Jayco, Inc. v. Her Majesty the Queen in Right of Canada et al.

[Indexed as: Jayco Inc. v. Canada]

Ontario Reports

Ontario Superior Court of Justice

Myers J.

March 22, 2021

154 O.R. (3d) 641 | 2021 ONSC 2120

Case Summary

Civil procedure — Pleadings — Statement of claim — Striking out — Plaintiff incurring substantial interest charges and consulting fees in successfully appealing HST assessment — Plaintiff commencing action for indemnity and for negligence against government defendants — Defendants moving to strike statement of claim — Motion granted — Neither common law nor statute provided HST collectors any entitlement to indemnity for costs incurred in carrying out their duties — No proximity to establish private law duty of care between Canada Revenue Agency and taxpayers facing an audit.

Courts — Stare decisis — Ample case law rejected proximity required to formulate private law duty of care between Canada Revenue Agency and taxpayers facing an audit, but one outlier case from British Columbia mentioned favourably by Ontario Court of Appeal in different context — Obiter reference, even if binding, subject to competing principle that judges were required to follow decisions of their own court — Superior Court of Justice case finding no duty of care was followed and action against government defendants dismissed.

Taxation — Goods and Services Tax — Plaintiff incurring substantial interest charges and consulting fees in successfully appealing HST assessment — Plaintiff commencing action for indemnity and for negligence against government defendants — Defendants moving to strike statement of claim — Motion granted — Neither common law nor statute provided HST collectors any entitlement to indemnity for costs incurred in carrying out their duties — No proximity to establish private law duty of care between Canada Revenue Agency and taxpayers facing an audit.

Torts — Negligence — Duty of care — Proximity — Plaintiff incurring substantial interest charges and consulting fees in successfully appealing HST assessment — Plaintiff commencing action for indemnity and for negligence against government defendants — Defendants moving to strike statement of claim — Motion granted — Neither common law nor statute provided HST collectors any entitlement to indemnity for costs incurred in carrying out their duties — No proximity to establish private law duty of care between Canada Revenue Agency and taxpayers facing an audit.

The plaintiff was a U.S. business that sold RVs and parts to dealers in the U.S. and Canada. The sales of parts attracted HST, so the plaintiff was registered under the Excise Tax Act. The Canada Revenue Agency (CRA) conducted an HST audit and issued an assessment against the plaintiff in the amount of almost $14 million for uncollected HST on RVs sold into Canada during the audit period. The plaintiff appealed through the CRA's internal process, and the tax branch upheld the assessment. The plaintiff appealed to the Tax Court of Canada, and was required to pay or secure the amount of the assessment pending the appeal. The plaintiff [page642] obtained a letter of credit. The Tax Court upheld the plaintiff's position. By the time the plaintiff was able to terminate the letter of credit, it had incurred interest charges of over $1.2 million and consulting fees of over $240,000 in U.S. funds. The plaintiff commenced an action against Her Majesty the Queen in Right of Canada and the CRA for indemnity and for negligence in forcing it to incur those expenses. The plaintiff claimed that since it was not a taxpayer but rather an agent of Her Majesty collecting HST on qualifying sales, it was entitled to indemnity from its principal for costs incurred in fulfilling its assigned duties. The defendants moved for an order striking out the statement of claim and dismissing the lawsuit.

Held, the motion should be granted.

There was no right to indemnity. The Supreme Court of Canada had long since determined that neither the common law nor statute provided collectors of GST or HST any entitlement to indemnity for costs incurred in carrying out their duties. The Supreme Court left open the possibility of claims for reimbursement by tax collector agents for tort liabilities incurred in fulfilling their duties, but that was not a reference to torts committed by the CRA.

