An Ontario appeal court has given the go ahead for a potential class action against law firm Cassels Brock & Blackwell LLP over a legal opinion that was used to promote a time-share donation scheme.

The Court of Appeal for Ontario upheld the appeal of prospective plaintiff in the case, Jeffrey Lipson, who donated cash and resort time-share weeks to Canadian athletic associations between 2000 and 2003 as part of a tax reduction scheme operated by the Canadian Athletic Trust.

According to the appeal court’s decision, participants in the scheme expected to receive tax credits greater than the value of their actual financial outlay. And, the promotional materials touting the scheme included an opinion from Cassels Brock indicating that it was unlikely that the Canada Revenue Agency (CRA) would deny the expected credits.

However, in 2004, the CRA did just that. Two of the taxpayers challenged that ruling, and in 2008, the CRA agreed that they could have credits for the value of their cash donations, but not the time-share weeks. In 2009, Lipson brought a proposed class action against the firm for negligence over its legal opinion that was used to promote the scheme.

The motions judge refused to certify the case citing the limitation period, but otherwise saying that the case satisfied the criteria for a class action. He held that the claim should have been apparent in 2004 when the CRA denied the tax credits, or at the very latest 2006 when others in the scheme challenged the CRA ruling, meaning that the case had to be brought by 2008 under the two-year limitation period.

Lipson then appealed that decision, and the appeal court has now allowed the appeal, setting aside the lower court ruling that the action is statute-barred, and certifying the class action.

The appeal court found that the motion judge incorrectly interpreted the precedent he relied on in deciding the action was out of time. “In our view, neither the fact that the [CRA] was challenging the claimed tax credits nor the fact that the class members may have been incurring professional fees to challenge the [CRA’s] denial of the tax credits is determinative of when the class members reasonably ought to have known they had suffered a loss as a result of a breach of the standard of care on the part of Cassels Brock,” it said.

The firm also cross appealed the lower court decision’s ruling that the case could be certified as a class action if not for the limitation period issue, but the appeal court rejected those arguments and dismissed the cross appeal. It ordered the class action certified as proposed by the motion judge, with the addition of the common issue of causation in simple negligence.