Signal Hill Manufacturing Inc v Canada Revenue Agency, 2021 ABQB 460

Court of Queen’s Bench of Alberta Citation: Signal Hill Manufacturing Inc v Canada Revenue Agency, 2021 ABQB 460 Date: 20210611 Docket: 0701 11034 Registry: Calgary Between: Signal Hill Manufacturing Inc. Appellant - and - Canada Revenue Agency and Shortridge Civil Enforcement Agency Now Known As Consolidated Civil Enforcement Agency ("Shortridge") and Gregory Pearcey, John Doe and Jane Doe Respondent _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice R.W. Armstrong _______________________________________________________

Appeal from the Judgment by J.B. Hanebury, Master in Chambers Filed on the 30 th day of August, 2019 Dated the 01 st day of August, 2019 ( Docket: 0701-11034) Background [ 1 ] The Plaintiff, Signal Hill Manufacturing Inc., sued the Canada Revenue Agency and one of its employees, Gregory Pearcey. Signal Hill alleges that the CRA and Mr. Pearcey wrongfully interfered with Signal Hill’s contractual and economic relations and that Mr. Pearcey committed misfeasance in public office and defamed Signal Hill. The claim against the CRA and Mr. Pearcey also includes allegations of negligence. [ 2 ] Signal Hill brought a

summary judgment application and the CRA and Mr. Pearcey cross applied for

summary dismissal of the claims against them. The applications proceeded by way of a Special Chambers Application before a Master. The Master decided that it was appropriate for the matter to be determined by way of

summary judgment application and she dismissed Signal Hill’s action against the CRA and Mr. Pearcey. [ 3 ] This is an appeal of the Master’s decision. Signal Hill’s appeal is limited to its claims against the CRA and Mr. Pearcey in negligence and unlawful interference with economic relations. Signal Hill takes no issue with the dismissal of its other causes of action alleged against the CRA and Mr.

Pearcey. [ 4 ] On appeal, Signal Hill takes the position that there are triable issues with respect to its claims in negligence and unlawful interference with economic relations and the matter should therefore proceed to trial. [ 5 ] The CRA and Mr. Pearcey argue that a claim in negligence does not exist against the CRA and its employee and that Signal Hill has not established its claim for wrongful interference with economic relations. Their position is that the Master was correct in summarily dismissing Signal Hill’s claims and the decision ought to be affirmed.

Facts [ 6 ] There is very little disagreement between the parties on the facts in this matter. While the parties characterize some of the facts differently and have differing positions on the significance of many of the facts, the actual events as they unfolded are generally not contentious. [ 7 ] Signal Hill was incorporated in 1995 following the demise of its predecessor company, Signal Hill Plastics Corporation (“Plastics”).

Both Plastics and Signal Hill were in the business of manufacturing plastic parts. [ 8 ] When Plastics ceased operating, it transferred its assets to Signal Hill for $1.00 and an assumption of a loan and trade debts. By the time Plastics ceased operating it was indebted to the CRA for approximately $200,000 for failing to make required remittances.

The tax debts were not transferred to Signal Hill with Plastics’ other debts. [ 9 ] Peter Rasmussen was the sole officer and director behind Plastics and Signal Hill. [ 10 ] The CRA is the federal agency responsible for administering and enforcing the Income Tax Act , RSC 1985, c 1 (5 th Supp ) and the Excise Tax Act , RSC 1985, c E-15 . [ 11 ] The CRA maintains an online diary of transactions relating to taxpayers called ACSES. ACSES is updated by CRA employees contemporaneously with actions or decisions taken in relation to a tax payer’s account. ACSES entries cannot be altered or backdated.

Where excerpts of the ACSES system are reproduced in this judgment, they appear here as entered into the system. No corrections to spelling, grammar or punctuation have been made. [ 12 ] Transactions in the ACSES system relate to two kinds of tax payer accounts. The first is a source deduction account, called RP, which tracks employer remittances of source deductions from employee pay cheques, including income tax, Employment Insurance and Canada Pension Plan deductions. When the employer withholds these amounts from a paycheque, it is required to remit them to the CRA.

The second account is a GST account, called RT. When a business collects GST on its accounts, it is required to remit the collected GST to the CRA. [ 13 ] Employers must file an annual T4

summary detailing the deductions taken from employee pay cheques. The amounts set out in the T4

summary should match the source deduction payments remitted to the CRA by the employer. If there is a shortfall in the remittances, the CRA can raise an assessment for the shortfall. Similarly, if GST remittances fall short of what was or what ought to have been collected, an assessment can be raised by the CRA for those shortfalls. [ 14 ] Shortly after Signal Hill commenced its operations, issues arose with respect to its tax accounts with the CRA. One of Signal

Hill’s clients, who had also been a client of Plastics, was making payments directly to the CRA. The payments were meant to be credited to the account of Signal Hill but the CRA credited some of the payments to the outstanding Plastics account. This resulted in the application of penalties and arrears against Signal Hill by the CRA. [ 15 ] In 1997 the CRA and Signal Hill resolved the issues regarding the misallocation of payments between Plastics and Signal Hill.

The CRA reallocated some payments resulting in a reduction of the penalties that had previously been assessed against Signal Hill. [ 16 ] After resolving the initial issues with the allocation of payments to the CRA between Plastics and Signal Hill, Signal Hill failed to keep its accounts with the CRA current. By July 1998, Signal Hill had an assessed payroll debt of approximately $30,650 and an assessed GST debt of approximately $27,900. [ 17 ] In February 1999, Signal Hill worked out a payment plan with the CRA to address the accrued arrears.

Pursuant to the agreement, Signal Hill was to pay $20,000 per month to the CRA. Those monthly payments were to be credited first to the current monthly source deductions totalling approximately $8,000 per month. The remaining balance would then be credited to reducing the accumulated arrears. Allocating the payments in this fashion was intended to keep Signal Hill’s accounts current so that further arrears were not accruing.

