Court of Appeal for Ontario
Panel: Hoy A.C.J.O., Lauwers and Zarnett JJ.A.
Parties
Between
Sheryl Nelson Respondent (Plaintiff)
and
Roland Lavoie, Investment Planning Counsel Inc., IPC Investment Corporation, IGM Financial Inc., Dennis Serre and Serre Financial Consulting Services Inc. Appellants (Defendants)
Counsel
Kenneth Dekker and Christopher Somerville, for the appellants, Roland Lavoie and IPC Investment Corporation
John J. Longo, for the appellants, Dennis Serre and Serre Financial Consulting Services Inc.
Brian A. Pickard, for the respondent
Heard: May 8, 2019
On appeal from: The order of Justice Robert G.S. Del Frate of the Superior Court of Justice, dated August 22, 2018.
Reasons for Decision
Introduction
1The appellants appeal the motion judge's order: (i) dismissing their motions seeking summary judgment dismissing the respondent's claim against them on the basis that it was statute-barred; and (ii) ordering, pursuant to r. 20.05(1) of the Rules of Civil Procedure, that the applicable limitation period commenced September 28, 2011, and did not expire before the respondent commenced her action on June 20, 2012.
2The motion judge's decision that the respondent, Sheryl Nelson, had not discovered her claim until September 28, 2011 turned on ss. 5(1)(a)(iv) and 5(b) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B: when did the respondent first know, or when would a reasonable person with the abilities and in the circumstances of the respondent first have known, that, having regard to the nature of the loss or damage, a proceeding would be an appropriate means to seek to remedy it?
3The respondent argued that a proceeding was not appropriate until the Canada Revenue Agency ("CRA") advised her on September 28, 2011 that the Independent Pension Plan ("IPP") she had established on the appellants' advice did not comply with the relevant provisions of the Income Tax Regulations, C.R.C., c. 945. The appellants – Roland Lavoie, IPC Investment Corporation, Dennis Serre and Serre Financial Consulting Services Inc. – argued that a claim was appropriate by August, 2009, at the latest. The motion judge agreed with the respondent.
4For the following reasons, we are not persuaded that we should interfere with the motion judge's order.
Background
5The respondent was a Hydro One employee for over 27 years. A co-worker told the respondent that her financial planner, Mr. Lavoie at IPC Investment Corporation, had created a financial plan that would permit the co-worker to "retire early", without any reduction in her pension and referred the respondent to Mr. Lavoie.
6Mr. Lavoie advised the respondent that she could set up an IPP and transfer the commuted value of her Hydro One pension plan to the IPP. Mr. Lavoie and Mr. Serre advised her that she would have to incorporate a company, start a business, and work for that business for a minimum of two years before retiring. The appellants insisted that if she did so, after two years the return would be more substantial than what her Hydro One pension plan would pay her.
7The respondent intended to start a business selling children's clothing online. She met with the appellants to prepare the necessary paperwork. On June 13, 2009, the respondent asked the CRA to register her IPP. On August 31, 2008, she left her employment at Hydro One. On October 16, 2008, the CRA confirmed that the IPP had been accepted, effective as of September 1, 2008. On November 24, 2008, the transfer of the commuted value of her Hydro One pension to the IPP was completed.
8On January 16, 2009, the respondent requested a withdrawal of $2,700 from her IPP. By the next month, she became aware that the payments from her IPP were lower than what she had been expecting. In May, 2009, the accountant she had retained for her newly-incorporated company advised that there might be problems with her IPP. She communicated these concerns to Mr. Lavoie and Mr. Serre, who reassured her that all was fine. Nonetheless, she retained the services of a lawyer in May 2009 and subsequently sought the opinion of a financial advisor and an accountant.
9The financial advisor provided a memorandum dated July 30, 2009 which stated that, in his opinion, her IPP did not meet the requirements for registration under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), and it was very likely that the CRA would revoke its registration.
10The accountant provided his report on August 4, 2009. He similarly opined that the IPP did not appear to meet the requirements for registration and that it was very likely its registration would be revoked by the CRA.
11The appellants say that the respondent knew or a reasonable person ought to have known, by no later than this time, that it was appropriate to commence a proceeding against the appellants.
12In the meantime, the respondent had obtained employment at Chapters. On August 23, 2009 she encountered one of the appellants, Mr. Lavoie, while at Chapters. She was uncomfortable talking to him because by then she had "pretty much figured there was going to be a lawsuit".
