Her Majesty the Queen - v. -, 2016 SKPC 145

IN THE PROVINCIAL COURT OF SASKATCHEWAN Citation: 2016 SKPC 145 Date: November 9, 2016 Information: 39744643 Location: Saskatoon _____________________________________________________________________________ Between: Her Majesty the Queen - and - Franc ’s Consulting Inc. and Francine Messier Appearing: Ms. Carol Carlson For the Crown Mr. Lyle Kenneth Bouvier For the Accused JUDGMENT D.A. LAVOIE , J Information #39744643 [ 1 ] The Franc’s Consulting Inc. and Francine Messier stand jointly charged as follows: 1) That Franc ’s Consulting Inc. and Francine Messier (DOB: 17 Aug 1957), both of Saskatoon, Saskatchewan, on or about September 1,

2005, at Saskatoon, Saskatchewan, did make, participate in, assent to or acquiesce in the making of false or deceptive statements in the return of income for Franc’s Consulting Inc. for the taxation year 2005 by failing to report taxable income in the amount of $14,975.00, and did thereby commit an offence contrary to paragraph 239(1)(

a) of the Income Tax Act ; 2) That Franc ’s Consulting Inc. and Francine Messier (DOB: 17 Aug 1957), both of Saskatoon, Saskatchewan, on or about August 31, 2006, at Saskatoon, Saskatchewan, did make, participate in, assent to or acquiesce in the making of false or deceptive statements in the return of income for Franc’s Consulting Inc. for the taxation year 2006 by failing to report taxable income in the amount of $63,084.00, and did thereby commit an offence contrary to paragraph 239(1)(

a) of the Income Tax Act ; and 3) That Franc ’s Consulting Inc. and Francine Messier (DOB: 17 Aug 1957), both of Saskatoon, Saskatchewan between July 31, 2004 and August 31, 2006, at Saskatoon, Saskatchewan, did wifully evade the payment of taxes imposed by the Income Tax Act for the taxation years 2005 and 2006 in the amount of $9,353.00 by failing to report taxable income in the amount of $78,059.00 and did thereby commit an offence contrary to paragraph 239(1)(

d) of the Income Tax Act . [ 2 ] Francine Messier stands charged alone as follows: 4) That Francine Messier (DOB: 17 Aug 1957), of Saskatoon, Saskatchewan, on or about April 22, 2006, at Saskatoon, Saskatchewan, did make, participate in, assent to or acquiesce in the making of false or deceptive statements in her return of income for the taxation year 2005 by failing to report taxable income in the amount of $84,185.00, and did thereby commit an offence contrary to paragraph 239(1)(

a) of the Income Tax Act ; 5) That Francine Messier (DOB: 17 Aug 1957), of Saskatoon, Saskatchewan, on or about April 20, 2007, at Saskatoon, Saskatchewan, did make, participate in, assent to or acquiesce in the making of false or deceptive statements in her return of income for the taxation year 2006 by failing to report taxable income in the amount of $47,971.00, and did thereby commit an offence contrary to paragraph 239(1)(

a) of the Income Tax Act ; 6) That Francine Messier (DOB: 17 Aug 1957), of Saskatoon, Saskatchewan, on or about April 28, 2008, at Saskatoon, Saskatchewan, did make, participate in, assent to or acquiesce in the making of false or deceptive statements in her return of income for the taxation year 2007 by failing to report taxable income in the amount of $56,520.00, and did thereby commit an offence contrary to paragraph 239(1)(

a) of the Income Tax Act ; and 7) That Francine Messier (DOB: 17 Aug 1957), of Saskatoon, Saskatchewan, between December 31, 2004 and April 29, 2008, at Saskatoon, Saskatchewan, did wilfully evade the payment of taxes imposed by the Income Tax Act for the taxation years 2005, 2006 and 2007, inclusive, in the amount of $37,996.00, by failing to report taxable income in the amount of $188,676.00, and did thereby commit an offence contrary to paragraph 239(1)(

d) of the Income Tax Act . [ 3 ] This trial involved some 9 days of hearing evidence and argument over a number of months. During the first few days Francine Messier insisted on self representing herself and the corporate defendant, Franc’s Consulting Inc. of which she was the sole shareholder and director. After strong suggestions by the Court, at the end of day 3 she finally asked for an adjournment so she could retain a lawyer to assist her.

