Grenon v Canada Revenue Agency, 2016 ABQB 260

Court of Queen ’ s Bench of Alberta Citation: Grenon v Canada Revenue Agency, 2016 ABQB 260 Date: 20160506 Docket: 1501 01439 Registry: Calgary Between: James T. Grenon Plaintiff/Respondent - and - Canada Revenue Agency, Attorney General of Canada, Scott Shelton, Gordon Lawrence, Derek Carroll, Gordon Ross, Helen Little, Andre Baril, Jane Doe, John Doe, Bruce Lo, Lizy Jacob and Judith Thain Defendants/Applicants _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice C. Dario _______________________________________________________ I.

Background [ 1 ] This application is brought by the Defendants to strike the Statement of Claim filed by the Plaintiff, James T. Grenon (“ Grenon ”). Grenon alleges a number of causes of action, including negligence, misfeasance in public office and interference with contractual relations and fiduciary duty, all arising from the conduct of the Defendant Canada Revenue Agency (“ CRA ”) and its officers in the course of an audit of Grenon and several business entities associated with him.

The Defendants argue numerous grounds in favour of their application to strike. [ 2 ] The following brief recitation of facts is summarized from Grenon’s Statement of Claim filed February 5, 2015. [ 3 ] Grenon is a former resident of Calgary, Alberta who moved to New Zealand in October 2012. [ 4 ] The CRA is an agent of the federal Crown statutorily mandated to administer and enforce federal taxation legislation. The Defendant Attorney General of Canada (“ AG ”) represents Her Majesty the Queen in Right of Canada.

The Defendant Scott Shelton (“ Shelton ”) was at all material times the Assistant Director of Audit of the CRA Calgary Tax Service Office. The Defendant, Gordon Lawrence (“ Lawrence ”) was at all material times the Manager for Aggressive Tax Planning and Specialty Audits of the CRA Calgary Tax Service Office. The Defendant Derek Carroll (“ Carroll ”) was at all material times a Team Leader of the Audit division of the CRA Calgary Tax Service Office. The Defendant Gordon Ross (“ Ross ”) was at all material times a Manager, Revenue Collections of the CRA Calgary Tax Service Office.

The Defendant Helen Little (“ Little ”) was at all material times a Team Leader of the Audit division of the CRA Calgary Tax Service Office. The Defendant Andre Baril (“ Baril ”) was at all material times a supervisor of the CRA’s collections

personnel in Calgary and was the supervisor of the Defendant Judith Thain. The Defendant Judith Thain (“ Thain ”) was at all material times an employee of the CRA who conducted investigations into the financial affairs of Grenon and his common-law partner. The Defendant Bruce Lo (“ Lo ”) was at all material times an auditor with the CRA Calgary Tax Service Office who managed the audit of a number of corporations wholly owned by Grenon and participated in the audit of Grenon.

The Defendant Lizy Jacob (“ Jacob ”) was at all material times an auditor with the CRA Calgary Tax Service Office who managed the audit of a number of income funds in which Grenon invested and participated in the audit of Grenon. The individual Defendants are collectively referred to as the “ CRA Personnel ” and all were involved in either or both of the auditing and collection activities against Grenon and entities with which he was involved.

The Defendants Jane Doe and John Doe were one or more executive decision makers or supervisors within the CRA who directed and oversaw the auditing and collection activities of the CRA Personnel. Shelton, Lawrence, Carroll, Ross, Little, Baril, Jane Doe and John Doe were at all material times the supervising auditors (“ Supervising Auditors ”) of the audits and collections against Grenon and associated entities. [ 5 ] In or around 2003, Grenon began investing in mutual fund trusts (“ MFTs ”), holding the same within a registered retirement savings plan at CIBC Wood Gundy (the “ CIBC RRSP ”).

At all material times, the trustee of the CIBC RRSP was CIBC Trust Company, acting through its agents, CIBC Wood Gundy and CIBC World Markets Inc. [ 6 ] Grenon also held an RRSP (the “ RGMP RRSP ”) with Richardson GMP (“ RGMP ”), of which Computershare Trust Company (“ Computershare ”) was the trustee with RGMP acting as Computershare’s agent. [ 7 ] In May 2012, the Canadian government announced that it would be entering into a new tax treaty with New Zealand (the “ New Treaty ”), which would increase the withholding tax rate on RRSP withdrawals by New Zealand residents from 15% to 25%.

As of the filing of Grenon’s Statement of Claim, the New Treaty was not yet in force. The New Treaty took effect June 26, 2015, and is applicable to income years commencing from 2016 on. [ 8 ] In or around 2007, the CRA began an extensive audit (the “ Audit ”) of Grenon and several corporations wholly owned by him. The Audit included activities related to the MFTs. [ 9 ] On April 24, 2012, the CRA issued a proposal letter (the “ First Proposal Letter ”) to Grenon.

The First Proposal Letter was based on the general anti-avoidance Rule (“ GAAR ”) under the Income Tax Act (“ ITA ”) and proposed to assess tax of $157 million against the CIBC RRSP and $2.6 million against Grenon personally. [ 10 ] In the second half of 2012 and in February 2013, Grenon transferred $55 million from the CIBC RRSP to the RGMP RRSP. Grenon alleges he was required to do this because of changes in the RRSP rules regarding MFTs.

He also asserts he did it to have cash available to pay the withholding tax that would become payable upon removal of funds from the CIBC RRSP to New Zealand. [ 11 ] On February 8, 2013, the CRA issued a second proposal to Grenon (the “ Second Proposal Letter ”). This was similar to the First Proposal Letter but added additional interest and penalties, such that the tax proposed was $167 million against the CIBC RRSP and $3.8 million against Grenon. The Second Proposal Letter provided a 30 day period for Grenon to respond. The Second Proposal Letter was sent to CIBC.

In addition, the CRA contacted CIBC and RGMP in respect of the potential tax liability. [ 12 ] On or about February 28, 2013, the CRA issued reassessments against Grenon and the CIBC RRSP. On March 1, 2013, the CRA issued replacement reassessments (the “ Reassessments ”) with additional penalties and interest. [ 13 ] One of the bases for the Reassessments was an allegation that the income of the MFTs within the CIBC RRSP represented an over-contribution by Grenon and was subject to a penalty tax.

The Reassessments indicated tax owing of $283 million by the CIBC RRSP and $205 million by Grenon. [ 14 ] On March 7, 2013, on an ex parte basis, the CRA obtained from the Federal Court two jeopardy orders (the “ Jeopardy Orders ”), one against the CIBC RRSP and one against Grenon. I note that on September 9, 2015, the Federal Court allowed Grenon’s application for reconsideration of the RRSP Jeopardy Order and vacated it; see Canada (MNR) v Grenon , 2015 FC 1050 , [2016] 1 CTC 197.

The Federal Court noted that the Jeopardy Order against Grenon personally had been vacated by way of a Consent Order. [ 15 ] Grenon and CIBC formally objected to the Reassessments and ultimately were advised by the CRA Appeals Division that the Reassessments were confirmed. That confirmation has been appealed to the Tax Court of Canada.

No disposition has been made as of the date of these Reasons. [ 16 ] Grenon asserts that, as a result of the Audit, the CRA and the CRA Personnel were “in a close and direct relationship” to Grenon and knew that “carelessness by them would likely have a close, direct and monumental effect” on Grenon. Accordingly, Grenon asserts that the CRA and the CRA Personnel owed a duty of care to him. [ 17 ] Grenon complains of a number of aspects of the CRA’s conduct.

Specific examples include: demanding large numbers of documents that Grenon asserts the CRA knew were irrelevant, publicly available and/or solicitor-client privileged; providing the Second Proposal Letter to CIBC without prior notice to Grenon; and requiring production of a large number of documents over the Christmas holiday of 2014 in advance of Grenon’s cross-examination in respect of the Jeopardy Orders. [ 18 ] Grenon claims several heads of damages, including opportunity costs in respect of the assets of the CIBC RRSP and the RGMP RRSP, damage to his reputation and the difference in the amount of withholding tax in the event the New Treaty comes into force before he is able to remove the funds from the CIBC RRSP and the RGMP RRSP.

He also seeks punitive and exemplary damages. [ 19 ] As indicated above, Grenon alleges various causes of action against the Defendants including negligence, misfeasance in public office and interference both with his contractual relations with CIBC and RGMP and with their fiduciary duties to him. He makes these allegations with considerable flourish, using terms such as “Extensive Improper Auditing Activities”, “Improper Collection Activities” and “CRA Shakedown Strategy”.

