Harper
J.-
PART
ONE:
The
Facts
1.
The
defendant
Peter
W.
Pacey
stands
charged
in
his
own
right
of
three
counts
of
failing
to
comply
with
a
personally
served
demand
made
upon
him
under
paragraph
231.2(l)(a)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
for
the
taxation
years
1989,
1990,
and
1991,
contrary
to
subsection
238(1)
of
the
same
Act.
Calithumpians
Theatre
Co.
also
stands
charged
with
three
counts
of
equivalent
acts
during
the
same
time
periods.
2.
In
his
capacity
of
a
Director
of.
the
corporate
entity
known
as
Calithumpians
Theatre
Co.
the
said
Peter
W.
Pacey
is
also
charged
with
three
counts
alleging
that
he
directed,
authorized,
assented
to,
acquiesced
in
or
participated
in
the
commission
of
the
offence
of
the
said
Calithumpians
Theatre
Co.
in
its
failure
to
file
returns
for
the
same
time
periods.
3.
Since
the
operative
word
in
6
of
the
said
9
counts
are
the
(mutatis
mutandis)
it
will
suffice
to
quote
one
count
for
the
purpose
of
rendering
judgment
in
the
those
particular
matters.
4,
As
laid
in
the
first
instance
each
of
all
nine
counts
stated
that
the
respective
defendants
violated
a
subsection
of
the
“Income
Tax
Act,
R.S.C.
1952,
Chapter
148
as
amended.”
When
the
defendants
first
appeared
to
answer
to
the
charges,
each
pleaded
“not
guilty”
and
the
Crown
amended
each
of
the
nine
counts
so
as
to
allege
a
violation
of
a
subsection
of
the
“Income
Tax
Act,
R.S.C.
1970-71-72”.
5.
The
present
wording
of
Count
#1
of
the
Information
against
the
defendant
Peter
W.
Pacey
in
his
own
right,
(and
the
present
wording
of
the
equivalent
count
against
the
defendant
Calithumpians
Theatre
Co.
with
the
necessary
changes)
is
as
follows:
Peter
W.
Pacey
on
or
about
the
10th
day
of
May,
1993,
at
or
near
the
City
of
Fredericton,
York
Country,
Province
of
New
Brunswick,
unlawfully
failed
to
comply
with
the
demand
in
a
personally-served
notice
dated
the
1st
day
of
February,
1993,
made
upon
him
pursuant
to
paragraph
231.2(l)(a)
of
the
Income
Tax
Act
in
that
he
did
not
provide
to
the
Minister
of
National
Revenue
at
Saint
John,
in
the
County
of
Saint
John,
Province
of
New
Brunswick,
a
completed
and
signed
Individual
Income
Tax
Return
on
form
T1
for
the
taxation
year
1989,
including
a
statement
of
Assets
and
Liabilities
and
a
Statement
of
Income
and
Expenses,
required
from
him,
contrary
to
subsection
238(1)
of
the
Income
Tax
Act,
R.S.C.
1970-71-72.
[Note:
The
second
and
third
counts
in
each
of
the
Informations
against
Peter
Pacey
in
his
own
right
and
against
the
Calithumpians
Theatre
Corporation
were
of
similar
wording,
excepting
only
that
they
referred
to
the
taxation
years
1991
and
1992
respectively.
6.
The
three
count
Information
laid
against
Peter
W.
Pacey
in
his
capacity
as
a
Director
of
Calithumpians
Theatre
Co.
alleged
a
slightly
different
time
frame,
to
wit:
the
taxation
years
ending
March
31st
1990,
1991,
and
1992.
The
first
Count
of
said
Information
reads
as
follows:
Count
1:
Peter
W.
Pacey
on
or
about
the
tenth
day
of
May,
1993,
at
or
near
the
City
of
Fredericton,
York
County,
Province
of
New
Brunswick,
being
a
Director
of
Calithumpians
Theatre
Co.
did
direct,
authorize,
assent
to,
acquiesce
in
or
participate
in
the
commission
of
an
offence
by
the
said
Calithumpians
Theatre
Co.
failure
to
file
a
completed
and
signed
Corporation
Income
Tax
Return
on
Form
T2
for
the
taxation
year
ended
March
31,
1990,
including
a
statement
of
assets
and
liabilities
and
a
statement
of
Income
and
Expenses
following
a
personally
served
notice
date
the
1st
day
of
February,
1993,
made
upon
the
said
Calithumpians
Theatre
Co.,
pursuant
to
paragraph
231.2(l)(a)
of
the
Income
Tax
Act,
R.S.C.
1971-71-72
as
amended
and
is
thereby
a
party
to
and
guilty
of
the
said
offence
by
virtue
of
section
242
of
the
said
Act.
[Note:
Counts
2
and
3
of
the
same
information
allege
similar
offences
for
the
taxation
years
ending
March
31,
1991
and
1992
respectively.
7.
At
the
request
of
Mr.
Theriault
for
the
Crown,
the
Court
considered
in
the
first
instance
the
charges
against
Mr.
