In 2007 the Minister reassessed the 1994 to 1997 taxation years of the taxpayer ("Bolton"). For 1996, the Minister added $602,998 in alleged unreported sales to Bolton's reported income of $1,260,074 (for a total of $1,863,072) but later conceded, in the Notice of Reply, that Bolton's income had been overstated by $403,219 at most.
Bolton offered to settle on the basis of the Minister vacating the reassessments of its 1994, 1995 and 1997 taxation years, and varying the reassessment for 1996 "in order to add $403,219 to Bolton's income." The Minister treated "Bolton's income" as referring to its income as reassessed rather than as reported, and accordingly reassessed in 2012 by adding $403,219 to the $1,863,072 of income assessed in 2007.
Campbell J vacated the 2012 reassessment, and varied the (reinstated) 2007 assessment to reduce the income inclusion from $602,998 to $403,219. The 2012 reassessment was void on any of the following bases:
- As per Galway and CIBC, the Minister had no authority to assess a taxpayer for an amount lacking a "factual or legal basis" (para. 22).
- The Minister had no authority to issue the 2012 reassessment, as "the principle that the Minister may not increase tax from a previous reassessment, is a general limitation placed on the Minister's ability, as well as the Court's, to increase an assessment of tax" (para. 33).
- Having regard to the "factual matrix, surrounding the settlement offer," the Minister's interpretation of its terms could not prevail - so that Bolton's agreement under the settlement agreement did not satisfy the requirement under s. 169(3) for it to consent to the addition of the phantom income to its income (para. 44).
The settlement was enforceable in its own right. The Minister argued (in the alternative) that there was no "meeting of the minds" to form a settlement contract, but Campbell J held the Minister to what she had objectively negotiated for and agreed to, which was Bolton's interpretation (para. 47). As per the terms of the settlement, the reassessments for the 1994, 1995 and 1997 years were vacated.