R. v. McCartie Date:, 2014 BCPC 128

Citation: R. v. McCartie Date: 20140529 2014 BCPC 0128 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: N. Preshaw, R.L. Gibson and M. Down Appearing on their own behalf: Colin McCartie and Anne McCartie Place of Hearing: Nanaimo , B.C. Dates of Hearing: July 31, August 1, 23, October 1, 2, 4, November 6, 7, 2013, February 12, 13, 27 April 14, 15, 16, 17, May 20, 21, 22, 23, 29, 2014 Date of Judgment: May 29, 2014

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; R vs McCartie 2013 BCPC 221; R vs McCartie 2013 BCSC 1805; R vsMcCartie 2013 BCPC 289. [3] Relying on R vs Jarvis 2002 SCC 73 , [2002] 3 SCR 757, Mr. & Ms.

McCartie seek to exclude certain evidence whichthe Crown proposes to tender, on the ground that the evidence was obtained from them by compelled disclosure under the statutory auditpowers of the Canada Revenue Agency (“CRA”) at a time when the predominant purpose of CRA’s enquiries was to obtain evidence foruse in a criminal prosecution. In order to rule on that issue, it would be necessary for me to determine the date upon which thepredominant purpose of CRA’s enquiries changed from a civil audit to a criminal investigation (“the Key Date”). I commenced a voirdire on that issue on July 31, 2013.

After 19 days of hearing (some of which were part-days), the “Jarvis voir dire” (as we have come tocall it) is incomplete. Mr. Preshaw, Crown counsel, informs me that I have heard all of the evidence which the Crown considers to benecessary or appropriate on the Jarvis voir dire. Mr. & Ms. McCartie ask me to direct that further Crown witnesses be called. Theyhave not yet said whether there will be defence evidence on the Jarvis voir dire. [4] In September, 2013, Mr. & Ms.

McCartie filed an application for a judicial stay of these proceedings, on the ground that theyhave been materially prejudiced in presenting their defence by the loss of certain notes prepared by Ms. Coles, an auditor employed byCRA, during CRA’s audit of Mr. & Ms. McCartie’s tax returns. If they had not been lost, those notes might have assisted in thedetermination of the Key Date.

I will refer to that application as “the Stay Application”. [5] On May 22, 2014, I asked the parties to consider whether it would then be appropriate to hear and decide the Stay Application,although the Jarvis voir dire was then (and remains) incomplete. Mr. & Ms. McCartie and Mr. Preshaw all replied that they thought thatit would be useful and appropriate to hear and decide the Stay Application at that time. I heard Mr. McCartie’s submissions on the StayApplication on the afternoon of May 22, 2014, and expected to hear the submissions of Ms. McCartie and Mr. Preshaw on May 23,2014.

However, on the morning of May 23, 2014, Mr. & Ms. McCartie informed me that they had reconsidered, and that: a. they ask me to direct that certain other CRA employees, and one former CRA employee, be called as Crown witnesses on theJarvis voir dire; b. they do not think it appropriate to proceed with the Stay Application until all of the evidence on the Jarvis voir dire has beenheard. I must decide whether to direct that further witnesses be called, and whether to defer further consideration of the Stay Application, untilthat has been done.

CONTINUING THE STAY APPLICATION [6] In R vs Bero [2000] OJ #4199; (ON CA), 151 CCC (3d) 545, and in R vs Buyck 2007 YKCA 11; [2007] YJ#52 @ paragraph 23, the Courts of Appeal of Ontario and the Yukon Territory expressed the view that an application for a stay ofproceedings should not be heard or decided until the end of the trial. However, that categorical statement is not supported by the seminalauthority on the point: R vs La (appeal by Vu) (SCC), [1997] 2 SCR 680. The apposite passage is found in thejudgment of Sopinka, J @ paragraph 27.

The appropriateness of a stay of proceedings depends upon the effect of the conduct amounting to an abuse of process or other prejudiceon the fairness of the trial. This is often best assessed in the context of the trial as it unfolds. Accordingly, the trial judge has a discretionas to whether to rule on the application for a stay immediately or after hearing some or all of the evidence. Unless it is clear that no othercourse of action will cure the prejudice that is occasioned by the conduct giving rise to the abuse, it will usually be preferable to reserveon the application.

This will enable the judge to assess the degree of prejudice and as well to determine whether measures to minimizethe prejudice have borne fruit. [7] In this case, the issues on the Jarvis voir dire are distinct from the issues which will arise during the trial proper. On the Jarvisvoir dire, the issues are: a. Was the evidence upon which the Crown relies (or some of it) obtained by a breach of Mr.& Ms. McCartie’s Charter rights? b. If so, should that evidence be excluded on that ground? At trial, the issue will be whether the admissible evidence proves the charges beyond a reasonable doubt.

The Stay Application arisesfrom Mr. & Ms. McCartie’s submission that they have been denied a fair opportunity to prove their case on the Jarvis voir dire by theloss of Ms. Coles’ notes. They do not allege, and it could not fairly be argued, that the loss of Ms. Coles’ notes impairs their ability topresent their case at the trial proper. [8] For the reasons given in paragraphs 6 and 7, I do not think it appropriate to continue with the Stay Application until (

i) I haveheard all of the evidence on the Jarvis voir dire, or (ii) Mr. & Ms. McCartie and Mr. Preshaw all agree that I have heard enough of the

evidence on the Jarvis voir dire to render it appropriate to complete argument on the Stay Application and to render a decision. However, I do not think it necessary or appropriate to defer a decision on the Stay Application until the end of the trial. FURTHER WITNESSES [ 9 ] A

summary of the evidence given thus far is necessary to understand this issue. CRA’s Audit & Investigation Departments [ 10 ] CRA maintains separate departments for civil audits and criminal investigations. The name of the latter changed during the period in issue, having formerly been called the “Enforcement” department and latterly the “Investigations” department. I will refer to it as the “Investigations Department”. The Audit Department and the Investigations Department have separate offices, separate staff and separate files. [ 11 ] The function of the Audit Department is to conduct civil audits.

