COURT FILE NO.: C-2012-12 DATE: 2022-01-18 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Sheryl Nelson Plaintiff – and – Roland Lavoie, Investment Planning Counsel Inc., IPC Investment Corporation, IGM Financial Inc., Dennis Serre and Serre Financial Group Consulting Services Inc. Defendants

Counsel: Gavin J. Tighe, agent for P. Peter Diavolitsis, for the Plaintiff Kenneth A Dekker, for Roland Lavoie and IPC Investment Corporation John J. Longo, for Dennis Serre and Serre Financial Consulting Services Inc.

HEARD: November 12, 2021 via Zoom

Decision on Special Case

(Rule 22.01 of the Rules of Civil Procedure)

BOUCHER J.

[1] On August 22, 2018 Del Frate J. dismissed the defendants’ summary judgment motion which alleged the plaintiff’s claim was statute barred for having missed a limitation period.

[2] On May 24, 2019 the Ontario Court of Appeal dismissed the defendants’ appeal of Del Frate J.’s order. The parties have been unable to agree on the consequences of that dismissal, given their differing interpretations of the Court of Appeal’s reasons for decision.

[3] The parties accordingly seek the opinion of this court pursuant to r. 22.01 of the Rules of Civil Procedure with respect to three questions, which are reproduced below:

i. Do any of the plaintiff’s statements or positions taken before Justice Del Frate or the Court of Appeal for Ontario regarding the scope of her claim and when her losses occurred, constitute admissions or positions that are binding on the plaintiff at trial (i) that the plaintiff’s claim is narrowed or limited to the tax-effectiveness of the IPP and the risk of the IPP being found non-compliant with the Income Tax Regulations, and (ii) that the plaintiff’s damages arising from the claim as pleaded are limited to losses/penalties resulting from and after the deregistration of the IPP and as a result exclude (a) the loss of the plaintiff’s Hydro One pension in 2008; (b) the loss of the plaintiff’s Hydro One salary and benefits from the date of her resignation on August 31, 2008, and (c) the loss of an opportunity to invest the plaintiff’s Hydro One pension assets starting from November 2008 when the IPP was set-up ?

ii. Does paragraph 26 of the Court of Appeal for Ontario’s Reasons for Decision limit or narrow any aspect of the plaintiff’s claim as plead in the Statement of Claim, either as statute-barred or otherwise, for the purposes of the upcoming trial?

iii. If the answer to the first question is affirmative, should the plaintiff be permitted at trial to withdraw her admissions or resile from her positions and on what terms, if any, should such relief be granted?

What is a special case?

[4] Rule 22 provides as follows:

22.01 (1) Where the parties to a proceeding concur in stating a question of law in the form of a special case for the opinion of the court, any party may move before a judge to have the special case determined. R.R.O. 1990, Reg. 194, r. 22.01 (1) .

(2) Where the judge is satisfied that the determination of the question may dispose of all or part of the proceeding, substantially shorten the hearing or result in a substantial saving of costs, the judge may hear and determine the special case.

22.04 A special case (Form 22A) shall,

(a) set out concisely the material facts, as agreed on by the parties, that are necessary to enable the court to determine the question stated;

(b) refer to and include a copy of any documents that are necessary to determine the question;

(c) set out the relief sought, as agreed on by the parties, on the determination of the question of law; and

(d) be signed by the lawyers for the parties. R.R.O. 1990, Reg. 194, r. 22.04 ; O. Reg. 575/07, s. 2.

22.05 (1) On the hearing of a special case the court may draw any reasonable inference from the facts agreed on by the parties and documents referred to in the special case.

(2) On the determination of the question of law the court may make an order or grant judgment accordingly.

[5] Paragraphs 6 through 21 of the Special Case (Form 22A) delivered by the parties set out the material facts which the parties agree are necessary for me to determine the questions stated. They are reproduced below:

6. For the purpose of this Special Case only, the parties rely upon paragraphs 2-19 of the Decision on Summary Judgment Application of Justice Del Frate dated August 22, 2018, a copy of which is attached hereto as TAB 4 :

[2] The 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”)

[3] Ms. 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.

