http://decisions.fca-caf.gc.ca/site/fca-caf/decisions/en/item/63847/index.do 
Canada (National Revenue) v. JP Morgan Asset Management (Canada) Inc.[1] (October 24, 2013) is a lengthy decision (113 paragraphs) which seems to virtually[2] eliminate any possible role for the Federal Court in reviewing assessments under the
Income Tax Act.[3] The first 102 paragraphs take the form of a scholarly discourse on the role of administrative law in general, and income tax assessments in particular. The text has a somewhat censorious approach to clients and lawyers who seek administrative relief from income tax assessments, e.g.:
[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.
…
[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.
…
[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.
It is not until paragraph 103 that the substance of JP Morgan’s complaint is set out:
[103] JP Morgan pleads that at first the Minister audited its 2007 and 2008 taxation years with a view to imposing Part XIII tax upon it only for those years. But after the Minister completed her audit, she decided to expand it to include several earlier years. In the end, the Minister assessed JP Morgan Part XIII tax for all periods from 2002 through 2008. JP Morgan pleads that this was an improper exercise of discretion because it was contrary to the Minister’s own administrative policies which, it says, would have limited the assessments to the two immediately preceding years:
(k) By doing so, CRA improperly exercised its discretion and the decision [to assess Part XIII tax for certain taxation years] ought to be set aside. Amongst other things, CRA did not consider, or sufficiently consider, CRA’s own policies, guidelines, bulletins, internal communiqués and practices which would otherwise have limited assessments to the current tax year and the two (2) immediately preceding years. CRA thus acted arbitrarily, unfairly, contrary to the rules of natural justice and in a manner inconsistent with CRA’s treatment of other taxpayers.
(Notice of application for judicial review, grounds of review, paragraph (k).)
Beyond this there is no guidance in the decision as to what form these “policies, guidelines, bulletins, internal communiqués and practices” took, how widely disseminated they were, particulars of JP Morgan’s reliance upon them, etc.[4]
Having thus set out the bare bones of the JP Morgan complaint the court then goes on to demolish it in seven brief paragraphs:
(2) Should the notice of application for judicial review be struck?
[106] In this case, all three objections to the notice of application are present. Any one of these objections would warrant striking it out.
(a) Has the applicant failed to state a cognizable administrative law claim?
[107] Yes. JP Morgan has not offered any authority in support of the proposition that a failure to follow policies is, by itself, an abuse of discretion. The Court is unaware of any such authority.
[108] Indeed, there is ample authority to the contrary. Policies do not have the force of law and administrative decision-makers can depart from them: Pinto v. Canada (Minister of Employment & Immigration), [1991] 1 F.C. 619 (T.D.); Bajwa v. Canada (Minister of Citizenship and Immigration), 2012 FC 864 at paragraphs 44-45; and see authorities in paragraph 75, above. Substantive expectations created by policies are unenforceable: see authorities in paragraph 75, above. Indeed, an administrative decision-maker who follows policies blindly commits an abuse of discretion: see authorities in paragraph 72, above.
[109] In my view, in these circumstances, the Minister did not exercise any discretion independent of the assessment. Therefore, there was no discretion that could be abused. The word “may” in subsection 227(10), the authority for the assessment here, does not vest the Minister with a general, sweeping discretion not to assess tax. Rather, it allows the Minister to forego making a formal assessment of Part XIII tax in situations where the tax was properly withheld and remitted.
(b) Is the application for judicial review barred by section 18.5 of the Federal Courts Act or some other legal principle?
[110] Yes. The Tax Court can consider the question whether the Minister was legally entitled to assess Part XIII tax for the years in question: see authorities in paragraph 83, above; see also Income Tax Act, supra, sections 165, 169 and 171; Tax Court of Canada Act, supra, subsection 12(1); Federal Courts Act, supra, section 18.5. As was the case in Addison & Leyen, supra, in this case there is no “reason why it would have been impossible to deal with the tax liability issues relating to…the assessments …through the regular appeal process” in the Tax Court (at paragraph 10).
(c) Is the Federal Court unable to grant the relief sought?
[111] Yes. JP Morgan seeks certiorari, setting aside (or vacating) certain of the assessments. Only the Tax Court can grant this relief: subsection 152(8) of the Income Tax Act; and see paragraph 93, above.
