Citation: 2008TCC404
Date: July 3, 2008
Docket: 2007-764(IT)G
BETWEEN:
MARK BESNER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1]
The Appellant appeals
from Notices of Reassessment dated January 6, 2005 for his 2000 and 2001
taxation years wherein the Minister of National Revenue (“the Minister”)
increased the Appellant’s income by $109,732 and $175,191 respectively and assessed
penalties on the additional income amounts pursuant to subsection 163(2)
(“gross negligence penalties”) of the Income Tax Act (“the Act”).
[2]
The principal issue
that the Appellant argued at the hearing is whether subsection 239(3) of the Act
applies so that the gross negligence penalties should not have been assessed.
He does not dispute the amount of taxes assessed. Subsection 239(3) of the Act
reads as follows:
239(3) Penalty on conviction --
Where a person is convicted under this section, the person is not liable to pay
a penalty imposed under section 162, 163 or 163.2 for the same contravention
unless the penalty is assessed before the information or complaint giving rise
to the conviction was laid or made.
[3]
In particular it is the
Appellant’s position that a “complaint” was made prior to the assessment of
gross negligence penalties and for that reason these penalties should be
deleted. He also raised the following three issues:
a) Whether paragraph 11(h) of
the Charter applied in the circumstances;
b) Whether the principle in R.
v. Kienapple applied in the circumstances; and,
c) Whether the interest that
has accrued from the date of the notice of objection should be deleted?
[4]
It is my opinion that
there was never a complaint made; the penalties were properly assessed and the
appeal should be dismissed.
FACTS
[5]
In 2000 and 2001, the
Appellant was the sole shareholder of The Gulf Islands Food Company Inc.
(“TGIF”) and a director of Quinnbesner and Associates Inc. (“QB”) which was
operated by his then wife, Barbara Quinn. The Appellant and Barbara Quinn also
owned 55% of The CAIL Consulting Group of Companies Inc. (“CAIL”). The
Appellant maintained the books and records of TGIF, QB and CAIL.
[6]
The documentary
evidence showed that the Canada Customs and Revenue Agency (hereinafter
referred to as “CRA”) started to audit the books of TGIF and QB in February
2003. Kyam Smith was the auditor assigned to work on the files of TGIF, QB,
Barbara Quinn and the Appellant. He referred these files to the Investigations
Division of the CRA on September 16, 2003 by means of a Form T134. On this form
Mr. Smith outlined his reasons for requesting that there be an investigation of
the books and documents for the Appellant, Barbara Quinn, QB and TGIF. On
November 24, 2003, Leo Resk, an Investigator with the Investigations Division,
and his supervisor accepted the files for investigation.
[7]
On February 3, 2004 Leo
Resk swore an Information to Obtain a Search Warrant to search various places
where he believed there were documents that would enable him to determine the
taxable income and tax payable by QB, TGIF and the Appellant and the GST and
net GST required to be reported by QB and TGIF. Mr. Resk believed that this
evidence would disclose the commission of offences against the Act and
the Excise Tax Act.
[8]
As a consequence of the
search and an analysis of the documents seized, Mr. Resk prepared a Prosecution
Report (“the Report”) dated January 10, 2005 which he sent to the Department of
Justice (“DOJ”). The Report detailed the investigation undertaken by the CRA
and included a draft of the proposed charges to be laid. It appears that the
Report was sent to DOJ on January 11, 2005 or shortly thereafter. Prior to
sending the Report to the DOJ, the Minister, through Mr. Resk, assessed the
gross negligence penalties by Notice of Reassessment dated January 6, 2005.
[9]
On February 9, 2005 an
Information was laid which charged the Appellant with evading income tax and
causing both TGIF and QB to evade income tax and the remittance of GST.