She was represented by counsel for the remainder of the proceedings. [ 4 ] At the beginning of the trial it was agreed all matters could be tried together in the same proceedings. In addition, all documents were filed as full exhibits, by consent, as proof of the truth of their contents. [1] [ 5 ] The following is a

summary of the evidence forthcoming from the witnesses called by the Crown as well as Francine Messier who testified in her own defence at the trial. [ 6 ] In essence Ms. Messier had no formal post secondary accounting education or formal professional accounting designation. However, she clearly put forth the scenario that she had many years of experience running a business that provided bookkeeping, payroll

services, and preparing financial statements and income tax returns for individuals, sole proprietorships, partnerships and corporations that run businesses. She also prepared and electronically filed numerous tax returns for individuals for a professional fee. [ 7 ] Ms. Messier’s evidence set forth her personal circumstances and a detailed evolution of her bookkeeping/accounting business which eventually led to the charges before the Court. She was born in Prince George, British Columbia in 1957. She married and had three children born in 1979, 1981, and 1982.

She was divorced in 1982, moved to Saskatoon and remarried in 1991. She had some work experience in medical records at a Vancouver Hospital. Once moved to Saskatoon she was the office manager and did the bookkeeping for a fairly large restaurant, which was part of a national chain. [ 8 ] This gave her several years of learning fundamental “principles of” bookkeeping, financial statements and bank reconciliation procedures which was the genesis of her own bookkeeping business. From those years of experience she marketed herself as an experienced bookkeeper and started her own business as a sole proprietorship.

At first she worked from home, then as the business grew she rented commercial office space for her enterprise. [ 9 ] In 2000 she incorporated Franc’s Consulting Inc. She did not hire the services of a lawyer for the incorporation. As with her self taught accounting skills, she just went online, figured out the forms and created the corporate accounting business entity, by herself.

It appears she felt this was so simple that she in fact did the same for clients and her children by creating and registering corporate business entities and charged a professional fee for same. [ 10 ] She was the sole shareholder and director of Franc’s Inc. This is how she described the work done by Franc’s Consulting Inc.: Q Did you eventually open up a business for bookkeeping? A Yes. Q And what was that business called? A Franc ’ s Consulting. Q And did you run that as a sole proprietorship? A Yes. Q For how long did you run it as a sole proprietorship? A Over ten years.

Q And specifically what type of business did you do under Franc ’ s Consulting sole proprietorship? A Just small business. Q So small business bookkeeping? A Bookkeeping, yes. Q Did you file returns?

A Yes, mostly T-1s. Q And did the business grow? A Yes. Q And how did it grow? A Word of mouth. Q So did you take any training to become a bookkeeper? A No. Q So how did you learn the trade of bookkeeping? A On the job. Q When you say “ on the job, ” on which job? A Well, mostly at Earl ’ s. they -- I had to fill out certain forms and present reports at the end of every month and then they would send me back where to post it in the general ledger. It was a manual system back then, the old double entry ledger thing so they would send me the entries at the end of the month to make the income statements.

Q And eventually did that sole proprietorship turn into a corporation? Did you incorporate Franc ’ s Consulting? A Yes. Q And what year was that? A 2000 and -- 2000. Q And where did you practise or operate Franc ’ s Consulting Inc. out of? A At first at home. Q And did you move from your home location? A Yes, I moved to 8th Street in 2001. Q And why did you incorporate? A Somebody told me it was better for taxes. Q Did the business operation change? A No. Q And who owned Franc ’ s Consulting Inc? A I did.

Q So you owned all the shares of Franc ’ s Consulting? A Yes. Q And what type of bookkeeping did Franc ’ s Consulting do? A I did most of the day-to-day right from the daily cashouts, payroll hours. I would generate an income statement at the end of the month by reconciling the bank and I did their GST returns, liquor tax returns if they were licensed, and payroll. Q And how did you -- did you use a program, a computerized program for this? A Yes, DacEasy Accounting. Q And the DacEasy Accounting is a software program I take it? A Yes. Q And that ’ s for -- what ’ s the purpose of DacEasy?

A To generate the income statement. Q Did you take any training for DacEasy? A No. Q So how did you learn how to use DacEasy? A Trial and error. Q And did you have a program you utilized for filing returns? A Yes, CanTax. Q How did you learn about the CanTax program? A Like where to buy it do you mean? Q Yeah, when did you first -- A I -- I don ’ t remember. I just probably looked it up on the Internet -- tax programs.

Q And so when you use the CanTax program how does the system work when somebody brings you year-end documents or records or -- A Oh, I just calculate all the numbers and then the program will ask for -- or it ’ ll set out a form to fill in and put in the numbers. Q So was it a fill-in-the-blank type of program? A Yes.

