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Introduction — Dealing with the CRA: When "Just a Phone Call" Isn't Just a Phone Call
In Hillcore Financial Corporation v Attorney General of Canada 2025 FC 2009, the Federal Court considered whether an oral refusal by a Canada Revenue Agency (CRA) collections officer to refund previously garnisheed funds constituted a reviewable administrative decision, and if so, whether that decision was reasonable. Justice Ferron held that a reviewable decision had been made, found it unreasonable under the Vavilov framework, and remitted the matter to the CRA for redetermination rather than ordering a refund directly.
The decision is notable for clarifying when informal communications by tax officials may attract judicial review and for reaffirming limits on administrative reliance on internal policy in the absence of statutory analysis.
Facts in Hillcore Financial Corporation v Attorney General of Canada
Hillcore Financial Corporation was reassessed for GST in 2017, leading the CRA to garnishee approximately $879,000 under the Excise Tax Act (ETA). In July 2020, the CRA vacated the GST reassessments but did not return the garnisheed funds. Instead, the amounts were set off against Hillcore's outstanding corporate income tax liabilities under the Income Tax Act (ITA), which exceeded $40 million.
In October 2023, Hillcore requested the return of the garnisheed funds, arguing that subsection 296(6) of the ETA imposed a mandatory obligation to refund amounts collected in excess once the reassessments were vacated, and that neither the ETA nor the ITA authorized cross-statute set-off.
A CRA collections officer sought internal guidance, relied on CRA internal refund policies, and informed Hillcore's Canadian tax lawyer by telephone that no refund would be issued while income tax debt remained outstanding. No written reasons or statutory analysis were provided.
Hillcore's experienced Canadian tax litigation lawyer applied to the federal court for judicial review, challenging both the existence and the legality of the refusal.
Issues For Determination in Hillcore Financial Corporation v Attorney General of Canada
The Court addressed four principal issues:
- Whether the collections officer's oral refusal constituted a reviewable decision;
- Whether the application was an impermissible collateral attack on the 2020 set-off;
- The applicable standard of review; and
- The appropriate remedy.
Decision of the Federal Court in Hillcore Financial Corporation v Attorney General of Canada
The Collection Officer's Oral Refusal Constituted a Reviewable decision
The Canadian tax litigation lawyer for CRA argued that the phone call was merely a "courtesy response" confirming the earlier set-off. The Court rejected this characterization. Applying Dumbrava and Independent Contractors, Justice Ferron held that the key inquiry is whether there was a fresh exercise of discretion in light of new submissions, not whether the earlier outcome changed.
The record demonstrated that the collections officer understood Hillcore's request as one for a refund, sought internal advice, considered the taxpayer's current circumstances, reviewed internal policies, and ultimately refused the refund. The officer repeatedly referred to having made a "decision" during cross-examination. This constituted a new, reviewable decision rather than a mere confirmation of the 2020 set-off.
When delay does not defeat review: the Federal Court on limitation periods and post-reassessment refund refusals.
Although Hillcore could have challenged the 2020 set-off earlier, the Court held that the application was not time-barred. Hillcore was not seeking to review the set-off itself, but a distinct refusal in 2023 to refund garnished funds after the GST reassessments were vacated. The Attorney General did not establish that a statutory limitation period barred such a refund request under the ETA.
Reasonableness, reasons, and the misuse of internal policy in tax administration.
The parties agreed that the standard of review was reasonableness under Canada (Minister of Citizenship and Immigration) v Vavilov. The Attorney General conceded that if a decision existed, it was unreasonable.
Justice Ferron found that the decision lacked justification, transparency, and intelligibility. The collections officer relied mechanically on internal CRA policies, failed to engage with Hillcore's statutory argument concerning the limits of cross-statute set-off, cited no legislative provisions, and provided only minimal oral reasons. Treating internal policy as determinative rather than interpretive amounted to an unreasonable exercise of administrative authority.
Given this conclusion, the Court found it unnecessary to rule on Hillcore's additional procedural fairness arguments.
Remedy after unreasonableness: remittal, not substitution, under Vavilov.
Hillcore sought an order compelling the immediate refund of the garnisheed funds, arguing that the ETA left the Minister with no discretion. The Court declined. Citing Vavilov, Justice Ferron emphasized that courts should substitute their own decision only in exceptional circumstances where the outcome is inevitable. Although Hillcore raised a strong statutory argument, the Court held that the proper course was to remit the matter to the CRA for redetermination.
Commentary: Hillcore and the Discipline of Administrative Decision-Making under Vavilov.
Hillcore reinforces several core principles of Canadian administrative law. First, informal or oral communications by administrative officials can constitute reviewable decisions when they reflect a genuine exercise of discretion.
Second, internal policy cannot replace statutory analysis; decision-makers must meaningfully engage with the governing legislation.
Third, even where an applicant advances a compelling legal position, courts remain cautious about substituting their own conclusions for those of the designated administrative authority.
The decision thus serves as a reminder that CRA determinations—formal or informal—must be legally reasoned, statute-based, and defensible under Vavilov, or they risk being set aside on judicial review
PRO TAX TIPS: Do not assume CRA "automatic" actions are immune from challenge
The Court in Hillcore rejected the idea that automated
or system-driven CRA actions cannot be reviewed.
If an action affects your rights (set-off, refusal,
garnishment):
- Assume it is challengeable
- Track when and how it was communicated
Our top Canadian Tax Litigation Lawyers can represent or guide you in seeking judicial or administrative review of CRA decisions.
Frequently Asked Questions (FAQs):
When Can a Taxpayer Seek Judicial Review Against the CRA?
A taxpayer may seek judicial review against the Canada Revenue Agency when the CRA has made a reviewable administrative decision that is alleged to be unreasonable, unlawful, or procedurally unfair. The key is what the CRA has done—not merely that the taxpayer disagrees with the outcome.
What is a Reviewable Administrative Decision?
A Reviewable Administrative Decision is an exercise of statutory authority involving a fresh exercise of discretion that finally disposes of a substantive issue affecting the rights, interests, or legal position of a person, even if communicated informally or orally.
When Is an Application for Judicial Review Statute-Barred?
A judicial review application is statute-barred when it is brought more than 30 days after the date on which a reviewable administrative decision was first communicated to the affected party, unless the Federal Court grants an extension of time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
