Date: 20060628
Docket: T-20-06
Citation: 2006 FC 818
BETWEEN:
MINISTER OF NATIONAL REVENUE
Applicant
and
SANDRA BJORNSTAD
Respondent
REASONS FOR ORDER
DAWSONJ.
[1] In these reasons I explain why I have found Ms. Bjornstad to be in contempt of the Court's order of February 21, 2006 and note that her continued failure to comply with that order may lead to her imprisonment.
APPLICABLE LEGAL PRINCIPLES
[2] Rule 466(b) of the Federal Courts Rules, SOR/98-106 (Rules) provides that a person is guilty of contempt of court who disobeys an order of the Court.
[3] Principles to be applied when considering whether to find a person in contempt of court are:
1. The party alleging contempt has the burden of proving such contempt, and the person alleged to be in contempt (the contemnor) need not present evidence to the Court.
2. The constituent elements of contempt must be proven beyond a reasonable doubt.
3. In the case of disobedience of an order of the Court, the elements which must be established are the existence of the Court order, knowledge of the order by the alleged contemnor, and knowing disobedience of the order.
4. Unless the Court otherwise directs, evidence to establish contempt shall be given orally.
See: Rules 469 and 470, and Tele-Direct (Publications) Inc. v. Canadian Business Online Inc. (1998), 151 F.T.R. 271.
[4] The fundamental purpose of the Court's contempt power is to ensure respect for the judicial process so as, in turn, to secure the proper and effective functioning of the judicial system. In short, the rule of law requires that court orders be complied with.
FINDINGS OF FACT
[5] Oral evidence in support of the allegation of contempt of court was given by: Mr. So, an auditor with the Canada Revenue Agency (CRA); Ms. Duff, a civil enforcement bailiff; and Mr. Ebeling, another civil enforcement bailiff. Each person testified in a straight-forward manner with no inconsistencies or inherent implausibilities in their evidence. Each answered questions I put to them directly and without hesitation. I find each witness to be credible and accept their evidence.
[6] Additionally, certified copies of the Court's orders of January 23, 2006, February 21, 2006, and May 23, 2006 (all described below) were tendered and received as exhibits.
[7] Ms. Bjornstad did not attend in Court, nor did she otherwise respond to the application to find her to be in contempt of court.
[8] On the basis of the above described evidence, I am satisfied beyond a reasonable doubt of the following facts:
1. On July 19, 2005, Mr. So, accompanied by another auditor employed by the CRA, met with Ms. Bjornstad at her home in Stony Plain, Alberta. At that time Mr. So personally served Ms. Bjornstad with a Requirement to Provide Information and Documents (Requirement) issued pursuant to paragraphs 289(1)(a) and (b) of the Excise Tax Act, R.S.C. 1985, c. E-15 and paragraphs 231.2(1)(a) and (b) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). Attached to the Requirement as Appendix A was a list of the documents Ms. Bjornstad was required to provide. Attached as Appendix B to the Requirement was a series of questions Ms. Bjornstad was required to answer in respect of the period from January 1, 2002 to December 31, 2004. Attached to these reasons as Appendices A and B are true copies of the appendices attached to the Requirement. The Requirement specified that the information and documents were to be provided within 30 days of receipt.
2. Ms. Bjornstad failed to make any response to the Requirement. No information or documents were provided by her, or on her behalf.
3. On January 30, 2006, Ms. Bjornstad's husband was personally served at Ms. Bjornstad's residence with a copy of the applicant's record filed in this proceeding by the Minister of National Revenue (Minister) in which he sought an order requiring Ms. Bjornstad to comply with the Requirement. Ms. Bjornstad's husband was also served with a copy of the Court's order of January 23, 2006 which permitted documents to be served upon Ms. Bjornstad by handing them to an adult person at her residence.
4. On February 21, 2006, the Court allowed the Minister's application and ordered that Ms. Bjornstad comply with the Requirement by March 23, 2006. This is the order she failed to obey.
5. On March 5, 2006, Ms. Bjornstad was personally served with the Court's order of February 21, 2006.
6. Ms. Bjornstad did not comply with the Requirement by March 23, 2006 as required by the Court's order, or at all. To date, neither the required documents nor information has been provided by Ms. Bjornstad.
