R. v. Warawa, 98 DTC 6471, [1998] 1 CTC 345 (Alta. Q.B.)

Clarke J.:

Introduction and Statement of Issues

The accused is charged in an Information setting forth 59 counts. These counts all involve a claim by the Crown that the accused violated either s. 239(a) or (d) of the Income Tax Act (ITOA). The gravamen of these offences are that the accused made or participated in false or deceptive statements in a tax return (ss. a) or wilfully evaded the payment of taxes (ss. d). These offences are alleged to have occurred in a five year period from 1985 to 1990. The accused is an accountant who carried on that business in Elk Point, Alberta. The charges generally relate to tax returns of the accused and of clients of the accused where it is claimed the accused assisted those clients in making deceptive statements in their tax returns. Within Revenue Canada this latter activity was described as an “accommodation”.

During the course of an investigation by Revenue Canada into the tax affairs of clients of the accused and the accused, oral and documentary evidence was obtained from the accused by various staff members of Revenue Canada. The issues before the Court for resolution have arisen in the course of a voir dire into the admissibility of these statements and documents. Generally the accused submitted that the common law rules of voluntariness of a statement and the Charter provisions respecting the accused’s rights had been violated.

In order to provide continuity and context the Crown prepared a list of 28 separate occasions where Revenue Canada obtained statements or documents or both from the accused. (See Appendix A attached.) The Crown intends to rely on statements of the accused and documents obtained for the purpose of the proof of its case, to cross-examine the accused should he testify at trial, to the assessment of the reasonableness of the search and any Charter argument that might follow concerning admissibility pursuant to s. 24(2) of the Charter and some while not being relevant were included for the purposes of continuity and completeness. In this judgment, I will refer to each of these occasions by use of the word Crown followed by the number of the occasion. The accused identified six general occasions on which he was objecting to the admission of statements and documents. Those will be identified by reference to the accused and a number for each of the objections.

I will only set out those facts that are necessary to determine the issues arising in this voir dire. Reference to exhibits are to exhibits marked within the voir dire.

Decision

The evidence in the form of documents and statements of the accused on these voir dires are excluded from the trial. The evidence was obtained from the accused by conscription (s. 231.1 I.T.A.) in violation of the accused’s s. 7 and s. 8 Charter rights. The evidence is not saved under s. 24 because it was conscripted. The evidence used to obtain the search warrant for the July 22, 1992 searches was part of this same evidence; once it is excluded there is no longer sufficient untainted evidence to support the issue of the Warrant.

Contextual Background: Facts and Law

Characterization of the Audit and Investigation Process

When Revenue Canada suspects that a taxpayer has not paid the proper amount of tax in a given year there are generally two different paths they may take in enforcing the requirement to pay. The first path is taken when Revenue Canada conducts an audit of a taxpayer and at the conclusion of that audit issues a reassessment that requires the taxpayer to pay the amount of reassessed tax. The people who follow this path are the people working within audit at Revenue Canada (Audit path). The second path is followed when Revenue Canada through its special investigation branch (S.I.) charges a taxpayer under s. 239 with tax fraud or evasion. That section provides that the successful result of that prosecution can result in a fine of not more than 200 percent of the amount of the tax that was sought to be evaded and for imprisonment for a term not exceeding five years (S.I. path).

The Audit path uses s. 231.1 of the I.T.A. to obtain taxpayer information for its reassessment purposes. This is a section which requires a taxpayer or his accountant to provide assistance to the auditor including answering questions. The section enables the auditor to inspect and examine the books and records of a taxpayer and any document of the taxpayer or any other person that relates to the information that should be in the books or the records of the taxpayer and generally for that purpose allows the auditor to enter into any premises or place where the business is carried on and where any books or records are or should be kept and it requires the person in charge of that property or business to give all reasonable assistance and to answer all proper questions of the auditor. The purpose of this very broad “search and compelling information power” given to the auditor is necessitated by the self-reporting nature of the Canadian tax system. It is necessary that taxpayers provide information to Revenue Canada officials so that Revenue Canada can ensure compliance with the Act.

The exercise of these “search and compelling information power” by audit is done without regard to the common law or Charter rights of the target of the audit. Because the result of the audit is only a reassessment and the payment of tax and penalty, it is considered to be solely the exercise of a regulatory power and so does not attract the common law and Charter safeguards. The S.I. path is an investigation and leads ultimately to a crimi- nal prosecution and penalty - this makes the target an accused and obliges S.I. to respect the accused’s common law and Charter rights. The S.I. path requires S.I. to obtain statements and documents after appropriate cautions and through the use of search warrants.

Therefore when a matter is referred to the S.I. path it is a criminal investigation. In that regard the Federal Court of Appeal in Del Zotto v. Canada (1997), 97 D.T.C. 5328 (Fed. C.A.) at p. 5331 said:

It can hardly be a surprise that lower courts have consistently held that when a case is put in the hands of S.I., even if the statute is otherwise a regulatory one, the case at that moment becomes a criminal investigation: ...

The case goes on to make reference to five lower court decisions. Any doubt on this issue is resolved by Revenue Canada’s own policies (Ex. 41) where the Objectives and Goals of S.I. are spelled in a manual called TOM 11(10). It states at p. 1112 in part as follows:

1. The objective of Special Investigations is to plan and administer criminal investigation programs that will provide maximum deterrence to non-compliance by investigating, penalizing, prosecuting and publicising significant cases in all categories of taxpayers for deliberate or willful evasion practices.

S.I. is performing a function like that of the ordinary policeman. It is their job to investigate and where appropriate prosecute crimes. I have concluded therefore that when a matter is referred to S.I. the target or suspect of the investigation is entitled to the appropriate common law and Charter protections available to someone suspected of a crime.

In this case a number of audits were conducted on clients of the accused as well as on the accused and some special investigations were conducted on the same people. As noted in R, v. Jarvis (1997), 48 Alta. L.R. (3d) 298 (Alta. Prov. Ct.) in the Alberta Provincial Court, Judge Fradsham at 314 says:

...the requirement to cooperate can sometimes lead to a blurring of the line between the audit function (towards which section 231.1 is directed) and the investigatory function (towards which the section is not directed). The policies of Revenue Canada acknowledge the difficulty. Item 1142.2(3) [as found in Ex. 52 in this case] deals with files which have been referred to Special Investigations for review but must be returned because though fraud may be indicated the information is not sufficient to warrant further action of the part of Special Investigations. The policy notes that Special Investigations must not use the audit process to obtain information to support a search warrant application

(emphasis added)

If S.I. is not able to use the result of the work of persons following the audit path what other recourse do they have? In that regard, the answer is found in À. v. Kokesch (1990), 61 C.C.C. (3d) 207 (S.C.C.), at 227 where Mr. Justice Sopinka is speaking for the majority of the Supreme Court of Canada and he says as follows:

Where the police (S.I.) have nothing but suspicion and no legal way to obtain other evidence, it follows that they must leave the suspect alone, not charge ahead and obtain evidence illegally and unconstitutionally. Where they take this latter course, the Charter violation is plainly more serious than it would be otherwise, not less. Any other conclusion leads to an indirect but substantial erosion of the Hunter standards: the Crown would happily concede s. 8 violations if they could routinely achieve admission under s. 24(2) with the claim that the police did not obtain a warrant because they did not have reasonable and probable grounds. The irony of this result is self-evident. It should not be forgotten that the ex post facto justification of searches by the result is precisely what the Hunter standards were designed to prevent....

In the recent cases dealing with the issues raised in this case, the Courts have suggested that it is necessary to characterize the actions of Revenue Canada as either audit or criminal investigation. In R. v. Yvon Gaudet (1997) N.B. Provincial Court (unreported), Judge Lamperte said at p. 30:

I want to emphasize also that a determination of whether the audit was still ongoing or whether a criminal investigation had commenced, should not be determined on the basis of how officials of Revenue Canada describe what they are doing. In other words, I not prepared to accept that an audit was ongoing, rather than a criminal investigation, just because officials from Revenue Canada describe it as such. The determination must be made on the basis of the facts of the case.

In my opinion when matters are placed in the hands of S.I. the activities that follow can only be characterized as a criminal investigation. The only basis on which you can characterize it as anything else is if personnel within S.I. become in effect auditors following the audit path resulting in a reassessment which results in the characterization of their activities are regulatory. Where those activities result in an indictment as in this case the only possible characterization of S.I.’s activities is as a criminal investigation. If I am wrong in this analysis then it is necessary to consider the application of the predominant purpose test.

Judge Fradsham in R. v. Jarvis, supra, at p.315 says that one of the things that must be determined is the nature of the inquiries being made by Revenue Canada, that is, audit or investigation. The courts in previous cases have acknowledged that inquiries can leave the realm of audit and enter the realm of investigation. He goes on to adopt as I do the test from British Columbia (Securities Commission) v. Branch (1995) 180 N.R. 241 (S.C.C.) as summarized by Hughessen, J.A. in Samson v. R. (1995), 189 N.R. 89 (Fed. C.A.) Federal Court of Appeal where he said in referring to the Branch test at p. 109:

If I read this passage correctly it is necessary in determining the predominant purpose of an inquiry to examine its entire context and in particular the legislative and regulatory background against which it is held. Only such an examination can indicate the real purpose of the testimony sought.

I agree that that is the test to apply to the acts of Revenue Canada which are the subject of this voir dire to determine whether they were directed to an audit of the accused or others or to an investigation of him.

Relevant S.I. Policies

During the time that these investigations were being carried out, (1987- 1992), Revenue Canada had internal policies and procedures, some of which are relevant to the issues to be decided in this case. As noted earlier there was a policy related to Special Investigations (Ex. 41) and it stated that the objective of Special Investigations was to plan and administer criminal investigation programs. It then goes on to talk about the treatment of Records and it provides that in all cases when a decision is made to conduct a full scale investigation formal possession of all records which may afford evidence of a violation should be obtained as soon as possible. It carries on to further provide, “...however, under no circumstances will Special Investigators borrow records to enable them to conduct their investigations. During the course of routine audits it occasionally becomes necessary for an auditor to borrow records and conduct an examination of those records in some alternate location. If during the course of that examination, violations of the Act are uncovered, we must obtain formal possession of the records by obtaining a search warrant and seizing the documents from the auditor. Special investigators should never enter into negotiations to obtain taxpayers' records voluntarily". (Emphasis added) It goes on to provide that if records are surrendered voluntarily by a taxpayer in some unusual situations warrants should be requested to gain formal possession of those records. Special Investigators also received advice (Ex. 40) where they were advised that Department of Justice lawyers:

...feel that Judges are becoming more and more conscious of taxpayers’ rights. They are of the opinion that within a relatively short period of time the law of the country will require all criminal enforcement bodies to advise the taxpayer of their right to counsel before admitting any statement which will be used as evidence in court. Consequently it will henceforth be our policy to give the new criminal warning in all circumstances where we are asking the taxpayer for a statement or when the taxpayer may be placed in the position of incriminating himself/herself and where we plan to use the information or statement in the subsequent proceeding.

(emphasis added)

The Communique goes on to deal with the issue of identification and says that when Special Investigators are calling on third parties to obtain information, examine books or to obtain access to original documentation they are to identify themselves as being employees from Revenue Canada and they should ensure that the third party understands that the third party is not being audited and that the information required has nothing to do with the third party’s tax situation. If the third party insists on being informed as to whose affairs are being examined the Special Investigator must then decide either to give that information, try to dissuade the third party from insisting on that information or to withdraw without disclosure until a later date “if there is concern that future search action may be jeopardized”. It goes on to provide “in all cases if the Investigator is asked directly as to exactly which section of Revenue Canada, taxation he/she represents, he/she must not attempt to deceive the third party but advise that they are Special Investigations”. The Communique goes to deal with the taxpayer under investigation and says that when approaching the taxpayer whose file has been referred with the intent of making a preliminary investigation of the reported discrepancies and/or case potential, special investigators should identify themselves as being from Revenue Canada. It goes on to provide “if the taxpayer raises the matter as to which section the investigator is representing the investigator must not attempt to deceive or mislead but must state that he/she is a member of Special Investigations”. (Emphasis added) And it goes on at a later point

as Special Investigators we must continually guard against creating situations (through misrepresentation of our official capacity) in which a taxpayer may incriminate himself/herself without the proper caution being given. The Courts are becoming increasingly insistent that taxpayers be made fully aware of their situation and that we not exploit our position as employees of the department, that is persons in authority. As with the policy stated previously, in all cases Investigators must not attempt to deceive the taxpayer as to which section of Revenue Canada they represent. In summary, Investigators must always advise that they are from Special Investigations if questioned and in all cases where they find themselves in a position of taking a statement which may incriminate the taxpayer.

