Ciglen v. R., 70 DTC 6118, [1970] SCR 804

Supreme Court of Canada

Ciglen v. R., [1970] S.C.R. 804

Date: 1970-03-20

Samuel Ciglen (Plaintiff) Appellant;

and

Her Majesty the Queen (Defendant) Respondent.

1969: October 21, 22, 23, 24, 27; 1970: March 20.

Present: Cartwright C.J. and Fauteux, Abbott, Martland, Judson, Ritchie, Hall, Spence and Pigeon JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Criminal law—Conspiring to evade payment of tax—Suppression of profits—Allocation of appellant’s transactions to company—Duty of determining whether transactions resulted in taxable income or capital gain—Income Tax Act, R.S.C. 1952, c. 148, s. 132.

Appeal—Criminal law—Jurisdiction—Appeal by Crown to Court of Appeal—Question of law alone—Criminal Code, 1953-54 (Can.), c. 51, ss. 584(1)(a), 597(2)(a).

The appellant was acquitted at trial on a charge of conspiring to wilfully evade payment of taxes by suppressing taxable income, contrary to s. 132(1)(e) of the Income Tax Act, R.S.C. 1952, c. 148. The reasonable doubt which the trial judge expressed as giving rise to his acquittal of the appellant was based on three questions: (1) his view as to the proper definition of the word “suppressing” appearing in the indictment; (2) that the Minister had not made any decision fixing the character of the profits as being income and that unless such decision has been made the accused could not be convicted of conspiracy to evade the payment of tax on income; and (3) on his view of the auditors’ reports. On appeal by the Crown, the Court of Appeal directed a conviction of the appellant. He appealed to this Court and submitted that the Court of Appeal had gone beyond its jurisdiction.

Held (Cartwright C.J. and Hall J. dissenting): The appeal should be dismissed.

Per Fauteux, Abbott, Martland and Judson JJ.: The trial judge erred in law in his interpretation of the meaning of the word “suppression” when

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he held that a falsification of the true facts, by attributing transactions which were the appellant’s to a company would not be sufficient; only a total failure to account would be enough. He also erred in law in holding that the determination as to whether the profits were income or capital gains was for the Minister, and beyond the purview of the Court. While the judge has stated that he was unable to establish, by inference from the evidence, an agreement to conspire as charged in the indictment, he has, in his own reasons, shown that what he considered to be necessary to establish such an agreement was based upon an erroneous conception of the law. This was an error of law and therefore subject to appeal by the Crown.

Per Ritchie and Pigeon JJ.: The trial judge’s finding of reasonable doubt was founded in error at law and on a misapplication of the law to the evidence. His judgment was therefore the proper subject of an appeal under s. 584(1) (a) of the Criminal Code.

Per Spence J.: The Court of Appeal, in considering the three questions upon which the trial judge had professed to have based his reasonable doubt, were considering questions of law alone and they had jurisdiction to come to their own decision on those questions of law and to differ from the trial judge, using alone his findings of fact. The meaning in law to be given to a word which appears in an indictment or in a section of the Code is purely a question of law and the Court of Appeal had the jurisdiction to differ from the opinion of the trial judge as to the meaning in law of the word “suppressing”. To hold that the decision that the payments received by the appellant were income was a decision necessary for the trial judge himself to make and was not a decision to be made by the Minister is certainly a decision upon a question of pure law. Again the Court of Appeal has the jurisdiction to come to such a decision in law. The Court of Appeal found that the reports upon which the trial judge based his finding of reasonable. doubt could not, in evidence, supply a reasonable doubt. This was a finding on pure law and was within the jurisdiction of the Court of Appeal.

One may not rely on such vague words as “for these and other reasons” to determine that the trial judge relied on any general presumption of innocence

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which favoured the accused. The trial judge found that general presumption of innocence had been rebutted apart from the three reasons in law for which he, in error, assigned his reasonable doubt.

Per Cartwright C.J. and Hall J., dissenting: The judgment of the trial judge was based on one or more distinct grounds that do not involve questions of law alone. The Court of Appeal should have dismissed the Crown’s appeal. A ground which is ex facie one of fact or mixed fact and law may prove to be vitiated by an error in law in the strict sense, for example, if the trial judge acquits because the evidence does not satisfy him beyond a reasonable doubt and he has mistakenly excluded a piece of vital and legally admissible evidence duly tendered by the Crown. In such a case the Court of Appeal would have jurisdiction to set aside the judgment of acquittal.

In the case at bar, it was essential for the prosecution to prove that the moneys were taxable income. The trial judge did not base his finding that he was not satisfied that the moneys in question were taxable income on the failure of the Minister to assess the profits as income but on the view which he took of the evidence as a whole. The question whether his conclusion was right or wrong is not one of law alone.

It appears from the reasons of the trial judge read as a whole that he based his decision on the following two grounds amongst others (i) that he was not satisfied beyond a reasonable doubt that the appellant acted with a guilty mind and (ii) that he was not satisfied beyond a reasonable doubt that the moneys were taxable income. These were distinct grounds for his decision and in neither was the question whether his view was right or wrong a question of law alone.

APPEAL from a judgment of the Court of Appeal for Ontario[1], setting aside a verdict of acquittal and directing a conviction of the appellant. Appeal dismissed, Cartwright C.J. and Hall J. dissenting.

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George D. Finlayson, Q.C., and Burton Tait, for the appellant.

W.B. Williston, Q.C., P.A. Hess, Q.C., and W.C. Graham, for the respondent.

The judgment of Cartwright C.J. and of Hall J. was delivered by

THE CHIEF JUSTICE (dissenting)—The wording of the indictment charging the appellant and Morris Black and the course of the proceedings in the Courts below are set out in the reasons of my brother Spence, which I have had the advantage of reading, and as far as possible I will refrain from repetition.

