{"id":192,"date":"2025-03-04T19:38:19","date_gmt":"2025-03-04T19:38:19","guid":{"rendered":"https:\/\/toensurecompliance.ca\/?p=192"},"modified":"2025-03-04T19:38:19","modified_gmt":"2025-03-04T19:38:19","slug":"judicial-review","status":"publish","type":"post","link":"https:\/\/toensurecompliance.ca\/?p=192","title":{"rendered":"Judicial review"},"content":{"rendered":"\n

A “<\/em>New“<\/em> Way To Challenge Decisions of the Minister of National Revenue? <\/strong><\/p>\n\n\n\n

This article by<\/em> Carman R. McNary, Partner in the Tax Department with the Edmonton Office of Fraser Milner Casgrain LLP, first appeared in CCH’s Federal Tax Practice News newsletter No. 03 dated June 2009.<\/strong><\/em><\/p>\n\n\n\n

Decision Time: Judicial Review of Actions of the Minister of National Revenue<\/strong><\/p>\n\n\n\n

The evolution of tax dispute resolution procedures continues. Recent court decisions support an alternative to the traditional objection-then-appeal procedure. It is perhaps too early to predict a rising wave of judicial review applications, but the Supreme Court of Canada has opened a door and taxpayers may therefore want to consider when, and how, such an alternative remedy may be appropriate.<\/p>\n\n\n\n

The question of how to challenge tax assessments or other decisions most effectively has existed for as long as there has been more than one tribunal or court with the jurisdiction to resolve tax disputes. Currently, the key tribunal is, of course, the Tax Court of Canada, which has “<\/em>exclusive original jurisdiction to hear and determine references and appeals to the Court on matters arising under various taxing statutes including the Income Tax Act<\/em> and the Excise Tax Act<\/em>“<\/em>.Note1<\/a>. If that exclusive jurisdiction were the only avenue of relief, then tax dispute resolution would, perhaps, be relatively uncomplicated, but Canada’s court system is not so simple.<\/p>\n\n\n\n

For example, a taxpayer may challenge certain Canada Revenue Agency (“<\/em>CRA“<\/em>) enforcement and investigation actions in the appropriate provincial criminal courts. Or a taxpayer may challenge certain collections actions in the provincial courts of superior jurisdiction. Or a taxpayer may challenge assertions of priorities under bankruptcy legislation. Other examples exist.<\/p>\n\n\n\n

Additionally, at least two different types of application can be made to the Federal Court of Canada in respect of tax issues. First, the Federal Court has  “<\/em>exclusive jurisdiction … to issue an injunction, writ of certiorari<\/em>, writ of prohibition, writ of mandamus<\/em> or writ of quo warranto<\/em>, or grant declaratory relief against any federal board, commission or other tribunal“<\/em> Note2<\/a>. A “<\/em>federal board, commission or tribunal“<\/em> includes the Minister of National Revenue (the “<\/em>Minister“<\/em>). The Federal Court has, at least on its face, jurisdiction to issue relief on an application for judicial review of a decision of the Minister.<\/p>\n\n\n\n

Second, an application for judicial review in respect of “<\/em>a decision or an order of a federal board, commission or other tribunal“<\/em> may also be made, and pursuant to this provision, the Federal Court may potentially order the Minister to “<\/em>do any act or thing that it has unlawfully failed or refused to do or has unreasonably delayed in doing“<\/em>, or can “<\/em>declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding“<\/em> of the Minister. Note3<\/a>.<\/p>\n\n\n\n

These provisions are limited, however, by the clear direction that, despite sections 18 and 18.1 of the Federal Courts Act<\/em>, “<\/em>… if an Act of Parliament expressly provides for an appeal to … the Tax Court of Canada … from a decision or an order … that decision or order is not, to the extent that it may be so appealed, subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with, except in accordance with that Act”. Note4<\/a>.<\/p>\n\n\n\n

