Canus Fisheries Ltd. v. Canada Customs and Revenue Agency et al., (2005) 237 N.S.R.(2d) 166 (SC)

• Judge: Hood, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: October 18, 2005
• Jurisdiction: Nova Scotia
• Citations: (2005), 237 N.S.R.(2d) 166 (SC);2005 NSSC 283

Canus Fisheries Ltd. v. CCRA (2005), 237 N.S.R.(2d) 166 (SC);

    754 A.P.R. 166

MLB headnote and full text

Temp. Cite: [2005] N.S.R.(2d) TBEd. OC.033

Canus Fisheries Limited, a body corporate (plaintiff) v. Canada Customs and Revenue Agency and Michael Flinn (defendants)

(S.H. 166174; 2005 NSSC 283)

Indexed As: Canus Fisheries Ltd. v. Canada Customs and Revenue Agency et al.

Nova Scotia Supreme Court

Hood, J.

October 18, 2005.

Summary:

A corporate taxpayer was reassessed for substantial additional income tax after being audited by Flinn, an auditor for the Canada Customs and Revenue Agency (CCRA). The reassessment was subsequently vacated. The taxpayer alleged that it suffered losses as a result of Flinn's negligence or public misfeasance. The taxpayer sued Flinn for damages and the CCRA on the basis of vicarious liability.

The Nova Scotia Supreme Court dismissed the action. There was no public misfeasance and no duty of care was owed. The court declined to provisionally assess damages without further submissions based on the court's finding that the taxpayer's refinancing problems predated the reassessment and that all of the taxpayer's claimed losses could not be attributed to the reassessment.

Income Tax - Topic 9224.1

Enforcement - Inquiry (incl. audit) - Duty of auditor - [See Torts - Topic 77 ].

Torts - Topic 48.8

Negligence - Standard of care - Particular persons and relationships - Government tax auditors - [See Torts - Topic 77 ].

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - A corporate taxpayer was reassessed for substantial additional income tax after being audited by Flinn, an auditor for the Canada Customs and Revenue Agency (CCRA) - Three years later, the reassessment was vacated by Flinn's superiors on the basis that he used the wrong methodology and because there was insufficient evidence to support the reassessment on appeal - The taxpayer alleged that it suffered losses (loss of replacement financing) as a result of Flinn's negligence and that the CCRA was vicariously liable - The Nova Scotia Supreme Court dismissed the action on the ground that a CCRA auditor did not owe a duty of care to any individual taxpayer - The auditor was carrying out a statutory duty - He was not retained by the taxpayer to audit its books and provide an opinion - In fact, the relationship was adversarial - Although it was reasonably foreseeable that a reassessment could result in a loss of refinancing, there was insufficient proximity between Flinn and the taxpayer to create a duty of care - The audit was prepared solely for the purpose of reassessing tax - Unlike a commercial audit, it was not intended to be used by the taxpayer to govern its operations - If a duty of care arose, there were reasons to negate a duty of care - In any event, the auditor acted in a reasonably competent manner and was not negligent - See paragraphs 58 to 132.

Torts - Topic 9162

Duty of care - Particular relationships - Claims against public officials, authorities or boards - Misfeasance in or abuse of public office - A corporate taxpayer was reassessed for substantial additional income tax after being audited by Flinn, an auditor for the Canada Customs and Revenue Agency - Three years later, the reassessment was vacated by Flinn's superiors on the basis that he used the wrong methodology and because there was insufficient evidence to support the reassessment on appeal - The taxpayer alleged that it suffered losses as a result of Flinn's public misfeasance - The Nova Scotia Supreme Court held that there was no misfeasance - Public misfeasance required deliberate and unlawful conduct with knowledge of the unlawfulness of the conduct and an awareness that harm was likely - Flinn did not deliberately disregard his official duty with knowledge that his misconduct would harm the taxpayer - An error did not automatically constitute misfeasance - There was no improper purpose, no malice and no intent to cause harm - See paragraphs 23 to 57.

Cases Noticed:

Johnston v. Minister of National Revenue, [1948] S.C.R. 486, refd to. [para. 12].

Pollock v. Minister of National Revenue (1993), 161 N.R. 232 (F.C.A.), refd to. [para. 13].

Odhavji Estate et al. v. Woodhouse et al., [2003] 3 S.C.R. 263; 312 N.R. 305; 180 O.A.C. 201, refd to. [para. 30].

Alberta v. Nilsson (2002), 320 A.R. 88; 288 W.A.C. 88 (C.A.), refd to. [para. 30].

Powder Mountain Resorts Ltd. et al. v. British Columbia et al. (2001), 159 B.C.A.C. 14; 259 W.A.C. 14; 2001 BCCA 619, refd to. [para. 30].

Longley v. Minister of National Revenue (1999), 19 B.C.T.C. 81; 176 D.L.R.(4th) 455 (S.C.); affirmed in part (2000), 138 B.C.A.C. 17; 226 W.A.C. 17; 184 D.L.R.(4th) 590 (C.A.), refd to. [para. 30].

Chhabra v. Minister of National Revenue (1989), 26 F.T.R. 288 (T.D.), refd to. [para. 30].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268, refd to. [para. 58].

Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), refd to. [para. 63].

Haig v. Bamford et al., [1977] 1 S.C.R. 466; 9 N.R. 43, refd to. [para. 63].

Kripps et al. v. Touche Ross & Co. et al., [1997] 6 W.W.R. 421; 89 B.C.A.C. 288; 145 W.A.C. 288 (C.A.), refd to. [para. 63].

Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), refd to. [para. 66].

Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), refd to. [para. 70].

Western Minerals Ltd. v. Minister of National Revenue, [1962] S.C.R. 592, refd to. [para. 75].

Provincial Paper Ltd. v. Minister of National Revenue, [1955] Ex. C.R. 33; [1954] C.T.C. 367, refd to. [para. 75].

Western Leaseholds Ltd. v. Minister of National Revenue, [1958] Ex. C.R. 277; [1958] C.T.C. 257, refd to. [para. 75].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1, refd to. [para. 77].

Just v. British Columbia, [1989] 2 S.C.R. 1228; 103 N.R. 1, refd to. [para. 77].

Keeping v. Canada (Minister of Fisheries and Oceans) (2003), 224 Nfld. & P.E.I.R. 234; 669 A.P.R. 234; 2003 CarswellNfld 113 (C.A.), refd to. [para. 78].

Jones v. Department of Employment, [1998] 1 All E.R. 725 (C.A.), refd to. [para. 80].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 88].

Ultramares Corp. v. Touche (1931), 174 N.E. 441 (N.Y.C.A.), refd to. [para. 91].

Glanzer v. Shepard (1922), 135 N.E. 275 (N.Y.C.A.), refd to. [para. 93].

Symes v. Minister of National Revenue, [1993] 4 S.C.R. 695; 161 N.R. 243, refd to. [para. 127].

Canderel Ltd. v. Minister of National Revenue, [1998] 1 S.C.R. 147; 222 N.R. 81, refd to. [para. 128].

Uni-Jet Industrial Pipe Ltd. et al. v. Canada (Attorney General) et al. (2001), 156 Man.R.(2d) 14; 246 W.A.C. 14; 198 D.L.R.(4th) 577 (C.A.), refd to. [para. 148].

Counsel:

Christopher C. Robinson, Q.C., and Cheryl L.M. Hodder, for the plaintiff;

John J. Ashley and Caitlin A. Ward, for the defendants.

This action was heard on April 4-8, 11, 12 and 15, 2005, at Halifax, N.S., before Hood, J., of the Nova Scotia Supreme Court, who delivered the following judgment on October 18, 2005.