7. On May 23, 2006, an order was made requiring Ms. Bjornstad to appear at the Court's general sitting in Edmonton on June 19, 2006 and to be prepared to answer the allegation of contempt of court made against her.
8. On May 24, 2006, Ms. Bjornstad was personally served with the Court's order of May 23, 2006.
[9] These facts establish, without doubt, the existence of the Court's order of February 21, 2006, Ms. Bjornstad's knowledge of that order, and Ms. Bjornstad's disobedience of that order. She is guilty of contempt of court because she has disobeyed the Court's order of February 21, 2006.
APPROPRIATE DISPOSITION
[10] The Minister seeks an order requiring Ms. Bjornstad to: provide the information and documents; pay a fine of $2000.00; and pay costs.
[11] Rule 472 deals with the penalty which may be ordered on a finding of contempt. The rule provides that:
| 472. Where a person is found to be in contempt, a judge may order that
(a) the person be imprisoned for a period of less than five years or until the person complies with the order;
(b) the person be imprisoned for a period of less than five years if the person fails to comply with the order;
(c) the person pay a fine;
(d) the person do or refrain from doing any act;
(e) in respect of a person referred to in rule 429, the person's property be sequestered; and
(f) the person pay costs.
|
472. Lorsqu'une personne est reconnue coupable d'outrage au tribunal, le juge peut ordonner :
a) qu'elle soit incarcérée pour une période de moins de cinq ans ou jusqu'à ce qu'elle se conforme à l'ordonnance;
b) qu'elle soit incarcérée pour une période de moins de cinq ans si elle ne se conforme pas à l'ordonnance;
c) qu'elle paie une amende;
d) qu'elle accomplisse un acte ou s'abstienne de l'accomplir;
e) que les biens de la personne soient mis sous séquestre, dans le cas visé à la règle 429;
f) qu'elle soit condamnée aux dépens.
|
[12] I am prepared to order that:
1. The order that accompanies these reasons is to be personally served upon Ms. Bjornstad by leaving a copy of it with her.
2. Within 30 days of service of the order upon her, Ms. Bjornstad shall provide the information and documents which she was required to provide pursuant to the Requirement and the Court's order of February 21, 2006. As noted above, for ease of reference the information and documents are set out in Appendices A and B to these reasons.
3. Within 30 days of service of the order upon her, Ms. Bjornstad shall pay a fine of $2,000.00. I am satisfied that this amount reflects the gravity of the contempt and will deter similar conduct. But for the Minister's request at the oral hearing for a fine in this amount I would have been inclined to order payment of a larger fine. I reject the Minister's attempt to later seek an increased amount in the context of his submission on costs.
4. Within 30 days of service of the order upon her, Ms. Bjornstad shall pay costs to the Minister which I fix in the amount of $4,090.85. This amount represents reasonable costs calculated on a solicitor-client basis, recognizing that the services provided for in the previous order with respect to costs made by Justice Campbell should not be duplicated. I am satisfied this amount pays expenses reasonably incurred by the Minister. It includes an allowance of $440.85 on account of Court fees and disbursements. The award of costs on a solicitor-client basis reflects the policy of the Court that a party who assists the Court in the enforcement of its orders and in ensuring respect for its orders should not be put out of pocket. See, for example, Coca-Cola Ltd. v. Pardham (c.o.b. Universal Exporters), 5 C.P.R. (4th) 333 (F.C.T.D.) aff'd on other grounds, (2003) 23 C.P.R. (4th) 173 (F.C.A.) and the authorities reviewed in the trial division by Associate Chief Justice Lutfy (as he then was).
- In the event that Ms. Bjornstad does not comply with paragraph 2 above, the Minister may seek an order pursuant to Rule 471 requesting that the Attorney General of Alberta assist the Court by bringing Ms. Bjornstad before any judge of this Court to show cause why she should not be imprisoned for some period of time, or until she complies with the Court's order of February 21, 2006.
