Sankar et al v. Millard, Rouse & Rosebrugh LLP et al, 2017 ONSC 5491
COURT FILE NO.: CV 13-287
DATE: 2017Sept15
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Seeram Sankar and Esardi Sankar
Plaintiffs
– and –
Millard, Rouse & Rosebrugh LLP and Wayne Kensit
Defendants
David J. Maltby, for the Plaintiffs
John C. Teal, for the Defendants
HEARD: August 15, 2017
The Honourable Justice R. J. Harper
Reasons for Judgment
Issues
[1] This is a motion for summary judgment brought by the Defendants pursuant to Rule 20.01(3) of the Rules of Civil Procedure for an order dismissing the action of the Plaintiffs on the basis that there is no genuine issue requiring a trial.
[2] The issue that is central to the determination of this motion is:
What is the applicable limitation period and are the plaintiffs’ claim presumptively statute-barred?
If so, should the limitation period be extended on the basis that the claims against the Defendants had not been discovered or were not reasonably discoverable by the plaintiffs until within the two years of the date the Action was commenced?
The Law
[3] In the case of Hawkshaw v Bachly Investments Inc., 2017 ONSC 1364 Justice Glustein made the following observations with respect to summary judgment commencing at paragraph 49:
a. (Both parties rely on Hryniak. I summarize the Hryniak principles below:
i) Summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims. It is no longer merely a means to weed out unmeritorious claims but rather a “legitimate alternative means for adjudicating and resolving legal disputes” (Hryniak, at paras. 5 and 36);
ii) An issue should be resolved on a motion for summary judgment if the motion affords a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive process to achieve a just result than going to trial (Hryniak, at paras. 4 and 49);
iii) On a motion for summary judgment, the judge must first determine if there is a genuine issue requiring a trial based only on the evidence before the judge and without using the judge’s fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under Rules 20.04(2.1) and (2.2) (Hryniak, at para. 66); and
iv) The standard for determining whether summary judgment will provide a fair and just adjudication is not whether the procedure is as exhaustive as a trial, but rather “whether it gives the judge confidence that [the judge] can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” (Hryniak, at para. 50). A judge must be confident that he or she can fairly resolve the dispute (Hryniak, at para. 57).
In Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 (“Sweda Farms”), affirmed 2014 ONCA 878, Corbett J. reviewed the process by which the court considers whether summary judgment is appropriate. He stated (Sweda Farms, at para. 33):
The court on a motion for summary judgment should undertake the following analysis:
The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;
On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;
If the court cannot grant judgment on the motion, the court should:
a. Decide those issues that can be decided in accordance with the principles described in 2) above;
b. Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;
c. In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.
The moving party bears the evidentiary burden of demonstrating that there is no genuine issue requiring a trial. Only after the moving party has discharged its evidentiary burden of proving that there is no genuine issue requiring trial for its resolution does the burden shift to the responding party to prove that its claim has a real chance of success (Sanzone v. Schechter, 2016 ONCA 566, at para. 30).
A court should (i) be cautious to ensure that affidavit evidence does not “obscure the affiant’s authentic voice” and (ii) take “great care” “to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all” (Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, at para. 44 (“Baywood”)).
[50] I apply the same principles on this motion.
Limitation periods
[51] Under section 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the “Limitations Act, 2002”), no proceeding may be commenced more than two years after the claim is discovered.
[52] Under section 5(1) of the Limitations Act, 2002, a claim is discovered when a person knows or ought to know of the statutory requirements for discoverability. Section 5(1) provides:
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 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; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5 (1).
[53] In Sutton v. Balinsky, 2015 ONSC 3081 (“Sutton”), Dunphy J. reviewed the applicable law on section 5. He summarized the principles for discoverability (Sutton, at paras. 146-47):
Our courts have developed a considerable body of case law since 2002 under the new Limitations Act and the case law under the old still has application as regards many issues. Several themes that have consistently emerged from that jurisprudence that are of particular relevance here include:
a. it is not necessary to have all of the facts underlying the complete claim -- it is enough to have sufficient facts to bring a claim: Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80 at para. 55-61;
b. It is enough that the plaintiff has prima facie grounds to infer that a defendant's actions caused or contributed to her loss even if the responsibility of each of multiple possible defendants is not yet known -- certainty is not a requirement: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526 at para. 44 and Johnson v. Studley, 2014 ONSC 1732 at para. 61;
c. "Neither the extent of damage nor the type of damage need be known. To hold otherwise would inject too much uncertainty into cases where the full scope of the damages may not be ascertained for an extended time beyond the general limitation period": per Major J. in Peixero v. Haberman, 1997 325 (SCC), [1997] 3 S.C.R. 549 at para. 18;
d. "error or ignorance of the law or legal consequences of the facts does not postpone the running of the limitation period": per Perell J. in Nicholas v. McCarthy, 2008 54974 (ON SC), 2008 54974 (Ont. S.C.) at para. 27-29, aff'd 2009 ONCA 692, leave to appeal denied [2009] S.C.C.A. No. 476, 2010 12967 (SCC);
A corollary of these principles is the over-arching obligation of due diligence. Limitation periods are designed to incent claimants not to sleep on their rights. Ignorance of the law is not an excuse if the facts giving rise to legal claims are known. A party alerted to circumstances where a reasonably prudent person of similar abilities and in the same circumstances would seek professional advice must do so or risk having the claim struck as being out of time. Knowledge of the existence of damage, its source and a reasonable understanding of who is or might be expected to be responsible for some of it at least is enough.
