Lambert, J.A.:—Lester Lavers, Kalomira Lavers, and U.S. Dungaree Seafarers Ltd. were convicted in October, 1983 of wilfully evading payment of income taxes for the 1977, 1978 and 1979 taxation years. They were sentenced to pay fines. They appealed the sentences and some of the fines were reduced. The amounts of the fines were determined as a percentage of the taxes sought to be evaded.
In 1983, just before the informations were laid that started the criminal proceedings, the Minister of National Revenue issued penalty assessments for each of the three taxation years against each of the three taxpayers under section 163 of the federal Income Tax Act and under section 23 of the B.C. Income Tax Act. The assessments imposed on the three taxpayers tax liabilities for penalty taxes in addition to their liability for the taxes that they had sought to evade. The penalty assessments were also determined as a proportion of the taxes sought to be evaded.
Each of the three taxpayers paid the amount of the penalty assessments under the compulsion of section 158 of the Income Tax Act, and under protest. They objected to the penalty assessments and filed notices of objection under section 165 of the federal Income Tax Act.
On February 27, 1985, the three taxpayers launched the petition which started these proceedings in the Supreme Court of British Columbia. They applied for an order in these terms:
[THAT] the levying of penalties under subsections 23(1) and 23(3) of the Income Tax Act, R.S.B.C., 1979 c. 190, and subsections 163(1) and (2) of the Income Tax Act, S.C. 1970-71-72, c. 63, as amended, be declared to be in violation of paragraph 11(h) of the Canadian Charter of Rights and Freedoms and that all funds so collected be returned with interest to the Petitioners;
For the purposes of the Constitutional Question Act the petitioners stated the constitutional question in this way:
Will the imposition of penalties upon the Petitioners under subsections 23(1) and (3) of the Income Tax Act (B.C.) and subsections 163(1) and (2) of the Income Tax Act (Canada) where they have been previously found guilty and punished for offences under subsection 239(1) of the Income Tax Act (Canada) in relation to the same subject matter, infringe upon their rights as guaranteed by paragraph 11(h) of the Canadian Charter of Rights and Freedoms?
On March 13, 1985, the Minister of National Revenue confirmed the penalty assessments.
On March 27, 1985, the petition came on for hearing before Chief Justice McEachern on a preliminary question of jurisdiction. The issues were whether the Supreme Court of British Columbia had jurisdiction to hear the petition and, if so, whether it should nonetheless decline that jurisdiction in favour of the Tax Court of Canada or the Federal Court of Canada. Chief Justice McEachern decided that the Supreme Court of British Columbia had jurisdiction and should not decline to hear the petition. His reasons are reported at (1985), 62 B.C.L.R. 327 and at (1985), 18 D.L.R. (4th) 477 and it is not necessary to summarize them.
On May 7, 1985, the petition was heard by Mr. Justice Taylor. He dismissed it on May 16, 1985 on the ground that counsel for the petitioners had argued at the time of sentencing and on the sentence appeal that the fines should reflect the fact that penalty assessments had already been levied. Mr. Justice Taylor considered that by making that argument the petitioners had already elected their relief under subsection 24(1) of the Charter, and had not been subjected to double punishment.
On June 4, 1985, the three taxpayers filed appeals to the British Columbia Supreme Court from the Minister of National Revenue's confirmation of the penalty assessments under the B.C. Income Tax Act. On June 7, 1985, the taxpayers filed appeals to the Tax Court of Canada from the Minister of National Revenue's confirmation of the penalty assessments under the federal Income Tax Act. It is not suggested by either the Attorney General of Canada or the Attorney General of British Columbia that the appeals were not taken to the appropriate courts.
On June 12, 1985 the three taxpayers appealed to this court from the dismissal of their petition. The Attorney General of Canada then crossappealed from the decision of Chief Justice McEachern on the preliminary point of jurisdiction. After an unexplained lapse of four years the appeal and cross-appeal came on for hearing before a five judge division of this Court on June 8, 1989. The five judge division was constituted because of the importance of the questions raised by the appeal, and even more particularly, the crossappeal.
The Nature of the Substantive Issue
The petitioners, U.S. Dungaree Seafarers Ltd., Lester Lavers, and Kalomira Lavers do not rely on section 7 of the Charter. Nor do they say that the effect of paragraph 11(h) of the Charter is to render section 163 of the federal Income Tax Act and section 23 of the B.C. Income Tax Act unconstitutional and void. They say only that the applications of section 163 and section 23 to them in this case are applications that are in violation of paragraph 11(h) of the Charter.
Paragraph 11(h) of the Charter reads in this way:
PROCEEDINGS IN CRIMINAL AND PENAL MATTERS
11. Any person charged with an offence has the right
(h) if finally acquitted of the offence, not to be tried for it again and, if finally found guilty and punished for the offence, not to be tried or punished for it again;
[Emphasis added.]
Mr. Justice Toy, sitting then as a judge of the Supreme Court of British Columbia, decided in The Queen v. Georges Contracting Ltd. (1987), 15 B.C.L.R. (2d) 240; affirmed (1988), 24 B.C.L.R. (2d) 175, that the fact that a person had been assessed for penalty tax of 25 per cent under subsection 163(2) of the federal Income Tax Act for knowingly making a false statement in a tax return did not bar a later prosecution under paragraph 239(1)(a) of the Income Tax Act for making a false or deceptive statement in a return. Mr. Justice Toy’s decision was upheld by this Court. See (1988), 24 B.C.L.R. (2d) 175. The same result was reached by the Alberta Court of Appeal in Yes Holdings Ltd. v. The Queen (1988), 57 Alta. L.R. (2d) 227 and by the Ontario Court of Appeal in The Queen v. Ferreira (181/88, October 17, 1988, on appeal from [1988] 1 C.T.C. 225). The issue in all three cases was whether the imposition of a penalty assessment for tax evasion precluded a later criminal prosecution for the same tax evasion.
Counsel for the appellant taxpayers say that this case is distinguishable from those three cases. Counsel do not attack the criminal convictions. They say those convictions must stand. But they say that the appellants have appealed the penalty assessments and they say that those assessments cannot be maintained because, following the criminal convictions, the upholding of the penalty assessments would constitute a second punishment for the same offence, contrary to paragraph 11(h) of the Charter. So they say that the issue in this appeal is whether a conviction under paragraph 239(1)(d) for wilfully evading compliance with the Income Tax Act is a bar to upholding assessments for penalty tax under section 163 of the federal Act and under section 23 of the B.C. Act.
It is important to realize at the outset that the taxpayers do not attack the criminal proceedings against them or seek to avoid the consequences of those proceedings. But they say that the penalty assessments constitute an administrative double punishment for the very offences that resulted in the criminal convictions and that the penalty assessments cannot be upheld after the taxpayers have been punished for the criminal offences by the imposition of fines. They say that the double punishment is not the initial assessment of the penalty taxes which established the tax liability but the upholding of the assessments by the Minister of National Revenue, and perhaps beyond that by the Tax Court and the B.C. Supreme Court, and the unlawful retention of the penalty taxes, paid under compulsion, following the criminal convictions and the payment of fines.
The Cross-Appeal
I propose to deal with the cross-appeal before I deal with the appeal. The cross-appeal concerns the jurisdiction of the Supreme of British Columbia and, by extension, the jurisdiction of this Court. The question of jurisdiction was treated as a preliminary matter in the Supreme Court and I think it should continue to be treated in that way.
In Part I of these reasons I have set out the relief requested in the petition. It is that the levying of penalties under the income tax legislation of Canada and B.C., following the conviction of the petitioners, be declared to be contrary to paragraph 11(h) of the Charter in this case. The petition also contains an application for an order that all funds collected as penalties be returned to the petitioners, with interest.
In my opinion the primary remedy should be regarded as a declaration. If it is granted then it would establish that the constitutional rights of the petitioners have been violated. The remedy for that violation is secondary to establishing that the violation has occurred.
