Her Majesty the Queen v. Delbert Fisher, Joyce M. Fisher, and Aubrett Holdings Ltd., [1993] 1 CTC 374

Hamilton, J.:—Delbert Fisher, Joyce Fisher, and Aubrett Holdings Ltd. (hereinafter referred to as "Aubrett") stand charged with a total of 15 offences under the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), comprised of two varieties of charges:

1. evading the payment of taxes contrary to paragraph 239(1)(d) of the said Act, and

2. making, participating in, or acquiescing in the making of false statements in their respective income tax returns, contrary to paragraph 239(1)(a) of the Act.

Delbert and Joyce Fisher are husband and wife, and are the founders and sole shareholders of Aubrett Holdings Ltd., the corporate defendant. Aubrett in 1981 began operating an insurance agency known as Del Fisher Insurance. That agency dealt mainly in automobile and home insurance, and it is clear that over the years the Fishers have built the agency into a very successful business.

Delbert Fisher has a Grade 10 education, and has worked in the insurance business for over 42 years, initially for other agencies, and then establishing his own agency in 1981. His wife Joyce completed Grade 11 and a secretarial course, then worked as a secretary in the insurance field until 1961. For the next 20 years she stayed home to raise her family. In 1981 she returned to the work force entering the family business, Del Fisher Insurance, initially as secretary and later as an agent and office manager. It is clear that Mr. Fisher involved himself primarily with establishing and servicing an ever-burgeoning clientele, while Mrs. Fisher was mainly responsible for the management of the office.

Neither Mr. nor Mrs. Fisher has had any training in accounting or the preparation of financial statements. Mr. Ernie Bretz, a certified accountant who had been preparing the Fishers' personal tax returns since 1971, was hired by Aubrett Holdings upon its formation to do the firm’s accounting, specifically the preparation of the company's year end financial statements and the corporate T2 returns for Revenue Canada. Mr. Bretz also continued to prepare the Fishers' annual personal tax returns.

The terms of Mr. Bretz's employment with Aubrett were committed to writing in a letter dated August 13, 1984, entered as Exhibit 58 in these proceedings. I am satisfied, from the evidence given by Mr. Bretz as well as the evidence of Mr. Fowler, an expert in accounting called by the defence, that Mr. Bretz's employment can be classified as a “review engagement". Such an agreement falls within the middle of three levels of duty of care expected of an accountant. I am further satisfied that such an engagement requires of an accountant that he conduct a review by inquiry, i.e., that he set out in detail what he requires to prepare financial records; that he conduct comparisons, particularly of a current year's statements to previous year’s; and that he conduct discussions of the overall financial statements with the client, particularly in regard to any discrepancies which he has noted. An accountant on a review engagement is expected to have a relatively good knowledge of the client's business. A review engagement does not include any auditing, and this was pointed out to Aubrett by Mr. Bretz in exhibit 58.

Mr. Bretz, as noted, also prepared the Fishers’ personal tax returns. These returns were generally prepared in late April of each year, while Aubrett's corporate returns were done in the late summer to comply with the requirement that they be filed within six months of the company's fiscal year end which fell on May 31.

Mr. Bretz prepared these various statements and returns using documentation provided to him by the Fishers and Aubrett. These documents included Aubrett's general ledger, which was posted daily by use of a computerized accounting system which had been implemented by Aubrett in 1983. Mrs. Fisher and various employees working under her would use the computer to enter postings to the general ledger. Entries were made under various numbered categories and sub-categories, such as category 285, the shareholders loan account. Mr. Bretz would obtain the computerized general ledger at year end, review it, and make any adjusting journal entries he felt were necessary. He would give these adjusting journal entries to the Fishers, usually in the form of a draft financial statement. The adjusting journal entries would usually be assigned the appropriate computer category numbers by Mr. Bretz, and were then entered in the system by Mrs. Fisher or an employee. Mr. Bretz testified that the computer printout of the general ledger, the activity reports, computerized journal entries, bank statements, deposit books, accounts receivable, trade payables, and payroll earnings cards were the main company documents with which he acquainted himself in order to prepare Aubrett's financial statement and tax returns. The company's tax returns were then signed by Mr. or Mrs. Fisher and forwarded to Revenue Canada.

