HSBC Bank Canada v. Her Majesty the Queen

Date Closed

June 19, 2007

Lead Office


In this significant transfer-pricing case, HSBC filed its Notice of Appeal challenging income tax assessments regarding the deductibility of guarantee fees paid by a Canadian subsidiary to its non-resident parent. In the early stages of the Tax Court of Canada proceedings, the Crown brought a Motion to strike out what it called a “scandalous, vexatious or frivolous” paragraph in the Notice of Appeal. The paragraph alleged that the Minister of National Revenue had failed to adjust guarantee fees paid to the taxpayer's parent in the previous 10 years. The Chief Justice of the Tax Court of Canada determined that it was not obvious that the paragraph was so irrelevant to the question of reasonableness, pursuant to subsection 247(3), that it should be struck. He also determined that it would not prejudice the Crown or unduly lengthen the trial. In a victory for taxpayers, he dismissed the Motion.