[10]
On February 14, 2006 an
Agreed Statement of Facts and Joint Submission on Sentence was filed with the
Provincial Court of British Columbia wherein the parties agreed that the
Appellant would pay a fine of $112,262.67. At the hearing of this appeal the Appellant
stated that in addition to the fine, he received a sentence of one year house
arrest. He also admitted that he knowingly made a false statement or omission
in his tax returns for the 2000 and 2001 taxation years. In other words he
admitted that but for subsection 239(3) of the Act or the operation of
any principle against double jeopardy, the gross negligence penalties were
properly assessed.
[11]
It is the Appellant’s position
that a “complaint” was made prior to the imposition of the gross negligence
penalties. He stated that the word “complaint” in subsection 239(3) must be
given its ordinary everyday meaning. Counsel for the Appellant argued that in
this case a complaint was made when Mr. Smith referred the file to the
Investigations Division of the CRA on September 16, 2003. He argued in the
alternative that, the complaint was made when the Investigations Division
accepted the file or when Mr. Resk swore an Information to Obtain Search
Warrants or at the very latest when the search warrants were executed. All of
these events occurred prior to the assessment of the gross negligence penalties
on January 6, 2005.
ANALYSIS
What does the word “
complaint” in subsection 239(3) mean?
[12]
The term “complaint” as it is used
in subsection 239(3) of the Act has never been judicially considered.
However, the term is used in many other statutes and in particular, the Criminal
Code, and in this context it has been considered by other courts.
[13]
The legal meaning of the terms
“information” and “complaint” was best stated by Justice Saint-Pierre in The
King v. Mercier (1910), 18 C.C.C. 363 (Que. K.B.) at page 366:
When an order
for payment of money is sought for,” says Stone (Stone’s
Petty
Sessions, p. 35), “or a judgement upon a demand of a civil nature it is
designated a
‘complaint,’ while the same step is called an ‘information’ when
it is the
foundation of proceedings of a criminal nature, which are followed
either by a
conviction or an acquittal.”
However, there
were often cases of a mixed character which made it difficult for the
practitioner to determine whether the word “complaint” should be used or the
word “information.” With a view to avoid trouble, the practice finally
prevailed to join the two words together. This circumstance accounts for the
fact that in the text-books of the commentators in our statute books, and even
in our [Criminal Code, R.S.C. 1906, c. 146] the words “information and
complaint” are so often coupled together. Under the ancient practice, when a
complaint was made, the justice issued a summons, but when an “information” was
laid he had to issue his warrant. Under our present system this distinction
has virtually disappeared and now the justice who desires to compel the
attendance of an accused before him may either issue his summons or his warrant
as circumstances require.
[14]
In the case of Regina v. Bourassa
(1954), 109 C.C.C. 44 (B.C.C.A.) at page 47 Sloan C.J. speaking for the court
had this to say about the term “complaint” as it was used in the Criminal
Code:
Neither the related terms “information” or
“complaint” are defined by the Code.
Crankshaw’s Criminal Code, 6th ed.,
p. 833, defines their meaning to be: “When the proceeding is one taken against
the party charged with a criminal offence for which he is liable, on summary
conviction, to imprisonment, fine, penalty or other punishment, an INFORMATION
is laid; and when the proceeding is one against a person liable by law to have
an order made upon him to pay a sum of money or to do some act which he had
illegally failed, neglected or refused to do, a COMPLAINT is made.”
Tremeear’s Criminal Code, 5th ed.,
p.721 states as follows:
“Strictly speaking the word ‘complaint’ should
be used where an order is sought for the payment of money, or the demand is of
a civil nature, while the word ‘information’ should be restricted to the
document which is the foundation of a criminal proceedings, to be followed by
either a conviction or an acquittal.”
Sir Joseph
Chisholm C.J. in speaking for the majority of the Supreme Court of Nova Scotia en
banc in Re Farmer, [1937] 2 D.L.R. 529 at p.532, 68 Can. C.C. 50 at
p.53, 11 M.P.R. 366 said in relation to “informant or complaintant”: “These
terms in criminal or quasi criminal proceedings have a well-understood meaning.
They mean one who appears before a Magistrate or other judicial authority and
lays a charge that some one has committed a specified offence for which he
should be tried.”
