Docket: A-317-13Citation: 2014 FCA 243
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CORAM:
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TRUDEL J.A.
STRATAS J.A.
NEAR J.A.
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BETWEEN:
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TERRY PIERSANTI
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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 OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on October 28, 2014).
TRUDEL J.A.
[1]
This is an appeal by Terry Piersanti of a
judgment of the Tax Court of Canada rendered by V.A. Miller J. (the Judge) on
July 10, 2013 (2013 TCC 226).
[2]
Few facts are needed to understand the
appellant’s position in this appeal. In 1999, the Canada Revenue Agency (CRA)
launched an investigation under the Excise Tax Act, R.S.C. 1985, c. E-15
[the ETA] into allegations that corporations controlled by the appellant
and her spouse were not reporting the Goods and Services Tax they collected. As
part of the investigation, the CRA obtained a search warrant which it exercised
at the law firm of the appellant’s spouse – the search gave rise to numerous
proceedings in the Ontario Court of Justice that have no bearing on the outcome
of this appeal. It suffices to know that, as a result, 68 criminal charges were
laid against the appellant, her spouse, and some of the corporations they
controlled. In the end, the appellant pled guilty to 35 criminal charges under
the ETA for offences committed between 1995 and 1998.
[3]
As part of its criminal investigation, the CRA
had also issued third-party requirements for documents or information under
section 289 of the ETA. Most of the requirements concerned the
corporations but some referenced the appellant. The Minister relied on these
documents to reassess the appellant’s income tax liability under the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.) for the taxation years 1995, 1996,
and 1997.
[4]
At trial, the appellant brought a motion asking
the Judge to exclude all documents used by the Minister of National Revenue
(the Minister) in issuing the Notices of Reassessment dated November 14, 2001
on the ground that the documents were obtained without judicial authorization
during the course of a criminal investigation and in violation of her rights
under the Canadian Charter of Rights and Freedoms, Part I of the Constitution
Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c. 11
[the Charter]. The Judge dismissed the motion and upheld the
reassessments. Hence the within appeal. The appellant asks this Court to set
aside the Tax Court judgment and vacate the Notices of Reassessment. For the
reasons that follow, the appeal will be dismissed.
[5]
Before dismissing the appellant’s motion, the
Judge correctly stated that the issue before the Tax Court was “the determination of the [a]ppellant’s income tax liability
not her penal liability” (Judge’s reasons at paragraph 20). The Judge
was alive to the teachings of the Supreme Court of Canada in R v. Ling,
2002 SCC 74, [2002] 3 S.C.R. 814, decided on the principles enunciated in R.
v. Jarvis, 2002 SCC 73, [2002] 3 S.C.R. 757 [Jarvis]: a distinction
must be maintained between the administrative audit process and the
investigation of alleged criminal offences. A taxpayer’s Charter rights
are engaged when an audit becomes a criminal investigation.
[6]
Here, the Judge was asking herself whether the
appellant’s Charter rights were violated when the documents obtained
through the requirements were later used to reassess the appellant’s income tax
liability. The appellant opines that the Judge erred while framing that
question. Rather, the violation occurred when the documents were seized without
judicial authorization.
[7]
In dismissing the appellant’s motion, the Judge
relied on this Court’s recent decision in Romanuk v. The Queen, 2013 FCA
133, 455 N.R. 353 (leave to appeal to SCC refused, 35480 (November 21, 2013))
and held that the CRA could use documents obtained under its audit powers to
further an administrative matter, such as a reassessment.
[8]
Romanuk is
dispositive of this ground of appeal. In Romanuk, Webb J.A. noted
paragraph 103 of Jarvis and concluded that “…the
results [of an audit] can be used in relation to an administrative matter, such
as a reassessment”. This is what was done here. We have not been
persuaded that Romanuk is distinguishable from the present matter.
[9]
The Judge did not err in law when concluding
that the appellant’s rights under sections 7 and 8 of the Charter were
not violated by the CRA when it used the information gathered in the course of
the criminal investigation to reassess the appellant’s income tax liability for
the years in question. The Judge’s legal finding accords with Jarvis and
with the self-assessment and the self-reporting nature of the income tax
regime. Whether the CRA could properly use such documents to prosecute the
appellant for criminal offences under the ETA is irrelevant to the
current civil proceedings. A found by the Judge, whether the appellant’s Charter
rights were violated by using the information from the requirements to
prosecute the appellant under the ETA was a question for the Ontario
Superior Court of Justice where the criminal matter was heard and disposed of.
In any event, even if the appellant was right in distinguishing between the
civil audit and criminal investigation, we are all of the view that the facts
of this case, which raise at best a technical breach, do not call for a remedy
under subsection 24(2) of the Charter.
[10]
On the substance of the reassessments, the
appellant mostly takes issue with the Judge’s findings of fact. More specifically,
she argues that disbursements made by corporations she controlled should not be
included in her income since they were repayments of a loan she had made to a
family trust. The Judge did not believe the appellant and rejected this
argument (see in particular paragraphs 46, 55, 57, 58, and 60 of the Judge’s
reasons).
[11]
The appellant has failed to show that the Judge
committed any palpable and overriding error in her assessment of the evidence.
In particular, having examined the record, we are all agreed that the Judge was
entitled to conclude that the appellant had not made a personal loan to the
family trust or to corporations under her control. As a result, there was no
need for the Judge to intervene on the penalties.
[12]
Consequently, the appeal will be dismissed with
costs.
"Johanne Trudel"
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