Tax & Trade Blog
BCCA Set Aside $1.7 Million Order in Damages for Malicious Prosecution
This is an update of our May 2018 blog regarding Samaroo v. Canada Revenue Agency (2018 BCSC 324), a landmark decision for a successful claim against the Canada Revenue Agency (“CRA”) for malicious prosecution. The underlying prosecution involved allegations that Tony and Helen Samaroo (the “Samaroos”) and their companies evaded income tax by not reporting income generated by their businesses. The Samaroos were also charged criminally for tax evasion. After their acquittals of all the charges in the criminal trial, the Samaroos brought an action against the CRA for malicious prosecution. The trial judge found the CRA liable principally because its investigator knew that the actus reus of the tax evasion offence could not be proven, misled others involved in the prosecution and, by abusing his office, acted with malice. At the end, the trial judge ordered the CRA to pay approximately $1.7 million in damages to the Samaroos.
The CRA then appealed to the Court of Appeal for British Columbia (“BCCA”) (Samaroo v. Canada Revenue Agency (2019 BCCA 113)).
The main issue before the BCCA was whether the trial judge erred in law in concluding that the prosecution was undertaken without reasonable and probable cause and, if not, whether the CRA acted with malice.
The BCCA started by discussing the test for reasonable and probable cause, as mandated in Miazga SCC decision, as follows:
- a trial judge should take care in viewing past events retrospectively and, therefore, a finding of an absence of reasonable and probable cause ought not be based on the outcome of a criminal trial which could turn materially on a credibility assessment;
- the plaintiff, not the defendant, has the burden of proving that reasonable and probable cause to initiate the prosecution does not exist;
- the standard required for reasonable and probable cause to initiate a prosecution in malicious prosecution is lower that the charge approval standard in the criminal context; and
- subjective beliefs of the prosecutor should be assessed at the malice stage of the malicious prosecution analysis, not at the reasonable and probable cause stage.
The BCCA found that the trial judge erred in applying the test.
The BCCA found that the actus reus of the offence is the intentional underreporting of taxable income by the Samaroos, and the proving of the actual mechanics of the alleged evasion is not a necessary element of the offence. The BCCA found that the trial judge’s analysis of the actus reus of the tax evasion offence was faulty as the trial judge erroneously focused on the Crown’s failure to prove the actual mechanics of the allegedly tax evasion scheme or the quantum of tax evaded. The BCCA pointed out that the filing of false tax returns was sufficient to satisfy the actus reus of the offence of tax evasion: Millar (2016 BCSC 2039).
Rather than directing a new trial, the BCCA assessed whether reasonable and probable cause existed. The BCCA concluded that based on the uncontested evidence, the Crown was able to establish that the Samaroos did not report income with the intent of paying less tax – and this was sufficient to determine whether or not reasonable and probable cause existed for initiating or continuing the prosecution.
In conclusion, the BCCA found that even though the Crown could not prove the mechanics of the tax evasion, the Samaroos could not succeed in showing that there was an absence of reasonable and probable cause to initiate and continue the prosecution. Accordingly, the BCCA allowed the appeal, set aside the $1.7 million order in damages and dismissed the underlying action.
As one would note, while the trial judge was extremely critical of the CRA investigator’s conduct throughout the investigation and prosecution and made many adverse findings against him in his decision, the BCCA found it unnecessary to examine whether the CRA, through its investigator, acted with malice as the finding that reasonable and probable cause existed was sufficient to dispose the appeal.
The BCCA decision confirms that in general, acquittals in criminal proceedings have barely any impact on the subsequent civil (or tort) proceeding given their different charge approval standard. The decision also demonstrates that successful claims for malicious prosecution are extremely rare. The Samaroos have 60 days from the date of the BCCA decision to seek leave to appeal to the Supreme Court of Canada.