As part of this agreement, Signal Hill was also required to bring its source deduction and GST filings, which were delinquent, up to date. [ 18 ] The February 1999 agreement was documented in the CRA’s ACSES system in an entry dated February 19, 1999: Field call was completed with t/leader on Feb 18 th to Signal Hill Manufacturing to meet with Peter Rassmussen and his accountant, Barry Leggatt. All the Signal Hill accounts and Peter’s t-1 account were discussed and some arrangements were made. Manufacturing accounts: Payroll account will have a debt of approx. $25,000 + p&i once the t-4’s are received.

Peter was reminded that the monthly rem must be reported on time. Details for the Jan rem will be provided by Barry Leggatt by Feb 24. An $8,000 cheque was provided (dated Feb 26 th ) to be applied first to the Jan rem and then to arrears. Commencing in March, a total of $20000 per month will be remitted. The current month’s rem will be paid first and the balance will go to the arrears. On average, the rems are approx. $8000 per month, so $10,000 - $12,000 should be available for arrears payments. The paydac debt on Manufacturing is to be retired first.

Barry has the t-4 slips almost complete and will deliver to my attention by Feb 24 th . At that time he is also to provide an a/r listing. GST account – the returns will be complete by March 15 th . Accountant expects that the net owing for 1998 will be approx $30,000 bring the total on the GST to approx $75,000. Once the paydac debt is resolved, the pymts as outlined above will be applied to the GST arrears. Barry and Peter both kept emphasizing how business has turned around and they are extremely optimistic that 1999 will be a very good year.

Peter said that he fully expects to be able to maintain the $20,000 per month payment. Barry said returns on the GST will be kept current now & that they have the systems in place to facilitate this. Barry felt the year financials should be complete by the middle of March. [ 19 ] Signal Hill did not make the payments required by the February 1999 agreement with the CRA, nor did it bring its filings up to date. [ 20 ] When Signal Hill failed to meet its obligations under the February 1999 agreement, the CRA issued a series of Requirements to Pay (“RTPs”) to Signal Hill’s customers.

RTPs are a form of garnishment that divert money owed to a tax debtor directly to the CRA. [ 21 ] It is not uncommon for RTPs to be personally delivered to the recipients by a CRA employee working on a particular file. Personal delivery ensures that the RTP was, in fact, received by the intended party and it allows the CRA employee to provide information to the recipient about their potential liability should they not comply with the RTP.

Finally, it allows the CRA employee to ascertain some information from the recipient regarding the amounts that the CRA might expect to receive from the RTP. [ 22 ] The Signal Hill RTPs issued by the CRA following the default on the February 1999 agreement were delivered personally by CRA employee Linda Robertson. Ms. Robertson had conduct of the Signal Hill accounts since 1998. [ 23 ] In April 1999, following the issuance of the RTPs, Ms. Robertson had a meeting with Mr. Rasmussen and Signal Hill’s accountant, Barrie Legat, to discuss the outstanding tax accounts. Ms.

Robertson’s team lead was also in attendance at that meeting. [ 24 ] As the February 1999 Agreement had failed due to Signal Hill’s default, a new arrangement for payment of Signal Hill’s tax debt was made. The April 1999 agreement required that Signal Hill’s May 15 th payroll remittance and the April 30 th GST remittance be filed and paid on time. All of the RTPs that had been issued would be rescinded and a single RTP to one of Signal Hill’s clients, Circa, would be reissued.

The reissued RTP required Circa to pay 50% of Signal Hill’s receivable from them to the CRA. [ 25 ] The April 1999 agreement was documented in the CRA’s ACSES system in an entry dated May 3, 1999: CLIENT CAME TO OFFICE Peter Rassmussen and his accountant Barrie Legat came to TSO on April 29 to discuss this account & the related RP account. Meeting came as a result of the rtp’s issued to his bank & a/r. The Circa rtp is of particular concern. Approx 40% of Signal Hill’s revenue come from this source. After much discussion, an interim arrangement has been made.

The rtp to Circa will be revised to 50% commencing on May 7 th . Peter is paid weekly from this source and will pick up the department’s cheque when he pick’s up his own. The dept’s cheque will be dropped off at the cash unit. According to Peter, Canada Trust remitted $6,000. He has no loans or line of credit. The bank rtp & the remaining rtp’s will be released. Peter & Barrie will return to the TSO on June 2 @1:30 with current financial statements and prepared to commit to a long term pymt arrangement to resolve these accounts.

In the meantime, the May 15 th rem and the April 30 th GST return are both to be filed and paid on time.

[ 26 ] Absent an arrangement to the contrary, the CRA’s general practice is to apply monies collected by way of RTP to arrears first. A taxpayer is expected to maintain their current accounts up to date. Monies received from Circa pursuant to the revised RTP that was issued as part of the April 1999 agreement were credited towards Signal Hill’s accrued arrears. [ 27 ] On June 10, 1999, Ms. Robertson met with Mr. Legat. The ACSES entry with respect to that meeting says, in part: Barrie indicated that Peter did not want to reduce the rtp – he just wants to pay us and get it over with.

Barrie, however, feels that Peter may not be able to function with the rtp in place at 50%. Basically, after reviewing the statements, it would seem a little ambitious for Peter to think he can function with the 50% rtp in place, but I told Barrie the rtp will remain as is for now. Reiterated to Barrie that it is up to Peter to contact us if there is a problem meeting his commitments, otherwise, I am presuming the rems, returns, current pymts and arrears pymts will all be on time... [ 28 ] On June 15, 1999, Mr. Legat contacted Ms.

Robertson and advised her of the amounts for the May remittances but that the amounts could not be paid until, perhaps, the end of the month. A further call from Mr. Legat on July 15, 1999 provided the June remittance amounts and reiterated the inability to pay the current amounts due. Over this time period, the outstanding arrears were being reduced by the amounts received pursuant to the Circa RTP. [ 29 ] In April 2000, Mr. Pearcey took over the Signal Hill accounts from Ms. Robertson. Shortly after Mr.