On December 26, 1966, at the end of a trial before His Honour Judge Rogers without a jury which lasted 115 days judgment was reserved. On February 28, 1967, His Honour delivered oral judgment as follows:

In the matter of Samuel Ciglen and Morris Black, as set out in my Reasons for Judgment, which consist of one hundred and seventeen pages, and which are available at the Judges’ Secretary’s office, I am unable to establish, by inference from the conduct of the accused and the cumulative effect of the evidence, any agreement to conspire as charged in the indictment. The accused Ciglen and Black are acquitted.

Early in his reasons the learned Judge summarized the Crown’s case as follows:

The charge is against Ciglen and Black, they are the only persons charged in the indictment and the charge is a single conspiracy to commit one offence, that is to evade the payment of income tax for the year 1956 by suppressing taxable income of the said Samuel Ciglen and Morris Black. The Crown alleges that the accused made substantial profits in the sale of Great Sweet Grass and Kroy shares as a result of obtaining shares in the following deals:

(a) The Pitt Deal.

(b) The Depositors Mutual Deal.

(c) The Kroy-Fulton Deal.

(d) The Kroy-Coronet Deal.

The basis of the Crown’s case is that the profits made in the sale of the shares belonged to the ac-

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cused and that to evade payment of taxes thereon, they designated the corporations and the trusts as the persons entitled to the bulk of the profits, and then contrived to retain the profits for themselves and any profits not so designated were suppressed.

The phrase “the corporations and the trusts” refers to some of those named as co‑conspirators in the indictment or in the particulars given by the Crown.

The Court of Appeal[2] upheld the acquittal of Black and found itself unable to reverse the conclusions arrived at by the learned trial Judge in regard to the Pitt Deal, the Depositors Mutual Deal and the Kroy-Coronet Deal. It based its allowance of the Crown’s appeal and the entering of a verdict of guilty against Ciglen on the findings of the learned trial Judge in regard to the transactions involved in the Kroy-Fulton Deal and the disposition of the profits arising therefrom. In the view of the Court of Appeal the reasons of the learned trial Judge dealing with this phase of the matter contained serious errors in law and when these errors were corrected the facts as found by him led inevitably to the conclusion that Ciglen was guilty as charged.

This Court in The Queen v. Warner[3] decided that when a judgment of acquittal is based on distinct grounds, one of which involves a question which is not one of law alone, an appellate court whose jurisdiction to entertain an appeal from an acquittal is limited to grounds of appeal that involve a question of law alone is powerless to interfere with the judgment of acquittal although other of the distinct grounds on which that judgment was based do involve questions of law alone. In applying this rule it must be borne in mind that a ground which is ex facie one of fact or mixed fact and law may prove to be vitiated by an error in law in the strict sense. To give a simple example, a decision worded “I acquit the accused because the evidence does not satisfy me of his guilt beyond a reasonable doubt” may be successfully

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attacked on the ground that the trial Court had mistakenly excluded a piece of vital and legally admissible evidence duly tendered by the Crown. In such a case no doubt the Court of Appeal would have jurisdiction to set aside the judgment of acquittal and direct a new trial. The differences of opinion in this Court in The Queen v. Warner were not as to the scope of the rule but as to the interpretation of the judgment of the Court below.

In the case at bar counsel for the appellant contends that the decision of the learned trial Judge was based on several distinct grounds of fact or of mixed fact and law and that for this reason the Court of Appeal should have dismissed the appeal. Whether or not this contention is well founded is, of course, a question of law on which an appeal to this Court lies under s. 597 (2) (a) of the Criminal Code.

In view of the wording of the charge, to establish the guilt of the accused it was incumbent upon the Crown to prove beyond a reasonable doubt (i) that the profits from the sale of shares of Great Sweet Grass Oils Limited and Kroy Oils Limited for the taxation year 1956 were properly attributable to the accused, (ii) that such profits were taxable income, (iii) that Ciglen conspired to suppress this taxable income and (iv) that he did so to evade payment of taxes imposed in respect of such income by the Income Tax Act.

If it were proved that Ciglen agreed with another or others to wilfully evade payment of such taxes the offence charged would be complete even though the carrying out of the agreement was thwarted; but to support a conviction it was necessary for the Crown to establish that the agreement if carried out would have resulted in the commission of the offence created by s. 132(1) (d) of the Income Tax Act. As is often the case in the trial of a charge of conspiracy, there is no direct evidence of the making of the agreement charged

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in the indictment. The Crown asks that its making be inferred from the fact that, as it alleges, the offence contemplated was actually committed.

At p. 106 of his reasons the learned trial Judge makes the following statement:

…If I am to look at this case in its broadest terms from the standpoint of a conspiracy to do an illegal act, in my view, it would be incumbent upon the Crown to demonstrate that there would be an evasion of a tax liability. On the evidence I am unable to say whether the moneys are subject to tax.

He expresses the same conclusion elsewhere in his reasons; at p. 102:

…Under the circumstances, this Court is unable, on the evidence before it, and taking the case for the Crown at its highest, to determine whether the profits so derived are, beyond a reasonable doubt, income in the hands of the two accused as opposed to capital gains.

and at p. 114:

…It seems to this Court that it would be incumbent upon the Crown to demonstrate that there would be an evasion of tax liability by suppression. I am, however, unable to determine on all of the evidence whether the moneys are subject to tax and for this reason, amongst others, I can draw no conclusive inference.

As has been pointed out above it was essential for the prosecution to prove that the moneys in question were taxable income and the finding of the learned trial Judge that the evidence does not satisfy him of this is on its face fatal to the Crown’s case.

In the view of the Court of Appeal, however, this finding was vitiated by an error of law in that the learned trial Judge in effect directed himself that it was necessary that there should be a determination by the Minister of National Revenue as to whether the profits were capital gains or income subject to tax before a prosecution could proceed successfully. Had the learned trial Judge so directed himself it would clearly have been an error in law, but, as I read his reasons, he did not

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do so. He does seem to say that had there been an assessment by the Minister treating the profits as taxable income the onus of proving the contrary would have fallen upon the accused. While that would be true in civil proceedings it would not be true in a criminal prosecution but since there was in fact no assessment the question need not be pursued.