This restriction is interpreted by the Minister as a prohibition on all challenges in the Federal Court of the Minister’s decisions to assess or reassess. In fact, the Minister has sought, with some success, to have certain judicial review applications dismissed. Accordingly, tax professionals and advisors have focused on preparing and bringing appeals to the Tax Court in order to attack assessments or reassessments. However, the powers of the Tax Court are themselves limited. The Income Tax Act <\/em>Note5<\/a>.(the “<\/em>ITA“<\/em>) deems assessments to be “<\/em>valid“<\/em> unless shown to be otherwise Note6<\/a>. Further, the powers of the Tax Court on appeal are restricted: essentially, the Tax Court may set aside an assessment on the basis of findings of fact or errors in the parties’ interpretations of the relevant provisions of the ITA. The function of the Tax Court is to arrive at the correct tax assessment; the Tax Court will not review the correctness or reasonableness of the Minister’s discretionary decisions. Note7<\/a>.<\/p>\n\n\n\n

The contours of the jurisdictions of the Federal Court and the Tax Court result in a gap-where lies the authority to review and perhaps direct the Minister in respect of his activities leading to an assessment or reassessment? Such a review authority might, and likely would, go beyond the appeal powers and rest perhaps on the basis of the rules of natural justice, or upon potential or real abuse. The Tax Court lacks the jurisdiction to direct a “<\/em>fair“<\/em> result or to deal with situations of perceived or real abuse on the part of the Minister. One would generally hope that such cases would be rare. However, tax professionals are all too familiar with the many instances where the Tax Court has made specific findings of fact related to improper CRA conduct, but then grudgingly noted that the Tax Court lacked the jurisdiction to impose any sanction.<\/p>\n\n\n\n

This may be changing. In Addison & Leyen Ltd. v. Canada<\/em>, Note8<\/a>. the Supreme Court of Canada may have opened the door to such review authority in the Federal Court. In Addison<\/em>, the taxpayer had applied for judicial review of the Minister’s assessments, alleging delay, unfairness, and abuse of process. The Supreme Court ruled in favour of the Minister, but, importantly, stated that,<\/p>\n\n\n\n

It is not disputed that the Minister belongs to the class of persons and entities that fall within the Federal Court’s jurisdiction under section 18.5. Judicial review is available, providing the matter is not otherwise appealable. It is also available to control abuses of power, including abusive delay. Fact-specific remedies may be crafted to address the wrongs or problems raised by a particular case Note9<\/a>.<\/strong><\/p>\n\n\n\n

Had the Supreme Court stopped at simply saying that judicial review is available providing that the matter is not otherwise appealable, these issues would be much more difficult. Arguably, all assessments and reassessments are appealable; jurisdiction would remain only in the purview of the Tax Court. The argument for judicial review in the Federal Court would then turn on whether or not a review could proceed on the basis that the Tax Court did not have the jurisdiction to consider the issues raised in the appeal<\/strong> (i.e., the Tax Court was limited to looking only at issues of interpretation of the ITA itself, or applying the ITA to the facts of the case).<\/p>\n\n\n\n

However, by specifically noting that the Federal Court retains the power to control abuses of power, including abusive delay, the Supreme Court has made it abundantly clear that judicial review is available at least in respect of those cases where abuse can be proven.<\/strong><\/p>\n\n\n\n

Such circumstances may exist in a case currently before the Federal Court. Chrysler Canada Inc. has applied to the Federal Court for “<\/em>judicial review of acts or proceedings, including administrative action of the Canada Revenue Agency … as directed by the Minister of National Revenue … including persons acting on his behalf“<\/em>. In that case, in 2002 and 2004 the CRA had provided letters to Chrysler Canada regarding proposed transfer pricing adjustments. The letters were also intended to enable Chrysler Canada and the other party to the relevant transactions to avail themselves of their rights under the Canada-U.S. Tax Treaty (the “<\/em>Treaty“<\/em>). Chrysler Canada relied on the letters and notified the U.S. Internal Revenue Service of the proposed adjustments. Later, in 2005, the CRA reassessed Chrysler Canada on entirely different transfer pricing adjustments, the result of which was to substantially increase Chrysler Canada’s taxable income in Canada. Because of a time delay, Chrysler Canada was not able to avail itself of rights under the Treaty and would be subject to double taxation.<\/p>\n\n\n\n

In its judicial review application, Chrysler Canada alleged that “<\/em>by issuing the Reassessments with adjustments for the Transfer Pricing Transactions that are substantially inconsistent with the 2002 and 2004 letters, the Minister exercised his discretion unfairly, for an improper purpose, and based upon irrelevant considerations inconsistent with established policies.“<\/em> Note10<\/a>.<\/p>\n\n\n\n