Pearcey took over, a further assessment in the amount of $84,529.05 was raised against Signal Hill based on a shortfall between Signal Hill’s filed 1999 T4

summary and the amounts remitted by Signal Hill for that year. The arrears, which had been going down as a result of the payments received from Circa, increased from approximately $7,000 to over $91,000 as a result of the assessment. [ 30 ] On May 15, 2000, Mr. Pearcey and Mr. Legat had a telephone discussion about outstanding amounts owing. The ACSES entry for May 15, 2000 summarizes the discussion: Barry Legat called & LM reporting the April rem figures as: CPP $1550.96, EI $1427.86, TD $8437.30 for a total of $11,416.12. which he asked to ‘processed to the account’. Called him back [phone number omitted].

He seems to be under the impression that they were to report monthly remittances to Hugh O’Rourke, which he claims they’ve been doing, and we were to get the money from Circa. I pointed out that we have not rec’vd currents rems or reports for several months, with the exception of a Feb 2000 rem, and the ’99 T4 return reported with a substantial dificiency. In short, the employer is further behind on both payroll and GST than he was this time last year!

I remind Barry that the arrangement was that we would collect the arrears balances (RP & RT) from Circa and the client is responsible for making current remittances and filing/paying GST as due Barry contested this by stating he has been in regular contact with Hugh O’Rourke and/or Linda Robertson to report monthly remittance figures. I advised Barry the last reported rem figures we rec’vd were for June of ’99; nothing since until the ’99 T4 Ret. dificiency was assessed with 20% FTR penalty and the Feb 2000 rem posted on Mar 15.

Barry stated the amount posting as a Feb 2000 rem was money from Circa that he dropped off to our office (i.e. an arrears payment). Mr. Legat continued to suggest that everything owed/ing would eventually get paid by Circa (which is very busy now) and stated he would continue to phone in the monthly remittance amounts. I advised Mr. Legat that we are not prepared to continue on this basis. We will not provide a revolving line of credit nor tolerate continued failure to remit; that we would be forced to enhance legal collections action until the account is up-to-date and paid-in-full.

I informed him all 2000 remittance amounts, including 20% penalties and interest, will have to be PIF before we would even consider another attempt to intercept Circa $ for arrears on the assumption current rems w/b paid as due. Mr. Legat st’d he would t/t Peter about this and get back to me about this and the o/s GST returns (991031 & 00131) by Wednesday next... [ 31 ] Matters did not improve in the ensuing months. Signal Hill continued to fail to remit amounts due and the debt to the CRA grew. In September 2000, the CRA issued further RTPs to Signal Hill’s customers and banks.

Signal Hill applied for tax payer relief but the application was denied on the basis that Mr. Rasmussen and his spouse, or their corporations, had withdrawn $145,000 from Signal Hill. [ 32 ] In July 2000, Circa ceased doing business with Signal Hill. [ 33 ] Throughout the balance of 2000 and into 2001 Mr. Legat and the CRA stayed in contact but no meaningful progress was made on a plan to address the arrears that were accruing on Signal Hill’s tax accounts.

In June 2001, Signal Hill engaged William Cawston as a consultant to assist them with tax related matters. [ 34 ] In July 2001 Signal Hill’s co-tenant at its premises, a cabinet manufacturer, removed a dust collection system that had been in place. Signal Hill alleges that the resulting dust and soot that got into the building’s heating and ventilation system damaged its equipment causing it to lose customers and incur economic loss. Signal Hill ended up suing the cabinet manufacturer for $1.3 million. [ 35 ] The CRA continued its efforts to collect amounts owed by Signal Hill.

By November 2001, assessed arrears against Signal Hill were $122,969. Mr. Cawston advised the CRA that Signal Hill was considering receivership due to the malfunction of its equipment caused by the dust from its co-tenant. [ 36 ] Upon being advised that Signal Hill was considering receivership, the CRA increased its collection efforts by initiating seizure of Signal Hill assets and by issuing more RTPs. [ 37 ] An RTP against Signal Hill’s client Chariot was hand delivered to Chariot by Mr. Pearcey. Following Mr.

Pearcey’s attendance at Chariot, Jay Harris, Chariot’s controller, wrote a letter to Signal Hill dated November 21, 2001:

Greg Pearcey of Revenue Canada (Calgary Tax Service) served us personally with a Requirement to Pay notice yesterday. He implied to me that Signal Hill could be out of business or shut down. He advised me that the Requirement to Pay was more serious than past incidents and asked whether it was true we could not get our plastic parts from another supplier other than Signal Hill. In this context I have attached a letter I would like you to sign and fax back to me which clearly identifies the molds and materials of ours you have in your possession.

Please advise me if I have missed any molds and add them to the list. Your situation is troublesome to me as you are a key supplier for us. Please keep me posted as to what is going on. If things do not improve we may have no choice but to change suppliers. [ 38 ] Signal Hill lodged a complaint with the Minister of National Revenue about the interaction between Mr. Pearcey and Mr. Harris that led to Mr. Harris writing the November 21, 2001 letter to Signal Hill. The Minister reviewed Mr.

Pearcey’s conduct and found no wrong-doing. [ 39 ] By 2002 Signal Hill’s assets that were under seizure by the CRA were being utilized by another corporation. Discussions ensued and resulted in an agreement whereby the CRA would stay the seizure action provided Signal Hill made payments of $7,000 per month towards its tax debts. Signal Hill did not comply with its obligations under this new agreement. [ 40 ] Signal Hill submitted another application for taxpayer relief in 2002, alleging that the CRA committed errors in applying the payments received from Signal Hill.

The application was denied. [ 41 ] In June 2002, Signal Hill filed a formal appeal to the Tax Court of Canada.

Signal Hill obtained a stay of the collection proceedings relating to the taxes owing for the 1995 through 2001 tax years. [ 42 ] In 2004, with the tax appeal ongoing, the CRA noted the following in an October 2004 ACSES entry: . . . over the past 10 years, TSO Officers involved with this file may not have been consistent with their approach to past allocation, thus opening the issue (from the client’s stand point) that all payments should have been applied to current year remittances rather than to assessed arrears. [ 43 ] In 2007 the CRA and Signal Hill resolved the tax appeal.

