Law Times

May 16, 2016

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BY MICHAEL MCKIERNAN For Law Times A Bay Street lawyer who accused govern- ment lawyers of defrauding the court has failed in a bid to get his tax appeal reopened. Michael Davies, a partner in the banking and finance practice group at Dentons Canada LLP, was one of around 25 to 30 taxpayers who ap- pealed the Canada Revenue Agency's decision to disallow capital cost allowance claims for software licences in the tax years between 2005 and 2007. Davies claimed allowances totalling just un- der $1 million over the three years. However, when the group's law firm, Osler Hoskin and Harcourt LLP, settled the case for less than he had agreed to, Davies claimed the agreement had been made without his authority and was invalid, according to Tax Court Justice Randall Bocock's April 27 decision. Since justice department lawyers knew of his objections, Davies' new counsel argued they should never have filed a notice of discontinu- ance in his appeal without judicial direction, and that doing so constituted a fraud on the court. However, Bocock found Davies' objection, which came long after the agreement was reached and new reassessments had already been issued, arrived too late in the day, leaving Justice Canada lawyers little choice but to follow "legal logic and common sense" by proceeding with the discon- tinuance. "Even if the Court were to find such legal logic faulty, such an error did not constitute fraud. The Discontinuance when dated was correct not just in the mind of Respondent's counsel, but in the mind of [Oslers], the very and only firm retained to protect the Appellant's rights," Bocock's deci- sion reads. "Post-facto and untimely disavowal by a single Appellant, entirely caused by the omission of [Oslers], and the subsequent advice of same to Re- spondent's counsel, also too late in time, cannot re- voke, rescind or avoid the pre-existing settlement." Davies has appealed, and declined an oppor- tunity to comment while the case remains before the courts. In the meantime, he faces a steep legal bill in addition to his swollen tax bill, after Bocock ordered him to pay the CRA's costs on a substan- tial indemnity basis due to the unproven fraud al- legations. Adrienne Woodyard, a tax partner at DLA Piper (Canada) LLP in Toronto, says Davies faced an uphill task, since the Tax Court of Canada can only set aside notices of discontinuance where they were obtained by fraud. "The court will only find fraud in exceptional circumstances. But not only is it very difficult to establish but the failure to do so can also carry fairly serious cost consequences," Woodyard says. "That's why the court cautioned them about the cost consequences of alleging fraud, and ul- timately awarded substantial indemnity costs, which in itself is quite unusual." Davies was himself a partner at Oslers in the tax years at issue in his appeal, before departing Case to target judge's limit on fee-sharing deal BY SHANNON KARI For Law Times A Superior Court judge in Toronto improperly second-guessed experi- enced class action coun- sel and interfered with a settle- ment negotiated in another prov- ince, state two Vancouver-based law firms in arguments filed with the Ontario Court of Appeal. Justice Paul Perell "erred in law and principle and made pal- pable and overriding errors of fact" in his findings about a fee- sharing agreement, write lawyers for Camp Fiorante Matthews Mogerman LLP and Branch MacMaster LLP. The firms are appealing a de- cision issued last fall by Perell in Bancroft-Snell v. Visa Canada Corporation, a multi-jurisdictional class action proceeding over credit card charges imposed on retailers. The Ontario Court of Appeal is scheduled to hear the case on May 25. It will be asked to determine the scope of a judge's powers to limit fee-sharing deals between competing law firms to avoid liti- gation over who has carriage of a class action. These types of agreements are on the rise, says David Sterns, a partner at Sotos LLP in Toronto who specializes in plaintiff-side class actions. "Justice Perell has taken on a clearly vexing issue," says Sterns, who adds that more judicial guid- ance at the appellate level would be helpful for class action lawyers. In his ruling last fall, Perell re- duced total class counsel fees of $3.4 million for three settlements with financial institutions by 10 per cent because of an agreement with the Regina-based Merchant Law Group. Class actions led by the two Vancouver firms were commenced in five provinces. About 15 months later, compet- ing litigation was initiated in Al- berta and Saskatchewan by Mer- chant. However, that firm agreed to stay its actions, in exchange for DIGITAL GAPS Ontario needs tech improvements, say critics P4 CLASS ACTION DISMISSED Surveyors claimed copyright infringement P5 FOCUS ON IT/Telecommunications Law P8 See Natural, page 2 See Case, page 2 PM #40762529 $5.00 • Vol. 27, No.17 May 16, 2016 L AW TIMES C O V E R I N G O N T A R I O ' S L E G A L S C E N E • W W W . L A W T I M E S N E W S . C O M Follow LAW TIMES on TORONTO | BARRIE | HAMILTON | KITCHENER 1-866-685-3311 | cLeish Orlando_LT_Jan_20_14.indd 1 14-01-15 3:15 PM David Sterns says more judicial guidance at the appellate level on fee-sharing deals between competing law firms would be helpful for class action lawyers. When you're working, we're working. End-To-End Legal Marketing Solutions. Visit Findlaw_LT_May16_16.indd 1 2016-05-12 11:28 AM Adrienne Woodyard says the Tax Court of Canada will only find fraud in exceptional circumstances. Photo: Robin Kuniski Faulty legal logic isn't fraud, rules judge Lawyer accuses government counsel of fraud in tax appeal

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