Gardner v. Attorney General of Canada et al.
[Indexed as: Gardner v. Canada (Attorney General)]
Ontario Reports
Court of Appeal for Ontario,
Laskin, MacPherson and Gillese JJ.A.
June 21, 2013
116 O.R. (3d) 304 | 2013 ONCA 423
Case Summary
Limitations — Discoverability — Plaintiff successfully appealing income tax reassessment — Plaintiff claiming that Canada Revenue Agency ("CRA") had deliberately misapplied law for ulterior purpose and had defended assessment it knew to be invalid — Plaintiff suing federal government for abuse of power and misfeasance in public office within two years of resolution of appeal — Claim not statute-barred — Plaintiff entitled to seek determination that her tax reassessment was invalid before commencing action — Plaintiff unable to show that CRA knew that their conduct was unlawful without first showing that reassessment was invalid.
The plaintiff appealed her income tax reassessment, arguing that the Canada Revenue Agency ("CRA") deliberately misapplied the tax laws to her for an ulterior purpose and that it defended the reassessment while knowing it to be invalid. The appeal was successful. Minutes of settlement were signed and incorporated into a court order in February 2005. Within two years of the order, the plaintiff commenced an action against the federal government for abuse of power and misfeasance in public office. The defendant moved successfully for summary judgment dismissing the action as statute-barred. The motion judge found that the plaintiff was aware of all the material facts underlying her tort claims by 1998, when she alleged that she was unable to work because of the ongoing dispute over the reassessment of her income tax. The plaintiff appealed.
Held, the appeal should be allowed.
The plaintiff was entitled to seek a determination that her tax reassessment was invalid before commencing the action. She had to prove that the CRA knew that their conduct was unlawful. She was unable to do so without first showing that the reassessment was invalid. The action was not statute-barred. [page305]
Other cases referred to
Statutes referred to
Canadian Charter of Rights and Freedoms
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) [as am.]
Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.], ss. 4, 5(1)(a)
APPEAL from the summary judgment of R.J. Smith J., [2012] O.J. No. 1228, 2012 ONSC 1837 (S.C.J.) dismissing a claim as statute-barred.
Paul Champ, for appellant.
Brian Harvey, for respondents.
The judgment of the court was delivered by
LASKIN J.A.: —
A. Overview
[1] The sole issue on this appeal is whether the motion judge erred in holding that Sheridan Gardner's claims against the federal government for abuse of power and misfeasance in public office were barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
[2] Gardner was a federal government employee. From 1992 to 1995, she was posted to Japan, where she moved with her husband, Neil McFadyen, and their daughter. Under the federal Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), government employees posted abroad are "deemed residents" of Canada for tax purposes. McFadyen was not a government employee, and for the years 1993 to 1995, he filed his tax returns in Japan. In 1997, however, Revenue Canada reassessed McFadyen as a Canadian resident. Revenue Canada then reassessed Gardner as a "factual resident" of Canada.
[3] Gardner contended that no other federal government employee working abroad had been assessed this way. She maintained that Revenue Canada deliberately misapplied the tax laws to her to support its tax case against her husband. She appealed her income tax reassessment and eventually was successful. Minutes of settlement were signed and incorporated [page306] into an order of the Superior Court on February 17, 2005. On February 16, 2007 -- within two years of the order -- Gardner issued a notice of action claiming damages for various torts, including abuse of power and intentional or negligent infliction of mental suffering.
[4] Two months before the action was to be tried, the Attorney General of Canada brought a summary judgment motion to dismiss Gardner's action on the ground that the two-year limitation period in the Limitations Act, 2002 precluded her claim. The Attorney General submitted that Gardner was aware of all the material facts underlying her tort claims by 1998 or, at the latest, by 2001. The motion judge agreed. The crux of his holding is that "the tort of abuse of power or misfeasance in public office, did not require a successful appeal of her tax reassessment in order for the cause of action to accrue".