[4] Mr. 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.

[5] Sometime in June 2008, Ms. Nelson spoke once more with her co-worker who confirmed that she had no concerns about the financial plan.

[6] Reassured, 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.

[7] Ms. 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.

[8] In a letter dated October 16, 2008, the CRA confirmed the plan had been accepted and effective as of September 1, 2008.

[9] On 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.

[10] Ms. 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.

[11] Subsequently, 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.”

[12] Mr. 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.

[13] In 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.”

[14] On 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.

[15] In 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.

[16] Weaver 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.

[17] Mr. 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.

[18] On 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”.

[19] On 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.

7. In 2013, as a consequence of the CRA’s deregistration of the IPP, the plaintiff’s remaining pension assets were disbursed with the “Maximum Transfer Value” of $253,481.40 being transferred on a tax deferred basis to a Locked-In Retirement Account with the remaining $331,072.97 being paid to the plaintiff on a taxable basis.

8. The Statement of Claim pleads a claim for breach of contract, negligence and misrepresentation regarding advice given by the defendants to the plaintiff in 2008 about the suitability of transferring the proceeds of her Hydro One Networks Inc. (“ Hydro One ”) pension plan into an IPP, including advice that an IPP would allow her to take control over her Hydro One pension assets, retire immediately, and immediately thereafter withdraw a monthly income equal to or greater than her Hydro One pension income.

9. The Statement of Claim, as pleaded, seeks damages for (a) loss of the plaintiff’s Hydro One pension in 2008; (b) loss of the plaintiff’s Hydro One salary and benefits from the date of her resignation on August 31, 2008; (c) loss of an opportunity to invest the plaintiff’s Hydro One pension assets starting from November 2008 when the IPP was set-up; and (d) additional taxes and costs paid when the plaintiff’s IPP was deregistered by the CRA as non-compliant in 2013.

Summary Judgment Motion

10. On July 13, 2018, the defendants brought a motion for summary judgment on the basis that the plaintiff’s action was statute-barred under the Limitations Act, 2002. Specifically, the defendants alleged that the plaintiff’s cause of action was discovered by August 2009 (at the latest) after the plaintiff (i) had obtained employment at Chapters, (ii) learned that her income from the IPP was not equal to or greater than her Hydro One pension, and (iii) she had received the report from Mr. Heinsohn who, as set out above, opined that the IPP “does not appear to meet the requirements for registration and is very likely to have its registration revoked by CRA”. The defendants’ moving factums are attached hereto as TABS 5 and 6 .

11. The plaintiff’s responding factum, a copy of which is attached hereto as TAB 7 , stated the following at paragraph 5:

[5] It is the plaintiff’s position that her action is not statute barred because the requirements of section 5 of the Limitations Act, were not all met until the CRA sent the Notice on September 28, 2011 that it intended to deregister the plaintiff’s IPP, specifically:

a. Section 5(1)(a)(i) was not met until September 28, 2011, because the plaintiff had not actually suffered any damage because her IPP was registered and in good standing up to that date.

b. Until the CRA deregistered her IPP her claim was only speculative because the loss had not occurred.

c. Pursuant to section 5(1)(a)(iv), it was not legally appropriate to start an action until the CRA had deregistered the plan on September 28, 2011. Up until that point her IPP was in good standing and she had no obligation to indemnify the CRA by paying taxes on the funds transferred from her Hydro One Pension Plan to her IPP, along with interest and penalties.

d. Despite all the concerns about her IPP, the plaintiff’s cause of action did not ripen until the CRA deregistered the plan.

12. The motions judge, Justice Del Frate, dismissed the defendants’ motion and determined that the limitations period commenced on September 28, 2011 and that the plaintiff’s claim (issued on June 20, 2012) was not statute-barred. In doing so, Justice Del Frate determined that the defendants had “fail[ed] to satisfy the requirements of s. 5(1)(a)(i) and s. 5(1)(a)(iv)” of the Limitations Act, 2002.

