Her Majesty the Queen v. Cancor Software Corp., Cancor Research Inc. And Thomas A. Corr, [1992] 1 CTC 68, 91 DTC 5456, 92 DTC 6090, aff'd [1994] 1 CTC 237, 94 DTC 6102

Goodearle, J.:—This is a motion, moved before me as the designated trial judge, but prior to the opening of the trial, in which the three accused seek the following remedies:

(a) to set aside warrants dated June 16, 1986 to enter and search the following four premises:

(i) the dwelling house of Thomas A. Corr, 1601 Watersedge Road, Mississauga, Ontario, L5J 1A6;

(ii) the premises of Cancor Research Inc. and Cancor Computer Corp., 48 Village Centre Place, Mississauga, Ontario, L4Z 1V9;

(iii) the premises of Verchere, Noel & Eddy, First Canadian Place, Suite 6065, Toronto, Ontario, M5X 1A4; and

(iv) the premises of Wall & Associates, 17 Poplar Plains Road, Toronto, Ontario, N4V 2M7.

(b) for an order quashing the searches and seizures begun June 17, 1986;

(c) for the return of all documents seized together with any copies and notes made therefrom;

(d) for an order excluding from evidence in the trial of these matters, and of the material or copies thereof that were seized and prohibiting the Crown from using the material seized, in any manner.

The warrants were issued June 16, 1986 under subsection 231(3) of the Income Tax Act (R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act")) which, for the purposes of this trial, is deemed unconstitutional by reason of the decision of Hugessen, J. in the Baron v. Canada, [1991] 1 C.T.C. 125; 91 D.T.C. 5155 (F.C.A.) presently under appeal to the Supreme Court of Canada but which, unless overturned, has declared this section of the Act to be unconstitutional. They were executed the following day. In effect, therefore, I have before me warrantless searches acknowledged by the Crown to be a breach of section 8 of the Canadian Charter of Rights and Freedoms (the "Charter"). Despite this admission, the Crown argues that the material seized should nevertheless be admitted into evidence under subsection 24(2) of the Charter, that is, that to do otherwise would exclude evidence that, by its exclusion, would bring the administration of justice into disrepute.

Counsel for the three accused argues, inter alia, that the seized material was taken unlawfully and, therefore, unreasonably and with this contention I must and do agree. The material seized was taken under the mandate of warrants admitted by the Crown to be unlawful (by reason of subsection 231(3) having been struck down); and in accordance with the judgment of Sopinka, J. in R. v. Dersch (1990), 60 C.C.C. (3d) 132; 77 D.L.R. (4th) 473, by which I am bound, an unlawful search is an unreasonable search.

Not only does counsel for the three accused argue the materials seized in technical breach of section 8 of the Charter ought, for that reason alone, to be returned to the three accused, but, as well, argues:

(1) that the Information was based in part on statements deposed that were fraudulent or exemplified a reckless disregard for the truth and therefore were calculated to mislead the warrantissuing judge and did, in fact, mislead him materially such that, had he been aware of these circumstances, he would have declined to issue the warrant;

(2) that the warrants lacked sufficient specificity in law;

(3) that there is no such offence, as those charged, known in law;

(4) that, quite aside from all else, the manner in which the searches were planned and executed was intrusive, oppressive and excessive such that the yield from these searches should not, in any event, be allowed into evidence and the seized documents should be forthwith returned to source.

Preliminary to arguing this motion, counsel moved successfully for the right to cross-examine Giuseppe Vettese, C.G.A., an officer of the Department of National Revenue, Taxation, on his affidavit that comprised the Information upon which the warrants were sought.

I allowed this motion on the basis of the decision of Sopinka, J. in R. v. Garofoli, [1990] 2 S.C.R. 1421 where, at page 1464, he said as follows:

Applying that statement to this situation, the appellant cannot cross-examine unless he provides proof of deliberate falsehood or reckless disregard for the truth, and he cannot establish deliberate falsehood or reckless disregard for the truth unless he can cross-examine.

This Court has consistently demonstrated a policy to uphold the right to cross- examine.

The cross-examination that followed lasted several days and I would say was forceful and unrelenting throughout. The affiant's memory of events was challenged as was the choice of wording in parts of his Information. In particular, the accuracy of some of the paragraphs deposed was assailed. Defence counsel's exercise in this regard, was very well prepared, yet protracted. Mr. Vettese was not an easy target for close questioning. He was very much given to extensive narration in his answers that were calculated to include most, if not the entire background, of a given subject matter as a prelude to the answer sought. While prolixity was his benchmark, Mr. Vettese nevertheless demonstrated, as well, an impressive knowledge of the background to this investigation and, in most cases, an exceptional memory of events. Leaving aside the accuracy of his Information being challenged, and evaluating him only on the answers given in cross-examination, I must say he struck me as a witness endeavouring to be candid and forthright rather than devious and deceptive. He was indeed, at times, circuitous in answering some questions, yet I attribute this to his earnestness in ensuring that every last detail was laid bare in explaining precisely why he had deposed, statement by statement, as he had in this Information. He acknowledged in several instances the inaccuracy of some of the statements challenged, at other times he stoutly defended his statements as accurate and reasonable on the basis of information he then had at hand.

The cross-examination was confined to a challenge, chiefly of paragraph 12 of the Information (i.e., information gleaned from interviews with Mr. Sexton, but including Charles Brown, Tony Traylor and others) and, to a lesser extent, of paragraphs 13, 14,17, 5, 18(c) and 6(e) (i). There was no challenge of the contents of paragraphs 7, 8, 9, 10 and 11, these being statements based largely on information and documents received through the efforts of J.F. Psutka, a Revenue Canada tax auditor who had conducted an examination of the scientific research project alleged by involving Cancor Computer Corp.

Mr. Vettese's credibility generally will be addressed more fully in a close analysis of certain parts of this affidavit in subsequent paragraphs of this ruling.

The Crown's position throughout remained steadfast: that while the search must be deemed unlawful, therefore unreasonable and hence a breach of section 8 of the Charter, the documents seized are nevertheless evidence and admissible under subsection 24(2) of the Charter, as to do otherwise would bring the administration of justice into disrepute; furthermore, that while the Information of Mr. Vettese contains errors, they are inadvertent rather than advertent, careless at most in some instances and, in any event, not sufficient to have changed the result had the warrant issuing judge not had such misinformation before him; finally, that the search and seizure was conducted within acceptable limits.

In support of the subsection 24(2) argument, the Crown relies on R. v. Collins (1987), 15 S.C.R. 265; 38 D.L.R. (4th) 508, the case in which the Supreme Court enunciated for the first time the three-test formula to be employed in the balancing process to determine whether impugned evidence should be ruled admissible or inadmissible.

These can be stated as follows:

1. The fairness of the trial process.

2. Seriousness of the Charter breach.

3. Effect of admission or exclusion on the administration of justice.

Respecting the fairness test, evidence was divided into two categories: real evidence, that is, that which pre-existed the breach in any event, and evidence (such as an inculpatory statement) that emanates directly from the breach. Real evidence, as is the case with the documents at issue, cannot be said to affect the fairness of the trial, absenting other unrelated matters that might render them inadmissible and is, therefore, of no consequence in this case under the Collins test.

The effect of admission or exclusion is difficult to measure in this case in that the documents seized were impounded before much in the way of inspection and cataloguing had been accomplished. Mr. Dupont argues that the Crown cannot lay claim to any need for these documents in that it was prepared to proceed to trial without a decision on admissibility. While this argument is somewhat persuasive, it is also true that the Crown has a duty to ready a charge and bring it on for trial within a reasonable time. That process has been impeded by a multiplicity of proceedings launched by the three accused, none of which (other than obtaining and retaining the impounding order) has been successful. Such proceedings have absorbed almost five years. I believe in these circumstances that the Crown, in discharge of its responsibilities, was required to bring this matter on for trial. Furthermore, the decision of Sutherland, J., after several days of hearings on this very issue in June 1988, was that the accused's motion, as before him, should be dismissed but without prejudice to their right to bring the issue before the trial judge rather than a pre-trial motions judge. That is now in process, as I indeed, to the knowledge of all, am the trial judge.

It is also worth noting that in the Information of Mr. Vettese, he deposes that the documents, the subject of this present inquiry, “will be needed". Finally, I believe that under this head (effect of admission or exclusion), the nature of the intended prosecution must be noted. The charges here bear on alleged tax fraud levelled against two Canadian corporations and the operating mind of each of these corporations as they had interrelated dealings with other Canadian corporations (over which Mr. Corr, it is alleged, also had control) and American corporations engaged in business dealings with these three accused and again, as alleged, over which Mr. Corr had some control at certain periods of time. In other words, a paper chase of agreements and correspondence that might explain the activities or intentions of these companies with respect to the completion of scientific research on the SOTAS (State Of The Art Software) project.

All of the foregoing having been said, I can readily infer that amongst documents contained in 65 boxes presently impounded, there is very likely evidence that could be adduced by the Crown as part of its case, the extent to which it might be helpful, of course, being presently quite unmeasurable.

As to the remaining test, seriousness of the Charter breach, there has been much written since the pronouncement in Collins. Chiefly, however, refinements to Collins were made in Kokesch v. Canada, [1990] 3 S.C.R. 3 where Sopinka, J. expanded on this test by stating factors that are relevant in a subsection 24(2) inquiry. They were as follows:

1. Was the violation deliberate, wilful or flagrant or was it committed in good faith?

2. Was the violation motivated by urgency or necessity to preserve evidence?

3. Were other investigative techniques necessary?

Certainly, in this case, it cannot be said the violation was deliberate, wilful or flagrant in that the section under which Mr.Vettese sought the warrant (231.3 of the Income Tax Act) was valid at the time he applied to Justice Callaghan. Even now, though struck down by Hugesson, J. in the Baron case, that decision is under appeal to the Supreme Court. Accordingly the applicant, in applying for and acting upon these warrants per se, quite aside from how they were executed, must surely be deemed to have been in good faith at the time of applying.

As to urgency or necessity to preserve, it seems, from the facts put before me, that the investigators had been told (it was not said by whom) that the accused Corr had been seen removing cartons of documents from the corporate offices to his personal vehicle sometime in March of 1986. With respect to urgency, of course, it cannot go unnoticed that the application for warrants was not until mid-June. I do not know when the investigators learned of the alleged movement of documents by Mr. Corr from his offices.