There was no private law duty of care. There was ample case law rejecting the proximity required to formulate a private law duty of care between the CRA and taxpayers facing an audit. Cases had recognized that the CRA could owe a private law duty of care when undertaking a criminal investigation, but an investigator of criminal offences did not have the same relationship of an auditor to a taxpayer while carrying out administrative duties in an audit. There was one outlier case where the British Columbia Court of Appeal refused to dismiss a claim against the CRA for negligence in an audit. It had been mentioned favourably by the Ontario Court of Appeal in a criminal investigation case. That obiter reference was highly persuasive, but not formally binding. Even if it were binding, there was a competing principle, recently reiterated by the Court of Appeal, that judges were required to follow the decisions of their own court. In 2016, the Superior Court of Justice determined that the CRA owed no duty of care regarding an audit and there had been no change in the law since then. Furthermore, that was the correct approach doctrinally.

McCreight v. Canada (Attorney General) (2013), 116 O.R. (3d) 429, [2013] O.J. No. 3263, 2013 ONCA 483, 287 C.R.R. (2d) 272, 308 O.A.C. 128, 4 C.C.L.T. (4th) 44, 230 A.C.W.S. (3d) 389, consd

Leroux v. Canada (Revenue Agency), [2012] B.C.J. No. 235, 2012 BCCA 63, 316 B.C.A.C. 187, 2012 G.T.C. 1019, 2012 D.T.C. 5050, 27 B.C.L.R. (5th) 125, [2012] 2 C.T.C. 249, [2012] 4 W.W.R. 1, 347 D.L.R. (4th) 122, 211 A.C.W.S. (3d) 870, [2012] G.S.T.C. 18, distd

Deluca v. Canada (Attorney General), [2016] O.J. No. 3215, 2016 ONSC 3865, [2017] 1 C.T.C. 131, 267 A.C.W.S. (3d) 339 (S.C.J.); Duggan (Litigation guardian of) v. Durham Region Non-Profit Housing Corp. (2020), 153 O.R. (3d) 465, [2020] O.J. No. 5493, 2020 ONCA 788; Reference re: Goods and Services Tax (GST), [1992] 2 S.C.R. 445, [1992] S.C.J. No. 62, 1992 CanLII 69, 94 D.L.R. (4th) 51, 138 N.R. 247, [1992] 4 W.W.R. 673, J.E. 92-944, 2 Alta. L.R. (3d) 289, 127 A.R. 161, [1992] G.S.T.C. 2, 5 TCT 4165, 34 A.C.W.S. (3d) 602, folld

Other cases referred to

783783 Alberta Ltd. v. Canada (Attorney General), [2010] A.J. No. 783, 2010 ABCA 226, 322 D.L.R. (4th) 56, 482 A.R. 136, [2010] 6 C.T.C. 194, 29 Alta. L.R. (5th) 37, 89 C.P.C. (6th) 21, [2010] 12 W.W.R. 472, 192 A.C.W.S. (3d) 359; Canus Fisheries Ltd. v. Canada (Customs and Revenue Agency), 2005 NSSC 283, [2005] N.S.J. No. 413, [page643] 2005 NSSC 283, 237 N.S.R. (2d) 166, 143 A.C.W.S. (3d) 593; Catalyst Capital Group Inc. v. VimpelCom Ltd. (2019), 145 O.R. (3d) 759, [2019] O.J. No. 2286, 2019 ONCA 354, 95 B.L.R. (5th) 175; Foote v. Canada (Attorney General), [2011] B.C.J. No. 1500, 2011 BCSC 1062, 239 C.R.R. (2d) 367, 2011 D.T.C. 5139, 2011 G.T.C. 2046, [2011] G.S.T.C. 117, 205 A.C.W.S. (3d) 661; Grenon v. Canada (Revenue Agency), [2017] A.J. No. 281, 2017 ABCA 96, [2017] 6 W.W.R. 146, 49 Alta. L.R. (6th) 228, 36 C.C.L.T. (4th) 232, 2017 D.T.C. 5111, 276 A.C.W.S. (3d) 970 [Leave to appeal to S.C.C. refused [2017] S.C.C.A. No. 184, 2017 CarswellAlta 1714]; Hill v. Hamilton-Wentworth Regional Police Services Board (2007), 87 O.R. (3d) 397, [2007] 3 S.C.R. 129, [2007] S.C.J. No. 41, 2007 SCC 41, 285 D.L.R. (4th) 620, 368 N.R. 1, J.E. 2007-1867, 230 O.A.C. 253, [2007] R.R.A. 817, 64 Admin. L.R. (4th) 163, 50 C.C.L.T. (3d) 1, 50 C.R. (6th) 279, [2007] I.L.R. para. G-2125, 40 M.P.L.R. (4th) 1, 160 A.C.W.S. (3d) 573, EYB 2007-124525; Humby v. Central Springs Ltd., [2015] F.C.J. No. 1456, 2015 FCA 266, 262 A.C.W.S. (3d) 265, 479 N.R. 265, [2015] G.S.T.C. 140, 2016 D.T.C. 5001, [2016] 3 C.T.C. 159, affg [2013] F.C.J. No. 1225, 2013 FC 1136, [2014] 1 C.T.C. 149, 2014 D.T.C. 5010, [2013] G.S.T.C. 139, 235 A.C.W.S. (3d) 268 [Leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 578, 2016 CarswellRP 232015]; Leighton v. Canada (Attorney General), [2012] B.C.J. No. 1354, 2012 BCSC 961, 2012 D.T.C. 5123; Softcom Solutions Inc. v. Canada (Attorney General), [2020] O.J. No. 2617, 2020 ONSC 3290, [2020] 6 C.T.C. 116 (S.C.J.)

