



COURT OF APPEAL FOR ONTARIO

CITATION: Lipson v. Cassels Brock & Blackwell
    LLP, 2013 ONCA 165

DATE: 20130319

DOCKET: C54702

Goudge, Simmons and Gillese JJ.A.

BETWEEN

Jeffrey Lipson

Plaintiff (Appellant/

Respondent by way of Cross-Appeal)

and

Cassels Brock & Blackwell LLP

Defendant
    (Respondent/

Appellant by way of Cross-Appeal)

David F. O'Connor and J. Adam Dewar, for the appellant

Peter H. Griffin, Ian MacLeod and Shara N. Roy, for Cassels
    Brock & Blackwell LLP

Tim Gleason and Sean Dewart, for Gardner Roberts LLP and
    the Estate of Ronald Farano

Alexandra Urbanski, for Deloitte &
    Touche LLP

Heard: September 17 and 18, 2012

On appeal from the order of Justice Paul Perell of the Superior
    Court of Justice, dated November 14, 2011.

Goudge
    and Simmons JJ.A.:

A.

overview

[1]

The
    main issue before us is whether, on a motion for certification, the motion
    judge erred in holding that a proposed class action for solicitor negligence
    and negligent misrepresentation is statute-barred, but that the action
    otherwise qualifies for certification.

[2]

The
    appellant, Jeffrey Lipson, is one of about 900 Canadian taxpayers who donated
    cash and resort timeshare weeks to registered Canadian athletic associations
    during the four-year period between 2000 and 2003. He and the other donors made
    their donations through a program (the Timeshare Tax Reduction Program or
    the Program) operated by the Canadian Athletic Trust (the Athletic Trust).

[3]

Under
    the terms of the Timeshare Tax Reduction Program, donors anticipated receiving
    tax credits worth more than the donors actual financial outlay. In support of
    the viability of the Program, the promotional material included an opinion
    prepared by Cassels Brock & Blackwell LLP indicating that it was unlikely
    that the Canada Customs and Revenue Agency could successfully deny the
    anticipated tax credits.

[4]

In
    2004, the CCRA notified Mr. Lipson that it intended to disallow his claims for
    tax credits under the Timeshare Tax Reduction Program in their entirety. On
    receiving this information, he and other donors who had received similar notices
    sought legal and accounting advice.

[5]

In
    2006, two of the other donors launched proceedings with the assistance of
    counsel as a test case to challenge the CCRAs denial of the tax credits.

[6]

In
    2008, the CCRA settled the test case on the basis that the donors would receive
    tax credits for their actual cash donations, but not for their donations of
    timeshare weeks (which had been paid for by a third party). Mr. Lipson and
    other members of the proposed class entered into similar arrangements with the
    CCRA.

[7]

In
    April 2009, almost five years after he had received the initial notice of
    disallowance from the CCRA, Mr. Lipson commenced a proposed class action in
    which he sued Cassels Brock for negligence and negligent misrepresentation
    relating to their opinion about the Timeshare Tax Reduction Program. Mr. Lipson
    claimed damages in the form of interest arrears, lost opportunities to make
    other donations, and special damages consisting of professional fees for
    challenging the CCRAs position.

[8]

On
    a motion for certification of the action as a class proceeding, Perell J. found
    that, apart from the limitations issue (and with the exception of certain
    proposed common issues including causation), the proposed class action
    satisfied the criteria for certification. Nonetheless, in an order dated
    November 14, 2011 (the Order), he dismissed the action, holding that it is statute-barred
    by the two-year limitation period set out in the
Limitations Act, 2002
,
    S.O. 2002, c. 24, Sched. B.

[9]

Mr.
    Lipson raises two issues on appeal:

1.     Did the
    motion judge err in dismissing his action as statute-barred?

2.     Did the
    motion judge err in not certifying the action, including his proposed common
    issue relating to causation, as a class proceeding?

[10]

In the event Mr.
    Lipson succeeds on the first issue, Cassels Brock cross-appeals from aspects of
    the motion judges finding that the proposed class action otherwise satisfies
    the criteria for certification.

[11]

For the reasons
    that follow, we allow the appeal, set aside those portions of the  Order
    holding that the action is statute-barred and dismissing it, and substitute an
    order certifying the action as a class proceeding. The cross-appeal is
    dismissed.

B.

Background

(1)

The Timeshare Tax Reduction Program

[12]

The motion judge
    provided a full summary of the origin and structure of the Timeshare Tax
    Reduction Program at paras. 14 to 18 of his reasons.

[13]

In brief, after
    establishing the Athletic Trust in Ontario, a Bahamian resident purchased
    timeshare weeks in a Caribbean resort and transferred them to the Trust.

[14]

Under the terms
    of the Timeshare Tax Reduction Program, potential donors could apply to become
    beneficiaries of the Athletic Trust and, once accepted, the trustee of the
    Athletic Trust had discretion to distribute timeshare weeks to them.
    Beneficiaries could, but were not required to, donate their timeshare weeks to
    a registered Canadian amateur athletic association, along with sufficient cash
    to discharge encumbrances on the timeshare weeks.

[15]

In return for
    each donation, the registered Canadian amateur athletic association that received
    the donation would issue two charitable tax receipts: one for the donors cash
    contribution to discharge the encumbrances on the timeshare weeks (ranging from
    $4,600 to $9,700 per donated timeshare week); and one for the then fair market
    value of the donated timeshare week, less the amount of the encumbrance
    (ranging from $8,765-$18,900).

[16]

The Program also
    included arrangements for pooling the donated timeshare units and facilitating
    their resale to the original developer at a significantly discounted price, subject
    to a 5% commission on net revenue to one of the promoters of the Program.

[17]

Without getting
    into all the details, in general, the net result of these arrangements was:

·

assuming receipt of the anticipated tax credits, participants in
    the Program would realize a net return on their cash donations of about 35%
    (this is because it was the Bahamian resident who settled the Athletic Trust and
    actually paid for the timeshare weeks); and

·

although they issued charitable receipts to each participant totalling
    between $13,275 and $28,600, the registered Canadian amateur athletic
    associations that received donations ultimately benefited by about $1,300 per
    donated timeshare week.

(2)

The Cassels Brock Legal Opinions

[18]

Commencing in
    2000, on each occasion that timeshare weeks were made available for
    distribution to beneficiaries, Cassels Brock was retained to provide the
    promoters of the Timeshare Tax Reduction Program with a legal opinion about the
    tax consequences of participating in the Program as a beneficiary and donor.

