The Canada Revenue Agency (CRA) owes a duty of care to taxpayers. Who would have thought this was a new idea? One would assume that a modern liberal democratic state would have this concept enshrined in law and convention by now.
On July 30, 2014, Irvin Leroux finally got an important victory in his 18-year battle with the CRA. That day Justice M.A. Humphries of the Supreme Court of British Columbia made two extraordinary rulings: first, that the CRA owed Mr. Leroux a duty of care to deal with him in a non-negligent manner; and second, that the CRA breached this duty of care by doling out huge monetary penalties to Leroux for errors in reporting his income that he did not actually make.
Mr. Leroux’s story goes back to the early 1990s when he began developing a piece of property in a valley in Valemount, British Columbia, about three hours southeast of Prince George. He had purchased the land previously with the intention of developing it into a profitable asset for his eventual retirement. After logging the land, he built a recreational vehicle park and campground on the property. He also developed an 11-lot residential subdivision. His recreational vehicle park and campground opened in 1998 and became successful, eventually hosting as many as 10,000 visitors per season. By 2003, iRVin’s Park & Campground had won the SuperHost Customer Service Award conferred annually by Tourism British Columbia.
Meanwhile, Mr. Leroux went through the standard routine with the CRA.
He opened a GST account and went to the CRA’s Prince George office quarterly to file his returns. From 1993 to 1995, he was assisted by CRA employee Randy Hansen (now deceased), who filled out the forms for him and gave him the working copies for his records. Mr. Hansen also gave Mr. Leroux advice on how to report logging revenues on his Income Tax return, telling him that they could be declared as capital gains rather than ordinary income.
Starting in 1996, Mr. Leroux would undergo a tax audit by the CRA. What followed was a long dispute over paper work. The CRA claimed that Mr. Leroux was withholding valuable paperwork to back his expense claims and tax credits while Mr. Leroux accused the CRA of mishandling the paperwork he had prepared for them.
From this point onward, Mr. Leroux would be embroiled in legal battles with the CRA. As early as 1999, the CRA were demanding well over $500,000 in taxes, penalties and interest. By 2005, the CRA was demanding close to a million dollars because of Mr. Leroux’s “errors” in paying his taxes and reporting his income properly.
As the date for his appeal to the Tax Court over these charges approached, the CRA eventually conceded that Mr. Leroux owed no taxes at all. In fact, they owed him a small refund. He had been right this whole time, through years of litigation. Meanwhile, the stress and expense of the litigation had harmed both his physical and his financial health, leading to the loss of his business and home.
Mr. Leroux was then advised to sue the CRA over the losses he had suffered fighting their egregious and unfounded tax demands. It was during this round of litigation that the Canadian Constitution Foundation became involved. At last, Irvin Leroux won a moral victory when the court decided that the CRA owed him a duty of care. The judge did not, however, award damages, saying that his financial losses could not be shown to have been caused by the CRA’s actions.
The CCF is proud to have helped Irvin establish this important duty on the part of the CRA. All taxpayers will benefit from this case precedent. For Irvin, however, the fight for compensation continues. He has launched an appeal to the BC Court of Appeal. The CRA has responded by cross-appealing. In its arrogance, it now seeks to make Irvin pay its legal costs for his unsuccessful lawsuit. As part of its cross-appeal, the CRA accuses the trial judge of having relied too strongly on her finding that the CRA was negligent. In effect, the CRA is hoping the appellate court will backpedal on the duty of care finding.
Irvin has found a lawyer that is taking on his case from here, but he still needs YOUR help. He has launched a crowdfunding campaign to help him and his lawyer pay for his fight for compensation for the financial ruin that the CRA has brought on him.
The CCF will be seeking to participate at the Court of Appeal as an intervener to ensure that there is no weakening of the duty of care obligation.
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