Q And do you have to have any specific knowledge to use the program? A No. Q What happened if an issue came up, you as the bookkeeper, what would you do if you didn ’ t know the answer to a question? A Well, I would phone the inquiry line. Q Which inquiry line? A Yes. CRA inquiry line.

There ’ s two, one for personal and one for corporate. [2] [ 11 ] The business flourished somewhat and she added a payroll service which was operated as a partnership with two other individuals under the name of Gyrus Payroll. [ 12 ] It appears she had a number of new ideas, to provide services and assist her clients in organising their business records to simplify preparing tax returns. [ 13 ] On July 9, 2004 she self-incorporated “The Taxtimer Office Supply Co. Ltd.” under the

Canada Business Corporations Act . She testified how this was a large folding file folder system with a number of labelled compartments, that clients would just have to put business receipts and invoices into so they would be organized when time came to prepare financial statements and tax returns. [ 14 ] She prepared a comprehensive business plan to present to financial institutions, in applying to get financing for the new venture.

Of interest is one line in the business plan which reads: “The owners are competent in financial management, attention to detail, and process and data automation.” [ 15 ] In addition, she promoted her business and expertise in a number of ways. One matter of note, was a business trade show which happened in Saskatoon in the spring of 2006. There was an extensive 16 page brochure published to promote the show by “Mompreneur Networking Group Inc”and an article, written by Francine Messier, appeared at p 7 of the brochure and reads as follows: If the Tax Man Cometh . . . .

Since the current tax system is based on voluntary self-assessment, the various government agencies will, from time to time, call upon the taxpayer to verify all of the information presented. This is when it is imperative to have all records ready for review. The audit/review will consist of verification of revenues and expenses or deductions. Specifically, motor vehicle and entertainment expenses will be challenged. All receipts must be available even if only a percentage has been claimed as a deduction.

Odometer readings on your business vehicle are important and helpful in establishing the percent of business use. All meals and entertainment receipts should be annotated with the name of the client and the purpose of the meeting. It is also helpful to record the outcome if it is known at that time. Business use of Home Expenses is also an issue in some reviews. We will be addressing this item in our next publication.

The judicial system says that you are “innocent until proven guilty”. The tax systems imply that you are “guilty until you prove your own innocence”. Your proof is in your records. It has become apparent that with electronic and telephone filing of tax returns, a large number of taxpayers believe that their obligation is complete upon filing of their return. This is not the case! All records must be kept for six years following the filing date. If you want to destroy your records before the end of the six year period, you must get written permission from the director of your tax services office.

To do this, either use form T137, “Request for Destruction of Books & Records”, or prepare your own written request. Helpful Hint : Keep your records. The revenue agency will most likely request a review before allowing destruction. ( AND we all have better things to do!!) Francine Messier is an accountant and owner of The Taxtimer, a handy organizational tax tool. Visit her website at www.taxtimer.com for more information. [ 16 ] The evidence, as well set out that even with this self professed expertise, Ms.

Messier ran her entire business and personal finances through the Franc’s Consulting Inc., Scotiabank bank account. It is a single, corporate bank account in which she intermingles her personal finances and those of Franc’s Inc, Gyrus Payroll, her three children, her son-in-law, and her husband. The extensive audits done by CRA showed everything was intermingled, intertwined and conducted through a series of transactions, involving the banking needs of everyone enumerated above.

This was done with less than adequate records making it almost impossible to clearly differentiate whether the transactions were related to her businesses or herself or her family members. In addition search warrants were executed by CRA on her business offices and her personal residences. At no time were any hard copies of invoices issued to her business clients ever discovered, or disclosed by her, or produced by her during the entire unfolding of events. [ 17 ] Her explanation to the Court for the non-existence of any client invoices unfolded as follows: THE COURT: Unreported revenue, all right. Okay.

That ’ s it? MR. BOUVIER: Yeah, I believe that wraps up that section. THE COURT: I just have one quick question before we -- you said you generated invoices. THE WITNESS: Yes. THE COURT: Were they computer-generated invoices? THE WITNESS: Yes. THE COURT: They were, so all those invoices would or should still be on your computer. THE WITNESS: No, no, it was an invoice package. You type it up and just print it. It wasn ’ t part of the program. It was a separate program. THE COURT: But it would still record within your computer, wouldn ’ t it? THE WITNESS: I only kept them on a monthly basis.

Once they ’ re paid they went into the tax file -- the client file.

