Bergeron,
J:—This
Court
is
seized
with
an
appeal
by
the
Crown,
under
Part
XXIV
of
the
Criminal
Code,
from
a
judgment
rendered
on
December
14,
1982,
by
the
Court
of
the
Sessions
of
the
Peace
of
Montreal,
acquitting
respondents
of
a
summary
conviction
charge
reading
(as
later
amended
during
the
trial);
as
follows:
REDPATH
INDUSTRIES
LIMITED,
LES
INDUSTRIES
REDPATH
LIMITÉE
(formerly
Canada
and
Dominion
Sugar
Company
Limited
of
One,
Westmount
Square,
Suite
1212,
Montreal,
Quebec,
and
DOMINION
SUGAR
COMPANY
LIMITED,
of
285
Merritt
Avenue,
Chatham,
Ontario,
between
October
1,
1966
and
April
1,
1971,
at
Montreal,
District
of
Montreal,
in
the
Province
of
Quebec,
and
elsewhere
in
Canada,
wilfully
evaded
the
payment
of
taxes
imposed
by
the
Income
Tax
Act.
RSC,
1952,
Chapter
148
and
its
amendments,
for
taxation
years
1967
to
1971,
both
inclusive,
to
wit,
by
omitting
to
declare
in
their
income
tax
return:
taxable
income
of
$7,404,635.97,
thereby
evading
payment
of
$3,036,857.91
in
income
tax,
committing
thereby
an
offence
contrary
to
Section
239(1)(d)
of
the
said
Act.
(The
emphasis
on
the
word
“taxable”
is
mine
as
representing
the
amendments
brought
by
its
addition
in
the
course
of
the
presentation
of
the
defence.)
For
the
sake
of
abbreviation,
I
shall
refer
to
various
parties
involved
as
“Red-
path”
for
Redpath
Industries
Ltd,
to
“Dominion”
for
Dominion
Sugar
Limited,
a
wholly
owned
subsidiary
of
Redpath;
to
“T
&
L”
for
Tate
and
Lyle
Limited
of
London,
England
(holding
company)
as
the
parent
company
of
Redpath
—
I
shall
also
refer
to
Redpath’s
affiliated
company,
incorporated
in
Bermuda,
Albion
Company
Limited,
as
“Albion”.
As
already
noted
and
emphasized,
the
original
charge
of
“omitting
to
declare
income”
was
later
amended,
at
the
request
of
the
Crown
and
at
the
defence
stage,
by
judgment
of
the
trial
Court,
over
the
objections
of
the
defence,
by
adding
the
word
“taxable”
to
the
word
“income”.
For
what
it
would
have
been
worth
for
the
sake
of
clarity
and
to
reflect
the
true
nature
of
the
charge,
if
such
a
charge
exists
in
law,
and
in
view
of
the
tax
returns
filed
and
their
manner
of
filing
and
the
evidence
adduced,
it
might
have
been
more
factual
to
couch
the
information
and
state
in
the
charge
“by
omitting
to
declare
income
as
taxable
income”.
In
fact,
and
as
it
was
duly
demonstrated,
respondents
did
declare
income
of
some
$7,400,000,
indicating
its
source,
nature
and
origin,
eg,
in
the
form
of
dividends
received
from
a
non-Canadian
non-resident
corporation,
Albion,
of
Bermuda,
indicating
that
such
a
company
was
affiliated
to
respondents
in
a
non-arm’s
length
capacity,
and
respondents
claiming,
in
their
annual
returns,
a
tax
exemption
under
paragraph
28(1
)(d)
of
the
ITA,
as
it
then
existed,
for
the
period
of
five
years,
1967
to
1971
inclusively.
Before
entering
into
the
merit
of
the
case
and
because
there
exists
here
no
discussion
as
to
the
fact
that
total
income,
exact
almost
to
a
penny,
was
duly
declared
as
to
its
source
and
nature
and
an
exemption
claimed,
it
does
call
for
a
quick
examination
of
the
general
concept
of
fiscal
legislation
regarding
income,
the
duties
and
rights
it
imposes
and
confers
on
both
parties,
the
taxpayer
and
the
National
Revenue
and
the
basic
principles
normally
applied
and
followed
in
matters
of
taxation.
The
main
thrust
of
the
Act
is
to
compel
the
taxpayer
to
declare
his
income,
no
matter
what
the
source
may
be,
and
the
taxpayer
has
no
choice
but
to
declare
it
as
faithfully
as
his
activities
engendered.
In
doing
so,
he
is
entitled
to
take
into
account
whatever
exemptions
are
recognized
by
the
Act
and
he
may
claim
the
benefit
of
such
exemptions
in
his
tax
return.
The
Revenue,
upon
such
disclosure,
may
not
agree
with
the
taxpayer’s
exemptions
claim
and
may
move
to
reject
such
claim
by
notice
of
assessment,
opening
the
door
to
legal
civil
proceedings
to
be
decided
on
the
merit
of
the
respective
contentions
of
the
parties
by
the
Appeal
Board
and
the
Exchequer
Court
(for
the
years
involved),
later
on
by
the
Tax
Appeal
Board
(now
the
Tax
Court
of
Canada)
and
the
Federal
Court.
These
authorities
constitute
the
forum
where
adverse
contentions
are
debated
as
to
taxability
or
not.
The
obligation
to
declare
his
revenue
on
the
part
of
the
taxpayer
is
unquestionable
and
wilful
failure
to
do
so
may
entail
the
commission
of
an
offence
of
evading
compliance
with
the
Act,
which
is
not
to
be
confused
with
an
avoidance
of
tax.
The
case
law
is
replete
with
prosecution
for
failure
to
declare,
but
it
is
worth
noting
that
in
regard
to
a
charge
of
tax
evasion,
not
a
single
reported
case
could
be
found
based
on
wilful
omission
to
declare
income
such
as
in
the
present
case
where
the
total
income
is
declared,
and
declared
as
non-taxable
by
virtue
of
exemption
simultaneously
claimed
in
tax
returns.
This
mutism
in
the
case
law
seems
to
me
to
stem
from
logic
in
that,
once
a
total
income
is
duly
declared,
whatever
qualifications
are
attached
to
it,
the
taxpayer
has
satisfied
his
main
and
principal
obligation.
He
may
wrongly
claim
an
exemption,
possibly
opening
the
way
to
other
recourses
if
the
exemption
claim
is
tainted
with
fraud,
etc,
but
the
necessary
element
for
an
offence
of
omission
to
declare
is
not
present
to
support
a
charge
of
that
nature.
We
have
to
deal
here
with
a
specific
charge
of
“failure
to
declare”
and
not
with
the
manner
in
which
an
exemption
was
claimed
in
tax
returns,
since
it
is
clear
from
the
record
that
a
true
and
exact
income
was
admittedly
reported.
A
criminal
court
is
not
the
forum
to
determine
income
taxability
and
to
make
determinations
as
to
rights
to
tax
assessment
or
absence
of
rights
of
assessment
involved.
In
a
tax
evasion
charge,
it
must
appear
prima
facie
from
the
evidence
that
the
taxability
is
clear-cut,
obvious,
indisputable,
unquestionable
from
lack
of
reporting,
before
entering
the
examination
of
the
other
facts
of
the
charge,
eg,
whether
the
undisputable
taxability,
based
on
income
gained,
proven
and
undeclared,
leads
to
a
conclusion
beyond
reasonable
doubt
that
it
was
wilfully
omitted
by
a
taxpayer
in
his
tax
returns.
If
such
basis
is
not
present
and
there
exists
an
obligation
to
enter
into
the
examination
of
the
merit
of
a
possible
assessment
in
respect
of
a
declared
income
in
order
to
weigh
whether
a
taxpayer
is
susceptible
to
taxation
or
not,
may
or
may
not
take
advantage
of
claimed
exemptions,
a
criminal
court
usurps
its
function
and
appropriates
itself
of
a
jurisdiction
which
it
does
not
possess.
We
are
faced
in
this
instance,
with
a
strict
problem
of
taxability,
originating
from
the
creation
of
an
affiliated
company,
a
foreign
offshore
corporation,
a
device
widely
used
over
more
than
the
last
half
century
by
numerous
large
and
multinational
corporations
to
conduct
some
of
their
international
commercial
operations
and
as
a
means
of
recuperating
tax-free
dividends,
due
to
a
certain
elasticity,
if
not
to
say
laxity,
in
the
Canadian
legislation
as
it
then
existed.
