The City brought a motion in the Tax Court Appeal to be added as an intervenor so that it could (i) attend every discovery examination; (ii) question witnesses at the hearing of the Tax Court appeal; and (iii) make representations at the hearing. (Para. 33) The Tax Court could make such an order under r. 28 of the General Procedure rules if the applicant (a) has an interest in the proceeding, (b) might be prejudiced by the judgement, or (c) is connected by the same legal question, (as might be two former spouses claiming a child tax credit for the same child.)
Justice Jorre refused the City's request. He gave reasons why the City failed each of the three conditions for becoming an intervenor. But it seems the essence of his decision was that: "given the appellant's Superior Court action against the City, there is too great a risk that the City might prolong and unduly complicate the hearing of the appeal." (Para. 34, my translation from French.)
The City couldn't show a tax-related reason for being involved in the appeal. It wasn't subject of a tax assessment. (Para. 7) (Cities are tax-exempt.) Its reason was that it had a right to protect its dignity and honor. (Para.8.) Justice Jorre probably guessed that the real reason was to get evidence and admissions for its defence of Mr. Kerouac's civil lawsuit.
You don't necessarily have to be under assessment to take part in someone else's tax case. In Weyerhaeuser Company Limited v. The Queen, (2008 TCC, Beaubier), the province of British Columbia was allowed to intervene in favour of Weyerhaeuser "to minimize any possible double taxation on the Appellant, the result of which might affect its operations and income in British Columbia, and thereby adversely affect British Columbia both respecting tax and the effect on business operations of the Appellant and others in British Columbia." (Para. 6.) But you can't use the rules to help your civil lawsuit, as the City of Larouche tried to do here.
See Kérouac c. La Reine, (2013 TCC, Jorre)