[4] I apply the principle of the above cases referred to in my analysis.
Background
[5] Seeram Sankar (Seeram) worked in the residential home construction business. He operated his own business at all material times. He has a grade school education. He arrived in Canada from Guyana when he was 24 years of age. His wife is the Plaintiff, Esardi Sankar.
[6] The moving party/Defendant Millard, Rouse & Rosebrugh LLP (Millard) is a limited liability partnership practicing as a firm of chartered accountants. The moving party/defendant Wayne Kensit (Wayne) was an employee of Millard from 1997 to 2007. During that period of time Wayne provided bookkeeping and tax return preparation services for some of Millard’s clients.
[7] Seeram used the services of Millard’s for financial advice, accounting and the preparation of the necessary tax form including goods and services and income tax for his personal taxes in the tax years 2003 and 2004.
[8] In 2009, Canada Revenue Agency (CRA) advised Seeram by letter that they were reassessing his taxes, GST and income tax, for years that included 2003 and 2004. In a letter dated May 6, 2009, the CRA stated that there was unreported revenue and disallowed personal expenses for the years 2003 to 2007 totalling a business income increase of $969,408.00. A large portion of that increase was for the years 2003 and 2004.
[9] One of the more significant issues was the treatment of the property at 18 Valleyford Ave (the property), in Richmond Hill, Ontario. The CRA took the position that $461,682.00 in income came from the sale of that property. CRA also took the position that they would disallow certain personal expenses totaling $129,313.00 for the year 2004 and that he also owed GST taxes for those years. The CRA was also intending to seek penalties pursuant to both the Excise Tax Act and the Income Tax Act.
[10] After receipt of this reassessment, Seeram retained the services of Brantford lawyer, Gerry Smits. According to Seeram he spent approximately $21,000 in legal fees to Mr. Smits for the period 2009 to 2015 related to this matter.
[11] Seeram launched an appeal of the CRA’s position. That was not finally settled until May 4, 2015. The majority of Seeram’s legal argument in the tax appeal process related to substantial interest and penalty charges. Seeram contends that those charges would not have existed had Millard treated Seeram’s income tax and GST preparation properly.
When should Seeram have reasonably been able to know that he had a cause of action?
[12] I am of the view, on the record before me, that Seeram could not have reasonably known that he had a cause of action until at least December 2012. From the initial CRA reassessment until December 2012, Seeram was completely relying on the advice of the professionals that he hired.
[13] Mr. Smits advised Seeram in 2009 that he would be seeking disclosure and once sufficient disclosure from CRA was obtained he would seek the advice of an accountant in order to properly determine the course of action that would be available. During that period, objections and appeals were launched. Numerous reassessments were provided by CRA.
[14] On November 11, 2012, Seeram asked Mr. Smits if he had a case against Millard. Mr. Smits responded by advising Seeram that: “the statute of limitations would be two years from the date you became aware of the issue or should have been aware of negligence. I’m not sure we are there yet.” Mr. Smits went on to state that Seeram may have a case but he did not know for sure and that he would have to speak to an accountant.
[15] On April 2, 2013, Seeram sent an email to Mr. Smits telling him that he wished to bring a claim against Millard. Seeram later retained another lawyer, Mr Maltby. Mr Maltby assisted Seeram in issuing his Statement of Claim on September 10, 2013.
[16] I also find that Seeram has limited education and it is completely understandable that he would have relied on his professional advisors in order to prepare his taxes and to assist him in dealing with CRA in an appropriate manner.
[17] Seeram also contends that he has been going through significant mental health issues. He had been suffering from depression. At one point in 2009 he was hospitalized on a Mental Health Act Form 1 with suicidal ideation. Under the Mental Health Act, a person can be held for a 72 hour assessment in order to determine if he or she should be held for a longer period of time due to concerns that person is a risk of harm to self or others. There was no evidence that Seeram was held for any lengthier period. Seeram filed a letter from his psychiatrist, Dr. Sharma dated April 2, 2013. It states, in part, that Seeram has been diagnosed with depression and anxiety and that his legal conflict with Revenue Canada has been a perpetuation factor in his illness. There was no evidence from Dr. Sharma on how his diagnosis affected his functioning from 2009 forward. There was no evidence of what treatment, if any, Seeram had with respect to this diagnosis.
[18] I do not consider this medical evidence a factor in my determination of when Seeram could reasonably have known that he had a cause of action.
[19] Nevertheless, as stated earlier, I find that Seeram was entitled, under his circumstances, to rely on his professional advice. The process of disclosure and reassessment was ongoing and changing from 2009 until he brought his action in this case.
[20] Seeram received advice from his lawyer handling his tax case that any limitation period had not run by November 2012. Mr. Smits received an email on August 29, 2012 from an accountant John Carr, a tax partner at Millard, stating that he reviewed the file and much of the documentation had been destroyed. He also opined that he felt that Millard had insufficient information to determine whether CRA was correct in their reassessments.
[21] Under the circumstances, Seeram could not have reasonably known that he had a cause of action against the Defendants until December 2012. He did not merely sleep on his case, nor did he act in a manner in which he did not diligently pursue his rights and remedies. The statute of limitation had not run out by the time he issued his Statement of Claim.
[22] The motion for Summary Judgment is dismissed.
[23] If costs cannot be agreed upon, counsel are to arrange a time to speak to costs with the trial coordinator. A Cost Outline is to be provided. This outline is to be no longer than 5 pages. Counsel will be allowed 10 minutes each to make any submissions as to costs.
Harper, J.
Released: September 15, 2017
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ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
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