R v Breitkreutz, 2021 ABQB 193

Court of Queen’s Bench of Alberta Citation: R v Breitkreutz, 2021 ABQB 193 Date: 20210315 Docket: 180594889Q1 Registry: Calgary Between: Her Majesty the Queen Respondent/Crown - and - Arnold Breitkreutz and Susan Elizabeth Way Applicants/Accuseds _______________________________________________________ Decision of the Honourable Madam Justice N. Dilts _______________________________________________________ I. Introduction [ 1 ] Mr. Breitkreutz and Ms. Way (the “Applicants”) are charged with one count of fraud contrary to s 380(1) of the Criminal Code and one count of theft over $5000 contrary to s 334(

a) of the Criminal Code , both arising out of the business of Base Finance Ltd. (“Base Finance”). [ 2 ] The Applicants submit that their s 8 Charter rights were infringed when the RCMP received information from the Alberta Securities Commission (“ASC”) without judicial authorization. The information from the ASC included Royal Bank of Canada (“RBC”) bank records for Base Finance account 02XXX XXX4050 (“RBC account #4050”).

It is not disputed that the ASC compelled the production of the RBC bank records using its statutory powers under s 42(1) of the Securities Act , RSA 2000, c S-4 . [ 3 ] The Applicants also submit that they have been denied their right to make full answer and defence and have been denied their right to a fair trial because the ASC and the RCMP failed to make adequate notes of the meetings and conversations between members of the two agencies. The Applicants allege that the protections to be afforded them under ss 7 and 11(

d) of the Charter have been denied. Particularly, they say they are unable to fully and fairly challenge the s 8 breach because of the lack of police and investigator notes. [ 4 ] The Applicants submit that the prosecution should be stayed or, in the alternative, that the RBC bank records later obtained by the RCMP under a General Production Order must be excluded under s 24 of the Charter . II. Background

[ 5 ] On September 24, 2015, David Elzinga, Manager of Investigations, and Viola Pickering, Securities Investigator with the ASC were contacted by Andrew Shin, Senior Manager, Forensic Accounting at RBC regarding potential unlawful activities of Base Finance. The ASC commenced an administrative investigation immediately. On September 24, 2015, an ASC Investigation Order was signed by Cynthia Campbell, Director of Enforcement with the ASC in her capacity as the delegate of the Executive Director.

The Investigation Order, signed under s 41(1) of the Securities Act , authorizes the Executive Director to appoint persons to investigate matters relating to the administration of Alberta securities laws or the trading in securities or derivatives in Alberta. [ 6 ] Ms. Pickering was assigned as lead investigator on the ASC file supported by Gus Gallucci, Investigator, and Sean Bonazzo, Investigative Analyst.

Subsections 41(4) and 41(5) of the Securities Act give broad authority to persons appointed to investigate an alleged contravention of securities laws: 41(4) For the purposes of an investigation ordered under this section, the person appointed to make the investigation may with respect to the person or company that is the subject of the investigation, investigate, inquire into and examine (

a) the affairs of that person or company, (

b) documents, records, correspondence, communications, negotiations, trades, transactions, investigations, loans, borrowings and payments to, by, on behalf of or in relation to or connected with that person or company, (

c) the property, assets or things owned, acquired or alienated in whole or in part by that person or company or by any person or company acting on behalf of or as agent for that person or company, (

d) the assets at any time held by, the liabilities, undertakings and obligations at any time existing and the financial or other conditions at any time prevailing in respect of that person or company, and (

e) the relationship that may at any time exist or have existed between that person or company and any other person or company by reason of (

i) investments, (ii) commissions promised, secured or paid, (iii) interests held or acquired, (iv) the loaning or borrowing of money, securities or other property, (

v) the transfer, negotiation or holding of securities or derivatives, (vi) interlocking directorates, (vii) common control, (viii) undue influence or control, or (ix) any other matter not referred to in clauses (

i) to (viii).

(5) For the purposes of an investigation under this section, a person appointed to make the investigation may examine any documents, records or other things, whether they are in the possession or control of the person or company in respect of which the investigation is ordered or of any other person or company. [ 7 ] On September 24, 2015, after the Investigation Order was signed, Ms. Pickering directed Mr. Bonazzo to issue a notice to RBC compelling production of its records regarding Base Finance (“Notice Compelling Production”).

The ASC sought account opening documents, account statements, copies of cheques issued and deposited, and internal RBC investigative notes and statements. The ASC’s power to compel the production of records lies in s 42(1) of the Securities Act which provides: 42(1) The person appointed to make an investigation under

section 41 has the same power as is vested in the Court of Queen’s Bench for the trial of civil actions (

a) to summon and enforce the attendance of witnesses, (

b) to compel witnesses to give evidence on oath or otherwise, and (

c) to compel witnesses to produce documents, records, securities, derivatives, contracts and things. ...

(2) A person appointed to make an investigation under

section 41 may (

a) make copies or cause copies to be made of any documents, records, securities, derivatives, contracts or things produced pursuant to subsection (1), and (

b) record by any means, electronic or otherwise, any statement or evidence provided by a person, whether provided voluntarily or compelled under subsection (1), and may engage the services of a court reporter to make any such recording.

(3) The failure or refusal of a person summoned as a witness under subsection (1) to attend, to answer questions or to produce

documents, records, securities, derivatives, contracts or things that are in that person’s custody or possession makes that person, on application to the Court of Queen’s Bench by the person making the investigation, liable to be committed for contempt by the Court of Queen’s Bench in the same manner as if that person were in breach of an order or judgment of that Court.