In order to prepare the Fishers' personal tax returns, Mr. Bretz relied on T4 slips that were prepared by Diane Fitzgerald, an employee of Aubrett. Her duties included monthly reconciliation of bank statements, journal reconciliation and preparation of T4 slips and summaries. Mrs. Fitzgerald referred to the company's payroll earnings cards, and possibly the journals, in preparing the annual T4s. The payroll cards were compiled manually by joyce Fisher, who kept an ongoing record on the cards of each employee's pay, deductions, and other relevant payroll information.

Upon completing the Fishers' personal T1 returns, Mr. Bretz would send them over to the Aubrett's offices, and Mr. and Mrs. Fisher would sign them and forward them to Revenue Canada. Mr. Bretz would have attached small memo notes on the front of each return instructing the Fishers where to sign and telling them to either send an accompanying cheque for the amount owing or to expect a refund in a certain amount.

The practice outlined above continued until December, 1989, when a Revenue Canada field audit of Aubrett Holdings’ records was conducted. This routine audit caused the auditor sufficient concern to refer the matter through his superiors to Ruth Prudhomme, a Revenue Canada special investigator, for a full investigation, which she commenced in September, 1990. The investigation which followed, in which the Fishers cooperated fully with Revenue Canada officials, revealed to Mrs. Prudhomme alarming defalcations in both the personal tax returns of Mr. and Mrs. Fisher and the corporate returns of Aubrett Holdings Ltd., and resulted in the charges now before the court. The 15 counts in the information sworn by Ruth Prudhomme are comprised as follows:

1. Charges Against Aubrett Holdings Ltd.

Counts 1 through 5 consist of $7,215.86 owing by Aubrett Holdings Ltd. to Revenue Canada (count 1), based upon unreported income in 1986 of $16,183.60 (count 2); in 1987 of $7,088.12 (count 3); and in 1988 of $25,587.23. The 1988 total is made up of unreported contingent commissions in the sum of $10,587 (count 4) and an unpaid wage expense of $15,000 (count 5).

2. Charges Against Del Fisher

Count 6 relates to a total of $32,927.09 federal taxes owed by Delbert Fisher, a total based on unreported income of $8,023 in 1985 (count 7); $42,159 in 1986 (count 8); $20,791 in 1987 (count 9); and $38,488 in 1988 (count 10). This unreported income consisted of management wages, mortgage interest, and contingent commissions, and totalled $109,421 over the four years.

3. Charges Against Joyce Fisher

Joyce Fisher is alleged to owe $38,658.20 in federal tax (count 11). That tax was assessed based upon unreported income in 1985 of $8,023 (count 12); in 1986 of $48,602 (count 13); in 1987 of $28,697 (count 14); and in 1988 of $42,326 (count 15), for a total unreported income of $127,648 over four years. This income was comprised of management wages, mortgage interest, contingent commissions and T-Bill interest.

It is clear that all of the unreported income earnings assessed by Revenue Canada are “income” as defined in the Income Tax Act. It is clear that the defendants do not dispute that the amounts outlined above were not reported in the appropriate tax returns. What this court must determine is whether the failure to report these sums was done with the intent to make false statements or evade taxes.

The theory of the Crown is that the defendants knowingly made false statements for the purpose of evading taxes, either with full knowledge of the nature of the false statements contained in the returns prepared by Mr. Bretz or exhibiting wilful blindness to the inaccuracies in the returns. The defence contends that the defendants had no knowledge of the errors in the returns, and no intent to under-report income or evade taxes.

