In a recent blog, we introduced the ongoing tax saga of Tony and Helen Samaroo, a husband and wife that owned and operated a restaurant, a nightclub and a motel, who were charged with 21 counts of tax evasion.
The Samaroos were acquitted of all charges in a 2010 criminal trial where the trial judge found the Crown’s case “weak” and supported by “unreliable” and “highly uncertain” evidence which contained “significant flaws” and “discrepancies”.
Following their acquittals, the Samaroos sued the prosecutor and CRA for malicious prosecution. The claim against the prosecutor was dismissed; however, in a scathing 70 page decision Justice Punnett of the British Columbia Supreme Court found the CRA guilty of malicious prosecution and ordered the CRA to pay approximately $1.7 million in damages to the Samaroos.
In reaching his decision, Justice Punnett applied the test outlined by the Supreme Court of Canada (“SCC”) in Miazga v. Kvello Estate, 2009 SCC 51 (“Miazga”) which requires the following elements to be established for a claim of malicious prosecution to be successful:
- the defendant initiated or continued the prosecution against them;
- the prosecution terminated in the plaintiffs’ favour;
- the prosecution was undertaken without reasonable and probable cause; and
- the prosecution was motivated by malice or a primary purpose other than that of carrying the law into effect.
Starting with the first element, Justice Punnett found that the evidence supported a finding that the CRA investigator, and the CRA as his employer, initiated the prosecution by causing “everything to be done which could be done wrongfully to set the law in motion”. The CRA investigator was found to have done this by suppressing evidence and supplying the prosecution with an intentionally misleading Prosecution Report that formed the basis of the overriding theory of the case.
The second element was never really in dispute as all parties agreed that the tax evasion prosecution was terminated in the Samaroos’ favour.
In regards to the third element, Justice Punnett held that objectively the CRA investigator did not have reasonable and probable grounds to believe that he could prove the actus reus of the offence of tax evasion against the Samaroos beyond a reasonable doubt.
Moving onto the fourth and final element which speaks to “intent”, this is generally speaking the most difficult element to prove in a malicious prosecution action. This is particularly true in regards to prosecutorial misconduct as the SCC in Miazga made clear that “In the context of a case against a Crown prosecutor, malice does not include recklessness, gross negligence or poor judgment. It is only where the conduct of the prosecutor constitutes "an abuse of prosecutorial power", or the perpetuation of "a fraud on the process of criminal justice" that malice can be said to exist.” It was this final element upon which the Samaroos’ claim against the prosecutor ultimately failed as Justice Punnett found it could not be established that the prosecutor “intentionally sought to abuse or distort the role of a Crown prosecutor.”
That said, Justice Punnett determined this malice element was satisfied in regards to the CRA who was held to be vicariously liable for the conduct of the CRA investigator who “acted deliberately to subvert and abuse his office.” In particular, the CRA investigator was held to have acted with malicious intent when he “knowingly misstated evidence essential to the proof of the actus reus despite being aware of its importance, filed a misleading report knowing it would be relied upon to authorize the prosecution and then having achieved that end swore the Information all in the hope of convicting the plaintiffs.”
While successful claims for malicious prosecution, particularly in the context of tax cases, are extremely rare, the conduct of the CRA investigator in Samaroo was so egregious that it is not entirely surprising that the Samaroos were successful in their claim against the CRA.
Unfortunately, the Samaroos fight with the CRA is not yet over as this decision is being appealed and their TCC appeals remains ongoing.
Has the CRA accused you of tax evasion? If so contact us here.