[5] Thus, the narrow question on this appeal is whether Gardner was entitled to seek a determination that her tax reassessment was invalid before proceeding with her claim. I would answer yes to this question and therefore would hold that Gardner's action is not barred by the limitation period.
B. Relevant Background
[6] The motion judge accepted Gardner's factual assertions for the purpose of resolving the motion. The following is a brief summary of her assertions.
(a) Posting to Japan
[7] Gardner worked for Revenue Canada (now, the Canada Revenue Agency or "CRA"). In 1992, she was posted to the Canadian embassy in Tokyo as a customs attaché. Her job was to conduct anti-dumping investigations in Asia. McFadyen, a professional engineer, went with her.
(b) Gardner and McFadyen are reassessed as factual residents of Canada
[8] In December 1996, Gardner received an initial tax reassessment, which confirmed her status as a deemed resident under the Income Tax Act. Soon afterwards, the CRA reassessed McFadyen. It revoked his exemption under the Canada-Japan Income Tax Convention for the years 1993, 1994 and 1995. Instead, he was designated a "factual resident" of Canada and the Province of Ontario.
[9] In April 1997, the CRA reassessed Gardner as a factual resident of Canada. In her statement of claim, Gardner alleges [page307] that CRA employees knew she was not a "factual resident" but deliberately misapplied the law for an ulterior motive: to bolster their case against McFadyen. The appellant asserts that no other federal government employee posted abroad had ever been assessed as a factual resident of Canada.
[10] To support her claim, Gardner points to information entered into the CRA's "Residency Determination Advisor" in April 1998. The information entered included that Gardner had provincial/territorial hospitalization, a Canadian driver's licence, and memberships and professional associations dependent on residency. Gardner contends that this information was "patently false".
(c) Gardner's appeal
[11] Gardner appealed her reassessment. She acknowledges that the amount in issue on her appeal was small -- roughly $2,500. But she maintains that the ramifications of her appeal were significant.
[12] An internal CRA document written in July 1997 noted that CRA officials had placed a "stall appeals inquiry" directive on Gardner's tax appeal file. Gardner alleges that the purpose of this directive was to ensure McFadyen's appeal would be dealt with first. Nearly two years later, in 1999, the CRA confirmed its reassessment of Gardner's tax for the years 1993 and 1994. Nonetheless, by then, responsible CRA officials were aware that Gardner had been wrongly assessed. In October 1999, the CRA litigation officer responsible for her appeal sent the following memo to another CRA employee:
I personally feel that our case here is quite weak and the Appellant is correct in her assertion that the basis for the changes to her assessments were the changes made to her spouse's (i.e. we cannot treat him as a factual resident of Canada without assessing her in exactly the same manner.)
Gardner did not become aware of this memo until 2007.
[13] Gardner's tax appeal was finally resolved in her favour on February 18, 2005 by a settlement and a consent order of the Ontario Superior Court. Gardner brought her action less than two years later. She claimed that CRA officials had deliberately misapplied the law for an ulterior purpose and had defended a reassessment they knew was invalid.
(d) Gardner's injury claims
[14] Gardner alleges that by August 1998, she was unable to work because of the ongoing dispute over the reassessment of her income tax. In January 1999, she produced a medical report [page308] linking her disability and inability to work to her conflict with the CRA. In her September 2001 notice of tax appeal to the Ontario Superior Court, Gardner sought damages for negligence, abuse of power and Canadian Charter of Rights and Freedoms violations.[^1]
[15] Gardner also complained to the Canadian Human Rights Commission. In March 1999, she filed a formal complaint alleging discrimination on the ground of marital status. In May 2003, a commission investigation report recommended that Gardner's complaint be dismissed for lack of evidence. Gardner delivered a lengthy response in August 2003 and a shorter response in September 2003, in which she said that because of CRA's actions she had suffered both physical and psychological harm and had to go on long-term disability.
C. Analysis
(a) The motion judge's reasons
[16] Under s. 4 of the Limitations Act, 2002, Gardner was required to commence her action within two years of the day on which she "discovered" her claim. Section 5(1)(a) sets out when a claim is discovered:
5(1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it[.]
