Date: 20130207
Docket: T-2045-11
Citation: 2013
FC 133
Ottawa, Ontario,
February 7, 2013
PRESENT: The
Honourable Mr. Justice Zinn
BETWEEN:
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THE MINISTER OF
NATIONAL REVENUE
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Applicant
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and
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THE MONEY STOP LTD
and
TEL SUTHERLAND
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Respondents
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REASONS
FOR ORDER AND ORDER
Mr. Sutherland and The Money Stop
Ltd., his business, have had every opportunity to satisfy an Order of this Court,
or to purge their contempt, but have not done so. They chose not to attend
their sentencing hearing.
Background
[1]
The
Minister of National Revenue required certain financial records in order to
conduct an audit of The Money Stop Ltd, a “payday lender” with three locations
in Alberta and whose director is Tel Sutherland.
[2]
The
Canada Revenue Agency [CRA] requested this information in July and August 2011,
and it further asked that it be provided by October 2011. The respondents failed
to comply.
[3]
The
Minister initiated an application for an order of compliance pursuant to section
231.7 of the Income Tax Act, RSC 1985, c 1 (5th supp), which Justice
Harrington granted on February 6, 2012. The respondents did not comply with
Justice Harrington’s Order.
[4]
As
a consequence of their failure to comply with Justice Harrington’s Order, the
Minister initiated contempt proceedings. By Order dated April 3, 2012, Justice
Gleason directed that the respondents appear before this Court to answer the
allegation that they were guilty of contempt.
[5]
At
the contempt hearing on July 3, 2012, the respondents admitted that they had
not complied with Justice Harrington’s Order. Based on that admission, and being
satisfied that all other requirements had been met, on July 4, 2012 I issued an
Order finding the respondents in contempt but permitted them a further period
of 30 days to provide the following six items of information, failing which the
Minister was at liberty to proceed with a request that this Court sentence the
respondents for their contempt:
a.
The
password and username for the electronic version of the respondents’ QuickBooks
records previously provided on an USB key;
b.
Individual
cheque cashing transaction information in electronic format on a USB key,
including password and username;
c.
Bank
statements, cancelled cheques, and duplicate deposit books for all business bank
accounts;
d.
Corporate
Minute Book;
e.
Completed
RC59, Business Consent Form, to allow the Canada Revenue Agency to deal
with the individual or firm who prepared the amended Corporate Tax Returns; and
f.
Personal
bank statements and cancelled cheques for 2006, 2007, 2008 and 2009.
[6]
The
Minister filed evidence that the respondents have failed to comply, they have
failed to provide those six items, and accordingly the Minister asks that the
respondents be sentenced now for their contempt.
[7]
The
sentencing hearing came on by way of videoconference between the Court in Ottawa, Ontario, and Edmonton, Alberta, on Tuesday, January 29, 2013. The respondents
were properly served with notice of the hearing and, in fact, Mr. Sutherland
had been in contact with the Court Registry prior to that date, making it clear
that he was aware of the hearing. Nonetheless, and despite providing
additional time for them to appear in case they were late, the respondents
failed to appear before the Court on January 29, 2013. In addition to having
been served with the notice of hearing, the respondents had previously been
served and were aware of the sentence that the Minister was seeking for their
contempt. Further, I also specifically asked the applicant and the Court
Registry to inform me if the respondents contacted either of them subsequent to
the sentencing hearing. As of this date, neither has so informed me nor have
the respondents apparently attempted to communicate with the Court in any way.
[8]
The
Minister filed additional affidavit evidence on this hearing which proves that,
although the respondents “delivered five boxes of documents to a hotel near the
offices of the CRA,” they failed to provide to the Minister with the following:
a.
The
password and username for the electronic version of the respondents’ QuickBooks
records previously provided on an USB key;
b.
Individual
cheque cashing transaction information in electronic format on a USB key,
including password and username;
c.
Corporate
Minute Book;
d.
