Tax Horror Stories You Think is Impossible

Date: Sat. Feb. 5 2011 6:56 PM ET

Eli Humby is a dyed-in-the-wool Newfoundlander who started his own logging business in the early 1980s in Benton, outside Gander. Hard-working and proud, Humby isn’t one to back down from a fight. So when the Canada Revenue Agency audited Humby’s businesses in 2003, he rejected its findings.

But Humby had no idea how far the tax department would go to assert its claims. In 2005, the Newfoundland Sheriff’s Office and the RCMP, acting on behalf of the CRA, swooped in on Humby’s businesses — and seized almost all of his companies’ assets.

“They took about $1.2 million worth of assets from me. They took (the jobs of) 12 full-time employees, professional employees, put them all out the door,” recalled Humby.

The CRA effectively closed Humby’s businesses and seized his building and heavy machinery. But Humby claimed that he was never adequately notified of the impending seizure and even more importantly, Humby insisted that the CRA was wrong in its assessment of how he paid his employees.

Humby acknowledged that his logging operation, Humby Enterprises, was in arrears to the CRA due to financial distress. But the CRA audit alleged that Humby had transferred liabilities from Humby Enterprises to his two other companies, Central Springs and A& E. The tax auditors claimed that those two companies owed about $60,000, plus interest and penalties, and that triggered the seizure of the companies’ assets.

Humby’s accountant, Don Farrell, believed the CRA’s rationale was misguided. “It didn’t make sense. And we appealed it on that basis — that it didn’t make sense — and of course, the appeals were rejected,” Farrell said.

Even if Humby’s tax appeals had been accepted, it was too late to reclaim his companies’ lost assets. As he watched his life’s work disintegrate, the personal impact on Humby was devastating.

“(The CRA) destroyed (my life) completely. Completely. My life, I don’t want to say it on national TV but I don’t really care about it much anymore,” Humby said.

Nevertheless, Humby insisted on fighting his case. After the CRA seized his companies’ assets, Humby turned to his lawyer, Robert Anstey.

“They sent in a sledge hammer to kill a fly. Basically, the enforcement procedures that they took were totally drastic. Why would you go in and seize assets worth between one and two million dollars you know, to obtain $60,000?” said Anstey.

When Hubby’s appeals to the CRA were rejected, he followed protocol and took his fight to Tax Court.

And in October 2010, after a seven-year battle, a federal Tax Court judge found that the CRA’s “case was baseless” and that Humby’s companies had followed correct accounting procedures.

As part of his judgment, Justice Patrick Boyle wrote that the CRA’s seizure of Humby’s companies’ assets “appears to be a case of Collections’ actions gone awry.” The judge also called the actions of CRA Collections “unsuccessful, unauthorized and inappropriate.”

Scott Simms, the Member of Parliament for Humby’s riding of Bonavista-Gander-Grand Falls-Windsor was so concerned by the way his constituent was treated by the CRA that he added his support to Humby’s cause.

“If you only knew how much power that unelected people have in this country, you’d be scared,” said Simms.

Vindicated by the law and with the support of those around him, Humby is nevertheless still waiting to reclaim what he’s lost. But he can’t turn to the CRA or even to the recently instituted federal Taxpayers’ Ombudsman for recompense.

Paul Dub?, who was appointed as the Taxpayers’ Ombudsman three years ago, cited privacy rights for not being able to talk to W5 about Humby’s case. But Dub? did admit that the CRA makes “a lot of Canadians feel like it is a David and Goliath scenario”.

Dub? told W5 that his office has some power to effect change but is limited by what it can tell the CRA to do.

“We rely on moral suasion. We try and negotiate, we try to mediate,” Dub? said.

So, Humby is going to take his case to the Federal Court in a last attempt to get back what he claims is rightfully his. But that will provide no emotional relief as he
continues to live with his tax nightmare.

“It’s not a torment, it’s a torture. I am sure there’s a description of torture and different kinds. And CRA is nothing short of illegally  torturing people.”