The Canada Revenue Agency has been ordered to pay nearly $10,000 in legal costs after a federal court ruled it provided insufficient reasoning for refusing to refund nearly $880,000 in collected GST to a national financial firm.
The order was imposed by Justice Danielle Ferron at the conclusion of a judicial review of a CRA officer’s decision in December 2025. The decision said the CRA would need to pay $9,500 in legal costs to Hillcore Financial, an investment firm with locations in Toronto, Calgary, Edmonton, and Vancouver.
The dispute between Hillcore and the CRA dates back to 2017, when the tax authority claimed the company owed $1.7 million in unpaid GST and subsequently garnished funds from the firm amounting to $879,093.36, according to the decision published last month.
Garnishment is a legal mechanism the CRA can use to seize funds from an employer or bank that are due to a taxpayer. These funds are then directed toward the payment of unpaid tax obligations.
The CRA cancelled its GST reassessment in mid-2020 but did not return the collected funds, according to court documents. Instead, the agency said it would use the more than $879,000 to put toward Hillcore’s allegedly unpaid income tax. The CRA alleged Hillcore owed in excess of $40 million for the 2012 to 2017 tax years.
The company was not aware of the change until it received new income tax reassessments. It was then that the firm discovered the balance on its GST account had been set to $0.
Hillcore registered a complaint in 2023, and requested a refund of the money. The company received a call from a CRA collections officer in November of that year in which it was told the CRA would not be returning the seized funds.
The company filed for a judicial review of the case after receiving the phone call, the judge noted in her ruling.
It was then up to the court to decide if the collections officer had the authority to deny the refund. The ruling noted that the officer failed to pass Hillcore’s request to a superior and did not consider the arguments contained in Hillcore’s October 2023 letter, but merely “confirmed the basis for the original set-off and communicated this to the applicant.”
The judge also said the collection officer’s authority to approve or reject the refund was “unclear.”
During cross-examination, the collections officer said he occasionally requires different authorizations to perform specific actions concerning refunds. He then later said he did not believe he could have sanctioned a refund without his management’s consent; however, he did not communicate that to Hillcore.
“This alone constitutes a breach of procedural fairness, if not a decision, because if he did not have the authority to deal with this matter, it prevented any genuine consideration of the Applicant’s request,” the judge said.
Ferron was also critical of the way the phone call was handled, saying the decision relayed to the company by the officer “provided minimal reasoning and no supporting details.”
“It was clearly not justified, transparent nor intelligible,” she wrote. “The Court therefore finds that the decision is unreasonable.”
Ferron imposed court costs of $9,500 on the CRA for its handling of the matter but said she was “not convinced” the agency should also be ordered to refund the GST money. She returned Hillcore’s concern to the tax agency for “redetermination” on the refund.
The CRA said it is unable to comment on any legal cases involving tax payers and attempts to reach Hillcore for comment were unsuccessful.
