Court File and Parties
Court File No.: C-2012-12 Date: 20180822 Ontario Superior Court of Justice
Between:
Sheryl Nelson, Plaintiff (Respondent)
– and –
Roland Lavoie, Investment Planning Counsel Inc., IPC Investment Corporation, IGM Financial Inc., Dennis Serre and Serre Financial Consulting Services Inc., Defendants (Applicants)
Counsel: Brian Pickard, for the Plaintiff Kenneth A. Dekker and Christopher Somerville, for IPC and Lavoie John Longo, for Serre and Serre Financial
Heard: July 13, 2018 in Toronto, Ontario
Decision on Summary Judgment Application
1The defendants brought a summary judgment application on the basis that there is no triable issue. The defendants submit the plaintiff discovered her claim more than two years before she commenced this action. Accordingly, the claim is statute barred under the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B.
Background
2The plaintiff, Sheryl Nelson (“Ms. Nelson”), was a Hydro One employee for over 27 years. Sometime in 2008, Ms. Nelson discussed retirement with a co-worker. During that conversation, the co-worker told Ms. Nelson that she was going to “retire early” without any reduction in her pension. The co-worker explained that a specific financial plan created by a financial planner allowed her to retire early. The co-worker referred Ms. Nelson to the defendant Roland Lavoie (“Mr. Lavoie”), a financial planner at IPC Investment Corporation (“IPC”).
3Ms. Nelson and Mr. Lavoie first met on April 10, 2008. During this meeting, they discussed the option of transferring the Hydro One pension to an Individual Pension Plan (“IPP”). Denis Serre (“Mr. Serre”) of Serre Investments would assist in the set-up of the IPP. According to Lavoie, the IPP would permit Ms. Nelson to retire earlier and be more beneficial to her in the long-term.
4Mr. Lavoie and Mr. Serre informed Ms. Nelson that if Canada Revenue Agency (“CRA”) accepted the IPP, she would have to incorporate a company that would employ her. Ms. Nelson would then start her own business and sell children’s clothes online. She would have to work for a minimum of two years before retiring from that company. The defendants insisted that after two years, the return would be much more substantial than what her Hydro One pension would pay her.
5Sometime in June 2008, Ms. Nelson spoke once more with her co-worker who confirmed that she had no concerns about the financial plan.
6Reassured, Ms. Nelson met with the defendants on June 17, 2008. Together they prepared the necessary paperwork to transfer her pension to an IPP and to form a corporation. At the same time, she signed a letter addressed to the CRA, dated June 13, 2008, requesting the registration of her IPP.
7Ms. Nelson left her employment at Hydro One on August 31, 2008. Her Hydro One salary and benefits were terminated at that time. She also requested Hydro One withdraw the commuted value of her pension of some $683,115.27 and transfer it to the IPP. On November 24, 2008, the transfer was completed.
8In a letter dated October 16, 2008, the CRA confirmed the plan had been accepted and effective as of September 1, 2008.
9On January 16, 2009, Ms. Nelson requested a withdrawal of $2,700 from the IPP. By the next month, Ms. Nelson became aware that the payments were lower than what she had been expecting. Her bookkeeper also informed her that there might be problems in withdrawing funds from the IPP. At her suggestion, she retained an accountant to prepare the tax return for her company. This accountant, Brad Lecour, advised Ms. Nelson in May 2009 that there might be problems with the IPP.
10Ms. Nelson returned to see Mr. Lavoie and Mr. Serre to share her concerns. They reassured her that all was fine. Ms. Nelson was not so easily convinced. She retained the services of Mr. Brian Montgomery, a lawyer with Weaver Simmons LLP, in May of 2009.
11Subsequently, Ms. Nelson sought the opinion of two professionals: a financial advisor, Jules A. Lalonde (“Mr. Lalonde”), and an accountant, Daryl Heinsohn (“Mr. Heinsohn”). Mr. Lalonde provided a memorandum dated July 30, 2009. In his memorandum, Mr. Lalonde states : “[i]n our opinion, the IPP set up for Sheryl Nelson does not meet the requirements for registration and is very likely to have its registration revoked by CRA.”
12Mr. Heinsohn provided his report, dated August 4, 2009, a few days later. In this report, Mr. Heinsohn opined that the IPP “does not appear to meet the requirements for registration and is very likely to have its registration revoked by CRA.” Mr. Heinsohn recommended that she look into a Locked In Retirement Account (“LIRA”) and discuss resolution with the CRA.
13In the meantime, Ms. Nelson had obtained employment at Chapters. During discoveries, she explains that on August 23, 2009, Mr. Lavoie, approached her at her place of work. Ms. Nelson felt uncomfortable speaking to him because by then she had “pretty much figured there was going to be a lawsuit.”
