Bélanger,
Sr.,
O.C.J.:—The
accused
is
charged
with
wilful
evasion
of
federal
income
taxes
in
the
amount
of
$111,657.31
by
understating
his
income
in
his
returns
for
the
taxation
years
1984/
85/
86
and'87.
That
charge
is
contained
in
one
count
on
the
informations.
The
accused
is
also
charged
with
making
false
or
deceptive
statements
of
his
income
for
each
of
those
years
in
individual
counts.
The
Crown's
evidence
has
proceeded
on
the
basis
of
a
purported
increase
in
the
accused's
net
worth
during
the
overall
period
in
question.
Net
worth
statements
for
the
years
1983
to
1987
inclusively
were
prepared
by
Department
of
National
Revenue
officials
and
have
been
filed
as
Exhibit
21.
The
figures
from
those
statements
differ
slightly
from
the
amounts
alleged
in
the
informations
in
that
they
purport
to
illustrate
a
cumulative
under
reporting
of
income
of
$347,686.53,
and
the
evasion
of
taxes
in
the
amount
of
$109,534.56
instead
of
$353,090.33
and
$111,657.31
respectively.
The
accused
called
no
evidence
and
the
defence's
contention
is
that
the
accused
ought
to
be
acquitted
on
the
following
bases:
first,
that
the
opening
net
worth
has
not
been
satisfactorily
proved;
second,
that
the
jewelry
evaluated
at
$5,290.38
has
not
been
proven
as
belonging
to
the
accused;
third,
that
a
loan
of
$51,608
to
Yehia
Akl
and
shown
as
an
asset
has
not
been
proven;
fourth,
that
although
the
amounts
are
insignificant
in
relation
to
the
total,
that
at
least
four
bank
accounts
shown
in
the
business
assets
statement
included
in
Exhibit
21
are
similarly
not
sufficiently
proven;
fifth,
that
a
deposit
in
the
amount
of
$35,000
also
occasionally
referred
to
as
$35,008
and
also
known
as
the
Carson
Unsworth
deposit
is
insufficiently
proven;
sixth,
that
the
sum
of
$124,970
shown
as
cash
on
hand
in
the
net
worth
statement
of
1987
could
not
be
attributed
to
the
accused;
seventh,
and
finally,
that
the
sum
shown
to
have
existed
in
the
National
Bank
account
20981-97
and
appearing
on
Exhibit
17-A
is
not
income
and,
hence,
ought
not
be
included
in
the
calculation.
I
have
reviewed,
as
best
I
can,
all
of
the
evidence
before
the
court
and
counsel's
submissions.
I
am
not
satisfied
that
the
opening
personal
net
worth
has
been
satisfactorily
proved.
I
agree
with
Judge
Delisle,
as
he
then
was,
in
The
Queen
v.
Lowe,
26
C.C.C.
(2d)
346,
that
the
prosecution
cannot
establish
a
negative
in
a
vacuum
and
that
there
is
no
evidence
before
the
court
that
the
prosecution
failed
to
investigate
leads
furnished
by
the
taxpayer,
a
practice
mandated
by
the
United
States
Supreme
Court
in
the
leading
case
in
this
area,
Holland
v.
U.S.A.,
348
U.S.
121
(1954),
a
case
which
has
been
referred
to
and
adopted
in
a
number
of
Canadian
cases.
However,
in
my
view,
the
prosecution
has
an
obligation
to
put
before
the
court
sufficient
evidence
to
show
that
there
was
an
investigation
of
"all
known
possible
avenues
that
might
yield
information
with
respect
to
other
assets
owned
by
the
accused”,
to
use
Judge
Delisle's
words
in
Lowe,
supra.
In
The
Queen
v.
Ada
Jane
McCallum,
April
19,
1983
(unreported),
a
case
provided
by
counsel
to
show
that
the
net
worth
method
is
valid,
the
provincial
magistrate,
which
court
and
which
magistrate
remains
unclear,
stated
at
page
four:
From
the
Tax-Roll
Section
of
Revenue
Canada,
Harris
obtained
Exhibits
3-8
inclusive
and
Exhibit
9,
which
I
already
referred
to.
His
investigation
also
included
visits
to
various
banks
in
the
area
to
gain
information
pertaining
to
bank
loans,
bank
accounts
et
cetera
in
the
defendant's
name;
attendance
at
the
Registry
of
Deeds
to
search
for
documents
which
would
disclose
the
purchase
and/or
sale
of
real
property
by
her
or
by
companies
in
which
she
was
a
shareholder;
and
to
search
for
Bills
of
Sale
in
her
name
which
might
contain
information
showing
loans
made
to
her
on
personal
property
or
personal
property
sold
by
her.
The
Registry
of
Motor
Vehicles
and
car
dealerships
were
canvassed
for
information
concerning
motor
vehicles
owned
by
her.
