R. v. Jarvis, [1998] 3 CTC 252, 98 DTC 6308

Lutz J.:

The Crown appeals three rulings by the trial judge whereby he excluded, under s. 24(2) of the Charter, some of the evidence the Crown sought to adduce because of violations of the Respondent’s ss 7 and 8 rights. Consequently, the Respondent was successful in his application for a directed verdict of acquittal because there was no evidentiary foundation remaining for the Crown to proceed.

Facts and History of Proceedings

The Respondent was charged with a number of offences contrary to s. 239(1) of the Income Tax Act, R.S.C. 1985, c. [1] (5th Supp.) [Hereinafter called the ITA]. The facts necessary for the trial judge’s rulings are set out in his reasons dated February 25, 1997 and June 9, 1997. A very brief summary of those facts will suffice for the purposes of these reasons.

Revenue Canada’s Chief of Audit received an anonymous letter, alleging that the Respondent failed to report income on sales of his late wife’s artwork. The letter also indicated a number of galleries that were purportedly selling the artwork. Ms. Goy-Edwards of the audit department of Revenue Canada followed up the lead. In doing so, she contacted the galleries as well as the Respondent and his accountant who compiled his tax returns. Eventually on March 16, a meeting was arranged for April 11, 1994, between the Respondent and Ms. Goy-Edwards, who was accompanied by a Mr. Moriarty, her supervisor. During this meeting, the Respondent provided documents and answered questions respecting the sale of the artwork. Ms. Goy-Edwards secured some banking information on April 29, 1994, that had been authorized by the Respondent during the April 11 meeting. On May 4, 1994, the Respondent’s file was referred to Special Investigations where a Ms. Chang assumed control of the file. On May 6, the Respon dent’s son delivered additional banking documentation. On November 23, 1994, Ms. Chang swore an information in support of an application to obtain a search warrant. Between May and November, there was limited contact between the Respondent, his accountant, and Revenue Canada; however the Appellant at no time disclosed to the Respondent that the nature of the inquiry had changed.

The Decision Below

The trial judge found at 308 of his reasons, (1997), 48 Alta. L.R. (3d) 298 (Alta. Prov. Ct.), that prior to the April 11 meeting, Ms. Goy-Edwards had the following information:

(1) ... that the cost of sales was 29.9 percent because in March she had received the relevant information from the gallery that framed the artwork;

(2) she knew what had been reported on the filed tax returns for 1990 and 1991]:

(3) she had information regarding the sales of Jarvis artwork from the galleries which were listed in the informant’s lead.

After a thorough review of the facts before him, examination of internal Revenue Canada policy dealing with the handling of informants’ leads, and assessing the credibility of witnesses, the trial judge found that the appellant was in fact “conducting an investigation and not a compliance audit” under the ITA as of April 11. The trial judge conducted a careful analysis before reaching this finding, as outlined in his reasons; this finding of fact is not unreasonable and I see no basis upon which to disturb it.

The jurisprudence relied on by the trial judge indicated that this finding required greater safeguards in terms of the Respondent’s rights against selfincrimination because the possibility of imprisonment requires higher standards than those required in a merely regulatory context. The trial judge made no overriding or palpable error in his application of the law in this regard and so it does not merit further consideration.

Section 7 Violation

In the next stage of his analysis, the trial judge found at 322 that the Respondent was “labouring under two forms of misapprehensions.” First, that “he did not know that he had the right to silence resulting from being under investigation (as opposed to being audited);” and second, that “he thought he had a legal duty to provide information to Revenue Canada because of the operation of section 231.1(1) of the Income Tax Act.”

In a purely regulatory context, the Respondent would be required to furnish Revenue Canada with the information they requested. However, once the character of the inquiry changed from audit to investigation, the Respondent no longer had any obligation to provide information that could later be used against him by Revenue Canada in prosecuting him under the tax evasion provisions of the ITA. The trial judge was aware that while generally there is no duty to caution the Respondent of his right to remain silent, the unusual circumstances presented in this case required some sort of positive action on behalf of Revenue Canada to alert the Respondent to the fact that he was no longer merely being audited but he is now under investigation for tax evasion. The trial judge’s conclusion at 324 that “[w]here a taxpayer has been led by the authorities to believe that a statutory requirement to answer questions continues to apply to that taxpayer when it does not, then the authorities have an obligation to inform the taxpayer that the obligation no longer applies” is reasonable in light of the unique circumstances in this case. Furthermore, the Appellant has not presented any persuasive authority to challenge this position.

