Docket: T-1352-11
Citation:
2015 FC 74
Toronto, Ontario, January 20, 2015
PRESENT: The
Honourable Mr. Justice Diner
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BETWEEN:
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LOTHAR SCHEUER,
ELIZABETH ANDRUSIAK, MICHAEL ANDRUSIAK, DONALD BELFOUR,
DENISE BANGA, RON BILLINGTON, CAROLINE BIRD, WAYNE BOYCHUK, SUSAN
BUCKLE, WAYNE BUCKLE, MICHAEL CHERWENUK,
MICHAEL CHILLOG, LAURA CROTENKO, RONALD DAVIDSON, DWAYNE DECK,
LINDA DEIS, BARABRA DICKSON, WILLIAM DICKSON, DEBORAH DOWSWELL, ROBERT
DOWSWELL, PATRICK DUVAL, GARY FALKENSTEIN, COLIN FONG, PATRICK GENOWAY, BARRY
GERVAIS, CHERYL GIAMBATTISTA, JORDAN GIAMBATTISTA, NICK GIAMBATTISTA, KEN
HANLEY, DALE HANLEY, DONNA HARVEY,
CHERYL HELMECZI, DENNIS HELMECZI, LAURIE HELMECZI, LINDA HELMECZI,
RAND, DUANE HILLSENDAGER,
GARTH HILTS, CAROL HIPFNER, JACQUELINE HOFFERT, RUSSELL HOLM,
FREDERRICK HOWARD, FRED HUBER, GARTH HUBER, LORI IRELAND,
GORDAN JOYCE, GORDON AND
MAXINE JOYCE, TESS KOSSICK, KENNETH KRAWCZYK,
FRANCES KULLMAN, GORDAN KULLMAN, DERRICK LAMB, BRADLEY LAMONTAGNE,
BRAD LANCE,
WAYNE LARSEN, LESLIE PADWICK,
NICK LOFFLER, RON LYKE, SHANE LYKE, SHERYL LYKE, JOHN MACDONALD,
BARRY MALESH, MARTIN MARCHUK, ALICE MCKIM, MARK MELNYK,
GLEN MISKOLCZ, HERBERT PADWICK, SUKHDEV PARMAR, ROCHELLE
PATENAUDE, KELLY PERKINS,
JOANN PIETT, JUSTIN PIETT,
LORNE PIETT, MARGARET PIORO, BERNICE PREDENCHUK,
BILL PREDENCHUK, JASON PUGH, MICHAEL PUGH, DENNIS READ, GWENDOLYN
READ, CARLA REINHEIMER, JAMIE REINHEIMER, LANCE REINHEIMER. ALEXANDER
ROBERTSON, CLIFF RUNGE,
DELORES RUNGE, KURT SCHEMMER, JAMIE SCHNEIDER, LARRY SCHNEIDER,
MICHAEL SCHNEIDER,
RONALD SCHNEIDER, WARREN SCHULTZ, HEIDI SEVERSON, DAVID SHIPLETT,
LISA SHOTTON, MICHAEL SNIDER,
JANET STANZEL, KENT STANZEL,
GREG STEWART, MAGDALINE STIEBEN, DANIEL SZMUTKO,
KATHERINE SZMUTKO, ROB TEMSLAND, ANNA TROWER, DAVID TROWER,
MARGARET TROWER, MERLIN TROWER, NORMA TROWER, LYLE ULRICH, MARLISE VITTUR,
DAVID WEBSTER, SHEILA WEBSTER, ELEANOR WELSH, GERALD WELSH, LEONARD WEIBE,
LORETTA WEIBE, WALTER WILHELMS, GREGORY WOITAS, CHRISTINE YOUNGHUSBAND, JAKE
ZAPSHALLA
AND KAREN ZATYLNY
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Plaintiffs
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and
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HER MAJESTY THE QUEEN
CANADA REVENUE AGENCY AND
THE ATTORNEY GENERAL OF CANADA
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Defendants
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JUDGMENT AND REASONS
[1]
This is an appeal, brought by the Defendants in
this action, of the Order of Prothonotary Aalto [Prothonotary] dated April 17,
2014, in which he dismissed a motion to strike out the Plaintiffs’ Amended
Statement of Claim and to dismiss the Plaintiffs’ action pursuant to Rules
221(1)(a) and (c) of the Federal Courts Rules, SOR/98-106.
