Global Enviro Inc. v. Ian George, 2011 ABQB 32

Court of Queen ’ s Bench of Alberta Citation: R. v. Global Enviro Inc., and Ian George McIntyre, 2011 ABQB 32 Date: 20110120 Docket: 060808508 S2 Registry: Calgary Between: Global Enviro Inc. and Ian George McIntyre Appellants - and - Her Majesty the Queen Respondent Corrected judgment: A corrigendum was issued on January 20, 2011; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice B.L.

Rawlins _______________________________________________________ [ 1 ] The Appellants, Global Enviro Inc. (“Global”) and Ian George McIntyre, are a corporation based in Calgary and the director and controlling mind of that corporation, respectively. The Appellants were charged with the following offences: Count 1: On or about January 7, 2003, at or near Calgary, Alberta, did claim a refund or credit under the Income Tax Act of Canada to

which they or any other person was not entitled by making, participating in, assenting to or acquiescing in the making of false or deceptive statements in the T2 Return of Income of Global Enviro Inc. and in their Claim for Scientific Research and Experimental Development in Canada (SR&ED) for the period from June 1, 2001 to May 31, 2002, contrary to paragraph 239(1.1) (

a) of the Income Tax Act of Canada . Count 2: Between the 31 st of May 2001 and the 24 th of July 2003, both dates inclusive, at or near Calgary, Alberta, willfully in any manner did claim an Investment Tax Credit under the Income Tax Act of Canada , to which they or any other person was not entitled, contrary to paragraph 239(1.1) (

e) of the Income Tax Act of Canada . [ 2 ] The trial judge acquitted the Appellants on Count 1, but convicted on Count 2. Each Appellant was sentenced to a fine of $250,000.00, being approximately 77% of the SR&ED claim made. The Appellants appeal both the convictions and the sentences. [ 3 ] The convictions arose from Global’s claim for a Scientific Research and Experimental Development (“SR&ED”) credit. The facts of this case were thoroughly canvassed by the trial judge in his reasons: see 2009 ABPC 76 .

I do not propose to review the facts in detail again here, but I will set out those points that, in my view, are of particular importance to the trial judge’s decision and therefore to this appeal. [ 4 ] On January 7, 2003, the Appellants filed a T2 corporate income tax return for Global for its taxation year June 1, 2001 to May 31, 2002.

In that return, Global claimed to have incurred scientific research expenses totalling $923,437.00; it therefore claimed a SR&ED investment tax credit in the amount of $323,202.95, being 35% of the expenses claimed. [ 5 ] The material time with respect to Count 1 was January 7, 2003, the date the Appellants made the SR&ED claim. The trial judge found that, at that time, the Appellants had an honest belief that the claim was valid. Thus, the Appellants did not wilfully make any false statements at that time and they were acquitted on Count 1. [ 6 ] However, the situation changed after January 7, 2003.

The Canada Revenue Agency (“CRA”) raised concerns about the Appellants’ SR&ED claim. Those concerns culminated in a meeting in Medicine Hat, Alberta on March 24, 2003. The persons in attendance at that meeting were the Appellants, two members of the CRA’s audit team (Dr. Chandra Patel and Ms. Velma Quonn) and Mr. Patrick Glen Page, who was involved in business with the Appellants. Mr.

Page was also charged under Counts 1 and 2, but was acquitted by the trial judge on both counts and is not involved in this appeal. [ 7 ] This meeting was very significant and the trial judge made the following findings of fact in respect thereof at paras. 25 and 27: I have previously found that Mr. McIntyre had an honest belief that work performed prior to the claim period could be used based on representations made to him by Mr. Velhat. This particular belief changed during the March 24 meeting with Dr. Patel and Ms. Quonn. I find that during this meeting Mr.

McIntyre and Global came to the realization that the [CRA] required the work to be done during the taxation year, June 1, 2001 to May 31, 2002. The importance of these dates were made clear to McIntyre and Global by Dr. Patel and Ms. Quonn. ... During the March 24, 2003 meeting with the [CRA] auditors, Mr.

