



COURT OF APPEAL FOR ONTARIO

CITATION: Nelson v. Lavoie, 2019 ONCA 431

DATE: 20190524

DOCKET: C65898 and C65904

Hoy A.C.J.O., Lauwers and Zarnett JJ.A.

BETWEEN

Sheryl
    Nelson

Respondent (Plaintiff)

and

Roland Lavoie
,
    Investment Planning Counsel Inc.,
IPC Investment
    Corporation
, IGM Financial Inc.,
Dennis Serre
and
Serre Financial Consulting Services Inc.

Appellants (Defendants)

Kenneth Dekker and Christopher Somerville, for the
    appellants, Roland Lavoie and IPC Investment Corporation

John J. Longo, for the appellants, Dennis Serre and
    Serre Financial Consulting Services Inc.

Brian A. Pickard, for the respondent

Heard: May 8, 2019

On appeal from the
    order of Justice Robert G.S. Del Frate of the Superior Court of Justice, dated August
    22, 2018.

REASONS FOR DECISION

[1]

The appellants appeal the motion judges order: (i) dismissing their
    motions seeking summary judgment dismissing the respondents claim against them
    on the basis that it was statute-barred; and (ii) ordering, pursuant to r.
    20.05(1) of the
Rules of Civil Procedure
, that the applicable
    limitation period commenced September 28, 2011, and did not expire before the
    respondent commenced her action on June 20, 2012.

[2]

The motion judges decision that the respondent, Sheryl Nelson, had not
    discovered her claim until September 28, 2011 turned on ss. 5(1)(a)(iv) and
    5(b) of the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B: when
    did the respondent first know, or when would a reasonable person with the
    abilities and in the circumstances of the respondent first have known, that,
    having regard to the nature of the loss or damage, a proceeding would be an
    appropriate means to seek to remedy it?

[3]

The respondent argued that a proceeding was not appropriate until the
    Canada Revenue Agency (CRA) advised her on September 28, 2011 that the
    Independent Pension Plan (IPP) she had established on the appellants advice
    did not comply with the relevant provisions of the
Income Tax Regulations
,
    C.R.C., c. 945. The appellants  Roland Lavoie, IPC Investment Corporation, Dennis
    Serre and Serre Financial Consulting Services Inc.  argued that a claim was
    appropriate by August, 2009, at the latest. The motion judge agreed with the
    respondent.

[4]

For the following reasons, we are not persuaded that we should interfere
    with the motion judges order.

Background

[5]

The respondent was a Hydro One employee for over 27 years. A co-worker
    told the respondent that her financial planner, Mr. Lavoie at IPC Investment Corporation,
    had created a financial plan that would permit the co-worker to retire early,
    without any reduction in her pension and referred the respondent to Mr. Lavoie.

[6]

Mr. Lavoie advised the respondent that she could set up an IPP and
    transfer the commuted value of her Hydro One pension plan to the IPP. Mr.
    Lavoie and Mr. Serre advised her that she would have to incorporate a company,
    start a business, and work for that business for a minimum of two years before
    retiring. The appellants insisted that if she did so, after two years the
    return would be more substantial than what her Hydro One pension plan would pay
    her.

[7]

The respondent intended to start a business selling childrens clothing
    online. She met with the appellants to prepare the necessary paperwork. On June
    13, 2009, the respondent asked the CRA to register her IPP. On August 31, 2008,
    she left her employment at Hydro One. On October 16, 2008, the CRA confirmed
    that the IPP had been accepted, effective as of September 1, 2008. On November
    24, 2008, the transfer of the commuted value of her Hydro One pension to the
    IPP was completed.

[8]

On January 16, 2009, the respondent requested a withdrawal of $2,700
    from her IPP. By the next month, she became aware that the payments from her
    IPP were lower than what she had been expecting. In May, 2009, the accountant
    she had retained for her newly-incorporated company advised that there might be
    problems with her IPP. She communicated these concerns to Mr. Lavoie and Mr.
    Serre, who reassured her that all was fine. Nonetheless, she retained the
    services of a lawyer in in May 2009 and subsequently sought the opinion of a
    financial advisor and an accountant.