THE COURT: But you didn ’ t keep an electronic copy of anything? THE WITNESS: I had copies but they ’ re not on the computer. THE COURT: But what about the electronic copy within the computer? THE WITNESS: Not on the computer, no. they were paper copies. THE COURT: And you only kept them for a month and then you -- THE WITNESS: No, on the computer only for a month. THE COURT: So kept on the computer, okay, so invoices. You always printed a hard copy? THE WITNESS: Yes. THE COURT: And those hard copies were kept for how long? THE WITNESS: Those were always kept. They would be with my year end files at the end.

THE COURT: But we do have evidence that no invoices were found, hard copies. THE WITNESS: That ’ s what they said, yes. THE COURT: Yes, that ’ s what they ’ ve said. What do you say? THE WITNESS: Well, they were in the files as paid invoices with my year end stuff. [3] [ 18 ] Later she stated that she always mailed a hard copy of the invoice to the client and never kept a hard copy on her files. As well in her business practice the invoices were computer generated but no electronic copy of the invoice was ever kept.

In the end there were no copies of any client invoices in her hard copy files or computer records. [ 19 ] In addition the testimony disclosed she never kept any mileage log or copies of receipts for any of her automobile expenses which she regularly claimed as a 100% deductible business expense in her corporate and personal tax returns. [ 20 ] Of note as well, is in her testimony Ms. Messier made the sad disclosure that during this entire time period she struggled with a severe addiction to alcohol consumption.

Several times she had been through a 30 day inpatient treatment program, only to be struggling with the disease even at the time of trial. [ 21 ] She also disclosed that she was very familiar with the Canada Revenue Agency (hereinafter referred to as “CRA”) auditing process as her business and personal tax returns had been audited several times in and around the year 2000 to 2002. [ 22 ] It is with this background that the following unfolded in the years 2004 to 2008 leading to these charges before the court. [ 23 ] In or around August 2005 Ms.

Messier decided to sell two of her businesses being Franc’s Consulting Inc. (the bookkeeping operation) and the partnership Gyrus Payroll. In her testimony she indicated one of the reasons was to get a bit of operating capital to fully develop her new venture Tax Timer Office Supply Co. Ltd., which was incorporated on July 9, 2004.

[ 24 ] She retained a real estate agent to assist her in finding a buyer for the businesses. An add was placed in the Saskatoon Star Phoenix daily newspaper, to advertise the sale for a price of $120,000.00. In response to the ad a Mr. Laurence Trenouth met with her on September 5, 2005 and after a short discussion gave her a $500.00 deposit cheque payable to Franc’s Consulting Inc. [ 25 ] Mr. Trenouth drafted a written offer to purchase. The parties met again on September 10, 2005, signed the offer and finalized the transaction. The document is fairly short, with the terms of the transaction are set out below: Offer to Purchase Whereas Franc’s Consulting Inc. (Franc’

s) desires to sell certain corporate assets and; whereas Marlet Ventures Inc. (Marlet) desires to purchase these same assets, Marlet hereby offers to purchase these assets. These assets include:

a) The book of business of Franc’s, including the client list as specified in the documentation provided to Larry and Marlene Trenouth, with the exception of specified clients as agreed upon between Larry and Marlene Trenouth and Francine Messier. Also to be included is the tax business and the payroll business known as Gyrus.

b) Assets and supplies as specified in the documentation provided.

c) The use of the name “Franc’s Consulting”.

d) Assumption of the lease from the closing date until the lease expiry date. This offer is for $110,000.00 (one hundred and ten thousand) Canadian dollars. Closing date is to be September 23, 2005, and the purchaser is to take possession on October 1, 2005. Franc’s is to operate the business until October 1, 2005. Payment is to be 50% down payment with the balance to be paid in thirty-six monthly instalments plus interest at Scotiabank prime as of September 23, 2005 plus 1%.

A non-refundable performance deposit of $500.00 has been tendered, which will form part of the down payment when the transaction is closed. [ 26 ] On September 23 the purchaser gave a cheque payable to Franc’s for $54,500.00 representing 50% of the purchase price. The balance of $55,000.00 was to be paid in equal monthly payments over three years with interest at prime rate plus 1%. [ 27 ] In fact the purchaser had prepared and given to the vendor a written detailed payment

schedule setting out the monthly interest being paid with a total for interest payments. Balance of purchase price is $55,000.00 and the total interest to be paid is $4,663.54. [ 28 ] The purchaser took possession on October 1, 2005 and took over the lease, the business offices, the client list and office assets of Franc’s Inc. All accounts receivable remained with Ms. Messier and work in progress was billed to possession date of October 1, 2005.

