R. v. Giroux Date:, 2013 BCPC 330

Citation: R. v. Giroux Date: 20131119 2013 BCPC 0330 File No: 74360-2-C Registry: Nanaimo IN THE PROVINCIAL COURT OF BRITISH COLUMBIA REGINA v. SYLVAIN GIROUX CHRISTINE GIROUX REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE J.P. MacCARTHY Counsel for the Crown: B. Jones and R. Gibson Counsel for the Accused Sylvain Giroux: G. Jones, Q.C. Counsel for the Accused Christine Giroux : D. Mulroney Place of Hearing: Nanaimo , B.C.

Date of Judgment: November 19, 2013 THE COURT (orally): Introduction [1] Sylvain Giroux and Christine Giroux (the "co-accused") are charged on an eight-count information with various offencesrelated to the Income Tax Act and the Excise Tax Act. [2] Sylvain Giroux is charged on Count 1 in his personal capacity with false reporting under s. 239(1)(

a) of the Income Tax Act("ITA") for the taxation years 2006 to 2008, inclusive. [3] On Count 3 in his personal capacity with evasion under s. 239(1)(

d) of the ITA for the taxation years 2006 to 2008, inclusive. [4] On Count 4 in his capacity as a Director of Lyons and Noble Developments Ltd. (the "Corporation") with false reporting unders. 239(1)(

a) of the ITA for the taxation years 2007 and 2008. [5] And on Count 5 in the same capacity with evasion pursuant to s. 239(1)(

d) of the ITA for the taxation years 2007 and 2008. [6] He is further charged in Count 6 in his capacity as a Director of the Corporation with false reporting under s. 327(1)(

a) of theExcise Tax Act ("ETA") for the years 2007 and 2008. [7] On Count 7 in the same capacity with evasion pursuant to s. 327(1)(

c) of the ETA during the period of August 31st, 2006, toJanuary 16th, 2009, inclusive. [8] And on Count 8, in the same capacity, with improperly obtaining a tax credit pursuant to s. 327(1)(

d) of the ETA for thetaxation years 2006 to 2008, inclusive. [9] Christine Giroux is charged on Count 2 in her personal capacity with false reporting under s. 239(1)(

a) of the ITA for thetaxation years 2006 to 2008, inclusive. [10] On Count 3 in her personal capacity jointly with Sylvain Giroux and on Count 3 through 8, jointly with Sylvain Giroux in hercapacity as a Director of the Corporation. [11] The defence has filed and served a Notice of Intention to Seek a Charter Remedy on Crown counsel, alleging violations of theaccuseds' rights under s. 7 and s. 8 of the Charter of Rights and Freedoms (the "Charter"). [12] Defence submits that the Charter rights of the co-accused will be violated in the circumstances of this case if the evidencegathered by Judith Wise, a Canada Revenue Agency ("CRA") auditor, in the course of conducting an audit of the Corporation and theevidence derivative therefrom is used in the course of the prosecution of these charges.

Specifically, defence says that the rights againstself-incrimination and the rights to be warned thereof, their privacy rights, and their rights against unreasonable search and seizure wouldbe violated. [13] Accordingly, the defence wishes to raise a challenge to the evidence sought to be admitted by Crown at trial or to the derivativeevidence. The defence correctly acknowledges that it bears the onus of making an application for remedies such as exclusion ofevidence in a hearing prior to the admission of the evidence.

They further submit that this is usually done by cross-examining Crownwitnesses on the means and the purpose by which they obtained the evidence. [14] The co-accused say that they will ultimately rely upon the Supreme Court of Canada analysis in the decisions of R. v. Jarvis,2002 SCC 73 , [2002] 3 S.C.R. 757, ("Jarvis") and R. v. Ling, 2002 SCC 74 , [2002] 3 S.C.R 814, ("Ling") in seekingto exclude the evidence from the trial under s. 24(2) of the Charter.