I think, however, more important than this is the fact that Mr. Vettese had come into certain information, derived in extensive interviews with former employees of Amcor during his trip to Kentucky and with Mr. Psutka, the Revenue Canada tax auditor, that led him to the conclusion that, along with other aspects of his investigation, he had reasonable and probable grounds to believe that offences under Part VIII of the Income Tax Act in the nature of fraud had been committed. If such belief was well founded in a case such as this, it would seem to me that a search of the corporate premises would almost certainly yield evidence relevant in the trial process. A search of the residence of the operating mind of such corporations would equally be justified, particularly if reliable” (according to the Informant) evidence was at hand that Mr. Corr had been seen removing corporate documents from the office and so long as it was confined to a search for those documents.

With all of this in mind, there is certainly compelling argument for the need to preserve evidence that might otherwise disappear.

It follows from this that no investigative technique other than search and seizure could protect the availability of the corporate documents.

The facts as I note them in this case, viewed in the light of the tests outlined in Collins and Kokesch, are persuasive that any evidence found in these boxes should be admitted rather than rejected, absent all the other arguments that must yet be addressed.

The first of these and the most important, I believe, is the issue of whether or not the affidavit of Giuseppe Vettese, an officer of the Department of National Revenue, Taxation, provided a truthful account of what his investigation had revealed and by which he could genuinely have reasonable grounds to believe that anoffence had been committed by this accused and that evidence in support of this belief was to be found in the locations named or whether, as alleged by the defence, the information he provided to the warrant issuing justice was either dishonest and fraudulent or was reckless in its accuracy to the point that had its recklessness or untruthfulness been known, the issuing judge would simply have refused to act on the information.

As noted by Sopinka, J. in R. v. Garofoli, supra,“ When permitted, the cross- examination should be limited to questions that are directed to establish that there was no basis upon which the authorization could have been ranted.” The onus of establishing this is upon the accused who must so satisfy a court on a balance of probabilities.

In the course of the cross-examination already referred to, there was an extensive review of transcripts of his interviews with former employees of Amcor Computer, (chiefly Mr. Sexton, but, as well, including Charles Brown, Tony Traylor and Joseph Hibbs). As well, there was a close scrutiny of many documents that had been available to Mr. Vettese during his investigation and prior to applying for the warrant. The attack on the Information was directed chiefly (though not entirely) at the contents to be found in paragraph 12 which deposed information and belief from an extensive interview with James Sexton during which fellow employees Charles Brown and Tony Traylor were also present and participants.

It was aimed at establishing that Mr. Vettese inaccurately stated some of the information he had been given and withheld still other information of which he had been apprised through different sources to the extent that showed a reckless disregard for the truth of what he deposed, viewed in the overall.

Some examples of this attack and the responses are as follows:

Paragraph 12

Re Paragraph 12(a):

. . .he (Sexton) was responsible for the research and development of the Sotas Project since its inception, which was a minor element of this total responsibility with his new employer [Defence emphasis.]

The defence takes issue with this statement by the affiant arguing that Sexton did not use the words "minor element”.

But Sexton did say, (transcript of tape of this interview, page 1011 of Vol. V) "there's no way I'd spend more than five per cent at most of my time in any given week on SOTAS". At page 1012, he allowed that this estimate was "way too low” but went on to explain that he went up to Canada normally twice a month during which most of his time was spent on SOTAS but when in Louisville, he spent very little time on it, relying rather on Ron Zambonini.

I cannot conclude as submitted by defence counsel that paragraph 12(a) was intended to belittle the importance of the scientific research in relation to SOTAS. While it is true the statement is not accurate to a degree, neither is it reckless having in mind the overall impressions left by Mr. Sexton to Mr. Vettese in respect of time truly and properly allocated to SOTAS by Sexton and those he supervised from September, 1984 and onward.

Re Paragraph 12(b):

Such project was an R & D Project of Amcor Computer Corp. entirely conceived in Louisville, Kentucky by the Senior Staff of Amcor Computer Corp. in December 1983, prior to the involvement in the operation of the new company by Thomas A. Corr. The actual development of the plan for the project did not occur until February 1985 as evidenced by the SOTAS Project Handbook he submitted for examination to the Informant. [Defence emphasis]

The defence complaints concerning this paragraph run some ten pages in their outline of argument (pages 23-33) and come down to this:

(1) the statements that . . . the project "was an R & D project of Amcor Computer Corp."

and (2) "the actual development of the plan for the project did not occur until February 1985” . . . are untrue statements.

Against these references given by defence, my attention has been drawn to these passages by the Crown:

(1) Sexton Tape Vol. V, pages 974-975, 980-1;

Mr. Volk: —okay. Now, Joe mentioned to us yesterday that in the latter phases of ‘83 and early ‘84 when you initially started to brain storm SOTAS as a potential project for Amcor—

Mr. Sexton: Mmm-hm. Right.

Mr. Volk: —and probably what we're, we're looking at in February of'85 then, is— and Joe's going to get a copy for you, just so you can have a look at it and see if you recognize it—ah, is probably that initial conceptual thing.

That's it. I’ll leave it out.

Did the, ah, the concept for SOTAS come on stream, like the concept itself, before Cancor and before Corr?

Mr. Sexton: Oh, yeah. Charlie—I think it was you. . .

Mr. Brown: 1982.

Mr. Sexton: —no, no, 1980. . .

Mr. Brown: You, Rod. . .

Mr. Sexton: —Cliff Jefferies, Rod Hands and myself. . .

Mr. Brown: Bob Bearden. . .

Mr. Sexton: —Tom Aubrey and Bob Bearden were in Tom Aubrey's office before Christman and we were going to call it Ambase II at that point in time.

Mr. Brown: Yeah, it was going to be called Ambase Version II.

Mr. Volk: Mmm-hm.

Mr. Sexton: And then, three months later, or two months later we got acquired the first time by a company out of Houston, Texas and they squelched it. And then 18 months later we got acquired by another company and they squelched it. And so this came about in 1983 when Firemen's Fund was going to spin us off as an R & D arm, and we weren't going to be doing marketing, we were just going to do research development stuff, and we picked it up again. And that's when I finalised the thing.

(...)

Mr. Sexton: —takes the brain storming and its beginning to, to think a little bit more about, okay, we've got all these grand ideas, now how are we actually going to implement these on the computer?

Mr. Volk: Right okay. So, so, so in other words, there was nothing really that was developed as beyond the brain storming idea. . .

Mr. Sexton: No.

Mr. Volk: —until 1985 when you really put down on paper and set your minds to, ah,. . .

Mr. Sexton : Right, exactly.

Mr. Volk: —how are we going to do this?

Mr. Sexton: Exactly.

(2) The Thomas Corr deposition (Vol. II at 306) where he is quoted as saying:

The project or the product was to be developed and to be marketed solely by Amcor. So the project existed to the benefit of Amcor. . .

And far in excess of that money was returned to Amcor and therefore the basis of wiring the money up there providing the money to secure the financing was twofold. One was to fund the R&D of Amcor effectively; and secondly, would provide meaningful financial consideration being returned to Amcor far in excess of the money that was sent up.

Sexton Tape, Vol. V, page 1056:

(3) Mr. Vettese: But wasn't this SOTAS project really an Amcor project, not a Cancor project?

Mr. Sexton: It was an Amcor project until this SRTC funding became available. And then they tried to call it a Cancor project. It was being done exclusively for Amcor, yeah.

Mr. Vettese: It was being done for Amcor?

Mr. Sexton: Sure, absolutely.

While it is true that some contradiction exists in a careful reading of all these cited passages, nevertheless, in a reading of the whole, I cannot conclude that paragraph 12(b) is recklessly inaccurate and, more importantly, of such substance as to mislead a warrant issuing judge to the extent that he would have misapprehended the material as a whole that was tendered in the Information.

Re Paragraph 12(c)

The purpose of the SOTAS project was to enhance the Ambase Software programs which were the main product of Amcor Computer Corp.

". . .The beneficial interest in the results of such project remained the property of Amcor Computer Corp. but was represented to be a scientific research project of Cancor Computer Corp, and Cancor Research Inc. set up in Canada by Thomas Corr and Thomas Aubrey in order to qualify for the SRTC funds available in Canada. [Defence emphasis]

The defence takes issue with these statements as something that were, in substance, never said to the affiant and hence reckless. It would seem, however, that the affiant gleaned this information, at least in substantial part, from the following statements made to him by Sexton and as taken from the Thomas Corr deposition as well:

. . .’to enhance the Ambase software program^'

Did the, ah, the concept for SOTAS com on stream, like the concept itself, before Cancor and before Corr?

Mr. Sexton: Oh yeah. Charlie—I think it was you. . .

Mr. Brown: 1982.

Mr. Sexton: —no, no, 1980. . .

Mr. Sexton: You, Rod. . .

Mr. Sexton: —Cliff Jefferies, Rod Hanks and myself. . .

Mr. Brown: Bob Bearden. . .

Mr. Sexton: —Tom Aubrey and Bob Bearden were in Tom Aubrey's office before Christmas and we were going to call it Ambase II at that point in time.

Mr. Brown: Yeah, it was going to be called Ambase Version II.

"beneficial interest remained property of Amcor’

Sexton Interview, Vol. V, page 1056:

Mr. Vettese: But wasn't this SOTAS project really an Amcor project, not Cancor project?

Mr. Sexton: It was an Amcor project until this SRTC funding became available. And then they tried to call it a Cancor project. It was being done exclusively for Amcor, yeah.

Mr. Vittese: It was being done for Amcor.

Mr. Sexton: Sure, Absolutely.

Mr. Vittese: And the benefits of SOTAS were to be appropriated by Amcor, not Cancor.

Mr. Brown: Except for the 15 per cent royalty or whatever.

Motion Record, Vol. Il, Corr Deposition, page 306:

The project or the Product was to be marketed solely by Amcor. So the Project existed to the benefit of Amcor.

. . . The basis of wiring the money up there . . . was twofold. One was to fund the R & D of Amcor.