I agree with Chief Justice McEachern that the decisions of the Supreme Court of Canada in A-G Canada v. Law Society of B.C. (the Jabour Case), [1982] 2 S.C.R. 307; 137 D.L.R. (3d) 1, and Canada Labour Relations Board v. Paul L'Anglais Inc., [1983] 1 S.C.R. 147; 146 D.L.R. (3d) 202 confirmed that the Supreme Court of British Columbia has jurisdiction, as a Provincial court of general original jurisdiction, to declare that a particular application of federal legislation is contrary to the Constitution. I have no doubt that the principle confirmed by those decisions applies to declarations respecting applications of the Charter to federal legislation in the same way as to declarations respecting applications of sections 91 and 92 of the Constitution to federal legislation. Nor do I think that those two decisions can be confined to cases of the total unconstitutionality of particular federal legislation as opposed to cases of the unconstitutional application of otherwise constitutional legislation. In both the Jabour case and the L'Anglais case the legislation in question was constitutional. It was the particular application in question that was said to be beyond the powers of Parliament. In that respect this case is indistinguishable from those two cases.
I move on now from the jurisdiction to grant declaratory relief to the jurisdiction to order return of the penalty taxes which have been paid. That relief is dependent on the conclusion that the particular application of the legislation with respect to which the declaration is sought is unconstitutional. But, if it is, then the Attorney General of Canada should not be able to claim that the return of money that has been levied unconstitutionally is beyond the competence of the Provincial superior courts. The applicable principle was discussed by Mr. Justice Estey in the Jabour case, at page 330, where he referred to this passage from the reasons of Chief Justice Kerwin in British Columbia Power Corporaiton Limited v. British Columbia Electric Company, [1962] 1 S.C.R. 642; 34 D.L.R. (2d) 274 at pages 644-645:
In a federal system, where legislative authority is divided, as are also the prerogatives of the Crown, as between the Dominion and the Provinces, it is my view that it is not open to the Crown, either in right of Canada or of a Province, to claim a Crown immunity based upon an interest in certain property, where its very interest in that property depends completely and solely on the validity of the legislation which it has itself passed, if there is a reasonable doubt as to whether such legislation is constitutionally valid. To permit it to do so would be to enable it, by the assertion of rights claimed under legislation which is beyond its powers, to achieve the same results as if the legislation were valid. In a federal system it appears to me that, in such circumstances, the Court has the same jurisdiction to preserve assets whose title is dependent on the validity of the legislation as it has to determine the validity of the legislation itself.
In any case, I consider that the declaratory relief requested is severable from the relief consisting of a return of the penalty taxes with interest, and I would not consider that the jurisdiction to grant declaratory relief should be regarded as taken away because that request for relief is associated in the petition with a request for the return of the taxes. As Chief Justice McEachern said in his reasons on the preliminary motion, to do that would be to give a jurisdictional advantage to those who have refused to pay their taxes as against those who have paid them.
The Attorney General of Canada also argued that even if the Supreme Court of British Columbia had jurisdiction, it should decline to exercise it and defer to the Tax Court of Canada or the Federal Court. Finally he argued that the petition was premature and that the issues under the Charter should be dealt with at the same time as any other issues about the validity and effect of the penalty assessments.
In my opinion the constitutional question under the Charter is ripe for decision. I agree with Chief Justice McEachern's opinion, on the preliminary motion, that a court whose jurisdiction is invoked, and which has jurisdiction, should not lightly decline to exercise it. The reasons advanced for declining jurisdiction in this case do not persuade me that jurisdiction should have been declined.
I would dismiss the cross-appeal.
The Appeal
In order to understand the issues with respect to the application of paragraph 11(h) of the Charter to the assessment and upholding of the penalty taxes in this case, it is necessary to understand the precise legislation underlying the criminal offences and the precise legislation underlying the penalty assessments, and it is necessary to consider exactly how they were applied in this case. I propose to start by setting out that background. I propose then to discuss the particular aspects of the Charter application that are relevant to this case. I will then set out my conclusions and proposed disposition.
The Penalty Assessment Provisions
The provisions of the federal Income Tax Act under which the penalty assessments were made are subsections (1) and (2) of section 163:
WILFUL FAILURE TO FILE RETURN
163. (1) Every person who wilfully attempts to evade payment of the tax payable by him under this Part by failing to file a return of income as and when required by subsection 150(1) is liable to a penalty of 50% of the amount of the tax sought to be evaded.
False Statements or Omissions
(2) Every person who, knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer (in this section referred to as a ''return") filed or made in respect of a taxation year as required by or under this Act or a regulation, is liable to a penalty of
(a) 25% of the amount, if any, by which
(i) the tax for the year that would be payable by him under this Act if his taxable income for the year were computed by adding to the taxable income reported by him in his return for the year that portion of his understatement of income for the year that is reasonably attributable to the false statement or omission
exceeds
(ii) the tax for the year that would have been payable by him under this Act had his tax payable for the year been assessed on the basis of the information provided in his return for the year, . . .
[Emphasis added.]
I have underlined the word "penalty" because it categorizes the assessments as penal assessments.
The provisions of subsections (1) and (3) of section 23 of the British Columbia Income Tax Act are so similar to the provisions of subsections (2) and (1), respectively of section 163 of the federal Income Tax Act that it is unnecessary to set them out.
The Penalty Assessments
On March 77, 1983, U.S. Dungaree Seafarers Ltd., was reassessed for the 1977, 1978 and 1979 taxation years. The reassessments included penalty assessments under subsection 163(2) of the federal Income Tax Act and subsection 23(1) of the British Columbia Income Tax Act.
On April 29, 1983, Lester Lavers was reassessed for the 1977, 1978, and 1979 taxation years. For the 1977 and 1979 taxation years the reassessments included penalty assessments under subsection 163(2) of the federal Act and subsection 23(1) of the B.C. Act. For the 1978 taxation year the reassessment included penalty assessments under subsection 163(1) of the federal Act and subsection 23(3) of the B.C. Act.
Also on April 29, 1983, Kalomira Lavers was reassessed for the 1977, 1978, and 1979 taxation years. The reassessments included penalty assessments under subsection 163(2) of the federal Act and subsection 23(1) of the B.C. Act.
All three appellants in this case, namely U.S. Dungaree Seafarers Ltd., Lester Lavers, and Kalomira Lavers, objected to the assessments, including the penalty assessments. They filed notices of objection. The assessments were confirmed in 1985. After that the available appeal processes, if pursued, would lead to judicial determinations by the Tax Court of Canada, the Federal Court of Canada and the Supreme Court of British Columbia. The appeal processes would not be concluded until the appeal periods had expired and the taxpayers had failed to appeal to those courts and perhaps beyond. In the present case the three taxpayers launched appeals but the appeal processes are in abeyance pending the outcome of these proceedings.
In compliance with subsection 158(1) of the Income Tax Act, the amounts of the assessments, including penalty assessments, were paid to the Receiver General of Canada. The payments were made under protest.
The amounts of the penalty assessments were as follows:
| U.S. Dungaree | L. Lavers | | K. Lavers |
Year | S. 163 | S. 23 | 5. 163 | S. 23 | S. 163 | S. 23 |
1977 5,415.86 4,284.38 8,171.65 3,816.45 5,615.54 2,606.94
1978 6,238.51 4,436.69 8,633.90 4,086.60 3,659.58 1,694.11 1979 180.92 144.74 982.58 475.80 939.40 422.74
As I have indicated, the penalty assessments on Lester Lavers for 1978 were under subsection 163(1) of the federal Act and subsection 23(3) of the B.C. Act. All other penalty assessments for all three years were under subsection 163(2) of the federal Act and subsection 23(1) of the B.C. Act.
The Offence Provisions
The criminal charges were all laid with respect to the offences described in paragraphs 239(1)(a) and 239(1)(d) of the federal Income Tax Act:
OFFENCES
239. (1) Every person who has
(a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation,
(d) wilfully, in any manner, evaded or attempted to evade, compliance with this Act or payment of taxes imposed by this Act, or
(e) conspired with any person to commit an offence described by paragraphs (a) to (d),
is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to
(f) a fine of not less than 25% and not more than double the amount of the tax that was sought to be evaded, or
(g) both the fine described in paragraph (f) and imprisonment for a term not exceeding 2 years.
