Docket: T-1971-14
Citation:
2015 FC 707
Toronto, Ontario, June 3, 2015
PRESENT: The Honourable Madam Justice St-Louis
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BETWEEN:
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ROSE MARIE JOAN RAE
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Applicant
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and
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MINISTER OF NATIONAL REVENUE
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Respondent
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JUDGMENT AND REASONS
I.
Introduction
[1]
This is a motion by the applicant, Ms. Rose
Marie Joan Rae, against the Minister of National Revenue [the Minister] for
certification of proceeding as a class proceeding pursuant to Rule 334.12(2) of
the Federal Courts Rules, SOR/98-106 [the Rules].
[2]
In 2013, Ms. Rae participated in what is known
as a “widely-marketed gifting tax shelter.” In
April 2014, her accountant delivered her 2013 income tax return to the Canada
Revenue Agency [CRA], but Ms. Rae has yet to receive her Notice of Assessment for
the 2013 taxation year from the Minister.
[3]
Ms. Rae is seeking an Order certifying this
application as a class proceeding and appointing her as the representative applicant
of the class.
[4]
The foundation for this motion is an application
brought by Ms. Rae for a writ of mandamus requiring the Minister to
comply with section 152 of the Income Tax Act, RSC 1985, c 1 (5th
Supp.) [the ITA]. According to section 152 of the ITA, the Minister shall, with
all due dispatch, examine a taxpayer’s return of income for a taxation
year, assess the tax for the year, the interest and penalties, if any, payable and
determine the amount of refund payable to the taxpayer or the amount of tax
payable by said taxpayer. Ms. Rae is therefore asking the Minister to assess her
and the other proposed members of the class’ 2013 tax returns forthwith, to
issue a corresponding tax assessment and send the proper Notice of Assessment.
[5]
On the merits, Ms. Rae will also seek a
declaration that the Minister has no authority to delay the assessment of an
income tax return and the issuance of a Notice of Assessment to a taxpayer on
the grounds that the taxpayer has participated in a widely-marketed gifting tax
shelter as described by the Gifting Tax Shelter Initiative of the CRA. In the
alternative, Ms. Rae will seek a declaration that the Minister has no authority
to delay the assessment of an income tax return and issuance of a Notice of Assessment
to a taxpayer as a means of deterring or otherwise limiting participation in a
registered widely-marketed gifting tax shelter.
[6]
The Court must examine if each of the conditions
for certification provided at Rule 334.16 of the Rules have been met. For the
reasons discussed below, I find that some of these conditions have not been met
and, accordingly, I will dismiss the motion to certify the application as a
class proceeding.
II.
Factual background
[7]
Ms. Rae is a Canadian citizen living in Kelowna,
British Columbia.
[8]
In 2013, she participated in a widely-marketed
gifting tax shelter called the Pharma Gifts International Inc. [Pharma Gift
2013], which is registered with the Minister under the identification number
TS075200. She made two donations, one in cash and one in kind, claimed a
charitable donation tax credit in her 2013 income tax return, and asked for a
tax refund.
[9]
On or about April 28, 2014, Ms. Rae’s tax income
return was hand-delivered to the Minister by her accountant, but she has not yet
received a Notice of Assessment from the Minister.
[10]
On July 24, 2014, Ms. F. Caligiuri, Manager at
the Compliance Service Initiative Branch in the Winnipeg Tax Center of the CRA,
wrote to Ms. Rae, advising her that her 2013 income tax and benefit return had
not been assessed as the CRA was reviewing her donation claim related to a
gifting tax shelter. The letter also indicated that the CRA was undertaking an
audit of the associated tax shelter gifting arrangement, and that it could take
up to two years to complete this audit.
[11]
Ms. Caligiuri briefly outlined the history and
general outcome of these audits and indicated the timeline of the interest that
would be paid, or claimed, depending on the outcome. Alternatively, the CRA suggested
that Ms. Rae could withdraw her donation claim and agree to a proposed waiver
agreement which would allow for the assessment of her 2013 tax return prior to
the completion of the audit. In substance, the proposed waiver agreement
required that Ms. Rae withdraw her claim to the donation tax credit for the
2013 taxation year with respect to her contribution in the Pharma Gift 2013,
and that she waived any right of objection or appeal related to the issue of
her eligibility to said claim for taxation year 2013. Ms. Rae did not agree to
this waiver.