In summary, the failure of Revenue Canada to “caution” the Respondent in some manner as to the change in circumstances violated his right to remain silent, also known as the privilege against self-incrimination, as protected by s. 7 of the Charter. See British Columbia (Securities Commission) v. Branch, [1995] 2 S.C.R. 3 (S.C.C.) and R. v. S. (R.J.), [1995] 1 S.C.R. 451 (S.C.C.).

There are two types of evidence that comprise the privilege against selfincrimination. There is actual testimony given by the Respondent — this is called “use immunity” — and there is evidence that is discovered or obtained as a result of the actual testimony. This is referred to as “derivative use immunity.” The remedy for the violation of the Respondent’s right to remain silent is the exclusion of the actual testimony given by him; that is, use immunity. However, in the instant case, the more pressing concern is the evidence that is derived from the testimony and cooperation, such as the banking documents and sales books, inter alia. This issue was addressed by lacobucci J. in S. (R.J.), supra, where he held that the infringement of the right to remain silent can be remedied by the inability to use evidence derived from such testimony in subsequent proceedings. This rule is not absolute. If the evidence could have been discovered in any event, it is unlikely to enjoy exclusion under s. 24(2) of the Charter.

The following comments by lacobucci J. at 561 in the context of compelled testimony are apposite in the present situation:

Since it is the principle against self-incrimination which is at stake, and since that principle finds recognition under s. 24(2) as I have described, we should avoid the incongruity which would result if a different quality of protection was offered to the witness who is compelled to answer questions. The Charter should be construed as a coherent system: Herbert, supra. Accordingly, I think that derivative evidence which could not have been obtained, or the significance of which could not have been appreciated, but for the testimony of a witness, ought to generally be excluded under s. 7 of the Charter in the interests of trial fairness. Such evidence, although not created by the accused and thus not self-in- criminatory by definition is self-incriminatory nonetheless because the evidence could not have otherwise become part of the Crown’s case. [Emphasis in original.]

Some evidence obtained in the case at bar, according to the trial judge’s finding, existed independently of the breach and was to a great extent already in the possession of the Appellant. For this reason, exclusion is not appropriate for the real evidence other than actual evidence by the Respondent which was previously excluded by the trial judge.

Section 8 Violation

The trial judge’s finding that the Respondent’s s. 8 rights were infringed follows from his previous finding that there was a s. 7 violation. As part of the investigation, on November 23, 1994, Revenue Canada applied for and was granted three search warrants. Information disclosed by the Respondent in violation of s. 7 of the Charter as well as some inadvertently erroneous information supplied by the Appellant, together being the tainted information, constituted the basis for the warrants. Through these warrants, the Appellant obtained evidence from the residences of the Respondent, his accountant, and information held by the offices of Revenue Canada.

Upon review, the trial judge found that when the tainted portions of the information were excised from the information to obtain the search warrants, what remained was insufficient to justify the granting of the warrant. The trial judge therefore concluded that the searches were warrantless and, accordingly, prima facie unreasonable. The Crown did not rebut this presumption, the trial judge found this unreasonable search violated the Respondent’s s. 8 rights and excluded the evidence under s. 24(2) in accordance with the three-step analysis enunciated in R. v. Collins (1987), 33 C.C.C. (3d) 1 (S.C.C.)

The trial judge, when determining whether sufficient evidence existed for the issuing judge to issue a search warrant, is the reviewing judge whose role was described by Sopinka J. in R. v. Garofoli (1990), 60 C.C.C. (3d) 161 (S.C.C.) at 187:

The correct approach is set out in the reasons of Martin J.A. in this appeal. He states (at page 119):

If the trial judge concludes that, on the material before the authorizing judge, there was no basis upon which he could be satisfied that the pre-conditions for the granting of the authorization exist, then, it seems to me that the trial judge is required to find that the search or seizure contravened s. 8 of the Charter.

The reviewing judge does not substitute his or her view for that of the authorizing judge. If, based on the record which was before the authorizing judge as amplified on the review, the reviewing judge concludes that the authorizing judge could have granted the authorization, then he or she should not interfere. In this process, the existence of fraud, non-disclosure, misleading evidence and new evidence are all relevant, but, rather than being a prerequisite to review, their sole impact is to determine whether there continues to be any basis for the decision of the authorizing judge.

