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Federal Tax - Tax Court of Canada (2). Dow Chemical Canada ULC v. Canada
In Dow Chemical Canada ULC v. Canada (SCC, 2024) the Supreme Court of Canada dismissed an FCA appeal (which in turn was from a Tax Court appeal), of an income tax assessment involving 'transfer pricing adjustment' [under ITA s.247(2)].
In this appeal-route case, an enthusiastic appellant sought to direct this appeal to the Tax Court rather than the Federal Court by way of judicial review under the argument that - in part - the former route was more efficient to the litigants from an access-to-justice perspective. These extracts are the SCC's summary of the case:I. Overview
[1] This appeal concerns the jurisdiction of the Tax Court of Canada, sitting in appeal of a taxpayer’s assessment, to review the Minister of National Revenue’s decisions under s. 247(10) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”). Parliament has conferred on the Minister discretionary authority to decide whether “the circumstances are such that it would be appropriate” to make a downward transfer pricing adjustment. A downward adjustment can only be made in accordance with the ITA where the Minister has come to the opinion that it is appropriate. When the taxpayer seeks to challenge the Minister’s discretionary decision, should that challenge be brought by an appeal to the Tax Court, pursuant to that court’s exclusive statutory jurisdiction to decide on the correctness of the taxpayer’s income tax assessment? Or should the taxpayer’s challenge be brought instead before the Federal Court of Canada, pursuant to that court’s exclusive statutory jurisdiction over judicial review, proceeding on the presumptively applicable standard of reasonableness?
[2] Dow Chemical Canada ULC argues that a review of the Minister’s decision under s. 247(10) of the ITA falls within the exclusive jurisdiction assigned to the Tax Court because that decision directly affects or is inextricably linked to the assessment of tax liability. Dow says its position advances the cause of fairness and convenience for all taxpayers, including multinational corporations like itself, that might benefit from one-stop judicial shopping in the Tax Court. Accordingly, Dow asks this Court to enlarge the statutory jurisdiction of the Tax Court on appeal by providing it with a new power to conduct what amounts to judicial review of the Minister’s decision on a reasonableness standard.
[3] I have had the advantage of reading the reasons prepared by my colleague Côté J. in which she proposes to allow Dow’s appeal. I agree with her that the Federal Court has exclusive statutory jurisdiction to grant relief in relation to federal ministerial decisions under s. 18(1) of the Federal Courts Act, R.S.C. 1985, c. F-7. We share the view that s. 18.5 of that Act allows for this jurisdiction to be ousted where a federal statute, such as the ITA, expressly provides for an appeal to another body, including the Tax Court. I agree as well that the Tax Court has exclusive jurisdiction to hear appeals seeking to vary or vacate income tax assessments pursuant to s. 12 of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, and s. 169 of the ITA. For both of us, the central question before the Court is whether the Minister’s decision under s. 247(10) is part of an assessment, and thus subject to the jurisdiction of the Tax Court, or whether as a separate exercise of ministerial discretion it should be subject to judicial review, on the standard of reasonableness, before the Federal Court.
[4] With the utmost respect, however, I am unable to agree with the view that the Minister’s decision under s. 247(10) can be appealed as part of an assessment to the Tax Court. Allowing this matter to be heard on appeal in the Tax Court as part of an assessment would require this Court to accept Dow’s expansive jurisdictional theory, based not on an express provision of an act of Parliament as s. 18.5 of the Federal Courts Act requires, but on what Dow claims is fair and best for access to justice. In my view, ousting the Federal Court’s jurisdiction in the absence of express direction by statute and enlarging the Tax Court’s review function would prompt new controversy over jurisdictional boundaries, all in service of supposed benefits for access to justice that strike me as largely illusory. Parliament plainly did not intend for the Tax Court to serve as an exclusive forum for taxation matters; it expressly granted by statute some jurisdiction over taxation matters to the Federal Court, some to the Tax Court, and even some original jurisdiction in taxation matters to the Federal Court of Appeal.