13. In particular, Justice Del Frate found:

[55] Firstly, 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.

[56] Secondly, 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 institute an action in the fall of 2009, she would have very likely faced a summary judgment application dismissing her claim. Had 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.

[57] Further, 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 Plaintiffs IPP. The Plaintiffs taxes have not been reassessed, and, as such, no associated damages have yet been suffered. The Plaintiffs claim for alleged damages suffered due to the de-registration of the IPP and any potential tax reassessment is thus premature and improper.

[58] Had 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.

14. In paragraph 60, Justice Del Frate also held that “[e]ven 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.”

15. On August 22, 2018, Justice Del Frate signed an order dismissing the defendants’ motions and ordered as follows:

THIS COURT ORDERS pursuant to Rule 20.05(1) of the Rules of Civil Procedure that the applicable limitation period in this action commenced on September 28, 2011 and did not expire prior to the commencement of this action, which is binding on the Plaintiff and Defendants at the trial of this action.

16. A copy of Justice Del Frate’s order is attached hereto as TAB 8 .

Court of Appeal for Ontario

17. The defendants appealed the decision of Justice Del Frate which was heard on May 8, 2019.

18. The defendants (appellants), IPC Investment Corporation and Roland Lavoie, in their appeal factum, a copy of which is attached hereto as TAB 9 , stated the following in paragraphs 2-7:

[2] In this 2012 action, the Plaintiff sues for alleged misrepresentations and negligent financial planning and pension advice she received in 2008 regarding the option of transferring the proceeds of her Hydro One Networks Inc. (“Hydro One”) pension plan into an individual pension plan (an “IPP”);

[3] The Plaintiff claims that the Defendants advised her in 2008 that the option of transferring her assets to an IPP was suitable for her in the circumstances, and that an IPP would allow her to take control over her Hydro One pension assets, retire immediately, and immediately thereafter withdraw a monthly income equal to or greater than her Hydro One pension income.

[4] The Plaintiff claims she relied upon these misrepresentations and negligent advice by giving up her Hydro One employment, benefits and pension in favour of an IPP. She claims damages for the loss of her Hydro One pension, salary and benefits together with damages for the lost opportunity to invest her pension assets starting from the November 2008 date she set up her IPP. The Plaintiff also claims a smaller amount of damages for additional taxes paid when her IPP was deregistered by the Canada Revenue Agency (the “CRA”) in 2013.

[5] The Motion Judge erroneously made no finding of when the Plaintiff’s claim arose. However, it cannot be seriously in dispute that it arose by the end of November 2008. All alleged misrepresentations and advice took place in 2008 and, by November 24, 2008 all steps taken by the Plaintiff in reliance upon the Defendants’ misrepresentations and advice had occurred.

[6] Regarding the Plaintiff’s discovery of her claim, the Plaintiff hired a lawyer and had received two expert reports regarding her IPP by the end of August 2009. By that time, she knew: (1) that her IPP would never be able to pay benefits equal to or higher than under her Hydro One pension; (2) that she had not been able to retire immediately and, in fact, had to return to work to make ends meet; (3) that her IPP did not comply with the legal requirements for a pension plan and would almost certainly be deregistered by the CRA; and (4) that all of this was the fault of the Defendants.

[7] The Plaintiff has admitted that by August 24, 2009 she knew that she was going to have to sue the Defendants. By the end of September 2009, she no longer communicated with the Defendants or relied upon them for advice. However, the Plaintiff did not sue until June 20, 2012 – almost three years later.