In my opinion the following passage at pp. 82 and 83 in the reasons of the learned trial Judge makes it clear that he rejected the submission of counsel for the accused that it was necessary for the Crown to show that an assessment had been made:

Counsel for the accused Ciglen advanced an argument that there could be no offence under Section 132(1)(d) of the Income Tax Act of wilfully evading the payment of taxes imposed by the Act unless an assessment had been made, i.e. that the only crime envisioned by the Income Tax Act was one of evading payment of taxes which had been actually assessed. The two words ‘taxes imposed’ are not defined in the Income Tax Act and consequently their meaning must be found elsewhere. Section 139(1)(ba) defines the term “tax payable by taxpayer” as meaning the tax payable by him as fixed by assessment or re-assessment subject to variation on objection or on appeal, if any, in accordance with the relevant appeal provisions of the Act.

The facts in this case are that at no time were Ciglen and Black assessed for the profits from the sale of Kroy and Great Sweet Grass shares in issue herein and, in my view, the ordinary meaning of “imposed” does not necessarily carry with it the connotation or ingredient of “assessment” or calculation of amount. It is simply the liability to taxation.

It is obvious that if the learned trial Judge had accepted the submission of counsel for Ciglen on this point he would have dismissed the charge and reasons of over one hundred pages would have become unnecessary. As I read his reasons, the learned trial Judge did not base his finding that he was not satisfied that the moneys in question were taxable income on the failure of the Minister to assess but on the view which he took of the evi-

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dence as a whole. The question whether his conclusion was right or wrong is not one of law alone.

Another ground on which the learned trial Judge based his decision to acquit appears in his reasons at p. 114, where he says:

Having dealt with the P.O.G.N. reports, which in law are evidence both for and against the accused Ciglen, I am of the opinion that these reports have raised a reasonable doubt in my mind as to the guilt of the accused Ciglen for the offence of conspiracy as charged.

The Court of Appeal criticized this finding on the ground that having found that Ciglen had a beneficial interest in the shares from which the profits realized in the Kroy-Fulton deal were derived and had used those shares as his own property, the learned trial Judge could not rely on the POGN reports allocating such profits to Torny Financial Corporation Ltd. as raising a doubt as to the guilt of the accused. If it be agreed that the POGN reports could not be relied on to raise a doubt as to Ciglen’s beneficial interest in the shares in question they might yet raise a doubt as to Ciglen’s guilty intention to evade payment of tax. In the view of the learned trial Judge the allocation of the profits to Torny was not necessarily inconsistent with the existence of a noncriminal intention on the part of Ciglen and was as consistent with an intention to avoid tax, that is lawfully to so arrange matters as not to attract tax, as with an intention to evade tax. Once again the question whether this view was erroneous is not a question of law alone. The “well known and very important distinction between avoidance and evasion in relation to the law of taxation” has recently been emphasized in the unanimous judgment of the Court of Appeal for the Yukon Territory, delivered by MacFarlane J.A., in The Queen v. Regehr[4], in which it was held that a count charging that the accused “did wilfully avoid a payment of taxes imposed by the Income Tax Act in that he failed to report all of his income contrary to para. (d) of Subsection (1)

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of Section 132 of the said Act” did not charge an offence known to the law, and leave to amend by changing the word “avoid” to “evade” was refused.

The Court of Appeal was further of opinion that the learned trial Judge erred in law in defining “suppression” as a total failure to account. The passage criticized appears at pp. 109 and 110 of the reasons of the learned trial Judge. It is as follows:

…The Crown has clearly made out a prima facie case of an agreement betwen Samuel Ciglen and Torny Financial Corporation Limited to treat these matters as having been Torny transactions. Whether such an allocation can be equated with an intention to evade tax payable through suppression or in the light of its disclosure in the P.O.G.N. reports albeit as a Torny transaction as an attempt to attract no tax is open to serious doubt. In my view, suppression denotes something more than an allocation and is a total failure to account. It is for this reason that the explanations put forth in the P.O.G.N. reports by way of adjusting entries must be shown as false.

Proof that an accused allocated income of his own to a third party if shown to be done with the intention of evading payment of income tax imposed upon him by the Income Tax Act would support a finding that he was guilty of a breach of s. 132(1)(d); but when the passage quoted is read in the light of the reasons as a whole it appears that the learned trial Judge in distinguishing between “allocation” and “total failure to account” was pointing out that the former is more consistent with an innocent intention than is the latter. I cannot find in the passage quoted an error of law which vitiates the judgment of acquittal.

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It is clear that mens rea is an essential element of an offence against s. 132(1)(d) of the Income Tax Act; the use of the word “wilfully” in the clause puts this beyond question. It is trite law that a taxpayer is free to so arrange his affairs as to attract as little liability to tax as possible provided that in so doing he does not employ unlawful means. Of course guilty intent may be inferred from the actions of an accused but the question whether or not the guilty intent exists is one of fact. This is expressly stated in the judgment of this Court in Lampard v. The Queen[5].

The learned trial Judge ended his reasons as follows:

Since a taxpayer is entitled to adopt a position that will not attract any tax as opposed to wilfully evading payment of tax imposed by the Act, and if such a course of conduct is open to a taxpayer, it has a direct bearing on the issue of a guilty mind.

I am unable to establish by inference from the conduct of the accused and the cumulative effect of the evidence herein, any agreement to conspire as charged in the indictment, the accused Samuel Ciglen is acquitted.

It appears from the reasons of the learned trial Judge read as a whole that he based his decision on the following two grounds amongst others (i) that he was not satisfied beyond a reasonable doubt that Ciglen acted with a guilty mind and (ii) that he was not satisfied beyond a reasonable doubt that the moneys in question were taxable income. In my opinion these were distinct grounds for his decision and in neither was the question whether his view was right or wrong a question of law alone.