Cor Deposition, Vol. Il, pages 317-18:

Q.: Did Cancor Computer of Canada or CRI (sue) contract with anyone to have their research and development work done?

A.: Yes.

Q.: Who did they subcontract with?

A.: Amcor Computer, Ltd., and IBS Canada.

Q.: Amcor Computer Group, Ltd. was owned by you?

A.: Correct.

Q.: Were there any employees of Amcor Computer Group, Ltd.?

A.: Yes.

Q.: Did Amcor Computer Group, Ltd. contract any of its work out?

A.: Yes, it did.

Q.: To whom?

A.: Amcor Computer Corp.

Q.: Of Louisville?

A.: Yes.

Furthermore, as noted by the Crown in argument, Mr. Vettese testified to having seen two identical documents describing SOTAS, one of which identified it as an Amcor project and the other as a Cancor project which, in turn, rendered him suspicious of the Cancor material.

In my view, his failure to bring the fact of these two contradicting documents to the attention of Justice Callaghan was in no way misleading, particularly in light of the above-quoted material upon which he relied and again bearing in mind the wealth of other material that he had been given. An overview of all material scrutinized on this subject by Mr. Vettese leads me to the conclusion that he had every right to depose, as a residue of this information, the contents of paragraph 12(c).

To argue that the warrant issuing judge should have been given the benefit of all the minutia of information emanating from this investigation is, I believe, to ignore the licence surely allowed an informant, i.e., to summarize the substance of his investigation that has led him to conclude that he has reasonable and probable grounds to believe that (a) an offence or offences has or have been committed; and (b) that evidence in support thereof rests at certain locations.

Were it to be otherwise, surely then a warrant issuing judge would be faced with a convolution of statements and documents, some of which no doubt would be contradictory with one another and which, in the overall, would amount to a confusing restatement of all that the investigator had been told in the course of his entire investigation. This is not to say that an informant is excused from being generally accurate in the summary he has provided and within this proposition, let it also be said that a world of difference will be found in summarizations that are inadvertently inaccurate and those that are inadvertently inaccurate, the former being reckless at the least and the latter, probably careless at most and even trivial and insignificant depending on circumstances.

Re Paragraph 12(d)

Very little scientific research was carried on in Canada by either Cancor Computer Corp. or Cancor Research, Inc. until early 1985 since the computer hardware necessary to conduct the software development research was not in place until February 1985. Prior to the arrival in Canada of the first 5 employees of Amcor no scientific research with respect to the SOTAS Project was carried out by them in Louisville, Kentucky. From August 1984 to February 1985 said employees occupied their time in Toronto in unrelated matters including house hunting and looking for office premises first and selecting office furniture and equipment later; [Defence emphasis]

The defence challenges this statement, particularly the underlined part, as having no origin in the material then available to Mr. Vettese.

And once again I quote extensively from the tapes that he did have in hand and to which he had resort before making this statement.

Volume V, Sexton Tape, page 971:

Mr. Sexton: Number one, our guys didn't move to Canada until September of'84. (. . .) September 10th 1984 was the first day that those guys were officially in Canada.

Tape #7, Sexton Tape, page 13:

Traylor: Well, we knew what we wanted to do as a project that’s what we'd been sent up there to do, we got there the first part of September. . . . They wanted us to get individual contracts, went out and got contracts for somebody to paint it, somebody for carpet, you know, run around all over the place and send all that stuff down to Louisville, no that's not what we wanted to do. And you know to me they were spending an awful lot of money on our salaries and stuff like that for sitting up there doing nothing.

Volume V, Sexton Tape, page 984:

Mr. Volk: Here we are, it's almost the end of'84 and nothing has been done yet?

Mr. Sexton: Well, see, here's the thing: the guys didn't go, even though they were supposed to have been working in Louisville, conceptually on this stuff, they didn't get to it because if you were in Louisville and there was a customer that had a problem, you resolved the problem. . . . So these guys had fragmented time that were used, up until we got then in Canada.

Sexton Interview, Tape #7, pages 12 and 13:

Question: Ok, did anyone ever explain to you how your time should be allocated between R&D and let say other activities that weren't necessarily R&D.

Traylor: We were told that we had to fill out a time sheet that had to have at least 40 hours per week on it concerning the project.

Question: It had to have at least 40 hours per week on it concerning whether you worked on it or not.

Traylor: And I know during September, October, we could basically run around playing contractors, when out getting bids on paint and stuff like that a lot of times there wasn't anything to do and we'd sit around and watch television or play cards. You know we were told to fill out a time sheet so we did.

Question: Ok so you filled out the time sheets for the SOTAS project. Ok, who told you, who gave you those instructions.

Traylor: Those came down from Corr.

Question: From Corr.

Okay, how did they come down to you, did they come down in the form of a memo or did he come down and tell you or

Traylor: Corr told us about it once, they were conveyed through Jim once, then when Cliff Jefferies was up there I got it from Cliff once which you I you know which direction he got it I don’t know.

Question: Ok while we're on the subject Jim, I might as well have you fill in who, you apparently directed some of these people from time to time to do this.

Sexton: Based on directions from Tom Corr.

Question : So Tom Corr told you to do that.

Sexton: Absolutely.

(. . .)

Sexton: I thought it was kind of unusual of him paying me one rate and then billing a company that they owned another rate for me. That seemed kind of highly unusual. It seemed to me for a company that was in business to make money, they were sure not in any hurry to get this project done or to even get started with it.

(. . .)

Question : Ok, what were you really waiting for?

Answer: What we were waiting to get a building to move into so we could get computers and so forth so we could actually do something.

Question: When did you actually get your computers?

Answer: The computer room was not functional until after I left. I guess it was in mid to late February.

Volume 5, Sexton Interview, page 965:

Mr. Volk: So, and, and there was some apparently some flow charting going on and so on that—

Mr. Sexton: Very little.

While it was acknowledged by Mr. Vettese in cross-examination that house hunting and the locating of office premises constituted, to his knowledge, legitimate expenses in the establishment of an R & D company, surely the foregoing material could lead an informant to the conclusion that is deposed in paragraph 12(d).

The quotations relied upon by the defence to impugn the accuracy of this statement (found on pages 38-39 of their outline of argument) are, in my view, extensively taken from context. They do indeed leave one with a different impression than when read with all the information then at Mr. Vettese's disposal. But once again, viewed in the light of the overall information he then had at hand, the substance of paragraph 12(d) is neither misleading nor inaccurate. In fact, to the contrary, it is a statement of what he might reasonably have concluded, bearing in mind all he had then been told.

Re Paragraph 12(e)

The alleged expenditures to IBS Canada claimed by Cancor Computer Corp, in the amount of $1,685,262 and by Cancor Research, Inc. in the amount of $3,334,519 were fictitious inasmuch as:

i) IBS did not have the facilities in Canada or the U.S.A. to conduct such

research and there was in fact no evidence of any research being conducted,

ii) the invoices used by IBS Canada to bill Cancor Computer Corp, and Cancor Research, Inc. were printed in Louisville, Kentucky by Amcor Computer, Corp, staff using that company's printing press,

iii) the staff of Intelligent Business Systems Inc. of New Haven Connecticut were in fact engaged in the adaptation of their artificial intelligence software to the Ambase products of Amcor Computer Corp., but emphasised that such activities did not relate to the SOTAS Project and that no usable product had been developed by September 1985,

iv) Intelligent Business Systems Inc. as a licensed user of Amcor's Ambase products had encountered certain difficulties in using such products. Amcor staff in particular Charles Brown and Tony Traylor were assigned to assist liarion Kuskin of Intelligent Business Systems Inc. to resolve said problems. Their wages and associated expenses were charged at the direction of Thomas Corr to the SOTAS project. [Defence emphasis]

The defence takes issue with this paragraph in several respects and the Crown acknowledges the existence of some misinformation.

12(e)(1)

In paragraph 12(e)(i), it is not stated as to which''IBS" he is referring, (i.e., IBS Canada or IBS U.S.). Surely it is apparent from the preamble in this paragraph that he is referring to IBS Canada, in that paragraph (i) clearly refers back to the preamble in which IBS Canada is stipulated.

Defence argues that it was fundamentally misleading to state that there was no evidence of any research being done by IBS (by implication IBS Canada). In response to this, the Crown refers me to the following extracts which Mr. Vettese had in hand prior to his deposition:

Volume V, Sexton Tape, page 966:

Mr. Sexton: . . . that we didn't complete for April 1, of 1985, but yet their going back and billing saying they did all these things that they couldn't have done. (. . .)

Volume V. Sexton Tape, page 973:

Mr. Brown: And another, and another important point I think that needs to be made is that none of this work was ever done in Canada—it was all done in Connecticut. Well, I don’t even know today whether they have an employee in Canada, I don't know in fact I think that came out in the deposition yesterday. I think Corr said no, that’s an office with a phone in it, it's a shell office, and my attorney says well that's a shell office, he says, well how do you determine shell, he says, With no employees, a phone and an address? He says, well, I guess so.

Volume V. Sexton Tape, pages 1067-1068:

Mr. Sexton: It’s still bogus. You know, as far as I’m concerned, because number one IBS didn't do any of this work. For $1.6 million, they did nothing.. . .

Volume V, Sexton Tape, page 1084:

Mr. Sexton: IBS did not do any work for Cancor or Cancor Research Inc. in the time that I was associated with the company up through September, 1985.

Volume V, Sexton Tape, pages 943, 944:

Mr. Brown: —there were billing where IBS Canada worked on the artificial intelligence interface—(. . .)

—and the employees of IBS Canada, the names that are on those invoices. . .

(. . .)

—are people that worked at IBS in Connecticut.

(...)

I don’t think IBS Canada ever had any employees.

is . .)

I really don't.

(...)

But I mean, I don’t know that for sure.

(...)

As far as I can tell that was a shell. . .

(...)

—okay, and to be really honest, I think IBS Canada was a laundromat.

(. ..)

Mr. Vittesse: Well, IBS Canada was, ah, was Tom Corr, right? So . . .

Mr. Brown: No, I, l, I don't think it was Tom Corr, I think it was Bill Bird who is the President of IBS in Connecticut. But I think he was in cahoots with Corr.

(. . .)