[5] Dow’s submissions, if accepted, would disturb settled jurisprudence, including this Court’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, by changing rules on standard of review, in particular for the “appeal” before the Tax Court pursuant to s. 169(1) of the ITA. Further, Dow’s position would upset Parliament’s choice to leave judicial review of discretionary administrative acts to the Federal Court, where an appropriate standard of reasonableness review may be applied and where the proper administrative law remedies are available. Dow’s theory would lead to a significant erosion of the statutory jurisdiction of the Federal Court, in tax law and potentially in other areas, where judicial review is available to supervise discretionary authority that Parliament has conferred on the executive branch of government.
[6] Importantly, Dow seeks to undermine Parliament’s design of limiting the Tax Court’s appeal jurisdiction to reviewing the correctness of assessments by changing the foundational notion of an assessment in tax law. In arguing that the s. 247(10) decision is inextricably linked to an assessment and subject to a single recourse before the Tax Court, Dow relies on a changed understanding of an “assessment” that is entirely out of step with settled law. Dow would transform the very foundation of the Tax Court’s statutory mandate to hear appeals by departing from a long-settled precedent of this Court defining an assessment in Okalta Oils Ltd. v. Minister of National Revenue, 1955 CanLII 70 (SCC), [1955] S.C.R. 824, a leading case that Dow did not cite in its argument before us. Dow’s reformulation of the concept of an “assessment” is also inconsistent with the understanding of a tax assessment as a “product” and not a “process”, a well‑established principle in the jurisprudence of the Federal Court of Appeal (see, e.g., Main Rehabilitation Co. v. Canada, 2004 FCA 403, 247 D.L.R. (4th) 597; Canada v. Anchor Pointe Energy Ltd., 2007 FCA 188, [2008] 1 F.C.R. 839, cited in C.A. reasons, 2022 FCA 70, [2022] 5 C.T.C. 1, at paras. 72-74). As Webb J.A. explained in this case, the Minister’s “opinion” in s. 247(10) of the ITA may directly affect a tax assessment where one is issued, but that does not make it part of the assessment. In s. 247(10), Parliament has delegated to the Minister — not to the Tax Court — the authority to make a discretionary determination about whether in the circumstances it is appropriate that the downward adjustment be made. I agree with the view that this is a separate decision that stands apart from the assessment. In order to vacate or vary the assessment on appeal in a manner that would impact a denial of a downward transfer pricing adjustment, the Tax Court would have to quash the decision and substitute its opinion for that of the Minister, authority the Tax Court does not have on an assessment appeal.
[7] By empowering the Minister to weigh her “opinion” of whether circumstances are such that it would be appropriate to depart from the ordinary rule and permit a downward adjustment, Parliament has conferred on the Minister, by s. 247(10), a policy-based discretionary decision-making power that is distinct from an assessment. This is no less true by reason of the fact that the Minister’s decision directly affects tax liability and the fact that the Minister’s decision will sometimes be reflected in an assessment, although a new assessment is not always issued after the Minister makes her decision. With due regard to the essential nature of Dow’s claim — which questions whether the exercise of ministerial discretion was reasonable — its grievance is one of administrative law that has been reframed as an appeal to the Tax Court relating to amounts owing in the assessment. It would appear that Dow sensed this when it started this litigation in Federal Court with an application for judicial review within the applicable limitation period after the Minister’s decision was made in 2013, four years before its appeal to the Tax Court following a reassessment in 2017.
[8] The foundational principles of administrative law set forth by this Court in Vavilov dictate that the Minister’s discretionary decision, the authorization for which was conferred by statute, is presumptively subject to judicial review on the standard of reasonableness. Dow argues that this decision can be reviewed before the Tax Court as part of an appeal from an assessment and that in this context a reasonableness standard applies. Indeed, Dow goes as far as to assert that “[t]he description by this Honourable Court in Vavilov of a ‘reasonableness review’ is equally apposite to the review that the Tax Court would undertake in an appeal of an assessment based on the Minister’s exercise of discretion under a provision like s. 247(10)” (A.F., at para. 97, citing Vavilov, at para. 15; see also transcript, at pp. 10-15). This directly contradicts the principle, made clear in Vavilov, at para. 37, that the availability of a recourse other than judicial review indicates that the legislature intends for the reasonableness standard to be displaced. In the case of “appeals” of assessments to the Tax Court under s. 169(1) of the ITA, Parliament has put in place a de novo review process which is in the nature of a trial, in which both sides adduce evidence and make submissions and in which the Tax Court decides factual questions on the balance of probabilities. A review of ministerial decisions for reasonableness has no place in the context of Tax Court “appeals”. Accepting Dow’s approach would give the Tax Court the power to review not just the application of tax law to the facts, but the power to review discretionary tax policy decisions of the Minister.