[2]
For the reasons that follow, this appeal is
dismissed with costs.
I.
The Pleaded Facts
[3]
The Plaintiffs are a group of Canadian taxpayers
who participated in a tax shelter donation program marketed by Global Learning
Group Inc [GLGI]. The Plaintiffs made a claim in negligence in 2011 against Her
Majesty the Queen, the Canada Revenue Agency [CRA], and the Attorney General of
Canada for the CRA’s alleged breach of its duty of care by failing to properly
warn the Plaintiffs in a timely fashion of the consequences that could follow
from their participation in the GLGI program.
[4]
The Plaintiffs allege in the Amended Statement
of Claim that CRA was aware of potential issues surrounding the charitable
donations made to GLGI as early as the year 2000, but took no steps to warn or
inform Canadian taxpayers, and in particular the Plaintiffs, of its concerns
with the program. The Plaintiff Scheuer alleges that he relied upon the fact
that CRA had issued a valid tax shelter number to GLGI and made various
donations to GLGI for the years 2004 to 2007, for which he claimed charitable
donation tax credits. The CRA later reassessed the Plaintiff Scheuer and
disallowed those charitable donation tax credits. The Plaintiffs claimed
damages from the Defendants for the CRA’s failure to properly warn and protect
them.
II.
The Decision Under Appeal
[5]
The Defendants sought to strike the claim on the
basis that it revealed no reasonable cause of action. They argued that the CRA
did not have a recognized duty of care to inform taxpayers of the consequences
of investing in tax shelters, and that the Plaintiffs had not pled the facts
necessary for the recognition of such a duty of care.
[6]
The Prothonotary dismissed the motion to strike
the claim, concluding that he was not convinced that it was abundantly clear
that the claim was bereft of any chance of success, given: the findings in Ficek
v Canada (Attorney General [Ficek] , 2013 FC 502, which supported
the proposition that the within taxpayers were part of a targeted group within
CRA who were being treated differently than other taxpayers; the provisions in
the Income Tax Act [ITA]; the exceptions in section 241 of the ITA
to the prohibition against providing confidential information; the relevant
case law regarding motions to strike and duties of care; and the allegations in
the Amended Statement of Claim.
III.
Grounds of Appeal
[7]
In this motion, the Defendants appeal the Order
of the Prothonotary pursuant to section 51 of the Federal Courts Rules,
seeking an order setting aside the Prothonotary’s Order, as well as costs. The
Defendants claim that the Prothonotary erred in law by:
1)
improperly relying on the findings of fact in Ficek,
above, as evidence to be considered on the motion to strike;
2)
improperly finding that the facts were
sufficient to disclose proximity by interaction;
3)
failing to consider the role of legislation in
determining proximity; and
4)
failing to conduct the second part of the Anns/Cooper
test.
[8]
The Defendants argue that the facts pled in the
Amended Statement of Claim fell short of meeting the proximity requirement to
impose a duty of care on the CRA, and that there are policy considerations that
dictate against the imposition of such a duty of care.
[9]
The Plaintiffs argue that the standard for
reviewing the Prothonotary’s decision is a deferential one, and that it should
not be interfered with, since the Prothonotary did not exercise his discretion
based on a wrong principle or a misapprehension of the facts.
IV.
Issues
[10]
This matter raises the following issues:
a)
What is the standard on which I am to consider
the Prothonotary’s Order?
b)
Given this standard, should the Order stand?
A.
Issue #1: The standard of Review of the Decision
below
[11]
The case law is clear that discretionary orders
of prothonotaries ought only to be reviewed de novo by a judge on appeal
where: (a) the questions raised in the motion are vital to the final issue of
the case; or (b) the orders are clearly wrong, in the sense that the exercise
of discretion by the prothonotary was based upon a wrong principle or upon a
misapprehension of the facts: See R v Aqua-Gem Investments Ltd, [1993] 2
FC 425 (CA) at 462-63; ZI Pompey Industrie v ECU-Line NV, 2003 SCC 27; Merck
v Apotex, 2003 FCA 488 at para 19; Gordon v Canada, 2013 FC 597 at
para 10 [Gordon] .
