Date: 20010918
Docket: 2000-3468-IT-I
BETWEEN:
HECTOR MacKINNON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Margeson, J.T.C.C.
[1]
This matter was originally scheduled to be heard in Sydney,
Nova Scotia, on the 28th day of June 2001. At that time
counsel for the Appellant made a preliminary objection in that
the Crown was intending to introduce into evidence in this trial,
the evidence of the Appellant, Hector MacKinnon, which he gave in
a trial of Her Majesty the Queen v. Ronald James MacKinnon and
Theresa Darlene MacKinnon under sections 39(1)(b) and
39(1)(a) of the Revenue Act of Nova Scotia.
[2]
At that trial the Appellant, Hector MacKinnon was subpoenaed as a
witness and compelled to give testimony at the trial. A copy of
the decision of the Court was presented before the commencement
of this trial, with the consent of the parties. In that trial,
the Appellant Hector MacKinnon, claimed possession of the
contraband tobacco. This evidence was intended to be introduced
in the trial before the Tax Court of Canada to establish that the
accused failed to report revenue for the years 1995, 1996 and
1997 which was the basis upon which the Appellant was reassessed
certain amounts as net business income from the illegal sale of
tobacco products. Penalties were also assessed against him under
section 163(2) of the Income Tax Act
("Act").
[3]
It was the position of counsel for the Appellant that the
admissibility of such evidence was contrary to section 7 of the
Charter of Rights which reads:
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.
It was also contended that it violated section 11(c) of
the Charter of Rights which reads:
Any person charged with an offence has the right
(c) not to be compelled to be a witness in proceedings
against that person in respect of the offence;
Further, section 13 of the Charter of Rights reads:
Self-Crimination
13. A witness who testifies in any proceedings has the right
not to have any incriminating evidence so given used to
incriminate that witness in any other proceedings, except in a
prosecution for perjury or for the giving of contradictory
evidence.
[4]
The parties agreed that if the Appellant's arguments
prevailed, the appeal should be successful, but if the
Appellant's argument did not prevail, and the
Respondent's arguments were accepted, that the appeal should
be dismissed without a need for the hearing of further
evidence.
[5]
Counsel for the Appellant wished to make written submissions in
the matter and the Court set the date of July 16 for receipt of
this submission, with same being exchanged with counsel for the
Respondent. The Court ordered that the Respondent would file a
reply to this argument, if any, by July 31 and exchange same with
counsel for the Appellant. These requirements have been
fulfilled.
[6]
Counsel for the Respondent took issue with the memorandum filed
by counsel for the Appellant arguing that factual allegations
were made which were not in evidence before the Court. Such
allegations related to whether or not the tobacco to which the
assessment relates includes the seized tobacco that was in issue
in the trial of Ronald MacKinnon and whether or not the trial
judge in that case believed his testimony.
[7]
Counsel for the Respondent takes the position that if this Court
wishes to base its decision on such evidence, the Respondent
should be entitled to call evidence to show that the seized
tobacco was not included in the assessment of the Appellant's
income for the 1995, 1996 and 1997 taxation years.
[8]
This argument by counsel for the Respondent is well taken. These
were not issues that were to be addressed in the submissions
before this Court. The submissions here were restricted to the
issue as to whether or not prior evidence of the Appellant can be
received in evidence or whether or not it violated the provisions
of the Charter as earlier referred to.
[9]
The Court is satisfied that what it has to decide in this case,
as a result of the agreement between the parties at the time of
the hearing, boils down to whether or not the assessments made
against the Appellant in the years 1995, 1996 and 1997 which
increased the income of the Appellant in those years to include
amounts for the illegal sales of tobacco for those years and the
imposition of penalties pursuant to subsection 163(2) of the
Act, are "true penal consequences", as outlined
in Taylor (R.T.) v. The Queen, 95 DTC 591, bearing
in mind the other cases that have been referred to by both
counsel. It was the position of counsel for the Respondent that
they were not and that their intention and purpose was not to
redress wrongs done to society but to maintain the internal
discipline of the self-reporting nature of the income tax regime
as referred to by Madame Justice Wilson in R. v.
Wigglesworth, 45 D.L.R. (4th) 235 at page 252.
[10] Counsel
for the Respondent submits that section 13 of the Charter
does not grant the Appellant the desired protection that he seeks
as the Appellant in this case will not be "convicted"
of anything. Her position was that the procedure before the Tax
Court of Canada is not a criminal prosecution, but a civil
appeal. The Appellant was reassessed to include amounts of net
business income for the 1995, 1996 and 1997 taxation years. The
allegation was that his business income was earned from the
illegal sale of tobacco products. It is that assessment that is
now being appealed to the Tax Court of Canada.
[11] She takes
the position that the Charter protection from
self-incrimination is not applicable in this instance as the
proceedings before this Court do not involve penal
consequences.
[12] She
referred to Knutson v. Saskatchewan Registered Nurses
Association, [1990] S.J. No. 603 (C.A.) No. 681; McDonald
v. Law Society of Alberta, [1993] A.J. No. 985 (Q.B.);
and Taylor, supra.
[13] The
submissions of counsel for the Appellant referred to
Wigglesworth, supra; Taylor (R.T.), supra;
and A. Tyler v. M.N.R., [1991] 1 C.T.C.
