Taylor v. The Queen, 95 DTC 591, [1995] 2 CTC 2133 (TCC)

Sobier J.T.C.C.:-The appellant appeals from the assessments made by the Minister of National Revenue (the ’’Minister”) for his 1986, 1987, 1988 and 1989 taxation years, whereby the Minister:

A. attributed additional income for those years aggregating $527,341 as the result of the appellant misappropriating funds;

B. added interest income aggregating $4,062 for the 1988 and 1989 taxation years; and

C. added $950 additional income received from F. Gallent Enterprises in the 1986 taxation year.

The appellant does not dispute the amounts of income resulting from misappropriation for the 1986, 1987 and 1989 taxation years, but he does dispute approximately $90,000 ($89,985.54) for the 1988 taxation year. The interest income set forth in paragraph B above was earned on the misappropriated funds.

By 1986, the appellant was the deputy treasurer of the town of Richmond Hill, Ontario (the "town”). During the years 1986 through 1989 inclusive, the appellant used his position to misappropriate from the town $31,942, $182,797, $242,502 and $69,150 respectively. Although the actual amounts misappropriated differ depending on the source, .!» will take it from the appellant’s instructions to his counsel, who advised in connection with the criminal charges, that he misappropriated approximately $518,000; that $488,000 was found as having been misappropriated and that $26,000 of the $488,000 is disputed.

In August 1989, the appellant met with the mayor of the town and confessed to his misdeeds and together with the mayor went to the York Regional Police and confessed to them. The appellant made his records available to the authorities and to forensic accountants retained by the town. Although he eventually admitted stealing approximately $590,000, in August 1989 he confessed to stealing only approximately $380,000. However the appellant maintains that he confessed to larger amounts in order to put everything behind him, including criminal charges and his problems with Revenue Canada.

The news media carried the story of the thefts and it was given great publicity for a few days.

In November 1989, as a result of these newspaper articles, Revenue Canada became interested in the matter and began its investigation. It was at that time that the appellant was first contacted by Revenue Canada.

On August 29, 1989, the appellant retained counsel in the persons of Mr. Austin Cooper and Mr. Peter West who acted on his behalf in relation to criminal matters. Messrs. Cooper and West negotiated with the police and/or Crown Attorney with the result that Mr. Taylor eventually agreed to make restitution and pleaded guilty to one count of theft over $1,000.

Mr. West was aware that Revenue Canada had contacted Mr. Taylor in November 1989.

The next contact between Mr. Taylor and Revenue Canada took place at a meeting held in February 1990, at which Mr. Taylor, Ms. Pope and Mr. Macri, both of Revenue Canada were present. Ms. Pope was the investigator in charge and Mr. Macri was her supervisor. It was at this meeting that Mr. Taylor claims that Revenue Canada stated that if restitution was made, taxes would "wash” and there would be no interest or penalties assessed. Mr. Taylor claims that the same offer was made to him during the telephone call conversation in November 1989. A further meeting was held in April 1990, attended by Ms. Pope, Mr. Macri and Mr. West. Mr. Taylor did not attend but was nearby. After the meeting, Mr. Taylor met with Mr. West, and was told by Mr. West that there would be a ’’wash”. In his evidence concerning the April 1990 meeting, Mr. West claimed that he made inquiries of Ms. Pope and Mr. Macri as to the tax consequences of Mr. Taylor making restitution. Mr. West stated that he was informed by them that if restitution was made, there would be a "balancing out"; that there would be a "wash". He claims that he was told that he had nothing to worry about, because if there was a "wash" with respect to taxes, there would be no penalties or interest. Mr. West stated that he then met with Mr. Taylor and informed him that, as a result of the meeting, he had nothing to worry about; again stating that the word "wash" had been used.

Once armed with what he believed to be an agreement with Revenue Canada Mr. West was prepared to meet with the Crown Attorney to negotiate a plea. Part of the plea bargaining with the Crown Attorney included an agreement that the authorities would look only to the proceeds of the sale of the assets purchased with stolen money. If there was any Shortfall, it would be dealt with in a restitution order and not by realizing on Mr. Taylor’s other assets. This would mean that Mr. Taylor’s matrimonial home would not be seized and sold.