Completed
RC59, Business Consent Form, to allow the Canada Revenue Agency to deal
with the individual or firm who prepared the amended Corporate Tax Returns; and
e.
Personal
bank statements and cancelled cheques for 2006, 2007, 2008 and 2009.
Further, although the respondents
provided the Minister with some business bank statements and cancelled cheques,
they did not provide those listed on Schedule A attached hereto.
[9]
The
respondents have provided no evidence either through affidavit or oral
testimony to dispute the Minister’s evidence, which the Court therefore
accepts. I remain satisfied beyond a reasonable doubt that the respondents
remain in contempt.
[10]
The
Minister submits that the following sanctions are warranted and appropriate:
(a) a fine of $5,000
plus solicitor-client costs, to be paid within 30 days, failing which Tel
Sutherland is to be imprisoned for 30 days; and
(b) an order that
the information set out in my Order dated July 4, 2012, other than that since
provided, be provided to the Minister within 30 days of service of this Order,
failing which Tel Sutherland is to be imprisoned until the respondents comply.
The Minister proposes other terms
involving safeguards in case payment or disclosure is not possible, and the
provision of warrants in the case of non-compliance.
[11] Rule 472 of the Federal
Courts Rules outlines the Court’s jurisdiction regarding penalties for
contempt:
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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.
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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.
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[12] The Federal
Court of Appeal in Canada (Human Rights Commission) v Winnicki,
2007 FCA 52, at para 17, endorsed that the following factors are to be
considered when determining an appropriate penalty for contempt:
1. the gravity of
the contempt in the context of the particular circumstances of the case as they
pertain to the administration of justice;
2. whether the
contempt offence is the first offence;
3. presence of any
mitigating factors such as good faith or an apology; and
4. deterrence of
similar conduct.
[13] The Minister
also points to this Court’s decision in Minister of National Revenue v
Marshall, 2006 FC 788, at para 16 [Marshall], wherein this Court
considered the following factors relevant to determining a sentence for
contempt of an Order of this Court to disclose information pursuant to section
231.7 of the Income Tax Act:
i. The primary purpose of imposing sanctions is to
ensure compliance with orders of the court. Specific and general deterrence are
important to ensure continued public confidence in the administration of
justice;
ii. Proportionality of sentencing requires striking a
balance between enforcing the law and what the Court has called
"temperance of justice";
iii. Aggravating factors include the objective
gravity of the contemptuous conduct, the subjective gravity of the conduct
(i.e. whether the conduct was a technical breach or a flagrant act with full
knowledge of its unlawfulness), and whether the offender has repeatedly
breached orders of the Court; and
iv. Mitigating factors might include good faith
attempts to comply (even after the breach), apologize or accept responsibility,
or whether the breach is a first offence.
[14] In my view, ensuring
compliance with orders made by the Court pursuant to the Income Tax Act is
critical because most everyone in Canada pays tax, and reporting is largely
self-reporting. If efforts by the Minister taken to ensure that taxpayers have
complied and accurately reported income are ignored or thwarted, the taxation
regime is seriously compromised and that affects every Canadian as we are dependant
on tax revenue to fund most of our social and other programs, and indeed our
government as a whole. In that sense, compliance with the Income Tax Act
is a fundamental civic duty which cannot be taken lightly or ignored.
[15] Moreover, the breach here
is not unintentional. The respondents have known for many months of this
Court’s Order and they have been provided, more than once, with an opportunity
to comply or explain their non-compliance. They have done neither. The recent
delivery of five boxes of documents, to a location other than the offices of
the CRA, might be deserving of more positive consideration if those boxes
contained most of the materials ordered to be produced. However, as the record
indicates, these respondents have yet to produce the majority of the items
ordered. I am particularly disturbed by the respondents’ failure to produce
the password and username for the electronic version of the respondents’
QuickBooks records previously provided on an USB key, because this was
specifically discussed when the respondents previously appeared before me. Mr.