The resolution was achieved when the CRA learned that the Signal Hill payroll records that had been submitted to the CRA were inaccurate. Payroll records did not reflect the correct names of employees and the dates of payments to employees were not accurate. The CRA agreed to recalculate Signal Hill’s payroll debts based on new financial records, including bank statements and cancelled cheques provided by Mr. Legat. The May 9, 2005 ACSES diary noted: . . . Legat had a grocery bag full of envelopes in which the monthly statements and cancelled cheques were contained.

However, he advised that Peter Rasmussen would not allow these items out of Barrie’s sight so we were obviously not able to copy or retain any of that info for our review. I advised Barrie that he had 2 options – allow CCRA to retain the bank records & a B&R receipt would be provided on the spot, or he could take the records back to his office, copy same in its entirety, and deliver the copies back to CCRA at a later date. [ 44 ] Eventually the records were provided by Signal Hill and the CRA conducted its review.

After the review, the parties agreed to resolve all issues as between them based on revised assessments calculated in accordance with the new records provided by Signal Hill. The Minutes of Settlement read in part: WHEREAS . . . F. the Appellant [Signal Hill] through its Agent, and the Respondent [the CRA] through its counsel have agreed that this appeal should be resolved by the reallocation of payroll account remittances and employee source deductions in respect of remittance periods in the 1995 to 2003 calendar years.

G. as a result of the reallocation described in paragraph 1 of this Settlement Agreement, the Assessments will be varied which will result in a refund to the Appellant as well as interest on the refund amount. . . . NOW THEREFORE In consideration of the premises and mutual covenants and undertakings set out herein, these Minutes of Settlement, executed by Agent for the Appellant and counsel for the Respondent witness that the parties agree as follows: 1.

The Minister shall a. with all due dispatch, vary the payroll assessments and issue a notice of Assessment to reflect the reallocation of payroll remittances and employee source deductions in accordance with

Schedule “A” to this Settlement Agreement, resulting in a refund to the Appellant in the amount of $65,945.97 (“Refund Amount”; and b. pay interest on the Refund Amount in respect of the period December 2002 to the date the Refund Amount is issued, in accordance with

Schedule “B” to this Settlement Agreement. . . . 3. The Appellant is entitled to no further relied in respect of its 1999 to 2001 taxation years. [ 45 ] The Minutes of Settlement were signed on behalf of Signal Hill by Peter Rasmussen.

[ 46 ] Within a month of the Minutes of Settlement being signed, the CRA had issued the refund cheque to Signal Hill and released the seizure of Signal Hill’s assets. [ 47 ] The within action was commenced on October 25, 2007. [ 48 ] Mr. Legat passed away on April 8, 2008. [ 49 ] Mr. Rasmussen passed away in December 2008. [ 50 ] The parties have conducted extensive documentary production in the action and questioning of the CRA defendants and Signal Hill’s representatives has occurred. Additionally, cross examinations on the affidavits filed in support of both parties’ applications for

summary judgment have taken place. Issues [ 51 ] The issues for determination in this appeal are: (

a) The standard of review on appeal from the Master’s

summary dismissal of the action; (

b) Whether there is a genuine issue for trial in relation to Signal Hill’s allegations of negligence against the CRA and Mr. Pearcey; and (

c) Whether there is a genuine issue for trial in relation to Signal Hill’s claim of unlawful interference with economic relations against the CRA and Mr. Pearcey. Standard of Review [ 52 ] The parties agree that the standard of review on an appeal of a Master’s decision to a Justice is correctness.

While the appeal is on the record (see Rule 6.14(3) of the Alberta Rules of Court ; Sewak Gill Enterprises Inc v Bedaux Real Estate Inc , 2018 ABQB 823 at paragraphs 18 and 19 (overturned on other grounds 2020 ABCA 125 ) and Prestige Granite & Marble Inc v Maillot Homes Inc , 2018 ABQB 1040 at paragraphs 4-6 .), there is no deference due to the decision below: Bahcheli v. Yorkton Securities Inc. , 2012 ABCA 166 at paragraph 30 .

Summary Judgment [ 53 ] Before the Master, the parties agreed that

summary judgment was an appropriate process for the determination of the claim. Signal Hill applied for

summary judgment in its favor and the CRA and Mr. Pearcey cross-applied for

summary dismissal of the claims against them. Neither party argued that

summary judgment was not the appropriate forum for the determination of the claim. [ 54 ] On appeal, Signal Hill now argues that the existence of triable issues in relation to its claims of negligence and interference with economic relations renders the

summary judgment procedure inappropriate and necessitates a trial. Given Signal Hill’s position on appeal, it is appropriate to review the factors that inform the court when exercising its discretion to grant or deny

summary judgment. [ 55 ] Rule 7.3 of the Alberta Rules of Court governs

summary judgment applications. It says: 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded.

(2) The application must be supported by an affidavit swearing positively that one or more of the grounds described in subrule (1) have been met or by other evidence to the effect that the grounds have been met.

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single and undivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; (

b) if the only real issue to be tried is the amount of the award, determine the amount or refer the amount for determination by a referee; (

c) if judgment is given for part of a claim, refer the balance of the claim to trial or for determination by a referee, as the circumstances require. [ 56 ]

Summary judgment is one of the tools available to litigants to effectively and efficiently resolve claims short of a full trial. The relative importance of the

summary judgment procedure increased significantly in 2014 following the decision of Hryniak v Mauldin , 2014 SCC 7 wherein the Supreme Court of Canada called upon litigants and the courts to divest themselves of the notion that a full trial is necessarily the best means for resolving all civil disputes. At paragraphs 27 and 28 of the decision, the Supreme Court of Canada said:

There is growing support for alternative adjudication of disputes and a developing consensus that the traditional balance struck by extensive pre-trial processes and the conventional trial no longer reflects the modern reality and needs to be re-adjusted. A proper balance requires simplified and proportionate procedures for adjudication, and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alterative models of adjudication are no less legitimate than the conventional trial. This requires a shift in culture.