Numerous case authorities substantiate the premise that the charges laid herein require proof of mens rea. The Saskatchewan Court of Appeal in R. v. Paveley, [1976] C.T.C. 477, 76 D.T.C. 6415, a prosecution under paragraph 239(1)(d), stated that in addition to an actus rea, there must be proof of “the intention to accomplish an evasion of payment of taxes in the sense of accomplishing something forbidden by or in defiance of the law (mens rea)” (C.T.C. 483, D.T.C. 6418). That Court went on to state at page 485 (D.T.C. 6420) that“ the word'wilfully*, as used in the subsection under consideration, carries a distinct connotation of deliberate purpose and ulterior motive.” In the case of R. v. Regehr, [1968] C.T.C. 122, 68 D.T.C. 5078, a decision of the Yukon Territory Court of Appeal, that Court clearly accepts that mens rea or guilty intent is necessary to the establishment of guilt under paragraph 132(1)(a) [now paragraph 239(1)(a)].

The Court in Regehr also stated, at page 123 (D.T.C. 165):

I think it is clear on principle and authority that an inference of the fact of guilty intent may, as a matter of fact, be made from the existence of a series or multiplicity of omissions although each such omission may in itself be regarded as mere negligence.

It is essentially that proposition that the Crown is advancing as part of its case against Aubrett and the Fishers. The Crown contends that the misinformation filed involved so many glaring discrepancies, over such a lengthy time period, that it can be inferred that the defendants knew of or were wilfully blind to the deficiencies in income being reported.

In regard to the concept of wilful blindness, it was stated in Sansregret v. The Queen, [1985] 1 S.C.R. 570, 17 D.L.R. (4th) 577, at page 584 (D.L.R. 588) that

Wilful blindness is distinct from recklessness because, while recklessness involves knowledge of a danger or risk and persistence in a course of conduct which creates a risk that the prohibited result will occur, wilful blindness arises where a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant. The culpability in recklessness is justified by consciousness of the risk and by proceeding in the face of it, while in wilful blindness it is justified by the accused's fault in deliberately failing to inquire when he knows there is reason for inquiry.

In order to determine whether mens rea on the part of the defendants can be inferred, it is important to examine the manner in which the false information came to be recorded and filed. I think it is instructive to deal separately with the various types of unreported income involved.

A. Wage expense to Richard Savage

This item is the subject matter of Count 5. Richard Savage was employed in a branch office of Aubrett Holdings as an insurance agent from February 1987 through September 1988. Upon his termination, he was given his final wages and vacation pay, which totalled approximately $1,900. No further moneys were owed to him, yet the company books for 1988 show a wage payable to Richard Savage of $15,000. In showing a wage payable, the income of Aubrett for that year was accordingly reduced by $15,000.

Both Mr. and Mrs. Fisher testified that they had no knowledge of that amount being so entered until it was revealed in the Revenue Canada audit. Exhibit 40.3, the adjusting journal entries made by Mr. Bretz for the 1988 year end, shows the $15,000 as a wage payable. Mr. Bretz initially testified that he thought that Mr. and Mrs. Fisher had instructed him that there was a $15,000 wage payable to an employee named Savage. On cross-examination he conceded that he may not have received any such specific instructions.

The $15,000 was never in fact paid out, and in 1989 the $15,000 was reversed in the adjusting journal entry, by crediting $15,000 to the shareholders’ loan (Exhibit 75.3). Mr. Bretz testified that he made this adjustment believing that the $15,000 had been paid out. He obviously made no review or comparison to determine whether in fact it had.

It is clear to me that the $15,000 in journal entry 40-3 should have been shown as payable to Joyce and Delbert Fisher, consistent with Mr. Bretz's practice of annually clearing out the shareholders' loan account, declaring the amount therein as a bonus to the shareholders. This annual practice was a perfectly legitimate accounting manoeuvre which would decrease the income payable by the corporation but create taxable income in the hands of the shareholders receiving the bonus. Somehow the $15,000 wage payable became entered in the company's records under category 205-12 (Richard Savage) rather than under category 285 (shareholders' loan).

