fettered its discretion by selecting a range and then considering how the factors in Rule 147(3) of the Tax Court of Canada Rules (General Procedure) “moved the needle” within that range.[4]

The Court emphasized the importance of consistency and gave two reasons for this. First, a lack of consistency in the treatment of comparable cases leads to arbitrary results.[5] Second, a consistent approach to costs leads to predictability and helps litigants make decisions.[6] Given the goal of consistency, the Court held that a decision on costs must be grounded in the Tax Court’s past practice and jurisprudence.[7]