[19]

In all, Cassels
    Brock provided six opinions between October 2000 and April 2003. The six
    opinions are substantially the same. The motion judge excerpted the relevant
    passages of the opinions at para. 23 of his reasons.

[20]

For the purposes
    of this appeal, two aspects of the opinions are key. First, the opinions are
    directed not just to the promoters of the Athletic Trust, but also to potential
    donors. In fact, all but the final opinion specifically state that the opinion
    may be relied upon  by  potential donors.

[21]

Second, although
    the opinions acknowledge the prospect of a challenge by the CCRA to the tax
    benefits available under the Program, the opinions state that it is unlikely
    that the CCRA could successfully deny  the [anticipated] tax credit[s].

[22]

As we have said,
    a copy of the pertinent Cassels Brock opinion was included in the promotional
    material marketing the Timeshare Tax Reduction Program on each occasion that
    timeshare weeks were offered for distribution.

[23]

Because the
    opinions are central to the issues on appeal, we set out here the text of the
    key passages. The remainder of the excerpts quoted by the motion judge together
    with certain other passages we consider important are set out in Appendix A:

Re:
    Donation of One-Bedroom and Two-Bedroom, Biennial Timeshare Vacation Weeks

You have requested our opinion regarding the Canadian Federal
    Income Tax consequences relating to a donation of  Timeshare Resort Weeks  by
    individual Canadian resident taxpayers. It is contemplated that any such
    donation would entitle the donor to claim a tax credit under the
Income Tax
    Act
(Canada) (the "Tax Act").


This opinion is specifically directed to potential donors
    who are individuals
and who acquire and hold the Timeshare Weeks as
    capital property.

...

3. Meaning of "Gift"

In order to claim a tax credit for a donation there must be a
    complete gift of the property.



If all or substantially all of the Class A Beneficiaries
    who receive Timeshare Weeks donate them, the CCRA may be more inclined to
    challenge the arrangement (but see our opinion below at page 23 as to the
    unlikely success of such a challenge.)

....

7. General Anti-Avoidance Rule ("GAAR")



In our opinion, and based on the foregoing, a donation of
    Timeshare Weeks in these circumstances would not likely be successfully
    attacked under GAAR.

....

9. General Comments



This opinion may be relied upon only by CAA and potential
    donors, their agents and professional advisors, for the purpose of the
    transactions contemplated by this opinion.


Based on and subject to the foregoing review, in our
    opinion it is unlikely that the CCRA could successfully deny the deemed
    adjusted cost base of the Timeshare Weeks to, nor the tax credit claimed by,
    the Class A Beneficiaries
who receive a distribution of the Timeshare
    Weeks from the Trust, and subsequently choose to make a voluntary and complete
    donation of some or all of their Timeshare Weeks to a [registered Canadian
    amateur athletic association].

(3)

Other Legal Opinions Obtained by Promoters and Marketers

[24]

In addition to
    the Cassels Brock opinion, in December 2002, the promoters of the Timeshare Tax
    Reduction Program obtained an opinion from a Manitoba law firm confirming the
    applicability of the Cassels Brock opinion to the
Manitoba Tax Act
.

[25]

Further, one of
    the entities marketing the Timeshare Tax Reduction Program obtained a second
    opinion confirming the Cassels Brock opinion from Ronald J. Farano, Q.C., a tax
    partner at Gardner Roberts LLP.

(4)

Mr. Lipsons Participation in the Timeshare Tax Reduction Program

[26]

In an affidavit
    filed on the certification motion, Mr. Lipson deposed that his accountant spoke
    to him about the Timeshare Tax Reduction Program in the fall of 2000. Although
    he understood the gist of the Program, he says he did not understand the
    intricacies of how it worked. He asked his accountant whether there was a legal
    opinion to support the tax benefits of the program. On being told that Cassels
    Brock had issued a supporting legal opinion, Mr. Lipson was satisfied that the
    Program offered legitimate tax benefits and decided to participate. He states:
    I would not have participated in the Program absent a favourable tax opinion
    from a reputable law firm.

[27]

On his
    cross-examination, Mr. Lipson indicated he has no recollection of reading the
    Cassels Brock opinion. He understood from his accountant that the Cassels Brock
    opinion provided an assurance that the Program was legal and thus that there
    would be nothing for the [CCRA] to complain about. According to Mr Lipson,
    had there been an 80% chance he would not receive the tax credits, he would not
    have participated.

[28]

Mr. Lipson
    confirmed that, for the years 2000 to 2003, he claimed the following tax
    credits for donations under the Timeshare Tax Reduction Program:

2000  $634,352

2001  $1,261,988

2002  $2,085,835

2003  $1,148,879.60.

(5)

Mr. Lipsons Dealings with the CCRA

[29]

In a series of
    letters to Mr. Lipson dated October 19 through to November 9, 2004, the CCRA
    indicated it would be denying the full amount of the tax credits Mr. Lipson had
    claimed arising from the Program. Among other things, in their correspondence,
    the CCRA challenged (i) the validity of the Athletic Trust; (ii) the validity
    of the gifts of timeshare weeks; and (iii) the valuation of timeshare weeks

[30]

Both in the
    statement of claim and in his affidavit, Mr. Lipson indicates that in response
    to the reassessments, he sought legal and accounting advice at significant
    personal expense. In his affidavit, Mr. Lipson also states that he retained Thorsteinssons
    LLP in April 2004 to act for him in his dealings with the CCRA and that it is
    his understanding that Thorsteinssons acted for most of the class members in
    this regard.

[31]

On his
    cross-examination, Mr. Lipson confirmed that the promoters of the Program had
    created a fund to look after any challenge to the tax structure that might
    occur and that he understood that Thorsteinssons legal fees were paid from
    that fund. This evidence was confirmed by evidence from one of the creators of
    the Program.

[32]

According to Mr.
    Lipson, the dispute with the CCRA proceeded by way of test cases launched in
    2006 by two of the participants in the Timeshare Tax Reduction Program on
    behalf of all of the donors who participated in the Program and who were
    reassessed.

[33]

On March 24,
    2008, Mr. Lipson accepted an offer to settle made by the CCRA restricting his
    tax credits for participation in the Timeshare Tax Reduction Program to the amount
    of his cash donations to Canadian athletic associations.