[Emphasis added.]
(There were insignificant variations in this section over the course of the three relevant taxation years.)
No criminal charges were laid under sections 47 and 48, the offence sections, of the British Columbia Income Tax Act. Those sections are not materially different from the federal provisions which I have quoted immediately above.
The Criminal Charges
The information was laid on May 13, 1983, two weeks after the assessment of the penalty assessments on Lester Lavers and Kalomira Lavers. It contained ten counts, as follows:
US Dungaree Seafarers Ltd., a corporation carrying on business in the City of Vancouver, in the Province of British Columbia,
Count 1: On or about the 25th day of July, 1978 made a false or deceptive
statement in its return of income for the fiscal year ending September 30, 1977, filed as required by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) by stating that the gross income for the said year was $688,809.60 which statement was false or deceptive by reason that it failed to report additional income in the amount of $132,266.66 contrary to paragraph 239(1)(a) of the said Act.
Count 2: | On or about the 27th day of September, 1979 made a false or deceptive |
| statement in its return of income for the fiscal year ending September |
| 30, 1978, filed as required by the Income Tax Act, R.S.C. 1952, Chapter |
| 148 (as amended) by stating that the gross income for the said year was |
| $1,034,130.91 which statement was false or deceptive by reason that it |
| failed to report additional income in the amount of $133,368.30 con |
| trary to paragraph 239(1)(a) of the said Act. |
Count 3: | US Dungaree Seafarers Ltd. carrying on business in the City of Van |
| couver, Lester Harold Lavers and Kalomira Lavers (Biniari) both residing |
| in the Municipality of Richmond, Province of British Columbia, be |
| tween September 30, 1976 and September 28, 1979, wilfully evaded . . . |
| payment of taxes imposed by the Income Tax Act, R.S.C. 1952, Chapter |
| 148 (as amended) in relation to income in the amount of $265,634.96 |
| received by the said US Dungaree Seafarers Ltd. and did thereby |
| commit an offence contrary to paragraph 239(1)(d) of the said Act. |
LESTER HAROLD LAVERS, residing in the Municipality of Richmond, in the Province of British Columbia,
Count 4: | On or about the 20th day of November, 1979 made a false or deceptive |
| statement in his return of income for the 1977 taxation year, filed as |
| required by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) |
| by stating that his total income for the said year was Nil which state |
| ment was false or deceptive by reason that he failed to report addi |
| tional income in the amount of $96,813.40 contrary to paragraph |
| 239(1)(a) of the said Act. |
Count 5: | On or about the 14th day of April, 1980 made a false or deceptive |
| statement in his return of income for the 1979 taxation year, filed as |
| required by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) |
| by stating that his total income for the said year was $56,478.52 which |
| statement was false or deceptive by reason that he failed to report |
| additional income in the amount of $11,748.76 contrary to paragraph |
| 239(1)(a) of the said Act. |
Count 6: Between December 31, 1976, and April 15, 1980, wilfully evaded ... .
payment of taxes imposed by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) in relation to income in the amount of $174,895.27 received by him and did thereby commit an offence contrary to paragraph 239(1)(d) of the said Act.
KALOMIRA LAVERS (BINIARI), residing in the Municipality of Richmond, in the Province of British Columbia,
Count 7: On or about the 30th day of April, 1978 made a false or deceptive
statement in her return of income for the 1977 taxation year, filed as required by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) by stating that her total income of the said year was $20,060.10 which statement was false or deceptive by reason that [she] failed to report additional income in the amount of $76,312.60 contrary to paragraph 239(1)(a) of the said Act.
Count 8: On or about the 11th day of May, 1979 made a false or deceptive
statement in her return of income for the 1978 taxation year, filed as required by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) by stating that her total income for the said year was $26,710.45 which statement was false or deceptive by reason that she failed to report additional income in the amount of $42,045.97 contrary to paragraph 239(1)(a) of the said Act.
Count 9: On or about the 16th day of April, 1980 made a false or deceptive
statement in her return of income for the 1979 taxation year, filed as required by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) by stating that her total income of the said year was $34,315.92 which statement was false or deceptive by reason that she failed to report additional income in the amount of $11,277.50 contrary to paragraph 239(1)(a) of the said Act.
Count 10: Between December 31, 1976, and April 17, 1980, wilfully evaded . . .
payment of taxes imposed by the Income Tax Act, R.S.C. 1952, Chapter 148 (as amended) in relation to income in the amount of $129,636.07 received by her and did thereby commit an offence contrary to paragraph 239(1 )(d) of the said Act.
As I have said, there were no charges laid under the offence sections of the B.C. Income Tax Act.
The Criminal Convictions and Sentences
All three appellants were convicted on Count 3. Lester Lavers was also convicted on Count 6. Kalomira Lavers was also convicted on Count 10. We were told by counsel for the appellants that all the other counts were Kienap- pled, though I am not sure whether that procedure resulted in a dismissal of the counts or a staying of the counts.
The trial judge, Judge Davies, imposed these sentences:
U.S. Dungaree Seafarers Ltd. | Count 3—fine of $41,181.28 |
| (100% of the Tax Sought to be Evaded) |
Lester Lave rs | Count 3—Fine of $10,295.32 |
| (25% of the Tax Sought to be Evaded) |
Lester Lavers | Count 6—2 Months Imprisonment and |
| Fine of $50,000 |
| (About 100% of the Tax Sought to be |
| Evaded) |
Kalomira Lavers | Count 3—Fine of $10,295.32 |
| (25% of theTax Sought to be Evaded) |
Kalomira Lavers | Count 10—2 Months Imprisonment and a |
| Fine of $50,000 |
| (About 125% of the Tax Sought to be |
| Evaded) |
All of those sentences were appealed to the County Court. Judge Oppal dismissed the appeals with respect to Count 3. He allowed the appeals, in part, with respect to Counts 6 and 10. He struck out the imprisonment and reduced the fines. In the result, the sentences with respect to Count 3 remained unchanged and the sentences on Count 6 and 10 became:
Lester Lavers | Count 6—Fine of $35,000 |
| (70% of Tax Sought to be Evaded) |
Kalomira Lavers | Count 10—Fine of $30,000 |
| (70% of the Tax Sought to be Evaded) |
Neither Judge Davies nor Judge Oppal referred in their reasons to the fact that the taxpayers had been assessed a penalty assessment for the same tax evasion as was the subject matter of the criminal charges, though that fact had been mentioned to each of them in the course of argument.
The Disposition of the Petition in Chambers
Mr. Justice Taylor relied on the fact that both before Judge Davies and before Judge Oppal counsel for the petitioners had asked that the penalty taxes which had been assessed should be taken into account in setting the sentences for the criminal offences. Mr. Justice Taylor considered that the petitioners had thus elected their relief under subsection 24(1) of the Charter and that by their petition they were seeking a further remedy which was inconsistent with their previous position and which, if granted, would permit them to receive less than proper punishment.
The Interpretation of Paragraph 11(h): General
The essential words of the Charter are:
11. Any person charged with an offence has the right
(h) . . . if finally found guilty and punished for the offence, not to be... punished for it again;
The first point to note is that while the Charter must be interpreted in its linguistic, legal and historical context, it should not be interpreted in such a way as to freeze the criminal and administrative law concepts that were embodied in the public law of Canada in 1982 in the form that they had in 1982. Those concepts in that form constitute an aid in interpreting the Charter but they are not a substitute for the plain words of the Charter itself.