I will give some consideration to the propriety of such language in the course of these Reasons, but the primary task of this Court is to determine whether the facts as alleged in the Statement of Claim, stripped of hyperbole,

are sufficient to support one or more causes of action that are within the jurisdiction of this Court. II. The Application [20] The Defendants’ application is brought pursuant to Rule 3.68, which provides, in part, as follows: 3.68(1) If the circumstances warrant and a condition under sub Rule (2) applies, the Court may order one or more of the following: (

a) that all or any part of a claim or defence be struck out; (

b) that a commencement document or pleading be amended or set aside; (

c) that judgment or an order be entered; (

d) that an action, an application or a proceeding be stayed. (2)The conditions for the order are one or more of the following: (

a) the Court has no jurisdiction; (

b) a commencement document or pleading discloses no reasonable claim or defence to a claim; (

c) a commencement document or pleading is frivolous, irrelevant or improper; (

d) a commencement document or pleading constitutes an abuse of process; (

e) an irregularity in a commencement document or pleading is so prejudicial to the claim that it is sufficient to defeat the claim. (3)No evidence may be submitted on an application made on the basis of the condition set out in sub Rule (2)(b). [21] The Defendants rely upon Rules 3.68(2)(a), (b), (

c) and (

e) in resisting the claims alleged by Grenon. III. The Law [22] This Court has held that the test for striking a pleading under this Rule is the same as that under its predecessor Rule 129; see,for example, Donaldson v Farrell, 2011 ABQB 11 and Polsom v Couston, 2014 ABQB 43, 581 AR 342. Accordingly, cases decidedunder the old Rule still may provide useful guidance. [23] It is commonly understood that, on an application to strike a pleading, the court must assume that the facts alleged in thatpleading are true.

In Fullowka v Whitford, (NWT CA), [1997] NWTR 1 (CA), the Court took a broad approach tothis principle, holding at paras 39, 47: ...it is elementary that a pleading is valid and suffices to raise a certain cause of action if it gives facts which create that cause of action. Itneed not name that or any cause of action or give a legal conclusion, and indeed it may name a different cause of action, or the wrongcause of action... All of the defendants who moved argue that the amended statement of claim at key places offers something bald and without supportingdetail.

Some counsel allege that these are bald facts, other that they are bald conclusions. Doubtless a statement of claim must plead thenecessary facts, and a mere legal conclusion is not enough. Merely to plead that the defendant is liable to the plaintiff for the tort ofdefamation might well not suffice, for example. That is a legal conclusion, not a fact. However, there is a big difference betweenpleading a mere conclusion of law and pleading a fact.

To plead that the defendant negligently injured the plaintiff is to plead a fact, evenif it also implies a legal conclusion. [24] The latter statement seems surprisingly broad and, unfortunately, the Court did not elaborate on precisely what “fact” iscontained in the pleading referred to.

Subsequent courts, however, have provided greater clarification. [25] For example, in Tottrup v Alberta (Minister of Environmental Protection), 2000 ABCA 121, 255 AR 204 at paras 11 and 13,the Court of Appeal provided further guidance on the distinction between a fact and an allegation: In my view, it is not the allegation of a duty at law that is critical, but the facts alleged supporting such a duty.

For example, a statementof claim alleging only that “A” breached a duty owed to “B” thereby causing damage does not, in my view, disclose a cause of action.Pleadings are allegations of fact and, in my view, where negligence is alleged, that allegation must be supported by facts capable ofsustaining a determination that a duty was owed, that

an act or omission occurred breaching that duty, and that damages resulted. On amotion to strike it is the allegations of fact that must be examined to determine whether a cause of action exists. ... It is an appropriate function of the Court to consider and determine these questions of law on the basis of the alleged facts. The existenceof a duty of care, for example, may depend on the facts of the case, but whether certain facts could sustain a finding of such a duty is aquestion of law.

It is therefore proper, in the circumstances of this case, to ask whether a duty of care and a breach of that duty by theseMinisters could be found on the facts alleged by the plaintiff. The Court ought not to refuse to strike solely on the grounds that the factsmay, at some later stage, turn out to be different from those alleged.

[26] In Hovsepian v Westfair Foods Ltd, 2001 ABQB 700, 296 AR 283, this Court observed that Tottrup distinguished Fullowkaand went on to narrow the application of the principle that the plaintiff’s allegations must be taken as true, saying at paras 28, 29 and 31: While the Plaintiffs state that all allegations in the Claim must be taken as proved, the Defendants propose two limits on that principle:(1) bare allegations with no facts need not be taken as proved; and (2) speculative facts or those incapable of proof need not be taken asproved. In my view, the Defendants are correct on both points.

Regarding the first limitation argued by the Defendants, I agree that there is no presumption that allegations not backed by facts must betaken as proved. Bare allegations are insufficient; allegations of fact are taken as proved for purposes of the striking out test. ... Regarding the second limitation argued by the Defendants, they submit that the court is not required to assume the truth of “allegationsbased on assumptions or speculations”, or facts that are “patently ridiculous or incapable of proof”. These phrases come, respectively,from Operation Dismantle v.

The Queen, (SCC), [1985] 1 S.C.R. 441 at 455, and Air India Flight 182 DisasterClaimants v.

Air India et al. (1987), (ON SC), 62 OR. (2d) 130 (H.C.J.) at 135. [27] In Merchant Law Group v Canada (Revenue Agency), 2010 FCA 184, 405 NR 160 at paras 34 and 35, the Federal Court ofAppeal, applying a similar Rule, cautioned against the injudicious use of opprobrium in pleadings: I agree with the Federal Court’s observation (at paragraph 26) that paragraph 12 of the amended statement of claim “contains a set ofconclusions, but does not provide any material facts for the conclusions.” When pleading bad faith or abuse of power, it is not enough toassert, baldly, conclusory phrases such as “deliberately or negligently,” “callous disregard,” or “by fraud and theft did steal”: Zundel v.Canada, 2005 FC 1612, 144 A.C.W.S. (3d) 635; Vojic v.

Canada (M.N.R.), (FCA), [1987] 2 C.T.C. 203, 87 D.T.C.5384 (F.C.A.). “The bare assertion of a conclusion upon which the court is called upon to pronounce is not an allegation of materialfact”: Canadian Olympic Association v. USA Hockey, Inc. (1997), (FC), 74 C.P.R. (3d) 348, 72 A.C.W.S. (3d) 346(F.C.T.D.). Making bald, conclusory allegations without any evidentiary foundation is an abuse of process: AstraZeneca Canada Inc. v.Novopharm Limited, 2010 FCA 112 at paragraph 5.

If the requirement of pleading material facts did not exist in Rule 174 or if courts didnot enforce it according to its terms, parties would be able to make the broadest, most sweeping allegations without evidence and embarkupon a fishing expedition. As this Court has said, “an action at law is not a fishing expedition and a plaintiff who starts proceedingssimply in the hope that something will turn up abuses the court’s process”: Kastner v. Painblanc (1994), 58 C.P.R. (3d) 502, 176 N.R.68 at paragraph 4 (F.C.A.).

To this, I would add that the tort of misfeasance in public office requires a particular state of mind of a public officer in carrying out theimpugned action, i.e., deliberate conduct which the public officer knows to be inconsistent with the obligations of his or her office:Odhavji Estate v. Woodhouse, [2003] 3 S.C.R. 263, 2003 SCC 69 at paragraph 28. For this tort, particularization of the allegations ismandatory.

Rule 181 specifically requires particularization of allegations of “breach of trust,” “wilful default,” “state of mind of aperson,” “malice” or “fraudulent intention.” [28] Graesser J of this Court made similar comments in PL v Alberta, 2012 ABQB 309, 529 AR 1 at paras 51 and 59: I must consider each paragraph and determine the extent to which the paragraph relates to a necessary element of a cause of action(alleging a duty and a breach of that duty and the resulting harm) or how it relates to relevant or necessary facts supporting the cause ofaction.

Sufficient, but not too many, particulars of the necessary facts must be given. Hence the tension between too little and too much. ... Using terms such as “maliciously” and “recklessly” is frivolous, irrelevant and improper within the meaning of Rule 3.68(2)(c), andthose adverbs should be struck. [29] As will be discussed later in these Reasons, Grenon asserts that there is precedent for his negligence claim. He argues,however, that even if that were not so, his claim is that the “novel” relationship between him and the CRA gives rise to a duty of care andit should not be struck.

In O’Connor Associates Environmental Inc v MEC OP LLC, 2014 ABCA 140, 572 AR 354 at paras 15 and 16,the Court of Appeal commented on the application of the striking Rule to “novel” claims: ... [R v Imperial Tobacco, 2011 SCC 42, [2011] 3 SCR 45] states that it is “not determinative” that a cause of action has not previouslybeen recognized, but the opposite does not hold true; just because there is no “binding authority” does not mean that the claim has areasonable prospect of success.