[9] In service of its view of the Tax Court’s appeal jurisdiction founded on this expanded notion of assessment, Dow advances a framework of analysis where deference to the Minister based on reasonableness or another deferential standard would apply to the s. 247(10) decision. This cannot be reconciled with the principle from Vavilov that the appeal mechanism the legislature has crafted — here the de novo process under s. 169(1) of the ITA — determines the applicable standards of review (paras. 36 et seq.). Whether the applicable standards for the review of the s. 247(10) discretionary decision are those in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, or some other appellate standard developed for reviewing administrative action by analogy to the exercise of judicial discretion raises issues of broad significance for the applicable standard of review in administrative law. The Tax Court judge also proposed a different standard from that in Vavilov and that associated with the de novo appeal proceeding under s. 169(1). She said the Minister must form her opinion “judicially” or “properly” and, if this was not done, it could be corrected by the Tax Court rather than on a reasonableness standard upon judicial review to the Federal Court (2020 TCC 139, [2021] 2 C.T.C. 2063, at paras. 142-44 and 165). I respectfully disagree with these characterizations of the applicable standard of review which I see as errors of law.
[10] Equally problematic is Dow’s position on available remedies which, in the end, invites this Court to expand the Tax Court’s powers by giving “guidance . . . as to whether the Tax Court has the ability to substitute its opinion . . . for that of the Minister” under s. 247(10) (A.F., at para. 101). In ruling on the assessment, the Tax Court cannot quash a discretionary decision of the Minister and cannot substitute its own opinion for that of the Minister acting under her delegated statutory authority. It bears recalling too that the remedies provided for in the Federal Courts Act may only be obtained on an application for judicial review to the Federal Court.
[11] These are all signs, I fear, that an embrace of Dow’s position would undermine basic administrative law principles on standard of review and remedy and leave the dividing line between the Federal Court and the Tax Court’s respective jurisdictions in disarray. These complications are avoided if it is recognized, contrary to Dow’s argument, that this distinct, discretionary decision-making power of the Minister, conferred upon her by Parliament in s. 247(10) of the ITA, is subject to judicial review in the Federal Court on a reasonableness standard, where there is an appropriate set of available statutory remedies, pursuant to the Federal Courts Act.
[12] Dow’s position also puts in jeopardy settled principles governing the jurisdiction of the Federal Court which, like the Tax Court, is a creature of statute. The Federal Court’s exclusive jurisdiction to conduct judicial review of federal administrative action — such as the Minister’s discretionary decisions under s. 247(10) — can only be excluded where there is an “express” statutory appeal mechanism in accordance with s. 18.5 of the Federal Courts Act that ousts the supervisory jurisdiction of the Federal Court. By setting the high bar that the route of appeal must be provided for expressly, Parliament ensured that exceptions to the Federal Court’s jurisdiction would flow from considered legislative direction rather than ad hoc development in the courts. Dow’s argument that jurisdiction can be conferred on the Tax Court by “necessary implication” rather than by “express” legislative provision ought to be rejected as being plainly inconsistent with the language, context, and purpose of s. 18.5. Dow’s theory would lower this bar by interpreting s. 18.5 to exclude the Federal Court’s jurisdiction not just where a decision is subject to an express statutory appeal, but also where it is merely captured by an appeal provision by implication. Beyond its significant encroachment on the Federal Court’s jurisdiction in tax law, Dow’s theory is likely to provoke litigation about which discretionary decisions are caught, implicitly, by statutory appeal provisions in other settings. This does not appear consonant with the aspirations for efficient access to justice.