Statutes referred to

Excise Tax Act, R.S.C. 1985, c. E-15 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 21.01(1) (b)

Authorities referred to

Gal, Y., "Obiter or Not? A Refresher from the Ontario Court of Appeal", Gilbertson Davies LLP Blog, May 13, 2019

MOTION to strike a statement of claim.

David Douglas Robertson and Jonathan Ip, for plaintiff.

Nathalie Hamam and Nancy Arnold, for defendants.

MYERS J.:[^1] --

The Motion

[1] The defendants move for an order striking out the statement of claim and dismissing the lawsuit under rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] The plaintiff sues the government for indemnity and for negligence in forcing it to incur over $1 million in interest expense and professional fees to defend an audit and an HST assessment that were undertaken and conducted in bad faith. The plaintiff [page644] succeeded in having the tax assessment set aside in Tax Court. But the interest expense and professional fees that it incurred to do so were not recoverable as costs in that proceeding.

[3] The government argues that it has no duty to indemnify the plaintiff for costs it incurred in an HST audit and it has no private law duty of care to protect plaintiff from incurring costs in a tax audit under the applicable statutory scheme.

[4] I agree. The action is therefore dismissed. I do not provide an opportunity to amend as there is no amendment that the plaintiff can make to enable it to succeed on the two grounds pleaded -- indemnity and negligence.

[5] The plaintiff made it clear that it was not claiming under the tort of intentional malfeasance in public office. Accordingly, I do not consider whether that tort might be pleaded on the facts alleged or with an amendment.

The Facts

[6] The facts that follow are allegations contained in Jayco's statement of claim. For the purpose of determining the legal questions before me, these facts must be assumed to be true.

[7] Jayco is a U.S. business. Its sells RVs and parts to dealers in the U.S. and Canada. Jayco acknowledges that the sales of some of its parts are sales that occur in Canada. As those sales of parts attract HST, Jayco is registered under the Excise Tax Act, R.S.C. 1985, c. E-15.

[8] The government alleged that Jayco was also required to charge and collect HST on its sales of RV's to Canadian dealers. It alleged that delivery was in Canada. Jayco showed that legally its sales occur at its factory in the U.S. In some cases, it ships its RVs to dealers in Canada. But it only does so after a sale has closed and then it acts on behalf of the purchasing dealers.

[9] The CRA conducted an HST audit for the period June 1, 2007 to December 31, 2009. Jayco hired professional tax consultants to assist it during the audit.