(Emphasis added)

It should be noted at this point that documents and statements which Revenue Canada seeks to use in this prosecution against the accused were all obtained (with the exception of the final search warrant executed on the accused) without the accused being told that he was a suspect, without the accused being given any caution or being advised of any rights that he might have to silence. The accused during this time believed that the actions of Revenue Canada were being conducted following the audit path and that pursuant to s. 231.1 he had no choice but to cooperate and provide information and documents as requested by Revenue Canada.

Time of Applicable Law

Although these offences are alleged to have occurred from 1985 to 1990 and the investigations took place from 1987 to 1992 counsel were agreed that the law as at today’s date should be the applicable law in reviewing the two main issues: the voluntariness of the statements at common law and alleged breaches of the Charter. However, the law as it existed at the time of a breach is crucial to a determination of the seriousness of the breach and to the issue of the effect of the exclusion of that evidence on the administration of justice.

Onus of Proof

With respect to statements made by the accused the Crown acknowledged that it had the onus of establishing beyond a reasonable doubt that those statements were voluntary. With respect to the Charter violations claimed the onus is on the accused who asserts the breach to prove that breach on a balance of probabilities. To the extent that a breach is established the onus is also on the accused to prove on a balance of probabilities that the evidence ought to be excluded under s. 24(2).

S.I. Persons in Authority for Purposes of Charter S. 8

It was common ground by both Crown and the accused that persons from S.I. were “persons in authority” for the purpose of considering the accused’s common law and Charter rights. It was also common ground that Charter rights are personal rights in the sense that while it might be established that the Charter rights of a client of the accused had been violated that violation would not mean that the accused’s Charter rights had necessarily been violated.

Revenue Canada as a Collective and Time Frame of Review

Since it will become necessary during the course of this judgment to characterize the actions of various Revenue Canada personnel who were involved in the events subject to this voir dire and since it will be necessary to consider the issue of good faith there are two other concepts to be kept in mind. In this regard, I have adopted the view of His Honour Judge Frad- sham in R. v. Jarvis, supra, at p. 351. Firstly, in our case there were many separate individuals who were involved acting on behalf of Revenue Canada. It is my view that the collective acts performed on the part of Revenue Canada must be considered. It would be misleading to take in isolation the acts of some of the actors to the exclusion of others. The conduct of Revenue Canada through all its agents must be considered as a whole when considering the question of both the characterization of the acts and the issue of good faith. While on the face of it, it may appear that there were a series of separate audits and investigations being carried on by Revenue Canada with respect to the accused and his clients, what is clear is that the fruits of those audits and investigations all have come together to form the basis of the prosecutions that are the subject of the 59 count indictment. Thus the reality of what occurred is not that they were separate independent streams but that, while they were at some point in time separate streams, they were all leading and pointing to one person, namely the accused. Secondly, I am satisfied that we must look at the conduct of Revenue Canada vis à vis the accused, not only at the time the offences are alleged to have occurred but also before and after the alleged offences. The conduct of Revenue Canada in respect of the accused clearly was a continuum. It is distorting to focus on only one part of it. The pre and post breach conduct can fairly lead to an inference regarding the good faith of a breach of the accused’s Charter rights and the characterization of those actions all of which form a part that continuum of conduct. It is clear that the personnel of both audit and S.I. are a group of well educated, knowledgeable people who were aware of the Charter. They received relevant Charter information from the Department of Justice in the form of communiques and had access to Department of Justice people in Edmonton. They were not operating “in the dark”.

Finally, some observations about Special Investigations in the 1985 to 1992 period are relevant. S.I. was a relatively small department consisting of approximately 15 employees. There were divided into two groups, General Investigation Program (GEP) and Special Investigations Program (SEP). The SEP group concentrated mainly on tracking income tax evasion or fraud from known criminals. The GEP group more generally enforced the Income Tax law where fraud or evasion was suspected. The section occupied basically one large open space. The section chief, Mr. David Brown, had his own office. Otherwise some of the group heads on occasion had an office and some did not and all of the investigators sat in an open area al- though toward the latter part of this period the open area was divided up with low level dividers. Mr. Brown testified that it was essentially up to each individual investigator as to how much information they gave out within their group to other investigators. Mr Brown said he neither encouraged nor discouraged discussion amongst the investigators. However, he did note that it was what he called a “small shop” and “it was impossible for each investigator not to know what others were doing and what cases they were working on”. In addition to conversations amongst the investigators there was a vault where seized and other material was kept in boxes with the name of the person being investigated on the front of the box. As well there was a register of all of the material which again contained the names of the individuals being investigated. While some investigators by nature tended to be less talkative about the cases on which they were working I am satisfied on the evidence that I heard that Mr. Brown’s conclusion was correct and the investigators in S.I. knew what investigations were on going generally at any one time.

Facts

During the course of this judgment I will refer to the various statements and events upon which the Crown seeks a ruling using the numbers that were set out in a document entitled “List of Statements and Contacts Between Revenue Officials and Mr. Warawa - Listed Chronologically” attached as Appendix “A”. I will refer the accused’s statements in accordance with the numbers assigned by myself to of those statements to which the accused objects.

Crown 1 — October 9, 1987 Call to the Accused

The first witness for the Crown was Mr. George Leblanc. He is a Revenue Canada employee, employed since 1981 in numerous capacities. During the relevant times he was working in audit. He testified that after establishing certain general parameters of suspected tax evasion their main computer in Winnipeg would select on a random basis files that fell within those general parameters and generated what was called a screening list. That list is sent to the geographic location where the taxpayer is located. It is screened by a supervisor and if the supervisor concludes that a further review is warranted it is then assigned to one of the persons for an audit. The computer had generated the name of Clifford Baumgardner and that name was assigned to Mr. Leblanc to conduct an audit. After conducting the audit Mr. Leblanc referred Mr. Baumgardner’s file to S.I. for follow up. He did so because his analysis indicated that Mr. Baumgardner had not paid taxes over the relative period in excess of $100,000.00. /t is noteworthy that it is not the culpability of the taxpayer per se that seems to govern a referral to S.I. but the dollar amount resulting from that culpability.

Crown 2 — October 19, 1987 Meeting with the Accused

The purpose of this meeting was to obtain the books and records of Mr. Baumgardner. The accused being an accountant was aware of his obligation to produce those records under s. 231.1 of the I.T.A. Mr. Leblanc gave a receipt for them. He took those books and records to St. Paul to work on them. The accused advised Mr. Leblanc that there were two separate businesses of Mr. Baumgardner. The first was to haul water to oil rigs and the second was to operate a farm. The records consisted mainly of adding machine tapes of income and expenses which were prepared by the accused’s staff and they were then transferred to the appropriate tax forms. The accused was aware of the purpose of Mr. Leblanc’s trip which was that Mr. Baumgardner was under audit and Mr. Leblanc was, as part of his job, picking up those records. He received a lot of receipt books and source documents but no record or journal which tried to put all of that material together and he made notes.

Crown 3 — October 20, 1987 — Telephone Call with the Accused

Mr. Leblanc told the accused that he was having difficulty in reconciling the income. The accused said that the income was done on adding machine tapes but apparently Mr. Leblanc didn’t have those. For 1986/87 the accused said that the cattle were wintered and fed and then sold; they were purchased in the fall and sold the following year.

Crown 4 — October 21, 1987 — Meeting with Baumgardner, His Wife and the Accused

The accused said little of anything during the meeting. Mr. Baumgardner appeared fully aware of his financial circumstances and his business affairs. Mr. Leblanc needed to hear from Baumgardner personally with respect to his story and he needed to know if there had been any non-taxa- ble events which accounted for what appeared to be an increase in Baumgardner’s net worth. During the course of the meeting they covered firstly, the problem of income reconciliation; secondly, the rough net worth discrepancy statement prepared by Leblanc; thirdly, farming activities; fourthly, an inheritance Mr. Baumgardner received from his grandmother’s estate of approximately $34,000; fifthly, Mr. Baumgardner’s personal expenses. He got authorization from Mr. Baumgardner to go to his bank to verify information. Mr. Leblanc concluded that he needed the bank’s information before he could reach a conclusion. Mrs. Baumgardner signed the bank authorization. Mr. Baumgardner provided answers and carried the meeting with the accused not saying very much.

Crown 5 — October 23, 1987 — 11:30 a.m.

Mr. Leblanc returned the records of Baumgardner to the accused’s office. He presented the net worth proposal that he had made up for Baumgardner but the accused didn’t say much of anything and had no additional information to add. In the course of casual conversation the accused mentioned that he too was engaged in farming activities.

As a result of learning that the accused was engaged in farming activities Leblanc wanted to explore the accused’s position further. He had concluded with respect to Mr. Baumgardner that Baumgardner’s farming financial affairs had been co-mingled with his water hauling business affairs. The I.T.A. did not permit that co-mingling and that co-mingling appeared to cause Mr. Baumgardner’s income to be understated. Since the Return had been prepared by the accused and since the accused also had a farming operation Mr. Leblanc decided that he would take a look at the accused’s Return to see if a similar co-mingling had occurred with respect to the accused’s affairs. He reviewed those with the purpose in mind of trying to find out whether the accused was sheltering farm losses with his professional practice. To do that he requested from the Winnipeg Tax Centre the accused’s returns from 1984, 1985, and 1986. He assumed that the accused would not co-mingle because the accused was a professional accountant with a C.G.A. designation and would know better. He didn’t tell the accused what he was doing because the accused was not his audit target when he went up to Elk Point; Mr. Baumgardner was the one that was being audited. His notes (Exhibit 5) simply reflected his opinion. He said it was also not an investigation. He was simply suggesting that an audit be done. He had no suspicion of there being a tax fraud. Mr. Leblanc left the audit shortly after preparing his notes and he doesn’t know what happened after that. His notes do use words like disguising and creative. While Mr. Leblanc might characterize these activities of the accused tax as fraud they clearly would be tax evasion and a s. 239(1) offence.

Crown 6 —December 7, 1987 Messrs Rodgirs and Steele Visit the Accused’s Office

The results of Mr. Leblanc’s audit along with Ex. 5 were referred to S.I. In November 1987, a Mr. Heath Rodgirs was assigned to work on the Baumgardner file. He obtained the file on November 5. He reviewed the working papers prepared by Mr. Leblanc generally to ensure that there were no obvious errors. He also noted Mr. Leblanc’s four page analysis of the accused. With respect to the Baumgardner matter, he called Mr. Baumgardner and advised that he was coming out to conduct a review. He said he was from Special Investigations. He also told Mr. Baumgardner that it was because of an approximate $300,000 discrepancy in income reported that he was doing this review.

Based on Mr. Leblanc’s analysis with respect to the accused it had also been concluded that an audit should be done of the accused. Mr. Rodgirs said he would undertake that audit. He did not do so for some time he said, because he wanted the accused as his prime witness and he did not want the accused to be under audit. He had searches conducted on the accused at Land Titles, Motor Vehicles and Central Registry.

When asked why he obtained this information on the assets of the accused Mr. Rodgirs said that he did this in every case with respect to someone who was a potential witness. While there was some common sense in his statements that he would want to know if a potential witness had filed their Returns that information he could obtain easily from accessing their computer system. To go the further step to obtain not only Returns for six years (Mr. Leblanc had reviewed three years) for the accused and his wife but also this additional information could hardly be necessary for someone that was being looked at only as a witness in a potential criminal prosecution. It is noteworthy that when the balance of the members of S.I. were asked about this kind of activity all of them expressed surprise that it would have been done and none of them adopted Mr. Rodgirs’ position that this was done as a matter of course for all witnesses. The only reasonable conclusion I can draw is that it was done because Mr. Rodgirs had concluded that while the accused could be a witness in the Baumgardner matter it was also clear that he was looking at the accused as a potential target for a prosecution. Other witnesses from S.I. said this is the type of information you would collect for a suspect and not for a witness.

On December 7, 1987 there was a meeting with respect to the Baumgardner matter where Messrs. Steele and Rodgirs are present for Revenue Canada and Mr. Baumgardner and the accused are present. Mr. Rodgjrs introduced them as being from Special Investigations of Revenue Canada and produced their ID cards. He explained there was a large discrepancy in net worth. He also explained that he wanted to look at all of the documents before they asked any questions. The meeting was friendly and businesslike. They borrowed the records that the accused had of Baumgardner for the period 1983 to 1986. They then worked on those records in the hotel. They ultimately did a net worth because they could not get the necessary figures to do a detailed reconstruction. He came up with the same type of discrepancy that had earlier been identified by Mr. Leblanc. Mr. Steele who was Mr. Rodgirs supervisor only vaguely recalls the meeting with the accused. His only memory of what occurred is from Mr. Rodgirs’ notes. He had no independent memory of what went on at that meeting.

Mr. Steele said that the general policy to be followed in S.I. was that investigators were not to discuss their files with other people; that was out of bounds, or indeed with other investigators. So far as the Baumgardner investigation was concerned he would only discuss that case with his superior, Mr. Brown. It was also his view that the policy was that investigators discussing a particular file were limited to discussing that with their supervisor. The overall person in charge of the office, Mr. Brown, was the hub to which the various investigation matters were referred. From an objective review of the evidence while that might have been his notion of the policy it was not the practice.

