Why do we need a class action? By signing up, will I really make a difference? Yes. There is power in numbers. The more people who sign up the better. (Judges tend to look at it this way: the greater the number of individuals affected, the more serious the injustice must be.) That s why it s important to pass this information on to your family and friends. Why now? A group of donors, worried about the pace and possible outcome of GLGI s legal action, took it upon themselves to win the right to be heard as a small group in court. They decided to create back-up protection for themselves by starting as a class action. After a considerable research effort, they retained Merchant Law to represent you and other donors. Why me? You were a donor or a part of the GLGI donation program in the years 2004-2014. You have or had a disputed amount of dollars payable to CRA that was, or is still due despite it not being heard in a court of law. Simply put, Merchant Law believes that CRA and the Canadian Government failed in their duty of care to you as a donor and participant in a tax shelter. What are the chances of us winning? Merchant Law is putting their name and reputation behind this class action. Consider this: Do you think the current government wants a class action alleging CRA s shoddy treatment of citizens to be investigated by the mainstream press? What is the likely timeline of this action? If the case goes to court and then on to the Supreme Court, it could take 3 years. Merchant Law is prepared to spend 3-5 million dollars to fight this action. It should be noted that more than 90% of class action cases are settled after certification (see What is a Class Action? ) has been achieved, often within a period of 1 year. What about GLGI s court action? This case is separate from GLGI and we wish them well in their action. That said, it s absolutely critical that you understand this is a completely independent non-related action for donors by donors against CRA and the government. The GLGI court action and this class action on behalf of donors are NOT tied together in any way. Page 1
Why don t I just wait for the GLGI action? You can, but this action may be completed prior to GLGI s. Moreover, have you considered what will happen if GLGI s action is dismissed? If that happens, you need a back-up plan in place. Merchant Law believes we will win this action whichever way the GLGI action turns out. Will I not be represented in this action as well? You help this action only if you decide to sign-up and get behind Merchant Law. Remember, Merchant Law s class action is a completely separate action with separate claims (e.g. failed duty of care ) very different from the claims GLGI s lawyers are fighting in court. This class action is for donors by donors against CRA for their failure to warn donors and lookout for them. Can I participate in this action if I have signed a waiver? Yes. This is a separate action. You can and should stand up for your rights. Remember, a class action allows claims for damages. You have suffered enough. It s time justice was served. If I have paid CRA or settled, does this still apply to me? Again, yes. Merchant Law s class action is a separate action with separate claims. You have every right to receive your fair share of a settlement, including, if warranted in your case, damages. What do I do in the meantime? I m receiving letters from CRA. Will guidance be provided? Assuming Merchant Law achieves certification (see, What is a Class Action ) for the Class Action, we will insist that all questions and letters from CRA cease and desist as the matters under consideration are now before the court. Who is Merchant Law? Tony Merchant Q.C. has been dubbed by the media as Canada s class action king for taking-on some pretty big names; names like GM, Maple Leaf Foods, CIBC/Talvest Mutual Funds, Toyota, Sony and, of course, our own federal government through various class-actions. Most notably, Mr. Merchant played a key role in bringing about the landmark 2005 settlement on behalf of native Indian abuse victims who suffered terribly within the residential school system that they were forced to attend. The estimated value of that settlement was 5 billion dollars. Mr. Merchant is a member of the Saskatchewan, Alberta, British Columbia and Arizona bars and has argued cases at the trial level before various tribunals, as well as the Federal Court Page 2
