Dockets:
T-437-12
T-967-12
Citation: 2013 FC 1219
Ottawa, Ontario, December 5, 2013
PRESENT: The Honourable
Madam Justice Mactavish
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Docket:
T-437-12
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BETWEEN:
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GENERAL MOTORS OF CANADA LIMITED
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Applicant
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And
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MINISTER OF NATIONAL REVENUE
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Respondent
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Docket:
T-967-12
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AND
BETWEEN:
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RICHARD SZYMCZYK
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Applicant
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And
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MINISTER OF NATIONAL REVENUE
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Respondent
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REASONS FOR JUDGMENT AND JUDGMENT
[1]
For over 25 years,
General Motors of Canada Limited (GMCL) calculated the value of the taxable
benefits received by certain of its senior employees in connection with the use
of company cars in accordance with a formula that had been agreed to by Revenue
Canada Taxation in 1982 (“the 1982 formula”).
[2]
In 2012, the Canada
Revenue Agency (CRA), (the successor to Revenue Canada Taxation), advised GMCL
that the 1982 formula was no longer appropriate, and that the automobile
benefits for GMCL employees for the 2008 taxation year had been incorrectly
calculated. The CRA then re-assessed the automobile-related taxable benefits
for some 350 GMCL employees. One of these employees was Richard Szymczyk.
[3]
GMCL and Mr. Szymczyk
accept that it was open to the CRA to re-evaluate the situation in 2012 and to
adopt a different approach to the calculation of automobile-related taxable
benefits on a going-forward basis. However, they submit that GMCL and its
employees relied upon the 1982 formula in calculating the value of the
automobile-related taxable benefits for GMCL employees, and that it was unfair
for the CRA to reassess those benefits using a different formula on a
retrospective basis.
[4]
GMCL and Mr. Szymczyk
have each commenced applications for judicial review challenging the CRA’s
actions. The Minister has brought motions to strike both of the applications.
In accordance with the Order of Justice Gleason, the motions to strike were
heard together with the merits of the two applications.
[5]
For the reasons that
follow, I have determined that the relief sought by GMCL is not available in
this Court. I am further satisfied that GMCL’s Notice of Application fails to
raise a “cognizable administrative law claim”, as that term was used by the
Federal Court of Appeal in Canada (Minister of National Revenue) v.
JP Morgan Asset Management (Canada) Inc., 2013 FCA 250, [2013] F.C.J. No.
1155 (JP Morgan). As a consequence, GMCL’s application for
judicial review will be dismissed.
[6]
I am further
satisfied that this Court does not have the power to grant the relief sought by
Mr. Szymczyk in his application for judicial review. As a result, his
application will also be dismissed.
1. Background
[7]
GMCL makes
automobiles available to certain management and executive-level employees
through its Product Evaluation Program (“the Program”). The Program is intended
to increase product visibility, to provide a pool of cars for work-related
employee travel, and to obtain continuous and timely evaluations of GMCL
products from its employees.
[8]
Under section 6 of
the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), GMCL employees are
required to include a “reasonable standby charge” and an “automobile operating
expense benefit” (together, the “taxable benefits”) when calculating their
income for income tax purposes. The amount of the taxable benefits depends, in
part, on the cost of the vehicle in question and the extent of the employee’s
personal use of that vehicle.
[9]
It is GMCL’s
responsibility to compute the value of the taxable benefits, determine source
deductions and prepare T4 slips each year for each employee.
The 1982 Formula
[10]
In 1982, in
anticipation of amendments to the Act governing the taxation of automobile
benefits, GMCL sought direction from the Minister with respect to the
computation of the taxable employee benefits flowing from the Program.
[11]
GMCL had encountered
difficulties in determining the cost of vehicles used by its employees, given
that the vehicles had not been purchased or leased from a third party. Problems
were also encountered in keeping track of who was using which vehicle as a
result of the frequent reassignment of vehicles and the pooling of vehicles
during working hours for use by multiple employees. Finally, difficulties had
arisen in attempting to quantify and distinguish between personal and business
use of vehicles, given that GMCL employees enrolled in the Product Evaluation
Program (“Program Employees”) were expected to promote GMCL products when they
were outside of the workplace, and to assess and report on the performance of
the vehicles during both business and personal use.
[12]
By letter dated
September 7, 1982, the Minister set out a specific formula for GMCL to use in
computing the value of the taxable benefits received by Program Employees. The
letter included instructions as to how to calculate the cost of vehicles to
GMCL and how to determine the extent of Program Employees’ personal use of the
vehicles.
[13]
The Minister
challenges the admissibility of the September 7, 1982 letter, which was
included in the record through the affidavit of David Penney. Mr. Penney is identified
in his affidavit as the General Director Taxes for GMCL. The Minister objects
to the admission of the letter, arguing that it constitutes hearsay evidence as
Mr. Penney was not employed by GMCL in 1982. The Minister further submits that
the letter contains information that is not within Mr. Penney’s personal
knowledge, and he has not provided the source of his information regarding the
correspondence.
[14]
As a result of his
job, Mr. Penney was in a position to provide first-hand evidence as to GMCL’s
practice regarding the calculation of taxable automobile benefits for Program
Employees for 2008 and its reliance on the 1982 formula. Moreover, while the
Minister claims that she cannot locate a copy of the September 7, 1982 letter
in her own files, she does not dispute the authenticity of the document.