(4) Notwithstanding the Alberta Evidence Act , a bank or any officer or employee of the bank is not exempt from the operation of this section. Notably, judicial authorization is not required for the ASC to exercise its statutory powers to compel under s 42(1). [ 8 ] On September 25, 2015 pursuant to the Notice Compelling Production, RBC produced to the ASC two months of banking information relating to Base Finance, specifically RBC account #4050. Ms. Pickering reviewed those RBC bank records on September 25, 2015. Ms.

Pickering’s evidence at the voir dire was that her immediate strategy was to obtain a freeze order over RBC account #4050 to protect the funds that were on deposit. At that time, the account balance was $1,084,604.03. Ms. Pickering swore an Affidavit on September 28, 2015 in support of an application for a freeze order over RBC account #4050. Ms. Pickering’s September 28, 2015 Affidavit details the ASC investigation to date and includes details regarding RBC account #4050 and RBC’s internal investigation into Base Finance.

Appended as exhibits to her Affidavit are the transaction history on RBC account #4050, copies of cheques deposited to RBC account #4050, and copies of cheques cleared out of RBC account #4050, amongst other things. [ 9 ] The Executive Director of the ASC issued a freeze order regarding RBC account #4050 on September 29, 2015. His authority to do so resides in s 47(2) of the Securities Act , described by Ms.

Campbell as one of the ASC’s internal powers to disrupt misconduct as it is happening. [ 10 ] The ASC continued its investigation into Base Finance: the investigators interviewed in excess of 25 investors, reviewed cheques issued to investors by Base Finance, and reviewed assignment agreements provided by Base Finance to its investors.

They also contacted agencies in Alberta and the United States, including the Texas County Clerk’s office and the Texas Railroad Commission, amongst others. [ 11 ] On October 15, 2015, on the application of a Base Finance investor, a Receiver was appointed to oversee the business and affairs of Base Finance. The ASC investigators engaged with the Receiver and made a number of inquiries to gather additional information regarding Base Finance and its activities. [ 12 ] According to the evidence of Ms.

Campbell, by October 20, 2015, the ASC was assessing what course of action was most appropriate with respect to Base Finance, including the possibility of referring the matter to the RCMP for criminal investigation. Ms. Campbell’s evidence was that there were three potential avenues for investigation into Base Finance: an administrative investigation under the Securities Act , a quasi-criminal investigation under the Securities Act , or a criminal investigation. She disagreed with the suggestion that the ASC’s first intention was to have the RCMP deal with the whole investigation as a criminal investigation.

However, her evidence was that by October 20, 2015 based on the information the ASC had gathered, her view was that the appropriate avenue was a criminal investigation. [ 13 ] Broadly speaking, the mandate of the ASC is to protect investors and to protect the integrity of the Alberta capital market. Its Enforcement Division is tasked with detecting, deterring, disrupting, investigating, and prosecuting securities offences. In that regard, the ASC has legislative powers to stop harm that may be ongoing to protect investors, and to conduct proceedings for Securities Act violations. [ 14 ] Ms.

Campbell’s evidence was that administrative investigations can lead to a notice of hearing being issued and an administrative hearing being conducted before a panel of the ASC. The panel would have the authority to impose administrative penalties where warranted, including bans on capital market participation and disgorgement orders; however, there is no possibility of incarceration. Ms. Campbell’s evidence was that the purpose of administrative proceedings is protective and preventative in nature.

Her evidence was that the ASC can and has run administrative investigations in parallel with a criminal investigation, but that the ASC would not run an administrative investigation in parallel with a quasi-criminal investigation. [ 15 ] In comparison, quasi-criminal proceedings under the Securities Act can result in quasi-criminal charges being laid under the Securities Act that are prosecuted in Provincial Court. The maximum punishment for a quasi-criminal offence under the Securities Act is 5 years less a day of imprisonment. [ 16 ] On October 21, 2015, Ms.

Campbell signed an Authorization Order pursuant to s 45(

b) of the Securities Act permitting the ASC investigators on the Base Finance matter (being Ms. Pickering, Mr. Gallucci, Mr. Elzinga and Mr. Bonazzo) to provide information gathered as part of their investigation to a number of law enforcement and regulatory agencies including the RCMP. Under s 45 of the Securities Act , all information or evidence obtained pursuant to an investigation order is confidential and is not to be divulged unless, amongst other reasons, disclosure is authorized by the Executive Director. [ 17 ] On October 23, 2015 there was a meeting of senior members of the RCMP and ASC personnel.

In attendance at that meeting were RCMP Superintendent Tim Head, Inspector Gord Sereda and Staff Sergeant Les Dolhun, and ASC personnel Ms. Campbell, Mr. Elzinga, Ms. Pickering, Mr. Gallucci and Tom McCartney, ASC senior litigation counsel. There are varying recollections of the meeting particularly as to who lead the discussion and what information was discussed. Ms. Campbell testified that the purpose of the meeting was to discuss the potential referral of the Base Finance matter for criminal investigation.

She described the meeting as a high-level discussion and said that while the details contained in the ASC referral letter may have been reviewed, the purpose of the meeting was to determine which agency would investigate given issues of resourcing and capacity. [ 18 ] Ms. Campbell took some notes of the October 23, 2015 meeting particularly to record information that was not contained in an ASC briefing note. Neither Ms. Pickering nor Mr. Gallucci made any entry or took any notes of the October 23, 2015 meeting. Ms.

Pickering did not recall specifics of the meeting and described her role in the meeting as quite limited despite being the lead investigator. Mr. Gallucci recalled the meeting generally and described it as a discussion about the referral of the Base Finance matter to the RCMP. His evidence was that the contents of the referral letter were discussed and that the ASC’s contributions to the meeting were led by Mr.

Elzinga. I am led to understand that notes of the meeting were taken by Staff Sergeant Dolhun. [ 19 ] On November 3, 2015, the RCMP advised the ASC that it would assume responsibility for a criminal investigation into Base Finance and Mr. Breitkreutz. The ASC in turn advised the RCMP that it would proceed with its administrative investigation. [ 20 ] On November 7, 2015, the ASC sent the RCMP a referral letter regarding Base Finance. The letter states that: On September 24, 2015, Mr.

