R. v. McCartie Date:, 2013 BCPC 221

Citation: R. v. McCartie Date: 20130822 2013 BCPC 0221 File No: 1091:74283-1 Registry: Nanaimo IN THE PROVINCIAL COURT OF BRITISH COLUMBIA REGINA v. COLIN McCARTIE and ANNE McCARTIE REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE GOUGE Counsel for the Crown: R.L. Gibson and M. Down Appearing on their own behalf: Colin McCartie and Anne McCartie Place of Hearing: Nanaimo , B.C. Date of Hearing: July 31, August 1, 2013

Date of Judgment: August 22, 2013 Background [1] Mr. and Ms. McCartie are charged with a number of counts of false reporting, and one count each of tax evasion, under section239 of the Income Tax Act. Mr. McCartie is also charged with one count of tax evasion under

section 327 of the Excise Tax Act. [2] This case has an extensive procedural history: R vs McCartie 2012 BCSC 928; R vs McCartie 2012 BCPC 510; R vsMcCartie 2013 BCPC 150; R vs McCartie 2013 BCPC 174. Of those, the last is the most important for present purposes. In it, theHonourable Judge MacCarthy held that informer privilege applies to any information which might give rise to a risk of disclosure of theidentity of an informer in this case. Mr.& Ms. McCartie concede that the “innocence at stake” exception does not apply in this case.

TheCrown acknowledges that the informer, while confidential, was not anonymous, and that the Crown is aware of her or his identity. [3] There is an issue as to whether certain evidence gathered by Canada Revenue Agency (“CRA”), by the exercise of CRA’s auditpowers, should be admissible at this criminal trial because (or so Mr. & Ms. McCartie assert) it was obtained by compelled disclosurefrom them at a time when the predominant purpose of CRA’s enquiries was to gather evidence for a criminal prosecution. Mr. & Ms.McCartie rely on R vs Jarvis 2002 SCC 73 , [2002] 3 SCR 757.

A central subissue is the date on which the predominantpurpose of CRA’s enquiries changed from audit to criminal prosecution (“the Key Date”). [4] Mr. & Ms. McCartie are entitled to oppose the admissibility of any evidence gathered by CRA after the Key Date. Theirobjection on that ground may or may not succeed - I am far from certain that any evidence gathered after the Key Date is necessarilyinadmissible on that ground alone. It is clear that the Key Date must be established as a foundation for their objection. Theidentification of the Key Date will depend primarily on the oral evidence of CRA employees. Mr.

Gibson and Ms. Down have, veryproperly, agreed to call such witnesses as Mr. & Ms. McCartie request who may have material evidence to give on the question. [5] The present problem arises from the Crown’s assertion that much of the evidence which might shed light on the Key Datewould, if disclosed to Mr. & Ms. McCartie, give rise to a risk of disclosure of the identity of the informer. For that reason, Mr. Gibsonand Ms.

Down submit that I should hear evidence in camera to determine: a. whether, and, if so, which, items of evidence relevant to the determination of the Key Date should be excluded from considerationbecause of the risk that, if disclosed to Mr. & Ms. McCartie, they might allow Mr. & Ms. McCartie to identify the informer; b. whether it might be possible to provide Mr. & Ms. McCartie with edited summaries of evidence heard in camera, so as to safeguardthe identity of the informer while providing Mr. & Ms. McCartie with as much information as possible about the evidence. Mr. Gibsonand Ms.

Down point out that a similar procedure is often followed in relation to affidavits filed in support of applications for searchwarrants and wiretaps: R vs Garofoli (SCC), [1990] 2 SCR 1421. The Trial So Far [6] At this stage in the trial, I am in no position to make any assessment of the accuracy or veracity of any of the evidence. Thereferences to the evidence in this judgment are simply summaries of the evidence - they are not findings of fact.

