The Ontario Superior Court of Justice dismissed a lawsuit against an advisor and his firm on Wednesday, ruling that the two-year limitation period had expired before the claim was brought.
The plaintiff in the case, Patrick Sinn, sued financial advisor Kenneth Drabble, his firm, Assante Capital Management Ltd., among others, alleging that they provided poor financial advice. According to the decision, Sinn alleges that based on the advice he received, he sold $475,000 in mutual funds to purchase of a flow-though investment, which, ultimately, triggered a significant tax liability (almost $200,000 in capital gains tax). None of the allegations were proven in court.
Before the case got to trial, the defendants moved to dismiss it on the basis that it was brought after the two-year limitation period for civil claims had elapsed. The judge in the case sided with the defendants, ruling that the case must be dismissed as it was brought after the deadline. In reaching that conclusion, the issue for the court is when the investor learned he had possible grounds for a lawsuit.
Sinn brought his action on April 20, 2014. The transactions in question took place in November 2010. The defendants argued that, at the time of the transactions, or at latest, when the investor filed his tax return in May 2011, he would have known about the tax impact of the transactions. The plaintiff argued that he only discovered his claim on April 30, 2012.
“It is the plaintiff’s submission that only then did he receive the information necessary to realize that the ‘expert professional advice’ the defendants gave him was wrong,” the decision states.
“The plaintiff claims that he did not appreciate the amount of capital gains that arose from the advice of the defendants in 2010. His position is that when he prepared his own 2011 tax return in 2012, which showed him he had a capital gain in 2011 as a result of the November 2010 transactions, he then examined his 2010 tax return and realized he had a large capital gain in 2010 that arose because he followed the advice of the defendants that was given in 2010,” the decision adds.
As well, the court agreed with the defendants, finding that the plaintiff should have known about the tax impact when the 2010 tax return was filed.
“The average taxpayer had a duty to and would have looked at his 2010 income tax return and noticed the large capital gain before it was approved. A detailed review of the return was not needed to notice the large capital gain; a quick glance was all that was required,” the court said.
As a result, it granted the defendants’ motion for summary judgment and dismissed the case.