[34]

Although
    Thorsteinssons conducted the test case litigation, on his cross-examination,
    Mr. Lipson testified that he retained Davies Ward Phillips & Vineberg LLP
    to interface with Thorsteinssons. Further, he says he settled with the CCRA
    as a result of advice received from Davies Ward, and not Thorsteinssons.

[35]

During his
    cross-examination, Mr. Lipson agreed with suggestions that he realized there
    was a problem as soon as he received the first disallowance letter and that he
    knew then that the result Cassels Brock had said would occur was not going to
    happen.

(6)

The Proposed Class-Action

[36]

On April 15,
    2009, Mr. Lipson commenced the proposed class action in which he sued Cassels
    Brock for negligence and negligent misrepresentation.

[37]

At para. 35 of
    his Fresh As Amended Statement of Claim, Mr. Lipson characterizes the Cassels
    Brock opinions as follows:

35. In each of the Legal Opinions, Cassels Brock stated that
    Lipson and the other Class Members would obtain the tax benefits described in
    the promotional materials. Cassels Brocks ultimate conclusion, as set out in
    each of the Legal Opinions, was that:

[I]t is unlikely that the [CCRA] could successfully deny the
    deemed adjusted cost base of the Timeshare Weeks to, nor the tax credit claimed
    by, the Class A beneficiaries who receive a distribution of the Timeshare Weeks
    from the [Athletic] Trust, and subsequently choose to make a voluntary and
    complete donation of some or all of their Timeshare Weeks to an RCAAA.

[38]

In essence, Mr.
    Lipson alleges that Cassels Brock (i) fell below the standard of care of a reasonably
    competent tax solicitor in preparing its opinion, resulting in an opinion that contains
    material misrepresentations; (ii) knew that a favourable tax opinion was a
    necessary precondition to the creation and successful promotion of the
    Timeshare Tax Reduction Program; and (iii) knew that potential donors would
    rely on the existence of a favourable tax opinion in deciding whether to
    participate in the Program.

[39]

Mr. Lipson claims
    that, but for the Cassels Brock opinion, the Timeshare Tax Reduction Program
    could not have been made publicly available or successfully promoted. In
    addition, he claims that he and the other class members decided to participate
    in the Program in reliance on the Cassels Brock opinion and the
    representations, both express and implied, which it contained.

[40]

Finally, Mr.
    Lipson claims that, as a result of the negligence and negligent
    misrepresentations of Cassels Brock, he and the other class members suffered
    damages in the form of substantial interest arrears under federal and
    provincial income tax legislation, loss of the opportunity to make other
    donations or participate in other tax shelters, and special damages in the form
    of accounting and other professional fees to respond to the CCRAs
    reassessments.

[41]

In his Fresh As
    Amended Statement of Claim, Mr. Lipson defines the proposed class as:

[A]ll individuals who applied and were accepted to be
    beneficiaries of the Athletic Trust 2000, 2001, 2002 and/or 2003 and received
    Timeshare Weeks from the Athletic Trust and donated them, together with a cash
    donation, to one or more of [certain registered Canadian amateur athletic
    associations].

[42]

According to the
    Fresh As Amended Statement of Claim, Mr. Lipson and the other class members
    settled with the CCRA when it became at least likely, if not certain that the
    CCRA would be successful in challenging the tax credits claimed by Mr. Lipson
    and the other class members.
[1]

(7)

Cassels Brocks Third-Party Claim and Statement of Defence

[43]

On April 15,
    2011, Cassels Brock issued a third party claim against a number of individuals
    and entities, alleging that they provided tax, financial or legal advice to
    putative class members with respect to the Timeshare Tax Reduction Program. Gardiner
    Roberts LLP and the Estate of former Gardiner Roberts senior tax partner Ronald
    J. Farano, deceased, are among the named third parties.

[44]

In accordance
    with a direction from the motion judge, prior to the certification motion,
    Cassels Brock delivered its statement of defence and the third parties delivered
    statements of defence to the main action and to the third party action.

[45]

The statements
    of defence to the main action included an assertion that, by pleading that the
    CCRA denied his claims for tax credits in 2004, Mr. Lipson had acknowledged
    that the proposed class action is statute-barred.

(8)

Mr. Lipsons Reply

[46]

In his reply, Mr
    Lipson pleaded that [u]ntil January 2008 during the test case litigation  it
    was not known or reasonably discoverable that it was at least likely  that
    [the CCRA] would be successful in challenging the tax credits claimed by Lipson
    and the other Class Members. He also pleaded that it was not until at least
    January 2008, when the test case appeal litigation had significantly
    progressed, that a proceeding against Cassels Brock became an appropriate
    avenue for the donors to seek redress.

(9)

The Proposed Common Issues

[47]

On the
    certification motion, the Mr. Lipson proposed the following common issues:

Negligence

1.      Did
    the Defendant owe the Class a duty of care (in among other things, negligence
    or negligent misrepresentation) in the preparation of the Legal Opinions?

2.      If
    the answer to common issue 1 is yes, what is the content of the standard(s)
    of care?

3.      Did
    the Defendant breach the foregoing standard(s) of care? If so, how?

4.      If
    the answer to common issue 3 is yes, did the Defendants breach of the
    foregoing standard(s) of care cause or materially contribute to the damages of
    the Class Members?

Damages or Other Relief

5.      If
    the answer to common issue 4 is yes, what types or heads of damages, if any,
    are the class members entitled to?

6.      If
    the answer to common issue 4 is yes, what remedy or remedies, if any, are the
    Class Members entitled to?

7.      If
    the Class Member is entitled to a damages award, can some or all of that award
    be determined commonly? If so, what is the quantum and how?

(10)

Expert Opinion from Professor Vern Krishna

[48]

Mr. Lipsons
    material on the certification motion included affidavits and letters of opinion
    from Professor Vern Krishna concerning the validity and appropriateness of the
    Cassels Brock legal opinions supporting the Timeshare Tax Reduction Program.

[49]

Professor
    Krishnas letters of opinion address two main issues: i) Cassels Brocks
    opinions concerning whether the donation of timeshare weeks constitutes a valid
    gift; and ii) Cassels Brocks opinions concerning the general anti-avoidance
    rule.