Crown 7 —Accused 1 — December 10, 1997 Meetings with the Accused

On December 10, 1987 there were three separate occasions when Mr. Steele and Mr. Rodgirs were involved with the accused. The first occurred at 9:00 a.m. when they had a general discussion with the accused. They asked how he had gone about gathering information and did the Returns. They then reviewed his working paper files with respect to Baumgardner. As far as Mr. Rodgirs was concerned the accused was their main witness and was not a target of the investigation. That session was friendly and businesslike. The minutes of the meetings that day are found in Ex. 65. The accused told them that in preparing the Returns he relied primarily on figures given to him by Mr. Baumgardner and they simply ran those figures on tapes and transferred the totals to the Returns. With respect to the issue of cattle purchases and sales the accused said he had no specific knowledge except that it was for tax deferment. He then says that the accused did not have the working papers with him, that they were at home and he would get them later that day.

The next meeting was at 4:00 p.m. with the accused and Messrs. Steele and Rodgirs. The accused produced the working paper file. It was reviewed and several documents were photocopied. Rodgirs remembers paying the bill for that photocopying. They also arranged to meet later that night.

At 11:00 p.m. there was another meeting again with Messrs. Steele and Rodgirs and with the accused and Mr. Baumgardner. He said the meeting was friendly and businesslike. Rodgirs had prepared a list of questions. He asked about the cattle transactions including the number of cattle, what type of breed they were, where they were kept and where they could locate the bill of sale. Baumgardner said he did not know. He said he gave a cheque in the winter to the Wainwright Livestock Exchange (W.L.E.) and then got a cheque back in the spring. They generally told Mr. Baumgardner that they had a major problem because there was a very large net worth discrepancy. They concluded following the meeting that they would start third party contacts to verify the figures that they had.

Mr. Steele said no caution was given to the accused because as far as Steele was concerned the accused was not under investigation. He was to be a witness.

Crown 8 — Accused 1 — December 11, 1987 Meeting with the Accused

On December 11, 1987 they met with the accused. They were returning the books and records that they had borrowed with respect to Baumgardner. The notes of that meeting are Ex. 66. They told the accused that there was a major discrepancy in Baumgardner’s net worth and that they would be doing third party checks. The accused said to them that he had told Baumgardner that if Baumgardner had done anything wrong that he should come clean now. The accused felt that the explanations given did not wash.

Crown 10 —December 17, 1987

It appears that Mr. Rodgirs cannot recall anything as significant happening that day.

Crown 11 — January 20, 1988

Mr. Rodgirs had a telephone call with the accused. He was asking about the Bluebell and L’Hereux transactions. Bluebell Louise L’Hereux were Mrs. Baumgardner’s parents. The L’Hereux were also a client of the accused.

By that time Mr. Rodgirs had spoken to one Robert Rajotte who was their principal contact at the W.L.E. From him they had learned that cattle had never been purchased or sold. Mr. Rajotte told them the W.L.E. would simply hold the cheque and return it in the spring when Baumgardner called. The first time they had met Mr. Baumgardner was at the accused’s office. Mr. Baumgardner asked the accused how much money he needed to put away by buying cattle. Mr. Baumgardner would then write a cheque for that amount. The W.L.E. would postdate a cheque back to Baumgardner dated in February sometime for the same amount. The W.L.E. through a Mr. Wilson would then go out and look for suitable cattle to cover the cheque. All of this led Mr. Rodgirs to conclude that the accused was an even more important witness because he was at the meeting and prepared the Returns. Rodgirs concluded that the information that he got from Rajotte had removed the accused as a suspect because the accused never saw the cheques coming back. He felt that it cleared the accused. Furthermore the information that he got from Mr. Willisko’s (referred to below) interview of the accused when asked about the cattle transactions confirmed Rajotte’s information and therefore the opinion that he had reached.

Crown 14 and Accused 2 —April 12, 1988 — Search Conducted at the Accused’s Office

On April 12, 1988 search warrants were executed with respect to Mr. Baumgardner at his residence and at the accused’s business premises. The search warrant was based on an information sworn by Mr. Rodgirs. The Information (part of Ex. 7) was reviewed by Steele as his section head, by Mr. Brown as the senior person S.I. in Edmonton and then by their department in Ottawa. They were proceeding under the then s. 231(3) of the Income Tax Act. He set out his sources of information from Baumgardner, the accused and others. The warrant was granted by Mr. Justice Cavanagh.

Mr. Rodgirs said they were focussing on the cattle transactions, vehicle transactions and truck depreciation, the L’Hereux transactions, the $34,000 apparent inheritance and unreported lease truck and custom work. He prepared questions for Mr. Willisko who was in charge of the search of the accused’s business premises. Mr. Rodgirs was at the Baumgardners’ residence when the search warrant was executed.

Terry Willisko of S.I. testified that he was a search leader executing the search warrant in the Baumgardner matter at the accused’s office. The search was done pursuant to powers given under the I.T.A. and the Search Warrant (Ex. 7). His role in the search was to secure the premises on entry, interview the accused and direct the search being conducted by his other colleagues. Mr. Rodgirs had obtained the search warrant.

He spoke to the accused when he entered the premises. He told the accused from his notes of the events that the accused could call a lawyer if he wanted. The accused had a legal right to call a lawyer. The accused responded that it was not necessary. Mr. Willisko gave the accused a copy of the Warrant and said that two other people would be doing the search. Mr. Willisko handed his identification card which has his picture and name on the card to the accused for inspection. The accused said, in effect, that he didn’t wish to call a lawyer and they should proceed. The search warrant and the application for the warrant (Ex. 7A) are all directed towards Mr. Baumgardner. Neither document suggests that the accused is a target of the search and seizure. What is significant is that the affidavit used in the application (Ex. 7A) is able to set out the type and location of documents based on information from Leblanc’s audit and from subsequent interviews with the accused.

Mr. Willisko had been in Special Investigations of Revenue Canada for eight years. There was a manual (T.O.M. 11) that contained a procedure for searches and the proper protocol to follow as well as some reference to interviewing people. There were at least two categories of people - a witness or a suspect. If the person was a suspect then they were required to caution that person about the person’s right to remain silent and the person’s right to contact a lawyer.

The accused was then asked a series of prepared questions. He was not cautioned about obtaining counsel or his right to be silent or the consequences that might happen to the accused for either answering or, indeed, not answering the questions. The questions and answers are contained in Exhibit 6. As far as Willisko is concerned the accused was not a suspect or an accused at that point. It was Baumgardner that was the subject of their investigation. The accused was simply his accountant. Mr. Willisko was not aware of any investigation going on at that time with respect to the accused. As a result, no warning other than the initial one was given to the accused. He acknowledged that some of the questions on Exhibit 6 seemed to point at the accused by reference to his personal accounts. He acknowledged that if anyone was involved in alleged “sham transactions” by Baumgardner, then if it was the accused, Revenue Canada would be interested in the accused because he could well be culpable. He knew that it was the theory of Revenue Canada that Baumgardner was engaging in a sham cattle transaction whereby he gave a cheque at the end of the year to the W.L.E. and then in the spring cashed that same cheque. It was also their theory that this same type of transaction was being done with Bluebell L’Hereux. It appeared that Mr. Baumgardner never did actually take possession of or keep the cattle. The accused never saw the cattle either but simply the cheques and the receipts.

The accused was co-operative and replied to all questions and it seemed to Mr. Willisko like it was a typical interview of an accountant. The search action was completed and about one box of items was seized and they left the premises. The Crown now wants to use the accused’s statement and some of the seized records in this prosecution.

They prepared an inventory following the seizure of the material seized and then reviewed those documents. Mr. Rodgirs concluded that the accused would be an important witness; that he was not involved in the offences because he was on the outside and was not privy to those offences.

Shortly after April 18, 1988 Rodgirs received a copy of an anonymous letter (Ex. 53) that had been sent to Revenue Canada. This letter suggested that the accused was cheating Revenue Canada on the basis of doing something with clients’ tax returns. Rodgirs’ own view was that he saw nothing of that sort of thing in his review of Baumgardner’s tax return so he thought that the allegations were simply too vague and it did not change his view as to how he saw the accused in the process of his investigation.

Crown 12 — Meeting with the Accused and Ms. Wok (later known as Ms. Bardoel)

Mr. Cass who was working in the audit department was assigned in February of 1988 to do an audit on Titan Oilfield Services Ltd. (Titan). Titan was another client of the accused. The purpose was to ascertain the correct tax liability of Titan. He received from the Group Head (Exhibit 8) a form which listed some reasons why the file should be audited. On February 29, 1988 he went to Elk Point and he met Ms. Wok and Mr. Hopaluk (the principal of Titan) in the accused’s office. The accused was not present. They discussed the business of Titan, its major customers, who did the accounting, who had cheque signing authority, etc. Mr. Hopaluk said that he had left the accounting to Ms. Wok and to the accused. Mr. Cass took source documents and the synoptic with him when he left. He came across some cheques, bank deposits and other records that he could not explain and that caused him some concern.

As a result on March 4, 1986 he met with Ms. Wok and the accused to go over what was being done and matters that were outstanding so far as he was concerned. The meeting lasted between 30 to 60 minutes and it was a regular routine meeting. On the contentious items that he had identified the accused indicated that they would get back to him with backup. In addition to the specific matters that he had identified he raised such things as unreported interest, shareholder loan account history and tax credit matters. The questions that he was putting to the accused were for the purposes of getting information.

Mr. Cass did not take any original records away with him. He took photocopies after he had asked for permission to do so. He indicated that while he had no specific recollection of asking for permission it was part of his standard practice.

On March 30, 1988 Mr. Cass toured the premises of Titan, requested certain information and was told by Hopaluk that he should speak to the accused. At that point, Mr. Cass warned Mr. Hopaluk that the accused might be in a conflict of interest position because depending on what information the accused gave it might make Mr. Hopaluk liable for tax.

Claim 13 — March 31, 1988 Meeting with the Accused

The accused greeted him and was not happy. The accused suggested that Mr. Hopaluk had in turn suggested that Cass was saying that the accused might be ripping off Mr. Hopaluk. Mr. Cass told the accused that he was not suggesting that the accused was dishonest; there was simply a conflict of interest. Mr. Hopaluk had told the accused that he was changing accountant because he was not happy so the accused would not give Cass anymore information. Notwithstanding that statement they talked about the helicopter deal which was one of the transactions involving the accused and Titan which was of concern to Mr. Cass. He asked the accused a variety of questions concerning payments regarding the helicopter and the accused provided information to him on that subject. The meeting lasted about half an hour and the accused agreed to try to get some information and forward it to Mr. Cass. At this time Mr. Cass was looking only at the Titan side of the matter. However, like Mr. Leblanc, he set up a “lead” so someone could follow up with reviewing the accused. He set up the “lead” because of the suspicions raised with respect to payments to the accused. He was concerned about the accused’s personal involvement and the potential for the conflict of interest that that created. However, he also knew that you could not jump to conclusions.

Crown 15 — May 16, 1988

The accused called Mr. Cass and said that there had been miscommunication. The accused had made the December 1985 helicopter payment and Titan had been reimbursed in 1986. Therefore the cheques should not have been expenses. The accused was analyzing the other payments to him and would courier information about those other payments to Mr. Cass by May 18. Mr. Cass never heard anything further from the accused. Mr. Cass contacted S.I. by sending them the brokers’ statement (Ex. 16) with respect to the helicopter purchase. He passed it on wondering if it was a “smoking gun”.

Mr. Cass said that it was not his field to determine if fraud had been committed. His purpose was to determine whether the proper taxes had been paid. He never served the accused or Mr. Hopaluk or Ms. Wok with any formal Requirement to provide information. He simply waited to see how they responded to his request.

Crown 16 — September 14, 1988 Mr. Sinclair Calls Accused to Set Up a Meeting

John Sinclair was with S.I. in 1988. He was one of their most senior investigators. He was assigned to investigate the file of Titan in August 1988. He got the assignment by way of a referral form (Ex. 23) that contained a series of reasons as to why the audit department thought that this file might appropriately be the subject of a special investigation. The referral spoke of there being an “accommodation” situation which would include not only Titan but also the accused. Thus so far as Mr. Sinclair was concerned the accused was one of the subjects of the investigation at that time. He knew that he would be collecting information and evidence that might at some point support a criminal prosecution of the accused. That possibility is now a reality in this indictment.