[15]
Stated simply, a “complaint” is a
means of initiating a judicial proceeding. In my opinion the word “complaint”
as it is used in subsection 239(3) has this same meaning.
[16]
The word “complaint” in subsection
239(3) cannot be read in isolation to the rest of section 239 or the Act
itself. Section 239 of the Act creates a number of criminal offences. It
also gives penalties that may be imposed by the courts if the person is
convicted of an offence. The purpose of subsection 239(3) is twofold. It
prevents the Minister from waiting to see if a taxpayer will be convicted under
section 239 before he assesses gross negligence penalties. It also allows a
court which convicts a taxpayer on account of the violation of certain duties
under the Act to take into account whether or not the Minister has already
imposed a penalty (Robertson v. Minister of National Revenue,
[1972] C.T.C. 2588 at paragraph 7).
[17]
The word “complaint” when read in
conjunction with the rest of section 239 must have a legal meaning and not an
everyday, ordinary meaning. This is especially so where it is joined to the
word “information”. If nothing else, the principle of noscitur a sociis,
that is the associated word rule, invites the reader to look for the common
feature between the words linked by “and” or “or”. In this situation, the
common feature between “information” and “complaint” are that they are both
processes for bringing a matter before the court. See Sullivan and Driedger
on the Construction of Statutes, 4th ed. (Markham:
Butterworths Canada Ltd., 2002) at page 173.
[18]
The expression
“information or complaint” is also used in section 244 of the Act and a
textual, contextual and purposive approach to interpretation would mandate that
the phrase has the same meaning in section 244 as it has in section 239.
Section 244 reads as follows:
244. (1) Information or complaint -- An information or complaint under this Act
may be laid or made by any officer of the Canada Revenue Agency, by a member of
the Royal Canadian Mounted Police or by any person thereto authorized by the
Minister and, where an information or complaint purports to have been laid or
made under this Act, it shall be deemed to have been laid or made by a person
thereto authorized by the Minister and shall not be called in question for lack
of authority of the informant or complainant except by the Minister or by a
person acting for the Minister or Her Majesty.
(2) Two or more offences -- An information or complaint in respect of an
offence under this Act may be for one or more offences and no information,
complaint, warrant, conviction or other proceeding in a prosecution under this
Act is objectionable or insufficient by reason of the fact that it relates to
two or more offences.
(3) Venue
-- An information or complaint in respect of an offence under this Act may be
heard, tried or determined by any court, judge or justice if the accused is
resident, carrying on business, found or apprehended or is in custody within
the territorial jurisdiction of the court, judge or justice, as the case may
be, although the matter of the information or complaint did not arise within
that jurisdiction.
(4) Limitation
period -- An information or complaint under the provisions of the Criminal
Code relating to summary convictions, in respect of an offence under this
Act, may be laid or made at any time but not later than 8 years after the day
on which the matter of the information or complaint arose.
[19]
It is clear from the reading of
section 244 that the term “complaint” does not have its ordinary, everyday
meaning. It is used in the technical sense. It has a legal meaning that refers
to a process which initiates a judicial proceeding. A “complaint” is heard in
the courts (see subsection 244(3)) and by extension, a “complaint” is made to
the court system.
[20]
Mr. Smith’s referral of the files
to the Investigations Section of the CRA, that is, Form T134 does not have the
essential legal characteristics of a “complaint”. None of the scenarios put
forward by Appellant’s counsel constitute a “complaint” as that word is used in
the Act. There was no complaint made in this case. An Information was
laid and the gross negligence penalties were assessed prior to the Information
being laid.
[21]
The Appellant’s counsel submitted
that because it is CRA’s practice to have the same person assess the gross
negligence penalties and prepare the Report upon which the Information is
based, subsection 239(3) could never be invoked. He stated that CRA’s practice
was an abuse of process and contrary to the decision in R. v. Jarvis,
[2002] SCC 73.