He
also
met
with
the
defendant
and
her
solicitor
Mr.
Palmeter
on
several
occasions
and
received
from
Mr.
Palmeter
the
defendant's
trust
account
records.
At
page
21
of
the
Holland
decision,
Mr.
Justice
Clark
says
under
the
caption
Establishing
a
Definite
Opening
Net
Worth:
We
agree
with
petitioner
that
an
essential
condition
in
cases
of
this
type
is
the
establishment,
with
reasonable
certainty,
of
an
opening
net
worth,
to
serve
as
a
starting
point
from
which
to
calculate
future
increases
in
the
taxpayer's
assets.
The
importance
of
accuracy
in
this
figure
is
immediately
apparent,
as
the
correctness
of
the
result
depends
entirely
upon
the
inclusion
in
this
sum
of
all
assets
on
hand
at
the
outset.
There
is
no
evidence
of
this
quality
before
this
Court.
We
have
not
heard
from
the
original
investigator
who
was
replaced
by
Mrs.
Charbonneau
in
1989.
Essentially,
all
I
have
to
assist
me
in
determining
the
accuracy
of
the
net
worth
figures
in
any
of
the
years
in
question,
and
particularly
in
1987,
is
her
statement
that
she
examined
the
income
tax
returns,
the
bank
statements
and
the
accountant's
working
papers.
Her
evidence
in
this
respect
is
found
in
volume
four
of
the
transcript
at
the
following
pages
and
lines.
I
refer
specifically
to
the
following
exchanges,
and
I
wish
to
read
them
into
the
record.
Page
4,
lines
9
to
22:
Question:
And
that
you
took
over
this
particular
file
in
November
of
1989.
Answer:
Yes,
I
did.
Question:
From
someone
else.
Answer:
A
previous
investigator,
yes.
Question:
And
that
in
the
course
of
functioning
as
the
investigator
on
this
file,
you
served
bank
requirements
on
various
banks.
Answer:
I
did.
Question:
And
you
contacted
various
individuals
in
our
—
in
the
parlance
known
as
third
parties.
Answer:
Yes,
I
did.
Question:
With
regard
to
the
purchase
of
assets
by
the
taxpayer.
Answer:
Yes.
Page
5,
lines
17
to
26:
Question
by
Mr.
Leclair:
What
are
the
sources
of
the
information
that
you
have
used
in
compiling
this
net
worth
statement?
Answer:
They
are
mostly
from
banks
—
from
serving
the
bank
requirements,
we
obtain
that
information.
Question:
Yes?
Answer:
Through
third
parties.
Question:
Yes?
Answer:
And
—
well,
one
of
them
being
Mr.
Baassiri,
the
taxpayer's
accountant.
Rage
19,
lines
19
to
31,
and
page
20,
lines
1
to
15,
Mr.
Jensen
in
cross-
examination:
This
approach
that
you’ve
taken
required
a
number
of
assumptions,
correct?
The
net
worth?
Answer:
What
do
you
mean
by
"assumptions"?
Question:
Well,
the
first
assumption
that
it
requires
is
that
in
1983,
he
was
worth
$6,001.
Answer:
Through
information
we
have,
either
from
him
or
from
third
parties;
that
is
what
he
was
worth,
yes.
Question:
I'm
not
asking
you
that,
okay?
My
question
is
these
calculations
proceed
on
the
assumption
that
in
1983,
he
was
worth
$6,001,
correct?
Answer:
That's
my
belief,
that
he
was
worth
$6,001
in
1983,
yes.
.
.
Question:
That's
not
my
question.
THE
COURT:
Well,
it's.
THE
WITNESS:
But
that’s
my
answer.
THE
COURT:
That's
the
answer.
THE
WITNESS:
Right.
MR.
JENSEN:
Question:
But
your
calculations
go
from
there.
Answer:
But
the
personal
net
worth
is
the
total
of
his
personal
assets
less
personal
liabilities.
I
put
in
the
total
personal
assets
that
we
had
and
personal
liabilities
that
we
had,
through
him
or
through
third
parties.
Question:
Your
calculations
proceed
from
6,001
being
accurate,
correct?
Answer:
Right.
And
then
at
page
43,
lines
4
to
14,
Mr.
Leclair
in
re-examination:
Question:
Were
you
aware.
.
.?
Answer:
No,
I’m
not
aware
of
any
other
accounts.
Question:
And
how
did
you
become
aware
of
these?
Answer:
Through
bank
requirements
and
through—first
of
all,
through
the
tax
returns—when
there's
interest
earned
on
different
bank
accounts,
you
receive
a
T-5
which
you're
supposed
to
include
in
the
T-1
return
as
interest
income,
and
that's
where
I
got
the
first
information
that
he
had
bank
accounts
at
several
bank
locations,
and
that’s
how
we
obtained
the
information
—
and
through
questioning
the
taxpayer,
also.