[12]
The vitality issue raised in summary judgment
case law was briefly addressed at the hearing. Although it is immaterial to the
outcome of this motion, the Court recognizes that recent jurisprudence of this
Court holds that appeals from dismissals of motions to strike should not be
considered de novo as they do not raise a question that is vital to the
final issue of the case: See Teva v Pfizer, 2014 FC 69 at paras 25-26; Teva
v Pfizer, 2013 FC 1066 at para 10; Gordon v Canada, 2013 FC 597 at
para 11; Seanautic v Jofor, 2012 FC 328 at paras 20-21; Peter G White
Management Ltd v Canada, 2007 FC 686 at para 2. Thus, I will only conduct a
de novo review where the Prothonotary exercised his discretion based
upon a wrong principle or upon a misapprehension of the facts: Seanautic,
above, at para 21.
B.
Issue #2: Should the Order stand?
[13]
Applying the above standard, I conclude that the
Prothonotary’s Order dismissing the motion to strike the Plaintiffs’ claim
should stand.
[14]
A claim will only be struck if it is plain and
obvious, assuming the facts pleaded to be true, that the pleading discloses no
reasonable cause of action: R v Imperial Tobacco Canada Ltd, 2011 SCC 42
at para 17 [Imperial Tobacco] . Claims should
proceed through the court system in the usual way unless they have no
reasonable chance of succeeding: Imperial Tobacco at para 25. On motions
to strike, judges should err on the side of permitting novel but arguable
claims to proceed to trial: Imperial Tobacco at para 21.
[15]
The Prothonotary identified the proper framework
for determining a duty of care where it has not been previously recognized in
the case law, that framework being the Anns/Cooper test (Anns v
Merton London Borough Council, [1978] AC 728; Cooper v Hobart, 2001
SCC 79 [Cooper]). On the first part of the Anns/Cooper test, a prima
facie duty of care is established where the facts disclose foreseeability
and proximity. Where the duty is said to be owed by a government actor, the
duty may arise explicitly or implicitly from the statutory scheme, or
alternatively from interactions between the claimant and the government. Where
an alleged duty of care conflicts with an overarching statutory or public duty,
the Court may find that the statute forecloses the existence of such a duty of
care. If a prima facie duty of care is established, the second part of
the Anns/Cooper test requires the Court to consider whether there are
residual policy reasons which negate the imposition of the claimed duty of
care: Imperial Tobacco at paras 41-44, 49-50, 52-54; Cooper at
para 30.
[16]
The Defendants submit that the Prothonotary
erred in law in his consideration of the motion to strike in numerous respects.
I will deal with each of these in turn.
(1)
Reliance on Ficek
[17]
The Defendants submit that the Prothonotary
improperly considered the case of Ficek, above, as evidence, since
judges on motions to strike are required to limit their consideration to the
language of the pleadings: Imperial Tobacco at paras 23-24.
[18]
I agree with the Defendants that evidence is not
admissible on motions to strike: Imperial Tobacco at para 22. On a
motion to strike, the facts pleaded are assumed to be true, and the test is
whether it is plain and obvious that the pleadings disclose no reasonable cause
of action: See Imperial Tobacco at paras 17, 22; Taylor v Canada (Attorney General), 2012 ONCA 479 at para 22 [Taylor].
[19]
As it is not entirely clear whether the
Prothonotary relied on Ficek as evidence that the Plaintiffs were
treated differently than other taxpayers, or whether he properly limited his
consideration to the facts as pleaded in the Amended Statement of Claim, I have
conducted a de novo review and find any error in this regard to be
immaterial in any case. As explained below, the facts as pleaded in the Amended
Statement of Claim are arguably sufficient to establish proximity in the duty
of care analysis, and are therefore sufficient to prevent this claim from being
struck at this time.
(2)
Proximity analysis
[20]
The Defendants argue that the Prothonotary erred
by finding that the facts pleaded may be sufficient to ground proximity by interaction.
