Canada (National Revenue) v. JP Morgan Asset Management (Canada) Inc.

Canada (National Revenue) v. JP Morgan Asset Management (Canada) Inc.
Court (s) Database
Federal Court of Appeal Decisions
Date
2013-10-24
Neutral citation
2013 FCA 250
File numbers
A-532-12
Notes
Reported Decision
Decision Content
Date: 20131024
Docket:
A-532-12
Citation: 2013 FCA 250
CORAM:
SHARLOW J.A.
STRATAS J.A.
NEAR J.A.
BETWEEN:
THE MINISTER OF NATIONAL REVENUE AND CANADA REVENUE AGENCY
Appellants
and
JP MORGAN ASSET MANAGEMENT (CANADA) INC.
Respondent
Heard at Toronto, Ontario, on September 18, 2013.
Judgment delivered at Ottawa, Ontario, on October 24, 2013.
REASONS FOR JUDGMENT BY: STRATAS J.A.
CONCURRED IN BY:
SHARLOW J.A.
NEAR J.A.
Date: 20131024
Docket:
A-532-12
Citation: 2013 FCA 250
CORAM:
SHARLOW J.A.
STRATAS J.A.
NEAR J.A.
BETWEEN:
THE MINISTER OF NATIONAL REVENUE AND CANADA REVENUE AGENCY
Appellants
and
JP MORGAN ASSET MANAGEMENT (CANADA) INC.
Respondent
REASONS FOR JUDGMENT
STRATAS J.A.
[1] In this appeal, the Minister of National Revenue renews her attempt to strike out the application for judicial review brought by JP Morgan Asset Management (Canada) Inc. in the Federal Court.
[2] In that application for judicial review, JP Morgan alleges that the Minister departed from an administrative policy when she assessed it for tax under Part XIII of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) for 2002, 2003 and 2004. This, JP Morgan says, was an improper exercise of discretion. The Minister counters that, in reality, JP Morgan is challenging the validity of the assessments, a matter that is within the exclusive jurisdiction of the Tax Court of Canada.
[3] Prothonotary Aalto dismissed the Minister’s motion to strike: 2012 FC 651. In his view, the application raised an independent administrative law ground of review and was properly in the Federal Court. Mandamin J. declined to quash the Prothonotary’s decision, finding no clear error on the part of the Prothonotary: 2012 FC 1366.
[4] For the reasons below, I would allow the Minister’s appeal, set aside the orders below and strike out JP Morgan’s application.
[5] JP Morgan’s application fails to state a cognizable administrative law claim. Further, in reality it is a challenge to the assessment for which recourse can be obtained only in the Tax Court. Finally, the relief being sought is the setting aside or vacating of the Minister’s assessments, a remedy the Federal Court cannot grant.
A. The basic facts
[6] JP Morgan is a Canadian corporation resident in Canada for the purposes of the Income Tax Act. It provides investment advice to Canadian clients. It also markets the selection of international stock by foreign related entities.
[7] JP Morgan’s clients pay fees to it based on the value of assets they invest. In turn, to compensate the foreign related entities for their services, JP Morgan pays them fees.
[8] The Minister has assessed JP Morgan under Part XIII of the Income Tax Act concerning the fees paid by it to JF Asset Management Limited, a private Hong Kong corporation, for all periods ending December 31, 2002 to December 31, 2008, inclusive.
[9] Part XIII applies where certain amounts are paid or credited by a resident of Canada to a person who is not a resident of Canada. The resident of Canada must withhold a tax of 25% on those amounts and if it does not do so, it is itself liable for that tax (subsections 212(1), 215(1) and 215(6)). Under subsection 227(10), the Minister “may at any time” assess the resident of Canada for those amounts.
[10] Following the assessments, JP Morgan applied to the Federal Court for judicial review. The precise nature of its application for judicial review will be considered below. It seeks the quashing of the decision of the Minister to issue assessments for the periods ending December 31, 2002 to December 31, 2004, inclusive.
[11] JP Morgan alleges that the Minister abused her discretion by issuing assessments for Part XIII tax for so many years. It says she did not consider or sufficiently consider policies that would have limited the number of years subject to assessment.
[12] The Crown moved to strike JP Morgan’s application. As mentioned, it has been unsuccessful before the Prothonotary and the Federal Court. It now appeals to this Court.