Mr. West claims he was led to believe, from his dealings with Revenue Canada, that if restitution was not made, Mr. Taylor would be assessed under the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

At the time of his conviction, Mr. Taylor had repaid approximately $190,000 and the judge entering the conviction issued a restitution order in the amount of $298,000, making a total of $488,000.

As a result of the April 1990 meeting with the representatives of Revenue Canada, Mr. West believed that he had struck a bargain and in- itiated no further contact with Revenue Canada and in turn, Revenue Canada did not contact Mr. Taylor or Mr. West until November 1990.

Mr. Taylor was convicted on July 26, 1990 and later sentenced to 18 months in prison, of which he served approximately six months.

On November 16, 1990, while he was serving his sentence, Ms. Pope wrote to Mr. Taylor with a copy of the letter sent to Mr. West. The upshot of this letter was that Revenue Canada intended to assess Mr. Taylor for his 1986 through 1989 taxation years, a total of $527,341 of unreported income resulting from the misappropriations. In addition, interest income to that date of $4,062 was also to be assessed. Most important however, was Ms. Pope’s statement that Revenue Canada intended to levy penalties against Mr. Taylor, under subsection 163(2) of the Act.

While admitting liability for most of the tax resulting from the misappropriation and the interest earned on the funds, the thrust of the appellant’s appeal is aimed at penalties and interest. Counsel for the appellant puts forth the following issues as the heart of the appeal:

1. What was the amount of the additional income and the tax that should be imposed upon that additional income?

2. Is the Minister estopped from assessing penalties and interest upon the appellant on the basis of promissory estoppel or waiver?

3. Is the Minister estopped from assessing penalties and interest on the basis of ’’abuse of process", (Common Law and section 7 of the Charter of Rights and Freedoms, (the "Charter”)) or in the alternative, public policy and Revenue Canada’s own formal policy? Is the appellant entitled to a remedy under subsection 24(1) of the Charter?

4. Is the imposition of penalties in excess of $99,000 a "true penal consequence” pursuant to section 11 of the Charter?

(i) If yes, has the appellant been subjected to double jeopardy pursuant to paragraph 11 (h) of the Charter?

(ii) If no, has the appellant been subjected to double jeopardy pursuant to section 7 of the Charter?

(iii) Is the appellant entitled to a remedy under subsection 24(1) of the Charter? [1]

Amount of income to be attributed

Mr. Taylor’s evidence dealing with the first issue as to unreported income falls short of what is required to discharge the onus placed upon him to demolish the Minister’s assessment. The appellant denies taking cash of approximately $90,000 while admitting to taking between $5,000 and $10,000. This denial together with the evidence submitted dealing with the employee bonspiel and the town planning department with no further evidence, are insufficient and accordingly the inclusion of these amounts in dispute must stand. No evidence was led to counter the assessment with respect to the $950 of unreported income from F. Gallent Enterprises.

Promissory estoppel

The authorities have long set forth the requirements of estoppel. The appellant puts forth the major elements of promissory estoppel as follows (P.M. Perell, Remedies and the Sale of Land (1988), at page 71) [2] :

A. a pre-existing legal relationship between the parties;

B. a representation or conduct amounting to a representation;

C. the representation or conduct was intended to induce a course of conduct on the part of the person to whom the representation was made [the intention may be inferred from the factual circumstances];

D. the person to whom the representation was made detrimentally relied on the representation [either by some act or omission].

The matter was also succinctly put by Mr. Justice Martland of the Supreme Court of Canada in Canadian Superior Oil Co. et al. v. Paddon-Hughes Development Co. et al., [1970] S.C.R. 932 at page 939:

The essential factors giving rise to an estoppel are I think:

(1) A representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made.

(2) An act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made.

(3) Detriment to such person as a consequence of the act or omission.

It must be established that the representatives of Revenue Canada did make the representations which the appellant relied upon, and that having relied upon these representations, he did so to his detriment.