Andrew Shin (“Shin”), Senior Manager, Forensic Accounting, Anti Money Laundering, Financial Intelligence Unit of the Royal Bank of Canada (“RBC”) contacted the ASC. Shin expressed concern that Base Finance was operating a Ponzi type scheme.

Shin provided the following information: • Base Finance was operating as a mortgage broker; • Mortgage funds were obtained from Investors; • Arnold Breitkreutz was the sole Director and Shareholder • Bank account information identified that deposits were coming in from what appeared to be investors and then payments were made from those deposits to individuals via cheques that had notations in the memo fields of principal and interest payments; • Breitkreutz and Susan Elizabeth Way, an office manager/partner in the business, had signing authority on the account; • The RBC review did not identify lending for mortgages. [ 21 ] The referral letter provided additional detail of the information and evidence gathered by the ASC during its investigation, including information gathered from Alberta Corporate Registries, the Real Estate Council of Alberta, ASC internal records, investor interviews, and information filed on the Court of Queen’s Bench of Alberta receivership file.

Notably, the referral letter included information received by the ASC from RBC in response to the Notice Compelling Production. Although the letter referenced the incorrect RBC account number, the letter demonstrates that the ASC attempted to provide the RCMP with the Base Finance RBC bank account number as early as November 7, 2015. [ 22 ] The ASC continued its administrative investigation. In furtherance of that, in November 2015 the ASC sought and obtained an interim cease trade order with respect to Base Finance. Ms.

Pickering swore a second Affidavit in support of the interim cease trade order. [ 23 ] The RCMP commenced its investigation into Base Finance in earnest in January 2016; Sergeant Douglas Johnston was assigned as lead investigator. He reviewed the ASC referral letter and the early information compiled by the RCMP. He began contacting witnesses in early January 2016 and began interviewing witnesses on or about January 22, 2016. His evidence was that on January 22, 2016, he spoke with an investor who provided him with the RBC bank account number for Base Finance.

During the course of his investigation, investors informed him who was involved in Base Finance, what investors were told regarding how their investments would be used, the documentation they received, and banking information regarding money paid to and by Base Finance. [ 24 ] On January 21, 2016, Sergeant Johnston and Ms. Pickering had an in-person meeting near the ASC offices where they discussed the Base Finance matter. At that meeting, Ms. Pickering informed Sergeant Johnston that there was information on the receivership file at the courthouse that she thought he would find useful. Ms.

Pickering knew that her September 28, 2015 Affidavit formed part of the court file and that her Affidavit disclosed the RBC bank records compelled by the ASC, including RBC account #4050. Ms. Pickering made no notes of the January 21, 2016 meeting with Sergeant Johnston, although she has an independent recollection of the meeting. Her evidence was that in her conversation with Sergeant Johnston, she touched on the receivership, the Receiver, court documents, and public information that was available on the ASC website.

Specifically, she testified that she informed Sergeant Johnston where information was publicly available, including at the courthouse, and that the information would be of interest to him. [ 25 ] Sergeant Johnston made notes of the January 21, 2016 meeting and has an independent recollection of the meeting. His recollection is consistent with Ms.

Pickering’s insofar as she told him that there was useful information in the receivership file at the courthouse. [ 26 ] Sergeant Johnston’s evidence was that he went to the courthouse that same day, searched the receivership action number, reviewed the court file, and requested a copy of the Pickering September 28, 2015 Affidavit.

He says he reviewed the Pickering September 28, 2015 Affidavit sometime in February to confirm the Base Finance RBC bank account number. [ 27 ] On January 27, 2016 Sergeant Johnston received RBC banking information regarding Base Finance through FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada. The FINTRAC information included information regarding RBC account #4050 and showed dozens of large, round number deposits from various individuals. Using the FINTRAC information, Sergeant Johnston determined that the bank account number in the ASC referral letter was Ms.

Way’s bank account number, and not that of Base Finance. [ 28 ] Sergeant Johnston spoke with Ms. Pickering again on March 23, 2016. His notes of that call (made on April 27, 2016) are that Ms. Pickering advised him that the Base Finance account number cited in the ASC referral letter was incorrect and that the correct account number was RBC account #4050. Sergeant Johnston was aware that the ASC had obtained the RBC account number for Base Finance through a non-judicially authorized process. [ 29 ] Ms. Pickering’s evidence of that call differs.

Her evidence was that she invited Sergeant Johnston to tell her the account number that he had and that she would confirm whether it was the Base Finance account number. Ms. Pickering made a brief note of that call and testified to having an independent recollection of the call.

[30] On June 6, 2016, Sergeant Johnston swore an Information to Obtain (“ITO”) in support of an application for a GeneralProduction Order directed to RBC to produce documents or data respecting RBC account #4050. On June 7, 2016, a Justice of the Peacegranted the General Production Order. The General Production Order directed RBC to produce its banking records for RBC account#4050 for the period May 1, 2014 to October 15, 2015. [31] On May 23, 2018, an Information was sworn charging Mr. Breitkreutz and Ms. Way with fraud contrary to s 380(1) of theCriminal Code and theft contrary to s 334(

a) of the Criminal Code. III. Issues [32] There are four issues to be decided on this application: 1. Was there a s 8 Charter breach when the RCMP received non-judicially authorized information and documents from the ASC? 2. Was the failure of ASC personnel and RCMP members to make notes of inter-agency discussions a breach of s 7 of the Charter? 3. Are the Applicants unable to receive a fair trial under s 11(

d) of the Charter as a result of the failure of ASC personnel and RCMPmembers to take adequate notes? 4. If there is a breach of the Charter, what is the appropriate remedy? IV. Analysis 1.