Indeed, in Imperial Tobacco itself the challenged claims were all struck even though they were noveland there was no binding authority on the point. The test for striking pleadings is to be found in Imperial Tobacco, which is binding authority in this province. In determining whether anovel claim has a “reasonable prospect” of success, many factors must be examined. The clarity of the factual pleadings is important.The existence of case law discussing the same or similar causes of action is relevant.

As noted in Imperial Tobacco, the courts must becareful not to inhibit the development of the common law by applying too strict a test to novel claims. However, the courts must resistthe temptation to send every case to trial, even if some legal analysis is needed to determine if a claim has any reasonable prospect of success: Kripps v.

Touche Ross & Co. (1992), (BC CA), 94 DLR (4th) 284 at p. 309, 69 BCLR (2d) 62 (CA). [30] In Arabi v Alberta, 2014 ABQB 295, 589 AR 249 at paras 48, 72 and 74, this Court commented on the proper approach to astriking application where the pleading in question contains numerous and complex allegations: Arabi’s action is defective on many bases, cannot succeed, and therefore must be struck. The amorphous nature of Arabi’s manyallegations and the large cast of Defendants means that a detailed, point-by-point analysis is not a logistically viable process.

I willtherefore approach Arabi’s allegations by identifying a number of general legal and factual defects that, alone and in combination, meanthe Arabi Civil Action cannot legally succeed or is based on an inadequate matrix of supporting facts. ...

In evaluation of a Rule 3.68 application the hearing judge is to presume that the alleged facts are true. This general Rule has two caveats. One is that a fact is different from a bald allegation: an allegation “...that recite[s] the basic elements of the tort in very general terms but fails to provide material facts sufficient to demonstrate an intentional wrongdoing...”: GH v. Alcock , 2013 ABCA 24 at para 58 . For example, Arabi’s many allegations of a conspiracy among the Defendants are a bald allegation – he offers nothing on the context or details of that conspiracy. ...

A second basis on which an alleged fact may be rejected is when it is simply an absurdity, or highly implausible. Arabi’s complaints are also plagued by this defect of inherent improbability. ... [ 31 ] Finally, in HOOPP Realty Inc v Guarantee Co of North America , 2015 ABCA 336 at paras. 14 , 15 and 19, the Court of Appeal held that the judge hearing an application to strike should not parse the pleading too minutely: In so doing, the chambers judge was not to consider any evidence submitted in support. However, he or she was required to consider the contents of the entire pleading.

Rule 3.68(3) states only that no evidence may be submitted on an application to strike for failure to disclose a reasonable claim. It does not state that when hearing an application to strike, the chambers judge is to examine only specific wording extracted from the statement of claim at the applicant’s discretion; he or she must place that wording in the entire context of the pleading. At minimum, the relevant examination must logically extend beyond the specific words or paragraphs said to allege a cause of action.

If other portions of the same pleading reveal a complete defence to that cause of action, the action may be struck. ... We conclude that the Rule 3.68(3) bar on considering evidence did not preclude the chambers judge from considering factors other than evidence, even when outside the contents of the Amended Statement of Claim. This Court concluded in O’Connor, supra at para 16 that many factors, short of evidence, must be examined in determining whether a novel claim has a “reasonable prospect of success”.

We interpret this to include consideration of the underlying litigation context of a claim, even one which does not give rise to a novel cause of action. [ 32 ] From all of the foregoing case law, I draw the following statements of principle applicable to an application to strike. 1. The Court must assume the facts plead are true, but this assumption does not extend to bald allegations, to legal conclusions or to speculations, absurdities, highly implausible statements or statements incapable of proof. 2. Making conclusory statements without evidence is an abuse of process and such statements should be struck. 3.

Improper reference to terms such as “maliciously” and “recklessly” also constitutes an abuse of process and such terms should be struck unless they are relevant to the cause of action alleged. 4. Where a plaintiff’s statement of claim includes contradictory facts that cannot both be true, such contradictory allegations need not be accepted by the Court. I consider this a variant of the “defect of inherent improbability” discussed in Arabi . 5. The Court is not obligated to assume that an alleged fact is true where that allegation is contrary to a statutory directive.

For example, s. 152(8) of the ITA deems tax assessments to be valid until varied or set aside by the Tax Court of Canada and this Court need not, and indeed cannot, presume otherwise, regardless of what is contained in the Statement of Claim. [ 33 ] There may be additional bases upon which the Court ought properly to reject a plaintiff’s allegations of “fact”; the categories are not closed. [ 34 ] Finally, while the Court should not be quick to dismiss novel claims, the entire contents and context of a pleading must be considered and a minute, line-by-line analysis may not be appropriate. IV.

Analysis [ 35 ] On the basis of the above-stated principles and given that Grenon’s Statement of Claim, like that in Arabi , is lengthy, complex and raises a large number of issues, I will consider this application on the basis of the objections raised by the CRA, rather than by reviewing the Statement of Claim paragraph by paragraph. A. Jurisdiction/Collateral Attack [ 36 ] The CRA argues that certain paragraphs of the Statement of Claim speak to issues that are outside the jurisdiction of this Court and should be struck pursuant to Rule 3.68(2)(a). 1.

Issues Belonging in Tax Court [ 37 ] First, the CRA asserts that the Statement of Claim invites this Court to make some determination with respect to the validity or accuracy of the Reassessments. They point out that s. 152(8) ITA provides that tax assessments are valid and binding unless and until they are varied or set aside pursuant to the objection and appeal process set out in the ITA. That process must be followed in the Tax Court of Canada, which has exclusive jurisdiction to determine the validity of tax assessments pursuant to s. 12(1) of the Tax Court of Canada Act , RSC 1985, c T-2:

(1) The Court has exclusive original jurisdiction to hear and determine references and appeals to the Court on matters arising under ... the Income Tax Act ... when references or appeals to the Court are provided for in those Acts. [ 38 ] In his brief, Grenon refers to the Supreme Court of Canada’s decision in Canada (Attorney General) v TeleZone Inc , 2010 SCC 62 , [2010] 3 SCR 585. He asserts that “The TeleZone decision has overtaken any notion that the TCC must rule on the Reassessments before this action can be continued.” [ 39 ] In my view, Grenon has misapprehended and over interpreted TeleZone .

It is important to bear in mind that TeleZone was not a tax case. Rather, what was at issue there was a decision by the Minister of Industry Canada to reject TeleZone’s application for a telecommunications license. It is true that the Supreme Court held that judicial review of that ministerial decision was not a necessary precursor to TeleZone’s action for damages, saying 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 (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. [Emphasis added.] [ 40 ] There are two features that distinguish this case from TeleZone .

One is the applicable statutory regime and the other is that Grenon, unlike the claimant in TeleZone , is not “content to let the order stand”. [ 41 ] First, the statutory framework in this case is significantly different from that before the Supreme Court in TeleZone . In TeleZone , the question was whether an action for damages could proceed in the Ontario superior court without prior judicial review of the ministerial decision by the Federal Court.

In respect of jurisdiction, the Supreme Court made these comments at paras. 6 and 42: In the present case, the Ontario Superior Court has jurisdiction over the parties, the subject matter and the remedies sought by TeleZone. That jurisdiction includes the authority to determine every legal and factual element necessary for the granting or withholding of the remedies sought unless such authority is taken away by statute.

The Federal Courts Act does not, by clear and direct statutory language, oust the jurisdiction of the provincial superior courts to deal with these common law and equitable claims, including the potential “unlawfulness” of government orders. That being the case, the Superior Court has jurisdiction to proceed. ...

What is required, at this point of the discussion, is to remind ourselves of the Rule that any derogation from the jurisdiction of the provincial superior courts (in favour of the Federal Court or otherwise) requires clear and explicit statutory language. ... [ 42 ] The Supreme Court then went on at para. 57 to consider the legislative history of s. 17 of the Federal Courts Act, RSC 1985, c F-7, which gives the Federal Court “ concurrent original jurisdiction in all cases in which relief is claimed against the Crown” (emphasis added).

The Supreme Court noted that the intention of changes to the Federal Courts Act was for the Federal Court and the provincial superior courts to share jurisdiction over certain matters; they stated at para. 59: The effect of the argument of the Attorney General, if accepted, would be to undermine the purpose and intended effect of the 1990 amendment by retaining in the Federal Court exclusive jurisdiction over a key element of many causes of action proceeding in the provincial courts despite the promise to give plaintiffs a “choice of forum” and to make available relief in the provincial superior courts that may be more “familiar” to litigants. [ 43 ] In contrast to the Federal Court’s concurrent jurisdiction in the circumstances articulated in TeleZone , the Tax Court, as noted above, has exclusive jurisdiction over assessments of tax.

