Continental Casualty Company v. Lawyers' Professional Indemnity Company
Ontario Reports
Ontario Superior Court of Justice
Leiper J.
November 23, 2020
154 O.R. (3d) 23 | 2020 ONSC 7131
Case Summary
Insurance — Liability insurance — Interpretation and construction — Lawyer giving advice to multiple clients regarding plan for charitable donations — Canada Revenue Agency finding plan to be a sham and disallowing donations — Litigation against lawyer and firm resulted in LawPRO contributing $1 million to settlement — Excess insurers applying for declaration that claims were not related or did not amount to a single claim such that LawPRO's liability limit was $2 million — Application allowed — One client had received advice regarding a separate tax shelter — Common solicitor-client relationship but distinct errors resulted in aggregate policy limit being available.
Professions — Barristers and solicitors — Professional liability insurance — Lawyer giving advice to multiple clients regarding plan for charitable donations — Canada Revenue Agency finding plan to be a sham and disallowing donations — Litigation against lawyer and firm resulted in LawPRO contributing $1 million to settlement — Excess insurers [page24] applying for declaration that claims were not related or did not amount to a single claim such that LawPRO's liability limit was $2 million — Application allowed — One client had received advice regarding a separate tax shelter — Common solicitor-client relationship but distinct errors resulted in aggregate policy limit being available.
A lawyer gave tax advice to four sets of clients about a proposed plan whereby the client donated money to a Canadian charity and received a tax receipt. The Canada Revenue Agency (CRA) concluded that the plan was a tax shelter and disallowed the donations. The clients commenced litigation against the lawyer and his firm. Claims brought by three of the clients, L, B, and I, were settled. The claim by the fourth client, Z, remained unresolved. The respondent contributed $1 million to the settlement. The applicants, being the excess insurers, contributed $3,194,588.53. The applicants disagreed with the respondent's position that the client claims amounted to a single claim or related claims such that its contribution was limited to $1 million. The respondent's aggregate limit of liability for multiple claims would have been $2 million. The applicants argued that L, in addition to the claim related to the donation plan, claimed that the lawyer acted negligently in recommending that she participate in a plan involving her athletic trust and purchase of a life and disability policy. Further, L's charitable donation deduction was disallowed not only because the donation plan was a sham, but because the donation was made to an entity that was not a registered charity. That entity was a foundation was created by another client, I, who had participated in the donation plan and gave instructions to the lawyer and paid him fees to create the foundation to implement the donation plan. Its charitable status had been revoked by the time that L donated to it. The applicants relied on those differential elements in applying for a declaration that the claims did not constitute a single claim or related claims.
Held, the application should be allowed.
There were unrelated allegations in the claims against the lawyer and his firm such that the aggregate limit under the respondent's policy was available. At a general level, it was fair to describe the client claims as somewhat related, with elements in common such as each client's participation in the donation plan and the fact that all steps taken and advice given was to reduce taxes payable. The CRA made similar findings as against most of the clients. However, L's claim had two added errors, one of which was different in nature and in kind from the donation plan error. The life/disability plan was not part of the donation plan, but rather was a different tax saving vehicle which used a life and disability policy to transfer shares from an athletic trust to an offshore company. It had features independent of the donation plan, including different penalties and potential consequences to L. The advice leading to L's participation and subsequent successful claim in liability for her participation in the life/disability plan did not depend on a successful claim in negligence related to the donation plan. There was a common solicitor-client relationship but distinct errors. Although the lawyer's failure to advise L against donating to an ineligible Canadian charity was in one sense a stand-alone error, the donation was the first necessary step for L's participation in the donation plan and so the relationship amounted to the errors being related. Also, the claims involving the creation of the foundation were related to the primary error of advising that the donation plan was lawful.