The second point to note is that the question in this case is not whether a quasi-judicial proceeding which might have resulted in a form of professional discipline or other administrative or quasi-judicial punishment can cause a true criminal prosecution to be barred. See The Queen v. Wigglesworth, [1987] 2 S.C.R. 541 and Tri mm v. Durham Regional Police, [1987] 2 S.C.R. 577 and the professional discipline cases referred to in those two decisions. There is a natural reluctance to give the Charter an interpretation that would prevent true criminal proceedings from taking place. In this case the true criminal proceedings have occurred and are not under attack. They constitute the matter of a public nature, intended to promote public order and welfare within a public sphere of activity, that is necessary to constitute the "offence". See Wig- glesworth, per Madam Justice Wilson at page 560. Instead, the question in this case is whether the Charter gives protection against the administrative punishment, namely the penal assessments.
The third point to note is that the words of the Charter themselves are fairly straightforward. A person must have been charged with an offence. There is no doubt that the three petitioners in this case were charged with offences under section 239 of the federal Income Tax Act. The person must have been finally found guilty and punished for the offence. There is no doubt that the three petitioners were finally found guilty, nor is there any doubt that they were finally punished for their offences. So the question comes down to whether the three petitioners, with respect to each offence, are in danger of being "punished for it again".
I do not consider that “punished” presents any difficulty in this case. Both subsection 163(1) and subsection 163(2) describe the assessment under the subsection as making the taxpayer “liable to a penalty". The penalty so imposed is no different in its concept or in its general manner of calculation, as a percentage of tax sought to be evaded, than the fine imposed by section 239. See Wigglesworth, per Madam Justice Wilson at page 561. The penalty, like the fine, finds its way into the federal Consolidated Revenue Fund by payment to the Receiver General of Canada. Moreover the penalty, like the fine, is large enough to constitute a “true penal consequence". Again, see Wigglesworth, per Madam Justice Wilson at pages 561-2.
So the question comes down to the meaning and application of "for it”, and to the meaning and application of "again", in their context in paragraph 11(h) of the Charter. I will turn to those two problems in the next two divisions of these reasons.
The Interpretation of Paragraph 11(h): "For It”
There are four separate issues involved in the question of whether whatever is encompassed by the words “for it” in paragraph 11(h) of the Charter is met in this case.
The first issue relates to the fact that the offence is set out in one section, namely section 239 of the federal Income Tax Act, and the penalty assessment is set out in another section, namely section 163. In my opinion, the separate numbering makes no difference. The section number is not a necessary part of the description of the offence. The offence is a matter of substance. The punishment for the offence is also a matter of substance. The punishments are described in the sections. The question is whether the two punishments are imposed for substantially the same thing, not whether they are described in the same sections. The different section numbers do not mean that the punishments are not for the same offence.
The second issue relates only to Lester Lavers, and only to the 1978 year. That is the most straightforward case. The criminal conviction was under paragraph 239(1 )(d) for the offence that he “wilfully . . . attempted to evade . . . payment of taxes . . ." The penalty assessment was under subsection 163(1) as a person who “wilfully attempts to evade payment of the tax . . . by failing to file a return of income.” The two provisions correspond. The manner of committing the offence is specified in one provision but not in the other. But the manner specified was the manner in which the offence was committed in this case. In my opinion the punishment imposed by the penalty assessment for 1978 on Lester Lavers was punishment for the same act and same offence as the punishment comprised by the sentence imposed following conviction on the criminal charge on Count 6.
The third issue relates to U.S. Dungaree Seafarers Ltd. and to Kalomira Lavers for the 1977, 1978 and 1979 years and to Lester Lavers for the 1977 and 1979 years. For those taxpayers in those years the convictions were under paragraph 239(1 )(d) for the offence that the taxpayer “wilfully . . . attempted . . . to evade . . . payment of taxes.” The penalty assessment in each case was under subsection 163(2) and was imposed on each of them as a person who ”. . . knowingly . . . has made . . . a false statement... in a return." Those two provisions do not precisely correspond. There were counts against all three taxpayers under paragraph 239(1)(a) as persons who had "made false or deceptive statements in a return." Those counts correspond to the penalty assessment provisions in subsection 163(2). Under the Kienapple principle those counts were not proceeded with, and there were no convictions and no punishments with respect to those counts. In my opinion the penalty assessments were nonetheless for the same acts as the acts which constituted the offences giving rise to the convictions and fines. If the counts were properly subject to the Kienapple principle because in substance they were for the same acts constituting in substance the same delicts, as I think they were, then the very identity in substance that makes them subject to the Kienapple principle also makes them two separate punishments for the same substantive offence. What the taxpayers actually did was to attempt to evade payment of taxes by intentionally making a false statement in a return. It is for that single intentional act with that intended consequence that they have been both convicted and fined, on the one hand, and assessed a penalty, on the other.
The fourth issue relates solely to the British Columbia Income Tax Act. Penalty assessments were levied under that Act but there were no criminal prosecutions under the Act. In those circumstances, can it be said that the levying of penalty assessments under subsection 23(1) and subsection 23(3) of the B.C. Act constitutes being punished for the same acts which constituted the offences under the federal Act?
For Lester Lavers for the 1978 year, the penalty assessment was imposed under subsection 23(3), which imposed a penalty for attempting to evade payment of tax. The only tax to which that can refer is the tax imposed under the B.C. Income Tax Act. There has been no conviction for attempting to evade that tax. So the imposition of a penalty for that act is not a second punishment, since there has been no previous punishment.
The same result is arrived at, but in a slightly different way, for all the other penalty assessments under subsection 23(1). The penalty assessments are being imposed for knowingly making a false statement in a return. The false statement in each case was a statement in relation to the amount of income and was made for each taxpayer for each year in the single return for that taxpayer in that year which the federal and provincial tax authorities agreed would be used as a return for both federal and provincial income tax. The false statement in the single return of income was the same false statement which was then the basis for the federal penalty assessment under subsection 163(2) and the B.C. penalty assessment under subsection 23(1). But that same false statement did not lead to a conviction for making a false statement in a return. The counts for that offence were stayed under the Kienapple ruling. The convictions were for attempting to evade federal taxes. Since the taxes sought to be evaded were not B.C. taxes there was no conviction for evading B.C. taxes. Nor can the Kienapple ruling have the effect of saying that substantially the same delict was involved in both knowingly making a false return for B.C. purposes, on the one hand, and in attempting to evade federal taxes, on the other hand.
In conclusion on the fourth issue arising with respect to the meaning and application of "for it” in paragraph 11(h) of the Charter, it is my opinion that neither for Lester Lavers in the 1978 year nor for the other two petitioners for all three years, nor for Lester Lavers for the 1977 and 1979 years, is the penalty assessment under the B.C. Act a punishment for the same offence as the offences for which sentences were imposed following convictions under the federal Act.
So my conclusion with respect to the meaning and application of “for it” in paragraph 11(h) of the Charter, as those words affect this case, is that for all three taxpayers in all three years the federal penalty assessments were punishments for the same offences as those for which convictions were entered and fines were imposed, but that the B.C. penalty assessments were not punishments for the same offences for which convictions were entered and fines were imposed because there never were prosecutions or convictions for any B.C. offences, or for any acts involving B.C. taxes.
The Interpretation of Paragraph 11(h): "Again"
Counsel for the respondents argued that the penalty assessments, if they constituted punishments at all, were punishments only at the time when the assessments were imposed, or, alternatively, at the time when they were paid, and that those two times both occurred before the convictions for the income tax offences, so that the penalty assessments could not constitute punishment “again” for the same offences as the income tax offences, since "again" denotes something occurring later in time. In short, counsel for the respondents argued that the penalty assessments occurred first.
In my opinion penalty assessments operate as punishment when the liability for the penalty is finally established, by administrative or judicial process, to the extent that those processes are pursued by the taxpayer. He is in jeopardy in relation to the punishment for so long as he has a right to try to establish by an administrative or judicial process that he is entitled to a refund of the penalty assessments which were paid under statutory compulsion. Until that time the taxpayer still has an opportunity to escape from the punishment by establishing that he is not liable for it. At the worst the taxpayer has suffered only a provisional punishment when he makes the payment under statutory compulsion. The final punishment occurs when the taxpayer no longer has a right to recover the amount which he has paid as a penalty assessment. So it is my opinion that the Charter protection is available following conviction and sentence for so long as the liability for the penalty assessment is not finally determined.
