Canada: Canada Revenue Agency and the Private Law Duty of Care to Taxpayers

Last Updated: February 12 2016

Introduction – CRA Duty of Care

Any Canadian taxpayer who has ended up on the wrong side of a dispute with the Canada Revenue Agency (“CRA”) is likely aware of the broad powers given to the Tax Man by the Canadian Income Tax Act. Revenue Canada auditors can make assumptions about a taxpayer’s tax liability in the absence of documentary evidence to the contrary and have the power to levy significant penalties and interest that often exceed the actual underlying taxes owing. CRA income tax collections officers have one directive, to collect, and are not concerned with the validity of the underlying income tax assessment. Income tax collectors can garnishee taxpayer bank accounts by simply mailing a letter and can register a certificate in Federal Court, without notice, and put a lien on a taxpayer’s home for the full amount of an unsatisfied tax debt, even if the income taxes owing turn out to be less than the original income tax assessment shows. Not surprisingly, the actions of the Canadian income tax department can have disastrous effects on the lives of Canadian taxpayers, but in the past there has been little no recourse against CRA for taxpayers once the damage is done.

Historically, Canadian courts have been hesitant to recognize that governmental bodies such as CRA are capable of being sued privately by Canadian citizens for the damage their actions cause; ostensibly because of the “chilling effect” the fear of legal liability would have on their duty to perform their statutory directives. However, in Leroux v Canada Revenue Agency, 2014 BSSC 720, the British Columbia Supreme Court ruled that employees of Revenue Canada owe a “duty of care” to Canadian taxpayers that requires them to exercise reasonable care when performing their functions at CRA. This article will analyze the Leroux decision and subsequent case law to track the development of the duty of care recognized in Leroux.

The Hurdles to Recognizing a CRA Duty of Care for Regulators

Regulators in Canada are created and empowered by their constituting legislation, which in the case of CRA is the Canadian Income Tax Act or the Excise Tax Act for GST/HST. Statutes like the Income Tax Act often impose broad public welfare duties on the regulator, which are often hard to reconcile with duties to individual citizens. This issue was discussed by the Ontario Court of Appeal in Taylor v Canada, 2012 ONCA 479. In Taylor, a group of Canadians were attempting to hold Health Canada responsible for alleged irreversible and catastrophic biomedical consequences they suffered from the insertion of surgical joint implants, which had been endorsed by Health Canada. The Court of Appeal reviewed the lengthy jurisprudence on duties owed by governmental regulators and commented that “schemes under which regulators operate almost inevitably impose public duties on those regulators”, and that such broad public duties necessarily “conflict with a private law duty of care to an individual”, a conflict which usually precludes a conclusions that a given governmental body “owes a private law duty of care to an individual”.

Applying the reasoning in Taylor to Canadian tax law, it is clear CRA has an overarching duty to the Canadian public to collect income tax revenues in order to fund government projects and works, and Revenue Canada lives up to this duty through the rigorous enforcement of the provisions of the Tax Act. CRA’s duty to collect tax revenues for the government is difficult to reconcile with a duty of care to individuals, as the broad and rigid policies required to gather tax revenues are often not able to adapt to the unique circumstances of individual taxpayers, which may warrant relief in certain situations. Our experienced Toronto Tax Lawyers are experts on the Income Tax Act and the programs of CRA. If a resolution exists for your tax problem, we will identify and implement it.

The Leroux Decision: The Recognition of the CRA Duty of Care

In Leroux, a taxpayer sought to hold CRA responsible for the damages he suffered, most notably the loss of his home and business, as the result of the negligent actions taken by Revenue Canada auditors in the issuing of an income tax assessment against Mr. Leroux, a tax assessment which was eventually overturned at the Tax Court of Canada. The Canadian tax department took the position that Mr. Leroux’s action should be dismissed because CRA did not owe a private law duty of care to an individual taxpayer.

