The CRA’s Civil Liability

The tax system in Canada is a self-reporting system.  Taxpayers are expected to calculate their taxes and pay as necessary and the  Canada Revenue Agency’s (CRA) role is to administer Canada’s tax laws. Lately, taxpayers have achieved some success in the civil courts holding the CRA liable for abusive audits and tax collection practices.  The (limited) success ought to serve a moderating effect on CRA’s aggressiveness and encourage other taxpayers who have suffered aggressive CRA behaviour to seek to hold CRA accountable civilly.


In administering Canada’s tax laws, the CRA’s audit and collection departments are often high-handed, insensitive, and even abusive with taxpayers.  Unfortunately, it is often difficult for taxpayers to hold CRA to account for their abusive practices.  The CRA often violates its own Taxpayer’s Bill of Rights and its Service Complaint feature is slow and not independent of the CRA.  Tax Court is generally concerned with whether the dispute assessment is correct and is not concerned with the CRA audit or collection practices.  It is possible to review the CRA’s conduct in federal court, however, it is a time-consuming process and the court is reluctant to restrain CRA collection action.


In Leroux v Canada Revenue Agency,[1] a court recognized for the first time that the CRA owes a common-law duty of care to a taxpayer under audit.  This permitted Leroux to sue the CRA for negligence.  Leroux and the CRA settled the file while it was under appeal to the British Columbia Court of Appeal.


In Agence du revenue du Quebec c Groupe Enico,[2] the Quebec Court of Appeal (QCA) upheld a lower court’s decision to award $3 million dollars in damages to Groupe Enico and its founder, Jean-Yves Archambault.  The trial court identified numerous abuses by the CRA audit and collections departments (infiltrating the taxpayer under false pretenses, destroying relevant taxpayer records, issuing intentionally inflated reassessments and then encouraging the collections departments that the reassessed amounts were at risk and that they should be subject to immediate and aggressive collection action, seizing a bank account to pay withholding taxes which had been paid by not properly recorded, refusing to cancel erroneous collection action).


On account of Revenu Quebec’s audit and collections departments’ combined efforts, the company’s credit lines were exhausted, and the company was forced to make a proposal to its creditors.  Revenu Quebec, a creditor, refused to accept the proposal unless it received all of the amounts owing on account of its inflated reassessments).   The company ceased operations and laid off employees.


The QCA had no problem finding that Revenu Quebec’s audit and collection activities constituted negligence.


In early 2018, the British Columbia Supreme Court upheld a claim for malicious prosecution against the CRA and awarded $1,700,000 (which included aggravated and punitive damages) to the plaintiffs, Tony and Helen Samaroo.[3]  The Samaroos owned a restaurant and nightclub in BC.  The CRA conducted an audit and identified cash deposits in their bank accounts and suspected that the couple were underreporting their income.  The CRA initiated a criminal investigation and laid charges.


Ultimately, the Samaroos were acquitted of all charges.  The CRA investigator was unable to explain how the Samaroos skimmed revenues from their restaurant / nightclub (and therefore, how they allegedly underreported their income) and admitted that that case was based largely on assumptions about the nightclub’s profitability.  After the acquittal, the Samaroos sued the CRA successfully for malicious prosecution.[4]  In the BC Supreme Court’s decision, the judge described the CRA investigator’s behaviour in harsh terms explaining that he “acted deliberately to subvert and abuse his office” and that the presumption of innocence “appeared to be meaningless to him.”  After listing the investigator’s unfortunate actions, the Court wrote that his approach “may indicate an unfortunate culture within the CRA.”




The CRA owes a duty of care to taxpayers and courts are becoming more willing to find in favor of taxpayers involved in civil suits against the CRA.  Hopefully, such awards will serve to moderate the CRA’s audit and collections behaviour.


[1] 2014 BCSC 720.

[2] 2016 QCCA 76.

[3] Samaroo v Canada Revenue Agency, 2018 BCSC 324.

[4] The Samaroos also sued the agent prosecutor (a private practitioner who prosecuted the case for the Crown on a contract basis) on the grounds that malice was not proved.