The
case
law
abounds
with
instances
where,
in
taxation
matters,
the
Revenue
Department
has
constantly
frowned
upon
the
practice
and,
not
seeing
eye
to
eye
with
the
taxpayer’s
exemption
claims,
has
on
multiple
occasions
set
the
civil
machinery
in
motion
to
contest
the
validity
of
the
exemption
claim
pursuant
to
a
declaration
so
qualified
by
the
taxpayer;
in
all
such
cases,
always
introduced
in
civil
jurisdictions,
the
Revenue
has
often
relied
on
the
theory
of
“sham”,
an
artifice
to
camouflage
the
true
nature
of
a
taxpayer’s
operations
through
a
corporate
dummy
or
puppet.
But
never,
as
well
as
I
could
ascertain,
has
a
criminal
prosecution
been
instigated,
based
on
a
totally
declared
income
couched
in
returns
duly
filed
as
required
by
law
but
qualified
by
direct
and
unequivocal
indications
of
the
source
and
nature
of
the
income,
and
the
dispositions
of
the
law
on
which
the
taxpayer
relies
to
claim
tax
exemption.
If
the
true
income
has
been
declared,
what
opposite
views
the
parties
may
adopt
as
to
their
respective
merit,
should
not
be
the
concern
of
a
criminal
court,
but
that
of
civil
tribunals,
and
the
matter
could
end
right
there
as
far
as
an
information
for
“failure
to
disclose”
is
concerned.
However,
it
would
not
be
fair
and
just
to
the
parties
and
counsels,
who
not
only
went
through
an
original
lengthy
criminal
trial,
scrutinized
some
nine
volumes
of
transcript
evidence,
hundreds
of
documentary
exhibits,
filed
voluminous
arguments,
notes,
submissions
of
considerable
jurisprudential
authorities
and
further
verbally
argued
before
this
Court
for
a
period
of
more
than
two
and
a
half
weeks,
if
I
did
not
summarize
the
facts
and
the
principles
of
law
involved
so
as
to
determine
whether
in
some
criminal
fashion
and
as
per
the
information
charged,
a
mandatory
or
prohibitive
disposition
of
the
ITA
has
been
infringed.
Redpath
is
and
has
always
been
a
sugar
refiner
buying
at
large
throughout
the
world,
raw
sugar,
96
per
cent
pure,
for
the
purpose
of
refining
and
eventual
sale
for
Canadian
consumption.
It
is
not
a
sugar
trader
per
se,
eg,
to
simply
buy
and
sell
sugar
in
its
original
form.
Dominion
is
a
wholly
owned
subsidiary
of
Redpath,
a
paper
corporation
with
a
capitalization
of
$500,
kept
on
the
shelf
and
totally
inactive
until
the
incorpo-
ration
of
Albion;
its
sole
activity
thereafter
was
to
become
a
sometime
assignee
of
dividends
received
by
Redpath
from
Albion.
Throughout
the
1950s,
Redpath
incurred
substantial
commercial
and
financial
losses
mainly
through
lack
of
expertise
in
the
world
sugar
market.
T
&
L,
of
London,
a
sugar
trading
corporation,
if
not
the
largest
such
trader
worldwide,
with
36
subsidiaries
and
dealing
with
some
fifty
countries,
took
an
interest
in
Redpath
and
acquired
a
56
per
cent
interest
in
Redpath,
becoming
thereby
its
largest
shareholder
having
final
word
on
the
destiny
of
Redpath,
leaving
Redpath
with
wide
latitude,
through
its
own
board
of
directors
on
matters
of
day-to-day
policy,
but
holding
the
high
hand
on
matters
of
worldwide
policy.
Sometime
during
the
year
1966,
the
events
took
a
turn.
Whereas
Redpath
had
become
flourishing
and
showed
profits,
T
&
L
went
through
a
period
of
shortage
in
its
liquidity
position.
Various
means
and
ways
were
explored
in
order
to
restore
T
&
L’s
liquidity
position.
Firstly,
a
loan
by
Redpath
to
T
&
L
was
considered;
it
was
discarded
due
to
possible
obstacles
which
might
be
raised
by
the
British
currency
control
authorities
in
case
a
loan
recall
on
short
notice
should
be
needed
and
exercised
by
Redpath
and
also
due
to
the
uncertain
situation
of
the
currency,
the
English
pound
undergoing
fluctuations
and
presenting
dangers
of
devaluation.
The
examination
of
other
possibilities
then
veered
unto
another
avenue,
a
proposal
by
which
Redpath
would
acquire
ships
from
another
subsidiary
of
T
&
L,
such
purchase
providing
fresh,
much
needed
and
important
funds
to
T
&
L,
this
purchase
to
encompass
a
charter
arrangement
or
lease-back
of
the
ships
to
the
vendor
subsidiary
company.
This
second
avenue
did
not
materialize
in
its
original
concept,
although
steps
had
been
taken
and
approved
by
the
English
authorities
concerned;
it
did
however
materialize
at
a
later
date
after
the
incorporation
of
Albion,
but
by
Albion
going
through
with
the
ship-charter
deal
with
a
T
&
L
subsidiary
quite
outside
the
intervention
of
Redpath.
While
these
avenues
were
being
explored,
a
third
one
was
envisaged,
eg,
the
formation
of
an
offshore
corporation,
preferably
in
Bermuda,
due
to
the
absence
or
near
absence
in
that
country
of
income
tax
legislation.
Important
Canadian
tax
specialists
were
consulted,
to
ascertain
the
requirements
to
be
met,
in
order
to
take
advantage
of
fiscal
exemptions
under
the
Canadian
ITA.
All
aspects
of
the
proposed
incorporation
were
thoroughly
couched,
as
outlined
in
the
tax
experts’
advice,
T
&
L
wanting
to
make
sure
that
the
proposed
plan
would
be
completely
above-board
and
in
no
way
contravening
any
dispositions
of
the
law,
in
a
lengthy
memorandum
emanating
from
T
&
L
dated
November
11,
1966
and
filed
as
exhibit
E-17
and
entitled
“Proposed
Bermuda
Corporation”.
Another
internal
memorandum,
addressed
by
a
Mr
Dennis,
manager
of
the
purchasing
department
of
Redpath,
to
London,
on
November
24,
1966
(exhibit
E-38)
amplifies
on
the
former
memorandum
by
setting
the
factual
procedure
which
would
be
used
to
implement
the
proposed
offshore
corporation’s
day-to-day
operations
that
would
ensue.
It
is
plain
as
day,
without
any
hiding
whatsoever,
that
the
whole
purpose
and
intent
of
the
proposed
plan,
was
to
take
advantage
of
the
existing
stipulations
of
the
ITA,
leading
to
tax
exemptions
under
paragraph
28(l)(d),
while
staying
within
the
confines
of
what
was
legal
and
permissible.
The
experts,
in
their
advice,
may
have
even
seemed
overcautious
in
indicating
the
needed
requirements;
in
outlining
first,
as
was
true
and
exact,
the
necessity
of
creating
a
bona
fide
offshore
corporation
subscribing
therein
at
least
25
per
cent
of
its
voting
stock
but
seeming
to
place
a
maximum
limitation
of
50
per
cent
to
such
subscription,
whereas
no
such
limitation
existed
in
the
ITA.
They
further
advised,
having
probably
in
mind
the
character
of
residency
which
may
attach
to
Albion,
if
conducting
business
in
Canada,
through
intermingled
management
and
control
by
various
directors
and
officers
acting
in
one
of
the
other
corporations
and
Albion
becoming
thereby
susceptible
of
taxation
in
Canada,
that
care
should
be
taken
that
management
and
control
of
Albion
be
confined
to
Bermuda.
Again,
this
aspect
of
local
management
and
control
is
not
the
subject
of
a
requirement
of
the
law,
keeping
in
mind
however
that
if
it
should
lead
to
a
factual
situation
whereby
management
and
control
were
exercised
in
Canada,
the
legal
consequences
would
be
to
possibly
open
the
way
to
fiscal
recourses
against
Albion,
a
corporation
which
is
not
the
object
of
the
present
recourse.
The
original
concept
in
creating
Albion,
was
to
funnel
through
it
the
operations
in
respect
to
raw
sugar
purchases
by
Redpath,
in
order
to
satisfy
its
needs
as
a
sugar
refiner,
in
accordance
with
a
day-to-day
schedule
based
on
its
inventory
position.
The
ship-charter
aspect,
however,
was
altogether
present
as
well
as
the
use
of
Albion
as
a
raw
sugar
trader
at
large,
on
a
very
sophisticated
market,
involving
purchases
on
the
“Spot”
market,
dealings
in
“futures”
based
on
paper
transactions
as
would
exist
on
the
commodities
market,
buying
and
selling
“short”
and
“long”
on
the
terminal
market,
eg,
on
a
term
basis
without
actual
and
physical
sugar
deliveries.
