The four co-accused and their ten related companies, who had been charged with offences relating to large allegedly false input tax credit claims made over a period of over four years, alleged breaches of their ss. 7 and 8 Charter rights as a result of the intended use of the information gathered in the context of a civil audit, contrary to the Jarvis principle. The audit had commenced with a review of one registrant, whose history included disallowed ITCs, notations suggesting poor manual record keeping, and failure to provide requested records. The auditor (Ms. Power) extended the audit to related companies using the same bookkeeper, who told Ms. Power there were no electronic records, no corporate bank accounts and therefore no bank records to produce, there were no employees, and no customs documentation to support claims. By September of 2015, Ms. Power had eight related companies before her for various review periods. Ms. Power conducted site views of the business premises and interviews with the registrants on October 6 and 7, 2015. On November 10, in the process of concluding her audit work and passing the file to another auditor as she was going on leave, Ms. Powers for the first time suggested that the matter should be referred to the Criminal Investigation Division (“CID”). The referral was made, but the criminal investigation did not begin until June of 2016.
In dismissing the application (so that the evidence collected by Ms. Power was admissible), Gogan J stated (at paras. 83, 84, 87, 93):
… None of Power’s work can be characterized as de facto investigation. It was related to her work to try and verify the information in the credit returns.
In the end, she was unable to verify much and her audit opinion to disallow ITCs and adjust the returns accordingly rested mainly on the lack of supporting information. There is no question that the conduct of the registrants, their inability to provide support for the claims made in credit returns and the constantly evolving presentation of the various company operations triggered suspicion by the time interviews concluded. However, no further information was collected after that point in the audits.
...I also observe that it is a nuanced distinction to assess relevance as between a registrant being unable to support claims made (the audit conclusion and one potentially explained by poor record keeping) and a registrant making false or fraudulent statements to CRA (a criminal conclusion potentially explained by having no legitimate records). In this case, I am satisfied that any evidence obtained came as a result of Power’s audit inquiries. ...
… I find that the predominant purpose of the investigation did not turn to criminal or penal liability until after the completion of Power’s interviews with each of the accused. …
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