Regina v. Henry H. Regehr, [1968] CTC 122, [1968] DTC 5078

MCFARLANE, J.A. (all concur) :—An information was presented against the respondent in June 1966, charging five counts (relating respectively to the taxation years 1960 to 1964 inclusive) of making false and deceptive statements in tax returns under the Income Tax Act, R.S.C. 1952, c. 148, Section 132(1) (a) and a sixth count purporting to charge an offence against Section 132(1) (d) of the same statute. After a trial at Whitehorse, Yukon Territory, before Trainor, P.M., who gave extended and detailed reasons for his decision, all of the charges were dismissed. An appeal by the Crown resulted in the holding of a trial de novo (Criminal Code, Section 727(1)) before Morrow, J., sitting as a Deputy Judge of the Territorial Court of the Yukon Territory. On the trial de novo the evidence consisted, by agreement of counsel, of a transcript of the proceedings before the learned Magistrate. On January 31, 1967, the learned Judge delivered reasons for his judgment dismissing the appeal and affirming the acquittals.

The appeal which may be brought to this Court by the Attorney-General of Canada, with leave, is restricted by Criminal Code, Section 743 (am. 1960-61, c. 48, Section 45) to any ground that involves a question of law alone.

With regard to the five counts under the Income Tax Act, Section 132(1) (a), a great amount of consideration in both Courts was given to the question whether or not mens rea is an essential element. Both tribunals held that it is. In this Court counsel for the appellant conceded, in my opinion correctly, that this view is right.

The learned Magistrate and the learned Judge on appeal have both found that during the period of five years the respondent failed to include in his income tax returns some fifty items of income and that the failure was due to carelessness and negligence without any intention to conceal or deceive. These are findings of fact which cannot be reviewed or set aside by this Court.

Counsel for the appellant submits that the learned Judge misdirected himself in law by holding that the number of proved omissions due to carelessness and negligence does not constitute some evidence from which an inference of guilty intent may be drawn. I think it is clear on principle and authority that an inference of the fact of guilty intent may, as a matter of law, be made from the existence of a series or multiplicity of omissions although each such omission may in itself be properly regarded as merely negligence: Paradis v. The King, 61 C.C.C. 184; [1934] 2 D.L.R. 88; [1934] S.C.R. 165; R. v. Miller, 73 C.C.C. 343; [1940] 3 D.L.R. 293; 55 B.C.R. 121. The question here is, however, whether the learned Judge misdirected himself by holding otherwise.

In support of his submission counsel for the appellant relies in particular upon the two following extracts from ‘the learned Judge’s reasons for judgment ([1967] 3 C.C.C. at pp. 71-2) :

The learned Magistrate dealt with each particular item making up the basis of each of the charges. He made a careful analysis in each case and in the end result, although he found that the respondent had been in general negligent, he held that there was no evidence that the respondent acted surreptitiously or with the intention of deceiving anyone. I have carefully examined his judgment and the evidence and the many exhibits filed and am unable to reach any different conclusion. I see no need to myself repeat the analysis of the evidence item by item.

As to the factual situation, therefore, I am not satisfied that the appellant has proven that there has been any mens rea or any plan to cheat the taxation authorities but that, at most, all that has been proven is carelessness and negligence.

(Page 75)

I am unable to agree that s. 132(1) (a) making use of “false or deceptive” as it does could reasonably be interpreted to mean mere carelessness or recklessness, but rather that mens rea or guilty intent forms an integral part of the offence to be established by the Crown.

It will be observed that when the learned Judge used the expression “‘there was no evidence’’ he was stating in summary form his interpretation of the reasons given by the Magistrate. He went on to say that as a result of his own examination of that judgment and the evidence, and the exhibits, he was “unable to reach any different conclusion’’. The learned Judge’s use of the expression must, therefore, be considered in the context of his judgment as a whole as well as that of the learned Magistrate. My examination of the judgment of the Magistrate convinces me that he did not act on the view that the number of negligent omissions proved could not justify a factual finding of the existence of a guilty mind. Two extracts, as examples, from the Magistrate’s judgment will suffice to indicate my reasons for reaching this conclusion. Dealing with an item of alleged unreported income he used this language:

It is a clear case of negligence in not posting this up in the receipt system, and subsequently permit or arrange for the money to go into the general account. Here again I wonder whether or not I have sufficient evidence before me that the accused did something of that kind which I believe must be done in order to find him guilty of an offence.

Again dealing with a category or class of items (described as contra accounts which made up seventeen of the total), the learned Magistrate said:

It was therefore negligent of the accused to engage in these contra account dealings without establishing a proper recording system, but I cannot find that such negligence goes to the extent required to find the accused guilty of a crime.

(My italics.)

I think also the use of the word ‘mere” in the second extract quoted earlier in these reasons from the judgment of the learned Judge on appeal is important as indicating an awereness that repeated negligent omissions could justify the inference of planned, intended or wilful concealment or deception. My study of the whole of the learned Judge’s judgment related to that of the Magistrate, which he affirmed, does not satisfy me that there was misdirection as contended by the appellant, but does convince me that when the learned Judge said ‘‘there was no evidence’’ his real purpose was to say that upon the whole of the evidence he was not satisfied that the Crown had proved mens rea beyond a reasonable doubt. Whether the inference should, as opposed to could, have been drawn is a matter of fact which is not open for consideration on this appeal.

Turning to the sixth count it was in these words :

Count 6. Between the 1st day of April, 1960 and the 29th day of November, 1965, Henry H. Regehr did wilfully avoid a payment of taxes imposed by the Income Tax Act in that he failed to report all of his income contrary to paragraph (d) of subsection (1) of Section 132 of the said Act.

It will be apparent at once that the word “avoid” is an error and that ‘‘evade’’ must have been intended by the informant. It is obvious that the count as presented did not charge an offence known to the law. The first reference to this feature of the case in the proceedings appears in the judgment of the learned Magistrate where he said:

The accused is not charged in count 6 with an offence known to law. If I should be wrong in this, and if count 6 should constitute a valid charge, I am satisfied on considering all of the evidence that the Crown have not made out a case that the accused wilfully evaded the payment of taxes imposed by the Income Tax Act during the period alleged. The charge against the accused contained in count 6 is therefore dismissed.

As I have said the trial de novo was dealt with, by agreement of counsel, upon the basis of a transcript of the proceedings before the Magistrate. No alteration of the charges was made and no other evidence was adduced. It was not until after all of the evidence, on behalf of both Crown and defence, had been placed before the appeal Court that counsel for the Crown applied to amend count 6 by substituting the word “evade” for “avoid”. The learned Judge refused to allow the amendment and it is now submitted he was in error in so refusing. Appellant’s counsel asks that the amendment should be made now and the case remitted for retrial.

Counsel’s first argument is that the error is merely typographical. I readily agree there is error but I cannot regard it as merely typographical in view of the well-known and very important distinction between avoidance and evasion in relation to the law of taxation. Apart altogether from the circumstances and the stage of the proceedings at which the learned Judge exercised his discretion against allowing the amendment, I would refuse to reverse his refusal because of the Magistrate’s clear finding of fact referred to above ‘‘I am satisfied on considering all of the evidence that the Crown have not made out a case that the accused wilfully evaded the payment of taxes’’. Having regard to that finding of fact I think it would be wrong to accede to the Crown’s submission at this stage.

For these reasons I would grant leave and dismiss the appeal. I would not interfere with the learned Judge’s disposition of costs in the Courts below. In the exercise of power conferred by Criminal Code, Section 743(3) I would allow the respondent his costs of appeal to this Court.