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Federal Tax - Tax Court of Canada (3). Iris Technologies Inc. v. Canada
In Iris Technologies Inc. v. Canada (SCC, 2024) the Supreme Court of Canada dismisses an appeal regarding "the shared statutory jurisdiction in tax matters of the Tax Court of Canada and the Federal Court of Canada":[2] It brings into plain focus the divide between the exclusive jurisdiction of the Tax Court to hear “appeals” relating to the correctness of tax assessments and the exclusive jurisdiction of the Federal Court to conduct judicial review in tax matters. The appeal in this case helps explain why the appeal in Dow should — as the Federal Court of Appeal held — give rise to a different outcome, based on a principled understanding of the distinct statutory foundations for the exclusive jurisdiction of these two courts established by Parliament.
[3] In the result, I agree with the conclusion of my colleague Côté J. to dismiss the taxpayer’s appeal before our Court but, with respect, my conclusion rests on different reasons.
[4] In my view, the Federal Court of Appeal’s reasoning is entirely well founded, including its statement that the Tax Court does not have jurisdiction where the true purpose of an application for judicial review is to “seek practical relief against the exercise of a discretion” by the Minister of National Revenue (2022 FCA 101, [2022] 1 F.C.R. 401, at para. 13). As Rennie J.A. observed, in the circumstance of ministerial discretion, the statutory rule ousting Federal Court jurisdiction in judicial review in favour of the Tax Court does not apply. This explains, as Rennie J.A. said for the court, why the outcome of the Federal Court of Appeal’s decision in Canada v. Dow Chemical Canada ULC, 2022 FCA 70, [2022] 5 C.T.C. 1 (“Dow FCA”), is favourable to the Federal Court’s jurisdiction where the discretionary ministerial decision under s. 247(10) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”), was at the centre of the jurisdictional debate.
[5] In other words, the Federal Court of Appeal in this case confirmed its decision in the partner case of Dow FCA in which it recognized the exclusive jurisdiction of the Federal Court over a ministerial discretionary decision provide for by the ITA. In this case, the Federal Court of Appeal recognized the exclusive jurisdiction of the Tax Court in appeals of the assessments where no such ministerial discretion was involved. Importantly, Rennie J.A. said, at para. 13 of his reasons, that the decisions of the Federal Court of Appeal in the two companion cases, with their apparently divergent outcomes, are entirely compatible.
[6] I agree with Rennie J.A.
[7] Significantly, the reasoning of the Federal Court of Appeal that I propose to endorse on this point explains, jurisprudentially, the proper contours of the dividing line between the exclusive jurisdiction of the Tax Court to review the correctness of a tax assessment by a de novo procedure on appeal and the jurisdiction of the Federal Court in tax matters. Notwithstanding the issuance of a tax assessment, the Federal Court has the exclusive jurisdiction to conduct judicial review over discretionary decisions delegated to the Minister by Parliament, including those that directly affect tax liability. The Minister’s assessment of net tax pursuant to the Excise Tax Act, R.S.C. 1985, c. E-15 (“ETA”), is not the exercise of a discretionary power. Instead, it is a non‑discretionary determination where the outcome, the assessment, is dictated by statute. Jurisdiction over the correctness of the assessment falls to the Tax Court under s. 302 of the ETA.
[8] Highlighting this distinction between ministerial discretionary decisions and the tax assessment itself, which is non-discretionary, is, I think, all-important in explaining the jurisdictional debate in our Court in Dow and in this appeal. It further explains why the Attorney General of Canada defended the jurisdiction of the Federal Court in Dow, notwithstanding the issuance of an assessment and, on the same day before this Court in this appeal, challenged the jurisdiction of the Federal Court as trenching on the exclusive jurisdiction of the Tax Court over the correctness of the taxpayer’s assessment.
[9] When juxtaposed against Dow, as Rennie J.A. sought to do at para. 13 of his reasons, this case presents a further opportunity to confirm the view that it is Parliament’s intention that jurisdiction in tax matters is shared between the two courts and that the Tax Court is not a one-stop judicial shop for resolving tax disputes.
[10] On the specifics of the Attorney General of Canada’s motion to strike the application for judicial review brought by the taxpayer, I agree with the Federal Court of Appeal that two of the claims raised by the appellant, Iris Technologies Inc., in its application — those alleging procedural unfairness and a lack of an evidentiary foundation — are properly within the exclusive jurisdiction of the Tax Court. They are best characterized as attacks on the correctness of the assessment which is the proper subject matter of an appeal to the Tax Court under the express authority of the ETA. Since the Tax Court has exclusive jurisdiction over challenges to the correctness of assessments, the bar in s. 18.5 of the Federal Courts Act, R.S.C. 1985, c. F-7 (“FCA”), applies to these two aspects of the application. Accordingly, the Federal Court has no jurisdiction over these aspects. This is because of an express statutory grant of jurisdiction to the Tax Court from the assessment in s. 302 of the ETA and not, as the appellant proposed in Dow, based on an extension of the Tax Court’s jurisdiction by “necessary implication”.
[11] Iris’ third claim, that the Minister acted with an improper purpose, could, in some circumstances, be the basis for an application for judicial review. But the improper purpose claim should nevertheless be struck here because Iris did not allege facts in its application that, if taken to be true, would give any support to this claim.
[12] I further agree with the Federal Court of Appeal that the declaratory remedy sought in the application would have no practical effect and the application should also be struck on this basis.
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