When an auditor suspects that a criminal offence has been committed, the auditor is required to report the suspicion to her team leader. If the team leader considers it appropriate, the team leader reports the facts to the Investigations Department, which then decides whether to launch a criminal investigation. If the Investigations Department decides to launch a criminal investigation, the Audit Department hands over its file to the Investigations Department and ceases to have any role in the case. The sole function of the Investigations Department is to conduct criminal investigations.

CRA’s Note-Taking Policies [ 12 ] Two CRA auditors, Ms. Coles and Mr. McLachlan, gave divergent evidence about CRA’s note-taking and note retention policies. Ms. Coles said that: a. She took handwritten notes during all meetings of significance, whether with the taxpayer, with other CRA employees or with external sources of information. b. Upon her return to her office, she would transpose those notes onto CRA Form T-2020. c. In many cases, her notes on Form T-2020 were more extensive than her handwritten notes because she would supplement her handwritten notes with her memory of the meeting. d.

Form #T-2020 is used to record notes of: (

i) substantive information received; (ii) significant oral communications; and (iii) decisions relevant to the audit, which are not otherwise recorded in writing. So, for example, all oral communications with the individuals who are the subject of the audit are recorded on Form #T-2020, but correspondence with those individuals is not because hard copies of the correspondence are maintained in the correspondence file. e. As she understood CRA’s policies, she was required to make notes on Form T-2020 whenever she discussed an audit with her team leader or with any employee of the Investigations Department.

Those notes would include summaries of the matters discussed, of any decisions taken and of the reasons for the decisions. f. Form T-2020 notes were stored on CRA’s computer system. [ 13 ] Mr. McLachlan said that he would make a note on Form T-2020 whenever he met with his team leader, but that the note would not necessarily record what was said at the meeting - it might simply record that a meeting occurred.

Similarly, if he met with staff of the Investigations Department, and the Investigations Department decided not to launch a criminal investigation, he would note the existence, but not necessarily the substance, of the discussion, on Form T-2020. He said that, if the Investigations Department decided to launch a criminal investigation, he would hand over his files (paper and electronic) to the Investigations Department, and would not thereafter have access to the file, with the result that he could not make any further notes on Form T-2020. [ 14 ] The evidence includes some examples of Mr.

McLachlan’s T-2020 notes on the McCartie file. They are consistent with his oral evidence of his note-taking practice; i.e. they provide few or no details of the matters discussed on the occasions which are the subject of the notes. [ 15 ] Mr. & Ms. McCartie made access-to-information requests of CRA, seeking to obtain copies of CRA’s written policies on the subject of note-taking and note retention. They received some documents in response to those requests, and those documents were tendered in evidence. It is clear that the policies changed from time to time.

The evidence does not clearly establish which policies were in force at any particular time, nor whether there were different policies applicable in the Audit and Investigations Departments. The Evidence of Mr. Brown [ 16 ] About the end of June, 2004, Mr. Jason Brown, who worked in the Audit Department, was assigned to audit the tax returns of Ms. & Mr. McCartie for the years 2002 and 2003. Mr. Brown completed his audit in March, 2005. As a consequence, he disallowed certain deductions which Mr. McCartie had claimed for certain expenses and issued a notice of reassessment. Mr.

McCartie appealed the re-assessment, and was successful in achieving a substantial reduction in the tax assessed by Mr. Brown. [ 17 ] After the appeal, Mr. McCartie made an assignment in bankruptcy. [ 18 ] Shortly after issuing his notice of reassessment, Mr. Brown was approached by Ms. Karen Etches and Mr. Greg Chan. Ms. Etches was then the Assistant Director of the Investigations Department and Mr. Chan was an investigator who worked under her supervision. Mr. Brown, Ms. Etches and Mr. Chan met. Mr.

Brown described the meeting in the following terms: … they were asking me questions about possibly conducting an investigation, and I told them that this is mostly just personal expenses, and I don’t think that this would warrant a … full-on investigation. I just felt that it was just a --- that they [Ms. & Mr. McCartie] were

just negligent. Mr. Brown said that, at the conclusion of the meeting, Ms. Etches and Mr. Chan expressed a lack of interest in pursuing a criminal investigation of Mr. & Ms. McCartie. [ 19 ] Mr. Preshaw informed me that Ms. Etches and Mr. Chan have no notes of the meeting, and profess to have no recollection of it. [ 20 ] Mr. Brown denied that he suspected Mr. or Ms. McCartie of fraud or tax evasion. However, three passages in his report to his team leader, Mr. Gordon Lidster, cast some doubt on the assertion. a. In his report, Mr. Brown said: The taxpayers’ records were inadequate for income tax purposes.