One
must
remember,
that
in
the
sugar
world,
there
exists
a
daily
price
setting
for
sugar,
determined
by
traders
and
brokers,
meeting
every
day
and
agreeing
as
to
price
remaining
valid
for
24
hours.
It
is
a
recognized
norm
called
LDP,
or
London
Daily
Price.
Once
a
buyer
agrees
on
a
physical
purchase,
of
sugar,
the
price
that
he
binds
himself
to
pay
is
the
one
set
by
the
LDP
or
“Spot”
market.
It
has
great
importance
on
the
determination
of
the
various
activities
of
Albion,
of
its
true
character
and
functions
over
a
five-year
period;
the
evidence
shows
that
Albion
did
not
limit
itself
to
being
solely
a
purchaser
for
resale
of
raw
sugar
to
meet
the
requirements
of
Redpath
at
a
price
determined
by
an
external
agency,
but
engaged
in
the
business
of
sugar
trading
at
large,
involving
a
high
degree
of
speculation,
with
expectations
of
profit
making
but
with
the
risks
of
losses
which
at
times
did
occur,
and
important
ones
as
reflected
on
Albion’s
financial
statements,
these
losses
eventually
having
an
influence
on
the
dividend
to
its
shareholders.
Redpath,
on
the
other
hand,
by
virtue
of
its
objective
to
operate
as
a
sugar
refiner,
was
not
expected
to
enter
into
the
field
of
a
sugar
trader
at
large,
and
incur
the
risks
involved
in
such
a
trade,
and
therefore
confined
its
own
activities
to
the
refining
aspect
for
resale.
Also
shown
by
the
evidence,
there
were
two
additional
facets
in
which
Albion
engaged
in
way
of
commercial
activities,
and
in
which
Redpath
was
not
connected.
One
consisted
in
the
purchase
of
two
ships
by
Albion,
from
a
T
&
L
subsidiary,
Sugar
Line
Limited,
for
a
price
close
to
$4,000,000,
involving
a
charter-
back
agreement.
With
the
rights
and
obligations
involved,
particularly
as
regards
third
parties,
it
can
hardly
be
said,
in
this
regard,
that
the
identity
of
Albion
was
fused
with
the
identity
of
respondents.
A
third
aspect
of
Albion’s
income
producing
operations,
consisted
in
portfolio
investments,
again
totalling
hundreds
of
thousands
of
dollars,
by
way
of
term
deposits,
in
England,
Bermuda
and
Canada.
All
of
Albion’s
various
activities
are
fully
substantiated
by
voluminous
documentary
evidence
regarding
each
and
all
transactions,
concerning
the
four
facets
of
its
commercial
operations,
physical
raw
sugar
purchases
for
Redpath,
raw
sugar
trading
at
large,
ship-charter
and
investment
dealings.
The
whole
tenor
of
the
prosecution
thesis
is
to
the
effect
that
Albion
was
a
mere
“sham”
or
puppet
standing
for
Redpath,
which
used
it
as
a
vehicle
to
camouflage
its
own
personal
operations,
Redpath
being
at
all
times
and
in
every
respect
the
Deus
ex
machina,
Albion’s
every
dealing
being
that
of
Redpath
acting
behind
the
scene
through
a
fictitious
dummy.
The
Crown
draws
a
parallel
with
the
Dominion
Bridge-Span
case
([1975]
CTC
263;
75
DTC
5150),
a
civil
matter
decided
in
1975,
four
years
after
the
period
involved
in
the
present
instance,
by
the
Federal
Court,
both
in
the
first
Court
and
in
appeal,
on
a
strict
factual
basis
that
Span
was
a
“sham”
offshore
corporation
fictitiously
created
for
the
sole
purpose
of
acting
as
an
apparent
purchaser
of
offshore
steel,
for
resale
to
its
one
and
only
customer,
Dominion
Bridge,
at
a
price
higher
than
its
costs,
the
profit
derived
from
the
operation
flowing
back
to
Dominion
Bridge
as
dividends
which
were
then
declared
as
tax
free.
The
evidence
adduced
in
the
Dominion
Bridge
case
may
offer
a
number
of
similarities
with
the
case
at
hand,
such
as
regards
the
creation
of
an
offshore
corporation,
little
or
no
management
and
control
by
the
offshore
company
within
the
confines
of
the
Bahamas,
every
move
being
directed
by
its
parent
company,
absence
of
a
real
place
of
business
except
a
pied-à-terre,
absence
of
private
telephone
service
and
staff,
etc.
In
order
to
decide
on
the
factual
grounds
of
the
case,
the
Federal
Court
queried
itself
on
six
aspects
leading
to
conclusions
that
the
business
of
the
offshore
corporation
was
a
“sham”:
1.
Who
was
really
carrying
on
the
business?
2.
Were
the
persons
conducting
the
business
appointed
by
the
parent
company?
3.
Was
the
company
the
head
and
the
brain
of
the
trading
venture?
4.
Did
the
company
govern
the
adventure,
decide
what
should
be
done
and
what
capital
should
be
embarked
on
the
venture?
5.
Did
the
company
make
the
profits
by
its
skill
and
direction?
6.
Was
the
company
in
effectual
and
constant
control?
All
these
aspects
being
present,
the
Court
then
attached
itself
to
the
facts
of
the
case,
to
reach
a
decision
that
Span
was
a
“sham”.
However,
caution
must
be
exercised
not
to
extend
the
presence
of
the
above
criteria
as
being
conclusive
per
se
of
the
existence
of
a
“sham”.
As
observed
by
Cattanach,
J,
in
Denison
Mines
Ltd
v
MNR,
[1971]
CTC
640;
71
DTC
5375,
with
whom
I
agree,
they
are
criteria
that
are
helpful
in
determining
the
question,
but
one
must
consider
all
other
indicia
which
may
nevertheless
bring
a
conclusion
that
the
subsidiary
business
is
separate
from
that
of
its
parent.
Two
dominant
evidential
factors
were,
in
my
opinion,
instrumental
in
leading
the
Federal
Court
to
conclude
that
Span
was
a
“sham”.
First,
the
insignificant
if
not
ridiculous
investment
of
a
paid-up
capital
of
35
shillings
by
way
of
five
shares
on
a
total
of
100
shares
and
on
a
total
capitalization
of
350
pounds
sterling.
The
second
one
resides
in
the
finding
that
the
cost
of
offshore
steel
to
Dominion
Bridge,
via
its
purchases
from
Span,
was
purely
artificial,
offended
the
fair
market
value
rule
as
couched
in
subsection
17(1)
of
the
ITA
then
in
effect,
and
resulted
in
an
illegal
increase
in
costs
of
operation
over
and
above
the
normal
price
of
the
domestic
market,
overcosts
then
claimed
as
an
operational
expense,
such
overcosts
ultimately
finding
their
way
back
to
Dominion
Bridge
by
way
of
dividends
emanating
from
Span’s
profits.
Whereas
in
the
present
case
we
may
find
the
presence
of
some
of
the
above
criteria,
at
least
two
important
aspects
totally
differ
from
the
Dominion
Bridge
case.
Shortly
after
the
creation
of
Albion,
some
$4,000,000
were
infused
into
it
by
way
of
capital
investment,
and
it
eventually
reached
a
sum
close
to
$10,000,000.
It
is
far
from
the
35
shillings
invested
in
Span.
Furthermore,
the
factual
finding
based
on
the
fair
market
value
rule,
could
not
come
into
play
because
the
sugar
market
is
conditioned
and
regulated
by
the
LDP
exchange,
establishing
daily
and
on
a
24-hour
basis,
what
the
price
of
raw
sugar
is
to
be.
Because
of
the
existence
of
such
an
external
norm,
over
which
respondents
had
no
control,
the
price
of
raw
sugar
could
be
spotted
and
examined
for
any
given
day,
rendering
any
artificial
overcost
claim
impossible
to
achieve
by
a
purchaser
desiring
to
fix
an
arbitrary
consensual
price
for
his
purchases.
The
price
of
sugar,
with
the
most
minute
daily
variation,
is
posted
and
readily
available
to
all
concerned
and
can
be
ascertained
at
a
glance
without
the
need
of
expert
testimony
as
would
be
the
case
in
a
great
number
of
commodities.
In
the
present
instance,
it
therefore
can
hardly
be
said,
that
other
than
the
criteria
invoked,
having
particular
regard
to
these
two
distinguishing
facets,
that
the
factual
situation
is
a
valid
reflection
of
the
Dominion
Bridge-Span
case.