[10] On March 26, 2012, the CRA issued an assessment against Jayco for almost $14 million for uncollected HST on RVs sold into Canada during the audit period.

[11] Jayco appealed through the CRA's internal appeal process. Although the CRA appeal process is supposed to be fair, the appeal staff never took independent advice on the issue in the appeal. Rather, they unduly consulted and deferred to the CRA's technical advisor who had advised the auditors on the initial assessment.

[12] The tax branch upheld the assessment.

[13] Jayco appealed to the Tax Court of Canada. Under the statute, Jayco was required to pay or secure the amount of the [page645] assessment pending the appeal. Jayco obtained a letter of credit. The CRA required Jayco to increase the amount of the letter of credit as time passed and interest accrued on the assessed taxes.

[14] By the end of the day, the letter of credit was for $19 million.

[15] The Tax Court upheld Jayco's position in February 2018. By the time Jayco was able to terminate its letter of credit, it had incurred interest charges of US$1,231,984.52 and consulting fees of US$242,634.

[16] Jayco pleads that the government ought to indemnify it for needlessly making it incur these costs. First, it should have properly researched the law. The issue was not difficult. Second, this is not a typical income tax issue where the government wants and is entitled to its money. Here, because HST is in issue, the allegation is that Jayco should have collected HST from its dealers. The dealers then would have been entitled to input tax credits reducing their HST by the exact same amount. The end result is that the government would not receive a single incremental dollar of tax revenue even if its assessment was upheld. As a result, Jayco argues there was no valid basis for it to have to secure the amount assessed against it and the CRA acted in bad faith in declining to waive the requirement.

[17] Jayco's key factual plea in its statement of claim is represented by para. 57 as follows:

Further, as the CRA Audit Division failed to act in good faith or obtain independent legal advice in considering the submissions made by Jayco's professional advisors, and as a consequence of CRA's Appeals Division to objectively, independently, and impartially consider Jayco's Objection and the additional representations of its professional advisors, or obtain any independent legal advice in considering Jayco's Objection, Jayco incurred additional and unnecessary costs for professional advice and services.

[18] Jayco asserts the following causes of action at para. 59 of its statement of claim:

a. A cause of action for the Defendants' duty to indemnify its statutory agent, Jayco, against losses, liabilities and expenses incurred in respect of the interest that accrued on the Letter of Credit that was posted as demanded by the CRA as security to secure the Assessed Amounts pending the resolution of the dispute between Jayco and the CRA.

b. A cause of action for the Defendants' duty to indemnify its statutory agent, Jayco, against losses, liabilities and expenses incurred in respect of professional fees, disbursements, and applicable taxes incurred by Jayco in respect of the CRA's audit, Assessment, Objection, and TCC Appeal.

c. A cause of action for the Defendants' negligence in demanding that Jayco post security to secure the Assessed Amounts until such time as the dispute as to whether GST/HST was collectible was resolved between Jayco and the CRA despite the fact that any purported failure by Jayco to charge and collect GST/HST from its Canadian Dealers was fully recoverable as [page646] an input tax credit by the Canadian Dealers and that there was absolutely no revenue loss to the Federal Government and the CRA.

d. A cause of action for the Defendants' negligence in failing to act objectively, impartially, and in good faith in considering the extensive written and oral representations of Jayco's professional advisors either during the CRA's audit or in consideration of Jayco's Objection and in failing at any time to obtain independent legal advice on the narrow legal point at issue.

[19] It is essential to Jayco's claim that this is an HST issue and not one of income tax. Jayco is not the taxpayer. It collects HST on qualifying sales as agent for Her Majesty. As an agent, Jayco claims it is entitled to indemnity from its principal for costs incurred in fulfilling its assigned duties.

[20] In addition, Jayco argues that the proximity analysis between the CRA and an HST agent is different than the relationship between the CRA and income tax payers. Essentially, Jayco says, during an HST audit, HST collection agents are not adverse in interest to the taxman the way a taxpayer is during an income tax audit.