Pacey
personally.
No
order
of
consolidation
was
made,
and
strictly
speaking
there
are
three
informations
each
containing
three
counts
which
are
separately
before
the
Court
for
adjudication.
Since
the
arguments
applicable
to
each
are
very
similar,
however
I
have
elected
to
consider
all
technical
arguments
at
the
one
time.
8.
Evidence
was
adduced
by
the
Crown
by
way
of
affidavit
and
in
addition
the
Informant
James
F.
McAlduff
testified
orally
as
did
the
defendant
Peter
W.
Pacey
and
his
accountant
Bruce
Lunergan,
C.A.
Credibility
is
not
an
issue
in
any
of
the
instant
matters.
9.
The
affidavit
evidence
was
all
sworn
to
by
James
McAlduff,
a
compliance
officer
with
Revenue
Canada
and
was
with
respect
to
personal
service
of
a
notice
upon
all
three
defendants
on
February
3rd,
1993
under
paragraph
231.2(1)(a)
of
the
Income
Tax
Act,
and
evidencing
their
respective
failures
to
comply
with
the
demands
made
in
said
notices.
The
contents
of
each
notice
varied
but
slightly
one
from
the
other
and
the
pertinent
text
read
as
follows:
Revenue
Canada
Taxation
February
1,
1993
Gentlemen:
For
purposes
related
to
the
administration
or
enforcement
of
the
Income
Tax
Act,
pursuant
to
the
provisions
of
paragraph
231.2(l)(a)
of
the
said
Act,
I
hereby
require
from
you
on
or
before
the
7th
day
of
May,
1993:
A
completed
and
signed
Income
Tax
Return
on
Form
T1
for
the
taxation
year
ended
March
31,
1990,
including
a
statement
of
Assets
and
liabilities
and
a
Statement
of
Income
and
Expenses.
If
this
requirement
is
not
complied
with
on
or
before
the
7th
day
of
May,
1993
you
will
be
liable
to
prosecution
without
further
notice.
Subsection
238(1)
of
the
said
Act
provides
that
a
person
who
fails
to
comply
with
this
requirement
is
guilty
of
an
offence
and
is
liable
on
summary
conviction
to
a
fine
of
not
less
than
$1000,
and
not
more
than
$25,000
or
both
the
fine
and
imprisonment
not
exceeding
12
months.
In
addition,
subsection
162(2)
of
the
said
Act,
provides
that
every
person
who
has
failed
to
make
a
return
as
and
when
first
required
to
be
filed
is
liable
to
a
penalty
equal
to
the
aggregate
of
10
per
cent
of
the
tax
for
the
year
that
was
unpaid
when
the
return
was
required
to
be
filed
and
2
per
cent
of
the
tax
that
was
unpaid
when
the
return
was
required
to
be
filed
multiplied
by
the
number
of
complete
months,
not
exceeding
20,
from
the
date
on
which
the
return
was
filed.
That
penalty
is
hereby
demanded
of
you.
The
return,
as
described
above,
is
required
to
be
forwarded
to
the
Saint
John
District
Taxation
Office
at
the
address
shown
below
to
the
attention
of
J.
McAlduff.
10.
It
is
of
great
import
in
the
instant
matters
that
Revenue
Canada
could
well
have
proceeded
in
each
instance
by
way
of
a
demand
made
under
the
provisions
of
subsection
150(2)
of
the
Act,
which
reads
as
follows:
150(2)
Demands
for
returns.—
Every
person,
whether
or
not
the
person
is
liable
to
pay
tax
under
this
Part
for
a
taxation
year
and
whether
or
not
a
return
has
been
filed
under
subsection
(1)
or
(3),
shall,
on
demand
from
the
Minister
served
personally
or
by
registered
letter,
file,
within
such
reasonable
time
as
may
be
stipulated
in
the
demand,
with
the
Minister
in
prescribed
form
and
containing
prescribed
information
a
return
of
the
income
for
the
taxation
year
designated
in
the
demand.
11.
The
penalties
for
failing
to
file
pursuant
to
a
demand
made
under
subsection
150
(2)
are
drastically
different
from
those
applicable
to
a
failure
to
comply
with
a
notice
under
paragraph
232.2(1
)(a).
Those
applicable
to
a
failure
to
comply
after
a
subsection
150(2)
demand
are
found
in
section
162
of
the
Act
which
reads
as
follows:
162
Failure
to
file
return
of
Income.
(1)
Every
person
who
fails
to
file
a
return
of
income
for
a
taxation
year
as
and
when
required
by
subsection
150(1)
is
liable
to
a
penalty
equal
to
the
total
of
(a)
an
amount
equal
to
five
per
cent
of
the
person’s
tax
payable
under
this
Part
for
the
year
that
was
unpaid
when
the
return
was
required
to
be
filed,
and
(b)
the
product
obtained
when
1
per
cent
of
the
person’s
tax
payable
under
this
Part
for
the
year
that
was
unpaid
when
the
return
was
required
to
be
filed
is
multiplied
by
the
number
of
complete
months,
not
exceeding
12,
from
the
date
on
which
the
return
was
required
to
be
filed
to
the
date
on
which
the
return
was
filed.