Mr. Volk: Well you mentioned you saw something where Corr was supposed to have bought the shares of IBS Canada?

Mr. Brown: Compuvest. . .

Mr. Volk: Compuvest. . .

Mr. Brown: —for a million dollars.

Mr. Volk: —yeah, so well, that’s the same thing. So,. . .

Mr. Brown: Yeah.

Mr. Volk: —so Corr must have owned, ah, IBS Canada. . .

Mr. Brown: Right.

A reasonable reading of all this material would, in my view, allow an investigator such as Mr. Vettese to reach the general conclusions he has herein summarized.

12(e)(ii) is another matter. There is a world of difference between an "invoice" and "invoice forms". The former implies a completed or an engrossed document containing particulars of a service or merchandise, while the latter implies simply the paper base on which the former is prepared. Mr. Vettese would readily know the difference. His failure to implant the word "forms" after the word "invoice" might well have misled Justice Callaghan as to just what was provided by the Louisville Kentucky base to the Canadian Company. It was certainly a carelessly worded part of this deposition that might well imply a conspiratorial arrangement, criminal in character. The central question is whether this carelessly worded paragraph was advertent or inadvertent. If the latter, it was careless in the extreme. If the former, it was reckless and intentionally so. I observed Mr. Vettese, at times with great care, in the course of his cross-examination by Mr. Waldin lasting several days. While given to prolixity in his responses and showing occasional flashes of righteous indignation to some of the questions, I must again say that I found him to be forthright and candid. He strove at times to be all-inclusive in his supply of information. He seemed extremely well informed though on occasion he claimed memory lapse by reason of the length of time that had gone by (with some justification I might add). While at times he tended to justify the statements in his Information most expansively, I do not conclude that he was giving well tailored answers and I do not believe he was at any time being untruthful. It would have been much better had he said “ invoice forms" and using the word "invoice" alone no doubt was misleading to some extent. But I do not believe that this misstatement standing alone and measured with all else that was found in the Information would by itself have tipped the warrant issuing judge "over the top”, as it were, whereby this mistake made the difference. In this single instance, I will, bearing in mind my overall impression of Mr. Vettese, characterize this misleading statement as careless but inadvertently so.

12(e)(iii)

In measuring the accuracy of this paragraph I examined:

Volume V, Sexton Tape, pages 1086-87:

Mr. Vittese: —you don't know of any work done by IBS.

Mr. Sexton: I know of no work done by IBS for the SOTAS project in Canada, period.

Mr. Volk: You mean you've never seen any evidence of it in the form of reports or. . .

Mr. Sexton: Absolutely none.

Mr. Volk: Other than what we're showing you now.

Mr. Sexton: Other that what you're showing me right now.

(...)

Mr. Sexton: Yes, and I can guarantee you that those people weren't working on any SOTAS project, because they had all they could do to get their projects done at IBS.

Volume V, Sexton Tape, page 973:

Mr. Volk: Right. Okay, so the key thing then, is that even if they were working on it, they were working on it, ah, not for SOTAS, and —Mr. Brown: Right.

Mr. Volk: —for Cancor. . .

Mr. Brown: They were working on it for themselves.

Mr. Volk: Yeah, yeah, so it was a—an enlargement of their product or a perfection.

Mr. Brown: And another, and another important point I think that needs to be made is that none of this work was ever done in Canada. . .

Mr. Volk: Mmm-hm.

Mr. Brown: —it was all done in Connecticut.

Mr. Sexton: Oh no. . .

Mr. Brown: Well, I don't even know that today whether they have an employee in Canada. I don't know—in fact, I think that came out in the deposition yesterday, and I said, no, I think Corr said no, that's an office with a phone in it, it's a shell office, and my attorney says well that's a shell office, he says, well how do you determine shell, he says, with no employees, a phone and an address. He says, well, I guess so.

And at page 1084:

Mr. Volk: How do you know that IBS didn't do anything?

Mr. Sexton: Because I was responsible for both the project in Canada and the United States. And I would have been the one to call them in to do any work, and I did not do that.

Mr. Volk: So you didn't authorise anybody else to. . .

Mr. Sexton: I would have had to authorise and approve any involvement on their part, for billings, for consulting work, for anything that had to be done.

In the overall, I find little to be critical of in the manner in which Mr. Vettese has summarized the substance of his belief in this part.

Paragraph 12(e) (iv) must certainly be said to contain some erroneous statements. Firstly, liarion Kuskin was a Cancor consultant (or employee), not an IBS employee. Secondly, paragraph (iv) of 12(e) speaks of an invoice of about $1700 and can scarcely be said to exemplify a sweeping statement that expenditures in amounts of $1,685,262 and $3,334,519 are all fictitious. Furthermore, the amount of the invoice, $1700, is not set out in this paragraph.

Against this, I have examined the following extracts from the transcripts:

Volume V, Sexton Interview, page 1047:

Mr. Sexton: And hours. But what we found out later, this showed up on a SOTAS invoice, against the SRTC money. Now, that’s only $2,000, but still that’s the type of stuff that any bill that they could throw through there they were doing.

Sexton Interview, Tape #7, pages 10 & 11:

Sexton: Let me tell you what knowledge he does have though and that is that we were working on a response problem with IBS on Amcor software all through the summer of 1985 up through August and the same people that appear on those invoices were working on the Ambase/Amcor Software problems in conjunction with Tony.

(. . .)

Sexton: And the people that were working on that problem on IBS with Tony had nothing to do with SOTAS, and those were Martin, Whitmore, Mueller and Schwarz.

(. . .)

Volk: Ok so you were working with these people in May but as an employee of Amcor and in respect to the Ambase project.

Sexton: Correct.

fc = .)

Volk: And there were two employees of Cancor in Toronto who were also working on the Ambase problem to assist you and we have the names of those, Jim gave us those names.

Sexton: Jim Miles and Hallorian Kuksin.

I conclude, from reading this paragraph and these transcripts, that Mr. Vettese had no right to make such a sweeping statement as he did, though the Sexton interview relevant to this part, no doubt, would lead one to the conclusion that some invoices were being improperly allocated with respect to legitimate research. There is, however, no basis for saying all the alleged expenditures were fictitious. This statement was careless, would no doubt be misleading, but, excised from the Information as a whole, would make no difference whatsoever to the ultimate decision as to whether or not warrants should issue.

Re Paragraph 12(f) (i, ti & Hi)

The alleged software purchases from Amcor Computer Corp, by both Cancor Computer Corp. and Cancor Research, Inc. were both grossly exaggerated and fictitious inasmuch as:,

i) the appropriate billings for such software including the Ambase source code and necessary training of Cancor staff were represented by invoices numbers 051292 and 051439 (Contract #027522) in the amounts of U.S. $77,750 (Cdn $104,962.50) and U.S. $25,000 (Cdn $33,333.25) from Amcor Computer Corp., respectively,

ii) invoice #051641 in the amount of U.S. $350,000 (Cdn $496,440) from Amcor Computer Corp. to Cancor Computer Corp, resulted in a rebilling from Ambase software referred to in paragraph 12(f) (i) supra,

iii) the charge by Amcor computer Corp, to Cancor Research, Inc. in the amount of Cdn $1,250,000 for the Amwriter source code contained in the $10,000 ,012.07 list of Expenditures submitted to Mr. Psutka, was totally fictitious inasmuch as source code had already been acquired by the invoices referred to in paragraph 12(f)(i) supra. [Defence emphasis]

The Crown readily concedes that 12(f)(i) is erroneous but argues it is unintentionally so. She agrees there were not three sales of the "source code" but states rather that there were two. She argues that Exhibits B and C are documents that would be misleading to a layman such as Vettese, who was unfamiliar with computer terminology.

The basis for the conclusion that it was sold twice might well lie in the following dialogue involving the February 14, 1986 interview between Charles Brown and the Informant Vettese accompanied by Mr. Volk:

Volume 7, page 1326:

Mr. Brown: Oh, sure, yeah. I believe, but I'm not exactly sure about this—okay, at one point, Amcor sold the source code to Ambase,. . .

Mr. Volk: Mmm-hm.

Mr. Brown: To Cancor.

Mr. Volk: Right.

Mr. Brown: And I don't remember exactly the amount of money involved, but it was considerable.

Mr. Volk: 350,000?

Mr. Brown: That sounds right.

Mr. Volk: Yeah.

Mr. Brown: In that area.

Mr. Volk: Okay.

Mr. Brown: And then later, they did it again.

Mr. Volk: The same thing?

Mr. Brown: I believe that that software was actually sold to Cancor twice.

Mr. Vittese: That's, we have a—that's why we had two—two buildings.

One can readily conclude from the foregoing that this paragraph was misleading. The questions are to what extent and with what effect on the Judge.

It must, I think, be presumed that Mr. Vettese, in drafting paragraph 12(f), had in mind the following information (or at least same was available from the Sexton-Brown-Traylor interviews of February 15).

Volume V, Sexton Interview, pages 1078-1079

Mr. Vittesse: How about this $1,250,000 for Amwriter Source?

Mr. Brown: How much?

Mr. Sexton: 1 million, 2, no, that is completely bogus. Let me explain to you what Amwriter Source is. Am-writer is only a non-technical query facility against the Ambase database structure.

Mr. Vittese: So it's a software programme.

Mr. Sexton: It's a software productivity tool that would represent approximately 3 per cent of the total functionality of Ambase. And we sold the product for 5 to $10,000.

Mr. Vittese: And they have it for $1,250,000.

Mr. Sexton: And there's no way that there's a $1,250,000 in that product. A total of three people worked on it for less than a year, in fact there's probably 1.6 man years in the product, and that would probably cost—would have had a cost associated with it of maybe $50,000 at the outside. No, it wouldn't even have been that high. Yeah, it would have been about $50,000 at the outside.

Mr. Brown: Well, you have—you have an invoice where we see that they paid $465,000 for the Ambase Source Code.

Mr. Vittese: Mmm-hm.

Mr. Brown: The Ambase Source Code would automatically include the source code to Amwriter, because Amwriter is a part of Ambase.

Mr. Sexton: Yes, Amwriter was included automatically with the Ambase product. We did not sell it separately unless people had not purchased a development copy of Ambase.

Mr. Volk: So the cost of the source code would give you all that, then.