[12]
Along with her letter, Ms. Caligiuri enclosed a copy
of a January 10, 2014 news release published by the CRA, warning that it would
not “assess taxes owed or provide a refund to taxpayers
who claim a tax credit under a gifting tax shelter scheme until the CRA has
audited the tax shelter”, and providing a few statistics on the history
of denials of the gifting tax shelter claims following the audits.
[13]
The validity of the tax shelters is not to be
evaluated by this Court. The definition of a tax shelter is found under subsection
237.1(1) of the ITA and refers to gifting arrangements, also defined in
subsections 237.1(1).
[14]
A “widely-marketed gifting
tax shelter” is a type of tax shelter which is subject to the Gifting
Tax Shelter National Program [the GTS Program] of the CRA.
[15]
“Widely-marketed” means the same as “mass-marketed.”
(Mr. André Émile Malouf’s October 17, 2014 affidavit at paragraph 31) The CRA
initiated the GTS Program for the 2012 taxation year and it continued for the
2013 taxation year.
[16]
Based on the record, Pharma Gift 2013 is a kind of “leveraged-donation program.” In this type of program,
a taxpayer typically receives a prearranged loan and makes a donation of the
loan proceeds and additional cash to a charity, while the charity must use the
donation in a pre-determined manner. Some programs involve a loan of property
rather than cash. Under the Pharma Gift 2013, certificates to acquire
pharmaceuticals were loaned instead of cash.
[17]
Although it was not mentioned by this name or
acronym, the GTS Program is said to have been first publicised by a news release
dated October 30, 2012, which was attached to Mr. André Émile Malouf’s October
17, 2014 affidavit. The CRA declares that this national program aims to protect
Canadians from gifting tax shelter schemes, avoid the issuance of invalid
refunds, and discourage participation in what it qualifies as abusive systems.
[18]
Under the GTS Program, the assessment of the tax
returns for taxpayers claiming a credit for either the 2012 or 2013 taxation
year after participating in a widely-marketed gifting tax shelter in 2012 or
2013 was put on hold by the CRA pending the completion of the tax shelter’s
audit. The GTS Program also applies to taxpayers who filed their tax return for
the 2012 or 2013 taxation year without making a claim for a charitable donation
tax credit in respect of participation in a widely-marketed gifting tax shelter
in 2012 or 2013, but had filed a T1 Adjustment Request Form after their
assessment, requesting a charitable donation tax credit in respect of
participation in a widely-marketed gifting tax shelter in 2012 or 2013. The T1
Adjustment Requests of those taxpayers are also delayed until the completion of
the tax shelter’s audit. The GTS Program can also apply to the spouse of a
taxpayer.
[19]
The GTS Program applied to four widely-marketed
gifting tax shelters for 2013, one of them being Pharma Gifts 2013, and to eight
widely-marketed tax shelters for 2012. All the audits for 2012 started between
May and early July 2013, while the audits of three tax shelters for 2013 began
in June, July and September 2014. One of them was not yet started as of October
17, 2014.
[20]
About 2,438 other taxpayers would have similarly
participated in a widely-marketed gifting tax shelter for the 2013 taxation
year, and approximately 1,245 have been offered waivers similar to that offered
to Ms. Rae. Moreover, 40 taxpayers made a T1 Adjustment Request claiming a
charitable donation tax credit for their participation in a widely-marketed
gifting tax shelter in 2013.
III.
Issues
[21]
The issue in the present motion is whether this
proceeding is suitable for class action certification pursuant to the
conditions set out in Rule 334.16(1) of the Rules.
IV.
Position of the parties
A.
Rule 334.16(1)(a): Reasonable cause of action
(1)
Ms. Rae’s position
[22]
Ms. Rae submits that the Minister conceded that
he has failed to examine her 2013 tax return, to issue a corresponding tax
assessment, and to send her a Notice of Assessment.
[23]
She further submits that the Minister has
adopted a policy of delaying or postponing the processing of returns where a
taxpayer participated in a widely-marketed gifting tax shelter, and that this
Court has already found this to be in contravention with section 152 of the ITA
in Ficek v Canada (Attorney General), 2013 FC 502 [Ficek].
According to Ms. Rae, the cause of action raised in Ficek mirrors the
issues raised in her application for the certification of a class proceeding.