"Eleanor R. Dawson"
Ottawa, Ontario
June 28, 2006
REQUIREMENT TO PROVIDE INFORMATION AND DOCUMENTS
APPENDIX A:
The following documentation is to be provided for the period January 1, 2002 to December 31, 2004.
Business Records:
1) All source documents such as income & expense invoices.
2) All books of entry such as synoptic journal, cash receipts and disbursement journal, general journal, general ledgers and grouping schedules, if applicable.
3) Chart of accounts and a listing of vendors and suppliers
4) Accounts payable list, accounts receivable list and payroll ledgers, if applicable.
5) Bank statements, cancelled cheques and duplicate deposit books.
6) Credit card statements and source documents for business purchases
7) Contracts, loan and lease agreements
8) Details of drawings account
9) Copies of income tax returns for 2002, 2003 and 2004
10) List of fixed assets purchased and disposed; with date purchased, description and amount. Supporting documentation will be required as well.
11) Capital Cost Allowance (CCA) Schedule
12) Copies of year end financial statements
13) Sales invoices, sales summaries, work estimates, and work orders.
14) All backups of accounting software, if any, for the above stated audit period.
15) GST returns and the working papers used to prepare the GST returns.
16) Accountant's or Representative's working papers, grouping schedules and adjusting entries for the years under audit.
Personal Records:
1) All personal bank account statements/passbooks, transaction records, cancelled cheques and bank account reconciliation's.
2) All credit card statements, line of credit statements, and loan/mortgage documents including the repayment schedules and the purpose of the loans.
3) All insurance policy documents.
4) List of major personal assets (eg real estate, vehicles, equipment, recreational, etc.) along with the approximate costs/proceeds of disposition and year of acquisition/disposal.
5) Personal investment statements (eg. RRSP, mutual funds, term deposits, etc.).
6) If you have received any non-taxable sources of funds that would impact your financial situation during the audit period, please provide the details.
REQUIREMENT TO PROVIDE INFORMATION AND DOCUMENTS
APPENDIX B:
1. BUSINESS HISTORY:
A) When and how was the business started or acquired?
Organization type is:
Changes to business structure and/or ownership during the audit period are as follows:
List of Shareholders & Directors (and % shares) or partners (and % interest):
List of any related or associated businesses (or persons):
Is the taxpayer part of a group (for promotion purposes etc.):
B) Determine the nature of goods and services performed - including any secondary and/or by-products. (refer to specific guidelines for this type of business, if available, for common sources).
Description activity A: ________%
Description activity B: ________%
Description activity C: ________%
Most common activity or product sold currently and in the audit period:
Main Goods/Services
Sold/Provided Major Customers
------------------- ---------------
i) 7% taxable
ii) 0% taxable
iii) Exempt
iv) Major suppliers
Days and hours of operation:
Are operations seasonal?
Peak and slack periods of operation.
D) Has there been any changes in the goods and services provided in recent years?
E) Major business asset acquisitions and dispositions:
Acquisitions/Dispositions:
Item acquired/ Percentage
disposed of Date Cost Proceeds Commercial Use
------------- ------ -------- -------------- ----------------------
2. MAINTENANCE OF BUSINESS BOOKS AND RECORDS:
A) List and describe the books and records maintained?
Business fiscal year end:
Bookkeeping System:
manual:
computerized:
type of software used:
B) Vending Licenses, municipal and/or provincial:
C) Who maintains the books and records?
Persons and responsibility:
Frequency of visits to the accountant:
Personal portions and how determined:
"Travel/Promotion" expenses:
"Vehicle" expenses
"Personal Consumption"
How involved is the owner in the handling of cash in the business?
What controls are in place in owner's absence?
D) Preparation of Income Tax and GST Returns:
Are the GST returns/elections prepared and filed by the taxpayer, staff (bookkeeper or controller) or an external accountant?
Are the Income Tax returns and financial statements prepared and filed by the taxpayer, staff (bookkeeper or controller) or an external accountant?
E) Accounting for Sales/Revenue and GST on Taxable Supplies
How are sales and accounts receivable recorded in the books and records?
How sales received and receivable recorded in the books and records?
How is GST received and receivable recorded in the books and records?
How is GST calculated (7% or 7/107)?