19. The defendants (appellants), Dennis Serre and Serre Financial Consulting Services Inc. in their appeal factum, a copy of which is attached hereto as TAB 10, stated as follows in paragraphs 3 - 4:

[3] Ms. Nelson's claim is premised on certain alleged misrepresentations made to her by the defendants in 2008. The nature of the alleged misrepresentations relate to whether it was financially beneficial for Ms. Nelson to establish an individual pension plan (''IPP"). Ms. Nelson states that the defendants advised her that she could immediately retire from her employment with Hydro One Networks Inc. ("Hydro One"), transfer the proceeds from her Hydro One pension to an IPP, and thereafter withdraw a monthly income at least equal to, if not greater than, her Hydro One pension income. By the end of November of 2008, allegedly on the basis of this advice, Ms. Nelson had resigned from Hydro One and transferred the assets from her Hydro One pension plan to her now registered IPP.

[4] The damages sought by Ms. Nelson in this action relate to the loss of her Hydro One pension, salary and benefits, as well as damages for the loss of opportunity and investment growth associated with her Hydro One pension. All of these damages flow from the same alleged misrepresentations made to Ms. Nelson in 2008.

20. The plaintiff’s responding appeal factum, a copy of which is attached hereto as TAB 11 , stated the following at paragraph 2:

[2] The Respondent takes the position, which was accepted by the learned motion judge, that the action was timely for the following reasons:

a. Until the CRA deregistered the Respondent’s Individual Retirement Plan (IPP) her claim was only speculative because no loss had occurred.

b. The Respondent could not attribute any loss to the conduct of the Appellants until the CRA deregistered her IPP.

c. Section 5(1)(i) of the Limitations Act was not met until September 28, 2011, when the CRA deregistered her IPP. Until the CRA deregistered the Respondent’s IPP she could not have known that she had a claim against the Appellants.

d. The Appellants reassured the Respondent that her IPP was meeting its funding goals and that the IPP was valid as long as she remained employed.

e. Pursuant to section 5(1)(a)(iv), it was not legally appropriate to start an action until the CRA had deregistered the plan on September 28, 2011. Up until that date, her IPP was in good standing and she had no obligation to indemnify the CRA by paying taxes on the funds transferred from her Hydro One Pension Plan to her IPP, along with interest and penalties. She could also use the pension funds to invest as she saw fit which was one of the purposes of her IPP and why she started it.

f. The Respondent’s claim is for negligence. Although it has elements of negligent misrepresentation, that cause of action is still subject to discoverability which is a rule of general application. There is no exemption for negligent misrepresentation.

g. Regardless of when she may have suffered damage, she could not attribute any of that to the negligence of the Appellants because her IPP had not been deregistered by the CRA and was continually in good standing until September 28, 2011. The statement of claim was issued less than two years later on June 20, 2012.

21. The Court of Appeal dismissed the defendants’ appeal without varying Justice Del Frate’s order. However, in dismissing the appeal, the Court of Appeal made the following statements at paragraphs 26-29:

[26] While the respondent’s statement of claim is broadly drafted, in his approach, the motion judge accepted that her case was, in essence, a “tax case” – it was based on the tax consequences of deregistration of her IPP and, consequently, hinged on the CRA’s letter advising that her IPP did not confirm to the relevant provisions of the Income Tax Regulations. In her submissions, the respondent reiterates this position; her claim flows entirely from the IPP and its deregistration under the Income Tax Act; the alleged misrepresentations and negligence at issue are in relation to the tax-effectiveness of the IPP and the risk of the IPP being found non-compliant with the Income Tax Regulations. We would not interfere with the motion judge’s acceptance of this characterization. But the respondent cannot resile from this position at trial and seek to advance a broader claim . [emphasis added].

[27] Nor, given this characterization of the respondent’s claim, would we interfere with the motion judge’s conclusion that it was not legally appropriate for the respondent to commence a proceeding before the CRA advised her that her IPP did not conform to the relevant provisions of the Income Tax Regulations. The respondent was faced with what she viewed as conflicting advice as to whether her IPP conformed to the Income Tax Regulations: that of the appellants, and that of the advisors she subsequently retained. To know whether the appellants had made misrepresentations about or provided negligent advice in relation to the tax effectiveness of their plan, she first needed to know that the appellants’ advice was wrong.