[ 29 ] On her part, Ms. Messier prepared a hand written list of the office furniture, office equipment and client list which were included in the business sale. [ 30 ] In essence the parties clearly set out the following valuations for the sale: Purchase price $110,000.00, office equipment and supplies $6,000.00, use of the business name nil, take over of office lease nil, client list of book of business $104,000.00. [ 31 ] Some of Franc’s Inc.’s clients were long standing friends or family. Accordingly, it was agreed Ms.

Messier would retain those clients and continue bookkeeping services for them under a sole proprietorship. [ 32 ] The parties sent out a joint letter to all of Franc’s Inc. customers to advise of the Transfer of Ownership. In addition, at the suggestion of the purchaser Ms. Messier personally prepared and both parties signed and filed a specific election form dated October 10, 2005, with the Canada Revenue Agency (hereinafter referred to as “CRA”) such that neither party had to collect, nor pay GST on the transaction. Of note is that one

section of the form reads as follows: Provide a description of the Property Acquired; Answer written in by Ms. Messier: “Office equipment and client list and goodwill”. [ 33 ] It was clear from the purchaser’s evidence that at no time did the purchase include the shares of Franc’s Inc.: Q And my question is is but you were not using -- you were not intending to use the name with the word Inc at the end. A No, we were not. Q And why is that? A Because we did not take on the shares of Franc ’ s Consulting Inc.

Q And the Court has certainly addressed this issue and I ’ m going to ask again, any consideration of buying the shares of Franc ’ s Consulting Inc? A No. Q And why not? A We had no purpose for them and we did not want to assume any potential of unrecorded liabilities. Q And was that ever something that was discussed at all with Francine Messier as a possibility? A We may have laid it out right at the initiation of our discussions. Q So your intention at the very beginning of negotiations were to always buy assets. A That ’ s right.

That was always our intent. [4] [ 34 ] The purchaser made all monthly payments on time, however for whatever reason, Ms. Messier gave him written instructions to change the name of the payee on two occasions. The history of payments unfolded as follows: 1) the first 6 payments were made to Francine Messier personally at her request;

2) pursuant to written instructions from Ms. Messier the next 13 payments were made to Tax Timer Supply Company Ltd.; and 3) on August 16, 2007 the purchaser made an accelerated payment for the balance of the purchase price to Tax Timer in the amount of $21,439.45. [ 35 ] Over the next years Ms. Messier continued to provide bookkeeping services to the clients she had kept under a sole proprietorship. [ 36 ] The fiscal year end for Franc’s Consulting Inc. was July 31.

She in fact personally prepared and filed tax returns as follows: 1) Franc’s Consulting Inc. for year end July 31, 2005; 2) Franc’s Consulting Inc. for year end July 31, 2006; 3) Francine Messier for the 2005 taxation year; 4) Francine Messier for the 2006 taxation year; and 5) Francine Messier for the 2007 taxation year. It is these tax returns that are the subject matter of these charges. [ 37 ] Some time in 2007 the above noted returns were flagged by CRA for further review. In February 2008 they were in fact turned over to the Audit Department for an extensive audit review.

On March 12, 2008 an auditor from CRA had a meeting with Ms.

Messier to advise her of areas of concern and request production of all necessary business records and documents in relation to the above noted tax returns. [ 38 ] The flaws or deliberate failures of reporting alleged by CRA in relation to all the returns which are in essence the res gestae of the charges before the Court are as follows: 1) she at no time reported any of the $110,000.00 sale proceeds of the assets of Franc’s Consulting Inc. as income or capital gains of any kind by either Franc’s Inc. or herself; 2) she declared a capital cost allowance for the equipment, on the Franc’s Inc.

July 31, 2006 return when in fact those assets were sold on October 1, 2005; 3) in those tax returns she failed to report all required personal income from inappropriate shareholder loan credits, from bookkeeping income she performed as a sole proprietor after October 1, 2005, or from other sources which were in fact deemed income; 4) she declared ineligible costs as business expenses on all the tax returns in relation to items such as, car expenses, health insurance premiums and a number of other items for which she had not kept adequate or any records or receipts; 5) failed to report recapture on the $6,000.00 value of the sale of the equipment in Franc’s Inc.; and 6) failed to report the interest income from the deferred monthly payments received from Marlet Ventures Inc.