Furthermore, some of the expense receipts were not even incurred by the taxpayer. In his oral evidence, Mr. Brown characterized that statement as an assumption, rather than an assertion. The document does not support that characterization. b. In his report, Mr. Brown said: Along with the egregious amounts of personal expenses being deducted, there were many other problems with the records. Some of the cash expenses were already recorded. In answer to Mr. McCartie’s question during cross-examination, Mr. Brown confirmed that this passage was intended to convey Mr. Brown’s suspicion that Mr. & Ms.

McCartie had double-reported, or claimed twice, certain expenses. c. In his report, Mr. Brown said: Also, the taxpayer deducted two receipts from the same restaurant bill. In his oral evidence on the Jarvis voir dire , Mr. Brown denied that he intended any of those assertions to be an allegation of criminal fraud. [ 21 ] Mr. Brown was transferred from the Audit Department to the Investigations Department for a period of about 6 months in mid- 2007. [ 22 ] In November, 2007, Mr.

Brown completed and submitted a document, on CRA Form T-133, entitled “Tax Lead or Project Information”, the purpose of which was to recommend a further audit of Ms. & Mr. McCartie, in relation to their tax returns for the years 2005 - 2006. In that document, Mr. Brown said: Geodiscovery Interactive Inc is owned by Annie McCartie although day-to-day operations are performed by Annie’s spouse, Colin. Annie and Colin reported a total income of $28,035 from April 1005 to December 31, 2006.

However, according to income and expense statements provided to trustee, they have personal expenditures of between $4000 and $5000 per month, or between $84,000 and $105,000 from April, 2005 to December 31, 2006. The only known source of revenue is Annie’s company, Geodiscovery Interactive Inc in 2006. Geodiscovery reported $145,000 in subcontracts on gross sales of $165,000, and no T4A’s issued. Was this $145,000 paid to Colin? Between Colin and Annie, they only reported gross income of $1635 in 2006. Colin and Annie were previously audited and reassessed for a large amount of expenses that were deducted.

In 2004, Colin declared bankruptcy and was absolved of his tax debt. In June, 2007 (outside audit period) the McCarties sold their house for $365,000 and purchased a new house for $540,000. Where’s all this money coming from? Possible net worth. [ 23 ] At the conclusion of Mr. Brown’s evidence, I was left in some doubt about the reliability of his evidence. I found it difficult to reconcile his assertion that he did not suspect Mr. & Ms. McCartie of tax evasion with the documents quoted in paragraphs 20 and 22. That, in turn, led me to doubt his assertion that Ms. Etches and Mr.

Chan disclaimed any interest in a criminal investigation. [ 24 ] Mr. Brown was asked no questions about notes, note-taking or Form T-2020. Mr. & Ms. McCartie say that they asked no questions on that subject because Mr. Brown’s T-2020 notes were not disclosed to them until after Mr. Brown had given his evidence and been excused. I asked him no questions about note-taking because I first learned about Form T-2020 from Ms. Coles, who gave evidence after Mr. Brown. If Ms. Coles’ evidence of CRA’s note-taking policies is correct, Mr. Brown ought to have made detailed notes, in Form T-2020, of his meeting with Ms.

Etches and Mr. Chan. Some of his T-2020 notes have since been disclosed by the Crown and tendered in evidence. However, the notes disclosed do not include notes from the period after he issued his notice of re- assessment, and so do not span the period in which he met with Ms. Etches and Mr. Chan, and later with Ms. Coles. No notes of those meetings have been disclosed. The Evidence of Ms. Coles

[ 25 ] The CRA auditor first assigned in response to Mr. Brown’s Form T-133 was Mr. Ian Chabot. Mr. Chabot wrote to Mr. & Ms. McCartie on July 24, 2008, requesting certain types of documents relevant to the assessment of their income for the years 2005 - 2007. There is no indication in the file that Mr. Chabot received any meaningful response to his enquiries, or that he made any progress in the audit. [ 26 ] Mr. Chabot fell ill later that summer, and Ms. Annette Coles, another CRA auditor, was assigned to replace him on August 14, 2008. Ms. Coles does not recall whether she met with Mr.

Chabot when she assumed conduct of the file. She agrees that, in the normal course, she would meet with the preceding auditor on assuming conduct of an audit, so as to be briefed about what had been done and what remained to be done to complete the audit assignment. However, she believes that she may not have done so in this case because Mr. Chabot was unwell. She is simply uncertain about whether the meeting occurred or not. [ 27 ] Ms. Coles said that, if she had met with Mr. Chabot, she would have entered her notes of the meeting on Form T-2020. [ 28 ] Ms. Coles met with Mr.

Brown at an early stage of her audit of the McCartie file. She said that she would have made detailed notes of that meeting on Form T-2020. [ 29 ] At some point in the chronology, CRA received an informer tip in relation to Mr. & Ms. McCartie. Such tips are routed to the Investigations Department. Sometimes, such tips are referred by the Investigations Department to the Audit Department. That was done in relation to Ms. & Mr. McCartie. When first assigned to the file, Ms. Coles attended at the office of the Investigations Department and reviewed the informer tip.

She said that she did not discuss the tip with anyone in the Investigations Department, and that she had no other communication with the Investigations Department (in relation to Ms. or Mr. McCartie) until after the McCartie file had been formally referred to the Investigations Department by Mr. McLachlan (see paragraph 43, below). [ 30 ] On August 25, 2008, Mr. McCartie sent a letter, entitled “Notice of Facts”, to Ms. Coles. Although the document is confusing, it would be reasonable for the reader to infer from it that Mr.

