Docket: A-83-13
Citation: 2014 FCA 156
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CORAM:
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DAWSON J.A.
TRUDEL J.A.
NEAR J.A.
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BETWEEN:
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JACK KLUNDERT
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Appellant
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and
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HER MAJESTY THE QUEEN
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Respondent
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REASONS FOR
JUDGMENT
DAWSON J.A.
[1]
For reasons cited as 2013 FC 110, a judge of the
Federal Court dismissed a motion brought by the appellant. The appellant
sought an order that monies collected by the Canada Revenue
Agency pursuant to a jeopardy order issued by the Federal Court be applied to
criminal fines imposed upon the appellant as a result of a conviction for tax
evasion.
[2]
The facts giving rise to the motion are
uncontroversial. On June 11, 1998, the Minister of National Revenue assessed
the appellant for $927,893.89 in outstanding taxes for the 1993-1996 taxation
years. Although the appellant filed notices of objection to these assessments,
the Minister sought a jeopardy order under section 225.2 of the Income Tax
Act, R.S.C. 1985, c. 1 (5th Supp.) (Act), in order to immediately enforce
payment of the amounts assessed. The order was granted by a judge of the Federal
Court on April 26, 1999.
[3]
Part of the information used to support the
Minister’s application for the jeopardy order was obtained on a search of the
appellant’s home and business premises, conducted pursuant to a search warrant
lawfully issued in the course of the Canada Revenue Agency’s criminal
investigation of the appellant for tax evasion.
[4]
Subsequently, the jeopardy order was upheld by a
judge of the Federal Court in a review conducted pursuant to subsection
225.2(8) of the Act.
[5]
Approximately two years later, the appellant
again sought to set aside or vary the jeopardy order to allow reasonable living
expenses. The jeopardy order was again upheld; the reviewing judge found the
appellant had not established that the order was unreasonable or constituted undue
hardship.
[6]
In 2010, the appellant was convicted of tax
evasion in a trial held before the Ontario Superior Court. As a result of that
conviction, the appellant was required to pay $522,346.73 in fines in respect
of the 1993 through 1997 taxation years. In a separate proceeding a further
fine of $101,398.80 was imposed for tax evasion relating to the 2000 through
2005 taxation years.
[7]
The appellant now argues that because evidence
obtained during the investigation of his criminal tax evasion was used to obtain
the jeopardy order, amounts collected under that order should first be applied
to pay his criminal fines. He seeks this relief on the basis that:
i)
The Canada Revenue Agency violated the
principle articulated by the Supreme Court in R. v. Jarvis, 2002 SCC 73,
[2002] 3 S.C.R. 757, at paragraph 84, that there must be “some
measure of separation between the audit and investigative functions within” the
Canada Revenue Agency;
ii)
The Canada Revenue Agency used its criminal
powers, namely the right to seek and obtain a search warrant under section 487
of the Code to enforce a civil debt; and
iii) The allocation of 100% of his income towards a civil liability together
with his exposure to the issuance of a warrant for incarceration for
non-payment of a fine, give rise to security of person “concerns” under section 7 of the Charter of Rights and
Freedoms;
[8]
In my view, for the following reasons, the Judge
did not err in dismissing the appellant’s motion.
[9]
First, the appellant reads Jarvis out of
context. In particular, his reliance upon the portion of paragraph 84 of the
Court’s reasons quoted above is misplaced.
[10]
In Jarvis, the Supreme Court held that a
criminal investigation does not suspend or prevent the Minister from conducting
civil audits or civil enforcement proceedings. I accept the submission of the
respondent that there is no reason why information obtained in a criminal
investigation, such as information gathered pursuant to a lawful search
warrant, should not be available for related civil purposes.
[11]
The concern that animated the Court in Jarvis
was that when the predominant purpose of an inquiry is the determination of
penal liability, the full panoply of Charter rights are engaged for the
taxpayer’s protection.
[12]
The appellant does not challenge the validity of
any search warrant used to collect evidence for the criminal investigation. It
follows that there is no basis to conclude that any of the appellant’s Charter
rights were violated and no reason to conclude that properly obtained evidence
could not also be used in support of the motion for a jeopardy order.
[13]
Second, I disagree that the Canada Revenue
Agency used its criminal powers to enforce a civil debt. The Judge found as a
fact that, based on the appellant’s conduct (such as his position that “collecting income tax by the government is against the
Constitution of Canada”), the authorities had
every reason to believe the appellant would not voluntarily pay his taxes.
[14]
This finding has not been shown to be palpably
and overridingly wrong. It follows, in my view, that the appellant has failed
to establish that the jeopardy order would not have issued but for evidence
obtained by way of a search warrant.
[15]
Additionally, while a criminal investigation may
not be used in terrorem over alleged debtors, there is no evidence of
any in terrorem threat in this case. The fact some evidence obtained
through a search warrant was put before the Court in the motion to obtain a
jeopardy order does not disclose any impropriety.
[16]
Finally on this point, the Canada Revenue
Agency’s use of the jeopardy order to enforce payment of a tax debt is not
analogous to the use of criminal powers to enforce a civil debt.
[17]
Third, section 225.2 of the Act is a
comprehensive scheme for obtaining and contesting jeopardy orders (Tennina
v. Canada (Minister of National Revenue – M.N.R.), 2010 FCA 25, 402 N.R.
1). The only mechanism for varying or vacating a jeopardy order is an
application for review by a judge of the court which originally issued the
jeopardy order (subsections 225.2(8) and (13) of the Act). No appeal lies from
such review.
[18]
In the present case, the jeopardy order was reviewed
under subsection 225.2(8). On the first review the appellant sought an order
quashing the search warrants and an order excluding evidence obtained as a
result of the search warrants pursuant to subsection 24(2) of the Charter of
Rights and Freedoms. The jeopardy order was upheld. The appellant then
sought a second review challenging the collection of 100% of his income. He
again alleges abuse of the Canada Revenue Agency’s audit/administrative and
investigative powers and again asserts that 100% of his income ought not to be
subject to execution. To the extent these matters were dealt with on the review
of the jeopardy order, this motion constitutes a collateral attack on the
jeopardy order proceedings.
[19]
That leaves for consideration the appellant’s
argument that non-payment of the criminal fines exposes him to risk of
incarceration so as to engage section 7 of the Charter.
[20]
Assuming, without deciding that such a threat
engages section 7, the appellant has failed to demonstrate that the process
followed to date, or to be followed, was or is not in accordance with the
principles of fundamental justice.
[21]
For these reasons, I would dismiss the appeal
with costs.
“Eleanor
R. Dawson
“I agree.
Johanne Trudel J.A.”
“I agree.
D.G. Near J.A.”
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