



COURT OF APPEAL FOR ONTARIO

CITATION: Gardner v. Canada (Attorney
    General), 2013 ONCA 423

DATE: 20130621

DOCKET: C55378

Laskin, MacPherson and Gillese JJ.A.

BETWEEN

Sheridan Gardner

Plaintiff (Appellant)

and

Attorney General of Canada
    and Her
    Majesty the Queen in Right of Ontario

Defendants (Respondents)

Paul Champ, for the appellant

Brian Harvey, for the respondents

Heard: November 30, 2012

On appeal from the judgment of Justice Robert J. Smith of
    the Superior Court of Justice, dated March 20, 2012, with reasons reported at
    2012 ONSC 1837.

Laskin J.A.:

A.

overview

[1]

The sole issue on this appeal is whether the motion judge erred in
    holding that Sheridan Gardners claims against the federal government for abuse
    of power and misfeasance in public office were barred by the
Limitations
    Act, 2002
, S.O. 2002, c. 24, Sched. B.

[2]

Gardner was a federal government employee. From 1992 to 1995, she was
    posted to Japan, where she moved with her husband, Neil McFadyen, and their
    daughter.  Under the federal
Income Tax Act
, R.S.C. 1985, c. 1 (5th
    Supp), government employees posted abroad are deemed residents of Canada for
    tax purposes.  McFadyen was not a government employee, and for the years 1993
    to 1995, he filed his tax returns in Japan. In 1997, however, Revenue Canada reassessed
    McFadyen as a Canadian resident.  Revenue Canada then reassessed Gardner as a
    factual resident of Canada.

[3]

Gardner contended that no other federal government employee working
    abroad had been assessed this way.  She maintained that Revenue Canada
    deliberately misapplied the tax laws to her to support its tax case against her
    husband.  She appealed her income tax reassessment and eventually was
    successful.  Minutes of Settlement were signed and incorporated into an order
    of the Superior Court on February 17, 2005.  On February 16, 2007  within two
    years of the order  Gardner issued a notice of action claiming damages for
    various torts, including abuse of power and intentional or negligent infliction
    of mental suffering.

[4]

Two months before the action was to be tried, the Attorney General of
    Canada brought a summary judgment motion to dismiss Gardners action on the
    ground that the two year limitation period in the
Limitations Act, 2002
precluded her claim.  The Attorney General submitted that Gardner was aware of
    all the material facts underlying her tort claims by 1998 or at the latest, by
    2001.  The motion judge agreed.  The crux of his holding is that the tort of
    abuse of power or misfeasance in public office, did not require a successful
    appeal of her tax reassessment in order for the cause of action to accrue.

[5]

Thus, the narrow question on this appeal is whether Gardner was entitled
    to seek a determination that her tax reassessment was invalid before proceeding
    with her claim.  I would answer yes to this question and therefore would hold
    that Gardners action is not barred by the limitation period.

B.

relevant background

[6]

The motion judge accepted Gardners factual assertions for the purpose
    of resolving the motion.  The following is a brief summary of her assertions.

(a)

Posting to Japan

[7]

Gardner worked for Revenue Canada (now, the Canada Revenue Agency or
    CRA).  In 1992, she was posted to the Canadian Embassy in Tokyo as a customs
    attaché. Her job was to conduct anti-dumping investigations in Asia.  McFadyen,
    a professional engineer, went with her.

(b)

Gardner and McFadyen are reassessed as factual residents of Canada

[8]

In December 1996, Gardner received an initial tax reassessment, which
    confirmed her status as a deemed resident under the
Income Tax Act
. Soon
    afterwards, the CRA reassessed McFadyen.  It revoked his exemption under the Canada-Japan
    Income Tax Convention for the years 1993, 1994, and 1995.  Instead, he was
    designated a factual resident of Canada and the province of Ontario.