The evidence of the appellant and Mr. West was that Ms. Pope and/or Mr. Macri of Revenue Canada made representations to the effect that by making restitution, the matter with respect to taxes would be a ’’wash” and no interest or penalties would be assessed. These statements were made on at least two, if not on three occasions. First, the meeting of February 1990, at which Mr. Taylor attended; second, the meeting of April 1990, at which Mr. West attended; and third, the telephone conversation in November 1989.

While Messrs. Taylor and West insist that the word "wash" was used at the meeting each of them attended, and Mr. Taylor further states that the word ’’wash” was used during the November 1989 telephone conversation as well. Ms. Pope denies that this word or any similar word or phrase was ever used or mentioned.

On balance, I must accept the evidence of the appellant and Mr. West that the representations were made that taxes, penalties and interest would not be assessed if restitution was made. Reference by both of these witnesses as to the use of the word ’’wash” leads me to that conclusion. The word is too specific, too colloquial and very memorable. The evidence was not that "restitution would result in favourable treatment vis-à-vis taxes" but that there would be a "wash" and no penalties and interest would be assessed.

Having determined that the representation was made, I also find that the appellant acted upon it to his detriment.

The bargain struck with the Crown Attorney did not require the appellant to mortgage his home to raise money to pay restitution. The Crown Attorney agreed to realize on assets acquired from the proceeds of the misappropriation. However, to satisfy the perceived requirements of Revenue Canada, Mr. Taylor mortgaged his home in the amount of $108,000. This was over and above liquidating the embezzlement-related assets. I do not find that Mr. Taylor was mistaken in his perception. I find that he believed that he had to go beyond the Crown Attorney’s requirements in order to assure favourable tax treatment by Revenue Canada. The guilty plea and the less severe requirements of the Crown as to restitution may have been inducements in the plea bargaining process, but not mortgaging the matrimonial home.

Having found the first two elements, it must then be determined whether the Crown was estopped from assessing the taxes, penalties and interest.

That the Crown can be estopped is not in doubt (see R v. Langille, [1977] C.T.C. 144, 77 D.T.C. 5086 (F.C.T.D.). At page 150 (D.T.C. 5089), Grant D.J. stated:

Mrs. McLaren who sold the annuity contract to Langille was an employee in the Federal Department of Labour. She was acting within the scope of her employment. In describing the terms of the contract to such a purchaser, she described it as one in which if he did not deduct the premium paid from his taxable income he would not have to pay tax on the refund of capital but would only have to pay tax on the interest element of each year’s annuity. Such statement was not an opinion of law but a statement of fact descriptive of the type of contract being offered to him. If the statement had been an opinion or interpretation of section 146 of the Act, stoppai [estoppel] would not lie against the Minister. (See Stickel v. M.N.R., [1972] C.T.C. 210, 72 D.T.C. 6178 at page 219 (D.T.C. 6185).)

The purchaser relied upon and acted upon such statements throughout. There is no suggestion that such saleslady did not herself believe such description to be true. If I am right in my interpretation of the contract it was true. The principle of estoppel is binding on the Crown. The fact that the Crown’s servant who sold the contract worked in a different department of the government does not affect this responsibility. (See Robertson v. Minister of Pensions, 1949 1 K.B. 227, 1948 2 All E.R. 767.)

However, estoppel against the Crown only lies with respect to statements of fact. The issue of estoppel against the Crown dealing with question of law was dealt with thoroughly in Wo on v. M.N.R., [1950] C.T.C. 263, 50 D.T.C. 871 [Ex. Ct.]. After referring to cases dealing with the applicability of the doctrine of estoppel against the Crown, Mr. Justice Cameron said at pages 270-71 (D.T.C. 874):

It is not necessary in this case, however, to consider the effect of the cases to which reference has just been made. It is sufficient to state that the assessment here under appeal was made pursuant to the terms of a statute and that, therefore, it is not open to the appellant to set up an estoppel to prevent its operation.

In Phipson on Evidence, 8th Ed., 667, it is stated that:

Estoppels of all kinds, however, are subject to one general rule: they cannot override the law of the land. Thus, where a particular formality is required by statute, no estoppel will cure the defect.

