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Leroux's tax odyssey comes to an end

A Prince George businessman's long-running legal battle with the Canada Revenue Agency wrapped up Friday with both sides agreeing to drop their appeals of a B.C. Supreme Court ruling.
Irvin Leroux on the steps of the Prince George Law Courts Tuesday morning. Citizen photo by Brent Braaten April 24 2013

A Prince George businessman's long-running legal battle with the Canada Revenue Agency wrapped up Friday with both sides agreeing to drop their appeals of a B.C. Supreme Court ruling.

Irvin Leroux had been seeking as much as $4 million in damages and court costs through the appeal. Instead, he is to pay CRA the nominal sum of $10 for its court costs under the agreement accepted by the B.C. Court of Appeal.

However, the agreement leaves intact B.C. Supreme Court Justice Mary Humphries' finding that CRA breached the expected standard of care in its assessment of penalties for alleged income tax violations.

The Canadian Taxpayers Federation, which stepped in to help Leroux defray the costs of his appeal, declared that aspect of the outcome a victory for taxpayers in general.

"It's sad that Irv isn't getting compensated for his losses, but he's a real hero for having fought this battle for 19 years," said CTF B.C. director Jordan Bateman in a press release. "All taxpayers across Canada owe Irv a thank you for sticking it out for so long to get the duty of care ruling."

Humphries' decision, issued in May, amounted to only a partial victory for Leroux.

While she found CRA had breached its duty of care, Humphries concluded Leroux failed to show a link between the negligence and the loss of his business and home.

In 1999, the Minister of National Revenue advised Leroux that he owed over $600,000 in taxes, interest and penalties. Leroux appealed the outcome to the Tax Court of Canada and, in 2005, it reduced the penalty to $57,000.

And after some payments and a "fairness application," all interest and penalties were canceled and Leroux was issued a refund of about $25,000.

But in the meantime, Leroux said he "lost everything."

Leroux had been trying to establish an RV park and an 11-lot subdivision on 160 acres of land along Highway 5 near Valemount.

While he tried to obtain financing from all the banks in Prince George, only the Business Development Canada, with its mandate to assist small businesses, would advance money to him.

Leroux ran into problems making payments to BDC and had intended to sell the subdivision lots to cover those costs and contended that once the CRA judgments were registered against the property, he could not do so.

However, Humphries noted that BDC had advised Mr. Leroux of difficulties with his mortgage in October 2000 and had sent a demand letter in November 2000.

"Thus the problems with BDC over the mortgage on the RV park were well underway before the income tax judgment was registered in July of 2001," Humphries said in her decision.

"Even if there were a link, and the filing of the income tax judgment did lead BDC to foreclose, there was no loss caused by the filing of the judgment that could not have been completely prevented by Mr. Leroux filing an appeal on his income tax assessment.

"Filing an appeal would have prevented any collections actions, including the filing of the judgment, but Mr. Leroux did not file his appeal for 18 months, until February of 2002."

Humphries also found that while the CRA breached its duty of care on its assessment of Leroux's income taxes, it did not do so in its assessment of his goods and services tax payments.

Following Humphries' decision, Leroux filed an appeal seeking damages while the CRA filed a cross appeal seeking court costs and to have Humphries' decision on duty of care overturned.

"I'm so grateful that this 19-year battle is over and that there is now an avenue that Canadian taxpayers have to hold the CRA accountable if the CRA causes them harm or loss," Leroux said in the CTF's press release.