B. Relevant legislative provisions
[13] Various provisions of the Income Tax Act give the Minister the power to assess, additionally assess, or reassess tax. Also the Minister has many wide powers to administer, investigate, enforce and collect.
(1) The Minister’s regime
[14] Subsection 152(1) of the Income Tax Act sets out the Minister’s obligation to assess tax:
152. (1) The Minister shall, with all due dispatch, examine a taxpayer’s return of income for a taxation year, assess the tax for the year, the interest and penalties, if any, payable and determine
(a) the amount of refund, if any, to which the taxpayer may be
entitled by virtue of section 129, 131, 132 or 133 for the year; or
(b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3),122.51(2), 122.7(2) or (3), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year.
152. (1) Le ministre, avec diligence, examine la déclaration de revenu d’un contribuable pour une année d’imposition, fixe l’impôt pour l’année, ainsi que les intérêts et les pénalités éventuels payables et détermine :
a) le montant du remboursement éventuel auquel il a droit en vertu des articles 129, 131, 132 ou 133, pour l’année;
b) le montant d’impôt qui est réputé, par les paragraphes 120(2) ou (2.2), 122.5(3), 122.51(2), 122.7(2) ou (3), 125.4(3), 125.5(3), 127.1(1), 127.41(3) ou 210.2(3) ou (4), avoir été payé au titre de l’impôt payable par le contribuable en vertu de la présente partie pour l’année.
[15] Subsection 152(4) of the Income Tax Act empowers the Minister to assess, reassess, or additionally assess tax for a taxation year, along with any interest and penalties:
152. (4) The Minister may at any time make an assessment, reassessment or additional assessment of tax for a taxation year, interest or penalties, if any, payable under this Part by a taxpayer or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the year, except that an assessment, reassessment or additional assessment may be made after the taxpayer’s normal reassessment period in respect of the year only if: [list of exceptions omitted].
152. (4) Le ministre peut établir une cotisation, une nouvelle cotisation ou une cotisation supplémentaire concernant l’impôt pour une année d’imposition, ainsi que les intérêts ou les pénalités, qui sont payables par un contribuable en vertu de la présente partie ou donner avis par écrit qu’aucun impôt n’est payable pour l’année à toute personne qui a produit une déclaration de revenu pour une année d’imposition. Pareille cotisation ne peut être établie après l’expiration de la période normale de nouvelle cotisation applicable au contribuable pour l’année que dans les cas suivants : [le liste des exceptions est omise]
[16] Subsection 152(8) deems assessments to be binding until varied, vacated or replaced by a reassessment, notwithstanding any error, defect or omission in their making:
152. (8) An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission in the assessment or in any proceeding under this Act relating thereto.
152. (8) Sous réserve des modifications qui peuvent y être apportées ou de son annulation lors d’une opposition ou d’un appel fait en vertu de la présente partie et sous réserve d’une nouvelle cotisation, une cotisation est réputée être valide et exécutoire malgré toute erreur, tout vice de forme ou toute omission dans cette cotisation ou dans toute procédure s’y rattachant en vertu de la présente loi.
[17] The assessments issued against JP Morgan are based on certain liability provisions in Part XIII of the Income Tax Act: paragraph 212(1(a) and subsections 215(1) and 215(6).
[18] Paragraph 212(1)(a) of the Income Tax Act obligates a non-resident person, here JF Asset Management Limited, to pay a tax on certain fees received from a resident of Canada, here J.P. Morgan:
212. (1) Every non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit, to the non-resident person as, on account or in lieu of payment of, or in satisfaction of,
(a) a management or administration fee or charge;
212. (1) Toute personne non-résidente doit payer un impôt sur le revenu de 25 % sur toute somme qu’une personne résidant au Canada lui paie ou porte à son crédit, ou est réputée en vertu de la partie I lui payer ou porter à son crédit, au titre ou en paiement intégral ou partiel :
a) des honoraires ou frais de gestion ou d’administration;
The Minister alleges that the fees in issue are within the scope of this provision.
[19] Subsection 215(1) of the Income Tax Act obligates a resident of Canada, here JP Morgan, to withhold from the fees paid the tax payable under paragraph 212(1)(a) and remit it to the Crown:
215. (1) When a person pays, credits or provides, or is deemed to have paid, credited or provided, an amount on which an income tax is payable under this Part, or would be so payable if this Act were read without reference to subparagraph 94(3)(a)(viii) and to subsection 216.1(1), the person shall, notwithstanding any agreement or law to the contrary, deduct or withhold from it the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the non-resident person on account of the tax and shall submit with the remittance a statement in prescribed form.