[50]

In relation to
    the first issue, Professor Krishna concludes that the Cassels Brock opinions
    failed to address issues relevant to the validity of the gift in circumstances
    where the anticipated tax credit substantially exceeds the donors financial
    outlay. On that issue, he opines that the Cassels Brock legal opinions do not
    meet the standard of care expected of a tax lawyer.

[51]

In relation to
    the second issue, Professor Krishna states that while existing jurisprudence
    suggests that the [Timeshare Tax Reduction Program] would violate the general
    anti-avoidance provisions of the
Income Tax Act
the jurisprudence in
    the Supreme Court of Canada did not emerge until 2005. Moreover, even after
    the three Supreme Court of Canadas decisions, there remains considerable
    uncertainty as to the scope and reach of GAAR. On that issue, he opines that
    the Cassels Brock legal opinions reasonably address the anti-avoidance aspects
    of the Timeshare Tax Reduction Program in light of the available jurisprudence
    at the relevant time.

(11)

The Positions of the Parties on the Certification Motion

[52]

Cassels Brock
    and the third parties opposed certification of the proposed class action on the
    grounds that the claims of all class members, including Mr. Lipson, are
    statute-barred under the
Limitations Act
. In particular, they argued
    that the class members claims were discoverable when the CCRA disallowed their
    claims for tax credits. In addition, they claimed that, when it can be shown
    that a proposed representative plaintiffs claim is statute-barred, he or she
    cannot be a member of the proposed class and he or she cannot act as the
    representative plaintiff.

[53]

Cassels Brock
    also submitted that the proposed class action failed to satisfy three of the
    five criteria for certification under s. 5(1) of the
Class Proceedings Act,
    1992
, S.O. 1992, c. 6:

i)    The
    claims of the class members must raise a common issue (s. 5 (1)(c));

ii)   A
    class proceeding must be the preferable procedure for the resolution of the
    common issues (s. 5 (1)(d)); and

iii)  There
    must be a suitable representative plaintiff (s. 5 (1)(e)).

[54]

Finally,
    although Cassels Brock conceded that the proposed class action disclosed a
    cause of action for negligent misrepresentation, it argued that the negligence
    claim failed to disclose a reasonable cause of action (s. 5 (1)(a)) because
    none of the class members were clients of Cassels Brock.

C.

the motion judges decision

[55]

In the analysis
    section of his reasons, the motion judge dealt first with the question of
    whether, leaving aside the limitation issue, the proposed class action meets
    the criteria for certification. He held as follows:

·

It was not plain and obvious that either the negligent
    misrepresentation claim or the negligence claim failed to disclose a reasonable
    cause of action (s. 5(1)(a) of the
Class Proceedings Act
). Although
    the negligence claim may be novel, the question of whether Cassels Brock owed
    class members a duty of care should be left for trial.

·

The proposed class definition satisfies the identifiable class
    criterion (s. 5 (1)(b) of the
Class Proceedings Act
).

·

The claims of the proposed class raise common issues. Proposed
    questions one, two and three are suitable for certification as common


issues.
    Proposed questions five and six would be suitable for certification if revised.
[2]
Proposed questions four and seven, relating to causation and damages, are not
    suitable common issues. (Section 5 (1)(c) of the
Class Proceedings Act
).

·

A class proceeding would be the preferable procedural for
    resolution of the common issues. Although there is little to suggest that the
    class proceeding is necessary to ensure access to justice or to modify behaviour,
    the judicial economy factor justifies a class proceeding in which the common
    issues at trial will focus essentially on the opinions of Cassels Brock. (Section
    5 (1)(d) of the
Class Proceedings Act
).

·

As Mr. Lipson had selected competent and experienced counsel and,
    as his litigation plan was unchallenged, there was no reason to believe he
    would not move the action forward to the common issues stage. Leaving aside the
    limitations issue, he is a suitable representative plaintiff (Section 5 (1)(e)
    of the
Class Proceedings Act
).

[56]

As for the
    limitations issue, the motion judge concluded that no independent factual inquiry
    was necessary to dispose of it. Based on the Supreme Court of Canadas decision
    in
Central Trust Co. v. Rafuse
, [1986] 2 S.C.R. 147, and a review of
    the facts alleged in the statement of claim, the claims for negligence and
    negligent misrepresentation should have been discovered in 2004 when the CCRA
    denied the validity of the tax credits or, at the very latest, in 2006, when
    Thornsteinssons was retained to sue the CCRA. The claims of Mr. Lipson and the
    other class members were therefore statute-barred.

D.

The Appeal

(1)

Did the motion judge err in dismissing the appellants claim as statute-barred?

(a)

The Positions of the Parties on Appeal

[57]

On appeal, Mr.
    Lipson submits that the motion judge acted without jurisdiction or authority in
    dismissing the action as statute-barred on a certification motion. He argues
    that the purpose of a certification motion is purely procedural. Such a motion
    is intended to determine whether the proposed claims are suitable as a class
    proceeding and there is to be no preliminary review of the merits of any
    proposed defence.

[58]

Further, Mr.
    Lipson says that, in the absence of a Rule 21 motion or a summary judgment motion,
    he had no proper notice of the limitation issue. The record he placed before
    the court was intended to address only the certification issue. It was not
    intended to address a merits defence. It was particularly not intended to
    address a merits defence for the class that had never been certified as a
    common issue  and one which, by its very nature, is not a common issue in any
    event.

[59]

In the
    alternative, if the motion judge was entitled to address the limitation issue
    under s. 5(1)(a) of the
Class Proceedings Act
 as relating to whether
    the statement of claim disclosed a reasonable cause of action  Mr. Lipson
    submits that the motion judge erred by failing to accept the facts as pleaded
    in the statement of claim and in the reply as true. In both documents, Mr.
    Lipson pleaded facts indicating the claim was not discovered until
    approximately January 2008 when the test case had significantly progressed and
    it became apparent that the CCRA would likely be successful in denying a
    substantial portion of the tax credits claimed.

[60]

Further, whether
    the motion judge proceeded under s. 5(1)(a) or 5(1)(e) (proper plaintiff) of
    the
Class Proceedings Act
, Mr. Lipson submits that he erred by misinterpreting
Central Trust Co. v. Rafuse
as standing for the proposition that, in a
    claim for negligence arising from a solicitors opinion, the limitation period
    begins to run when the validity of the opinion is challenged.