Cases Cited
Simpson Wigle (para. 48), apld
Cases referred to
Dunn v. Chubb Insurance Co. of Canada (2009), 97 O.R. (3d) 701, [2009] O.J. No. 2726, 2009 ONCA 538, 266 O.A.C. 1, 75 C.C.L.I. (4th) 29; Elfstrom, Smith & Co. v. Kansa General Insurance Co., 1988 2904 (BC SC), [1988] B.C.J. No. 1476, 29 B.C.L.R. (2d) 41, [page25] 36 C.C.L.I. 106, 11 A.C.W.S. (3d) 38 (S.C.); Lindsay v. Aird & Berlis LLP, [2018] O.J. No. 675, 2018 ONSC 7424; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, 323 D.L.R. (4th) 513, 406 N.R. 182, [2010] 10 W.W.R. 573, J.E. 2010-1683, 293 B.C.A.C. 1, 9 B.C.L.R. (5th) 1, 73 B.L.R. (4th) 163, 89 C.C.L.I. (4th) 161, 93 C.L.R. (3d) 1, [2010] I.L.R. I-5051, 193 A.C.W.S. (3d) 1292, EYB 2010-179515, 2010EXP-3049; Simpson (Receiver of) v. Lloyd's Underwriters, [2009] O.J. No. 1577, 2009 ONCA 327, 176 A.C.W.S. (3d) 615, 73 C.C.L.I. (4th) 23, affg (2008), 2008 51771 (ON SC), 92 O.R. (3d) 551, [2008] O.J. No. 3919, 66 C.C.L.I. (4th) 311, 300 D.L.R. (4th) 722, 170 A.C.W.S. (3d) 627, [2009] I.L.R. I-4757 (S.C.J. (Comm. List)); Simpson Wigle Law LLP v. Lawyers' Professional Indemnity Co. (2014), 120 O.R. (3d) 655, [2014] O.J. No. 3037, 2014 ONCA 492, 320 O.A.C. 187, 98 E.T.R. (3d) 180, 241 A.C.W.S. (3d) 939 [Leave to appeal to S.C.C. refused [2014] S.C.C.A. No. 401, 2015 3366]
Statutes referred to
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 110 [as am.]
APPLICATION for a declaration regarding professional liability insurance coverage.
Heather Gray and Emma Nicholl, for applicants.
Stephen Cavanagh, for respondent.
LEIPER J.: —
Overview
[1] In this Application, the Applicants (the "Excess Insurers") seek a declaration against the Lawyers' Professional Indemnity Company ("LawPRO") that certain claims made against a lawyer, Stuart Bollefer ("Bollefer") and Aird & Berlis, were not "single" or "related" claims.
[2] LawPRO responds that the claims were a "single claim" or "related" claims.
[3] LawPRO's insurance policy limits its contribution to $1 million per "single claim". If the claim is not a "single" or "related" claim, LawPRO would be required to pay the $2 million aggregate limit of liability toward the settlement of the claims.
The Issue on the Application
[4] There is one issue on this application: whether the claims arose from a single error, omission or negligent act or alternatively, whether the claims arose from related errors, omissions or negligence acts such that LawPRO's contribution would be limited to $1 million.
Background
[5] Bollefer gave tax advice to clients, Dlorah Zaak Investment Inc., and Harold Kaaz (collectively "Zaak"), Catherine Pace Lindsay, [page26] ("Lindsay") Donovan Bailey ("Bailey") and Don Ierullo, Vito Ierullo and affiliates (the "Ierullo Group") about a proposed "Donation Plan". The clients followed this advice and participated in a donation arrangement in which the client donated money to a Canadian charity (either the Dillon Foundation or the Latitude Foundation, both created by Aird & Berlis in part, at the direction of the Ierullo Group) and received a tax receipt. In Bailey's case he made his donation directly to the University of West Indies. The Canadian charities in turn gifted the funds to the University of West Indies. The University kept a portion of the donation and used 85 per cent of the donation to purchase life insurance policies through Hampton Insurance Limited located in the Bahamas, a long-time client of Aird & Berlis (the "firm"). The life insurance was to benefit the University, but through a "Protector" the original donors (the clients) would become the ultimate beneficiaries to the proceeds under the policies. A portion of the donation funds went to the insurance broker for fees.