The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible – proportionate, timely and affordable. The proportionality principle means that the best forum for resolving disputes is not always that with the most painstaking procedure. [ 57 ] The Court of Appeal of Alberta provided a comprehensive overview of the

summary judgment procedure in its decision of Weir-Jones Technical Services Incorporated v Purolator Courier Ltd , 2019 ABCA 49 . The key principles to achieving a just, appropriate and reasonable result in a

summary judgment application are summarized at paragraph 47 of that decision:

a) Having regard to the state of the record and the issues, is it possible to fairly resolve the dispute on a

summary basis, or do the uncertainties in the facts, the record or the law reveal a genuine issue requiring a trial?

b) Has the moving party met the burden on it to show that there is either “no merit” or “no defence” and that there is no genuine issue requiring a trial? At a threshold level the facts of the case must be proven on a balance of probabilities or the application will fail, but mere establishment of the facts to that standard is not a proxy for

summary adjudication.

c) If the moving party has met its burden, the resisting party must put its best foot forward and demonstrate from the record that there is a genuine issue requiring a trial. This can occur by challenging the moving party’s case, by identifying a positive defence, by showing that a fair and just

summary disposition is not realistic, or by otherwise demonstrating that there is a genuine issue requiring a trial. If there is a genuine issue requiring a trial,

summary disposition is not available.

d) In any event, the presiding judge must be left with sufficient confidence in the state of the record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute. [ 58 ] The principles set out in Weir-Jones were recently reviewed and approved by the Court of Appeal of Alberta in its decision of Hammam v Medicine Hat School District No 76 , 2020 ABCA 343 . The Court of Appeal once again highlighted the utility of the

summary judgment process in resolving disputes and affirmed the ability of the court hearing a

summary judgment application to resolve factual disputes where the record permits. [ 59 ] In the present case, the record before the Court is comprehensive, the parties having engaged in documentary exchange and questioning leading up to the

summary judgment application. Several affidavits have been exchanged for the

summary judgment application and questioning on those affidavits has been completed. A trial will not provide a more complete factual record than already exists because the only two individuals who could provide direct evidence on behalf of Signal Hill in relation to any factual issues in dispute are deceased. [ 60 ] With this record before it, the Court shall consider whether the CRA and Mr. Pearcey have successfully demonstrated that there is no merit to the claims advanced by Signal Hill notwithstanding Signal Hill’s claim that there are genuine issues requiring a trial.

Negligence [ 61 ] The claim of negligence advanced by Signal Hill is based primarily on the following allegations in the Amended Statement of Claim against Mr. Pearcey and the CRA: (

a) they administered Signal Hill’s tax accounts at all material times; (

b) they entered into payment plans with Signal Hill to address Signal Hill’s tax debts; (

c) they misapplied or reallocated payments to Signal Hill’s tax accounts to Signal Hill’s detriment; (

d) they refused to correct the misapplied or reallocated payments when requested to do so by Signal Hill; (

e) they wrongfully initiated enforcement proceedings against Signal Hill to collect on tax arrears that the CRA knew or ought to have known were not in fact owing; and (

f) as a result of such enforcement, they caused Signal Hill loss or damage. [ 62 ] In order for a negligence claim to succeed, a plaintiff must establish that the defendant owed the plaintiff a duty of care, that the standard of care was breached by the defendant, that the plaintiff suffered a loss and that the loss suffered by the plaintiff was caused by the defendant’s breach.

Failing to prove any one element is fatal to a claim in negligence. [ 63 ] The focus of Signal Hill’s claim that there is a triable issue in relation to the negligence claim revolves around the question of whether the CRA or its employees owed Signal Hill a duty of care. Signal Hill argues that the law is unclear on whether such a duty was owed and the only way to resolve that issue is a trial.

The CRA argues that the law is well settled in Alberta: the CRA and its employees do not owe a duty of care to tax debtors. [ 64 ] When the existence of a duty of care owed by a regulator is at issue, the starting point for the analysis is the Cooper/Anns test, fist articulated in Anns v Merton London Borough Council , [1978] AC 728, [1977] 2 All ER 492 and then clarified in Cooper v Hobart ,

2001 SCC 79 . At paragraph 30 of the Cooper decision the Supreme Court of Canada described the test as follows: At the first stage of the Anns test, two questions arise: (1) was the harm that occurred the reasonably foreseeable consequence of the defendant’s act? and (2) are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here? The proximity analysis involved at the first stage of the Anns test focuses on factors arising from the relationship between the plaintiff and the defendant.

These factors include questions of policy, in the broad sense of that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care. It may be, as the Privy Council suggests in Yuen Kun Yeu , that such considerations will not often prevail.

However, we think it useful expressly to ask, before imposing a new duty of care, whether despite foreseeability and proximity of relationship, there are other policy reasons why the duty should not be imposed. [ 65 ] Prior to embarking on the analysis outlined in the Cooper /Anns test, a preliminary inquiry should be made to determine whether the existence of a private law duty of care in a particular circumstance has previously been determined by the courts or if the duty claimed is analogous to findings made in previous cases.

If the question has been previously decided, there is no need to embark on the full Cooper/Anns analysis anew. [ 66 ] The CRA argues that Signal Hill’s negligence claim is without merit because the Court of Appeal of Alberta has previously determined that there is no duty of care owed by the CRA and its employees to a tax debtor. The CRA’s argument is focused on the adverse relationship between the CRA and Signal Hill and the claim that an adverse relationship does not give rise to sufficient proximity between the parties to support the existence of a duty of care.

In support of its argument, the CRA relies on the Court of Appeal of Alberta’s decision in Grenon v Canada Revenue Agency , 2017 ABCA 96 . [ 67 ] The adversarial nature of the relationship between Mr. Grenon and the CRA in that case is comparable to the relationship between Signal Hill and the CRA in the present case. Mr. Grenon was a high net worth individual who invested heavily in mutual fund trusts held in RRSP accounts with CIBC Wood Gundy and Richardson GMP. In 2007 the CRA commenced an extensive audit of Mr. Grenon and several of his wholly owned corporations. As a result of its audits.

