Executive Summary: Key Legal and Evidentiary Issues

• The Crown did not clearly identify how the uranium contract terms deviated from those between arm’s length parties.

• Cameco argued the Replies failed to comply with prior Tax Court rulings on proper transfer pricing pleadings.

• Issue estoppel was raised to prevent relitigation of prior findings but was rejected due to different taxation years and contracts.

• The Court held the Crown’s response, though poorly communicated, disclosed the arm’s length prices relied upon.

• Requests to strike the Replies or paragraphs under Rule 53 and Rule 170.1 were denied due to unresolved factual and legal issues.

• A litigation timetable was set, and the Crown was ordered to provide further particulars by June 30, 2025.

Facts and outcome of the case

Background and facts

Cameco Corporation appealed tax reassessments for its 2007 to 2015 taxation years, involving three court files: 2021-2686(IT)G (2007–2013), 2022-2715(IT)G (2015), and 2022-2717(IT)G (2014). The reassessments were based on transfer pricing adjustments under paragraphs 247(2)(a) and (c) of the Income Tax Act.

Cameco brought a motion challenging the Crown’s Replies on the basis that they failed to set out the specific arm’s length prices and terms that differed from those used in Cameco’s uranium contracts with its Swiss subsidiary, CEL. This omission, Cameco argued, violated prior court rulings from earlier Cameco litigation regarding taxation years 2003, 2005, and 2006, including 2010 TCC 636, 2011 TCC 356, and 2015 FCA 143.

Cameco sought several remedies: an order striking out the Replies or certain paragraphs; precluding the Crown from contesting that the terms were at arm’s length; or, alternatively, requiring the Crown to amend its pleadings to specify arm’s length terms, prices, and conditions. Cameco also pursued issue estoppel to prevent relitigation of facts found in the earlier decisions.

Policy terms and clauses at issue

The dispute centred on transfer pricing provisions under paragraphs 247(2)(a) and (c) of the Income Tax Act, which allow adjustments where the terms or prices of transactions between related parties differ from those that would have occurred between parties dealing at arm’s length.

The Crown’s Replies included assumptions such as that “the Appellant sold uranium to CEL at prices that were below arm’s length prices in the Years in Issue” (para. 14.86) and that “the terms and conditions of the renegotiated agreements were not made at arm’s length” (para. 14.78). However, the Court noted that these assumptions lacked specificity, contrary to prior rulings which required the Crown to clearly identify how the terms and prices differed.

Outcome and ruling

The Court rejected Cameco’s motion to strike the Replies. Although it found that the Crown’s pleadings were vague, it accepted that the Crown had provided, in response to a demand for particulars, arm’s length uranium prices it relied upon—specifically the “Cameco Group average realized price” listed in paragraph 14.44 of the Reply (e.g., US$37.47 in 2007). Since this information formed part of the pleadings, the Court concluded that there was no abuse of process.

The Court also declined to apply issue estoppel. Although the prior decisions were final and involved the same parties, the present appeals concerned new taxation years and involved renegotiated or new uranium purchase contracts, thereby distinguishing them from the earlier litigation.

Additionally, Cameco raised three further issues: a $16 million excess in penalties, a $3 million refund shortfall, and the Crown’s failure to reassess the 2014 year consistent with concessions in its Reply. The Court found unresolved legal and factual disputes in all three, and declined to issue judgment under Rule 170.1.

Next steps

Justice MacPhee ordered the Crown to provide, by June 30, 2025, the following as part of its response to the demand for particulars:

• The arm’s length price relied upon (in dollars per pound) for each of the 12 agreements referenced in the 2007–2013, 2014, and 2015 Replies.

• The differing terms and conditions from what would have been agreed upon between arm’s length parties.

• A calculation of the income adjustments and reassessed tax resulting from those prices.

The Court also established a litigation timetable with document disclosure by September 10, 2025, completion of discovery by January 10, 2026, and responses to undertakings by April 10, 2026. By June 10, 2026, parties must either request a hearing, schedule a settlement conference, or indicate an expected settlement. Costs were left in the cause.

The Court found that both parties had partial success. No specific monetary award, damages, or final cost orders were made in this decision.