[6] The Canada Revenue Agency ("CRA") investigated and concluded that the Donation Plan was a tax shelter. It disallowed the donations. This led to claims and litigation against Bollefer and the firm, (the "Client Claims"). In his reporting letter to LawPRO, Bollefer described the mechanism of the Donation Plan as well as his firm's relationships to Hampton Insurance Limited and to the Ierullo Group. In his letter, he admitted that he might "not have adequately addressed whether The University of West Indies could issue a tax receipt in the amount it did, knowing it would not be entitled to 85 per cent or more of the proceeds received if the beneficiary of the trust was changed".
[7] LawPRO and the Excess Insurers settled the claims brought by Lindsay, Bailey, and the Ierullo Group (the "settlement"). The Zaak claim remains unresolved. The Excess Insurers contributed $3,194,588.53 to the settlement. LawPRO contributed $1M to the settlement.
[8] At the time of the settlement, LawPRO considered the Client Claims to be one claim, thus limiting its contribution to $1 million. Under the LawPRO Policy (the "Policy"), a single claim arises "from a single or related error(s), omission(s) or negligent act(s)". In the case of multiple or unrelated claims, the Policy provides for a $2 million aggregate limit of liability.
[9] The Excess Insurers contributed to the settlement but reserved their rights to argue that the Client Claims were not a "single claim".
The Nature of the Client Claims
Elements in common
[10] The Client Claims concerned negligent advice concerning the risks and legality of the Donation Plan. This is evident from [page27] a review of the Statements of Claim for Lindsay and Zaak, the similar CRA letters sent to several of the clients and the description of the claim in Bollefer's letter to LawPRO. These elements are described further below.
[11] In 2009-2010 the CRA notified Lindsay, Ierullo Group and Zaak that it was disallowing their deductions under the Donation Plan. The CRA found that the donated funds did not meet the definition of "gift" under s. 110 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) because the participants each received a benefit via the insurance policies that would see substantial return of their cash donations to them. It also found there was no intention to give, a necessary precondition for a gift. The CRA notices described the Donation Plan as a "sham".
Differential element Oone: The Lindsay Life/Disability Plan
[12] In addition to the common claims for damages relative to the Donation Plan, there were services and tax advice provided by Bollefer that were not common to each client. These differences are what separate the positions of the parties. The Excess Insurers frame these features as unrelated acts of negligence/errors/omissions. LawPRO submits they are all features of the overarching error: the problematic Donation Plan. LawPRO submits that these are "distinctions without a difference" or aggravating features of a singular act of negligence.
[13] The first difference is found in the Lindsay claim. In addition to the claim related to the Donation Plan, Lindsay claimed that Bollefer acted negligently in recommending that she participate in a plan (referred to as the "Life/Disability Plan") which would permit shares in private companies owned by her athletic trust to be transferred to an offshore company by purchasing a life and disability policy. Lindsay's claim alleged she had paid $250,000 to Aird & Berlis' trust account to fund the Life/Disability Plan. This was a separate amount from the amount she paid to donate into the Donation Plan ($750,000). In 2008, Lindsay's claim alleged that she received the record book for the Life/Disability Plan and discovered an opinion warning that if the CRA learned of the Life/Disability Plan it would likely reassess her and might bring criminal proceedings against her.
[14] In 2018, Dietrich J. granted summary judgment against Bollefer and Aird & Berlis: Lindsay v. Aird and Berlis LLP, [2018] O.J. No. 675, 2018 ONSC 7424. Justice Dietrich found that Lindsay had presented compelling evidence of negligence on the defendants' part by failing to warn her of the risks inherent in her $750,000 "Donation" (the "Donation Plan"). [page28]
[15] Justice Dietrich also found that the defendants were liable for an "untimely and ineffective warning" in relation to the $250,000 which Lindsay placed in the Life/Disability Plan. The question of damages was referred to trial, and later settled.
[16] The Excess Insurers submit that the Life/Disability Plan advice was a separate error/omission/act of negligence from that involved in the creation of the Donation Plan.
Differential element two: Donation to a charity with revoked charitable status
[17] In addition to the disallowance for the donations based on its finding that the Donation Plan was a sham, the CRA disallowed the charitable deduction claimed by Lindsay because it was made to an entity that was not a registered charity. Lindsay made two donations to the Dillon Foundation in December of 2006. The Dillon Foundation had its charitable status revoked on October 28, 2006.