Mr. Brown: Should.

Mr. Sexton: Yes.

Mr. Vittese: So they are charging twice for the same thing.

Mr. Brown: Oh, yes, because Am base. . .

Mr. Vittese: And they are inflating the price hundred per cent, or more?

Mr. Brown: Oh, no.

Mr. Sexton: More than a hundred per cent.

(everybody speaking at once)

Mr. Vittese: (Inaudible) a hundred times, then.

Mr. Brown: A hundred times.

Mr. Sexton: Oh, a hundred times maybe, yeah. But, yes, Amwriter Source would be included in Ambase Source which they've already paid twice for, according to this. So now you're paying six or eight times, based on this.

Mr. Vittese: So that's the $1,250,000. . .

Mr. Sexton: That's completely bogus.

Mr. Brown: Can't believe it.

Sexton Interview—Tape #7—Page 4

Question: Do you see anything unusual on that list and you look down it.

Answer: Well, the things that I saw unusual, one was the Amwriter source code. Which is on page four.

Question: Right, $1,250,000.00. How much is it worth in your

Answer: I'd say at the most $100,000.00.

Answer: I remember this was after

Answer: I’m talking Canadian dollars.

Answer: No I’m saying, no wait a minute, no, no, no, they're billing for source code for Amwriter which is included normally in the Ambase product when they buy source there, they've already bought it twice, now they're paying over a million dollars for Amrighter source. Is that legitimate?

Answer: No, it's not legitimate.

Answer: How much of that would be.

Answer: Well since they've already paid for it once, it should be zero. I mean if they bought the source code to Ambase,

Answer: That includes Amrighter.

Volume V, Sexton Interview, pgs. 1065-6:

Mr. Volk: Okay, so that 496,000 for the source code is the second time it's been sold.

Mr. Sexton: Correct. Or it's the first time it's been sold. . .

Mr. Volk: The that company. To research.

Mr. Sexton: In the fronting sequence, the second time was for Cancor Research Inc. Because this is Cancor Computer Corporation.

(. . .)

Mr. Volk: The same employees are working for both, eh?

Mr. Sexton: Yes.

Mr. Vittese: Yeah. It says here. . .

Mr. Volk: So they can have access to the same programme.

Mr. Sexton: You only need it one time.

Mr. Brown: The companies are one and the same

And at page 1003:

Mr. Sexton: And then you've got the $350,000 one here, and that was—now, see, here's the thing, we never would sell source code to anybody.

On Ambase. Now, we did on all the other products, so they could modify them if they needed to. But Aubrey signed that one.

Well, that's why he went to Aubrey, he knew l wouldn't sign.

One could take, from these passages, two things: firstly, that these three former computer programmers of Amcor were telling Mr. Vettese there was gross exaggeration of the software purchases, and, secondly, that there had been duplication in the purchase of the product. Such information, taken with the whole of the other information available, could reasonably have led Vettese to the conclusion that the accused had initiated a plan by which the Canadian Cancor companies were intended to substantially exaggerate the extent of their scientific research expenditures. While the numbers alleged (thrice rather than twice) are clearly wrong, the basis for his belief is not groundless; the use of language such as "grossly exaggerated and fictitious” is, of course, poor drafting and indeed contradictory, as well. It was, nevertheless, language that was placed before and I am sure carefully considered by a very experienced judge.

Re Paragraph 12 (g)

That the billings for officers’ compensation from Amcor Computer Corp, to Cancor Computer Corp, in the total amount of $247,945.24 and Cancor Research Inc. in the total amount of $155,964.33 were grossly exaggerated inasmuch as such billings represented in excess of 50% of the total salaries of Thomas Aubrey and Thomas Corr whereas such officers did not have the capability of contributing to the development of the SOTAS Project and were engaged almost entirely in the management of the normal business of Amcor Computer Corp. totally unrelated to the SOTAS Project.

This paragraph, in my view, is designed to convince the warrant issuing judge that the principals, Corr and Aubrey, charged themselves out to this project at grossly exaggerated rates that, in effect, exceeded 50% of their overall salaries when, in fact, they lacked the technical expertise that would allow them to gainfully participate in actual research.

Mr. Vettese conceded in cross-examination that management and entrepreneurial personnel could charge for their time in seeking financing if the company for whom they sought the financing was pure Research and Development. He also explained that the reason for reaching the conclusion that there was gross exaggeration was that the companies involved (Amcor—an American company and Cancor—Canadian companies) were not in his view (bearing in mindhis investigation overall) behaving as arm's length operations. This latter fact was not set out in his paragraph 12(g).

The Crown, on the other hand, refers me to the following passages:

Volume V, Sexton Interview, page 1055:

Mr. Volk: How many hours is he billing for?

Mr. Brown: 165. That's a full month.

Mr. Volk: Yeah.

Mr. Brown: And, oh, Corr's billing for 201.

Mr. Volk: What's the period?

Mr. Brown: Two months, January and February.

Mr. Vittesse: Of'85.

Mr. Volk: Well, he's saying that 50 per cent of his time or more is spent on.. . .

Mr. Brown: That's again, you see, I'll tell you how you can dispute that.

Mr. Volk: Even if it was venture capital it wouldn't be that much time, would it?

Mr. Brown: Oh, no. But he'll tell you it was.

And further at page 1009:

Mr. Sexton: —for their times. They didn't spend a minute's time on the project, and let alone even if they did, they couldn't have contributed anything because they don’t know anything.

With these passages in mind Mr. Vettese, according to his evidence, had a twofold concern: firstly, why should the accused be charging his time to his own company (Cancor), that was still in the neophytic stage of development, at consultant rates rather than at actual salary rates; secondly, how could he claim to spend over half of his time at Cancor, an alleged Research and Development company with only five employees when his other company (Amcor) was a viable full-blown entity with 55 employees.

It is true that he did not check consultant rates, nor did he have proof that the time sheets were inaccurate. But again it must be said that from his investigative yield in the overall, he coula have had reason to believe that an exorbitant puffery of executive compensation had been worked into the R & D expense equation as a whole and that such suspicions could be established to the required degree by documentary evidence to be found on the various locations sought to be searched. Nothing more than seemingly reliable information that Mr. Corr was probably charging himself out to his own company at consultant rates in attempting to raise venture capital would, in my view, give a sufficient basis for the statement made in this paragraph.

Re Paragraph 12(h)

That the billings from Professional Services from Amcor Computer Corp, to Cancor Computer Corp, in the total amount of $626,422.50 and Cancor Research Inc. in the total amount of $741,830.10 were grossly exaggerated inasmuch as:

i) such employees were not actively engaged in the development of the SOTAS Project until February 1985,

ii) the mark up of their normal salaries by 2 /2 times was far in excess of the normal fair market charge for such services,

iii) he and other employees of Amcor were directed by Thomas Corr to prepare their individual time sheets showing time charged on the SOTAS project when in fact no such effect had been expended.

The defence characterized the whole of the paragraph as " incorrect and misleading". They accuse Mr. Vettese of labelling the two sums mentioned (626,000 and $742,000) as fraudulent which he does not. He does state them to be "grossly exaggerated" but this is surely not to deny their existence to some degree.

12(h)(i) basically states nothing more than that the employees weren't actively engaged in SOTAS—until February, 1985; (ii) that employee salaries were marked up /2 times and that this was excessive; and (iii) that Mr. Corr directed research employees to allocate working time to SOTAS that hadn't been expended.

One must examine, once again, transcript available to Vettese at the time to determine the basis, if any, for his statements.

Volume V, Sexton Interview, pages 980-81:

Mr. Sexton: —takes the brain storming and its beginning to, to think a little bit more about, okay, we've got all these grand ideas, now how are we actually going to implement these on the computer?

Mr. Volk: Right, okay. So, so, so in other words, there was nothing really that was developed as beyond the brain storming idea. . .

Mr. Sexton: No.

Mr. Volk: —until 1985 when you really put down on paper and set your minds to, ah,. . .

Mr. Sexton: Right, exactly.

Mr. Volk: —how are we going to do this?

Mr. Sexton: Exactly.

Sexton Interview—Tape #7—pages 8 and 12

Answer: Right, they were billing us out as consultants. They were paying us one thing out of one room and then charging Cancor like 2 to 3 times what they were actually paying us. [Emphasis added.]

(. . .)

Answer: No I think they were being claimed as SOTAS expenses.

Question: Ok so they were being recovered in essence.

Answer: They were being recovered by the SRTC funds.

Question: From Cancor.

Answer: But at more than we were actually being paid at.

Question: So you were transferring the actual payroll expenditure down and that was what was being dispersed to the employees but it was being recovered at a much higher rate on the basis of consultants fees. [Emphasis added.]

Answer: That's correct. [Emphasis added.]

Question: Ok, did anyone ever explain to you how your time should be allocated between R&D and let say other activities that weren't necessarily R&D.

Traylor: We were told that we had to fill out a time sheet that had to have at least 40 hours per week on it concerning the project.

Question: It had to have at least 40 hours per week on it concerning whether you worked on it or not.

Traylor: And I know during September, October, we could basically run around playing contractors, when out getting bids on paint and stuff like that a lot of times there wasn't anything to do and we'd sit around and watch television or play cards. You know we were told to fill out a time sheet so we did.

Question: Ok so you filled out the time sheets for the SOTAS project. Ok, who told you, who gave you those instructions?

Traylor: Those came down from Corr.

Question: From Corr.

Ok, how did they come down to you, did they come down in the form of a memo or did he come down and tell you or

Traylor: Corr told us about it once, they were conveyed through Jim once, then when Cliff Jefferies was up there I got it from Cliff once which you I you know which direction he got it I don't know.

Tape #7, Sexton Feb. 15/86, page 12.

I have examined (I believe carefully) the submissions of defence counsel outlined in their brief on pages 50-54 measured against the above-noted extracts from transcript, and I do not agree that Mr. Vettese has set forth in this paragraph an allegation that is "both incorrect and misleading". These allegations come from what might easily be seen as well informed former employees, albeit two of whom were than engaged in wrongful dismissal litigation against Mr. Corr. From what other more reliable source might this information come? The answer plainly is none (other than time sheets that would not state the whole picture). Their statements clearly leave an impression that is consistent with the import of what Vettese states in paragraph 12(h). It is true that time sheets, in some cases, show employees allocating no more than a few hours per week to SOTAS, especially in the early stages. Once again, Vettese could, it must be acknowledged, have provided further detail in respect of hours worked, etc. But notwithstanding this, surely in the overall, this investigator could have had reasonable grounds to reach the conclusions he stated in this paragraph and which no doubt required proof that might well be found in the search and seizure process sought.