[17] The motion judge found that Gardner had "discovered" her claim by as early as August 1998 or no later than September 2001. At para. 38 of his reasons, he said:
Ms. Gardner acknowledged that she had discovered the material facts underlying her claim for damages in 1998, as she was aware of the actions of the CRA officials which she alleged were wrongful, malicious, carried out for an improper purpose and in breach of her Charter rights. She was also [page309] aware at that time that she had suffered damage as she went on long term disability as a result of the stress caused by the reassessment of her Ontario income tax return.
[18] And then, at para. 51, he wrote:
In 1998, Ms. Gardner was aware that she had suffered injury, loss or damage allegedly caused by the actions of CRA officials who reassessed her 199394 income tax for the allegedly improper purpose and unlawful conduct of harassing her intentionally and negligently causing her mental suffering, and to assist in their reassessment of her spouse, Neil McFadyen. She was also aware that the alleged actions of the CRA officials were the legal cause of her injury and she knew that her injuries were compensable in tort law, as she claimed damages for these torts in her income tax appeal in 2001.
[19] At para. 53, the motion judge concluded: "By 2001, Ms. Gardner was aware of all of the material facts that she relied on as the basis for her tort claims."
[20] Relying on the Supreme Court of Canada's decision in Canada (Attorney General) v. TeleZone Inc., [2010] 3 S.C.R. 585, [2010] S.C.J. No. 62, 2010 SCC 62, the motion judge held, at para. 53, that Gardner could have brought her action for misfeasance in public office in 1998 or at least by 2001, as "she was not seeking to challenge her tax assessment in her claim for tort damages". Therefore, as she did not commence her action until 2007, it was out of time.
(b) Was Gardner entitled to seek a determination that her tax reassessment was invalid before proceeding with her claim?
[21] As I have said in the overview, this appeal turns on the answer to this question. The motion judge answered the question no, and I would answer it yes.
[22] Gardner acknowledges, as the motion judge found, that she was aware of the harm caused by the CRA employees who reassessed her tax. However, she submits that she was entitled to obtain a determination that her reassessment was invalid before proceeding with her claim. I agree with this submission.
[23] Although Gardner has alleged several causes of action in her pleading, her principal claim is for abuse of power or misfeasance in public office. In Odhavji Estate v. Woodhouse, [2003] 3 S.C.R. 263, [2003] S.C.J. No. 74, 2003 SCC 69, Iacobucci J. discussed the elements of this tort. At paras. 22-23 of his reasons, he wrote that the tort of misfeasance in public office can arise in two different ways, which he called Category A and Category B. The distinction is important because, as I read the motion judge's reasons, he concluded that Gardner's claim falls under [page310] Category A, while I conclude that it falls under Category B. Iacobucci J. said:
What then are the essential ingredients of the tort, at least insofar as it is necessary to determine the issues that arise on the pleadings in this case? In Three Rivers, the House of Lords held that the tort of misfeasance in a public office can arise in one of two ways, what I shall call Category A and Category B. Category A involves conduct that is specifically intended to injure a person or class of persons. Category B involves a public officer who acts with knowledge both that she or he has no power to do the act complained of and that the act is likely to injure the plaintiff. This understanding of the tort has been endorsed by a number of Canadian courts: see for example Powder Mountain Resorts, supra; Alberta (Minister of Public Works, Supply and Services) (C.A.), supra; and Granite Power Corp. v. Ontario, [2002] O.J. No. 2188 (QL) (S.C.J.). It is important, however, to recall that the two categories merely represent two different ways in which a public officer can commit the tort; in each instance, the plaintiff must prove each of the tort's constituent elements. It is thus necessary to consider the elements that are common to each form of the tort.