The most recent case that I am aware of is Maritime Electric Co. Ltd. v. General Dairies Ltd. (1937), A.C. 610, in which it was:

Held, that the appellants were not estopped from recovering the sum claimed. The duty imposed by the Public Utilities Act on the appellants to charge, and on the respondents to pay, at scheduled rates, for all the electric current supplied by the one and used by the other could not be defeated or avoided by a mere mistake in the computation of accounts. The relevant sections of the Act were enacted for the benefit of a section on the public, and in such a case where the statute imposed a duty of a positive kind it was not open to the respondent to set up an estoppel to prevent it.

An estoppel is only a rule of evidence, and could not avail to release the appellants from an obligation to obey the statute, nor could it enable the respondents to escape from the statutory obligation to pay at the scheduled rates. The duty of each party was to obey the law.

The judgment in that case was delivered by Lord Maugham. At page 620 he said:

The Court should first of all determine the nature of the obligation imposed by the statute, and then consider whether the admission of an estoppel would nullify the statutory provision.

And at page 621 :

If we now turn to the authorities it must be admitted that the reported cases in which the precise point now under consideration has been raised are rare. It is, however, to be observed that there is not a single case in which an estoppel has been allowed in such a case to defeat a statutory obligation of an unconditional character. The textbooks have regarded the case as one closely analogous to the cases of high authority where it has been decided that a corporation could not be estopped from contending that a particular act was ultra vires.

He referred also to In re A Bankruptcy Notice (1924), 2 Ch. 76, in which Atkin L. J. stated:

Whatever the principle may be (referring to a contention as regards approbation and reprobation) it appears to me that it does not apply to this case, for it seems to me well established that it is impossible in law for a person to allege any kind of principle which precludes him from alleging the invalidity of that which the statute has, on grounds of that which the statute has, on grounds of general public policy, enacted shall be invalid.

In the instant case, section 19.1 of the statute expressly provides that the payment received by a taxpayer under the circumstances there mentioned shall be a dividend and therefore part of a taxpayer’s assessable income. It was therefore the duty of the taxing authorities to apply the provisions of the section to the case of any taxpayer falling within its terms and it was the duty of such taxpayer to pay such tax as might properly be payable thereunder. It was the duty of both to obey the law.

I think it is quite clear that the "ruling” said to have been made in this case, was made without authority and was not in any way binding upon the Crown. There is nothing in the section itself which confers any sort of discretionary powers on the Minister or his officials. Parliament has said that under certain circumstances certain things are deemed to be dividends and manifestly the Commissioner of Taxation had no power to declare otherwise or to settle the limit of taxation thereunder, other than according to the statute itself.

Associate Chief Judge Christie of this Court concurred with this interpretation in Lamash Estate v. M.N.R., [1990] 2 C.T.C. 2534, 91 D.T.C. 9.

In addition, in the reasons for judgment in Stecko v. Canada, [1995] 1 C.T.C. 269, 95 D.T.C. 5215 (F.C.T.D.), Mr. Justice Cullen of the Federal Court-Trial Division, referred to the issue of estoppel at C.T.C. page 275 of his reasons, where he wrote:

However, that being said, I do not accept that the plaintiff could reasonably have relied on the statements made by Mr. Mardell. Moreover, even if the plaintiff did rely on the representations made by Mr. Mardell to his detriment, the plaintiff cannot rely on the doctrine of estoppel. First, as Mr. Balfe admitted, advice or assurances made by a Revenue Canada agent are not binding. They may be a reasonable way of "testing the waters” but they are not iron-clad guarantees. Second, the defence of estoppel can be invoked neither against the Crown, nor against the acts of the Crown’s servants or agents. This principle was enunciated in Gibbon v. The Queen, [1977] C.T.C. 334, 77 D.T.C. 5193 (F.C.T.D.). Although this case was not cited by counsel for the defendant, I think it provides a clear statement of the law in this area. Walsh J., having reviewed British authorities relating to estoppel against the Crown, stated at page 338 (D.T.C. 5196):

This judgment therefore makes a clear distinction between an erroneous decision on questions of fact which has nevertheless induced the beneficiary of the decision to act on it, and a failure to apply the law, and in the latter case no decision by a servant or officer of the Crown can bind it. The Canadian courts have consistently so held.