13On August 25, 2009, the respondent's legal counsel wrote to Mr. Lavoie seeking confirmation her IPP was in compliance with the Income Tax Act. He replied on September 8, 2009 enclosing a short memorandum dated September 2, 2009 from the appellant Serre Financial Services. The memorandum stated that it was a condition of registration under the Income Tax Act that the pension plan satisfy the Primary Purpose, namely to provide retirement benefits to individuals in respect of their services as employees; and that to satisfy the Primary Purpose requirement, the employer/employee relationship must be legitimate and the employee must work for and earn income through the sponsoring company. "These conditions are naturally met when the employee continues to work and earn income through the sponsoring company."
14On September 29, 2009, Mr. Lavoie wrote to the respondent expressing concern that she was not returning his calls and regarding her current investment strategy.
15On October 10, 2010, counsel for the respondent contacted the CRA asking it to review the IPP's compliance with the Income Tax Act. The law firm wrote again on October 27, 2010.
16Following Mr. Lavoie's September 29, 2009 letter to the respondent, there was no further communication between the appellants and the respondent until March 23, 2011 when Mr. Serre provided his opinion, as Trustee of her IPP, as at December 31, 2010. His opinion stated:
As of the plan year ending December 31, 2010, the following observations have been noted.
The history of pensionable service earned while at the current plan sponsor indicates the plan may be at risk of not meeting the primary purpose as is required by all pension plans. Although the plan may currently be in good status with the regulatory bodies, it is important to note that this is a potential risk to the plan.
Following a review of the funding activity on the pension plan, it is my opinion that the pension is meeting funding expectations at this time.
17On September 28, 2011 the CRA responded by letter to the respondent's counsel's letters and confirmed that the respondent's IPP did not comply with the relevant provisions of the Income Tax Regulations.
18The respondent's statement of claim was issued on June 20, 2012.
The Motion Judge's Reasons
19The motion judge acknowledged that it was clear that the respondent had some suspicions by August 2009 "regarding the conformity of the IPP".
20However, he concluded, at paras. 55-58, that it was not appropriate for the respondent to commence her action until the CRA confirmed that her IPP did not comply with the relevant provisions of the Income Tax Regulations:
Firstly, the [appellants'] reassurance prevented the [respondent] from discovering that loss or damage has occurred. The [appellants], her financial advisors, insisted that the plan was not only acceptable to the CRA but it would be beneficial to her in the long-term. On at least two subsequent occasions, the [appellants] reassured her that the IPP complied with the Income Tax Act. This repeated advice casted doubts over the inadequacy of the IPP. In this light, Ms. Nelson could not conclude if damage had occurred.
Secondly, I cannot accept the [appellants'] position concerning the right time for the institution of appropriate proceedings. It would not have been appropriate for Ms. Nelson to institute an action without a final determination from the CRA. Her counsel started a review process by notifying the CRA that something may be amiss. The CRA did not make a final decision until September 2011. Until then, the IPP's compliance with the regulation remained uncertain. Ms. Nelson could not know that the advice she received from the [appellants] was in fact wrong. On September 28, 2011, the CRA made the decision to deregister the plan. Her suspicions and doubts about the plan crystallized with that notice. There was no doubt, at that point, that she would be responsible for tax arrears and additional penalties. It is only at that time that it was appropriate to institute an action. Had Ms. Nelson instituted an action in the fall of 2009, she would have very likely faced a summary judgment application dismissing her claim.
Further, [the appellants] themselves have recognized that the damages had not been the subject of final determination, making an action inappropriate. In fact, in its Statement of Defense, the [appellants] Roland Lavoie, Investment Planning Counsel Inc. and IGM Financial Inc. plead, at paras. 47-48:
These defendants deny that the plaintiff has suffered the damages as alleged in the claim or at all.
In particular, no final determination has been made as to the status of the funds and other assets held for the Plaintiff's IPP. The Plaintiff's taxes have not been reassessed, and, as such, no associated damages have yet been suffered. The Plaintiff's claim for alleged damages suffered due to the de-registration of the IPP and any potential tax reassessment is thus premature and improper.
Had Ms. Nelson instituted the action prior to September 28, 2011, the court would not have been able to determine if any damages resulted from a still only potential deregistration of the IPP.