(d) Conclusion
[112] JP Morgan’s notice of application for judicial review is fatally flawed within the meaning of David Bull, supra. Accordingly, it should have been struck out.
Comment: This is an important decision which should be reviewed by the Supreme Court of Canada. The conclusion in paragraph 111 that only the Tax Court can set side or vacate an assessment seems to run counter to the language of the Supreme Court in Canada v. Addison & Leyen Ltd.[5]:
The Minister is granted the discretion to assess a taxpayer at any time. This does not mean that the exercise of this discretion is never reviewable. However, in light of the words “at any time” used by Parliament in s. 160 [of the Income Tax Act], the length of the delay before a decision on assessing a taxpayer is made does not suffice as a ground for judicial review, except, perhaps, inasmuch as it allows for a remedy like mandamus to prod the Minister to act with due diligence once a notice of objection has been filed.
[Emphasis added]
I do not understand the above passage to suggest that the Minister’s discretion can only be reviewed in cases of undue delay; the example of undue delay clearly seems to respond to the taxpayer’s specific complaint in that decision. Generally speaking obiter dicta in the Supreme Court of Canada are binding on lower courts. See: R. v. Prokofiew, 2010 ONCA 423, paras. 18-35 per Doherty JA.
One must obviously be attentive to the Federal Court of Appeal’s underlying concern about being overrun by judicial review applications. Nevertheless one has to balance this against the rights of the subject. Surely the courts could develop a test involving strict legal and factual requirements before the Federal Court would assume administrative jurisdiction over an assessment (or a proposed assessment).
Finally this decision is out of touch with the reality of income tax practice in Canada. There are an enormous number of policies, guidelines, bulletins, internal communiqués and practices relied upon by both taxpayers and CRA in conducting their affairs. While the Minister can in theory go back decades in assessing withholding tax in reality this does not happen. Yes the Minister is obliged to act in accordance with law in issuing assessments but that does not mean he or she has no discretion in “gray” areas and deals are struck every day on that basis. The entire system is premised on mutual trust between taxpayers and CRA. If one accepts the conclusion in JP Morgan that CRA has complete impunity to ignore guidance it has given to the public and apply new rules or interpretations retroactively then that entire trust based system is put at risk.
[1] 2013 FCA 250. In the interests of full disclosure this decision is not unlike a much shorter (8 paragraphs) decision in an appeal I argued unsuccessfully two years ago in the Federal Court of Appeal seeking an order prohibiting the issuance of assessments: Canada Revenue Agency v. Tele-Mobile Company Partnership, 2011 FCA 89. The JP Morgan decision sought an order of certiorari quashing the Minister’s decision to issue existing assessments.
[2] I use the term “virtually” since to my mind the decision is somewhat opaque as to whether there are residual circumstances under which the Federal Court might retain jurisdiction to review an assessment for, .e.g., fraud. I believe that the only clear example given of such a jurisdiction is found in paragraph 98:
“Suppose that the Minister could issue an assessment under section 160 of the Income Tax Act against any one of the five directors of a corporation for the corporation’s tax liability. Only one of the directors is a person of colour. The Minister issues an assessment only against that director, and only because of the colour of his skin, in circumstances where immediate, effective relief is required.”
It is not made clear however what form such relief would take since paragraph 111 of the reasons goes on to say that only the Tax Court can set aside or vacate an assessment.
[3] R.S.C. 1985, c. 1 (5th Supp.).
[4] The underlying decision of the Case Management Judge, 2012 FC 651, which had originally dismissed the Crown’s motion states the grounds for the application as follows:
[10] JP Morgan then brought this application for an order, inter alia, in the nature of certiorari quashing the decision of the Minister of National Revenue (the Minister) and CRA, to assess JP Morgan for amounts payable under Part XIII of the ITA. As alternative relief, JP Morgan also seeks an order that the decision to issue the Assessments was an invalid and unlawful exercise of a statutory power under subsection 227(10) of the ITA. It is alleged the discretion was exercised for an improper purpose and thus JP Morgan is entitled to an order setting aside the assessments.
http://decisions.fct-cf.gc.ca/site/fc-cf/decisions/en/item/61091/index.do
There is no discussion of alternative relief in the Court of Appeal decision. The intervening appeal to a judge of the Federal Court does not appear to be reported.
[5] 2007 SCC 33, [2007] 2 S.C.R. 793.