It must not be inferredthat I have accepted (or rejected) the accuracy or veracity of any of the evidence tendered thus far. [7] The trial commenced on the morning of July 31, 2103. Mr. Gibson announced that the first phase of the trial would be the“Jarvis voir dire”, and, with no further ado, called his first witness. I was somewhat bemused by this abrupt plunge into the morass, andsaid so, but allowed Mr. Gibson to proceed. [8] The Crown’s first witness was Mr. Jason Brown, who, in 2004, conducted an audit of Mr. & Ms. McCartie’s 2002 and 2003tax returns.

He submitted his audit report to his supervisor in March 2005. A re-assessment of tax owing for 2002 and 2003 was issuedas a result. Mr. & Ms. McCartie appealed the re-assessment, and were substantially successful on their appeal, resulting in a significantreduction of the re-assessed tax payable. [9] Prior to March, 2005, Mr. Brown had no communication, in relation to Mr. & Ms. McCartie, with the department of CRAresponsible for criminal prosecutions. The name of that department has changed from time to time.

To avoid confusion on the point, Iwill refer to it as the “Enforcement Department”. [10] In March, 2005, Mr. Brown prepared a “Penalty Recommendation Report”, in which he recommended that CRA impose on Mr.& Ms. McCartie penalties pursuant to section 163(2) of the Income Tax Act, which provides: Every person who, knowingly, or under circumstances amounting to gross negligence, has made or has participated in, assented to oracquiesced in the making of, a false statement or omission in a return ... filed or made ... for the purposes of this Act, is liable to apenalty ...

The “Penalty Recommendation Report” contains the following pertinent assertions. The “taxpayer” referred to is Mr. McCartie. The wholly personal nature of the types of expenditures claimed as business expenses supports an assertion that the taxpayer knowinglymade false statements on his tax return by including these amounts. * * *

... the taxpayer deducted two receipts from the same restaurant bill. ... Clearly, the taxpayer was aware that he only paid for one meal, not two. * * * The taxpayer is also claiming expenses incurred in Canada when he wasn’t even in the country. * * * The taxpayer deducted amounts that weren’t even incurred. Simply read grammatically, each of these assertions is an allegation of a criminal fraud on the part of Mr. McCartie. However, Mr. Brown denied that he intended to make such an allegation. He said that he felt that Mr. & Ms.

McCartie were grossly negligent, but that their conduct did not warrant a criminal investigation, and that he thought that some of the unsupported expense claims might prove to be justified when Mr. & Ms. McCartie presented appropriate documentation. [ 11 ] Copies of Penalty Recommendation Reports are sent, as a matter of routine, by the Audit Department of CRA to the Enforcement Department.

That is because, in most cases, circumstances which would justify the imposition of a penalty under section 163(2) of the Income Tax Act raise at least the possibility of criminal misconduct. [ 12 ] Sometime in the two months following preparation of the “Penalty Recommendation Report” (i.e. before June, 2005), Mr. Brown was summoned to a meeting with Ms. Karen Etches, the assistant director of the Enforcement Department, and Mr. Greg Chan, an investigator who reported to Ms. Etches. The duties of Ms. Etches and Mr. Chan at that time were confined to criminal investigations.

The purpose of the meeting was to discuss whether Ms. Etches should initiate a criminal investigation into the affairs of Mr. & Ms. McCartie. Mr. Brown expressed the view that the matter did not warrant a criminal investigation. Ms. Etches and Mr. Chan agreed, because the amounts involved and the available evidence did not, in their view, justify such an investigation. [ 13 ] Mr. Brown flagged Mr. & Ms. McCartie’s audit file for follow-up in future years. [ 14 ] Mr.

Brown was transferred to the Enforcement Department for the period February 5 – August 31, 2007, and worked as an investigator in the Enforcement Department during that time. He does not recall whether he took any of his audit files (including the McCartie audit file) with him to the Enforcement Department, whether he could access the McCartie audit file electronically when he was working in the Enforcement Department, or whether other staff in the Enforcement Department could access audit files (including the McCartie audit file) electronically. [ 15 ] In September, 2007, Mr.