[9]

The financial advisor provided a memorandum dated July 30, 2009 which
    stated that, in his opinion, her IPP did not meet the requirements for
    registration under the
Income Tax Act,
R.S.C. 1985, c. 1 (5th Supp.),
and it was very likely that
    the CRA would revoke its registration.

[10]

The
    accountant provided his report on August 4, 2009. He similarly opined that the
    IPP did not appear to meet the requirements for registration and that it was
    very likely its registration would be revoked by the CRA.

[11]

The
    appellants say that the respondent knew or a reasonable person ought to have
    known, by no later than this time, that it was appropriate to commence a
    proceeding against the appellants.

[12]

In
    the meantime, the respondent had obtained employment at Chapters. On August 23,
    2009 she encountered one of the appellants, Mr. Lavoie, while at Chapters. She
    was uncomfortable talking to him because by then she had pretty much figured
    there was going to be a lawsuit.

[13]

On
    August 25, 2009, the respondents legal counsel wrote to Mr. Lavoie seeking
    confirmation her IPP was in compliance with the
Income Tax Act
. He
    replied on September 8, 2009 enclosing a short memorandum dated September 2,
    2009 from the appellant Serre Financial Services. The memorandum stated that it
    was a condition of registration under the
Income Tax Act
that the
    pension plan satisfy the Primary Purpose, namely to provide retirement benefits
    to individuals in respect of their services as employees; and that to satisfy
    the Primary Purpose requirement, the employer/employee relationship must be
    legitimate and the employee must work for and earn income through the sponsoring
    company. These conditions are naturally met when the employee continues to
    work and earn income through the sponsoring company.

[14]

On
    September 29, 2009, Mr. Lavoie wrote to the respondent expressing concern that
    she was not returning his calls and regarding her current investment strategy.

[15]

On
    October 10, 2010, counsel for the respondent contacted the CRA asking it to
    review the IPPs compliance with the
Income Tax Act
. The law firm
    wrote again on October 27, 2010.

[16]

Following
    Mr. Lavoies September 29, 2009 letter to the respondent, there was no further
    communication between the appellants and the respondent until March 23, 2011
    when Mr. Serre provided his opinion, as Trustee of her IPP, as at December 31,
    2010. His opinion stated:

As of the plan year ending December 31, 2010, the following
    observations have been noted.

The history of pensionable service earned while at the current
    plan sponsor indicates the plan may be at risk of not meeting the primary
    purpose as is required by all pension plans. Although the plan may currently be
    in good status with the regulatory bodies, it is important to note that this is
    a potential risk to the plan.

Following a review of the funding activity on the pension plan,
    it is my opinion that the pension is meeting funding expectations at this time.

[17]

On
    September 28, 2011 the CRA responded by letter to the respondents counsels
    letters and confirmed that the respondents IPP did not comply with the
    relevant provisions of the
Income Tax Regulations
.

[18]

The
    respondents statement of claim was issued on June 20, 2012.

The motion
    judges reasons

[19]

The motion judge acknowledged that it was clear
    that the respondent had some suspicions by August 2009 regarding the
    conformity of the IPP.

[20]

However, he concluded, at paras. 55-58, that it
    was not appropriate for the respondent to commence her action until the CRA
    confirmed that her IPP did not comply with the relevant provisions of the
Income
    Tax Regulations
:

Firstly, the [appellants] reassurance
    prevented the [respondent] from discovering that loss or damage has occurred.
    The [appellants], her financial advisors, insisted that the plan was not only
    acceptable to the CRA but it would be beneficial to her in the long-term. On at
    least two subsequent occasions, the [appellants] reassured her that the IPP
    complied with the
Income Tax Act
.
This repeated advice casted doubts over the inadequacy of the IPP.
    In this light, Ms. Nelson could not conclude if damage had occurred.

