Kibalian v. The Queen (May 24, 2019 – 2019 FCA 160, Nadon, Webb, Woods (Author) JJ. A.).
Précis: The taxpayer appealed reassessments for the 2006-2010 taxation years. The Tax Court, of its own motion, awarded $7,500 in costs against the taxpayer in pre-trial proceedings and subsequently dismissed the taxpayer’s appeal (or, possibly, appeals – it is not clear from the decision) for failure to pay the outstanding costs award. The Court of Appeal found that the Tax Court violated the rules of natural justice and set aside that portion of the Tax Court order directing the payment of $7,500 in costs. The taxpayer did not seek costs in the Court of Appeal and none were awarded.
Decision: The facts underlying this appeal were not complex:
 The appellant has instituted income tax appeals in the Tax Court of Canada with respect to reassessments for the 2006 - 2010 taxation years, inclusive. In this Court, the appellant appeals from two orders issued by the Tax Court during the pre-trial process.
 The first order (the December Order), issued on December 13, 2017, required the appellant to pay an outstanding costs award in the amount of $7,500. Further, the last paragraph of the order provided:
Should the appellant not comply with this Order, the appeal will be automatically dismissed without further notice or formality and with additional costs.
 The December Order was not requested by the respondent and it does not appear as though the parties were provided an opportunity to make submissions with respect to its terms prior to its issuance.
 By way of background, the matter of outstanding costs was brought to the attention of the Tax Court by the respondent who was replying to the Court’s standard request to advise whether the appeal should be set down for hearing. In its status report, the respondent informed the Court that discoveries were not complete and that the appellant had not paid an outstanding costs award. The respondent submitted that “the appeals should not be set down for trial until a period of at least 15 days after [the discoveries are complete]” (appeal book, p. 257).
 The second order (the April Order) was issued on April 13, 2018 pursuant to a motion brought by the appellant for a stay of the Tax Court proceedings pending an appeal of the December Order. The Tax Court dismissed the motion on the ground that there was nothing to stay since the appeals were automatically dismissed when the appellant failed to pay the amount owing by the deadline of January 8, 2018.
The Court of Appeal found the December Order to have involved a denial of natural justice:
 As mentioned earlier, the December Order was issued on the Tax Court’s own initiative. The respondent did not seek this relief and no opportunity was provided for submissions regarding its terms. This was a breach of the principle of natural justice, which includes the right to be heard. The breach warrants the intervention of this Court and the last paragraph of the December Order should be set aside for this reason (The Queen v. Nunn, 2006 FCA 403, 2007 D.T.C. 5111, at para. 26).
The Court of Appeal also took the somewhat unusual step of outlining the requirements for a costs award by the Tax Court, particularly one that is punitive in nature:
 Nevertheless, I would make a brief comment on the practice of awarding costs and would refer to an excerpt from this Court’s decision in Exeter v. Canada (Attorney General), 2013 FCA 134, 445 N.R. 356 which considers the awarding of costs that have not been requested:
 The general principle is that a court may not award costs when costs were not requested: see, for example, Balogun v. Canada, 2005 FCA 350. To award costs in these circumstances would be a breach of the duty of fairness because it would subject the party against whom they are awarded to a liability when the party had had no notice or an opportunity to respond: see, for example, Nova Scotia (Minister of Community Services) v. Elliott (Guardian ad litem of) (1995), 141 N.S.R. (2d) 346 (N.S.S.C.) at para. 5.
 I would also say that a judge, when granting costs of a punitive nature, which at first glance certainly appears to be the case here, is duty bound to provide a reasonable explanation as to why such costs are being granted. Failure to provide such an explanation may well not pass muster should an appeal be taken thereof.
The appellant did not seek costs and none were awarded.