CRA Ordered To Pay $1.7 Million in Damages for Malicious Prosecution
In Samaroo v. Canada Revenue Agency (2018 BCSC 324),
the Supreme Court of British Columbia held that a CRA investigator both
suppressed and misrepresented evidence in prosecuting a BC couple for
tax evasion. The court ordered the CRA to pay nearly $1.7 million in
compensatory, aggravated, and punitive damages, noting the damage to the
taxpayers' reputations and the impact on their business and personal
Mr. and Mrs. Samaroo operated a restaurant, motel, and nightclub. The
CRA undertook an investigation of the Samaroos' restaurant based on
(1) a net worth analysis, (2) a theory that the Samaroos were not
reporting the revenue from one of three daily restaurant shifts, and
(3) the fact that Mr. Samaroo had been making cash deposits into his
personal bank account.
The CRA filed 21 separate tax evasion charges. However, the Provincial
Court of British Columbia acquitted the Samaroos on all charges, finding
that Mr. Samaroo was a credible witness whose demeanour was impressive
and whose explanations were plausible and consistent with the evidence (R v. Samaroo, 2011 BCPC 503).
Further, the CRA's underreporting theory was unproved, and its net
worth analysis was plagued by major omissions and plainly wrong
assumptions. The Samaroos sued the CRA and the prosecutor for malicious
The test for malicious prosecution is found in Miazga v. Kvello Estate (2009 SCC 51):
On points 1 through 3 above, Punnett J wrote that throughout the
investigation and prosecution "the [CRA] lacked evidence of the overt
acts or actus reus of tax evasion." In particular, the theory
of the prosecution was founded on an unproved assumption; moreover, no
one ever advanced a theory of how Mr. Samaroo supposedly skimmed the
cash from the restaurant but still accounted for debit and credit sales.
The court found that the prosecution's only explanation was that it was
done by "magic."
the defendant must have initiated or continued the prosecution;
the prosecution must have terminated in the plaintiffs' favour;
the prosecution must have been undertaken without reasonable and probable cause; and
the prosecution must have been motivated by malice or by a primary purpose other than that of carrying the law into effect.
With respect to point 4 above—motivation—Punnett J (quoting from Casey v. Auto Renault Canada Ltd., 1965 CanLII 72 (SCC))
found that the CRA investigator "'caused everything to be done which
could be done wrongfully to set the law in motion' against the
Samaroos." Among other serious faults, the investigator
The conduct of at least one other CRA employee was also egregious. An
employee bragged about the charges in an e-mail: "Front page of
Wednesday's Nanaimo Daily News. I can't wait to read the edition after
the guilty verdict." Another e-mail mockingly asked: "[D]oesn't a guilty
verdict call for a guillotine?" Punnett J reprimanded them: "Here, the
CRA employees looked forward with unprofessional glee to the plaintiffs'
anticipated conviction and sentencing and their resulting ruination."
created, concealed, and wrongly attributed evidence and information, all in a way designed to mislead;
acted as an advocate, not an investigator; and
demonstrated no remorse and testified that he "would, if given
the chance, prosecute [the Samaroos] again on the same theory and the
same evidentiary basis."
Punnett J concluded that the investigator and the CRA had maliciously
prosecuted the Samaroos. Punnett J also found that the prosecutor,
"[whether] through negligence or otherwise, gave up control of the
prosecution to [the investigator] and the CRA and in so doing risked a
miscarriage of justice." Although this conduct was deplorable, it did
not rise to the level of malicious intent, and so the claims against the
prosecutor were dismissed. One wonders whether the fact that the
prosecutor was not an employee of the Department of Justice, but was
engaged on an ad hoc contractual basis, contributed to this tendency to
rely excessively on the CRA investigator rather than to evaluate the
BCF LLP, Montreal