Specifically, the Defendants submit that no specific interactions between CRA
and the investors are pleaded other than the filing of tax returns by the
investors and information returns by the tax shelter promoters. In any event,
they argue, any duty is foreclosed by the ITA, specifically by: its
purpose which is to raise revenue for the treasury; section 241, the
confidentiality provision; and the requirement on promoters in subsection
237.1(5).
[21]
In this case, I am conducting a de novo review
of the proximity analysis for two reasons. First, as discussed above, the
Prothonotary’s reference to Ficek made it unclear whether he had relied
on the facts in Ficek as evidence. Second, while the Prothonotary
alluded to having considered “the provisions of the ITA”
in his conclusion, it is unclear whether he considered the statutory scheme in
his proximity analysis, other than section 241 of the ITA. Therefore, my
de novo proximity analysis follows.
[22]
Where the claim is advanced against a regulator,
the proximity analysis focuses first on the applicable legislative scheme, to
determine whether it either imposes or forecloses a private law duty of care by
the regulator, and then on the interactions between the regulator and
plaintiff: See Imperial Tobacco at paras 43-45; Taylor at paras
75-79. The legislative scheme is not determinative one way or the other in this
case. Thus, my de novo review focuses on the specific circumstances of
the interactions between the regulator and the plaintiff in the context of the
legislative scheme to determine whether a sufficiently “close
and direct” relationship exists to justify the imposition of a prima
facie duty of care: Taylor at para 79.
[23]
In considering whether allegations of
interactions between the Plaintiffs and the CRA are sufficient to survive a
motion to strike at the pleadings stage, I bear in mind the warning of Chief
Justice McLachlin at paragraph 47 of Imperial Tobacco:
Since this is a motion to strike, the question
before us is simply whether, assuming the facts pleaded to be true, there is
any reasonable prospect of successfully establishing proximity, on the basis of
a statute or otherwise. On one hand, where the sole basis asserted for
proximity is the statute, conflicting public duties may rule out any possibility
of proximity being established as a matter of statutory interpretation: Syl
Apps. On the other, where the asserted basis for proximity is grounded
in specific conduct and interactions, ruling a claim out at the proximity stage
may be difficult. So long as there is a reasonable prospect that the asserted
interactions could, if true, result in a finding of sufficient proximity, and
the statute does not exclude that possibility, the matter must be allowed to
proceed to trial, subject to any policy considerations that may negate the prima
facie duty of care at the second stage of the analysis.
[Emphasis added]
[24]
“Proximity” is the term used to describe a relationship that is sufficiently “close and direct” to render it fair and reasonable to
require the defendant, in conducting his or her affairs, to be mindful of the
plaintiff’s legitimate interests: Cooper at paras 32-33; Taylor at
para 66. The case law is clear that findings of proximity are fact-specific,
that there is no single unifying characteristic in the proximity analysis, and
that the relevant factors will depend on the circumstances: Cooper at
para 35; Taylor at para 80. Among the potentially relevant factors are
considerations such as: expectations; representations made by the defendant,
especially if made directly to the plaintiff; reliance by the plaintiff on the
defendant’s representations; the nature of the plaintiff’s property or other
interests engaged; the nature of the overall relationship between the plaintiff
and defendant; the existence of a close and direct nexus between the decisions
taken by the defendant and the harm alleged; and the magnitude of the effects
of the defendant’s discretionary decisions on the plaintiff that were obvious
to the defendant at the time it made its decision: See Cooper at paras
34-35; Leroux v CRA, 2014 BCSC 720 [Leroux] ; Taylor at
para 69.
[25]
Neither physical proximity nor a personal
relationship is necessary for a finding of proximity. Rather, the proximity
analysis is concerned with whether the actions of the defendant had a close or
direct effect on the plaintiff, such that the defendant ought to have had the
plaintiff in mind as a person potentially harmed: Taylor at para
68, citing Hill v Hamilton-Wentworth Regional Police Services Board,
2007 SCC 41 at para 29. As such, the lack of face-to-face contact or similar
direct communication in this case is not determinative.
