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.”


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.

Conversely, there are areas where judicial review may potentially be available in tax matters. These include discretionary Ministerial decisions under the fairness provisions, assessments that are purely discretionary and conduct during collection matters that is not acceptable o defensible. For instance, aggressive methods of investigation against the members of a particular political party would be judicially reviewable. The list is not exhaustive, and may be expanded on a case-by-case basis, with the above principles in mind.

In the case at hand, the Federal Court of Appeal found three reasons to strike out JP Morgan’s notice of application. Firstly, the Court was unaware of any authority that the Minister’s alleged failure to follow her own policies could constitute an abuse of discretion. Secondly, because the Tax Court could consider the same question on appeal, the application for judicial review was barred by Rule 18.5 of the Federal Courts Rules. Finally, the Federal Court cannot set aside tax assessments – only the Tax Court has the power to grant this relief.

The appeal was therefore allowed, and JP Morgan’s application for judicial review was dismissed.

Significance of the Decision

The decision clarifies the principles of judicial review of administrative action. It restates the principles of the availability of judicial review, the nature of decisions that can be reviewed and the remedies available. Its primary significance will be for tax practitioners, who have obtained further guidance as to the (very narrow) grounds upon which a Ministerial decision in the tax context can be judicially reviewed. The broader impact of this decision is in its restatement of general principles concerning judicial review of Ministerial action, which will be of interest to the practitioners of administrative law.



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