Mr. Harris sued Revenue Canada for allowing a wealthy family, believed to be the Bronfmans of Montreal, to transfer huge sums of money to [the USA] without paying an estimated $300- to $600-million in taxes.

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Toronto, Thursday, December 20, 2001

 

Judge scolds tax officials, but crusader loses case

By KRISTA FOSS Thursday, December 20, 2001 -- Page A1

WINNIPEG -- A Federal Court judge has scolded Revenue Canada's "sloppy practice" in its handling of controversial rulings that let a rich Canadian family move nearly $2-billion across the U.S. border without paying tax.

Nonetheless, Madam Justice Eleanor Dawson dismissed a legal challenge yesterday against the federal tax agency. It alleged that those rulings were made in bad faith and with ulterior motives.

Her decision brings to an end a five-year legal odyssey that turned 57-year-old Winnipeg bookkeeper and social activist George Harris into a folk hero for average taxpayers.

In an unusual and precedent-setting legal case, Mr. Harris sued Revenue Canada for allowing a wealthy family, believed to be the Bronfmans of Montreal, to transfer huge sums of money to a cross-border trust fund without paying an estimated $300- to $600-million in taxes. Mr. Harris argued that the family received preferential treatment.

Judge Dawson ruled there was insufficient evidence to support Mr. Harris's case, but she had plenty of criticism for Revenue Canada in her 87-page decision.

"Indeed, given the large amounts of money involved, it is astonishing that senior officials at Revenue Canada failed to keep minutes of certain meetings where crucial decisions were being made. It is axiomatic that poor practice of this sort has the potential of compromising public accountability," she wrote.

Although Mr. Harris's case failed to prove the bad faith on the part of the government that it had alleged, Judge Dawson ordered the Crown to pay him and his lawyers undetermined costs.

"I can't say I was terribly surprised," Mr. Harris said yesterday. He called the decision a moral victory for his side.

At issue for him, and the Winnipeg-based public interest group CHOICES that backed him, was whether Revenue Canada treats some taxpayers -- especially the well-heeled -- better than others.

Two advance tax rulings made while the federal Conservatives were in power allowed a family to transfer nearly $1-billion worth of trust assets to the U.S. in 1985 and then again in 1991 without paying a dime in taxes.

In 1996 the auditor-general at the time, Denis Desautels, and his staff investigated the rulings and published their findings in a report.

After reading the report, Mr. Harris, who has a degree in actuarial mathematics, took up the gauntlet. The crux of his argument was that the advance tax rulings were made in meetings held in haste behind closed doors and without documentation.

In five years of legal manoeuvres, his team scored some significant victories for public-interest litigation: They were able to obtain standing for Mr. Harris, as a citizen, in a case against the government challenging the tax treatment of another citizen. And they were able to qualify the former auditor-general as the star witness in a public-interest case.

The case finally made it to Federal Court this fall.

"From the day this litigation started, I said that all George Harris was asking was that he be given his day in court and the case be decided on its merits," lawyer Norm Cuddy said a few hours after the decision was released. "After five years that's what he has."

Judge Dawson argued that Mr. Harris's lawyers did not present enough evidence to conclude bad faith or preferential treatment on the part of the government. "Another available conclusion is sloppy practice and haste," she wrote.

But she didn't consider Mr. Harris a "busybody," as federal lawyers had called him.

"Though ultimately unsuccessful in this instance, public institutions and the confidence which they carry can only be strengthened by close scrutiny of government actors by responsible citizens," she wrote.

Mr. Harris, a man of modest means who describes himself as "anal" when it comes to filing tax returns, said that although he is through with fighting the tax system for now, his days of challenging government aren't over.

"I'm really interested in how the government does its accounting."

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 Bronfman family's mystery tax break faces Canadian trial