Analysis
21The appellants advance three main arguments on appeal.
22First, they argue that the motion judge's conclusion flowed from his misapprehension of the nature of the respondent's claim against them. They say that he treated her claim as a "tax case", whereas it is one for alleged misrepresentations and negligent financial advice regarding the consequences of retiring and transferring the commuted value of her Hydro One pension plan to an IPP. They argue those causes of action arose as early as February 2009, when she became aware that the payments from her IPP were less than what she had been expecting. Any "tax damages" that the respondent suffered were simply further damages flowing from the same causes of action.
23Second, and in the alternative, they argue that to the extent that this is a "tax case", it was appropriate to commence an action by August 2009, when both her financial adviser and accountant had opined that it was likely that the CRA would revoke the registration of her IPP.
24Third, they argue that the motion judge's statement that the appellants reassured her that her IPP complied with the Income Tax Act was a palpable and overriding error. On her own evidence, by June 1, 2009 she no longer trusted the appellants and by August 2009 she knew she was going to sue them. They submit that there is no evidence that the further communications from the appellants alleviated her concerns or that she relied on these communications. Moreover, the memorandum dated September 2, 2009 did not confirm that her IPP was in conformity with the Income Tax Act.
25We begin by noting that when a proceeding is appropriate turns on the facts of each case: 407 ETR Concession Company Limited v. Day, 2016 ONCA 709, 133 O.R. (3d) 762, at para. 34. We are not persuaded that there is any basis to interfere with the motion judge's fact-driven conclusion that a proceeding was not legally appropriate until September 28, 2011.
26While the respondent's statement of claim is broadly drafted, in his approach, the motion judge accepted that her case was, in essence, a "tax case" – it was based on the tax consequences of deregistration of her IPP and, consequently, hinged on the CRA's letter advising that her IPP did not conform to the relevant provisions of the Income Tax Regulations. In her submissions, the respondent reiterates this position: her claim flows entirely from the IPP and its deregistration under the Income Tax Act; the alleged misrepresentations and negligence at issue are in relation to the tax-effectiveness of the IPP and the risk of the IPP being found non-compliant with the Income Tax Regulations. We would not interfere with the motion judge's acceptance of this characterization. But the respondent cannot resile from this position at trial and seek to advance a broader claim.
27Nor, given this characterization of the respondent's claim, would we interfere with the motion judge's conclusion that it was not legally appropriate for the respondent to commence a proceeding before the CRA advised her that her IPP did not conform to the relevant provisions of the Income Tax Regulations. The respondent was faced with what she viewed as conflicting advice as to whether her IPP conformed to the Income Tax Regulations: that of the appellants, and that of the advisors she subsequently retained. To know whether the appellants had made misrepresentations about or provided negligent advice in relation to the tax effectiveness of their plan, she first needed to know that the appellants' advice was wrong.
28In light of the conflicting advice, it was reasonable for the motion judge to conclude that it was legally appropriate for the respondent to wait until the CRA responded to her counsel's express inquiry and advised her that her IPP did not conform to the relevant provisions of the Income Tax Regulations before commencing a proceeding. Indeed, it is possible that commencing a proceeding before obtaining confirmation from the CRA could have jeopardized the respondent's position before the CRA. The CRA's response resolved her uncertainty and confirmed that she would face unanticipated tax consequences as a result of deregistration of her IPP. Further, as the motion judge noted, Mr. Lavoie, Investment Planning Counsel Inc. and IGM Financial Inc. acknowledged that it was appropriate to wait for the CRA's determination: they pled in their Statement of Defence that any tax claim was premature before the respondent's taxes were reassessed.
29We agree with the appellants that, to the extent it was based on the September 2, 2009 memorandum from Serre Financial Services and the opinion as at December 31, 2010 from Mr. Serre, the motion judge's finding that the appellants' reassurances prevented the respondent from discovering that loss or damage had occurred is suspect. However, this is of no moment. It does not affect the conclusion that the respondent did not discover her claim before September 28, 2011 when the CRA confirmed that her IPP did not comply with the relevant provisions of the Income Tax Regulations.
Disposition and Costs
30The appeal is dismissed. The respondent shall be entitled to her costs of the appeal, fixed in the agreed-upon amount of $8,500, inclusive of HST and disbursements.
"Alexandra Hoy A.C.J.O."
"P. Lauwers J.A."
"B. Zarnett J.A."