The Law [39] The defence in their written brief substantially set out the basic legal principles to be applied to this matter. [40] Section 239(1) of the Criminal Code reads as follows: 239

(1) Every person who has (

a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statementor answer filed or made as required by or under this Act or a regulation, (

b) to evade payment of a tax imposed by this Act, destroyed, altered, mutilated, secreted or otherwise disposed of the records orbooks of account of a taxpayer, (

c) made, or assented to or acquiesced in the making of, false or deceptive entries, or omitted, or assented to or acquiesced in theomission, to enter a material particular, in records or books of account of a taxpayer, (

d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act, or [41] A charge under s. 239(1)(

a) of the ITA [Income Tax Act] of making false or deceptive statement in income tax returns requiresthe Crown to prove, beyond a reasonable doubt, that (

a) the accused made, participated in, assented to or acquiesced in the making offalse or deceptive statements, and (

b) they acted so intentionally (R v Alberta Hot Oil Services Ltd., 2006 ABPC 45, para 53). [42] On the other hand, for a charge of tax evasion under s. 239(1)(d), the Crown must prove, beyond reasonable doubt,

an act orcourse of conduct, which has the effect of evading or attempting to evade payment of taxes actually owed under the Act. In the often-cited case of R v Khundert, 2004, [2204] OJ No 3515 (Ont CA), the Ontario Court of Appeal succinctly addressed and analyzed theessential elements of the offence of tax evasion and held thus: [35] The offence requires proof of

an act or course of conduct which has the effect of evading or attempting to evade payment of taxesactually owed under the Act. In normal parlance, the word evade can refer to the act of deliberately avoiding something, or it can carrya sinister connotation meaning an underhanded or devious way of avoiding something. . . . [39] Bayda J.A. (in R v Pavely, (1976), (SK CA), 30 CCC (2d) 483 (Sask CA) provided a helpful analysis of theelements of the offence of tax evasion. He first examined the meaning of the word “wilful” in arriving at the mens rea requirement. I willreturn to that analysis later.

He then turned to the conduct component. He said at pp. 494-495: I am not prepared to go so far as to say that only in those cases where there is an artifice or scheme can there be a conviction for evasionunder this subsection. The presence of an artifice or scheme would tend to make it easier to draw the necessary inference of intent toevade payment of taxes, but in my respectful view it cannot be said that the existence of an artifice or scheme is a necessary element ofthe offence created by this subsection.

Where the necessary intent is present, then the “manner” in which the intent is carried out is notimportant. The plain words of the subsection specify it may be done “in any manner” [emphasis added]. [40] I agree with the above

interpretation of Bayda J.A. Section 239(1)(d), unlike other parts of s. 239, is not limited to specified

conduct, but speaks in broad terms: see R v.Kidd (1974), (ON SC), 6 OR (2d) 769 at 772 (HC). The conduct component of the crime of evading tax contrary to s. 239(1)(

d) is made out if the Crown proves that the accused voluntarily2 performedan act or engaged in a course of conduct that avoided or attempted to avoid payment of tax owing under the Act. 2: I use voluntary as meaning a conscious and willed act. See D. Stuart Canadian Criminal Law: A Treatise, 4th ed. (Carswell Toronto:2001) at pp. 103-107. . . . [46] Although I would avoid the use of the phrase “ulterior motive”, I agree with Bayda J.A. that the word “wilfully” in s. 239(1)(d)signals that culpability will follow only where the accused engages in conduct intended to avoid the payment of tax owing under the Act.More precisely, I think the fault component in s. 239(1)(

d) is twofold. First, the accused must know that tax is owing under the Actand second, the accused must intend to avoid or intend to attempt to avoid payment of that tax. An accused intends to avoid, orintends to attempt to avoid, payment of taxes owing under the Act where that is his purpose, or where he knows that his course ofconduct is virtually certain to result in the avoiding of tax owing under the Act: see Buzzanga, supra, at 383- 385. [43] Thus the law requires the Crown to show (

a) the existence of an unreported “income”, and (

b) the “income” must to have been“wilfully” or “deliberately” falsely reported or evaded. See also: R v Robert Tiffin, 2013 SKPC 140 (Sask PC); R v Wilfred Smith, 2012SKPC 116 (Sask PC); R v Mayda, (ONSC). [44] In determining whether or not the Crown has proven all the elements of the offence charged beyond reasonable doubt vis-à-visthe credibility of an accused, the Supreme Court of Canada, in R v W(D) (1991), (SCC), 63 CCC (3d) 397 at page 409stated the applicable principles: First, if you believe the evidence of the accused, obviously you must acquit.

Second, if you do not believe the testimony of the accused but you are left in reasonable doubt by it, you must acquit.

