In Presidential MSH Corp. v. Marr, Foster & Co. LLP, 2017 ONCA 325, the Court of Appeal for Ontario allowed a client’s lawsuit against an accounting firm to continue, despite the fact that the two-year limitation period had expired before the action was commenced. While a motion judge had dismissed Presidential’s lawsuit on summary judgment as the limitation period had expired, the Court of Appeal reversed that decision, finding the accountant’s attempts to mitigate the client’s damages in the year after receiving the fines tolled the limitation period.
The facts in this case are important. The respondents filed the appellant’s corporate tax returns after their due date. As a result, Canada Revenue Agency denied tax credits that would have been available had the returns been filed on time. The appellant suffered damages in unpaid taxes, interest and penalties. The appellant received CRA’s Notices of Assessment disallowing each of the claimed credits on April 12, 2010. The appellant retained a lawyer who filed a Notice of Objection. The respondent accountants continued to help the appellant prepare its appeals to the CRA by drafting the application for relief and helping the appellant and its lawyer with whatever else they needed.
By letter dated May 16, 2011, the CRA responded to the Notice of Objection advising that it intended to confirm the assessments. It did in fact confirm them on July 7, 2011. On August 1, 2012, the appellant issued its statement of claim against the accountants. This was more than two years after the initial denial by CRA of the credits, but within two years of CRA’s refusal to alter the assessments in response to the Notice of Objection.
The decision turned on the interpretation of s. 5(1)(a)(iv) of the Limitations Act, 2002,which requires the plaintiff to have knowledge, having regard to the nature of the injury, loss or damage, that a proceeding would be an appropriate means to seek to remedy it.
The Court discussed the purpose of s. 5(1)(a)(iv) and held that whether an action is appropriate depends on the specific factual or statutory setting of each individual case. Prior case law suggested that a legal proceeding against an expert professional may not be appropriate if the claim arose out of the professional’s alleged wrongdoing but may be resolved by the professional himself or herself without recourse to the courts, rendering the proceeding unnecessary. Further, where alternate processes are available to potentially resolve a dispute, commencing a court proceeding would not be appropriate. The courts will allow plaintiffs to have the benefit of working through other possible remedies under administrative or non-administrative, alternative processes in order to avoid needless litigation (e.g. CRA’s internal appeal procedures).
Accordingly, the accountants’ involvement in the appellant’s appeal to the CRA was not trivial. It would not have been appropriate under s. 5(1)(a)(iv) of the Act for the appellant to commence a proceeding against the accountants until their ameliorative efforts concluded. Thus, the plaintiff’s underlying claim was not discovered until May 2011 when CRA responded to the appellant’s Notice of Objection and advised that it intended to confirm its initial assessments.