Position of the Co-accused [15] It is argued that at a very early stage the predominant purpose of Auditor Wise's audit was the determination of penal liabilityand therefore all Charter protections should have been afforded the co-accused. [16] Defence concedes that under the Jarvis analysis there is no general rule that prevents CRA auditors from passing filescontaining validly obtained audit materials to CRA investigators, nor is there any reason that CRA cannot conduct parallel administrativeaudits and criminal investigations.

However, if the CRA simultaneously conducts an administrative audit and a criminal investigation,the investigators can avail themselves of that information obtained pursuant to the audit powers prior to the commencement of thecriminal investigation. They cannot avail themselves of information obtained pursuant to such audit powers subsequent to thecommencement of the investigation into penal liability. [17] Defence argues that a significant amount of evidence obtained by Auditor Wise falls within that latter category and is thereforesubject to exclusion.

The Vukelich Hearing [18] Accordingly, this court has held a Vukelich hearing (see R. v. Vukelich, (BC CA), [1996] B.C.J. No. 1535(BCCA)) to determine if there is a reasonable factual basis to embark on a voir dire, to ascertain whether the Charter rights of theco-accused were or are violated if that evidence obtained by Auditor Wise is used for the purposes of a prosecution for income taxevasion, either as evidence or as the basis for a search warrant.

Materials Before the Court in The Vukelich Hearing [ 19 ] In the Vukelich hearing the defence provided comprehensive written submissions and detailed oral submissions of counsel.

Defence has relied upon several documents disclosed by the Crown, including: the audit plan containing handwritten notes of the auditor; the auditor's memo to file completed during the course of the audit; correspondence dated July 23rd, 2010, to the Corporation from CRA requesting documentation for the audit; the supplemental will-say statement of Judith Wise dated November 15, 2013; correspondence from CRA dated October 8, 2010, to the Corporation requiring disclosure or further books, records and documents and citing the relevant provisions of the ITA which require such disclosure; notes of the auditor's interview with the Corporation's bookkeeper; a copy of the interview questionnaire prepared by the auditor for her meeting held with her team leader and to interview the co-accused and their professional accountant and containing notes arising therefrom; and the information to obtain search warrants prepared and sworn June 15th, 2011, by Greg Chan, a CRA investigative officer.

Defence Submissions [ 20 ] Defence points to a theme running throughout this documentation in support of its contention that Auditor Wise had commenced the investigation into penal liability and to establish the mens rea of the co-accused for the offences under the ITA and the ETA, at a very early stage. [ 21 ] Defence further points to the very large number of hours, being in the range of 197.5 hours, devoted by Auditor Wise to the audit.

It is submitted this is a further indication that the audit was not really an audit but rather had become an investigation of the co- accused and a hunt for their personal culpability. [ 22 ] It was during this hunt that Auditor Wise compelled disclosure of evidence contrary to the co-accused’s Charter Rights.

This compelled evidence was subsequently used to obtain search warrants. [ 23 ] The cross-examination of Auditor Wise in a voir dire is necessary in order for the court to be able to decide what the auditor's state of mind was at any relevant time with respect to the inquiry that she was conducting: was the predominant purpose of the particular inquiry an audit or was it an investigation to determine penal liability?

In other words, Auditor Wise must be examined to assist in determining whether and, if so, when she as a CRA official, (as is described in Jarvis ) may have "cross(ed) the Rubicon when the inquiry in question engages the adversarial relationship between the taxpayer and the state." (See Jarvis at para. 88 .) [ 24 ] Defence argues that it has raised an issue worthy of an examination to determine whether or not a breach of the defendants' Charter rights has or will occur. Crown's Position and Submissions [ 25 ] Crown submits that a voir dire in which Auditor Wise is cross-examined should not be held.

It is submitted that at all times Auditor Wise was conducting an audit and not an investigation. Crown says that this is evident from the documentation relied upon by the defence. [ 26 ] Although at an early stage of the audit Auditor Wise was considering whether or not the co-accused may be subject to administrative penalties under s. 163(2) of the ITA , she is entitled to do so as part of an audit function. Furthermore, the documentation suggests that Auditor Wise was actually being frustrated by the lack of compliance by the co-accused in providing necessary documentation for her to complete the audit.