[NOTE:
If
no
tax
is
found
to
be
payable
there
is
no
penalty!]
12.
Subsection
162(2)
refers
to
“repeated
failures
to
file”
and
provides
for
a
penalty
of
10
per
cent
of
the
tax
that
was
unpaid
when
the
return
was
required
to
be
filed
plus
two
per
cent
of
the
tax
that
was
unpaid
when
the
return
was
required
to
be
filed
multiplied
by
the
number
of
complete
months
not
exceeding
twenty,
from
the
date
on
which
the
return
was
required
to
be
filed
to
the
date
on
which
the
return
was
filed.
Subsection
163(2)
provides
for
even
greater
penalties
when
false
statements
or
omission
are
made
by
the
person
making
the
return.
All
of
said
penalties,
however,
are
civil
in
nature
and
not
quasi-criminal.
13.
The
formal
demands
in
this
case
served
personally
upon
Pacey
incorporate
a
demand
for
payment
of
the
penalties
provided
for
in
subsection
162(2)
although
no
reference
is
made
in
any
of
said
demands
of
any
“repeated
failure
to
file”
which
is
the
basis
for
the
increase
penalties
provided
for
in
that
section.
Nothing
turns
on
this.
14.
Section
231.2
of
the
Act
reads
as
follows:
231.2(1)
Notwithstanding
any
other
provision
of
this
Act,
the
Minister
may,
subject
to
subsection
(2),
for
any
purposes
related
to
the
administration
or
enforcement
of
this
Act,
by
notice
served
personally
or
by
registered
or
certified
mail,
require
that
any
person
provide,
within
such
reasonable
time
as
is
stipulated
in
the
notice,
(a)
any
information
or
additional
information,
including
a
return
of
income
or
a
supplementary
return;
or
(b)
any
document,
(ss.
(2)
not
applicable).
15.
The
penalties
for
a
failure
to
comply
with
a
notice
pursuant
to
paragraph
231.2(l)(a),
however,
are
much
more
severe
and
are
found
in
subsection
238
(1)
of
the
Act,
which
section
reads
as
follows:
238.
Offences
and
Punishment.
(1)
Every
person
who
has
failed
to,
file
or
make
a
return
as
and
when
required
by
or
under
this
Act
or
a
regulation
or
who
has
failed
to
comply
with
subsection
116(3),
(127(3.1),
or
(3.2)
147.1(7)
or
153(1),
any
of
subsections
230
to
232
or
a
regulation
made
under
subsection
147.1(18)
or
with
any
order
made
under
subsection
(2)
is
guilty
of
an
offence
and,
in
addition
to
any
penalty
otherwise
provided,
is
liable
on
summary
conviction
to
(a)
a
fine
of
not
less
than
$1,000
and
not
more
than
$25,000;
or
(b)
both
the
fine
described
in
paragraph
(a)
and
imprisonment
for
a
term
not
exceeding
12
months.
[Note:
subsection
239(2)
provides
for
procedure
by
indictment.]
16.
It
is
of
note
that
a
failure
to
comply
with
subsection
150(2)
is
not
one
of
the
specified
sections
justifying
a
charge
under
section
238,
and
it
may
well
be
that
the
maxim
“Expression
unius
est
exclusio
alterius”
is
applicable
to
the
instant
matter.
Such
argument
was
not
advanced
before
me
by
either
party,
and
to
my
knowledge
there
are
no
precedents
with
reference
to
such
a
view.
17.
It
is
the
position
of
the
Crown
that
it
is
open
to
the
Minister
in
his
sole
discretion
to
proceed
under
either
section.
The
defendant
does
not
agree.
18.
The
evidence
indicated
that
on
May
3,
1993,
(just
four
days
before
the
date
required
for
compliance)
the
defendant
notified
Bruce
Lunergan,
his
accountant,
of
the
said
notice
he
had
personally
received
on
February
3,
1993
and
asked
for
instructions.
Pacey
was
informed
to
get
his
records
together
so
that
Lunergan’s
office
could
prepare
the
returns.
On
May
4,
1993,
Lunergan
telephoned
James
McAlduff
and
advised
him
that
he
had
seen
Pacey
and
that
he
would
work
on
the
matter
as
soon
as
the
material
was
provided
him
by
the
defendant.
19.
Lunergan
received
the
bulk
of
the
material
required
from
Pacey
on
June
19
or
20
and
assigned
a
member
of
his
staff
to
work
on
the
matter
Over
the
next
month
or
so
further
information
was
supplied
Lunergan’s
office
by
Pacey,
but
even
as
of
the
end
of
July,
1993,
a
bank
statement
that
Lunergan
felt
was
necessary
was
still
not
produced
by
Pacey,
but
in
any
event,
the
demand
was
eventually
complied
with
in
November
and
December
without
the
missing
bank
statement.
20.