I am not prepared to find anything close to a reckless disregard for the truth in this paragraph, again, and particularly bearing in mind the whole of the information that Vettese has stated he, at that time, had available.

Re Paragraph 12(i)

(i) That the billings for the DEC computers in the amount of $1,029,434.47 from Amcor Computer Corp. to Cancor Research, Inc. were exaggerated by $298,284 in as much as:

i) under the terms of the distributorship agreement between Digital Equipment Corp. and Amcor Computer Corp. the latter could not re-sell computers but was required to sell the computer enhanced by the inclusion of Ambase software as a total package,

ii) the normal selling price for such package was cost to Amcor plus 10% plus the normal selling price for the relevant software,

iii) that based on the foregoing the normal selling price in this instance would be $641,283 as opposed to the actual amount charged of $939,567.

Mr. Vettese herein basically has represented to the judge

that the sum paid for DEC computers (hardware) was grossly exaggerated for the reasons he states in the three subparagraphs. The defence describes this as “totally unfounded” and goes on to explain why at pages 55-56 of its factum.

Measure these submissions against the following extracts from the tapes:

Volume V, Sexton Interview, page 994:

Now, Joe mentioned something to us about those two computers, the two DEC computers that were sold.

Mr. Sexton: Mmm-hmm.

Mr. Volk: From Amcor to Cancor.

Mr. Sexton: Mmm-hmm.

Mr. Volk: In his estimation the prices were way excessive.

Mr. Sexton: I think they were. I think they had been inflated quite a bit. What we did as a company, we were an OEM or an authorised distributor, so we got breaks of about 28 to 32 per cent on anything that we bought from DEC and resold.

Mr. Volk: Mmm-hmm.

Mr. Sexton: But I think what they did, they took our cost and marked it up even more than what the difference would have been between our cost and the list price.

And at page 1000:

Mr. Volk: Oh, yeah, it was marked up something phenominal. . .

Mr. Sexton: We averaged in margins somewhere between 9 and 11, 12 per cent. For the entire year. And the reason that I know is I had Bill Scearce, this guy that worked for me. . .

Mr. Volk: Yeah.

Mr. Sexton: He did all ordering of all types of equipment, I don't care whether it's a tape, tape drive, disk, disk drive, whatever, computers—and I had him keep a running total per year of what we bought it for and what we sold it for, and he gave an analysis (inaudible), and the last one wasn't even 10 per cent, it was 9.9 per cent, or something like that.

Mr. Volk: Okay. So that's the average gross margin for all sales including the software and hardware.

Mr. Sexton: Right.

And further at page 1072:

Mr. Sexton: Um, the duty on the equipment I would say is under inflated by the fact that the two amounts that were shown for duty going into Canada were substantially less that what the value of the equipment was new.

Mr. Volk: It was about $165,000 each, I believe.

Mr. Sexton: Yeah, I think a total of $330,000 was what they were saying they were billing it at, but they're showing $900 and some thousand here.

Mr. Vittese: That's right. So on the one end they are trying to inflate the cost, and the other end for duty purposes they are. . .

Mr. Volk: Decreasing it. Yeah.

Mr. Vittese: Decreasing the value, or showing it. . .

Mr. Volk: Showing the true value.

Mr. Sexton: With a $600,000 spread.

In the light of these passages, it would seem to me that Mr. Vettese is amply armed with statements from informed persons by which he could reach the conclusions he deposed. And once again, such information might well be buttressed by documentation to be found in the respective company records.

The Other Paragraphs Challenged

Re Paragraphs 5 and 3(a)(vi)

The complaint here is that the affiant did not state that payment of tax in a certain amount had been made but rather stated that Cancor Computer Corp, "claimed it had made payments totalling. . .

This informant was addressing tax that allegedly had been evaded, not a summary of what had been paid and which had nothing to do with this investigation. I do not believe that he had any obligation to summarize what tax had been paid in a deposition aimed, as was this one, at a charge of evasion; furthermore, a careful reading of paragraph 3(a)(vi) suggests no denial of the payment claimed to have been made but rather informs that the accused company was claiming an overpayment of $1,284,289.33—in effect, seeking a rebate or credit in this amount from Revenue Canada. I find no merit in this submission.

Re Paragraph 6(e)(1) and See Paragraph 13 of the Information

It seems from the contents of pages 63-5 of the accused's outline of argument that the mere stating of "Joseph Hibbs III, Vice-President Sales” was, in their view, insufficient information to put before the warrant issuing judge when, in fact, Mr. Vettese was aware of the letters Mr. Hibbs had written to Aubrey threatening civil and criminal action if his claim for damages (for wrongful dismissal) was not settled.

While it is true that these letters are disposed to a threat of criminal prosecution if damages are not paid, which might well lead to an extortion charge in this jurisdiction, and these letters do suggest a vengeful attitude on the part of Hibbs, it is also true that the affiant did not rely on anything that Hibbs told himbut rather only on hard copy documents from computerized tape storage records of the Amcor Corp. (paragraph 13 of the Information). In other words, the source of what is deposed in paragraphs 13(a) and (b) is the tapes, not the person. Surely it would be unreasonable to expect this affiant to check these tapes for accuracy because they were provided by the then disgruntled Hibbs. Furthermore, the manner in which they came into Hibbs’ possession is, in my view, of no consequence to Mr. Vettese unless he had initiated or participated in their being pilfered, which is simply not the case.

Re Paragraph 14

I find no merit in the defence complaint with respect to this paragraph, the contents of which are a reasonable summary of the information Mr. Vettese had at hand.

Re Paragraph 17

The Informant further states that he has reviewed the testimony of Thomas Corr contained in the Deposition referred to in paragraph 6(g), supra, and that as a result of such review he knows that the said testimony indicates that:

(a) the SOTAS Project was to be developed solely by Amcor Computer Corp, and that the purpose of the SRTC financing was:

i) To fund the R&D of Amcor Computer Corp, re the SOTAS Project, and

ii) to provide financing to Amcor Computer Corp. Such financing would consist of the difference between the amounts paid to Amcor Computer Corp, by Cancor Computer Corp, and Cancor Research Inc. in respect to billings by Amcor Computer Corp, in the alleged development of the SOTAS Project

Re Paragraph 17(c)

Commencing in March 1984, Thomas Corr became an employee of Amcor Computer Corp. From March until September 1984 he directed Amcor Computer Corp, to pay his salary of approximately U.S. $10,033 per month to Compuvest Management Ltd., and for October, November and December 1984, he directed that Amcor Computer Corp. withhold his monthly salary and apply it against a U.S. $50,000 salary advance he received from the said Amcor Computer Corp. in May 1984.

Re Paragraph 17(e)

Of the total amount of $5,019.781 billed by Compuvest Management Ltd. under the name of IBS Canada to Cancor Computer Corp, and Cancor Research, Inc. only $250,000 was paid.

The statement by Vettese developed solely by Amcor Computer Corp." is, in the overall, not accurate. It might well mislead a judge as to the literal and precise involvement of these companies as stated.

No doubt this statement by Vettese comes from the Corr deposition as follows:

Volume II, page 306: "The project or the product was to be developed and to be marketed solely by Amcor. So the project existed to the benefit of Amcor."

While there might be carelessness in failing to disclose the exact transaction in accordance with all information at hand, I do not view this deficiency as misleading to the extent that a judge might have refused to issue the warrant when viewed in the overall of accurate information then at hand.

Re Paragraphs 17(c) and 20

Mr. Vettese, as a tax investigator, would surely know the difference between a calendar year and a fiscal year-end. He swore that he believed that Corr had failed to report income of $90,000 (in the year 1984). In fact, that income was reported in the taxation year 1985 (i.e., payable in April of 1986). Mr. Vettese acknowledged that he had looked only at the 1984 return and that the 1985 return would have been, at the relevant time, in process and, therefore, unavailable to him.

I do not believe that the deficiencies in the paragraph were intended to mislead the warrant issuing judge. Hindsight tells us that Vettese should have known that Corr was, on the basis of tax advice, claiming his income from the company as a consultant rather than as an employee and hence such income would appear on the later rather than the earlier return. On these facts, it could, on the one hand, be argued that Mr. Vettese was being purposely misleading or, on the other, that he was careless in failing to determine if the income was declared on the later return. Once again, viewed in the overall, this affiant, on the basis of many allegations that have gone unchallenged, had apparently concluded that Corr was involved in serious tax evasion misconduct. He made an assumption in respect of these paragraphs, (17(c) and 20) that lacked complete accuracy because he lacked full information that he might well have sought. But, again, I do not see it as an advertent attempt to mislead the Court, nor is this statement such as would form the basis to issue a warrant that would otherwise not have been issued.

Paragraph 17(e)

Mr. Vettese quite obviously derived this part of the information from an extract from Mr. Corr's deposition as follows:

Volume II, page 342:

Q. And those billings total some $5,000,000, don't they?

A. Uh-huh

Q. And in fact those were paid, were they not?

A. No, they weren't.

Q. How much of them were paid?

A. As I said last time less than $250,000 Canadian

This paragraph is not, in my view, misleading. The defence argues that this statement is incomplete in that it ignores Mr. Corr's explanation at page 343 of this deposition that repayment of the balance was in accordance with terms of a contract between the two companies that basically provided the balance was to be paid on completion. This explanation of Mr. Corr's, of course, ignores the fact, as pointed out by Mr. Vettese, that the repayment provisions were forgiven upon a single default of any required payment.

Re Paragraph 18(c)

Paragraph 18(c) is simply the affiant's summary of the history and control of the companies overseen by Corr at certain periods in time. In my view, it is not misleading, and it leaves no impression from which could be inferred any wrongdoing. It is simply part of the history and background being developed by the informant that might assist in overall comprehension on the part of the warrant issuing judge.

