Withholding Its Assessment: The Federal Court Of Appeal Clarifies The Narrow Limits On Judicial Review In The Tax Context

The Federal Court of Appeal has issued its decision in The Minister of National Revenue and Canada Revenue Agency v. JP Morgan Asset Management (Canada) Inc., 2013 FCA 250. The case concerns the scope of administrative law remedies and the essence of an administrative "decision."

Background

The case arose out of a "withholding tax" assessment by the Minister of National Revenue of JP Morgan (Canada) Inc. ("JP Morgan") for fees paid by JP Morgan to a private Hong Kong corporation, its client. JP Morgan challenged the assessment by applying to the Federal Court for judicial review. The Crown moved to strike JP Morgan's application. It was unsuccessful before the Prothonotary and the Federal Court. The Crown appealed to the Federal Court of Appeal.

The Federal Court of Appeal observed that the Minister is a "federal board, commission or other tribunal" within the meaning of the Federal Courts Rules, and in appropriate circumstances, her decisions can be judicially reviewed. Nevertheless, the Court bemoaned the "flow of unmeritorious applications for judicial review in the area of tax" which are struck out "time and time again."

Indeed, the Federal Court is precluded from dealing with matters that can be appealed to the Tax Court by virtue of Rule 18.5 of the Federal Courts Rules. Further, the application for judicial review, to be valid, must state a ground of review cognizable at law, such as jurisdiction, procedural unacceptability, substantive unacceptability or abuse of discretion.

The Court noted that all claims of abuse of ministerial discretion in the tax context to date have been struck, because in this context the Minister has no discretion to exercise, and thus to abuse. Where the facts indicate a tax liability, the Minister must issue an assessment.

A further principle that restricts the availability of judicial review of Ministerial decisions is that a judicial review brought in the face of adequate, effective recourse elsewhere cannot be entertained. This principle is justified by the perception of judicial review remedies as remedies of last resort, as well as the unwillingness of the Courts to upset specialized schemes set up by Parliament for the appellate review of administrative decisions.

Finally, the Federal Court will strike out a notice of application for judicial review if it cannot grant the relief sought. For example, in the tax context, the Court cannot vary, set aside or vacate tax assessment.

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