[9]

In April 1997, the CRA reassessed Gardner as a factual resident of
    Canada.  In her statement of claim, Gardner alleges that CRA employees knew she
    was not a factual resident but deliberately misapplied the law for an
    ulterior motive: to bolster their case against McFadyen.  The appellant asserts
    that no other federal government employee posted abroad had ever been assessed
    as a factual resident of Canada.

[10]

To
    support her claim, Gardner points to information entered into the CRAs
    Residency Determination Advisor in April 1998.  The information entered
    included that Gardner had provincial/territorial hospitalization, a Canadian
    drivers licence, and memberships and professional associations dependent on
    residency.  Gardner contends that this information was patently false.

(c)

Gardners appeal

[11]

Gardner
    appealed her reassessment.  She acknowledges that the amount in issue on her
    appeal was small  roughly $2,500.  But she maintains that the ramifications of
    her appeal were significant.

[12]

An
    internal CRA document written in July 1997 noted that CRA officials had placed
    a stall appeals inquiry directive on Gardners tax appeal file.  Gardner
    alleges that the purpose of this directive was to ensure McFadyens appeal
    would be dealt with first.  Nearly two years later, in 1999, the CRA confirmed
    its reassessment of Gardners tax for the years 1993 and 1994.  Nonetheless, by
    then, responsible CRA officials were aware that Gardner had been wrongly
    assessed.  In October 1999, the CRA litigation officer responsible for her
    appeal sent the following memo to another CRA employee:

I personally feel that our case here is quite weak and the
    Appellant is correct in her assertion that the basis for the changes to her
    assessments were the changes made to her spouses (i.e. we cannot treat him as
    a factual resident of Canada without assessing her in exactly the same manner.)

Gardner did not become aware of this memo until 2007.

[13]

Gardners
    tax appeal was finally resolved in her favour on February 18, 2005, by a
    settlement and a consent order of the Ontario Superior Court.  Gardner brought
    her action less than two years later.  She claimed that CRA officials had
    deliberately misapplied the law for an ulterior purpose and had defended a
    reassessment they knew was invalid.

(d)

Gardners injury claims

[14]

Gardner
    alleges that by August 1998 she was unable to work because of the ongoing
    dispute over the reassessment of her income tax.  In January 1999, she produced
    a medical report linking her disability and inability to work to her conflict
    with the CRA.  In her September 2001 notice of tax appeal to the Ontario
    Superior Court, Gardner sought damages for negligence, abuse of power, and
    Charter violations.
[1]

[15]

Gardner
    also complained to the Canadian Human Rights Commission.  In March 1999, she
    filed a formal complaint alleging discrimination on the ground of marital
    status.  In May 2003, a commission investigation report recommended that
    Gardners complaint be dismissed for lack of evidence.  Gardner delivered a
    lengthy response in August 2003 and a shorter response in September 2003, in
    which she said that because of CRAs actions she had suffered both physical and
    psychological harm and had to go on long-term disability.

C.

analysis

(a)

The motion judges reasons

[16]

Under
    s. 4 of the
Limitations Act, 2002
, Gardner was required to commence
    her action within two years of the day on which she discovered her claim. 
    Section 5(1)(a) sets out when a claim is discovered:

5(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first
    knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by
    or contributed to by an act or omission,

(iii) that the act or omission was that of the
    person against whom the claim is made, and

(iv) that, having regard to the nature of the
    injury, loss or damage, a proceeding would be an appropriate means to seek to
    remedy it; and

[17]

The
    motion judge found that Gardner had discovered her claim by as early as
    August 1998 or no later than September 2001.  At para. 38 of his reasons, he
    said:

Ms. Gardner acknowledged that she had discovered the material
    facts underlying her claim for damages in 1998, as she was aware of the actions
    of the CRA officials which she alleged were wrongful, malicious, carried out
    for an improper purpose and in breach of her
Charter
rights.  She was
    also aware at that time that she had suffered damage as she went on long term
    disability as a result of the stress caused by the reassessment of her Ontario
    income tax return.

