“Judges are expected to decide cases as framed by the parties, then step back and allow the appellate process to unfold. In this case, the trial judge did neither.”- Taxpayer’s Supplemental Memorandum of Fact and Law
The transfer pricing case of McKesson v. The Queen has raised procedural issues that are without precedent in Canadian tax cases. This week, those procedural issues became a central part of the matters that will be considered by the Federal Court of Appeal.
In a Notice of Motion (and other materials) filed this week, the taxpayer has asked for a new trial before the Tax Court.
McKesson is a case involving transfer pricing adjustments under section 247 of the Income Tax Act (Canada) in respect of the factoring of accounts receivable as well as the limitation period in Article 9(3) of the Canada-Luxembourg Tax Convention. The Tax Court dismissed the taxpayer’s appeal.
After the taxpayer had commenced an appeal in the Federal Court of Appeal, Tax Court Justice Patrick Boyle recused himself (2014 TCC 266) from the two remaining issues before the lower court (i.e., costs and the content of the Tax Court’s public file) on the basis that the taxpayer had, in its materials filed in the Court of Appeal, accused of him of bias (see our previous post here).
Notice of Motion
On November 3, the taxpayer filed a Notice of Motion in the Federal Court of Appeal for leave to file (i) an Amended Notice of Appeal, and (ii) a Supplementary Memorandum of Fact and Law. In its Motion, the taxpayer states that Justice Boyle’s reasons for recusal raise a further ground of appeal in addition to those already set out in the original Notice of Appeal. The proposed Amended Notice of Appeal and Supplementary Memorandum of Fact and Law address the following additional ground of appeal:
Do the trial judge’s Recusal Reasons compromise the appearance and reality of a fair process in this case such that a new trial is necessary?
Specifically, the proposed Amended Notice of Appeal states,
8. The Trial Judge’s Reasons for Recusal dated September 4, 2014 interfere with the fairness of the appellate process and compromise the appearance and reality fairness of both the trial and appeal.
The taxpayer has also hired additional counsel in respect of the motion, namely Henein Hutchison LLP, a Toronto-based litigation law firm.
The taxpayer’s Written Representations in support of its Motion argue that the recusal reasons were directed at the Court of Appeal and have compromised the fairness of the case. The taxpayer argues that this “improper intervention” has compromised the integrity of the appeal process.
The taxpayer’s Supplementary Memorandum of Fact and Law states that the trial judge’s “intervention in this appeal was ill-advised and improper”. The taxpayer argues that the trial judge should have remained “above the fray” and should not have “put himself into the appellate arena”.
The taxpayer characterizes the recusal reasons as a “post-hoc attempt to justify to an appellate court a decision given many months earlier” [emphasis in original]. The taxpayer states that the “Recusal Reasons are nothing less than an explicit attempt by the trial judge to insert himself into the appellate process as an advocate against the Appellant and its lawyers.”
The taxpayer argues that the recusal reasons must be considered part of the record in the case before the Federal Court of Appeal. A new trial would, in the taxpayer’s view, give it “an opportunity to make its case at trial, free of the unfairness that has now tainted this proceeding.”
The taxpayer also argued that the recusal reasons have undermined the solicitor-client relationship, and retrospectively reveal the trial judge’s disposition against the taxpayer.
The taxpayer has requested that the appeal be allowed and the matter remitted to the Tax Court for a new trial before a different judge.
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The Crown has not yet filed its response to the taxpayer’s Notice of Motion.