His Majesty the King v. Leo Frank, [1945] CTC 11

CAMPBELL, C.J.—The respondent was convicted before Stipendiary Magistrate Martin on a charge of making a false statement in delivering an income tax return (1942, T-1, General). The sentence imposed was $65 and costs, and the object of the Crown’s appeal is to increase the penalty.

In pleading, the respondent admits making an inaccurate statement, but denies fraudulence or intended falsity, thus substantially cross-appealing.

The alleged false statement is contained in a "‘statement'' attached to Item 22 of the return, in which the respondent specifies an expenditure in the year 1942 of $655.18 for auto repairs (of which ⅔ is claimed as a deduction for taxation purposes). The said expenditure is certified by a general letter from Martin ‘s Garage, but is not itemized either in the statement or in the letter.

On being pressed for items and vouchers, the respondent later admitted to the Tax authorities that an item of $297.00 had not been incurred in 1942, though he claimed that at the time of the return he thought it belonged in that year. He subsequently, however, produced from Martin’s Garage detailed vouchers, totalling $585.10, although they did not include the $297.00 item. These vouchers were compiled largely from the memory of the respondent and the garage people, but instead of being frankly stated as such they were inscribed in carbon on carbon duplicates of saleslips, many of which had previously been used for accounts of the proprietor himself, and nearly all of which varied substantially from the originals of the slips on which they were written, numerous changes of names, dates, descriptions and amounts being obvious. The proprietor explained that he was satisfied all the work on the vouchers was done in 1942 and he had prepared the vouchers in that way to avoid the loss of "‘days’’ which would be involved in going through 15,000 slips to find the respondent’s proper original vouchers.

Prior to 1942 the respondent had not been liable for Income Tax and had developed the habit of keeping an account of his car expenses, When, on making his 1942 Return, he discovered those expenses to be relevant, he was perhaps under the necessity of relying on his memory to a certain extent, as items paid in cash did not show on the garageman’s ledger.

I readily accept Mr. Bentley’s submission that a false statement is not merely an inaccurate statement, but one made fraudulently with mens rea or intent to deceive. But, in Item 8 of the Return, the respondent certifies the truth of all information and statements furnished and the actual incurring of all expenses claimed. That is, I think, an assurance that he has exercised diligence, or at least reasonable care, in their compilation. The respondent appears to have certified the truth of the expenditure of $655.18, without due care as to its accuracy, and I therefore hold that the evidence justifies the conviction.

The penalty applicable at the time of the offence (Sec. 80 of the Income War Tax Act) was "‘a penalty not exceeding ten thousand dollars or six months’ imprisonment, or both fine and imprisonment.” Undoubtedly, one of the factors in determining penalty is the question whether the inaccuracy was due merely to carelessness or to some more or less serious actual intent to deceive or defraud.

That question must be determined as at the time of the original return. The subsequent vouchers are applicable only to show the inaccuracy of the original statement and to indicate the original intent of the respondent. It may be a reasonable hypothesis that the respondent at the outset merely prepared a carelessly inaccurate statement, and later, when the inaccuracies were discovered, decided to compensate them by submission of fictitious vouchers. The respondent must be given the benefit of the doubt on all questions affecting the gravity, as well as the commission, of the offence.

I purposely curtailed the evidence on the later vouchers, and now refrain from making any comment on them. If improper, they might form the subject-matter of another charge, but their impropriety could not aggravate the seriousness of the present offence.

I have recently discussed (Re Richards) the fundamental law against the mixing of offences, convictions, and penalties. So far as the nature of the case permits the Court must exclude consideration of one charge (or potential charge) from adjudication upon another. This principle was forcefully laid down by the full Bench of the Supreme Court of Nova Scotia in Reg. v. McBerny (1897), 3 C.C.C. 339.

And in R. v. Harris (1917), 30 C.C.C. 18, the High Court Division of the Supreme Court of Ontario (per Sir Wm. Mulock, C.J.) reduced a penalty from $1,000 to $200, because the Magistrate improperly based his sentence partly on evidence as to another offence with which the accused was not charged.

I therefore find no urgent reason for altering the penalty imposed by Martin, S.M. The facts of the case warranted fuller consideration than was possible on the materials before the Magistrate. Both parties offended in not tendering all available materials at the trial. There will therefore be no order as to costs.

The conviction and sentence made and passed by the Magistrate are confirmed.