The right of appeal given by s. 584(1) (a) of the Criminal Code to the Attorney General or counsel instructed by him, was unknown to the Common Law. No similar right exists in England although it does exist in some other jurisdictions in the Commonwealth. It is the creature of statute and is strictly limited in scope. The power of the Court of Appeal to set aside a judgment of a

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court of competent jurisdiction acquitting an accused of an indictable offence extends only to grounds of appeal that involve questions of law alone. It is, I suggest, of the utmost importance that the Courts should guard against extending this power by judicial decision to cases, not falling strictly within the terms of the statute creating it, in which the Court of Appeal is satisfied that the judgment of acquittal is clearly wrong. When an appeal is brought from a conviction of an indictable offence the Court of Appeal has power to allow the appeal if “it is of the opinion that the verdict should be set aside on the ground that it is unreasonable or cannot be supported by the evidence”; but that Court has no corresponding power in an appeal from an acquittal; such a power could be conferred only by Parliament; its creation would be without precedent in the Commonwealth.

For the reasons set out above it is my opinion that the judgment of the learned trial Judge acquitting the appellant was based on one or more distinct grounds that do not involve questions of law alone and that this case is governed by our decisions in The Queen v. Warner, supra, and Lampard v. The Queen, supra. It follows from this that the Court of Appeal should have dismissed the Crown’s appeal.

I would allow the appeal, set aside the judgment of the Court of Appeal and restore the judgment at trial acquitting the appellant.

The judgment of FAUTEUX, ABBOTT, MARTLAND and JUDSON J.J. was delivered by

MARTLAND J.—I am in agreement with the view expressed by Aylesworth J.A., who delivered the reasons for judgment of the Court of Appeal[6], that the trial judge erred in law in his interpretation of the meaning of the word “suppression”, which appeared in the indictment in the phrase “by suppressing taxable income of the said Samuel Ciglen.” I agree with him, also, that there was error in law in attributing to the Minister the duty of determining whether the impugned transactions resulted in taxable income or capital gain.

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The trial judge found as a fact, in connection with the “Kroy-Fulton deal”:

At this point, however, I would find as a fact that, at the time of the delivery of the shares to the Bank of Nova Scotia, March 19th, 1956, Ciglen exercised such control over the said shares that it is a reasonable inference he had a beneficial interest in the same. He used the shares as if they were his own property. I would also find as a fact that the rewritten General Ledger of Torny was a falsification of the facts as they occurred at the time of the Fulton deal.

Later in his reasons he said this:

…the Crown has clearly made out a prima facie case of an agreement between Samuel Ciglen and Torny Financial Corporation Limited to treat these matters as having been Torny transactions. Whether such an allocation can be equated with an intention to evade tax payable through suppression or in the light of its disclosure in the P.O.G.N. reports albeit as a Torny transaction as an attempt to attract no tax is open to serious doubt. In my view, suppression denotes something more than an allocation and is a total failure to account. It is for this reason that the explanations put forth in the P.O.G.N. reports by way of adjusting entries must be shown as false.

This is a statement of the understanding of the trial judge as to what evidence was necessary to establish a suppressing of taxable income. A falsification of the true facts, by attributing transactions which were his own, to Torny, would not be sufficient. Only a total failure to account would be enough.

This was an error in law, and his conclusion as to the guilt of the appellant has to be considered in the light of that error. That conclusion is expressed later, as follows:

Having dealt with the P.O.G.N. reports, which in law are evidence both for and against the accused Ciglen, I am of the opinion that these reports have raised a reasonable doubt in my mind as to the guilt of the accused Ciglen for the offence of conspiracy as charged.

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As Aylesworth J.A. has pointed out, the P.O.G.N. reports, which were auditors’ reports, were based, and had to be based, on Torny’s ledger, which, the trial judge had already found, had been rewritten and was a falsification of the facts of the Kroy-Fulton deal.

They did disclose an allocation of income to Torny. The trial judge, even though they disclosed an allocation which he himself had found to be false, felt that they created a reasonable doubt as to the appellant’s guilt. But in so holding he was applying an erroneous concept as to what evidence was necessary to establish suppression.

The trial judge also erred in law when considering whether the impugned transaction resulted in taxable income to the appellant. I cite the following passages from his judgment:

Traditionally, profits derived from the sale of stocks and bonds have not been treated as income by the Department of National Revenue even though it is conceded that this is an anomaly under the law relating to the distinction between capital gains and income. It does not appear to me to be within the purview of this Court to determine whether the profits received here are income as proceeds of a business or a capital gain.

It is in the discretion of the Minister of National Revenue and he has not seen fit to make such a designation in this case. Were he to do so, this issue would be subject to review by the Income Tax Appeal Board and/or the Exchequer Court in the manner provided for in the Income Tax Act. Under the circumstances, this Court is unable, on the evidence before it, and taking the case for the Crown at its highest, to determine whether the profits so derived are, beyond a reasonable doubt, income in the hands of the two accused as opposed to capital gains.

* * *

If I am to look at this case in its broadest terms from the standpoint of a conspiracy to do an illegal act, in my view, it would be incumbent upon the Crown to demonstrate that there would be an evasion of a tax liability. On the evidence I am unable to say whether the moneys are subject to tax.

* * *

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However, I am of the view that, unless there is a statutory onus, and there is none in the Income Tax Act, nothing displaces the ordinary law in relation to a criminal case, which is that the Crown must establish the guilt of the accused beyond a reasonable doubt and whether these transactions are capital gain or not are matters that should be determined by the Minister, and are not facts peculiarly within the knowledge of the accused. Had the Minister made an assessment, then the duty of explanation would arise.

The trial judge erred in law in holding that the determination as to whether the profits were income or capital gains was for the Minister, and beyond the purview of the Court, and that he was unable to make a decision on the evidence before him.