and the Supreme Court of Canada. And he has, at last count, over 1,300 cases reported in leading law journals. Merchant Law has 11 offices in Canada and 1 in the U.S. Mr. Merchant was voted the best lawyer in Regina in 2007 and has received numerous other awards and distinctions for his many legal accomplishments over the years. A graduate of the University of Saskatchewan, Mr. Merchant was named Queen s Counsel in 1995 and previously represented Regina-Wascana in the Legislative Assembly of Saskatchewan. What will Merchant Law do for me? They will represent you, the donor, along with other donors (in a class action there is power in numbers) to go all the way to the Supreme Court (if required) or to negotiate a successful settlement (a return of up to 100% of your current disputed GLGI related donation tax bill). What is a Class Action? In simplest terms, a class action occurs when a single individual or a group of people initiate a lawsuit on behalf of other people who find themselves in a similar situation in the same boat if you will So, when a number of people, have been wronged in a similar manner, often the best way to fight in the courts is by initiating a class action. Now, before a class action can proceed, the representative plaintiffs named in the action the single person or group who started the lawsuit must ask the court to certify the action as a class proceeding. What this means is that representative plaintiffs and the lawsuit itself must meet certain standards and abide by specific legal rules before the class proceeding is considered valid. Advantages of Class Actions 1. When many people, sometimes thousands have been wronged, a class action lawsuit carries greater weight and has far more impact than separate suits brought by individual plaintiffs. 2. The legal costs of initiating and fighting major lawsuits on your own, especially, as in this case, against a department of the federal government, is beyond the reach of most individuals. 3. Plus, if you choose to take legal action on your own and lose in the end, you may be ordered to pay court costs which in this case would amount to many millions of dollars. Page 3
4. On the other hand, if you choose to become part of a class action and triumph, in the end you benefit equally with other members of the action. 5. What s more, when you become part of a class action, initial legal costs are shared equally and sometimes capped at a pre-specified amount. In this particular class action, your individual total cash commitment to cover legal costs is only $500 whether the suit is successful or not. The remaining legal costs will be paid only out of what you save, which means only if the action is successful. 6. And if the legal firm acting for the plaintiffs chooses where the lawsuit will be heard with care, odds are that court costs will not become the responsibility of the plaintiffs and you as a donor can never pay more than $500 if we lose. 7. Plus, if you re a member of a class action, once it s certified no one is permitted to make a separate legal deal or settlement for themselves. Who is the Steering Committee? The Steering Committee is made up of a handful of individuals who initiated this action. These individuals provide ongoing direction and guidance to the firm on behalf of the class or donors. Why Merchant Law? (We think you d like to have a legal firm in your corner that is proud to stand behind its accomplishments, one that will relentlessly pursue success on your behalf no matter what.) Merchant Law is focused on class actions with a solid reputation. The Steering Committee that, in the end unanimously voted for Merchant Law, made the decision knowing the depth of experience, bench strength, and determination of Tony Merchant and the firm. The Committee is convinced Merchant Law is the right firm to win for them and their fellow donors in a class action against CRA for abandoning their duty of care (among other things) to donors who had invested in GLGI s tax shelter program. Page 4
Why is there a fee of $500? Taking this case to court is costly. DonorSupport.ca is working with Merchant Law to provide this service for an initial nonrefundable payment of $500 per donor: $200 to Merchant Law (plus 10% of each donor s final dollar savings to Merchant Law), $100 for processing and support, $100 for administration, and $100 for ongoing communication and support via DonorSupport.ca. So if you get back 100% of the money you expect to get back, Merchant Law s fee will be 10% of that amount. If the judge only gives you back 60%, then Merchant Law s fee is reduced to 6%. NOTE: Merchant Law expects to put in over $3-5 million of their own money in fees to fund this class action. Will there be any additional, hidden, or future fees? NO. Only the initial $500 plus applicable fees (outlined above) if Merchant Law is successful. This information is found on your sign up form. Is Merchant Law related to GLGI? No. This case was brought to Merchant Law by a third party independent group of donors and fundraisers. Does the class action in question apply for all years pertaining to all years of GLGI participation by various donors? Yes that is the plan. What if I don t do anything? You can choose to do that, however, we wouldn t recommend that you decide to put all your eggs in one basket (i.e. back a single course of action). In effect, you are betting that GLGI s legal action will proceed smoothly to a successful conclusion. That s it. You have no back-up plan. Now take a moment to consider the position you would be putting yourself in, if you decide to back-up your position by contributing to Merchant Law s class action. Effectively, then you would be backing both cases, two different legal approaches (i.e. two different statement of claims one refuting CRA s contention that GLGI s tax shelter program was a sham (the case put forward by GLGI s lawyers) and one case (Merchant Law s case) hinging on CRAs alleged failed duty of care (i.e. they failed to warn donors in a reasonable amount of time that they considered the GLGI tax shelter program to be invalid). All things considered, we think having a sound back-up plan in place is the best way to go. Merchant Law can win even if GLGI loses! Page 5
