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]

Range of costs awards since Bowker

Since Bowker, there have been ten Tax Court decisions which have addressed costs awards in detail after the disposition of an appeal.[8] The ten decisions and the amounts of costs awarded in each are as follows:[9]

Decision	Costs award (% of actual legal fees)
Ahamed v. The King, 2023 TCC 177	35%
Nixon v. The King, 2024 TCC 4	35%
Prospera Credit Union v. The King, 2024 TCC 34	7.44%
Emergis Inc. v. The King, 2024 TCC 38	20%
Madison Pacific Properties Inc. v. The King, 2024 TCC 47	35%
Marine Atlantic Inc. v. The King, 2024 TCC 51	60%
Husky Energy Inc. v. The King, 2024 TCC 73	57.65%
Hutchison Whampoa Luxembourg Holdings S.À. R.L. v. The King, 2024 TCC 74	36.28%
L.F. Management and Investment S.A.R.L. v. The King, 2024 TCC 75	41.60%
Watts v. The King, 2024 TCC 100	30%

As can be seen, the amount of costs awarded ranged from 7.44% to 60% of actual legal fees. Furthermore, seven of the ten decisions fell within a range from 20% to 41.60% of actual legal fees. The decisions outside of this range awarded costs in the amount of 7.44%, 57.65%, and 60% of actual legal fees. Lastly, the average amount awarded in the ten cases was 35.80% of actual legal fees.

Factors impacting the amount of costs

Rule 147(3) identifies eleven relevant factors which the Tax Court may consider in determining an appropriate amount of costs, and further includes “any other matter relevant to the question of costs”.[10]

To look for trends in recent costs decisions, two factors were chosen to see how they correlate to the amount of a cost award. The two factors chosen were a) the litigation conduct of the parties and b) the amounts in issue in the appeal.

Correlation of litigation conduct with costs awards

Four of the eleven listed factors in Rule 147(3) relate to the conduct of parties in the litigation.[11] In five of the ten decisions since Bowker, the Court found that one or more of the factors related to litigation conduct supported a higher award of costs.[12]

In the cases where one or more of the factors related to litigation conduct supported a higher award of costs, the average award was 39%. The average award of the remaining cases was 32.61%.

Correlation of amounts in issue with costs awards

The factors in Rule 147(3) also include the “amounts in issue”. In five of the ten decisions since Bowker, the Court found that the amounts in issue in the appeal supported an increased award of costs.[13] In the remaining decisions, the Tax Court found the amounts in issue to be a factor of little or neutral weight.

In the five cases where the amounts at issue favoured a greater award of costs, the Tax Court awarded an average of 46.11% of actual legal fees. In contrast, in the remaining cases, the Tax Court awarded an average of 25.50% of actual legal fees.

Comment

This article should not be taken as a complete analysis of all of the factors affecting these decisions on costs. Nor should correlation be assumed to necessarily show that a factor impacted the outcome of a decision. That being said, it appears that since, most costs awards have fallen within a range of approximately 20 to 40% of actual legal fees. Furthermore, both poor litigation conduct and the amounts in issue appear to correlate with higher costs awards, with the correlation being greater for the latter in recent cases.

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