Appeal court overturns decision blaming lawyer's advice for foreign buyers tax on North Van home

The B.C. Court of Appeal has overturned a decision that would have forced a Vancouver law firm to pay almost $75,000 to a North Vancouver client because of allegedly “bad advice” about the foreign buyers tax.

In its written decision, the panel of three appeal court justices concluded the lawyer’s advice wasn’t to blame for the client not being able to claim a refund on the foreign buyers tax, because the legislation about refunds wasn’t in place yet when she was being advised.

The complicated case arose after Carolina Poniaczyk Tellini sued the legal company Bell Alliance and lawyer Sunjeet Grewal claiming their negligent advice resulted in her having to pay over $82,000 in taxes, which could have been avoided if she had been provided with competent advice.

In a decision March 26, 2021, B.C. Supreme Court Justice Lindsay Lyster agreed with her, awarding Tellini $74,700 in damages for the foreign buyers tax she had to pay.

According to the original court decision, Tellini and her common-law husband moved from Brazil to Canada in 2015. At that time, Tellini decided to buy a home in North Vancouver, paying the down payment, while the mortgage was in both spouses’ names.

When she and her husband separated the following year, he agreed to transfer his interest in the property to her.

In the interim, however, the B.C. government had brought in the foreign buyers tax in July 2016, requiring people who aren’t citizens or permanent residents of Canada to pay an additional tax of 15 per cent on their share of any property bought or transferred in the province.

Tellini hired Bell Alliance to give her legal advice about transferring her husband’s share of the property to her.

When she met with Grewal, at the end of 2016, she was asked for the first time about her immigration status, and was told she would have to pay the foreign buyers’ tax on the share of the property being transferred. Lawyers estimated the tax at about $54,000.

While Tellini told the lawyer she was in the process of applying to become a permanent resident, she was never advised to wait to complete the transfer or asked if it was urgent, she testified.

While she was considering what to do, in early January 2017, Tellini received a new property assessment, indicating the value of the property had jumped 38 per cent.

When she phoned the lawyer, Tellini said she was told if she acted quickly she could still be assessed the tax on the 2016 property value.

Tellini went ahead with the transfer, borrowing money from a friend to pay the extra cost of the tax. But a year later, she received a notice from the government, saying she still owed almost $24,000 in taxes. It was only then she realized the foreign buyers tax had been re-assessed on the 2017 property value. A month later she received permanent resident status – which would have entitled her to a refund if it had come within a year of the transfer.

The original trial judge ruled that the lawyer in the real estate transaction “fell below the standard of a reasonably competent real estate solicitor” by not advising her on “whether there was a way to restructure or reschedule the transfer” to avoid the taxes.

In reversing the decision, however, the appeal court ruled it was not the lawyer’s advice that resulted in her client paying additional tax.

“Since Ms. Tellini was a foreign national when she registered the transfer she was liable to pay the foreign buyers tax on that date,” wrote Justice Mary Newbury for the B.C. Court of Appeal.

The appeal court added at the time the lawyer was giving advice, the new rule about refunds for people who subsequently became permanent residents within a year had not yet come into effect – or even been made public.

Since nobody knew about the new refund policy, “I am unable to accept that Ms. Tellini’s loss of an opportunity to claim the refund was foreseeable, much less reasonably foreseeable,” wrote Newbury.