Muir v. The Queen, 79 DTC 5267, [1979] CTC 259 (Ont. Co. Ct.)

Zalev, CCJ:—Subsection 231(3) of the Income Tax Act provides as follows:

“The Minister may, for any purposes related to the administration or enforcement of this Act, by registered letter or by a demand served personally, require from any person (a) any information or additional information, including a return of income or a supplemantary return”, and them omitting irrelevant parts, “within such reasonable time as may be stipulate therein’.

On July 22, 1976, the Minister served a demand on the accused by registered mail, requesting the following information: the name and address of parties to, amounts paid and nature of transaction on each and every cash transaction between the first day of January, 1974 and the 31st day of December, 1975. Compliance with that demand was to be made on or before the 7th day of September, 1976.

On or about the 1st of September, 1976, the Accused wrote a letter to the Deparment of National Revenue, giving them some of the information required, but not giving all of it.

It was not suggested by counsel for the accused in the course of his argument that the request in itself was an unreasonable request, nor was it suggested that the reply complied with the demand.

In any event, a prosecution was launched, the appropriate section for such a prosecution being subsection 238(2) of the Income Tax Act. The matter came on for hearing before His Honour Judge Stewart in the Provincial Court at Windsor. After hearing the evidence, His Honour convicted the accused. An appeal is now taken on the ground that in the circumstances indicated subsection 231(10) of the Income Tax Act has provided a defence; that on that basis, the learned Provincial Judge ought to have acquitted the accused.

Subsection 231(10) reads, “No person shall hinder or molest or interfere with any person doing anything that he is authorized by or pursuant to this section to do or prevent or attempt to prevent any person doing any such thing and, notwithstanding any other law to the contrary, every person shall, unless he is unable to do so, do everything he is required by or pursuant to this section to do”, and the relevant words for our purposes are “every person shall, unless he is unable to do so, do everything he is required by or pursuant to this section to do”.

It is submitted on behalf of the accused that he was unable to comply with the demand and that provides an absolute defence to the charge.

The evidence indicates that Mr Muir operated a scrap business in or about the Town of Leamington for some 32 years. He had only a Grade 8 education and left the keeping of books and records for that business to his wife. His wife is now deceased, and in going through the records which she kept, after receiving the demand, neither the accused nor his accountant or auditor were able to find the information demanded. It would appear that she did not keep such information.

The accused also made some efforts to do so, but in view of the nature of the business itself, he felt that it was impossible for him to come up with any more names or any better addresses of the persons who sold scrap to his company in relevant years, than he was able to do in Exhibit number 2 filed at the trial.

In support of the appellant’s position, his counsel relies on the judgment of Mr Justice McFarlane in the British Columbia Supreme Court in Regina v Bourassa, reported [1968] CTC 412; 68 DTC 5287.

In that case, the Crown appealed by way of Stated Case from the dismissal of a charge under what was then subsection 131(2) of the Income Tax Act for failure of the accused, pursuant to a demand, to file an income tax return for a corporation of which he was a director and a principal officer. The case stated was in the following words: “Was I correct in holding that pursuant to subsection 126(6) of the Act the accused was not personally required to do that demanded upon or required from him of completing the income tax returns of a corporation of which he was a director and the principal officer since he did not have the physical and mental ability to personally do that demanded upon or required from him”.

Mr Justice McFarlane dismissed the appeal and took pains to point out that he was dealing with this case on its own facts and was not purporting to create any sort of precedent. His Lordship said, at pages 413, 5287 of the report,

The clear question which I am asked to decide is whether the defendant Bourassa has a good defence under section 126(6) of the Income Tax Act by reason of the words therein, . . unless he is unable to do so.’’ These words are very wide and seem to be unrestricted in the statute.

It is not for me to decide the facts but to decide whether or not there has been an error of law. The magistrate has heard the evidence and he has decided as a matter of fact that the defendant was unable to comply with this demand. I have to find that there was some evidence upon which that finding could be made and that is as far as I am permitted to go in an application by way of state case.

I cannot find that there is any error in law.

The first thing to note from His Lordship’s judgment is that he treats the finding that the respondent taxpayer in that case was unable to comply with the demand as a finding of fact and, of course, he would be precluded on an apepal by way of stated case from withdrawing in any way from that finding.

If that reasoning were to be applied to the case at bar, it would seem to me that the learned Provincial Court Judge has made a finding of fact that the accused was not unable to comply with the demand and that with necessity would dispose of the appeal. However, I am not satisfied that the question is that narrow. In my view, I think I am entitled to look at all the evidence and see whether or not upon that evidence, the finding in this case is justifiable. It seems to me that the Bourassa judgment can be distinguished on its facts.

The accused in this case was not physically or mentally unable to do those things which were demanded of him, at least in my view. All that was requested of him is that he supply a list of the names and addresses of the persons who sold scrap to his company in the relevant period of time. It seems to me that any person with a Grade 8 education would be capable of keeping a list of the names and addresses of the persons who sold scrap to him and the amount of money paid to each person.

Secondly, the inability of the accused to comply with the demand does not, in this case, depend upon his physical and mental ability. It is a result of failure of his wife to keep proper books and records. That, in itself, could provide no answer to the charge.

The Income Tax Act requires each person to maintain proper books and records of his business. Now obviously, he is not required to keep such books and records personally, but on the other hand, it is his duty to see that proper books and records are kept, even when such work is delegated to another person—in this case, his wife.

In my view, the learned magistrate arrived at the correct conclusion. The basis of his judgment was that the accused cannot set up his own failure to comply with the statute by keeping proper books and records as a ground for saying that he was unable to provide the information which the Department demanded, when the information which the Department demanded was not in itself of an unreasonable nature. Obviously, if the Department demanded that the accused provide them with, let us say, the formula for the creation of an atomic bomb, then that demand would, in itself, be unreasonable and no person could be convicted under the Income Tax Act of failure to comply to that demand. But as I said, it was not suggested during the course of argument that the request or demand in itself was unreasonable. Given that the demand was reasonable, the issue then is whether or not the accused was unable to comply with that demand. In the circumstances of this case, I am not able to say that the learned Provincial Court Judge was wrong. Indeed, in my view, he was correct.

For those reasons the appeal is dismissed.

What do you say with respect to costs, Mr Wright?

MR WRIGHT: I am not requesting costs.

THE COURT: I have endorsed the Notice of Appeal, “Appeal dismissed. No order as to costs”.