The CRA issued reassessments against Mr. Grenon indicating taxes owing of $283 million in the CIBC RRSP account and taxes owing of $205 million by Mr. Grenon personally. Mr. Grenon and CIBC formally objected to the reassessments but the CRA Appeals Division confirmed the reassessments. Mr. Grenon sued the CRA alleging many of the same causes of action raised by Signal Hill in this case including negligence, misfeasance in public office and interference with contractual relations.

On an application to strike the Statement of Claim, the judge struck the negligence claim on the basis that there was no duty of care owed to Mr. Grenon: Grenon v Canada Revenue Agency , 2016 ABQB 260 at paragraph 88 . Mr.

Grenon appealed. [ 68 ] On appeal, the Court of Appeal of Alberta summarized the state of the law with respect to the existence of a duty of care at paragraph 17 of the decision and then set out its conclusion at paragraph 25: [17] In the regulatory context, the weight of authority is that a regulator does not owe a private law duty of care to plaintiffs who might be damaged by activities of regulated parties. Generally speaking, there is insufficient foreseeability and proximity to establish a private law duty of care in those situations.

Even where a sufficiently proximate relationship is found, strong policy considerations militate against extending negligence to reach those situations: [citations omitted]. ... [25] In our view, it is plain and obvious that an action in negligence cannot succeed. It is clear that, because of the inherently adverse relationship between auditors who are exercising a statutory function and taxpayers, a finding of sufficient proximity to ground a private law duty of care does not exist. The chambers judge correctly applied the Cooper-Anns test and considered foreseeability and proximity to reach the same conclusion.

Not only is her decision entitled to deference, the chambers judge could have gone further to conclude that public policy considerations also militate against finding the existence of a prima facie duty of care in this case. [ 69 ] Notwithstanding the Court of Appeal of Alberta’s decision in Grenon , Signal Hill argues that a duty of care may be owed by the CRA to a tax debtor and that, at the very least, it is an issue requiring determination at a trial.

It relies primarily on four authorities: Hill v Hamilton-Wentworth (Regional Municipality) Police Services Board , 2007 SCC 41 ; Ludmer v Canada (Attorney General) , 2018 QCCS 3381 , (aff’d 2020 QCCA 697 ); Scheuer v R , 2016 FCA 7 ; and Leroux v Canada Revenue Agency , 2014 BCSC 720 . The authorities relied upon by Signal Hill are not helpful and do not raise a triable issue in this case for the reasons that follow. [ 70 ] The Hamilton-Wentworth decision from the Supreme Court of Canada concerned the police investigation of a suspect who was eventually charged with a crime as a result of the investigation.

The Supreme Court of Canada held in that a private law duty of care was owed by the police investigators and the suspect.

The Alberta Court of Appeal considered the Hamilton-Wentworth decision at paragraph 22 of the Grenon decision and rejected its applicability to the circumstances of the Grenon case: Hill v Hamilton-Wentworth does not assist the appellant beyond confirming the point that a government actor, exercising its powers under a statute with a public purpose, may bring itself into a relationship of proximity through its specific dealings with a plaintiff, a point not contested in this appeal or by this Court. Hill v Hamilton-Wentworth involved an exceptional set of circumstances.

Moreover, there were particular considerations relevant to proximity and policy applicable to the relationship in that case which are not present here.

Those included the likelihood of imprisonment, the legal duties owed by the police under the Charter , and the importance of balancing the need for police to be able to investigate effectively with the protection of the fundamental rights of a suspect or accused person. [ 71 ] Just as the exceptional circumstances relevant to proximity and policy applicable in the Hamilton-Wentworth decision were not present in the Grenon case, they are not present in this case either. The relationship between Signal Hill and the CRA is far more akin to the relationship between Mr.

Grenon and the CRA than it is to the relationship between the police and a suspect as described in the Hamilton-Wentworth case.

[ 72 ] In the Ludmer decision, the Cour Supérieure du Quebec referred to the Grenon decision rendered by the Court of Appeal of Alberta but noted, at paragraph 141, that the Grenon decision “...is based on common law notions of duty of care, proximity, foreseeability and public policy that have no application in Quebec.” [ 73 ] Just as the Alberta decision based on the common law had no application in Quebec, the Ludmer decision, based on the Quebec Civil Code , has no application in Alberta. [ 74 ] The Leroux case from British Columbia has been expressly rejected by the Court of Appeal of Alberta as having been founded upon “insufficient footing” and “bad policy”: Grenon at paragraph 13.

It has also been rejected by the Ontario Superior Court of Justice in its recent decision of Jayco Inc v Her Majesty the Queen , 2021 ONSC 2120 . At paragraphs 34 and 35 of that decision, the court said: The taxation statutes set up regulatory schemes with internal appeals and appeals to the court. Judicial review can be available if the government makes a decision that is not appealable (like the decision to refuse to exercise the discretion to allow Jayco not to post security for the HST assessment pending appeal).

Taxpayers and HST collectors have resort to administrative processes and the courts to ensure that the taxman is kept in check. Imposing negligence liability on top of that is inconsistent with the statutory scheme. Moreover, it is hard, if not impossible, to discern anywhere in the relevant taxation statutes an implicit or implied private law duty of care owing by the CRA to taxpayers. As the Alberta Court of Appeal noted, there can be policy considerations at the first stage of a Cooper-Anns analysis.

Or the policy can come in at the second stage where one looks at risks of indeterminate liability and other policy concerns. In my view, imposing a super- added private law duty of care on the CRA just imposes more costs on the government and gives taxpayers more procedural tools to defer tax. Unlike police officers investigating crime, there are already thorough and comprehensive regulatory scheme to ensure that the CRA obeys the rules. [ 75 ] I am satisfied that the Grenon case, not the Leroux case, sets out the law in Alberta from our Court of Appeal which I am bound to follow.

