Canada: How And Where To Litigate With The CRA - Canadian Tax Lawyer Comment

Last Updated: January 11 2018
Article by David Rotfleisch

Introduction – When and Where can you Sue the CRA in Tort?

A taxpayer's interaction with the Canada Revenue Agency (the "CRA") can give rise to a variety of emotions and results: some good, some bad, and some very bad. While the Minister of National Revenue (the "Minister") is the CRA's representative, a taxpayer will always be dealing with one or more of the CRA's many tax personnel and not the Minister herself. The result of an interaction with CRA tax personnel is usually a tax bill or a tax payment problem.

The formal term for a tax bill is called a Notice of Assessment (a "Tax Assessment") and once a taxpayer has been assessed by the CRA they can put the amount of tax they have been assessed into dispute. A taxpayer must file a Notice of Objection within statutory timelines to dispute a Tax Assessment. Once the Notice of Objection is filed, the taxpayer can either proceed through the CRA's administrative process or appeal to the Tax Court of Canada (the "Tax Court") directly. A direct appeal to Tax Court can be made 90 days after a Tax Assessment is issued if the CRA has not vacated or confirmed the Tax Assessment or reassessed the taxpayer.

Being assessed by the CRA can be a long, unpleasant, and complicated process, especially if a tax audit is involved. Most taxpayers only want to dispute the amount of tax they've been assessed but, in extraordinary circumstances, the taxpayer may want to sue the CRA's personnel in tort for wrongful acts as well. A tort is a civil wrong (as opposed to a criminal one) therefore the taxpayer must bring the claim to a court with civil jurisdiction.

Tort actions against the CRA have been raised by taxpayers with varying levels of success. Often, once the respondent (the CRA) has brought a motion before the court, these tort claims will be struck from the taxpayer's pleadings. Tort claims that have been brought against the CRA include misfeasance in public office, malicious prosecution, negligence, failure to implement a judicial decree, and abuse of process. Please note that a discussion on the requisite elements for these torts is outside of the scope of this article.

Many taxpayer tort claims have failed at the pleadings stage; however, in several recent decisions, actions have proceeded to trial to benefit from a full factual record. For example, the Ontario Court of Appeal in McCreight v Canada (Attorney General) allowed the taxpayer's appeal and permitted the actions of negligence and abuse of process to proceed to trial after they had been struck from pleadings by the motion judge. There were no further decisions published, suggesting that an out of court settlement was reached by CRA and the taxpayer.

Similarly, in Leroux v Canada Revenue Agency ("Leroux"), the taxpayer's claims of negligence and misfeasance in public office were tried. At trial, the court determined that the CRA owed the taxpayer a private law duty of care and, with respect to the way in which penalties for income tax were considered and assessed, that the standard of care was breached. Unfortunately, the taxpayer did not receive a damage award as all elements of the tort of negligence were not made out.

Other lawsuits followed the Leroux decision. In 2015, a Calgary based construction company initiated a lawsuit against the CRA seeking $32,000,000 for alleged damages to its business as well as mental anguish caused by the CRA's actions. The concept of a private law duty of care being owed by the CRA to taxpayers is an interesting one and more commentary on the Leroux case can be found here. This article examines which courts have the ability, or jurisdiction, to hear a tort claim against the CRA.

The Tax Court of Canada – No Civil (Tort) Jurisdiction

The Tax Court is a statutory court and does not have inherent jurisdiction, which means it has specific limited cases that it can try. It is a "creature of statute" and its decision making powers are limited to those granted by its enabling statute The Tax Court of Canada Act (the "TCCA"). Subsection 12(1) of the TCCA grants the Tax Court exclusive original jurisdiction to hear appeals on matters arising under the following pieces of legislation when references or appeals to the Tax Court are provided for in those Acts:

  • Air Travellers Security Charge Act
  • Canada Pension Plan
  • Cultural Property Export and Import Act
  • Customs Act (Part V.1)
  • Employment Insurance Act
  • Excise Act, 2001
  • Excise Tax Act (Part IX)
  • Income Tax Act
  • Old Age Security Act
  • Petroleum and Gas Revenue Tax Act
  • Softwood Lumber Product Export Charge Act, 2006

Take for example an appeal under the Income Tax Act. Pursuant to s. 12(1), the TCCA grants the Tax Court exclusive original jurisdiction over the appeal because appeals to the Tax Court are provided for specifically in s.169 of Income Tax Act. Under s. 169 a taxpayer may appeal to the Tax Court to have a Tax Assessment "vacated or varied." The Tax Court's jurisdiction is limited to disputes over the amount of tax assessed by the CRA against a taxpayer. The conduct of CRA tax employees in the process of issuing a Tax Assessment or collecting on it cannot be heard in the Tax Court.

The Federal Court of Appeal in Ereiser v. Canada concluded that the Tax Court does not have civil jurisdiction. Mr. Ereiser's principal ground of appeal to the Tax Court was that his reassessments should be vacated because they were issued as the result of misfeasance in public office on the part of CRA investigators. The Tax Court will vacate an assessment if it is not valid or not correct. A valid tax assessment is compliant with the procedural provisions of the ITA. A correct tax assessment is where the amount of tax assessed is based on the applicable provisions of the ITA, correctly interpreted and applied to the facts. As a result, the Tax Court cannot vacate an assessment solely on the basis of wrongful conduct of a tax official authorizing it. Mr. Ereiser's principal ground of appeal was not a matter that could be decided in Tax Court and was properly struck from his pleadings; however, the court determined that Mr. Ereiser could "seek a remedy in the Federal Court or the superior court of a province... if he [had] a tort claim or an administrative law claim arising from the wrongful conduct of one or more tax officials."

Provincial Superior Courts – Civil (Tort) Jurisdiction

The jurisdiction of provincial superior courts does not flow from legislation – its jurisdiction is inherent. The provincial superior courts have "traditionally exercised general jurisdiction over all matters of a civil or criminal nature" and continue to do so today. The inherent substantial jurisdiction of the provincial superior courts arises from the presumption that "if there is a justiciable right, then there must be a court competent to vindicate that right."

The jurisdiction of the provincial superior courts can be denied via explicit legislative language. For example, s. 12(1) of the TCCA provides the Tax Court with exclusive original jurisdiction over particular appeals. The explicit language in the TCCA ousts the jurisdiction of the provincial superior courts.

The TCCA does not enable the Tax Court to decide tort actions against CRA employees. Since the jurisdiction of provincial superior court is not explicitly ousted by legislation, a taxpayer may bring a tort claim against the CRA in any provincial superior court.

The Federal Court – Civil (Tort) Jurisdiction for Cases Against the Crown Only

In addition to the superior provincial courts, the Federal Court has jurisdiction to hear tort cases against the CRA. The Federal Court does not have inherent jurisdiction and is a statutory court (like the Tax Court). The enabling statute of the Federal Court is the Federal Courts Act (the "FCA") and section 17(1) of the FCA provides the Federal Court with concurrent original jurisdiction in all cases in which relief is claimed against the crown.

The FCA does not grant the Federal Court with exclusive jurisdiction over all cases where relief is claimed against the crown therefore, the jurisdiction of the provincial superior courts is not ousted by statute. The Federal Court has concurrent jurisdiction with the provincial superior courts meaning that tort claims can be brought against the CRA in either forum. This leads to forum shopping and a Canadian tax lawyer will have their case heard in the court that they perceive is most favorable to their client.

Tax Tip – Claims Against CRA

Many taxpayers feel that they have been wronged by the CRA but the actions of the CRA employees do not constitute tortious conduct in the large majority of cases. In fact, there has yet to be a published decision wherein the CRA was found liable to a taxpayer in negligence. A taxpayer may be more successful in other tort claims such as misfeasance in public office.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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