Judge Slams CRA for ‘Malicious Prosecution’ of Couple in Tax Evasion Case

Canada Revenue Agency's conduct 'highly reprehensible,' says Justice Robert Punnett
March 6, 2018 Updated: March 6, 2018

A tip to the Canada Revenue Agency resulted in a world of trouble for a British Columbia couple and charges of tax evasion, but a judge’s ruling has found they did nothing wrong. The CRA, on the other hand, was condemned for “malicious prosecution” of the couple and suppressing evidence in the case.

In a scathing 70-page ruling, Justice Robert Punnett of the B.C. Supreme Court criticized the tax agency for its zeal to prosecute Tony and Helen Samaroo for tax evasion despite evidence to the contrary.

He ordered the CRA to pay the couple close to $1.7 million in damages, noting that it was clearly a case of malicious prosecution that violated the Samaroos’ fundamental rights and ruined reputations.

“A government agency maliciously used the criminal justice system to pursue the plaintiffs, and its wrongful conduct continued into the criminal trial itself. The CRA was seeking substantial terms of imprisonment and significant penalties. The manner in which the prosecution was initiated and carried out was egregious. It must be denounced,” Punnett wrote in his ruling.

“It affected the reputations of the plaintiffs, their professional lives, and their family lives. It involved the concealment of exculpatory evidence. It involved the power imbalance of the state over the individual. It violated fundamental rights and was highly reprehensible.”

The Samaroos operated a restaurant, nightclub, and motel in Nanaimo on Vancouver Island, and were brought to the CRA’s attention in 2006 due to a tip, according to the judgement. The agency determined through an audit that considerable amounts in cash had been deposited to the couple’s business accounts.

The Samaroos, who are immigrants to Canada, claimed that the source of the deposits was cash savings that they had accumulated over many years. They were afraid the bank would stop accepting old $100 bills, which made up a portion of the savings, so they deposited the bills into their business accounts.

CRA investigators rejected that explanation and believed the couple was trying to avoid paying taxes by failing to report income from their business—to the tune of $1.7 million—and laid 21 charges against them for tax evasion. A provincial trial in 2011 ended in Samaroos’ acquittal.

Punnett found that CRA investigator Keith Kendal provided “incomplete and erroneous information” when he failed to take certain steps in his investigation that were requested by a Crown prosecutor.

“As a witness, I found Mr. Kendal to be argumentative, evasive, inflexible and reluctant to concede what clearly should have been conceded,” Punnett wrote.

“His clear intent was to see that criminal charges were laid. The presumption of innocence appeared to be meaningless to him. The manner in which he approached the evidence was not objective. He had his theory and he then sought to prove it.”

Punnett also said there was “evidence that Mr. Kendal’s approach may indicate an unfortunate culture within the CRA” in which “employees looked forward with unprofessional glee to the plaintiffs’ anticipated conviction and sentencing and their resulting ruination.”

As a result of the pressure of the investigation, the Samaroos no longer live together. Tony Samaroo testified that he now drinks and smokes more, that his credit is “shot,” and that he has “lost his spirit and his strength.” He spends his days watching TV and no longer socializes.

Helen Samaroo said she feels people look at her with suspicion, noting that she had a breakdown after the acquittal. She said she feels embarrassed to go to the restaurant and visit with her customers. The charges also had a profound effect on the family, to the point that their house has ceased being a hub of family life, she said.

Punnett wrote that the CRA is “vicariously liable” for the conduct of its employees, and its conduct in this case was “high-handed, reprehensible, and malicious.”

“The behaviour of Mr. Kendal respecting the suppressing and misstating of evidence deserves rebuke. It offends this Court’s sense of decency and was a marked departure from conduct expected of an individual in Mr. Kendal’s position and an agency such as the CRA.”

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