Canada (Minister of National Revenue) v. McMordie, 2006 FC 209

Date: 20060216

Docket: T-916-03

Citation: 2006 FC 209

Vancouver, British Columbia, Thursday, the 16^th day of February, 2006

Present:           THE HONOURABLE MR. JUSTICE LEMIEUX                         

BETWEEN:

                                       THE MINISTER OF NATIONAL REVENUE

                                                                                                                                            Applicant

                                                                         - and -

                                               KENNETH ROBERT MCMORDIE

                                                                                                                                        Respondent

                                            REASONS FOR ORDER AND ORDER

[1]                On December 19, 2005, Prothonotary Lafrenière, pursuant to Rule 467 of the Federal Courts Rules, 1998 (the "Rules"), cited for contempt the Respondent who represents himself and ordered that he appear before a judge of this Court in Vancouver on February 13, 2006, and be prepared to hear proof of the acts with which he has been charged and be prepared to present any defence that he may have.

[2]                The acts with which Prothonotary Lafrenière found the Applicant had established a prima faciae case of contempt relate to a Compliance Order which Justice MacKay had issued on March 18, 2004, pursuant to section 231.7 of the Income Tax Act which required the Respondent to provide within a certain time certain information/documents to Canada Customs and Revenue Agency (the "Agency").

[3]                Prothonotary Lafrenière was of the view, based on the materials before him, that the Respondent had prima faciae breached Justice MacKay's Compliance Order "in that the Respondent has not wholly provided the following information and/or documents to the Canada Customs and Revenue Agency as required by the Compliance Order within the time provided by the Compliance Order, or at all:

(a)         a list of all the Canadian and foreign banks and financial institutions which held accounts for which the Respondent had signing authority or power of attorney;

(b)         with respect to (a) above, the names of the account holders, the account numbers, and the dates that the accounts were opened and closed; and

(c)         a list of the names of the credit cards, the names of the issuers of the credit cards and the account numbers for all credit cards that were in the Respondent's name, or in a name in which the Respondent did business, and for credit cards in which the Respondent was a joint holder.

[4]                I summarize the following background events:

1.          On January 21, 2002, pursuant to section 231.2(1) of the Income Tax Act (the "Act"), the Burnaby-Fraser Tax Service Office issued to the Respondent a request for information ("RFI") covering the period December 1, 1996 to January 31, 2001.

2.          Not being satisfied with the Respondent's response, the Minister of National Revenue (the "Minister") sought a compliance order pursuant to section 231.7 of the Act.

3.          The matter came before Mr. Justice MacKay who through various conference calls and directives sought to clarify the differences between the parties and sought to arrive at a mutually acceptable solution.

4.          The Respondent provided lengthy answers to the several queries raised by the Minister (see Exhibits A-4 dated November 25, 2003, Exhibit A-5, Exhibit A-6 dated December 22, 2003).

5.          Pursuant to a direction issued by Mr. Justice MacKay, counsel for the Minister indicated the Minister remained of the view that a compliance order should issue pursuant to section 231.7 of the Act. In a letter dated February 23, the Minister's counsel identified the following items which were considered outstanding (Exhibit A-9):

1.              all Canadian and foreign business and personal bank statements, passbooks, negotiated cheques and deposit books for any account for which you had signing authority or power of attorney.

2.              a list of all the Canadian and foreign banks and financial institutions which held accounts for which you had signing authority or power of attorney. Provide the names of the account holders, the account numbers, and the dates that the accounts were opened and closed.

3.              Business and personal credit card statements for all credit cards that were in your name, a name in which you do business, and for credit cards in which you were a joint holder.

4.              List the names of the credit cards, the names of the issuers of the credit cards, and the account numbers of the credit cards for all credit cards that were in your name, a name in which you do business, and for credit cards in which you were a joint holder.

6.          The Respondent answered on March 15, 2004 (Exhibit A-11).

7.          Justice MacKay after considering the matter issued his Compliance Order of March 18, 2004 (Exhibit A-12) requiring the Respondent to provide the outstanding information requested by the Minister within 30 days.