Brown returned to his duties in the Audit Department. His reminder system brought the McCartie audit file forward for review. He ascertained that Mr. McCartie had made an assignment in bankruptcy, and that the annual personal expenses which he reported to his trustee in bankruptcy were greater than could be funded by the income which he reported to CRA. [ 16 ] Mr. Brown’s evidence concluded at the end of the day on July 31.

At that time, I was troubled by the fact that I had heard a day of evidence and still had no idea what the case was about. [ 17 ] It occurred to me that I might begin my search for enlightenment by asking Mr. Gibson to define the issue on the “ Jarvis voir dire ”, so I put that question to Mr. Gibson at the opening of proceedings on August 1. Mr. Gibson deferred to Ms. Down, who told me that the issue on the “ Jarvis voir dire ” is “... when the predominant purpose of the enquiry turned toward a penal investigation”. For the reasons stated below, I do not think that a satisfactory answer.

I made that observation in response to Ms. Down’s comments, but allowed the “ Jarvis voir dire ” to proceed. As will become apparent, that was an error on my part. [ 18 ] The Crown’s second witness on the “ Jarvis voir dire ” was Mr. Gill, who was the supervisor of a CRA audit team, of which Mr. Brown was a member. The team conducted a series of audits of Mr. & Ms. McCartie’s tax returns during the period 2002 – 2007. In his evidence, Mr. Gill identified a document, being a print of a computer screen, which was prepared by his audit team and printed on February 11, 2008.

On the second page of the document appears the imprint of a rubber ink-stamp bearing the following words: ADDITIONAL INFORMATION SEE INVESTIGATIONS DO NOT PLACE SCREEN 1 IN TAX PAYERS FILE I have heard no evidence to indicate when the rubber stamp was imprinted on the page. It may or may not have been so on February 11, 2008. Mr. & Ms. McCartie asked Mr. Gill no questions about the imprint when they cross-examined him. That surprised me because it appears at least likely that the stamp was applied after the Key Date. After the conclusion of Mr. Gill’s examination by the parties, I asked Mr.

Gill about the imprint. He told me that the rubber stamp is kept in the offices of the Investigations Department, and used by that department. I then put the following question and received the following partial answer: Q And tell me if I’m guessing correctly. When a file is referred to the Investigations Department, they would put this stamp on it to alert people that they were doing an investigation? A No, no. What happens here is Investigations may have received information -- At that point, Ms. Down rose to object on the ground that Mr.

Gill’s answer might reveal the date on which CRA received the informer tip, and so, perhaps, assist Mr. & Ms. McCartie to identify the informer. A long discussion of that subject ensued. During the course of that discussion, I asked Ms. McCartie why she had not asked any questions about the imprint of the rubber stamp. The following are extracts from her response to that enquiry:

The reason we didn’t ask questions about the rubber stamp is because we’ve dealt with that ... on disclosure with the Crown. We sawthe rubber stamp; we asked them what it was ... they said it was in relation to the informer tip. Then we went into the whole debateon ... informer privilege ... and then [Judge] MacCarthy ruled. So ...

I had a full understanding of stamp ... as being related toinformer privilege and it was an area that I couldn’t touch. * * * We understood that we were bound by that decision by [Judge] MacCarthy .... [19] I observe that Judge MacCarthy’s reasons contain no reference to any specific items of evidence. I do not know whether thedocument in question was brought to Judge MacCarthy’s attention. I have no reason to think that Judge MacCarthy directed his mind tothis document, or to any specific items of evidence. The Problem [20] The present situation may be summarized as follows: a. Mr. & Ms.

