Michael Ford (post until Oct. 31/19)

$1.7M award for B.C. couple after malicious prosecution by CRA


VICTORIA — A Vancouver Island couple has been awarded nearly $1.7 million in damages after a judge criticized the Canada Revenue Agency for the “ruination'' of their business and personal lives by “high-handed, reprehensible and malicious" actions.

A judge of the Supreme Court of British Columbia says a Nanaimo couple were the victims of an “egregious'' prosecution based on unfounded theory and suspicion about alleged tax evasion at the couple's restaurant and other businesses.

The couple were operating a restaurant, nightclub and motel in Nanaimo in 2008 when they were charged with 21 counts of tax evasion for allegedly skimming $1.7 million from the business.

They were acquitted of all charges in a provincial court trial in 2010 in what the judge hearing the case agreed amounted to the Crown using “voodoo accounting'' to support its case.

The couple sued for malicious prosecution, alleging the prosecutor, the Canada Revenue Agency and its senior investigator targeted them, despite lacking any direct evidence of wrongdoing.

The ruling says the prosecutor failed to exercise “prosecutorial discretion'' but clears him of malicious intent. It criticizes the agency and its senior investigator in assessing punitive and aggravated damages on behalf of the couple.

“The CRA used the powers of the state in the form of a criminal prosecution to wrongfully and maliciously prosecute,'' writes the judge.

The judge also criticizes the senior investigator for misleading the prosecution, almost from the beginning, finding he knew evidence that was required to support any allegation of skimming could not be gathered.

“The behaviour of [the senior investigator] respecting the suppressing and misstating of evidence deserves rebuke. It offends this court's sense of decency and was a marked departure from conduct expected of an individual in [the senior investigator’s] position and an agency such as the CRA,'' the judge writes in his judgment dated Friday.

The ruling discusses what the judge calls “the unfortunate culture'' within the Canada Revenue Agency.

It describes an email to the prosecutor and the senior investigator from another investigator during discussions about 88 proposed charges against the couple, quipping that “after 85 charges, doesn't a guilty verdict call for a guillotine?''

Later, after 21 charges had been approved, the same author wrote to Jones, pointing to a front page newspaper story about the case, with the comment, “I can't wait to read the edition after the guilty verdict.''

The judge writes that agency employees “looked forward with unprofessional glee to the plaintiffs' anticipated conviction and sentencing and their resulting ruination,'' an approach he calls “deeply troubling.''

“The CRA and [the senior investigator] do not acknowledge their wrongdoing or their violation of professional standards. They expressed no apology and were without remorse. Given the opportunity they would pursue the plaintiffs again on the same basis,'' says the judge.

In an interview with AdvocateDaily.comCanadian tax lawyer David J. Rotfleisch says that it is “very common” for CRA investigators to make up their minds about the guilt or tax evasion of a taxpayer.

“I have had many cases where CRA auditors and appeals officers will not accept the facts and law and proceed based on their personal views of a file. The taxpayers then have to go to court and win, but the process takes a financial and emotional toll on them,” says Rotfleisch, founding tax lawyer with Rotfleisch & Samulovitch Professional Corporation

The couple was seeking $6 million for the violation of their Charter rights as an alternative to punitive damages, but the judge awarded them $750,000 in punitive damages.

He also writes that no amount will cause the tax agency financial hardship, but the award will “bring home to the CRA and its employees that conduct such as has occurred here is not acceptable.''

The couple has also been awarded $300,000 each in aggravated damages for the “irrevocable'' harm to their reputations and about $348,000 to cover their legal fees.

© 2018 The Canadian Press

— With files from AdvocateDaily.com

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