[21] Neither argument is weighty.

There is No Right to Indemnity

[22] The Supreme Court of Canada has authoritatively resolved the indemnity issue previously. In Reference re: Goods and Services Tax (GST), [1992] 2 S.C.R. 445, [1992] S.C.J. No. 62, 1992 CanLII 69, the court found that neither the common law nor the statute provides GST/HST collectors any entitlement to indemnity for costs incurred in carrying out their duties. Jayco's counsel argued that in the Reference, the court was dealing with requests for remuneration rather than indemnity for expenses incurred. This is not correct. The court set out the questions expressly. It considered whether [at para. 37]:

. . . registered suppliers under the GST Act have the right to be reimbursed from the consolidated revenue fund of Canada for all expenses and charges incurred in collecting the GST.

(Emphasis added)

[23] The Supreme Court left open the possibility of claims for reimbursement by tax collector agents for tort liabilities that they may incur in fulfilling their duties. That is not a reference to torts committed by the CRA. Rather, it is offering the possibility that tax collector agents who commit torts in the course of collecting HST could have a right to indemnity against the CRA. That has nothing to do with the claims in this case.

[24] If the government committed a tort for which it is liable to Jayco, that liability is independent of any obligation for it to indemnify Jayco for tort liability that Jayco might incur to third parties from whom it collects HST. [page647]

[25] Accordingly, the claims for indemnity must fail.

There is No Private Law Duty of Care

Leroux as approved in McCreight

[26] The claims for negligence fare no better. There is ample case law rejecting the proximity required to formulate a private law duty of care between the CRA and taxpayers facing an audit.[^2]

[27] However, there is one wrinkle in the case law. Cases have recognized that when the CRA is undertaking a criminal investigation, it can owe a private law duty of care analogous to the duty owed by police officers to suspects under Hill v. Hamilton-Wentworth Regional Police Services Board (2007), 87 O.R. (3d) 397, [2007] 3 S.C.R. 129, [2007] S.C.J. No. 41, 2007 SCC 41.

[28] The cases generally agree that the relationship of an auditor to a taxpayer while carrying out administrative duties in an audit is not the same as the relationship between tax investigators who are investigating criminal offences. The cases hold that auditors in an audit do not owe a private law duty of care to the taxpayers.

[29] But, there is one outlier case. In Leroux v. Canada (Revenue Agency), [2012] B.C.J. No. 235, 2012 BCCA 63, the British Columbia Court of Appeal refused to dismiss a claim against the CRA for negligence in an audit. That case is readily distinguished or regarded as unique. But, it was mentioned favourably by the Ontario Court of Appeal in McCreight v. Canada (Attorney General), [2013] O.J. No. 3263, 2013 ONCA 483.

[30] In McCreight, the Court of Appeal considered the question of whether the CRA may owe a private law duty of care when it conducts a criminal investigation. The Court of Appeal wrote [at paras. 54 and 61-63]:

Thirdly, in Leroux v. Canada Revenue Agency, 2012 BCCA 63, 347 D.L.R. (4th) 122, that same court refused to strike a negligence claim against the [page648] CRA and recognized that it is at least arguable that the CRA owes a duty of care to individual taxpayers in the administration or enforcement of taxing statutes. The appellants therefore argue that this cause of action should not have been struck as plainly and obviously having no reasonable prospect of success. They also ask this court to establish the existence of such a duty of care on the part of the CRA, thus obviating the need for a trial of the issue.

Firstly, given the Supreme Court's ruling in Hamilton-Wentworth that, in certain circumstances, police officers may owe a duty of care to their suspects, surely it is not plain and obvious that a CRA investigator owes no such duty when operating under ITA provisions that attract criminal sanction and under the Criminal Code. The same analogical reasoning applies to any residual policy rationale that could negate such a duty.