Moreover, this letter and the 1982 formula are specifically referred by the CRA
in communications with GMCL leading up the 2012 reassessment. In these
circumstances I am prepared to exercise my discretion to admit the September 7,
1982 letter into evidence.
[15]
The September 7, 1982
letter included an acknowledgment by the Minister of the “administrative
difficulties” encountered by GMCL in accurately assessing the taxable benefits
for each of the Program Employees, given the high turnover rate of the vehicles
and variations in personal versus work-related use.
[16]
As a result, instead
of requiring GMCL to conduct a personalized assessment of the taxable benefits
received by each Program Employee, the Minister agreed to adopt a single
approach covering all eligible Program Employees. The Minister opted to base
the stand-by charge on the “average cost” of all passenger vehicles sold by
GMCL in Canada. The Minister further accepted an across-the-board 50/50 split
between personal and business use of the vehicles for all of the Program
Employees.
[17]
The September 7, 1982
letter concluded with the statement that “If our position is agreeable to GM,
this letter will serve as your authority to proceed accordingly”.
[18]
GMCL agreed with the
Minister’s proposal. It asserts that it then relied upon the 1982 formula to
compute employees’ taxable benefits, determine source deductions and prepare T4
slips for each taxation year from 1982 up to 2011. GMCL and Mr. Szymczyk both state
that they did not keep detailed records regarding individual vehicle use during
this period because they understood that the Minister would rely upon the 1982
formula in valuing Program Employees’ taxable benefits.
The 2010 Benefits Audit
[19]
In May of 2010, the
CRA commenced an employer compliance audit. As part of that audit, in March of
2011, a CRA employee began reviewing the records provided by GMCL with respect
to the calculation of the taxable benefits for automobiles used by Program
Employees in the 2008 taxation year.
[20]
The auditor
determined that the cost values used to calculate the stand-by charges for the
vehicles used by Program Employees were less than the Manufacturer’s Suggested
Retail Price for the automobiles in question. The auditor further determined
that Program Employees had failed to record the extent of their personal and
business use of the vehicles, affecting the accuracy of the automobile
operating expense benefit calculation.
[21]
After discussions
with representatives of GMCL, on February 15, 2012, the Minister sent letters and
a fact sheet to GMCL advising that GMCL had failed to properly calculate the
taxable benefits for approximately 350 Program Employees for the 2008 taxation
year. As a result, the Minister proposed to issue amended T4 slips to the
affected employees reflecting a higher amount of taxable benefits than had been
calculated by GMCL pursuant to the 1982 formula.
[22]
The Minister
explained in the February 15, 2012 letter that the calculation method set out
in the 1982 formula was no longer valid due to “changes to the facts provided
in the original request”. For example, the Minister noted that computers would
ease the administrative burden of recording vehicle use, since “employees are
able to access information easily and readily”. The Minister also observed that
Interpretation Bulletins had been issued since 1982 relating to the calculation
of the taxable benefits. Finally, the Minister noted that because the cost of
each vehicle assigned to employees was available, the automobile benefit could
be calculated based upon actual vehicle cost.
[23]
Insofar as the ratio
of business to personal vehicle use was concerned, the Minister noted that it
was necessary for employers and employees to keep records regarding their vehicle
use. Recognizing that neither GMCL nor Program Employees had kept such records,
the Minister stated that “an approximation could have been considered using
appointment calendars, expense reports or other sources”. The Minister noted
that this had not been done, and that, moreover, the Minister’s requests that
GMCL provide details as to how the Program vehicles were pooled had gone
unanswered. As a result, the Minister indicated that personal vehicle use for
each Program Employee would be estimated at 20,004 kilometres per employee.
[24]
Subsequent to the
Minister’s February 15, 2012 letter, the CRA issued revised T4 slips
recalculating the Program Employees’ taxable automobile benefits for the 2008
taxation year.
[25]
Mr. Szymczyk had
declared a taxable benefit for 2008 in the amount of $7,988.81 in accordance
with the T4 issued to him by GMCL. The Minister made no adjustment to this
amount in Mr. Szymczyk’s 2008 notice of assessment. However, in 2012 the
Minister issued a revised T4 for Mr. Szymczyk for the 2008 taxation year,
increasing the value of his taxable benefit by $8,280.23. The Minister issued a
reassessment on April 16, 2012, assessing a total of $4,456.41 in additional
tax payable by Mr. Szymczyk.
[26]
Mr. Szymczyk states
that the Minister never sought any information from him regarding his
participation in the Program. He further says that he has no knowledge of the
cost to GMCL of the Program vehicles that he drove in 2008, nor does he have
access to this information.
[27]
Mr. Szymczyk is
pursuing the appeals process contemplated by the Income Tax Act, having
filed a Notice of Objection with the CRA with respect to his reassessment. In
addition, he commenced his application for judicial review in this Court. GMCL
has also commenced an application for judicial review with respect to the
Minister’s actions.
2. The Applications for Judicial
Review
[28]
GMCL’s application
for judicial review challenges “a decision of the Minister of National Revenue
… that GMCL had failed to properly determine the ‘reasonable standby charge’
and the ‘automobile operating expense benefit’ under section 6 of the Income
Tax Act … for approximately 350 employees in respect of their 2008 taxation
year, with the result that GMCL had failed to properly meet certain obligations
in respect of those employees…”.