Third, even if you are not left in doubt by the evidence of the accused, you must ask yourself whether, on the basis of the evidence whichyou do accept, you are convinced beyond a reasonable doubt by that evidence of the guilt of the accused. [45] In R v Ay (1994), (BC CA), 93 CCC (3d) 456 (BCCA) Wood, JA reviewed the law in this area at pp 476 -477 thus: However, it is apparent that throughout their deliberations the jury were troubled by the issue of credibility and how it related to the ruleon reasonable doubt.

The second question asked the judge to re-clarify what reasonable doubt is specifically in the context of "thisparticular case”. Unfortunately, the further instructions which resulted did not relate the rule to the principle issue in this case which wascredibility. The third question left no doubt that the answer to the second had not provided the jury with the assistance they required.What was necessary at that point was a full instruction which made clear to the jury the substance of all the instructions set forth in W.(D.) and this court's decision in R. v.

H. (C.W.) (1991), (BC CA), 68 C.C.C. (3d) 146, 7 W.A.C. 205, 14 W.C.B. (2d)89, namely: (

a) If they believe the accused they must acquit. (

b) If they do not know whether to believe the accused or the complainant, they must acquit. (

c) If they do not reject the evidence of the accused they will have a reasonable doubt and must acquit.

(

d) If they disbelieve the accused, that is if they reject his evidence as untrue, they have to be convinced beyond a reasonable doubtof the guilt of the accused on the whole of the evidence before they could convict. See also: R v Klemenz and Matychuk, 2015 SKCA 89 (SKCA) and R v McKenzie (1994) (SK CA), 141 Sask R 221(SKCA). Analysis and Conclusion [46] The written arguments sets the elements of the defence as follows: Defence Position The Crown has failed to prove beyond a reasonable doubt that either Ms.

Francine Messier and/or the Franc’s Consulting Inc. are guiltyof making false or deceptive statements in the income tax returns filed during the periods in question or that they evaded or attempted toevade compliance with the ITA or payment of taxes imposed by the Act due to the absence of mens rea on all counts.

In the alternative, in the event that this Court finds that the accused did have mens rea in respect of some of the counts, it is our positionthat not all of the amounts contained therein are properly assessed as they are not all income and therefore the requisite actus reus tosupport the charges is absent. [47] In relation to the specific amounts stated in each count the Court is satisfied the case law clearly establishes the evidence neednot prove the exact dollar amount, as set out in the individual counts. [48] In this case it is sufficient for the evidence to establish deceptive statements in relation to specific categories and significantidentifiable amounts. [49] Ms.

Messier gave evidence for several days, basically trying to go through each line item identified in the audit evidence to tryand explain away the conclusions drawn from each entry or deposit. [50] It was an exhausting, time consuming process which in the end gave the Court an extensive time period and basis to assess thecredibility, truthfulness and reliability of Francine Messier’s testimony. The Court somewhat interprets her evidence to try and establishthat in 2005 to 2008 she did not have sufficient detailed knowledge of the requirements of the sale of a corporate business, to deliberatelyfile false returns.

Also at the time she had significant health and substance abuse issues contributing to her confusion and lack of intent tofile false returns. [51] Then on the witness stand some 8 to 10 years later she asserted that she had a clear memory and was able to recollect eachindividual transaction even without complete written or computer documents and records to refresh her memory.

Quite frankly the Courtwas of the opinion that at times she simply made up what she believed to be the proper explanation for the transactions, and then in thenext sentence would change her explanation to something different or ultimately say, “I may be wrong, I can’t remember what that was”. [52] On several of the transactions, with the assistance of the copy of some cancelled cheques she gave a plausible explanation that

a specific deposit was not business income but was in fact a personal banking transaction for her children or husband. Otherwise the majority of her explanations defied all logic, were unsubstantiated by any proper record keeping whatsoever. In other words, the Court totally rejects the majority of her testimony as being unreliable, not plausible or not credible.

The experience of this Court leads it to conclude that most of her explanations and testimony were not based on reliable memory but was simply a desperate attempt on her part to create an internally rationalised explanation or justification that had no basis in the reality of what actually happened.

There is no way the Court is prepared to accept the reliability of her recollection on the stand today when her defence is somewhat based on the fact that 10 years earlier she made a mistake because she was confused and unsure of the specifics of the Income Tax Act on how to report the sale of corporate assets. [ 53 ] The Court categorically rejects her assertion that she thought she was selling the shares of Franc’s Consulting Inc. and could roll over those proceeds to Tax Timer Inc. tax free. The sale documents are very clear she was selling the assets and not the shares.