14On August 25, 2009, Ms. Nelson’s legal counsel wrote to Mr. Lavoie seeking confirmation that the IPP was in compliance with the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). Mr. Lavoie sent a reply on September 8, 2009 along with a memorandum dated September 2, 2009 from Serre Financial Services.
15In this document, Serre Financial Services stated that the IPP complied with the Income Tax Act further and explained:
the company sponsoring the pension plan […] must also be for a legitimate use and not for the sole purpose of transferring a pension plan. These conditions are naturally met when the employee continues to work and earn income through the sponsoring company.
16Weaver Simmons LLP sent an additional letter to the defendants on September 14, 2009. In that letter, they expressed their disappointment that both defendants had left numerous questions asked in the initial letter unanswered.
17Mr. Lavoie wrote to Ms. Nelson on September 28, 2009, asking why she would not return his calls. There was no further communication between the defendants and Ms. Nelson until March 23, 2011, when Mr. Serre gave an opinion on the pension plan. Mr. Serre explained that although there were risks to the plan, it was in fact meeting its funding expectations. He stated:
As of the plan year ending December 23, 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 point in time.
18On October 10, 2010, Weaver Simmons LLP contacted the CRA asking it review the IPP’s compliance with the Income Tax Act. They received no reply. The legal firm then wrote on October 27, 2010, to the audit manager asking for confirmation that the plan conformed to “the relevant provisions of the Income Tax Regulations”.
19On September 28, 2011, the CRA confirmed in a written letter that Ms. Nelson’s IPP did not comply with the regulations. Ms. Nelson submitted a request for voluntary disclosure and finalized a resolution with the CRA on July 5, 2013.
20The Statement of Claim was issued on June 20, 2012.
Position of the Applicants (Defendants)
21Although separate counsel represent the defendants, their positions on this motion are the same. They submit that Ms. Nelson’s action is statute barred due to the expiration of the two-year limitation period for an action as set out in s. 4 of the Limitations Act, 2002. They also submit that there is no real dispute on the summary of the facts as outlined.
22On those facts, Ms. Nelson knew or ought to have known by August 2009 that she had a cause of action against the defendants. By then, she was aware that the monthly benefits were not what the defendants suggested. Further, her bookkeeper, two other accountants and one financial advisor informed her that the viability of the IPP was questionable. She had consulted with counsel. Her counsel had obtained an expert’s report that opined: “the IPP created for Ms. Nelson does not appear to meet the requirements for registration and is very likely to have its registration revoked by CRA.”
23Ms. Nelson admitted during discoveries that they seriously considered a lawsuit by August 23, 2009. She stated, “I’m not sure if it was already in the work, but we knew, yeah, we were going to have to, yeah.” Yet, she waited until June 20, 2012, to institute an action claiming some $3,000,000 in damages sustained because of negligent financial advice and misrepresentation.
24The defendants submit that the cause of action materialized when the plaintiff entered into a transaction or took steps relying on the defendant’s misrepresentation or negligent advice. They submit these misrepresentations and negligent advice occurred from April to November of 2008, with the establishment of the IPP taking place in the fall of 2008.
25According to the defendants, the fact that the IPP was de-registered by the CRA in 2011 is nothing but a red herring, since the cause of action had its genesis in 2008 or, at the latest, in August of 2009.
26The defendants further submit that the plaintiff did not require specific knowledge of what her losses would be but only specific knowledge that the cause of action had arisen. The defendants rely on ss. 4 and 5 of the Limitations Act, 2002. As well, the defendants rely on Hamilton (City) v. Metcalfe & Mansfield Capitol Corporation, 2012 ONCA 156, 347 D.L.R. (4th) 657; and Unicorr Limited v. Minuk Construction & Energy Limited, 2016 ONSC 7350, aff’d 2017 ONCA 757.
Position of the Respondent (Plaintiff)
27Ms. Nelson does not dispute the facts outlined by the defendants. She disputes that the discovery of her claim commenced in August 2009 upon receipt of Mr. Heinsohn’s report.
28Although she may have had suspicions on the validity of her IPP, she submits her claim did not materialize until the CRA deregistered her plan by notice dated September 28, 2011. Since the Statement of Claim was issued on June 20, 2012, it is well within the time prescribed by the Limitations Act, 2002. She submits it was not until that time that the essential elements of s. 5 of the Limitations Act, 2002, were met. At that point, she was aware that she would have to indemnify the CRA for back taxes, interest and any associated penalties.
29Ms. Nelson submits that discoverability involves fairness to both parties. She argues the courts should fully consider the individual interests of both parties when determining when a limitation period begins.
30According to Ms. Nelson, court must employ reasonableness in the analysis to discourage unnecessary and premature lawsuits. In that sense, it does not assist the administration of justice to institute an uncertain claim. Although she may have had suspicions about the viability of the IPP, it was not until the CRA informed her of its invalidity that a cause of action accrued. It was only then that she came to know that losses and damages occurred.