According
to
Lunergan’s
testimony,
if
the
missing
bank
statement
had
been
included
with
the
final
material
deposited
with
his
office
by
Pacey,
his
firm
might
possibly
have
had
the
returns
prepared
by
mid-August,
1993.
In
the
final
analysis
the
required
information
was
not
filed
until
November
and
December
1993.
All
informations
were
laid
on
November
3,
1993.
No
request
for
an
extension
was
made
or
requested.
Pacey
offered
no
cogent
excuse
for
his
failure
to
comply
with
the
demand.
He
claimed
to
be
“mathematically
illiterate”,
although
he
admitted
to
having
a
University
education
and
to
having
taught
High
School
for
a
number
of
years
prior
to
starting
his
own
Theatre
company.
He
admitted
to
filing
his
returns
on
time
each
year
that
he
was
a
teacher.
21.
Mr.
McAlduff
testified
that
he
was
a
compliance
officer
with
revenue
Canada
and
that
he
had
been
involved
with
the
defendant
for
approximately
6
years
“in
pursuing
compliance
with
the
filing
requirements
of
the
Income
Tax
Act.
That
is,
getting
Mr.
Pacey
to
file
on
a
timely
basis....”
22.
After
being
questioned
as
to
whether
or
not
a
prosecution
would
have
ensued
in
any
event
if
the
returns
had
been
made
late
in
time
but
prior
to
the
laying
of
an
information
he
stated
the
following:
“I
indicated
that
prosecution
is
not
the
goal,
that’s
not
the
main
purpose
of
serving
these
notices.
the
purpose
is
to
obtain
a
timely
compliance
to
filing
requirements
of
the
Act.”
He
also
admitted
that
he
dealt
with
Mr.
Lunergan
as
Mr.
Pacey’s
accountant
with
reference
to
similar
late
filings
on
at
least
one
previous
occasion.
PART
TWO:
The
Issues
23.
Although
argument
was
raised
at
trial
by
defendant’s
counsel
with
reference
to
the
manner
in
which
the
various
affidavits
were
sworn,
the
Court
was
satisfied
that
it
was
proper
for
Mr.
McAlduff
to
swear
to
all
or
any
combination
of
the
various
affidavits
at
the
one
time
in
that
the
officer
taking
his
oath
referred
to
“these
your
affidavits”
or
words
to
like
effect
and
the
defendant
did
not
pursue
the
matter
in
his
brief
filed
after
trial.
24.
The
defendant
raises
three
issues
as
follows:
1
:
Should
the
charge
be
based
upon
subsection
150(2)
of
the
Income
Tax
Act
as
opposed
to
paragraph
231.2(1)(a)
of
the
Income
Tax
Act?
2:
Was
statutory
reference
to
the
Income
Tax
Act,
1970.
incorrect
and
if
so,
was
the
defendant
prejudiced?
3:
Did
the
defendant’s
actions
in
this
matter
amount
to
due
diligence?
25.
This
Court
will
consider
the
issues
in
the
same
order
as
raised
by
the
defendant.
No
one
in
Canada
is
liable
to
pay
income
tax
unless
he
has
received
taxable
income.
Nor
is
he
obliged
to
file
a
return
unless
he
has
(a)
been
in
receipt
of
taxable
income
during
any
taxation
year,
or,
(b)
in
the
alternative
he
has
received
a
demand
from
the
Minister
under
the
provisions
of
subsection
150(2)
of
the
Act.
Apart
from
section
150
there
is
no
section
which
requires
any
one
to
file
an
Income
Tax
return
in
the
first
instance.
26.
Neither
a
failure
to
file
a
return
for
any
year
in
which
a
person
has
received
taxable
income,
nor
a
failure
to
file
a
return
after
a
demand
by
the
Minister
are
of
themselves
offences
in
the
first
instance,
but
none
the
less
a
failure
to
file
a
return
after
receiving
taxable
income
for
any
year
or
failure
to
file
after
demand
makes
a
person
liable
to
certain
penalties
which
may
be
exacted
from
the
delinquent
taxpayer
without
going
to
Court.
27.
Section
162
provides
that
any
person
who
fails
to
file
as
and
when
required
by
section
150
is
liable
to
a
penalty
equal
to
the
total
of
five
per
cent
of
the
person’s
tax
payable
for
the
year
that
was
unpaid
as
of
the
date
that
the
return
was
required
to
be
filed
plus
the
product
obtained
when
one
per
cent
of
the
person’s
tax
payable
for
the
year
that
the
return
was
required
to
be
filed
is
multiplied
by
the
number
of
complete
months,
(not
exceeding
12)
from
the
date
on
which
the
return
was
required
to
be
filed
to
the
date
on
which
it
was
filed.
28.
There
are
various
other
penalties
imposed
in
Part
I
of
the
Act
appertaining
to
false
statements
in
a
return,
failure
to
supply
a
Social
Insurance
number
after
demand
and
various
other
infractions
of
the
requirements
to
file
a
return,
but
all
of
these
penalties
are
civil
penalties,
and
are
imposed
by
the
Act
and/or
the
Regulations
themselves
by
operation
of
law
and
are
not
criminal
or
quasi
criminal
offences.