Therefore, she submits that the underlying application has a valid cause of
action and has a strong chance of success.
(2)
The Minister’s position
[24]
The Minister accepts that there is a reasonable
cause of action pursuant to Rule 334.16(1)(a), although it does not accept Ms.
Rae’s conclusion on the impact of the Ficek decision.
B.
Rule 334.16(1)(b): Identifiable class of two
or more persons
(1)
Ms. Rae’s position
[25]
Ms. Rae relies particularly on the Minister’s
identification of approximately 2, 438 taxpayers who participated in a
widely-marketed gifting tax shelter in 2013 to submit that there is a readily identifiable
class. Ms. Rae also indicates that among those taxpayers, 1,245 individuals
were offered a waiver, although it is unclear how many have accepted it. Ms.
Rae asserts that there is an easily identifiable class of individuals affected
by the GTS Program, which have all received the same treatment and that more
than two individuals’ assessments remain unprocessed for the 2013 taxation
year.
[26]
Hence, Ms. Rae proposes that the Class be
defined as: “any person who is not a non-resident of Canada,
as defined by the Income Tax Act, who participated in a widely-marketed gifting
tax shelter in 2013 and transmitted their 2013 income tax return to the
Minister. Excluded from the class would be any taxpayer who otherwise meets the
proposed definition but who has since accepted and/or acted on any waiver
offered by the Minister.” During the hearing, Ms. Rae also refined the
class to exclude the taxpayers who are assessed before the hearing of the application
on the merits. Ms. Rae submits that the Court must examine if the conditions
for certification are met and that neither possible mootness, nor any possible
variation should have an impact at this stage.
(2)
The Minister’s position
[27]
The Minister submits that Ms. Rae has not
properly identified a class of two or more individuals. In fact, during her
cross-examination, and subsequently during the hearing, Ms. Rae refined the
proposed class to exclude any taxpayers who are assessed before the hearing of the
application on the merits. Hence, the Minister’s position is that the class is
too narrow as it excludes other taxpayers than those in the proposed class who
have claimed charitable donation tax credits related to a widely-marketed
gifting tax shelter in 2013 and are affected by the GTS Program, namely those
who are assessed before the hearing. In this regard, Ms. Rae herself could
become excluded, which could put an end to the class proceeding.
C.
Rule 334.16(1)(c): Common questions of law or
fact
(1)
Ms. Rae’s position
[28]
Ms. Rae submits that one question unites the
class members on a single common issue, namely: “whether
the policy adopted by the Minister and the excuse given for delaying the
assessments of those members of the proposed class is consistent with the
Minister’s duty to assess their income tax returns “with all due dispatch” pursuant
to section 152(1) of the Income Tax Act.”
(2)
The Minister’s position
[29]
The Minister argues that the proposed common
question must avoid duplication of fact-finding or legal analysis, but that the
question of law proposed here by Ms. Rae is one that has no factual or legal
foundation.
[30]
After a review of the Supreme Court’s
instructions on the matter in Western Canadian Shopping Centres v Dutton,
2001 SCC 46 [Dutton], the Minister puts Ms. Rae’s proposed common
question in the context of a mandamus application and asserts that the
essential question is whether the delay for the Minister to assess Ms. Rae’s
income tax return and to issue a Notice of Assessment is unreasonable. The
Minister submits that Ms. Rae takes the rationale behind the GTS Program for
granted as she argued this rationale has already been “canvassed,
considered and rejected” in Ficek. The Minister submits this
argument is unfounded as the Ficek decision did not concern the GTS
Program but the Pilot Project of the Winnipeg Tax Center [the Pilot Project], a
CRA program which, for the purposes of the decision in Ficek, applied to
individuals in the Prairie Region who claimed charitable donation tax credits
through their participation in 2010 and 2011 into the Global Learning Gifting
Initiative [GLGI], a widely-marketed gifting tax shelter.
[31]
The Minister submits that the rationale behind
the Pilot Project is different than the rationale behind the GTS Program since the
former was only aimed at deterring participation in the GLGI, while the latter aims
to both deter participation in widely-marketed gifting tax shelters and to
review the validity of donation claims before issuing tax refunds that might prove
invalid.
[32]
Further, the Minister submits that Ms. Rae
erroneously contends that the findings of fact in Ficek are binding on
another judge of this Court since the principle of judicial comity does not
apply to findings of fact.