[61]

Cassels Brock
    asserts that a motion judge on a certification hearing is required to perform a
    gatekeeping function  accordingly, where it is apparent on the certification
    motion that an action is bound to fail, the certification judge has the
    authority both to decline to certify the action and to dismiss it without the
    need for a cross-motion. The motion judges decision in this regard is entitled
    to deference.

[62]

In this case,
    Mr. Lipson had notice of the limitations issue by virtue of the statements of
    defence that were delivered. Further, on Mr Lipsons own evidence, it was clear
     and the motion judge concluded  that the limitation period had expired. Mr.
    Lipson did not read the Cassels Brock opinions. Moreover, he testified that he
    understood the opinions to mean that the Timeshare Tax Reduction Program was
    legal and that there was no risk that the CCRA would reassess him. He learned
    in 2004 that that was not the case  he also began incurring damages in the
    form of legal and accounting fees at that time.

[63]

Further, all
    members of the class were aware of the reassessments and had begun incurring
    legal and accounting fees by no later than 2006 when the test case litigation
    was commenced.

[64]

Except for
    acknowledging that it may have been preferable for Cassels Brock to have
    brought a formal motion to dismiss the action, the third parties, take the same
    position as Cassels Brock. They assert that the motion judge had authority to decline
    to certify the action because it was clear on the evidence that the limitation
    period had expired and Mr. Lipson was fully aware of this issue.

(b)

The Discoverability Principle

[65]

As the motion
    judge observed, in this case, the application of the two-year limitation period
    turns on the discoverability principle, now codified in s. 5 of the
Limitations
    Act
. That section provides as follows:

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 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

(b) the day on which a reasonable person with the
    abilities and in the circumstances of the person with the claim first ought to
    have known of the matters referred to in clause (a).

(2) A person with a claim shall be presumed to have
    known of the matters referred to in clause (1) (a) on the day the act or
    omission on which the claim is based took place, unless the contrary is proved.

(c)

Discussion

[66]

In our view, it
    is unnecessary that we resolve the question of whether it is open to a certification
    judge to dismiss a proposed class action based on a finding that the action is
    statute-barred, and in particular, in the absence of a cross-motion under
    either Rule 20 or Rule 21.

[67]

Based on our
    review of the motion judges reasons, his decision to dismiss the proposed
    class action as statute-barred turned on his interpretation of the Supreme
    Court of Canadas decision in
Central Trust Co. v. Rafuse
and his
    application of that decision to the facts of this case.

[68]

In our respectful
    view, the motion judge erred in interpreting and applying
Central Trust Co.
    v. Rafuse
. Moreover, when that decision is interpreted properly, it is
    apparent that the record before the motion judge did not disclose whether Mr.
    Lipsons claim was statute-barred. Nor did it support the conclusion that the
    limitation period applicable to Mr. Lipsons claim also applied to the entire
    class.

[69]

The motion
    judges findings concerning
Central Trust Co. v. Rafuse
begin at para.
    138 of his reasons where he said that, in his view, the Supreme Court of
    Canadas decision in that case is dispositive of the question of whether the class
    members claims in this case are statute-barred.

[70]

The motion judge
    correctly described the issues in
Central Trust Co. v. Rafuse
. In that
    case, the defendant solicitors had acted for Central Trust on a mortgage
    transaction in 1969 and had certified that Central Trust had a valid mortgage
    against the title to the property on which it was registered. However, in a
    subsequent action by Central Trust against the mortgagor, the mortgage was held
    to be void
ab initio
because it contravened a statutory prohibition
    against a certain form of lending.

[71]

In 1980, Central
    Trust sued the solicitors who acted for it on the mortgage transaction. A major
    issue was whether the solicitors could be held liable both in contract and in
    negligence. If the solicitors could be found concurrently liable in negligence,
    further issues arose concerning whether the doctrine of discoverability applied
    in determining the limitation period, and, if so, when the limitation period began
    to run.

[72]

However, the
    motion judge had this to say at paras. 146-147 of his reasons about the Supreme
    Court of Canadas conclusions about discoverability:

[146] Justice Le Dains succinct analysis of discoverability is
    found in paragraph 77 where he stated:

Since the [lawyers] gave the [Central Trust] a certificate
    on January 17, 1969 that the mortgage was a first charge on the Stonehouse
    property, thereby implying that it was a valid mortgage,
the earliest that
    it can be said that [Central Trust] discovered or should have discovered the
    respondents negligence by the exercise of reasonable diligence was in April or
    May 1977 when the validity of the mortgage was challenged in the action for
    foreclosure
. Accordingly [Central Trusts] cause of action in tort did not
    arise before that date and its action for negligence against the [lawyers] is
    not statute-barred.

[147] It should be noted that the damage suffered by Central
    Trust occurred when it accepted a mortgage that could be challenged as illegal.
    It later transpired that the mortgage was challenged, and
Justice Le Dain
    held that the limitation period for the claim of solicitors negligence
    commenced running with the manifest challenge to the mortgage
, even though
    the actual declaration of invalidity of the mortgage would occur still later.
    [Emphasis added.]

[73]

In our
    respectful view, the motion judges conclusion about Justice Le Dains holding
    in
Central Trust Co. v. Rafuse
is incorrect. Justice Le Dain did not
    hold that the limitation period for the claim of solicitors negligence
    commenced running with the manifest challenge to the mortgage. Rather, he
    concluded that the
earliest
date on which the claim for solicitors
    negligence could have commenced running was the date on which the validity of
    the mortgage (and therefore the validity of the solicitors opinion) was
    challenged.

[74]

Because the applicable
    limitation period for solicitor negligence was six years when
Central Trust
    Co. v. Rafuse
was decided, it was unnecessary that Justice Le Dain go
    further and determine the actual date on which the limitation period commenced
     the action for solicitor negligence had been started well within six years
    after the earliest date on which Justice Le Dain found the cause of action was
    discoverable.

[75]

In
Kenderry
     Esprit (Receiver of) v. Burgess, MacDonald, Martin and Younger
(2001),
    53 O.R. (3d) 208, at para. 19, Molloy J. recognized that
Central Trust Co.
    v. Rafuse
is not binding authority for the proposition that the limitation
    period in an action for solicitor negligence begins to run on the date of a
    manifest challenge to the solicitors opinion.