McIntyre acquired the knowledge that led him to conclude that if Global was to obtain the funds from the SR&ED claim, it must be shown to the auditors that the work was performed during the period of June 1, 2001 to May 31, 2002. [ 8 ] The trial judge went on to find that, despite understanding by then the CRA’s position that Global’s SR&ED claim was not valid, Mr. McIntyre provided documentation to the CRA after this meeting that was intentionally misleading and designed to continue to pursue the claim.

The trial judge made these findings at paras. 27 - 30 and 33: I find that McIntyre continued to attempt to mislead [CRA] by presentation of the WHMIS invoice (Exhibit 5), McIntyre’s invoice of May 31, 2002 (Exhibit 3), and McIntyre’s letter to Dr. Patel (Exhibit 11).

Mr. McIntyre testified, at page 1228, that he personally picked up Exhibit 5, the WHMIS invoice from Dr. Arrison. Despite what Mr. McIntyre said about not knowing when the work was done by Dr. Arrison, it would have been obvious to Mr. McIntyre on a review of the invoice that WHMIS did not perform the work in the period of time of January to May, 2002. Providing this invoice to [CRA], in support of the SR&ED claim, was an attempt by McIntyre to mislead [CRA] as to when the work was performed. ...When we review McIntyre’s testimony which commences with a review of Exhibit 87, Mr.

McIntyre’s notes, we see that work outlined in McIntyre’s invoice to Global does not correspond with the dates of the claim period. During the claim period, June 1, 2001 to May 31, 2002, McIntyre is performing work, but it is for the purposes of raising money for [Global], rather than what is specified in his invoice of May 31, 2002. ... Once again to submit this particular invoice to [CRA], which does not accurately describe the work performed, was a further attempt to mislead the government agency. I find the letter to Dr.

Patel which was faxed April 3, 2003 was intentionally misleading in that it did not describe a time period when various activities were performed. In Exhibit 11, McIntyre only refers to collection of sand in the “summer months”, and testing and lab work done “throughout the year”. At this time McIntyre knew the importance of the claim period and knew Dr. Patel wanted details as to dates. I find this letter was intentionally vague in an attempt to mislead Dr. Patel. ...

Subsequent to the March 24, 2003 meeting, McIntyre and Global provided false and misleading documentation to the [CRA] in an attempt to show that the work claimed occurred during the specified time period. [ 9 ] The thrust of the Appellants’ argument seems to be that they should not be convicted if they genuinely believed that Global was entitled to the credit claimed, irrespective of the CRA’s position. For example, the Appellants’ brief states “There is simply no evidence that McIntyre had ceased to believe that Global was not entitled to the credit, and considerable evidence that he believed that it was. ...

It is therefore submitted that the charge fails.” (I believe the “not” in this sentence is there in error.) The Appellants’ brief also states “...the Crown must prove that Global was not entitled to any SR&ED credit at all .” (Emphasis in original.) [ 10 ] In my view, the Appellants’ argument miscasts what the Crown is required to prove. This is not the Tax Court. It is not the function of this Court to determine the validity of Global’s SR&ED claim.

If the Appellants believed that the CRA was wrong in its position with respect to the claim, there is a procedure to be followed to determine that question and the Appellants should have gone that route. Interestingly, the Appellants now concede that Global was not, in fact, entitled to the credit claimed. The following appears in a footnote in the Appellants’ brief: Although it turned out, literally in mid-trial, that Global is not entitled to the credit, albeit for reasons that required Mr. Yaskowich’s knowledge and experience as tax counsel to figure out.

This is the sort of advanced wisdom that is not expected of lay taxpayers like McIntyre. [Emphasis in original.] [ 11 ] Again, this last statement reflects a misunderstanding of what is at issue here. The question is not whether Mr. McIntyre was required to have “advanced wisdom”. If Mr. McIntyre and Global questioned the correctness of the CRA’s

interpretation of the SR&ED rules, they should have objected directly and followed the proper procedure to have the matter dealt with. The issue here is whether, in the face of a clear understanding as to the CRA’s position, the Appellants provided misleading information in an attempt to circumvent that position and claim the credit. This is exactly what the trial judge found. [ 12 ] As the Crown points out, s. 686(1) (

a) of the Criminal Code permits this Court, acting in an appellate capacity, to allow the appeal only where it is of the opinion that: (

i) the verdict should be set aside on the ground that it is unreasonable or cannot be supported by the evidence; (ii) the judgment of the trial court should be set aside on the ground of a wrong decision on a question of law; or (iii) on any ground there was a miscarriage of justice.