This jurisdiction has been interpreted rather broadly by the courts. For example, in Canada v Addison & Leyen Ltd , 2007 SCC 33 , [2007] 2 SCR 793, the Supreme Court said at para 11: Reviewing courts should be very cautious in authorizing judicial review in such circumstances. The integrity and efficacy of the system of tax assessments and appeals should be preserved. Parliament has set up a complex structure to deal with a multitude of tax-related claims and this structure relies on an independent and specialized court, the Tax Court of Canada.

Judicial review should not be used to develop a new form of incidental litigation designed to circumvent the system of tax appeals established by Parliament and the jurisdiction of the Tax Court. Judicial review should remain a remedy of last resort in this context. [ 44 ] In a number of recent cases, the Federal Court has refused to deal with an application on the grounds that its “essence” or “essential character” was a challenge to or collateral attack on the validity of a tax assessment and was therefore within the exclusive jurisdiction of the Tax Court.

See, for example, Ritter v Canada (Minister of National Revenue) , 2013 FC 411 , [2013] 4 CTC 145; Newcombe v Canada , 2013 FC 955 , [2014] 1 CTC 58; Feng v Canada (Minister of National Revenue) , 2016 FC 66 . [ 45 ] Notwithstanding Grenon’s argument that TeleZone obviates the need for parallel proceedings, such proceedings subsequently were before the Federal Court of Appeal in the companion cases Johnson v Canada (Minister of National Revenue) , 2015 FCA 51 , 469 NR 326 (“ Johnson 1 ”) and Johnson v Canada (Minister of National Revenue) , 2015 FCA 52 , 470 NR 183 (“ Johnson 2 ”).

In both of those cases, the taxpayer alleged that the Minister had acted improperly in issuing GST assessments; the same conduct was at issue in both cases. In Johnson 1 , the taxpayer sought judicial review of the Minister’s conduct by the Federal Court. He also appealed the assessments to the Tax Court and Johnson 2 pertained to the CRA’s application to strike paragraphs of the notice of appeal dealing with the Minister’s alleged conduct. The Tax Court struck the paragraphs and the Federal Court refused judicial review.

The taxpayer appealed, but the Federal Court of Appeal upheld both judgments, holding in Johnson 1 at para 38 that it was not possible to separate the requested declaration of invalidity from the question of the correctness of the assessments. The Federal Court of Appeal cited The Queen v. Roitman , 2006 FCA 266 , 353 NR 75 at para 25 for these comments: Counsel for Mr. Roitman alleges abuse of process on the part of the Minister in issuing the notice of assessment. The alleged abuse is that of a deliberate incorrect

interpretation of the law. The allegation assumes that the law has been incorrectly interpreted, which in turn

assumes that the reassessment is invalid, a determination that can only be made by the Tax Court of Canada. To paraphrase the words ofHugessen J. in Walsh, 2006 FC 56 , [2006] F.C.J. No. 54 (supra, at paragraph 5), the relief based on the alleged deliberateactions of the Minister or of the Agency “would be a meaningless exercise when divorced, as is [sic] must be, from the substantialquestion as to the validity of the assessment itself”.

It is remarkable that the very question the Judge ordered to be decided prior to trialby the Federal Court is precisely the type of legal question that would normally fall within the very expertise and domain of the TaxCourt of Canada. It is clear in the end that the claim for damages can only succeed if the reassessment is first found to be invalid. TheStatement of Claim is, at best, premature. [46] I note that Grenon attempts to undermine Roitman on the basis that it was decided prior to TeleZone.

Given the differentstatutory regimes at issue here and in TeleZone and given the Federal Court of Appeal’s recent reference to Roitman in Johnson 1, Ifind that Roitman has not been overruled by TeleZone. [47] Second, unlike the claimant in TeleZone, it is clear that Grenon is not “content to let the order stand” insofar as theReassessments are concerned. He has appealed the Reassessments to the Tax Court, though the outcome of that appeal is not yet known.Moreover, it is abundantly clear from his Statement of Claim that he believes the Reassessments are invalid.

Indeed, he says so explicitlyand several of his claims are predicated on the assumption that the Reassessments are invalid. [48] Grenon points to the decision in Ludmer v Canada (Attorney General), 2015 QCCS 1218, in which there were concurrentproceedings in the Tax Court, the Federal Court and the Quebec Superior Court, all arising out of the same factual circumstances. Therehad been several tax assessments against a number of taxpayers, most of which had been resolved by consent. Only a few remained to bedetermined by the Tax Court.

The Quebec Court discussed the concurrent jurisdiction at para 13: This is not a case where the different courts or bodies are exercising concurrent jurisdiction over the same dispute. Rather, the differentcourts or bodies each have jurisdiction over different aspects of the dispute. [49] At para 18, the Court referred to TeleZone and held that “...the Superior Court’s jurisdiction to award damages is notdependent on a prior finding by the Tax Court that the assessment was incorrect...”.

The Court also pointed out in paras 31 and 32,however, that the issues before the Superior Court, the Tax Court, the Federal Court and the Information Commissioner were related, butdifferent and that the outcome in the Superior Court did not depend “in large part” on the outcome of the other proceedings. The SuperiorCourt stated at para 36 that “The Tax Court’s determination to maintain, vary or vacate the reassessments will be binding on the SuperiorCourt.

The incorrectness of the tax reassessments as a matter of substantive tax law is not, however, an essential element of thePlaintiffs’ claim.” [50] By contrast, several of Grenon’s claims do depend “in large part” on invalidity of the Reassessments. Invalidity of theReassessments is an “essential element” of those claims. While, in principle, this Court may be the correct forum in which to adjudicateclaims for which the validity of the Reassessments forms an essential element, such adjudication cannot take place until the validity ofthe Reassessments is determined by the Tax Court.

As such, Ludmer is of limited assistance to Grenon. [51] Accordingly, I find that allegations in Grenon’s Statement of Claim that pertain to, or constitute a collateral attack on, theReassessments must be struck as being within the exclusive jurisdiction of the Tax Court of Canada. I note that the Supreme Court ofCanada at para. 60 of TeleZone approved the definition of “collateral attack” as “an attack made in proceedings other than those whosespecific object is the reversal, variation, or nullification of the order or judgment”.

While the Reassessments are not an “order orjudgment”, I am satisfied that the doctrine of collateral attack is applicable to this context. [52] Paragraph 41 of the Statement of Claim alleges that the Reassessments were “improper, unlawful, and invalid” for variousreasons. Leaving aside that these are legal conclusions, not facts, s. 152(8) of the ITA provides that a tax assessment is valid and bindinguntil set aside in accordance with the appropriate procedure. Thus, Grenon asks this Court to accept as true a statement that is contrary tostatute.

This Court cannot do so and, indeed, is obliged to do the opposite. Further, it is clear that the question of the validity of theReassessments is within the exclusive jurisdiction of the Tax Court. Accordingly, this paragraph raises no issue that can be determinedby this Court and is struck. 2. Issues Belonging in the Federal Court [53] The CRA also argues that this Court has no jurisdiction to review the validity of the Jeopardy Orders. I agree with this generalproposition.

Concerns with respect to the Jeopardy Orders must be brought before the Federal Court, as the court that granted them.Indeed, this has already occurred. As noted above, the Jeopardy Order against Grenon personally was vacated by a Consent Order of theFederal Court.

That Court also set aside the RRSP Jeopardy Order in its decision in Grenon, supra, making these comments at paras 24,26 and 27: As argued at the hearing, what the MNR observed when the application for the ex parte jeopardy order was filed were substantial assetswere being withdrawn in a relatively short time frame from the Trust, some of it moving to overseas accounts. ... While the transfers from the Trust and the relocation of Mr.

Grenon may have provided an initial impression that the Trust had thepotential to be hollowed out before an opportunity for collection arose, upon hearing submissions from all the parties and reviewing theirevidence, I do not believe that the MNR has shown reasonable grounds to believe that the assets of the taxpayer are currently in dangerof debt collection.

Informing my view is not only that the Trustee would be jointly liable if the assets of the taxpayer were distributed such that the assetswould be less than the tax debt (section 159(1)(a)), but also that pursuant to section 159(2), the Trustee would need to obtain a“clearance certificate” prior to distributing assets for a tax debt which it may be reasonably expected to become liable...