[18]

And
    then at para. 51, he wrote:

In 1998, Ms. Gardner was aware that she had
    suffered injury, loss or damage allegedly caused by the actions of
    CRA officials who reassessed her 1993‑94 income tax for the
    allegedly improper purpose and unlawful conduct of harassing her intentionally
    and negligently causing her mental suffering, and to assist in their
    reassessment of her spouse, Neil McFadyen. She was also aware that the alleged
    actions of the CRA officials were the legal cause of her injury and she
    knew that her injuries were compensable in tort law, as she claimed damages for
    these torts in her income tax appeal in 2001.

[19]

At para. 53, the motion judge concluded: By 2001, Ms. Gardner was
    aware of all of the material facts that she relied on as the basis for her tort
    claims.

[20]

Relying on the Supreme Court of Canadas decision in
Canada
    (Attorney General) v. TeleZone Inc.
, 2010 SCC 62, [2010] 3
    S.C.R. 585, the motion judge held, at para. 53, that Gardner could have brought
    her action for misfeasance in public office in 1998 or at least by 2001, as
    she was not seeking to challenge her tax assessment in her claim for tort
    damages.  Therefore, as she did not commence her action until 2007, it was out
    of time.

(b)

Was Gardner entitled to seek a determination that her
    tax reassessment was invalid before proceeding with her claim?

[21]

As I have said in the overview, this appeal turns on the answer to this
    question.  The motion judge answered the question no, and I would answer it
    yes.

[22]

Gardner acknowledges, as the motion judge found, that she was aware of
    the harm caused by the CRA employees who reassessed her tax.  However, she
    submits that she was entitled to obtain a determination that her reassessment
    was invalid before proceeding with her claim.  I agree with this submission.

[23]

Although Gardner has alleged several causes of action in her pleading,
    her principal claim is for abuse of power or misfeasance in public office.  In
Odhavji
    Estate v. Woodhouse
, 2003 SCC 69, [2003] 3 S.C.R. 263,
Iacobucci J. discussed the elements of this tort.  At paras. 22-23
    of his reasons, he wrote that the tort of misfeasance in public office can
    arise in two difference ways, which he called Category A and Category B.  The
    distinction is important, because as I read the motion judges reasons, he
    concluded that Gardners claim falls under Category A, while I conclude that it
    falls under Category
B.  Iacobucci J. said:

What then are the essential ingredients of the
    tort, at least insofar as it is necessary to determine the issues that arise on
    the pleadings in this case?  In
Three Rivers
,
    the House of Lords held that the tort of misfeasance in a public office can
    arise in one of two ways, what I shall call Category A and Category B. 
    Category A involves conduct that is specifically intended to injure a person or
    class of persons.  Category B involves a public officer who acts with
    knowledge both that she or he has no power to do the act complained of and that
    the act is likely to injure the plaintiff.  This understanding of the tort
    has been endorsed by a number of Canadian courts: see for example
Powder
    Mountain Resorts
,
supra
;
Alberta
    (Minister of Public Works, Supply and Services)
(C.A.),
supra
; and
Granite Power Corp. v. Ontario
,
    [2002] O.J. No. 2188 (QL) (S.C.J.).  It is important, however, to recall
    that the two categories merely represent two different ways in which a public
    officer can commit the tort; in each instance, the plaintiff must prove each of
    the torts constituent elements.  It is thus necessary to consider the
    elements that are common to each form of the tort.

In my view, there are two such elements. 
    First, the public officer must have engaged in deliberate and unlawful conduct
    in his or her capacity as a public officer.  Second, the public officer
    must have been aware both that his or her conduct was unlawful and that it was
    likely to harm the plaintiff.  What distinguishes one form of misfeasance
    in a public office from the other is the manner in which the plaintiff proves
    each ingredient of the tort.  In Category B, the plaintiff must prove the
    two ingredients of the tort independently of one another.  In Category A,
    the fact that the public officer has acted for the express purpose of harming
    the plaintiff is sufficient to satisfy each ingredient of the tort, owing to
    the fact that a public officer does not have the authority to exercise his or
    her powers for an improper purpose, such as deliberately harming a member of
    the public.  In each instance, the tort involves deliberate disregard of
    official duty coupled with knowledge that the misconduct is likely to injure
    the plaintiff.