Unfortunately, it is not clear how new evidence — that is, evidence that was not before the issuing judge — is to be treated. The British Columbia Court of Appeal in R. v. Troncoso (1994), 48 B.C.A.C. 271 (B.C. C.A.) has interpreted the foregoing passage to mean that new evidence not known to the issuing judge that comes out during the review process is capable of supporting a warrant upon review.

Conversely, Harradence J.A. in R. v. Carrier (1996), 181 A.R. 284 (Alta. C.A.) in dissenting reasons, was of the view that only information that was contained within the “four walls” of the initial warrant application can be the basis of the determination. His view is that any new evidence is capable of “destroy[ing] the basis for its [the warrant’s] existence, but cannot be used to prop up a warrant that was deficient in the first instance.” The majority in Carrier declined to deal with this issue as it was not necessary to the final outcome of that case. While Harradence J.A.’s statement does not run headlong into a view voiced by the majority, it is obiter from a dissenting judge. Neither the obiter in Carrier nor the position adopted in Troncoso is binding on this court, but upon review of the rationale for both approaches as included in the trial judge’s reasons, I prefer the reasoning adopted by the court in Troncoso. I am mindful of the fact that Harradence J.A.’s views have been adopted by judges in this province in the cases of R. v. Lyding (November 24, 1997), Doc. Calgary 70542733P10101-0104 (Alta. Prov. Ct.) And R. v. Larson (1996), 194 A.R. 161 (Alta. Prov. Ct.). And I say that with great respect to the learned trial judge, but I believe that as a matter of policy, the court should adopt the law as enunciated in Troncoso, supra.

The following passage at 285 of McEachern C.J.’s speaking for the court in Troncoso, supra, captures the essence of the principle at issue:

Counsel for the appellants argue that the above passage means that cross-examination can only weaken the force of the affidavit evidence, but it cannot strengthen it. With respect, I doubt the correctness of that view. First, Sopinka J. referred to the record ‘as amplified on the review,’ making no distinction between ‘amplifying’ evidence that helps the defence case and that which hurts it. Second, if appellants’ counsel have stated the correct view, there would be no down-side to cross-examination and counsel may fish, at least until the patience of the trial judge is exhausted, without risk of an unfortunate answer or unfavourable evidence. This would be contrary to all the principles of a balanced adversarial trial process: T.A. Mauet, Fundamentals of Trial Techniques (3rd Ed. Boston: Little, Brown, 1992) at page 216; E. Crowther, Advocacy for the Advocate (2nd Ed. London: Longman, 1990), at pages 95 to 96; J.A. Olah, The Art and Science of Advocacy (Toronto: Carswell, 1990), at page 12 to 40.

With respect, I am not satisfied that either Sopinka J., or Watt J., had in mind the narrow question I am considering, where sparse evidence is enhanced on cross-examination. Sopinka J., says that the ‘sole impact’ of fraud, et cetera, is to determine whether there continues to be any basis for an authorization. This relates, in my view, to the consequences of successful cross-examination, not to the use to be made of the evidence given on a review generally. Sopinka J., does not say that the evidence given on the review cannot be considered in deciding whether the deponent had the requisite state of mind for an authorization.

The legal issue on the review may be stated in two ways. First, could the authorizing judge be satisfied that a basis existed for the authorization? I have already concluded that the sparse admissible evidence in the P. 442 affidavit was sufficient. If that evidence was not sufficient, the alternative question was whether that evidence, amplified by the further evidence given on the review could be used by the reviewing judge to satisfy him that Corporal Rioux did in fact have reasonable and probable grounds to believe the target persons or any of them were engaged in a stated offence. Corporal Rioux’s knowledge and state of mind were ultimately important. Probative evidence on that issue, whether from his affidavit or from his testimony, must surely form a part of the total circumstances to be considered. [Emphasis added]

It is apparent from the foregoing passage that it is the deponent’s state of mind that is critical to the determination if there existed reasonable and probable grounds at the time the warrant was issued. The considering of new evidence upon review that was in the mind of the Appellant when the information was sworn corrects a procedural as opposed to a substantive error in the warrant. In my view, McEachern C.J.’s reasoning regarding the fairness of the trial, which includes taking the good evidence along with the bad and considering the totality of circumstances, is the proper interpretation of Sopinka J.’s comments in Garofoli, supra. Accordingly, when the trial judge adopted Harradence J.A.’s reasoning, he erred in law. On at least two occasions in his reasons, the trial judge states that the Appellant had sufficient grounds as of March 16, 1994, to justify the issuance of the search warrant. This finding is enough to satisfy me that the search warrant would have issued absent the tainted information. For this reason, the search was conducted pursuant to a valid warrant which causes no s. 8 breach to occur.