The British Columbia Supreme Court was rather creative in coming to the conclusion that a private law duty of care exists. Justice Humphries was careful to point out that it is the individual CRA auditors that owe Canadian taxpayers a duty of care and not the agency as a whole. By framing the duty narrowly, the Court was able to sidestep previous jurisprudence that refused to impose private law duties of care on regulators since “the individual employees of CRA are not regulators...their duties are operational”.

Note that the Mr. Leroux was not successful in recovering compensation from CRA, largely because the Court was not convinced that the poorly conducted audit actually caused Mr. Leroux to lose his business and home: he was in dire financial straits prior to the income tax audit. However, the mere fact that the Court in Leroux recognized that a private law duty of care existed is a huge victory for individual taxpayers and a massive development in the common law. Even though each province is responsible for administering their respective private law, the Courts often draw from, and give deference to, rulings given in separate provinces. As a result, it is very likely that Leroux will be cited in Courts across Canada for the principle that CRA employees owe a duty of care to individual taxpayers. Our Toronto tax lawyers have had numerous enquiries about this CRA duty of care to taxpayers.

CRA and the Duty of Care in Granting Charitable Donation Status to Tax Shelters

Our Toronto tax law firm frequently deals with clients who have been reassessed by Revenue Canada to deny previously claimed charitable donation tax credits with respect to donations the clients made to charities registered by CRA. These reassessments often result in significant taxes owing and can have disastrous effects on the lives of taxpayers.

In Canada v Scheuer, 2016 FCA 7, a group of taxpayers who had been reassessed to deny several years of donation tax credits sought compensation from the Canadian government and CRA for the damages they suffered as a result of the reassessments. The taxpayers claimed that CRA owed a duty of care “to all Canadians when issuing tax shelter numbers or a duty to warn all Canadians that participation in a given tax shelter may lead to the denial of the income tax deductions”.

In denying the plaintiff’s assertion that a duty of care exists, the Federal Court of Appeal relied heavily on the provisions of the Income Tax Act. Central to the Court’s decision was the fact that the decision of CRA to grant charitable status to any given donation program is not discretionary: under subsection 237.1(3) of the Tax Act, when Revenue Canada receives an application for charitable status containing the prescribed materials, “the Minister shall issue an identification number for the tax shelter”. Thus, a finding that CRA is negligent for issuing a tax shelter number to a charity would be illogical because CRA has no choice in the matter: once it receives a proper application, it is bound by statute to issue a tax shelter number to the applicant. Similarly, the Federal Court of Appeal addressed the taxpayers’ argument that CRA and Canada had a duty to warn them about tax shelters by again relying on the Tax Act. Subsection 237.1(5) mandates each tax shelter to, on the information returns, warn taxpayers that the issuance of a tax shelter number “does not in any way confirm the entitlement of an investor to claim any tax benefits associated with the tax shelter”.

The Court ultimately arrived at its conclusion by citing public policy. To recognize that Parliament and CRA owe duties of care to investors in tax shelters would effectively create an insurance policy for investors at the expense of the tax paying public, which would be completely contrary to the legislative intent behind section 237.1 of the Tax Act, which the Court interpreted as Parliament essentially stating that “taxpayers should participate in tax shelters at their own peril”.

Punitive Damages Awarded Against Revenue Quebec

In Agence du Revenu du Québec c. Groupe Enico inc., 2016 QCCA 76, the Quebec Court of Appeal upheld the judgment of the Superior Court in part, including the $1 million punitive damage award against Revenue Quebec, payable to the taxpayer corporation, for Revenue Quebec’s role in the issuance of an abusive and incorrect tax assessment against the taxpayer, which in turn led to overly aggressive collections action based on the assessment. The Court of Appeal reversed the Superior Court’s $1 million punitive damage award against Revenue Quebec that was to be paid to the owner of the taxpayer Corporation. In total, the damages awarded to the plaintiffs approached $3 million. Though the punitive damage award was cut in half on appeal, the very fact that punitive damages were levied at all is noteworthy because in Canada, unlike the United States, punitive damages are extremely rare at common law, and the reason for their imposition in Enico is likely due to the fact that the action was tried in Quebec, a civil law jurisdiction.