[18] As part of her claim, Lindsay alleged that Bollefer and Aird & Berlis breached their duties to her by "failing to ensure that her donation was made to a registered Canadian charity".
[19] The Excess Insurers argue that this is a separate error/ omission/act of negligence by Bollefer and is unrelated to the creation of the University Insurance Tax Arrangement.
Differential element three: The creation of the Latitude Foundation
[20] The Ierullo Group participated in the Donation Plan as described above. They also gave instructions to Bollefer to create the Dillon Foundation and the Latitude Foundation to implement the Donation Plan.
[21] The Ierullo Group made their donation under the Donation Plan to the Latitude Foundation. Bollefer was one of the original directors of the Latitude Foundation. He was paid fees by the Ierullo Group for setting up the Latitude Foundation.
[22] In their demand letter of December 2017, the Ierullo Group included a claim for fees paid to unwind the structure created to support the University Insurance Tax Arrangement.
[23] The Excess Insurers argue that the creation of the Latitude Foundation and the claim by the Ierullo Group for a return of the fees paid is a separate act of negligence unrelated to the University Insurance Tax Arrangement.
The Policy Definition of "Claim"
[24] The LawPRO policy in force at the time of the claims defined a "Claim" as follows: [page29]
"CLAIM" is defined as "(i) a written or oral demand for money or services; or (ii) a written or oral allegation of breach in the rendering or failure to render PROFESSIONAL SERVICES, received by the INSURED and resulting from a single or related error(s), omission(s) or negligent act(s) in the performance of or failure to perform PROFESSIONAL SERVICES".
ALL CLAIM(S) or circumstances of an error, omission or negligent act which any reasonable person or LAW FIRM would expect to subsequently give rise to a CLAIM, which arise from a single or related error(s), omission(s) or negligent act(s), shall be considered a single CLAIM regardless of the number of INSUREDS or the number of persons or organizations making a CLAIM; or the time or times the error(s), omission(s) or negligent act(s) took place.
The Applicable Law
[25] The general principles applicable to the interpretation of insurance policies are:
-- Where the language of the policy is unambiguous the court should give effect to that language, reading the policy as a whole;
-- Where the language of the policy is ambiguous, general rules of contract construction apply, and:
-- The courts should prefer interpretations that are consistent with the reasonable expectations of the parties, so long as that interpretation is supported by the text of the policy.
-- The courts should avoid interpretations that would give rise to unrealistic results or that would not have been in the parties' contemplation at the time the policy was concluded.
-- Courts should strive to ensure that similar insurance policies are construed consistently.
-- When the rules of contract construction fail to resolve the ambiguity, courts will construe the policy contra proferentem -- against the insurer. This means that coverage provisions are interpreted broadly, and exclusion clauses narrowly.
See: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33.
[26] The principle of striving to ensure that similar insurance policies are construed consistently is an important feature of the case at bar. This is because the provision in the LawPRO policy that is the subject of this case has been considered in Simpson Wigle Law LLP v. Lawyers' Professional Indemnity Co. (2014), 120 O.R. (3d) 655, [2014] O.J. No. 3037, 2014 ONCA 492, leave to appeal to S.C.C. refused [2014] S.C.C.A. No. 401, 2015 3366. [page30]
The Leading Case in Ontario: Simpson Wigle
[27] The leading case in Ontario on the issue of whether a claim results from "related" errors, omissions or negligent acts is Simpson Wigle Law LLP v. Lawyers' Professional Indemnity Co.
[28] The Court of Appeal concluded that the analysis should be informed by the dictionary meaning of the word "related". Two or more claims will be found to be "related" when there is a "sufficient association or connection between them" with such a determination to be made in the context of the whole policy. The court must consider the similarities and differences between the nature of the alleged misconduct and the losses for which recovery is sought: Simpson Wigle, at para. 70.
[29] In Simpson Wigle, the Court of Appeal considered legal advice and services provided to two brothers, A. and F., who owned agricultural properties in Waterdown, Ontario. One of the brothers, A. suffered from Parkinson's Disease. Although each brother held a power of attorney for the other, and there was an alternate named attorney, their lawyer Francis Wigle of the firm Simpson Wigle, and CIBC applied to be appointed committees for A. This arrangement continued until A.'s death.