As Aylesworth J.A. points out, the trial judge had actually made a finding of fact on this point, when he said:

There does not seem to be much doubt on the evidence that both Ciglen and Black, through the assistance of various individuals and companies, actively engaged in the promotion and sale and thus in the trading of shares of Great Sweet Grass and Kroy.

In the penultimate paragraph of his judgment, the trial judge, dealing with the issue of a guilty mind, said this:

Since a taxpayer is entitled to adopt a position that will not attract any tax as opposed to wilfully evading payment of tax imposed by the Act, and if such a course of conduct is open to a taxpayer, it has a direct bearing on the issue of a guilty mind.

He approaches that issue by relying upon the proposition which was stated by Lord Tomlin in The Commissioners of Inland Revenue v. The Duke of Westminster[7]:

Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be.

But in relation to the Kroy-Fulton deal, that can have no relevance, when, on the trial judge’s

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own finding, records were deliberately falsified in order to allocate profits accruing to the appellant to Torny.

The trial judge concluded his reasons by saying, immediately after the paragraph above quoted:

I am unable to establish by inference from the conduct of the accused and the cumulative effect of the evidence herein, any agreement to conspire as charged in the indictment, the accused Samuel Ciglen is acquitted.

For the appellant it is urged that this is a finding of fact or of mixed fact and law, and, therefore, not subject to appeal by the Crown. But when the trial judge reached that conclusion, for the reasons already outlined, he was considering the evidence under a misconception of law as to what was necessary to be proved in order to establish the Crown’s case. The error in this case was as to the legal effect of facts which he had found, and that is an error of law. Chief Justice Anglin, in Belyea v. R.[8], said this:

The right of appeal by the Attorney-General, conferred by s. 1013 (4), Cr. C., as enacted by c. 11, s. 28, of the Statutes of Canada, 1930, is, no doubt, confined to “questions of law.” That implies, if it means anything at all, that there can be no attack by him in the Appellate Divisional Court on the correctness of any of the findings of fact. But we cannot regard that provision as excluding the right of the Appellate Divisional Court, where a conclusion of mixed law and fact, such as is the guilt or innocence of the accused, depends, as it does here, upon the legal effect of certain findings of fact made by the judge or the jury, as the case may be, to enquire into the soundness of that conclusion, since we cannot regard it as anything else but a question of law,—especially where, as here, it is a clear result of misdirection of himself in law by the learned trial judge.

I do not regard the judgment of this Court in Warner v. R.[9], as affecting the application of that

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principle to the circumstances of this case. In that case, on an appeal by the accused from a conviction of murder, the Chief Justice of Alberta, delivering the unanimous reasons of the Appellate Division, on appeal, said:

I am strongly of the opinion that the verdict of murder cannot be supported by the evidence. But I feel I must go further, and set out other reasons for setting aside the conviction.

The majority of this Court, on a five to four division, dismissed the Crown’s appeal from this judgment.

Chief Justice Kerwin said, at p. 147:

I read the first sentence as meaning that the Chief Justice considered that the evidence was not sufficient to support a conviction,—which is a question of fact.

Cartwright J., as he then was, delivering the reasons of himself and two other members of the Court, held that this first ground of decision was a distinct ground, upon which the judgment was based, and was a ground raising no question of law in the strict sense.

Under s. 592 (1) of the Criminal Code the Appellate Division, on an appeal against conviction, was empowered to allow the appeal where the verdict could not be supported by the evidence, as well as where the verdict, at trial, involved a wrong decision on a question of law. Under s. 597, on appeal from the Appellate Division, this Court was only empowered to allow an appeal from the decision of the Appellate Division on a question of law.

Cartwright J. said, at p. 149:

So far as the judgment of the Appellate Division is based on the first ground mentioned, this Court is powerless to interfere with it. The question whether the Appellate Division was right in proceeding on this ground is not a question of law in the strict sense. It is a question of fact or, at the best from the point of view of the appellant, a mixed question of fact and law.

At p. 152 he said:

I conclude that the Appellate Division quashed the conviction on the ground inter alia that it can-

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not be supported by the evidence, that this was a distinct ground on which its judgment was based, that it is a ground raising no question of law in the strict sense and that it is nihil ad rem that the judgment was based also on other grounds raising such points of law.

No opinion was expressed by the majority of the Court as to what the situation would have been if the decision expressed by the Appellate Division that the verdict could not be supported by the evidence had been based upon a mistaken view as to the law applicable. That issue did, however, arise in R. v. Lemire[10], a case in which, on an appeal from conviction, the appellate court had held that certain evidence created a reasonable doubt as to the guilt of the accused. At p. 192, the view of the majority of this Court on that issue was expressed as follows:

In my opinion, on an appeal from a conviction, if an appellate court allows the appeal on the ground that certain specified evidence creates a reasonable doubt as to the guilt of the accused, when, on a proper view of the law, that evidence is not capable of creating any doubt as to his guilt, there is an error in law.

In the present case, the situation is that, while the trial judge has stated that he was unable to establish, by inference from the evidence, an agreement to conspire as charged in the indictment, he has, in his own reasons, shown that what he considered to be necessary to establish an agreement to conspire, as charged in the indictment, was based upon an erroneous conception of the law.

I would dismiss the appeal.

The judgment of Ritchie and Pigeon J.J. was delivered by

RITCHIE J.—I share the opinion, as expressed in the reasons for judgment of my brothers Martland and Spence, that the learned trial judge’s finding of reasonable doubt as to the guilt of the appellant was founded in error at law and on a misapplication of the law to the evidence; his judgment was therefore in my view the proper

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subject of an appeal by the Attorney General of Canada under the provisions of s. 584 (1)(a) of the Criminal Code.

I would accordingly dismiss this appeal.