[ 54 ] These comments from the Federal Court undermine certain aspects of Grenon’s arguments. First, Grenon asserts that the CRA “improperly, quickly and secretly” obtained the Jeopardy Orders when it knew there was “no legitimate basis” for doing so. This is not consistent with what the Federal Court said. Notwithstanding that the Federal Court vacated the RRSP Jeopardy Order, its findings above do not support the assertion of mala fides on the part of the CRA. The Federal Court seems to indicate that there was a reasonable basis for the CRA to have obtained the RRSP Jeopardy Order at the first instance.

Second, it is significant that the Federal Court was prepared to vacate the RRSP Jeopardy Order on the strength of the potential for trustee liability under s. 159(2) ITA, the very provision of which Grenon complains in the present action. [ 55 ] Grenon’s allegations regarding the Jeopardy Orders amount to an assertion that the CRA misused the process of the Federal Court.

In reviewing these allegations, it is important to bear in mind the distinction between the doctrine of abuse of process, which is relevant to jurisdiction, and the tort of abuse of process, which will be discussed later in these Reasons. [ 56 ] The doctrine of abuse of process was discussed at some length by McIntyre J of this Court in Stoney Nakoda Nations v Canada (Attorney General) , 2015 ABQB 565 .

At para 19, he quoted the Supreme Court of Canada in Toronto (City) v Canadian Union of Public Employees Local 79 , 2003 SCC 63 for this explanation of the doctrine: The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute... [ 57 ] In Magno v Lariviere , 2014 ONSC 705 at para 25 , the Court quoted para 43 of that same Supreme Court of Canada decision: [T]he primary focus of the doctrine of abuse of process is the integrity of the adjudicative functions of courts.

Whether it serves to disentitle the Crown from proceeding because of undue delays or whether it prevents a civil party from using the courts for an improper purpose the focus is less on the interest of parties and more on the integrity of judicial decision making as a branch of the administration of justice. [ 58 ] Justice McIntyre held in Stoney at para 23 that a litigant’s “entire court history” is relevant to the abuse of process analysis.

But it is clear from the case law that what is relevant for this purpose is the history of court proceedings rather than out-of-court conduct. [ 59 ] While the Federal Court is a statutory court, there is no suggestion that it does not have the authority to assert control over its own process. See, for example, AB Hassle v Apotex Inc , 2005 FC 234 , [2005] 4 FCR 229 and Tractor Supply Co of Texas, LP v TSC Stores LP , 2009 FC 154 , 341 FTR 157, aff’d 2009 FCA 352 , 399 NR 1. Accordingly, issues pertaining to abuses of the process of the Federal Court must be addressed in that Court.

This Court has no jurisdiction over such allegations. [ 60 ] Paragraphs 43, 44 and 45 all pertain to this alleged misconduct on the part of the CRA in obtaining the Jeopardy Orders ex parte . The Federal Court’s decision does not support such an allegation. In any event, that is a matter for the Federal Court, not this Court, and these paragraphs are struck. [ 61 ] Paragraphs 54, 56, 57 and 58 pertain to the documents the CRA demanded in the course of the dispute over the Jeopardy Orders and to the cross-examination of Grenon in respect of the Jeopardy Orders.

Grenon alleges in paragraph 57 that the CRA’s actions were a “malicious and abusive misuse and perversion of the court process”. Any abuse of the process of the Federal Court should be addressed before that Court. See, for example, Trans-Pacific Shipping Co v Atlantic & Orient Trust Co , 2005 FC 311 and Louis Vuitton Malletier SA v Singga Enterprises (Canada) Inc , 2011 FC 247 , 92 CPR (4 th ) 76. Those paragraphs are struck. [ 62 ] Similarly, paragraph 70 deals with the evidence the CRA put before the Federal Court on its application for the Jeopardy Orders.

This is not within this Court’s jurisdiction and is struck. [ 63 ] Paragraphs 73(b), (d), and (

e) further pertain to the Federal Court process and are not within the jurisdiction of this Court. They are struck. [ 64 ] Notwithstanding its inherent equitable jurisdiction, this Court should not tread upon those areas where the Federal Court is entitled to control its own process. B. No Reasonable Cause of Action [ 65 ] Rule 3.68(2)(

b) provides that a commencement document or portion thereof may be struck out where it discloses no reasonable claim. As the above case law demonstrates, a court will find that there is no reasonable claim when the alleged claim has no reasonable prospect of success. The CRA asserts that this is the case in respect of several of Grenon’s claims. 1. Inducing Breach of Contractual Relations and Fiduciary Duty [ 66 ] Several of Grenon’s claims pertain to the CRA’s alleged interference in his relations with CIBC and RGMP, in their capacities as trustees of the RRSP Trusts.

He states as follows at paragraph 20 of the Statement of Claim: At all material times, the trustee of the CIBC RRSP was the CIBC Trust Company, who through its agents, CIBC Wood Gundy or CIBC World Markets Inc. (collectively “CIBC”), administered the CIBC RRSP. Mr. Grenon also had a banking and brokerage relationship with CIBC throughout most of 2012 and for many years prior. In administering the CIBC RRSP and acting as Mr. Grenon’s bank, CIBC owed duties to Mr. Grenon, including fiduciary and contractual obligations.

Among other things, those duties required CIBC to administer the RRSP Trust at all times in accordance with Mr. Grenon’s best interests, and not to act in self-interest. In addition, the CIBC owed fiduciary and contractual duties to apprise Mr. Grenon of the conduct of and communications with the CRA Personnel. The CRA and CRA Personnel were at all material times aware of these duties owed by CIBC to Mr. Grenon. [ 67 ] At paragraph 21 of the Statement of Claim, similar fiduciary and contractual obligations are described in respect of RGMP.

[68] At paragraph 27(b), Grenon claims that the CRA interfered with his relationship with CIBC by demanding documents from itin the course of the Audit. It is clear from the Statement of Claim itself that the Audit and the resulting Reassessments pertained not onlyto Grenon personally, but also to the RRSPs. As trustee of the CIBC RRSP, CIBC would have been in possession of the relevantdocuments. A trust is a taxpayer for income tax purposes and CIBC’s obligations as trustee would have included filing tax returns for theCIBC RRSP.

The CRA is statutorily obligated to administer the ITA and statutorily entitled to conduct audits of taxpayers, includingtrusts, in so doing. The CRA seeking documents from a trustee in the course of an audit of a trust does not found a cause of action. Thisparagraph is struck. [69] In paragraph 49, Grenon alleges that the CRA “refused to advise CIBC that CIBC would not be held personally liable for anytaxes of the CIBC RRSP”. The potential for liability on the part of CIBC, as trustee of the CIBC RRSP, arises from s. 159(1) ITA. TheCRA has no discretion to waive or otherwise obviate such liability.

Therefore, the CRA’s refusal to breach, misstate or ignore theprovisions of the ITA cannot give rise to a cause of action. This paragraph is struck. [70] In paragraphs 63 and 64, Grenon alleges the CRA induced CIBC and RGMP to breach their fiduciary and contractualobligations by sending the Second Proposal Letter and the Reassessments to them and by otherwise impeding them from allowingGrenon to withdraw funds from the RRSPs. These paragraphs disclose no cause of action.

Section 159 of the ITA provides for liabilityon the part of a trustee who distributes property in its possession or control to a taxpayer who “can reasonably be expected to becomeliable” under the ITA. Again, for purposes of this application, the Reassessments are deemed valid per s. 152(8) of the ITA. Further,even if the CRA had not put CIBC and RGMP on notice of the potential tax liability, a trustee faces personal liability if it fails to obtain aclearance certificate pursuant to s. 159(2) ITA prior to distribution.

It is clear that trustees are obligated to comply with the lawnotwithstanding that such compliance may affect the beneficiaries’ interests. See, for example, R v National Trust Company, 98 DTC6409 (Fed CA). Therefore, these paragraphs are struck. 2. Negligence [71] Grenon alleges negligence on the part of the CRA. One element a plaintiff is required to prove to establish negligence is aduty of care. The case law, as set out below, establishes that the existence of such a duty of care requires both foreseeability of harm andproximity between the parties.

Grenon asserts that the CRA owed him a duty of care arising from the “close and direct relationship andproximity” between him and the CRA as a result of the Audit. [72] Grenon relies on the decision of the British Columbia Supreme Court in Leroux v Canada Revenue Agency, 2014 BCSC 720[2014] 6 CTC 71. The Court in that case conducted the Cooper-Anns analysis that originated in Cooper v Hobart, 2001 SCC 79, [2001]3 SCR 537 and Anns v Merton London Borough Council, [1978] AC 728 (HL).

