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Milgram Foundation v. Canada (Attorney General), 2024 FC 1405

February 10, 2026 by SpenceDrake Tax Law Administration, Audits, General, Voluntary Disclosure
Home | Administration | Milgram Foundation v. Canada (Attorney General), 2024 FC 1405

Milgram Foundation v. Canada (Attorney General), 2024 FC 1405

The Applicant, the Milgram Foundation, was established in 1964 as a non-resident entity in Liechtenstein and had not filed Canadian tax returns prior to 2015. In 2015, the Foundation applied under the Canada Revenue Agency’s (“CRA”) Voluntary Disclosures Program (“VDP”), disclosing its 2003 to 2014 taxation years based on available financial records.

The Minister accepted the disclosure in 2015. A year later, in 2016, the Minister conducted a second audit of the Foundation for the 2003–2014 taxation years and found no errors.

The Proposal Letter

Two years later, in 2018, the Minister issued a proposal letter indicating the discovery of previously undisclosed investment income and proposed reassessments for the 1998 to 2002 taxation years (the “Decision”). The Minister claimed the reassessments were due to a “misrepresentation” attributable to “neglect, carelessness, or wilful default.” The proposed adjustments required the Foundation to pay additional taxes and penalties.

The Foundation sought judicial review of the proposal to assess additional tax and penalties. Note, reassessments had not yet been issued. The Foundation alleged a breach of legitimate expectations, abuse of process, and unreasonableness. The Minister argued that the Proposal Letter was not reviewable and that the application was barred by section 18.5 of the Federal Courts Act, R.S.C., 1985, c. F-7, as the Federal Court lacked jurisdiction. The correctness of a tax assessment is solely under the jurisdiction of the Tax Court of Canada (“TCC”) and the Foundation’s efforts represented a collateral attack on a tax assessment.

Issues

  1. hat is the “decision” or “matter” under review in this application, and in this context, whether the “decision” in question is the Proposal Letter and whether it is a reviewable decision?
  2. Is the application a collateral attack on a tax assessment?
  3. Did the Minister’s acceptance of the Foundation’s Disclosure under the VDP result in a binding agreement which had been breached?
  4. Is the Decision an abuse of process?
  5. Is the Decision unreasonable because it was made without justification, departed from the VDP practices and violated the Foundation’s legitimate expectations?
  6. What relief should the Court issue, if any?

The Court's Decision

The Court held:

• Whether a proposal letter is too preliminary to be reviewable must be assessed contextually. Amour International Mines d’Or Ltée v. Canada (Attorney General), 2010 FC 1070 (CanLII) and 4053893 Canada Inc. v. Canada (National Revenue), 2021 FC 218 (CanLII) confirm that the Minister’s decision to reject a VDP application is reviewable. Accordingly, a subsequent proposal letter reversing an earlier VDP decision, as here, is likewise reviewable.

• The Minister reached two different conclusions based on the same facts and legislation. This constitutes a discretionary decision by the Minister. Therefore, the Federal Court has jurisdiction, and the application does not amount to a collateral attack on the assessment, which is within the jurisdiction of the Tax Court only.
 
• The VDP does not create a binding agreement. The language and qualifiers used—specifically, that the Minister accepted the disclosure for the years 2003 to 2014 inclusive and reserved the right to reassess—do not support the Foundation’s argument that the disclosure was accepted unconditionally and without qualifications as a binding agreement.
 
• The Minister’s conduct constituted an abuse of process. The Minister claimed the reassessment was based on misrepresentation, relying on discrepancies between the Foundation’s earlier disclosures and those made under the VDP. However, the Minister had already accepted the VDP disclosure, reassessed the Foundation, and found no errors. In the absence of any proper justification, the subsequent reversal was arbitrary, violated principles of fairness, and amounted to an abuse of process.
 
• As the Minister’s conduct amounts to an abuse of process, the Federal Court did not address the remaining arguments.
 
• The appropriate remedy was to quash the Minister’s decision to reassess and to grant declaratory relief. The Federal Court reached this conclusion relying on Dow Chemical Canada ULC v. Canada, 2024 SCC 22 [Dow], in which the Supreme Court of Canada (“SCC”) confirmed that this Court has the power to “quash the Minister’s discretionary decision, which would require her to reconsider it.” 

Administrative Law Decision

This case is a important administrative law decision related to tax assessments, addressing two principal issues: jurisdiction and abuse of process.

Jurisdiction

A key challenge in administrative tax law has been the jurisdictional divide between the Tax Court of Canada (TCC) and the Federal Court.

Historically, as observed in The Power to Audit is the Power to Destroy, taxpayers lack a clear administrative mechanism to challenge procedural fairness in the tax assessment process due to this division. The TCC has exclusive jurisdiction over the validity of assessments but cannot review the fairness of the administrative process that led to them. Conversely, the Federal Court may conduct judicial reviews but lacks jurisdiction to rule on the correctness of tax assessments.

The SCC addressed these concerns and ruled on the division of jurisdiction in tax assessment matters in Dow Chemical Canada ULC v. Canada, 2024 SCC 23 [Dow] and Iris Technologies Inc. v. Canada (National Revenue), 2022 SCC 18 [Iris].

In Dow, the SCC distinguished between discretionary administrative decisions and non-discretionary tax assessments, holding that discretionary administrative decisions fall within the Federal Court’s jurisdiction and are reviewed based on judicial review principles. In contrast, non-discretionary tax assessments are within the TCC’s jurisdiction, and the applicable standard of review is correctness. 

In Iris, the SCC held that where the Minister’s actions are non-discretionary, the TCC retains exclusive jurisdiction—even if the taxpayer alleges procedural unfairness during the audit and assessment process.

The Federal Court in Milgram reiterated that a non-discretionary tax assessment involves applying a fixed statutory formula to a taxpayer’s income based on past events and requires the Minister to apply the facts and the law in exactly the same way to every taxpayer. In contrast, discretionary decisions are based on policy considerations rather than the strict application of the law to the facts. 

The Minister issued inconsistent decisions in 2016 and 2018 despite both being based on the same facts. This inconsistency indicated that the 2018 decision was discretionary. Accordingly, the Federal Court concluded that it had jurisdiction and that the application did not constitute a collateral attack.

In practice, a distinction is made between the product—the assessment itself—and the process by which it was reached. The product is not reviewable, but decisions made during the process may be. However, not all such decisions are reviewable; preliminary decisions may be considered too early-stage to be subject to judicial review.

Abuse of Process

Milgram also addressed the issue of abuse of process in the tax assessment context. In Milgram, the Federal Court found that the Foundation had fully disclosed all relevant information in its initial VDP application. By reversing its earlier decision and alleging misrepresentation without any new evidence, the Minister’s actions were deemed arbitrary and unfair.

The core concern was that the Minister relied on information disclosed under the VDP to assert misrepresentation and unilaterally reversed prior decisions at any time. Such conduct risks undermining the integrity of the VDP. If permitted, it could deter future voluntary disclosures and compromise the program’s objectives.

Milgram leaves open the question of whether the Minister could have lawfully reassessed the Foundation had it, in 2016, informed the taxpayer of its intention to reassess earlier years, rather than concluding that there were no errors in the assessments and later reversing that conclusion.

 

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