Tax Court Jurisdiction

In Sorbara v. Canada (Attorney General), 2009 ONCA 506, the Ontario Court of Appeal held that the Ontario Superior Court of Justice does not have jurisdiction to hear an application relating to liabilty for GST under the Excise Tax Act (Canada). Parliament has given exclusive jurisdiction over that kind of question to the Tax Court of Canada. The appellant’s application for leave to appeal to the Supreme Court of Canada was dismissed with costs (2009 CanLII 61389).

Interestingly enough, the decision under appeal was in response to a motion for summary judgment in an action under the Class Proceedings Act, 1992, in which “The Plaintiffs [sought] recovery from the Federal Crown of goods and services tax … collected since April 29, 2002 on fees charged by professional portfolio managers who manage investments accounts on a fully discretionary basis.” To a tax lawyer, it would seem pretty obvious that that kind of claim is within the exclusive jurisdiction of the Tax Court. The problem, however, is that the amounts of GST for any particular individual in circumstances like those of the Sorbaras were likely to be relatively small, and so an appeal to the Tax Court would not have been economic for any particular taxpayer. The Tax Court does not have a class proceedings procedure, which means that, in theory, each taxpayer must litigate his or her own appeal.

In practice, Tax Court appeals involving groups are possible. Our firm has considerable experience with “group appeals”, mainly with tax shelters. The difficulty is in putting together a group and preventing free-rider problems, especially in cases where the amount at stake for each taxpayer is relatively small. Statutes like the The Class Proceedings Act, 1992, are meant to address these kinds of problems, which probably explains why counsel for the Sorbaras tried to bring the matter before the Ontario Superior Court, without success.