215. (1) La personne qui verse, crédite ou fournit une somme sur laquelle un impôt sur le revenu est exigible en vertu de la présente partie, ou le serait s’il n’était pas tenu compte du sous-alinéa 94(3)a)(viii) ni du paragraphe 216.1(1), ou qui est réputée avoir versé, crédité ou fourni une telle somme, doit, malgré toute disposition contraire d’une convention ou d’une loi, en déduire ou en retenir l’impôt applicable et le remettre sans délai au receveur général au nom de la personne non-résidente, à valoir sur l’impôt, et l’accompagner d’un état selon le formulaire prescrit.
[20] The Minister alleges that JP Morgan did not withhold and remit the tax under paragraph 212(1)(a) of the Income Tax Act as it was required to do and so it is liable for the tax under subsection 215(6):
215. (6) Where a person has failed to deduct or withhold any amount as required by this section from an amount paid or credited or deemed to have been paid or credited to a non-resident person, that person is liable to pay as tax under this Part on behalf of the non-resident person the whole of the amount that should have been deducted or withheld, and is entitled to deduct or withhold from any amount paid or credited by that person to the non-resident person or otherwise recover from the non-resident person any amount paid by that person as tax under this Part on behalf thereof.
215. (6) Lorsqu’une personne a omis de déduire ou de retenir, comme l’exige le présent article, une somme sur un montant payé à une personne non-résidente ou porté à son crédit ou réputé avoir été payé à une personne non-résidente ou porté à son crédit, cette personne est tenue de verser à titre d’impôt sous le régime de la présente partie, au nom de la personne non-résidente, la totalité de la somme qui aurait dû être déduite ou retenue, et elle a le droit de déduire ou de retenir sur tout montant payé par elle à la personne non-résidente ou portée à son crédit, ou par ailleurs de recouvrer de cette personne non-résidente toute somme qu’elle a versée pour le compte de cette dernière à titre d’impôt sous le régime de la présente partie.
[21] The Minister has assessed JP Morgan for the tax under subsection 215(6) of the Income Tax Act. The Minister’s power to assess is found in subsection 227(10) of the Income Tax Act:
227. (10) The Minister may at any time assess any amount payable under
(a) subsection 227(8), 227(8.1), 227(8.2), 227(8.3) or 227(8.4) or 224(4) or 224(4.1) or section 227.1 or 235 by a person,
(b) subsection 237.1(7.4) or (7.5) or 237.3(8) by a person or partnership,
(c) subsection 227(10.2) by a person as a consequence of a failure of a non-resident person to deduct or withhold any amount, or
(d) Part XIII by a person resident in Canada,
and, where the Minister sends a notice of assessment to that person or partnership, Divisions I and J of Part I apply with any modifications that the circumstances require.
227. (10) Le ministre peut, en tout temps, établir une cotisation pour les montants suivants :
a) un montant payable par une personne en vertu des paragraphes (8), (8.1), (8.2), (8.3) ou (8.4) ou 224(4) ou (4.1) ou des articles 227.1 ou 235;
b) un montant payable par une personne ou une société de personnes en vertu des paragraphes 237.1(7.4) ou (7.5) ou 237.3(8);
c) un montant payable par une personne en vertu du paragraphe (10.2) pour défaut par une personne non-résidente d’effectuer une déduction ou une retenue;
d) un montant payable en vertu de la partie XIII par une personne qui réside au Canada.
Les sections I et J de la partie I s’appliquent, avec les modifications nécessaires, à tout avis de cotisation que le ministre envoie à la personne ou à la société de personnes.
(2) The Tax Court regime
[22] The closing words of subsection 227(10) give an assessed taxpayer the right to object to the assessment under section 165 and to appeal to the Tax Court under subsection 169(1). JP Morgan has objected to all of the assessments under section 165. If its objections are unsuccessful, JP Morgan will be able to appeal to the Tax Court under subsection 169(1). This subsection provides as follows:
169. (1) Where a taxpayer has served notice of objection to an assessment under section 165, the taxpayer may appeal to the Tax Court of Canada to have the assessment vacated or varied after either
(a) the Minister has confirmed the assessment or reassessed, or
(b) 90 days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that the Minister has vacated or confirmed the assessment or reassessed,
but no appeal under this section may be instituted after the expiration of 90 days from the day notice has been sent to the taxpayer under section 165 that the Minister has confirmed the assessment or reassessed.