On August 26, 1988 Mr. Sinclair had prepared was is called a T131 Referral Report. This report contains the essential features of his preliminary examination of this matter and suggests a plan of action to management. A second document was prepared as part of that general form following discussions that he had with his group leader. These forms (Ex 24, 25) disclose an intention on the part Mr. Sinclair to limit the audit of the accused to those matters where the accused was involved with Titan. He also wanted to find out where the accused kept those parts of his records that related to his dealings with Titan in case they needed at a later date to apply for a search warrant. He was also aware that a Mr. Rodgirs who was also in 8.1. was using their Electronic Data Processing facility through the Winnipeg Taxation Centre to obtain all of the returns of clients of the accused. That activity of Rodgirs was to be done separately from Sinclair’s examination of the accused as it relates to Titan/Hopaluk. He wanted to keep his investigation separate and he cannot recall reporting to Mr. Rodgirs any of the results of his investigation. The focus of his work was on Titan and Hopaluk and involved the accused to the extent that the accused was part of transactions with that company and person.

He was of the view at this time that he had no reasonable and probable grounds to believe that an offence had been committed. At this stage it was simply a suspicion and until he talked to all the relevant parties and saw the relevant documents and found out who did what he would not know whether it was anything more than a suspicion. While it appeared that an accommodation had occurred between Titan and the accused there might well be an innocent explanation. I am satisfied that Mr. Sinclair considered the accused to be at least a suspect.

At the same time that Mr. Sinclair was doing his work Mr. Rodgirs was doing some work with respect to the accused. He had obtained the Returns of Mr. and Mrs. Warawa and he had done an extensive amount of searching of the accused’s assets at Land Titles office, Motor Vehicle, etc. In addition, there was on August 30, 1988 a request made of their Electronic Data Processing centre for a list of the accused’s clients. The purpose of obtaining this list was to see whether or not there were other instances of accommodation of the type that they suspected was occurring through the accused. Mr. Brown in his evidence made it clear that both of those activities clearly pointed to the accused being a suspect in the sense that he was being investigated. Indeed it was clear that the audit check being done by Mr. Paquin’s audit department of the accused’s clients was being done to see if the accused was involved in an accommodation arrangement with his other clients of the type that they suspected in the Baumgardner matter.

Deborah Kowaluk was working in S.I. in the summer 1988. She received a T134 referral in mid-August from Mr. Sinclair. This kind of a lead or referral was done where audit picked up something that looked to them like fraud or evasion. Mr. Sinclair stated that their (S.I.) actions should be coordinated with the audits ongoing by Mr. Paquin to see if the accused had encouraged fraud or tax evasion. Ms. Kowaluk essentially acted as a liaison person between S.I. and audit. She had spent most of her career in audit. It was felt that because she understood audit and the people working in audit they might feel more comfortable bringing suspected tax fraud or evasion matters to her and she in turn would screen them for S.I.’s purposes. She testified that she was not aware of any investigation going on of the accused. She was aware of the Baumgardner and Titan investigations. She did not know if there was a file in the office ongoing with respect to the accused. She doubts that there was such a file because if there was she would not have expected S.I. to have gone through the process of setting a new T134 for the accused.

Mr. Dave Brown the S.I. chief testified that the policy set out in Ex. 40 with respect to contact with the taxpayer was in effect in 1987 and 1988. He said that his instructions to the investigators were to identify themselves as being from Revenue Canada if they were questioned they should identify themselves as being members of the audit division. He testified that the preliminary examination that was conducted was the initial contact with a taxpayer under investigation.

Mr. Gregory Wagar gave evidence. He was Mr. Sinclair’s group head during the relevant time. He acknowledged that he signed off the T134 Referral Report and he acknowledged that when he did so he knew that there were signs of accommodation on the part of the accused on at least two files being Baumgardner and Titan. He cannot specifically recall where he got the information with respect to the Baumgardner investigation but he expects it would have come from either the section chief, Mr. Brown, or Mr. Rodgirs or Mr. Rodgirs’ group head at the time, Mr. Steele. He testified that he and Mr. Steele liked to discuss matters. He also testified that since they had the Baumgardner and Titan files where there was potential accommodations by the accused it was only logical to pull the accused’s client files to see whether there was any other accommodation. He did not know what Mr. Paquin’s audit was doing at the time. He was aware of Mr. Sinclair’s August 26, 1988 (Ex. 25) report. He had a meeting with Mr. Sinclair to discuss that report and how they were going to conduct their investigation. He and Mr. Sinclair decided to go ahead and limit their investigation to Titan, its major shareholder, Mr. Hopaluk and the accused. He was satisfied that they were doing an investigation of those three parties. When he called the accused he explained that the auditor dealing with this matter had gone to Calgary and they would be there to finalize the audit.

Crown 17 Accused 3 —Mr. Sinclair Calls the Accused to Set Up an Audit of Titan and Mr. Hopaluk - September 19, 1988

After a preliminary review of his file, he met with the accused. Mr. Sinclair was accompanied by Mr. Endruschat of S.I. He testified that the ac- cused was asked generally about payments from Titan to the accused in the nature of professional fees, subcontract expenses and wages. The accused said that he was performing services for Titan but the money had been returned because the principal of Titan, Mr. Hopaluk, had changed his mind.

When they met with the accused Mr. Sinclair introduced themselves as being from Revenue Canada from the audit division. It was the policy of their department in the early stages of an investigation not to identify themselves as being from S.I. The reason for that policy was to protect evidence. He acknowledged that he was not being truthful with the accused when he said that he was from audit because in fact, of course, he was from S.I. The accused took a photocopy of the identification card of Messrs. Sinclair and Endruschat as well as a photocopy of the business card of Mr. Sinclair (Ex. 40). None of that documentation contained any reference to the particular department to which either person was attached. In cross-examination of the accused during his voir dire on other matters the accused said that Mr. Sinclair introduced himself by saying that they were from the audit department and they were finishing an audit. Mr. Sinclair explained that he told the accused that he was from audit because he did not want the accused to know that he was from S.I. He believed he was following the policy not to let people know they were from S.I. In his view a warning would only be issued if the person made a statement that might lead to prosecution. He did not hear anything from the accused that he thought was incriminating him. He was in the preliminary stage described in the communique under the heading “Taxpayer Under Investigation” and he did present himself as being from Revenue Canada and presented his card.

They saw some documentation of both Titan and the accused; the accused became busy with clients so they made some photocopies of some of the documents and left.

Crown 18 Accused 3 — September 21, 1988 Attendance at Accused’s Office

Mr. Sinclair returned on Wednesday, September 21. At that time he saw Titan’s synoptic journal, the accused’s bank statements and cancelled cheques and the accused’s deposit books. They looked at all of these in the office that was provided by the accused in his building.

Crown 19 Accused 3 — September 28, 1988

On September 28, 1988 Mr. Sinclair phoned Mr. Hopaluk because he wanted to arrange a meeting with him at his residence. Hopaluk was reluc- tant to meet at his residence and said he would meet instead at the accused’s office in Elk Point. Mr. Sinclair wanted to visit Hopaluk’s residence to find out the physical location of documents of Titan and Hopaluk in case they needed to do a search warrant and seizure sometime in the future.

Crown 20 Accused 3 — October 11, 1988 Phone Call and Meeting with Accused

On October 11, 1988 a telephone call was made by Sinclair to the accused trying to arrange a meeting. The accused said that he was in the middle of harvest and it was a busy time for him. Nonetheless, after some discussion the accused ultimately concluded that he would meet because he wanted to get the matter done with.

Fred Endruschat gave evidence of that meeting. Mr. Endruschat was attending with Sinclair for training purposes, to take notes and to help Sinclair as required. The tone of the meeting was very amicable and the purpose of the meeting concerned Titan and Hopaluk. Endruschat did not ask any questions. He acknowledged that if the accused was a target that they had to give him a warning. As far as he was concerned the accused was not the file that they were dealing with. He also knew that if they had told the accused that they were from S.I. division then they would not be able to borrow the books; they would need a search warrant. They had not formed any opinion with respect to fraud or possible tax evasion. Their task was to look to see if there was any evidence to suggest that that might have happened. Everything in their office was on a need to know basis and this was Sinclair’s file. As a result, he had not read the file.

Crown 20 and 21 Accused 3 — October 13, 1988 Telephone Call and Meeting with the Accused

After a telephone call by Mr. Sinclair to the accused, on October 13, 1988 there was a meeting with the accused at his office. Present at the meeting were Mr. Sinclair, Mr. Endruschat and the accused. Mr. Sinclair had prepared a series of questions relating to those transactions of Titan that were under investigation. Those questions were asked and the answers given by the accused were noted in point form (Ex. 27). In addition, they received copies of numerous records relating to the transactions under investigation which they took away, reviewed and returned that day. Mr. Sinclair made a note (Ex. 28) that the accused during the course of this meeting asked why they were checking into this matter in such detail. Mr. Sinclair said that he had previously explained that the 1985 tax return might still be reassessed if they uncovered gross negligence by the taxpayer and he went on to explain that in order to establish such gross negligence detailed questions had to be asked. This was all part of an audit path process. He said he did not want to tell the accused they were investigating possible tax evasion. The accused seemed to accept that. He notes in the document that the accused at no time asked Mr. Sinclair what section of Revenue Canada he represented nor did he ask if they were from S.I. He was following what he understood to be the policy of his department at that time. He was still of the view that they did not yet have reasonable and probable grounds to proceed with any criminal action because they still needed to talk to the bookkeeper, Susan Wok, to see who instructed the entries to be made.

Mr. Sinclair acknowledged that there was a policy in S.I. at the time that stated that where they were doing a full scale investigation formal possession of all records that may afford evidence of a violation should be obtained as soon as possible by obtaining a search warrant. Under no circumstance should special investigators borrow records to enable them to conduct their investigation. It is OK during a routine audit to borrow records but if violations of the I.T.A. are uncovered they must obtain formal possession of the records by obtaining a search warrant and seizing the documents from the auditor. Special investigators should never enter into negotiations to obtain the taxpayer’s records voluntarily. Mr. Sinclair was aware of this policy as contained in Ex. 41. Notwithstanding that policy he nonetheless borrowed records from the accused relevant to the transactions he was investigating and returned them that day or the next day after reviewing the documents. In each case he said he would only borrow records where he had the consent of the person possessing the records. The Crown conceded Mr. Sinclair was “pushing the boundaries”.

After his meeting on October 13 he prepared a list, (Ex. 31) of documents that might well be seized if the investigation went that far. This list included the accused’s bank statements, cancelled cheques and deposit books. He was still of the view that they did not have enough information to establish reasonable and probable grounds because they still did not know who was responsible for the entries in Titan’s books.

On December 5, 1988 he prepared a preliminary report (Ex. 32) which summarized his investigation to date and contained his conclusion: “Mens rea in this file depends on who instructed the bookkeeper to make the entries, why she did not make correcting entries in certain areas”. He then went on to recommend that a formal Requirement be issued to the bookkeeper to obtain information from her; Hopaluk had forbidden Ms. Wok from talking to Mr. Sinclair. The report went on to recommend that further action on the file be based on her responses.

A letter was then prepared in the form of Requirement for Information sent to the bookkeeper on December 13, 1988 (Ex. 33); she responded by writing her responses on that letter and returning it.

Just prior to preparing his Preliminary Report he prepared a memo (Ex. 34) which he discussed with his supervisor and with which his supervisor agreed. In this memo, he suggests that this matter has a strong potential of there being mens rea on the part of the accused and that it might well be part of a pattern. His view was that they should see what the other investigators turned up and then they might prepare a composite information against the accused at that time.

Although his investigation had stopped by the end of December 1988 he had a further discussion in July 1989 with Mr. Dave Brown the chief of S.I. about whether they could proceed criminally against either Mr. Hopaluk or the accused. His notes suggest that they concluded that they did not have reasonable and probable grounds to proceed against either for reasons set out in the memo.

On December 20, 1989 he issued his Final Report with respect to this investigation of Titan which concluded that the bookkeeper’s answers were too inconclusive to be of any use to them and thus the file was “aborted” in the preliminary stage. He did however issue a civil reassessment of Titan. It is noteworthy that notwithstanding Sinclair’s conclusion on an information of Mr. Rodgirs Titan, Hopaluk and the accused were all charged by the Crown in July 1993 with I.T.A. s. 239(1) offences.

By further memo of December 22, 1988 Sinclair and his supervisor had both concluded that the accused was a better target for prosecution than Hopaluk. It is one more indication that the accused was a suspect.

Mr. Sinclair was shown a portion of a Revenue Canada manual dated November 1992 dealing with “T134 Fraud Referral Procedure” (Ex. 52) and particularly the portion at p. 1142.24 which said in part:

It may occur that initial information in a referral indicates that fraud characteristics are present but the information at hand is not sufficiently complete or strong enough to warrant a preliminary investigation without obtaining additional information. In circumstances such as these the referral should be declined and returned to the originating section with a covering memo or comments on the T134 clearly explaining why the T134 cannot be accepted on the basis of the information provided. Special Investigations staff should not put themselves in a position of directing the audit process for the purpose of gathering information for a search warrant. This documented audit trail may be necessary at a later stage to distinguish between the audit and the investigation functions. Where additional work is contemplated for the purpose of gathering information for a special warrant the T134 should be accepted by Special Investigations and the taxpayer’s right under the Charter must be considered as outlined in TOM 11(10) 0. Copy 3 of the original T134 should only be used when a preliminary decision to accept or reject a file for preliminary investigation has been reached.