McCartie espoused the theory that “natural persons” (however defined) are not liable to pay income tax. That theory is promoted by a number of people to whom CRA employees commonly refer as “tax protesters”. Ms. Coles said that: (

i) after she read the letter, she probably reviewed it with her team leader, Mr. Lidster, at a meeting; and (ii) they both probably concluded that Mr. & Ms. McCartie were tax protesters. If the meeting occurred, she would have recorded the fact of the meeting, the substance of the discussion, and the conclusion reached in a T-2020 note. However, she does not recall the meeting. [ 31 ] I pause for a necessary digression. The “natural person” theory is complete nonsense. It has no basis in law. It is not even remotely arguable.

It is important to make that clear because some people have been persuaded by it that they are not liable to pay tax, and have suffered as a result. [ 32 ] Ms. Coles, accompanied by another CRA auditor, Mr. Lecznar, met with Mr. & Ms. McCartie in November, 2008. At the meeting, Mr. & Ms. McCartie provided copies of some of the documents which Ms. Coles wanted to see. Among those were some cancelled cheques with the names of the payees blanked out. Mr. & Ms. McCartie declined to provide the names of the payees or unredacted copies of the cheques. Mr. Lecznar and Ms.

Coles each took handwritten notes at the meeting. After the meeting, Mr. Lecznar gave his notes to Ms. Coles and Ms. Coles used them, along with her own, to prepare her T-2020 notes of the meeting. She put the handwritten notes in the file. [ 33 ] In December, 2008, Ms. Coles met with Mr. Lidster. They decided to exercise CRA’s statutory power to issue notices to certain financial institutions to require those institutions to provide copies of financial records pertaining to Mr. & Ms. McCartie. Among the documents sought were unredacted copies of the cheques produced by Mr. & Ms.

McCartie at their meeting with Ms. Coles and Mr. Lecznar. Ms. Coles said that she would have made T-2020 notes of her meeting with Mr. Lidster, recording the decision to issue notices to the financial institutions and the reasons for that decision. [ 34 ] Ms. Coles was transferred to other duties early in 2009. As a result, it was necessary for another auditor to be assigned to the McCartie file. Mr. McLachlan was chosen for that assignment. Because Ms. Coles and Mr. McLachlan belonged to different teams, a meeting or discussion between the two team leaders was necessary to effect the transfer. If Ms.

Coles’ evidence about CRA’ record- keeping policies is correct, there ought to have been a T-2020 note of that communication. No such note has been produced. [ 35 ] Ms. Coles believes that she met with Mr. McLachlan in or about April, 2009 to acquaint him with the file. She has little recollection of the meeting. She believes that she told him of her suspicion that Mr. & Ms. McCartie were tax protesters. She gave Mr. McLachlan her file, including all handwritten and typed notes and all of her T-2020 notes (in electronic form). She did not make a T- 2020 note of her meeting with Mr.

McLachlan - she expected that he would do that. [ 36 ] Ms. Coles said that, when she transferred the file to Mr. McLachlan: a. She had received responses from some, but not all, of the financial institutions. b. The audit was incomplete. c. She thought that Mr. & Ms. McCartie might have underreported gross business revenues, but, in her view, that did not necessarily mean that they had underreported net income or evaded tax, because she did not know what business expenses had been incurred to generate those business revenues. d.

She saw no need to refer the file to the Investigations Department. [ 37 ] After the initiation of this prosecution, Ms. Coles was asked to produce her notes, including her T-2020 notes. She has looked for them, but cannot find them. The last time she saw them was when she handed the file to Mr. McLachlan. As noted below, the evidence provides very little information about how the notes came to be lost. Mr. Preshaw says that the answer to that question may never be known.

The Evidence of Mr. McLachlan [ 38 ] Mr. McLachlan’s team leader, then Mr. Rick Gill, asked him to take on the McCartie audit. Mr. McLachlan does not recall whether he met with Mr. Lidster. He recalls meeting with Ms. Coles, but does not recall what occurred or was discussed at the meeting. He does not recall whether he made notes of the meeting. It was not his view that he was expected or required to make T-2020 notes of the meeting. He recalls that he subsequently met with his team leaders (initially Mr. Gill and latterly Ms.

Sally Biggar), but does not recall how many times he met with them about the McCartie audit, nor what was discussed on each occasion. He did not make T-2020 notes of those meetings. [ 39 ] Mr. McLachlan was busy with other matters, and so unable to give attention to the McCartie audit for some months after receiving the file from Ms. Coles. He thinks that he began work on the file in June, 2009. The only information which he received was: (

i) that contained in Ms. Coles’ file; (ii) responses received from financial institutions during the period April - September, 2009 in response to the requests sent out by Ms. Coles in December, 2008. From that material, he concluded that there were “vast discrepancies” between the income reported by Mr. & Ms. McCartie for the years in question and the information provided by the financial institutions. [ 40 ] Mr. McLachlan had no communication with Mr. or Ms. McCartie on any matter of substance, asked them for no information and received none from them. [ 41 ] On March 2, 2010, Mr.

McLachlan prepared a “Penalty Recommendation Report”, recommending the imposition of a penalty on Mr. McCartie under section 163(2) of the Income Tax Act . In the Penalty Recommendation Report, Mr. McLachlan said (bold print in the original document): [Mr. McCartie] is claiming that he is a “ Natural Person ” and has failed to report any income from his personal business operations. He has failed to report net business income of $404,458.39 for the period 2005-01-01 to 2007-12-31. * * * [Mr. McCartie] failed to provide any documents for his personal business operations.