169. (1) Lorsqu’un contribuable a signifié un avis d’opposition à une cotisation, prévu à l’article 165, il peut interjeter appel auprès de la Cour canadienne de l’impôt pour faire annuler ou modifier la cotisation :
a) après que le ministre a ratifié la cotisation ou procédé à une nouvelle cotisation;
b) après l’expiration des 90 jours qui suivent la signification de l’avis d’opposition sans que le ministre ait notifié au contribuable le fait qu’il a annulé ou ratifié la cotisation ou procédé à une nouvelle cotisation;
toutefois, nul appel prévu au présent article ne peut être interjeté après l’expiration des 90 jours qui suivent la date où avis a été envoyé au contribuable, en vertu de l’article 165, portant que le ministre a ratifié la cotisation ou procédé à une nouvelle cotisation.
[23] In an appeal, the Tax Court has specific powers concerning assessments:
171. (1) The Tax Court of Canada may dispose of an appeal by
(a) dismissing it; or
(b) allowing it and
(i) vacating the assessment,
(ii) varying the assessment, or
(iii) referring the assessment back to the Minister for reconsideration and reassessment.
171. (1) La Cour canadienne de l’impôt peut statuer sur un appel :
a) en le rejetant;
b) en l’admettant et en :
(i) annulant la cotisation,
(ii) modifiant la cotisation,
(iii) déférant la cotisation au ministre pour nouvel examen et nouvelle cotisation.
[24] Parliament has declared the Tax Court’s powers concerning assessments to be exclusive:
12. (1) The Court has exclusive original jurisdiction to hear and determine references and appeals to the Court on matters arising under…the Income Tax Act…when references or appeals to the Court are provided for in those Acts.
12. (1) La Cour a compétence exclusive pour entendre les renvois et les appels portés devant elle sur les questions découlant de l’application…de la Loi de l’impôt sur le revenu…dans la mesure où ces lois prévoient un droit de renvoi ou d’appel devant elle.
(Tax Court of Canada Act, R.S.C. 1985, c. T-2, subsection 12(1).)
(3) The Federal Court’s judicial review authority
[25] The Federal Court determines judicial reviews from “federal board[s], commission[s] or other tribunal[s].” The Minister is a “federal board, commission or other tribunal” and, in appropriate circumstances, her decisions can be reviewed:
2. (1) In this Act,
“federal board, commission or other tribunal” means any body, person or persons having, exercising or purporting to exercise jurisdiction or powers conferred by or under an Act of Parliament…
2. (1) Les définitions qui suivent s’appliquent à la présente loi.
« office fédéral » Conseil, bureau, commission ou autre organisme, ou personne ou groupe de personnes, ayant, exerçant ou censé exercer une compétence ou des pouvoirs prévus par une loi fédérale…
[26] When a judicial review is properly before it, the Federal Court has wide powers:
18. (1) Subject to section 28, the Federal Court has exclusive original jurisdiction
(a) to issue an injunction, writ of certiorari, writ of prohibition, writ of mandamus or writ of quo warranto, or grant declaratory relief, against any federal board, commission or other tribunal; and
(b) to hear and determine any application or other proceeding for relief in the nature of relief contemplated by paragraph (a), including any proceeding brought against the Attorney General of Canada, to obtain relief against a federal board, commission or other tribunal.
(2) The Federal Court has exclusive original jurisdiction to hear and determine every application for a writ of habeas corpus ad subjiciendum, writ of certiorari, writ of prohibition or writ of mandamus in relation to any member of the Canadian Forces serving outside Canada.
(3) The remedies provided for in subsections (1) and (2) may be obtained only on an application for judicial review made under section 18.1.
18.1. (1) An application for judicial review may be made by the Attorney General of Canada or by anyone directly affected by the matter in respect of which relief is sought.
(2) An application for judicial review in respect of a decision or an order of a federal board, commission or other tribunal shall be made within 30 days after the time the decision or order was first communicated by the federal board, commission or other tribunal to the office of the Deputy Attorney General of Canada or to the party directly affected by it, or within any further time that a judge of the Federal Court may fix or allow before or after the end of those 30 days.
