http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/66747/index.do 
Spruce Credit Union v. The Queen[1] (February 6, 2014) is a very sophisticated costs decision arising out of a complex multi-factor tax decision:
http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/30984/index.do 
The gist of the matter was that the Crown attempted to tax dividends received by BC Credit Unions both on the basis of the general language of the
Income Tax Act[2] and on the basis of a GAAR assessment:
[2] The appeal involved a four day hearing with each side represented by three or four counsel, and two rounds of further written submissions, including one in respect of the intervening decision of the Supreme Court of Canada in
Copthorne Holdings Ltd. v. The Queen, 2011 SCC 63. Prior to the hearing there had been two contested motions. One was to have the Appellant’s case proceed as lead case for all of the credit unions in British Columbia that chose to pursue their objection and appeal rights (the “Bound Credit Unions”). The other was to permit the Appellant to file an Amended Answer thereby effectively withdrawing an admission. Both were granted and the second led to three further examinations for discovery. In the Order dealing with the Amended Answer, Associate Chief Justice Rossiter expressly dealt with the costs of the motion and the additional discoveries.
[3] The appeal involved two distinct alternative issues. The first was whether the dividend received by the Appellant from Stabilization Central Credit Union of British Columbia (“STAB”), a British Columbia deposit insurance corporation, was a deductible intercorporate dividend under the substantive provisions of the
Income Tax Act (the “Act”), including the Act’s régime applicable to deposit insurance corporations. This required a determination of whether the dividend amount was paid as an allocation in proportion to past deposit insurance assessments, as well as a consideration of the interplay between the Act’s generally applicable provisions and the specific deposit insurance corporation régime provisions of the Act. The second, alternative issue was whether the Act’s General Anti-Avoidance Rule (“GAAR”) applied to the receipt of the dividend to recharacterize it as other than a deductible dividend received.
[4] Written submissions were received by the Court on costs in April and May 2013.
[5] The Appellant has asked for a lump sum costs award in the range of 75% of its actual legal costs in respect of the litigation from the date the Notice of Appeal was filed to the date judgment was rendered, together with all of its disbursements. In the alternative, the Appellant asks that, if the Court decides to defer to the costs Tariff, that costs be awarded by reference to Class C of the Tariff because of the lead case nature of this appeal notwithstanding that looked at alone the amount of tax in dispute in this particular appeal would characterize it as a Class A appeal.
[6] The Respondent opposes the Appellant’s request for a lump sum costs award. It is the Respondent’s position that there must be unusual and exceptional circumstances to warrant an award of costs not based upon the Tariff. The Respondent agrees with the Appellant’s alternative request to have a costs award based upon Class C of the counsel fee Tariff given the aggregate amount involved in all of the Bound Credit Unions’ appeals.
[7] The amount of federal tax in issue in this particular appeal was less than $50,000. The amount of federal tax in issue in this appeal together with all of the Bound Credit Unions’ appeals is approximately $7 million.
[8] The actual costs incurred by the Appellant in respect of the pursuit of this appeal from the date of filing the Notice of Appeal to the date of judgment therein was approximately $860,000. Seventy-five per cent of this is approximately $645,000. The disbursements incurred in that time period were approximately $19,500. Thus, the Appellant has requested a lump sum award of approximately $665,000 in the aggregate.
[9] It is not clear why the Appellant is not seeking any costs in respect of preparing and filing the Notice of Appeal.
[10] The $860,000 amount is the amount that was billed by Blake, Cassels & Graydon LLP (“Blakes”) to the client. The accrued time at posted, hourly docket rates was in fact in excess of $1.1 million dollars. That is, Blakes billed its client at an effective average time of billing ‘discount’ or write down of approximately 23%, being more than $250,000. Appellant’s counsel says this “already provided discount” is a relevant factor to be considered. I do not accept that position. There was no suggestion that Blakes’ actual billings to the client did not represent what that firm believed at the time of billing to be the full value of the services provided, nor that that there was any retainer agreement providing for a deferred or success fee in respect of this difference. Considering this discount would be the equivalent of awarding disbursements for out-of-town witnesses using hotel rack rates.