In addition, Auditor Wise was challenged to understand the business operations of the Corporation as disclosed by the financial information in her possession and, in particular, the treatment of personal expenses of the co-accused paid for by the Corporation. [ 27 ] Accordingly, the documentation shows that she, in an audit capacity, was seeking to gather necessary information from the co- accused in their capacities as shareholders and Directors of the Corporation.

Therefore, any compulsion for disclosure was in furtherance of the audit function and not part of an investigation of the co-accuseds' mens rea in order to support charges against them under the ITA . [ 28 ] Furthermore, Crown says that at this stage and based upon what defence has put before me, they have not satisfactorily made out that a successful Jarvis defence will ultimately be available to them. Analysis [ 29 ] The accused has no automatic entitlement as of right to a Charter voir dire.

The onus is on the accused on a balance of probabilities to demonstrate the breach of the Charter and the entitlement to a remedy. An exception is the warrantless search, which is prima facie unreasonable. [ 30 ] Although the burden is on the accused, the Crown will often arrange for witnesses to attend and consent to the defence cross- examining the witness. [ 31 ] Vukelich provides some of the following points to assist in determining whether the accused has crossed the threshold required for a voir dire: a.

The trial judge must control the course of the proceedings, and he or she need not embark upon an enquiry that will not assist the proper trial of the legal issues. b. An application for a voir dire must be made before or at the time when the evidence is tendered. c. The reason for having, or not having, a voir dire, and the conduct of such proceedings, should, if possible, be based and determined upon the statements of counsel.

d. Defence counsel should, in the first instance, summarize the facts upon which it relies in support of its submission that there has been a Charter breach. If that does not persuade the trial judge to embark upon a voir dire, then the defence must go further or fail on this issue, subject to its eventual right of appeal. e. Where the statements of counsel are not sufficient to dispose of the application, then a more formal approach is required, involving the filing of affidavits and possibly the undertaking to adduce evidence. f.

The accused is not required to file an affidavit, as it may expose him or her to cross-examination. g. In essence, there must be some factual basis supporting the application before the judge is required to embark on a voir dire. h. If the statement of grounds does not disclose a basis on which the court could make an order excluding evidence, the application may be dismissed without hearing evidence. i. This procedure should be flexible and should be adapted to the circumstances of the case. j.

Defence counsel should advise the court of the circumstances in which the application for a Charter remedy will be made. k. If the circumstances show a basis to conduct a voir dire, then the court should proceed with the hearing and, if necessary, require evidence to be called. l. If the circumstances show no basis for a breach or remedy, the court may dispense with a voir dire and dismiss the application. m.

If the judge is not sure, then he or she may require further evidence on the hearing to dispense with the voir dire. [ 32 ] Based on defence's submission and the materials before me and having due regard for the guidance provided by our Court of Appeal in Vukelich , I am satisfied that defence has met the required threshold and that a voir dire is appropriate and necessary in these circumstances.

Such an enquiry will assist in the proper trial of the possible Jarvis defence and may assist in dealing with further issues, namely a possible challenge by the defence to the search warrants obtained by CRA. [ 33 ] I am mindful of Crown's submissions and in particular the suggestion that at this stage defence has not satisfactorily made out that a Jarvis defence will succeed. It is premature for me at this juncture to decide that issue, without having the appropriate evidence before me to reach such a conclusion.

There is sufficient information before me to conclude that there is some basis for the claim of a Charter breach or a remedy available under the analysis in Jarvis . [ 34 ] A voir dire in which Auditor Wise is cross-examined may provide the necessary evidentiary foundation in support of that Charter breach or a Charter remedy or it may not. I cannot make that determination based upon what I have before me at this stage, but there is sufficient material before me to embark upon that inquiry by way of the voir dire.

Conclusion [ 35 ] Accordingly, I will order that a voir dire will be held, at which time Auditor Judith Wise will be examined and cross-examined to ascertain whether the rights of the co-accused were or are violated if the evidence obtained by Judith Wise is used for the purposes of a prosecution for tax evasion either as evidence or as the basis for a search warrant sought and obtained by CRA. [ 36 ] That concludes my reasons for judgment. (REASONS CONCLUDED)