Secondly, I cannot accept the [appellants]
    position concerning the right time for the institution of appropriate
    proceedings. It would not have been appropriate for Ms. Nelson to institute an
    action without a final determination from the CRA. Her counsel started a review
    process by notifying the CRA that something may be amiss. The CRA did not make
    a final decision until September 2011. Until then, the IPPs compliance with
    the regulation remained uncertain. Ms. Nelson could not know that the advice
    she received from the [appellants] was in fact wrong. On September 28, 2011,
    the CRA made the decision to deregister the plan. Her suspicions and doubts
    about the plan crystallized with that notice. There was no doubt, at that
    point, that she would be responsible for tax arrears and additional penalties.
    It is only at that time that it was appropriate to institute an action. Had Ms.
    Nelson instituted an action in the fall of 2009, she would have very likely
    faced a summary judgment application dismissing her claim.

Further, [the appellants] themselves have
    recognized that the damages had not been the subject of final determination,
    making an action inappropriate. In fact, in its Statement of Defense, the
    [appellants] Roland Lavoie, Investment Planning Counsel Inc. and IGM Financial
    Inc. plead, at paras. 47-48:

These defendants deny that the plaintiff
    has suffered the damages as alleged in the claim or at all.

In particular, no final determination has
    been made as to the status of the funds and other assets held for the
    Plaintiffs IPP. The Plaintiffs taxes have not been reassessed, and, as such,
    no associated damages have yet been suffered. The Plaintiffs claim for alleged
    damages suffered due to the de-registration of the IPP and any potential tax
    reassessment is thus premature and improper.

Had Ms. Nelson instituted the action prior to
    September 28, 2011, the court would not have been able to determine if any
    damages resulted from a still only potential deregistration of the IPP.

Analysis

[21]

The appellants advance three main arguments on
    appeal.

[22]

First, they argue that the motion judges
    conclusion flowed from his misapprehension of the nature of the respondents
    claim against them. They say that he treated her claim as a tax case, whereas
    it is one for alleged misrepresentations and negligent financial advice
    regarding the consequences of retiring and transferring the commuted value of
    her Hydro One pension plan to an IPP. They argue those causes of action arose
    as early as February 2009, when she became aware that the payments from her IPP
    were less than what she had been expecting. Any tax damages that the
    respondent suffered were simply further damages flowing from the same causes of
    action.

[23]

Second, and in the alternative, they argue that
    to the extent that this is a tax case, it was appropriate to commence an
    action by August 2009, when both her financial adviser and accountant had
    opined that it was likely that the CRA would revoke the registration of her
    IPP.

[24]

Third, they argue that the motion judges
    statement that the appellants reassured her that her IPP complied with the
Income
    Tax Act
was a palpable and overriding error. On her own evidence, by June
    1, 2009 she no longer trusted the appellants and by August 2009 she knew she
    was going to sue them. They submit that there is no evidence that the further
    communications from the appellants alleviated her concerns or that she relied
    on these communications. Moreover, the memorandum dated September 2, 2009 did
    not confirm that her IPP was in conformity with the
Income Tax Act
.

[25]

We begin by noting that when a proceeding is
    appropriate turns on the facts of each case:
407 ETR Concession Company
    Limited v. Day
, 2016 ONCA 709, 133 O.R. (3d) 762, at para. 34. We are not
    persuaded that there is any basis to interfere with the motion judges
    fact-driven conclusion that a proceeding was not legally appropriate until
    September 28, 2011.

[26]

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

[27]

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

[28]

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

[29]

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

Disposition and Costs

[30]

The appeal is dismissed. The respondent shall be
    entitled to her costs of the appeal, fixed in the agreed-upon amount of $8,500,
    inclusive of HST and disbursements.

Alexandra
    Hoy A.C.J.O.

P.
    Lauwers J.A.

B.
    Zarnett J.A.


