Executive Summary: Key Legal and Evidentiary Issues

• The case examines whether three professional-service defendants owed a duty of care to non-client class members in a charitable tax shelter scheme that was later found to be a "sham."
   
• Solicitor-client privilege held by GLGI restricted the evidentiary record available regarding the law firms' communications with their client.
   
• Discoverability principles under Ontario's Limitations Act, 2002 determined when the limitation period began to run for the class.
   
• Proximity analysis under the Anns/Cooper framework governed whether each defendant's undertaking extended beyond its own client to the class members.
   
• Evidence of outreach and reliance differed materially among the three moving defendants, affecting the outcome for each.
   
• Justice Morgan granted summary judgment dismissing the claims against two defendants while allowing the claim against the third to proceed to trial.
   

Facts of the case

This decision arises from three motions for summary judgment brought under Rule 20.01(3) of the Rules of Civil Procedure in a class action concerning a charitable tax shelter scheme known as the Global Learning Gift Initiative, operated by Global Learning Group Inc. and related entities (collectively "GLGI") from 2004 to 2014 [also described elsewhere in the decision as running from 2004 to 2015]. Under the program, an offshore entity acquired low-cost software licences and donated or sold them to a Canadian trust, which distributed them to participants; those participants then donated the licences to a charity and received donation receipts purportedly valued far above their actual cash outlay. The Plaintiffs, Lynn Wintercorn, Peter Newman, and Alex Kepic, represent roughly 40,000 class members who claimed charitable tax credits under section 118.1 of the Income Tax Act. The Canada Revenue Agency reassessed all participants and denied the credits, and the Tax Court of Canada later held in Mariano v. The Queen, 2015 TCC 244 that the program was a "sham." The Statement of Claim was issued on September 28, 2017, and the action was certified as a class proceeding on June 26, 2019. GLGI itself and its principal, Robert Lewis, are no longer active parties due to insolvency and death, and a separate group of defendants providing back-office services did not participate in these motions. The three moving defendants were Cassels Brock & Blackwell LLP, which provided the tax opinion underlying the program; Fasken Martineau DuMoulin LLP and its partner Allan Beach, who provided corporate and commercial legal services to GLGI; and Evans & Evans Inc., an appraisal firm that valued the donated licences.

Policy and legislative provisions at issue

The motions engaged section 118.1 of the Income Tax Act, under which the class members claimed charitable tax credits before being reassessed. Limitation issues turned on section 5(1) of Ontario's Limitations Act, 2002, which sets out the discoverability test for when a claim is considered discovered, including when the claimant knew or ought to have known that a proceeding would be an appropriate means to seek a remedy. The Plaintiffs also raised the limitation periods of other jurisdictions, noting that Quebec's basic limitation period is three years and that Prince Edward Island, the Northwest Territories, and Nunavut apply six-year periods, though the court's discoverability analysis focused on the Ontario statute. The motions were brought under Rule 20.01(3) of the Rules of Civil Procedure, which permits a defendant to move for summary judgment dismissing a claim.

Reasoning and analysis

Justice Morgan first addressed the Plaintiffs' request to adjourn the motions pending a Court of Appeal decision in an unrelated privilege case, Sakab Saudi Holding Company v. Al Jabri, and refused the adjournment, citing the need for orderly scheduling and noting that any resulting change in the law could be addressed later if it arose. He also confirmed that GLGI's solicitor-client privilege over its communications with Cassels and Fasken remained intact, following the earlier ruling in Wintercorn v. Global Learning Group Inc., 2022 ONSC 4576, for which leave to appeal had been denied. On the limitation issue, the court applied the discoverability principles from Grant Thornton LLP v. New Brunswick, 2021 SCC 31, concluding that the class members could not have known that a claim against the professional defendants was appropriate until the Mariano decision was released on November 23, 2015, given that GLGI and its advisors had continued to reassure participants that the CRA's position would be defeated. Since the Statement of Claim was issued in September 2017, the action was not statute-barred. Turning to duty of care, the court applied the Anns/Cooper test and the proximity framework from Deloitte & Touche v. Livent Inc., which asks whether a defendant's undertaking and a plaintiff's reasonable reliance establish sufficient proximity. For Cassels, the evidence showed its tax opinion was directed only to GLGI, with an express limitation against use in soliciting donations, and no class member had a solicitor-client relationship with the firm or relied on it directly; the court found no duty of care and no basis for liability. For Fasken, the evidence established that Allan Beach was a corporate/commercial solicitor who provided no tax advice, that Fasken had no contact with class members, and that participants signed disclaimers acknowledging that GLGI's lawyers did not represent them; although Beach's dual role as a Fasken partner and sole director of Escrowagent Inc. was found to be an improper, non-arm's-length arrangement, the court found it caused no loss to class members, since Escrowagent performed only mechanical escrow functions without any failure or mishandling. For Evans, however, the record showed that its valuation report was expressly intended for use by the CRA and "outside parties," that class members relied on it in their Notices of Objection, and that Evans was aware its report supported the class members' position even after a related valuator withdrew its own report. The court found this reliance foreseeable and within the scope of Evans' undertaking, creating a genuine triable issue as to its liability.

Ruling and overall outcome

Justice Morgan granted the summary judgment motions brought by Cassels and Fasken, dismissing the action against both of those defendants on the basis that neither owed a duty of care to the class members; the reasons also found that Fasken's non-arm's-length arrangement with Escrowagent Inc. and Allan Beach, while improper, was not causally linked to any class member's loss. The motion brought by Evans was denied, and the action will proceed to trial against Evans on the basis that a genuine issue exists regarding the scope of its undertaking and the class members' reliance on its valuation report. No monetary award, damages, or costs figure was ordered in this decision; the court directed the parties to exchange written costs submissions within specified timelines following the ruling, so no amount can be determined from this decision.