However,
on
the
finding
of
facts
by
the
trial
Court
in
the
present
matter,
from
which
a
parallel
is
drawn
with
Dominion
Bridge,
one
would
tend
to
conclude
that
these
facts
bear
all
the
hallmarks
of
the
Dominion
Bridge
criteria,
and
that
once
these
criteria
are
acknowledged
to
exist,
the
trial
court
unreasonably
erred
in
deciding
that
Albion
was
not
a
“sham”.
It
is
worth
reproducing
at
length
the
summary
of
the
criteria
supported
by
the
evidence,
and
capsulated
as
follows:
(p
1816-7
of
volume
9
of
the
record):
At
this
point
a
brief
look
at
how
the
operations
were
actually
carried
out
would
seem
to
be
warranted.
It
was
obviously
the
intention
of
this
group
of
corporations,
that
is
Tate
&
Lyle,
Redpath,
Dominion
Sugar
and
Albion,
to
maximize
the
operations
through
Albion
so
that
profits
accruing
would
not
thereby
be
taxed
in
Canada
and
could
then
be
transmitted
to
Tate
&
Lyle.
However,
as
already
noted,
Albion
had
no
telephone,
no
employees
and
no
facilities
with
which
to
purchase
sugar
worldwide.
The
way
that
this
was
effected
was
that
the
raw
sugar
purchasing
departments
of
Redpath,
headed
by
a
Mr
Howard
Dennis,
would
carry
out
all
negotiations
with
a
sugar
broker,
but
the
purchaser
would
officially
be
Albion.
Howard
Dennis
was
authorized,
by
Redpath’s
management,
to
negotiate
Albion
contracts
as
well
as
Red-
path’s.
Once
this
initial
transaction
had
been
accomplished,
papers
were
then
drawn
up
by
which
Albion
then
contracted
to
sell
the
same
sugar
to
Redpath.
Once
these
documents
had
been
prepared,
copies
would
then
be
sent
to
the
Albion
company’s
files,
held
in
a
Bermuda
law
firm
and
copies
would
also
be
held
in
Redpath’s
headquarters,
here
in
Montreal,
and
the
transaction
would
then
take
place
according
to
the
terms
set
out
therein.
In
other
words,
at
all
times,
it
was
the
accused,
here
in
Montreal,
that
was
wholly
in
control
of
the
operations
and
négociations
supposedly
carried
out
by
Albion.
The
profits
realized
would
be
treated
as
“offshore
dividends”
and
thereby
subject
to
the
provisions
of
the
then
Section
28
of
the
Income
Tax
Act
of
Canada.
We
must
emphasize
that
at
all
times,
Redpath
management
considered
Albion
as
an
extension
of
itself.
It
couldn’t
be
otherwise
since
Albion
didn’t
have
so
much
as
an
employee.
This
summary
by
the
trial
Court
brings
into
focus
the
whole
concept
on
which
the
corporate
world
is
based.
In
its
essence,
there
is
hardly
a
greater
artificial
machinery
than
the
life-creating
of
corporations;
they
emanate
from
a
fiction
of
the
law,
giving
them
birth,
identity,
powers
to
acquire
rights
and
to
incur
liabilities,
separate
and
distinct
from
the
physical
persons
needed
and
required
to
direct
their
destiny.
Viewed
in
the
light
of
an
artifice,
the
corporation
is
a
“gimmick
by
excellence”
which
would
be
incapable
of
any
activity
were
it
not
for
the
physical
persons
generating
profitable
actions
such
as
directors
and
officers,
on
behalf
of
its
interested
participating
shareholders.
Thus,
it
is
not
surprising
to
find
that
the
artifice
is
commonly
extended
by
the
creation
of
off-shoots,
in
the
form
of
related
corporations
such
as
subsidiaries,
or
by
engaging
in
affiliations
with
other
corporations,
by
subscribing
in
their
capital
structure
and
most
often
acquiring
a
degree
of
control
over
them,
as
well
as
the
large
word
to
say
in
their
management.
Needless
to
say
that
the
situation
to
come
about
and
develop
will
depend
on
the
extent
of
the
shareholding,
as
regards
management
and
control
of
a
corporation,
through
the
power
of
appointment
by
shareholding
majority,
of
the
people
who
will
guide
and
direct
the
corporate
operations.
It
is
therefore
normal
to
visualize
that
familiar
faces
will
be
found
in
one
and
the
other
of
the
parent,
the
subsidiary
or
the
affiliated
corporations,
often
acting
in
similar
capacities,
but
separate
and
distinct
as
regard
each
corporation
concerned.
There
is
nothing
novel
in
the
corporate
world
in
the
idea
that
the
majority
rules,
and
does
so
by
its
directors.
They
are
the
head
that
wags
the
tail
and
there
is
therefore
nothing
wrong
to
find
that
a
particular
board
of
directors,
acting
on
behalf
of
one
corporation
may
originate
and
approve
a
business
decision,
and
concur
in,
and
accept
such
consensual
decision,
as
a
board
of
directors
of
another
affiliated
or
subsidiary
corporation,
without
even
so
much
as
changing
seats
after
a
first
sitting
when
passing
to
a
second
one.
What
greater
artificiality
can
there
be,
in
matters
of
management
and
control,
where
separate
identities
are
involved,
as
that
examined
by
our
courts
in
the
matters
of
Sazio,
Caflk,
Cameron,
Massey-Ferguson
etc,
where
the
general
criteria
of
Dominion
Bridge
were
present
and
yet
did
not
lead
to
the
conclusion
that
a
“sham”
existed
even
though
it
could
be
nothing
else
but
an
instrument,
a
device,
a
gimmick
to
save
tax?
The
artificiality
of
a
creation
of
a
company,
to
take
advantage
of
a
lesser
rate
of
taxation,
is
shown
most
vividly
in
the
Sazio
case,
it
being
an
example
of
the
extreme
the
concept
of
artificiality
may
reach
(Sazio
v
MNR,
[1968]
CTC
579;
69
DTC
5001).
Being
the
coach
of
the
Hamilton
Tiger-Cats
Football
club,
Ralph
Sazio
incorporated
“Ralph
W
Sazio
Ltd”,
owned
solely
by
him
and
his
wife,
a
passive
shareholder.
With
the
consent
of
the
club,
he
assigned
his
coaching
contract
to
his
company.
Although
the
coaching
services
were
physically
rendered
and
performed
by
Sazio
himself,
the
validity
of
the
device
was
upheld
in
spite
of
forceful
argument
by
the
MNR
that
the
income
of
the
company
was
the
income
of
Ralph
Sazio.
There
could
hardly
be
a
case
more
blatant
and
obvious
of
management
and
control,
nor
a
closer
and
apparent
one
of
a
corporation
identifying
itself
with
its
directing
mind.
In
the
same
vein
of
thought
can
be
examined
the
cases
of
Cameron,
Cafik,
Spur
Oil,
Raoul
Engel,
Atinco
Paper
Products,
Frederick
G
Vivian,
Massey-Ferguson,
Lawrence
Shapiro,
etc.
referred
to
in
the
Appendix
to
this
judgment.
In
all
these
instances,
the
dominant
principle
of
management
and
control
residing
in
the
hands
of
the
people
presiding
over
the
incorporation
and
remaining]
in
charge
of
it,
does
not
lead
to
an
automatic
conclusion
that
the
corporation
so
formed
and
substituting
itself
to
its
originators,
must
be
treated
as
a
“sham”
or
in
some
other
way
ineffective
because
a
tax
reduction
motive
led
to
its
formation.
In
the
same
manner
was
the
John
W
Daly
case
decided,
although
adversely
to
the
taxpayer,
not
by
virtue
of
the
principle
not
applying
but
because
the
taxpayer
claimed
that
the
assignment
of
his
contract
with
a
radio
station
had
been
implemented
during
the
taxable
years
and
he
had
waited
some
seven
years
before
doing
so,
thereafter
claiming
the
existence
of
an
assignment
which
the
evidence
did
not
support.
All
these
instances
reflect
the
validity
of
measures
taken
with
a
view
of
tax
avoidance.
All
of
them
found
their
way
through
civil
debate,
between
the
taxpayer
and
the
MNR,
without
so
much
as
a
civil
penalty
claimed
and
all
of
them
dealing
with
the
“grey
area”
regarding
taxability.