D.
Rule 334.16(1)(d) : The Preferable procedure
for the just and efficient resolution of the common questions of law or fact
(1)
Ms. Rae’s position
[33]
Ms. Rae submits that a class proceeding is the
preferable procedure as it respects the criteria set forth in Rule 334.16(2) of
the Rules and favours judicial economy, access to justice, and the modification
of the Minister’s behaviour.
[34]
Ms. Rae submits that having a single
representative taxpayer acting for all taxpayers is a logical, cost-effective
and preferable procedure for adjudicating this issue. Ms. Rae relies on the
fact that the underlying issue has already been canvassed by this Court in Ficek
and that there have been a significant number of taxpayers affected by the Minister’s
policy to support her position that a class action is the preferable procedure
in the present case.
[35]
Ms. Rae argues that although the underlying
issue has been raised in several applications by taxpayers, none of those have
been adjudicated, none have been certified as a class proceeding and none
address the 2013 taxation year.
[36]
According to Ms. Rae, the certification of this
application will extend the benefits of the decision in Ficek to all
taxpayers, will resolve the underlying issue, and will address the central
issue of her application: the modification of the Minister’s behaviour.
(2)
The Minister’s position
[37]
The Minister submits that Ms. Rae has not shown that
the class proceeding would be a fair, efficient and manageable method of
advancing the application or that it would be preferable to other reasonably
available procedures.
[38]
The Minister argues that a mandamus application
as part of a judicial review is supposed to be a summary process as it can move
to a hearing relatively quickly, and that the certification “bogs this summary process down.” Hence, a judicial
review of Ms. Rae’s case would be more efficient, and the resolution of her
claim may provide guidance in the determination of the claims of other
taxpayers affected by the GTS Program.
[39]
Moreover, the Minister submits that if Ms. Rae
is excluded from the class, the class proceeding will come to an end even if
other class members who have not been assessed may still have an interest in
the resolution of the proposed common question. Therefore, the Minister submits
that a class proceeding is not the preferable procedure for the just and
efficient resolution of the proposed common question.
E.
Rule 334.16(1)(e): Appropriateness of the
representative plaintiff
(1)
Ms. Rae’s position
[40]
Ms. Rae submits that she is a suitable
representative applicant for the proposed class action and would fairly and adequately
represent the interests of the members for the following reasons : (1) she is
not, and never has been, a promoter of any widely-marketed gifting tax shelters;
(2) she is a typical taxpayer; (3) she is committed to fulfilling her
responsibilities to the benefit of all members of the class; (4) she does not
have any conflict of interests with any members of the proposed class; (5) she
has prepared a suitable litigation plan; and (6) she has submitted a summary of
the agreement respecting fees between her and her counsel.
[41]
In particular, Ms. Rae proposes three methods
for giving notice of the proceeding to the taxpayers. The first method requires
the Court to direct the Minister to provide to Ms. Rae the names and contact
information for each member of the class in order for her to provide them with
the Notice of Proceeding. If the Minister objects to the first proposed method,
Ms. Rae proposes a second method under which the Minister will undertake to
deliver the Notice of Proceeding to the taxpayers. The third proposed method is
that she will undertake to publish the Notice of Proceeding in such
publications considered as fair and appropriate by the Court.
(2)
The Minister’s position
[42]
The Minister submits that in assessing whether Ms.
Rae is fairly and adequately able to represent the interests of the class, the
Court must consider her motivations, whether she will vigorously and capably
prosecute the interests of the class, her capacity to bear any costs that she
may incur and the competence of her counsel (Dutton at para 41). The
Minister asserts that an adequate representative applicant must control the
litigation, and that said representative does not control the litigation if she
receives funding for the litigation from a third party. According to the
Minister, a third-party funding agreement should not operate secretly.
[43]
Ms. Rae refused to answer some of the Minister’s
questions during her cross-examination, in particular, questions related to possible
third-party funding. The Minister submits that given this refusal, it may be
inferred that a third party is funding the litigation.
[44]
The Minister submits that if a third-party is
funding the litigation, Ms. Rae may have ceded control to a third-party or
allowed them to have give influence over the litigation, and she would thus not
be an adequate representative, as she would not have the control of the
litigation.