He did provide some information for his wife’s corporation (operating as CGM Multimedia). [Mr. McCartie] provided information from the corporation blackened all references to Mr. McCartie and to his bank account information. Mr. McCartie’s name was blackened from the cheques and his endorsement was blackened from the back of the cheques. All references to his name on the invoices he issued to the corporation were also blackened out. Bank requirements were issued to determine the business operations of [Mr. McCartie] and confirmed the recipients of the funds. It is instructive to compare Mr.

McLachlan’s conclusions, as expressed in the Penalty Recommendation Report, with those of Ms. Coles, as noted in paragraph 36, above. Essentially, the two auditors were working from the same information. Mr. McLachlan had a complete set of responses from the financial institutions, but there was no suggestion in the evidence that those records were different in kind from the partial responses received by Ms. Coles before April, 2009, or that the additional responses received after April provided the missing information about Mr. McCartie’s business expenses. As noted below, Mr.

McLaclan was prepared to recommend a criminal investigation on the basis of the information he had. Ms. Coles said that she was not. [ 42 ] Mr. McLachlan reviewed the Penalty Recommendation Report with his team leader, Ms. Sally Biggar, on March 4, 2010. Ms. Biggar approved the report on that day. [ 43 ] Once a Penalty Recommendation Report is approved, a copy is sent to the Investigations Department as a matter of routine. That was done in this case. On March 4, 2010, Ms.

Biggar signed a document entitled “Referral to Enforcement Division”, in which the following allegation was made (bold print in the original document): The taxpayers have failed to report over $525,000.00 in Income Tax revenue and almost $30,000 in GST. Colin McCartie has been claiming that he is a Natural Person and has failed to report any of the income he received from 2005 to 2007. [ 44 ] Sometime after March 4, 2010, staff of the Investigations Department came to Mr. McLachlan’s office with a search warrant and seized his file. That seemed to him to be an unusual procedure.

In the ordinary case, if a file was to be referred to the Investigations Department, the file would simply be handed over without a warrant. Hypotheses [ 45 ] Mr. & Ms. McCartie wish to explore the hypothesis that CRA targeted them for audit and prosecution because CRA believed them to be tax protesters. They allege that CRA initiated and pursued a Canada-wide program of such targeted prosecutions, entitled “Project Fable”. They say that records and witnesses from Project Fable are necessary to determine whether, and when, CRA targeted them.

They ask that I direct the Crown to call two other CRA employees on the Jarvis voir dire , being Ms. Cheryl Boggs, whom they allege to be the director of Project Fable, and another CRA employee, unknown to them, who was the Vancouver Island liaison with Project Fable [ 46 ] A second hypothesis is that Ms. Etches and Mr. Chan decided: a. to target Mr. & Ms. McCartie for prosecution because of the information which led Mr. Brown to issue his notice of re- assessment, because CRA believed Mr. & Ms McCartie to be tax protesters, or both; b. to allow the second audit (recommended by Mr.

Brown and ultimately carried out by Ms. Coles and Mr. McLachlan) to take its course before initiating a prosecution, in the hope of obtaining from the second audit evidence for use in the prosecution.

Witnesses Requested [47] Mr. & Ms. McCartie ask that I direct: a. CRA to produce Mr. Brown’s T2020 notes for the period 2005 - 2010, and that he be recalled to permit cross-examination onthose notes. b. that Ms. Etches, Mr. Chan, Mr. Lidster, Ms. Biggar and Mr. Lloyd Robbie be called to give evidence on the Jarvis voir dire. Mr.Robbie is a CRA employee who, in 2007, wrote an e-mail to a colleague, stating that “investigation” had been unable to discover anyexigible assets of Mr. McCartie.

The e-mail does not make it clear whether “investigation” is a reference to the InvestigationsDepartment or to an activity undertaken by Mr. Robbie. c. that Mr. Gibson be called to give evidence in relation to a letter which he sent, his capacity as Crown counsel, to Mr. & Ms.McCartie dated August 15, 2013. Mr. Preshaw admits the authenticity of the letter, but objects to its admissibility. In the letter, Mr.Gibson said: We understand that T2020 notes are ordinarily kept during the course of an audit. We have made enquiries in this regard.

Unfortunately, we understand that due to design issues of the relevant CRA databases, the T2020 entries were not retained in this matter. We understand that you have all available T2020 notes/Memo for File notes that have been retained. d. that Ms. Boggs and the Vancouver Island liaison for Project Fable be called to give evidence in relation to whether, and, if so,when, Mr. & Ms. McCartie became targets of Project Fable. Jurisdiction & Principles [48] Mr. Preshaw concedes that I have jurisdiction to make the orders sought, and submits that the orders are purely discretionary.

Iwas referred to no authority in which the principles governing the exercise of that discretion were articulated. In my view, jurisdiction isconferred by section 699(2) of the Criminal Code, and the governing principles were stated in the following authorities: … [a party] should not be permitted to call[an individual] to conduct a fishing expedition or toexamine in the hope that something might turn up thatwould assist him on the issue; but rather counsel mustsatisfy the judge that there is a real basis forbelieving that it is likely the witness can give materialevidence. Regina v.

Harris (1994), (ON CA), 93 C.C.C. (3d) 478 Although it does not expressly so provide, … the Code implicitly provides that before issuing thesubpoena a justice … should satisfy himself or herself that the person required by the intended subpoena to attend theproceeding is "a person [who] is likely to give materialevidence in [that] proceeding". Foley v.