Was there a s 8 breach when the RCMP received non-judicially authorizedinformation and documents from the ASC? [33] The right to be secure against unreasonable search or seizure protected under s 8 of the Charter applies to a search or seizurecarried out by a state actor where there is a reasonable expectation of privacy: Canada (Director of Investigation & Research, CombinesInvestigation Branch) v Southam Inc., (SCC), [1984] 2 SCR 145.

For a search or seizure to be reasonable, the search orseizure must be authorized by law; the law must itself be reasonable; and the search or seizure must be executed in a reasonable manner:R v. Collins, (SCC), [1987] 1 SCR 265. [34] The Applicants submit that their s 8 Charter rights were infringed when the ASC shared the RBC bank records for BaseFinance with the RCMP after a criminal investigation had commenced.

They say that the RBC compelled information formed part of thebasis for the ITO sworn by Sergeant Johnston on June 6, 2016 and that as the ITO contained information gathered without judicialauthorization, they are entitled to a remedy under s. 24. [35] The Applicants submit that when the ASC shared with the RCMP the RBC bank records it had obtained under the NoticeCompelling Production, the ASC improperly used its statutory investigative powers to further a criminal investigation.

They say thatwhile the investigative function of the ASC allows it to obtain banking information for administrative purposes, it does not permit thatinformation to be used for a criminal investigation. They say the law is clear that once a criminal investigation has been commenced, thestatutory powers available to the ASC cannot be used to further a criminal investigation.

To do so is to “short circuit” the judicial reviewfunction to determine whether sufficient grounds exist to obtain the information. [36] Using the language of the Supreme Court of Canada in R v Jarvis, 2002 SCC 73, the Applicants say that the ASC inquiry intoBase Finance “crossed the Rubicon” when the ASC shared the RBC bank records with the RCMP after a criminal investigation hadcommenced. They point to the information shared in the referral meeting of October 23, 2015, in the referral letter of November 7, 2015,in the meeting between Ms.

Pickering and Sergeant Johnston on January 21, 2016, and in the telephone call between Ms. Pickering andSergeant Johnston on March 23, 2016 all as instances of the misuse of ASC investigative powers to further a criminal investigation. [37] The Applicants say the presence of the Authorization Order dated October 21, 2015 does not override the RCMP’s obligationto collect information and evidence under judicial authority. And they say that the statutory obligation of confidentiality under s 45 of theSecurities Act exacerbates the breach.

Moreover, they say that the Charter infringing conduct by both the ASC and the RCMP wasegregious because the lead ASC investigator failed to take notes of key meetings and was aware that the RCMP needed judicialauthorization to obtain evidence; and because the RCMP investigator was willfully blind as to how the ASC obtained the information itshared. [38] The Crown submits that the RBC bank records included in the referral letter and in Ms. Pickering’s September 28, 2015Affidavit and shared directly or indirectly on January 21 and March 23, 2016 were validly obtained by the ASC under its statutorypowers to compel.

It says the ASC used its powers to compel for valid administrative purposes and not to advance a criminalinvestigation. The Crown argues that as the RBC bank records were validly compelled by the ASC for purposes of administrativeinvestigation, not only could the ASC provide that information to the RCMP, but the RCMP was entitled to use it in its criminalinvestigation, including to support the obtaining of the General Production Order. [39] In any event, the Crown submits that Sergeant Johnston obtained the Base Finance RBC account number from a number ofsources.

It maintains that even if the information Sergeant Johnston received from the ASC is redacted from the ITO sworn on June 6,2016, the ITO contains sufficient information to support the issuance of the General Production Order and a finding of reasonable andprobable grounds that the offence of fraud contrary to s 380(1) of the Criminal Code had been committed.

[ 40 ] The challenge presented in this application turns on the proper

interpretation and application of Jarvis . In Jarvis , the Supreme Court addressed whether Revenue Canada’s powerful inspection and requirement tools could be used to further a tax evasion investigation under the Income Tax Act . In the course of addressing that question, the Supreme Court in Jarvis and its companion case R v Ling , 2002 SCC 74 addressed whether information gathered in the course of an administrative inquiry could later be shared with those conducting a penal investigation. [ 41 ] The facts in Jarvis merit review. In February 1994, a Revenue Canada auditor began to gather information from Mr.

Jarvis and his accountant following information from an anonymous source that Mr. Jarvis had failed to report substantial income from the sale of his late wife’s art works. The auditor’s investigation took place over two months. By late April 1994, the auditor had obtained many records and much information from Mr. Jarvis, including from a meeting she and her supervisor had with Mr. Jarvis on April 11, 1994. Mr. Jarvis was not cautioned as to his rights in that meeting and answered all of the auditor’s questions, provided banking information, and signed a bank authorization. In addition, and not disclosed to Mr.

Jarvis, the auditor’s inquiries regarding the sale of the artworks had already extended to third party sources. [ 42 ] In late April 1994, the auditor performed calculations to determine whether Mr. Jarvis had underreported the income from the sale of the artwork. She concluded that Mr. Jarvis had grossly omitted revenues which suggested to her that fraud may be a possibility and that further action was warranted. On May 4, 1994, she referred her file to the Special Investigations

Section of Revenue Canada. The decision is clear that the referral included the auditor’s entire file, including records of all of her contacts, conversations and calculations: Jarvis at para 22 . After the auditor referred her file to the Special Investigations Section, she received additional bank statements from Mr. Jarvis’ son. Those bank statements were also provided to the Special Investigations Section: Jarvis at para 23 . Mr. Jarvis and his accountant were not told that his file had been transferred or that the Special Investigations

Section was investigating him for tax evasion, despite there having been numerous opportunities for Revenue Canada personnel to do so. Mr. Jarvis only became aware that the investigation had been transferred to the Special Investigations

Section when search warrants were issued under the Criminal Code . Mr. Jarvis was charged and tried on three counts of making false or deceptive statements in an income tax return and two counts of tax evasion. [ 43 ] In two voir dire decisions, the trial judge concluded that from the point at which the auditor arranged for her supervisor to attend with her to meet with Mr. Jarvis on April 11, 1994, the predominant purpose of the auditor’s inquiry was no longer an audit but was an investigation.