[13] Dow nevertheless says it advances its theory in service of the public good of access to justice, invoking the advantages its proposed innovation would achieve for unrepresented litigants before the Tax Court. This Court must of course always be mindful of the challenges to access to justice in the matters before it. It is trite law in this field that “parallel proceedings” are to be avoided and that the statutory rules should, insofar as possible, be interpreted accordingly (Walker v. Canada Customs and Revenue Agency, 2005 FCA 393, 344 N.R. 169, at para. 11). And judicial review is of course an avenue of last resort in our law. But as important as it is, access to justice cannot displace settled understandings of Parliament’s intended division of jurisdiction between the Tax Court and the Federal Court that have meaningful purpose. Here, the proceedings challenge a decision of the Minister in a way that the Tax Court is neither charged nor equipped to undertake. “One-stop shopping” at the Tax Court would come at the expense of the remedies the taxpayer can find in the Federal Court based on considerations of relief available on judicial review, including quashing a ministerial decision. By proceeding to the Tax Court as a single venue, the taxpayer would find no redress and lose the opportunity to ask a competent court to supervise the Minister’s exercise of statutory power to ensure that the administrative actor did not overstep their legal authority in arriving at the discretionary decision. Moreover, even on Dow’s expansive view of the assessment, in circumstances in which the Minister’s decision under s. 247(10) leads to no assessment, the Tax Court has no power whatsoever to do the work that rightly should be done by the Federal Court. Respectfully stated, I am unmoved by Dow’s claim that it is before us to fight the fight of the unrepresented litigant who would benefit from the simplified procedure before the Tax Court. It is indeed those taxpayers who, in many circumstances, need the protection that judicial review and judicial review alone can provide against the wayward exercise of ministerial discretion.
[14] It is plainly in the legislative branch where far-reaching considerations related to the jurisdictional divide between the Federal Court and the Tax Court should be studied and considered. It has been usefully suggested that Parliament is the proper forum for achieving certain changes to s. 247 (see D. Sandler and L. Watzinger, “Disputing Denied Downward Transfer-Pricing Adjustments” (2019), 67 Can. Tax J. 281, at pp. 307-8). Others have decried the ad hoc character of the development of the law in this area and have called for a “comprehensive” exercise of law reform (M. H. Lubetsky, “The Fractured Jurisdiction of the Courts in Income Tax Disputes”, in P. Mihailovich and J. Sorensen, eds., Tax Disputes in Canada: The Path Forward (2022), 63, at p. 65). The courts, including this Court, are not institutionally designed to undertake such tasks and must be mindful of unanticipated consequences of changing jurisdictional boundaries between courts.
[15] When asked at the hearing what the effect of recognizing a jurisdiction for the Tax Court to review discretionary decisions of the Minister would be, counsel for Dow acknowledged that it would be “a bit of a revolution” (transcript, at p. 85). But, he said, that was why Dow brought the case to the Supreme Court. In my view, this Court should decline this invitation and leave the matter to Parliament and its informed measure of the public policy implications of any such change to the Tax Court’s and the Federal Court’s respective jurisdictions.
[16] Applying the settled principles that govern the nature of a tax assessment, the divided statutory jurisdiction between the Federal Court and the Tax Court in income tax matters, and the standard of review and remedial relief associated with general principles of judicial review in administrative law, I conclude that the challenge to a decision of the Minister under s. 247(10) is outside the appellate jurisdiction of the Tax Court. It is the proper and exclusive subject matter of judicial review before the Federal Court. I would therefore propose to dismiss the appeal. . Dow Chemical Canada ULC v. Canada
In Dow Chemical Canada ULC v. Canada (SCC, 2024) the Supreme Court of Canada dismissed an FCA appeal (which in turn was from a Tax Court appeal), of an income tax assessment involving 'transfer pricing adjustment' [under ITA s.247(2)].