See:
R.
v.
Sharma
(sub
nom.
The
Queen
v.
Sharma),
[1987]
2
C.T.C.
253,
87
D.T.C.
5424
(Ont.
S.C.).
Also
Sommers
v.
Minister
of
National
Revenue,
[1991]
1
C.T.C.
2451,
91
D.T.C.
656
(T.C.C.).
29.
Collection
of
these
various
penalties
is
similar
to
collection
of
a
civil
judgment
except
that
the
Minister
has
much
wider
powers
and
may,
for
example,
garnishee
salaries
without
further
process.
See
section
222
et
seq.
of
the
Act.
30.
Part
XV
of
the
Act
deals
with
administration
and
enforcement.
Sections
238
et
seq.
deal
with
offences
and
punishment.
In
years
past
there
was
a
separate
offence
section
dealing
with
failure
to
file
a
return
pursuant
to
section
150.
It
established
that
a
failure
to
file
pursuant
to
section
150
was
a
summary
conviction
offence
and
it
read
in
part
as
follows:
131(1)
Every
person
who
has
failed
to
file
a
return
as
and
when
required
by
or
under
this
Act
or
a
regulation
is
guilty
of
an
offence
and,
in
addition
to
any
penalty
otherwise
provided,
liable
on
summary
conviction
to
a
fine
of
not
less
than
$25
for
each
day
of
default.
(2)
Every
person
who
has
failed
to
comply
with
or
contravened
subsection
(1)
of
section
47,
subsection
(5)
of
section
123,
section
125
or
126
is
guilty
of
an
offence
and,
in
addition
to
any
penalty
otherwise
provided
is
liable
on
summary
conviction
to
(a)
a
fine
of
not
less
than
$200
and
not
exceeding
$10,000,
or
(b)
both
the
fine
described
in
paragraph
(a)
and
imprisonment
for
a
term
not
exceeding
6
months.
It
no
longer
exists.
31.
It
is
important
to
note
that
when
proceedings
are
commenced
under
section
238
of
the
Act,
the
minimum
fine
is
$1,000
on
each
count,
and
in
the
instant
situation
would
result,
upon
conviction,
to
a
total
fine
of
at
least
$9,000.
The
maximum
penalty
under
the
section
is
a
fine
of
$25,000
per
count
plus
imprisonment
for
12
months.
If
the
Crown
proceeds
by
way
of
Indictment
under
subsection
239(2)
the
Act
provides
for
an
additional
fine
of
not
less
than
100
per
cent
and
not
more
than
200
per
cent
of
the
amount
of
the
tax
that
was
sought
to
be
evaded
and
to
imprisonment
for
a
term
not
exceeding
five
years.
32.
It
seems
readily
apparent
from
subsection
239(2)
at
least,
that
the
pith
and
substance
of
both
subsections
238(1)
and
239(2)
is
the
punishment
of
wilful
tax
evaders,
and
not
the
punishment
of
a
taxpayer
who
is
merely
delinquent
in
filing
his
annual
returns.
There
is,
however
no
explicit
direction
to
that
effect
any
where
in
the
Act,
and
in
this
instance
the
Crown
has
elected
to
proceed
under
subsection
238(1).
The
Crown’s
position
is
that
it
is
open
to
it
to
choose
any
manner
of
prosecution
contained
in
the
Act.
The
defendant
argues
that
the
Crown
is
precluded
from
so
doing
by
virtue
of
certain
legal
precedents.
Mr.
Theriault.
for
the
Crown
submits
that
the
present
procedure
was
necessary
in
order
to
obtain
“a
statement
of
assets
and
liabilities
and
a
statement
of
Income
and
Expenses”
along
with
the
return.
With
respect,
subsection
150(2)
of
the
Act
and
other
sections
give
Revenue
Canada
the
power
to
demand
and
receive
any
and
all
information
it
may
require.
33.
The
first
case
relied
upon
by
the
defendant
is
the
Supreme
Court
of
Canada
decision
in
James
Richardson
&
Sons
Ltd.
v.
Minister
of
National
Revenue,
[1984]
1
S.C.R.
614,
[1984]
C.T.C.
345,
84
D.T.C.
6325.
In
that
case
the
Department
sought
the
appellant’s
magnetic
tape
file
of
its
commodity
monthly
statements
for
processing
on
a
test
basis.
At
first
the
appellant
complied,
but
did
not
identify
the
clients
on
the
tape.
The
Department
later
asked
for
that
information
and
it
was
refused
by
Richardson.
The
appellant
lost
in
the
courts
below,
but
was
successful
before
the
Supreme
Court.
34.
The
Minister
relied
upon
the
provisions
of
paragraph
231.2(1
)(a)
of
the
Act
which
reads
as
follows:
231.2(1).
