Docket: A-237-13
Citation: 2014 FCA 155
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CORAM:
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DAWSON J.A.
TRUDEL J.A.
NEAR J.A.
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BETWEEN:
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JACK KLUNDERT
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Appellant
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and
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HER MAJESTY THE QUEEN
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Respondent
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REASONS FOR
JUDGMENT
DAWSON J.A.
[1]
For reasons cited as 2013 TCC 208, a judge of
the Tax Court of Canada struck out the appellant’s notice of appeal and
dismissed his appeals from reassessments made under the Income Tax Act (Act),
R.S.C., 1985 c. 1 (5th Supp.), for the 1993 through 1996 taxation years. This
is an appeal from that decision.
[2]
The relevant underlying facts were concisely
summarized by the Judge at paragraph 3 of his reasons:
The facts providing context for the issues in
dispute here are not themselves disputed. The Appellant, an optometrist
practising in Windsor, Ontario, either filed tax returns showing nil income or
failed to file tax returns between 1993 and 1997 taxation years and was
investigated by audit at first and then subject to a criminal investigation
pursuant to which a warrant for search and seizure was executed pursuant to
section 487 of the Criminal Code, R.S.C. 1985, c. C-46, as amended. The
Appellant had three trials before the Ontario Superior Court of Justice on tax
evasion, two appeals before the Ontario Court of Appeal, and leave to appeal to
the Supreme Court of Canada was denied. The third and last trial before the
Ontario Superior Court of Justice, by jury, was decided on May 20, 2010, in
which the Appellant was convicted of tax evasion under section 239 of the Income
Tax Act (the “Act”); which conviction was appealed to the Ontario
Court of Appeal which dismissed his appeal on September 12, 2011, and for which
leave to appeal to the Supreme Court of Canada was denied on April 5, 2012.
Based on the findings of this third trial, in which the Appellant was found to
have failed to report respective amounts of $241,625, $270,403, $434,931,
$254,520 and $272,910 for the years from 1993 to 1997, the Canada Revenue
Agency (“CRA”) reassessed his income taxes on exactly the same basis.
[3]
The notice of appeal filed by the appellant did
not challenge the amount of tax reassessed by the Minister, or any part of her
reassessment which would alter the amount of the appellant’s tax liability.
Rather, the notice of appeal recited a chronological narrative of events
together with bare assertions that the Canada Revenue Agency used its audit
powers to gather information for the ongoing criminal investigation. In the
result, the appellant sought a declaration that all evidence gathered using the
Canada Revenue Agency’s audit powers while his criminal investigation was
ongoing infringed rights guaranteed under the Canadian Charter of Rights and
Freedoms (Charter) and should be excluded in the Tax Court pursuant
to subsection 24 (2) of the Charter. The appellant did not advance any
argument based upon the misuse of audit powers at any point in any of the
criminal proceedings.
[4]
The Judge gave two reasons for striking the
notice of appeal and dismissing the appeal.
[5]
First, the Judge found the pleading disclosed no
cause of action; the pleading simply cited a chronology of events without any
specific allegation as to what information was improperly obtained and used.
Second, the Judge found the notice of appeal constituted an abuse of process.
[6]
I agree the notice of appeal did not disclose a
cause of action, substantially for the reasons given by the Judge. In R. v.
Jarvis, 2002 SCC 73, [2002] 3 S.C.R. 757, the Supreme Court considered the
distinction between an audit inquiry related to the administration of the Act
and an investigation that could lead to charges under section 239 of the Act.
Once the “predominant purpose” of an inquiry is related to the investigation
and prosecution of an offence, the Canada Revenue Agency can no longer use its
audit powers to gather information or documents that may be used in such
investigation and prosecution.
[7]
That said, the Supreme Court expressly confirmed
that although an investigation has been commenced, audit and administrative
powers may continue to be used in relation to the administration of the Act,
including in relation to a reassessment. See also the decision of this Court in
Romanuk v. Canada, 2013 FCA 133, 445 N.R. 353.
[8]
In the present case, beginning in January of
1996 the Canada Revenue Agency commenced using its administrative powers (such
as requirements to provide information and documents) in order to obtain
information. This was in response to taxation returns filed by the appellant, a
practicing optometrist, who reported nil income for the 1993 and 1994 taxation
years. Endorsed on the 1993 return was the notation “Collecting
income tax by the government is against the constitution of Canada”.
[9]
The appellant then failed to file returns for
the 1995 and 1996 taxation years. A return was filed in respect of the 1997
taxation year that reported nil income.
[10]
On March 31, 1999, search warrants were executed
on the appellant’s home and business premises.
[11]
Because information was obtained by both
administrative/audit processes and search warrant, it was incumbent on the
appellant to point to specific evidence that was improperly obtained. However,
no material facts were pled as to what information was improperly obtained or
in what manner it was obtained, or that improperly obtained information was
used.
[12]
I agree with the Judge that the exposition of
historical narrative combined with bare assertions results in an appeal
premised upon conjecture, speculation and innuendo.
[13]
The Judge also denied a request to amend the
notice of appeal. In my view, the Judge properly denied such request because
the proposed amendment related only to the relief requested and so would not
cure the deficient nature of the pleading.
[14]
The finding that the notice of appeal did not
disclose a cause of action was dispositive of the motion to strike. It is
therefore not necessary to consider whether the notice of appeal constituted an
abuse of process. Therefore, we neither accept nor reject the Judge’s analysis.
[15]
For these reasons, I would dismiss the appeal
with costs.
“Eleanor R.
Dawson”
“I agree.
Johanne Trudel J.A.”
“I agree.
D.G. Near J.A.”
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