Secondly, I see no relevant distinction between the above-cited case of Leroux and this case. That case that involved a claim of negligence against CRA employees as well and the British Columbia Court of Appeal dismissed an appeal of an order, [2010] B.C.J. No. 1356, permitting the cause of action to proceed to trial. The Court was not persuaded that the claim should be struck because it was at least arguable that such a cause of action could succeed and the issue was to be considered at trial.

The action for negligence against the CRA investigators should be permitted to proceed to trial along with the causes of action for misfeasance in public office and abuse of process, and thereby benefit from a full factual record.

[31] The case involved an investigation and held, like many others, that a claim in negligence is available when the CRA conducts an investigation. The reference to Leroux then was obiter dicta. However, McCrieght certainly suggests that if an audit case comes along, Leroux may well be followed in Ontario.

The analysis apart from Leroux

[32] Other than Leroux, the cases that have looked at the relationship between the CRA auditors and taxpayers have consistently held that their relationship is adverse in interest. The CRA's job is to enforce the taxation statutes. To that end, unlike the police, the taxman is not your friend. His job is to maximize your tax burden within the bounds of the various statutory schemes.

[33] In Grenon v. Canada (Revenue Agency), supra, the Alberta Court of Appeal put it this way [at paras. 25 and 26]:

In our view, it is plain and obvious that an action in negligence cannot succeed. It is clear that, because of the inherently adverse relationship between auditors who are exercising a statutory function and taxpayers, a finding of sufficient proximity to ground a private law duty of care does not exist. The chambers judge correctly applied the Cooper-Anns test and considered foreseeability and proximity to reach the same conclusion. Not only is her decision entitled to deference, the chambers judge could have gone further to conclude that public policy considerations also militate against finding the existence of a prima facie duty of care in this case. [page649]

It is important to reiterate that questions of policy are relevant considerations at the first stage of the test. Part of the appellant's complaint is that the chambers judge did not perform a discrete analysis under both parts of Cooper-Anns. Rather, she referred to the foreseeability and proximity branch of the test at para 71, but only in a generalized way and in the context of her analysis of the cases provided to her by the parties. Doing so is not wrong in principle. Provided the proper balancing of the factors relevant to a duty of care is done, it may not make any practical difference where the policy issues are considered: Cooper at paras 25-28. The two stages are simply a means to an end and are not a formulaic exercise: "The important thing is that in deciding whether a duty of care lies, all relevant concerns should be considered": Hill v Hamilton-Wentworth at para 31. The chambers judge properly balanced the factors as part of her analysis and correctly struck the claim.

[34] The taxation statutes set up regulatory schemes with internal appeals and appeals to the court. Judicial review can be available if the government makes a decision that is not appealable (like the decision to refuse to exercise the discretion to allow Jayco not to post security for the HST assessment pending appeal). Taxpayers and HST collectors have resort to administrative processes and the courts to ensure that the taxman is kept in check. Imposing negligence liability on top of that is inconsistent with the statutory scheme. Moreover, it is hard, if not impossible, to discern anywhere in the relevant taxation statutes an implicit or implied private law duty of care owing by the CRA to taxpayers.

[35] As the Alberta Court of Appeal noted, there can be policy considerations at the first stage of a Cooper-Anns analysis. Or the policy can come in at the second stage where one looks at risks of indeterminate liability and other policy concerns. In my view, imposing a super-added private law duty of care on the CRA just imposes more costs on the government and gives taxpayers more procedural tools to defer tax. Unlike police officers investigating crime, there are already thorough and comprehensive regulatory schemes to ensure that the CRA obeys the rules.

[36] In Deluca v. Canada, supra, Dunphy J. of this court considered whether the CRA had a duty to warn taxpayers that charitable deductions to a particular "charity" would not likely be recognized as valid. He conducted a Cooper-Anns analysis and concluded that the CRA owed no duty of care.