The result of this conclusion may be that Charter protection is only available to taxpayers who object to their penalty assessments. But that is consistent with other aspects of Charter protection that are only available when asserted. I think it would be preferable if the Income Tax Act were changed so that an act which invited penal consequences could be the foundation for either a criminal conviction and criminal punishment, on the one hand, or a penalty assessment, on the other hand, but not both. Only that result is consistent with the spirit of paragraph 11(h) of the Charter. But that is not the position at the present time.
I do not consider that my conclusions with respect to the application of the word “again” in paragraph 11(h) of the Charter are affected by the provisions of subsection 239(3) of the federal Income Tax Act which I will set out in a later division of these reasons headed "Will the Petitioners Have Undergone Only One Punishment?” and in which I consider the reasons of Mr. Justice Taylor, from whose judgment this appeal was taken.
I consider that the upholding of the federal penalty assessments in this case would constitute punishment “again” for the federal income tax offences.
The Interpretation of Paragraph 11(h): "Is a 'corporation' a 'person'?"
Counsel for the Attorney General of Canada argued that while the rights guaranteed by paragraph 11(h) of the Charter are available to Lester Lavers and Kalomira Lavers, as individuals, to the extent that those rights are applicable, the rights under paragraph 11(h) are not available to the third petitioner, U.S. Dungaree Seafarers Ltd., because it is a corporation.
Counsel for the Attorney General relied on the Attorney General of Quebec v. Irwin Toy Limited, [1989] 1 S.C.R. 927; 94 N.R. 167, particularly at page [S.C.R.] 1004, and on Reference re: s. 94(2) of the Motor Vehicle Act, [1985] 2 S.C.R. 486; [1986] 1 W.W.R. 481; particularly at pages 502-503. The former case decided that section 7 of the Charter does not apply to corporations. The second case decided that sections 8-14 of the Charter address specific deprivations of the rights to life, liberty and security of the person, in breach of the principles of fundamental justice. So, counsel for the Attorney General argued, with only logic to support the argument, paragraph 11(h) does not apply to corporations. The fallacy is that the Motor Vehicle Reference should not be taken to have decided that the rights guaranteed by sections 8-14 are restricted only to the ambit of section 7. Those rights cover that ambit but may go further. The Supreme Court of Canada has not decided otherwise, and I consider that the arguments in favour of permitting paragraph 11(h) and some of the other paragraphs of section 11 of the Charter to apply to corporations are so compelling that I would not deny the paragraph 11(h) rights to corporations without binding authority to the contrary.
I will summarize what seem to me to be the most persuasive arguments in favour of permitting the paragraph 11(h) rights to apply to corporations.
1. The English version of section 11 of the Charter starts with the words "Any person". The French version starts with the words "Tout inculpe”. Section 57 of the Constitution Act, 1982 provides that the English version and French version are equally authoritative. To the extent that the English version is ambiguous, the French version resolves the ambiguity. "Tout inculpe” must extend to corporations charged with a criminal offence. See Peter Hogg: Constitutional Law of Canada, 2nd ed., 1985, at page 667 and Hrabinsky, J. in R. v. Unity Auto Body (1988), 68 Sask. R.3.
2. Section 2 of the Charter starts with the word "Everyone", which surely must be equivalent to "Any person". It affirms the existence of fundamental freedoms, including freedom of the press and other media of communication. Those fundamental freedoms would be much confined if they were not available to corporations.
3. Corporations are frequently tried in the same proceedings as individuals. It would be strange if one set of rights, both substantive and procedural, were to be available to the individuals, and a different set of rights were to be available to the corporations. The right to be presumed innocent is confirmed in paragraph 11(d) of the Charter. It affects the burden of proof and it affects the constitutional validity of some statutory presumptions. Are those statutory presumptions to operate with respect to corporations but not to operate with respect to individuals, in the very same trial? See Scollin, J. in Balderstone v. R., [1983] 1 W.W.R. 72; 143 D.L.R. (3d) 671 (Man. Q.B.); 4. The Charter provisions in section 11 and in other sections confirm, or extend, or modify rights which existed when the Charter was passed. Those rights will tend to merge with the Charter rights, where the Charter applies, to provide a coherent body of law that is dependent on the Charter. It would be complicated, unnecessary, and unwise to permit the development of a parallel body of law based solely on the rights which existed at the time the Charter was created, but owing nothing to the Charter, for the determination of the legal position of corporate entities.
5. One of the earlier versions of the Charter, in draft form, contained terms such as "his" or "her" and “individual”. Those terms were eliminated before the final version was settled. See Dale Gibson: "The Law of the Charter: General Principles’ (1986) at pages 194-195. The historical evolution of the Charter document is a permitted tool in the interpretation of the concluded version.
6. The federal Interpretation Act and the British Interpretation Act, 1978 (Eng.) c. 30 schedule 1 both provide that "person" includes a corporation. (The federal Interpretation Act, of course, does not apply directly to the Charter, but it sets out a drafting context.)
7. The decided cases all support the view that paragraph 11(h) applies to corporations. See P.P.G. Industries Canada Ltd. v. A.G. Canada (1983), 146 D.L.R. (3d) 261 (B.C.C.A.); the trial decision of Mr. Justice Cavanagh in Southam v. Director of Investigation, [1982] 4 W.W.R. 673 (Alta.Q.B.); 20 Alta.L.R. (2d) 144; Balderstone v. R., [1983] 1 W.W.R. 72 (Man.Q.B.); 143 D.L.R. (3d) 671; R. v. Unity Auto Body Ltd. (1988), 68 Sask. R. 3 (Sask.Q.B.); Gordon Redi Mix v. R., [1988] 6 W.W.R. 470 (Sask.Q.B.); Re Panarctic Oils Limited and the Queen(1982), 69 C.C.C. (2d) 393 (N.W.T.S.C.); 141 D.L.R. (3d) 138; and Matheson & McMillan v. Minister of Finance (1986), 59 Nfld. & P.E.I. R. 189 (P.E.I.S.C.); 178 A.P.R. 189.
8. The fact that a corporation could not, because of its very nature, avail itself of some of the rights and freedoms confirmed or-conferred by the Charter, such as a right not to be a witness, or a right to liberty or to freedom of conscience, does not mean that other rights or freedoms which could be exercised by corporations should not be considered to have been conferred or confirmed for them. The unavailability of some rights to corporate entities, arising from the very nature of those entities, does not affect the general meaning which should be regarded as being carried by the words "Everyone" and “Any person".
For those reasons I conclude that the rights conferred and confirmed by paragraph 11(h) of the Charter are rights available to the corporate petitioner in this case, U.S. Dungaree Seafarers Ltd.
Will the Petitioners Have Undergone Only One Punishment?
The basis of of Mr. Justice Taylor's decision was that the petitioners made submissions at the original sentencing before Judge Davies, and on the sentence appeal before Judge Oppal, that the penalty assessments should be taken into account in setting the sentences following convictions for the federal income tax offences. Mr. Justice Taylor considered that those submissions constituted an election of a remedy under section 24 of the Charter and precluded the petitioners from arguing that they were being punished twice for the same offence.
Subsection 239(3) of the federal Income Tax Act contemplates the kind of submission that was made by counsel for the petitioners on the sentencing in this case. It reads:
PENALTY UPON CONVICTION
(3) Where a person has been convicted under this section of wilfully, in any manner, evading or attempting to evade payment of taxes imposed by Part I, he is not liable to pay a penalty imposed under section 163 for the same evasion or attempt unless he was assessed for that penalty before the information or complaint giving rise to the conviction was laid or made.