[13] The Appellants’ position seems to be that the trial judge wrongly decided a question of law, namely whether Global wasentitled to the SR&ED credit claimed. As set out above, that is not the question. The trial judge found that the Appellants understood theCRA’s position that Global was not entitled to the credit and that they provided misleading information designed to make it seem asthough the claim was valid.

These are findings of fact and led the trial judge to conclude that the Appellants had wilfully claimed a creditto which they were not entitled, as contemplated by Count 2. [14] As the Appellants’ convictions rest not upon a question of law, but upon a question of fact, s. 686(1)(a)(ii) of the CriminalCode is of no assistance to them. [15] In arriving at his findings of fact, the trial judge expressly found that Mr. McIntyre’s evidence with respect to the March 24,2003 meeting and the subsequent events was not credible.

As an appellate court, I am obliged to show deference to the trial judge’sfindings of fact, particularly when they involve findings of credibility. The Crown cited R. v. W.®.) (SCC), [1992] 2S.C.R. 122, in which the Supreme Court of Canada held: It is thus clear that a court of appeal, in determining whether the trier of fact could reasonably have reached the conclusion that theaccused is guilty beyond a reasonable doubt, must re-examine, and to some extent at least, reweigh and consider the effect of theevidence.

The only question remaining is whether this rule applies to verdicts based on findings of credibility. In my opinion, it does. Thetest remains the same: could a jury or judge properly instructed and acting reasonably have convicted? That said, in applying the test thecourt of appeal should show great deference to findings of credibility made at trial. This Court has repeatedly affirmed the importance oftaking into account the special position of the trier of fact on matters of credibility. ... The trial judge has the advantage, denied to theappellate court, of seeing and hearing the evidence of witnesses.

However, as a matter of law it remains open to an appellate court tooverturn a verdict based on findings of credibility where, after considering all the evidence and having due regard to the advantagesafforded to the trial judge, it concludes that the verdict is unreasonable. [16] Taking into account all of the evidence in this case, I am satisfied that neither the trial judge’s findings of fact nor the verdictwas unreasonable. The trial judge concluded that, after the March 24, 2003 meeting, Mr.

McIntyre understood the CRA’s position withrespect to Global’s claim, however much he may have thought it should be otherwise. I see no reason to disturb that finding. Equally, Isee no reason to interfere with the trial judge’s finding that Mr. McIntyre provided information intended to portray the claim asconsistent with the CRA’s position when he knew that it was not. The verdict, therefore, is not unreasonable and is supported by theevidence. [17] Finally, I am not persuaded that the convictions represent a miscarriage of justice as contemplated by s. 686(1)(a)(iii) of theCriminal Code.

The appeals from the convictions is therefore dismissed. [18] The Appellants also appeal the sentence imposed by the trial judge. The Appellants’ argument is simply that the sentence isexcessive. I disagree. Section 239(1.1)(g)(ii) of the Income Tax Act provides for a fine on

summary conviction of “not less than 50% andnot more than 200% of the amount by which the amount of the refund or credit obtained or claimed exceeds the amount, if any, of therefund or credit to which the person or other person, as the case may be, is entitled”. The amount of Global’s SR&ED claim was$323,202.95. The Crown’s position, which was acknowledged by the Appellants in the quoted footnote from their brief, is that Globalwas not entitled to the credit claimed. Therefore, the “excess” amount claimed is the full amount. The $250,000 fine imposed on eachAppellant is approximately 77% of this amount.

This is on the low end of the range set out in the Income Tax Act and, in my view, thereis no reason to reduce it. The appeals from the sentences are dismissed. Heard on the 2nd day of December, 2010. Dated at the City of Calgary, Alberta this 20th day of January, 2010.

B.L. Rawlins J.C.Q.B.A. Appearances: Murray Stone for the Appellants Ross Mitchell, Public Prosecution Service of Canada for the Respondent _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Madam Justice B.L. Rawlins _______________________________________________________ Citation line should read as follows: R. v. Global Enviro Inc. , and Ian George McIntyre