Sutherland not once suggested that it was unavailable; rather, despite my best
efforts to obtain its disclosure in open Court, he claimed in the July 2012
hearing that he did not then recall it. This suggests, in particular, an
intentional and deliberate flouting of the Court’s Order.
[16] The Minister references
the fact that Mr. Sutherland has appeared at each hearing as a mitigating
factor. Had he also appeared at the sentencing hearing, it may well have
weighed in his favour. Having failed to appear at this important and critical
hearing to explain the respondents’ actions or to dispute the Minister’s
evidence, however, I give it little weight.
[17] In Marshall, unlike
this case, the respondents were not given a further opportunity to comply beyond
the section 231.7 compliance order. These respondents were given a further
opportunity to comply by virtue of my July 4, 2012 Order. The following
penalty was ordered in Marshall:
1. The
respondent is guilty of contempt of this Court's order dated March 2, 2006, and
shall pay a fine of $3,000.00 within 30 days from the date of service of this
Order, and shall pay the applicant's legal costs in the amount of $2,000.00
within 30 days from the date of service of this Order. Failure to pay this fine
and the legal costs within 30 days shall subject the respondent to 30 days'
imprisonment.
2. The
respondent shall also provide the information and documents set out in the
Court's order dated March 2, 2006 within 30 days from the date of service of
this Order, or provide the Minister with a full explanation why the respondent
does not have this information and these documents, failing which the
respondent shall be imprisoned for 10 days, such term to run consecutive to any
other term of imprisonment imposed by this Order.
3. The
respondent shall not be imprisoned for failure to pay the fine or the legal
costs if within 30 days from the date of service of this Order the respondent
arranges with the Minister for an oral examination under oath and provides evidence
satisfactory to the Court that she is not able to pay the fine or the legal
costs, or that she needs an extended time period in which to pay.
4. If
the Minister informs the Court by affidavit that payment of either the fine or
the legal costs has not been made within 30 days from the date of service of
this Order, and that the respondent has not arranged with the Minister for an
oral examination under oath with respect to her ability to pay the fine or the
legal costs, the Court shall issue a warrant for the imprisonment of the
respondent for 30 days.
5. If
the Minister informs the Court by affidavit that the respondent has not
provided the information and documents set out in the Court's order dated March
2, 2006, within 30 days from the date of service of this Order or provided the
Minister with a full explanation why the respondent does not have this
information and these documents, then the Court shall issue a warrant for the
imprisonment of the respondent for a term of 10 days, such term to run consecutive
to any other term of imprisonment imposed by this Order.
[18] These respondents have
already had the benefit of lenience shown in the earlier Orders granting them
time to comply and purge their contempt. Having failed to take advantage of
that and having failed to either appear to explain their contempt or to provide
evidence of compliance, they are deserving of little more. A swift and serious
penalty is appropriate to compel compliance from these respondents, act as a
general deterrent, and maintain the public’s confidence in the administration
of justice. Justice is tempered by ordering no more than is necessary to
accomplish these legitimate ends; a balance I have considered in arriving at my
Order.
[19] The Minister is also seeking
solicitor-client costs and has provided a Bill of Costs showing a total of $19,905.74,
being $18,200.95 in fees and $1,704.79 in disbursements. The amount appears to
the Court to be reasonable and, in these circumstances, it is appropriate that
the Minister not be out of pocket for having to enforce this Court’s Orders.
ORDER
THIS
COURT ORDERS that:
1.
The respondents, having been found on July 4, 2012, guilty of contempt of this
Court's Order dated February 7, 2012, and having failed to provide the Minister
with the information and documents set out in the Court’s Order dated July 4,
2012, and having provided no defence or explanation for having failed so to do,
shall pay a fine of $5,000.00 within 30 days from the date of service of this
Order, and shall also pay the applicant's legal costs in the amount of $19,905.74
within
30 days from the date of service of this Order. Failure to pay this fine and
the legal costs within 30 days shall subject the respondent, Tel Sutherland, to
30 days imprisonment.