SPENCE J.—This is an appeal from the judgment of the Court of Appeal for Ontario[11] pronounced on January 7, 1969. By that judgment, the Court of Appeal for Ontario allowed an appeal from the judgment of Rogers, Co. Ct. J., pronounced on February 28, 1967, in which he acquitted the appellant and his co-accused Morris Black, and directed a conviction of Ciglen in lieu thereof.

The Attorney General for Canada had appealed to the Court of Appeal from the acquittal of both accused. The Court of Appeal, in its judgment, confirmed the acquittal as to the accused Black and there is no further appeal as to that accused.

The appellant and his co-accused, Morris Black, were charged in the indictment as follows:

That during the years 1955, 1956 and 1957, at the said Municipality of Metropolitan Toronto, and at other divers places, did, unlawfully, conspire together, the one with the other and with Torny Financial Corporation Ltd., Compania de Inversiones Amcub, S.A., otherwise known as Amcub Investment Company Incorporated, Ontario Cobalt Mines Limited, Glenrich Uranium Mines Limited, Albontec Development Company Limited and Americana Trading Company Limited and with persons unknown or with someone or more of them, to wilfully evade payment of taxes imposed on the said Samuel Ciglen and the said Morris Black by the Income Tax Act, R.S.C. 1952, c. 148, by suppressing taxable income of the said Samuel Ciglen and the said Morris Black from the sale of common shares of Great Sweet Grass Oils Limited and Kroy Oils Limited for the taxation year 1956, in violation of Section 132(1) (d) of the said Act, contrary to Section 132(1) (e) of the said Act.

The charges were based upon an exceedingly complicated series of transactions in reference to the shares in two corporations, Great Sweet Grass

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Oils Limited et Kroy Oils Limited. A la suite abortive trial, lasting 68 days and terminated by the unfortunate death of the first trial court judge, the second trial took 115 days before His Honour Judge Rogers in the County Court of the County of York. The accused called no evidence. At the first trial, in response to a demand for particulars of the “persons unknown” referred to in the indictment, the Crown named 32 co-conspirators. At the new trial, 14 additional co-conspirators were named. The argument on appeal required 24 days. The material is most voluminous—over 1500 exhibits, several of them consisting of many documents, were filed.

At trial, four different so-called deals or series of transactions were examined. Those deals were known as the Pitt deal, the Depositors Mutual Deal, the Kroy-Fulton Deal, and the Kroy‑Coronet Deal. As I have said, the learned trial judge acquitted both accused in reference to all four deals. The judgment in the Court of Appeal for Ontario was given by Aylesworth J.A. in a very detailed and carefully worked out set of reasons which cover 39 printed pages. In those reasons, Aylesworth J.A. affirmed the acquittal of the accused Black and accepted the trial judge’s acquittal of the accused Ciglen as to the Pitt deal, the Depositors Mutual deal, and the Kroy-Coronet deal, although the learned justice in appeal was very puzzled by the learned trial judge’s findings of fact involved in the acquittal of the accused Ciglen as to any one of those three deals. Aylesworth J.A. said:

There remains for consideration the effect of the evidence and findings made by the trial Judge with respect to the Kroy-Fulton deal so far as they affect Ciglen and the position in law of the respondent Black in the appeal as a whole.

I have quoted earlier the finding of the trial Judge that the Kroy-Fulton deal was Ciglen’s own deal and that ex post facto by falsification of records an attempt was made in agreement with Torny to treat the deal as a Torny deal. Moreover, as the trial Judge found, Ciglen, in his personal amended income tax return for 1956, claimed as a deduction bank inter-

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est on an overdraft he had been allowed by his bank in connection with his financing of the deal. The trial Judge found that—

Insofar as the back-dating is concerned, I have already dealt with this and it is not a piece of evidence from which I can infer the guilt of the accused as inconsistent with his innocence and that such is not an unusual practice in any office when the purpose of it is to document what in fact has occurred so that back-dating in itself is a neutral piece of evidence.

I should not like to think that in these observations the trial Judge was directing his mind to the falsification of documents which he found to have occurred with respect to the Kroy-Fulton deal. Falsification of documents for one’s own benefit surely is the most cogent evidence of the existence of the benefit itself—in this case, the existence of profits and profits in “trading in shares” as found by the trial Judge—and the suppression of those profits as personal to the accused Ciglen.

Again, I find it difficult in the extreme to follow the trial Judge’s reasoning in acquitting Ciglen. Given the finding he made, what possible inference can be drawn other than Ciglen’s guilt as charged? He is shown to have been engaged in the business of trading in the Great Sweet Grass and Kroy shares, to have made a profit, to have conspired with Torny wilfully to evade payment of taxes for which he personally became liable by depicting the profits as those of Torny; the profits as profits of Torny would be subject to different rates and tax considerations than would be the case relative to taxation of Ciglen’s personal profits. He “suppressed” his taxable income in conspiracy with Torny by falsely attributing that income to Torny. The trial judge expressed his views in part thus:

Whether such an allocation can be equated with an intention to evade tax payable through suppression or in the light of its disclosure in the P.O.G.N. reports albeit as a Torny transaction, as an attempt to attract no tax is open to serious doubt. In my view, suppression denotes something more than an allocation and is a total failure

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to account. It is for this reason that the explanation put forth in the P.O.G.N. reports by way of adjusting entries must be shown as false.

He also declared:

However, I am of the view that, unless there is a statutory onus, and there is none in the Income Tax Act, nothing displaces the ordinary law in relation to a criminal case, which is that the Crown must establish the guilt of the accused beyond a reasonable doubt and whether these transactions are capital gain or not, are matters that should be determined by the Minister, and are not facts peculiarly within the knowledge of the accused. Had the Minister made an assessment then the duty of explanation would arise.

And finally:

It seems to this Court that it would be incumbent upon the Crown to demonstrate that there would be an evasion of tax liability by suppression. I am, however, unable to determine on all of the evidence whether the moneys are subject to tax and for this reason, amongst others, I can draw no conclusive inference.

