Dominelli – Federal Court accepts that an agreement to compromise a s. 231.7 compliance procedure would have been binding if complied with by the taxpayer

Before judgment had been rendered in an application by the Minister for a s. 231.7 compliance order regarding failure of Mr. Dominelli (who had claimed $139 million in deductions from two leveraged insurance annuity arrangements) to provide related documents, Dominelli and the Minister made a written agreement that Dominelli would provide an affidavit with appended documents that was to certify with particulars that he and his advisors had canvassed their records for the requested documents – and that if the Minster was not satisfied with the affidavit, she would ask that judgment be delivered on the compliance application (until then, held in abeyance).

The Minister indicated dissatisfaction with the affidavit, whereupon Dominelli brought this motion before Pentney J to enforce the settlement agreement.

Pentney J stated (at para. 59) that he agreed “with Dominelli that the scope of the Minister’s discretion to determine that she is not satisfied that he has discharged his obligations under the agreement must be limited by the terms of their agreement … .” However, he went on to find that Dominelli’s affidavit did not demonstrate that he had met his obligations under the agreement, stating (at para. 79):

[T]he gap between what Dominelli promised to do and what his affidavit states is striking. … [H]is evidence does not establish that he has met the specific and detailed terms of the agreement and the Undertaking that he negotiated, and thus his motion cannot succeed.

Neal Armstrong. Summary of Canada (National Revenue) v. Dominelli, 2022 FC 187 under s. 231.7(1).