[30] After F. died, Francis Wigle and Milne, another partner at Simpson Wigle, were named as executors to the estate. Francis Wigle declined to act as executor although he acted as solicitor to the estate and assisted with its administration. He arranged for sales of the various pieces of real estate that were part of A.'s estate.
[31] An action brought by A.'s estate trustees against Simpson Wigle, Wigle, Milne and CIBC alleged losses resulting from breaches of fiduciary duty and conflict of interest leading to alleged improvident sales of property in A.'s estate (the "Real Property/Improvident Sale Claim"). The claim also alleged losses resulting from the wrongful appointment of Francis Wigle and CIBC as the committees for A. and failures of Francis Wigle and Simpson Wigle to disclose to the court the naming of an alternate attorney for A (the "Committee Claim").
[32] The Court of Appeal found that the Committee Claim was a separate claim from the Real Property/Improvident Sale Claim.
The Principles Discussed in Simpson Wigle
[33] The Court of Appeal began with the alleged acts of negligence in the claim. "Generally", it could be said that these were related claims. The claims concerned the same players, the same firm and a fiduciary relationship owed to the firm's clients.
[34] The Court of Appeal considered the approach to similar questions in the following cases and concluded that "general" [page31] relatedness does not end the analysis: Simpson (Receiver of) v. Lloyd's Underwriters (2008), 2008 51771 (ON SC), 92 O.R. (3d) 551, [2008] O.J. No. 3919 (S.C.J. (Comm. List)) affd [2009] O.J. No. 1577, 2009 ONCA 327, at para. 1, Dunn v. Chubb Insurance Co. of Canada (2009), 97 O.R. (3d) 701, [2009] O.J. No. 2726, 2009 ONCA 538, and Elfstrom, Smith & Co. v. Kansa General Insurance Co., 1988 2904 (BC SC), [1988] B.C.J. No. 1476, 29 B.C.L.R. (2d) 41 (S.C.).
[35] In Simpson (Receiver of), Lederman J. considered the issue of related claims after a wrongdoer stole real estate deposits from 22 different victims.
[36] Justice Lederman noted that the dictionary meaning of "related" reveals that this word is capable of broad definition. Things can be closely or tangentially related to one another. The court must determine the degree of relatedness that fits with the intention of the parties to the insurance contract given the objective of the contract and the facts surrounding the contract.
[37] The Court of Appeal affirmed the approach adopted in Simpson (Receiver of) and applied it in Simpson Wigle by looking beyond general notions of what amounts to relatedness in insurance claims.
[38] In Elfstrom, an accounting firm that acted as receiver-manager for several farm companies was sued for failing to: (1) consider and investigate the tax benefits to the companies had they pursued an amalgamation, and (2) improper management of the companies' property.
[39] The issue was whether these claims arose from "related acts" for the purposes of the firm's insurance policy. The court in Elfstrom considered the similarities and differences between the alleged errors, and the kind and character of the alleged losses.
[40] The British Columbia Supreme Court concluded that the claims were not related because the errors underlying the claims were "different in kind and substance". Although the errors were alleged against the same party acting in the same capacity, there were separate failures of judgment by the firm. The first claim was based on a failure to advise or propose amalgamation, an error arising from a failure to properly exercise accounting expertise. The other claim arose from failing to preserve farm property, such as hay and equipment. Reduced to its essence: same farms, different mistakes.
[41] In Dunn, the Court of Appeal considered whether two schemes that took place at different periods of time were "Interrelated Wrongful Acts". The insurance policy at issue defined "Interrelated Wrongful Acts" to mean "all causally connected Wrongful Acts". The Court of Appeal found that the allegations of misconduct were different in nature, kind and time. The [page32] allegations underlying the first scheme related to different acts of non-compliance than those in the second scheme. The acts took place at different times and in different ways. It is important to recognize that the timing of the acts of misconduct, although relevant in Dunn, did not apply in Simpson Wigle nor does timing apply here, due to the exclusion of timing by the LawPRO policy. With timing removed from consideration, the qualitative differences in the allegations of misconduct and claims for relief are critical to the analysis: Dunn, Elfstrom and Simpson Wigle.