I relied on these statements in the case of Cohen v. Canada, [1991] 1 C.T.C. 288, 91 D.T.C. 5239 (F.C.T.D.) and stated at page 297 (D.T.C. 5245):

With respect to the argument that the Crown is estopped from arguing that the maintenance is not deductible because of its previous representations in the case of Naomi Cohen, the case of Gibbon v. The Queen, [1977] C.T.C. 334, 77 D.T.C. 5193, makes it clear that the Minister or other subordinate of the Crown cannot by any conduct or representation bar the Crown from enforcing a statute where there has previously been a failure to apply the law. Estoppel cannot override the rule of the land.

In the case at bar, the representations made by Mr. Mardell concerned the application of the Income Tax Act. Relying on the decisions in Gibbon and Cohen, supra, the plaintiff's arguments on estoppel are without merit.

These authorities in themselves are not finally determinative of the issue since there are three issues: the assessment of taxes, the assessment of interest and the assessment of penalties.

Subsection 152(1) of the Act states:

152(1) The Minister shall, with all due dispatch, examine a taxpayer’s return of income for a taxation year, assess the tax for the year, the interest and penalties, if any, payable and determine....

These words are mandatory and impose an obligation on the Minister to assess not only taxes but penalties and interest as well.

The Act, not an assessment, creates the liability for tax. The Minister cannot ‘contract out" of the Act. It is a question of law whether the appellant is taxable. The doctrine of estoppel is therefore not applicable to the issue of taxes.

The remaining issues in this appeal deal with estoppel as it may apply to the assessment of penalties and interest.

The appellant admittedly failed to report substantial amounts of income in the years under appeal. That he did so knowingly or under circumstances amounting to gross negligence is not in question. In addition, it is clear that he made a false statement or omission in a return filed in respect of a taxation year as required by the Act. [3] On its face, subsection 163(2) creates a liability.

Similarly, the provisions of subsection 161(1) impose an obligation on a taxpayer to pay interest on unpaid taxes. [4]

Again, there was a statutory obligation to pay interest out of which the Minister cannot contract.

If the matter were left there, I would then be forced to say that the doctrine of estoppel would not be applicable to penalties and interest for the reasons given above concerning the appellant’s liability for tax. However, subsection 220(3.1) of the Act has a direct bearing on penalties and interest:

220(3.1) The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership and, notwithstanding subsections 152(4) to (5), such assessment of the interest and penalties payable by the taxpayer or partnership shall be made as is necessary to take into account the cancellation of the penalty or interest.

[Emphasis added.]

Without the provisions of subsection 220(3.1) the Minister would be without power or authority to waive or cancel penalties or interest. The enactment of subsection 220(3.1) gave him that power and that power is discretionary.

However, this discretion cannot be exercised until there has been an assessment of penalties and interest. As stated above, subsection 152(1) of the Act provides that the Minister shall assess the taxes for the year and the interest and penalties, if any, payable. It is only the penalties and interest which are payable that may be waived or cancelled by the Minister. The penalties and interest which are payable become payable only after they are assessed and therefore there must be an assessment before the provisions of subsection 220(3.1) come into play. See Turkstra v. Canada, [1993] 2 C.T.C. 2405 at page 2407 (T.C.C.) and Wasson v. Canada, [1993] 2 C.T.C. 2338 (T.C.C.).

The events giving rise to the estoppel claim arose prior to any assessment of penalties and interest and are therefore outside the ambit of subsection 220(3.1) of the Act. Accordingly the doctrine of promissory estoppel is inapplicable to the issues of penalties and interest as well.

Charter of Rights and Freedoms

The appellant put forth several arguments under the Charter and specifically under section 7 and paragraph 11(h) as they pertain to penalties when coupled with the appellant’s conviction for theft over $1,000.

Paragraph 11(h) of the Charter reads in part as follows:

11. Any person charged with an offence has the right

(h) ...if finally found guilty and punished for the offence, not to be tried or punished for it again....

