The Second Opinion: CRA Officials May Be Liable For Negligent Investigation

In an interesting new judgment released yesterday, the Ontario Court of Appeal refused to strike out a claim involving allegations of negligent investigation against officials of the Canada Revenue Agency ("CRA"). The decision in McCreight v. Canada (A.G.), 2013 ONCA 483 holds that CRA investigators may owe a duty of care to suspects under investigation for criminal misconduct, even if those suspects are not the taxpayers themselves.

Background

McCreight involved claims by two accountants who, together with their corporate clients, had been investigated by the audit department of the CRA. The CRA's concern was that the corporate taxpayers, with the help of the appellants, had applied for fraudulent research and development tax credits. From 1998-1999, the lead CRA investigator obtained warrants to search their homes and businesses, and seized numerous documents which the CRA was authorized to retain until July, 1999.

The CRA did not complete its investigation by July, 1999, and applied for a judicial extension of the warrants, which was denied. Rather than return the documents, the lead CRA investigator obtained approval from the Department of Justice to charge the appellants and their clients...