Gares (1989), (SK CA), 53 C.C.C. (3d) 82 Analysis [49] I must exercise my discretion by reference to two distinct questions. 1 How might the proposed evidence bear on the issues in the Jarvis voir dire, and particularly on the determination of the KeyDate? 2 How might the proposed evidence bear on the issues on the Stay Application, and particularly on the extent, if any, to which Mr.& Ms. McCartie have been hampered in the presentation of their case on the Jarvis voir dire by the loss of Ms. Coles’ notes? [50] In considering those questions, I bear in mind an unusual feature of this case.

When they were Crown counsel, Mr. Gibson andMs. Down told me that, because Mr. & Ms. McCartie allege a breach of their Charter rights, they carry the onus of proving the breachwhich they allege. So, they said, Mr. & Ms. McCartie carry the onus of proving the Key Date, and so carry the onus of proving whenthe predominant purpose of CRA’s enquiries changed from civil audit to criminal investigation. I understand Mr. Preshaw to concurwith them on that point. Mr. Gibson and Ms. Down told me that the issue is to be decided by reference to the subjective state of mind ofMs. Coles and Mr. McLachlan. Mr.

Preshaw has indicated that he advocates a more nuanced approach to the determination of CRA’scorporate purposes from time to time. Whatever the correct approach to that question, Crown counsel have taken the position that Mr. &Ms. McCartie carry the onus of proving CRA’s motivation and intention at the relevant time(s). I confess to some doubt on the pointbecause of the principle that, where the evidence necessary to prove a fact is in the exclusive possession of one party, that party carriesthe onus of proving that fact.

However, the time has not yet come for me to decide that issue, and it may be that Crown counsel arecorrect. On that premise, the onus carried by Mr. & Ms. McCarty is a formidable one, and can, as a practical matter, be discharged onlyby effective cross-examinations of CRA employees. The contemporaneous notes of a witness are among the most effective toolsavailable to the cross-examiner. [51] As noted in paragraph 23, there is reason to be sceptical of Mr. Brown’s evidence. If he has notes of his meeting with Ms.Etches and Mr. Chan or of his meeting with Ms.

Coles, those notes might be of significant use to the cross-examiner. Mr. Preshawobjects on grounds of relevance. He says that the documents which are the subject of the Jarvis voir dire were procured during the

course of the audit conducted by Ms. Coles and Mr. McLachlan, not during the earlier audit conducted by Mr. Brown, and that Mr. Brown’s intentions and motives are irrelevant. I disagree. The audit conducted by Ms. Coles and Mr. Brown was initiated on Mr. Brown’s recommendation. Mr. & Ms. McCartie are entitled to test the hypothesis that, during his audit, Mr. Brown came to suspect them of criminal misconduct, that he reported his suspicion to Ms. Etches, and that he and Ms. Etches decided to initiate a second audit to obtain evidence to confirm that suspicion. On that hypothesis, Ms. Cole’s and Mr.

McLachlan’s denial that they were concerned with a criminal investigation might be perfectly true. They might have been the unwitting tools chosen by Ms. Etches and Mr. Brown. This hypothesis demonstrates the flaw in the assertion by Mr. Gibson and Ms. Down that the only relevant state of mind is that of the auditor who compelled disclosure of the documents in question. [ 52 ] Mr. Preshaw objects that Mr. & Ms. McCartie have already had the opportunity to cross-examine Mr. Brown, and did not pursue the hypothesis outlined above during that cross-examination.

He says that some minimal standard of diligence is to be expected even of an unrepresented accused. I think that the answer to that objection is that Mr. Brown’s notes (T2020 and otherwise) ought to have been disclosed to Mr. & Ms. McCartie before the trial began. Some of his notes were disclosed, but only after Mr. Brown gave evidence, and then only those notes which relate to events before he issued his notice of reassessment. The most important notes, if they exist, would be of his meetings with Ms. Etches and Ms. Coles, which have not yet been disclosed.

I point out that the Crown’s disclosure obligations do not depend on a request by the accused for specific documents or classes of documents. It is the duty of the Crown to disclose relevant documents whether or not it is asked for them. The reason is obvious - the Crown knows what it has and the accused does not. Unless the Crown makes proactive disclosure, the accused may not know what to ask for. [ 53 ] I think it clear that the hypothesis under consideration could be thoroughly tested only by cross-examination of Ms. Etches and Mr.

Chan, and that any notes which they may have would be of material assistance to the cross-examiner. [ 54 ] Mr. Lidster was the team leader for both Mr. Brown (when he worked in the Audit Department) and Ms. Coles. If the hypothesis mentioned is correct, he may or may not have known of the scheme. He may also be able to give useful evidence on either or both of two additional points: a. During her cross-examination of Ms. Coles, Ms. McCartie sought to make the point that it must have been obvious to Ms. Coles at an early stage of the audit that Mr. & Ms. McCartie had evaded payment of tax, because (

i) Mr. McCartie had written to Ms. Coles, asserting that, as a “natural person”, he was exempt from taxation; and (ii) the redacted cheques were highly suspicious. Ms. Coles resisted that line of cross-examination, saying that she was able to conclude only that Mr. & Ms. McCartie had underreported gross revenue, and was unable to draw any conclusion about net taxable income. I have my doubts about that evidence. It would take an extraordinary degree of self-control to refrain from drawing the obvious inference from the information provided to Ms. Coles during the first three months of her audit. Mr.