Counsel for the appellant in dealing with this paragraph referred to R v. Wigglesworth, [1987] 2 S.C.R. 541, 45 D.L.R. (4th) 235, 37 C.C.C. (3d) 385. Here the Court (Wilson J.) dealt with the meaning of offence and dealt with offenses where the Charter would be applicable if the person affected is subject to true penal consequences. Madame Justice Wilson at page 252 (D.L.R.) of Wigglesworth stated:

Some of these matters may well fall within section 11, not because they are the classic kind of matter intended to fall within the section, but because they involve the imposition of true penal consequences. In my opinion, a true penal consequence which would attract the application of section 11 is imprisonment or a fine which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.

Mr. Sigurdson for the appellant argued that the imposition of penalties amounting to almost $100,000 is tantamount to "a fine which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity".

In support of this he referred to Re Knutson and Saskatchewan Registered Nurses Association (1990), 75 D.L.R. (4th) 723 (Sask. C. A.) at page 730 where it was found that "fines of up to $10,000 for each offence, leaving aside the additional liability to reprimand, suspension and disbarment, would, in all likelihood, have been found to be a true penal consequence within the meaning of Wigglesworth...."

It must be remembered however that we are not dealing with fines in a criminal or quasi criminal proceeding or a diciplinary proceeding but one of penalties in respect of an administrative matter based upon unreported income. There are no offenses since the penalties are applied based on unreported income and applied when a taxpayer makes a false statement on his return either knowingly or under circumstances amounting to gross negligence.

I believe the matter of the Charter and in particular paragraph 11(h) have been ably reviewed by Judge Sarchuk of this Court in Sommers v. M.N.R., [1991] 1 C.T.C. 2451, 91 D.T.C. 656.

At pages 2453-54 (D.T.C. 658) he states:

In Re v. Georges Contracting Ltd. and Cloarec, 15 B.C.L.R. (2d) 240, the respondent was charged with ten counts of making false or deceptive statements in his income tax returns contrary to paragraph 239(1 )(a) of the Income Tax Act. The Minister of National Revenue also levied a penalty against the respondent pursuant to subsection 163(2) of the Act. The Trial judge stayed the criminal charges on the ground that a trial would constitute a violation of paragraph 11(h) of the Charter. The Crown appealed to the Supreme Court of British Columbia. The headnote to the decision of the Supreme Court succinctly sets out the reasons for judgment:

The 25 per cent penalty, from the perspective of the taxpayer, is a punishment. However, the assessment of that penalty as well as the assessments for unpaid tax and interest under the Income Tax Act are purely administrative acts. There is no hearing, no tribunal-the assessment is a unilateral act which results in the taxpayer being obliged to pay, in effect, a civil judgment. On the other hand, paragraph 239(1 )(a) of the Act is truly an exercise of the power of the federal government to legislate in the field of criminal law. A proceeding against a taxpayer under section 239 is one which brings the citizen out into a public tribunal to be tried and, if convicted, punished for all society to see. While there are similarities between the proceeding under subsection 163(2) and under section 239, including the fact that the misconduct previously penalized under the former section is substantially the same as that which forms the subject matter of the charges under the latter, since under the former the taxpayer has not been tried nor finally found guilty of any offenses, his right not to be tried again as envisaged by paragraph 11(h) is not violated by the prosecution proceeding.

[Emphasis added. }

This judgment was affirmed on appeal to the British Columbia Court of Appeal ([1988], 24 B.C.L.R. (2d) 175, 41 C.C.C. (3d) 95). In The Queen v. Sharma, [1987] 2 C.T.C. 253, 87 D.T.C. 5424, the taxpayer was charged with income tax evasion and the Minister also imposed a penalty pursuant to subsection 163(2) of the Act. A judge of the Ontario Provincial Court stayed the criminal proceedings, utilizing the provisions of paragraph 11(h) of the Charter. The matter was appealed and the Supreme Court of Ontario found that the imposition of civil penalties did not amount to either a trial or to a final finding of guilt as contemplated by paragraph 11(h) of the Charter. Furthermore, the Court held that paragraph 11(h) applied only to criminal proceedings and it could not be said that the subsection 163(2) penalties were imposed in a criminal or penal proceeding.