2. The
respondents shall also provide the information and documents set out in the
Court's Order dated July 4, 2012, except those described in these Reasons for
Order as having been provided since that date, within 30 days from the date of
service of this Order, failing which Tel Sutherland shall be imprisoned for three
(3) years, such term to run consecutive to any other term of imprisonment
imposed by this Order.
3.
Tel Sutherland shall not be imprisoned for failure to pay the fine or the legal
costs described in paragraph 1 of this Order if within 30 days from the date of
service of this Order the respondents arrange with the Minister for an oral
examination under oath and provide evidence satisfactory to the Court
that they are not presently able to pay the fine or the legal costs, or that they
need an extended time period in which to pay.
4.
Tel Sutherland shall not be imprisoned for failure to produce the documents and
information described in paragraph 2 of this Order if within 30 days from the
date of service of this Order the respondents arrange with the Minister for an
oral examination under oath, and provide evidence satisfactory to the
Court that they are not able to produce those documents or information and that
their inability to do so does not stem from their own intentional actions,
recklessness, or negligence.
5.
If the Minister informs the Court by affidavit that payment of either the fine
or the legal costs described in paragraph 1 of this Order has not been made
within 30 days from the date of service of this Order and that the respondents
have not arranged with the Minister for an oral examination under oath with
respect to their ability to pay the fine or the legal costs, and the
respondents have not satisfied the Court in accordance with paragraph 3 of this
Order, the Court shall issue a warrant for the imprisonment of Tel Sutherland for
30 days.
6. If
the Minister informs the Court by affidavit that the respondents have not
provided the information and documents set out in paragraph 2 of this Order
within 30 days from the date of service of this Order and that the respondents
have not arranged with the Minister for an oral examination under oath with
respect to their ability to produce those documents and information, and the
respondents have not satisfied the Court in accordance with paragraph 4 of this
Order, then the Court shall issue a warrant for the imprisonment of Tel
Sutherland until the Minister informs the Court by affidavit that the
respondents have provided all of the information and documents set
out in paragraph
2 of this Order, or a term of three (3) years, whichever is earlier. Such term
shall run consecutive to any other term of imprisonment imposed by this Order.
“Russel
W. Zinn”
SCHEDULE
“A”
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Bank
Note
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Account
#
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2007
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2008
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2009
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All for the year (Y/N)
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BMO
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Redacted
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Y
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Y
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Y
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TD
Canada Trust
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Redacted
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Y
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Y*3
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N/A
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TD
Canada Trust
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Redacted
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Y
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Y*1
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N/A
|
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ATB
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Redacted
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Y
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Y
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N*7
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ATB
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Redacted
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Y
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Y
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N*6
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ATB
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Redacted
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Y
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Y
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N*6
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ATB
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Redacted
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Y
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Y
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N*6
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Royal
Bank
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^
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Redacted
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Y
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Y
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N*9
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TD
Canada Trust
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Redacted
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Y
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Y*5
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N/A
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TD
Canada Trust
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Redacted
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Y
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Y*4
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N/A
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ATB
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Redacted
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Y
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Y
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N*6
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ATB
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Redacted
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Y
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Y
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Y*8
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ATB
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Redacted
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Y*
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Y
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N*6
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BMO
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Redacted
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N/A
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Y*2
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Y
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*Missing
Feb, 2006 Stmt
*1-
Account closed March 9, 2007
*2-
Account opened March 28, 2007
*3-
Account closed March 9, 2007
*4-
Account closed March 9, 2007
*5-
Account closed April 10, 2007
*6-
Missing Jan 2008 Stmt
*7-
Missing Dec 2008 & Jan 2009 Stmt
*8-
Account closed June 11, 2008
*9-
Missing all statements – Feb 2008 to Jan 2009
^ -
Also require Jan 2006 & Feb 2009 bank statements as monthly bank statements
do not go to end of month. i.e. Jan 31st.
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