‘Malicious’ prosecution costs CRA $1.7 million

B.C. couple sued revenue agency after acquittal

VANCOUVER • A judge has rebuked the Canada Revenue Agency and ordered it to pay more than $1 million in damages for maliciously prosecuting a Nanaimo, B.C. couple for alleged tax evasion.

In June 2008, Tony and Helen Samaroo, who operated a restaurant, a nightclub and a motel in the Vancouver Island community, were charged with 21 criminal counts of avoiding taxes. They were accused of skimming $1.7 million from their restaurant, the MGM, between 2004 and 2005, but in April 2011, following a 19-day trial, a Provincial Court judge acquitted them of all charges.

The judge found that Tony Samaroo was a credible witness and that his demeanour was impressive and his explanations for the revenues at the restaurant plausible and consistent.

The couple then sued the Canada Revenue Agency and an “ad hoc” prosecutor for malicious prosecution.

In his ruling, B.C. Supreme Court Justice Robert Punnett found that the agency was liable for the actions of Keith Kendal, a senior investigator for the CRA, and other employees. “The conduct in this case was high-handed, reprehensible and malicious,” the judge said in a ruling released Monday. “The behaviour of Mr. Kendal respecting the suppressing and misstating of evidence deserves rebuke. It offends the 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.”

The judge added the conduct of the CRA was highly blameworthy as it engaged core values in society and the checks and balances that exist when invoking the power of the state against the individual.

“As noted earlier, t he charges never should have proceeded given it was clear prior to charge approval that additional evidence was required to meet the charge approval standard,” said the judge. “Mr. Kendal knew that the necessary evidence was not available from ( the company bookkeeper). The conduct of Mr. Kendal was reprehensible. Evidence was concealed.”

The CRA employees “looked forward with unprofessional glee” to an anticipated conviction and sentencing for the Samaroos and their “resulting ruination,” said Punnett. “It is appalling that the incarceration of the plaintiffs would be joked about,” he said.

Brian David Jones, acting as the ad hoc prosecutor, was named as a defendant in the case, but the judge dismissed the claims against him.

In awarding damages, the judge found the prosecution had “irrevocably” damaged the couple’s reputation and brought to an end their desire and ability to pursue further development and growth of their businesses.

“The plaintiffs are entitled to substantial compensation for their suffering with respect to their humiliation, loss of self-confidence, loss of self-esteem, stress, damage to their reputations and the like, and the impact that has had on their business and personal lives.”

Helen Samaroo testified at trial that her life had been turned upside down by the charges. She felt that others now looked at her differently and she felt embarrassed to go to the restaurant and visit with customers.

“She testified that the charges had a significant impact on her husband who became stressed and got quieter and quieter, and over time worked less and less and stopped socializing.”

Helen Samaroo also testified that after the acquittal, she had a breakdown and stayed in bed for six months, noted the judge.

“She said that, even with the acquittal, she will never feel the same again.”

The judge awarded $ 750,000 in punitive damages to the Samaroos and $ 300,000 to each of them for aggravated damages. The couple was also awarded $ 347,000 for legal fees. The total awarded to the couple comes to nearly $1.7 million.

In an emailed statement, the CRA said it “is firmly committed to responsible enforcement in order to preserve the integrity of Canada’s tax system. The CRA and the Department of Justice have 30 days to appeal the decision, from the date of the judgment. It would be inappropriate to comment further at this time.”