Here the court notes that the Tax Court is not the exclusive forum for tax litigation:[110] I agree that Parliament created the Tax Court to provide an accessible forum for taxpayers to challenge the correctness of assessments. But Parliament intentionally divided jurisdiction over tax matters between the Federal Court and the Tax Court. The Tax Court has never been a single forum for all tax litigation (see Sifto, at para. 26). Indeed, several provisions of the ITA expressly provide jurisdiction to the Federal Court or the Federal Court of Appeal over tax matters (see ss. 172(3), 204.81(9), 222 to 223 and 231), including provisions that provide jurisdiction to the Minister to make discretionary decisions (see ss. 220(3.1), 220(3.2) and 152(4.2)).
[111] The parties agree that s. 18.1 of the Federal Courts Act provides jurisdiction to the Federal Court to conduct judicial review of decisions made by federal administrative actors, including the Minister of National Revenue (Addison SCC, at para. 8). Judicial review of federal administrative action sits at the core of the mandate of the Federal Court. According to Prof. Craig Forcese, judicial supervision of administrative action is “anchored” in the Federal Court (“The Trials and Tribulations of the Federal Courts’ Jurisdiction”, in Valois et al., eds., 73, at p. 79). As “the administrative apparatus of government had grown enormously”, Parliament granted “exclusive original jurisdiction in administrative law proceedings against federal [administrative actors]” to the Federal Court in 1970 (ibid.). Parliament has provided [translation] “a single court with the power to review the legality of acts of the federal public administration to ensure that there is a consistent and uniform body of case law across the country that provides a framework for federal government action” (B. Letarte et al., Recours et procédure devant les Cours fédérales (2013), at pp. 43‑44).
[112] Specifically, the Federal Court retains exclusive jurisdiction over the Minister’s decisions that are not subject to an appeal to the Tax Court. As Professor Provencher observed, “[a] Canada Revenue Agency assessment is a decision of a federal board and could be subject to judicial review under [section 18.1] if not for section 18.5” (pp. 548-49). Stratas J.A. explained helpfully that “[t]here are areas, well recognized in the case law, where judicial review may potentially be had in tax matters. Examples include discretionary decisions under the fairness provisions [and] assessments that are purely discretionary” (JP Morgan, at para. 96).
[113] Some have suggested that the shared jurisdiction over tax matters between the Tax Court and the Federal Court “raises a significant policy issue” because “there seems little justification for bifurcating the tax jurisdiction” and that Parliament should therefore expand the jurisdiction of the Tax Court “by statutory grant” (Campbell, at p. 618). In fact, some have argued that s. 247(11) of the ITA should be amended in order to ensure that the Tax Court will have jurisdiction over decisions made under s. 247(10) (see Sandler and Watzinger, at p. 307). It has also been suggested that Parliament’s grant of jurisdiction to the Tax Court in s. 166.2 of the ITA may be a model for further amendments that would expand the Tax Court’s jurisdiction to include the jurisdiction to conduct judicial review in taxation matters. In doing so, Parliament would provide the Tax Court with “statutory guidelines for decision making or a broader, equitable jurisdiction” that would be appropriate if it were to have jurisdiction to review discretionary decisions (Lubetsky (2022), at p. 66). Indeed, if today’s jurisdictional difficulties are “primarily the result of ad hoc, unplanned, organic evolution over the last 75 years” and the appropriate solution is “a comprehensive review and overhaul of jurisdiction among the Tax Court, the Federal Court, and the superior courts with respect to income tax matters”, it falls to Parliament to conduct such a review (pp. 65 and 115). As this Court has recognized, “Parliament has set up a complex structure to deal with a multitude of tax-related claims” (Addison SCC, at para. 11). Making a change to that complex structure — which divides jurisdiction over taxation matters between three different federal courts — without a thoughtful, comprehensive reform that can only be achieved by Parliament would be imprudent, particularly if doing so would directly contradict the wording of the applicable statutes and Parliament’s intent. A patchwork judicial solution to this complex matter could increase uncertainty, cause further litigation over jurisdictional issues, and ultimately undermine access to justice.