Furthermore, once our class action is certified, we will seek a cease and desist order to stop alleged on-going donor harassment by CRA (e.g. threatening letters, phone calls). We will contest the new policy of CRA that sanctions printing payments under dispute on assessment letters. This is happening as you read this and it has to stop. (Note: This new policy can potentially affect your credit rating going forward and prevent you from extending or getting a mortgage for your property.) My father has a terminal illness and will not live through this (or someone has passed away another question)? The executor his estate or his Power of Attorney can handle everything for him. Make sure that your father s executor or Power of Attorney is well aware of the issues at hand. How will I be keep updated on the status of the case? Merchant Law will keep you informed as the case moves forward. Does the Steering Committee make decisions on behalf of all donors involved in the case? Do I have a say? The Steering Committee and then the representative client essentially becomes the client. They vote on behalf of the action. The reality is though that Tony Merchant is the one who will be determining the legal issues he thinks will win out in the end, including the ones that affected donors who chose to take their own lives. We will place our trust in him to fight for us. Together we are strong. (Rest assured, your issues ARE common to the donors and fundraisers who make up the steering committee. So, in a way, you do have a say.) Does this apply to other tax shelter programs? No. Not at this time. What happens if GLGI wins or settles? Then would the class action lawsuit be limited only to damages? Would the compensation to Merchant Law be based on a percentage of the total money saved, or the difference between the GLGI case and the class action, or something else? The Merchant Law class action is a separate case, adjudicated on its own. You only pay a percentage to Merchant Law if the class action is successful. Your total expenditure in the event that the class action is unsuccessful is $500. That s it. No extra fees. No assessments. If the action by GLGI wins, the class action will win damages because it will make CRA s action appear even worse. If GLGI loses, then this is the insurance another way to win a better way to win. Page 6
Why should I pay $500? The cost of a court action like this is prohibitive. The average person does not have millions stored away to fight for his or her legal rights. In fact, many legal firms would NOT take on the financial risk inherent in a case like this. As outlined earlier (see What If I Don t Do Anything?), the best way to look at the expenditure is that it buys you a rock-solid back-up plan. And considering what s on the line, this is, in our humble opinion, a smart way to proceed. Moreover, a judge looking at this case wants to see lots and lots of real people signed up, people who put their own hard-earned dollars on the line. When do we expect to start the class action suit and when does a donor need to sign up? You need to sign-up as soon as possible. The class action case by Merchant Law will be launched in the early fall, therefore all sign-ups are needed now. If Merchant Law decides to go through the provincial courts, how does this affect individuals who took part of the program in another province? This class action will apply to all donors in every province in Canada and for the years (i.e. 2004 through 2014) that GLGI s tax shelter program was offered. How does Merchant Law pay off our debt to the CRA? Assuming they win, do they send funds directly to the CRA to pay off my debt or do they send me the funds to pay off the debt? An example here will help. Let s say the CRA said you owed them $100,000 because they didn t accept any tax relief claimed due to your participation in the GLGI tax shelter program. Let s also say that you went ahead and paid them that amount. Here s what happens if the class action is successful: 1. The CRA now owes you $100,000. They have to give you your money back. 2. Because of the contingency payment arrangement in place, you would pay Merchant Law $10,000. (e.g. Merchant Law receives a contingency payment: 10% of any settlement amount see question and answer below.) On the other hand, if you haven t paid the CRA anything here s what happens: If the CRA claimed you owed them $100,000 but you haven t paid them anything, then you would not owe the $100,000 and that amount would be deducted from your CRA account. Then you would issue a cheque payable to Merchant Law for $10,000. (e.g. Page 7