McCartie have no way of knowing whether the answer to a question which they might put to one of the CRA employeesmight give rise to a risk of disclosure of the identification of the informer. I am in the same position. b. In my view, a bare assertion by Crown counsel that the answer might have that consequence is insufficient to support an objection tothe question. There must be a reasonable basis, objectively justifiable, for the fear of disclosure, and the court must be provided with away in which to assess that basis and the extent of the risk.

In relation to some items of evidence, it may be appropriate, and hencenecessary, to put forward a vigorous challenge to such assertions by Crown counsel. c. An exposition by Crown counsel of the basis for the objection and the extent of the risk is likely, in relation to many relevantquestions, to pose a risk of disclosure of the identity of the informer. If so, that exposition should not be given in the presence of Mr. &Ms. McCartie, for the reasons given by Judge MacCarthy in his most recent judgment in this case: 2013 BCPC 174. [21] Mr. Gibson and Ms.

Down submit that I should conduct an in camera hearing to determine what questions may be asked of theCRA witnesses in relation to the Key Date. I am reluctant to do that because of the principle which I articulated in the following terms inmy earlier judgment in this case (2013 BCPC 150): It is a fundamental principle of justice, which admits of few exceptions (and only those which can be justified by the most pressingnecessity), that an accused person is entitled to be present at all parts of the proceedings against him, and to see or hear, and challenge, allof the evidence to be tendered against him.

If I am to be the trial judge, I should not be privy to any information to which Mr. and Ms.McCartie are not also privy. Analysis [22] Although the words “full answer and defence” do not appear in the Canadian Charter of Rights & Freedoms, it is well-settledthat the right to make full answer and defence is an aspect of the right to fundamental justice guaranteed by

section 7 of the Charter. One cannot make a full answer to evidence which one has not heard. The right to make full answer and defence may be limited by otherpressing juridical objectives: R vs Mills (SCC), [1999] 3 SCR 668 @ paragraphs 69 – 76. [23] The Supreme Court of Canada has clearly approved of in camera hearings where there exists a risk that information disclosedduring the hearing may disclose the identity of a confidential informer: R vs Leipert (SCC), [1997] 1 SCR 281; R vsBasi 2009 SCC 52 , [2009] 3 SCR 389.

Where that risk exists, and (as in this case) the “innocence at stake” exception does notapply, the need to protect informer confidentiality outweighs the right of the accused to make full answer and defence. [24] While it may be appropriate to provide the accused with a carefully-redacted version of the evidence at the in camera hearing ora

summary of that evidence, it is difficult, and often dangerous, to do so because of the difficulty of identifying which items of evidencemight disclose the informer’s identity. For those reasons, it will rarely be possible to provide the accused with any information about theevidence given at the in camera hearing: R vs McLellan 2013 BCSC 175 @ paragraphs 36 – 38. [25] In this case, it is reasonable to expect that some of the evidence relevant to the Key Date is likely to pose a risk of disclosing theidentity of the informer. If Mr. & Ms.

McCartie are present when that evidence is given, or objections to that evidence are argued, it islikely that they will learn of facts which would assist them to identify the informer. For that reason, the Key Date should be determinedat an in camera hearing. [26] The next question is whether I should preside at the in camera hearing. Mr. Gibson and Ms.

Down point out that: a. in Basi, the trial judge conducted the in camera hearing and then continued with a conventional trial in the presence of the accused; b. trial judges often hold in camera hearings to review the affidavits on the strength of which search warrants were issued and thenresume the trial in the presence of the accused: Garofoli. [27] On the strength of those authorities, I could preside at the proposed in camera hearing. There remain, however, two furtherquestions: a. Am I required to preside at the in camera hearing? b. If I am not required to preside, should I do so?

For the reasons which follow, I have concluded that, while the Provincial Court of British Columbia is obliged to determine the Key

Date, that determination can and should be made by another judge of the court. [28] In Garofoli, Justice Sopinka said @ page 1449: An objection to the reception of evidence is very much a necessary incident of the trial process. A trial judge before whom wiretapevidence is tendered is obliged to rule on an objection based on alleged breach of the accused’s constitutional rights. He or she hasjurisdiction and it cannot be declined. Taken out of context, those remarks would indicate that I am obliged to determine the Key Date, and so obliged to preside at theproposed in camera hearing.