Other Lawsuits Initiated Against CRA

In early 2015, Calgary-based development company Cardel Construction initiated a lawsuit against CRA for $32 million for the alleged damages suffered by two of the company’s five shareholders, who “suffered mental anguish and stress as a result of multiple CRA audits that ‘threatened to impose unreasonable and punitive levels of … income tax, both corporate and personal, for the sole purpose of intimidating’ a settlement on Ottawa’s preferred terms”. Litigation is currently ongoing, and the success of the plaintiff will likely depend on their ability to show that the underlying tax audits done by Revenue Canada employees were incorrect and that the proposed penalties and interest were baseless as a matter of law.


Individuals trying to sue governmental bodies such as CRA for negligence will inevitably find themselves marching up the steepest of hills. If CRA is acting according to the provisions of the Income Tax Act, any action against it for the damages suffered by an individual taxpayer is likely doomed from the outset.

The recognition in Leroux that CRA auditors owe a duty of care to Canadian taxpayers was a major development in the common law, but the recognition of a general duty of care, as was the case in Leroux, is a far cry from a Court admitting that there is a specific duty to warn about the pit falls of tax shelters, which the Federal Court of Appeal ruled against in Scheuer.

A very large damage award was awarded to the plaintiffs in the Enico case, largely as a result of the palpable errors committed by Revenue Quebec, and the subsequent refusal to adequately rectify said errors, during the audit process. However, Quebec is not a common law jurisdiction and any decisions originating therefrom must be differentiated when trying to determine their application in other Canadian jurisdictions. In particular, it would be very unusual for punitive damages to be awarded against Revenue Canada in Canadian common law jurisdictions.

If a taxpayer is ever going to successfully collect damages from CRA due to the failings of its employees, the actions of the offending CRA agent would likely have to be shockingly egregious in addition to being causally linked to the damage suffered by the taxpayer. Engaging one of our experienced Toronto income tax lawyers early on in the tax audit process can ensure your rights are respected by Revenue Canada and help you attain an optimal outcome.

The information is thought to be current to date of posting. Income tax law changes frequently and content may no longer reflect the current state of the law. This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Contact the Author?
Click here to email the Author
In Association with
In Partnership with
Other Canada Advice Centres
Competition and Antitrust
Labour and Employment
Intellectual Property
More Advice Centers
Useful Resources
Forms available to download for income tax filing in Canada.
Hear David J. Rotfleisch discuss timely and highly topical tax matters during appearances and interviews with specialist publications.
Useful explanatory videos of income tax matters.
The following questions and answers are based on the proposed measures that were announced on December 7, 2015.
The official Government website of the CRA.
This guide is for any person who deals with the Canada Revenue Agency (CRA). The guide gives you information on the 16 rights set out in the Taxpayer Bill of Rights and explains what you can do if you believe that the CRA has not respected your rights.
The Office of the Taxpayers' Ombudsman (OTO) works to enhance the Canada Revenue Agency's (CRA) accountability in its service to, and treatment of, taxpayers and benefit recipients through independent and impartial reviews of service-related complaints and systemic issues.
Ontario personal income tax is an annual tax collected from individuals who are Ontario residents on the last day of the tax year or have income earned in Ontario for the tax year.
The following documents provide instructions for filing your 2015 income tax return.
If you earned income in B.C. or operated a Corporation with a permanent establishment in B.C. last year you need to file an income tax return. Find out when you need to file your income tax return, and if any tax credits or rebates apply to you.
Generally, a corporation must file an Alberta corporate income tax return (AT1) for each taxation year during which it has a permanent establishment in Alberta.
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions