Appeal court certifies class action against Cassels Brock

Up to 900 people are poised to sue Cassels Brock & Brockwell LLP following an appeal court ruling certifying a class action against the firm.

By overturning a previous order in Lipson v. Cassels Brock & Blackwell LLP, the Ontario Court of Appeal yesterday certified a class action accusing the firm of negligence and negligent misrepresentation.

The case hinges on tax advice by Cassels Brock published in promotional material for a program through which Canadians donated cash and resort timeshare weeks to athletic associations.

This advice indicated it was unlikely the Canada Customs and Revenue Agency could hold back tax credits that donors were expecting under the terms of the program.

But the CCRA did reject the donors’ tax credit claims. It later settled a lawsuit brought by three donors, offering them tax credits for their cash donations but not for their timeshare weeks.

Almost five years later, Jeffrey Lipson launched a class action, claiming damages in the form of interest arrears, lost opportunities to make other donations , and special damages for fees incurred in the CCRA challenge.

In November 2011, Ontario Superior Court Justice Paul Perell said the criteria for a class action were met, but the action was statute-barred by the two-year limitation period set out in the Limitations Act 2002.

However, the appeal court yesterday ruled the class action is not statute-barred.

“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. Lipson’s claim was statute-barred. Nor did it support the conclusion that the limitation period applicable to Mr. Lipson’s claim also applied to the entire class,” said the ruling.

The ruling also dismissed Cassels Brock’s cross-appeal against the class action certification.

Lipson’s counsel David O’Connor calls the decision “logical” and says the level of damages to be pursued “will come out in the fullness of time ,” as the claims are yet to be proven in court.

Min Kim,  a tax and litigation lawyer at Heydary Hamilton PC, says: “This decision has many interesting implications for practising lawyers, especially in tax law. Generally speaking, it is a prudent practice for lawyers to ascertain exactly who is the intended recipient of their opinion. This would be more so in a case [like this] that deals with an opinion letter that is meant to be distributed widely to other individuals or entities.

“It would be very interesting to see to what extent the court would determine that the duty that Cassels Brock allegedly owed to people who did not necessarily have a retainer with Cassels Brock, but who Cassels Brock knew or ought to have known were intended readers of the opinion, if any duty is found to be owed at all.

“As indicated in the judgment, Cassels Brock was retained by a promoter of the tax shelter program, not the potential donors themselves.”

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