Babe J.: (orally):— Antonio Lusaya and Elsie Lusaya, who are husband and wife, are being tried before me pursuant to the Crown's election to proceed summarily on an Information containing some 72 counts under the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").
Antonio Lusaya is charged with tax evasion with respect to his own returns. Mr. and Mrs. Lusaya are both charged with respect to Mrs. Lusaya’s returns; and Antonio Lusaya, in most of the counts, is charged with tax evasion with respect to returns that he prepared for a number of clients of his tax preparation business.
In the course of the trial, the Crown seeks to introduce certain oral responses that the defendant Antonio Lusaya made to Messrs. Duncan and Chan, for the most part to Mr. Duncan, in the course of an audit of his own 1987, 1988 and 1989 returns which was conducted at his home. These responses were made to requests for explanations of various items on the income and expense statements filed as part of his own returns and his wife's returns, which he indicated he had prepared for Mrs. Lusaya, and the evidence is that the investigators received the consent of Mrs. Lusaya to speak to her husband with respect to the returns that he had prepared for her.
I might say that on the voir dire the Crown called both Mr. Duncan and Mr. Chan, who were the only officials of Revenue Canada who dealt with the defendant in the course of the audit, and no evidence was called for the defence so that the only evidence I have on this voir dire is the evidence of Duncan and Chan.
Now, their evidence is that in early 1991 other employees, or perhaps Mr. Chan, I guess Mr. Chan was actually concerned with it, had conducted an audit of one Frutman, who had apparently had his return prepared by the defendant, and there was a statement obtained from him that the rental loss or business loss that had been claimed on that return was fictitious; that he had no knowledge of it; and that it had apparently been put there by the male defendant. That prompted the investigators to request or call up the defendant's own returns, as well as his wife's. They noted that those returns had reported business and rental losses, and it was determined that they would conduct an audit of those returns.
I have been referred to section 231.1 of the Criminal Code, and clearly officials of Revenue Canada are entitled to inspect the records of taxpayers, and a code is set out in section 231.1 and following that permits that to be enforced where necessary. I might say that I have been advised by the Crown that these provisions have been the subject of constitutional attack in recent years, but their constitutionality has been upheld. That is not an issue before me, because on the facts of this case, the officials did not avail themselves of the compulsory provisions of section 231.1 and following sections, but in any event I am not surprised that the highest courts in the country have upheld the constitutionality of these sections, because the Canadian income tax system is based on voluntary compliance and voluntary disclosure, or as the Crown put it the honour system, and while it may be that most taxpayers will act honestly and disclose their income accurately, there are always those who would take advantage of any honour system for their own advantage, and there would have to be some sort of check on that. But, in any event, under the Act Mr. Chan and Mr. Duncan were lawfully entitled to examine the records of the defendant.
Their evidence is that, in order to arrange to do that, Mr. Duncan telephoned the defendant and arranged a mutually agreeable appointment for February 12, 1991. On that occasion both Mr. Chan and Mr. Duncan attended at the defendant's house at the time they had arranged. The meeting was rather brief, although, as I understand it there was some discussion about the 1987 return, because most of the material was not available, or had not been assembled by the defendant. Accordingly, they left, and a further appointment was made after a fuller explanation of what they required. Mr. Duncan returned alone on February 26, when he spent the whole day going over the documents. He returned again on February 28 when he was there for a couple of hours. That meeting was cut short because the defendant indicated that he had some other business come up unexpectedly and he had to leave, and Mr. Duncan indicated that while he was invited to stay by the defendant and go over the documents, it is the policy of the Department not to be alone in a citizen's house, so he left as well.
A further visit was paid again with Mr. Chan on March 8. Mr. Duncan spent the whole day there, although Mr. Chan left some time in the morning and on that occasion some explanations were requested of items which had been claimed on the income and expense statements. These questions as I have noted them mainly refer to matters which on the face of it was not clear what they had referred to, or items which Mr. Duncan had not been able to total to reconcile with the items claimed, or explanations were asked as to on what basis certain expenses had been apportioned between business and personal use.