The trial judge therefore excluded the evidence obtained under search warrant on the basis that the audit had become an investigation by March 16, 1994. [ 44 ] The Supreme Court reached a different conclusion. The Supreme Court concluded that the distinction between the audit and the tax evasion investigation arose when Mr. Jarvis and the state entered an adversarial relationship, meaning the point at which Mr. Jarvis’ liberty interest was at stake: Jarvis at para 84 .

The Supreme Court concluded that once Revenue Canada’s inquiry engaged this adversarial relationship, it “crossed the Rubicon” and officials had to relinquish their statutory powers to inspect and to compel records: the adversarial relationship between Mr.

Jarvis and Revenue Canada had crystallized and Revenue Canada could no longer have recourse to its inspection and requirement (compelling) authority under the Income Tax Act . [ 45 ] To determine when the predominant purpose of an inquiry becomes the determination of penal liability, a court is to assess all factors that bear on the nature of the inquiry: Jarvis at para 88 .

Apart from a clear decision to pursue a criminal investigation, no one factor is necessarily determinative and all must be considered: Jarvis paras 93 - 94 . [ 46 ] It is clear from Jarvis that the spectrum of an inquiry is broad and extends from the point of mere suspicion, to a referral for criminal investigation, to reasonable grounds that an offence may have occurred, to something short of laying charges. The determination of where on that spectrum the relationship between the state and the individual reaches the point of being adversarial is a contextual one.

Courts are to assess the totality of the circumstances to determine when the predominant purpose of an inquiry becomes the determination of penal liability. Applying that principle to the facts in Jarvis , the Supreme Court found Mr. Jarvis’ liberty interests were engaged only once the auditor referred her file to the Special Investigations Section. [ 47 ] Taking the Jarvis principles and applying them to the facts of this case, Ms. Pickering sought production of the RBC bank records and received those on September 25, 2014. Ms.

Pickering’s evidence was that her purpose for gathering the RBC bank records was to obtain a freeze order for RBC account #4050 to protect the funds that were on deposit. Her evidence is supported by the evidence of Ms. Campbell and by the very actions taken by the ASC.

The ASC acted swiftly using its statutory powers to protect investors and on September 29, 2015 the Executive Director issued an order freezing RBC account #4050. [ 48 ] There is no evidence that there was any contact between the ASC and the RCMP regarding these Applicants or Base Finance prior to October 23, 2015, nor is there any evidence that the ASC was pursuing a criminal investigation when it gathered the RBC bank records. The ASC’s investigation continued with the ASC interviewing more than 25 investors, engaging with the Receiver, and reviewing cheques issued to investors.

In November 2015, the ASC obtained an interim cease trade order. Ultimately, the investigation file was referred to litigation in March 2016 for purposes of administrative hearing. There is no evidence that Ms.

Pickering or any other employee at the ASC used their powers improperly to gather evidence for the RCMP’s criminal investigation at any time and certainly not at the time that the ASC issued the Notice Compelling Production to RBC. [ 49 ] The predominate purpose or focus of the investigation determines the rights that must be protected and the process that must be followed in the gathering of information: United States v Wilson , 2010 BCCA 85 at para 56 . The mere existence of concern of criminal conduct does not mean that the purpose for an inquiry is penal or engages an individual’s liberty interests.

Considering all of the circumstances, I am satisfied that the Applicants’ liberty interests were not engaged until October 23, 2015 when the ASC met with the RCMP to request that they accept the referral of the matter for criminal investigation: the predominant purpose of the ASC investigation at least through to October 23, 2015 was to protect investors and to maintain the integrity of the public market through administrative processes. [ 50 ] The question that next arises is whether the ASC was at liberty to provide to the RCMP the RBC bank records that the ASC had compelled using its statutory powers.

As already noted, in Jarvis , the auditor transferred her entire file to the Special Investigations

Section, including evidence received after the referral. In my view, it is clear from Jarvis and Ling that the harm to be prevented is the misuse of investigative powers to further a criminal investigation. It is not to preclude the sharing with criminal investigators of information validly obtained during an administrative investigation.

At para 97 in Jarvis , the Supreme Court says: If an investigation is subsequently commenced, the investigators can avail themselves of that information obtained pursuant to the audit powers prior to the commencement of the criminal investigation, but not with respect to information obtained pursuant to such powers subsequent to the commencement of the investigation into penal liability. [ 51 ] That same distinction appears in Ling at para 32 where the Supreme Court concluded that all evidence gathered during the audit and not as an investigation “was properly obtained as part of the audit process and could be shared with the Special Investigations Section.” [ 52 ] Moreover, the cases are clear that there is nothing inherently concerning with an administrative inquiry proceeding in parallel with a penal investigation.

In Ling , the Supreme Court stated at para 30: At what point did the adversarial relationship crystallize? As stated in Jarvis , an audit and an investigation are not mutually exclusive. Revenue Canada may conduct both concurrently. Revenue Canada must be careful, however, not to use the requirement power of the audit to gather further evidence for an investigation after it has commenced.

If it does so it violates the Charter rights of the investigated taxpayer. [ 53 ] In R v Mercer , 2005 NLCA 10 , the Newfoundland and Labrador Court of Appeal applied the Jarvis analysis where the audit was pursuant to a provincial statute, i.e. the Securities Act , and the investigation and prosecution was pursuant to the Criminal Code . The Court held at para 39: It was underscored in Jarvis , and reiterated in Ling , that an audit and an investigation are not mutually exclusive.

