https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/344773/index.do
CBS Canada Holdings Co. v. The Queen (September 12, 2018 – 2018 TCC 188, Lyons J.).
Précis: CBC Canada Holdings Co. (CBS) and CRA entered Minutes of Settlement. CRA subsequently refused to complete the terms of the settlement on the basis that it was unenforceable:
[1] CBS Canada Holdings Co., the appellant (“CBS”), brings an enforcement motion (the “Motion”) against the respondent requesting an order allowing the appeals and referring the reassessments back to the Minister of National Revenue for reconsideration and reassessment, pursuant to paragraph 171(1)(b) of the Income Tax Act, in accordance with the terms of the Minutes of Settlement, including Schedule A, concluded by the parties (the “Minutes”). Immediately after, the Court was notified a settlement had been reached pursuant to subsection 169(3) of the Income Tax Act.
[2] CBS says the Minutes constitute a legally valid and binding settlement agreement after eight months of negotiations and the Minister is obligated to reassess CBS’ taxation years ended March 7, 2007 and December 31, 2007 (collectively the “2007 Years”), December 31, 2008, December 31, 2009 and December 31, 2010 (collectively the “subsequent years”) consistent with the Minutes. In part, to reallocate to CBS a non-capital loss in the amount of $24,366,301 (the “NCL”) in its taxation year ended March 7, 2007. CBS contends the NCL is available for carry-forward from its predecessors arising in years prior to the 2007 Years.
Justice Lyons agreed with the Appellant and directed CRA to reassess in accordance with the terms of the Minutes of Settlement. Thus CBS’s motion to enforce the Minutes of Settlement was allowed with costs.
Decision: The Court reviewed the jurisprudence and concluded that the modern test was that the Court should not interfere with a settlement unless the agreed-upon facts “clearly have no bearing to reality”:
[62] Recently, the Federal Court of Appeal in University Hill Holdings Inc. v Canada, 2017 FCA 232, 2017 DTC 5131, (FCA) [University Hill], reaffirmed the principles in Galway and CIBC and commented that settling the quantum of expenses is not an all or nothing function and involved a compromise of facts, therefore, “the Court will only interfere if the agreed‑upon facts clearly have no bearing to reality.” Application for leave to appeal to the Supreme Court of Canada was denied very recently.
[Footnotes omitted]
In the instant case the Court held that CRA had not met that threshold required to set aside the Minutes of Settlement:
[78] I conclude that the agreed fact in the Minutes - that the $24,366,301 is available - is grounded in objective reality. As such, the agreement to reassess on that basis is defensible on the facts (and the law) and the agreement is therefore binding, valid and enforceable against the Minister. Had this proceeded to trial, the Court could issue a judgment consistent with the order directing the Minister to reassess on said basis.
[79] In Noran West Development Ltd., Paris J. applied the principles of contract law to reject the argument that the taxpayer had made a mistake about the scope of the settlement agreement. Emphasizing the importance of objective clarity of the settlement agreement, he concluded it must be presumed that, in those circumstances the party intended to accept the agreement as written.
[80] The surrounding circumstances in the present case do not support the Minister’s subjective belief. Again, the Minutes were premised on information generated from the CRA records, as reassessed, that show the Pool of non‑capital losses from prior years exist. Terms were negotiated over eight months giving both parties ample opportunity to evaluate the Offer, its merits and implications plus query the contents of same. Five months after the Offer was sent, the CRA not only agreed the NCL existed but continued to negotiate, including giving CBS assurance on Schedule B, that the NCL was available and acknowledged in the signed Minutes that the “non‑capital losses arising in prior taxation years equal to $24,366,301” shall be reassessed in CBS’ March 2007 TY. Having entered into the Minutes and having invested time and effort, I conclude it must be presumed the parties intended to be bound by the Minutes as written and the Minister viewed the facts as defensible.
[Footnote omitted]
Justice Lyons agreed with the Appellant and directed CRA to reassess in accordance with the terms of the Minutes of Settlement. Thus CBS’s motion to enforce the Minutes of Settlement was allowed with costs.