Upon assessing all evidence on this point, I am satisfied that the $15,000 expensed to Richard Savage wages was an error in posting of which both Mr. and Mrs. Fisher, and consequently Aubrett Holdings, were unaware. I accept the evidence of Mr. and Mrs. Fisher that they had no intention of creating any wage payable to Mr. Savage, and gave Mr. Bretz no instructions in that regard. I do not accept the evidence of Mr. Bretz as to any mention of Mr. Savage by the Fishers. Although the posting of the $15,000 to Richard Savage wages resulted in an under reporting of Aubrett's 1988 income by $15,000, I am totally satisfied that this was wholly as a result of an error of which the company directors had no knowledge.

B. T-Bill interest

The Fishers had realized $100,000 on the sale of their house. Mrs. Fisher invested that money with the T-D Bank, initially in term deposits and later in T-Bills. Those T-Bills earned interest in 1986, 1987 and 1988 which was never reported as income in Mrs. Fisher's tax return.

The evidence established that banking institutions were not required to issue T5s for interest earned on T-Bills in 1986, 1987 and 1988. Legislation was subsequently passed by Parliament requiring that such T5s be provided, apparently in response to problems the government was encountering with people failing to report T-Bill interest income.

Mrs. Fisher had always received T5s from the T-D Bank with regard to her investments with them. She continued to have money invested in the T-D (apart from her T-Bills) in 1986 through 1988. She therefore received a T5 for each of those years from the T-D Bank. She testified that she never examined them, but simply placed them in her tax folder to be given to Mr. Bretz. Mr. Bretz simply transposed the figures from the T5s onto Mrs. Fisher's tax returns. Exhibit 60 makes it clear that Mr. Bretz was aware of Mrs. Fisher's $100,000 investment, yet the gross deficiencies in the interest shown on the T5s were never noticed by Mr. Bretz.

I accept Mrs. Fisher's evidence that she did not examine her T5s, simply assuming them to also account for T-Bill interest, since she (apparently like many other Canadians at that time) was unaware that T5s were not issued for T-Bill interest. Her demeanour on the stand, particularly her obvious lack of sophistication in various financial matters, persuade me that she is totally lacking in the guile that would be required to perpetuate such a deception in regard to this type of income.

C. Mortgage interest

Joyce and Delbert Fisher held mortgages on two pieces of property, referred to as the Beaury mortgage and the Leary mortgages in these proceed- ings. These mortgages generated interest, which was income to Mr. and Mrs. Fisher, totalling $30,690 from 1985 through 1988. That interest was never reported in the Fishers' income tax returns.

The mortgages in question had originally been held by Aubrett Holdings Ltd., which had purchased the properties involved and sold them to Beaury and Leary. Aubrett also owned the building which housed its head office, and a mortgage was registered against that title.

Mr. Bretz purports not to have been aware that the company had transferred the Leary and Beaury mortgages to the Fishers personally. He did acknowledge that the company transferred the office building to Joyce and Del Fisher, upon receiving his advice. The Fishers state that the mortgage transfers were also done on the advice of Mr. Bretz, and I accept their evidence on that point.

It is obvious that Mr. Bretz must have been aware of the transfer of the mortgages out of the company name to the Fishers; in cross-examination he conceded that “it may be that I knew" that this had been done. Documents prepared by Mr. Bretz portray an awareness on his part of the situation. Exhibits 65 and 60 are particularly relevant in this regard. Exhibit 65, Mr. Bretz's account of the company's assets, gives comparative figures for the years 1983 and 1984. That document clearly showed a loss in receivables of close to $120,000 over that year. He stated that he did not know if he inquired where it had gone. Exhibit 60, a statement of Mr. Fisher's net worth prepared by Mr. Bretz, shows mortgages receivable of $85,000, and Mr. Bretz acknowledged that he was aware that the Fishers owned some mortgages. Yet it would appear that Mr. Bretz made no inquiry of the Fishers about what one would have noted to be glaring discrepancies, had any connection been made between the assets of the Fishers and the low interest income reported.

