ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-CV-422615CP
DATE: 2012-12-19
BETWEEN:
WILLIAM BRUCE WOODS
Plaintiff
– and –
REDEEMER FOUNDATION and REDEEMER UNIVERSITY COLLEGE
Defendants
David Thomson, for the Plaintiff
John Downing, for the Defendants
Proceeding under the Class Proceedings Act, 1992
HEARD: December 19, 2012
REASONS FOR DECISION
Perell J.
I. INTRODUCTION
[1] The Plaintiff, William Bruce Woods, brings a motion for certification of this action as a class action under the Class Proceedings Act, 1992, S.O. 1992 for settlement purposes, for approval of the settlement, for approval of payment of class counsel fees, and for ancillary relief.
II FACTUAL BACKGROUND
[2] The Defendant Redeemer Foundation was established in 1987 to raise funds for scholarships and bursaries for students at the Defendant Redeemer University College.
[3] In 1989, Redeemer Foundation established a Loan Forgiveness Program. The idea was that charitable donation tax receipts would be issued for payment of tuition and related education costs for attending Redeemer University College. The payment would be treated as a loan. Provided certain nominal conditions were met, the loans were forgiven at the end of the academic year.
[4] Parents or other family members of students attending Redeemer University College were encouraged to participate in the Forgiveable Loan Program as donors.
[5] By way of example, a $10,000.00 education cost per year would generate a charitable donation tax credit of approximately 29% of the “donation” amount, being $2,900.00 as well as a tuition receipt of $1,600.00 resulting in total federal tax savings of $4,500.00, as well as provincial tax savings of $2,250.00, for total tax savings of $6,750.00. An additional amount of 10% over and above tuition and related education costs of an academic year was also required to be paid under the program. The net cash outlay for a $10,000.00 education cost per year was $4,250.00.
[6] In contrast, absent participation in the program the total eligible tax savings would only be the tuition receipt at 16% generating total federal tax savings of $1,600.00 and provincial tax savings of $800.00 for a total tax savings of $2,400.00. The net cash outlay for a $10,000.00 education cost per year would be $7,600.00.
[7] All loans made in 2001 and 2002 under the Forgivable Loan Program were in fact forgiven.
[8] Canada Review Agency (“CRA”), however, disallowed the charitable donation tax credits for 2001 and 2002. Donors became liable for interest charges on income tax reassessments. Years later, CRA eventually extended a settlement offer to allow 10% of amounts contributed to Redeemer Foundation to be recognized and considered valid gifts.
[9] Mr. Wood participated in the program for the taxation years 2001 and 2002 in connection with the attendance of his daughter. He received official charitable donation tax receipts from Redeemer Foundation of $11,800.00 for the 2001 taxation year and $10,564.00 for the 2002 taxation year.
[10] By letter dated December 15, 2004, CRA notified Mr. Woods that his charitable donation tax credits for the taxation years 2001 and 2002 were being reviewed.
[11] On February 18, 2005, CRA reassessed Mr. Wood’s tax returns for the 2001 and 2002 taxation years. As a result of the reassessment, he was required to make payment of additional taxes and CRA charged interest on tax arrears arising from the reassessments.
[12] Proceedings in the tax courts followed and eventually a settlement with CRA.
[13] On August 28, 2009, Redeemer Foundation surrendered its corporate charter and dissolved. Redeemer University College assumed all of Redeemer Foundation’s responsibilities, including regular communication with donors.
[14] On February 12, 2010, Redeemer University College advised Mr. Wood that CRA would extend an offer of settlement to recognize 10% of the amount contributed to the FLP as a charitable donation tax credit.
[15] On March 4, 2010, CRA confirmed that Mr. Wood’s charitable donation tax credits were disallowed; however, CRA extended a settlement offer to allow 10% of the amount contributed to Redeemer Foundation to be recognized and considered a valid gift.
[16] Mr. Wood accepted the CRA settlement offer, as recommended by Redeemer University College.
[17] Mr. Wood retained Scarfone Hawkins LLP as proposed Class Counsel in an action against the Defendants. In order to pursue this action, Mr. Woods signed a Contingency Fee Retainer Agreement. The Retainer Agreement provides that Class Counsel receive a legal fee of 30% of the value of settlement benefits available to the Class. No application was made to the Class Proceedings Fund in respect of the action.
[18] Scarfone Hawkins LLP engaged Professor Vern Krishna to assist in providing expert evidence as to the tax issues.
[19] The Statement of Claim was issued on March 22, 2011.
[20] On April 8, 2011, the defendants delivered a Notice of Intent to Defend.
[21] There were settlement negotiations both before and after the commencement of the action. Ultimately, a settlement of the class action was reached. Highlights of the settlement are as follows:
• Class Members receive a refund of 10% of the total amount donated to the Forgivable Loan Program in 2001 and 2002.
• Class Members may elect to receive payment of the settlement or direct that it be paid to Redeemer University College as a charitable donation.
• Subject to Class Counsel’s right to review and to audit the administration process, the defendants will administer and implement the settlement.
• The administration process requires Class Members to provide copies of Notices of Reassessment from Canada Revenue Agency for 2001 and 2002.
