Fee arrangement intended to ensure registrant able to obtain proper representation

At hearing of appeal, issues was whether three categories of food products were zero-rated supplies for purposes of Excise Tax Act. Court found that only two of three products were zero-rated and matter was referred back to Minister of National Revenue for reconsideration and reassessment on that basis. Subject to final assessment, registrant was entitled to refund of $38,865 plus interest and penalties. As part of submissions on costs, parties advised that judgment rendered was as favourable as terms of offer of settlement made by registrant on June 3, 2014, was rejected. Registrant’s counsel had entered into fee arrangement consisting of variable fixed fee stipulation and stipulation in event that court awarded enhanced costs. Since registrant was entitled to refund of $38,865, resulting variable fixed fee was $19,433 and that amount could be reduced by up to 90 per cent or to as little as $1,943 if court awarded enhanced costs. Registrant claimed substantial indemnity costs on basis that it served offer of settlement as favourable as judgment rendered, and claimed $90,882, representing 80 per cent of solicitor and client costs incurred after date of offer. Issue arose as to quantum of costs. Registrant was entitled to costs in total amount of $95,109 excluding applicable taxes. Fee arrangement between registrant and counsel meant that registrant would be responsible for solicitor and client costs over and above variable fixed fee provided that appeal was successful and provided those costs were incurred as supported by dockets and as confirmed by court in process of assessing costs. Irrespective of amount that may be assessed as substantial indemnity costs, registrant’s counsel agreed to be bound by that assessment and to invoice registrant accordingly. Fee arrangement was not intended to alter registrant’s legal obligation to pay for legal services rendered if appeal was successful, but was intended to ensure that registrant was able to obtain proper legal representation and was structured to limit registrant’s exposure to legal costs if appeal were ultimately dismissed. Offer of settlement was both thorough and comprehensive. Solicitor and client costs were assessed at $112,500 resulting in substantial indemnity costs of $90,000, plus Tariff B costs and disbursements including additional $3,500 for preparation of costs submissions.
Ike Enterprises Inc. v. The Queen (2017), 2017 CarswellNat 4238, 2017 TCC 160, Guy Smith J. (T.C.C. [General Procedure]); additional reasons (2017), 2017 CarswellNat 1405, 2017 TCC 59, Guy R. Smith J. (T.C.C. [General Procedure]).