Lidster discussed the file with Ms. Coles several times during that period. I have in mind that the Jarvis test is not whether CRA suspected criminal activity, but whether CRA’s predominant purpose at the relevant time was to gather evidence for a criminal prosecution, but Mr. Lidster’s evidence may be of assistance on that point. b. As noted above, Ms. Coles and Mr. McLachlan had very different understandings of CRA’s policies regarding the taking and retention of notes. Mr. Lidster ought to know which of them, if either, is right. That may matter because Mr. & Ms.

McCartie say that a failure or omission to create notes may, in the present context, be a ground for a judicial stay of proceedings; i.e. they argue that the principles established in R vs La (appeal by Wu) extend, not only to the preservation of notes which were made, but also to the obligation to create notes which were not made. Mr. Preshaw takes the contrary view. I have not yet heard that argument. In light of R vs Croft 2014 ABQB 23 ; [2014] AJ #28, it seems to me that the point is at least arguable. CRA’s internal policies may be relevant to that issue. There is a difficulty because Mr.

Lidster is retired, and presently on holiday in Europe. However, it is apparent that, no matter what I do, this case will continue on its slow, but inexorable, course toward ultimate resolution. We can await Mr. Lidster’s return. [ 55 ] The application to compel Ms. Biggar’s evidence is less compelling. She was Mr. McLachlan’s team leader in the latter stages of his audit. Mr. McLachlan did not use CRA’s audit powers to compel production of any documents from, or about, Mr. & Ms. McCartie. He received documents from the financial institutions, but only because Ms. Coles and Mr.

Lidster had decided to compel production of those documents, and had issued notices to compel production, before Mr. McLachlan had any role in the audit. He neither compelled nor received any relevant information from Mr. or Ms. McCartie. The essence of the complaint on the Jarvis voir dire is the allegation that CRA used its audit powers to compel production of evidence for use in a criminal prosecution. If that was done, it was done (wittingly or unwittingly) by Ms. Coles and Mr. Lidster, not by Mr. McLachlan or by Ms. Biggar. [ 56 ] I do not think that a sufficient basis has been shown to compel Mr.

Robbie to give evidence. As far as I can tell from the limited information I was given, the circumstances were these. As a result of Mr. Brown’s reassessment, and subject to an appeal which was partly successful, Mr. McCartie owed CRA some money. Mr. Robbie was assigned to collect it. He was unable to find any assets to seize. Nothing in that sequence of events gives rise to a plausible suspicion that anyone at CRA was then interested in a criminal prosecution. The word “investigation” has different meanings in different contexts. In this context, its use does not lead me to think it likely that Mr.

Robbie is able to give material evidence. [ 57 ] Mr. Gibson’s letter contains the only information provided to me about how Ms. Coles’ notes came to be lost. The significance of that information depends on the correct understanding of R vs La (appeal by Wu) . At paragraph 20 of his judgment in that case, Sopinka, J said: This obligation to explain arises out of the duty of the Crown and the police to preserve the fruits of the investigation. The right of disclosure would be a hollow one if the Crown were not required to preserve evidence that is known to be relevant.

Yet despite the best efforts of the Crown to preserve evidence, owing to the frailties of human nature, evidence will occasionally be lost. The principle in Stinchcombe (No. 2), supra , recognizes this unfortunate fact. Where the Crown's explanation satisfies the trial judge that the evidence has not been destroyed or lost owing to unacceptable negligence, the duty to disclose has not been breached. Where the Crown is unable to satisfy the judge in this regard, it has failed to meet its disclosure obligations, and there has accordingly been a breach of s. 7 of the Charter .

Such a failure may also suggest that an abuse of process has occurred, but that is a separate question. It is not necessary that an accused establish abuse of process for the Crown to have failed to meet its s. 7 obligation to disclose.

[58] I put to Mr. Preshaw the following propositions: a. If there were, in this case, no evidence of what happened to Ms. Coles’ notes, it would necessarily follow that: i. the Crown had failed to show that the loss of the notes was not due to unacceptable negligence; and ii. there had been a breach of Mr. & Ms. McCartie’s rights under

section 7 of the Charter. b. As a consequence, Mr. & Ms. McCartie would derive no advantage from Mr. Gibson’s letter (if it were received in evidence) orfrom his oral evidence (if I were to issue a subpoena for him), because there is no other evidence of what happened to the notes. c. Of course, even if a Charter breach is proven, it does not necessarily follow that Mr. & Ms. McCartie are entitled to a stay ofproceedings. Breach and remedy are distinct issues. Mr. Preshaw rejected the proposition “a”. It appears that he has a different understanding of R vs La (appeal by Wu) than I do.

He hasnot yet had a fair opportunity to explain why I am mistaken about that. I must therefore proceed on the basis that Mr. & Ms. McCartiemay have a legitimate need to provide evidence of how the notes came to be lost. None of the witnesses who have given evidence so farwere able to shed any light on that question. The only witness identified so far who might be able to do that is Mr. Gibson. [59] Mr. Preshaw objected to the admissibility of Mr. Gibson’s letter. I was surprised by that, and said so.

