Documents filed in Federal Court indicate the Justice Department wants the matter thrown out before it is certified, arguing it is destined to fail, amounts to a criticism of government policy and is better suited to a judicial review.
"It challenges an economic policy decision of government to limit the amount of reimbursement paid to members who sell their private homes at a loss," states the 24-page memorandum filed last month.
"Such a policy decision cannot ground a lawsuit....
"The claim has no reasonable prospect of success and should be struck."
A hearing date has not been set for the matter.
The original suit was filed in September 2014 by master warrant officer Neil Dodsworth, who took a loss on the sale of his home near Edmonton when he was posted to Kingston, Ont., in 2009.
A member can receive 100 per cent compensation of their loss through the home-equity assistance program if they sell their home in a housing market that is deemed by the Treasury Board to be depressed.
But the board disputes what is constitutes a depressed market in Canada. Dodsworth says it also lumps smaller communities into larger centres, like Edmonton, where the housing market is not considered to be depressed.
Dodsworth filed for compensation for the entire amount that he lost, but was told he would only receive $15,000 since his home in Morinville, about 35 kilometres outside Edmonton, was not in a depressed market.
The policy states that a depressed market is one that has seen real estate values drop by 20 per cent or more. Dodsworth argued that the value of his home went down 29 per cent over two years.
He says in the statement that he lost all the equity in his home, took out a $21,000 bank loan to cover part of his mortgage and volunteered for a seven-month tour in Afghanistan to earn more money.
Heather Domereckyj, a spokeswoman for the Treasury Board, said in an email that she could not comment since the matter is before the courts.
Dan Wallace, Dodsworth's lawyer, said his client was dismayed with the motion to dismiss the case.
"He's disappointed," Wallace said Thursday. "I told him when we started that this could be expected. He knew this was going to take a long time."
The case is similar to another one involving Maj. Marcus Brauer, who received $15,000 for a $88,000 loss he took on the sale of his house in Alberta.
Brauer launched a judicial review, which led a Federal Court judge to order the Treasury Board to review its decision.
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