[29]
Mr. Szymczyk’s
application for judicial review challenges “a decision of the Minister of
National Revenue … to issue a reassessment dated April 6, 2012 on the basis
that [GMCL] had failed to properly determine the ‘reasonable standby charge’
and the ‘automobile operating expense benefit’ under section 6 of the Income
Tax Act … for the applicant’s 2008 taxation year …”.
[30]
Both applications for
judicial review state that the Minister “faults GMCL for having relied on
specific directions received from the Minister, and consistently followed by
the Minister for over 35 years, for the calculation of the ‘reasonable standby
charge’ and the ‘automobile operating expense benefit’”.
[31]
GMCL’s Notice of
Application states that it is seeking a writ of certiorari quashing the
decision at issue by way of relief. GMCL also seeks a writ of prohibition to
prevent the Minister from assessing Program Employees for tax, interest and/or
penalties for the 2008 taxation year, and a declaration that any assessments
issued by the Minister to Program Employees for the 2008 taxation year on the
basis of the decision under review are invalid and unenforceable.
[32]
By his Notice of
Application, Mr. Szymczyk seeks a declaration that the reassessment issued by
the Minister to him on April 16, 2012 for the 2008 taxation year is invalid and
unenforceable.
3. The Motions to Strike
[33]
The Minister has
brought motions to strike both GMCL and Mr. Szymczyk’s applications for
judicial review.
[34]
In the case of GMCL,
the Minister submits that the Minister’s February 15, 2012 letter advising GMCL
that its calculation of Program Employees’ taxable benefits had not been done
correctly is not a “decision” that is amenable to judicial review. The Minister
further asserts that GMCL does not have standing to bring its application for
judicial review as it was not “directly affected” by the Minister’s decision to
reassess Program Employees.
[35]
The Minister also
contends that the relief sought by GMCL is not available as this Court does not
have the power to grant declaratory relief preventing the Minister from
carrying out her mandated jurisdiction to implement the Income Tax Act.
Finally, the Minister asserts that GMCL’s Notice of Application fails to raise
a “cognizable administrative law claim”, as that term has recently been used by
the Federal Court of Appeal in JP Morgan.
[36]
Insofar as Mr. Szymczyk’s
application for judicial review is concerned, the Minister contends that his
application should be struck as it is barred by Section 18.5 of the Federal
Courts Act, R.S.C.,
1985, c. F-7. This is
because Mr. Szymczyk has a right of appeal to the Tax Court of Canada, which
has exclusive jurisdiction to deal with the issues raised by his application
for judicial review. The Minister further asserts that the Federal Court does
not have the power to vacate a tax assessment or to or to declare it to be
invalid or unenforceable. Finally, the Minister argues that Mr. Szymczyk’s
2008 income tax reassessment is not a “decision” that is amenable to judicial
review.
[37]
It should be noted
that hearing of the motions to strike and the merits of these applications took
place prior to the release of the Federal Court of Appeal’s decision in JP
Morgan. As a consequence, the arguments advanced by the parties do not correspond
precisely with the analytical framework articulated by the Federal Court of
Appeal in that case.
[38]
The parties were,
however, afforded an opportunity to make further submissions with respect to
the significance of the JP Morgan decision for these cases, and those
submissions have been taken into account in my analysis.
A. Principles Governing Motions to
Strike
[39]
The Minister’s motion
to strike is brought under Rule 221(1)(a) of the Federal Courts Rules,
SOR/98-106, which provides that:
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221. (1) On motion, the Court may, at any time, order that a pleading, or
anything contained therein, be struck out, with or without leave to amend, on
the ground that it
(a) discloses no reasonable cause of action
or defence, as the case may be,
[…]
and may order the action be dismissed or judgment
entered accordingly.
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221. (1) À tout moment, la Cour peut, sur requête,
ordonner la radiation de tout ou partie d’un acte de procédure, avec ou sans
autorisation de le modifier, au motif, selon le cas :
a) qu’il ne révèle aucune
cause d’action ou de défense valable;
[…]
Elle peut aussi ordonner que l’action soit rejetée
ou qu’un jugement soit enregistré en conséquence.
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[40]
On a motion to strike
an application, the facts alleged in the Notice of Application to strike must be
assumed to be true: Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, 74
D.L.R. (4th) 321 at para. 54.
[41]
Applications for
judicial review should not be struck out unless the application is “so clearly
improper as to be bereft of any possibility of success”: David Bull
Laboratories v. Pharmacia Inc., [1995] 1 F.C. 588, 176 N.R. 48 (F.C.A.) at
para. 15.
B. The Motion to Strike GMCL’s
Application for Judicial Review
[42]
As was noted earlier,
GMCL’s application for judicial review challenges what it says was the “decision”
contained in the CRA’s February 15, 2012 letter informing GMCL that it had
failed to properly determine the ‘reasonable standby charge’ and the
‘automobile operating expense benefit’ for the Program Employees for the 2008
taxation year.
[43]
The Minister asserts
that GMCL does not have standing to bring its application for judicial review
and that the February 15, 2012 letter is not a “decision” amenable to judicial
review with the result that the application should be struck. The Minister also
contends that the relief sought by GMCL is not available as this Court does not
have the power to grant declaratory relief preventing the Minister from
carrying out her mandated jurisdiction to implement the Income Tax Act.
Finally, the Minister argues that GMCL’s application fails to raise a
cognizable administrative law claim.