(3) On an application for judicial review, the Federal Court may
(a) order a federal board, commission or other tribunal to do any act or thing it has unlawfully failed or refused to do or has unreasonably delayed in doing; or
(b) 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 of a federal board, commission or other tribunal.
(4) The Federal Court may grant relief under subsection (3) if it is satisfied that the federal board, commission or other tribunal
(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
(e) acted, or failed to act, by reason of fraud or perjured evidence; or
(f) acted in any other way that was contrary to law.
(5) If the sole ground for relief established on an application for judicial review is a defect in form or a technical irregularity, the Federal Court may
(a) refuse the relief if it finds that no substantial wrong or miscarriage of justice has occurred; and
(b) in the case of a defect in form or a technical irregularity in a decision or an order, make an order validating the decision or order, to have effect from any time and on any terms that it considers appropriate.
18. (1) Sous réserve de l’article 28, la Cour fédérale a compétence exclusive, en première instance, pour :
a) décerner une injonction, un bref de certiorari, de mandamus, de prohibition ou de quo warranto, ou pour rendre un jugement déclaratoire contre tout office fédéral;
b) connaître de toute demande de réparation de la nature visée par l’alinéa a), et notamment de toute procédure engagée contre le procureur général du Canada afin d’obtenir réparation de la part d’un office fédéral.
(2) Elle a compétence exclusive, en première instance, dans le cas des demandes suivantes visant un membre des Forces canadiennes en poste à l’étranger : bref d’habeas corpus ad subjiciendum, de certiorari, de prohibition ou de mandamus.
(3) Les recours prévus aux paragraphes (1) ou (2) sont exercés par présentation d’une demande de contrôle judiciaire.
18.1. (1) Une demande de contrôle judiciaire peut être présentée par le procureur général du Canada ou par quiconque est directement touché par l’objet de la demande.
(2) Les demandes de contrôle judiciaire sont à présenter dans les trente jours qui suivent la première communication, par l’office fédéral, de sa décision ou de son ordonnance au bureau du sous-procureur général du Canada ou à la partie concernée, ou dans le délai supplémentaire qu’un juge de la Cour fédérale peut, avant ou après l’expiration de ces trente jours, fixer ou accorder.
(3) Sur présentation d’une demande de contrôle judiciaire, la Cour fédérale peut :
a) ordonner à l’office fédéral en cause d’accomplir tout acte qu’il a illégalement omis ou refusé d’accomplir ou dont il a retardé l’exécution de manière déraisonnable;
b) déclarer nul ou illégal, ou annuler, ou infirmer et renvoyer pour jugement conformément aux instructions qu’elle estime appropriées, ou prohiber ou encore restreindre toute décision, ordonnance, procédure ou tout autre acte de l’office fédéral.
(4) Les mesures prévues au paragraphe (3) sont prises si la Cour fédérale est convaincue que l’office fédéral, selon le cas :
a) a agi sans compétence, outrepassé celle-ci ou refusé de l’exercer;
b) n’a pas observé un principe de justice naturelle ou d’équité procédurale ou toute autre procédure qu’il était légalement tenu de respecter;
c) a rendu une décision ou une ordonnance entachée d’une erreur de droit, que celle-ci soit manifeste ou non au vu du dossier;
d) a rendu une décision ou une ordonnance fondée sur une conclusion de fait erronée, tirée de façon abusive ou arbitraire ou sans tenir compte des éléments dont il dispose;
e) a agi ou omis d’agir en raison d’une fraude ou de faux témoignages;
f) a agi de toute autre façon contraire à la loi.
(5) La Cour fédérale peut rejeter toute demande de contrôle judiciaire fondée uniquement sur un vice de forme si elle estime qu’en l’occurrence le vice n’entraîne aucun dommage important ni déni de justice et, le cas échéant, valider la décision ou l’ordonnance entachée du vice et donner effet à celle-ci selon les modalités de temps et autres qu’elle estime indiquées.
(4) A limitation on the Federal Court’s judicial review authority
[27] Despite the broad powers the Federal Court has under the foregoing provisions, Parliament has forbidden it from dealing with matters that can be appealed to the Tax Court:
18.5. Despite sections 18 and 18.1, if an Act of Parliament expressly provides for an appeal to…the Tax Court of Canada…from a decision or an order of a federal board, commission or other tribunal made by or in the course of proceedings before that board, commission or tribunal, 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.
