Executive Summary: Key Legal and Evidentiary Issues

• The parties resolved appeals of reassessments for the 2013 to 2017 taxation years by consent to judgment, which specified small business deduction amounts for 2013 and 2014.

• After judgment was issued, the parties discovered that the small business deduction amounts in the consent were wrong and prepared an amended consent to judgment with corrected figures.

• The Respondent applied under subsection 172(1) of the Tax Court of Canada Rules (General Procedure) to amend the judgment to reflect the amended consent, and the Appellant consented to this application.

• The Respondent accepted that paragraph 172(1)(a) did not apply because the error was made by the parties, not by the Court.

• Justice Cook held that by implementing the consent to judgment, the Court had adjudicated the Appellant’s entitlement to the small business deduction and was functus officio on that matter.

• Justice Cook concluded that paragraph 172(1)(b) did not apply and dismissed the Respondent’s application without costs.

Background and facts of the case

Appeals of reassessments made under the Income Tax Act for Oram’s Enterprises Limited’s 2013 to 2017 taxation years were scheduled to be heard in January 2025 at the Tax Court of Canada. Before the hearing took place, the parties reached an agreement resolving the appeals and filed a consent to judgment covering all of the taxation years in issue. On January 27, 2025, Justice Cook rendered a judgment giving effect to the consent to judgment. For the 2013 and 2014 taxation years, the judgment allowed the appeals and referred the reassessments back to the Minister of National Revenue for reconsideration and reassessment in accordance with the consent to judgment. Under that consent, the Appellant was allowed a small business deduction of $34,035 for the 2013 taxation year and $12,086 for the 2014 taxation year.

Error in the small business deduction amounts and attempted correction

After the judgment was issued, the parties discovered that the small business deduction amounts stated in the consent to judgment were wrong. They submitted that the amounts should have been $32,701 for the 2013 taxation year and $28,349 for the 2014 taxation year, instead of the figures set out in the original consent and judgment. To remedy this error, the parties prepared an amended consent to judgment that contained the corrected small business deduction amounts for those two years.

The Respondent’s application under Rule 172(1)

The Respondent brought an application under subsection 172(1) of the Tax Court of Canada Rules (General Procedure) for an amendment to Justice Cook’s judgment so that it would reflect the amended consent to judgment with the corrected small business deduction amounts. The Appellant consented to this application. Subsection 172(1) provides that a judgment that contains an error arising from an accidental slip or omission, or that requires amendment in any matter on which the Court did not adjudicate, may be amended by the Court on application or on its own motion. The Respondent accepted that paragraph 172(1)(a) did not apply in this case because that paragraph has been interpreted as applying to errors made by the Court, not errors made by the parties. The reasons note that, in this instance, it was the parties—not the Court—who made the error in the small business deduction amounts.

Arguments on whether the Court had adjudicated the issue

The Respondent relied on paragraph 172(1)(b) and argued that Justice Cook had not adjudicated on the Appellant’s small business deduction entitlement because there was no trial, no evidence was heard, and the Court did not turn its mind to the issue. On that basis, the Respondent submitted that the Court could amend the judgment under paragraph 172(1)(b). Justice Cook began by noting that the use of Rule 172 to amend a judgment is an exception to the principle of finality of judgments and should not be exercised lightly. The reasons refer to previous authority emphasizing that finality of decisions and efficiency of the administration of justice are fundamental concerns reflected in the Tax Court of Canada Act and in Rule 172.

Court’s interpretation of adjudication and functus officio

Justice Cook considered the meaning of “adjudicate,” referring to prior case law and a dictionary definition indicating that to adjudicate means to decide judicially and to determine finally. He observed that his earlier judgment implemented the parties’ consent to judgment and that this consent specifically set out the Appellant’s entitlement to the small business deduction for the 2013 and 2014 taxation years. By giving judgment in those terms, he used his judicial authority to decide the Appellant’s entitlement to the small business deduction. The reasons state that it does not matter whether a judgment is rendered after conducting a full trial or in response to a consent to judgment, because in either case the judgment has the same force and effect. Having entered the judgment, the Court had adjudicated on the Appellant’s entitlement for the purposes of paragraph 172(1)(b), and Justice Cook concluded that he was functus officio in respect of that matter.

Scope of paragraph 172(1)(b) and outcome of the application

Justice Cook explained that paragraph 172(1)(b) is directed at matters that were overlooked by the Court in its judgment. He found that the Appellant’s entitlement to the small business deduction was not overlooked in the judgment because it was expressly addressed through the consent to judgment and the resulting order. The reasons also note that the Respondent’s interpretation would conflict with the desirability of finality in litigation and would provide a way to avoid an important limitation in the application of paragraph 172(1)(a). In light of this analysis, Justice Cook held that paragraph 172(1)(b) did not apply. He dismissed the Respondent’s application under subsection 172(1) of the Tax Court of Canada Rules (General Procedure) without costs.