Is GST collected on all sales/services?
Are credit cards accepted? Are cheques accepted?
What is the percentage (%) of credit card sales?
What is the percentage (%) of cash sales?
Does the cash register total the GST collected?
What is the basis of the gross revenues income reported on the financial statements - ie. is gross reported revenue net of or does it include GST and PST?.
How is GST reported on the GST tax returns - ie. received or receivable?
F) Accounting for Expenses and GST Input Tax Credits
How are purchase and expense transactions recorded in the books and records?
How are purchases and expenses - paid and payable - recorded in the books and records?
How is GST - paid and payable - recorded in the books and records in respect of expenses?
What purchases make up your regular ITC's?
Who are your major suppliers?
Is an adjustment made for personal portions of expenses?
Is an adjustment made for personal portions of GST paid on "Travel/Promotion" expenses, "Vehicle" expenses and "Personal Consumption"?
Are purchases/expenses paid by cheque, cash or both?
Estimate the percentage (%) of cash purchases/expenses.
What is the basis of purchases and expenses claimed on the financial statements - ie. do expenses include or are they net of ITC's?.
How are ITC's claimed on the GST tax returns - ie. paid or payable?
G) Was a physical inventory count taken and how is the inventory valued?
3. BUSINESS BANKING
What are the business bank accounts and their location for the audit period and current year - details:
Financial Institution Acct Numbers Type of Account Signing Authority
Who prepares the deposits?
How often are the deposits made?
Are all receipts deposited to the business account?
In which bank account(s)?
Are there any deposits to the business accounts other than sales:
ie. personal funds/loans etc?
Is there any cash withheld from the deposits?
For what purpose? (ie cash expenses/owner's draws).
Is a daily cash reconciliation done?
Is a cash float maintained - how much?
How are credit card receipt deposits handled? Is a separate bank account maintained for either Visa or MasterCard deposits?
Were there any business loans or lines of credit outstanding during the audit period - details:
3. PERSONAL BANKING
What are the personal bank accounts and their location for the audit period and current year - details:
Financial Institution Acct Numbers Type of Account Signing Authority
Nature and source of deposits to personal accounts:
Drawings/wages/sale of personal assets:
Spouse's (or equivalent's) personal bank accounts:
Financial Institution Acct Numbers Type of Account Signing Authority
Nature and source of deposits to personal accounts:
Wages/sale of personal assets:
4. Any non-taxable sources of funds?
Inheritances/lottery winnings/gifts/gambling:
Cash-on-hand:
How much "cash" do you maintain outside of your personal and business bank accounts?
Have you ever maintained any extraordinary "cash" amount outside of your personal or business bank accounts?
Do you maintain one or more safe deposit boxes?
5. Other Personal Investments:
Determine existence of and details of the following:
Have you loaned or given money personally - i.e. family/friends, etc.?
List real property bought/sold or owned currently and during the audit period.
i.e. Principal/Primary Residence
Cottage/Time Shares/Vacation Properties
Rental Properties
Development Property
Vacant Land
Farm Land
List vehicles bought, sold or owned during the audit period. (Obtain details.)
i.e. Automobiles
Boats/Yachts/Planes
Motorbikes/All terrain vehicles
Recreation Vehicles/Trailers
List other personal asset acquisitions/dispositions.
i.e. Furniture/Appliances/Stereo/Video/TV
Antiques or Collectibles
Works of Art/Coins, etc.
Any individual or family vacations taken during the audit period? (Obtain details.)
6. Personal Loans/Mortgages/Lines of Credit
Mortgages (principal residence or rental property)
Vehicle Loans
Personal Loans
Lines of Credit
Credit Cards
Were there any non-institution loans made or outstanding during the audit period
i.e. family/friends, etc.? (Obtain details.)
Have you received any money from family/friends, etc.? (Obtain details.)
Do you or have you ever held any money in trust for others? (Obtain details.)
7. International Information
Determine existence of and details of the following:
Offshore assets and liabilities.
Trust set-up offshore.
Business operations offshore.
Offshore banking information.
Offshore investment information and brokerage details.
Foreign pension income.
Foreign tax returns for all of the audit period.
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