Mr. Sinclair was unable to say whether that was the policy that was in effect when he was conducting his proceedings in 1987 and 1988.

Mr. Wagar who was Mr. Sinclair’s group head signed off on Mr. Sinclair’s December 12, 1988 (Ex. 32) preliminary report. The replies that they had gotten from Titan’s bookkeeper led them to conclude that they did not have enough evidence to implicate Mr. Hopaluk or the accused. Thus, as far as he was concerned the file was closed. In their memo of July 4, 1989 (Ex. 35) where the last sentence said that they were not going to proceed against the accused “at this time” that meant as far as he was concerned the file was officially closed but if any other transactions came to light the file could be reactivated.

Crown 22 — Accused 6 October 6, 1989 Accused 4 January 20, 1990 — Gahr Audit of the Accused

Mr. Douglas, a section head in Audit, said in October 1989 the audit group was travelling to the Elk Point region. What they would do is take a look in their audit bank for audits in that general territory and take them with them to do. They tried not to travel in the dead of winter so these trips would be taken, I take it, in the spring, summer or fall. He recalls looking at the accused’s file and determining that it appeared to be worthwhile for the recovery of potential income tax so he assigned the audit to Ms. Gahr. He could not recall having any contact with Mr. Steele notwithstanding the request contained in the second page of the T133 lead (Ex. 56(a)) asking that Mr. Steele be contacted before there was contact with the accused.

Ms. Gahr was assigned to do the audit of the accused in September 1989. She followed the usual audit pattern of getting the file, reviewing its contents and then making an appointment with the accused to go up and review his records. She told the accused what records she wanted. The Lead that led to her audit was a lead from S.I. (Ex. 56(A)).

On October 2, 1989 she travelled to Elk Point with Mr. Brian Douglas, who was then her group head. She is not entirely sure why Douglas came with her except that there was a lot of work to do. They interviewed the accused and reviewed the accused’s records for the years 1986, 1987 and 1988 working in the accused’s office at the request of the accused. They could not finish in that week. They did not take any either original or copies of documents with them.

They went back January 22 to 26, 1990 to the accused’s office to complete the audit. On this visit she took Sharon Lozinsky with her to help complete the audit. By that time Mr. Douglas was no longer her group head. She also spent that week reviewing records. When she left she handed a list to the accused of further information they required. There were questions that needed answering and there were documents missing that they wanted to locate.

She acknowledged that from this audit they collected a lot of information that Revenue Canada did not have in the sense that while they didn’t take either the documents or copies of the documents they took information from the documents. They also learned the location of where the accused’s records could be found and also learned about the condition of the documents in the sense of whether there were original documents or photocopies.

They waited for information to come from the accused. It never did.

As a result, on May 7, 1990 a meeting was held with Mr. Dave Brown in S.I. He asked that the file be referred back to them. It was along with all the material that they had prepared on the file.

During this entire time other than the meeting with Mr. Brown where they referred the file back, she has no recollection of talking to anyone in S.I. She did not know who Mr. Rodgirs or Mr. Steele were. She gave no material on her file to S.I. and no one from S.I. gave her any directions.

Mr. Dave Brown testified that he had a meeting with Ms. Gahr to review her notes and to discuss with her whether she had found sufficient information to warrant the preparation of a T134. This was an informal screening mechanism to make sure that when matters did come to S.I. that there was enough hard information to warrant an investigation. Thus the preparation of that T134 (Ex. 72) clearly indicated that the accused was under investigation. It was his evidence that the accused was not under investigation prior to May 1990 because they did not have any grounds.

Likely late in the month of October Mr. Douglas recalls going to see the Chief, Mr. Brown. After reviewing one year of the audit of the accused it appeared that there was about $100,000 worth of tax that had not been paid. Because it was a large amount S.I. liked to find out about that. Mr. Douglas did not know if a criminal offence had been committed. His recollection is that Mr. Brown told him to go back and do one more year and if he found as much unpaid tax they would be interested. He believes that he passed that information on to Ms. Gahr.

Crown 23 —December 20, 1989 Messrs. Rodgirs and Steele Take a Witness Statement from the Accused

On December 20, 1989 Mr. Rodgirs was in Elk Point to conduct an interview of the accused. He had made an appointment for that purpose at the request of the Department of Justice. Mr. Steele, Mr. Rodgirs and the accused were present. The meeting was tape recorded and a transcript was prepared of that tape recording (Ex. 69). Mr. Rodgirs had an extensive list of questions prepared on a question sheet (Ex. 68). No caution was given to the accused with respect to this interview because he said it was a witness interview. The purpose was to go through Mr. Baumgardner’s tax returns for the years 1983 to 1986 and see what knowledge the accused had of those and what knowledge he had of the matters raised by Mr. Leblanc. This was all with a view to getting a signed statement for the purpose of using the accused as a witness in the Baumgardner matter. After the interview they asked the accused for some time so that they could prepare a statement of the just completed interview for the accused to sign. They did so and presented it to the accused for signature (Ex. 70). Mr. Rodgirs testified that the accused did not sign then because he said he wanted to check this with his professional organization. At that time Rodgirs concluded that the accused was still a witness and not a target, although the Crown now wants to use that statement as part of its prosecution of the accused.

In between April 12, 1988 and December 20, 1989 Mr. Steele had obtained a list of people from their Electronic Data Processing bank of people where the accused had prepared their returns. They were looking for something analogous to an accountant out of Dawson Creek who had apparently done certain things with his clients’ returns that were fraudulent. They were looking to see if there were any similar type activities in any of the files of the clients of the accused. They could not find any so Rodgirs again concluded that the accused was simply providing his address as a service to his clients. That is what the accused had told Willisko in April 1988 and Mr. Rodgirs agreed.

With respect to both this interview and the earlier interview by Mr. Willisko (Ex. 6) the Crown took the position that while there were personal questions of the accused they were open-ended and they were not intended to implicate the accused. It is significant in my judgment, however, that the Crown seeks to use both documents in its prosecution of the accused in this indictment.

On March 24, 1989 Mr. Rodgirs prepared a T133 lead (Ex. 56a) with respect to the accused. His review of the accused’s Returns suggested that there was potential for an audit to recover unpaid taxes. In other words, the accused had evaded the payment of taxes. In 1987 he had promised Mr. Leblanc that he would prepare such a lead. He was doing it now because the Baumgardner file had gone to Justice for prosecution and this was the last loose end that needed to be completed. The T133 lead went to audit. He said that nothing in the lead arose from there being any suspicion of fraud or evasion. As far as he was concerned the document had no effect on the accused’s status with respect to the Baumgardner matter because the two were unrelated. He sent these off to Mr. Manary in audit and never spoke to him about it.

Mr. Steele said generally when a T133 is referred to them, like in the Baumgardner situation, they would pull all of the tax files including those of related people such as the accused. It was simply a policy as far as he was concerned that the department followed and he thought it was good business practice.

Mr. Steele did not discuss with either Mr. Wager or Mr. Brown any suggestion of there being an allegation of a “accommodation” by the accused. As that term accommodation is used it means working together with the taxpayer to commit a fraud. He did not discuss the Titan investigation with Mr. Wager because he was not working on it and because the accused was not being investigated.

Crown 24 —May 17, 1991 Mr. Rodgirs Calls the Accused

On May 17, 1991 Rodgirs called the accused to say that he was coming out again this time on July 4. They were going to look at the accused’s 1985 to 1990 income tax returns. Gahr’s audit had showed a discrepancy between 1983 and 1988 of approximately $443,000. The file had been transferred to him. He was bringing his group head, Mr. Miller, with him. He told the accused that he was “redoing Gahr’s audit” and expanding the period of years. While he cannot specifically recall, his usual practice was to identify himself as being from S.I. In this particular call, he was satisfied by the end of the call that the accused knew that he was under investigation. His notes of that call are Ex. 74.

Some events prior to this time are relevant to this particular meeting. In July 1990 Mr. Rodgirs was part of a meeting with the Crown and the defence in the Baumgardner case. Baumgardner’s lawyer said that he had information that two or three people other than Baumgardner had run the same type of cattle deal through the W.L.E. Baumgardner’s position was that he was not aware that what he was doing was illegal and that he had relied on the advice of the accused and others to do the transaction. As a result, Rodgirs was instructed to redo the figures deleting the cattle transactions (which total about $900,000) from the case against Baumgardner and on instruction from the Crown the charges that related to the livestock matters were withdrawn. Rodgirs said that he agreed with that decision even though Baumgardner clearly was involved in the transaction. He acknowledged that there was talk about Baumgardner being involved as a witness against the accused. Mr. Baumgardner is listed on this indictment as a witness.

In August he followed up with the W.L.E. to see if they knew the people that had been identified and in early September or October of 1990 he got copies of statements (Ex. 71A and 71B) from the two witnesses. In Rodgirs eyes this resulted in the accused becoming a suspect.

On October 17, 1990 a T134 lead on the accused was transferred to him. He knew that the lead had been in the office for several months although nothing had been done with it. In fact this lead had been referred to S.I. on May 7, 1990 (see Ex. 72). He says that prior to May 7, 1990 he was not aware that the accused was under investigation. No one told him and there was nothing in the system to tell him. It is noteworthy that even the Crown was prepared to concede by May of 1990 Rodgirs had decided the accused was a suspect.

He then reviewed Gahr’s working papers. He concluded that there was not enough information to verify her calculations.

He started work on a preliminary report which he signed on November 22, 1990 (Ex. 73). This report was done to see if the Director would approve a continued investigation; otherwise the file would stop. He used Gahr’s working papers, his discussions with audit, the statements that they had obtained from other people through Baumgardner’s defence lawyers and his personal review of the accused’s returns. His proposed course of action was to do an appraisal to see if they had enough information to obtain a search warrant. In fact from October 1990 to February 25, 1991 he had been working on a search warrant. That search warrant was presented to the department’s Director for approval; Mr. Brown would not approve.

After the search warrant was refused because Mr. Brown felt more information was needed he tried a number of activities to see if he could get more information. In the end he concluded that all he had was to go back to the work that Gahr had done. This is what led up to his call to the accused on May 17, 1991.

From the time of May 17, 1991 to June 18, 1991 while he was doing his investigation he did not give any caution or warning to the accused. He did not advise the accused that he was not required to give them any access to any documents nor did he tell the accused the full nature of their investigation nor did he tell the accused of any of the consequences of speaking to them or allowing them to see documents.

The accused gave evidence with respect to this voir dire. He said that he was notified by his secretary that a person from Revenue Canada was on the phone and wanted to speak to him. He was not expecting a call. When Ms. Gahr had left in January 1990 she had left with him some issues that needed to be resolved. The person on the phone identified himself as Mr. Rodgirs and said he was trying to finish up Ms. Gahr’s audit and wanted to come out. He knew when Ms. Gahr had left that she had not completed the audit. Mr. Rodgirs also said that he thought that it would be helpful to expand the years being reviewed. He said they would be coming out the week of June 4 and that was satisfactory to the accused. There was no caution given by him at that time. The accused knew that Mr. Rodgirs was from S.I. from Mr. Rodgirs’ involvement in the Baumgardner matter.

Crown 25 Accused 5 — June 4, 1991 At the Accused’s Office

On June 4, 1991 Miller and Rodgirs met with the accused. Part of the reason for the meeting was to return to the accused his working file on Messrs. Baumgardner and L’Hereux. He introduced Miller as the group head. He explained that the file had been referred up to him with respect to the work that Gahr had done and that there was $250,000 to $500,000 to be reassessed and he was expanding the years. He told the accused that he was proposing to proceed by way of doing his review by looking at the documents and it would only be then that he would ask questions of the accused. He asked the accused if they could use a space in his office to review the documents. The accused indicated that that would not be possible and that he would prefer them to use the hotel. The accused said they always found places for Revenue Canada people to work in his office complex; it was Mr. Rodgirs who wanted to work elsewhere. As a result, they took the various boxes of documents with them to the hotel. He believes that he questioned Mr. Rodgirs as to why he was not working on them in his office like Ms. Gahr had and Mr. Rodgirs said that he was taking them away. He took what he believes were five or six boxes of his farm, personal and business accounting records.

Mr. Miller confirmed that he attended with Rodgirs on this occasion. His role was limited in the sense that he let Rodgirs lead the conversation. He said it was department policy to advise that you were from S.I. at that particular time. He was Rodgirs’ group head at that point. He confirmed that they asked the accused for records and took them to the hotel to do their data entry. He also confirmed that they had lost material on their computer, so when they took the records back they found out they could take the records to Edmonton to re-input the data.