18.5. Par dérogation aux articles 18 et 18.1, lorsqu’une loi fédérale prévoit expressément qu’il peut être interjeté appel, devant… la Cour canadienne de l’impôt…d’une décision ou d’une ordonnance d’un office fédéral, rendue à tout stade des procédures, cette décision ou cette ordonnance ne peut, dans la mesure où elle est susceptible d’un tel appel, faire l’objet de contrôle, de restriction, de prohibition, d’évocation, d’annulation ni d’aucune autre intervention, sauf en conformité avec cette loi.
(Federal Courts Act, R.S.C. 1985, c. F-7, section 18.5.)
C. An introduction to the analysis
[28] Before considering this case, some opening observations are warranted.
[29] Time and time again, this Court strikes out taxpayers’ applications for judicial review. What explains the flow of unmeritorious applications for judicial review in the area of tax?
[30] One reason, perhaps, is the Supreme Court’s leading decision in this area: Canada v. Addison & Leyen Ltd., 2007 SCC 33, [2007] 2 S.C.R. 793. In the course of finding that the taxpayer’s application for judicial review must fail in that case, the Supreme Court confirmed that in appropriate circumstances “[j]udicial review is available” but “[r]eviewing courts should be very cautious in authorizing judicial review” (at paragraphs 8 and 11). Undoubtedly both propositions are correct on administrative law principles. However, in its brief reasons, the Supreme Court did not identify those principles.
[31] In legal submissions, commentaries and conferences, some tax counsel have viewed the Supreme Court’s words in Addison & Leyen in isolation, divorced from administrative law principles. To them, the Supreme Court’s words welcome taxpayers, albeit cautiously, to seek refuge in the Federal Court from the Minister’s harsh or unfair treatment. Taxpayers also see cases that, on occasion, provide redress for “unfairness,” “unreasonableness” and “abuses of discretion” – colloquially understood, more words of welcome. On this optimistic basis, some launch applications for judicial review. However, such a hopeful interpretation of Addison & Layen is based on a lack of awareness or misunderstanding of administrative law principles.
[32] Almost always, applications for judicial review of administrative actions by the Minister in connection with assessments fail, especially in this Court. The failure rate now has led some to conclude that the judiciary “is simply not fulfilling” the responsibility of “controlling, through administrative law procedures, the [Minister’s] exercise of government powers and…protecting common citizens from abuses” in the exercise of tax audit and assessment powers: Guy Du Pont and Michael H. Lubetsky, “The Power to Audit is the Power to Destroy: Judicial Supervision of the Exercise of Audit Powers” (2013), 61 Can. Tax J. 103 at page 120.
[33] In another scholarly article, a lawyer notes a parade of “somewhat redundant” decisions and suggests the reasons prompting the lines drawn in the jurisprudence can be hard to discern or understand: David Jacyk, “The Dividing Line Between the Jurisdictions of the Tax Court of Canada and Other Superior Courts” (2008), 56 Can. Tax J. 661 at 707; see also David Sherman, Annotation to Pine Valley Enterprises Inc. v. R., 2010 TCC 324 (in Taxnet Pro) (online).
[34] Administrative law has many moving parts, the interrelationship of which often is not understood. Collectively, these moving parts are what Du Pont and Lubetsky call “administrative law procedures.” They say administrative law procedures control government powers and protect citizens from abuses. That is partly true.
[35] But administrative law procedures also protect the ability of administrative decision-makers’ to exercise the powers given to them by law. Sometimes that law sets out when and how those exercises of powers can be challenged. Absent a constitutional challenge or the need for review based on the constitutional principle of the rule of law (Crevier v. A.G. (Québec) et al., [1981] 2 S.C.R. 220), courts must follow this legislation according to its terms. After all, the supremacy of laws passed by Parliament – a constitutional principle itself – forms part of the bedrock of administrative law.
[36] Broadly writ, administrative law courts enforce these and other principles and, when they clash, mediate them: see Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at paragraphs 27-30 (noting the tension between the rule of law and Parliamentary supremacy). Administrative law courts mediate the clashes by applying doctrines founded upon decades of well-considered solutions to practical problems – a mountain of decided cases. And in applying these doctrines, administrative law courts follow practices and procedures designed for this area of law.