The Crown brought a motion to strike out the Notice of Application. Relying on the Addison<\/em> decision, a prothonotary of the Federal Court dismissed the Crown’s motion, finding that “<\/em>it is not the reassessments which are central to the judicial review. Rather, it is the alleged impropriety on the part of the Minister <\/strong>in relation to the Transfer Pricing Transactions which flows from the improper, unfair and discriminatory exercise of the discretion to proceed with reassessments which are alleged to amount to double taxation“<\/em>.<\/p>\n\n\n\n

The decision was appealed to a Justice of the Federal Court and was upheld. The review application will proceed. Whether, at the end of the day, the evidence supports a finding that the allegations have been made out, and whether relief will be granted in respect of such findings, remains to be seen. But it seems relatively clear that, at the very least, the Federal Court is willing to conduct the necessary review to ensure that Ministerial abuses are controlled.<\/strong><\/p>\n\n\n\n

This is a positive development. As noted above, it is hoped that cases where direct abuse, or abusive delay can be proven against CRA officials will be few in number. However, some mechanism to control those abuses that do arise must exist. Such authority does not currently exist within the appeal procedures of the Tax Court. It is therefore helpful to taxpayers who are concerned with delays and other prejudicial actions that there is this second avenue to attack Ministerial decisions.<\/strong><\/p>\n\n\n\n

And, in the bigger picture, it is to be hoped that these cases also support a move to consolidate this jurisdiction in the Tax Court of Canada by amending the Tax Court of Canada Act<\/em> to expressly provide for such judicial review powers, in terms broadly equivalent to those currently contained in sections 18 and 18.1 of the Federal Courts Act<\/em>. Such an expansion of the jurisdiction of the Tax Court would be an excellent step forward. That Court has the expertise and experience to properly exercise the judicial review function, and consolidation would simplify jurisdiction, clarify process and ensure that one court is dealing with all matters associated with assessments and reassessments.<\/p>\n\n\n\n

<\/a>Notes:<\/strong><\/p>\n\n\n\n

1.Tax Court of Canada Act<\/em>, R.S.C. 1985, c. T-2 (as amended) at subsection 12(1); Minister of National Revenue v. Parsons<\/em>, 84 DTC 6345 (FCA).<\/p>\n\n\n\n

2.Federal Courts Act<\/em>, R.S.C. 1985, c. F-7 (as amended) at section 18.<\/p>\n\n\n\n

3.Ibid.<\/em>, at section 18.1.<\/p>\n\n\n\n

4.Ibid.<\/em>, at section 18.5.<\/p>\n\n\n\n

5.R.S.C. 1985, c. 1 (5th Supp.).<\/p>\n\n\n\n

6.Ibid.<\/em>, at subsection 152(8).<\/p>\n\n\n\n

7.A.G. (Canada) v. Buchanan<\/em>, 2002 DTC 7397 (FCA).<\/p>\n\n\n\n

8.2007 DTC 5365 (SCC) (“Addison”<\/em>).<\/p>\n\n\n\n

9.Ibid.<\/em>, at para. 8.<\/p>\n\n\n\n

10.Chrysler Canada Inc. v. Canada<\/em>, 2008 DTC 6452 at paras. 3-5.<\/p>\n","protected":false},"excerpt":{"rendered":"

A “New“ Way To Challenge Decisions of the Minister of National Revenue?  This article by Carman R. McNary, Partner in the Tax Department with the Edmonton Office of Fraser Milner Casgrain LLP, first appeared in CCH’s Federal Tax Practice News newsletter No. 03 dated June 2009. Decision Time: Judicial Review of Actions of the Minister of National Revenue The […]<\/p>\n","protected":false},"author":1,"featured_media":119,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-192","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-posts"],"_links":{"self":[{"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/posts\/192","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=192"}],"version-history":[{"count":1,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/posts\/192\/revisions"}],"predecessor-version":[{"id":193,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/posts\/192\/revisions\/193"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=\/wp\/v2\/media\/119"}],"wp:attachment":[{"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=192"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=192"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/toensurecompliance.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=192"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}