There is nothing intrinsically wrong with both proceeding simultaneously and nor is there a requirement that there be a fire wall between the two. What is not countenanced is the making use of the audit process, either directly or surreptitiously, to obtain information to support a criminal investigation.

Contact between the persons involved in the separate processes is not proscribed and use of the information gathered by way of an audit can be used in the criminal investigation as long as it has not been tainted. [ 54 ] Based on Jarvis and Ling , I am satisfied that once the ASC investigation revealed that there were possible criminal violations, the ASC was entitled to refer the matter to the RCMP and to share the information it had gathered to that point.

Evidence validly gathered by the ASC for administrative inquiry remains so; its complexion does not change simply because a criminal investigation is later commenced. [ 55 ] Even if RBC account #4050 was shared in the October 23, 2015 referral meeting and in the November 7, 2015 referral letter, and was directly or indirectly provided to the RCMP by the ASC through conversations on January 21, 2016 and March 23, 2016, my analysis is unchanged. Based on the evidence of Ms. Pickering and Ms.

Campbell and the actions of the ASC in pursuing its regulatory mandate, I find that the predominant purpose of the ASC’s inquiry when it compelled the RBC bank records was an administrative investigation. Having made that finding, I am satisfied that there was no breach of the Applicants’ s 8 Charter rights when that information was shared with the RCMP, even when the compelled evidence was shared after the criminal investigation was commenced.

The harm to be prevented under Jarvis and Ling is not the sharing of information validly obtained, but the misuse of statutory powers after an inquiry has engaged the individual’s liberty interests. [ 56 ] The Applicants did not otherwise argue that the ITO was deficient.

As I am satisfied that the RCMP was entitled to receive and to use the information that was gathered by the ASC using its statutory powers up to and including October 23, 2015, including the information compelled from RBC, I conclude that the evidence that was seized by the RCMP pursuant to the General Production Order issued June 7, 2016 was obtained pursuant to a valid search warrant. 2.

Was the failure of ASC personnel and RCMP members to make notes of inter- agency discussions a breach of s 7 of the Charter ? [ 57 ] The Applicants allege that their s 7 right to disclosure has been breached through inadequate note taking by the RCMP and the ASC. They argue that both agencies had a duty to take detailed notes regarding their communications with each other, particularly because by late October 2015, the ASC had asked the RCMP to conduct a criminal investigation and by November 3, 2015 the RCMP had accepted the responsibility to investigate.

They argue that the RCMP and the ASC intentionally failed to take notes in relation to the information shared between them. They say that their conduct was deliberate and not justifiable. [ 58 ] The Crown agrees that the police have a duty to make, preserve and disclose notes of an investigation. The Crown says that each Sergeant Johnston, Constable Spencer, Ms. Pickering and Mr. Gallucci took relevant and appropriate notes that recorded their investigatory steps.

The Crown maintains that they are not required to do more and that it would be impractical to expect otherwise. [ 59 ] These issues require me to consider a series of questions: first, whether there is a general duty on the part of police officers and regulatory investigators to take notes; second, whether the RCMP or ASC investigators in this case breached that duty; and third, if they breached that duty, whether that equates to a breach of the Applicants’ s 7 Charter rights. [ 60 ] The question of whether police officers have a general duty to take notes was answered by the Supreme Court in Wood v Schaeffer , 2013 SCC 71 .

In that case, the Supreme Court concluded that police officers have a positive duty to make notes to maintain “an up-to-date record” of what they have done, seen, heard, smelled or touched. Notes are not to explain or justify facts but are simply to set them out in a straightforward fashion: Wood at para 76 . One purpose of police notes is to assist in determining what events happened.

It is widely accepted and often expressed that complete, accurate and comprehensive notes enable an officer to give accurate testimony in court, particularly given that they may be called upon to provide evidence weeks, months or even years after an incident or

investigation. In R v Davidoff, 2013 ABQB 244 at para 25, Graesser, J observed that it is good police work to take contemporaneous,complete, accurate and comprehensive notes not only to be able to refresh memory but to stand in the place of memory where a witnessno longer recalls the events.

Not surprisingly, the absence of notes can impact the reliability of a witness’s testimony (R v Bailey, 2005ABPC 61 at para 43) and the credibility of a witness’s testimony (Davidoff at para 27). [61] In this case, the Applicants complain about the lack of note taking by Constable Spencer who was initially tasked with beingthe affiant for the ITO until seconded to the ASC in June 2016 (unrelated to this investigation). Moreso, they complain loudly of the lackof notes of Ms.

Pickering, particularly regarding her interaction with the RCMP in the referral meeting of October 23, 2015, and in herdiscussions with Sergeant Johnston on January 21, 2016 and March 23, 2016. They suggest that the lack of notes prevents them fromundertaking the necessary inquiry under Jarvis. [62] The importance of note taking was tested with the witnesses on the voir dire.

There was general agreement that accuratedetailed notes are important not just to assist in recalling events, but to discharge the disclosure obligation owed to the Applicants. [63] Constable Spencer, a 19-year member of the RCMP, was not involved in this file after May 2016. She was questionedregarding her lack of notes. Particularly she was asked about her lack of notes regarding five internal briefings she attended betweenMarch 1 and April 5, 2016 and four internal meetings she attended regarding the preparation of the ITO between March 1, and April 27,2016.

There is no evidence that Constable Spencer gathered any evidence in the Base Finance investigation or that she had any dealingswith members of the ASC. Ultimately, Constable Spencer was not the affiant for the ITO.