[45]
Moreover, the Minister submits that the
litigation plan is inadequate as it fails to deal with the contingencies
arising from the litigation. The Minister also points out that the means of
notifying class members would rely unnecessarily on taxpayers or on their personal
information. According to the Minister, Ms. Rae’s first and second proposed
methods for notice raise concerns under section 241 of the ITA and under
sections 3, 7 and 8 of the Privacy Act, RSC 1985, c P-21. The
Minister submits that the information sought by Ms. Rae is not necessary for
the administration and enforcement of the ITA, and that this case is not a
situation covered by the law where the disclosure of personal information
should be allowed. Alternatively, the Minister submits that if the Court finds
that the taxpayers’ information should be used for the purpose of sending out
notices to the potential class members, the Minister, acting through the CRA,
should do it so as to limit the intrusion.
[46]
The Minister submits that the plan fails to
provide for the questions that may remain and require individual adjudication.
Moreover, it fails to address individual issues arising from the fact that
since the class members participated in different widely-marketed gifting tax
shelters, the audit of these may be completed at different times.
[47]
The Minister also submits that the litigation
plan fails to address the issue of mootness. For instance, if the class is refined
to include taxpayers who are affected by the GTS Program but have been assessed
before the hearing of the application on the merits, the proceeding will become
moot and the Court will have to decide whether it allows the proceeding to
continue. However, Ms. Rae has not made any submissions to that effect.
[48]
The Minister submits that Ms. Rae is in a conflict
of interest with other members of the proposed class. The Minister submits that
since Ms. Rae’s definition of the class excludes tax payers who received their
Notice of Assessment, she has put herself in a situation of potential conflict
of interest. Indeed, if she is assessed in the meantime, she would be forced to
abandon the proceeding to the detriment of the taxpayers who still have not
been assessed.
[49]
Finally, the Minister submits that Ms. Rae has
not provided a satisfactory summary of agreement respecting fees as it does not
provide sufficient detail to allow the Court or a class member to decide
whether the fees are reasonable.
V.
Analysis
[50]
Rule 334.16(1), which is reproduced in the annex
to this decision, outlines the five conditions that must be reunited in order
for the Court to certify an application as a class proceeding. The Court must
examine if the conditions are reunited in this case.
[51]
The general principles developed with respect to
class proceedings in British Columbia and Ontario may guide this Court in the
application of the Rules in respect of class actions (Vézina c Canada
(Défense nationale, Chef d’État Major), 2011 CF 79 at para 29 [Vézina];
Tihomirovs v Canada (Minister of Citizenship and Immigration), 2006 FC
197 at para 45). In fact, Rule 334.16 is similar to the provisions relating to
class proceedings of the British Columbia and Ontario legislation (Class
Proceeding Act, RSBC 1996, c 59; Class Proceedings Act, SO 1993, c
6).
[52]
As the Supreme Court stated in AIC Limited v
Fisher, 2013 SCC 69 at para 48 [Fisher], the onus to establish some
basis in fact for every certification criterion lies with the applicant. Hence,
Ms. Rae must satisfy the Court that the criteria of Rule 334.16(1) are met (Buffalo
v Samson Cree Nation, 2010 FCA 165 at para 13).
[53]
Ms. Rae must establish that there is some “basis in fact” for each of the requirements in Rule
334.16(1) except for the requirement that the pleadings disclose a reasonable cause
of action (Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57
at para 102 [Pro-Sys]; Hollick v Toronto (City), 2001 SCC 68 at
para 25 [Hollick]).
A.
Rule 334.16(1)(a): Reasonable cause of action
[54]
The threshold to be met for a pleading to show a
reasonable cause of action is very low (Buffalo v Samson Cree Nation,
2008 FC 1308 at para 43 [Buffalo FC]). “[A] pleading
should not be struck for failure to disclose a cause of action unless it is “plain
and obvious” that no claim exists” (Hollick at para 25).
[55]
The parties agree, and I am satisfied, that there is a
reasonable cause of action.
B.
Rule 334.16(1)(b) : Identifiable class of two
or more persons
[56]
The definition of the class must be made
objectively and allow the Court to assess if a particular person falls under
the definition of the class. The class must not be unlimited (Hollick at
para 17). Also, it “must not be unnecessarily broad – that
is that the class could not be defined more narrowly without arbitrarily excluding
some people who share the same interest in the resolution of the common issue”
(Hollick at para 21). Over-inclusion and under-inclusion are not fatal
to the certification as long as they are not illogical or arbitrary (Ward
Branch, Class Actions in Canada (Toronto (ON): Canada Law Book, 2014)
(looseleaf updated 2014, release 38) ch 4 at para 4.250 [Branch]; see also
Hollick at para 21).