That subsection was enacted before the Charter came into operation. In my opinion the subsection recognizes that a person may be punished twice for an income tax offence by being sentenced for the offence and by suffering also a penalty assessment. It tries to ameliorate that consequence by requiring that the penalty be assessed before the information is laid, and so before the conviction or sentence. Consequently, the sentencing judge is aware of the penalty assessment and knows it is likely to be upheld, on appeal, having regard to his own conviction decision, and he can thus make whatever allowance he thinks is appropriate for that factor in fixing the sentence for the income tax offence.
But that is not to say that in this case, or in any other case, the sentence will be only a fine or that the fine will be reduced from what it would otherwise have been by an amount equal to the penalty assessment. Nor is there any indication in the reasons of Judge Davies, or the reasons of Judge Oppal, that either of them made an allowance of any kind for the amount of the penalty assessment.
In my opinion the penalty assessments under the federal Income Tax Act constitute punishment again for the income tax offences under the federal Income Tax Act. As such, the penalty assessments are now contrary to paragraph 11(h) of the Charter. My opinion is not affected by the fact that the criminal sentences may have been reduced to make an allowance of some kind for the penalty assessments, the Charter prohibits duplication of punishments, not excessive totality of punishments.
The Result of This Decision in the Context of Double Punishment
I do not consider that the conclusion I have reached with respect to the application of the Charter to the penalty assessments for federal tax is impractical or that it permits dishonest taxpayers to escape proper punishment for their acts of evasion. It is important in this area of the law that the true criminal conviction and punishment, by the regular criminal process, should stand unimpaired, and that some form of administrative or quasi-judicial punishment should not be permitted to bar the true criminal process. But if there is both a true criminal process and an administrative or quasi-judicial process, then it is proper to examine the administrative or quasi-judicial process closely to see whether it contravenes the Charter by providing punishment again for what is truly the same offence. To carry out the objects of the Charter, one would hope that the true criminal process would be permitted to occur first.
If it is important that the true criminal process should be unimpaired by paragraph 11(h) of the Charter, as I think it is, then it is the administrative or quasi-judicial process that must give way when criminal proceedings are appropriate and where the administrative or quasi-judicial process is for the very offence that is the subject of the criminal process. Subsection 239(3) of the federal Income Tax Act requires that if a penalty tax is to be assessed, it must be assessed before the criminal information is laid. That provision was passed before the Charter came into being. It was not intended to prevent the application of the Charter and, as I have explained, I do not think it has that effect. But if it did have that effect then it would operate as a device to secure double punishment for the same offence. In my opinion it would be a most lamentable state of the law if administrative punishments were constitutional if they were imposed before criminal punishment but unconstitutional if they were imposed afterwards.
The views I have expressed in this segment of my reasons are shared by the authors of two scholarly works in this field. See William I. Innes: Tax Evasion in Canada, Carswell 1987, at page 12, and Edwin C. Harris, Q.C.: “Civil Penalties Under the Income Tax Act”, Canadian Tax Foundation: Corporate Management Tax Conference, 1988, at page 9:16.
Disposition of Appeal
I would allow the appeal of all three petitioners with respect to the penalty assessments under the federal Income Tax Act and I would make the declaration requested by them with respect to those penalty assessments. I would dismiss the appeal of all three petitioners with respect to the penalty assessments under the British Columbia Income Tax Act and I would refuse to make the declaration that the petitioners have requested with respect to those penalty assessments. I would answer the constitutional question in this way:
(1) Imposition of penalties upon the petitioners in this case under subsections 163(1) and (2) of the Income Tax Act (Canada), where they have been previously found guilty and punished for offences under subsection 239(1) of the Income Tax Act (Canada) in relation to the same subject matter, infringe upon their rights as guaranteed by paragraph 11(h) of the Canadian Charter of Rights and Freedoms.
(2) The imposition of penalties upon the petitioners in this case under subsections 23(1) and (3) of the Income Tax Act (B.C.), where they have been previously been [sic] found guilty and punished for offences under subsection 239(1) of the Income Tax Act (Canada) in relation to an equivalent subject matter, do not infringe upon their rights as guaranteed by paragraph 11(h) of the Canadian Charter of Rights and Freedoms.
That disposition deals with the request for declaratory relief. I would hope that it would not be necessary to make any specific order for the return of the penalty taxes, with interest. If such an order proves to be necessary I would permit that matter to be brought back to the Court for an approriate order.
Addendum
When I wrote these reasons I did not know that I would be dissenting in this appeal. But I have now read Mr. Justice Wallace's reasons and I understand that the other members of the division agree with him. Because dissenting reasons should be responsive, I propose to state, as concisely as I can, the two points on which I disagree with the majority. I do so with respect and only for the purpose of convenience of reference, not by way of argument or criticism.
1. In my opinion the question of whether the administrative assessments and the resulting penalties constitute the same "offence" as that for which the appellants were found guilty and sentenced is meaningless and irrelevant. Assessments and penalties are not capable of being "offences". And the application of paragraph 11(h) of the Charter to this case does not depend on there being two "offences" or two offence provisions. Indeed it depends on there being only one "offence". That offence is the offence of attempting to evade taxes by making a false statement in a return. That is the offence for which the appellants were convicted and their fines were imposed. It is also the act which gave rise to the administrative assessments. The question under paragraph 11(h) of the Charter is not whether the administrative assessments and penalties constitute, in themselves, "an offence”, but whether they constitute punishment for the offence of attempting to evade taxes by making a false statement in a return, the very offence for which the true criminal convictions occurred and the criminal fines were imposed. In my opinion they do.
2. I have said that the imposition of the punishment by the administrative assessments is not complete until the appeal process in relation to the administrative assessments has come to an end. Until then, the punishment can be avoided entirely by a successful appeal. And so it can be said not to have been finally inflicted. By that reasoning I conclude that the administrative assessments constitute punishment "again" for the same offences as were punished by the fines that were imposed following conviction in the true criminal proceedings. I concede that this interpretation represents a choice between two competing interpretations, neither of which seems to me to be manifestly correct. But the interpretation which I prefer gives a purposive construction to the Charter in its application to this case by preventing double punishment. It is for that reason that I prefer it. See Hunter v. Southam, [1984] 2 S.C.R. 145; 27 B.L.R. 297 at page 156, per Dickson, J. for the Supreme Court of Canada.
Wallace, J.A.:—
I. Introduction
I have had the advantage of reading the reasons of my brother Lambert and I agree, for the reasons stated by him, that the cross-appeal must be dismissed. I differ, however, from the conclusions reached by my brother Lambert on the main appeal and, accordingly, consider it appropriate that I set out my reasons for doing so.
The relevant facts and pertinent legislation are succinctly set forth in Mr. Justice Lambert's reasons for judgment and need not be repeated here.
The major question for resolution on this appeal may be framed in the following form:
If the appeal courts should rule that the assessments and penalties imposed under subsections 23(1) and (3) of the Income Tax Act, R.S.B.C. 1979, c. 190, and subsections 163(1) and (2) of the Income Tax Act, S.C. 1970-71-72, c. 63, be upheld, would they constitute a violation of paragraph 11(h) of the Canadian Charter of Rights and Freedoms?
Paragraph 11(h) of the Charter provides in part:
11. Any person charged with an offence has the right
(h) . . . if finally found guilty and punished for the offence, not to be tried or punished for it again;
[Emphasis added.]
This question necessarily involves the resolution of two derivative issues:
(a) Do the administrative assessments and the resulting penalties constitute the same "offence" as that for which the appellants were found guilty and sentenced under subsection 239(1) of the federal Income Tax Act and thereby come within paragraph 11(h) of the Charter?
(b) Assuming the answer to (a) is yes—do the penalties imposed as a consequence of the Minister's assessments on March 11, 1983 and April 29, 1983 constitute punishment “again” for the sentences imposed on October 6, 1983 for a violation of section 239 of the federal Income Tax Act?
Il. The "Offence"
In R. v. Wigglesworth, [1987] 2 S.C.R. 541, the Supreme Court of Canada defined “offence” for the purpose of paragraph 11(h) of the Charter. An enactment would create an “offence” where a prohibition, together with the procedure for ensuring compliance, were "by their nature" criminal. This test focusses on the interdicted conduct and the procedural elements of enforcement. Alternatively, an enactment would create an "offence" where punitive sanctions were so severe as to constitute "a true penal consequence". The focus here is the severity of the punishment.