Her lack of note taking bears no relevance tothe issues on this application given her limited and finite role and I make no further comment regarding her note taking practices. [64] Importantly, it is evident from the voir dire that Sergeant Johnston took notes of his investigation, including his discussionswith ASC investigators, and that Staff Sergeant Dolhun took notes of the October 23, 2015 referral meeting. Although those notes arenot evidence on the voir dire, they quiet the concern of inadequate note taking on the part of the RCMP. [65] Regarding the note taking by the ASC investigators Ms.

Pickering and Mr. Gallucci, generally speaking, I accept that thepolicy considerations explored in Wood are equally valid in a regulatory or administrative inquiry: note taking is an essential tool in aninvestigation to support the adjudicative processes, and to enhance the truth-seeking function. Moreover, when made contemporaneouslywith the events of the investigation, they may be the most accurate source of information. This guidance and direction regarding thevalue and importance of note taking was acknowledged by Ms. Campbell. But Ms.

Campbell also noted that the level of note-takingrequired and the training provided to investigators is significantly different in the administrative context than it is in the criminal context.I accept that to be true. There was and is no written policy or statutory obligation regarding note taking by ASC investigators and therewas and is no formal note taking instruction.

In this environment, and absent a legal duty to make notes in policy or statute, I concludethat the ASC investigators do not have a duty, akin to police officers, to take notes. [66] In any event, however, I am satisfied that the note taking practices of Ms. Pickering and Mr. Gallucci were consistent asbetween them and materially consistent with the duties of police officers. Each of Ms. Pickering, Mr. Gallucci and Ms. Campbell gaveevidence along the lines that ASC investigators are to take notes where they are collecting evidence or where their actions or discussionsfurther their investigation.

In large measure, their actions on this investigation were consistent with that principle. Ms. Pickering has 52pages of notes reflecting her investigative steps.

As a result, to the question of whether the ASC investigators had a duty to take notesand whether they breached that duty, my answer to both questions is no. [67] To the third question of whether the failure to take notes could amount to a breach of the Applicants’ s 7 rights, I note thatdespite the recognized importance of complete, accurate and comprehensive notes, the absence of police notes in and of itself has notbeen found to constitute a breach of s 7 of the Charter.

In Bailey, the court stated at paras 42-44: It is clear from credible legal texts and reports that there is a duty upon officers to take complete, accurate and comprehensive notes. Theprimary reasons for this is to enable an officer to give accurate testimony in court, given the fact they may be called upon to provide thisevidence weeks, months or even years after the incident. Evidence not contained in officers' notes may be suspect or given less weight onthe basis of credibility, not Charter breach.

There is no legal authority that I am aware of which has held incomplete police notes, in themselves, to amount to a Charter breach ofthe accused's right to make full answer and defence under

Section 7 and 11(d). So far, some cases have merely held that evidencetestified to in court, but not confirmed in some fashion in police notes disclosed prior to trial, is not reliable. Such evidence has thereforebeen held to be suspect and not proven beyond doubt, with the result there has been insufficient objective evidence in such cases uponwhich the officer is entitled to rely to constitute the reasonable and probable grounds necessary to make the breath demand.

Evidence notfound in notes has been found suspect when notes are clearly deficient on key factual issues which an officer would be expected torecord. While there is a growing recognition of the additional purposes of police notes, the law has not reached a state where incomplete notes,in themselves, result in a breach of the accused's Charter right to make full answer and defence pursuant to Sections 7 and 11(

d) of theCharter of Rights and Freedoms. However, if it is shown the police deliberately omitted evidence from the notes to avoid theirobligation to disclose such evidence to the defence, there is authority which may support that result (R. v. Carosella (SCC), [1997] 1 S.C.R. 80 and R. v. La [1997] 2 S.C.R. 280).

In addition, police evidence testified to at trial but not found in notes earlierdisclosed can be suspect especially if the notes are deficient on a significant factual issue in the case. [68] This statement in Bailey has been cited by numerous courts across the country including by the Supreme Court in Wood atpara 63: 63 Although it is common ground among the parties that the duties of a police officer include a duty to make notes on the events that transpire during the officer's tour of duty, I recognize that neither side points to a definitive statement of this Court holding as much.3 Footnote 3 At least one lower court, however, has given the matter thoughtful consideration and arrived at that conclusion; see R. v.

Bailey , 2005 ABPC 61 , 49 Alta. L.R. (4th) 128, at para. 42 . Other courts have simply stated that such a duty exists, without significant analysis… [ 69 ] In Davidoff , Graesser, J relied on Bailey in concluding that the absence of police notes does not give rise to a Charter breach.

That conclusion has been referred to in support by this court in R v Faulkner , 2020 ABQB 231 at para 37 , and R v Turgeon-Myers , 2019 ABQB 493 at para 63 , and has been adopted in other provinces: see R v Whitton , 2016 BCSC 1799 at para 40 . [ 70 ] Even had I decided that the RCMP and ASC notes were inadequate, I have not been presented with any compelling reason to conclude that an investigator’s failure to take complete, accurate and comprehensive notes automatically amounts to a breach of an accused’s right under s 7 of the Charter to make full answer and defence.

The current state of the law says otherwise and I agree. 3. Are the Applicants unable to receive a fair trial under s 11(

d) of the Charter as a result of the failure of ASC personnel and RCMP members to take adequate notes? [ 71 ] The remaining question is whether in these particular circumstances the Applicants are unable to receive a fair trial under s 11(

d) of the Charter , bearing in mind that the Applicants’ carry the burden of proving that their Charter rights have been violated. They say the failure by key police and ASC investigators to take notes and their now limited recollection of events undermines the Applicants’ ability to effectively explore and challenge the issues at the heart of the Jarvis application. As such, they say their s 11(

d) Charter rights have been breached. [ 72 ] To assist me in my analysis, the Applicants referred me to the case of R v McCartie , 2015 BCPC 69 . In McCartie , the accuseds were charged with tax evasion arising from the 2005-2006 taxation years. They had first been audited by the Canada Revenue Agency (“CRA”) for the 2002-2003 taxation years. That first audit was conducted by auditor 1 who, on completion of the audit, wrote a penalty report and imposed penalties on the McCarties for making false statements or omissions on their returns.

