As part of the promotional materials for a questionable charitable donations tax shelter, ParkLane Financial included a legal opinion provided by a partner in the tax department of a prominent firm. A class action against ParkLane was certified, and an appeal from that dismissed by the Ontario Divisional Court in Cannon v Funds for Canada Foundation, 2012 ONSC 6101.
An interesting aspect of the Divisional Court decision is the discussion of the plaintiffs’ claim in negligence and in negligent misrepresentation against the lawyer and the two firms he had been associated with. MA Sanderson J agreed that it was not plain and obvious that those claims would fail, given that the lawyer had ‘provided substantial input into the development and marketing’ of the scheme, his help in drafting the relevant documents and his awareness that his opinion (and professional profile) would be included in the promotional materials. While he had not communicated directly with investors, he was not necessarily immune from liability to them, given the possibility that he nevertheless owed them a duty of care and their reliance on his representations. The lawyer’s failure to direct ParkLane to remove his ‘comfort letters’ from the promotional materials after a negative tax ruling in 2007 was clearly actionable. The lawyer also put himself in a conflict of interest by agreeing to act for ParkLane in a test case appeal of the CRA decision on the tax shelter, presumably because of potential divergence among his own interests and those of the two firms, ParkLane and the non-clients.
[Link available here].