[114] Parliament has turned its mind to the difficulties that arise from the fractured jurisdiction of the Tax Court and the Federal Court over tax matters. After doing so, it did not act to expand the jurisdiction of the Tax Court. For example, in 1997, the Auditor General recommended that the Federal Court and the Tax Court be merged. The Auditor General observed that members of the tax bar and several Tax Court judges “noted that certain current procedural difficulties would be eliminated by having taxation issues dealt with by judges of a superior court” (Report on the Federal Court of Canada and the Tax Court of Canada, at para. 209). Nevertheless, the Auditor General reported that “[t]he majority of judges of the Tax Court are strongly opposed to a merger of the courts” (para. 205). In the end, as Lubetsky notes, “Parliament elected not to merge the Tax Court and Federal Court but, rather, to merge their registry services” and to make no changes to “the actual jurisdiction of the Tax Court” (Lubetsky (2022), at pp. 107-8). In 2011, when presented with a proposal to expand the jurisdiction of the Tax Court to include all tax matters, the Minister of Justice declined to propose amendments to the relevant legislation (see p. 110).
[115] In my view, it falls to Parliament to respond, if appropriate, to the concerns of those who suggest that the jurisdiction of the Tax Court should be rethought to include the jurisdiction to conduct judicial review in taxation matters. . Comme Corporation v. Canada [time extension]
In Comme Corporation v. Canada (Fed CA, 2024) the Federal Court of Appeal notes the (unsurprising) requirement that a request for a time extension (here, to commence an appeal) will not be granted prior to the time period starting to run:[6] Filing a valid notice of objection is a condition precedent to commencing an appeal to the Tax Court (Beima v. Canada, 2016 FCA 205, at paragraph 14). Since the appellant did not file a valid notice of objection, the time period to commence an appeal to the Tax Court has not commenced. As noted in Beima, at paragraph 14, “[a]n extension of time is not available if the time period has not commenced”.
[7] The Act stipulates specific requirements for making an objection to the Minister and filing an appeal to the Tax Court. The appellant did not comply with these requirements. Neither the Tax Court nor this Court has the jurisdiction (either equitable or otherwise) to waive compliance with or modify these statutory requirements. . Rafique v. Canada (National Revenue)
In Rafique v. Canada (National Revenue) (Fed CA, 2024) the Federal Court of Appeal noted Tax Court of Canada (General) Rule 170.1 ['Setting Aside, Varying or Amending Interlocutory Judgments'], here as argued to vacate assessments:[5] The Tax Court judge considered whether rule 170.1 applied. As this Court explained in Georgeson Shareholder Communications Canada Inc. v. Canada, 2020 FCA 139 at para. 9, rule 170.1 allows a party to apply for judgment at any stage in a proceeding where “there is nothing in controversy, either regarding the facts or a fairly arguable legal issue.” It may apply, for example, where there has been an admission in the pleadings.
[6] The appellant had argued that the Minister’s alleged admission of failing to reconsider the appellant’s assessment “with all due dispatch” following a notice of objection (as required by subsection 165(3) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.)) warranted the assessments being vacated. The Tax Court judge disagreed, relying on applicable case law.
[7] We agree with this conclusion. As this Court has confirmed, the Minister’s failure to act “with all due dispatch” is not a basis for overturning an assessment; the taxpayer’s remedy is to appeal directly to the Tax Court under paragraph 169(1)(b) of the Income Tax Act: Ford v. Canada, 2014 FCA 257 at para. 19, citing Bolton v. The Queen, 1996 CanLII 21607 (FCA), [1996] 3 C.T.C 3, 200 N.R. 303. . Gloglo v. Canada (National Revenue)
In Gloglo v. Canada (National Revenue) (Fed CA, 2023) the Federal Court of Appeal notes the statutory status of the Tax Court:[5] The Tax Court of Canada is a statutory court. It derives its jurisdiction from statutory sources, such as the CPP. ... . Polarsat Inc. v. Canada
In Polarsat Inc. v. Canada (Fed CA, 2023) the Federal Court of Appeal considered (and dismissed) an appeal against a Tax Court's ordering of an "amended Reply to the Notice of Appeal" by the Crown respondent which introduced a new legal argument:[1] The appellant appeals from an Order of the Tax Court of Canada (the Tax Court), dated January 25, 2023 (per Favreau J.): 2023 TCC 10. The Tax Court permitted the respondent, pursuant to section 54 of the Tax Court of Canada Rules (General Procedure), SOR/90-688a, to file an amended Reply to the Notice of Appeal.