The Court in Leroux concluded that there was arelationship of sufficient proximity between the taxpayer and the CRA to give rise to a duty of care, making these comments at paras.273 and 284: In [Odhavji Estate v Woodhouse, 2003 SCC 69], the court clarified that more is required for a duty of care to exist than simplyforeseeability of harm. There must be a sufficient degree of proximity between the parties so that a prima facie duty of care isestablished.

The relationship must be such that the defendant may be said to be under an obligation to be mindful of the plaintiff’slegitimate interest in conducting his or her affairs (Hercules Managements Ltd. v. Ernst & Young, (SCC), [1997] 2S.C.R. 165). ... The court [in Hill v Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41, [2007] 3 SCR 129] said the most basic factorfor proximity is whether the defendant ought to have had the plaintiff in mind as a person potentially harmed by its actions.

A personalrelationship is not required, but if a person is singled out for investigation, a close and direct relationship is created (see para. 33). In Hill,the targeted suspect had a critical personal interest in the conduct of the investigation; his freedom was at stake. Torts of false arrest,false imprisonment and malicious prosecution did not provide an adequate remedy. To fail to provide a remedy for “very poorperformance of important police duties” and other “non-malicious categories of police misconduct” would be to deny justice.

The courtnoted that unreasonable and careless police conduct can lead to wrongful convictions, and such a duty of care is also consistent withCharter values. [73] It is noteworthy that the cases cited by the Court in Leroux dealt with criminal investigations, not administrativeinvestigations. The Court in Leroux acknowledged at para 298 that any duty of care on the part of a public officer must be determined inthe context of that officer’s mandate.

The Court stated at paras 300 and 301 that the courts have repeatedly refused to find a private lawduty of care between the CRA and taxpayers and that, in the vast majority of cases, an audit may not give rise to the degree of proximitynecessary to found such a duty of care. At para 300, the Court distinguished Mr.

Leroux’s claim from other cases on the basis that the“huge penalties” involved in his case were sufficient to found a duty of care, but ultimately held that the CRA was not liable because Mr.Leroux had failed to prove that the standard of care had been breached or that his damages were caused by CRA negligence. [74] Grenon asserts that the reasoning in Leroux was endorsed by the Ontario Court of Appeal in McCreight v Canada (AG),2013 ONCA 483. [75] In McCreight, the Court of Appeal reversed a decision of the motions judge striking a negligence claim against the CRA.

Inthat case, the CRA was investigating the use of research and development credits by several corporate taxpayers. In the course of sodoing, the CRA seized various documents from the taxpayers’ accounting firm. Shortly before the documents were required to bereturned, the CRA obtained approval from the Department of Justice to lay an information charging various taxpayers and their advisors,including McCreight and another employee of the accounting firm, with fraud and conspiracy under the ITA and the Criminal Code.

Theindividual accountants subsequently were discharged and brought proceedings against the CRA, alleging that they were charged so thatthe CRA could keep the seized documents. The Court of Appeal held as follows at paras 58, 59, 61 and 62: Foreseeability is conceded by the respondents in this case.

The factors to be considered in an analysis of whether the plaintiff and defendant are in a relationship of proximity are diverse and depend on the circumstances of the case. The categories of proximate relationships are not closed. In looking at the relationship between the parties, the focus is on whether the acts of the alleged wrongdoer have a close or direct effect on the victim, such that the wrongdoer ought to have had the victim in mind as a person potentially harmed: Hamilton-Wentworth , at para. 29. ...

Firstly, given the Supreme Court’s ruling in Hamilton-Wentworth that, in certain circumstances, police officers may owe a duty of care to their suspects, surely it is not plain and obvious that a CRA investigator owes no such duty when operating under ITA provisions that attract criminal sanction and under the Criminal Code . The same analogical reasoning applies to any residual policy rationale that could negate such a duty. Secondly, I see no relevant distinction between the above-cited case of Leroux and this case.

That case that [ sic ] involved a claim of negligence against CRA employees as well and the British Columbia Court of Appeal dismissed an appeal of an order permitting the cause of action to proceed to trial. The Court was not persuaded that the claim should be struck because it was at least arguable that such a cause of action could succeed and the issue was to be considered at trial. [ 76 ] I do not think McCreight is of assistance to Grenon. He points to the Court of Appeal’s comment that there was “no relevant distinction” between that case and Leroux . With respect, I do not agree.

The individual accountants in McCreight were facing charges under both the ITA and the Criminal Code . In my view, the possibility of criminal sanction distinguishes the matter from an audit and makes it more analogous to the criminal investigation at issue in Hamilton-Wentworth .

I do not interpret McCreight as authority that the relationship of proximity necessary to a duty of care is established by the existence of an audit, however extensive, in the absence of the element of criminal investigation. [ 77 ] Grenon also refers to Scheuer v Canada , 2015 FC 74 , [2015] 2 CTC 135, in which the Federal Court refused to strike a claim in negligence against the CRA.

The Court referred to Leroux , saying at para. 30 “Where Leroux is currently under appeal, and may resultantly be nuanced or reversed by the Court of Appeal, the case nonetheless establishes that these issues are arguable ones, and that the claims are not necessarily bound to fail…” [ 78 ] I note, however, that that decision was overturned by the Federal Court of Appeal: Scheuer v Canada , 2016 FCA 7 .

The Court of Appeal maintained at para 30 that there is “no category of recognized cases that supports the plaintiffs’ assertion that the Canada Revenue Agency owed a duty of care to all Canadians when issuing tax shelter numbers”. The Court of Appeal reiterated that performance of statutory duties, without more, does not give rise to private law duties of care.

They stated that “Something more must be alleged to bring the claim within one of the above enumerated classes or an analogous one: for example, misfeasance in public office or acting in a manner inconsistent with the proper and valid exercise of the powers conferred upon the Canada Revenue Agency under the [ITA].” [ 79 ] The Court of Appeal also made these comments at paras 36 and 40: I need not consider whether the Judge erred in finding that the allegations contained in the amended statement of claim were sufficient at law, for the purpose of a motion to strike, to assert a prima facie duty of care arising from “proximity by interaction”.

This is because, in my respectful view, the Judge erred in law by failing to give sufficient consideration to the relevant provisions of the Income Tax Act . ... Returning to the application of the Cooper-Anns test, at the second part of the first stage of the test, a court is to ask whether, notwithstanding the proximity between the parties, there are reasons such that tort liability should not be recognized.

Had the Judge considered the legislative regime at this stage of the analysis, he would have concluded that no tort liability can, or should, be imposed upon the Minister for simply issuing a tax shelter identification number because, in so acting, the Minister exercises no discretion. Once satisfied that the prescribed information has been provided, that the undertaking to keep the books and records is satisfactory and that the books and records will be kept and retained at a satisfactory place, the Minister must issue the identification number.

No duty of care can arise from the issuance of an identification number in this circumstance. [ 80 ] While the Federal Court of Appeal’s reasoning was specific to the tax shelter provisions of the ITA, Scheuer cannot be taken as an endorsement of the reasoning and result in Leroux . At a minimum, Scheuer indicates that Leroux has no application in circumstances where the CRA has no discretion. [ 81 ] The CRA’s position is that CRA officials undertaking assessment and collection activities do not owe a duty of care to individual taxpayers.

Rather, their duty is to the Minister of National Revenue and to Canadians as a whole to enforce the terms of the ITA. They referred to the Cooper -Anns test and cited numerous cases in support of their position.

See, for example, Knight v Imperial Tobacco Ltd , 2011 SCC 42 , 3 SCR 45; Los Angeles Salad Company Ltd v Canadian Food Inspection Agency , 2013 BCCA 34 , 40 BCLR (5 th ) 213; Canus Fisheries Limited v Canada Customs and Revenue Agency , 2005 NSSC 283 , 237 NSR (2d) 166; 783783 Alberta Ltd v Canada (Attorney General) , 2010 ABCA 226 , 482 AR 136; and Foote v Canada (Attorney General) , 2011 BCSC 1062 , 2011 DTC 5139. [ 82 ] I am satisfied that the weight of authority is that the CRA, in conducting an audit, is not in a relationship of sufficient proximity with an individual taxpayer to give rise to a duty of care.

There was no such duty in Scheuer , McCreight is distinguishable on its facts, and Leroux is, with respect, an outlier which is not binding upon this Court. The Court in Leroux appears to have been swayed by the “huge penalties” assessed against the plaintiff. I am concerned that basing the proximity analysis on the quantum of penalties assessed is not a principled approach to determining whether a duty of care exists.

