Executive summary: key legal and evidentiary issues

• The Theta King Appellants sought to unilaterally designate the Hawreluk appeal as a lead case under Rule 146.1(2) of the Tax Court of Canada Rules, which the Court dismissed.

• Interpretation of "each party" in Rule 146.1(3) was central, with the Court finding the term unambiguously includes both appellants and respondents, rejecting the Appellants' narrower reading.

• Evidence suggested a deliberate strategy to withhold related appeals until after Hawreluk was set down for trial, creating unfairness to the respondent.

• Mr. Hawreluk was found to be a problematic sole lead appellant due to his limited knowledge of the underlying foreign exchange trading strategy.

• Differing burdens of proof on the General Anti-Avoidance Rule (GAAR) between Hawreluk and the Theta King Appeals made the proposed lead case designation inappropriate.

• The Hawreluk Respondent's request for party status in the Theta King Motion was denied, though relief from the implied undertaking rule was granted to allow use of Hawreluk discovery evidence.

The underlying dispute and parties involved

Wanda Opheim and 20 other individuals, collectively referred to as the Theta King Appellants, along with David Hawreluk, were all involved in a series of foreign exchange (forex) transactions developed by Theta King Inc. Red Jacket Capital distributed and sold the contracts, while Kootenay Commercial Lending Trust provided short-term loans to the investors. Theta King's parent company was Midnight Integrated Financial Inc. The investors contracted with Theta King using funds loaned by Kootenay and placed bets on the movement of the Canadian dollar against the US dollar over 30-day periods. Each contract was valued at $800,000, with the Kootenay loan covering $700,000 of that amount. If the investor's bet was correct, they repaid the loan with interest and paid 85% of the gain on the contract. If the investor lost, the Kootenay loan, being non-recourse, did not need to be repaid, though the investor could still lose $100,000 of their own capital. Contracts came in standard, modified, and volatility forms affecting payout thresholds.

The CRA reassessments and GAAR

The Canada Revenue Agency reassessed both Hawreluk and the Theta King Appellants on the basis that the arrangement constituted an unregistered tax shelter, thereby precluding tax deductions. Forgiveness amounts were also assessed as income inclusions that fell outside certain debt forgiveness rules relied upon by the taxpayers. The CRA did not invoke the General Anti-Avoidance Rule (GAAR) under section 245 of the Income Tax Act in assessing Mr. Hawreluk, though the respondent later included section 245 as a ground relied on in its reply to the notice of appeal. In contrast, the GAAR was invoked by the CRA in assessing all of the Theta King Appellants, except for those whose tax years were statute barred when assessed, creating a significant difference in the burden of proof between the two sets of cases.

The preliminary motion on participation and implied undertaking (2026 TCC 21)

Before the lead case motion was heard, the Hawreluk Respondent (the Crown in its capacity as respondent in the Hawreluk appeal) sought to participate as a party in the Theta King Motion. Justice Ezri, in a decision dated January 30, 2026, declined to grant the Proposed Participant party status. The Court found that the Theta King Respondent and the Hawreluk Respondent were one and the same person — His Majesty the King — and that the Theta King Respondent could adequately represent the interests at stake. Drawing on intervention principles from Rule 28 of the Tax Court Rules and Federal Court jurisprudence, including the Rothmans Benson & Hedges factors, the Court concluded that there was no absence of other reasonable means to raise the Proposed Participant's concerns, and that allowing dual representation would blur the line between the two proceedings prematurely. However, the Court did grant the respondent relief from the implied undertaking rule, permitting the use of documentary and oral discovery evidence obtained in the Hawreluk proceeding for the purposes of the Theta King Motion.

The lead case motion and interpretation of Rule 146.1 (2026 TCC 31)

The principal motion, heard on February 10, 2026, concerned the Theta King Appellants' request to designate the Hawreluk appeal as the sole lead case under Rule 146.1(2). Both parties approached the interpretation of the Rule using the text, context, and purpose (TCP) framework. The Appellants argued that the word "party" in subrule (3) referred only to appellants and not the respondent, and that an appellant's filing of Form 146.1 would also bind the Crown. Justice Ezri rejected this interpretation, finding the text clear and unambiguous in both English and French. The Court conducted an extensive contextual analysis of how "party" is used throughout the Tax Court of Canada Act and its Rules, concluding that the term almost invariably refers to both appellants and respondents equally. The Court also rejected the analogy to class proceedings legislation, noting that Rule 146.1 is not class proceedings legislation and was never advertised as such, and that it does not expressly or by implication bind unwilling parties to lead cases.

Interests of justice and strategic timing concerns

Even assuming the Rule might permit the Court to exercise its discretion to designate a lead case, Justice Ezri found the interests of justice were not served by the Appellants' request for four reasons. First, the timing of the request indicated an effort to gain a strategic or tactical advantage; evidence showed that 16 of the 21 Theta King Appeals were filed on August 1, 2025, less than two months after the Court's June 3, 2025 scheduling order setting down Hawreluk for trial, and that at least 12 of those appeals could have been filed earlier, with the Appellants providing no evidence to explain the delay. Second, Mr. Hawreluk was a problematic sole lead appellant because his discovery evidence revealed he did not understand the mechanics of the trades, could not find the presentation emailed to him by promoters, did not understand the relationships between the parties, made no notes of his discussions, and knew nothing about how or why contract sizes, pricing, or maturity dates were set — while several Theta King Appellants, including the founder and CEO of Red Jacket, the co-founder of Red Jacket, and individuals who worked for Midnight or the law firm Miller Thomson, appeared to be far more knowledgeable. Third, the Appellants made no effort to negotiate a lead case agreement with the respondent, bypassing the collaborative approach that the Court considers one of its most strongly fostered policy imperatives. Fourth, the different burden of proof on the GAAR between Hawreluk and the Theta King Appeals — with the respondent more likely bearing the onus of proving GAAR facts in Hawreluk, while the Appellants were more likely to bear the onus of disproving those same facts in the Theta King cases — made Hawreluk a poor fit as the sole representative case.

The ruling and outcome

Justice Ezri dismissed the Appellants' motion in its entirety. The respondent — His Majesty the King — was entitled to an order for costs. If the parties could not agree on costs, the respondent was given until March 27, 2026 to provide up to three pages of submissions on costs and, if it wished, a one-page bill of costs. The Appellants were given until April 17, 2026 to file up to four pages on costs and, if they wished, a one-page bill of costs. The respondent was given until May 1 to file a one-page reply and, if it wished, a one-page amended bill of costs. No exact monetary amount for costs was specified in the decision.