I will first examine whether a penalty assessment is “by its very nature" criminal. I will then examine whether the quantum of an assessed penalty is so severe as to constitute a "true penal consequence".
(a) The "Nature" of a Penalty Assessment
In Wigglesworth, supra, the Supreme Court of Canada considered whether a disciplinary hearing for a "major service offence" under the Royal Canadian Mounted Police Act, R.S.C. 1970, c. R-9, precluded subsequent proceedings under the Criminal Code for the same misconduct (assault) on the ground that such proceedings would violate paragraph 11(h) of the Charter. Both proceedings involved a possible term of imprisonment upon a finding of guilt. Wilson, J. speaking for the majority, concluded (at page 560):
In my view, if a particular matter is of a public nature, intended to promote public order and welfare within a public sphere of activity, then that matter is the kind of matter which falls within s. 11. It falls within the section because of the kind of matter it is. This is to be distinguished from private, domestic or disciplinary matters which are regulatory, protective or corrective and which are primarily intended to maintain discipline, professional integrity and professional standards or to regulate conduct within a limited private sphere of activity . . .
As noted by Toy, J. in R. v. Georges Contracting Ltd. and Cloarec (1987), 15 B.C.L.R. (2d) 240; affirmed (1988), 24 B.C.L.R. (2d) 175 (B.C.C.A.), the assessment and consequent imposition of penalties pursuant to subsection 163(2) of the Income Tax Act are proceedings of a different nature and character than a prosecution of the taxpayer under section 239. Despite the fact that the same conduct was the subject of both the administrative assessments and of the prosecution under section 239, the court found that the nature and character of the two procedures were markedly different. The former was purely a unilateral administrative act—without a hearing and with an appeal to the Tax Court where the standard of proof is on the balance of probabilities, all of which may result in a civil judgment for the unpaid tax, penalties, and interest. A prosecution under section 239 proceeds by way of summary conviction or indictment with the taxpayer being tried in open court—the burden of proof being beyond a reasonable doubt—and if convicted, the taxpayer would be sentenced in public to pay a fine or imprisonment, or both, with the added consequence of having a "record" of his conviction.
This Court affirmed Mr. Justice Toy's conclusion that "the assessment is a civil proceeding to which section 11 of the Charter does not apply": R. v. Georges Contracting Ltd. and Cloarec (1988), 24 B.C.L.R. (2d) 175 at 177. In affirming Toy, J.'s decision the Court considered the judgments in Wigglesworth (which was handed down after Toy, J's decision), and Trumbley and Pugh v. Fleming, [1987] 2 S.C.R. 577; 81 N.R. 212 (sub nom. Trumbley v. Metropolitan Toronto Police). Referring to those cases Mr. Justice Esson (as he then was) said that "they afford no comfort whatever to the appellant” (page 177).
In Yes Holdings Ltd. and Yesmaniski v. R. (1987), 57 Alta. L.R. (2d) 227 (Alta. C.A.), Stevenson, J.A. reached a similar conclusion. He put the issue in this form at pages 233-4:
The accused thus do face a risk of being twice penalized for the same conduct. However, the argument founders when it is recognized that s. 11(h) does not provide a free-standing prohibition against double punishment, but rather a constitutional protection against trial, conviction and punishment in the context of s. 11. To succeed it is necessary to characterize proceedings under s. 163(2) of the Income Tax Act as proceedings in respect of an offence, which then could be raised as a bar.
The protection of s. 11 is accorded in criminal or quasi-criminal proceedings.
He concluded that “offence” in paragraph 11(h) of the Charter means “an offence which is prosecuted in a criminal or penal proceeding” (page 234).
A similar result, in like circumstances, was reached by the Ontario Court of Appeal in The Queen v. Ferreira, (1988), O.J. No. 2258; Ontario Court of Appeal Registry Action No. 181/88, on appeal from [1988] 1 C.T.C. 225 which affirmed the correctness of the decision in The Queen v. Sharma, [1987] 2 C.T.C. 253; 87 D.T.C. 5424, (Ont. S.C.) wherein Smith, J. held at page 254 (D.T.C. 5424):
. . .the imposition of the penalties did not amount to either a trial or to a final finding of guilt in the sense contemplated by paragraph 11(h) of the Charter.
The authorities cited do not turn on the narrow question of whether or not prior administrative decisions can bar subsequent criminal prosecutions. Rather, they were decided on the much broader ground that the definition of "offence" in paragraph 11(h) of the Charter is restricted to criminal or quasi- criminal prohibitions and that the prohibition, proceedings, and fine associated with assessments of penalties under the respective Income Tax Acts are not of a criminal or quasi-criminal nature or character. In other words, it is not a question of whether the administrative assessments and fines constitute a bar to subsequent criminal prosecutions but rather whether they constitute an offence at all in the sense in which that term is used in paragraph 11(h) of the Charter.
I have concluded that the assessments by the Minister and the imposition of penalties pursuant to subsections 163(1) and (2) of the Income Tax Act (Canada) and subsections 23(1) and (3) of the Income Tax Act (B.C.) are properly characterized as private matters of a regulatory nature—primarily intended to regulate the conduct of taxpayers with reference to their complying with the requirements of the respective Income Tax Acts. The penalties which may be imposed upon such assessment are designed to achieve that objective.
In contra-distinction, prosecutions for a violation of section 239 are properly characterized as criminal and penal matters intended to "promote public order and welfare within a public sphere of activity" by deterring the public from the commision of flagrant breaches of the Income Tax Act.
Accordingly, I find that the assessments by the Minister and the imposition of penalties for a violation of section 163 of the federal Income Tax Act and section 23 of the British Columbia Income Tax Act do not constitute a finding of guilty or a punishment for an offence which comes within paragraph 11(h) of the Charter.
(b) “True Penal Consequence"
In concluding that the assessments of the Minister and the imposition of penalties pursuant thereto cannot be properly characterized as an "offence" within paragraph 11(h) of the Charter, I have only dealt with the "nature" of the proceedings. This leaves to be resolved the question of whether the punishment imposed pursuant to the assessments of the Minister constitutes "true penal consequences" so as to bring the penalties consequent upon the assessment proceedings within the prohibition expressed in paragraph 11(h) of the Charter. Madam Justice Wilson in Wigglesworth, supra, enunciated the "true penal consequence" test in these words (at page 561):
In my opinion, a true penal consequence which would attract the application of s. 11 is imprisonment or a fine which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.
She acknowledged that the imposition of a fine "may be fully consonant with the maintenance of discipline and order within a limited private sphere of activity and thus not attract the application of s. 11" (page 561). This would particularly be so where the power to impose fines is for the purpose of achieving a particular private objective.
Madam Justice Wilson also observed that if a person is subject to penal consequences such as imprisonment that person should be entitled to the protection provided by section 11 of the Charter.
In the present case the penalties which can be imposed following the assessments by the Minister pursuant to subsection 23(1) of the Income Tax Act (B.C.) and subsection 163(2) of the Income Tax Act (Canada) for filing a false statement do not carry with them any threat of imprisonment, nor do they give a discretionary range of punishment. They are restricted in amount to 25 per cent of the tax sought to be evaded and, in the case of a wilful attempt to evade the payment of taxes, to 50 per cent of such tax. By contrast, the taxpayer who is guilty of a violation of section 239 is liable to a fine ranging from 25 per cent to 50 per cent of the amount of tax sought to be evaded or to imprisonment for a time not exceeding two years or to both imprisonment and a fine.
