Tax Court of Canada Jurisdiction & Main Rehabilitation Co. v. Canada, 2004 FCA 403
The Tax Court of Canada does not have the jurisdiction to consider issues of abuse of process. Its jurisdiction is limited to determining the correctness of a tax assessment. For example, the Tax Court cannot set aside an assessment because an auditor did not carry out their duties correctly. However, as was reiterated in the decision of Choptiany et al. v. The King, 2022 TCC 112, the Tax Court can set aside an assessment for an abuse of the Tax Court’s own process.
In the decision of Main Rehabilitation Co. v. Canada, 2004 FCA 403, the Canada Customs and Revenue Agency (CCRA), now the Canada Revenue Agency (CRA), reassessed Main Rehabilitation Co. Ltd. (“Main”), disallowing certain expenses for the 1996, 1997, and 1998 taxation years. Main appealed the reassessments to the Tax Court of Canada. The Tax Court struck out the portions of Main’s Notice of Appeal relating to the abuse of process allegations. Main then appealed the Tax Court’s decision to the Federal Court of Appeal. The Federal Court of Appeal, at paragraph 3, first set out the applicable test for striking out pleadings:
The test to be applied for striking out pleadings is whether it is plain and obvious that Main’s Notice of Appeal to the Tax Court discloses no reasonable claim. Only if its appeal is certain to fail should the relevant portions of the Notice of Appeal be struck out. As stated, the facts alleged in the Notice of Appeal are assumed to be true. See Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959.
This test remains the governing standard. For example, see Fultz v. The King, 2025 TCC 64.
It is Plain and Obvious...
The Federal Court of Appeal addressed the claim of abuse of process, stating at paragraph 6, “[i]n any event, it is also plain and obvious that the Tax Court does not have the jurisdiction to set aside an assessment on the basis of an abuse of process at common law or in breach of section 7 of the Charter…”
As the Tax Court Judge noted in her reasons, although the Tax Court has authority to stay proceedings that are an abuse of its own process (see for instance Yacyshyn v. Canada, 1999 CanLII 7552 (FCA)), it has consistently been held that the actions of the CCRA (now the CRA) cannot be taken into account in an appeal against assessments.
As per paragraph 48 of the decision in Dow Chemical Canada ULC v. Canada, 2024 SCC 23 [Dow], the Supreme Court of Canada held that “‘[t]he Tax Court does not have jurisdiction on an appeal to set aside an assessment on the basis of reprehensible conduct by the Minister leading up to the assessment, such as abuse of power or unfairness…’”
However, Dow further clarified the division of jurisdiction over tax assessments. Discretionary decisions fall within the jurisdiction of the Federal Court and are subject to judicial review, including review for abuse of process. Non-discretionary decisions fall within the jurisdiction of the Tax Court, which is limited to reviewing the correctness of the assessment.
As mentioned, the Tax Court may grant relief for abuse of process arising during its own proceedings. See Choptiany et al. v. The King, 2022 TCC 112.
For a comprehensive understanding of this topic see The Power to Audit is the Power to Destroy.
SpenceDrake Tax Law – Tax Lawyers
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