As a partner at Counter Tax Litigators, a boutique tax-dispute firm in Toronto, Natalie Worsfold has helped plenty of corporate clients in legal battles against the Canada Revenue Agency. In most cases, the client wants to contest its tax bill, hoping to overturn what it considers an incorrect assessment. But taking the government to court can cost a lot of time and money. And so, before embarking on the long road of litigation, clients pose a similar set of questions to their legal team: How likely is victory? How much of the assessment would the tax court overturn? What will the dispute cost in legal fees? Historically, lawyers have not answered such queries as concretely as clients would like.
Worsfold thinks the profession can do better. Over the past few years, she’s taken professional courses in decision science, a discipline that helps individuals and organizations interpret complex data in order to make smarter choices. Relying on that training, she has spearheaded an initiative at Counter Tax Litigators called CEO Reports. When a client is considering litigation, the firm can create a series of documents that, in part, predict what’s likely to happen if the case goes to court and help the client make the right strategic choices along the way. The primary aim, says Worsfold, is to “marry the rigour of a scientific approach with the art of litigation.”
Peter Aprile and Natalie Worsfold of Counter Tax Litigators are pictured here in the Benchers’ Reception Room, which the governors of the Law Society of Ontario use for informal meetings.
A portrait of William Dummer Powell (1755–1834), former chief justice of Upper Canada, hangs just over the shoulders of our winners. And above the fireplace is a portrait of Edward Blake (1833–1912), former treasurer of the Law Society.
When the firm begins work on a set of reports, the first step is to look for similar tax files on the public record. But that approach has its limits. “Most cases settle and never reach the public,” says Peter Aprile, the firm’s founder. “If you followed that data alone, you would likely go down the wrong path.” The team fills in the gaps with its own knowledge of how tax cases often settle. And, ultimately, the firm uses an in-house analytics tool to crunch the data.
The end result is a series of plain-language reports that the firm can present to the client. One report outlines the risks of litigation. Another describes the legal strategy that the firm would deploy. And, perhaps most importantly, one report lays out the most probable outcome in dollars if the client pursues the case.
Imagine, for instance, that a client wants to contest $4.4 million on its tax bill. After analyzing the case, Counter Tax Litigators might determine that there’s a 36-percent chance of a reduction between $2.2 million and $2.9 million. The probability of a better result might sit at 24 percent and a worse result at 40 percent. The report would outline that range of possible outcomes. The future remains uncertain, but the client can now make an informed decision about whether to proceed.
Having launched CEO Reports about a year ago, Worsfold has seen signs of success. “Clients have so much more confidence and clarity,” she says. “They can focus on their business because they know there’s a strategy in place.”