Further, there are no documents whatsoever to try and document and create such a corporate roll over in the first place. [ 54 ] In addition, at the relevant time, she marketed herself as a competent and knowledgeable bookkeeper and income tax return professional. [ 55 ] Of even further concern for the Court is that her banking and corporate record keeping practices at times fail to meet even the most basic business accounting principles. She used Franc’s Consulting Inc. business banking account for her business, her personal banking, her children’s personal banking and at times her husband’s personal banking.

This Court has come to the conclusion it was an attempt to establish financial corporate record confusion to such a level that no one could be able to figure it out. Adding to that platform, she kept no hard copies of the invoices she sent to her clients so that she could easily verify what was business income and what was not.

Also she kept no receipts of miscellaneous business expenses or mileage log to verify which vehicle expenses. [ 56 ] In her evidence she reluctantly finally admitted to a number of tax reporting errors including: 1) she should have declared the $110,000.00 sale proceeds as income in some form or another; 2) she incorrectly deducted 100% of her vehicle expenses when it should have only been 50%; 3) she should have declared recapture on the $6,000.00 sale of office equipment; 4) she should have declared the interest paid by the purchaser on the deferred payments as income; and 5) while on the stand she on too many occasions to enumerate, reluctantly admitted that she couldn’t remember or admitted that numerous bank deposits were in fact business income that she failed to report.

This Court finds in fact that it was business income that she deliberately failed to report. [ 57 ] Some examples of reluctant admissions are as follows: THE COURT: Deposit of October 28 th ? Q October 28th, ‘ 04. A Yeah, I got that mixed up. That is -- that is revenue, that one. Yeah, somehow I got confused with -- yeah. Yeah, I mixed that up. It was a mistake.

THE COURT: Okay. Meaning -- Q Do you mean that that is a mistake and it should be revenue? A Yes. Q So you admit that that ’ s revenue? A Yes. Q The deposit next is November 15th, ‘ 04, $1,000. A That one again I have searched on that one. There ’ s no deposit slip. I went through everything and I don ’ t see a deposit slip so I did not state it was corporate revenue, I said it could be but I don ’ t know. I have never seen a deposit slip for that. Q But you can ’ t admit or deny anything with respect to that deposit. A Not on that one, no, I -- I don ’ t know.

There ’ s no -- there was a deposit slip for every other one but not for this one so I don ’ t know if it got, you know, misplaced or put in the wrong place or something but I couldn ’ t find it so I have no comment on that one. Q The next one is $123.54. Now there ’ s a notation on the bottom of that saying you confirm that this was revenue with the auditor. Do you remember that conversation? A Oh, I didn ’ t know what to do with that. It was an outstanding invoice of mine. The clients went bankrupt so it went to the trustee and they sent me this $123.

The invoice was for I think three months of work so about $1200 and I wasn ’ t sure what to do with that but Devrin said that should be corporate revenue so we agreed on that one. [5] [ 58 ] Of note is that every mistake, benefited herself and Franc’s Inc. such that she always paid less or not tax. [ 59 ] In the end, this Court has no hesitation whatsoever, in finding the evidence proves beyond a reasonable doubt that Francine Messier had the requisite intent to commit the acts in question each time she prepared and filed the inaccurate tax returns. [ 60 ] As a result the Court finds both defendants guilty of each count set forth in Information #39744643 beyond a reasonable doubt. [ 61 ] Having found both accused guilty of both tax evasion and filing a false return both arising from the same facts, the Court finds itself needing to address the principles set out in R v Kienapple [1995] 1 SCR 729, [1975] 15 CCC (2d) 524 (SCC) and whether or not it is appropriate to convict them of each count.

This matter was not addressed at any time during the proceedings. The Court will now invite counsel to address this legal principle before proceeding further. [ 62 ] As a final matter, the Court would express its appreciation for the work done by both counsel in presenting this case. It was obvious that they were prepared and had a command of the multiple documents filed during the trial. They are to be commended for their counsel works. ____________________

D.A. Lavoie, J [1] Binders 1 through 11, documents 1 - 275) [2] Transcript, p. 503, lines 29 - 41, p. 504, lines 1 - 41, p. 505, lines 1 - 35, p. 506, lines 1 - 24 [3] Transcript, page 613, lines 7 - 41, page 614, lines 1 - 24 [4] Transcript page 38, lines 3 - 8, page 55, lines 39 - 41, page 56, lines 1 - 11 [5] Transcript, page 530, lines 6 - 18, 37 - 41, page 531, lines 1 - 14