Mrs. Fisher kept information involving the mortgages in a mortgage file, to which Mr. Bretz had access. While details such as the periodic lowering of mortgage interest rates were not specifically conveyed to Mr. Bretz, I accept that he could have readily obtained that information had he computed mortgage income. The fact that no mortgage income was recorded as personal income to the Fishers I attribute to a serious oversight on the part of Mr. Bretz, and not in any way to a withholding of information by the Fishers from Mr. Bretz.

D. Management wages

Both Mr. and Mrs. Fisher draw a bi-monthly salary from Aubrett Holdings Ltd. These earnings were posted by Mrs. Fisher to the payroll earnings cards, and appropriate deductions were made and remittances forwarded to Revenue Canada.

Mr. Bretz had set up a shareholders’ loan account for Aubrett Holdings Ltd., as is common in many business [sic]. Records of transactions in that account were kept in the general ledger, by means of computer entries made by Mrs. Fisher or her staff.

The shareholders’ loan account could be in either a debit or a credit position, depending on the transactions posted to it. If the shareholders owed money to the company, the shareholders’ loan account would show a debit balance. If money was invested by the shareholders, it could show as a credit in the account.

It was Mr. Bretz's practice, at the end of every fiscal year, to clear the shareholders’ loan account by dispersing any moneys in the account as bonuses to the shareholders, i.e., Mr. and Mrs. Fisher. This is a common and acceptable accounting practice. Any bonuses awarded to the Fishers, however, qualified as income under the Income Tax Act and tax should have accordingly been paid on those bonuses. The Revenue Canada audit revealed that a number of bonuses and benefits to the shareholders had not been declared as income.

These management bonuses were created in one of two ways; either a cash transaction took place; or a journal entry by Mr. Bretz, subsequently entered by Aubrett staff, documented the bonus. After the creation of such a bonus, the proper steps to be followed would have required the recording of these bonuses on Mr. and Mrs. Fisher's payroll earnings cards by Mrs. Fisher.

In the case of certain bonuses, the appropriate payroll record entries were made and tax was consequently paid. Others, however, were never properly documented.

In 1986, 1987 and 1988, cash bonuses of $30,000, $40,000 and $50,000 respectively were created. Of these, the first two were properly recorded in the journal ledger and the next steps, their entry on the payroll slips, was properly carried out. The last one was not properly recorded.

In addition, journal entry bonuses were created in those years, in the amount of $60,000 in 1986, $31,764 in 1987 and $10,000 in 1988. None of these bonuses were recorded on payroll record cards. All three of these journal entry bonuses had been created by Mr. Bretz, and were not picked up in the Fishers' personal tax returns. Generally, when bonuses were created at year end, the sums were subsequently repaid to the shareholders' loan, either by a cheque from the Fishers to the company, or by reversed journal entries.

Mr. Bretz explained that he did not pick up these amounts in the Fishers’ tax returns due to the fact that they did not show as wages in the payroll records and therefore were not reflected in the T4s he received. He testified that he had advised the Fishers that such bonuses had to be declared as wages and as such were taxable in their hands. Mr. and Mrs. Fisher both profess to have received no such advice from Mr. Bretz.

It is obvious that in at least one year, bonuses created for the Fishers were evidenced by a cash transfer, recorded as payroll entries, and taxes were duly paid. I am satisfied that that process took place because Mr. Bretz specifically instructed Mrs. Fisher to show these amounts as income and remit the appropriate taxes, and she simply carried out his instructions. I am also satisfied that such proper steps in the recording of wages were not followed in subsequent years because no such specific instructions were given to Mrs. Fisher.

Mr. Bretz testified that he received instructions from Mr. Fisher at a 1986 year-end meeting that the $60,000 in the shareholders’ loan account should be charged to wages. Exhibit 41 is Mr. Bretz's notes of that meeting. Mr. Bretz stated in evidence that he advised Mr. Fisher at that time that this charge to wages was taxable in the hands of Mr. and Mrs. Fisher, and that he believed Mr. Fisher understood this. I do find that what was discussed with Mr. Fisher at that meeting was the fact that there were numerous options available to clear out the shareholders' loan account, such as declaration of dividends, creation of bonuses, or assignment as wages, and that Mr. Fisher agreed to the option of Mr. Bretz treating it as management wages. I am also completely satisfied that Mr. Fisher was not made to understand the tax implications of what to him seemed to be merely a bookkeeping adjustment. All he knew was that such an entry would be made, and would be reversed shortly after year end. I totally accept Mr. Fisher's evidence that he did not perceive this as taxable income, and assumed that Mr. Bretz would have looked after the tax implications of this accounting adjustment if there were any.