[44]
Each of these
arguments will be addressed below.
i) Does GMCL have Standing to
Bring its Application for Judicial Review?
[45]
The Minister says
that GMCL’s application for judicial review should be struck on the basis that
it does not have standing to bring the application as it was not “directly
affected” by the proposed reassessment of the Program Employees.
[46]
The Minister cites
the test for standing identified by the Supreme Court of Canada in Canada
(Attorney General) v. Downtown Eastside Sex Workers United Against Violence
Society, 2012 SCC 45, [2012] 2 S.C.R. 524, submitting that GMCL has failed
to show that there is no other reasonable and effective way in which the
questions raised by its application may be brought to court. According to the
Minister, Program Employees can bring the issues raised by GMCL’s application
before the Courts and there is thus no need to grant standing to GMCL.
[47]
It is important to
note that the discussion in the Downtown Eastside case centered on the
issue of public interest standing. That is not the only issue here.
GMCL’s primary argument is that it has itself been “directly affected” by the
Minister’s February 15, 2012 letter, as that term is used in subsection 18.1(1)
of the Federal Courts Act, with the result that it has standing to
challenge the decision in issue.
[48]
As a general
proposition, a court should strike an application for judicial review for lack
of standing on a preliminary motion to strike “only in very clear cases”: Sierra
Club of Canada v. Canada (Minister of Finance), [1999] 2 F.C. 211, 157
F.T.R. 123 at para. 25. However, given that the motion to strike in this case was
heard in conjunction with the merits of the application, it is more appropriate
to determine the standing issue, not as a preliminary motion, but as a
substantive challenge to the application in the context of the record as a
whole.
[49]
When regard is had to
that record, I am satisfied that GMCL is not an “officious inter-meddler” -
that is, the type of applicant that the standing requirement is intended to
exclude: Moresby Explorers Ltd. v. Canada (Attorney General), 2006 FCA
144, 350 N.R. 101 at para. 17.
[50]
The jurisprudence
teaches that the words “directly affected” in subsection 18.1(1) of the Federal
Courts Act are not to be given a restricted meaning: Alberta v. Canadian
Wheat Board, [1998] 2 F.C. 156, 138 F.T.R. 186 at para. 26.
[51]
At paragraph 21 of Finlay
v. Canada (Minister of Finance), [1986] 2 S.C.R. 607, 33 D.L.R. (4th) 321, the
Supreme Court of Canada cited Gibbs J. in Australian Conservation Foundation
Inc. v. Commonwealth of Australia (1980), 28 A.L.R. 257, 146 C.L.R. 493 at
p. 271, and adopted the view that a party will have standing where “he is
likely to gain some advantage, other than the satisfaction of righting a wrong,
upholding a principle or winning a contest, if his action succeeds or to suffer
some disadvantage, other than a sense of grievance or a debt for costs, if his
action fails”: see also League for Human Rights of B’Nai Brith Canada v. Canada,
2008 FC 732, 334 F.T.R. 63, at paras. 23-25.
[52]
I am prepared to
accept that GMCL has indeed been “directly affected” by the Minister’s February
15, 2012 letter, as it imposes legal obligations on GMCL, or prejudicially
affects it directly: Rothmans of Pall Mall Canada Ltd. v. Canada (Minister
of National Revenue), [1976] 2 F.C. 500, 67 D.L.R. (3d) 505 at para. 13 (F.C.A.).
[53]
In coming to this
conclusion, I note that the correspondence from GMCL outlines the administrative
burden that would be imposed on it and the logistical difficulties that it
would encounter, if it were required to calculate the value of the taxable
automobile benefits received by its Program Employees in the manner suggested
by the CRA.
[54]
The change in the
methodology to be used in calculating taxable automobile expenses for Program
Employees required by the Minister would create a significant additional
administrative burden for GMCL in carrying out its statutory duties under the Income
Tax Act. This is sufficient to bring GMCL within the purview of subsection
18.1(1) of the Federal Courts Act as a party “directly affected” by the
Minister’s actions.
ii) No “Decision” made with
Respect to GMCL
[55]
The next question is
whether the Minister’s February 15, 2012 letter advising GMCL that its
calculation of Program Employees’ taxable benefits had not been done correctly
is a “decision” that is amenable to judicial review insofar as it relates to
GMCL.
[56]
The Minister says
that, unlike Mr. Szymczyk, GMCL has not had its taxes reassessed, nor have its
substantive rights been in any way affected by the February 15, 2012 letter.
According to the Minister, the letter is merely an expression of the Minister’s
intention to reassess, and no one’s rights were affected until such time as
Notices of Reassessment were actually issued to the Program Employees.
Consequently, the Minister submits that insofar as GMCL is concerned, the
Minister’s February 15, 2012 letter is not a decision that is amenable to
judicial review.
[57]
In support of this
contention, the Minister relies upon the decision in Democracy Watch v. Canada (Conflict of Interest and Ethics Commissioner), 2009 FCA 15, 86 Admin. L.R.
(4th) 149, for the proposition that judicial review is not available where the
conduct in issue does not affect legal rights, impose legal obligations, or
cause prejudicial effects.
[58]
The Minister cites
the decision in Rothmans, Benson & Hedges Inc. v. Canada (Minister of
National Revenue) (1998), 148 F.T.R. 3, [1998] F.C.J. No. 79 as authority
for the proposition that tax actions such as advance rulings or technical
interpretations have no binding legal effect as they do not grant or deny a
right, or have any legal consequences.