In my view, there are two such elements. First, the public officer must have engaged in deliberate and unlawful conduct in his or her capacity as a public officer. Second, the public officer must have been aware both that his or her conduct was unlawful and that it was likely to harm the plaintiff. What distinguishes one form of misfeasance in a public office from the other is the manner in which the plaintiff proves each ingredient of the tort. In Category B, the plaintiff must prove the two ingredients of the tort independently of one another. In Category A, the fact that the public officer has acted for the express purpose of harming the plaintiff is sufficient to satisfy each ingredient of the tort, owing to the fact that a public officer does not have the authority to exercise his or her powers for an improper purpose, such as deliberately harming a member of the public. In each instance, the tort involves deliberate disregard of official duty coupled with knowledge that the misconduct is likely to injure the plaintiff.
[24] In essence, under a Category B claim, Gardner has to prove that CRA knew that their conduct was unlawful -- in other words, that they knew they had no lawful authority to reassess Gardner as a factual resident of Canada -- and that their conduct was likely to harm her. I do not see how Gardner could show CRA knew their conduct -- reassessing her as a factual resident of Canada -- was unlawful without first showing that the reassessment itself was invalid. This, Gardner has done by pursuing her statutory appeal of her reassessment.
[25] That Gardner wanted to show her reassessment was invalid is what distinguishes her case from the result in TeleZone. TeleZone itself reflected the court's concern that procedural, costly and time-consuming roadblocks should not be put in the way of individuals who claim to have been injured by government action and wish to seek redress in the courts. As Binnie J. said, at para. 18, TeleZone "is fundamentally about access to justice". [page311]
[26] Thus, in a case such as TeleZone, where the plaintiff was seeking compensation for an invalid ministerial decision but not seeking to invalidate the decision itself, the plaintiff was not required to pursue judicial review of the decision before suing for damages. Gardner's case is different, and in TeleZone, Binnie J. recognized the difference. He wrote, at para. 19:
If a claimant seeks to set aside the order of a federal decision maker, it will have to proceed by judicial review, as the Grenier court held. However, if the claimant is content to let the order stand and instead seeks compensation for alleged losses (as here), there is no principled reason why it should be forced to detour to the Federal Court for the extra step of a judicial review application (itself sometimes a costly undertaking) when that is not the relief it seeks. Access to justice requires that the claimant be permitted to pursue its chosen remedy directly and, to the greatest extent possible, without procedural detours.
As Gardner sought to set aside her reassessment, she was entitled to exercise her statutory right of appeal before bringing her action for damages.
[27] I suppose Gardner could have brought a Category A claim for misfeasance in public office -- a claim that would focus only on the conduct of the CRA employees and would not require showing that her reassessment was invalid -- and thus a claim that could have been brought by 2001. The Attorney General submits that this is the route Gardner ought to have followed. However, he acknowledges that this claim would not have much merit without a successful tax appeal. He proposed that Gardner should have started her action by 2001 and then sought a stay of her action pending a resolution of her tax appeal. She undoubtedly could have done what the Attorney General proposed, but to say that she was required to do so is directly contrary to the philosophy underlying TeleZone. Binnie J. said, at para. 18:
This appeal is fundamentally about access to justice. People who claim to be injured by government action should have whatever redress the legal system permits through procedures that minimize unnecessary cost and complexity. The Court's approach should be practical and pragmatic with that objective in mind.
Gardner has taken a "practical and pragmatic approach" to her claim against the federal government. And, in my view, she started her lawsuit within the limitation period.
D. Conclusion
[28] I conclude that Gardner was entitled to show that her tax assessment was invalid before proceeding with her claim. I would allow her appeal, set aside the order of the motion judge [page312] and, in its place, order that the Attorney General's motion for summary judgment be dismissed.
[29] Gardner is entitled to her costs of the appeal and the motion, fixed in the agreed-upon amounts of $7,000 and $6,000, respectively, each amount inclusive of disbursements and applicable taxes.
Appeal allowed.
Notes
[^1]: Maranger J. struck these claims for damages. He held that they were distinct from her reassessment appeal.
End of Document