[37] Justice Dunphy followed Grenon and distinguished McCreight as follows [at para. 44]:

The plaintiff in this case relied upon McCreight v. Canada (Attorney General), 2013 ONCA 483, where the plaintiff sought to sue CRA and its investigators in connection with what was alleged to be a negligent investigation leading to fraud and conspiracy charges being brought under the ITA. Pepall J.A. found that given the recognition by the Supreme Court of Canada of a duty of care in some circumstances being owed by police officers to their suspects that it was "not plain and obvious that a CRA investigator owes [page650] no such duty when operating under ITA provisions that attract criminal sanctions and under the Criminal Code" (at para. 61). The proposed duty of care in McCreight was clearly analogous to a recognized duty of care (owed by police officers to suspects) and cannot be looked to as support for a broader duty of care in as clearly an administrative role as the registration of charitable organizations.

[38] What then of the plaintiff's allegations that in this case the CRA carried on in bad faith? Many statutes provide government employees with immunity from lawsuits absent bad faith. A plea of bad faith is therefore necessary in those case to make a negligence claim.

[39] The Excise Tax Act is not one of those statutes. Bad faith is not an element of negligence in general. But, if what the plaintiff means is that the CRA employees deliberately assessed its taxes and forced it to post security with a foreseeable cost, knowing that doing so was illegal and intending to act illegally, that could be pleaded as the tort of intentional malfeasance in public office. However, as noted above, Jayco has decided not to advance that tort. In my view, the question of bad faith adds nothing to the analysis of the tort liability negligence pleaded in this case.

[40] I also do not accept that there is a relevant distinction between HST collectors and income taxpayers facing audits. The fiction of agency is used by some taxation statutes for constitutional and enforcement reasons. It strains credulity to expand the fiction to suggest that there is any difference in practice between the position of an HST collector and an income taxpayer when both are facing audits across the table from CRA auditors. The roles are the same. The jeopardy is the same. The goals of each side in each audit are the same. There is no difference relevant to proximity and foreseeability on the relationships. The taxman seeks to make the other side pay tax and the tax collector/taxpayer seeks to avoid or minimize tax liability.

[41] Neither does the CRA's cashflow matter to the analysis. If Jayco was required to collect and remit tax, it is no answer to say that the government would give the tax back further along the chain of commerce. For the chain to remain intact, each payer and ITC claimant must do its duty. While the cash flow practicalities may have been relevant to a requested by Jayco for the CRA to exercise its statutory discretion to waive the requirement that it post security pending an appeal, the place to test the lawfulness of any such discretionary decision is in an application for judicial review. To bring that type of decision into a provincial Superior Court in a tort claim is an unwelcome and unnecessary incursion into the federal regulatory scheme. [page651]

Reconciling the two lines of authority

[42] None of the foregoing analysis matters if I am bound by the Court of Appeal's decision in McCreight. There is a competing principle, however. Just recently, the Court of Appeal reiterated the requirement that judges follow decisions of their own court.

[43] In Duggan (Litigation guardian of) v. Durham Region Non-Profit Housing Corp. (2020), 153 O.R. (3d) 465, [2020] O.J. No. 5493, 2020 ONCA 788. At para. 63, Feldman J.A. wrote:

The doctrine of stare decisis makes an important contribution to the cost- effective and efficient management of litigation by ensuring that a legal issue, including the interpretation of a legislative provision, regulation or rule, once decided, is not relitigated in the next case.

[44] There are exceptions that allow a court to depart from prior cases where a new legal issue is raised or "where there is a change in the circumstances or evidence that 'fundamentally shifts the parameters of the debate'": see Duggan, at para. 62.

[45] I am facing an interesting doctrinal problem. I do not think it is so easy to distinguish McCreight. The Court of Appeal went out of its way to support Leroux.

