The TCC’s General Procedure r. 58 allows the parties to shorten a hearing by having the Court decide a question of fact, law or both. In this case, two of the three taxpayers had agreed to a plea bargain in CRA’s criminal prosecutions on some of the tax issues. CRA refused to be bound by the agreed facts from the plea bargain, seeking to impose more tax. The taxpayers sought to have the TCC bind CRA to the plea bargain’s agreed facts; CRA resisted.
Very often, the situation has been reversed, with CRA urging that the Court should adopt the agreed facts in a criminal conviction. So, taxpayers could also use this decision in the future.
Justice Campbell confirmed that:
“[27] … a Rule 58 determination should never be a substitute for a hearing and there should never be a dispute as to the material facts underpinning the question of law. As such, a Rule 58 determination should not be an easily accessible alternative to a hearing for contentious disputes (Jurchison v The Queen, 2001 FCA 126 (CanLII), 2001 FCA 126 at para 8).”
To justify their wish to have CRA bound by the plea agreement, the taxpayers tried to argue that CRA was “estopped” from denying the agreed facts or that it would be an abuse of the TCC’s process to allow the CRA to challenge the agreed facts. Justice Campbell disagreed:
“[36] Generally, courts have been reluctant to apply issue estoppel or abuse of process to relieve taxpayers from having to prove facts allegedly determined in a prior criminal proceeding.”
After a thorough review of the cases, she said:
“[44] In summary, issue estoppel may be applied to prevent a party from relitigating an issue when that same issue has been determined in prior proceedings in another court. The Agreed Facts address only the tax appeals of the Corporation and Lorraine. Since the Agreed Facts do not involve Grant’s income tax matters or the corporate GST appeal, there is no relitigation of these two matters and, as a consequence, the preconditions for issue estoppel are not met. … Caselaw has clearly established that issue estoppel does not apply in circumstances where the prior criminal conviction arises from a plea bargain. Such agreed facts arising from a plea bargain cannot be determinative of the facts in subsequent tax appeals. The distinction, between criminal convictions arising from evidentiary findings resulting from a hearing and those convictions arising from plea bargains, is an important one. The latter do not constitute issue estoppel. As acknowledged by Justice Bowie in Hagon, the reality of convictions based on plea bargains is that they do not arise as the result of a trial on the merits with judicial consideration and weighing of evidence and consequent findings of fact. Instead, they are based on the parties’ negotiations for the purposes of a plea bargain and sentencing. In these circumstances, there can be no relitigation because there was no litigation of the initial criminal charges in the first instance and the basis of the plea bargain may contain considerations beyond the merits of the case.
“[46] Finally, I conclude that to restrict the Minister in the civil tax appeals before this Court to the Agreed Facts, established pursuant to a plea bargain, would constitute an abuse of process. Otherwise, unfairness would result because the parties would effectively be prohibited from tendering evidence in the appeals before this Court when no evidence was tendered or weighed in the prior criminal proceedings and no judicial findings of fact were made.”