Mr. Miller acknowledged that it was more difficult for S.I. to get information than it was for the auditors. When you are from S.I. you have to give warnings which the auditors did not have to. Ex. 41 with respect to the procedure for “borrowing” records was put to Mr. Miller in cross-examination. He said that the practice of borrowing records was OK in this case because there was no decision yet as to whether they were going to do a full scale investigation. They did not have the accused’s consent in writing because if the accused agreed to let them have the records they didn’t need written consent.

The accused in his testimony on this voir dire said that he knew Mr. Rodgirs was from S.I. and he knew that Mr. Miller who was accompanying Mr. Rodgirs was his group head and he presumed therefore he too was from S.I. The accused was adamant that he was told by Mr. Rodgirs that Revenue Canada was there to review his books and records to complete the audit of Ms. Gahr. He also said that there was no reference by Rodgirs to Rodgirs saying that they proposed to do this in the same manner as in the Baumgardner matter. He has no notes of any these visits and is relying on his memory. He knew from his training as an accountant and from the I.T.A. that when an audit was being conducted there was never any question of whether or not you would allow access to your records.

Crown 26 Accused 5 — June 5, 1991 Telephone Call from Mr. Rodgirs to the Accused

The accused in his evidence in this voir dire stated that there were some calls during the week asking for additional documents. He was told that they were required for the audit that Mr. Rodgirs was performing and the accused provided them by making them available through his secretary.

Crown 27 Accused 5 — June 14, 1991 At the Accused's Office

The accused says that sometime around June 14 or 16 Mr. Rodgirs and Mr. Miller came to the office. They stated that a storm that had occurred had caused them to lose a bunch of data. They wanted to make some photocopies of his records in case that happened again. He showed them to the photocopy room and Rodgirs told him that they were trying to finish the audit and wanted these as back up documents. They photocopied his synoptic journal for 1984 through 1987 and a variety of other records. The original documents stayed with the accused. The next time he saw the photocopies taken by Rodgirs was in the disclosure package given to him by the Crown on this prosecution. There was some general conversation in which Mr. Rodgirs was inquiring about how many staff he used and where he kept his files.

Crown 28 Accused 5 — June 18, 1991 At the Accused's Office

On June 18, 1991 there was another meeting with the accused. Mr. Miller and Mr. Rodgirs were present. They had spent the preceding two weeks in taking information from the accused’s records and putting them into their computer via a laptop computer. Unfortunately, an electrical storm occurred which resulted in a power surge and which caused all Miller’s entries to be destroyed. On June 18 when they met with the accused to return the records as they were returning to Edmonton they told him about this unfortunate incident to which the accused responded “Why don’t you take the records with you to Edmonton and work on them there?” They said OK and took the records after giving him a receipt.

The accused appeared so cooperative that they suspected that the discrepancies they were looking at were caused as a result of an error. If in fact, the accused had deliberately been evading tax they would have expected him to tell them to “take a hike” and they would have expected the accused to want them to look at his records at his office so that he could “hover around them”. He did none of those things.

In taking the records with them it was Rodgirs’ view that he was following policy. He was directed to the policy found in Ex. 41 at p. 1113(1) item

(C) which states in part:

Under no circumstances will Special Investigators borrow records to enable them to conduct their investigation....

However the policy goes on to provide in the same section “...if records are surrendered voluntarily by a taxpayer, in some unusual situations, warrants should be requested to gain formal possession of those records....” It was Mr. Rodgirs’ view that this was an unusual situation and fitted within that exception in the sense that the taxpayer had voluntarily offered to give them the records to take to Edmonton for review.

Subsequent to this “borrowing” and when obtaining the search warrant he put in a reference in paragraph 8 of the search warrant (Ex. 76) a paragraph that he thought allowed them to borrow the documents from the accused because there was a “unusual circumstance or situation”. He says that the accused knew he was under investigation and that Messrs. Rodgirs and Miller were from S.I.

The accused in his evidence on this voir dire said that his boxes of his documents were outside his office in the back of a pickup truck which was covered with a canopy. There was reference again to the storm causing the loss of computer data. Mr. Rodgirs said that an emergent matter was taking him back to the city and between that requirement and the loss of computer data they needed to take the records to complete the audit. He denies that Rodgirs brought these records back in to his premises and he denies telling Rodgirs that he did not need the records and that he could take them with him. He denies saying that if they were not finished there was no reason why they could not take them back to Edmonton. He also denied that Rodgirs said anything other than the fact that they were simply completing Ms. Gahr’s audit. He said that he never followed up with Mr. Rodgirs as to what was happening. His experience with Revenue Canada was that when they left and had not completed the audit you never contacted Revenue Canada because they would be back to you. He never heard from Mr. Rodgirs or indeed anyone else in Revenue Canada after that time until he received the letter Ex. 75 dated May 8, 1992 asking a series of questions. This letter was authored by Rodgirs and it contained a warning. That was the first time that he understood that he was under investigation. Up to that time he believed that Mr. Rodgirs was simply completing Ms. Gahr’s audit.

Beresh 6 —July 1992

On July 22, 1992 search warrants were executed at the accused’s office, S.I.’s office and the accused’s home. By May 1992 Rodgirs had completed entering the data, had done an analysis and was ready to ask questions. He also felt that they had grounds to obtain a warrant so when he wrote to the accused on May 8, 1992 he included a warning or caution in the letter (Ex. 75). This was the first caution ever given to the accused. He got no response to that letter. As a result, he prepared the necessary documentation including an information for a search warrant, an order was granted under the Criminal Code on July 17, 1992 and was executed on July 22.

Mr. Rodgirs testified that he did not talk to Mr. Sinclair about the files that he, Rodgirs was working on or the files that Sinclair was working on. They were encouraged not to do that. Certainly in August 1988 he did not talk to Sinclair about his file or about the accused. When shown Mr. Sinclair’s notes (Ex. 25) dated August 26, 1988 and the reference in that note to the fact that Mr. Rodgirs was obtaining an EDP printout he says that Mr. Sinclair is simply wrong. He had no conversation with anyone with respect to the Titan file. He knew that Mr. Steele had obtained the client list using the accused’s postal address and that Steele had asked him to look at that list. He also testified that in the August to December 1988 period that he was the only one that was doing any investigation with respect to the accused. Thus with respect to Ex. 24 the T134 referral report of Mr. Sinclair and the suggestion at p. 5 of that document that there was a “accommodation” by the accused is simply wrong. Of course, Mr. Sinclair was right as that claim forms part of this indictment. At that time, nothing that he knew of the Baumgardner matter which was also his file suggested that the accused was any part of an accommodation. In fact, he told his then supervisor, Mr. Steele, that nothing he saw suggested that the accused was doing anything wrong. He was shown Mr. Sinclair’s preliminary report (Ex. 32) and item 2 under Decision where it says that:

Information obtained from our preliminary investigation of this file will be coordinated with information obtained from other audits and investigations involving Allan Warawa, C.G.A., Elk Point, Alberta. The information so obtained will be retained for use in any future S.I. case against Warawa.

He says that he did not give that information to Sinclair. During that time all he was doing was working on the Baumgardner investigation and when shown Mr. Sinclair’s November 25, 1988 memo (Ex. 34) where Sinclair speaks about the potential mens rea in the Titan file being combined with the Baumgardner and others with respect to the accused, Rodgirs says that that certainly does not come from any information that he gave Sinclair. In any event, it is not correct because the review being conducted by Rodgirs led him to conclude that the accused had not done anything wrong.

With respect to the search warrant that was used to conduct this seizure an analysis of the sources of information for Mr. Rodgirs’ affidavit in support of the search warrant was done by counsel for the accused (Ex. 80). This was shown to Mr. Rodgirs and while he corrected some of the descriptions of the actions taken, the source of the information remained as described by the accused. What is clear from that analysis is that the material parts of the information which supported the application for and presumably issuance of the search warrant came from the June 1991 visit to the accused’s premises by Mr. Rodgirs and the interview conducted on December 20, 1989 by Mr. Rodgirs.

Credibility

It is necessary to make some findings with respect to credibility. I found the evidence of the accused to be forthright and to be consistent with the facts. Throughout the recitation by various witnesses from Revenue Canada they continually commented on how the various visits with the accused by them were cordial and businesslike. The reason, of course, that they were cordial and businesslike was that the accused as a professional accountant knew that when audits were being conducted under s. 231.1 he had no choice but to comply with their requests.

With respect to Mr. Rodgirs I have concluded that some of his evidence simply does not accord with common sense or reason. He was asked whether he had a file on the accused and he denied that he had such a file. After his testimony it came to light that indeed there was such a file. In addition, when he was shown the documents that he collected in November 1987 with respect the accused his explanation for his actions is simply incredible. More will be said about that later in this judgment. He also described the entries made by Mr. Sinclair at the time in Mr. Sinclair’s notes as being either the result of a vivid imagination on the part of Mr. Sinclair or was simply false. Once again I found that to be an incredible explanation. Furthermore, particularly in the June 1991 period there is an absence of any material notes by Rodgirs of his activities with respect to the accused. His explanation was that they must have got lost. As well when he attempted to explain how he borrowed the accused’s records in the face of departmental policy which clearly prohibited such a borrowing by use of the unusual circumstances section, once again I found his explanation not credible. His continued insistence that the accused was simply a potential witness is also not credible. It is clear that the accused could be not only a potential witness but a suspect. It was really a matter of how Mr. Rodgirs and Revenue Canada chose to treat the individual. For example, in the Baumgardner matter Mr. Rodgirs acknowledged being part of a discussion where consideration was being given to not proceeding against Baumgardner with the criminal proceedings because they might instead use him as a witness. Where the evidence of the accused and Mr. Rodgirs conflicts I accept the evidence of the accused.

The other key investigator for S.I. was Mr. Sinclair. Mr. Sinclair has suffered an unfortunate illness. I was satisfied from his testimony that his memory was not good and largely confined to the extensive notes that he made at the time. It did not appear to me that he had a very reliable memory of the events other than those notes. Thus I concluded that for his evidence I should rely primarily on the documents he prepared at the time.

Reasons for Decision

1. Was There a s. 7 Charter Breach?

In this analysis I will only consider the various actions of Revenue Canada as it affected the accused. When Mr. Leblanc referred the matter to S.I. he included a four page memorandum (Ex. 5) directed towards the accused. After having analyzed the accused’s income in the 1984 to 1986 period, he concludes by saying “it appears taxpayer is disguising the quantum of his actual farm losses” and he suggests that expenses are “extremely questionable in nature” and that the accused has prepared his statements “in a very creative manner”. While Mr. Leblanc concludes that the accused should be the subject of an audit what he is in effect saying is that the accused has evaded the payment of taxes. In other words, Revenue Canada can proceed with its review of the matter either following the audit path to require payment of unpaid taxes or it can proceed along the S.I. path which turns it into a criminal investigation. The Baumgardner file with that memorandum directed at the accused was accepted by S.I. Therefore, it became at that time a criminal investigation, not only of Baumgardner but also the accused. Shortly after the receipt of the file from Mr. Leblanc a file folder was prepared for the accused. Mr. Rodgirs of S.I. then arranged to have land titles searches conducted, motor vehicles searches and central registry searches all with respect to the accused. He also arranged to obtain the accused’s tax returns as far back as 1982. Mr. Rodgirs’ explanation for this was that he did not think the accused was the target of the investigation; in his view the accused was going to be their star witness. He said that he wanted to be sure that as a witness that the accused had filed his Returns. Of course, he could have found that information very simply by accessing their Electronic Data Bank and that would have told him whether or not there were Returns filed or not. He also said that this was the normal steps that were taken by Reve- nue Canada with respect to a potential witness. I do not accept Mr. Rodgirs’ characterization of the accused as simply a witness and not a suspect nor his explanation as to why he opened a file and obtained the information which he did in November 1987. When other members of S.I. were asked about the acquisition of these documents they all made it clear that this was not the normal kind of action that would be taken for someone who is simply to be a witness. Those actions were much more consistent with someone who was a suspect. The only rational conclusion that I can come to is that those actions were taken by Mr. Rodgirs because the accused was at that point a suspect.

Mr. Rodgirs of S.I. and his supervisor, Mr. Steele, then take over the investigation of the Baumgardner matter. They make a number of visits to the accused’s office and have discussions with the accused in the period from December 7 through to January 20 (Crown 6-11). During the course of those visits they obtain from the accused information about the accused’s activities in the preparation of Baumgardner and related persons’ returns. They of course visit the accused’s place of business and are able to observe where the accused keeps his records and the type and condition of those records. While Mr. Rodgirs continued to maintain that in taking those actions it was Baumgardner and others who were the target and the accused was only a witness that statement has to be examined in the overall context of what was occurring. In early 1988 another client of the accused, Titan, and its majority shareholder, Hopaluk, were the subject of an audit following the audit path. This audit revealed a series of payments and other transactions between Titan, Hopaluk and the accused. As a result, the auditor Mr. Cass referred the Titan matter to S.I. The audit took place during the March through May period of 1988 (Crown 12, 13, and 15).