[76]

Instead, Molloy
    J. held that, in an action for solicitor negligence arising from a solicitors
    opinion, [t]he date upon which the plaintiff can be said to be in receipt of
    sufficient information to cause the limitation period to commence to run will
    depend on the circumstances of the particular case.

[77]

We agree with
    that conclusion and note that it was adopted by the majority in this courts
    decision in
Ferrara v. Lorenzetti
,
Wolfe Barristers and Solicitors
,
    2012 ONCA 851, at para. 71.

[78]

The motion
    judge in this case applied his understanding of
Central Trust Co. v. Rafuse
to the facts pleaded in the Fresh As Amended Statement of Claim at paras. 148
    to 158 of his reasons.  We excerpt the most relevant portions of these
    paragraphs below:

[148] The same analysis can be applied to the case at bar. The
    Class Members, including Mr. Lipson  should have discovered their tort claims
    against Cassels Brock when the validity of the tax credits was denied by Canada
    Revenue in 2004. At that time and certainly not later than 2006, when
    Thornsteinssons LLP was retained to sue Canada Revenue, the Class Members knew
    or ought to have known the material facts on which the negligence claim or
    negligent misrepresentation claim against Cassels Brock was based.

[149] Like Central Trust,
the Class Members made
    donations that turned out to be ineligible for tax credits
. It is alleged
    that the Class Members relied on Cassels Brocks opinions or but for Cassels
    Brocks opinions they would have not participated in the Timeshare Program.
In
    both situations

their awareness of the material facts of their claim
    against Cassels Brock came  when Central Trust or the participants in the
    Timeshare Program respectively learned that there was a
potential
problem with the tax credits
.

[150] In the case at bar, as soon as the letters from Canada
    Revenue started to arrive, Mr. Lipson and the Class Members knew or ought to
    have known that Cassels Brocks opinion had caused damage because they had
    actually relied on the opinions, or, but for those opinions they would not or
    could not have participated in the Timeshare Program and suffered damages.
    Given that Canada Revenue was challenging the validity of the trust, the
    validity of the gift, the donative intent of the participants, and the value of
    the donation,
the donors
    knew that Canada Revenue could successfully deny the tax credit
.



[157] At the time of the letters from Revenue Canada, the Class
    Members loss was actual not potential and they knew who to blame for that
    actual loss. The Class Members had been denied the tax credits in their
    entirety, and they allegedly had been lured into a transaction or not properly
    warned about a transaction that they allege they would have avoided but for the
    role played by Cassels Brock. The Class Members incurred expenses, i.e. special
    damages, in an attempt to fix their problems by retaining another law firm in
    bringing proceedings against Canada Revenue.

[158] In the case at bar, no independent inquiry of the facts
    is necessary to determine whether or not the Class Members claims are
    statute-barred. Indeed, this is apparent from the statement of claim that sets
    out the material facts for the discovery of the negligence and negligent
    misrepresentation claims that occurred when the letters of from Canada Revenue
    arrived denying the tax credits to the Class Members. [Emphasis added.]

[79]

In our
    respectful view, the motion judges reasons concerning this issue are not
    entirely clear.

[80]

On the one hand,
    although the motion judge seems to acknowledge that the notices of disallowance
    were not a final disposition of the tax credit issue  and therefore at best
    provided notice of a
potential
claim  he appears to have concluded
    that all class members should have known when they received the notices of
    disallowance that the CCRA could successfully challenge their claims for tax
    credits and that the action therefore became statute-barred at that time (for
    example, see paras. 150 and 158).

[81]

Further, the
    motion judge appears to have treated the class members knowledge that they
    were incurring professional fees to challenge the CCRAs denial of the claimed
    tax credits as a relevant factor affecting the commencement of the limitation
    period (for example, see paras. 148, 157 ).

[82]

In our view,
    neither the fact that the CCRA was challenging the claimed tax credits nor the
    fact that the class members may have been incurring professional fees to
    challenge the CCRAs denial of the tax credits is determinative of when the class
    members reasonably ought to have known they had suffered a loss as a result of
    a breach of the standard of care on the part of Cassels Brock.

[83]

As pleaded in
    the Fresh As Amended Statement of Claim, the Cassels Brock opinion was that it
    was unlikely that the CCRA could successfully deny the claimed tax credits. Accordingly,
    the fact of a CCRA challenge to the tax credits did not, in itself, mean the
    challenge would likely be successful or make the Cassels Brock opinion invalid.
    Further, even accepting that receipt of the notices of disallowance prompted
    class members to obtain professional advice and to launch test case litigation
    to challenge the denial of the tax credits, that conduct does not demonstrate
    when class members knew, or ought reasonably to have known, that the test case
    litigation would not likely be entirely successful.

[84]

The test case
    litigation did not settle until 2008. The answer to when the limitation period
    began to run for each Class Member may very well depend on several factors,
    including what position, if any, Cassels Brock took in response to the CCRA
    challenge; what notice, if any, Cassels Brock gave to class members of their
    position, if any, on the CCRA challenge; and what each class member was told by
    his or her professional advisor(s) and when: see
Ferrara v. Lorenzetti
,
Wolfe Barristers and Solicitors
. Importantly, this may be an issue
    that must be determined individually for each class member, depending on what
    individual class members were told and when.

[85]

In the Fresh As
    Amended Statement of Claim, Mr. Lipson pleaded that he and the other class
    members settled with the CCRA when it became at least likely, if not certain
    that the CCRA would be successful in challenging the tax credits claimed by Mr.
    Lipson and the other class members. In his Reply, he pleaded that [u]ntil
    January 2008, during the test case litigation  it was not known or reasonably
    discoverable that it was at least likely  that [the CCRA] would be successful
    in challenging the tax credits claimed by Lipson and the other Class Members.

[86]

Although perhaps
    not express, these pleadings at least imply that Mr. Lipson and the other class
    members were not advised until January 2008 of the likelihood that the CCRAs
    disallowance of the tax credits would succeed, at least in part.

[87]

For the purposes
    of s. 5(1)(a) of the
Class Proceedings Act
(the reasonable cause of
    action prong of the certification test), no evidence is admissible. Unless
    patently ridiculous or incapable of proof, a plaintiffs pleadings must be
    accepted as true. On their face, Mr. Lipsons pleadings do not demonstrate that,
    prior to January 2008, he knew that the CCRAs challenge to his claimed tax
    credits would likely be successful. Accordingly, his pleadings do not
    demonstrate that his claim was statute-barred when he commenced his action in
    April 2009.

