Irvin Leroux fought the Canada Revenue Agency for 18 years over allegations of unpaid taxes and gross negligence. Despite losing some of Leroux’s original documents, the CRA eventually claimed he owed close to a million dollars in taxes, penalties and interest for three years when he was starting his RV park business in British Columbia.
Leroux sued the CRA for negligence on its part, arguing that the actions of the agency and its employees caused him financial ruin and humiliation: in his 60s, he lost his home, business and health, and had to move in with his in-laws. In Tax Court, he was exonerated, and after the penalties and interest were removed, he actually received a refund of $25,000.
BC’s Supreme Court found the CRA owes all tax-filers a duty of care, and had breached this duty in Leroux’s case. The Court stated:
CRA must live up to their responsibilities to the Minister and to the Canadian public, nearly all of whom are taxpayers, by applying a little common sense when the result is so obviously devastating to the taxpayer. It is a poor response to say ‘we put together our position without regard to the law; leave it to the taxpayer to appeal to Tax Court because we are immune from accountability.’
Despite this important ruling, the Court did not see sufficient evidence to find that the CRA’s negligence had caused Leroux’s financial and health problems.
Nonetheless, the key for business-owners and individuals is that the Court recognizes the CRA’s duty of care toward taxpayers, and as a result, parties that believe the agency or its employees have treated them negligently may have cause for legal action against the agency.
It is still possible that Leroux will appeal to the Supreme Court of Canada the BC Court’s ruling that the CRA was not responsible for his losses. It appears that the CRA will appeal the ruling that it has a duty of care toward taxpayers
See Leroux v. Canada Revenue Agency, 2014 on CanLII.