JD1HI et. al. v. Budden et. al., 2022 NUCJ 38

Nunavunmi Maligaliuqtiit NUNAVUT COURT OF JUSTICE Cour de justice du Nunavut Citation: JD1HI et. al. v.

Budden et. al., 2022 NUCJ 38 Date: 20221018 Docket: 08-15-754 Registry: Iqaluit JD1HI, JD2HI, JD3HI, JD4HI, JD5HI, JD6HI, JD7HI, JD8HI, JD8HI, JD9HI, JD10HI, JD11HI, JD12HI, JD13HI, JD14HI, JD15HI, JD16HI, JD17HI, JD18HI, JD19HI, JD20HI, JD21HI, JD22HI, JD23HI, JD24HI, JD25HI, JD26HI, JD27HI, JD28HI, JD29HI, JD30HI, JD31HI, JD32HI, JD33HI, JD34HI, JD36HI, JD37HI, JD38HI, JD39HI, JD40HI, JD41HI, JD42HI, JD43HI, JD44HI, JD45HI, JD46HI, JD47HI, JD48HI, JD49HI, JD50HI, JD51HI, JD52HI, JD53HI, JD54HI, JD55HI, JD56HI, JD57HI, JD58HI, JD59HI, JD60HI, JD61HI, JD1HII, JD2HII, JD3HII, JD4HH, JD5HIII, JD6HII, JD7HH, JD8HII, JD9HII, JD10HII, JD11HII, JD12HII, JD13HII, JD14HII, JD15HII, JD16HII, JD17HII, JD18HII, JD19HII, JD20HLI, JD21HII, JD22HH, JD23HII, JD24HII, JD25HII, JD26HII, JD27HII, JD28HH, JD29HII, JD30HII, JD31HH, JD32HII, JD33HII, JD34HII, JD35HII, JD36HII, JD37HH, JD38HII, JD39HII, JD40HH, JD41HII, JD42HII, JD43HII, JD44HII, JD45HII, JD46HII, JD47HII, JD48HII, JD49HII, JD50HH, JD51HII JD52HII, JD53HII, JD54HII, JD55HI, JD56HH, JD57HII, JD1HIII, JD2HIH, JD3HIII, JD4HIII, JD1HIV, JD1A, JD2A, JD3A, JD4A, JD1HUK, JD2HUK, JD3HUK, JD4HUK, JD5HUK, JD6HUK, JD7HUK, JD8HUK, JD9HUK, JD10HUK, JDUHUK Plaintiff/Defendant -and- GEOFFREY E.

BUDDEN and STUART A. MORRIS and GEOFFREY E. BUDDEN and STUART A. MORRIS cob. as BUDDEN MORRIS LAW OFFICES, “BUDDEN MORRIS”, OR “BUDDEN MORRIS BARRISTERS & SOLICITORS Defendants/Applicants __________________________________________________________________ Before: Mr. Justice Mulligan Counsel (Plaintiffs): Counsel (Defendants): A. Regel T. Kruger Location Heard: Date Heard: Iqaluit, Nunavut October 18, 2022 Matters: Motion to strike certain paragraphs from the Plaintiff’s Statement of Claim.

REASONS FOR DECISION (NOTE: This document may have been edited for publication) [ 1 ] The defendants bring a Motion to Strike certain paragraphs of the Statement of Claim brought against them by the plaintiffs. [ 2 ] Those paragraphs allege that the defendants, when acting as lawyers for the plaintiffs, wrongfully withheld HST from the plaintiffs’ shares of a negotiated settlement in an action against the Government of Nunavut. [ 3 ] The action related to sexual assaults committed by certain named individuals against some of the plaintiffs. These paragraphs are set out in the Statement of Claim, as paragraphs 30 to 31, 61, 63 to 72, 120(d), 142(d), 157(

d) and 173(d). [ 4 ] I pause to note that the relief, if granted, will not end the action. This aspect of the plaintiffs’ claim regarding HST is part of a much broader claim brought by a large group of plaintiffs against the defendants as their former solicitors, for withholding greater amounts from the negotiated settlement for fees than and they were entitled to pursuant to a contingency agreement. I. BACKGROUND [ 5 ] The plaintiffs were residents of small, isolated Inuit communities in Nunavut. The defendants were lawyers licensed to practice in Newfoundland and Labrador and in Nunavut.

The defendants acted as solicitors in negotiating a settlement of the plaintiffs’ sexual assault claims. [ 6 ] The plaintiffs’ claim against the defendants alleges that the defendants breached their fiduciary duties and committed a breach of trust in deducting greater amounts from the settlement funds for fees than they were entitled to, and, further, that they improperly deducted HST from funds owing to the plaintiffs. [ 7 ] This Motion to Strike only pertains to the defendants’ deduction of HST from funds it received. [ 8 ] The plaintiffs point out in their prayer for relief in the Statement of Claim that HST is an issue whether or not the defendants remitted HST to the Crown. [ 9 ] The defendants’ position is that

section 224.1 of the Excise Tax Act RSC, c. E-15 is a complete bar to the plaintiffs’ claim re: HST, claiming that they were acting as agents for the Crown in so deducting. That

section provides as follows:

Section 224.1: No person, other than Her Majesty in right of Canada, may bring an action or proceeding against any person for acting in compliance or intended compliance with this Part by collecting an amount as or on account of tax. [ 10 ] The defendants submit that they are therefore protected by immunity for deductions as agents for the Crown. [ 11 ] The defendants summarized the plaintiffs’ position in paragraph 6 of their brief, as follows. 6.