[88]

Further, under
    ss. 5(1)(b)-(e) of the
Class Proceedings Act
(the remaining prongs of
    the certification test), a plaintiff need only show some evidence that the
    proposed claim satisfies each of the relevant criteria. Because the limitation
    issue is a defence, in the absence of evidence tending to demonstrate that the
    limitation period had expired, the limitation issue did not undermine Mr.
    Lipsons request for certification.

[89]

Cassels Brock
    argues that Mr. Lipsons own evidence demonstrates that, at least for him, the relevant
    limitation period had expired. They rely, for example, on the fact that he
    testified that he did not read the Cassels Brock opinion; that he interpreted
    the existence of the opinion as meaning the Timeshare Tax Reduction was legal
    and not subject to challenge; and that, when the CCRA challenged the tax
    credits, he knew he had a problem and that he would not obtain what Cassels
    Brock had promised.

[90]

We do not accept
    this argument. Whatever Mr. Lipsons interpretation of the Cassels Brock
    opinion, their opinion remains the same. Their opinion did not promise that the
    CCRA would not challenge the anticipated tax credits under the Timeshare Tax
    Reduction Program. Rather, it stated that it was unlikely that the CCRA could
successfully
challenge tax credits claimed under the Program. Mr. Lipson is not entitled to,
    and did not, sue Cassels Brock for an opinion they did not give. To the extent
    that his interpretation of the opinion may weaken his claim for reliance in
    relation to his negligent misrepresentation claim, in our view, that will be an
    issue for the trial judge.

[91]

Based on the
    foregoing reasons, we allow the appeal on this ground.

(2)

Did the motion judge err in finding that causation in simple negligence
    is not a proper common issue?

[92]

The motion judge
    found that Mr. Lipsons pleading disclosed a cause of action in negligent
    misrepresentation and also in simple negligence, and that it was not plain and
    obvious that these claims would fail. He also found that, for both causes of
    action, whether Cassels Brock owed the class a duty of care and whether it had
    breached that duty were proper common issues.

[93]

However, the
    motion judge found that, for both causes of action, the question of whether Cassels
    Brocks breach caused the class damage was not a proper common issue but instead
    had to be answered on an individual basis for each class member.

[94]

Mr. Lipson
    contests this finding as it applies to his claim in simple negligence. He says
    that, for that cause of action, causation should be certified as a common
    issue.

[95]

For the
    following reasons, we agree.

[96]

In finding that Mr.
    Lipsons claim in simple negligence was properly disclosed by his pleading, the
    motion judge looked to Mr. Lipsons allegations that the Cassels Brock legal
    opinion was a necessary precondition for the marketing of the program, that Cassels
    Brock ought to have foreseen that for the promoters the opinion was
    fundamentally necessary for the presentation of the program, and that those who
    then bought into the program would suffer damage if the opinion had been
    negligently prepared.

[97]

Thus, the claim
    in simple negligence is distinct from Mr. Lipsons claim in negligent
    misrepresentation, which required proof of reliance on the opinion by
    individual class members in deciding to participate in the program.

[98]

Framed in this
    way, the cause of action in simple negligence does not require a showing of reliance
    on the Cassels Brock opinion by individual class members. The allegation is
    that class members suffered damage because they participated in the program,
    which, but for Cassels Brocks negligent opinion, would not have been marketed
    by the promoters and thus not available to class members. In our view, this
    issue is common to the claims of all class members.

[99]

It may be that,
    at the trial of this common issue, evidence will emerge that the Cassels Brock
    legal opinion was not a necessary precondition for the promoters to market the
    program. For example, there may be evidence that the promoters were satisfied
    to go to market without any legal opinion, or because of legal opinions other
    than those of Cassels Brock. However, that determination is for the trial. At
    this stage, there need only be some basis in fact supporting Mr. Lipsons
    simple negligence claim. That requirement was met here. In addition to Mr.
    Lipsons pleading that the legal opinion was a necessary precondition, there
    was evidence of the promoters accountant who said as much.

[100]

In summary, as it is pleaded, Mr.
    Lipsons claim in simple negligence raises the issue of whether, but for the
    Cassels Brock opinion, the program would have been marketed and therefore
    available to cause harm to all members of the class.  This issue is properly
    resolved in a common trial.

E.

The cross-appeal

[101]

Cassels Brock raises three issues
    by way of cross-appeal.

[102]

First, it says that the motion
    judge erred in finding that Mr. Lipson properly pleaded the elements of
    negligence, in particular: duty of care, causation and damages.

[103]

We do not agree. The claim pleads
    that Cassels Brock owed a duty of care to those who it could reasonably foresee
    would read and rely on its opinion and to those who would participate in the
    program marketed by the promoters based on the opinion. The claim pleads
    causation and damages insofar as those participating in the program on either
    basis suffered losses as a consequence.

[104]

Second, Cassels Brock says that
    the motion judge erred in certifying as common issues whether it owed the class
    a duty of care, what types of heads of damage class members may have suffered,
    and what remedies they might therefore be entitled to.

[105]

Again, we do not agree. Cassels
    Brock is mistaken in arguing that reliance on its opinion (which is an
    individual issue) is a key element in determining whether it owed a duty of
    care to any class members.  Whether or not any class member in fact relied on
    the Cassels Brock opinion is irrelevant to whether Cassels Brock owed a duty of
    care to those who Cassels Brock could reasonably foresee might do so. Cassels
    Brock is also in error in saying that the quantum of damage each class member
    in fact suffered (an individual issue) is integral to determining what types or
    heads of damage to which class members could be entitled, and what remedies
    flow from that determination. The former is not relevant to the latter.

[106]

Third, Cassels Brock argues that
    the motion judge erred in finding that Mr. Lipsons action met the preferred
    procedure requirement for certification. It says that, in this case, the
    individual issues overwhelm the common issues and that the third party claims
    make a common trial unmanageable.

[107]

Here too we reject Cassels Brocks
    argument. The motion judges conclusion about preferable procedure requires the
    balancing of a number of considerations. This exercise of judicial discretion
    will attract appellate scrutiny only if it reflects an error in principle or an
    unreasonable finding of fact. Neither argument raised by Cassels Brock permits
    such a conclusion. The motion judge was well-aware of the individual issues
    that would remain after adjudication of the common issues. He weighed the
    relative importance of each in fully resolving the action, and determined that
    the latter were not overwhelmed by the former. We see no basis to interfere
    with his conclusion.