In a civil case, a letterwritten by counsel to an opposing party, in which assertions of relevant fact are made, is admissible in evidence as an admission by theauthor’s client, if tendered by a party opposed in interest. If the authenticity of the document is disputed, it may be necessary to call theauthor to prove the document, but the document itself is evidence. Mr. Preshaw says that a different rule applies to letters written byCrown counsel to the accused in a criminal case. He cites no authority for that proposition, but assures me, on the strength of hisexperience as criminal counsel, that it is so.

I have struggled, and failed, to discern any principled basis for the distinction asserted byMr. Preshaw. However, I am prepared to address the present question (whether Mr. Gibson should be compelled to give evidence) onthe assumption that Mr. Preshaw is correct. [60] Whether or not Mr. Gibson’s letter is admissible in evidence, it is insufficient, standing alone, to support a conclusion, one wayor another, on the question whether Ms. Coles notes were deliberately destroyed, lost through unacceptable negligence, lost throughacceptable negligence or lost by innocent inadvertence.

The logical starting point for that enquiry would be a cross-examination of Mr.Gibson to identify his sources of information and to determine exactly what information he was given. [61] Mr. Preshaw submits that it would be inappropriate to require Crown counsel to submit to cross-examination. It has beenrecognized in many cases that difficulties arise when counsel are asked to give evidence. If counsel give evidence, care must be taken toensure that counsel are not compelled to disclose privileged information.

In this case, it would be necessary to consider whether CRAhas waived any privilege which might otherwise exist by the disclosure made in Mr. Gibson’s letter. Difficulties sometimes arise whencounsel propose to continue to conduct the case, as counsel, after giving evidence. That may leave counsel in the embarrassing positionof arguing, as counsel, in support of their own credibility, as witnesses. For that reason, it has often been said that it is unseemly forcounsel to continue to act as counsel after giving evidence: New West Construction Co Ltd vs Canada (FC), [1981] 1FC 583. However: (

i) that issue does not arise here - Mr. Gibson has withdrawn as Crown counsel and been replaced by Mr. Preshaw;(ii) in any event, that concern is subordinate to, and must yield to, the right of a party to compel the evidence of any witness who hasrelevant evidence to give: Phoenix vs Metcalfe (BC CA), [1974] 5 WWR 661; (BC CA), 48 DLR(3d) 631. [62] It is apparent that Mr. Gibson’s evidence would only be the starting point in a protracted enquiry to determine how and whenMs. Coles’ notes were lost. It would be prudent to avoid that enquiry if that is possible.

If I am correct on the issue discussed inparagraph 58, an absence of evidence on the question would mandate a conclusion that the loss of the notes was an infringement of Mr.& Ms. McCartie’s rights under

section 7 of the Charter. If that is right, they don’t need the evidence of Mr. Gibson. However, if I amwrong, and Mr. Preshaw is right, on that issue, then the enquiry which would begin with Mr. Gibson’s evidence is necessary. So, Ishould decide the issue discussed in paragraph 58 before I decide whether to compel Mr. Gibson to give evidence. The parties should beprepared to argue that issue as the first order of business when the case reconvenes. [63] I am not prepared to issue subpoenas in relation to Project Fable on the basis of the information which I now have.

However, Ithink that the Crown has an existing disclosure obligation in relation to this issue which may have been overlooked. Evidence that Mr.or Ms. McCartie was a target of Project Fable before Ms. Coles issued her requirements for documents to the financial institutions wouldbe relevant to the issues on the Jarvis voir dire. If that were true, there would be likely to be references, by name, to Mr. & Ms.McCartie in documents created by the Project Fable team prior to January, 2009. If such documents exist: a. they must be disclosed to Mr. & Ms.

McCartie; b. upon review, they may or may not provide a reason to issue subpoenas to one or more members of the Project Fable team. Disposition [64] Subject to any proper claim of privilege, CRA is to produce to Mr. & Ms. McCartie: a. the pages from the CRA policy manual, setting out CRA’s policies regarding note-taking and note-retention, which were in effect : (i)on the date of Mr. Brown’s meeting with Ms. Etches and Mr. Chan; and (ii) during the period August, 2008 – April, 2009. If there weredifferent policies for the Audit and Investigations Departments, both must be produced.

I hope that it will not be necessary for a witnessto be called to prove the pages from the CRA policy manual. If the parties consider that it is necessary to have viva voce evidence onthat subject, they may address that question when the case reconvenes. b. all notes, of any kind and any date, prepared by Mr. Brown in relation to Mr. & Ms. McCartie;

c. all documents which refer, by name, to Mr. or Ms. McCartie and were prepared by any member of the Project Fable team prior to January, 2009. If production is resisted on grounds of privilege in relation to any of those documents, Crown counsel must provide Mr. & Ms. McCartie with a list of documents over which privilege is claimed, identifying each of those documents by date, author and recipient, and stating the ground(

s) of privilege asserted. The list may be redacted to the extent necessary to protect informer privilege. [ 65 ] If necessary, subpoenas will be issued for Mr. Lidster, Ms. Etches, Mr. Chan and Mr. Brown. I suspect that subpoenas will not be necessary because Mr. Preshaw indicated that CRA would make available any witnesses whom I direct to be called. [ 66 ] Subpoenas will not be issued for Ms. Biggar and Mr. Robbie. I do not consider them to be necessary witnesses. [ 67 ] A subpoena will not be issued for Mr. Gibson at this time.

When the case next comes on for hearing, I will hear submissions on the issue identified in paragraph 58, and will decide that issue. Depending on that decision, a subpoena may be issued for Mr. Gibson. May 29, 2014 __________________________________ T. Gouge, PCJ