8.          On April 16, 2004, the Respondent enclosed a package of information which he said resulted from multiple requests from financial institutions with which he had dealt with in the past (Exhibit A-13).

9.          Not being satisfied, the Minister engaged the contempt procedure for breach of Justice MacKay's Compliance Order which is a two-phase procedure: the prima faciae determination by Prothonotary Lafrenière leading to his Show Cause Order of December 19, 2005, and the hearing before this Court on February 13, 2006, pursuant to Rules 467 to 470.

[5]                Pursuant to Rule 469, a finding of contempt shall be based on proof beyond a reasonable doubt. Pursuant to Rule 470 the person alleged to be in contempt cannot be compelled to testify.

[6]                Counsel for the Minister called as a witness Mr. Surinder Sekhon, who was then the auditor on the file, who identified various documents and who told the Court exactly how the Respondent had breached the Compliance Order. The Respondent's failure was by not having provided a list of all of the Canadian and foreign institutions which held accounts for which he had signing authority or power of attorney and, in connection therewith, the account holders, the account numbers and the dates the accounts were opened and closed as well as a list of the names of the credit cards, the names of the issuers of those cards, their account numbers that were in his name, in the name of his business or in which the Respondent was a joint holder.

[7]                The Respondent testified to the effect that he had substantially complied with the order because if one examined his several responses and his final response on April 16, 2005, the banks were identified as well as the credit cards and their issuers.

[8]                However, in argument, he admitted his responses lacked several details which he was required to provide.

[9]                Based on the evidence before me and the Respondent's admission I am satisfied beyond a reasonable doubt that the Respondent is guilty of contempt by failing to wholly provide the Minister the information/documents spelled out in items 2 and 4 of counsel to the Minister's letter of February 23, 2004, to Justice MacKay and which were the acts specified in Prothonotary Lafrenière's Show Cause Order of December 19, 2005.

[10]            The penalty which the Court may impose on a finding of contempt is spelled out in Rule 472 which reads:

[11]            The applicable principles on sentencing were summarized by this Court in Lyons Partnership L.P. v. MacGregor, [2000] F.C.J. No. 341 (F.C.T.D.), at paragraphs 21, 22 and 23:

¶ 21         In Cutter (Canada) Ltd., supra, Urie J.A. said in assessing the amount of the fine what was relevant was "the gravity of the contempt in the context of the particular circumstances of the case as they pertain to the administration of justice" (page 562). The Federal Court of Appeal endorsed the reasons of the trial judge that the amount of the fine should reflect "the severity of the law and yet sufficiently moderate to show the temperance of justice". The level of the fine, Urie J.A. indicated, could not be a token fine because this would "be inconsistent with the gravity of the contraventions and might serve to encourage others to flout the law if it is to their financial advantage to do so".

¶ 22         This last statement by Urie J.A. echoes the words of Justice Rouleau of this Court in Montres Rolex S.A. et al. V. Herson et al., 15 C.P.R. (3d) 368 (F.C.T.D.) "That the primary purpose of imposing sanctions is to ensure compliance with orders of the court". Dubé J. of this Court in Louis Vuitton S.A. v. Tokyo-Do Enterprises Inc. et al.., 37 C.P.R. (3d) 8, (F.C.T..D.), also stressed the importance of deterrence as the principal factor in ensuring that those orders will not be breached again because "if those who get caught were to get away unscathed that would encourage such activities and consequently destroy the intended effect of the laws that have been passed" (page 13,line b). Dubé J., in assessing a fine, took into account the value of the counterfeit goods sold. He also ordered solicitor-client cots capped to a maximum.

¶ 23         To close off on the issue of first principles, other relevant factors to be taken into account are whether the contempt offence is a first offence R. v. De L'Isle et al. (1994), 56 C.P.R. (3d) 371 (F.C.A.)) and the presence of any mitigating factors such as good faith or apology (Baxter Travenol Laboratories, supra).