Section 24(2)

In light of this finding, it is unnecessary to determine if the evidence should be excluded under s. 24(2). Nevertheless, I am of the view that the application of the law as articulated in R. v. Collins, [1987] 3 W.W.R. 699 (S.C.C.), and as expanded upon by R. v. Stillman (1997), 144 D.L.R. (4th) 193 (S.C.C.) and R. v. Belnavis (1997), 216 N.R. 161 (S.C.C.) to the facts as found by the trial judge reveals that he has not made “some apparent error as to the applicable principles or rules of law” or has “made an unreasonable finding” which is the standard of review on a s. 24(2) matter, see Stillman. Neither party contests the fact that the evidence at issue is real evidence and otherwise discoverable which precludes it from being excluded under the first branch of the Collins test. However, when considering the second and third branches of s. 24(2) analysis dealing with the seriousness of the breach and long-term effect on the administration of justice, the trial judge considered all of the relevant circumstances and there is no indication that he placed undue weight on any one in particular.

The Bank Statements

The Appellant obtained banking information directly from banks pursuant to s. 231.1 of the ITA and also as a result of the Respondent’s request to the banks to supply Revenue Canada with the information. These bank statements obtained by the appellant which are the subject of the ruling dated June 9, 1997, were obtained at a time when the Respondent was under investigation for tax evasion which potentially carries a term of imprisonment. The analysis conducted by the trial judge in determining that the Respondent’s s. 7 rights were violated applies to this situation with equal force. I agree with his findings that under the investigation circumstances, the bank statements could not be obtained without a properly issued search warrant. The additional cases of Del Zotto v. Canada (1997), 116 C.C.C.

(3d) 123 (Fed. C.A.), R. v. Soviak (1997), 5 G.T.C. 7131 (Ont. Prov. Div.), Le Comte v, British Columbia (1990), 1 C.R.R. (2d) D-1 (B.C. S.C.) and Massicotte v. British Columbia (1995), 31 C.R.R. (2d) 77 (B.C. S.C.) cited by the trial judge in this context leave little room for doubt that the expectation of privacy as it pertains to banking records invokes the necessity by the Appellant to obtain a search warrant once an investigation under the ITA is under way. Since no search warrant was issued, the warrantless search amounts to a prima facie unreasonable search under s. 8 of the Charter.

In the same way that the trial judge’s application of the three factors in Collins, supra, for exclusion under s. 24(2) was correct when he considered the alleged breaches under ss 7 and 8 as it pertained to the evidence obtained by search warrant, he also correctly applied that law to the exclusion of the bank records. Consequently, these documents were properly excluded from trial. Since the ruling regarding section 29 of the Canada Evidence Act was predicated upon the previous June 9, 1997, ruling, I can see no apparent error in law nor unreasonable finding of fact. Accordingly, that ruling is upheld.

Disposition of Appeal

This appeal falls within the scope of s. 686(4), which reads:

(4) Appeal from acquittal - where an appeal is from an acquittal, the Court of Appeal may,

(a) dismiss the appeal; or

(b) allow the appeal, set aside the verdict and

(i) order a new trial, or

(ii) except where the verdict is that of a court composed of a judge and jury, enter a verdict of guilty with respect to the offence of which, in its opinion, the accused should have been found guilty but for the error in law, and pass a sentence that is warranted in law, or remit the matter to the trial court and direct the trial court to impose a sentence that is warranted in law.

Since there was insufficient evidence presented at trial because of the exclusion pursuant to s. 24(2) of the Charter, I have no alternative but to order a new trial. For this reason, it is inappropriate at this time to consider the Respondent’s additional submissions in respect of the insufficiency of the charges.

In the result, the appeal is allowed, the acquittal is set aside, and the matter remitted to the Provincial Court for a new trial before a judge other than the subject Provincial Court Judge herein.

Any other submissions counsel want to make?

MR. PETCH: No, not on my behalf.

MR. MACLEOD: No, My Lord.

THE COURT: Thank you.

Appeal allowed; new trial ordered.