The foregoing has been an attempt to examine, part by part, the complaints of the accused about the contents of paragraphs 12, 14, 17, 5, 13, 6(e)(i) and 18(c), complaints that the defence would persuade me comprise an attempt by the affiant to mislead the warrant issuing judge in a recklessly inaccurate and even an untruthful way. Considering all the material, its sheer bulk and sometimes its complexity, this is by no means an easy task. Error certainly appears in some of the statements. Mr. Vettese was careless in paragraph 12(e)(ii) when he described invoice forms as invoices. Other parts of this paragraph could have been better drafted, more fully detailed and blessed with greater precision and accuracy. He did not provide every single facet of information then in hand. But how could he, really, in such an investigation as this? Bearing in mind the man, and how I I have judged his credibility as a whole from the extensive cross- examination to which he was subjected, and the source and extent of his information, I am not satisfied on probability that the defence has established the fraud or reckless disregard for the truth threshold so necessary to the thrust of their argument with respect to the paragraphs challenged.

I turn next to the accused's further complaints that:

A. The warrants lacked specificity.

It is argued that the description of the documents to be searched for is not reasonably specific within the meaning of the Act. I have examined all four of the Appendix B parts of each information, in effect, the description of what is to be searched for in each of the four locations named. Basically, each Appendix B describes the class of documents sought; i.e., ledgers, journals, financial reports, statements of costs incurred, contracts and agreements, invoices, purchase orders and other business documents that might be telling as to the extent these two companies engaged in scientific research that might constitute a bona fide claim under Part VIII of the Income Tax Act, or otherwise. These appendices are confined to documents relating to the two companies charged and Thomas Corr, the remaining accused; in the case of the Corr appendix, his personal income tax returns, bank records and pay stubs. All the named category of documents would, in my view, be extremely germane to the prosecution of an income tax evasion case. To require an investigator to specifically identify all the documents that might, in such a matter, be found, would be unreasonable in the ultimate. I would think that the descriptions found in the four appendices are pretty well exactly what a warrant issuing judge might expect to find in an application of this kind. These descriptions are, in my view, sufficiently specific in describing the mission intended by the affiant's information.

B. That the offences are void for vagueness

While I very much doubt that this argument will enjoy any success before me even if advanced at the appropriate time, suffice it to say that a Charter challenge of this magnitude is premature in the extreme as part of a pretrial motion aimed at setting aside a search and seizure.

A quote from R. v. Martin (1991), 2 O.R. (3d) 16 at pages 29-30 found in the Crown's argument brief is both appropriate and one with which I entirely concur:

At the opening of this appeal, all members of the court expressed their concern about the propriety of the lower court judge dealing with a challenge to the constitutionality of s. 13 of the Act, on a pre-motion hearing, before any plea had been entered or any evidence adduced. In my view, the court should not, at this early stage, entertain or dispose of an application to enforce a remedy under the Charter, except in those cases where it is abundantly clear that a constitutional right has been infringed or threatened.

. . it would have been preferable for the trial judge to decline to enter into the constitutional issue at the stage of a pre-trial motion and to leave such issue to be raised by the appellant by way of defence at the conclusion of the evidence at trial.

C. Solicitor's warrant

The objection here seems to be that the warrant did not set out procedures controlling execution of the search and that Callaghan, A.C.J.O. did not satisfy himself that there was no reasonable alternative to the search.

Both of these contentions must fail in that the Information clearly established justification for a search of the solicitors’ premises and the search was specifically limited to documents involving the three named accused and their business dealings with the four named entities that might be part of the suspected alleged fraud (i.e., IBS Canada, IBS U.S., Amcor and Compuvest).

I see no merit in this complaint other than as to whether or not the solicitor is entitled to further protect the documents seized by a claim of solicitor-client privilege. I am told this issue will be raised intra trial at the time evidence is adduced in support of this claim.

D. That the law is unreasonable—subsection 231(3) Income Tax Act

I need not deal with this issue in that the Crown has conceded that by reason of the decision in Baron, supra, subsection 231(3) is deemed, for the purposes of this case, to be unconstitutional rendering, thereby, a search under subsection 231(3) unlawful and, in that sense, therefore, unreasonable.

E. The "stolen tapes (paragraph 13 of the information)

The defence argues that certain tapes obtained by former employee Joseph Hibbs were taken from the company's files without colour of right and that Mr. Vettese knew this but did not state it as a fact in his information.

Firstly, Mr. Vettese denied emphatically knowing that they were "stolen", if, in fact, that is the case. Secondly, these tapes were already in the possession of Hibbs when Vettese first met him. Thirdly, as already noted, how Mr. Hibbs may have acquired these tapes was of no concern to Mr. Vettese who was simply presenting the evidence in support of his reasonable and probable grounds assertion.

Steele, J. addressed this very issue during earlier proceedings in this matter and I agree with his statement quoted as follows:

It may be that these tapes were improperly obtained. It may be that the Informant should have been suspicious as to how they were obtained. However, the failure to disclose such suspicion does not lead to even a prima facie case of deliberate falsehood or omission or reckless disregard for the truth.

In my view, this submission is of no avail to the defence motion.

F. The Fifth premises

The defence contends that the search upon 921 Queensway East (the storage facility) should not have been conducted, as there was no warrant issued authorizing same.

While the search plan (Exhibit HH) mentions the possibility that documents may have been stored somewhere, it is apparent from the evidence of Mr. Vettese and the collection officers that its precise location was unknown at the time of the application for the warrants. The precise address was uncovered in the course of the search. What followed thereupon was a seizure of all documents found in storage and which was not conducted in any unseemly way. In fact, Mr. Corr apparently went willingly to these premises with one of the investigators in his own car.

Mr. Corr, by his conduct in respect of this part of the search, can be readily seen as having willingly acquiesced. He did not expressly consent. He did not expressly object. It seems he treated the warehouse search and seizure as an extension of that which was progressing at the other scenes that were “ arrant authorized”. There is no question the search at the warehouse was technically warrantless. Its whereabouts was unknown at the time the warrant was sought. Information in the course of the “then” authorized search led to the specifics of precisely where documents and correspondence relating to these com- panies (C.C.C. and C.R.I.) could be found and which might well be expected to be found within the corporate premises authorized under the warrants. It is my understanding that the documents seized related only to C.C.C. and C.R.I. in their dealings with the other companies named and with which they had been dealing on the development of SOTAS. I have no evidence to the contrary.

In these circumstances, it is my view that any documents seized in the course of this part of the search, if otherwise relevant, are just as admissible under section 24(2) as those seized under the four warrants. To rule otherwise might well lead to the exclusion of documents and correspondence that had been purposely hidden away from the actual corporate premises for a nefarious purpose but which nevertheless formed part of the corporate records that might ordinarily be expected to be found on corporation premises but for the threat they might pose if seen during any investigation.

The following passage from the judgment of Martin, J.A. in R. v. Noble, 16 C.C.C. (3d) 146 at 173 is, in my view, the law in circumstances such as this:

The admission of the evidence

Section 24(2) of the Charter requires the exclusion of evidence obtained in a manner that infringed or denied a right or freedom guaranteed by the Charter only if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute. Section 24(2) of the Charter contemplates that not all evidence obtained by an unreasonable search or seizure will be excluded, but that such evidence will be excluded only where it is established that, having regard to all the circumstances, its admission would bring the administration of justice into disrepute. Evidence even though improperly obtained is prima facie admissible and the onus is on the person seeking its exclusion to establish on a balance of probabilities that its admission would bring the administration of justice into disrepute. It is proper for the judge in deciding whether the admission of the evidence would bring the administration of justice into disrepute to consider such matters as the nature and extent of the illegality, the unreasonableness of the conduct involved, and whether the officers were acting in good faith, as distinct from knowingly infringing the accused's rights

If, of course, this part of the search yielded anything not germane to the charges faced by these three accused, such material must be returned to the accused without being firstly copied and immediately upon being so found during the cataloguing process.

G. Officers not named in warrant

Was this search overreaching or oppressively executed?

The defence called Peter Gushel and James Dal lard, both of whom were officers employed by Revenue Canada Collection Department and who attended commencing 15 to 20 minutes after the search began. They had been pre-warned by the Special Investigation people (S.I.) of the time of the search and they had been told they could not participate in the search per se. They were there under the mandate of two sheriff's officers who, in turn, were armed with a writ of fieri facias. It was also understood from earlier meetings between S.I. and Collection that they might receive information from the S.I. search people pertinent to the existence of bank accounts upon which, if presented, they could act immediately. They came to the premises with blank but executed requirements to pay. In the course of the search, the S.I. people discovered the existence of an account with a branch of the Bank of Montreal which, when requirements to pay were served, yielded two amounts from two accounts, $12,784.26 Cdn. and $171,818.84 Cdn. Two other financial institutions, of which the collection people had been aware prior to the search, yielded as follows from Royal Trust accounts: $ 1,586 Cdn., $ 14,315 U.S., $ 13,362 Cdn., and $243,370 U.S.

Mr. Gushel made it very clear that he took no part in the search. Mr. Dallard likewise advised that he neither searched nor seized though once he watched the main door at the request of an S.I. officer to ensure that no employees left with documents and, as well, he assisted some female officers a few times in lifting heavy boxes onto tables.

There were probably 12 to 15 S.I. officers in attendance and three Collections personnel accompanying two Sheriff's Officers. The companies under seizure, C.C.C. and C.R.I., apparently employed about 20 people and Mr. Corr was present throughout the search, which lasted from 10:00 a.m. to about 3:00 p.m.

Throughout this process, the Collection Officers touched no documents but were available to receive any valuable information from the S.I. staff that might be pertinent to ongoing collection efforts.

They were unabashed about their stated purpose in attending: while their names were not engrossed on the search warrant, it was felt that this warrant would alert the accused to the fact he was being seriously investigated by which, in likelihoods, the computers at the premises and other attachable assets woulddisappear. Plainly, their attendance was motivated to foreclose any absconding exercise that his search might trigger.

Preceding the search date, these two separate departments of Revenue Canada had had meetings to exchange information and to coordinate their respective functions and behaviour at the search scene.