Page
44
and
45,
line
24:
Question:
And
I
just
want
to
confirm,
because
I
think
it
was
raised
in
cross-
examination,
that
the
assets
for
the
base
year,
1983,
both
personal
assets
and
business
assets
—
what
is
the
source
of
the
information
that
you"ve
used
as
the
base
of
your
calculations?
Answer:
Again,
through
third-party
banks
and
other
third
parties,
or
through
conversations
with
the
taxpayer
and
through
the
T-1
also
—
the
T-1—the
tax
return.
Question:
And
the
working
document.
Answer:
Right.
There
is
no
evidence
before
the
court
of
any
conversation
between
the
accused
and
the
Department
of
National
Revenue
investigators.
Any
such
statement
has
been
excluded
as
a
result
of
a
voir
dire.
Mrs.
Charbonneau's
opening
net
worth
figures
are
based
exclusively
on
material,
it
would
seem,
gathered
by
others—or
nearly
exclusively.
I
have
not
the
slightest
evidence
of
the
extent,
quality,
exhaustiveness
of
any
investigation
done
by
her
predecessor
or
other
employees
of
the
Ministry
of
National
Revenue.
In
those
circumstances,
at
least
in
respect
of
the
accused's
personal
net
worth,
it
is
impossible
for
me
to
find
that
it
has
been
established
with
reasonable
certainty.
The
situation
may
very
well
be
different
in
respect
of
business
assets
because
we
do
have
working
papers
and
income
tax
returns,
but
I
will
be
seeking
further
submissions
from
counsel
on
that
point,
particularly
in
view
of
the
further
findings
I
will
now
make.
Secondly,
I
fully
agree
that
the
evidence
attributing
to
the
accused
the
jewelry
seized
on
November
24,
1985,
is
too
weak
to
meet
the
standards
imposed
upon
the
Crown
in
these
courts.
I
do
not
propose
to
elaborate
upon
that
because
that
seems
obvious
to
me.
I
also
fully
agree
with
Mr.
Jensen
that
there
is
no
proof
of
a
loan
to
Yehia
Akl
in
the
amount
mentioned
in
the
net
worth
statement.
Similarly,
although
not
much
depends
on
it,
the
bank
accounts
mentioned
previously
have
not,
in
my
view,
been
shown
to
be
business
assets.
Five,
I
am
of
the
opinion,
however,
that
it
is
immaterial
that
the
sum
of
$35,000
is
labelled
"Carson
Unsworth's
deposit”
without
actual
proof
being
available
as
to
the
accuracy
of
that
caption.
The
fact
remains
that
however
unexplained
that
sum—indeed,
it
should
be
$35,008—nevertheless,
it
appears
as
a
debit
in
account
20981-97,
that
is
Exhibit
17-B,
and
should
properly
appear
as
an
asset
in
the
net
worth
calculation.
Six,
I
agree
with
Mr.
Jensen
that
the
sum
of
$124,970
cannot
be
attributed
to
the
accused.
Any
evidence
tending
to
link
the
accused
with
those
funds
has
a
speculative
quality,
in
my
opinion.
The
only
evidence
before
me
is
that
it
was
found
in
a
house
in
which
the
accused
and
many
others
resided.
The
other
extremely
circumstantial
evidence
tending
to
link
the
accused
with
these
funds
is
not
sufficient,
in
my
view,
again,
to
amount
to
proof
which
meets
the
standards
required
of
the
Crown
in
these
courts.
Seven,
as
to
the
funds
in
account
20981-97,
the
uncontradicted
evidence
elicited
by
Mr.
Jensen
in
his
cross-examination
of
Yehia
Akl
clearly
establishes
an
illegal
misappropriation
by
the
accused.
That
is
not
speculation
and
it
is
the
only
evidence
before
the
Court.
After
careful
reconsideration,
I
am
now
of
the
view
that
I
am
bound
by
the
reasoning
of
the
Court
of
Appeal
in
The
Queen
v.
Poynton,
[1972]
9
C.C.C.
(2d)
32,
and
that
the
amount
misappropriated
must
be
included
in
the
computation
of
income.
Now,
consequences
flow
from
these
findings,
and
I
am
prepared
to
receive
further
submissions
from
counsel
in
consequence.
What
is
the
effect
of
my
ruling
on
the
opening
net
worth?
Does
it
affect
the
entirety
of
the
personal
net
worth
evaluation
for
all
of
the
taxation
years?
In
what
manner,
in
light
of
my
other
findings,
and
particularly
in
light
of
the
effect
of
Poynton,
ought
the
Federal
tax
evaded
figures
to
be
re-calculated?
I
invite
counsel's
further
representations
on
these
points.
Order
accordingly.
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