Application of the Law to the Case at Bar
[42] As in Simpson (Receiver of) and Dunn, the Court of Appeal looked beyond the general labels or notions of relatedness. It considered the specific alleged errors, omissions, or negligent acts underlying the claims against the defendants.
[43] The Court of Appeal concluded that the "Committee Claim" and the "Real Property/Improvident Sale Claim" were distinct in nature and in kind. The Committee Claim involved misrepresentation to the court. It was a distinct claim from that of the Real Property/Improvident Sale Claim, which involved allegations of improvident sale of the estate properties. Neither depended on the other for success. The court focused on the conduct of counsel including where such conduct took place in the context of a solicitor-client relationship that was generally interrelated.
[44] The nature of the losses claimed were also distinct: The Committee claim sought costs, fees and expenses arising from the allegedly wrongful appointment of Mr. Wigle and the CIBC as A.'s committees. The Real Property/Improvident Sale Claim sought damages for recovery for the diminution of A.'s estate due to the improvident or unnecessary sales of properties in which he had an interest.
The Additional Errors and Omissions
[45] The Excess Insurers submitted that there were three significant stand-alone errors or omissions, existing over and above the participation by the clients in the Donation Plan. These were the Lindsay Life/Disability Plan advice and participation, the failure to ensure that Lindsay's donation was made to a registered Canadian charity and the set-up of the Latitude Foundation for the Ierullo Group, to facilitate the Donation Plan.
[46] LawPRO argues that the claims arise out of the same "error, omission or negligent act" identified in the CRA disallowance letters to Lindsay, the Ierullo Group and Zaak, with little to differentiate the basis for the disallowances as between those clients. In addition, LawPRO relies on the language in the Bollefer reporting letter to LawPRO which repeatedly referred to a plan, [page33] singular, to reduce taxes on behalf of the clients. LawPRO submits that the only error as reported by Bollefer to LawPRO was his failure to consider whether the University of West Indies could issue a tax receipt where 85 per cent or more of the donation would devolve to a beneficiary other than the university.
[47] LawPRO submits that the single, incorrect opinion from Bollefer, that is, the donation to life insurance policy plan was a viable tax planning strategy, and the CRA disallowance of the deductions for the charitable donations is sufficient to conclude that the same error, omission or negligent act caused each loss. LawPRO submits that other differences among the clients are "distinctions without a difference". I disagree.
[48] At a general level, it is fair to describe the Client Claims as somewhat related, with elements in common. These elements include each client's participation in the Donation Plan, the fact that all steps taken, and advice given was to reduce taxes payable by these clients. The clients made claims or litigated over the Donation Plan. The CRA made similar findings as against most of the clients, that the Donation Plan was a sham, there was no intention to give and a significant portion of the gift wound up in the hands of the donors. However, as in Simpson Wigle, and Elfstrom, the analysis must go further. I turn to the three alleged other errors and whether they are "related" to the Donation Plan error/omission.
[49] Lindsay's claim had two added errors, one of which I conclude is different in nature and in kind from the Donation Plan error. This the error related to the Life/Disability Plan. The Life/Disability Plan was not part of the Donation Plan. It was a different tax saving vehicle which used a life and disability policy to transfer shares from the athletic trust to an offshore company. It did not rely on the Dillon or Latitude Foundations. It did not involve the University of West Indies. It was an additional arrangement, with features that were independent of the Donation Plan, including different penalties and potential consequences to Lindsay. In addition to damages sought for various breaches of contract, negligence, negligent misstatement, breach of trust and breach of fiduciary duty Lindsay sought relief that included an accounting for the assets held by the offshore company.