There was an arrangement made to return on March 13 to check some items concerning the price for which a car had been purchased, but on that occasion apparently the material requested was left by the defendant on his steps, although he was not present and Mr. Duncan indicated he did not examine the documents on that date because he did not feel he had the right to take the items with him, and accordingly a further appointment was made for March 15. At that time Mr. Chan was there, and they completed their review of the material provided by the defendant, and there were a number of questions again put on that date of the same sort as I have outlined before. The questions asked were the sort of thing like what was meant by certain entries such as "accounts receivable, bad debts" and there was one item where there appeared to be a total expense claimed that, although the expense was claimed to the penny, appeared to be exactly $7 thousand more than the receipts that had been found and totalled by Mr. Duncan. There was an explanation asked as to on what basis 80 per cent of heat, light and water had been claimed for business use with respect to the house. There were also some questions about a rental loss claimed for another property, and the circumstances in which that had been acquired and disposed of. That is the sort of thing that was being asked. I am not attempting to detail the questions and answers which were obtained at this time. I am simply attempting to indicate what sort of discussion was held and what sort of answers the Crown is seeking to tender at this stage, for whatever use may be made of those replies.
Now, I might indicate at the outset that, as pointed out by the Crown, no notice has been given that there is a constitutional issue raised here, and the Crown did not address me on that. Nor did the defence in any specific way, although there was cross-examination on the lack of advice of the right to retain and instruct counsel. That was extensively put to the witnesses in cross-examination. In argument there were suggestions or submissions made about denial of natural justice, bringing the administration of justice into disrepute, and not giving constitutional rights. This was not brought home in any coherent way to either specific rights guaranteed by the Charter or as to what remedy, if any, might be appropriate under the Charter. However, I think that in a general way the Charter has been brought into it, and I will deal with it briefly in my reasons.
I would further indicate that the Crown has advised me that the only case that he is aware of which deals directly with the issue of the admissibility of answers given by a taxpayer in the course of an audit being performed pursuant to provisions of section 231.1 and following, is the decision of the Newfoundland Provincial Court in R. v. Roberts, 95 Nfld. & P.E.I.R. 49, 301 A.P.R. 49, and I am advised by the Crown that that was dealt with on the basis that an auditor is not a person in authority, and therefore the rules as to confessions do not apply, and it would follow from that, that anything that was said to the auditor could be admitted without a voir dire, just as any sort of other admission in a legal proceeding could be admitted.
The Crown, however, has not relied on that case, and we have proceeded on the basis that the auditors were persons in authority, and that, accordingly, the admissibility of statements made to them in the course of the audit is subject to a voir dire, and their admissibility is conditioned upon the proof by the Crown of their voluntariness, and the onus, of course, is beyond a reasonable doubt. As I have indicated, there is no case law directly relevant to statements made to auditors in the course of audits and the matter the Crown suggests then falls to be decided under the general principles governing the proof of voluntariness of statements made to persons in authority, which are pretty well settled in Canadian criminal law.
Now, the general principle of course is that, and the cases are legion, is that "voluntary" in this instance means that the statement has been obtained without fear of prejudice or hope of advantage held out by a person in authority. That has been perhaps enlarged to the extent that if the people in authority create an oppressive atmosphere that could also cause a statement to be excluded, although I would think that the oppressive atmosphere as outlined in cases really comes within the scope of the traditional terms “inducement” or “fear of prejudice". One of the examples that was cited to me by the Crown from Professor Lederman's book on evidence was an instance where a prisoner's clothes had been taken from him for forensic examination, and he had been left naked in the cell for a period of time before questioning. Perhaps out of a certain feeling of charity to the interrogators, the Court in that case held there was no improper motive in that, although I would have thought it would not be very difficult to view that as an inducement that would overbear the free will of the subject. In any event, there is nothing of that nature here.
Now, as I understand the submissions of the defence, which were lengthy but not particularly focused, the points are that there was no caution administered, and that by returning to the defendant's house on the occasions referred to, there was an oppressive atmosphere created, and therefore the statements were not voluntary.
Now, I am only going to refer here to one authority for various reasons. First of all, it was decided by the Court of Appeal after the Charter is in force, so it is obviously current law in the sense that some of the pre-Charter cases might now be questioned. Secondly, it is the unanimous judgment of the Court of Appeal of Ontario delivered b Mr. Justice Martin and it is characteristically clear and thorough. It also deals with the time when cautions are required and what is the effect of the absence of a caution, and in dealing with that Mr. Justice Martin compares not only the law of Canada but the current law of both the United States and England, and it also deals with the case where questions are put to a suspect at the stage of an investigation. That is the decision in R. v. Esposito (1985), 24 C.C.C. (3d) 88, 53 O.R. (2d) 356.