In
the
present
case,
we
are
obviously
faced
with
a
device,
an
instrument,
a
means
resorted
to
as
a
tax
saving
vehicle,
but
we
cannot
escape
the
fact
that,
although
the
operations
of
Albion
were
directed
and
conducted
by
its
parent
companies,
it
was
nevertheless
created
as
a
separate
entity,
which
dealt
extensively
not
only
in
the
raw
sugar
market
to
meet
the
needs
of
Redpath
as
a
refiner,
but
as
a
trader
of
raw
sugar
at
large,
and
furthermore
exceeded
the
simple
scope
of
business
authority
given
by
Redpath
to
its
employee,
Howard
Dennis,
in
that
it
conducted
business
of
buying
and
chartering
ships
and
generated
separate
income
through
substantial
investments.
Albeit
that
the
last
two
facets
emanated
from
the
directives
issued
by
the
parent
companies,
it
is
not
shown
by
the
evidence
that
Redpath
by
itself,
or
through
its
purchasing
manager,
Mr
Dennis,
had
much
to
do
with
these
latter
particular
aspects.
We
are
left,
as
outlined
in
the
early
part
of
this
judgment,
with
a
prima
facie
situation,
where
taxability
becomes
of
prime
importance,
and
where
on
the
face
of
the
record,
it
is
not
only
a
very
and
truly
debatable
one,
but
one
which
would
highly
favour
the
taxpayer.
As
to
tax
abatement
claimed
from
dividends
produced
by
a
non-resident
corporation,
the
ITA
as
existed
for
the
period
concerned,
1967
to
1971
inclusive,
contained
a
single
requirement
that
more
than
25%
of
the
issued
shares
(having
full
voting
rights
under
all
circumstances)
belong
to
the
receiving
corporation
There
was
no
other
requirement
couched
in
the
Act,
except
this
single
and
only
one,
under
paragraph
28(1
)(d).
It
therefore
did
not
matter
if
the
shareholding
was
greater
than
25
per
cent,
it
could
have
been
50
per
cent
as
it
could
have
been
100
per
cent
owned
by
the
receiving
corporation.
Nor
did
the
Act
require
that
management
and
control
be
exercised
only
from
the
situs
of
the
non-resident
corporation.
As
previously
underscored,
and
at
the
risk
of
being
repetitious,
the
matter
of
management
and
control
being
exercised
partly
from
Canada,
may
entail
a
question
of
de
facto
residency
regarding
a
non-resident
corporation
and
lead
to
a
scrutiny
as
to
whether
or
not
such
corporation
as
Albion
was
in
fact
conducting
business
in
Canada,
possibly
rendering
it
accountable
taxwise
for
such
business
operations.
We
are
not
however
concerned
with
this
aspect
in
this
case,
Albion
not
being
the
object
of
a
recourse,
either
civil
or
criminal.
In
statutory
criminal
matters,
there
must
exist
a
provision
on
which
a
criminal
information
rests,
by
way
of
prohibition
or
by
mandatory
stipulation,
as
to
what
one
is
required
by
law,
to
do
or
not
to
do,
failing
which
an
infringement
is
committed
quite
apart
from
the
element
of
intent.
Even
where
the
disposition
exists,
but
is
unclear,
it
is
to
be
interpreted
in
favour
of
the
taxpayer.
Whereas,
in
a
civil
aspect
a
debated
claim
may
shift
the
burden
of
proof
to
the
taxpayer,
in
criminal
matters
the
burden
of
proof
lies
with
the
prosecution
to
make
its
case
beyond
a
reasonable
doubt.
Here,
we
are
bound
by
the
statutory
limitations
as
far
as
the
criminal
information
goes,
and
I
am
at
a
loss
to
find
what
specific
provision
of
the
law
has
been
infringed.
Although
the
Crown
relies
on
a
general
allegation
of
“wilful
tax
evasion”
based
on
section
239
of
the
Act,
it
saw
fit
to
particularize,
in
its
charge,
the
manner
in
which
it
was
done,
namely
by
“omitting
to
declare”;
and
it
relies
on
an
act
of
omission
while
conscious
that
a
declaration
was
made,
and
specifically
made
with
the
divulgence
of
the
source,
nature
and
origin
of
the
income,
after
having
met
the
single
requirement
imposed
by
law
for
claiming
a
tax
free
dividend,
eg,
the
subscription
of
more
than
25
per
cent
of
the
voting
stock
of
Albion.
As
said
by
Dickson,
J
of
the
Supreme
Court
of
Canada
in
Morgentaler
v
The
Queen,
(30
CRNS
209
at
257):
it
seems
to
me
to
be
of
importance
to
indicate
what
the
court
is
called
upon
to
decide
in
this
Appeal,
and
not
equally
important,
what
it
has
not
been
called
to
decide.
Assuming,
without
having
to
decide,
that
the
Crown
was
right
in
its
contention
as
to
some
facets
of
the
evidence,
but
to
which
I
am
not
ready
to
agree,
that
there
was
some
shenanigan
involved
in
the
way
the
whole
scheme
of
things
developed,
it
might
possibly
have
had
some
grounds
for
invoking
fraud,
conspiracy,
false
documents
or
bookkeeping
entries,
etc
.
.
.
but
neither
the
trial
Court
was,
nor
this
Court
is
seized
with
such
specific
infractions.
The
prosecution
relies
on
four
main
grounds
which,
it
contends,
the
evidence
indicates:
(A)
management
and
control
of
Albion,
originating
and
conducted
largely
from
the
Montreal
base
of
Redpath;
it
is
true
as
regards
raw
sugar
purchases
for
Redpath’s
requirements
and
partly
true
as
regards
raw
sugar
trading
in
general
by
Albion,
done
through
Montreal
and
London,
but
not
factual
as
regards
the
other
facets
of
Albion’s
business
activities.
As
we
have
seen,
how-
ever,
it
may
have
been
done
and
where,
other
than
from
a
situs
in
Bermuda,
is
an
irrelevant
matter
to
be
considered;
(B)
a
camouflage
used
by
respondents,
through
a
letter
of
instructions
from
Mr
Dennis,
purchasing
manager
of
Redpath,
in
Montreal,
to
a
nominal
representative
of
Albion,
in
Bermuda,
outlining
documents
to
be
signed,
kept
or
returned,
by
way
of
offer,
acceptance
and
confirmation,
all
documents
which
in
the
eyes
of
the
prosecution
demonstrate
that
Albion
was
a
pure
puppet,
without
any
proper
self
identity,
and
reflecting
indications
that
what
Albion
did
in
every
respect,
was
what
the
respondents
decided
and
did,
the
former
being
only
a
shadow
moving
along
as
the
respondents
moved.
There
again,
one
must
bear
in
mind
that
in
the
corporate
system,
the
head
wags
the
tail,
and
it
should
come
as
no
surprise
that
instructions,
written
or
verbal,
are
issued;
without
much
latitude,
if
any,
left
to
the
affiliated
or
subsidiary
company.
Furthermore,
whether
a
transaction
is
evidenced
post
facto
to
reflect
a
transaction
already
consummated
in
order
to
have
it
recorded
on
file,
is
quite
immaterial,
particularly
when
the
records
show
and
indicate
clearly
that
the
transaction
was
effected.
(C)
the
use
of
a
code
between
respondents
and
T
&
L,
for
raw
sugar
calls,
which
according
to
the
prosecution,
was
a
device
to
hide
from
any
eventual
scrutiny
by
the
MNR,
the
true
transactions
between
them.
In
itself,
a
code
is
nothing
of
a
perverse
character.
In
the
world
sugar
market,
T
&
L
occupied
a
position
of
command
where
its
every
move
was
subject
to
scrutiny
by
competitors
as
to
anticipated
trends
of
the
market,
particularly
on
“futures”
and
terminal
market.
A
disclosure
of
intention
may
carry
with
it
financial
consequences
in
a
field
of
speculations.
This
was
duly
explained
by
the
witnesses
heard,
experts
in
the
matter,
declaring
that
the
code
was
introduced
to
hide
the
extent
of
their
sugar
trading
not
only
to
other
traders
but
to
their
own
sugar
broker.
Correspondence
and
telexes
bear
three
different
code
names,
the
main
one
being
for
sugar
trading
at
large
conducted
through
Albion.
It
may
not
have
been
the
safest
nor
the
most
appropriate
confidential
way
to
keep
the
information
from
reaching
outsiders,
not
privy
to
the
intercompanies
relationship,
but
as
the
trial
Court
found,
and
it
is
for
that
Court
to
assess
credibility,
and
not
for
this
Court
unless
it
is
totally
unreasonable
and
unsupported
by
the
evidence,
there
was
nothing
nefarious
in
the
use
of
a
code,
having
nothing
to
do
with
an
intent
to
camouflage
the
operations
with
a
taxation
view
in
mind,
since
apart
from
the
code,
the
transactions
in
their
objective
aspect
were
duly
posted
and
inscribed
in
the
respective
company
records.