[11] The $860,000 total includes the work relating to the Amended Answer Motion, the preparation and filing of that Amended Answer, and the conduct of the three resulting discoveries. The Appellant has not provided any breakdown whatsoever to the Court for those particular costs. I will not be interfering with or supplementing the costs already ordered by the Associate Chief Justice in respect of the Amended Answer and related discoveries.
[12] The $860,000 aggregate amount also includes Blakes’ fees regarding advising the other Bound Credit Unions and preparing their Notices of Appeal and agreements to be bound. Subsequent to the hearing of this Costs Motion, Blakes has conservatively estimated the amount billed for its services to the other Bound Credit Unions to be approximately $40,000. This estimate was based upon identifying from the firm’s docket entries all timekeepers’ services for each day that referenced any of the other Bound Credit Unions, and treating all of that timekeepers’ accrued time for that day as relating to the Bound Credit Unions and not the Appellant, even if it was clear from the entry that time was also spent on the Appellant’s appeal that day.
The appellant was asking for a somewhat staggering award of 75% of actual costs based on an extremely aggressive and wholly unsuccessful attack upon it and its sister credit unions. In a truly refreshing decision the Tax Court essentially allowed 50% of the actual costs incurred by the appellant (less awards previously made by the Tax Court in the proceeding):
[52] Given the particular combination of the broad importance of the issues, the particular complexity of the facts relating to the regulatory aspects, the complexity of the Respondent’s unsuccessful assertion that the specific statutory régime negated generally applicable provisions of the Act, and the considerable additional preparation time necessarily and reasonably entailed by this, and given the fact that the Appellant was entirely successful on both points, and given that the Respondent’s case was quite weak on key points of both its primary and secondary position, I would place the appropriate counsel fee cost contribution for the Respondent to pay to the Appellant at approximately 50% of the $820,000 incurred by the Appellant (which is net of the estimated $40,000 that related to the Bound Credit Unions), that is $410,000.
[53] This award is at the lower end of the traditional range described by Orkin and others. This is appropriate. There were no particular inefficiencies, delays, inappropriate conduct or settlement offers to be considered each of which might have moved this further up the range.
[54] In recognition of the fact that this is not intended to extend to the costs relating to the Amended Answer and the three related discoveries, this award is to be reduced by 50% of all of the fees relating to that work, to be computed on the same basis as Blakes accounted for the fees relating to the Bound Credit Unions, as described above and in greater detail and in Blakes’ letter to the Court dated May 7, 2013.
[55] The Appellant is also entitled to its disbursements in this appeal. This is not to include any filing fees for the appeals of the Bound Credit Unions. This is also not to include any disbursements relating to the Amended Answer and the three related discoveries. Further, only the travel and meal expenses of witnesses (not counsel) are to be accounted for as the Court was not given an itemized breakdown or other detail of this expense category.
[56] Fixed costs of $2,500 are awarded to the Appellant in respect of the submissions and hearing on costs. The Court is disappointed with the Respondent continuing to advance its position that this Court can not, or should not, depart from Tariff except in the most limited of circumstances, and this undoubtedly contributed to lengthening the time required for the costs hearing and submissions. However, as described above, cost awards are intended to be compensatory and contributory, not punitive. The Court is satisfied that $2,500 reflects the appropriate contribution on a principled basis
Comment: It is unlikely that many cases before the Tax Court will follow this trajectory since few reported assessments are this “scorched earth”, but the case will stand (unless reversed on appeal) as a salutary warning to CRA that highly aggressive, and ultimately unsuccessful, attacks on reputable taxpayers may prove very costly.
[1] 2014 TCC 42.
[2] R.S.C. 1985, c. 1 (5th Supp.).