In Hamilton-Wentworth , where the individual’s liberty was at stake, the case was much clearer, but relying on the quantum of monetary penalties adds an inappropriately subjective element to the tort analysis. What is a “huge” penalty to one taxpayer may not be to another. I do not consider this a proper factor to be taken into account in the proximity analysis. Therefore, I decline to follow Leroux . In my view, absent exceptional circumstances giving rise to a relationship of proximity, there is no duty of care. The existence of an audit is not such an exceptional circumstance.

[ 83 ] I am aware that the Quebec Court of Appeal recently upheld a large award, including punitive damages, against the Agence du revenu du Quebec, the CRA’s Quebec counterpart; see Agence du revenue du Quebec c Groupe Enico inc , 2016 QCCA 76 .

That decision is distinguishable from the present case because it turned on the duty of good faith that forms part of Quebec’s Civil Code, which states at s. 7 : 7. no right may be exercised with the intent of injuring another or in an excessive and unreasonable manner, and therefore contrary to the requirements of good faith. [ 84 ] Interestingly, this provision seems to me to speak more to misfeasance or abuse of power than to negligence per se . In any event, Parliament has not seen fit to enact a corresponding statutory duty on the part of the CRA and it is not within this Court’s jurisdiction to do so.

It is true that the CRA has broad authority and considerable enforcement powers. It must be remembered, however, that those powers arise from the ITA and express the will of Parliament. Should Parliament wish to temper the CRA’s authority by imposing a duty of care, it may do so.

It is not appropriate for this Court to attempt to achieve that result through an unprincipled application of the law of negligence. [ 85 ] In the absence of either a statutory duty or appellate authority finding such a duty at common law, I find that there is no such duty of care at law and Grenon’s claims based on the existence of such a duty have no reasonable prospect of success. [ 86 ] In paragraph 65 of the Statement of Claim, Grenon asserts that there was a relationship of proximity between him and the CRA as a result of the Audit.

In view of the foregoing analysis, this assertion cannot be sustained and this paragraph is struck. [ 87 ] In paragraphs 66 and 67, Grenon asserts a duty of care on the part of the CRA and various CRA Personnel. For the same reasons that the CRA does not owe a duty to Grenon, neither do the CRA Personnel. Therefore, these paragraphs are struck. [ 88 ] In paragraphs 68 and 69, Grenon alleges breaches of a duty of care and failures to meet the necessary standard of care.

As I have found that there is no such duty of care, these paragraphs are struck. [ 89 ] In paragraph 71, Grenon alleges foreseeability of damages in the event of negligence by the CRA. As I have found there is no duty of care, this paragraph cannot support a cause of action and is struck. In addition, many of the claimed heads of damages appear to be speculative at best. 3. Misfeasance in Public Office [ 90 ] In the Statement of Claim, Grenon accuses the CRA Personnel of misfeasance in public office.

He asserts that the CRA engaged in deliberate unlawful conduct and knew of or was reckless as to the harm that would result to Grenon from such conduct. [ 91 ] The leading case on this intentional tort is Odhavji Estate v Woodhouse , 2003 SCC 69 , [2003] 3 SCR 263, in which Iacobucci J held at para 23 that the tort comprises two elements. First, the public officer must have engaged in deliberate and unlawful conduct in his or her capacity as a public officer and second, the officer must have been aware both that his or her conduct was unlawful and that the conduct was likely to harm the plaintiff.

Justice Iacobucci enumerated as Category A and Category B two ways in which these elements can be established. In Category A, the conduct is specifically intended to injure the plaintiff.

In Category B, a public officer acts with knowledge both that he or she has no power to do the act complained of and that the act is likely to injure the plaintiff. [ 92 ] To this I would add these comments made by the New Brunswick Court of Queen’s Bench in Gray et al v Canada (Attorney General) et al , 2012 NBQB 375 , 397 NBR (2d) 112 at paras 86 and 87 : It is important to note that the Supreme Court’s characterization of misfeasance in public office in Odhavji excluded liability for the inadvertent or negligent discharge of one’s obligations. Establishment of the tort requires something more akin to malice.

The fact that the official knew harm would result to the plaintiff as a result of his actions is not enough to establish liability; the officer must also deliberately engage in conduct that he knows is unlawful. As stated at para. 28 of Odhavji : 28 (...) The requirement that the defendant must have been aware that his or her conduct was unlawful reflects the well-established principle that misfeasance in public office requires an element of “bad faith” or “dishonesty”.

In a democracy, public officers must retain the authority to make decisions that, where appropriate, are adverse to the interests of certain citizens. Knowledge of harm is thus an insufficient basis on which to conclude that the defendant has acted in bad faith or dishonestly. A public officer may in good faith make a decision that she or he knows to be adverse to interests of certain members of the public. In order for the conduct to fall within the scope of the tort, the officer must deliberately engage in conduct that he or she knows to be inconsistent with the obligations of the office.

The essential principle underlying this tort is that public bodies must not use their powers for purposes incompatible with the purpose envisaged by the statutes under which they derive their powers. The purpose of this tort is to provide a remedy where a public official or body misuses powers with which he or she has been endowed. [ 93 ] In Ereiser v Canada , 2013 FCA 20 , [2013] 3 CTC 49, the taxpayer appealed certain reassessments to the Tax Court of Canada on the grounds, inter alia , that the reassessments were issued as a result of misfeasance in public office on the part of CRA investigators.

The alleged misfeasance was the authorization of a grossly inflated reassessment to coerce a guilty plea to a criminal charge. The Tax Court struck this provision of the notice of appeal on the grounds that, as a statutory court, it was without jurisdiction to vacate the reassessment on that basis. The Federal Court of Appeal agreed, holding that the taxpayer must seek relief from the alleged misfeasance elsewhere.

In arriving at this conclusion, the Court of Appeal at para 19 allowed for the possibility that the conduct alleged could constitute misfeasance in public office: The second proposition is that it is misfeasance in public office for a tax official to authorize an income tax assessment in an inflated amount as a means of coercing an admission of criminal liability. This proposition is unchallenged by the Crown. For the purpose of this appeal I will assume without deciding it is correct.

[94] At para 21, the Court of Appeal drew a distinction between validity and correctness of tax assessments, holding that anassessment is “valid” if it is made in compliance with the procedural provisions of the ITA and is “correct” if the amount of tax assessedis based on the applicable provisions of the ITA. The Court of Appeal then held at para 31 that the conduct of tax officials is not relevantto the Tax Court’s determination of the validity and correctness of a tax assessment. [95] The invalidity or incorrectness of the tax assessment may be a factor to consider, however, in establishing misfeasance.

InGardner v Canada (Attorney General), 2013 ONCA 423, 116 OR (3d) 304, the plaintiff brought a claim for misfeasance aftersuccessfully appealing an assessment. The defendant argued that the plaintiff’s claim was statute-barred. The Court of Appeal referred tothe reasoning in Odhavji and held at paras 24 and 27 that appealing the assessment was a necessary first step to the plaintiff’s claim. TheCourt of Appeal held at para 24 that a Category B claim could not be proven without showing that the CRA’s conduct was unlawful,which required a finding that the assessment was invalid.

The Court also held at para 27 that a Category A claim “would not have muchmerit without a successful tax appeal”. Accordingly, the plaintiff was obliged to pursue the tax appeal process before she could bring herclaim. [96] It is important to recall, however, that invalidity of an assessment does not equate to misfeasance on the part of the taxofficials involved. In Foote v Canada (Attorney General), 2015 BCSC 849, [2015] 5 CTC 150, the Court held as follows at paras 110and 113: The same point was made by the Nova Scotia Supreme Court in [Canus].

That case arose out of a tax audit that led to a reassessmentthat was ultimately vacated following an internal appeal. The auditor was alleged to have deliberately and wilfully ignored informationavailable to him, using previously discredited information instead. There was evidence that employees in CRA’s appeals divisionconsidered the audit to be seriously flawed. Nevertheless, the Court found there was no misfeasance because the plaintiff failed toestablish that the auditor acted with malice or intended to cause harm to the plaintiff.

As the Court stated at para. 43, “being wrong is notsufficient to commit the tort of public misfeasance.” ... In [Leroux], ... the court held that the CRA auditors were not negligent, let alone liable for misfeasance, for characterizing the plaintiff’sincome in a manner that turned out to be wrong. This is so, even though the auditor “made erroneous and unsupported assumptions in herapproach” (para. 327). [97] I find that a determination that the Reassessments are invalid is a necessary, though not sufficient, precondition for a findingof misfeasance in public office.

Irrespective of whether the claim falls within Category A or Category B, it would be difficult to provewithout a determination of invalidity of the Reassessments. This is particularly so given that paragraph 61 of the Statement of Claimindicates that the alleged unlawful conduct is the issuance of the Reassessments, which can be unlawful only if they are invalid to theknowledge of the CRA Personnel.