[28] In light of the conflicting advice, it was reasonable for the motion judge to conclude that it was legally appropriate for the respondent to wait until the CRA responded to her counsel’s express inquiry and advised her that her IPP did not conform to the relevant provisions of the Income Tax Regulations before commencing a proceeding. Indeed, it is possible that commencing a proceeding before obtaining confirmation from the CRA could have jeopardized the respondent’s position before the CRA. The CRA’s response resolved her uncertainty and confirmed that she would face unanticipated tax consequences as a result of deregistration of her IPP. Further, as the motion judge noted, Mr. Lavoie, Investment Planning Counsel Inc. and IGM Financial Inc. acknowledged that it was appropriate to wait for the CRA’s determination: they pled in their Statement of Defence that any tax claim was premature before the respondent’s taxes were reassessed.

[29] We agree with the appellants that, to the extent it was based on the September 2, 2009 memorandum from Serre Financial Services and the opinion as at December 31, 2010 from Mr. Serre, the motion judge’s finding that the appellants’ reassurances prevented the respondent from discovering that loss or damage had occurred is suspect. However, this is of no moment. It does not affect the conclusion that the respondent did not discover her claim before September 28, 2011 when the CRA confirmed that her IPP did not comply with the relevant provisions of the Income Tax Regulations.

Positions of the Parties

Plaintiff

[6] The plaintiff submits the only issue to be determined is whether the Court of Appeal limited or excluded heads of damages set out in the statement of claim, effectively varying Del Frate J.’s order that the entire claim, as pleaded, was to go before the trial judge. Damages are remedies, it is argued, not causes of action. The claim is for negligence and negligent misrepresentation and the plaintiff wants her damages because of the failure of the plan as a whole, which only failed, it is submitted, when CRA de-registered the IPP.

[7] The plaintiff further submits the appeal relates to Del Frate J.’s order, not his reasons. His order which is at para. 15 of the Special Case set out the applicable limitation period in this action and did not in any way restrict the claim for damages.

[8] The plaintiff also notes that at para. 30 of his decision Del Frate J refers to other damages that arose prior to September 28, 2011 indicating the trial judge will be in the best position to determine “what damages if any” arise from the conduct of the defendants.

[9] The plaintiff argues that because the appeal was dismissed, the Court of Appeal did not vary Del Frate J.’s order. The Court of Appeal confirmed this in par. 4 where they state they were not persuaded they should interfere with the motion judge’s order. This paragraph, it is submitted, must be read in conjunction with para. 26 of their decision. At para. 25 the Court of Appeal also said they were not persuaded there was a basis to interfere with the motion judge’s fact-driven conclusion that a proceeding was not legally appropriate until September 28, 2011. It is inconceivable, the plaintiff argues, that the Court of Appeal would allow the appeal in part, thus significantly narrowing or excluding claims made in the statement of claim, without saying more than what is contained in para. 26 of their decision. In any event, the plaintiff submits that any ambiguity is clarified by what the Court of Appeal ultimately did: dismiss the appeal and uphold Del Frate J.’s order.

[10] The plaintiff also argues in her factum for this special case that any narrowing of her claim refers to her claim for business losses suffered because of the failure of her online clothing store. She suggests this is likely the narrowing the Court of Appeal refers to in para. 26.

[11] The plaintiff denies she made admissions that limit her claim. She suggests, rather, that the argument before Del Frate J. and the Court of Appeal and in this special case is the same: the tax treatment and the plan are one in the same thing. If the plan had not been de-registered, there would have been no claim because the plaintiff would have had to wait a long time to determine whether she would be better off under the plan.

The defendants

[12] The defendants submit the plaintiff narrowed her claim to survive the summary judgment motion because there was strong evidence that she had suffered damages and knew litigation was necessary prior to September 28, 2011.

