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An Australian police informant who infiltrated an outlaw motorcycle gang and later became a refugee in Canada – believed to be the first Australian granted asylum by a foreign country – has launched a lawsuit against Canadian officials, alleging that the drawn-out process of seeking asylum left him in legal limbo for years.

The $2.55m lawsuit, filed in Canada’s federal court in June, is directed at the country’s immigration department, the Canada Border Services Agency (CBSA) and two officers involved in the file.

Related: Bandidos informant granted refugee status by Canada after cover blown in Australia

Stevan Utah said Canadian officials took nearly a decade to decide on his asylum claim, a process that was initially hindered by their failure to consider his case seriously. “When I first came here, the CBSA not only could not believe that a white Australian could be a refugee, they wouldn’t entertain it,” Utah told the National Post.

He fled Australia in 2006, after facing attempts on his life by the Bandidos bikie gang.

Canadian officials accepted his asylum claim last year, noting that Utah appeared to have been abandoned by authorities in Australia after his cover was blown. In their decision, Canada’s refugee board noted Utah would likely face “a serious risk to his life” if he returned to Australia.

Months later he filed a legal challenge accusing Canadian officials of “pure, sheer incompetence” that saw his asylum request stretch into a years-long odyssey.

“We say that was negligent at the very least and as a result he has suffered because he has been in this legal limbo, if you like, for that period of time,” William Klym, one of Utah’s lawyers in Canada, told the National Post.

As he waited years for his asylum application to be heard, Utah did not have permission to work, open a bank account, obtain a driver’s license or access health care, according to court documents. Utah claims the situation left him battling post-traumatic stress disorder as well as depression.

The lawsuit seeks $1.35m in damages for lost income, $1m in general and punitive damages and a further $200,000 linked to the effects on his mental health, according his lawyer. “It’s not (supposed) to be a process where somebody is left on ice for nine and a half years,” said Klym.

The Canadian government has countered that Utah’s criminal history, which included involvement in an Australian murder case and fraud charges in Canada that were later withdrawn, required officials to carry out a comprehensive investigation before his application could be considered.

According to Duncan McNab, who documented Utah’s story in the book Dead Man Running, Utah was never a full member of the Bandidos, but knew the Australian national president of the club, making him a valuable source of information for authorities.

In 2000, McNab said Utah arrived on the scene shortly after a 54-year-old man had been killed by Bandidos members. According to McNab, Utah helped dump the body some 1,000km away.

In 2004, Utah was charged with the murder, but the charges were later dropped. Utah later led investigators to the body of the man, joining forces with police to infiltrate the Bandidos network, said McNab.

In their statement of defence, Canadian officials said it took them until August 2009 to confirm that no further charges would be laid against Utah in connection with the killing.

The process was again delayed soon after, this time over multiple fraud charges Utah was facing in Canada, according to court documents. The charges were later withdrawn after “restitution was paid”, the statement of defence noted.

The Canadian government argued that the years-long timeline was inevitable. “Given the complexity of the plaintiff’s situation, his claims that his life was at risk, and the ongoing criminal investigations and charges and previous criminal history their actions were justified,” the statement of defence alleges.