[26]
The pleadings provide various points in time at
which sufficient proximity can be found, with increasing proximity at each
point. The following facts, all obtained from the Amended Statement of Claim,
may be sufficient to establish proximity by interaction, the merits of which of
course will have to be determined if this matter makes it to trial. The
relevant sections from the Amended Statement of Claim potentially establishing
a basis for proximity are:
•
CRA issued a tax shelter number to GLGI without
properly assessing the scheme submitted by GLGI and with knowledge that the
Plaintiffs would rely on the tax shelter number as an indication that GLGI had
met the requirements of the ITA (para 147);
•
The Plaintiffs relied on the tax shelter number
(paras 147, 157);
•
The Plaintiffs are separate from the general
public in that they are part of a group of taxpayers who donated to GLGI (para
157);
•
CRA was aware of potential issues surrounding
the charitable donations made to GLGI as early as the year 2000 but took no
steps to warn or inform Canadian taxpayers and in particular the Plaintiffs
(para 149);
•
The Plaintiffs filed their tax returns to CRA
which included the specific information of the donations they made based on the
tax shelter numbers (para 150);
•
CRA received information returns from the GLGI
promoters which reported all their sales, as required by subsection 237.1(4) of
the ITA (para 151);
•
CRA assessed each individual tax return separate
and apart from all other Canadians. At this time, CRA had information available
to it regarding GLGI’s sales (para 152);
•
CRA accepted the Plaintiffs’ donations to GLGI,
creating further reliance by the Plaintiffs on CRA that the scheme was approved
by CRA (para 154);
•
CRA waited until 3 years later to reassess the
tax payer, when CRA knew or ought to have known that the donation would not be
accepted (para 156); and
•
CRA has continued to allow GLGI to market its
program to Canadian taxpayers, knowing that none of the tax credits issued will
be honoured by CRA (para 155).
[27]
The duty of care jurisprudence has suggested
that the following features are common among cases where regulators have been
held to owe a duty: (i) the facts demonstrate a relationship and connection
between the regulator and individual that is distinct from and more direct than
the relationship between the regulator and that part of the public affected by
the regulator’s work; and (ii) the public statutory duties are consistent with
the existence of a private law duty of care owed to an individual plaintiff: Taylor
at paras 80, 88, 104.
[28]
The facts as alleged above provide some basis
for distinguishing the relationship between the CRA and these Plaintiffs from
the relationship that exists between the CRA and all those affected by its
actions. The facts suggest that despite CRA’s knowledge as early as 2000 of
potential issues surrounding the charitable donations made to GLGI, and the
annual reporting by individual taxpayers and by GLGI of the names of
individuals who were investing in the GLGI program, CRA confirmed the
assessments of the individuals and did not reassess them until several years
later. In my view, this provides at least an arguable case of sufficient
proximity for a prima facie duty of care. Ultimately, it will be
necessary to consider the entirety of the circumstances said to constitute the
relationship to determine whether a duty exists: Taylor at paras
117-118. All we have at this very early stage of the proceedings are pleadings
of the affected taxpayer Plaintiffs who participated in the GLGI scheme. We do
not yet even have a statement of defense from the Defendants.
(3)
The Legislative Scheme
[29]
As mentioned above, the specific circumstances
of the interactions between the regulator and the plaintiff are to be assessed
in the context of the legislative scheme to determine whether a sufficiently “close and direct” relationship exists to justify the
imposition of a prima facie duty of care: Syl Apps Secure Treatment
Centre v BC, 2007 SCC 38 at paras 27-29. The Defendants have submitted here
that the legislative scheme forecloses the possibility of a finding of
proximity. I disagree.
[30]
In response to the Defendants’ arguments that
the ITA’s (i) purpose to raise funds for the treasury, and (ii)
self-assessment system, are both inconsistent with a private law duty of care
by the CRA to warn individual taxpayers of specific questionable tax schemes, I
need refer only to the following discussion of the British Columbia Supreme
Court in Leroux, above. Where Leroux is currently under appeal,
and may resultantly be nuanced or reversed by the Court of Appeal, the case
nonetheless establishes that these issues are arguable ones, and that the
claims are not necessarily bound to fail:
303. The
close causal connection between the alleged misconduct and the harm is another
indicator of proximity, according to Odhavji. The foreseeability of
devastating consequences to Mr. Leroux in a general sense was evident to everyone
involved at the time the assessment was levied, particularly in view of the
extremely large penalties and the daily compounding of interest, even if the
specifics of Mr. Leroux's business difficulties were not known to them. The
fact that Mr. Leroux had reciprocal and perhaps even more important duties
under the Income Tax Act, does not detract from the duty on the CRA
employees to conduct themselves as reasonably careful professionals in these
circumstances. There is nothing in the statutory scheme of the Income Tax
Act that would suggest otherwise.