[57]
In the present case, I find that the exclusion
of taxpayers assessed before the hearing on the merits from the class is illogical
or arbitrary. These taxpayers share the same interest in the resolution of the
common issue, regardless of whether or not they have received their Notice of
Assessment. Moreover, the class excludes the taxpayers who filed their tax
return for the 2013 taxation year without making a claim for a charitable
donation tax credit in respect of participation in a widely-marketed gifting
tax shelter in 2013, but filed a T1 Adjustment Request Form after their
assessment, requesting a charitable donation tax credit in respect of
participation in a widely-marketed gifting tax shelter in 2013. Thus, I find
the proposed class to be too narrow.
C.
Rule 334.16(1)(c) : Common questions of law
or fact
[58]
At paragraph 108 of Pro-Sys, the Supreme
Court of Canada, citing its previous decision in Dutton at paragraphs
39-40, listed McLachlin C.J.’s instructions for determining whether the
proposed issues for a class proceeding fulfill the requirements of Rule
334.16(1)(c) :
(1) The commonality question should be approached
purposively.
(2) An issue will not be “common” only where
its resolution is necessary to the resolution of each class member’s claim.
(3) It is not essential that the class members
be identically situated vis-à-vis the opposing party.
(4) It is not necessary that common issues
predominate over non-common issues. However, the class member’s claims must
share a substantial common ingredient to justify a class action. The court will
examine the significance of the common issues in relation to individual issues.
(5) Success for one class member must mean
success for all. All members of the class must benefit from the successful
prosecution of the action, although not necessary to the same extent.
[59]
In the present case, the resolution of the
common question submitted by Ms. Rae is necessary to the resolution of each
class member’s claim, and each of them will benefit from the successful
prosecution of the action. Further, the resolution of the issue submitted by Ms.
Rae as a common question under a class action will “avoid
duplication of fact-finding or legal analysis” (Dutton at para 39).
[60]
I agree with the Minister in that I read Justice
Phelan’s decision in Ficek as being tied to the facts of that case, and
I am satisfied that the factual findings and rationale in Ficek cannot
be transposed here. However, I fail to see how it affects the assessment of the
proposed common issue, as it is described in this case. I do not find that the
issue, as it reads, imports per se the factual findings of the Ficek decision.
[61]
I am therefore satisfied that the question
submitted by Ms. Rae constitutes a common question of law or fact which
fulfills the requirements of Rule 334.16(1)(c).
D.
Rule 334.16(1)d) : The Preferable procedure
for the just and efficient resolution of the common questions of law or fact
[62]
The Supreme Court of Canada has held that
the determination of whether a class action is the preferable procedure requires
comparing the class proceeding with other procedural options while bearing in
mind the three goals of class proceedings: access to justice, behaviour
modification, and judicial economy (Fisher at para 16). Rule 334.16(2),
reproduced in the annex to these reasons, states a non-exhaustive list of
factors to be taken into consideration in assessing whether a class proceeding
is the “preferable procedure.”
[63]
The Supreme Court in Hollick stated that
in order to satisfy the requirement under Rule 334.16(1)(d), an applicant has
to show: (1) that a class proceeding would be a fair, efficient and manageable
method of advancing the claim, and (2) that it would be preferable to any other
reasonably available means of resolving the class members’ claim (Hollick at
paras 28, 31). Hence, under this requirement:
[i]t is not necessary to show that it would be
impossible for each member to sue individually in order to justify
certification, merely that it would be difficult in the circumstances, by
reason of the number of class members as well as other factors (Branch
at para 4.1030)
[64]
I will now address factors under Rule 334.16(2)
in turn.