[12]            Counsel for the Applicant seeks a fine of $3,000, costs of $1,000 plus disbursements, imprisonment of 15 days in default of paying the fine and 15 days of imprisonment in default of paying the costs; ordering the Respondent to provide the information/documents which are required and which were not provided and in default thereof 15 days' imprisonment.

[13]            The Respondent suggests a fine of $500 on a finding of contempt and undertook to the Court to rectify the defective required information. Applying proper sentencing principles, I am prepared to order:

(i)          the payment by the Respondent of a fine of $1000.00 and costs of $800.00 payable within 30 days of this Order for this motion and the motion before Prothonotary Lafrenière;

(ii)         an Order that the Respondent provide within 30 days of this Order and Reasons the following information and documents sought by the Minister:

(a)         a list of all the Canadian and foreign banks and financial institutions which held accounts for which the Respondent had signing authority or power of attorney;

(b)         with respect to (a) above, the names of the account holders, the account numbers, and the dates that the accounts were opened and closed; and

(c)         a list of the names of the credit cards, the names of the issuers of the credit cards and the account numbers for all credit cards that were in the Respondent's name, or in a name in which the Respondent did business, and for credit cards in which the Respondent was a joint holder.

(iii)        in the event of the failure of the Respondent to fully comply with item (ii) of this paragraph, this Court reserves the right to impose upon the Respondent a sentence of imprisonment upon due notice to the Respondent and further hearing before the Court.

[14]            I do not believe this case warrants a heavy fine and a finding of automatic imprisonment.

[15]            First, this is not a case where the Respondent has ignored the RFI. The Respondent has provided substantial information to the Minister, albeit it was not in the form of a listing and not complete in the required details. Second, the Respondent has not been uncooperative with the Minister. He is on record expressing his willingness to further meet with representatives of the Agency. My sense is that the Respondent's failure to fully and wholly comply with the RFI is attributable not to the Respondent's ill will to the Agency or the Minister, but a mis-connect by the Respondent, perhaps because he was too close by conducting his own case. Third, as far as the Court is aware, this finding of contempt is the first the Respondent has been found guilty of. Fourth, the Respondent has indicated to the Court his remorse for not fully complying and given his undertaking to rectify the matter. Fifth, the Respondent realizes the consequences of not fully complying with today's Court order.

                                 FINDING AND ORDER

THIS COURT finds that:

1.          The Respondent guilty of contempt as charged in Prothonotary Lafrenière's December 19, 2005, Show Cause Order.

2.          The Respondent shall pay a fine of $1000.00 and costs of $800.00 to the Minister within 30 days of this Order.

3.          The Respondent shall, within 30 days of this Order fully provide the Minister with the following information and documents:

(a)         a list of all the Canadian and foreign banks and financial institutions which held accounts for which the Respondent had signing authority or power of attorney;

(b)        with respect to (a) above, the names of the account holders, the account numbers, and the dates that the accounts were opened and closed; and

(c)        a list of the names of the credit cards, the names of the issuers of the credit cards and the account numbers for all credit cards that were in the Respondent's name, or in a name in which the Respondent did business, and for credit cards in which the Respondent was a joint holder.

4.          In the event of non respect of para. [3] of this Order, this Court, upon request and hearing reserves the right to sentence the Respondent to imprisonment for such period of time the Court deems appropriate.

(Sgd.) "F. Lemieux"

     Judge                        

                                     FEDERAL COURT

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                  T-916-03

STYLE OF CAUSE: THE MINISTER OF NATIONAL REVENUE

- and -

KENNETH ROBERT MCMORDIE

PLACE OF HEARING:                                 Vancouver, BC

DATE OF HEARING:                                   February 13, 2006

REASONS FOR ORDER AND ORDER: LEMIEUX J.

DATED:                                                          February 16, 2006

APPEARANCES

Robert Carvalho                                                for Applicant

Kenneth McMordie                                           for Respondent (self-represented)

SOLICITORS OF RECORD:

John H. Sims, Q.C.                                           for Applicant

Deputy Attorney General of Canada

n/a                                                                     for Respondent