[13] It is argued that the statement of claim was broadly drafted and included various claims, such as:

a. At paragraph 14 – the misrepresentation that she could retire immediately with full pension benefits;

b. At paragraph 15 – she could retire immediately and take control of her pension assets;

c. At paragraph 19 – she would get a monthly stipend equal to or greater than her Hydro pension;

d. At paragraph 23 – the defendants knew she would have to withdraw a monthly stipend from the IPP to meet her ongoing living expenses;

e. At paragraph 31 – the defendants knew or ought to have known the CRA had concerns about the IPP but transferred her assets into it anyway;

f. At paragraph 38 – they mislead her in suggesting the retire sooner scheme was appropriate for her;

g. At paragraph 39 – the terms of the IPP did not allow her to withdraw an unreduced pension payment from her IPP before attaining age 65;

h. At paragraph 40 – she sets out the tax damages claim;

i. At paragraph 41 – claim she will lose pension income she would have received under the Hydro pension;

j. At paragraph 42 – claim for lost health benefits to which she was entitled under the Hydro pension plan; and

k. At paragraph 48 – claim for lost opportunity to invest her pension assets from the date of transfer into her IPP to the date of trial.

[14] The defendants submit that based on the statement of claim, there is one cause of action with two heads of damages. They suggest that some of these damages started right away in 2008; others, in 2011. Indeed, this position was set out in their statement of defence at para. 48 where they asserted it was premature to deal with damages flowing from the IPP if it was deregistered and in para. 49 where they plead that if the plaintiff was relying on damages suffered earlier, they were statute-barred.

[15] In support of the narrowing argument I am asked to consider the plaintiff’s factum delivered in the summary judgment motion. Paragraph 5 reads as follows:

[5] It is the plaintiff’s position that her action is not statue barred because the requirements of section 5 of the Limitations Act, were not all met until the CRA sent the Notice on September 28, 2011 that it intended to deregister the plaintiff’s IPP, specifically:

a. Section 5(1)(a)(i) was not met until September 28, 2011, because the plaintiff had not actually suffered any damage because her IPP was registered and in good standing up to that date.

b. Until the CRA deregistered her IPP her claim was only speculative because the loss had not occurred.

c. Pursuant to section 5(1)(a)(iv), it was not legally appropriate to start an action until the CRA had deregistered the plan on September 28, 2011. Up until that point her IPP was in good standing and she had no obligation to indemnify the CRA by paying taxes on the funds transferred from her Hydro One Pension Plan to her IPP, along with interest and penalties.

d. Despite all the concerns about her IPP, the plaintiff’s cause of action did not ripen until the CRA deregistered the plan.

[16] The defendants point out that the plaintiff had in fact suffered damages prior to de-registration because, for example, she was earning less money than had been promised. She accordingly obtained work at Chapter’s to make up for this loss.

[17] It is further submitted that at para. 7 of her factum the plaintiff referred only to negligence insofar as the tax consequences were concerned. Paragraphs 33-36, 43-44 and 46 of the statement of claim are cited in para. 7; the early claims, such as in para. 14, are not.

[18] Further, at para. 9 of her factum the plaintiff denied any claim for damages from the failure of her online business. In so doing she stated “[a]ny damages she may have suffered from the business itself are not a part of this lawsuit” [emphasis in original].

[19] The defendants otherwise point out the following statements in the plaintiff’s factum that support their argument:

a. At para. 61 – although the defendants were negligent when they set up the plan in 2008, damages did not occur until September 2011;

b. At para. 69 – she cannot assert a cause of action on the possibility that someday the IPP may not comply with the ITA;

c. At para. 70 – flowing from the defendants’ negligence, no damages were suffered until deregistration of the IPP;

d. At para. 73 – a loss cannot be discovered until there is one;

e. At para. 74 – a claim cannot be started until there are taxes and interest and penalties assessed by the CRA:

f. At para. 78 – the running of the limitation period does not start until the damage actually occurs;

g. At para. 90 – the plaintiff cannot sue for all of the fallout of the IPP until it is in fact de-registered.