Now, in that case police officers were investigating charges of fraud and forgery involving the use of a stolen credit card. The credit card had been used on a number of occasions at a gas station where the defendant was employed and the police attended at his residence to question him concerning the invoices. During the questioning the accused admitted that he had made out the invoices but he denied signing them. Several other questions were asked about that, and ultimately the officer indicated to the defendant that he did not believe him; that he was placing him under arrest; and at that point the usual cautions and advice as to right to counsel under the Charter were administered. The Court of Appeal held that those statements were properly admitted.
To deal briefly with the issue of the Charter, Mr. Justice Martin indicated that at that stage the defendant was not detained and, of course, the right to be advised of your right to counsel under section 10(b) of the Charter arises upon arrest or detention. Mr. Justice Martin indicated that on the facts of that case, the right to be so advised, was not triggered, and I think that the case is authority similarly here. I see no detention of the defendant on the evidence as I have it. The evidence is that the questioning took place in his home. I might say that most of the time that the auditors were there they were examining his documents. They were not dealing directly with him, and the evidence is he was in and out of the basement where the examination of documents was taking place. He was answering the door, dealing with other matters of his daily routine, and on the one occasion that I have alluded to, the interview was cut short when the defendant indicated that he had to leave. It is quite clear to me that he was not under detention, and therefore the Charter right to counsel did not arise. As I have indicated, there has been no specific application for Charter relief.
Accordingly, the matter as I see it, falls to be decided under the test of voluntariness and Esposito, supra, is also authority for the proposition that the test for voluntariness is the same now as it was before the Charter and the Charter has not added any additional requirements as to warnings and cautions.
Now, it is further clear from Esposito, supra, that the law in Canada is still as it was set out in R. v. Boudreau, [1949] S.C.R. 262, 94 C.C.C. 1, [1949] 3 D.L.R. 81.
That is a well known case which was cited to me by the Crown, and established that, in Canada, whether a caution was given may be a factor and sometimes an important factor in determining whether a statement was voluntary but it is not decisive. Mr. Justice Martin also cites the later decision of Mr. Justice Rand in R. v. Fitton, [1956] S.C.R. 958, 116 C.C.C. 1, 6 D.L.R. (2d) 529 at pages 963-64 (C.C.C. 6; D.L.R. 534) for the test of voluntariness. He concludes at page 96 (O.R. 364):
Thus, it was well established in Canada prior to the enactment of the Charter that the giving of a caution was not a prerequisite to the admissibility of statements made by a person in response to police questioning, even if that person was in custody. It obviously follows that a caution was not required where the person questioned was not in custody.
He goes on to say that the law as enunciated in Boudreau, supra, has survived the Charter.
He notes that, in England, Rule Two of the Judges' Rules issued in 1912 provided that a caution should be administered whenever a police officer had made up his mind to charge a person. At that stage he should first caution the person before asking questions or further questions. It is clear then that, under the original Judges' Rules, on the evidence in this case, as I have it, we were far ahead of any need for a caution in the course of this audit, because there was no decision made to charge the defendant.
The Judges' Rules in England, as Mr. Justice Martin points out, were changed in 1964 to provide that a police officer should administer a caution as soon as he had evidence which would afford reasonable grounds for suspecting that a person had committed the offence. Whatever the scope of reasonable grounds for suspecting may be, it seems to me that there were no grounds for suspecting an offence here, in relation to the defendant's own return, which is all he was being asked about, or the return of his wife. He is asked about both those returns, but there were no grounds for suspecting an offence had been committed until those returns and supporting documents had been examined and audited and explanations asked for. So, accordingly, I am of the view that there was no non-compliance even with the English Judges' Rules of 1964.
The English position was changed again when the Judges' Rules were replaced with something called the Code of Practice under the Police and Criminal Evidence Act of 1984 (U.K.), and that Code provides that a caution should be administered by a police officer at such time as he has grounds to suspect that a person has committed an offence. So that it is the stage of suspicion that would seem to bring about the need for a caution in England now, which is quite an early stage in proceedings, and it may be that cautions are administered in England now as soon as a person is under suspicion.