[31] The plaintiff relies on the following cases:
- Royal Bank of Canada v. Tie Domi Enterprises Ltd., 2011 ONSC 7297, 38 C.P.C. (7th) 317;
- Smyth v. Waterfall, 50 O.R. (3d) 48, 136 O.A.C. 348;
- Dundas v. Zurich Canada, 2012 ONCA 181, 109 O.R. (3d) 521;
- Novak v. Bond, [1999] 1 S.C.R 808,172 D.L.R. (4th) 385;
- Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, 323 O.A.C. 246; and
- Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321.
The Law
32The Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.04(2)(a), permit summary judgments if there is no genuine issue requiring a trial. The Supreme Court of Canada, in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 49, concluded that for a summary judgment to be granted, judges must be able to “reach a fair and just determination on the merits on [such] motion”. The judge must be able to make the necessary findings of fact, to apply the law to those facts, and thereby arrive at a just result.
33Sections 4 and 5 of the Limitations Act, 2002 must be analyzed to determine if a just result can be achieved.
34Section 4 of the Act states: “[u]nless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.”
35Section 5 of the Act sets out the elements to be met to ascertain when a claim was or should have been discovered by the plaintiff:
Discovery
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,
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 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).
Presumption
(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
36These two sections place the onus on both parties. First, the moving party must show that there is no genuine issue for trial. Second, court presumes that the respondent knew about the claim, on the day of the act or omission on which the claim is based, unless the contrary is proved.
Discussion
37There does not seem to be much dispute that Ms. Nelson had some concerns that the CRA might not accept the defendant’s financial plan. Her concerns increased as time progressed, especially when she received the report of Mr. Heinsohn.
38Ms. Nelson’s concerns were considerably relieved for two years because of the information she received from the CRA. After all, the CRA confirmed the approval and registration of the IPP. Additionally, the defendants appeased her concerns at least twice — on September 2, 2009 and March 23, 2011. They assured her that even though there were risks with the plan, “it was in fact meeting its funding expectations”. At no time did they ever tell her that the IPP could be deregistered.
39The defendants submit that by August of 2009, Ms. Nelson was quite aware that she was not receiving what she had expected. Her bookkeeper and two accountants, as well as the financial advisor, informed her that the plan could be deregistered and that she should have discussions with the CRA. Accordingly, they submit the test for knowledge of a cause of action and damages is satisfied.
40The defendants submit that this situation is similar to Hamilton (City) v. Metcalfe & Mansfield Capital Corporation. In that action, the city had purchased ten million dollars of non-bank sponsored notes on July 24, 2007. On August 13, 2007, the market collapsed. Ten days later, the city agreed to be part of the Montreal Accord. The participants of the Accord entered a standstill agreement for an initial period of 60 days, which was later extended. On September 26, 2007, the notes matured, but the city was not paid. On January 10, 2008, the standstill period ended and these parties put a stop to their participation in the Accord. On September 25, 2009, the city commenced an action.
41The Court of Appeal ruled that the limitation period ran from the date that the city purchased the shares on July 24, 2007. The city knew, on that date, that they were misled. The elements of the cause of action accrued at the time of the purchase, not at the time of the default.
42In Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, the Court of Appeal also ruled the Montreal Accord did not suspend the limitation period. The court ruled there was no evidentiary basis to arrive at that conclusion.
43The defendants also rely on Unicorr Limited v. Minuk Construction & Engineering Limited. In that case, a land developer hired a contractor and project manager in 2004. They did not seek site plan approval for the plaintiff’s project until January 2009. Pending approval, the city passed a by-law applying development charges for permits submitted after June 2009. The defendant did not alert the plaintiff about the new bylaw. In July 2011, they submitted the building permit application that was then subject to the new charges. The plaintiff commenced his action in 2015. Perell J. found that the plaintiff discovered the claim in 2011 when he was told about the charges that could have been avoided with an earlier application. Therefore, the claim was statute barred.
44These decisions appear to be somewhat opposed to the subsequent decisions where courts adopted a more holistic approach to analysis of s.5 of the Limitations Act, 2002.
45In Longo v. MacLaren Art Centre Inc., at para. 41, the Court of Appeal held that the criteria in s. 5(1)(a) of the Limitations Act, 2002, is conjunctive. Therefore, all of the elements of s.5 (1)(a) of the Act must be satisfied before the limitation period begins. Only two of these elements are contentious in this motion.
46First, the plaintiff must have discovered that loss or damage had occurred to satisfy s. 5(1)(a)(i) of the Act.