[50] The Life/Disability Plan is referred to in the Statement of Claim and in the reasons for summary judgment of Dietrich, J. in the Lindsay decision. The Statement of Claim pleaded that the Life/Disability Plan was advised "in connection" with the Donation Plan and part of the "overall tax planning". The Statement of Claim described additional actions and components of the Life/Disability [page34] Plan that were not common to the Donation Plan. These included the purchase of a "life and disability policy" to permit the shares in the Lindsay's athletic trust to be transferred to an offshore company. The idea behind this structure was to earn income without paying tax. The funding for the Life/Disability plan was provided by Lindsay sending $250,000 to Aird & Berlis for the purchase. It was not predicated on any donations via the University of West Indies.
[51] In her reasons for judgment, Dietrich J. noted that while there was no written advice on the risks associated with the Donation Plan, the firm provided ineffective and untimely advice to the client in the case of the Life/Disability Plan. This is an indication that this was faulty advice about a separate tax planning vehicle, with different losses, additional relief sought (the accounting) and not dependent on the steps taken in the Donation Plan to make out a claim in negligence.
[52] I conclude that the advice leading to Lindsay's participation and subsequent successful claim in liability for her participation in the Life/Disability Plan, did not depend on a successful claim in negligence related to the Donation Plan. As in Elfstrom, the properties involved in the professional advice were brought to a professional for advice (here, a pool of cash and securities, in Elfstrom, farm companies), but there is more than one error or professional failure. As in Simpson Wigle, there was a common solicitor-client relationship but distinct errors.
[53] The second added error also arises from the Lindsay claim. Unlike the other participants in the Donation Plan, Lindsay donated to the Dillon Foundation after its charitable status was revoked. The CRA disallowed her claim for a deduction on this basis.
[54] Bollefer's failure to advise Lindsay against donating to an ineligible Canadian charity could be characterized as a stand-alone error/omission. It did not depend on the co-existing errors given to Lindsay concerning the Donation Plan. In one sense it is a stand-alone error.
[55] However, the donation to the Dillon Foundation was also the first necessary step for Lindsay's participation in the Donation Plan. Lindsay's donation was disallowed for two overlapping and related reasons: the ineligibility of the Dillon Foundation by the time of her donation, and the Donation Plan which the CRA found to be a sham. Bollefer erred in advising Lindsay to make the donation, it was necessary for the Donation Plan that a donation be made and as it happened, the charity was also ineligible to receive that donation. [page35]
[56] I conclude that these relationships between the donation and the Donation Plan amount to these errors being "related" in the sense used in Simpson Wigle.
[57] The third area of difference submitted by the Excess Insurers involves the creation of the Latitude Foundation for the use of the Ierullo Group in the Donation Plan. Apart from the Ierullo Group's participation in the Donation Plan, they also incurred costs of setting up and unwinding a charity that was created for use in the Donation Plan, which was later found to be a sham by the CRA. The costs of creating and unwinding the foundation were separate line items sought by the Ierullo Group. This error claim did not rely on the Ierullo Group participating in the Donation Plan. It caused additional losses to the Ierullo Group.
[58] I have considered whether this error is closer in relationship to the Donation Plan, given that the Latitude Foundation was created for the use in the Donation Plan. Unlike the Life/Disability Plan created for Lindsay, the raison d'être for creating the Latitude Foundation was to start the process for the Ierullo Group to participate in the Donation Plan. The Latitude Foundation was offside because the Donation Plan was offside. There is a degree of relatedness here which I find makes the Ierullo Group claim "related" to the other claims against Bollefer for the primary error of advising that the Donation Plan was lawful. Any additional costs incurred by the Ierullo Group for the set up and unwinding of the Latitude Foundation were because of the primary error.
[59] I conclude that the error related to the Life/Disability Plan for Lindsay was an additional error that was more than aggravating or supplementary and thus "related" to the Donation Plan error. In contrast, I find that the error related to Lindsay donation to an unregistered charity, and the errors relative to the creation of the Latitude Foundation on behalf of the Ierullo Group are "related" to the claim of error in the Donation Plan.
Conclusion
[60] For these reasons, I find that the Lindsay claim includes a claim that is not "related" to the claims made by the Ierullo Group, Lindsay, and Zaak. I order as follows:
(1) I declare that two of the allegations in the claims against Mr. Bollefer and Aird & Berlis are not related and therefore that the aggregate limit under the LawPRO Policy is available.
Application allowed.
End of Document