A
private
notation
of
that
nature,
found
in
respondents’
records,
for
everyday
purposes
when
sugar
calls
were
being
made,
finds
its
reflection
on
the
eventual
posting
as
to
who
bought
what
and
on
what
day,
and
the
transactions
themselves
are
fully
documented
by
contracts,
invoicing
and
payments.
(D)
the
finding
in
respondents*
book
of
an
entry
of
$151.50
as
a
travelling
expense,
whereas
at
the
original
stage
of
the
incorporation
of
Albion,
a
corresponding
entry
is
couched
in
the
form
of
a
subscription
of
capital
shares
of
Albion,
in
favour
of
third
parties,
members
of
the
T
&
L
corporate
family.
This
again,
as
claimed
by
the
Crown,
is
a
device
to
veil
the
real
presence
of
Redpath
in
Albion’s
corporate
structure.
I
find
this
to
be
irrelevant
as
respondents
were
not
limited
to
a
25
per
cent
participation
in
the
voting
stock
of
Albion.
They
could
furthermore
give
or
otherwise
donate
assets
to
other
members
of
the
corporate
family
without
interference
of
any
kind.
It
is
not
an
offence,
and
whatever
inspired
or
caused
such
a
posting
in
the
books,
illegally
or
not,
is
not
for
this
Court
to
decide.
This
benign
sum
is
a
“de
minimis
non
curat
praetor”
and
a
trivial
one
in
the
light
of
a
$7,000,000
tax
evasion
charge,
although
it
would
seem
that
the
discovery
of
such
a
book
entry
was
the
spark
that
triggered
a
complete
investigation
in
which
respondents
fully
co-operated,
and
the
present
prosecution,
together
with
the
other
findings
previously
mentioned
in
A,
B
and
C.
Respondents
were
charged
jointly
in
the
information.
Redpath,
as
a
principal,
and
Dominion
as
a
participant,
because
of
having
received
the
dividends
from
Redpath
by
way
of
assignment,
the
Crown
then
relying,
as
far
as
Dominion
was
concerned,
on
section
21
of
the
Criminal
Code,
by
being
a
party
to
the
offence.
There
is,
of
course,
nothing
criminal
in
the
assignment
of
dividends
by
Redpath,
to
its
wholly-owned
subsidiary,
as
long
as
the
tax
exemption
is
not
claimed
twice
in
the
returns
and
on
behalf
of
both
respondents.
I
think,
before
concluding,
save
for
a
short
examination
of
the
question
of
the
jurisdiction
of
this
Court
regarding
the
matter
at
hand,
as
an
appeal
Court
under
Part
XXIV
of
the
Criminal
Code,
a
word
can
be
added
as
to
the
views
generally
held,
in
the
taxation
years
involved
in
respect
to
the
widely
used
system
of
offshore
corporations
by
Canadian
companies,
and
the
state
of
ineffectual
legal
situation
which
called
for
adoption
of
proper
remedial
legislation
in
order
to
do
away
with
extensive
tax
avoidance,
all
properly
taken
advantage
of,
within
the
scope
of
the
ITA.
Back
in
1969,
the
Carter
Commission
was
charged,
by
the
Canadian
Government,
to
enquire
and
report
on
the
opportunity
to
revise,
amend
and
bring
up-
to-date,
the
fiscal
legislation.
Paragraph
28(l)((d)
and
rules
relating
to
offshore
corporations,
retained
the
particular
attention
of
the
Commission,
which
found
them
to
be
a
“substantial
loophole
in
the
tax
system”
and
it
confirms
the
attitude
of
the
tax
experts
up
to
then
recommending
the
use
of
offshore
companies
to
their
clients,
such
as
McDonald
Currie,
Coopers
&
Lybrand,
Clarkson
Gordon,
Peat
Marwick
et
al.
I
quote
from
the
report
of
the
Commission:
Because
income
not
brought
into
Canada
must
necessarily
result
in
an
increase
in
the
value
of
the
resident’s
interest
in
foreign
property
(ignoring
foreign
source
income
that
the
resident
spends
on
personal
consumption
outside
of
Canada)
all
foreign
source
income
would
ultimately
become
subject
to
Canadian
taxation.
This
would
close
what
is
now
a
substantial
loophole
in
the
tax
system.
Residents
can
now
establish
a
foreign
corporation
to
hold
their
income
earning
assets
in
a
country
with
low
corporation
taxes.
The
income
can
be
retained
in
the
foreign
corporation
and
the
resident
can
realize
this
income
without
Canadian
tax
by
the
sale
of
the
shares
in
the
foreign
corporation.
(Vol
IV,
p
504.)
One
result
of
these
provisions
is
that
the
Canadian
taxpayer
has
enjoyed
a
much
greater
simplicity
and
ease
of
calculation
for
foreign
income
than
his
United
States
or
United
Kingdom
counterparts.
The
tax
minimization
possibilities
of
the
exemption
privilege,
in
combination
with
the
use
of
foreign
tax
havens,
have
not
gone
unnoticed.
The
provision
can
be
used
to
reduce
Canadian
tax
on
income
generated
in
Canada
for
the
benefit
of
Canadians.
By
establishing
companies
in
jurisdictions
which
impose
little
or
no
tax,
Canadians
can
reduce
their
Canadian
tax
by
engaging
in
a
series
of
paper
transactions
which
exploit
the
provisions
of
tax
treaties
in
combination
with
Section
28(1)(d).
(Vol
IV,
p
511.)
The
proposals
of
the
Carter
Commission
evoked
national
debate.
The
Minister
of
Finance,
in
the
same
year
1969,
tabled
a
‘‘White
Paper”
in
the
House
of
Commons:
“Proposals
for
tax
reforms”,
part
of
which
dealt
with
“taxing
international
income”:
Some
countries
do
not
levy
income
taxes.
Other
countries
levy
income
taxes
but
do
not
apply
them
to
particular
types
of
income.
Taxpayers,
both
here
and
abroad,
have
not
been
reluctant
to
use
such
jurisdictions
to
artificially
reduce
or
unduly
postpone
the
Canadian
taxes
they
would
otherwise
pay.
Some
types
of
income
(eg,
foreign
dividends,
rents
and
royalties,
shipping
income
and
some
export
profits)
are
easily
diverted
to
tax-haven
jurisdictions.
Canadian
taxes
are
thereby
at
least
postponed
until
the
funds
are
needed
in
Canada,
and
may
be
avoided
altogether.
In
some
instances,
Canadian
income
can
also
be
routed
through
a
tax
haven
to
produce
a
tax
advantage.
Consider
a
Canadian
Corporation
contemplating
the
purchase
of
a
Canadian
bond.
If
it
buys
the
bond
itself,
the
interest
will
bear
corporate
tax
of
50
per
cent.
If,
however,
it
causes
a
wholly-owned
corporation
in
a
tax-free
jurisdiction
to
buy
the
bond,
Canada
will
settle
for
a
15-per-cent
withholding
tax
on
the
interest,
and
the
subsidiary
corporation
can
distribute
the
funds
to
its
Canadian
parent
corporation
tax-free
by
way
of
a
dividend.
A
number
of
the
proposals
in
this
chapter
are
designed
specifically
to
counter
such
manoeuvres.
Section
6.20.
As
noted
above,
the
exemption
privilege
is
susceptible
to
abuse.
Not
all
foreign
corporations
carry
on
bona
fide
business
operations.
Some
are
merely
devices
of
convenience
to
which
income
for
other
sources
—
dividends,
interests,
royalties
and
trans-shipment
profits
—
may
easily
be
diverted.
The
dividend
exemption
system
would
permit
such
income
to
be
brought
back
to
Canada
tax-free.Even
the
tax-credit
system
would
permit
the
Canadian
tax
on
such
income
to
be
postponed
indefinitely.
Notwithstanding
the
acknowledgement
by
both
the
Carter
Commission
and
the
Minister
of
Finance,
of
a
state
of
the
law
allowing
for
tax
loopholes
in
respect
to
offshore
corporations
and
its
wide
usage,
it
was
not
before
1972
that
a
brand
new
Income
Tax
Act
was
introduced,
but
because
its
revolutionary
provisions
tended
to
greatly
disturb
Canadian
corporations
in
their
international
dealings
through
offshore
corporations,
it
was
found
necessary
to
suspend
the
application
of
the
law
in
order
to
give
taxpayers
time
to
rearrange
their
affairs;
revisions
were
made
from
time
to
time,
and
the
law
became
effective
in
1976,
eg,
five
years
after
the
period
covered
by
the
present
case.