It has been their primary aim to seize the computers that day, but the cost of such a manoeuvre, together with the advised prospects of damage to this delicate equipment, discouraged them from executing on their initial intention. The search had also disclosed that a security agreement encumbered this equipment.

Mr. Robert Young, an S.I. officer, searched the Corr residence. He entered these premises at 10:00 a.m. and left by 12:45 p.m. In all, there were four officers, a team leader and possibly one R.C.M.P. officer at this scene. He seized, in all, C.C.C. or C.R.I. documents that filled one box. He stated that Mr. Corr cooperated throughout and, at one point, drove in his own car, accompanied by an S.I. officer, to the storage depot where additional boxes were seized. There is no evidence to suggest overreaching or aggressive behaviour at this site.

Though he was only named on the warrant authorizing a search of the Corr residence, he did eventually attend at the business premises though he did not participate in the search in any meaningful way.

Sixty-five boxes of documents were seized in the course of this searching process. The search was the culmination of a prolonged investigation that had engaged thousands of hours of the time of Revenue Canada officers.

It is argued by the defence that the manner in which this search and seizure was conducted was oppressive and overreaching to the point that it would be offensive to the administration of justice to allow its yield into evidence; that the technique used, the number of officers involved, the coordinating of the two departments from Revenue Canada amount, in the overall, to an unacceptably oppressive invasion of privacy,—of a business and the private dwelling as well.

I am mindful that the search was a breach of section 8 of the Charter for reasons already stated. Nevertheless, bearing in mind the complexity and history of this investigation, the volume of documents seized, the size of the operation, the alleged fact that Mr. Corr had been seen by an unnamed informant removing documents from the office premises, I am not convinced that the search and seizure methods were an unacceptable invasion of Mr. Corr's privacy or oppressive in the manner in which they were executed. On the contrary, the evidence describing these leaves no doubt in my mind that the conduct of the officers was discreet and orderly throughout.

I turn finally to the central issue of this motion, whether or not, bearing in mind all of the foregoing, the seized documents should be returned to the three accused under subsection 24(1) of the Charter or whether they should be made available to the Crown for scrutiny and, if deemed relevant, admitted into evidence subject to subsection 24(2) of the Charter.

The defence submits that subsection 24(2) has nothing to do with the appropriate remedy because the seized boxes are not "evidence". If this is so, then what are they? It is true that the precise details of what lies in these boxes is not known. It is equally true that the informant, in swearing as he did at paragraph 28 of his Information that the documents or things stipulated will be required to

(a) Determine the correct amount of scientific research expenditures incurred by Cancor Computer Corp. and Cancor Research, Inc.,

(b) Determine the correct taxable income of Thomas Corr,

(c) Identify the persons who participated in the offences set out in Appendix A under" Offences”,

(d) Identify and prove the nature and details of the alleged fraudulent scheme,

had carefully calculated the nature of certain specified material to support a full-blown prosecution of the charges being levelled. How could this be otherwise characterized than "evidence"? This was, from the outset, a "document oriented" case and remains so.

The defence further argues that the Crown has chosen to proceed to trial and, therefore, the documents seized are not essential for the purpose of the trial. In responding to this, it must be borne in mind that we have not yet reached the trial stage despite counsel's views to the contrary. The accused has not yet been arraigned. He is still not, therefore, in jeopardy. This is, in my view, the third of three pre-trial motions. It is a motion that should be disposed of before the trial begins. Both counsel made that clear to me during chambers meetings in respect of scheduling. The Crown has made it clear that if the "evidence" is to be opened and inspected for relevance, then he will need about three weeks to sort through the boxes. If this motion succeeds, then he has stated the prosecution will still proceed but that he will need some time to restructure the tendering of evidence in that event. The defence has expressed no complaint with this approach. A trial, of course, is a search for the truth of facts by which conclusions may thereupon be reached. It is, to this end, desirable that both sides be afforded the opportunity of tendering all relevant evidence in support of their respective positions. That approach, of course, must be fine-tuned by such protective devices as subsection 24(2).

And so with all of this in mind, and upon reading the statement of Lamer, J. in Collins, at page 276, “This Court in Therens, supra, held that evidence can not be excluded as a remedy under s. 24(1) of the Charter, but must meet the test of exclusion under s. 24(2)", I am convinced that the real issue here is not under subsection 24(1) but whether or not this "evidence" should be excluded under the provisions of 24(2) by reason of the multifarious complaints raised by the defence in its well-prepared and lengthy brief which was further embellished in a full day of able submissions.

In determining the applicable test, I quote from Hunter v. Southam Inc., [1984] 2 S.C.R. 145,11 D.L.R. (4th) 641, in which Dickson, J. set out the minimum

requirements under section 8 of the Charter as: "reasonable and probable grounds, established on oath, to believe that an offence has been committed and that there is evidence to be found at the place of search”.

In R. v. Garofoli, supra, Sopinka, J. had this to say on the test by which evidence may be excluded under subsection 24(2) at page 1452:

While a judge exercising this relatively new power need not comply with the Wilson criteria, he should not review the authorization de novo. The correct approach is set out in the reasons of Martin J.A. in this appeal. He states, at p. 119:

If the trial judge concludes that, on the material before the authorizing judge, there was no basis upon which he could be satisfied that the pre-conditions for the granting of the authorization exist, then, it seems to me that the trial judge is required to find that the search or seizure contravened s. 8 of the Charter

The reviewing judge does not substitute his or her view for that of the authorizing

judge. If, based on the record which was before the authorizing judge as amplified on the review, the reviewing judge concludes that the authorizing judge could have granted the authorization, then he or she should not interfere. In this process, the existence of fraud, non-disclosure, misleading evidence and new evidence are all relevant, but, rather than being a prerequisite to review, their sole impact is to determine whether there continues to be any basis for the decision of the authorizing judge.

[Emphasis added.]

Now the defence has endeavoured, with some success, in impugning the accuracy of some of the paragraphs in the Information. I have found some to be inaccurate based on carelessness but none advertently misleading, that is to say, fraudulently so. It is to be noted that there has been no attack on the accuracy of many of the paragraphs, #7-11 for example, respecting information allegedly supplied by tax auditor Psutka.

My reading of all cases referred to me by both sides leaves me of the view that the properly applicable test in determiningwhether or not the warrant should have issued is to be found in R. v. Morrison, 50 C.C.C. (3d) 3553 at pages 365-66 and 369 where Morden, J.A., speaking for the Court, had this to say under the heading The test for setting aside an authorization on a Wilson application:

Following the decision of the Supreme Court of Canada in Wilson v. The Queen, supra, this court has formulated the test for setting aside an authorization on a Wilson application on two occasions. In R. v. Rowbotham et al., supra, the court (comprising Martin, Cory and Grange, JJ.A.) said at page 46:

Even if leave has been obtained and the affiant has been cross-examined, the burden rests upon the applicant to demonstrate that the authorization should be set aside. The applicant must satisfy the trial judge (or motions court judge) that based upon the evidence adduced that it has, on a balance of probabilities, been established that a material falsehood has been deposed to in the material or that a reckless disregard for the truth has been demonstrated in the material, or that there has been some material non-disclosure demonstrated of such a nature that it would, if it had been disclosed, have led to a refusal to grant the authorization.

It must be remembered that the authorization is an order that has been made by a judge based upon a sworn affidavit, giving rise to the reasonable presumption that the order is valid.

In the subsequent decision in R. v. Garofoli, supra, at page 117, Martin, J.A. said for a court comprising himself, Cory and Finlayson, JJ.A.:

On a "Wilson" application to set aside an authorization, the applicant must establish on a balance of probabilities that the authorization was obtained by fraud, material non-disclosure, misleading disclosure, or that there is new evidence which shows that the actual facts are different from those placed before the judge who granted the authorization.

I do not read either of these statements as dealing expressly with the question raised by the appellants submission that the reviewing judge should not uphold an authorization on the basis of the unsuccessfully challenged parts of an affidavit when intentional or reckless misrepresentation or non-disclosure in the affidavit has been shown. Clearly it is implicit in Martin J.A.’s statement in Garofoli that the onus is on the applicant to establish that the material non-disclosure (or one of the other bases) resulted in the obtaining of the order. Although the passage in Rowbotham may not be as clear on this point, I do not read it as saying anything different.

Watt J. set out the conditions precedent which must be satisfied by an applicant before he will be permitted to cross-examine theaffiant in R. v. Parmar (No. 3), released August 21, 1987 (not as yet reported) [since reported 37 C.C.C. (3d) 300, 61 O.R. (2d) 132]. They are essentially as follows:

3. The applicant must demonstrate that if the impugned material is false or was made in reckless disregard of the truth and is set aside, the remaining material is insufficient to sustain the issuance of the authorization under s. 178.13(1) or

(4) of the Criminal Code.

Further, at page 369:

Having regard to the foregoing it cannot be said that the trial judge was wrong in resorting to the remaining parts of the affidavit (those not successfully challenged), if indeed he had to do so, to determine that there was "more than sufficient evidence contained in the affidavit material to sustain the issuance of the impugned order”.

It would seem, therefore, that the law as it presently stands requires that, to succeed in a motion such as this, the defence must establish on a balance of probabilities that

(1) the affiant has put before the warrant issuing judge statements that are either fraudulent or that can be characterized as having a reckless disregard for the truth;

(2) that they are inaccurate and misleading; and

(3) that when such statements are removed from the affidavit at large, there no longer remains sufficient material by which a warrant would properly have issued initially.

In the case at bar, I have found that while there are misleading statements, they are not founded in either fraud or recklessness, nor were they advertent.

It is also abundantly clear to me that once one excises the inaccurate statements, there is a bountiful residue in paragraphs 7, 8, 9, 11 and 13 (none of which were challenged as to content) and the unsuccessfully challenged parts of paragraph 12 by which a judge could properly have issued the warrants. That being so, bearing in mind the propositions I have just cited and my findings with respect to the other extraneous matters already dealt with, I am satisfied that this motion should be dismissed, the impounding order of Henry, J. rescinded and the Crown should be at liberty to examine all documents seized for a determination of their relevance at the trial yet to be commenced with respect to these charges.

Once cataloguing has been completed, all documents not intended to be tendered as evidence in this trial are to be returned to the owners uncopied and promptly.

Motion dismissed.