[24]

In essence, under a Category B claim, Gardner has to prove that CRA
    knew that their conduct was unlawful  in other words, that they knew they had
    no lawful authority to reassess Gardner as a factual resident of Canada  and
    that their conduct was likely to harm her.  I do not see how Gardner could show
    CRA knew their conduct  reassessing her as a factual resident of Canada  was
    unlawful without first showing that the reassessment itself was invalid.  This,
    Gardner has done by pursuing her statutory appeal of her reassessment.

[25]

That Gardner wanted to show her reassessment was invalid is what
    distinguishes her case from the result in
TeleZone
.
TeleZone
itself reflected the courts
    concern that procedural, costly, and time consuming road blocks should not be
    put in the way of individuals who claim to have been injured by government
    action and wish to seek redress in the courts.  As Binnie J. said at para. 18,
TeleZone
is fundamentally about access to justice.

[26]

Thus, in a case such as
TeleZone
, where
    the plaintiff was seeking compensation for an invalid Ministerial decision but
    not seeking to invalidate the decision itself, the plaintiff was not required
    to pursue judicial review of the decision before suing for damages.  Gardners
    case is different, and in
TeleZone
, Binnie J.
    recognized the difference.  He wrote at para. 19:

If a claimant seeks to set aside the order of a federal
    decision maker, it will have to proceed by judicial review, as the
Grenier
court held.  However, if the claimant is content to let the order stand
    and instead seeks compensation for alleged losses (as here), there is no
    principled reason why it should be forced to detour to the Federal Court for
    the extra step of a judicial review application (itself sometimes a costly
    undertaking) when that is not the relief it seeks.  Access to justice
    requires that the claimant be permitted to pursue its chosen remedy directly
    and, to the greatest extent possible, without procedural detours.

As Gardner sought to set aside her reassessment, she
    was entitled to exercise her statutory right of appeal before bringing her
    action for damages.

[27]

I
    suppose Gardner could have brought a Category A claim for misfeasance in public
    office  a claim that would focus only on the conduct of the CRA employees and
    would not require showing that her reassessment was invalid  and thus a claim
    that could have been brought by 2001.  The Attorney General submits that this
    is the route Gardner ought to have followed.  However, he acknowledges that this
    claim would not have much merit without a successful tax appeal.  He proposed
    that Gardner should have started her action by 2001 and then sought a stay of
    her action pending a resolution of her tax appeal.  She undoubtedly could have
    done what the Attorney General proposed, but to say that she was required to do
    so is directly contrary to the philosophy underlying
TeleZone
.  Binnie
    J. said at para. 18:

This appeal is fundamentally about access to justice. 
    People who claim to be injured by government action should have whatever
    redress the legal system permits through procedures that minimize unnecessary
    cost and complexity.  The Courts approach should be practical and
    pragmatic with that objective in mind.

Gardner has taken a practical and pragmatic approach
    to her claim against the federal government.  And, in my view, she started her
    lawsuit within the limitation period.

D.

conclusion

[28]

I
    conclude that Gardner was entitled to show that her tax assessment was invalid before
    proceeding with her claim.  I would allow her appeal, set aside the order of
    the motion judge, and in its place, order that the Attorney Generals motion
    for summary judgment be dismissed.

[29]

Gardner
    is entitled to her costs of the appeal and the motion, fixed in the agreed-upon
    amounts of $7,000 and $6,000, respectively, each amount inclusive of
    disbursements and applicable taxes.

Released: Jun 21, 2013                                          John
    Laskin J.A.

JL                                                                     I
    agree J.C. MacPherson J.A.

I
    agree E.E. Gillese J.A.





[1]
Maranger J. struck these claims for damages.  He held that they were distinct
    from her reassessment appeal.


