A Tax Evasion Prosecution, an Acquittal and a Civil Action for Malicious Prosecution and Negligent Investigation Against CRA
The facts in the recent case of Samaroo v. Canada Revenue Agency, 2014 BCSC 1349 are not complicated. An investigator for CRA obtained a search warrant and the warrant was executed at the plaintiffs’ business and residence. Then CRA reassessed the plaintiffs. Tax evasion charges were also approved, a trial was conducted and the plaintiffs were acquitted. The plaintiffs then commenced an action for malicious prosecution and negligent investigation against both CRA and the prosecutor who had conduct of the prosecution.
The plaintiffs applied for the production of documents and the documents sought included communications between the CRA investigator and a lawyer at the Public Prosecution Service of Canada (PPSC), communications between PPSC lawyers and communications between PPSC and the lawyer who had been retained as agent to PPSC to conduct the prosecution.
The application was resisted on grounds that included relevance, crown immunity privilege, public interest immunity and solicitor client privilege.
In ordering production of a large number of the documents sought, the court noted that for an action for malicious prosecution to succeed, the plaintiff must prove that there was a prosecution that ended in the accused/plaintiff’s favour, that the prosecution was commenced without reasonable and probable cause and, that the prosecution was motivated by malice. According to the civil rules, documents that “are or have been in a party’s possession or control that could, if available, be used by any party of record a trial to prove or disprove a material fact” must be produced.
Against this legal framework, the court held that it is relevant to know what information the prosecutor had about the case “including any weaknesses in the evidence, both in the lead-up and during the prosecution. All of his communications on those points (and even communications among the PPSC counsel regarding the evidence that lead to the charges being laid) are relevant to that point.” Further, the court held that documents relating to the phase of charge approval, the prosecution and the post-acquittal phase are all relevant.
The court also rejected the argument that Crown immunity privilege could serve to block production of the documents. Crown immunity refers to prosecutorial independence and the discretion of the Crown with respect to the commencement and conduct of prosecutions. However, the existence and recognition of Crown immunity privilege does not act so as to prohibit claims against the Crown for malicious prosecution.
In Samaroo, the court held:
In a malicious prosecution claim the court is permitted to examine the exercise of prosecutorial discretion, not for the purpose of interfering with it in some way, but for the purpose of determining whether there has in fact been some “abuse or perversion of the system of criminal justice for ends it was not designed to serve” (Nelles). Given that Crown immunity does not bar a claim for malicious prosecution, Crown immunity cannot prevent disclosure of charge approval materials in such cases.
The court similarly rejected the argument based upon public interest immunity.
In cases involving an allegation of unconscionable behaviour by the government or its agents, there is an argument in favour of disclosure as the government cannot be permitted to hide behind secrecy in order to facilitate improper conduct; in that case, releasing the documents helps to support the public interest in seeing that justice is done…
In this case, non-disclosure may lead the public to infer that there is something being “hidden” from public view, thereby undermining their view of the justice system.
In the result, the court found that one document was protected by solicitor client privilege and one, which contained a password to an internal website was also not subject to the order for production. With respect to the others, the court found: “Although some of these documents appear to set out some of the PPSC policies as regards tax evasion cases, I think the balance tips in favour of disclosure.”
A decision to commence an action for malicious prosecution is not to be taken lightly because an acquittal alone does not necessarily prove that there was no proper basis for the prosecution or that the prosecution was conducted for an improper purpose. More is needed.
However, the broad authority given to CRA to conduct the investigation of tax evasion offences, and to the Crown to conduct the prosecution of those offences requires accountability. Malicious prosecution and negligent investigation are important causes of action because, in appropriate cases, they help to ensure the accountability of government actors in the exercise of their powers.
What the documents which were ordered to be produced in Samaroo might or might not prove, and whether liability will be found on the facts of the case is a separate matter. Time, and the unfolding of the litigation will tell. What makes the decision of interest is that on the basis of a careful legal and factual analysis of each of the grounds advanced for resisting production, the court ordered production of documents and allowed the litigation to proceed on the basis of all relevant evidence.
Further, what this case illustrates is that a claim of privilege or immunity is just that – a claim. More importantly, these are claims which can at times be defeated through carefully conducted litigation.
CRA Sued for $32million for Threatening to Intimidate Taxpayers into Accepting Settlement
http://www.thor.ca/tax-alerts/cra-sued-for-32million-for-threatening-to-intimidate-taxpayers-into-accepting-settlement/February 6th, 2015
Cardel Construction, a Calgary-based development company, recently initiated a lawsuit against the Canada Revenue Agency (the “CRA”) seeking $32million as a result of alleged damage to its business as well as “mental anguish and stress” caused by the CRA’s actions. Among other things, Cardel claims that the CRA initiated multiple audits and “threatened to impose unreasonable and punitive levels of…income tax, both corporate and personal, for the sole purpose of intimidating” the company into settling the audits on the CRA’s terms. This lawsuit follows on the heels of several other recent cases involving taxpayers suing the CRA directly for allegedly , in auditing and/or reassessing them (see, e.g., Leroux v. Canada Revenue Agency, 2014 BCSC 720 and Groupe Enico inc. c. Agence du revenue du Québec, 2013 QCCS 5189 – both of which are currently under appeal). More details regarding Cardel’s lawsuit can be found here: link