That, of course, is not the law of Canada, as Mr. Justice Martin has made clear, and it also appears that, according to him, the law of England is that even there that is merely a factor to be taken into account in deciding whether to exclude evidence. He cites the textbook on the Police and Criminal Evidence Act, 1984 (U.K.) by Michael Zander at pages 89, 94, 98 and 272. So that even under the strict rules as to when a caution should be administered in England that is not conclusive.
He also examines the current American authorities. He notes at page 99 (O.R. 367) that he does not hold that section 10 of the Charter: ”. . .imports the requirement of the panoply of warnings that under Miranda v. Arizona (1966), 384 U.S. 436 (S.C.). . .must precede any custodial interrogation of a subject by the police as a condition of admissibility of statements made by the suspect as the result of the interrogation". He does, however, review the American cases as to what constitutes custodial interrogation, which triggers the Miranda warnings, and he notes the decision of the Supreme Court of the United States in Orozco v. Texas (1969), 394 U.S. 324 as to the American position. He indicates that the American test as set out in McCormick on Evidence is (page 387):
Whether custody exists, then, where no actual restraint has been imposed should depend upon whether the suspect both actually and reasonably perceived that if he attempted to break off the confrontation with the officers this would be prevented. This has, in general, been the approach of the lower courts.
Accordingly, under the law of the United States it would appear that no warning was necessary in the circumstances here.
It is clear to me that under the current law of Canada there is no Charter requirement of a warning, and under the law of Canada no caution was required, and even under the current law of England, while it might have been the desirable practice to administer a caution at the outset, that would not be conclusive as to admissibility.
Accordingly, I am satisfied on the evidence as I have heard it, that there was no need for a caution to be administered in the course of the auditing procedure. I am further satisfied on the evidence that there was no atmosphere of oppression created by the investigators as that term has been used in the cases. Their evidence is unequivocal that the defendant was at ease, and co-operative. He was free to move about. He was free to terminate the interviews when he needed to. In other words, I am satisfied that what he said was said free from any hope of advantage or fear of prejudice held out to him by the auditors.
The other point which has been dealt with by the Crown in argument and raised inferentially in the submissions by the defence, is the question of whether a statutory compulsion to provide information makes a statement involuntary. I think that the law in Canada is clear that it does not. The Crown referred me to the 3rd edition of Kauffman On Confessions at page 117. There the learned author refers to the decision of the Supreme Court of Canada in R. v. Marshall, [1961] S.C.R. 123, 129 C.C.C. 232, 26 D.L.R. (2d) 459. In that case the Supreme Court of Canada was dealing with the admissibility in criminal proceedings of the compulsory statement that a person involved in an accident is compelled to provide to a police officer under the Ontario Highway Traffic Act, R.S.O. 1960, c. 172. It was held in that case that a statement made under compulsion of a statute is not, by reason of that fact alone, rendered inadmissible in criminal proceedings against the person making it. I understand that subsequent cases have held, however, that the voluntariness of such a statement in the sense as used in the confession cases must be established. That, I think, is a reasonable position if one looks at the rationale for the confession rule. The confession rule is, first of all, designed to guarantee the truthfulness of statements admitted, because the policy of the law is the Court should not admit coerced statements because they are liable to amount to false confessions, and in an extreme case, of course, tortured confessions might be obtained and the Court would not admit them. The cases have said there is also a subsidiary purpose of controlling the behaviour or persons enforcing the law so as to prevent inappropriate means being used to get a person to speak. Where there is compulsion of a statute that statement then has not been coerced in that sense so there is not the same danger of falsehood and, furthermore, there is no criticism to be made of the persons taking the statement. Of course even if a statement must be made under compulsion of a statute, if inappropriate means are used to force the person to make that statement, which would come within the confession rule, then that is something that would have to be canvassed by the Court. But, in any event, the mere fact that the statement was made under compulsion of a statute does not mean that it is not a voluntary statement as that term is defined in the case law.
In any event, in this case the evidence is that the statements were not made under the compulsion of the statute. They were made by the defendant without reference to his statutory duty to make the statements.
I am, then, satisfied beyond a reasonable doubt that the statements made in the course of the audit by the defendant are voluntary and they are to be admitted in evidence at the trial.
Ruling granted.
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