[22]
I disagree with the Appellant’s
counsel. CRA’s practice is in accord with the decision in Jarvis (supra)
in that, it ensures that once a file is referred to the Investigations
Division, only CRA’s investigative powers are used. With respect to counsel’s
abuse of process argument, I note that the Tax Court does not have jurisdiction
to set aside an assessment based on the actions of a CRA official or the
practice of CRA. See Main Rehabilition v. R., [2005] 1 C.T.C. 212 (FCA).
Paragraph 11(h) of the Charter
[23]
Appellant’s counsel
relied on the dissenting reasons of Lambert, J in Lavers et al. v. Minister
of Finance of B.C. et al., [1990] 1 C.T.C. 265 (BCCA) for the proposition that the “offence” was the
wilful attempt to evade tax and it was that act which gave rise to both the
administrative penalty and the criminal conviction and the fines. Justice
Lambert found that the taxpayers were subject to double jeopardy and their
rights under the Charter had been infringed.
[24]
Paragraph 11(h) of the
Charter reads as follows:
Any
person charged with an offence has the right
.
. . . .
(h) if finally
acquitted of the offence, not to be tried for it again and, if finally found
guilty and punished for the offence, not to be tried or punished for it again
[25]
Judge Sarchuk, in his decision in Sommers
v. M.N.R., 91 DTC 656, reviewed the application of paragraph 11(h) of
the Charter to subsection 163(2) penalties. He found that the imposition
of penalties under subsection 163(2) does not constitute a “finding of guilty
or a punishment for an offence which comes within paragraph 11(h) of the
Charter”.
[26]
In the case of Taylor v. The
Queen, 95 DTC 591, Judge Sobier relied on the decision in Sommers (supra)
to find that the “penalties do not amount to a ‘true penal consequence’”. The
penalties under subsection 163(2) are not fines in a criminal or quasi criminal
proceeding. They are assessed administratively for unreported income. There is
no offence committed and the penalties are based on a set percentage of
unreported income and applied when the taxpayer makes a false statement in his
return either knowingly or under circumstances amounting to gross negligence.
[27]
The Appellant’s rights under the Charter
have not been infringed.
The Principle in Kienapple
[28]
The principle that arose out of
the decision in R. v. Kienapple, [1975] 1 S.C.R. 729 is that an
accused should not suffer multiple convictions from the same act. Appellant’s
counsel did not argue this issue at the hearing but as it was raised in the
pleadings I will speak briefly to it.
[29]
The decision and comments of
Justice Dambrot in R. v. Hamilton, [2006] G.S.T.C. 104 are applicable to the facts in
the present appeal. With respect to the gross negligence penalties assessed
under the Excise Tax Act he stated the following at paragraph 43:
[43]
It
is well settled, particularly in relation to revenue schemes, that the
imposition of a civil penalty does not preclude a prosecution for the same
conduct. Neither s.11(h) of the Charter, nor the case of R. v.
Kienapple, 1974
CanLII 14 (S.C.C.), [1975] 1 S.C.R. 729, invoked by the appellant, have
application. They preclude multiple convictions for the same offence. They have
no application to civil penalties. In any event, s.326 of the Act is
dispositive of this issue, absent inconsistency with the Charter, which
has not been alleged. It provides that everyone who fails to file a return when
required under the Act is guilty of an offence, and, in addition to any
penalty otherwise provided, is liable on summary conviction to a fine and
imprisonment. The Act clearly contemplates a penalty and a prosecution
for the same conduct.
Interest
[30]
It was the Appellant’s
position that he disagreed only with the imposition of penalties. He argued
that if it is decided he did not have to pay the penalties, then he should be
relieved of the interest that has accrued on the actual tax liability since the
date of the notice of objection.
[31]
The Appellant was not
successful in this appeal. However, even if he had been successful, this Court
does not have the jurisdiction to delete or reduce interest that was properly
calculated and properly imposed (See Mohamed Moledina v. The Queen, 2007
TCC 354 at para. 5).
[32]
The appeal is dismissed
with costs to the Respondent.
Signed at Ottawa, Canada, this 3rd
day of July 2008.
“V.A. Miller”
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