http://decisions.fct-cf.gc.ca/site/fc-cf/decisions/en/item/63008/index.do 
Newcombe v. The Queen[1] (September 17, 2013) is a case where a former employee of the Department of Justice sought an order of mandamus to require the Department to change a T-4 issued to her on the termination of her employment in an attempt to obtain a different tax treatment for her termination payment. The facts are straightforward:
[5] Ms. Newcombe joined the Department of Justice in Halifax as a legal assistant in 1996. She left following the death of her husband, but then returned in the year 2000. According to her uncontradicted testimony, all went well until 2004. At that time, new personnel joined the Department. She was harassed, given poor performance reviews and spent, on doctor’s orders, some time on stress leave. Come June 2006, she had filed a number of grievances against her employer which were at the first, second and third levels. These grievances included claims of harassment, and contestation of performance reviews.
[6] She enlisted the aid of her union as both she and the Department were more than willing to part ways. By agreement signed at Halifax June 12, 2006, Ms. Newcombe resigned and agreed not to apply for work at the Department of Justice in the future. She also agreed to withdraw any and all grievances which she had brought, any and all outstanding appeals relating thereto and not to file any further complaints by grievance, action or otherwise.
[7] For its part, the Department agreed to pay her “the lump sum of one year’s salary (12 months) total amount, $46,290, less the applicable statutory deductions”, and further sums representing outstanding superannuation deficiencies and death benefit deficiencies. The Department also agreed not to recover any sick leave credits and to remove and destroy from Ms. Newcombe’s personnel file any documentation reflecting workplace issues with the employer.
[8] Within days, the Department deposited $35,466.65 into her bank account. Ms. Newcombe said her mind was in a bad place and she did not realize moneys had been deducted at source until the T4 form was issued in February 2007.
[9] Not surprisingly, the Notice of Assessment issued May 30, 2007 listed reported income as set out in the T4 slip, which comprised her salary up to her resignation in June 2006, and the lump sum payment.
[10] This is where matters began to go wrong. Ms. Newcombe should have filed a Notice of Objection to the Notice of Assessment. She did not. Rather, she called CRA to say that the T4 form was wrong and had to be amended. The CRA pointed out that it could not amend the form, only the employer could. If an amended form was received, her tax liability would be reconsidered.
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[13] From that point on, until the institution of this simplified action in January 2012, matters went from bad to worse. She, or from time to time counsel on her behalf, was in communication with the Department of Justice and the CRA. Mr. Tax, now Judge Tax of the Nova Scotia Provincial Court, was subpoenaed. He testified that he had no hand whatsoever in the issuance of the T4 form, or other financial documents. They would have been issued by personnel people in either Halifax or Ottawa. Indeed, the T4 form was issued by Public Works. The Department of Justice in Halifax made inquiries. It appears that in requesting monies, the Department used a “code 088”. Public Works replied that code 088 is for a lump sum taxable income payment: “If this was not the code that should have been used then what code were you supposed to use? The T4 was done correctly by the system based on what was input in the system. A separate T4 is not issued for this type of entitlement.”
[14] Ultimately, the position was taken by Public Works that the settlement payment was processed appropriately and that the T4 form was correctly issued. Meanwhile, this lump sum payment together with her salary from January through June 2006 put her in a higher tax bracket. Penalties and interest were assessed and her salary at her new employer was garnished.
The court held that Ms. Newcombe’s application was in reality an impermissible collateral attack on CRA’s assessment of the amount in issue:
[29] I can well understand why Ms. Newcombe focused on the incorrect T4 form. However, neither the original T4 form, nor an amendment thereto, would be binding on the CRA. Ms. Newcombe’s remedy was to file a Notice of Objection. Ignorance of the law cannot help her.
[30] If not satisfied with the results of her objection, her further recourse lay in an appeal to the Tax Court of Canada. Section 12 of the Tax Court of Canada Act states that the Court has exclusive original jurisdiction to hear and determine references and appeals on matters arising under the Income Tax Act.
[31] Thus, even though framed as an action against the Crown with a writ of mandamus component, the action is an impermissible collateral attack upon the assessment (Canada v Roitman, 2006 FCA 266, 2006 DTC 6514, [2006] FCJ No1177 (QL); Verdicchio v Her Majesty the Queen, 2010 FC 117, 2010 DTC 5036, [2010] FCJ No 130 (QL); Canada v Addison & Leyen Ltd, 2007 SCC 33, [2007] 2 SCR 793; and Moise v Canada (Revenue), 2012 FC 1468, [2012] FCJ No 1581 (QL)).
In addition the court held that even if it were wrong on the jurisdictional point it was not an appropriate case to issue mandamus:
[32] Should I be wrong with respect to jurisdiction, I still cannot give Ms. Newcombe the remedies she seeks. Mandamus is a discretionary remedy. No valid purpose would be served by ordering the issuance of an amended T4 form, as it would not be binding on the CRA. Ultimately, it falls upon it, subject to appeal, to determine the true nature of a transaction, irrespective of what the parties say or do. For instance, there are situations in which it is in the financial interest of both the employer and the employee to treat the employee as an independent contractor.
The court pointed to the Minister’s power to open assessments under paragraph 152(4.2)(a) of the Income Tax Act[2] and the power to forgive interest and penalties under subsection 220(3.1) of the Act and expressed the hope that “perhaps the Minister will decide to do the right thing and help her” (para. 34).
In an exercise of its discretion the court declined to award costs to the Crown.
Comment: This is a somewhat unusual, but refreshing, example of the court urging the Minister to provide a remedy to a taxpayer in circumstances where the court is powerless to intervene.
[1] 2013 FC 955.
[2] R.S.C. 1985, c. 1 (5th Supp.), as amended (the “Act”).