However, I think that, read in the context of the issues in Garofili and other passages from JusticeSopinka’s judgment, the quoted passage does not impose that obligation upon me. The central issue in that case was whether two kindsof applications (known as “Wilson“ and “Garofili” applications) fell within the jurisdiction of the trial judge (and so could be heard bythe trial judge), or whether such applications fell within the exclusive jurisdiction of the court which issued the warrant in question (andso could not be heard by the trial judge).

At page 1446, Justice Sopinka expressed the view that it would be “highly desirable” for suchapplications to be heard by the trial judge “… so that all aspects of the admissibility of evidence … could be dealt with at one time andat trial.” His Lordship’s ensuing analysis demonstrated that exclusive jurisdiction was not vested in the issuing court, with the resultthat the trial judge had jurisdiction to deal with the issue.

The passage quoted above follows on that analysis. [29] I consider Garofili to be authority for the propositions that: a. a court which has jurisdiction to decide whether a Charter right has been breached, and to grant an appropriate remedy if a breach isfound, is obliged to exercise that jurisdiction and to grant that remedy; b. where the issue arises in the course of a criminal trial, it is highly desirable that the issue be decided by the trial judge. I do not consider Garofili to be authority for the proposition that the issue must be decided by the trial judge.

Put another way, theProvincial Court of British Columbia has a duty to decide the issue, but not necessarily to assign the trial judge to decide it. [30] I observe that, in Garofili, Justice Sopinka quoted with approval the following passage from the judgment of Justice McIntyrein Mills vs The Queen (SCC), [1986] 1 SCR 863: It is to be hoped that trial judges will devise, as the circumstances arise, imaginative remedies to serve the needs of individual cases.

In a similar vein are the following comments, made by Justice (now Chief Justice) McLachlin, in relation to a proposed in camerahearing, in R vs Seaboyer (SCC), [1991] 2 SCR 577 @ paragraph 96: Such procedures do not require legislation. It has always been open to the courts to devise such procedures as may be necessary toensure a fair trial. The requirement of a voir dire before a confession can be admitted, for example, is judge-made law. [31] In this case, the pressing necessity of protecting informer privilege demands a limitation on the right of Mr. & Ms.

McCartie tomake full answer and defence to the charges against them. In such a circumstance, the court should devise a process which provides fullprotection to informer confidentiality while infringing as little as possible on the right to make full answer and defence: R vs EdwardsBooks and Art Ltd (SCC), [1986] 2 SCR 713 @ paragraph 117. [32] I agree with the proposition that it is highly desirable that all evidentiary issues in a trial be decided by the trial judge. However, in the present circumstances, it is more important to devise a trial process which will ensure the fairest possible trial for Mr. &Ms.

McCartie. In the course of the in camera hearing which must now be held, the presiding judge will hear evidence about Mr. & Ms.McCartie and their conduct in relation to tax matters. Because that conduct led to the initiation of this prosecution, it seems likely thatthe evidence will reflect badly on them. Because of the overwhelming imperative of protecting informer privilege, that evidence must betendered in their absence and they must be denied the opportunity to test it by cross-examination or to respond to it. That is a necessaryunfairness.

However, the unfairness would be compounded if the judge who is to ultimately determine their guilt or innocence hearsthat evidence. That would be an unnecessary unfairness, and would infringe more than is necessary on their right to make full answerand defence. [33] There is a further reason to recuse myself from the in camera hearing. As noted below, it may be that the in camera hearingwill be an inquisitorial process.