Having dealt with the P.O.G.N. reports, which in law are evidence both for and against the accused Ciglen, I am of the opinion that these reports have raised a reasonable doubt in my mind as to the guilt of the accused Ciglen for the offence of conspiracy as charged.

The finding of fact made by the trial judge as to the Kroy-Fulton deal, which Aylesworth J.A. refers to in the portion of the judgment I quoted above, was also quoted by Aylesworth J.A. in his reasons for judgment and is as follows:

I think it necessary to indicate that if certain shares were alleged by Ciglen to have been purchased by various individuals from Torny, then one would expect the purchaser would be entitled to the difference between the cost and the sale. However, the evidence does not bear this out with respect to some of the purchasers who as mentioned were very vague, and in some instances, the purchasers did not seem to know what it was all about. In my view this is evidence of an agreement between S. Ciglen and Torny to treat the Fulton deal as being a Torny deal, which agreement was made after December,

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1956 and before November 5th, 1957, and while it is cogent evidence of an attempt to allocate the proceeds of a deal to diminish the incidents of tax liability as it is to evade tax, since it is set forth in the P.O.G.N. reports I shall deal with it in relation to these reports as evidence for and against the accused Ciglen. At this point, however, I would find signé ce fait, je le traiterai à la lumière de ces rapas a fact that, at the time of the delivery of the shares to the Bank of Nova Scotia, March 19, 1956, Ciglen exercised such control over the said shares that it is a reasonable inference that he had a beneficial interest in the same. He used the shares as if they were his own property. I would also find as a fact that the re-written general ledger of Torny was a falsification of the facts as they occurred at the time of the Fulton deal.

It will be seen therefore that the reasonable doubt which the learned trial judge expressed as giving rise to his acquittal of the accused Ciglen was based on three different questions. The first of those questions dealt with the learned trial judge’s view as to the proper definition of the word “suppressing” appearing in the indictment. It was the view of Aylesworth J.A., with which I agree, that there could be no such limitation on the allocation of income to another person, in the present case, one of those associated, to avoid the payment of income tax by attributing income which the taxpayer has received merely as receipts by a trustee or agent for another person. When that attribution is false, it is a suppression of the taxpayer’s income for the purpose of evading tax.

The second reason for expressing reasonable doubt was that the Minister had not made any decision fixing the character of the profits on these shares as being income and that unless such decision has been made the accused could not be convicted of a conspiracy to evade the payment of tax on income. As to that view, Aylesworth J.A. said, and again, with respect, I agree with him:

Likewise, he erred in law in attributing to the Minister the duty of determining whether the impugned transactions resulted in taxable income or capital

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gain. This was for the trial Judge himself and he does not seem to realize that he did determine it when he found as a fact—

There does not seem to be much doubt on the evidence that Ciglen and Black, through the assistance of various individuals and companies, actively engaged in the promotion and sale and thus in the trading of shares of Great Sweet Grass and Kroy.

The third question upon which the learned trial judge based his finding of a reasonable doubt was the position of the auditors’ report filed by the accused with the Department in the year 1960, that is, many months after the end of the conspiracy charged. Those reports were known throughout the trial as P.O.G.N. reports. The trial judge had already found that the Crown bad proved that Ciglen had conspired with the Torny Financial Corporation Limited to show that Ciglen’s Kroy-Fulton profits were those of the Torny Corporation and had done so even by falsification of the books of the Torny Corporation. That falsification of books by reason of such a conspiracy then provided the working material on which the auditors drew up the auditors’ reports, i.e., the P.O.G.N. reports. As Aylesworth J.A. notes, “under such circumstances those reports merely echo the result of the conspiracy as found and, in law, could not be relied upon to raise a reasonable doubt”. (The underlining is my own.) Aylesworth J.A. concluded his consideration of the guilt of the accused in reference to the Kroy-Fulton deal in these words:

When the serious errors in law to which reference has been made are corrected, the facts as found by the trial Judge in the Kroy-Fulton deal lead inevitably to one conclusion—the guilt of the accused Ciglen as charged.

(The underlining is my own.)

All the members of the Court of Appeal concurred in the reasons given by Aylesworth J.A., McLennan J.A. having expressed his concurrence in conference although his unfortunate death oc-

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curred prior to the delivery of the reasons. It is submitted on behalf of the appellant in this court that in making the finding of guilt as to the accused Ciglen in reference to the Kroy‑Fulton deal the Court of Appeal for Ontario went beyond the jurisdiction conferred upon it. The appellant cites the two recent decisions in this court: Regina v. Sunbeam Corporation of Canada Limited[12] and Lampard v. The Queen[13].

The appeal by the Crown to the Court of Appeal for Ontario is governed by the provisions of s. 584 (1) of the Criminal Code. Subsection (1)(a) of that section provides:

584. (1) The Attorney General or counsel instructed by him for the purpose may appeal to the Court of appeal

(a) against a judgment or verdict of acquittal of a trial court in proceedings by indictment on any ground of appeal that involves a question of law alone,

It will be seen, therefore, that the right of appeal given to the Crown is limited to a question of “law alone”. I am of the opinion that the three questions which the Court of Appeal was called upon to consider as to the guilt of the accused in reference to the Kroy-Fulton deal were all questions of law and that, therefore, when Aylesworth J.A. said, “when the serious errors in law to which reference has been made are corrected, the facts as found by the trial Judge in the Kroy-Fulton deal lead inevitably to one conclusion—the guilt of the accused as charged” he was giving a conclusion on questions of law. The first of those three questions was as to the meaning of the word “suppressing” as it appeared in the indictment. Surely the meaning in law to be given to a word which appears in an indictment or in a section of the Code is purely a question of law and the Court of Appeal had the jurisdiction to differ from the opinion of the learned trial judge as to the meaning in law of the word “suppressing”. The second question considered by the Court of Appeal for Ontario was the argument that it was impossible to convict the accused of an attempt to evade the payment of income tax without demon-

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strating that income tax was due by having the Minister declare that the payments received by the accused on the profits from trading in these shares were income. The view that such a decision was a decision necessary for the trial judge himself to make and was not a decision to be made by the Minister is certainly a decision upon a question of pure law and again the Court of Appeal has the jurisdiction to differ from the opinion of the learned trial judge thereon.