[…]
306.
The next consideration is whether policy
considerations should prevent a duty of care from being imposed. While there
is a duty to the public and to the Minister of National Revenue to collect
taxes that are properly payable, as recognized in the cases above, I am unable
to see that this duty conflicts with a duty to take reasonable care in
assessing taxes, auditing taxpayers, and particularly in imposing penalties. It
is true, as CRA contends, that the Canadian tax system depends on
self-assessment, and therefore the honesty and full disclosure of taxpayer is
crucial. However, within that scheme, CRA is given almost unchecked powers.
CRA officials are not accountable to any independent body for their actions,
except through an appeal to the Tax Court of Canada. As the Supreme Court of
Canada observed at para. 56 of Hill, holding police officers to a
standard of care that might make them more careful is not necessarily a bad
thing. The same reasoning applies in this case.
[Emphasis Added]
[31]
Nor is any alleged duty of care determinatively
foreclosed by the legislative requirement on promoters to display on written
statements that tax shelter numbers are administrative only and do not confirm
the entitlement of investors to claim tax benefits associated with the tax
shelter (ITA, s 237.1(5)). I find that this, too, is an arguable issue,
and should be determined only after an airing of a full record and after
hearing from both sides.
[32]
In conclusion, on this point of the duty of care
analysis, it is not plain and obvious on the facts as pleaded in the Amended
Statement of Claim and in the context of the legislative scheme that the
Plaintiffs will be unable to establish a duty of care. The pleading is not
devoid of any chance of success, and accordingly the claim should be allowed to
proceed.
(4)
Part II of the Anns/Cooper Test: Residual policy
concerns
[33]
I am not satisfied that the Prothonotary
sufficiently considered the second question raised by the Anns/Cooper test
as to whether there are residual public policy considerations that would negate
the imposition of the alleged duty of care. To the extent that he did not, I
will do so here, as did this Court in Gordon (above, at para 36).
[34]
The Defendants submit that the following policy
considerations are sufficient to negate the imposition of a duty of care in
this case: the prospect of indeterminate liability; the fact that the CRA’s
decision to issue a warning is a true policy decision; and the fact that
section 241 of the ITA conflicts with such a duty.
[35]
In my view, none of these policy considerations
are sufficient to negate the duty of care at this stage without a hearing. All
raise arguable points, especially in the context of the clearly evolving law in
this area, and accordingly I am not prepared to strike the claim at this time.
[36]
With respect to the prospect of indeterminate
liability, it is clear from the following discussion of Justice Humpries at
paragraph 307 of Leroux, above, that the spectre of indeterminate liability
and widespread litigation is not necessarily determinative:
As for the spectre of widespread litigation,
the battle for any plaintiff in this situation is a steep uphill one, as Mr.
Leroux has found. While taxpayers subjected to an audit constitute a larger
class as compared to those subjected wrongfully to criminal investigation as in
Hill, in order to rely on a duty of care a potential plaintiff must
establish the requisite degree of foreseeability and proximity in their
particular situation, followed by proven breaches, causation, and damages. Any
suit will be rigorously defended with unlimited resources, if the present one
is any measure. It is difficult to envision a glut of lawsuits overcoming these
onerous burdens. By his own evidence, Mr. Leroux started this action because he
was operating under the misapprehension that this was the only way he could get
compensation and it would not be hard fought. Those expectations proved to be
wrong.
[37]
Similarly, in this case, GLGI only impacted a
limited number of taxpayers. They were each impacted by a set of facts that set
them apart from other taxpayers, as enumerated in the Plaintiffs’ Statement of
Claim (see above). Therefore, I do not accept a floodgates argument with
respect to finding, as the Respondents request, that the action is bereft of
any chance of success due to failure at the “policy
grounds” prong of Anns-Cooper.