I am satisfied that the law in Alberta is settled and that no duty of care exists in the circumstances of this case. [ 76 ] The final decision relied upon by Signal Hill in its effort to raise a triable issue in relation to its claim of negligence is the Scheuer decision from the Federal Court of Appeal. The Scheuer decision arises out of a tax shelter donation program that Mr. Scheuer participated in along with the other plaintiffs in the case. The program issued charitable tax donation receipts which Mr. Scheuer then claimed in his tax returns to reduce the taxes he would otherwise have to pay.

The CRA eventually reassessed Mr. Scheuer’s tax returns and disallowed the program’s charitable donation credits. Mr.

Scheuer sued the CRA claiming it was negligent in allowing the charitable donation tax shelter program to be marketed to Canadians. [ 77 ] The Federal Court of Appeal, at paragraph 45 of its decision, struck the statement of claim (with leave to amend) for failing to “assert a cognizable cause of action.” The Court’s ultimate conclusion in the Scheuer case is then set out at paragraph 46 of the decision: The above conclusions concerning a duty to warn reflect that the performance of statutory duties does not generally give rise to private law duties of care.

However, liability may attach if public officials act in a manner inconsistent with the proper and valid exercise of their statutory duties, in bad faith or in some other improper fashion. [ 78 ] According to Signal Hill, its allegations of bad faith and improper dealings on the part of the CRA and its employees in their handling of Signal Hill’s accounts, at the very least raise a triable issue as to whether liability may attach in this case in accordance with the Federal Court of Appeal’s pronouncement in Scheuer as set out above. [ 79 ] Signal Hill asserts that the following conduct of the CRA or its employees is sufficient to establish that the CRA was acting outside the proper and valid exercise of their statutory duties, in bad faith or in some other improper fashion.

The allegations are that the CRA or its employees: (

i) misallocated or misapplied numerous payments made by or on behalf of Signal Hill; (ii) refused to allocate those payments in a manner to minimize penalties when requested to do so by Signal Hill; (iii) improperly applied numerous severe penalties to Signal Hill’s accounts; (iv) issued numerous RTPs to Signal Hill’s customers and financial institutions, and (

v) eventually seized Signal Hill’s equipment. [ 80 ] As previously noted, the record before the Court is comprehensive, consisting of multiple affidavits and transcripts of cross examinations. The parties had the benefit of extensive documentary disclosure and questioning prior to having to file the evidence in relation to this

summary judgment application. A trial is unlikely to shed any additional light on these allegations.

The following facts in relation to the conduct of the CRA and its employees in their handling of the Signal Hill file have been established on a balance of probabilities: 1) When Signal Hill and the CRA entered into the February 1999 agreement, it was a term of that agreement that when Signal Hill made its $20,000 per month payment, the payment would be applied first to Signal Hill’s current obligations and then, any remaining funds would be allocated to any accrued arrears; 2) The February 1999 agreement was contrary to the CRA’s general practice which was to apply monies collected first to arrears and then to current obligations.

As such, the terms were expressly recorded in the ACSES diary; 3) Signal Hill defaulted on the February 1999 agreement and it came to an end;

4) The April 1999 Agreement was negotiated after the failure of the February 1999 Agreement. It was not a continuation of the February 1999 Agreement and the terms were fundamentally different. Rather than payments coming from Signal Hill, the payments to the CRA were being realized by way of an RTP to Signal Hill’s client, Circa; 5) The existing record is sufficient for the terms of the April 1999 Agreement to be fairly ascertained. A trial is unlikely to shed any additional light on the terms of the April 1999 Agreement.

The only witnesses who could provide direct evidence on behalf of Signal Hill as to what was agreed to are deceased; 6) It was not a term of the April 1999 Agreement that monies collected by way of the Circa RTP would be allocated first to current obligations with any remaining funds allocated to arrears. Pursuant to the April 1999 Agreement, monies collected by the CRA from Circa would be allocated to pay down arrears. I make this finding based on the evidence that the normal practice of the CRA is to allocate funds to arrears first.

There is no notation in the ACSES diary that the April 1999 Agreement was to deviate from the normal practice. Additionally, evidence in the form of ACSES diary entries for June 15, 1999 and July 15, 1999, establish that Mr. Legat called the CRA to advise them of the May and June remittances but that Signal Hill was not in a position to pay. If the money from Circa was meant to pay the current obligations first, there would have been no reason for Mr.

Legat to be communicating to the CRA that the payment of the current (May and June) remittances would be late; 7) Based on the terms of the April 1999 Agreement, the CRA did not misallocate or misapply funds received from Circa pursuant to the RTP. The funds were properly applied to reduce the accrued arrears. Signal Hill defaulted on its obligation to keep its current remittances up to date; 8) Mr. Pearcey was not engaged in any improper purpose and was not acting in bad faith when he personally delivered the RTP to Mr. Harris at Chariot in November 2001.

Personal delivery of an RTP by the CRA is commonplace and achieves legitimate purposes relating to confirmation of delivery and information gathering. While Mr. Harris indicated in his letter to Signal Hill following the delivery of the RTP that Mr. Pearcey implied Signal Hill could be shut down or out of business, that does not establish any wrongdoing on the part of Mr. Pearcey. In terms of the completeness of the record before the Court on this point, it is noteworthy that on December 3, 2018, Mr. Harris was questioned regarding Mr. Pearcey’s attendance at Chariot to deliver the RTP. Mr.

Harris had no recollection of the meeting with Mr. Pearcey or the circumstances giving rise to him sending the November 21, 2001 letter. His memory will not have improved over the intervening 3 years and therefore no additional evidence on this point would be available to the parties if the matter were sent to trial; 10) The CRA and its employees did not engage in any wrongful act or act for any improper purpose when the seizure of Signal Hill’s assets was effected. The seizure was undertaken upon being informed by Mr. Legat that Signal Hill was contemplating receivership. Given that Mr.

Rasmussen had left a large tax debt in his defunct company, Plastics, the CRA’s actions in effecting the seizure were prudent and reasonable; 11) The assessments raised and the RTPs issued by the CRA were based on the information that was provided to the CRA by Signal Hill.