In my view, the distinction in the severity of the respective penalties indicates that Parliament intended that the imposition of the statutory penalty following assessments by the Minister would reflect a sufficiently significant monetary punishment to deter taxpayers from failing to comply with the Income Tax Acts and would thereby achieve the objective of this administrative procedure. It is also an incentive to diligence for those who might be grossly negligent but not truly criminal. On the other hand, the severity of the public sentence which could be imposed following a conviction under section 239 clearly points to Parliament's intention to provide a punishment designed to redress a public wrong. I do not consider this distinction in the nature and purpose of the two punishments to be diminished by the fact-that all fines end up in the consolidated revenue fund, via the Receiver General of Canada. In the circumstances this is the only appropriate office to which such payments could be made. In summary, therefore, the penalty assessment, while not trivial, is not so severe as to amount to a "true penal consequence".
I find support for the conclusion I have reached from the decision of Georges Contracting, supra, where this Court, after considering the Wigglesworth decision, found the Minister’s assessment and consequent penalty to be a civil proceeding to which paragraph 11(h) of the Charter did not apply.
Accordingly, I find that the assessments of the Minister and the penalties imposed as a consequence of such assessments do not come within paragraph 11(h); they are not criminal or quasi-criminal “by nature", nor are the penalties a "true penal consequence".
lll. If finally "punished for the offence, not to be . . . punished for it again" Finding that the penalty assessment is not an “offence” is sufficient for the disposing of this appeal. If, however, the appellants had been successful in demonstrating that the Minister’s assessments came within paragraph 11(h) of the Charter, either because of the nature of the offence or its penal consequences, they would have still been faced with a further hurdle on this appeal; namely, that of demonstrating that the Minister’s assessments and the consequent penalties of March and April, 1983 (still under appeal) constitute punishment “again” for the violation of section 239 of the federal Income Tax Act and the consequent sentence imposed on October 6, 1983. If it did not, the appellants are not entitled to the protection of paragraph 11(h).
In the present case, unlike the previous cases cited, no question is raised as to the validity of the criminal prosection, conviction or the consequent sentence imposing a fine on the ground that the taxpayers were being found guilty and punished again for an offence for which the Minister had previously assessed a penalty—nor is any other ground for attacking the validity of the prosecution or sentence under section 239 raised—presumably because the taxpayers in such circumstances would have been met with the Georges Contracting case and the other cases cited. Those cases state unequivocally that a penalty assessment will not bar subsequent criminal proceedings.
Rather, the appellants here adopt the position that it is the imposition of penalties pursuant to the Minister's assessments in March and April, 1983, in addition to the sentences imposed for a breach of section 239 on October 6, 1983, which constitutes a violation of paragraph 11(h) of the Charter. In other words, they assert that a prior criminal conviction could bar a subsequent confirmation of a penalty assessment.
Because of the circuitous route adopted by the appellants to seek the protection afforded by paragraph 11(h) of the Charter, it is important to keep in mind that paragraph 11(h) still requires, as a prerequisite to its implementation, that the person found guilty and punished for the “offence” is being punished “again” for an offence of the same nature and character.
In my opinion, the penalty assessments do not operate as punishment only when the liability for the penalty is finally established at the conclusion of the appeal procedures pursued by the taxpayers. I do not agree that the punishment occurs when the taxpayer no longer has a right to recover the amount which he has paid as a penalty assessment or an opportunity to have the punishment modified or varied. Rather I am of the opinion the taxpayers were "punished" (in the sense that term is used in paragraph 11(h)) when the Minister’s assessments and consequent penalties were imposed on October 6, 1983.
In considering this issue it is to be noted that, at the time of the criminal trial of the charge under section 239, the taxpayers did not adopt the position that they had not been “punished” by reason of the penalties they had previously paid consequent upon the Minister’s assessments. Rather, the taxpayers sought to have the sentence imposed at the criminal trial by the trial judge, tempered or modified, in part, by reason of the penalties they had previously paid.
Counsel, having made that submission in the criminal proceeding to the trial judge, the judge may well have taken such matters into consideration— there is certainly no reason why he should expressly state he did so in his reason for judgment and it cannot be inferred from the sentence delivered that he did not take into account all relevant considerations and submissions when determining the appropriate sentence.
Moreover, the procedure adopted by the appellants, in drawing to the trial judge's notice in a criminal trial the penalties which they had previously paid, was in accord with the principle inherent in subsection 239(3) of the federal Income Tax Act which provides that the assessment of such penalties must precede the laying of the information in the criminal proceeding if the taxpayer is to be liable for the same.
One must also consider the effect of subsection 152(8) of the federal Income Tax Act on this issue. It provides:
An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission therein or in any proceeding under this Act relating thereto.
Even if this provision were given the most liberal interpretation it would still declare an assesment "valid and binding” until an appeal court varied or vacated the assessment.
Other provisions in the federal Income Tax Act confirm the principle that assessments are valid until a competent body determines otherwise. For example, section 165, which provides for appeals within the department empowers the Minister of National Revenue to “vacate, confirm, or vary the assessment or reassess . . ." all terms that imply that the original assessment continues operative until the Minister of National Revenue decides otherwise. Similarly, a taxpayer may choose to by-pass intra-departmental appeal and proceed directly to the Tax Review Board or the Federal Court. When an appeal is thus instituted the Minister is deemed to have confirmed the assessment (subsection 165(4)).
I would be hard put to accept the proposition, without authority to support it, that a taxpayer, against whom a valid and binding assessment has been made and penalties imposed, which he has paid, has not been "punished" until such time as the taxpayer exhausts all available appeal processes.
I am supported in my conclusion by decisions of the Tax Court of Canada and the Federal Court-Trial Division. In Super Jewellers Inc v. M.N.R., [1986] 1 C.T.C. 2591; 86 D.T.C. 1404, (T.C.C.) a taxpayer was assessed a penalty under subsection 163(2) and was later charged with an offence under section 29. After the taxpayer was convicted, the Minister issued a reassessment. (Apparently the taxpayer had not paid the initial penalty and the reassessment reduced the penalty previously assessed.) The taxpayer asserted that the reassessment came after the conviction and claimed that it constituted punishment “again” for the same offence. Rip, T.C.J. held that the reassessment was a mere variation of the original assessment, which had continued in force throughout the criminal proceedings. He wrote at page 2600 (D.T.C. 1401):
I have determined that the penalty imposed pursuant to subsection 163(2) of the Act was assessed prior to the laying or making of the information or complaint giving rise to the conviction. Counsel for the appellant appears to have continued his argument on the Charter issue on the basis that the penalty assessed under subsection 163(2) of the Act was made after the conviction under subsection 239(1) of the Act. He argues that since the appellant has already been punished under section 239 of the Act, paragraph 11(h) of the Charter precludes a penalty being assessed under subsection 163(2) of the Act; to assess a penalty would be to punish the appellant a second time. Because of my earlier finding that the assessment of the penalty was prior to the initiation of proceedings under section 239 of the Act, I have had difficulty in following counsel's reasoning on this point. Since at time of the trial before the Provincial Court the penalty under subsection 163(2) had been assessed, counsel, for the purpose of consistency ought to have raised at that trial the defence that the prosecution of his client under subsection 239(1) of the Act was contrary to paragraph 11(h) of the Charter, if indeed it is. The penalty assessed under subsection 163(2) of the Act was levied prior to the appellant being found guilty and punished for an offence described in subsection 239(1) of the Act.
See also The Queen v. Taylor, [1984] C.T.C. 436 at page 439; 84 D.T.C. 6459.
I have concluded that the taxpayers were clearly “punished” when they were required to pay the penalties levied as a consequence of the Minister's assessments in March and April, 1983. Since these penalties preceded any punishment which the taxpayers received for a violation of section 239, they cannot constitute punishment “again” for the section 239 offence. It would be straining the language of paragraph 11(h) to consider that the upholding of the Minister’s assessment by an appellate court constituted punishment “again” for the section 239 sentence.
In the circumstances, I find it unnecessary to deal with the issue of whether the rights provided by paragraph 11(h) of the Charter are not available to U.S. Dungaree Seafarers Ltd. because it is a corporation. I would defer expressing an opinion on that issue until the circumstances raised on appeal require such a ruling.
I would dismiss the appeal.
Appeal dismissed.