As was the case in Gardner, the unlawful conduct can be established only if there is a finding ofinvalidity by the Tax Court. [98] Therefore, it cannot be said at this point that the allegations of misfeasance in public office set forth in paragraphs 60, 61 and62 of the Statement of Claim have no reasonable prospect of success. They are, however, premature and that portion of this action isstayed pursuant to Rule 3.68(1)(d). 4. Abuse of Process [99] The CRA also argues that Grenon’s allegations in the Statement of Claim of the tort of abuse of process disclose no cause ofaction.

The essence of this tort is aptly set out in the opening passage of a paper by Mr. Justice Paul Perrell of the Ontario Superior Courtof Justice, “Tort Claims for Abuse of Process”, (2007) 33 Advoc Q 193: So long as it is not the predominant purpose, it may be quite proper for a litigant to bring a lawsuit for spite and for the purpose ofmaking his or her opponent silent, miserable, weak or incapable.

However, there is a tort, known as the tort of abuse of process, thatexposes a litigant to liability for damages if he or she abuses the process of the law by using it to extort property or to achieve a collateralpurpose outside the ambit of his or her lawsuit. [100] This tort has been analyzed in a number of cases, most of them emanating from Alberta and Ontario. That case law makes clearthat the tort is to be narrowly construed and requires proof of certain specific elements. It is not sufficient that a party has acted out ofspite or with bad intentions.

Rather, the “bad actor” must be seeking to effect an objective beyond what can be achieved through the legalprocess and must act in a manner to achieve that purpose. [101] In Rocky Mountain Rail Society v H&D Hobby Distributing Ltd (1995), (AB KB), 167 AR 16 (QB), an oft-quoted case from this Court, Fruman J (as she then was) said at paras 19 - 20: Based on my analysis of the case law, two elements must be pleaded: first, there must be an improper purpose which is outside the ambitof the litigation; secondly, there must be a definite act or threat in furtherance of that purpose.

If one or both of these elements is absent,it is then beyond doubt that the counterclaim is doomed to failure. Any lawsuit may have the effect of causing serious economic loss to the opposing party. It may have an effect on the party’s customers,shareholders, creditors, lenders, and on members of the community in which it conducts its business. Further consequential losses mayresult from this economic loss. If financial loss were the only requirement to constitute abuse of process, theoretically every plaintiffwould be open to such a claim.

Any lawsuit may have the effect of “antagonizing, impoverishing or intimidating” the opposing party.(Poulos v. Matovic (1989), 47 C.C.L.T. 207 (H.C.J.), at 209). The lawsuit may have the effect of bringing about a settlement. That alsois not beyond the ambit of the litigation. ([Tsiopoulos v Commercial Union Assurance Co of Canada (1986), (ONSC), 57 OR (2d) 117 (HCJ)] at 122.) In order to found a claim for abuse of process, the improper purpose must be outside the ambit ofthe litigation.

[102] In Ilic v Toronto Sun Publishing Corp et al (1998) 1998 ABQB 419 , 224 AR 116 (QB), this Court held at para 35that even a malicious motive for the litigation was insufficient to make out the tort if the required elements are not present.

The Courtstated that “A desire for revenge may be present collaterally in many types of litigation but that fact alone does not render the litigationabusive or preclude it from proceeding.” [103] In AM et al v Matthews et al, 2003 ABQB 942, 344 AR 182 at para 18, Justice Veit cited the Tsiopoulos decision for theelements of the tort: The essential elements of abuse of process are: first, a collateral and improper purpose, such as extortion, and secondly, a definite act orthreat, in furtherance of a purpose not legitimate in the use of the process.

Some such overt conduct is essential, because there is clearlyno liability when the defendant merely employs regular legal process to its proper conclusion, albeit with bad intentions. [104] Justice Veit went on at para 28 to say that an action for the tort of abuse of process will not lie where a party has institutedproceedings in order to effect an object within the scope of the proceedings, even if the proceedings have been irregularly or maliciouslyinstituted. [105] In WestJet Airlines Ltd v Air Canada [2005] OJ No 2310 (SCJ), the plaintiff asserted that the defendant had brought a separateproceeding against it in order to “destroy” it and eliminate a competitor.

The Court held at para 19 that “... if there is some basis for theclaim, it seems to me that it then becomes difficult to characterize the action as having been instituted for an improper purpose justbecause a by-product of it successful prosecution may be the elimination of the defendant as a competitor.” The Court also held that “...there is no liability when the defendant properly employs the legal process but with bad intentions.” [106] The Court went on at para 23 to identify two arguments in favour of the narrow scope of the tort.

The first is that allowing suchclaims to be advanced easily might lead to a proliferation of litigation with every action being met by an abuse of process action inresponse.

The corollary concern is the possible chilling effect if parties wishing to seek resolution of disputes in the courts must fearbeing subject to abuse of process claims with the attendant costs and prospect of damages awards. [107] In Rowe v Unum Life Insurance Co of America (2006) 37 CCLI (4th) 32 (SCJ) at para 255, the Court reiterated the narrowscope of the tort and the requirement that both the improper purpose and the act or threat in furtherance thereof must be outside the ambitof the claim.

The Court noted that the alleged abuse must relate to something other than the prosecution and conclusion of the actionitself and stated at para 257 that settlement is not an improper purpose: Based on the above reviewed jurisprudence it is my view that the proposed pleading with respect to the tort of abuse of process is nottenable at law. Alleging a claim or defence for the sole purpose of inducing settlement, or prosecuting a matter in a manner intended todissuade a plaintiff from pursuing his claim does not suffice to meet the two essential elements for the tort of abuse of process.

Animproper purpose, collateral to the litigation is required. Such has not been pleaded. The issue of whether the defendant acted properly orreasonably in the conduct of the litigation, is an issue with respect to costs. [108] Similar comments were made in Apotex Inc v Sanofi-Aventis, 2010 FC 182, 364 FTR 131. In that case, Apotex sued Sanofi,seeking a declaration that a product it intended to manufacture and sell in Canada would not infringe Sanofi’s patent. Sanofi’s responsewas to sue for patent infringement and Apotex argued that the predominant purpose of Sanofi’s lawsuit was to discourage Apotex’saction.

The Court held at para 73 that there could be no abuse where an action was taken to assert the very right sought to be impugnedby the opposing party. [109] The elements of the tort of abuse of process were set out in more detail by Justice Perell in Harris v GlaxoSmithKline Inc, 2010ONSC 2326, 101 OR (3d) 665 as follows at para 48: The case law authorities establish that there are four constituent elements to the tort of abuse of process: (1) the plaintiff is a party to alegal process initiated by the defendant; (2) the legal process was initiated for the predominant purpose of furthering some indirect,collateral and improper purpose; (3) the defendant took or made a definite act or threat in furtherance of the improper purpose; and (4)some measure of special damage has resulted. [110] These factors were adopted by the Alberta Court of Appeal in 3058354 Nova Scotia Company v On*Site Equipment Ltd, 2011ABCA 168, the case cited by Grenon in support of his argument, though the Court of Appeal went on at para 59 to state that it was notnecessary to decide if the tort of abuse of process was made out in that case. [111] In respect of the first element, Grenon asserts in his brief that he was “subjected to legal process commenced by the Defendants,including the Reassessments and the Jeopardy Orders”.

As is clear from the facts set out above, legal proceedings in respect of thismatter have been commenced in three courts. Both the action in this Court and the appeal of the Reassessments to the Tax Court ofCanada were initiated by Grenon, however, and cannot form the basis of the tort of abuse of process as against the CRA. The applicationto the Federal Court for the Jeopardy Orders was brought by the CRA and satisfies the first element of the test.

Grenon also asserts thatthe Reassessments themselves constitute a legal process for purposes of this analysis. [112] Although Grenon cites no case in support of the proposition that the Reassessments themselves constitute a legal process, thereis some suggestion in the case law that quasi-judicial processes may be considered in respect of the tort of abuse of process.

In Big BearHills v Bennett Jones Alberta Ltd Liability Partnership, 2010 ABQB 764, 507 AR 21, Justice Marceau, in arriving at his decision,considered proceedings before the Development Appeal Board of the Municipal District of Rocky View No. 44 (“DAB”) and theAlberta Environmental Appeal Board (“AEAB”). He stated as follows at para 71: I have found there is no evidence the Defendant law firm was pursuing the action for the predominant purpose of hurting the Plaintiffs.The evidence of Chomistek does not lead to the inference the legal proc

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