47This requirement was determinant in Charette v. Trinity Capitol Corporation, 2012 ONSC 2824, O.J. No. 2328. In that case, the plaintiffs had participated in a leveraged charitable donation plan. The CRA eventually disallowed the plan. The motion judge stated, at para. 112:
Considering all these circumstances, as well as the confusing and intimidating nature of the CRA assessment and appeal process, a trial judge might conclude that even a sophisticated taxpayer like Charette did not and could not know that damage had occurred or that a legal proceeding against the defendants would be an appropriate remedy.
48The judge opined the evidence suggested that the damages had not crystallized until the CRA denied that tax credits. He stated that this issue had to be decided at trial. Accordingly, the judge dismissed the motion for summary judgment.
49The same result occurred in Dundas v. Zurich and Inzola Main Street v. Brampton (City of), 2017 ONSC 5392.
50The second contentious element of this motion is s. 5(1)(a)(iv) of the Act: the proceeding must be an appropriate means to seek to remedy the injury, loss or damage. In Clarke v. Faust 2016 ONCA 223, at para. 11, Juriansz J.A. wrote:
The motion judge was mistaken in her understanding of the Act. She failed to consider the requirement of s. 5(1)(a)(iv) that a person with a claim know that a proceeding would be an appropriate means to seek to remedy the injury, loss or damage having regard to its nature. That provision requires, in my view, a person to have good reason to believe he or she has a legal claim for damages before knowing that commencing a proceeding would be an appropriate means to seek to remedy the injury, loss or damage.
51Most recently, in Presidential MSH Corp. v. Marr, Foster & Co. LLP, the Court of Appeal held that an action against a professional tax advisor was not appropriate until the CRA responded to a Notice of Objection and confirmed its initial assessment — not when the taxpayer received a Notice of Assessment. It is only when the CRA decision was final, that legal proceedings became appropriate. In other words, the pursuit of an administrative or alternative dispute-resolution process that could eliminate potential damages prevents the start of the limitation period. These processes make legal proceedings premature and inappropriate. This is ultimately the goal of s. 5(1)(a) of the Act: discourage the institution of premature actions. (Unicorr Limited v Minuk Construction & Engineering Limited, at para. 87, citing 407 ETC Concession Co. Ltd. v. Day, 2016 ONCA 709, 133 O.R. (3d) 762.)
52The analysis of s. 5(1)(a)(iv) is distinct from the analysis at s. 5(1)(a)(i). The discoverability of loss or damage and the institution of appropriate legal proceeding are two different requirements. The Court of Appeal, in Presidential MSH Corporation at para. 27, warns:
it is important not to collapse the analysis of discoverability of loss or damage […] with the determination whether legal action is appropriate although other proceedings to deal with the loss may be relevant to both questions.
53Laskin J., in 407 ETR Concession Company Limited v. Day, 2016 ONCA 709, 133 O.R. (3d) 762, explains at para. 33:
[t]he appropriateness of bringing an action was not an element of the former limitations state or the common law discoverability rule. This added element can have the effect – as it does in this case – of postponing the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant’s action.
The determination as to whether the action is “appropriate” will depend on the specific factual and statutory setting of each case (407 ETR Concession, para. 34).
54When applying these principles to this factual situation, it is clear that Ms. Nelson had some suspicions by the August of 2009 regarding the conformity of the IPP. The advice that she received from the accountants and financial planners she consulted was concerning. The defendants submit that these facts satisfy the test at s. 5(1)(a) of the Act. However, I am unable to accept this argument because it fails to satisfy the requirement of s. 5(1)(a)(i) and s. 5(1)(a)(iv).
55Firstly, the defendants’ reassurance prevented the plaintiff from discovering that loss or damage has occurred. The defendants, 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 defendants 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.
56Secondly, I cannot accept the defendants’ 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 defendants 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.
57Further, the defendants 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 defendants 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.
58Had 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.
59I prefer and accept the reasoning of the more recent decisions of Presidential MSH and Clarke v. Faust, since such an approach is more in line with the rule of fairness enunciated in Smyth v. Waterfall; Dundas v. Zurich; and Berardinelli v. Ontario Housing Corp., [1979] 1 S.C.R. 275, 90 D.L.R. (3d) 481; and Novak v. Bond. This approach reduces the amount of premature litigation and permits the courts to better assess the issues and the damages, when the matter proceeds to trial.
60In summary, I find that the limitations period commenced on September 28, 2011. Since the Statement of Claim was issued on June 20, 2012, the claim is well within the limitation period. Even though the plaintiff is claiming damages for loss of wages, pension and benefits that may have occurred prior to September 28, 2011, the trial judge will be in the preferred position of determining what damages if any, arise from the conduct of the defendants.
61Accordingly, the defendants’ motion is dismissed. Should it be necessary to address the issue of costs, parties may make arrangements through the Trial Coordinator’s office in Sudbury for a date to be set at everyone’s convenience.
62Order to issue as per reasons.
The Honourable Mr. Justice Robert G.S. Del Frate
Released: August 22, 2018