[20] It is argued that this focus on the tax aspect of the IPP was the basis for Del Frate J.’s decision to fix the running of the limitation period as of September 28, 2011. Paragraphs 56 and 57 of his decision, it is submitted, are illustrative of this focus. In para. 60, however, Del Frate J. mentions the other claims for damages, such as loss of benefits and wages, and suggests the trial judge will be in the best position to determine what damages, if any, “arise from the conduct of the defendants.” During submissions the defendants suggested this reference to other damages was narrowed by the Court of Appeal to only tax damages.

[21] I am further encouraged to consider the plaintiff’s factum filed with the Court of Appeal. At paras. 2, 3, 4 and 15 of her factum the plaintiff repeats the same arguments made before Del Frate J., which I have detailed above. In para. 3 of their reasons for decision the Court of Appeal notes the plaintiff argued on appeal that “a proceeding was not appropriate until the Canada Revenue Agency (“CRA”) advised her on September 28, 2011 that the Independent Pension Plan (“IPP”) she had established on the appellants’ advice did not comply with the relevant provisions of the Income Tax Regulations …”

[22] The defendants point to para. 22 of their reasons as proof the Court of Appeal was alive to the issue of the other claims such as the plaintiff’s IPP earning less than expected. In fact, this was one of their arguments on appeal: that the tax damages suffered later were “further damages flowing from the same causes of action” and thus statute barred.

[23] Finally, it is submitted that a plain reading of para. 26 of their reasons demonstrates the Court of Appeal declined to interfere with the motion judge’s fact-driven conclusion that the plaintiff’s claim was a “tax case”. The Court of Appeal interpreted Del Frate J.’s decision as limiting her claim to the “tax consequences of deregistration”. The Court of Appeal repeated the plaintiff’s arguments on appeal; namely, that “her claim flows entirely from the IPP and its deregistration under the Income Tax Act; the alleged misrepresentations and negligence at issue are in relation to the tax-effectiveness of the IPP and the risk of the IPP being found non-compliant with the Income Tax Regulations. We would not interfere with the motion judge’s acceptance of this characterization.”

[24] In short, the Court of Appeal specifically referred to the broadly drafted claim, to Del Frate J.’s approach of treating it as a “tax case” and to the plaintiff’s reiterated position on appeal which supports this narrowing of the claim. The Court of Appeal went on to state that the plaintiff “cannot resile from this position at trial and seek to advance a broader claim.” It is argued the Court of Appeal thus acknowledged it would not be fair for the plaintiff to broaden her claim at trial. This fairness, it is submitted, relates to the inability of the defendants to argue the other claims, of which the plaintiff was aware before 2011, are statute-barred.

Analysis

[25] Despite counsel for the plaintiff’s very able argument, I respectfully disagree on the use that is to be made of Del Frate J.’s and the Court of Appeal’s reasons in this case. While a formal order may set out the consequences of the decision, for example, the motion is dismissed, the reasons inform the order and the two cannot be severed.

[26] The important role played by reasons was recently highlighted by the Court of Appeal in R. v Artis 2021 ONCA 862. At paras. 11 and 12 the court noted:

[11] Reasons for judgment constitute the very means by which judges remain accountable for the verdicts they reach. Transparency in how verdicts are arrived upon is critical to ensuring that justice is not only done, but seen to be done. Remaining accountable to the parties and the public by explaining how verdicts have been arrived upon is fundamental to nurturing respect for the rule of law.

[12] Where judges simply announce verdicts and fail to provide reasons for the conclusions reached, it is impossible to know whether justice has been done and, without a doubt, it cannot be seen to have been done: R. v. Sheppard, 2002 SCC 26, [2002] 1 S.C.R. 869, at para. 15 .

[27] Accountability includes the ability for appellate review. If courts were restricted to reviewing only the orders as opposed to the reasons for decision, no effective review could take place.