(F.C.A.). Counsel suggested that there is no distinction between
the statements that penal consequences are those which have an
intent to promote public order involved within the public sphere
of activity whereas fines and penalties for certain sections of
the Act are not said to be penal because they are intended
to regulate the conduct of taxpayers with reference to the
complying with the requirements of the Act. Counsel's
position was that both are intended to make society comply with
the law. Counsel also relied upon the case of R. v.
Mannion, 25 C.R.R., 182 where the Court found that the
cross-examination of an accused on prior and uncontested
evidence given at the first trial violates section 13 of the
Charter and that the new trial of an accused on the same
indictment is indicated in the phrase, "in any other
proceedings".
[14] Counsel
also relied upon the case of Donald v. Law Society of British
Columbia, (1984) 7 C.R.R., 305, in support of his proposition
that the words "any other proceeding" as used in
section 13 of the Charter would encompass the procedure of
reassessing Hector MacKinnon. He was being fined and penalized.
He was in a Court of law at both levels. The levels involved
evidence. The Provincial Court and the Tax Court are not
administrative bodies. The judges are not administrators. Revenue
Canada employees are administrators. The Provincial Court hearing
of Ron MacKinnon falls within the definition of "any
other proceeding".
Decision
[15] In the
case of Taylor, supra, Judge Sobier, of this Court, dealt
extensively with the issue which must be decided here. In that
case, when discussing the implications of Wigglesworth,
supra, Judge Sobier referred to the argument of counsel
for the Appellant in that case that the imposition of penalties
amounting to almost $100,000 was 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.
Judge Sobier also referred to the case of Knutson,
supra, which 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,... .
However, as Judge Sobier pointed out, we are not dealing with
fines in a criminal or quasi-criminal proceeding or disciplinary
proceeding before the Tax Court. We are dealing with one of
penalties in respect of an administrative matter based upon
unreported income. He did not liken these to offences because the
penalties were based upon unreported income and apply when a
taxpayer makes a false statement on his return either knowingly
or under circumstances amounting to gross negligence.
[16] Further,
Judge Sobier stated that the matter of the Charter, and in
particular paragraph 11(h) has been the subject of review
by Judge Sarchuk of this Court in Sommers v. M.N.R.,
[1991] 1 C.T.C. 2451, 91 DTC 656. In the end result he found that
the assessments by 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".
[17] Judge
Sobier further pointed out that 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). Judge Sobier concurred with these reasons and found
that the penalties do not amount to a "true penal
consequence". Judge Sobier further found that section 7
affords no safeguard of economic rights.
[18] He
referred to the case of Canada v. Caseley, [1991] 1 C.T.C.
211, 90 DTC 6618 (P.E.I.S.C.) where the double jeopardy issue
arose with respect to penalties under subsection 163(2) and
section 239 of the Act, the latter being a criminal charge
dealing with tax evasion.
[19] He
referred to Chief Justice MacDonald's statement at pages
216-217 (DTC 6621) where he 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.
[20] Judge
Sobier concurred with Chief Justice MacDonald's conclusions
and found that the Appellant's rights under the
Charter had not been violated and that he was entitled to
no remedy under the Charter.
[21]
Generally, the learned trial judge found that the imposition of
penalties under subsection 163(2) does not constitute an
"abuse of process" in any guides which would entitle
the Appellant to a Charter remedy.
[22] It is to
be noted that this case was referred to by the Federal Court of
Appeal at [1997] F.C.J. No. 193 (C.A.) and an application for
leave to appeal to the Supreme Court of Canada was dismissed at
[1997] S.C.C.A. No. 223.
[23] This
Court is satisfied that the assessments that were made increasing
the Appellant's income to include amounts from the illegal
sale of tobacco for the 1995, 1996 and 1997 taxation years and
penalties assessed pursuant to subsection 163(2) of the
Act are not of "true penal consequence" as
outlined in the case referred to above. Their purpose is to
maintain the internal discipline of the self-reporting nature of
the income tax regime.
[24] The
appeals are dismissed and the Minister's assessment is
confirmed.
Signed at Ottawa, Canada, this 18th day of
September 2001
"T.E. Margeson"
J.T.C.C.
COURT FILE
NO.:
2000-3768(IT)I
STYLE OF
CAUSE:
Hector MacKinnon and The Queen
PLACE OF
HEARING:
Sydney, Nova Scotia
DATE OF
HEARING:
June 28, 2001
REASONS FOR JUDGMENT BY: The
Honourable T.E. Margeson
DATE OF JUDGMENT AND
REASONS FOR
JUDGMENT:
Sept. 18, 2001
APPEARANCES:
Counsel for the Appellant: Hugh R. McLeod
Counsel for the
Respondent:
Christa MacKinnon and
John Bodurtha
COUNSEL OF RECORD:
For the
Appellant:
Name:
Hugh R. McLeod
Barrister & Solicitor Inc.
Firm:
275 Charlotte Street, Suite 208
P.O. Box 306
Sydney, Nova Scotia B1P 1C6
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-3468(IT)I
BETWEEN:
HECTOR MacKINNON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on June 28, 2001, at Sydney, Nova
Scotia, by
the Honourable Judge T.E. Margeson
Appearances
Counsel for the
Appellant:
Hugh R. McLeod
Counsel for the
Respondent:
Christa MacKinnon and
John Bodurtha
JUDGMENT
The appeals from the assessments of tax made under the
Income Tax Act for the 1995, 1996 and 1997 taxation
years are dismissed in accordance with the attached Reasons for
Judgment.
Signed at Ottawa, Canada, this 18th day of
September 2001.
J.T.C.C.
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