Requirements
to
provide
documents
or
information
(1)
Notwithstanding
any
other
provision
of
this
Act,
the
Minister
may,
subject
to
subsection
(2),
for
any
purpose
related
to
the
administration
or
enforcement
of
this
Act,
by
notice
served
personally
of
by
registered
mail,
require
that
any
person
provide,
within
such
reasonable
time
as
is
stipulated
in
the
notice,
(a)
any
information
or
addition
information,
including
a
return
of
income
or
a
supplementary
return;
or
(b)
any
document.
35.
The
Court
found
that
the
Minister
could
not
conduct
a
“fishing
expedition”
into
the
affairs
of
one
broker’s
customers
under
subsection
221(3)
of
the
Act
in
order
to
check
generally
on
income
tax
compliance
by
traders
in
the
commodities
futures
market.
The
Court,
(after
acknowledging
that
the
language
of
paragraph
231.2(l)(a)
was
very
broad,)
stated
as
follows
in
its
conclusions:
231(3)
is
only
available
to
the
Minister
to
obtain
information
relevant
to
the
tax
liability
of
some
specific
person
or
person
if
the
tax
liability
of
such
person
or
persons
is
the
subject
of
a
genuine
and
serious
inquiry.
36.
Although
the
Supreme
Court
was
specifically
involved
with
subsection
(3)
in
Richardson,
the
general
tenor
of
its
remarks
lead
one
to
conclude
that
the
Section
in
general
is
only
applicable
in
those
instances
where
there
is
a
general
and
serious
inquiry
in
progress.
37.
The
next
precedent
upon
which
the
defendant
relies
is
Skalbania
Ltd.
v.
R.
(sub
nom.
Skalbania
Ltd.
v.
The
Queen).
This
was
a
judgment
of
the
B.C.
County
Court
delivered
in
1989.
It
is
reported
in
[1989]
2
C.T.C.
183,
89
D.T.C.
5495.
In
that
case,
the
defendant
was
convicted
on
three
counts
of
failing
to
comply
with
a
demand
from
the
Minister
of
National
Revenue
pursuant
to
paragraph
231.2(l)(a)
of
the
Act.
The
argument
of
the
defendant
was
the
same
in
Skalbania
as
it
is
in
the
instant
case.
He
argued
that
the
Minister
should
have
proceeded
pursuant
to
subsection
150(2)
of
the
Act,
rather
than
s.
231.2(1).
It
was
common
ground
in
Skalbania
that
there
was
no
on-going
investigation
with
reference
to
the
affairs
of
Mr.
Skalbania
and
in
point
of
fact
there
was
no
tax
owing
for
the
years
in
question.
38.
Van
der
Hoop,
Co.
Ct.
Judge
stated
as
follows
on
Page
185
(D.T.C.
5496):
With
respect,
I
conclude
that
the
learned
trial
judge
was
not
dealing
with
the
specific
issue
which
was
raised
before
him,
which
has
been
raised
again
on
this
appeal,
of
the
difference
between
the
two
sections.
The
Richardson
case
is
ample
authority
for
the
conclusion
that
subsection
231.2
is
available
to
the
Minister
to
facilitate
an
ongoing
and
serious
inquiry.
Subsection
150(2)
is
available
to
the
Minister
generally
to
demand
a
return
whether
or
not
a
tax
return
has
been
filed.
Since
the
demand
here
was
made
under
an
inapplicable
section,
the
conviction
cannot
be
sustained.
The
appeal
is
allowed
and
the
conviction
set
aside.
39.
The
defendant
also
relies
upon
the
cases
of
À.
v.
Dakus,
a
1992
decision
of
Girgulis,
J.
of
the
Alberta
Court
of
Queen’s
Bench
(unreported).
In
that
case,
all
the
requisite
facts
were
proven
by
affidavit
in
a
matter
involving
a
demand
under
paragraph
231(3)(a)
of
the
Act,
contrary
to
subsection
238(2)
of
said
Act..
The
defendant
successfully
argued,
however,
that
there
was
no
evidence
whatsoever
to
indicate
that
there
was
a
genuine
and
serious
inquiry
by
the
Minister
into
the
tax
liability
of
Mr.
Dakus.
The
Court
thus
found
that
the
Crown
has
proceeded
under
the
wrong
section
and
found
the
defendant
“not
guilty”
40.
The
learned
Justice
in
Dakus,
considered
the
cases
of
Canadian
Bank
of
Commerce
v.
Canada(Attorney
General),
[1962]
S.C.R.
729,
62
D.T.C.
1236
as
well
as
Richardson,
supra,
and
spoke
of
the
requirement
of
proof
necessary
to
decide
whether
or
not
the
demand
was
a
legitimate
enquiry
into
the
affairs
of
some
specific
person
or
persons,
concluded
as
follows
at
page
378:
...Cartwright
J.,
referred
to
whether
the
validity
of
the
requirement
was
to
be
determined
on
a
subjective
or
an
objective
basis,
and
concluded
that
the
latter
test
was
correct...the
clear
ratio
decidendi
is
that,
underlying
the
demand
there
must
be
the
purpose
of
obtaining
information
relevant
to
the
tax
liability
of
a
specific
person
or
persons.
41.