In Belyea & Weinraub v. The King[14], this court considered an appeal by an accused person from a conviction rendered in the appellate division of the Supreme Court of Ontario after an acquittal at trial. The appellants and others had been charged with conspiracy contrary to the provisions of the then s. 498, subs. (1) (a), (b) and (e) of the Criminal Code, and the trial judge had found that the conspiracy existed but he had refused to convict these two appellants on the ground that no overt acts following the making of the agreement had been proved against them. The Appellate Division and this Court were both of the opinion that the Crown need not prove such overt acts. Anglin C.J.C. said at p. 296:

But we cannot regard that provision as excluding the right of the Appellate Divisional Court, where a conclusion of mixed law and fact, such as is the guilt or innocence of the accused, depends, as it does here, upon the legal effect of certain findings of fact, made by the judge or the jury, as the case may be, to enquire into the soundness of that conclusion, since we cannot regard it as anything else but a question of law,—especially where, as here, it is a clear result of misdirection of himself in law by the learned trial judge.

I am of the opinion that the statement of the Chief Justice in that case applies exactly to the question as to the necessity of first obtaining a

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declaration from the Minister that the profits accruing to the accused on the trading in these shares were, in law, income.

The third question considered by the Court of Appeal was the professing to find a reasonable doubt based on the P.O.G.N. reports. These reports, as pointed out by Aylesworth J.A., were simply the echo of the conspiracy which the learned trial judge had found and, therefore, those reports could not, in evidence, supply a reasonable doubt. Again, I am of the opinion that this was a finding on pure law and was within the jurisdiction of the Court of Appeal under s. 584(1) (a) of the Code.

For these reasons, I am of the opinion that the Court of Appeal, in considering the three questions upon which the learned trial judge had professed to have based his reasonable doubt, were considering questions of law alone and that they had jurisdiction to come to their own decision on those questions of law and to differ from the learned trial judge, using, of course, alone his findings of fact.

One other problem arises which does not seem to have been considered in the Court of Appeal. In The Queen v. Warner[15], this court considered an appeal by the Crown. The accused had been found guilty of murder at trial, but the Appellate Division of the Supreme Court of Alberta reversed that conviction and substituted therefor a conviction for manslaughter. In coming to this conclusion, the Appellate Division had assigned two reasons for allowing an appeal: firstly, that the verdict of guilty of murder should be set aside on the ground that it could not be supported by the evidence; and, secondly, that there had been errors in law in the charge of the learned trial judge. This court, by a majority judgment, refused to consider the appeal holding that the Appellate Division had the power to make the first finding, which is undoubtedly a finding of fact, by virtue of s. 592(1) (a) of the Criminal Code but that no such power existed in this Court and, therefore, were this Court to have found that the errors in

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law in the charge of the learned trial judge, which had been found by the Appellate Division, did not, in fact, exist, the result would still have been the dismissal of the Crown’s appeal. It was, of course, sufficient to justify the decision of the Appellate Division reducing the conviction to one for manslaughter to have found the first ground of appeal alone.

So, in the present case, it is submitted that the learned trial judge had expressed a reasonable doubt not only on the three propositions of law, with which I have dealt, but for other reasons and that reasonable doubt was not within the consideration of the Court of Appeal, it not being a question of law alone.

It is true that the learned trial judge said in one portion of his judgment:

It seems to this Court that it would be incumbent upon the Crown to demonstrate that there would be an evasion of tax liability by suppression. I am, however, unable to determine on all of the evidence whether the moneys are subject to tax and for this reason, amongst others, I can draw no conclusive inference.

(The underlining is my own.)

It is also true that on the immediately preceding page of his reasons for judgment the learned trial judge said:

That the burden of proof rests and remains upon the Crown and never shifts is trite law yet if the Crown produces evidence which, if unanswered, and believed, is sufficient to raise a prima facie case, the Crown has discharged its burden and the accused may be convicted unless he counteracts the effect of that evidence, and the presumption of innocence cannot be displaced by evidence which merely tends or inclines in the direction of guilt. The making out of a prima facie case against the accused does cast a burden upon him to the extent that, if no further evidence is given, the jury will be entitled to convict him but the extent of that burden is not to prove his innocence but merely to raise a reasonable doubt in the minds of the jury.

Therefore, in my view, the learned trial judge has recognized the general presumption of evidence

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of innocence in favour of the accused but he did, in fact, deal with it when he made the finding of fact that the evidence showed that there was an agreement between the accused and Torny Financial Corporation Limited to treat the Fulton deal as being a Torny deal although it was a deal solely for the benefit of the accused and the profits therefrom were the property of the accused. In short, the learned trial judge did find there was a prima facie case adduced by the Crown which rebutted the general presumption of innocence in favour of an accused. Since no evidence was given on behalf of the defence, there was nothing to discharge the burden which, as the learned trial judge pointed out, was, under such circumstances, put on the defence. I, therefore, have concluded that one may not rely on such vague words as “for these and other reasons” to determine that the learned trial judge relied on any general presumption of innocence which favoured the accused. On the other hand, I am of the opinion that he found that general presumption of innocence had been rebutted apart from the three reasons in law for which he, in error, assigned his reasonable doubt.

I would, therefore, dismiss the appeal.

Appeal dismissed, CARTWRIGHT C.J. and HALL J. dissenting.

Solicitors for the appellant: McCarthy and McCarthy, Toronto.

Solicitor for the respondent: The Attorney General of Canada, Ottawa.