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The Canada Revenue Agency does not owe a private law duty of care or common law indemnity to taxpayers for costs incurred contesting administrative tax audits.
Jayco, Inc. appealed the dismissal of its action against the Canada Revenue Agency (CRA) and Her Majesty the Queen in Right of Canada.
Jayco sought recovery of legal costs and interest incurred while successfully contesting a GST/HST assessment.
The claims were based on theories of common law indemnity (as a statutory agent under the Excise Tax Act) and private law duty of care (negligence) owed by the CRA during an audit.
The Court of Appeal dismissed the appeal, affirming that no common law right to indemnity exists for statutory agents in this context, nor does the CRA owe a private law duty of care to taxpayers during administrative audits, distinguishing such audits from criminal investigations.
Motion to strike granted; CRA owes no private law duty of care to taxpayers during audits.
The plaintiff, a U.S. business registered to collect HST, successfully appealed a $14 million CRA tax assessment but incurred over $1.4 million in interest and professional fees.
The plaintiff sued the government for indemnity and negligence, alleging the CRA acted in bad faith during the audit.
The defendants moved to strike the statement of claim.
The Superior Court of Justice granted the motion, finding that neither the common law nor the Excise Tax Act provides a right to indemnity for such costs, and that the CRA does not owe a private law duty of care to taxpayers or tax collection agents during an audit.