In
view
of
such
acknowledgement
by
official
authorities,
as
to
the
state
of
the
law,
it
can
hardly
be
said
that
the
resorting
to
offshore
company,
for
tax
saving
purposes,
justifiably
or
not,
offended
the
statute.
The
existence
of
a
void
in
such
matter,
was
patent,
recognized
and
admitted.
As
to
the
nature
of
a
“sham”,
we
find
that
our
Supreme
Court
adopted
in
the
James
A
Cameron
v
MNR,
([1972]
CTC
380;
72
DTC
6325)
the
definition
given
by
the
English
Courts,
in
Snook
v
London
and
West
Riding
Investments
Ltd,
[1967]
1
All
ER
518,
at
528:
As
regards
the
contention
of
the
plaintiff
that
the
transactions
between
himself,
Auto
Finance,
Ltd
and
the
defendants
were
a
“sham”,
it
is,
I
think
necessary
to
consider
what,
if
any,
legal
concept
is
involved
in
the
use
of
this
popular
and
pejorative
word.
I
apprehend
that,
if
it
has
any
meaning
in
law,
it
means
acts
done
or
documents
executed
by
the
parties
to
the
“sham”
which
are
intended
by
them
to
give
the
third
parties
or
to
the
court
the
appearance
of
creating
between
the
parties
legal
rights
and
obligations
different
from
the
actual
legal
rights
and
obligations
(if
any)
which
the
parties
intend
to
create.
It
appears
to
me,
from
the
reviewing
of
the
evidence,
that
the
legal
rights
and
obligations
which
were
created,
by
the
formation
of
Albion
as
an
offshore
company,
were
those
which
all
parties
intended
to
create,
as
per
the
memorandum
filed
in
evidence
as
exhibit
E-17
and
entitled
“Proposed
Bermuda
Corporation”.
The
proposal
was
thereafter
fully
implemented
and
totally
documented.
It
may
be
trite
to
say
that
substantiating
documentation
alone
would
cast
aside
any
resort
to
a
“sham”,
because
a
“sham”
may
exist
in
spite
of
an
outward
appearance
by
documentation;
here,
however,
in
the
light
of
the
evidence,
we
find
the
activities
of
Albion
were
not
confined
to
dealing
in
raw
sugar,
either
to
supply
Redpath’s
need
as
a
refiner,
or
as
a
trader
of
raw
sugar
at
large.
As
already
pointed
out,
Albion
bought
and
chartered
ships;
it
further
produced
investment
income
to
the
extent
of
some
$2,500,000,
in
which
dealings
Redpath
had
nothing
or
little
to
do,
except
at
times,
as
collateral
guarantor
and
security
by
bank
loans.
I
find,
as
the
trial
Court
did,
that,
what
was
achieved,
was
what
the
parties
intended
to
do
from
the
start,
on
all
the
facets
of
the
proposed
plan
and
in
no
way
did
it
fall
under
the
definition
of
a
“sham”
as
couched
in
the
Snook,
Cameron
and
Dominion
Bridge
matters.
Ex
majore
cautela
and
further
to
invoking
the
fact
that
the
evidence
showed
total
absence
of
mens
rea
and
of
actus
reus,
respondents
submit
that
on
matters
of
jurisdiction
of
this
Court,
as
an
appeal
tribunal
from
summary
conviction
under
Part
XXIV
of
the
Criminal
Code,
the
long-standing
rule
should
apply
that
this
Court
has
no
jurisdiction
to
disturb
the
findings
of
the
trial
Court
on
the
facts
and
on
its
assessment
of
credibility,
which
must
remain
intact,
unless
such
findings
of
facts
and
assessment
of
credibility,
are
unreasonable
and
unsupported
by
the
evidence.
Respondents
however,
subsidiarily,
went
much
further
in
their
contention,
by
submitting
that
the
right
of
appeal
by
the
Crown,
from
an
acquittal,
is
restricted
to
a
question
of
law
alone.
In
this
line
of
thought
they
seek
support
from
the
Parliamentary
debates
preceding
the
amendments,
changing
the
former
concept
of
a
trial
de
novo
into
a
formal
appeal
on
the
face
of
the
record,
a
form
of
trial
de
novo
being
kept
in
a
limited
way,
but
by
leave
of
the
Court,
as
also
was
kept
the
appeal
by
stated
case
limited
to
questions
of
law
or
excess
of
jurisdiction.
Respondents
contend
that
the
Parliamentary
debates
reflect
the
intent
of
the
legislator
to
treat
such
appeals
before
this
Court
in
the
same
manner
as
are
treated
appeals
before
the
Court
of
Appeal
in
matters
of
indictment.
They
further
argue
that
subparagraph
613(4)(b)(ii),
applicable
by
virtue
of
subsection
755(1)
clearly
shows
this
intent
of
Parliament
through
the
use
of
the
words
“but
for
an
error
of
law”.
This,
respondents
contend,
is
not
a
strict
procedural
matter
but
a
matter
of
jurisdiction
as
it
is
incorporated
in
the
section
headed
and
dealing
with
the
“powers”
of
the
Court.
The
words
so
left,
incorporated
indistinctively
as
regards
appeals
before
this
Court
on
summary
convictions
as
on
appeals
to
the
Appeal
Court
on
indictments,
would
reflect
the
intent
of
Parliament,
to
restrict
appeals
of
the
Crown,
on
acquittals,
to
questions
of
law
alone.
Having
regard
to
the
trend
of
our
highest
Courts
(as
shown
in
Vasil,
[1981]
1
SCR
469
and
Babineau,
32
OR
(2d)
545),
it
would
now
seem
that
in
exceptional
cases,
resort
can
be
had
to
the
Parliamentary
debates
as
a
help
on
interpretation.
Whether
the
intention
of
the
Legislator,
in
the
House
of
Commons
debates,
was
to
restrict
the
appeals
of
the
Crown,
on
matters
of
acquittals,
to
questions
of
law
alone
or
not,
one
significant
feature
of
the
amendments
resides
in
the
fact
that
such
limitation
as
contained
in
subsection
605(1)
was
not
made
applicable
in
appeals
under
section
748
and
namely
in
the
governing
subsection
755(1).
In
view
of
the
clear
wording
of
subsection
755(1),
not
incorporating
subsection
605(1),
it
would
seem
to
indicate
that
the
right
of
appeal
of
the
Crown
from
an
acquittal
is
unfettered
and
not
restricted
to
questions
of
law
alone.
In
this
respect,
I
share
the
view
adopted
by
Farris,
J.
in
Regina
v
Antonelli,
38
CCC
(2d)
207
regarding
the
weight
to
be
given
to
the
expression
“but
for
the
error
in
law”
couched
in
subparagraph
613(4)(b)(ii),
as
to
implying
that
the
Crown’s
right
to
appeal
is
restricted
to
questions
of
law
alone:
He
argued
that
the
words
‘‘but
for
an
error
of
law’’
were
sufficient
to
restrict
by
implication
the
Crown’s
right
of
appeal
to
questions
of
law
alone.
This
argument
is
unsound.
The
incorporating
section,
s
755(1)
qualifies
its
absolute
incorporation
with
the
words
“mutatis
mutandis’’.
They
mean
of
course
“with
the
necessary
changes
in
points
of
details”
(see
Jewitt’s
Dictionary
of
English
Law,
2nd
Ed,
1977).
It
seems
to
me
that
a
necessary
change
which
must
be
made
in
ss
(4)
when
it
is
applied
to
summary
conviction
appeals,
is
the
striking
out
of
the
words
“but
for
the
error
in
law”.
Those
words
are
a
necessary
part
of
the
section
as
it
applies
to
appeals
in
proceedings
by
way
of
indictment
because
of
the
application
of
s
605(1
)(a)
restricting
the
Crown
to
appeals
on
questions
of
law
alone.
However,
as
has
already
been
pointed
out,
s
605(1)(a)
does
not
apply
to
appeals
in
summary
conviction
matters
and
the
words
“but
for
an
error
in
law”
are
thus
irrelevant
in
that
context.