Auditor 1 met with the Assistant Director of the Investigations Department who had read auditor 1’s penalty report, and a staff member from the Investigation Department, to discuss whether a tax evasion investigation should be conducted. There were no notes taken of that discussion. [ 73 ] Over two years later, following a stint in the Enforcement Department, auditor 1 recommended a second audit of the McCarties for the tax years 2005-2006. Auditor 1 spoke with auditor 2 who was tasked with conducting the 2005-2006 audit. During the course of the second audit, auditor 2 compelled the production of bank records.

Those bank records were essential to the Crown’s case. Ultimately, auditor 3 reviewed the bank records and recommended a prosecution for tax evasion. The implication on the evidence was that auditor 1 directed the second audit to allow the CRA to use its powerful statutory tools to gather the necessary evidence of tax evasion, and that the suspicions of tax evasion that had arisen out of the first audit permeated the actions on the file.

Some of the CRA actors had no present recollection of their discussions regarding the second audit and notes that were likely taken of those discussions were lost. [ 74 ] The McCarties argued that when the CRA compelled production of their banking records in the second audit, the CRA’s predominant purpose was to gather evidence for a criminal prosecution. The trial judge concluded that to determine the Jarvis issue raised by the McCarties, it would be necessary to determine the date on which the CRA’s predominant objective changed from civil audit to criminal prosecution.

He concluded that he was unable to determine the date because some of the CRA’s internal documents were lost; and some CRA employees omitted to create documents that would have provided insight into the CRA’s motives and objectives: see R v McCartie , 2015 BCPC 254 at para 4 . [ 75 ] The trial judge engaged in the exercise of assessing whether the witnesses’ lack of recollection and the missing notes precluded the accuseds from receiving a fair trial under s 11(d).

He concluded that the absence of evidence would result in an unfair trial unless the evidence procured during the second audit was excluded from the trial. He was satisfied that the McCarties would not be able to receive a fair trial because there were no notes from the 2005 meeting and auditor 2, while truthful, could not recall her discussions with auditor 1 or with her supervisor when she sought the authority to compel the bank records.

The court concluded that this lack of affirmative evidence as to the motives or intentions of the CRA in compelling evidence in the second audit deprived the McCarties of the opportunity to have a fair trial. [ 76 ] The Applicants in this case argue that they are in a position analogous to the McCarties. Like McCartie , the Applicants express material concern that the collective lack of notes makes it impossible for them to effectively challenge the motives or intentions of the ASC.

I disagree and say that for a number of reasons. [ 77 ] What was missing in McCartie was the necessary evidence to consider and challenge the motives or intentions of the CRA at the time that it compelled the McCarties’ banking records. In the case before me, there is evidence from Ms. Pickering as to her motivations and intentions at the time she compelled the RBC bank records. That evidence was not challenged. And there is evidence that the ASC acted swiftly to protect investors and to maintain the integrity of the capital market, consistent with its regulatory mandate and Ms. Pickering’s evidence.

In my view, there is sufficient evidence and adequate opportunity for the Applicants to consider and challenge the motives and intentions of the ASC when the ASC compelled the RBC bank information. [ 78 ] Moreover, there is sufficient record of when the ASC first considered the possibility of a criminal investigation and the steps they took to engage with the RCMP. We know what information was shared by the ASC in the referral letter and through witness notes and recollections. [ 79 ] Based on the evidence of Ms. Pickering and Ms.

Campbell, I am satisfied that there is adequate credible and unchallenged evidence as to the motive and intentions of the ASC that clearly demonstrates that when the ASC compelled the RBC banking records using its statutory authority, it did so for the predominant purpose of pursuing its regulatory mandate of protecting the integrity of the Alberta capital market and Base Finance investors. The Applicants had the opportunity to consider, test and challenge that evidence. They challenged the reliability and credibility of the evidence at length as they are entitled to do. My conclusion is unaltered:

1. we have insight into the motives and intentions of the ASC through Ms. Pickering’s evidence, Ms. Campbell’s evidence, and the actions of the ASC taken in the September and October timeframe; 2. when the ASC compelled the Base Finance bank records using its statutory powers, it did so in furtherance of its regulatory mandate and not with a mind to criminal prosecution.

The Applicants’ liberty interests were not at stake at that time; 3. having compelled the RBC banking records for the predominant purpose of an administrative investigation into potential securities violations, the ASC was entitled to share that information with the RCMP at any time including after the RCMP commenced a criminal investigation; and 4. the RCMP were permitted to rely on that information in swearing the ITO to obtain the General Production Order. The evidence obtained under the General Production order was validly obtained. 4.

If there is a breach of the Charter , what is the appropriate remedy? [ 80 ] Having concluded that there has not been a breach of the Applicants’ Charter rights under ss 7, 8 or 11(d), there is no need for me to engage in the analysis under s 24. Heard on the 21 st of August, 2020, the 12 th of January, 2021, the 16 th of February, 2021 and the 5 th of March, 2021. Dated at the City of Calgary, Alberta this 15 th day of March, 2021. Given orally on the 15 th day of March, 2021. N. Dilts J.C.Q.B.A.

Appearances: Brain Holtby, Q.C. and Shelley Smith For the Crown Shamsher Kothari and Benedict Leung For the accused- Susan Elizabeth Way Eleanor Funk and Cory Wilson For the accused- Arnold Breitkreutz