Remember, Merchant Law receives a contingency payment of 10% of any settlement amount.) What about interest and penalties? Merchant Law will fight to negotiate that best possible deal for every donor. Can I use the financial hardship caused by this situation as a basis for going bankrupt? After all, it is CRA that has put me in this position. Yes, you can. You also can join this class action to seek payment for damages. If damages are awarded and become part of any final settlement, then you are eligible to receive payment for damages. In a class action, damage awards vary according to the level of hardship each person has endured. How would damages be awarded if the case is won? There are two components to this question: 1) Pecuniary damages: These damages include all the money you lost because of the CRA s negligence, including the amounts you currently are said to owe the CRA in tax liability, along with penalties and interest. That amount is your individual degree of hardship under this head of damages. 2) Non-pecuniary damages: These are your damages for pain and suffering. These will likely be determined individually through simplified procedures. There may be a common experience fixed amount, based on the types of hardships that the majority suffered. Those outside of this common experience, for example who suffered major injury or death, can (or their estate can in the latter case) make a claim for more. The judge will decide the best and most just way to administer each individual claim. The judge may award only some or all of the above damages. It is impossible to know at this point which types of damages will be awarded. If one has paid back the amount in dispute (assuming it s not taxable) and the class action is successful, how are we paid back and would any damages be awarded? If the class action is successful, the CRA and/or Government of Canada will be ordered to refund any disputed funds. These funds are not taxable as they are, quite simply, funds that are technically owed to you. Damages are calculated and negotiated separately and approved by the presiding judge. Page 8
Will any win result in a percentage of money being paid back to me or will everyone get the same cut? Those issues under dispute that are common to every class member will be paid out according to a formula (usually a set percentage of the settlement) that has been negotiated by both sides in the dispute and then approved by the judge. Individual damage claims, particularly those claims that involve extreme hardship (i.e. suicide, bankruptcy or proved hardship), will be addressed separately. In terms of damage awards for pain and suffering, how are the awards divided up or does Tony Merchant get all the damage award money? It is impossible for class counsel to get all damage award money in a class action. Counsel fees must always be approved by the court, which is vigilant in ensuring that counsel fee is only fair and reasonable. If, hypothetically speaking, no one were to make a claim under the settlement, the money would be administered by the court, which usually directs that it be given to some charity. In no event would it be paid to class counsel. Would any damages awarded be taxable? It is unlikely that any amounts awarded in this action will be taxable. I held back including the donations for years 2011, 2012, and 2013 because of returns being held in abeyance. Earlier this year, I filed amendments for those years and they were all denied. By letter, the CRA told me that my donations must be included in an actual tax filing, not an amendment. Will these donations be eligible for coverage by the class action lawsuit or do I have to include them this year in my taxes? In other words, will this lawsuit only cover donations already done? The class action lawsuit will cover every signed-up donor who participated in the GLGI tax shelter program for every year it was offered up to and including all of 2014. Any donations made or not made because of extenuating circumstances (i.e. returns held in abeyance) plus all taxes owed and due will all be dealt with by the class action. If I don t participate in the class action, will I be included in the outcome? Technically yes. The law is that a class certification makes everyone automatically a class member who meets the class description which will also be determined by a judge. However, you will be much less aware of the stage of progress of the class action and will be entirely dependent on the notice provided by the court to know when and how to make your claim. Court notice is good, but studies of class action have shown that many people don t get notice and subsequently don t make any claims under settlements. Page 9