The
learned
Justice
in
Dakus
also
quoted
from
an
unreported
Judgment
of
His
Honour
Judge
Ketchum
in
The
Queen
v.
Schacher,
as
follows
at
page
379:
subsection
231(3)
is
only
available
to
the
Minister
to
obtain
information
relevant
to
the
tax
liability
of
some
specific
person
or
persons
if
the
tax
liability
of
such
person
or
persons
is
the
subject
of
a
genuine
and
serious
inquiry.
42.
The
Crown
offered
several
cases
in
support
of
its
position;
among
them
being
Canada
(Attorney
General)
v.
Cossette,
[1966]
C.T.C.
813,
66
D.T.C.
5468
(Que.
Q.B.);
R.
v.
Slupek
a
1992
decision
of
Mr.
Justice
Wilson
of
the
Alberta
Court
of
Queen’s
Bench,
Doc.
Edmonton
10107258P10101/02;
R.
v.
Leibel,
an
August
23,
1990
judgment
of
Lynn,
P.C.J;
of
Saskatchewan;
R.
v.
Skalbania,
[1991]
1
C.T.C.
160,
a
1990
decision
of
the
County
Court
of
British
Columbia;
Minister
of
National
Revenue
v.
Ruszkowski
et
al;
(unreported;);
a
Judgment
of
Goliath
J.
of
the
Ontario
Provincial
Court;
R.
v.
Alaouze;
a
1993
judgment
of
Sharpe,
J.
of
Ontario;
R.
v.
Merkle,
[1979]
C.T.C.
519,
80
D.T.C.
6027
(Alta.
C.A.);
R.
v.
J.P.
Consultants
Ltd.,
[1990]
2
C.T.C.
514,
a
1990
decision
of
Devine
J.
of
the
Manitoba
Provincial
Court;
R.
v.
Harding,
a
1992
decision
of
D.A.
Lavoie,
P.C.J
of
Saskatchewan.;
and
R.
v.
Philp',
a
1993
decision
of
Bovard
P.C.J
of
the
Ontario
Provincial
Court.
43.
Most
of
the
above
authorities
were
decided
on
a
strictly
factual
basis;
i.e.
that
there
was
a
serious
ongoing
investigation
into
the
business
affairs
of
the
defendant.
One
which
was
a
little
different,
however,
was
that
of
Sharpe
J.
in
Alaouze.
In
that
case
the
defendant
contended
that
there
was
no
ongoing
investigation,
but
apparently
called
no
evidence
in
support
of
that
position.
Sharpe
J.
found
that
the
phrase
“It
is
for
the
purposes
related
to
the
administration
or
enforcement
of
Income
Tax
Act.”
at
the
beginning
of
the
Demand
was
sufficient
evidence
to
indicate
an
investigation;
(or
rather,
the
absence
of
evidence
negating
an
investigation)
Judge
Sharpe
neatly
reversed
not
only
the
onus
of
proof
in
his
reasons,
but
as
well
he
relied
upon
an
amendment
to
paragraph
231.2(1
)(a)
passed
in
1986
which
added
the
words:
“Notwithstanding
any
other
provision
of
this
act”
which
he
found
added
meaning
to
the
section
to
such
an
extent
that
now
the
Department
need
not
even
mention
either
an
investigation
or
state
that
the
demand
was
made
“for
purposes
related
to
the
administration
and
enforcement
of
this
Act”.
I
do
not
agree
with
his
findings,
as
the
words
added
do
nothing
to
change
the
ratio
decidendi
in
Richardson
and
Skalbania,
supra.
PART
THREE:
Conclusions
44.
The
said
demands
served
upon
Pacey
are
obviously
an
amalgam
formed
by
combining
notice
of
the
civil
penalties
that
could
be
imposed
under
section
162
as
well
as
alleging
a
possible
quasi-criminal
summary
conviction
offence
arising
out
of
section
238
of
the
Act.
The
question
of
whether
the
two
proceedings
constitute
double
punishment,
(which
was
not
argued
before
me,)
does
not
arise
in
any
event
as
one
of
the
penalties
is
a
civil
penalty
and
is
not
imposed
pursuant
to
any
criminal
procedure.
See
R.
v.
Sharma,
[1987]
2
C.T.C.
253,
87
D.T.C.
5424
(SC
Ont.);
also
Sommers
v
Minister
of
National
Revenue,
[1991]
1
C.T.C.
2451,
91
D.T.C.
656
(T.C.C.).
This
Court
finds
that
the
demands
themselves
are
not
in
violation
of
the
statute
and
are
acceptable
in
form.
45.
Since
the
evidence
adduced
by
the
Crown
in
the
instant
matter
was
partly
by
way
of
affidavit
and
partly
viva
voce,
this
case
is
somewhat
different
than
the
ordinary
“run
of
the
mill”
prosecution
in
that
the
norm
is
to
proceed
by
way
of
affidavit
only.
46.
This
Court
finds
it
of
great
import
that
no
evidence
whatsoever
was
offered
by
the
Crown
as
to
the
amount,
(if
any,)
of
income
tax
owed
by
the
various
defendants,
and
I
therefore
assume
that
no
income
tax
was
found
to
be
due
when
the
returns
demanded
were
finally
filed.