(1)
Predominance under Rule 334.16(2)(a)
[65]
In the present case, Ms. Rae has submitted only
one common question of law or fact. The Minister has only referred to one issue
that will require individualized assessment, namely, that in the event that the
Court finds that the rationale for delaying the assessments was not
unreasonable, the Court will have to decide whether the Minister is simply
taking too long to raise the assessments depending on the particular
widely-marketed gifting tax shelter in which the class member participated. As
stated in Buffalo FC, in order to establish whether the common questions
of law or fact predominate over questions affecting only individual members,
the Court must determine “whether there are common issues
that could advance the litigation by their resolution” (Buffalo FC at
paras 100, 130). I am satisfied that the resolution of the common question
identified by Ms. Rae will determine the heart of the claims that would be
advanced by the class members and any individual issue that may remain could be
efficiently dealt by the judge hearing the class action. Therefore, I am
satisfied that this factor favours the finding that a class action is
the preferable procedure.
(2)
Valid interest individual control of action
under Rule 334.16(2)(b)
[66]
The only submission of the parties with respect
to this issue is from the Minister and relates to the possibility that the
class action come to an end if Ms. Rae is being assessed before the resolution
of the proposed common question. In fact, the Minister relies on the fact that Ms.
Rae refined the class to exclude any taxpayers who are assessed before the hearing
of the application on the merits.
[67]
However, a motion to remove Ms. Rae as the
representative plaintiff and to substitute her by another class member or to
decertify the class proceeding could be brought in the event that she is
effectively assessed before the hearing of the application on the merits, which
would prevent the class action from coming to an end (Grant v Canada
(Attorney General), [2009] OJ No 5232 at para 136 (ONSCJ)).
[68]
Therefore, there is no evidence that there is a
significant number of the members of the class who have a valid interest in
individually controlling the prosecution of separate proceedings, I am satisfied that this factor favours the finding that a
class action is the preferable procedure.
(3)
Claims that are or have been the subject of
other proceedings under Rule 334.16(2)(c)
[69]
As previously stated, Ms. Rae submits that there
are several applications that have been filed by taxpayers with respect to the
common issue submitted in the present case but none of those have finally been
adjudicated, none have been certified as a class proceeding and none address
the 2013 taxation year. The Minister does not make any submission on this
factor.
[70]
On the sole basis that the present proposed
class action concerns the 2013 taxation year and that the parties pointed to no
other applications filed in this respect, I am satisfied that this factor
favours the finding that a class action is the preferable procedure.
(4)
Comparative practicality under Rule 334.16(2)(d)
and (e)
[71]
The Minister argues that a class
proceeding would be less efficient than an individual action, relying on
paragraph 18.4(1) of the Federal Courts Act, RSC 1985, c F-7 which
provides that a judicial review is a summary proceeding. The Minister points
out that a judicial review “can move to a hearing
relatively quickly [and that certification] bogs this summary process down.”
[72]
Ms. Rae could seek
relief through a judicial review which would probably be heard more
expeditiously than would a class proceeding. I agree with the Minister that the
resolution of this claim may provide guidance in dealing with other taxpayers’
claims.
[73]
However, I disagree with
the Minister that individual actions would be more efficient than a class
action. The Minister has not submitted evidence that a class proceeding would
create greater difficulties than other litigation alternatives. All taxpayers
that are affected by this same issue would have to bring this matter in front
of this Court individually and given the number of those taxpayers, I cannot
conclude that this option would be more efficient than a class proceeding. Therefore,
bearing in mind the goals of class proceedings (access
to justice, behaviour modification, and judicial economy), I find that this
factor favours the finding that a class proceeding is the preferable procedure.
[74]
Accordingly, I am of the view that a class
proceeding is the preferable procedure for the just and efficient resolution of
the common issue raised by this case.
E.
Rule 334.16(1)(e) : Appropriateness of the
representative plaintiff
[75]
During Ms. Rae’ cross-examination, her counsel
objected to the questions related to third-party funding on the basis that such
questions were not relevant. On this basis, the Minister submits that there are
some concerns regarding Ms. Rae’s independence.
[76]
In Fairview Donut Inc v The TDL Group Corp,
2012 ONSC 1252 [Fairview], Justice Strathy for the Superior Court of
Justice of Ontario found that a third-party funding “might
be reason to question the independence and suitability of the representative
plaintiff” (Fairview at para 358). During cross-examination, the
plaintiffs had refused to answer questions about whether they have any arrangements
with any third party for the funding of the litigation. Justice Strathy
ruled that before granting the certification motion, the class representative
would have to answer the questions related to third-party funding (Fairview at
para 364). In fact, third-party funding raises concerns about the person who is
actually controlling the litigation (Fehr v Sun Life Assurance Company of Canada,
2012 ONSC 2715 at para 139).
[77]
In light of the above, I am of the view that Ms.