Even if Mr. Bretz did mention something to Mr. Fisher about tax payable, I find that this was done in the context of a meeting wherein dozens of items were discussed.

It is my observation that Mr. Bretz speaks in a monotonous atonal voice almost totally devoid of effect, to the point where even the court reporter in these proceedings had difficulty recording his evidence. His discussion with Mr. Fisher at 1986 year end, I envision as a steady drone of accounting items and figures which never registered with Mr. Fisher as signifying the need for any steps to be taken personally by the Fishers.

It seems remarkable that Mr. Bretz, even though he created these significant bonuses, failed to record them in the Fishers’ tax returns and did not pick up on the fact that the T4s did not reflect them. I find that to the Fishers, these bonuses were merely some sort of accounting sophistry; only Mr. Bretz recognized them as management income which should have been claimed by the Fishers. His overlooking of them in the personal tax returns could have been avoided by taking simple precautions such as making note of the bonuses as they were declared in the personal files.

I have no hesitation in finding that Mrs. Fisher had no appreciation of the tax implications of any of these journal entries, and only dealt with tax withholdings when explicitly instructed by Mr. Bretz to do so. Mr. Fisher testified that he just assumed that if there was a tax to be paid by the creation of such bonuses, that Mr. Bretz would take enough out to cover the taxes. It may well have been foolish for the Fishers to leave such important details to their accountant, but it was not deceitful conduct on their part.

E. Contingent commissions

Mr. Fisher would from time to time receive from various insurance companies what were known as contingent commissions — a type of performance bonus given to an agent if he performs well as an underwriter. These contingent commissions were always duly recorded in the company's records with entries showing the name of the company paying the commission and the amount received.

Contingent commissions should also have been declared as taxable income, but in the years 1986 through 1988 they were not. Mr. Bretz was aware of the company having received such commissions in previous years. In fact his working papers clearly noted contingent commissions in 1985 of $15,000 and in 1986 of zero dollars. He did not see fit to question this sudden dearth of contingent commission income in 1986 and ensuing years. Had he done so, I am satisfied that he would have been advised by the Fishers that the contingent commissions were now being posted under the heading of shareholders’ loan account rather than as company income.

I accept the evidence of Mr. and Mrs. Fisher as to the reason for this change in posting. The Fishers had listed Del Fisher Insurance for sale, and had received advice from a broker dealing in the sale of such agencies that it was improper to reflect these contingent commissions as income to the company for the purpose of valuation of the business. This was proper advice in that regard, in the sense that another agent or agency may well not earn contingent commissions as Mr. Fisher did, and to include these funds in income could over-inflate the value of the business. Mr. Fisher conveyed this information to Mrs. Fisher, and requested that she no longer enter the contingent commissions as company income. Mrs. Fisher then chose to enter them in the shareholders' loan account, which she explained was the most active account, through which many personal transactions were properly entered.

Mr. Fisher candidly acknowledged that he did not specifically advise Mr. Bretz of this instruction to Mrs. Fisher, and as he said “I! am fully to blame for that". Mr. Bretz, unaware of this change in journal entries, failed to recognize the insurance company names specifically recorded in the postings now made under the shareholders' loan account. He stated that while he noted the lack of such commissions after 1985, he did not think the discrepancy was significant enough to warrant inquiry by him. He never inquired, and Mrs. Fisher simply assumed that the postings were explicit enough that Mr. Bretz would readily recognize them as contingent commissions.

I find that the failure to report contingent commissions in the relevant years resulted from a misapprehension by the Fishers and an oversight on the part of Mr. Bretz, who had not received notification of a change in journal entry procedures. That change in journal entry procedures I find was for the purposes outlined by the Fishers in their evidence and not the purpose of evading taxes on those commissions.