The Titan referral from audit was received by S.I. and Mr. Sinclair, the senior investigator in S.I., was assigned to this file. Mr. Sinclair steadfastly held to the position throughout his evidence that the accused was not a target of their investigation because they did not have reasonable and probable grounds to proceed against him. The documents generated by Mr. Sinclair and others at around that time tell quite a different story. They lead to inescapable conclusion that the accused’s status as a suspect had grown from the Baumgardner file to the Titan file and more generally. Mr. Sinclair conducted a review of the audit path material and prepared a report proposing a course of action with respect to the Titan matter (Ex. 24). Under the recommendation section he notes that money has gone to the accused and notes a failure by the accused to report those amounts. That is tax evasion. He con- eludes that the accused therefore should be audited. He also says that his action should be coordinated with other investigations and audits involving the accused. He notes that he had discussed with Mr. Rodgirs’ supervisor the Baumgardner file and he says “it also shows signs of taxpayer accommodation by Warawa”. And significantly he says that “audit of Warawa should be done in conjunction with a preliminary investigation of Titan”. After discussion of his recommendations with his supervisor, Mr. Wager, they agree upon a course of action (Ex. 25). They conclude that they should limit their audit of the accused to his treatment of payments to from Titan or Hopaluk. It is significant that he goes on to say “in addition to questioning Warawa in connection with above items take note (or photocopy) of what records would be available for seizing in the future”. He goes on to make reference to the fact that Mr. Rodgirs is obtaining from their Electronic Data Processing centre all client returns processed through the Winnipeg Taxation Centre under the accused’s name. He says that the action of Mr. Rodgirs will be done separately from their examination of the accused as it relates to Titan and Hopaluk.

During the same period of time, a tax lead is prepared by Ms. Kowliuk in S.I. to initiate an audit with respect to the accused. Her notes of information that she received in the summer of 1988 are instructive. For example she makes reference to two taxpayers, Mr. Nazarchuk and Mr. Mayer and notes “both of these taxpayers said they acted on their accountant’s instructions” which means an accommodation by the accused. In another note she says “appears to be an accommodation situation” with respect to Titan and Hopaluk “by Warawa”. She is also aware of a search being done under the direction of Mr. Paquin in audit of clients of the accused. The search is being done to ascertain whether there has been an accommodation by the accused. Thus notwithstanding Mr. Rodgirs’ continued insistence that the accused was not a suspect, it is very clear that the accused was being investigated as a suspect by S.I. It is also clear that that fact was known by a number of people in S.I. Mr. Rodgirs in his evidence had said that he did not talk to anyone about the actions he had taken with respect to the accused. Whether he did or not, it is clear that his activities, Mr. Sinclair’s activities and audit’s activities with respect to the accused was known by S.I. generally.

On April 12, 1988 (Crown 14) a search warrant was executed on the accused’s office with respect to Mr. Baumgardner. The warrant was issued under a section of I.T.A. that was shortly thereafter struck down by the Supreme Court of Canada as offending the Charter. Records and documents were seized with respect to Baumgardner. However, records and documents of the accused were also seized. While the accused on this occasion was told that he could, if he wished, consult a lawyer with respect to the search warrant, the accused had no knowledge that he was at that time a suspect and that records seized from him would form part of the basis of the criminal prosecution of the accused in this case. In addition, during the course this search and seizure, Mr. Willisko questioned the accused. The nature of some of these questions were directed at determining the extent to which the accused participated in certain transactions that formed the basis of the suspected Baumgardner tax evasion. The Crown proposes to use some of the answers given by the accused to those questions in this prosecution.

In the September through October 1988 period Mr. Sinclair and his supervisor Mr. Endruschat made a number of visits to the accused’s premises and had a number of phone discussions with the accused (Crown 16-21). At the first meeting of Mr. Steele and Mr. Endruschat with the accused they identified themselves as being from Revenue Canada. They also say that they are from the audit division. He said they were there to follow up on the audit of Titan and Hopaluk. Remarkably, Mr. Sinclair testified that he did not tell the accused that he and his supervisor were from S.I. because he did not want the accused to know that. Furthermore he also testified that he did not want the accused to know that they were investigating possible tax evasion with respect to Hopaluk and Titan. He also acknowledged that he was aware of their own policy that permitted borrowing of records by someone following the audit path; he also knew that S.I. was not permitted to borrow to enable them to conduct their investigation. After his various visits he prepared a memorandum to file (Ex. 34) at the end of November 1988 in which he noted “the potential mens rea in this file will be combined with (possibly) Baumgardner and other Warawa files being obtained by Heath Rodgirs through EDP”. And he went on “depending on the total potential resulting from the above combination in terms of mens rea and tax evaded, a composite information could be prepared against Warawa at that time”. In that memo Mr. Sinclair forecasted exactly what ultimately happened. He concluded his investigation of the Titan and Hopaluk matter and decided that they did not have enough evidence to proceed against the accused. After discussing the matter with the section chief, Mr. Brown, he concludes “that we would not proceed criminally against Hopaluk or Warawa at this time”. In addition in his preliminary report (Ex. 32) under the heading Decision he said at item 2:

Information obtained from our preliminary examination of this file (Titan) will be coordinate with information obtained from other audits and investigations involving Allan Warawa, CGA, Elk Point, Alberta. The information so obtained will be retained for use in any future S.I. case against Warawa.

In 1993 Revenue Canada did proceed criminally against Titan, Hopaluk and the accused.

In the fall of 1989, the audit department finally got around to following up on the lead that Mr. Rodgirs had prepared with respect to the accused himself. In October 1989 and January 1990 Ms. Gahr, an auditor, followed the audit path with respect to the accused. She attended at his premises, asked questions, was provided with book and records and otherwise given the information that she had requested.

During her October trip, she had taken Mr. Douglas, her supervisor along to assist. When he returned he had a meeting with Mr. Brown, the section chief of S.I., to tell him that it appeared that there was about $100,000 worth of tax that had not been paid and he wanted to know if S.I. was interested. His recollection was that he was told by Mr. Brown to go back and do one more year and if he found as much unpaid tax they would be interested.

During the time the audit of the accused was being conducted Mr. Rodgirs returned to the accused’s premises on December 20, 1989 (Crown 23). He said the purpose of this trip was to arrange a witness interview of the accused with respect to the Baumgardner matter. They were looking to get a signed a statement from the accused as a witness in that matter. By this time charges had been laid and the Baumgardner prosecution was proceeding. The purpose of this interview which was tape recorded and transcribed was to get details of the accused’s involvement as the tax preparer in the Baumgardner matters. The Crown proposes to rely upon the results of that interview in this prosecution.

In the period May through June 1991, Mr. Rodgirs contacted the accused and paid a number of visits to the accused’s office to obtain information from him, borrowed his records while they were at the location of the accused’s office and further borrowed his records to take them to Edmonton to complete their work (Crown 24-28). The accused knew that Rodgirs worked for S.I. However, Mr. Rodgirs told the accused that the purpose for his visit was that he was “redoing Gahr’s audit” and expanding the period of years. By this time even Mr. Rodgirs was now prepared to acknowledge that the accused was a suspect. Indeed, in the period from October 1990 to February 1991 he had been working preparing a search warrant to search the accused’s premises. He prepared the warrant which must have included his conclusion that even by his standard they had reasonable and probable grounds to suspect that the accused had committed I.T.A. offences. The Department chief, Mr. Brown, would not approve the search warrant since he was of the view that it did not contain enough information. He sent them back to try to get more information. The only conclusion which I can reach is that Mr. Rodgirs decided the only way he could obtain that information was by going back to redo the work that Ms. Gahr had done in her audit and he deliberately misled the accused about the real reason for his visits. He did not give any warning or caution to the accused. The accused gave evidence with respect to these voir dires. His evidence as to the purpose of the visit of Mr. Rodgirs was essentially the same. Both Mr. Rodgirs and his supervisor Mr. Miller who attended on these occasions knew that if they had told the accused they were conducting an investigation they would be obliged to give him the appropriate warning and caution.

Mr. Rodgirs testified that the accused appeared so cooperative that they suspected that the discrepancies that they had been looking at in his records were caused as a result of error. They thought that if the accused had been deliberately evading tax he would have expected him to “take a hike” and they would have expected the accused to want them to look at the records at his office so that he could “hover around them”. He did not do those things. There is however a more plausible explanation for the conduct of the accused. He thought once again that he was being subject to yet another audit. He knew what the rules were with respect to audit and that he had no choice but to give to Revenue Canada officials what they requested. The accused also testified that at the point when Mr. Rodgirs and his supervisor were returning to Edmonton that the records of the accused were still in the back of a truck which was being driven by Mr. Rodgirs. It was his evidence that Mr. Rodgirs essentially said that they were taking the records with them. I accept the evidence of the accused in that regard.

Finally, search warrants were executed at the accused’s office and his home on July 22, 1992. It is significant to note that Mr. Rodgirs had written to the accused on May 8, 1992 requesting information (Ex. 75). This was the first caution ever given to the accused. It is also the point in time at which the accused for the first time seeks legal counsel with respect to this matter. I am satisfied on all of the evidence that I heard that the accused up until May 1992, in all of his dealings with Revenue Canada was operating under the erroneous assumption that s. 231.1(1) of the ITA applied and that he was bound by law to answer the inquiries and comply with requests. I am further satisfied that, while the audits of his clients, including Baumgardner and Titan, were initially for the predominant purpose of following the audit path, the information obtained from those audits was used by S.I. with the predominant purpose of investigating the accused. I have concluded from the time that Mr. Leblanc’s notes about the accused were received in S.I. in November 1987, the intrusions of Revenue Canada into the privacy of the accused was for more than monitoring compliance with the I.T.A. in its regulatory sense. In this regard, I adopt the principle of Mr. Justice LaForme in R. v. Norway Insulation Inc. (1995), 23 O.R. (3d) 432 (Ont. Gen. Div.) at p. 438 where he says:

The provisions of s. 231.1(1) were, in the case at bar, being relied upon and employed by Revenue Canada as quasi criminal legislation thus requiring greater safeguards to the individual. Section 231.1(1) is designed as a regular audit tool to ensure compliance with the Act. It is not designed to gather evidence for the purpose of a criminal prosecution. It should not be used to bootstrap the ministry investigators into a position where they can obtain a warrant which would otherwise be unattainable.

Given that these proceedings were in reality a criminal investigation then the accused was clearly entitled to the protection afforded by s. 7. Authority for this conclusion is found in R. v. Esposito (1985), 24 C.C.C. (3d) 88 (Ont. C.A.) (Ontario Court of Appeal) (leave to appeal to the Supreme Court of Canada refused [R. v. Esposito (1986), 53 O.R. (2d) 356n (S.C.C.) ]) at p. 94 where Mr. Justice Martin delivering the judgment of the Court says in part:

The right of a suspect ... to remain silent is deeply rooted in our legal tradition. The right operates both at the investigative stage of the criminal process and at the trial stage. In Canada, save in certain circumstances, a suspect is free to answer or not questions by the police. We say that he has a right to remain silent because there is no legal obligation upon him to speak....

(Emphasis added)

And further in R. v. Hebert (1990), 57 C.C.C. (3d) 1 (S.C.C.) where Mr. Justice Sopinka says at pp. 10-11:

However, it cannot be denied that, apart altogether from the privilege, the right to remain silent - the right not to incriminate oneself with one’s words - is an integral element of our accusatorial and adversarial system of criminal justice. As Cory, J.A. (as he then was) noted in R. v. Woolley (1988) 40 C.C.C. (3d) 531 at p. 539:

The right to remain silent is a well settled principle that has for generations been part of the basic tenets of our law....

In a different context Lamer, J. pointed out in R. v. Collins (1987) 33 C.C.C. (3d) 1 at p. 19 that the acquisition of a self incriminatory admission from an accused following a Charter violation ‘strikes one of the fundamental tenets of a fair trial, the right against self-incrimination’. I take Lamer, J.’s words to mean that the full range of an accused’s right to stand mute in the face of an accusation by the state is not exhausted by reference to the privilege against self-in- crimination, as that privilege has been defined by this Court. It follows, it seems to me, that the basic principle underlying the right to remain silent must be ‘principle of fundamental justice’ within the meaning of s. 7 of the Charter. In other words the right to remain silent is truly a right.

As a result, I am satisfied that there was an obligation to caution the accused on all of the occasions following the audit of Mr. Leblanc including the follow up on the Baumgardner matter, when S.I. was dealing with the Titan and Hopaluk matter, during the audit of the accused by Ms. Gahr and when S.I. was dealing with the accused not as the auditor of a client but as the taxpayer. If the audits of the accused’s clients and the accused had resulted simply in a reassessment so that the audit was confined to its regulatory function no caution would have been required. However, when S.I. takes that information and expands upon it for the purposes of investigating the accused the caution is required before the audit is conducted and expanded.