[59]
The Minister also
relies on Neeb v. Canada (Minister of National Revenue) (1990), 38
F.T.R. 73, 90 D.T.C. 6666, where this Court held that a letter indicating that
a taxpayer’s taxes may be reassessed is not reviewable. Rather, a taxpayer’s
right to challenge a Ministerial decision is not triggered until such time as
the reassessment is actually issued.
[60]
However, subsection
18.1(1) of the Federal Courts Act does not limit the availability of
judicial review to “decisions”. Instead it provides that an application for
judicial review may be brought by anyone directly affected by “the matter in
respect of which relief is sought” [my emphasis].
[61]
As to what
constitutes a “matter” for the purposes of subsection 18.1(1), the Federal
Court of Appeal held in Krause v. Canada, [1999] 2 F.C. 476, 236 N.R.
317 that judicial review is available in relation to “any matter in respect of
which a remedy may be available under section 18 of the Federal Courts Act”:
at para. 21.
[62]
As the Federal Court
of Appeal observed in Air Canada v. Toronto Port Authority, 2011 FCA 347, 426 N.R. 131, subsection 18.1(3) refers to relief being available “for an ‘act or
thing,’ a failure, refusal or delay to do an ‘act or thing,’ a ‘decision,’ an
‘order’ and a ‘proceeding.’” Citing Rule 300 of the Federal Courts Rules,
the Court noted that “the rules that govern applications for judicial review
apply to ‘applications for judicial review of administrative action,’ not just
applications for judicial review of ‘decisions or orders’”: at para. 24
[63]
The Minister’s
February 15, 2012 letter advises GMCL that its calculation of Program
Employees’ taxable benefits for the 2008 taxation year had not been done
correctly. The letter further sets out the Minister’s expectation that “in the
future GMCL will comply with the requirements of the Income Tax Act …”.
[64]
As an employer, GMCL
has a statutory obligation to keep records, calculate the value of the taxable
benefits received by its employees, make source deductions and remit the
appropriate amounts to the CRA. Failure to do so constitutes an offence under
the Income Tax Act and could expose GMCL to penalties: see section 238.
[65]
GMCL’s Notice of
Application states that it has relied upon the specific guidance provided by
the 1982 formula which had been agreed to by Revenue Canada and that it had
done so to its detriment. If I were to decide this issue on a purely
preliminary basis, these facts would be presumed to be true.
[66]
However, because the
motion was heard in conjunction with the merits of the application, the Court
is in possession of all of the relevant facts pertaining to this issue,
including a record of the correspondence between GMCL and the CRA leading up to
the Minister’s February 15, 2012 letter. As a result, I once again prefer to
address this issue, not as a preliminary motion, but as a substantive challenge
to the application, in the context of the record as a whole.
[67]
From this, it is
apparent that the Minister’s February 15, 2012 letter could have real
consequences for GMCL in carrying out its statutory responsibilities. It
“affect[s] legal rights, impose[s] legal obligations, or cause[s] prejudicial
effects”: Air Canada, above at para. 29.
[68]
That is not, however,
the end of the matter. As noted above, the Federal Court of Appeal made it
clear in the Krause case that judicial review will be available, not just
in relation to any matter, but any matter in respect of which a remedy may be
available under section 18 of the Federal Courts Act. As will be
explained below, I am not persuaded that the remedy sought by GMCL is one that
is available to it from this Court under section 18 of the Federal Courts
Act.
iii) Is the Relief Sought by GMCL
Available in this Court?
[69]
In its Notice of
Application, GMCL identifies the remedies that it is seeking as being:
1.
a writ of certiorari
quashing the “Decision”, namely the determination communicated to GMCL in the
Minister’s letter of February 12, 2012, that it had failed to properly
calculate the taxable automobile benefits for its Program Employees for the
2008 taxation year;
2.
a writ of prohibition
prohibiting the Minister from assessing Program Employees for tax, interest
and/or penalties for the 2008 taxation year; and
3.
a declaration that
any assessments issued by the Minister to Program Employees for the 2008
taxation year on the basis of the Decision are invalid and unenforceable.
[70]
Citing cases
including the Federal Court of Appeal’s decisions in Domtar Inc. v. Canada,
2009 FCA 218, 392 N.R. 200 and Canada v. Roitman, 2006 FCA 266, 353 N.R.
75, the Minister submits that in determining whether the relief sought by GMCL is available
in this Court, regard must be had to the essential nature of GMCL’s claim,
having “a realistic appreciation of the practical result sought by the
claimant”: Domtar, at para. 28.
[71]
The Minister submits
that GMCL’s application for judicial review is in reality a disguised attempt
to have the Minister’s tax reassessments set aside, and that this Court does
not have the power to grant declaratory relief preventing the Minister from
carrying out her statutory duties under the Income Tax Act simply because
doing so may “impose unfair and onerous obligations and financial hardships” on
the taxpayer: Canada (Revenue Agency) v. Tele-Mobile Company Partnership et
al., 2011 FCA 89, 417 N.R. 261 at para. 5.
