William Arthur Branch v. Her Majesty the Queen, [1976] CTC 193

Medhurst, JDC:—This is an appeal by trial de novo from a conviction bearing date of June 17, 1975, made by His Honour Judge L A Justason on a charge against the appellant under paragraph 239(1)(d) of the Income Tax Act which reads as follows:

That William Arthur Branch of Calgary, Alberta between the 30th day of June, AD 1969 and the 1st day of May, AD 1974, did unlawfully and wilfully evade the payment of taxes imposed by the Income Tax Act, RSC 1952, Chapter 148, and amendments thereto, with respect to income received by him during his 1970, 1971, 1972 and 1973 taxation years in the approximate amount of $113,417.88 and did thereby commit an offence contrary to Section 239(1)(d) of the Income Tax Act.

The penalty imposed was a fine of $10,000 or in default one year in gaol. The Crown has appealed this sentence.

Counsel for the Crown and counsel for the accused agreed at the trial de novo on the following statement of facts:

1. That the prosecution of the accused under the Income Tax Act was properly authorized by the Minister of National Revenue.

2. That the accused did properly file income tax returns for the taxation years of 1968 and 1969 and did pay the approximate amount of $7,000 or $8,000 for each such tax year.

3. That the accused did earn net income in the taxation years 1970 to 1973 inclusive in the following amounts:

4, That the federal tax payable on the foregoing sum of $113,417.88 after personal exemptions and standard deductions was $27,835.32.

5. That Dr William Arthur Branch is the accused and ne did practise dentistry in the City of Calgary in the Province of Alberta in the years in question and that his tax year commences on July 1 and ends on June 30 in each year.

6. No income tax returns were filed by the accused for the years 1970, 1971, 1972 and 1973.

7. No payments have been made to the Department of National Revenue by the accused for income tax on income earned during the years in question.

8. That at least three demands were served on the accused between 1971 and 1973 requiring him to file income tax returns.

9. That the accused was convicted on March 17, 1972 and March 7, 1973 and March 6, 1974 for failing to file an income tax return for the year 1970.

It also appeared from the evidence submitted that Dr Branch kept his own records and books of accounts although he did have some pari-time. help. At the end of May 1974 the Department of National Revenue inspectors took possession of Dr Branch’s records which consisted of approximately 8,000 receipts, a full set of bank statements, as well as cancelled cheques and vouchers.

The accused gave evidence to the effect that he filed his tax returns for 1968 and 1969 but in 1970 he encountered marital problems. His first marriage broke up and a subsequent remarriage also ended after a short period. The accused stated he was washed up emotionally and the burden became too much. He was ashamed to consult an accountant. This is the explanation given by the accused for his failure to comply with the numerous demands made on him to file a tax return.

Counsel for the appellant and for the Crown have referred me to recent reported decisions respecting prosecutions under this section of the Income Tax Act:

In Regina v Baker, 45 DLR (3d) 247, Nova Scotia County Court Judge McLellan upheld a Provincial Court decision which reviewed the definitions of the word “evasion”. At page 251 he had this to say:

The learned Provincial Magistrate in a reserved reasoned decision considered several dictionary definitions of the word “evade” and then continued:

“These definitions seem to be divisible into ‘avoid’ or its synonyms and ‘avoid by strategy or craft’ and similar phrases. Parliament has used the word ‘avoidance’, however, in s 246(6) of the Income Tax Act, in such a way that it makes it clear that not all avoidance of taxes is contrary to s 239(1 )(d). It seems obvious, then, that Parliament did not intend the word ‘evasion’ in s 239(1 )(d) to mean simple avoidance, and, therefore, ! think that the other meaning given by the dictionaries in explanation of ‘evade’—to avoid by craft, artifice or strategy—is the meaning of the word ‘evade’ as used in s 239(1)(d).

1 am supported in this view by the definition of ‘evasion’ in Black’s Law Dictionary—‘artifice or cunning is implicit In the term as applied to contest between citizen and government over taxation’.

Î come to the same decision if I take the view that, as there is more than one choice of meaning for the word ‘evade’, I must, in a penal section of a taxation statute, use the meaning most favourable to the accused. In this case, it would be the meaning of ‘avoiding by artifice, craft, or strategy’.

I, therefore, come to the view that contained within the word ‘evade’ is an element of artifice, craft or strategy.”

in Thistle v Her Majesty the Queen, [1974] CTC 798, Judge Gross- berg of the County Court of Ontario on similar facts found that the accused was guilty of the charge and on page 799 he stated:

I find on the totality of the evidence that the deliberate failure to file returns and to pay income taxes on the part of the accused was a cunning scheme and was conceived in evil and intended deceit, and in trickery, and in subterfuge.

He found that the evasion consisted of the accused deliberately planning his failure to file returns to refrain from and avoid paying income taxes.

lt is noted that paragraph 239(1 )(d) of the Income Tax Act actually creates iwo offences. The first is wilfully, in any manner, evading or attempting to evade compliance with the Act. The second offence is wilfully, in any manner, evading or attempting to evade payment of taxes imposed by the Act.

Many decisions have been given on the interpretation to be placed on words used in a statute and it is an accepted principle that such words shall be given the meaning ordinarily attached to them.

The accused has been charged with wilfully evading payment of taxes imposed by the Income Tax Act. This is an offence punishable on summary conviction and mens rea is an essential element. Furthermore counsel for the Crown readily conceded that the offence must be proven beyond a reasonable doubt. It was submitted on behalf of the Crown that the circumstances of the failure to file the tax returns as required and the failure to. pay any tax constitute an evasion of obliaations as contemplated by the Act.

In Maxwell on Interpretation of Statutes, 11th edition at page 108 the following statement is made:

Everybody agrees that the word [evade] is capable of being used in two senses: one which suggests underhand dealing, and another which means nothing more than the intentional avoidance of something disagreeable.

In my opinion the word evade implies something of an underhanded or deceitful nature. In other words a deliberate attempt to escape the requirement of paying tax on income that had been earnd. This intention can be inferred from acts of omission or commission. Certainly failure to file tax returns and to pay taxes for four successive years might suggest an attempt to evade in some way the payment of taxes.

However in the case of the accused we have other factors to consider. There is no suggestion that there was anything secretive about his default. He was convicted in 1972, 1973 and 1974 of failing to file tax returns. He had received numerous demands to file returns and he knew that he was under surveillance. It also appears that the records were intact when finally taken over by the tax department for examination. The explanation given by the accused is that during this period he was having persona! problems and was emotionally washed up.

On a consideration of a!l the curcumstances I am unable to conciude that the accused has wilfully evaded payment of income tax. I find the accused not guilty of the charge and allow the appea! against conviction.