This is another procedural case dealing with taxpayer rights to sue CRA. It is a technical decision; it doesn’t say CRA did wrong. It simply says that the tax advisors are entitled to a court trial for their abuse of process and negligence claims against the CRA investigators.
The plaintiffs advised taxpayers on Scientific Research & Experimental Development (SR&ED) claims. CRA prosecuted them for fraud and conspiracy under the Income Tax Act and the Criminal Code. They said (and a judge agreed) that CRA did not give them a chance to make any exculpatory submissions before laying charges and that the CRA investigator “had sworn the information in support of the charges ‘primarily to retain possession of [documents seized under warrants, beyond the 1 year period the Criminal Code allows if charges aren’t laid.]’” (Para. 6.) The criminal court later discharged the plaintiff tax advisors. So the advisors then sued, saying “that the CRA investigation had been mishandled and had resulted in the laying of false charges.” (Para. 9) The advisors’ spouses also claimed damages, under a rule in the Family Law Act.
The plaintiffs made several claims. Some the OCA said they cannot win and so they may not pursue them. For other claims, the plaintiffs are allowed a trial.
Malicious prosecution: The OCA said that the malicious prosecution claim had no chance to succeed and should not go ahead. There are four tests for malicious prosecution:
“in order to succeed in an action for malicious prosecution, a plaintiff must prove that the prosecution was: (i) initiated by the defendant; (ii) terminated in favour of the plaintiff; (iii) commenced or continued without reasonable and probable cause, and; (iv) motivated by malice or a primary purpose other than that of carrying the law into effect.” (para. 43)
The OCA said the plaintiffs could not meet the fourth test. Although the CRA had laid charges so that it could keep the documents, it did so to help with prosecution. That does not amount to malice. (Para. 44.)
Abuse of process: On a technicality, the plaintiffs were allowed to continue this claim. (Para. 50)
Negligence: As yet, the law does not require CRA investigators to be careful in conducting criminal investigations. But the OCA relied on the SCC decision in Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41, which says police may owe a duty to suspects of crime. So, the OCA said the same rule could apply to CRA criminal investigations. (Para. 61) So, this claim can go to trial with the claims for abuse of process and “misfeasance in public office”. (Para. 63)
Family law claims: s. 61 of Ontario’s Family Law Act allows near kin, including spouses, children and siblings, to make their own claims for losses arising from injuries to their kin. So, the spouses of the tax advisors were themselves plaintiffs in this case. The OCA said the spouses could not win and their claims were struck (could not go ahead). The spouses’ claims were based on emotional harm to the tax advisors but the claims didn’t refer to a recognized psychiatric illness. (Para. 69) The more important reason for disallowing the claim, though, was that the harm pleaded arose from being subject to criminal investigation. The OCA said “stress or upset caused by participation in the criminal process does not attract any recoverable damages”. (Para. 70).
Keep in mind that cases such as this say that you can sue CRA; they don’t say you will win. When one of these cases finally goes to trial, the court may still say that CRA owes no legal duty of care to suspects when prosecuting tax evasion cases. Or the court might say that CRA could be responsible for “abusing the process” of the law or for misfeasance and negligence but only in extreme cases, and not one like this.