[72]
GMCL accepts that tax
cases should generally be pursued through the appeals process established in
the Income Tax Act, and that the Supreme Court of Canada has held that
“[j]udicial review should not be used to develop a new form of incidental
litigation designed to circumvent the system of tax appeals established by
Parliament and the jurisdiction of the Tax Court. Judicial review should remain
a remedy of last resort in this context”: Canada v. Addison & Leyen Ltd.,
2007 SCC 33, [2007] 2 S.C.R. 793 at para. 11.
[73]
GMCL contends,
however, that the Supreme Court did not completely foreclose the possibility of
judicial review proceedings ever being available in tax matters. It notes that
the Court expressly stated that “[j]udicial review is available, provided the
matter is not otherwise appealable. It is also available to control abuses of
power, including abusive delay”. The Court further observed that
“[f]act-specific remedies may be crafted to address the wrongs or problems
raised by a particular case”: Addison & Leyen, above at para. 8.
[74]
Citing Canada v.
McLarty, 2008 SCC 26, [2008] 2 S.C.R. 79 at para. 75, and Main
Rehabilitation Co. v. Canada, 2004 FCA 403, 329 N.R. 248 at para. 7, GMCL
submits that the Tax Court can only determine whether the Minister’s assessment
was right or wrong: it cannot review the process that was followed or the
Minister’s actions in determining the reassessment.
[75]
According to GMCL, it
is not challenging the correctness of its employees’ tax assessments,
but rather the process that was followed by the Minister in
arriving at these assessments. This, it says, is properly the subject of a
judicial review application before the Federal Court: Chrysler Canada Inc. v. Canada, 2008 FC 727, 329 F.T.R. 260, aff’d 2008 FC 1049, 2008 D.T.C. 6654.
Moreover, GMCL submits that such a claim is quite distinct from the right to
appeal a tax assessment to the Tax Court: Ereiser v. Canada, 2013 FCA 20, 2013 D.T.C. 5036 at paras. 37-38, (leave to appeal dismissed
[2013] S.C.C.A. No. 167).
[76]
GMCL refers to
subsection 152 (4) of the Income Tax Act, which provides, in part, that
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 ….”. Noting the use of the word “may” in this provision,
GMCL submits that the Minister has discretion as to whether or not to reassess,
which discretion is reviewable in this Court.
[77]
According to GMCL,
the essence of its application for judicial review relates to the Minister’s
discretionary decision to “retroactively rescind the Directions” given in 1982.
GMCL notes that it is not one of the affected taxpayers with the result that it
has no right of appeal to the Tax Court. As a consequence, GMCL says that the
statutory bar contained in section 18.5 of the Federal Courts Act does not
apply to its application.
[78]
Moreover, given that
the case involves the review of the exercise of Ministerial discretion, GMCL
says that its application is properly before this Court: Addison & Leyen,
above at para. 8.
[79]
I would start my
analysis by observing that to the extent that GMCL seeks to prohibit the
Minister from assessing Program Employees for tax, interest and/or penalties in
relation to their taxable benefits for the 2008 taxation year, that request
appears to be moot, given my understanding that these assessments have already
been issued.
[80]
More fundamentally,
however, I am satisfied that what GMCL seeks in its Notice of Application is to
prevent the Minister from carrying out her statutory responsibility to assess taxes
in accordance with the law. Such relief is not available in this Court.
[81]
Subsection 152(8) of
the Income Tax Act provides that an assessment shall “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”, subject only
to being varied or vacated through the tax appeal process under that Act. The
Federal Court is not permitted to vary, set aside or vacate income tax
assessments: JP Morgan at para. 93; Redeemer Foundation v. Canada (National Revenue), 2008 SCC 46, [2008] 2 S.C.R. 643 at paras. 28 and 58.
[82]
It is true that in Addison
& Leyen, the Supreme Court did not completely foreclose the possibility
of judicial review proceedings ever being available in tax matters. However, as
the Federal Court of Appeal observed in JP Morgan, “these remedies
cannot be used to make the Minister act contrary to statute or to refrain from
acting under statute where she must act”: at para. 94.
[83]
The jurisprudence
also teaches that judges must “look beyond the words used, the facts alleged
and the remedy sought and ensure … that the statement of claim [or Notice of
Application] is not a disguised attempt to reach before the Federal Court a
result otherwise unreachable in that Court”: Roitman, above at para. 16.
[84]
In ascertaining an
application’s essential character, the Notice of Application is read “holistically
and practically”: JP Morgan, above at para. 50. See also Sifto Canada
Corp. v. Minister of National Revenue, 2013 FC 986, at para. 21.
[85]
When GMCL’s Notice of
Application is read “holistically and practically”, it is apparent that what it
seeks to do is prevent the Minister from carrying out her statutory duty to
assess the value of the tax payable by GMCL’s Program Employees on account of
the taxable benefits they received from their employer through the provision of
company cars.
[86]
Lest there be any
doubt about that, it is only necessary to have regard to paragraph 1(c) of
GMCL’s Notice of Application, where it seeks a declaration that “any
assessments issued by the Minister to Program Employees for the 2008 taxation
year on the basis of the Decision are invalid and unenforceable”. In essence,
GMCL seeks to have these assessments quashed. This is not a remedy that this
Court can grant.
iv) No Cognizable Administrative
Law Claim
[87]
Although this
argument was not initially framed in these terms, the Minister contends that
GMCL’s Notice of Application fails to raise a “cognizable administrative law
claim”, as that term has since been used by the Federal Court of Appeal in JP
Morgan. I agree.