[38]
With respect to the Respondents’ argument that
the CRA’s decision whether to issue in this case (or not to issue) a warning to
taxpayers is a true policy decision and therefore exempt from tortious claims,
it is not plain and obvious to me that the decision to warn is a true policy
decision. Rather, it is an arguable issue which merits further exploration: Imperial
Tobacco, above, at para 91.
[39]
Finally, the Respondents argue that a duty to
warn would directly contravene the confidentiality obligations in section 241
of the ITA and policy relating to this issue, i.e. to avoid issuing
warnings when private individuals are involved, both on the “investor” and “participant”
sides.
[40]
First, I note that the Prothonotary dealt with
this issue (Order, pp 16-17). Even if I were to consider it de novo here,
the existence of a duty on CRA to warn taxpayers about questionable tax schemes
in a timely manner, enumerated in section 14 of the Taxpayer Bill of Rights,
suggests that the duty to warn does not in fact directly contravene the
confidentiality obligations, and/or any policy decisions to disclose, flowing
out of that section. Further, as the Prothonotary notes, there are exceptions
to section 241 that could be found to apply, including the exceptions to the
confidentiality provisions provided in subsections 241(3), (3.1), and (4). For
example, subsection 241(3) of the ITA reads as follows:
(3) Subsections 241(1) and 241(2) do not
apply in respect of
(a) criminal proceedings, either by indictment or on summary
conviction, that have been commenced by the laying of an information or the
preferring of an indictment, under an Act of Parliament; or
(b) any legal proceedings relating to the administration or
enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance
Act or the Employment Insurance Act or any other Act of Parliament or law of a province that provides
for the imposition or collection of a tax or duty.
[41]
Certainly, with a carve-out built into the very
legislative provision from the ITA that the Respondent relies on, and
which speaks to the protection of the public, to state that section 241
forecloses the possibility of a finding of proximity, is to put the proverbial
cart before the horse.
[42]
The basic point is that while this and the other
“policy considerations” cited by the Defendants to
negate any duty could indeed ultimately negate the imposition of any prima
facie duty of care at trial, I am not prepared to conclude at this very
early stage of the proceedings that the Plaintiffs have a hopeless case, and no
chance of success: the Plaintiffs in my view are entitled to have these matters
fully and properly considered at a hearing.
V.
Conclusion
[43]
Based on the above reasons, it is my view that
the Prothonotary’s Order should stand, and he concluded correctly in finding
that the legal issues raised did not leave the taxpayers bereft of any prospect
of success. Where I find the Prothonotary to have exercised his discretion on a
wrong principle of law, I have conducted my own de novo review. It is
not clear to me that the Plaintiffs will ultimately succeed in establishing a
private law duty of care owed to them by the CRA. However, bearing in mind that
at this stage, the pleadings are assumed to be true and must be read
generously, and having regard to the evolving nature of the duty of care
jurisprudence, it is not plain and obvious that the claim as pleaded is bound
to fail for want of a private law duty of care. As such, the Plaintiffs should
not be denied the opportunity to argue their case fully: Taylor, above,
at para 120.
[44]
I am supported in my reluctance to strike the
claim at this stage by the jurisprudence: Gordon, above, at paras 13,
39; McCreight v Canada (AG), 2013 ONCA 483 at paras 62-63; Taylor,
above, at paras 103, 120; Imperial Tobacco, above, at para
47; Leroux v CRA, 2012 BCCA 63 at para 41; Leroux v CRA, 2010
BCSC 865 at para 56.
[45]
Even if I had found that the question was vital
to the final issue in the case and reviewed the entire Order de novo, I
would have arrived at the same result. Despite the fact that the duty of care
asserted by the Plaintiffs is a novel one, it is simply not “plain and obvious” that the facts as pled fail to
establish the existence of a duty of care by CRA in this case. The proximity
and policy issues raise arguable issues to be determined by a court with the
benefit of a trial and a complete record. It cannot be said at this stage that
the Plaintiffs’ claim is hopeless.
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