Central to this motion is the plaintiffs’ allegation that the defendants breached legal and fiduciary duties arising out of their former solicitor/client relationship with the plaintiffs by negligently deducting monies for HST from the plaintiffs that was not required to be withheld. For the purpose of this motion, the defendants will assume that allegation is true.

II. THE PLAINTIFFS’ POSITION [ 12 ] Relying on its claim of negligence and breach of fiduciary duty, the plaintiffs submit that the immunity provision in

section 224.1 of the Excise Tax Act has no application here. [ 13 ] The plaintiffs raise a number of points in their statement of issues. Paragraph 7 sets out in part: 7. The following overlapping issues are raised on this application: (

a) How should

section 224.1 of the Excise Tax Act be interpreted? (

b) Do the pleadings allege the Defendants withheld money from the Plaintiffs in good faith and in compliance or intended compliance with the Excise Tax Act? (

c) Is a party who negligently charges HST for goods and services acting in compliance or intended compliance with tax legislation, such that they have a defence? [ 14 ] The plaintiffs submit in their argument at paragraph 11, that: The Defendants as lawyers in control of the Plaintiffs’ monies undertook the obligation to deduct only those monies that they were allowed to deduct. The defendants were authorized to withhold from the Plaintiff monies for taxes that lawfully applied, but not for taxes that did not apply. They were not authorized to negligently withhold any money from the Plaintiffs.

That was an implied term of the trust. What is clearly pleaded is that the Defendants withheld monies from the settlement monies they held in trust for the Plaintiffs that they were not authorized to withhold. [ 15 ] And further in its argument at paragraph 17: 17. Moreover, the action against the Defendants is not for suing them for monies remitted to Her Majesty while they were acting in compliance or intended compliance with the legislation. That is the action against which

section 224.1 of the Excise Tax Act provides a defence. The action against the Defendants is for withholding monies that they were not authorized to withhold under the terms of the trust and retainer agreements. There is nothing in

section 224.1 of the Excise Tax Act to suggest that Parliament intended that section, to provide a defence to a trustee who breaches the terms of a trust agreement. III. THE LAW [ 16 ] This Motion to Strike is brought by the defendants pursuant to the Nunavut Rules of Court 129.1(a). This rule provides in part: 129.1

(1) The Court may, at any stage of the proceeding, order that (

a) any pleading in the action be struck out or amended, on the ground that (

i) it discloses no cause of action or defence, as the case may be. [ 17 ] The standard of review and applicable test has been discussed in a number of cases. In Hunt v. Carey Canada Inc. , 1990 SCR 959, at paragraph 16, the Supreme Court of Canada provided some overarching principles for consideration on such points:

(

a) The test to be applied is whether it is plain and obvious or beyond reasonable doubt that the plaintiffs Statement of Claim discloses no reasonable claim. Only if the action is certain to fail should it be struck. (

b) On a motion to strike it is not for the court to reach a decision with respect to the plaintiff’s chance of success. It is enough that the plaintiff has a chance of success; and (

c) Striking out cannot be justified because a pleading reveals an arguable difficult or important point of the law. IV.

ANALYSIS [ 18 ] For the purpose of this Motion to Strike it is assumed that the defendants were negligent and breached their duties as fiduciaries in withholding HST from their clients. [ 19 ] Black’s Law Dictionary defines negligence as “the failure to exercise a standard of care that a reasonably prudent person would have exercised in a similar situation, any conduct that falls below the legal standard established to protect others against unreasonable risk of harm.” [ 20 ] Although not alleged here, courts are often called upon to find higher standards of negligence, such as gross negligence or criminal negligence.

Did Parliament intend to exclude any forms of negligence in choosing the words, “compliance or intended compliance” in the immunity

section of the Excise Tax Act ? In my view it is not plain and obvious that the negligence of the defendants, if proved, is sheltered by the immunity provisions of the Act . In my view the claim re HST deductions is not certain to fail. There is an important legal issue to be determined. If negligence and breach of duty of care are found, does the immunity

section of the Excise Tax Act protect such conduct under the “intended compliance” umbrella? [ 21 ] The issues of negligence and breach of duty of care and the legal question need to be decided on a full evidentiary record using the machinery of a trial. [ 22 ] This aspect of the plaintiffs’ claim, the deduction of HST from settlement funds is part of the plaintiffs’ larger claims against the defendants. V. CONCLUSION [ 23 ] In the result, it is ordered that the Motion to Strike paragraphs 30 to 31, 61, 63 to 72, 120(d), 142(d), 157(

d) and 173(

d) of the Statement of Claim is dismissed. VI. COSTS [ 24 ] Both counsel made submissions on costs. Costs on a motion like this are very much in the discretion of the motions judge. I have considered the submissions of both counsel, and the tariff applicable, which counsel submits is badly out of date. Both counsel agree that it is not an appropriate standard here. [ 25 ] This matter was focused and took a fairly short period of time. No travel was required, but Mr.

Regel’s point is that the issues were complicated and that ought to be a consideration. [ 26 ] I remind myself that this HST issue is part of a larger issue. The issues discussed here will no doubt be also litigated at trial. Preparation here may well benefit counsel as they move forward with this case on the issues that have been identified on this motion.

Costs are not meant to reimburse a party for every dollar spent, but to provide what is fair and reasonable under the circumstances. [ 27 ] Having considered all of the matters before me, I am satisfied that an award of costs of $6,000 to the successful party, the plaintiffs, is fair and reasonable under the circumstances. Further that figure is to include taxes, if any, to be dealt with appropriately by

the party receiving same. [ 28 ] It is ordered that costs are fixed at $6,000, payable by the defendants to the plaintiffs forthwith. Dated at the City of Iqaluit this 18th day of October, 2022 ___________________ Justice G. Mulligan Nunavut Court of Justice