[88]
While GMCL accepts
that it was open to the CRA to re-evaluate the situation in 2012 and to adopt a
different approach to the calculation of automobile-related taxable benefits on
a going-forward basis, it says in light of the agreement regarding the use of
the 1982 formula, the Minister should be estopped from reassessing those
benefits, using a different formula, on a retrospective basis. This is not,
however, a cognizable administrative law claim.
[89]
This type of claim
was discussed at length by the Federal Court of Appeal in JP Morgan:
see, in particular, paras. 75-80. The Court observed that “changes in policies
or departures from policies, by themselves, do not constitute an abuse of
discretion or make a decision unreasonable”. This is because the Minister is
“bound to apply the law of the land, not [her] administrative policies, to the
facts before [her]”. By way of example, the Court held that “in the tax
context, information bulletins do not create estoppels”: JP Morgan at
para. 75.
[90]
By analogy, the
Minister’s determination that the calculation method specified in the 1982
formula was no longer appropriate as it did not properly ascertain the true
value of the taxable benefits enjoyed by GMCL’s Program Employees does not
constitute an abuse of her discretion. Indeed no such abuse is alleged in
GMCL’s Notice of Application.
[91]
As the Federal Court
of Appeal observed in JP Morgan, “the Minister generally has no
discretion to exercise and, indeed, no discretion to abuse”. That is, “[w]here
the facts and the law demonstrate liability for tax, the Minister must issue an
assessment: at para. 77, citing Galway v. Minister of National Revenue,
[1974] 1 F.C. 600 at p. 602, 2 N.R. 324 (F.C.A.). Moreover, as was noted earlier,
this Court cannot prevent the Minister from carrying out her duty: JP Morgan
at para. 78.
[92]
Indeed, neither GMCL
nor Mr. Szymczyk has suggested in their Notices of Application that the
reassessments at issue were not reasonable, or that they had not been carried
out in accordance with the law.
[93]
If the Minister has
erred in her assessment of the Program Employees’ tax liability, it is open to
those employees to challenge their assessments in the Tax Court. That does not,
of course, address GMCL’s concerns.
[94]
Indeed, I have
accepted that GMCL has been directly affected by the decision underlying this
application in a manner that it is sufficient to give it standing to bring its
application for judicial review. However, inasmuch as the increased
administrative burden on GMCL results from the discharge of its statutory
obligations under the Income Tax Act, it is an unfortunate cost of doing
business.
[95]
To the extent that
GMCL may be of the view that the Minister’s repudiation of the 1982 formula
without advance notice constitutes wrongful or reprehensible conduct
(allegations that have not been advanced in its Notice of Application), it is
not necessarily without a remedy. The Federal Court of Appeal has made it clear
that in such cases “adequate and effective recourses may be available by means
other than an application for judicial review in the Federal Court”: JP
Morgan, above at para. 89.
Conclusion
[96]
For these reasons, I
am satisfied that the relief sought by GMCL is not available in this Court. I
am further satisfied that GMCL’s Notice of Application fails to raise a
“cognizable administrative law claim”, as that term was used by the Federal
Court of Appeal in JP Morgan. As a consequence, GMCL’s application for
judicial review will be dismissed.
[97]
The next issue to be
addressed is the Minister’s motion to strike Mr. Szymczyk’s application for
judicial review.
C. The Motion to Strike Mr.
Szymczyk’s Application for Judicial Review
[98]
It will be recalled
that Mr. Szymczyk’s application for judicial review challenges “a decision of
the Minister of National Revenue … to issue a reassessment dated April 6, 2012
on the basis that [GMCL] had failed to properly determine the ‘reasonable
standby charge’ and the ‘automobile operating expense benefit’ under section 6
of the Income Tax Act … for the applicant’s 2008 taxation year …”.
[99]
By way of relief, Mr.
Szymczyk’s Notice of Application seeks “a declaration that the reassessment
issued by the Minister to [him] on April 16, 2012 for the 2008 taxation year is
invalid and unenforceable”.
[100]
The Minister contends
that Mr. Szymczyk’s application should be struck as he has a right of appeal to
the Tax Court of Canada, which has exclusive jurisdiction to deal with the
issues raised by his application for judicial review. Indeed, Mr. Szymczyk has
already commenced the appeals process having filed a Notice of Objection in
relation to his 2008 tax reassessment.
[101]
The Minister further
asserts that Mr. Szymczyk’s 2008 income tax reassessment is not a “decision”
that is amenable to judicial review.
[102]
Finally, the Minister
contends that the Federal Court does not have the power to vacate a tax
assessment or to or declare it to be invalid or unenforceable.
[103]
I do not need to
address the Minister’s first two arguments, as I am satisfied that this Court
does not have the power to grant the relief sought by Mr. Szymczyk.
Why the Relief Sought by Mr. Szymczyk is
not Available in this Court
[104] The Minister submits that even though Mr.
Szymczyk purports to be attacking the Minister’s decision to reassess (as
opposed to the reassessment itself), his application for judicial review is in
essence, an attack on the tax reassessment itself. I agree. Trying to separate
the decision to reassess from the reassessment itself is a meaningless exercise:
Roitman, above, at para. 25.
[105]
I would also note
that the claim advanced in JP Morgan appears to have been framed in
similar terms – that is, as a challenge to the decision to reassess rather than
an attack on the actual assessments: see para. 10. Nevertheless, the Federal
Court of Appeal was satisfied that the application for judicial review at issue
in that case was, in reality, an attack on the assessments themselves.