47.
Since
no
assessment
of
any
civil
penalty
imposed
under
either
section
162
or
163
was
revealed
by
Mr.
McAlduff
either
by
affidavit
or
in
his
viva
voce
testimony,
this
Court
is
led
to
the
making
of
the
following
assumptions:
(a)
No
taxes
were
found
to
be
due
or
unpaid
by
any
of
the
defendants
for
the
periods
in
question;
and
(b)
The
actual
basis
upon
which
the
demands
were
predicated
and
the
only
reason
they
were
made,
was
a
desire
to
require
the
entities
in
question,
(who
had
been
repeatedly
delinquent
in
filing
annual
returns)
to
file
in
a
timely
manner.
48.
The
evidence
of
Mr.
McAlduff,
(which
I
accept
in
toto
without
reservation,)
is
very
clear
and
definite
that
Revenue
Canada
had
recurring
problems
over
the
last
6
years
or
so
in
obtain-returns
on
time
from
Pacey
and
the
companies
with
which
he
was
associated.
There
is
no
intimation
whatsoever
that
the
demands
were
based
upon
Revenue
Canada
undertaking
a
serious
investigation
of
Pacey’s
tax
liabilities,
nor
is
there
any
suggestion
of
fraud
on
the
part
of
any
one
concerned.
Through
his
Counsel,
Pacey
argues
that
the
Crown
“should
have
proceeded
under
section
150
instead
of
subsection
238(1)”.
Such
an
approach
would
preclude
any
proceedings
in
this
or
any
other
Court
as
no
question
of
a
quasi-criminal
nature
would
be
involved.
I
have
therefore
decided
to
consider
that
argument
of
the
defendants
as
if
it
were
based
upon
sections
7
and
8
of
the
Canadian
Charter
of
Rights
and
Freedoms.
Section
7
provides
for
the
right
to
life,
liberty
and
security
of
the
person
except
in
accord
with
the
principles
of
fundamental
justice
and
section
8
guarantees
the
right
not
to
be
subjected
to
any
cruel
or
unusual
treatment
or
punishment.
49.
It
was
argued
by
the
Crown
that
since
there
was
no
explicit
evidence
adduced
to
the
effect
that
there
was
not
a
serious
and
ongoing
investigation
of
the
tax
position
of
Pacey
and
the
other
defendants
in
progress,
that
the
case
of
Dakus,
supra
is
authority
for
the
assumption
that
there
was
such
an
inquiry
in
effect
at
the
time
demands
were
made.
50.
Such
an
argument
in
essence
provides
for
a
reverse
onus
requiring
the
defendant
prove
that
he
was
not
the
subject
of
a
serious
tax
investigation.
Although
the
Act
is
silent
on
the
point,
subsection
163(3)
of
the
Act
provides
that
whenever
any
penalty
assessed
by
the
Minister
is
appealed
and
becomes
in
issue,
the
burden
of
establishing
the
facts
justifying
the
assessment
of
the
penalty
is
on
the
Minister.
51.
Thus
being
the
case
in
the
matter
of
civil
penalties
assessed
(and
without
even
considering
the
provisions
of
the
Charter,)
it
must
be
assumed
a
fortiori
that
the
onus
is
no
the
Minister
to
establish
the
grounds
to
support
a
quasi-criminal
charge
under
section
238
of
the
Act.
52.
It
appears
obvious
to
me
that
in
instances
where
the
real
and
true
ground
upon
which
Revenue
Canada
bases
a
demand
for
a
return
is
merely
to
foster
its
desire
that
the
taxpayer
make
timely
returns
and
nothing
more
serious
than
that
proceedings
under
section
238
of
the
Act
result
in
a
Draconian
penalty
for
a
very
minor
infraction
of
the
Act.
Surely
the
civil
penalties
provided
afford
the
Crown
an
adequate
remedy
in
lieu
of
a
mandatory
minimum
fine
of
$1,000!
53.
In
the
instant
matter
should
this
Court
find
that
the
Crown
has
proceeded
in
a
legal
manner
it
would
be
required
on
the
evidence
before
it
to
find
all
defendants
guilty
on
all
charges
and
would
be
further
required
to
impose
a
totality
of
fines
amounting
to
a
minimum
of
$9,000!
Strong
medicine
indeed!
54.
For
the
reasons
hereinbefore
set
out
it
is
the
finding
of
this
Court
that
it
is
not
open
to
the
Minister
to
invoke
the
intervention
of
a
Court
of
Criminal
Jurisdiction
under
such
circumstances
and
that
to
condone
such
conduct
would
bring
the
administration
of
justice
into
disrepute.
This
Court
therefore
orders
a
stay
of
proceedings
herein
pursuant
to
subsection
24(1)
of
the
Charter.
55.
Having
so
found
it
is
not
necessary
for
me
to
consider
the
alternative
arguments
of
the
defendants.
Order
accordingly
Email this Content