In Yes Holdings Ltd. and Yesmaniski v. R. (1987), 57 Alta. L.R. (2d) 227, 40 C.C.C. (3d) 30, the Alberta Court of Appeal in similar circumstances rejected an argument that there existed a violation of the paragraph 11(h) Charter right not to be tried again for an offence for which one has previously been acquitted or convicted. That court held that the relevant section of the Charter only provides protection against trial, conviction and punishment in the context of section 11 which requires that the proceedings impugned must be "in respect of an offence". "Offence" means an offence which is prosecuted in a criminal or penal proceeding. Although there are penal elements to penalties imposed under subsection 163(2) of the Income Tax Act, those penalties are not imposed through criminal process. Accordingly the proceedings did not violate the rights of the accused under paragraph 11(h). Stevenson, J.A. further stated:

To accede to the appellants’ argument would be to conclude that the state cannot impose a penalty other than through the criminal process. This is an extravagant conversion of section 11, sweeping into it and criminalizing all state imposed penalties.

The same conclusion was reached in the case of Lavers et al. v. M.N.R., [1990] 1 C.T.C. 265, 90 D.T.C. 6017. This is a decision of the British Columbia Court of Appeal in which the provisions of paragraph 11(h) of the Charter were raised in similar circumstances to those before me. In his consideration of the nature of a penalty assessment Wallace J. reviewed a number of decisions and concluded, at page 285 (D.T.C. 6019-20):

..that the assessments by the Minister and the imposition of penalties pursuant to subsections 163(1) and (2) of the Income Tax Act (Canada) and subsections 23(1) and (3) of the Income Tax Act (B.C.) are properly characterized as private matters of a regulatory nature—primarily intended to regulate the conduct of taxpayers with reference to their complying with the requirements of the respective Income Tax Acts. The penalties which may be imposed upon such assessment are designed to achieve that objective.

[Emphasis added. ]

In contra-distinction prosecutions for a violation of section 239 are properly characterized as criminal and penal matters intended to "promote public order and welfare within a public sphere of activity" by deterring the public from the commission of flagrant breaches of the Income Tax Act.

Accordingly, I find that the assessments by the Minister and the imposition of penalties for a violation of section 163 of the federal Income Tax Act and section 23 of the British Columbia Income Tax Act do not constitute a finding of guilty or a punishment for an offence which comes within paragraph 11 (h) of the Charter.

In dealing with the issue of the true penal consequence Judge Sarchuk continued on page 2455 (D.T.C. 659) with the Lavers, supra decision:

The Lavers decision is of particular significance since in his reasons Wallace J. also considered the question of whether the ’’punishment imposed" pursuant to the assessments of the Minister constitutes "true penal consequences" so as to bring the penalties consequent upon assessment proceedings within the prohibition expressed in paragraph 11(h) of the Charter. Reference was made to the decision of the Supreme Court of Canada in Wigglesworth v. R. and in particular to the tests suggested by the judgment of Madame Justice Wilson. Utilizing these tests Wallace J. concluded at pages 287-88 (D.T.C. 6020):

In my view, the distinction in the severity of the respective penalties indicates that Parliament intended that the imposition of the statutory penalty following assessments by the Minister would reflect a sufficiently significant monetary punishment to deter taxpayers from failing to comply with the Income Tax Acts and would thereby achieve the objective of this administrative procedure. It is also an incentive to diligence for those who might be grossly negligent but not truly criminal. On the other hand, the severity of the public sentence which could be imposed following a conviction under section 239 clearly points to Parliament’s intention to provide a punishment designed to redress a public wrong. I do not consider this distinction in the nature and purpose of the two punishments to be diminished by the fact that all fines end up in the consolidated revenue fund, via the Receiver General of Canada. In the circumstances this is the only appropriate office to which such payments could be made. In summary, therefore, the penalty assessment, while not trivial, is not so severe as to amount to a "true penal consequence".