[37] To deal with the appeal before us and to offer wider guidance, I begin with the practices and procedures governing notices of application for judicial review and motions to strike them. Then I shall turn to the doctrines underpinning judicial reviews in the area of tax.
D. Practice and procedure: notices of application for judicial review and motions to strike them
(1) Notices of application for judicial review: pleading requirements
[38] In a notice of application for judicial review, an applicant must set out a “precise” statement of the relief sought and a “complete” and “concise” statement of the grounds intended to be argued: Federal Courts Rules, SOR/98-106, Rules 301(d) and (e).
[39] A “complete” statement of grounds means all the legal bases and material facts that, if taken as true, will support granting the relief sought.
[40] A “concise” statement of grounds must include the material facts necessary to show that the Court can and should grant the relief sought. It does not include the evidence by which those facts are to be proved.
[41] The evidence is supplied in the parties’ affidavits at a later stage in the proceedings: Rules 306 and 307, subject to restrictions in the case law (see, e.g., Association of Universities and Colleges of Canada v. Canadian Copyright Licensing Agency (Access Copyright), 2012 FCA 22, 428 N.R. 297).
(2) The grounds stated in the notice of application for judicial review
[42] While the grounds in a notice of application for judicial review are supposed to be “concise,” they should not be bald. Applicants who have some evidence to support a ground can state the ground with some particularity. Applicants without any evidence, who are just fishing for something, cannot.
[43] Thus, for example, it is not enough to say that an administrative decision-maker “abused her discretion.” The applicant must go further and say what the discretion was and how it was abused. For example, the applicant should plead that “the decision-maker fettered her discretion by blindly following the administrative policy on reconsiderations rather than considering all the circumstances, as section Y of statute X requires her to do.”
[44] The statement of grounds in a notice of application for judicial review is not a list of categories of evidence the applicant hopes to find during the evidentiary stages of the application. Before a party can state a ground, the party must have some evidence to support it.
[45] It is an abuse of process to start proceedings and make entirely unsupported allegations in the hope that something will later turn up. See generally Merchant Law Group v. Canada (Revenue Agency), 2010 FCA 184 at paragraph 34; AstraZeneca Canada Inc. v. Novopharm Ltd., 2010 FCA 112 at paragraph 5. Abuses of process can be redressed in many ways, such as adverse cost awards against parties, their counsel or both: Rules 401 and 404.
[46] Sometimes evidence that could support an application for judicial review is found after the deadline for starting an application for judicial review: Federal Courts Act, supra, subsection 18.1(2) (thirty days). For example, a taxpayer might obtain evidence during Tax Court proceedings or as a result of information requests made under the Access to Information Act, R.S.C. 1985, c. A‑1. In appropriate circumstances, the Court can grant an extension of time: Federal Courts Act, supra, subsection 18.1(2).
(3) Motions to strike notices of application for judicial review
[47] The Court will strike a notice of application for judicial review only where it is “so clearly improper as to be bereft of any possibility of success”: David Bull Laboratories (Canada) Inc. v. Pharmacia Inc., [1995] 1 F.C. 588 at page 600 (C.A.). There must be a “show stopper” or a “knockout punch” – an obvious, fatal flaw striking at the root of this Court’s power to entertain the application: Rahman v. Public Service Labour Relations Board, 2013 FCA 117 at paragraph 7; Donaldson v. Western Grain Storage By-Products, 2012 FCA 286 at paragraph 6; cf.. Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959.
[48] There are two justifications for such a high threshold. First, the Federal Courts’ jurisdiction to strike a notice of application is founded not in the Rules but in the Courts’ plenary jurisdiction to restrain the misuse or abuse of courts’ processes: David Bull, supra at page 600; Canada (National Revenue) v. RBC Life Insurance Company, 2013 FCA 50. Second, applications for judicial review must be brought quickly and must proceed “without delay” and “in a summary way”: Federal Courts Act, supra, subsection 18.1(2) and section 18.4. An unmeritorious motion – one that raises matters that should be advanced at the hearing on the merits – frustrates that objective.
(4) Scrutinizing the notice of application for judicial review
[49] Armed with sophisticated wordsmithing tools and cunning minds, skilful pleaders can make Tax Court matters sound like administrative law matters when they are nothing of the sort. When those pleaders illegitimately succeed, they frustrate Parliament’s intention to have the Tax Court exclusively decide Tax Court matters. Therefore, in considering a motion to strike, the Court must read the notice of application with a view to understanding the real essence of the application.