Rae’s refusal to answer those questions raises some concerns.
[78]
In order to demonstrate that she could fairly
and adequately represent the interests of the class, Ms. Rae must show that she
prepared a plan for the proceeding which sets out a workable method of
advancing the proceeding on behalf of the class and of notifying class members
as to how the proceeding is progressing.
[79]
At the certification stage, the Court will not
scrutinize the plan in order to determine whether it is adequate and could
carry the case through to trial without being amended. In Buffalo FC,
the Court set out a list of non-exhaustive matters to be addressed in a
litigation plan at paragraph 151:
(i) the steps that are going to be taken to
identify necessary witnesses and to locate them and gather their evidence;
(ii) the collection of relevant documents from
members of the class as well as others;
(iii) the exchange and management of documents
produced by all parties;
(iv) ongoing reporting to the class;
(v) mechanisms for responding to inquiries
from class members;
(vi) whether the discovery of individual class
members is likely and, if so, the intended process for conducting those
discoveries;
(vii) the need for experts and, if needed, how
those experts are going to be identified and retained;
(viii) if individual issues remain after the
termination of the common issues, what plan is proposed for resolving those
individual issues; and
(ix) a plan for how damages or any other forms
of relief are to be assessed or determined after the common issues have been
decided.
[80]
The litigation plan must show that the
representative applicant and his or her counsel “have
thought the process through, and that they grasp its complexities” (Buffalo
FC at para 148). However, a litigation plan may be found adequate
even if not enough detailed, and the Court can grant leave to review the plan
where the other certification requirements are met (see Glover v Toronto (City)
(2009), 176 ACWS (3d) 947 at para 97 (ONSCJ); Branch at para 4.590). The nature, scope and complexity of the particular
litigation will determine how detailed a litigation plan should be (Buffalo
FC at para 150).
[81]
The litigation plan submitted by Ms. Rae
proposes three methods for the notification of the proceeding to the class
member and provides for delays in general procedural steps. I do not find that
the litigation plan fulfills the requirement set out in the jurisprudence. I am
also not convinced that Ms. Rae would fairly and adequately represent the
interests of the class.
[82]
Ms. Rae must also provide a summary of any agreements
respecting fees and disbursements between her and the solicitor of record in
order to show that she is an appropriate representative plaintiff. As stated by
Justice De Montigny of this Court at paragraph 57 of Vézina, the purpose
of such a disclosure is to :
[permettre] à un membre de décider s’il entend
s’exclure du groupe ou s’il entend chercher à faire modifier la convention
d’honoraires puisque cette convention liera tous les membres du groupe et affectera
le montant de la réparation qu’ils pourraient obtenir alors même qu’ils n’ont
pas participé à la négociation de la convention.
[83]
In my view, the fee agreement submitted by Ms. Rae does not allow the
fees’ reasonableness to be gauged. In fact, the letter specifies the hourly
rate for the counsel of the record and the hourly rate for other personnel.
However, this fee agreement is not sufficient for a class member to determine
the amount that will be due monthly by the class members to the counsel of the
record. Therefore, I am not satisfied that the fee agreement, as submitted by Ms.
Rae meets the requirements of Rule 334.16(1)(e)(iv).
[84]
In light of the above, I cannot find that Ms. Rae would fairly and
adequately represent the interests of the class. Since this requirement is not
met, it is not necessary to address the issue of the proper method to give
notice of the proceeding to the class members.
VI.
Conclusion
[85]
In the present case, I find that Ms. Rae has
failed to meet the criteria set in Rule 334.16(1). Specifically,
she does not meet the requirement of Rule 334.16(1)(b) as she has not properly
identified a class of two or more individuals. Moreover, there are some issues
that remain undetermined regarding her independence. Therefore, I cannot
conclude that Ms. Rae is an appropriate representative applicant as per Rule
334.16(1)(e). Furthermore, the litigation plan and fee agreement submitted by
Ms. Rae both lack detail and are not sufficiently developed in order to fulfill
the requirements of the Rules and the case law.
[86]
I will therefore dismiss the motion.
[87]
Each party will bear their own costs for this
motion.
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