[2] The appeal before the Tax Court puts at issue the appellant’s status as a Canadian Controlled Private Corporation and its entitlement to an enhanced refundable investment tax credit pursuant to subsection 127(10.1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the Act) for the 2011 to 2015 taxation years. The amended Reply introduces an alternative argument based on the general anti-avoidance rule (GAAR).
[3] It is trite—and the Tax Court expressly referred to this guiding principle at paragraph 53 of its decision—that an amendment to a pleading should be allowed if it (i) assists the tribunal in determining the real questions in controversy, (ii) does not result in an injustice to the other party not compensable by costs and (iii) serves the interests of justice (El Ad Ontario Trust v. Canada, 2023 FCA 231 at para. 4 (El Ad Ontario), citing Canada v. Pomeroy Acquireco Ltd., 2021 FCA 187, 462 D.L.R. (4th) 577 at para. 4 (Pomeroy)).
[4] It is also trite that the decision to permit or not an amendment to a pleading is entirely within the discretion of the Tax Court. Decisions of this type are to be reviewed by this Court under the standard of review set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. This means that absent an error on a question of law or an extricable legal principle, such decisions are reviewable on the highly deferential standard of palpable and overriding error (El Ad Ontario at para. 8, citing Hospira Healthcare Corporation v. Kennedy Institute of Rheumatology, 2016 FCA 215, [2017] 1 F.C.R. 331 at para. 79; Canada v. South Yukon Forest Corporation, 2012 FCA 165, 431 N.R. 286 at para. 46 (South Yukon Forest).
....
[7] The appellant then submits that the Tax Court erred by not requiring the respondent to justify its amendment by adducing evidence relevant to the determination of the motion and by explaining why “after having taken the institutional position that GAAR was not applicable for the last nine (9) years, [it] suddenly changed its mind.”
[8] Again, we do not see any merit to this contention. As stated above, amendments should be allowed “at any stage of an action” (Pomeroy at para. 4), provided they assist in determining the real questions in controversy between the parties, do not result in an injustice not compensable in costs and serve the interests of justice. As alluded to by the Tax Court, this test is anchored in section 152(9) of the Act, which allows the respondent, subject to certain limitations, to advance an alternative argument in support of an assessment “[a]t any time after the normal reassessment period.”
[9] The Tax Court was satisfied that the respondent’s evidence—that of a paralegal with no personal knowledge of the facts of the case—was satisfactory “in its present form because no new facts requiring personal knowledge by the deponent and not already mentioned in the pleadings [had] been advanced in the notice of motion.” In our view, this finding was open to the Tax Court based on the record before it.
[10] It was open to it as well to conclude that the respondent “should not be precluded from adding an alternative argument in a reply because some officers of the CRA, no matter how important they are, have decided not to do so in the pre-trial steps.” We agree with the respondent that concluding otherwise would impose on it an additional burden not contemplated in the test to amend. We also agree that the appellant’s reliance on this Court’s decisions in Merck & Co., Inc. v. Apotex Inc., 2003 FCA 488, [2004] 2 F.C.R. 459 (Merck) and Apotex Inc. v. Bristol-Myers Squibb Company, 2011 FCA 34, 414 N.R. 162 (Apotex) is of little, if any, assistance to it as those cases (i) deal with non-tax-related matters, (ii) in the case of Merck pertain to amendments to withdraw substantial admissions, where the burden for the party seeking the amendments is much heavier (Merck at para. 32; Apotex at para. 3), and most importantly (iii) do not support the proposition that the moving party has the burden of proving the facts justifying the amendments, as opposed to demonstrating that the test for amendment is met.
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