[50] The Court must gain “a realistic appreciation” of the application’s “essential character” by reading it holistically and practically without fastening onto matters of form: Canada v. Domtar Inc., 2009 FCA 218 at paragraph 28; Canada v. Roitman, 2006 FCA 266 at paragraph 16; Canada (Attorney General) v. TeleZone Inc., 2010 SCC 62, [2010] 3 S.C.R. 585 at paragraph 78.
(5) The admissibility of affidavits on a motion to strike
[51] As a general rule, affidavits are not admissible in support of motions to strike applications for judicial review.
[52] This general rule is justified by several considerations:
● Affidavits have the potential to trigger cross-examinations and refused questions and, thus, can delay applications for judicial review. This is contrary to Parliament’s requirement that applications for judicial review proceed “without delay” and be heard “in a summary way.”
● A respondent bringing a motion to strike a notice of application does not need to file an affidavit. In its motion, it must identify an obvious and fatal flaw in the notice of application, i.e., one apparent on the face of it. A flaw that can be shown only with the assistance of an affidavit is not obvious. A respondent’s inability to file evidence does not normally prejudice it. It can file evidence later on the merits of the review, subject to certain limitations, and often the merits can be heard within a few months. If an application has no merit, it will be dismissed soon enough. And if there is some need for faster determination of the merits, a respondent can always move for an order expediting the application.
● As for an applicant responding to a motion to strike an application, the starting point is that in such a motion the facts alleged in the notice of application are taken to be true: Chrysler Canada Inc. v. Canada, 2008 FC 727 at paragraph 20, aff’d on appeal, 2008 FC 1049. This obviates the need for an affidavit supplying facts. Further, an applicant must state “complete” grounds in its notice of application. Both the Court and opposing parties are entitled to assume that the notice of application includes everything substantial that is required to grant the relief sought. An affidavit cannot be admitted to supplement or buttress the notice of application.
[53] Exceptions to the rule against admitting affidavits on motions to strike should be permitted only where the justifications for the general rule of inadmissibility are not undercut, and the exception is in the interests of justice.
[54] For example, one exception, relevant in this case, is where a document is referred to and incorporated by reference in a notice of application. A party may file an affidavit merely appending the document, nothing more, for the assistance of the Court.
[55] In this case, before the Prothonotary, both parties filed evidence on the motion to strike.
[56] The Minister filed a short affidavit of an official who maintains records at the Canada Revenue Agency. The affidavit appends the assessments for Part XIII tax made against JP Morgan for the 2002, 2003 and 2004 taxation years – the documents under attack in the notice of application. The affidavit does not offer any editorial commentary or supplementary information concerning the assessments.
[57] The affidavit filed by the Minister is unobjectionable, as it merely appends a document referred to and incorporated by reference in a notice of application.
[58] JP Morgan filed an affidavit of its executive director responsible for managing its financial affairs. The affidavit offers evidence concerning JP Morgan, the nature of its business and considerable information about the Minister’s audit and her shift to earlier taxation years. It appends letters sent by the Minister during the audit, an audit report, JP Morgan’s notices of objection to the assessment for the 2002 taxation year, and the facts and reasons for the notices of objection.
[59] Before the Prothonotary, the Minister sought to strike JP Morgan’s affidavit. The Prothonotary declined to strike the affidavit.
[60] The Prothonotary correctly observed (at paragraph 24) that “in the ordinary course affidavit evidence is not permitted on motions to strike” and “notices of application must be accepted on [their] face.” However, the Prothonotary considered the affidavit proper, as it “goes to the issues of why this Court has jurisdiction to deal with the decision by way of judicial review” and “does not contain information which is unknown to the [Minister]” (at paragraph 24).
[61] In the end, the Prothonotary’s admissibility ruling was of no consequence. JP Morgan’s affidavit does not appear to have factored significantly into the Prothonotary’s decision and the Federal Court did not refer to it when reviewing the Prothonotary’s decision. Finally, in her notice of appeal to this Court, the Minister has not challenged the Prothonotary’s admissibility ruling. Therefore, it is not necessary to consider the matter further.
[62] For the benefit of future cases, however, I will offer some brief guidance.
[63] In the circumstances of this case, I disagree with the Prothonotary’s view that the affidavit tendered by JP Morgan was adm