Having made the above findings regarding the various types of unreported income, I must still address myself to the question of wilful blindness. Did the Fishers recognize that their tax forms did not accurately reflect their income and choose to close their eyes to the problem, in the hope of perhaps benefiting from their accountant's errors or simply not wishing to deal with the tax implications of the true picture?

Mr. and Mrs. Fisher both testified that they never read their tax returns, but only the instructions on the memos affixed by Mr. Bretz, before signing them. Those memos told them where to sign and what amount to remit or what refund to expect. The Crown contends that it is not reasonable to accept that two people running a successful insurance business generating large revenues would not examine their tax returns before signing them. The Crown urges the Court to rely on its "human experience” in determining that question. Drawing not only on human experience, but also on the evidence of Mr. Fowler, an expert in accounting, this Court finds it quite plausible that not only insurance agents but a variety of professional people employ what Mr. Fowler described as the "shoebox" approach to tax returns. They give their accountant a“ "shoebox" containing all relevant records, relying on their accountant to accurately translate the contents of that “shoebox” into a tax return, which they then stoically sign on the dotted line, frequently with no appreciation of anything except the bottom line i.e., how much do I owe? When a taxpayer, in employing this approach, is aware of inadequacies in his records which he does not convey to his accountant, or suspects that his accountant may have made an error but ignores it, he does so at peril of having the inference drawn that he was acting with a deceitful purpose or was exhibiting wilful blindness.

I must confess that I listened to the evidence of Mr. and Mrs. Fisher initially with a tinge of skepticism, perhaps warranted by the rather glaring discrepancies revealed by the Revenue Canada audit. I am reminded by defence counsel that I must determine whether the evidence of the defendants is worthy of belief. On hearing all of the testimony, I find it not only worthy of belief, but completely believable, and I accept their evidence in its entirety. Both Mr. and Mrs. Fisher struck me as honest, hard-working people clearly lacking the accounting acumen or the cunning required to perpetuate the tax evasions alleged by the Crown. They hired an accountant and relied on him totally to carry out the requirements of filing tax returns. Whether they were correct to so rely on him under the terms of his engagement is a question for another day. Clearly they did so, and clearly having done so was less than prudent on their part. They kept detailed records of all financial transactions, and turned these records over to the accountant for translation into financial statements and tax returns. They had little if any understanding of what the accountant's procedures were in preparing these documents, and their blind reliance on that accountant was their folly, resulting in over $100,000 in taxes and penalties found owing on reassessment. I am satisfied that they did not have the intent to either evade taxes or to file false statements.

I think this case is distinguishable from R. v. Carrigan, Spiers and Lake Echo Forest Park Ltd., an unreported case from Nova Scotia cited by the Crown. In that case, accurate records of transactions had not been maintained to be turned over to the company's accountant. On the other hand, careful accounts were kept of every financial transaction in which Aubrett was involved. No entries were missing, with the exception of entries on payroll cards regarding bonuses, which I find Mr. and Mrs. Fisher did not appreciate had to be so recorded.

Likewise I find the case at bar distinguishable from R. v. Arch K. Adams, another unreported Nova Scotia case cited by the Crown. In the Nova Scotia case, Adams failed to divulge to his accountant the significance of various vouchers he'd received for expenses. Adams' accountant had no reason to be aware of the nature of the vouchers or their significance, while Mr. Bretz was instrumental in creating many of the sources of income of the Fishers and their company, and was well acquainted with other sources of income. While it is true that the discrepancies in income reported were significant having regard to the actual incomes earned in the years in question, it is also significant that Mr. Bretz, a professional accountant familiar with the defendants’ sources of income for many years honestly overlooked those discrepancies.

I do not find that the Fishers' blind faith in their accountant in the circumstances before me can be equated with the legal concept of wilful blindness. Accordingly I acquit the company and Mr. and Mrs. Fisher on all counts.

Accused acquitted.