I
believe,
however,
that
if
the
Crown
is
not
restricted
to
questions
of
law
alone,
but
may
do
so
on
questions
of
fact,
it
does
not
give
a
licence
at
large
to
this
Court
on
such
appeals,
as
if
it
were
a
retrial
and
not
simply
a
power
to
review,
and
we
fall
back
on
the
earlier
propositions
of
respondents,
that
the
power
to
review
can
only
be
exercised
where
there
exists
a
palpable
and
overriding
error
in
the
trial
court’s
findings
on
the
facts
or
its
assessment
of
credibility,
findings
that
would
be
unreasonable
and
unsupported
by
the
evidence
(see:
Jae-
gli
Enterprises
v
Taylor,
[1981]
2
SCR
2
at
4).
It
is
not
sufficient
to
be
able
to
conclude
otherwise
than
the
trial
Court
did;
a
review,
if
made,
must
be
based
on
an
error
which
is
“manifeste
et
dominante”.
Therein
resides
the
scope
of
the
Superior
Court
intervention.
I
do
not
find
such
criteria
in
the
judgment
a
quo
and
therefore
I
would
feel
unjustified
to
disturb
the
findings
of
facts
or
credibility
assessment
of
the
trial
Court.
I
have
tried
to
address
the
salient
aspects
of
the
present
case,
realizing
full
well
that
my
examination
in
the
present
judgment
does
not
exhaust
all
the
points
covered
by
counsel,
who
spent
considerable
time
in
sifting
the
evidence
at
great
length,
presented
a
thorough
and
complete
analysis
of
the
case
law,
couched
their
arguments
and
submissions
in
voluminous
factums.
For
a
proper
understanding
by
the
Court
of
the
matter
at
hand,
they
presented
a
detailed
study
of
sugar
trading,
necessitating
the
outlining
of
sugar
calls
under
all
their
forms,
with
the
incidence
of
FOB
and
CIF
commitments,
tied
to
a
Commonwealth
price
formula,
involving
discounts
etc.
All
of
it
was
of
great
help
in
understanding
the
broad
as
well
as
the
minute
aspects
of
the
debate.
I
extend
my
sincere
thanks
to
counsel
for
having
been
of
such
great
assistance
to
me
in
the
complex,
difficult
and
somewhat
sophisticated
field
of
business.
My
conclusions
hold
no
surprise
in
that
the
appeal
of
the
Crown
is
dismissed,
for
the
present
judgment
intimated
as
much
from
its
very
inception.
Respondents,
however,
called
for
an
adjudication
with
costs,
as
it
is
the
discretion
of
this
Court
to
grant,
under
section
758
of
the
Criminal
Code,
even
as
against
the
Crown
(R
v
Ouellette
(1979),
50
CCC
(2d)
346).
However,
it
must
be
recalled
that
the
present
appeal
would
seem
to
be
a
first,
“une
Première”,
instituted
by
way
of
criminal
prosecution,
without
any
previous
guidelines
to
enlighten
the
path,
a
prosecution
based
primarily
on
the
manner
in
which
tax
returns
were
made
and
not
a
failure
per
se
to
declare
income.
I
tend
to
entertain
a
compassion
for
the
little
taxpayer
on
whom
a
granting
of
costs
would
eventually
reflect.
I
am
further
aware,
through
the
evidence,
that
the
parties
still
have
a
long
way
to
travel,
in
view
of
the
fact
that,
immediately
prior
to
the
lodging
of
a
criminal
information,
a
notice
of
assessment
was
served
on
respondents,
which
is
being
contested.
This
side
of
the
picture
will
find
its
way
through
the
civil
tribunals
with
eventual
adjudications
as
to
costs
to
follow
the
merits
of
the
case;
they
shall
more
properly
be
dealt
with
according
to
specific
rules
existing
in
civil
matters
than
they
would
be
by
way
of
discretionary
powers
of
a
criminal
jurisdiction.
This
appeal
of
the
Crown
is
therefore
dismissed
without
costs.
Authorities
Examined
Re:
Appeal
Jurisdiction,
procedure,
amendments,
etc
R
v
Antonelli
(1977),
38
CCC
(2d)
(CA
BC);
R
v
Gillis
(1981),
60
CCC
(2d)
169
(NS
App
Div);
R
v
Purves
(1980),
50
CCC
(2d)
2111
(CA
Man);
R
v
Nelson,
[1979]
3
WWR
97
(CA
Sask);
R
v
Wilkie
(1980),
56
CCC
(2d)
61
(CA
Ont);
R
v
Webb,
56
CCC
(2d)
26;
R
v
Joy
Oil
Co
Ltd,
123
CCC
370;
R
v
Ayer,
XIV
CCC
210;
R
v
Ross,
94
CCC
150;
R
v
MacDougal,
[1970]
4
CCC
369;
R
v
Colbeck,
42
CCC
(2d)
117;
Roberge
v
The
Queen,
147
DLR
(3d)
493;
R
v
Medicine
Hat
Greenhouses,
59
CCC
(2d)
257;
R
v
Arthur,
63
CCC
(2d)
118;
R
v
David
John
Warren,
CA
BC,
March
26th
1982;
R
v
Hall,
[1982]
2
WWR
249:
R
v
Andres,
[1982]
2
WWR
249;
R
v
Elliott
(re
amendment),
[1970]
3
CCC
233;
R
v
Dreher,
14
CR
339;
R
v
Podetz,
58
CCC
(2d)
259;
Rose
v
The
Queen,
31
CR
27;
Bill
C-71,
House
of
Commons,
1st
reading,
July
17th,
1975;
Minister
of
Justice
House
of
Commons
p.
29-6
sq,
of
Justice
and
Legal
Affairs,
Nov
27th,
1975;
MNR
v
Leon
et
al,
[1976]
CTC
352;
76
DTC
6299.
Authorities
Examined
Re:
On
the
merit
(in
civil
matter)
King
George
Hotels
Ltd
et
al
v
The
Queen,
[1981]
CTC
87;
81
DTC
5082;
MNR
v
Pillsbury
Holdings
Ltd,
[1964]
CTC
294;
64
DTC
5184;
Spur
Oil
Ltd
v
The
Queen,
[1981]
CTC
336;
81
DTC
5168;
Aluminum
Co
of
Canada
Ltd
v
City
of
Toronto,
[1944]
SCR
267;
Raoul
Engel
v
MNR,
[1982]
CTC
2422;
82
DTC
1403;
Corporation
of
the
City
of
Toronto
v
Aluminum
Co
of
Canada
Ltd,
[1943]
CTC
114;
Frederick
G
Vivian
v
The
Queen,
[1983]
CTC
107;
83
DTC
5144;
Lawrence
Shapiro
v
MNR,
[1983]
CTC
2618;
83
DTC
563;
Bonavista
Cold
Storage
Co
Ltd
v
MNR,
[1983]
CTC
2093;
83
DTC
89;
Massey-Ferguson
Ltd
v
The
Queen,
[1977]
CTC
6;
77
DTC
5013;
Duke
of
Westminster
v
CIR,
12
TC
490;
Simard-Beaudry
Inc
v
MNR,
[1974]
CTC
715;
74
DTC
6552;
The
Queen
v
Esskay
Farms
Ltd,
[1976]
CTC
24;
76
DTC
6010;
MNR
v
James
A
Cameron,
[1972]
CTC
380;
72
DTC
6325;
Ralph
J
Sazio
v
MNR,
[1968]
CTC
579;
69
DTC
500;
Norman
Cafîk
v
MNR,
[1976]
CTC
2183;
76
DTC
1141;
Asamera
Oil
(Indonesia)
Ltd
v
The
Queen,
[1973]
CTC
305;
73
DTC
5274;
MNR
v
Tara
Exploration
&
Development
Co
Ltd,
[1970]
CTC
557;
70
DTC
6370;
[1972]
CTC
328;
72
DTC
6288
(SCC);
Allied
Farm
Equipment
Ltd
v
MNR,
[1970]
Tax
ABC
1265;
[1972]
CTC
107;
Dominion
Bridge
Co
v
The
Queen,
[1975]
CTC
263;
75
DTC
5150.
Lagacé
v
MNR,
[1968]
2
Ex
CR
98;
Estate
of
MW
Israel
et
al
v
MNR,
[1978]
RDFQ
182;
R
v
Myers
&
Inter
Publishing
Co
Ltd
(1977),
35
CCC
(2d)
1;
The
Queen
v
John
J
Daly,
[1981]
CTC
270;
81
DTC
5205;
Snook
v
London
&
West
Riding
Investments
Ltd,
[1967]
1
All
ER
518.
N.B.
After
signing
and
depositing
the
present
judgment,
a
recent
decision
of
the
Supreme
Court
of
Canada,
dated
June
7th,
1984
has
come
to
my
attention,
relating
to
the
matter
of
“Sham”
in
re:
Stubart
Investments
Limited
v
The
Queen,
(no
16623).