Executive Summary: Key Legal and Evidentiary Issues

• Motion to strike addressed whether the plaintiff’s negligence claim against the Canada Revenue Agency (CRA) disclosed any reasonable cause of action under Rule 221(1) of the Federal Court Rules.

• The plaintiff, Paul James Medhurst, an undischarged bankrupt, alleged that the CRA’s delay in processing his 2024 personal income tax return caused him to be denied eligibility for government dental benefits and led to stress and deterioration of his physical and mental well-being.

• Materials filed on the motion included a bankruptcy search showing that the plaintiff made a second assignment into bankruptcy on July 18, 2024 and is not yet eligible for discharge, and a Notice of Discontinuance signed by the trustee in bankruptcy but not by the plaintiff, who opposed discontinuance.

• The central legal issue was whether the CRA owes a private law duty of care to individual taxpayers, with the court relying on decisions such as Grenon v Canada Revenue Agency and Oddi v Canada (Revenue Agency) that reject the existence of such a duty.

• Policy considerations against recognizing a duty of care included the self-reporting nature of the income tax system, the broad powers granted under the Income Tax Act to supervise assessment and auditing, the opposing interests of CRA and taxpayers, and concerns that a duty might impede CRA’s functions or chill the work of its officers.

• The court granted the defendant’s motion, struck the Statement of Claim in its entirety without leave to amend, dismissed the action, and made no order as to costs given the plaintiff’s status as an undischarged bankrupt already facing financial stress.

Facts and outcome of the case
The case involved a proceeding brought by the plaintiff, Paul James Medhurst, against His Majesty the King in Right of Canada, as represented by the Attorney General of Canada. The plaintiff is an undischarged bankrupt who commenced an action alleging that the Canada Revenue Agency was negligent in processing his 2024 personal income tax return. He pleaded that he filed the 2024 return on April 16, 2025 through his trustee in bankruptcy and that, as of September 9, 2025, the CRA had not processed or completed the return. He stated that the return was straightforward and that the CRA’s failure to process it within nearly five months was “unreasonable and negligent.” The plaintiff further alleged that this alleged negligence caused him to be denied eligibility for government dental benefits and caused him stress as well as deterioration of his physical and mental well-being. The defendant disputed the plaintiff’s account and submitted that the 2024 return was not filed in April 2025 as alleged, but was refiled in July 2025 due to incorrections in the initial return, and that the CRA completed processing the return sometime in September 2025, shortly after the Statement of Claim was filed. The defendant’s motion record included a Bankruptcy and Insolvency Search result confirming that the plaintiff assigned into bankruptcy on July 18, 2024 as a second-time bankrupt and is not yet eligible for a discharge, and a Notice of Discontinuance for this matter signed by the plaintiff’s trustee in bankruptcy on October 13, 2025. The plaintiff, who does not consent to discontinue the action, did not sign the Notice of Discontinuance.

Legal issues and arguments on negligence
On the motion, the defendant asked that the Statement of Claim be struck out in its entirety. The defendant argued, among other things, that the plaintiff is an undischarged bankrupt and does not have legal capacity to commence the action, and that the Statement of Claim discloses no reasonable cause of action, is frivolous, vexatious, and otherwise an abuse of process under Rule 221(1) of the Federal Court Rules. The defendant also sought, in the alternative, an extension of time to serve and file its Statement of Defence and an order that the plaintiff be represented by a solicitor under Rule 121. The plaintiff, while not disputing that he is an undischarged bankrupt, submitted that his personal rights of action do not vest in his trustee in bankruptcy because his claim is personal in nature, and he cited Biron v Canada in support of that position. He also submitted that the Statement of Claim discloses a reasonable cause of action. In addressing the negligence claim, the defendant argued that the plaintiff must first establish that the CRA owes him a duty of care and submitted that case law confirms that the CRA does not owe a private law duty of care to taxpayers. The plaintiff argued that the standard of care is reasonableness, contending that a straightforward return filed in April should have been processed by May or June at the latest and that waiting until September to process a “two-slip” return is prima facie unreasonable, particularly where the defendant provided no justification for the delay.

Court’s analysis of the CRA’s duty of care
The court characterized the determinative issue as whether the plaintiff’s Statement of Claim discloses a reasonable cause of action and focused its analysis on the duty of care question. The court accepted the defendant’s submission that the CRA does not owe a private law duty of care to taxpayers and relied on jurisprudence, including Grenon v Canada Revenue Agency. In Grenon, the Alberta Court of Appeal confirmed that the CRA does not owe a private law duty of care and rejected an approach that would create a duty based on the size of monetary penalties, noting that a duty owed to all raises the spectre of indeterminate liability and other policy concerns. The court summarized the policy considerations listed in Grenon, including that the income tax system relies on self-reporting by taxpayers, that the Income Tax Act grants the Minister of National Revenue and delegates broad powers in supervising assessment and auditing, and that the CRA and taxpayers have opposing interests such that CRA auditors should not be responsible for protecting taxpayers from losses arising from their assessments. The court also relied on Oddi v Canada (Revenue Agency), where the Anns/Cooper framework was applied to determine whether a negligence claim against the CRA should be dismissed. In Oddi, it was noted that the first step of the Anns/Cooper analysis is to identify whether a duty of care has already been recognized or is analogous to previous cases, and that the jurisprudence supports the conclusion that the CRA does not owe a duty of care to taxpayers. The court highlighted that Oddi found the statutory framework in the Income Tax Act does not impose a duty of care, that Canadian courts have repeatedly held there is insufficient proximity between CRA officers performing administrative functions and taxpayers to ground a duty of care, and that recognizing a duty could impede the CRA from ensuring all taxes are lawfully owing and correctly assessed and collected and risk a chilling effect on CRA auditors and collections officers.

Ruling and overall outcome
The court concluded that the plaintiff’s submissions, although well-articulated, did not overcome the central obstacle that the CRA does not owe him a private law duty of care. In the absence of such a duty, the plaintiff’s negligence claim could not succeed. The court therefore found that the plaintiff’s Statement of Claim discloses no reasonable cause of action and ordered that the Statement of Claim be struck in its entirety. In the formal order, the court granted the defendant’s motion, struck the Statement of Claim in its entirety without leave to amend, and dismissed the action. The defendant requested costs for the motion, but the court declined to award costs, noting that the plaintiff is an undischarged bankrupt already facing much financial stress and that he did not have funds to pay a notary to commission his affidavit, which the court allowed him to refile as written representations. As a result, there was no order as to costs, and the successful party in the proceeding was the defendant, His Majesty the King in Right of Canada, as represented by the Attorney General of Canada.