The reassessment that formed the basis of the Minutes of Settlement that resolved Signal Hill’s tax appeal was the result of the CRA’s good faith agreement to review new information regarding Signal Hill’s payroll and to re-assess the penalties assessed and the taxes due based on that new information; 12) The re-assessment that occurred was the result of Signal Hill’s failure to provide the CRA with accurate information about its payroll rather than any errors or improper actions on the part of the CRA.

To the extent that the CRA recorded the reason for the settlement in its ACSES diary as CRA error, that was for administrative expediency only and does not establish any actual errors on the part of the CRA. 13) In failing to provide accurate information regarding its payroll remittance obligations to the CRA and not remitting payroll taxes and GST as required, Signal Hill was the author of its own misfortune. [ 81 ] There is no factual foundation, and therefore no triable issue, in relation to Signal Hill’s claim that a duty of care may arise in circumstances where a public official acts in a manner inconsistent with the proper and valid exercise of their statutory duties, in bad faith or in some other improper fashion.

Even if Signal Hill is correct that a duty of care may arise in such circumstances, absent some factual basis to the allegations of impropriety or bad faith on the part of Mr. Pearcey or the CRA, there is no triable issue. [ 82 ] Based on all of the foregoing, the CRA and Mr. Pearcey have successfully established that no duty of care was owed by the CRA and its employees to Signal Hill. In Alberta the law is clear that the adversarial relationship between the CRA (and its employees), exercising its statutory functions, and taxpayers is not of sufficient proximity to create a private law duty of care.

As stated by the Court of Appeal of Alberta at paragraph 25 of Grenon , there are public policy considerations that also militate against finding the existence of a duty of care. [ 83 ] Signal Hill has put its best foot forward to try and establish the existence of a triable issue. The record is, however, more than sufficient for a fair and just determination to be made in relation to Signal Hill’s allegations against the CRA and Mr. Pearcey.

The facts and the law simply do not support Signal Hill’s claim that there are issues that require a trial to fairly determine its claim in negligence against the CRA and Mr. Pearcey.

Summary dismissal of Signal Hill’s claim in negligence is therefore justified. Unlawful Interference with Economic Relations [ 84 ] In order to establish a claim for interference with economic relations, three elements must be proven: (1) the defendant must have intended to injure the plaintiff’s economic interests; (2) the interference must have been by illegal or unlawful means; and (3) the plaintiff must have suffered economic harm or loss as a result. [ 85 ] Signal Hill claims that the personal delivery of the RTPs by the CRA constitute the wrongful acts necessary to raise a triable

issue with respect to its claim of unlawful interference with economic relations. [ 86 ] Based on the findings of fact outlined above, there are no wrongful acts on the part of the CRA that would raise a triable issue in relation to the claim for unlawful interference with economic relations. [ 87 ] I agree with and adopt the following reasoning of the Master in relation to her dismissal of Signal Hill’s claim for unlawful interference with economic relations.

At page 21, lines 12-25 of the transcript of her decision she said: As already noted, Signal Hill has not provided evidence from its customers or others that improper information was provided to them, nor evidence from them that this resulted in their decision to breach their contracts and business relationships with Signal Hill, or that they were induced by Mr. Pearcey to breach those contracts. As stated prior, in relation to Signal Hill’s customers who were served with RTPs, the termination of the business relationship can be a normal result.

Customers do not wish to live with the administrative headache or the potential liability of an RTP. Serving an RTP is not a tortious act in and of itself that induces a breach of a contract. The issuance of RTPs to parties who ultimately did not owe money to the tax debtor is also not sufficient to establish this tort. Creditors frequently cast a broad net when trying to collect money owing, and the obligation is then on the recipient to respond that there is no debt owing.

Furthermore, there is no evidence that those other parties who were served breached their contracts or severed their business relationships is [ sic ] Signal Hill. [ 88 ] Signal Hill also argues that the issuance of the RTP to Chariot was unlawful because there were, in fact, no payroll tax arrears in existence at the time the RTP was issued.

Signal Hill claims that because the reassessment that was conducted to resolve the tax appeal was in its favor, there were never amounts owed to the CRA that could support the issuance of an RTP. [ 89 ] This argument ignores the fact that the assessment that led to the issuance of the RTP was valid at the time it was issued. It was based on the information that Signal Hill had provided to the CRA.

The reassessment in question was not conducted because the CRA had committed errors or acted improperly; it was conducted because Signal Hill had not provided complete and accurate records to the CRA and the CRA agreed to conduct a reassessment based on the new information provided to the CRA by Signal Hill. [ 90 ] Signal Hill cannot provide inaccurate information to the CRA and then claim that the CRA acted unlawfully by issuing an RTP based on that inaccurate information. [ 91 ] The CRA and Mr.

Pearcey have successfully demonstrated that Signal Hill’s claim for unlawful interference with economic relations is without merit. Signal Hill has not raised any issues that require a trial for a fair determination.

Summary dismissal of the claim for unlawful interference with economic relations is therefore warranted. Conclusion [ 92 ] Having regard to the state of the record and the issues raised, I am satisfied that this matter can be fairly resolved on a

summary basis and that

summary dismissal of the claims is just and proportionate in all of the circumstances. [ 93 ] The Master’s decision to dismiss the claims advanced by Signal Hill against the CRA and Mr. Pearcey was correct. The CRA and Mr. Pearcey have met their burden and established that there is no merit to Signal Hill’s claims in negligence or unlawful interference with economic relations. [ 94 ] Despite putting its best foot forward in this

summary judgment application, Signal Hill, as the party resisting

summary judgment, was unable to demonstrate the existence of a genuine issue for trial. [ 95 ] The appeal is dismissed. Heard on the 29 th day of April, 2021. Dated at the City of Calgary, Alberta this 11 th day of June, 2021. R.W. Armstrong J.C.Q.B.A. Appearances: Joshua A. Jantzi and Anthony Mersich Gowling WLG (Canada) LLP

for the Plaintiff / Appellant Wendy Bridges Department of Justice Canada Prairie Region, Edmonton Office for the Defendants / Respondents Canada Revenue Agency and Gregory Pearcey