I am satisfied that the accused in this case was entitled to exercise the right to silence. In that regard, I respectfully adopt the analysis and conclusion of Judge Fradsham in R. v. Jarvis, supra at p. 320 to p. 325. The accused was told that he and his clients were being audited and no one advised him that the matter had progressed to an investigation of the accused. He was still operating under the erroneous conclusion that s. 231.1(1) of the Income Tax Act applied and he was bound by law to answer the inquiries and comply with requests. Up until May 10, 1992 the accused was labouring under two forms of misapprehension: (1) he did not know that he had the right to silence resulting from being under investigation (as opposed to being audited); (2) he thought he had a legal duty to provide the information to Revenue Canada officials because of the operation of s. 231.1(1) of the I.T.A. I have concluded that the failure to give a caution resulted in a violation of the accused’s s. 7 Charter rights. In that regard I adopt and apply the analysis again of Judge Fradsham in R. v. Jarvis, supra at p. 325 through p. 328. For emphasis I simply note that the accused is in a significantly different position from a suspect in most criminal investigations. Unlike most criminal suspects the I.T.A. s. 231.1 conscripted the accused to cooperate by answering questions and providing documents if he was the subject of an audit under the I.T.A. Therefore the accused as a result of the failure of the Revenue Canada to tell him that the audits were in fact an investigation believed that he was still compelled by law to answer questions and provide information. This distinction from the more traditional situation makes the failure to caution him a very serious matter and a clear violation of s. 7 Charter rights.

It follows that I do not agree with the views of Judge Lamperte in R. v. Gaudet, supra, where at p. 22 he says as follows:

I want to point out that in my opinion, neither the Norway case, supra, nor the Jarvis, case, supra, nor any of the other cases cited by defence counsel stand for the proposition that in a situation, such as the case at bar, where national revenue, without any prior indication of tax evasion by the taxpayer set out to do an audit, at some time later, the audit becomes an Investigation, Revenue Canada is then precluded from using the information secured during the audit either during the investigation or in connection with any search warrant related thereto. The case, of course, is somewhat different when National Revenue officials, under the guise of conducting an investigation, commence an audit, and then attempt to use that information secured during the so-called audit, which in fact was an investigation, during later investigatory proceedings.

With respect that opinion cannot be correct. All of the information that is given by a taxpayer during the audit is conscripted information. When used by S.I. it can result in the taxpayer being subject to criminal sanctions. When that information comes into the hands of S.I. and is used in a criminal prosecution it is tainted evidence obtained in violation of the accused’s s. 7 Charter rights. In other words audit’s conscriptive powers may only be used for audit purposes. S.I. may not use the results of those conscriptive powers unless the taxpayer has from the beginning been advised of his s. 7 Charter rights through the appropriate caution. If I am wrong and in any event, there was a clear indication of tax evasion by the taxpayer in the notes of Mr. Leblanc (Ex. 5.) and he was a suspect from November 1987 onward.

Was There as, 8 Charter Breach?

Section 8 provides a right to a person “to be secure against unreasonable search or seizure”. The Crown submitted that the key interest here being protected is privacy. Furthermore, could it be said that there was a reasonable expectation of privacy in the documents that were obtained. What was being sought was financial business records and the courts have held that there is a lower expectation of privacy in such records. Furthermore it was the Crown’s submission that the search was reasonable, and minimally intrusive in its scope.

Once again I respectfully adopt and agree with the analysis of His Honour Judge Fradsham in R. v. Jarvis, supra, at pp. 345 and 346 where he too concludes that both a taxpayer and the taxpayer’s accountant have a reasonable expectation of privacy with respect to the documents of the taxpayer.

Madam Justice Wilson in delivering the principal judgment in R. v. Mc- Kinlay Transport Ltd. (1990), 55 C.C.C. (3d) 530 (S.C.C.) at p. 546 makes this statement:

This is not to say that any and all forms of search and seizure under the Income Tax Act are valid. The state interest in monitoring compliance with the legislation must be weighed against an individual’s privacy interest. The greater the intrusion into that privacy interest of the individual, the more likely it will be that safeguards akin to those in Hunter will be required. Thus when tax officials seek entry onto the private property of an individual to conduct a search and seizure the intrusion is much greater than a mere demand for production of documents. The reason for this is that, while a taxpayer might have little expectation of privacy in relation to his business records relevant to the determination of his tax liability, he had a significant privacy interest in the inviolate ability of his home.

(Emphasis added)

Where Revenue Canada is sending out a demand for some documents which were then sent to them by the taxpayer she noted that that kind of a demand provides the least intrusive means of monitoring compliance with the Income Tax Act. She notes again at p. 546 it involves no invasion of a taxpayer’s home or business premises...”. In this case it is clear that an invasion occurred at both places.

Furthermore, particularly with respect to the audit and search and seizure of the accused a great deal more than simply business records was involved. The records disclose a great deal of personal information with respect to the accused and his wife and his business. This issue was addressed again by the Supreme Court of Canada in a judgment issued in the same year as À. v. McKinlay, supra. In Thomson Newspapers Ltd. v. Canada (Director of Investigation & Research) (1990), 76 C.R. (3d) 129 (S.C.C.), Mr. Justice LaForest was of the view that business records. and documents while not devoid of any privacy interest raised much weaker privacy concern than personal papers. He went on at p. 205 to say in part:

The ultimate justification for a constitutional guarantee of the right to privacy is our belief, consistent with so many of our legal and political traditions, that it is for the individual to determine the manner in which he or she will order his or her private life. It is for the individual to decide what persons or groups he or she will associate with, what books he or she will read, and so on. One does not have to look far in history to find examples of how the mere possibility of the intervention of the eyes and ears of the state can undermine the security and confidence that are essential to the meaningful exercise of the right to make such choices. Thus where the possibility of such intervention is confined to business records and documents the situation is entirely different. These records and documents do not normally contain information about one’s lifestyle, intimate relations or political or religious opinions....

In July 1992 when S.I. conducted its search and seizure it also seized records from its own vaults of the accused (Ex. 101). From a review of the list of documents seized it is clear that the information seized contains a great deal of personal information with respect to the accused’s lifestyle. His VISA bills disclose his personal spending habits, his receipts disclose his religious affiliation, other records disclose Alberta Health Care and drugstore transactions, all of which would disclose information concerning his health and numerous other records which disclose a great deal of information about the lifestyle of the accused and his wife. Their use in a subsequent criminal prosecution will make that information available to the public. I am satisfied that the accused had an expectation of privacy with respect to being secure against search and seizure of his home and business premises.

With respect to the first search warrant that was executed on the accused’s business premises in the Baumgardner matter the courts subsequently determined that the power under which the warrant was granted was unconstitutional. Thus that particular search must be considered on the basis of being a warrantless search. I am satisfied on the evidence that at least so far as the accused is concerned S.I. did not have reasonable and probable grounds that would have enabled it to obtain a search warrant with respect to the accused.

With respect to the search of the accused’s home and business that search warrant was obtained under powers granted under the Criminal Code. The issue then becomes was there evidence obtained as a result of a Charter breach used to obtain the warrant. A review of the Information to Obtain a Search Warrant (IOSW Ex. 76) taken by Mr. Rodgirs and his adoption of the analysis of the sources of information for that Information (Ex. 80A) make it clear that the vast majority of the information used to satisfy the requirement of reasonable and probable grounds to issue the warrant came from material gathered by S.I. in violation of the accused’s s. 7 Charter rights. When that information is excluded from the IOSW it is apparent that what remains is not sufficient to meet the test of reasonable and probable grounds. Without that information the search warrant would not have been granted. Thus I have concluded that the accused’s s. 8 Charter rights were violated by the search and seizure of July 22, 1992 of his home and business and by the search and seizure conducted in April 1988 by Mr. Willisko as a warrantless search to the extent that the Crown seeks to use information from that search in the prosecution of the accused.

Should the Evidence Obtained Through the Searches Be Excluded — the Application of s. 24(2) of the Charter?

At one time the starting point in determining an answer to this question was R, v. Collins [1987] 3 W.W.R. 699 (S.C.C.) in the Supreme Court of Canada. The test enunciated in that case has been refined in subsequent cases and distilled in a very recent decision of the Supreme Court of Canada in À. v. Stillman (1997), 113 C.C.C. (3d) 321 (S.C.C.). Mr. Justice Cory in delivering the judgment of the majority reviews the development of the law in this area, summarizes the law and then with respect to his summary says as follows at pp. 364 and 365:

The summary itself can be reduced to this short form:

1. Classify the evidence as conscriptive or non conscriptive based upon the manner in which the evidence was obtained. If the evidence is non conscriptive its admission will not render the trial unfair and the court will proceed to consider the seriousness of the breach and the effect of exclusion on the repute of the administration of justice.

2. If the evidence is conscriptive and the Crown fails to demonstrate on a balance of probabilities that the evidence would have been discovered by alternative non conscriptive means, then its admission will render the trial unfair. The court, as a general rule, will exclude the evidence without considering the seriousness of the breach or the effect of the exclusion on the repute of the administration of justice. This must be the result since an unfair trial would necessarily bring the administration of justice into disrepute.

3. If the evidence is found to be conscriptive and the Crown demonstrates on a balance of probabilities that it would have been discovered by alternative non conscriptive means, then its admission will generally not render the trial unfair. However, the seriousness of the Charter breach and the effect of exclusion on the repute of the administration of justice will have to be considered.

The first step that I must take is to classify the evidence as either conscriptive or non conscriptive based upon the manner in which the evidence was obtained. It is clear in this case that all of the evidence prior to the search and seizure in July 1992 was conscriptive. I am satisfied that the satisfied that the accused provided the evidence under the mistaken belief that he was conscripted to do so because of the provisions of s. 231.1.

Given that the evidence is conscriptive has the Crown demonstrated on a balance of probabilities that the evidence would have been discovered by alternative non conscriptive means. In this case the evidence includes not only documents but also oral information given by the accused through statements taken from him and information obtained from him on various occasions by Revenue Canada about his own and his clients’ tax affairs. The information disclosed the type, location and condition of documents or indeed the absence of such documents. When the accused became aware for the first time that he was a suspect in May 1992 his reaction was immediate. He promptly sought legal advice. On the evidence that I heard, I am satisfied that the Crown has not met the onus of demonstrating on a balance of probabilities that the evidence would have been discovered by alternative non conscriptive means. Similarly the documents themselves while they are real evidence are documents which S.I. would not have been able to discover either the existence or location had they not used the conscriptive means of s. 231.1. In any event, I am satisfied that the Crown has failed to demonstrate on a balance of probabilities that this category of evidence would have been discovered by alternative non conscriptive means. The result of this conclusion following from R. v. Stillman, supra, is that this evidence must be excluded since it would result in an unfair trial of the accused and that would necessarily bring the administration of justice into disrepute.

If I am wrong, in the conclusion that I have reached above then when I consider the seriousness of the Charter breach and the effect of the exclusion of this evidence on the repute of the administration of justice I reach the same conclusion. The two main sources of evidence that the Crown seeks to use in the prosecution of the accused came through the actions of Messrs. Rodgirs and Sinclair. The evidence is clear that Sinclair deliberately lied to the accused for the purpose of misleading the accused as to the true nature of his activities when he said he was from audit and was “following up” on the Titan audit. I am also satisfied that Rodgirs mislead the accused when he told him that he was in effect completing the audit that Gahr had performed on the accused. As the evidence makes clear that was not true because he was in fact seeking additional evidence which he decided he could not get any other way with which to prosecute the accused having concluded that the accused had committed tax evasion and fraud. In those circumstances, there again can be no doubt in my mind that to permit the evidence obtained in those circumstances to be used at trial would bring the repute of the administration of justice into disrepute. They are also in my view serious breaches of the Charter particularly having regard to Revenue Canada’s own policies that were in place at the relevant times.

Conclusion

As a result of the breach of the accused’s s. 7 and s. 8 Charter rights and the inability of the Crown to overcome those breaches under s. 24 of the Charter all of the documents and statements subject to these voir dires starting with the Leblanc audit material and ending with the July 1992 search and seizure material will be excluded from the trial.

If I am wrong in my conclusion that S.I. cannot use material from the audit path unless the auditors have respected the target’s Charter rights and if the requirement to respect the taxpayer’s Charter rights only arises when S.I. decides a taxpayer is a suspect then I have concluded that the accused became a suspect when Mr. Leblanc’s report (Ex. 5) was received in S.I. in November 1987 so that all of the documents and statements following the Leblanc audit will be excluded from the trial of this matter.

The Crown advised that if these voir dires resulted in the exclusion of the evidence that would end the prosecution of the accused because the Crown would have no case. That consideration is not relevant to the decision that I am required to make. I simply note that Revenue Canada is not left without recourse with respect to the accused. It is free to follow the audit path to require the accused to pay any tax which he has evaded.

DATED At the City of Edmonton this /0th day of October, A.D. 1997

Evidence inadmissible.