R. v. Mariani, 2019 ONCJ 128

In July 2013 a CRA auditor (Mrs. Voth) became suspicious that the corporation under audit (“MMFL”) had paid for substantial construction work on the home of its individual shareholder (Mr. Mariani). However, she did not turn the file over to the criminal investigations group until February 2014, when she encountered evidence suggesting to her that the invoices on hand at MMFL from the building contractor (Capoferro) had been fraudulently altered to disguise that this was going on. The criminal investigations unit then did a search of the MMFL business premises and the residence of Mr. Mariani in December 2015 pursuant to a search warrant, removed computers and digital data storage, along with boxes of paper documents, from both sites, and over the course of several months extracted business records from the computers and data storage units. Tax evasion charges ultimately were laid against MMFL and Mr. Mariani under ITA s. 239(1)(d) and ETA s. 327(1).

After noting (at para. 36) that “There appears to be no clear line between when a CRA auditor will chose to administer a civil penalty as opposed to transferring the matter over to investigations for the laying of actual charges and for the imposition of penal sanctions.,” and (at para. 42) that in July 2013 “any reasonable person would have suspected that MMFL was paying for the work done by Capoferro on Mr. Mariani’s personal residence and that Mr. Mariani was declaring a personal expense as a business expense,” Greene J found that the evidence supported “Mrs. Voth’s assertion that up until February 2014 she was only exploring civil penalties and civil liability” (para. 52). Accordingly, the evidence obtained on the search should not be excluded on Jarvis grounds.

However, the search warrant did not authorize the CRA investigators to conduct a thorough search of the data storage units. Accordingly (para. 67):

the CRA investigators violated Mr. Mariani’s and MMFL’s section 8 Charter rights when they conducted a thorough search of the data storage units found in the premises at MMFL and at Mr. Mariani’s residence.

However, the “admission of the evidence at the Applicants’ trial would not put the administration of justice into disrepute” under the Charter s. 24(2) test given that “while all Charter breaches are serious, the breaches in the case at bar are at the lower end of the continuum” (para. 79). In particular, the “the CRA investigators honestly believed that the warrant permitted the search of the computers and the ability to forensically examine the computers” (para. 79) and since the “CRA officers limited their search to banking records, tax forms, invoices and similar documents,” “the privacy interest was arguably reduced” (para. 80). Accordingly, the evidence should not be excluded.

A CRA auditor had a strong suspicion that the audited company (MMFL) had been paying for substantial construction work on its individual shareholder’s home, but she did not transfer the file over to criminal investigations until eight months later when she encountered evidence suggesting that invoices on hand at MMFL from the building contractor had been fraudulently altered to disguise that this was going on. Greene J found that this did not engage the Jarvis doctrine based on evidence of the CRA auditor that, up until that point, she was exploring s. 163(2) civil penalties rather than considering it to be a criminal matter. Accordingly, the evidence subsequently seized pursuant to a search warrant after the transfer of the file to criminal investigations was not excluded by Greene J on Jarvis grounds.

However, there was a deficiency in the search warrant. It authorized CRA to seize records and data storage units, but did not authorize CRA to conduct a thorough search of the data storage units. However, Greene J found that s. 24(2) permitted this evidence seized contrary to s. 8 of the Charter to be used at trial since the admission of such evidence would not put the “administration of justice into disrepute.” In particular, “the CRA investigators honestly believed that the warrant permitted the search of the computers and the ability to forensically examine the computers” (para. 79) and since the “CRA officers limited their search to banking records, tax forms, invoices and similar documents,” “the privacy interest was arguably reduced” (para. 80).