[28] In this case, the Court of Appeal reviewed Del Frate J.’s reasons and declined to interfere with his order for the reasons they provided. Their explanation is binding on the parties generally and in particular with respect to the clear direction provided in paragraph 26.

[29] Paragraph 26 must be read in the context of the reasons as a whole. The phrase “[w]hile the respondent’s claim is broadly drafted…” is informed by paras. 5 through 8 which refer to other claims, such as that she would earn as much and, after two years, more than her Hydro Pension Plan. On the record before Del Frate J. and the Court of Appeal, this was clearly not the case and she was aware of this claim prior to September 28, 2011. The Court of Appeal was alive to these claims and they were not referring simply to the losses suffered due to the failure of the online business.

[30] The Court of Appeal found the plaintiff restricted her claim on the summary judgment motion to “the tax consequences of deregistration of her IPP” and this was accepted by Del Frate J. This is clear from reviewing her factum filed on the summary judgment motion. The Court of Appeal noted the plaintiff took the same position on appeal, arguing that “her claim flows entirely from the IPP and its deregistration under the Income Tax Act; the alleged misrepresentations and negligence at issue are in relation to the tax-effectiveness of the IPP and the risk of the IPP being found non-compliant with the Income Tax Regulations.” This, too, was set out in her factum before the Court of Appeal.

[31] The Court of Appeal did not interfere with Del Frate J.’s “acceptance of this characterization” and accordingly left in place his conclusion linking the running of the limitation period to when the plaintiff learned from the CRA that her IPP did not conform with the legislation. Having explained why they did not interfere with Del Frate J.’s characterizations and conclusions, the Court of Appeal provided clear direction to the plaintiff: she could not “resile from this position at trial and seek to advance a broader claim.”

[32] While the Court of Appeal did not specifically refer to para. 60 of Del Frate J.’s decision, they otherwise made clear findings and provided direction which resolved any confusion about the claims moving forward.

[33] It would be unfair for the plaintiff, having narrowed her positions to avoid summary judgment and to succeed on appeal, to then at trial return to her broader claim. Not only would it be contrary to the Court of Appeal’s direction, this would effectively deprive the defendants of a defence; namely, that the limitation period for the other claims expired prior to the issuance of the statement of claim. The plaintiff cannot on the one hand avoid a dismissal of the claim by framing it as a “tax case” and then at trial seek damages or claims of which she was aware many years prior to 2011.

[34] Put another way, based on the way the plaintiff framed her argument, if the CRA had not de-registered the plan, then she could not have sued the defendants for the other losses (even if the claims complied with the Limitations Act, 2002), such as the loss of her salary and benefits. If the IPP had not been de-registered, she would never have been able to sue for the loss of her benefits, for example. This does not accord with the way the statement of claim was plead: the loss of salary and benefits and the lower monthly payments from her IPP had nothing to do with whether or not the IPP qualified under the tax legislation.

FOR THESE REASONS:

[35] The answer to the first question is yes.

[36] The answer to the second question is yes. The plaintiff’s claim at trial is subject to the following limits:

(i) it is limited to the tax-effectiveness of the IPP and the risk of the IPP being found non-compliant with the Income Tax Regulations; and

(ii) the plaintiff’s damages arising from the claim as pleaded are limited to losses/penalties resulting from and after the deregistration of the IPP and as a result exclude (a) the loss of the plaintiff’s Hydro One pension in 2008; (b) the loss of the plaintiff’s Hydro One salary and benefits from the date of her resignation on August 31, 2008, and (c) the loss of an opportunity to invest the plaintiff’s Hydro One pension assets starting from November 2008 when the IPP was set-up.

[37] The answer to the third question is no.

[38] If the parties are unable to agree on costs of this special case, the plaintiff may deliver costs submissions within fourteen days of the date of this decision; the defendants, within twenty-one days. The submissions cannot be more than five pages, double-spaced, not including a bill of costs.

The Honourable Mr. Justice P. J. Boucher

Released: January 18, 2022