R. v. Barker, [1996] 2 CTC 190

Ryan J.A.: — The appellant, David Barker, was convicted on June 15, 1993 by Judge Govan in Provincial Court of one count of wilfully evading or attempting to evade compliance with the Income Tax Act by failing to declare taxable income in the amount of $154,300 for the taxation years 1985 to 1989 contrary to section 239(1 )(d) of the Income Tax Act of Canada.

Mr. Barker’s appeal to the Supreme Court was dismissed by Mr. Justice Singh on September 8, 1994.

All but one of the grounds of appeal relate to the lawfulness of searches of Mr. Barker’s home which took place on September 26 and October 1, 1991. The appellant also claims that the verdict cannot be supported by the evidence in light of the requirement that the Crown prove a deliberate purpose and ulterior motive to establish evasion.

The appeal to this Court is limited to questions of law alone.

Most of the evidence at trial was called on a voir dire held to determine the admissibility of statements made by the accused to officials of Revenue Canada and of documents removed from his home. The evidence on the voir dire revealed the following. The appellant is the owner of a number of sex shops scattered throughout the lower mainland. Mr. Barker failed to file income tax returns for the years 1985 to 1989.

On September 11, 1989 Revenue Canada sent the appellant letters, known as TX-11 ’s, indicating that they had not received tax returns for the years 1985 to 1987 and requesting that he forward the delinquent returns. Mr. Barker did not respond to these letters.

Eventually a compliance officer was assigned to Mr. Barker’s case. Contact was made and the officer, Mr. Burton, attended Mr. Barker’s residence to audit his records. It was determined by this time that in addition to the 1985 to 1987 returns, Mr. Barker had not filed returns for 1988 or 1989. After a number of audit sessions and meetings with Mr. Barker and his accountant, Revenue Canada prepared arbitrary assessments for the years 1985 through to 1989.

In mid-February Mr. Popat took charge of Mr. Barker’s file for Revenue Canada. He met with Mr. Barker and his accountant and once again examined the records. On April 9, 1991 Mr. Barker filed tax returns for 1985 to 1989. He claimed taxable income of about $154,000 for those four years.

On May 23, 1991 Mr. Popat contacted Mr. Barker to advise him that he wished to verify the figures reported in the returns. Mr. Barker asked that the audit take place at Revenue Canada because of the lack of room at his place of business. On June 4, 1991 Mr. Popat took ten boxes of records from the appellant’s home to the offices at Revenue Canada. After analyzing the pattern of sales Mr. Popat determined that sales invoices for 1988 were missing from the material supplied by Mr. Barker on June 4th. On September 21, 1991 Mr. Popat telephoned Mr. Barker to arrange a meeting and pick up the missing records. Mr. Barker informed Mr. Popat that he had two additional boxes of records and that Popat could have them. On October 1, 1991 Mr. Popat and another officer visited Mr. Barker’s home to tell him that he was under a criminal investigation. Mr. Barker was Chartered and given the usual warnings. Mr. Barker subsequently made several statements to the officers. I will refer to these statements later in these reasons. At the end of the meeting the Revenue Canada officers removed two additional boxes from Mr. Barker’s home. As I understand the evidence it was on the basis of these documents that the officials from Revenue Canada reached the conclusion that Mr. Baker had not declared the whole of his taxable income for the years in question.

Mr. Barker did not testify on the voir dire. Counsel for Mr. Barker took the position that the documents taken from his home on September 21 and October 1 had been obtained in a manner that infringed Mr. Barker’s section 8 privacy rights under the Charter. The trial judge found that no breach had occurred. He found that Mr. Barker had consented to the search. He said:

No attack is made on the constitutional validity of Section 231.1(1) or (2) of the Income Tax Act. That section provides that authorized departmental auditors and the like may enter any premises where the business records are kept to inspect, audit, or examine them. Whether the premise is a dwelling house, as here, the consent of the occupant is required. That consent had been obtained previously on September 26th in a telephone conversation between the accused and Mr. Popat. The consent continued during the visit of Mr. Popat and his supervisor on October 1.

The trial judge found that the statements taken were voluntary.

After the evidence called on the voir dire was admitted as evidence on the main trial the accused, Mr. Barker, elected to call no evidence.

The trial judge convicted Mr. Barker of wilfully evading compliance with the Income Tax Act by failing to file his income tax for the years 1985 to 1989. He did not convict Mr. Barker on the basis of undisclosed income. The sole issue at this point in the trial was the question of intention. In convicting Mr. Barker Judge Govan relied on the following facts:

1. Mr. Barker’s failure to file his 1985 to 1989 tax returns until April 9, 1991. This was only after demands by Revenue Canada and several meetings and audits.

2. Mr. Barker’s statement to the Revenue Canada officers as to how he kept the books of his business. From this statement the trial judge deduced that Mr. Barker was “daily reminded about payment of sales tax and bi-weekly reminded of his obligation to hold back and then pay income tax for his employees”.

3. The evidence disclosed that Mr. Barker had received 3 TX-11 forms for 1985, 86 and 87 — these are demands to file a return. He failed to file a return.

4. Mr. Barker told the Revenue Canada officials that he was not sure he had taxable income but he also told them he knew he was making money because his business was growing and his cash flow was good.

5. Mr. Barker told Revenue Canada officials that he had not filed because he “just kept on rolling and never got around to it.” Later he said that he did not know that he had to file income tax returns and did not pay any attention to it.

6. Mr. Barker had paid income tax in 1983.

The trial judge did not take into account the fact that Mr. Barker may have had income over and above the $154,300 he had declared.

The search issue in this case is likely resolved against the appellant by the finding of the trial judge that he consented to the search. It may also be decided against the appellant by the judgment of the Supreme Court of Canada in McKinley Transport Ltd. v. R. (1990), 55 C.C.C. (3d) 53. But we need not decide those questions. In the end it is clear that the trial judge did not rely on evidence found in the documents seized from Mr. Barker’s home in convicting him.

As to the ground of appeal dealing with the evidence it is clear too, from the evidence I have set out that there was evidence upon which the trial judge could reach the conclusion that there was wilful evasion in this case. It cannot be said that Mr. Justice Singh erred in failing to find that the verdict was unreasonable.

In my view, the appellant has raised no viable issues of law. I would grant leave to appeal but dismiss the appeal.

CUMMING J.A.: I agree.

WOOD J.A.: I agree.

CUMMING J.A.: Leave is granted but the appeal is dismissed.

Leave to appeal granted; appeal dismissed.