[106]
The real nature of
Mr. Szymczyk’s claim is, moreover, revealed by the relief that he is seeking
which relates to the reassessment itself, and not the Minister’s decision to
reassess. That is, Mr. Szymczyk’s Notice of Application seeks a declaration
“that the reassessment issued by the Minister to him on April 16, 2012 for the
2008 taxation year is invalid and unenforceable”.
[107]
I agree with the
Minister that if this Court were to grant Mr. Szymczyk the relief that he
seeks, it would have the same practical effect as if the Court were to vacate
the tax assessment. As was explained earlier in these reasons, this is clearly
not relief that the Federal Court is competent to grant: JP Morgan, above
at para. 93.
[108]
Given that Mr.
Szymczyk’s Notice of Application seeks only a remedy that cannot be granted by
this Court, it follows that it must be struck: JP Morgan, above at para.
92.
[109]
As was noted earlier,
if Mr. Szymczyk takes issue with the amount of his reassessment for the 2008
taxation year, it remains open to him to pursue his objection through the
appeals process established under the Income Tax Act.
[110]
I am aware that Mr. Szymczyk
argues that what is at issue in his application is not the amount of his
tax reassessment, but rather the process whereby that reassessment was
carried out.
[111]
That is, Mr. Szymczyk
does not dispute that it was open to the Minister to revisit the 1982 formula
and to determine that the methodology prescribed by that formula did not
conform to the requirements of the Income Tax Act. It was also
admittedly open to the Minister to provide new directions as to how the taxable
automobile benefits received by GMCL’s Program Employees (including Mr. Szymczyk)
should be calculated in the future.
[112]
What Mr. Szymczyk says
that he is challenging in his Notice of Application is the Minister’s change of
position, after the fact, with respect to the methodology to be used by GMCL in
calculating the value of the taxable benefits received by Program Employees. He
contends that the Minister’s agreement to the use of the 1982 formula, the
acceptance by the Minister of taxable benefits being calculated in accordance
with that formula over a period of some 25 years, and the reliance of GMCL and
its employees on the Minister’s conduct, give rise to an estoppel which should
preclude the Minister from being able to resile from the agreement to the 1982
formula without first providing fair notice to GMCL and its employees.
[113]
In support of this
argument, Mr. Szymczyk asserts that he had relied on the Minister’s acceptance
of the 1982 formula to his detriment. Notwithstanding his statutory obligations
under subsection 230(1) of the Income Tax Act, Mr. Szymczyk says that he
did not keep records regarding his own individual vehicle use because he
understood that the Minister would rely upon the 1982 formula in valuing
Program Employees’ taxable benefits. As a consequence, he contends that he is
not now in a position to be able to challenge the Minister’s assessment of the
value of his taxable automobile benefits.
[114]
To buttress his
position that this is a claim that can be advanced in the Federal Court, Mr. Szymczyk
relies on the decision of the Federal Court of Appeal in Ereiser, above.
In that case the Federal Court of Appeal held that “[t]here
is also some potential for an administrative law remedy where the conduct
complained of represents an abuse of discretionary authority on the part of a
tax official, particularly if recourse to the Tax Court of Canada is not
possible or would not afford an adequate remedy”: at para. 37.
[115]
Mr. Szymczyk contends
that he cannot advance his estoppel argument in the Tax Court, as the argument
is based upon an equitable principle, and the Tax Court is not a Court of
equity. It has no inherent jurisdiction, and is limited to the jurisdiction
conferred by its enabling statute, the Tax Court of Canada Act R.S.C., 1985, c. T-2: Chaya v. Canada, 2004 FCA 327, 2004
D.T.C. 6676, at para. 4, Darte v. Canada, [2008] T.C.J. No. 35. Indeed, the Minister does not dispute
that the Tax Court does not have equitable jurisdiction.
[116]
Be that as it may,
Mr. Szymczyk is not left without a remedy.
[117]
Indeed, Mr. Szymczyk
can pursue his appeal through to the Tax Court, if necessary. While he may not
have detailed written records regarding his vehicle use in 2008, the Tax Court
can receive oral testimony from Mr. Szymczyk regarding his reconstructed assessment
of his vehicle use, based upon his personal recollection and documents such as
his appointment calendar, expense reports and credit card receipts. It is,
moreover, open to the Tax Court to decide how much weight should be ascribed to
Mr. Szymczyk’s estimate of his personal vehicle use, in light of all of the
surrounding circumstances, including his reliance upon the 1982 formula as an
explanation for his failure to keep records.
[118]
If the Tax Court
determines that the Minister has correctly calculated the value of the taxable
benefits that Mr. Szymczyk had received in connection with his use of company
cars, the Minister’s conduct cannot serve to relieve him of his statutory
obligation to pay: Webster v. Canada, 2003 FCA 388, 312 N.R. 236, at
para. 21; Addison & Leyen Ltd. v. Canada, 2006 FCA 107, [2006] 4
F.C.R. 532 (F.C.A.), at para. 68.
[119]
Although I understand
that no penalties have been assessed in this case, the Minister’s conduct may
also be taken into account in determining whether Mr. Szymczyk should be
afforded relief against any assessment of interest under subsection 220(3.1) of
the Income Tax Act: JP Morgan, above at para. 90.
D. Conclusion
[120] For these reasons, both applications for
judicial review are dismissed. Each party shall have 10 days in which to make
brief submissions on the issue of costs.
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