More importantly, your participation is crucial to allowing this action to go forward. When we go before a judge and say 2,000 people have not only signed up, but paid $500, that is impactful. That lets the judge know that people care about this, that there is a real sense among many people that a significant injustice has taken place. Is Tony's $3 to 5 Million actual money in or are those figures based on the value of his time and resources? Tony s estimated costs are based on time, resources, cash disbursements and regular payments to his team of salaried researchers and staff. I participated in the GLGI tax shelter program in 2008, and I also participated in the Mission Life program in 2010. Both programs are under a CRA Notice of Objection. Question: are both of these programs covered by the class action? Or does the class action only deal with the GLGI program? Only GLGI. My wife and I filed joint tax returns. I contributed to a tax shelter, she subsequently obtained a tax benefit as a result. Is she covered by the class action as well if I alone join the class action? We request that all persons who have taxes owing to the CRA as Global Learning participants pay $500 and sign their own retainer agreement. If successful, do we receive any settlement money individually? Are there income tax implications, or does our settlement money pay off our tax liability directly? Will our reward be limited by the amount CRA says we owe them? If our class action is successful, any amount the CRA says you owe because of your tax shelter participation will no longer be owed (i.e. your statement of account will be adjusted downwards.). Money that is owed is not taxable. And no, you are not limited by the amount the CRA says you owe them. If damages are awarded, you will be asked to make an individual claim for it through a simplified procedure, which will be determined by the court. It may be as simple as simply filling out a form, but for some it may involve more. Page 10
What is the lowest percentage of settlement with CRA that would constitute a victory? How is this percentage derived? Award Merchant Law Fee 100% 10% 90% 10% 80% 10% 70% 6% 60% 6% Less than 59% 0% What does the fee agreement with Merchant Law look like? 100 90 80 70 60 50 40 30 You CRA Merchant Law 20 10 0 100% Win 80% Win 60% Win 50% Win 0% The damages this action is seeking are first and foremost the amount of taxes you owe the CRA. If we are successful in cancelling more than 80% of that debt or more, you will owe us 10% of that cancelled debt. That is a modest amount for a contingency fee agreement. If we cancel 60% of your debt or more, you will owe us 6% of that cancelled debt. Page 11
Award $100,000 Merchant Law Fee (%) You ($) CRA ($) Merchant Law Fee ($) 100% 10% $90,000 0 $10,000 90% 10% $81,000 $10,000 $9,000 80% 10% $72,000 $20,000 $8,000 70% 6% $65,800 $30,000 $4,200 60% 6% $56,400 $40,000 $3,600 Less than 59% 0% $50,000 $50,000 0 Because this is a class action, the courts will also review the fairness of the amount you have to pay us based on the work we have done and the risk we have taken. More often than not, courts have reduced the contingency fee payable to class counsel. So you have additional protection from the courts. Courts are very vigilant to ensure that class counsel are not overpaid. If I don t participate in the class action, will I be included in the outcome? Technically, yes, assuming you get notice, understand the notice and act upon it accordingly. You will not be known to Merchant Law Group and thus be able to receive their communications. More importantly, if you do not participate, there is a chance the action will not go forward. On the other hand, if you do participate and others don t, a judge will take those things into account when individual claims under a judgement or a settlement is made. So the courts will ensure that everyone is treated fairly in the end. If the current GLGI suit against the CRA succeeds, will that portion of money retained by the donor be subject to the 10% contingency fee by Merchant Law Group? No. Our class action is separate and not affiliated with GLGI s court case. Merchant Law s fees only apply to its class action. What level of time, personal monetary information and CRA history will your firm require from each donor that signs on to the suit? Almost none. A class action is not concerned so much with individual stories as with common issues. Most class members do not need get involved at all other than to make their claim once a settlement or judgment is reached. You will also not need to pay any other money in this action until a successful outcome is reached for you. Page 12
If everyone pays $500 and you fail to get the case certified, what happens? The cost of certification itself will be more than the amounts we hope to raise through this fundraising effort. Certification is a hard-fought process, with multiple appeals and applications in between. Once certified, a class action is usually settled. Certification should not be seen as the procedure at the beginning of the litigation race in most cases it is the finish line! If this action is not certified, we will have been unsuccessful, but that will not mean that your payment was wasted. The point of the $500 payment is to provide a deposit of funds necessary to litigate certification. Win or lose, you will receive value for this payment. Will the CRA receive the list of people that are part of this class action lawsuit? My fear is that the CRA will punish people that are suing. The CRA will never have access to this information, as it is solicitor-client privileged. Page 13