The Tax Court of Canada – Settlement Conferences
Hearings are expensive. Not only is it expensive for the taxpayers but it also consumes an immense amount of court time and resources. This is why the Tax Court of Canada (the “TCC”) strongly encourages taxpayers to settle their disputes with the Canada Revenue Agency (the “CRA”) before the issue makes it to a hearing. At the TCC, disputes may be settled through settlement conferences. Settlement conferences have been increasingly popular as the TCC has sought to encourage disputing parties to reach an agreement without a hearing.
The TCC may require parties to attend a settlement conference through its authority under Rule 126.2(1) of the Tax Court of Canada Rules (General Procedure). The TCC may compel parties to consider the possibility of settling any or all of the issues, either under the court’s own initiative or at the request of a party.
How to Prepare for a Settlement Conference
Prior to the settlement conference, both parties must confirm that a written offer of settlement has been made and that a written reply has been provided.
At least 14 days before a settlement conference, each party is required to submit a settlement conference brief to the court. The brief should be less than 10 pages, unless the parties apply for and obtain permission from the court by informal communication with the Registry.
The settlement conference brief must contain:
- An explanation of the party’s theory of the case;
- A statement of the material facts that the party expects to establish at the hearing of the appeal and how they will be established;
- A statement of the issues to be determined at the hearing; and
- A statement of how the law and authorities that the party will rely on at the hearing of the appeal.
The purpose of the brief is to present a concise summary of a party’s case. The brief is provided to the opposing party and the TCC to review.
A substantial amount of preparation is required prior to attending a settlement conference. Not only do settlement offers have to be presented, but the offer must be grounded in a correct application of the law to the facts and within a reasonable degree of compromise. More importantly, a party walking away from a favourable settlement offer may face greater cost consequences in certain circumstances. Therefore, it is very important for taxpayers to dedicate a significant amount of time to prepare for settlement conferences.
Attending the Settlement Conference
There are no standard processes for settlement conferences. Judges are often free to dictate the process how they see fit.
During the settlement conference, parties will discuss the relevant facts and law and seek to reach a compromise. In some instances, the settlement judge will provide an opinion on the legal issue and present views on the relative strengths and weaknesses of each party’s case. Furthermore, the judge may offer a settlement proposal for the parties to consider.
It is very important that parties be willing to compromise during the settlement conference. Otherwise, the TCC may impose adverse cost awards on a party where it deems that the conduct of the party to have impeded on the efficient functioning of the settlement conference.
The Pros of Settlement Conferences
The primary purpose of settlement conferences is to encourage parties to reach an agreement to settle their dispute without incurring further legal costs, draining judicial resources, and clogging up the significant backlog of cases after the COVID-19 pandemic.
However, there are also benefits to attending settlement conferences even when the parties do not reach an agreement.
A settlement conference can help parties obtain an objective, independent view of their case from the presiding judge. Often, what one side may think to be a winning case is far different in the eyes of a neutral party. Similarly, the settlement conference can also validate and reinforce one side’s position. Regardless of the results of the settlement conference, parties can be confident that they’ll walk out of the negotiations with a better understanding of the case.
Even if a full settlement is not reached, the case can often be expedited through the TCC by clarifying the issue and reducing the number of issues in dispute. This is favourable for all parties, including the justice system, because the case would require less documents to review, less witnesses to interview, and less time spent in trial.
At Rosen Kirshen Tax Law, we have represented countless clients during and after settlement conferences. If you have a file in the Tax Court of Canada, we can help negotiate a favourable settlement for your case. Contact us today to schedule an appointment with our team of experts. We are here to help!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.