I am uncomfortable, and the parties would have a right to be uncomfortable, with the idea that I shouldconduct a part of the trial as an inquisitor before resuming my traditional role as an adjudicator in an adversarial process. [34] Another judge of this court will preside at the in camera hearing and determine the Key Date. [35] One reason that objections to evidence should be heard and decided by the trial judge is that context matters, often critically, inrelation to the admissibility of evidence.

In most cases, the trial judge possesses a deeper understanding of the context than anotherjudge sitting in chambers. If I possessed such an advantage in this case, I would still require the Key Date to be determined by anotherjudge, for the reasons given above. Because of the absence of any meaningful opening statement by the Crown, I lack that advantage inthis case. That deficiency should be remedied when the trial reconvenes. The Nature of the In Camera Hearing [36] The in camera hearing is not a voir dire. A voir dire is a hearing to determine the admissibility of one or more specific items ofevidence.

Each item of evidence, and the legal issue to be considered in relation to each, should be specifically identified at the inceptionof the voir dire. It is inappropriate to ask for an advance ruling on a category of items of evidence, or a subject on which evidence mightbe led.

[37] The in camera hearing will be the trial of an issue; specifically the identification of the Key Date. The evidence andsubmissions should be confined to that issue. [38] The judge who presides at the in camera hearing will decide whether to require Mr. Brown and Mr. Gill to attend to giveevidence orally, or whether to accept the transcript of the evidence before me in lieu of oral evidence. That may depend, in part, onwhether Mr. & Ms.

McCartie challenge the credibility of any of that evidence. [39] The judge who presides at the in camera hearing will decide whether any of the evidence tendered at that hearing, or asummary thereof, may be disclosed to Mr. & Ms. McCartie, and, if so, at what stage of the process. [40] I observe that, while a person who alleges an infringement of a Charter right normally carries the onus of proving the breach,on a balance of probabilities ( see R vs Lundrigan (1985) (MB CA), 19 CCC (3d) 499), it is not clear that Mr. & M.McCartie carry the onus of proving the Key Date.

It may be that the Crown carries the onus on that issue because the facts pertinent tothe Key Date are within the exclusive knowledge of the Crown (see Blumberger vs Solloway Mills Ltd. (1932) 46 BCR 241 @paragraphs 13 – 14.). That will be an issue to be considered by the Judge who presides at the in camera hearing. [41] The question of onus of proof also bears on the question whether the in camera hearing is to be an adversarial or inquisitorialprocess. If it is to be an adversarial process, it is difficult to imagine how the case for Mr. & Ms. McCartie is to be presented in theirabsence.

That difficulty may be addressed, at least in part, by the appointment of amicus curiae. I say “in part” because any amicuswould be handicapped by the absence of a client with the ability to give instructions. The difficulty would be significantly enhanced if itwere held that Mr. & Ms. McCartie bear the onus of proof on the issue to be addressed. If the in camera hearing is to be an inquisitorialprocess, the judge conducting the hearing will bear the responsibility to lead a searching enquiry to ensure that the Key Date is properlydetermined in the absence of Mr. & Ms. McCartie.

That task will be somewhat easier if the Crown carries the burden of proof. All ofthese are matters to be decided by the judge who presides at the in camera hearing. [42] Once the Key Date has been judicially determined, I will resume the trial. I will expect the Crown to provide an openingstatement, in which the issues in the case will be identified and the Crown will provide an outline of the evidence which the Crownintends to call. As individual items of evidence are tendered, Mr. & Ms. McCartie may state any objection which they consider proper inrelation to any specific item of evidence.

One or more of those objections may be based on Jarvis. If so, it will be necessary for me todecide whether, and, if so, when, the evidence was procured by compelled disclosure from Mr. & Ms. McCartie. It may be necessary forme to decide whether the fact that an item of evidence was compelled from Mr. & Ms. McCartie after the Key Date is, alone, sufficientto require it to be excluded from evidence. Other issues may arise, and will be decided as and when they arise. August 22, 2013 _____________________ T. Gouge, PCJ