[108]

Mr. Lipsons litigation plan
    effectively addresses the manageability question in light of the third party
    claims. The motion judge approved that plan, and Cassels Brock did not
    challenge the plan in this court. Here too, we see no basis to interfere with
    the motion judges determination.

F.

disposition

[109]

For these reasons, we allow the
    appeal, set aside paras. 1, 2 and 3 of the Order and dismiss the cross-appeal. Further,
    the action is ordered certified as proposed by the motion judge, with the
    addition of the common issue of causation in simple negligence. The Order
    should be amended to that effect.

[110]

The parties shall file submissions
    of no more than ten pages addressing the issues of costs here and below. These
    are to be filed within 30 days of the release of these reasons.

Released: STG March 19, 2013

S.T.
    Goudge J.A.

Janet
    Simmons J.A.

I
    agree E.E. Gillese J.A.


Appendix A

Re:

Donation of One-Bedroom
    and Two-Bedroom, Biennial Timeshare Vacation Weeks


You have requested our opinion regarding the Canadian Federal
    Income Tax consequences relating to a donation of 75-year leasehold Biennial
    Timeshare Resort Weeks at the Alexandra Resort and Spa in Providenciales, Turks
    and Caicos Islands, British West Indies (the "Timeshare Weeks") by
    individual Canadian resident taxpayers. It is contemplated that any such
    donation would entitle the donor to claim a tax credit under the
Income Tax
    Act
(Canada) (the "Tax Act").

This opinion is specifically directed to potential donors who
    are individuals and who acquire and hold the Timeshare Weeks as capital
    property. The Timeshare Weeks will generally be considered to be held as
    capital property, unless

...

1.Meaning of "Gift"

In order to claim a tax credit for a donation there must be a
    complete gift of the property. Each of several elements must be found in order
    for a donation to qualify as a gift for income tax purposes. These elements are
    summarized by the CCCRA in its Interpretation Bulletin IT-110R3 entitled,
    "Gifts and Official Donation Receipts", at para 3 as follows:

A gift, for purposes of sections 110.1 and 118.1, is a
    voluntary transfer of property without valuable consideration. Generally, a
    gift is made if all three of the conditions listed below are satisfied:



(c) the transfer is made without expectation of return. No
    benefit of any kind may be provided to the donor or to anyone designated by the
    donor, except where the benefit is of nominal value.



The courts have held that a tax advantage (that is a tax credit
    for an individual) is not considered to be a benefit within this test (see
Friedberg
    (A.D.) v. Canada
92 DTC 6031 (F.C.A.)).



If a Class A Beneficiary chooses to retain the Timeshare Weeks,
    he or she may do so and hold, exchange, or sell the Timeshare Weeks, as well as
    to utilize them for his or her own vacations, or for any other lawful and
    permitted purposes.
If
    all or substantially all of the Class A Beneficiaries who receive Timeshare
    Weeks donate them, the CCCRA may be more inclined to challenge the arrangement
    (but see our opinion below at page 23 as to the unlikely success of such a
    challenge.)


....

7. General Anti-Avoidance Rule ("GAAR")

Although the current version of GAAR has been in place since
    1988, there has to date been little jurisprudence of direct relevance to
    charitable donations. GAAR is intended to apply to situations where a
    transaction or series of transactions results in a tax benefit, unless the
    transaction may reasonably be considered to have been undertaken or arranged
    primarily for
bona fide
purposes other than to obtain the tax benefit,
    or unless the transaction does not result in a misuse of the provisions of the
    Tax Act or an abuse having regard to the provisions of the Tax Act as a whole.

....

Accordingly, we are of the opinion that a good argument can be
    made that it cannot reasonably be said that there is an abuse of the provisions
    of the Tax Act as a whole in these circumstances.

In our opinion, and based on the foregoing, a donation of
    Timeshare Weeks in these circumstances would not likely be successfully
    attacked under GAAR.

....

9. General Comments

This opinion is based on the current provisions of the Tax Act,
    the regulations thereunder, and our understanding of the current administrative
    practices of the CCCRA. .... No advance tax ruling has been sought or obtained
    from the CCCRA to confirm the tax consequences or any of the transactions described
    herein.

This opinion may be relied upon only by CAA and potential
    donors, their agents and professional advisors, for the purpose of the
    transactions contemplated by this opinion. It may not be relied upon by any
    other person or for any other purpose, nor may it be quoted in whole or in part
    or its existence or contents otherwise referred to, without our prior written
    consent.

Based on and subject to the foregoing review, in our opinion it
    is unlikely that the CCCRA could successfully deny the deemed adjusted cost
    base of the Timeshare Weeks to, nor the tax credit claimed by, the Class A
    Beneficiaries who receive a distribution of the Timeshare Weeks from the Trust,
    and subsequently choose to make a voluntary and complete donation of some or
    all of their Timeshare Weeks to an RCAA.





[1]

Paragraphs 54 and 55 of the Fresh As Amended Statement of
    Claim provide as follows:

54. In or about
    January 2008, [the CCRA] agreed to settle the test case litigation on the basis
    that [the two donors] would be entitled to a tax credit for the cash portion of
    their donations to the [registered Canadian amateur athletic associations]
    under the [Timeshare Tax Reduction Program], but would not receive any tax
    credits for their donations of Timeshare Weeks. [The CCRA] extended this
    settlement offered to Lipson and the other Class Members.

55. Faced with the
    prospect that it was at least likely, if not certain  and not
    "unlikely" as Cassels Brock had represented in each of the Legal
    Opinions  that [the CCRA] would be successful in challenging the tax credits
    claimed by Lipson and the other Class Members in respect of at least their donation
    of Timeshare Weeks to the [registered Canadian amateur athletic associations],
    Lipson accepted [the CCRA's] settlement offers.



[2]

The motion judge stated the revised questions as follows:

5.  If after an individual issues trial,
    the defendant were found liable to a Class Member for negligent
    misrepresentation or negligence, what types or heads of damages, if any, would
    the Class Members be entitled to?

6. If after an individual issues trial, the
    defendant were found liable to a Class Member for negligent misrepresentation
    or negligence what remedy or remedies, if any, would the Class Members be
    entitled to?


