Law Times

June 26, 2017

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Concerns voiced over tax change BY ALEX ROBINSON Law Times L awyers are decrying a pro- posed change to the In- come Tax Act, which they say could greatly affect lawyers' cash f low. Critiques have continued to pile up after the release of the 2017 budget, where the federal govern- ment has proposed to eliminate billed-basis accounting, which allows lawyers and some other professionals to exclude the value of work in progress from their in- come. This lets lawyers defer paying taxes on work until it is billed. Lawyers say the change could be burdensome for lawyers who might not have the cash f low to pay tax on work for which they have not billed their clients. "It' pretty devastating," says Leigh Taylor, a tax lawyer with Leigh Somerville Taylor PC in To- ronto. She says the change doesn't mean more tax for lawyers, but it does mean they must pay tax ear- lier. Taylor says the change also means lawyers will have to take a meaningful look at their revenue recognition policies and will like- ly have to bill clients more fre- quently. "If you had [work in progress] at the end of a calendar year that [wasn't] billed until the next, tax is now going to be payable in a year, even though you might not have the cash f low to pay the tax, which is unfortunate," she says. News of the change was con- tained in the federal budget in March. It stated that billed-basis ac- counting would be eliminated, which lawyers say will mean abol- ishing s. 34(a) of the Income Tax Act that allowed for the deferral. The section was first enacted because it is difficult to value work in progress, as lawyers do not ne- cessarily know what they are going to bill until they have enough infor- mation to render a bill, Taylor says. SELF-REPPED LITIGANTS Problem achieving endemic proportions P7 FOCUS ON Municipal & Planning Law P8 See CBA, page 2 PM #40762529 $5.00 • Vol. 28, No.22 June 26, 2017 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 VICTIMS OMBUDSMAN Bill proposes position be independent office P4 BY ALEX ROBINSON Law Times A n Ontario judge has left the door open for a law- yer to owe a duty of care to a non-client in a real estate transaction. In Chegancas v. Godo, On- tario Superior Court Justice Sid- ney Lederman dismissed a sum- mary judgment motion brought by a real estate lawyer, Christian Piersanti, asking the judge to throw out a claim initiated by a non-client. The lawsuit concerned a $300,000 mortgage transaction on a Brampton, Ont. property that would later turn out to be fraudu- lent. The lender on the transaction, Arcanjo Chegancas, brought the negligence claim against Piersanti, as he had been retained to provide independent legal advice to the borrower. In the summary judg- ment motion, Piersanti and, by extension, LawPRO, argued that lawyers do not owe a duty of care to non-clients, except for limited circumstances. But Lederman found that the matter should proceed to trial, as it was arguable that there was a "sufficient proximity" in the rela- tionship between Piersanti and the plaintiff that gave rise to a poten- tial duty of care. "Knowing that the representa- tions were being made directly to the lender at the lender's request, and that the lender would be rely- ing on such representations before advancing the funds and given the Law Society requirements to guard against identity fraud in part to protect a lender, it is arguable that a special relationship existed be- tween Piersanti and Chegancas," Lederman wrote in the decision. Mark Ross, the lawyer repre- senting the plaintiff, says lawyers need to be very careful to check a client's identification when pro- viding independent legal advice on real estate transactions. "Lawyers should be vigilant generally when taking IDs for something even as small as [giving independent legal advice] and do- ing the proper client identification and verification requirements," he says. Ross says lawyers should make sure they know what the Law So- ciety of Upper Canada's require- ments are when it comes to client identification, especially when it See No, page 2 Mark Ross says lawyers need to be vigilant about confirming identification when providing independent legal advice in real estate transactions. Photo: Robin Kuniski Lawyers could have duty of care to non-clients Leigh Taylor says a change to the federal Income Tax Act means lawyers will have to examine revenue recognition policies and likely have to bill clients more frequently. 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