[46] But the issue in Leroux was not before the court for decision. The Court of Appeal has never upheld a finding of a duty of care in a claim for negligence against the CRA in an audit. It has not conducted a Cooper-Anns analysis in a case where the facts before them involved an audit. While the obiter of the Supreme Court of Canada is often binding, the obiter of the Court of Appeal is highly persuasive. Ignoring it suggests a legal risk; but it is not formally binding insofar as I am aware.[^3]

[47] There has been no change in the law or any change in circumstances or evidence that fundamentally shifts the parameters [page652] of the debate since Dunphy J.'s decision in Deluca. According to Duggan therefore, I must follow it.

[48] Moreover, this strikes me as the correct approach doctrinally. The common law develops incrementally as fact situations present themselves for decision. While the Court of Appeal has touched on the issues raised in this case, it has not seen this fact situation squarely before it. By ruling consistently with the prior cases of this court, I frame the issue for the Court of Appeal. The law remains certain rather than arbitrarily turning on which judge of this court happens to hear the case.

[49] It may well be that the Court of Appeal will follow McCreight and Leroux on appeal and overturn this decision. If so, that will be an example of the common law developing as it should.

[50] Were I free to choose which decision I wanted to follow, judicial statescraft would push me to follow McCreight. But I am not free. I have two aspects of stare decisis applicable and both tell me that I must follow Dunphy J.'s decision. There is no exception within Duggan and I am not required to ignore Deluca by a binding decision of the Court of Appeal. Following Deluca is a matter of doctrine and not choice. I also happen to agree with the outcome for the reasons discussed above. Although with stare decisis, that seems to matter less.

[51] The action is therefore dismissed. Both parties sought costs of approximately $30,000. The defendants' costs are for the full action (although it is at a very early stage). The costs sought are fair and reasonable and are proportional given the significant amounts in issue. Thereof, I order the plaintiff to pay costs to the defendants fixed at $30,000 on a partial indemnity basis all-inclusive.

Motion granted.

[^1]: On May 3, 2021, the court amended para. 36 as shown below to fix a typo.

[^2]: See: Canus Fisheries Ltd. v. Canada (Customs and Revenue Agency), [2005] N.S.J. No. 413, 2005 NSSC 283; 783783 Alberta Ltd. v. Canada (Attorney General), [2010] A.J. No. 783, 2010 ABCA 226; Foote v. Canada (Attorney General), [2011] B.C.J. No. 1500, 2011 BCSC 1062; Leighton v. Canada (Attorney General), [2012] B.C.J. No. 1354, 2012 BCSC 961; Humby v. Central Springs Ltd., [2013] F.C.J. No. 1225, 2013 FC 1136, affd [2015] F.C.J. No. 1456, 2015 FCA 266, leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 578, 2016 CarswellRP 232015; Deluca v. Canada (Attorney General), [2016] O.J. No. 3215, 2016 ONSC 3865 (S.C.J.); Grenon v. Canada (Revenue Agency), [2017] A.J. No. 281, 2017 ABCA 96, leave to appeal to S.C.C. refused [2017] S.C.C.A. No. 184, 2017 CarswellAlta 1714; and Softcom Solutions Inc v. Canada (Attorney General), [2020] O.J. No. 2617, 2020 ONSC 3290 (S.C.J.).

[^3]: I am aware that there are different ways to understand what is obiter in a given case. See: Catalyst Capital Group Inc. v. VimpelCom Ltd. (2019), 145 O.R. (3d) 759, [2019] O.J. No. 2286, 2019 ONCA 354 and Y. Gal, "Obiter or Not? A Refresher from the Ontario Court of Appeal", Gilbertson Davies LLP Blog, May 13, 2019, online: <http:// w.gilbertsondavis.com/obiter-or-not-a-refresher-from-the-ontario-court-of-appea determined McCreight solely on the basis of Leroux so as to elevate that discussion to ratio decidendi. With the law already recognizing the private law duty of care of investigators, I cannot see the court leaving out that line of authority to then decide the case solely on the point that: since the B.C.C.A. has said that auditors might have a private law duty of care, therefore investigators may have one too. Elevating this to ratio ignores the overarching authority of the S.C.C. in Hill.