A lawsuit over a failed individual pension plan (IPP), and a lawyer’s role in creating the plan, should go to trial an Ontario court has ruled.
Ontario’s Superior Court of Justice denied a motion from a law firm, and one of its lawyers, seeking to have a case against them dismissed. Instead, the court ruled that there are genuine issues for trial, including whether the firm owed a fiduciary duty to the client.
According to the court’s decision issued last month, a retired math teacher, Julia Gacesa, is suing Investment Planning Counsel, actuarial firm Actuben Consulting Inc., and law firm MacDonald, Porter Drees, Barristers and Solicitors, along with various individuals at those firms, after she attempted to convert her teacher’s pension into an IPP, with terrible results.
The decision states, “The IPP transaction was flawed from the outset, as the plaintiff’s corporation did not meet the requirements of the primary purpose test stipulated in the Income Tax Act… The result has been a disaster for the plaintiff: the value of her pension has deteriorated, and she has been reassessed by Canadian Revenue Services and is required to pay taxes and penalties in excess of $360,000.”
In an effort to recover her losses, the decision notes Gacesa is now suing various professionals involved with the transaction including financial advisor David Pelletier of IPC, the actuary, and the law firm. None of the allegations have been proven.
According to the decision, the law firm and the lawyer involved in the case brought a motion to have the case against them dismissed, arguing that their role was limited to a simple incorporation, that they weren’t aware of the nature of the IPP transaction, and that the plaintiff did not rely upon their advice in structuring the transaction.
The decision notes that there is no direct precedent for a case of this kind. And, it concludes that there is “certainly a triable issue about whether a lawyer… without a clear, limiting retainer, can simply be the conduit of documentation and information from other experts without making any independent inquiry whatsoever about the nature of IPP transactions and without understanding her part in the transaction, and advising the client accordingly.”
There’s also a question about whether the lawyer had a duty to warn the plaintiff, the decision notes. “The issue of the duty to warn is complex and factually dependent. This issue should be determined upon a full factual record. I cannot possibly assess the evidence fully and fairly applying the full appreciation test based upon the materials before me,” it states.
Additionally, the decision states there’s a question of whether the law firm is in conflict of interest, which has to be judged in the context of a trial.
As a result, the court ruled the case must proceed to trial, and it denied the motion to dismiss.