I find support for the conclusion I have reached from the decision of George's Contracting, supra, where this Court, after considering the Wigglesworth decision, found the Minister’s assessment and consequent penalty to be a civil proceeding to which paragraph 11(h) of the Charter did not apply.

Accordingly, I find that the assessments of the Minister and the penalties imposed as a consequence of such assessments do not come within paragraph 11(h); they are not criminal or quasi-criminal "by nature"; nor are the penalties a "true penal consequence".

Finally, a similar conclusion was reached by the Ontario Court of Appeal in The Queen v. Compton Joseph Ferreira, Ont. C.A., 88-4676, July 12, 1988 (unreported). I refer to this case because in the lower courts Ferreira argued that having been penalized under section 163 of the Income Tax Act he was in jeopardy of being penalized a second time under subsection 239(1) of the Act and that this was contrary to well established principles of fundamental justice. Thus under section 7 of the Charter his liberty was unfairly at risk in accordance with the principles of fundamental justice, in this case, double punishment or double jeopardy. Both the trial court and the District Court of Ontario which heard the matter by way of summary conviction appeal, concluded that prosecution was barred by reason of section 7 of the Charter. The Ontario Court of Appeal unequivocally found that section 7 had no application in the circumstances, albeit without further reasons.

I concur with these reasons and find that the penalties do not amount to a ’’true penal consequence”.

Section 7 of the Charter provides as follows:

Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

Section 7 affords no safeguard of economic rights.

Counsel for the respondent referred to Canada v. Caseley, [1991] 1 C.T.C. 211, 90 D.T.C. 6618 (P.E.I.S.C.). The double jeopardy issues in that case were penalties under subsection 163(2) and section 239 of the Act, the latter being a criminal charge dealing with tax evasion.

At pages 216-17 (D.T.C. 6621) MacDonald, C.J.T.D. dealt with the section 7 argument as follows:

Under subsection 163(2) there is no threat to life, liberty or security of the person. Only a monetary penalty may be assessed. In Whitbread v. Walley (1988), 51 D.L.R. (4th) 509, [1988] 5 W.W.R. 313, the British Columbia Court of Appeal, McLachlin J., giving the opinion of the Court, stated at pages 519-20 (W.W.R. 323-24):

To date section 7 has been applied mainly in cases where the physical liberty of the complainant has been infringed or is in danger of infringement. Imprisonment and detention by the state offers classic examples of situations where section 7 clearly applies....

At the other end of the scale, it appears clearly that purely economic claims are not within the purview of section 7 of the Charter. No one suggests, for example, that imposition of a monetary disability on a corporation would infringe section 7 if not effected in accordance with the principle of fundamental justice.

McLachlin J. went on to examine the instance where the matter complained of involves an economic aspect but is connected to or affects life, liberty or security of the person. She stated that there were two related grounds put forth for the proposition that there can be a connection between the limitation of liability and the liberty and security of the person which would bring section 7 into play. The first she summarized as being a claim for an economic interest which is founded on a deprivation of life, liberty or security of the person. In the present case, the claim of an economic loss, resulting from the assessment of the penalty cannot be said to arise from the deprivation of life, liberty or security of the person.

McLachlin J. summarized the second argument as being a claim for an economic interest which may enhance a person’s ability to acquire aids and amenities to improve the person’s life or security of the person. Again the respondent would not meet such a test. McLachlin J. points out the difficulties of tying economic interests to section 7. All property and economic interest will affect the life, liberty and security of the person. She concluded that it was not the intent of the framers of the Charter to give section 7 that meaning. Based on another rationalization that she put forth, it can be said that any deprivation of life, liberty or security of the person, which the respondent may have suffered, or will, is not caused by section 163 but by the fact that he made a false statement in his tax return or wilfully omitted information in his tax return. I can see no infringement of section 7.

I also concur with Chief MacDonald’s conclusions. Accordingly, I find that the appellant’s rights under the Charter of Rights and Freedoms have not been violated and that he is entitled to no remedy under the Charter.

Similarly, the imposition of penalties under subsection 163(2) does not constitute an "abuse of process" in any guise which would entitle the appellant to a Charter remedy.

For the above reasons the appeals are dismissed with costs.

Appeals dismissed.