• The defendants will pay costs to Class Counsel of $65,000.00 inclusive of fees, disbursements and taxes.
[22] For the purposes of the settlement, the following class definition is proposed:
All individuals who participated in the Redeemer Foundation Forgivable Loan Program ("FLP") for the taxation years 2001 and 2002, and who were re-assessed by Canada Revenue Agency (“CRA”), which re-assessment(s) resulted in the disallowance of the charitable donation tax credit(s) related to participation in the FLP."
[23] The Class consists of approximately 200 individuals.
[24] Class Counsel estimates that the value of the settlement is approximately $400,000.00, based on their being approximately 200 Class Members, with an average of $1,000.00 per year of participation in the Forgiveable Loan Program.
[25] Class Counsel recommends the approval of the settlement. Its opinion is that the settlement represents a fair and reasonable compromise of complex litigation that provides significant benefits to Class Members.
[26] Mr. Wood recommends the approval of the settlement.
[27] There were no objectors to the settlement.
[28] Class Counsel are requesting approval of their legal fees, disbursements, and taxes in the amount of $65,000.00 all inclusive. This amount is being paid by the defendants. It represents significantly less than Class Counsel is entitled to under the Class Counsel Contingency Fee Retainer Agreement, and less than the value of time spent. There is no premium or multiplier.
DISCUSSION
[29] Pursuant to s. 5(1) of the Class Proceedings Act, 1992, S.O. 1992, c.6, the court shall certify a proceeding as a class proceeding if: (a) the pleadings disclose a cause of action; (b) there is an identifiable class; (c) the claims of the class members raise common issues of fact or law; (d) a class proceeding would be the preferable procedure; and (e) there is a representative plaintiff who would adequately represent the interests of the class without conflict of interest and who has produced a workable litigation plan.
[30] Having reviewed the motion record, I am satisfied that the criteria for certification are satisfied in the case at bar.
[31] Section 29(2) of the Class Proceedings Act, 1992 provides that a settlement of a class proceeding is not binding unless approved by the court. To approve a settlement of a class proceeding, the court must find that in all the circumstances the settlement is fair, reasonable, and in the best interests of the class: Fantl v. Transamerica Life Canada, [2009] O.J. No. 3366 (S.C.J.) at para 57; Farkas v. Sunnybrook and Women’s Health Sciences Centre, [2009] O.J. No. 3533 (S.C.J.), at para. 43.
[32] In determining whether a settlement is reasonable and in the best interests of the class the following factors may be considered: (a) the likelihood of recovery or likelihood of success; (b) the amount and nature of discovery, evidence or investigation; (c) the proposed settlement terms and conditions; (d) the recommendation and experience of counsel; (e) the future expense and likely duration of litigation; (f) the number of objectors and nature of objections; (g) the presence of good faith, arms-length bargaining and the absence of collusion; (h) the information conveying to the court the dynamics of, and the positions taken by, the parties during the negotiations; and, (i) the nature of communications by counsel and the representative plaintiff with class members during the litigation. See: Fantl v. Transamerica Life Canada, supra at para 59; Corless v. KPMG LLP, [2008] O.J. No. 3092 (S.C.J.), at para. 38; Farkas v. Sunnybrook and Women’s Health Sciences Centre, supra at para. 45.
[33] In my opinion, having regard to the various criteria set out above, the outcome of this class action is fair, reasonable, and in the best interests of the Class Members.
[34] Turning to the matter of Class Counsel’s fee request, the fairness and reasonableness of the fee awarded in respect of class proceedings is to be determined in light of the risk undertaken by the lawyer in conducting the litigation and the degree of success or result achieved: Parsons v. Canadian Red Cross Society, 2000 22386 (ON SC), [2000] O.J. No. 2374 (S.C.J.), at para 13; Smith v. National Money Mart, 2010 ONSC 1334, [2010] O.J. No. 873 (S.C.J.), at paras 19-20; Fischer v. I.G. Investment Management Ltd., [2010] O.J. No. 5649 (S.C.J.), at para 25.
[35] Factors relevant in assessing the reasonableness of the fees of class counsel include: (a) the factual and legal complexities of the matters dealt with; (b) the risk undertaken, including the risk that the matter might not be certified; (c) the degree of responsibility assumed by class counsel; (d) the monetary value of the matters in issue; (e) the importance of the matter to the class; (f) the degree of skill and competence demonstrated by class counsel; (g) the results achieved; (h) the ability of the class to pay; (i) the expectations of the class as to the amount of the fees; (j) the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement: Smith v. National Money Mart, supra, at paras. 19-20; Fischer v. I.G. Investment Management Ltd., supra, at para 28.
[36] In my opinion, Class Counsel should be commended for taking on this small class action. It provided access to justice for the Class Members and a fair and reasonable settlement. The fee request should be approved.
CONCLUSION
[37] For the above reasons, the motion is granted.
[38] Order accordingly.
Perell J.
Released: December 19, 2012
COURT FILE NO.: 11-CV-422615CP
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
WILLIAM BRUCE WOODS
Plaintiff – and –
REDEEMER FOUNDATION and REDEEMER UNIVERSITY COLLEGE
Defendants
REASONS FOR JUDGMENT
Perell J.
Released: December 19, 2012