R. v. Dundas and Biokinetic Energy Date:, 2015 BCPC 74

Citation: R. v. Dundas and Biokinetic Energy Date: 20150123 2015 BCPC 0074 File No: 198998-1 Registry: Surrey IN THE PROVINCIAL COURT OF BRITISH COLUMBIA REGINA v. DAVID REX DUNDAS dba BIOKINETIC ENERGY MANAGEMENT ORAL REASONS FOR SENTENCE OF THE HONOURABLE JUDGE M. GILLESPIE Counsel for the Crown: Federal Crown: B. Savage Counsel for the Defendant: D. Albert Place of Hearing: Surrey , B.C. Date of Hearing: January 20, 2015 Date of Judgment: January 23, 2015

BACKGROUND [ 1 ] THE COURT: David Dundas has been given a compliance order on two previous occasions by the courts in relation to failing to file income tax returns. He has pled guilty to failing to comply with the compliance order of Judge Field dated March 6th, 2012. This time in between the date of the charge and the sentencing hearing which occurred two days ago on January 20th, 2015, he has now complied with this order. He advises he retained the services of Barrett Taxation, a law firm in Toronto, who also employs chartered accountants. Mr.

Dundas advises that in addition to the penalties levied by Revenue Canada, which he says are somewhere in the neighbourhood of $30,000, he has paid Barrett Taxation $25,000 to resolve the compliance order issues as he says they were far too complex for him. He also advises today that he continues to retain them for the purposes of ensuring subsequent compliance. ISSUE [ 2 ] What is the appropriate sentence which properly reflects the principles of sentence? POSITION OF THE PARTIES [ 3 ] Crown submits that the appropriate penalty is a 30-day jail sentence and a $4,000 fine.

The defence says that no jail is necessary to address the principles of sentence and that one of the key features I should be mindful of is that the defendant has now complied with the orders and accordingly the principles of sentence can be satisfied through the imposition of a fine. Both parties agree that the predominant principles of sentence here are deterrence, both specific and general deterrence, and denunciation. Where they differ is what the appropriate penalty is to properly address those principles. FACTS [ 4 ] Mr. Dundas is an entrepreneur.

He has over the years run several businesses relating to various computer applications, including being a network administrator. He has evolved those businesses over time. In the result, some of those companies ceased to operate, but because of the structure of these various businesses, tax liabilities have sometimes accrued. While Mr. Dundas's various companies have been profitable, the nature of his business and structures resulted in the creation of complications for his taxation situation. Indeed, Mr.

Dundas did not file tax returns from 2006 through 2010 and GST returns were also not filed in 1999 and 2007 through 2010. [ 5 ] Mr. Dundas reports that he usually earns somewhere in the vicinity of 50 to $60,000 a year and currently services somewhere between four to 800 clients, providing advice on computer-related applications. From my review of the materials provided to me, these clients appear generally to be smaller businesses. He is also involved in the community with various charities. At one time he was a highly-ranked tennis player in British Columbia.

Much of his continued community-based work is in relation to tennis. He is, for example, coordinating volunteers for the Paribas Tournament in Palm Springs in March 2015. RECORD [ 6 ] Mr. Dundas has prior convictions in 2010 and 2012 in relation to this noncompliance, in other words failing to file returns. In 2010 he received a $1,000 fine on five counts, I understand that collectively. I believe that was a $5,000 collective fine. In 2012 he pled guilty to an offence of failing to comply with a compliance order he was ordered by the court to comply with from 2010.

In 2012 he received a $2,000 fine and a three-month conditional sentence order, although I am advised that there were no punitive terms in that order. [ 7 ] This matter was originally set for trial in June 2014. At that time the defendant had not complied with the order of the court to file his tax returns. Since June 2014, defence counsel advises the defendant has retained Barrett Tax Services in Toronto and paid them $25,000 to ensure that he is in compliance with the court orders together with the previous noncompliance for failing to file the returns.

Crown's position is that that has now occurred but that it has taken several years to do that. I should also note that Mr. Albert told me today that in addition to other matters, Mr. Dundas intends to continue to retain the services of Barrett Taxation to ensure that he is compliant in the future. [ 8 ] Crown's position on sentence is that the last time the accused entered a guilty plea it was for failing to comply with a court ordered compliance order. At that time he was sentenced to a three-month conditional sentence order. There were no significant punitive terms.

The defence submits he was unaware that his sentence was the equivalent to a jail sentence. Crown says that the principles of deterrence, both specific and general deterrence, are appropriate here and denunciation.

Notwithstanding that the defendant has now complied with the court orders, his compliance has only arisen after a second set of charges were brought, and then only after he adjourned the first trial date. [ 9 ] Defence counsel submits that the accused was not aware of the impact of a conditional sentence order last time, although I do pause to note that ignorance of the law is not really a mitigating factor here, and that he attempted to comply along the way with the compliance orders but that he received little assistance and ultimately found that it was exceedingly complicated.

He has lost most of the equity in his home and has been required to pay over $30,000 in Revenue Canada assessed penalties, $25,000 in legal and accounting fees to Barrett Taxation, as well as previous penalties imposed as a result of his noncompliance. Defence counsel submits all of the above has served to sufficiently specifically deter his client, so much so that as pointed out today, Mr.

Albert says that his client has now retained the services going forward of Barrett Taxation to ensure future compliance. [ 10 ] He also submits that the step-up principle is not actually a principle of sentence and that what I have to consider here is that the accused has complied now with court orders at considerable expense to himself and that when I consider the principles of sentence it is appropriate for me consider, when assessing whether or not a jail sentence is necessary to further address those principles, all of the additional consequences that I have referenced here as at least in some measure addressing the principles of deterrence and denunciation.

CASE LAW

[ 11 ] Crown provides three cases. The Jakes case is an unreported decision of Judge Alexander, Information 15743 Nelson Registry, June, September, October of 1999. The Jakes case dealt with charges relating to an accused who failed to comply with a compliance order requiring him to produce his income tax return for 1992, 1993, 1994 and 1995. Mr. Jakes filed tax returns ultimately for those years, but in the opinion of Revenue Canada the returns were lacking significant information, most notably any information relating to what his income actually was with an "n/a" listed there.

Ultimately, Revenue Canada concluded that those returns were not adequate and essentially while returns were filed, it had the effect of really thwarting the basis upon which a return should have been filed. [ 12 ] The issue in the trial for the Jakes case was whether the Crown had established that the compliance order actually had been made, and if so whether the tax returns filed by the accused were sufficient to address that order. Judge Alexander found a compliance order was made and then noted that the purpose of a compliance order was to ensure that the accused complies with the Income Tax Act .

Judge Alexander found that Mr. Jakes did not disclose any information relating to his financial circumstances and had not done so up to and including the time of sentencing when she noted that these offences were really failing to comply with an order, not for tax evasion, but in the end she sentenced the accused to 30 days in jail and a fine of $2,000 on each count. She noted that court orders are to be taken seriously and there must be consequences for a breach, as without that foundation the legal system is undermined if there is no meaningful consequence to breaching a court order.

The Supreme Court judgment and the B.C. Court of Appeal judgments are reproduced and they did not alter the decisions both with respect to the judgment at trial, together with sentence. [ 13 ] Yarwood was also provided to me. That Is a January 11th, 2006 unreported decision of Judge Klinger from the Kelowna registry, file number 58797. Mr. Yarwood was also charged for noncompliance. He had not paid his fines, as well, for the previous matter. The judge noted at the time of sentencing that the accused was still noncompliant with respect to his filings and that he had not paid his fines.

On the four counts Judge Klinger levied a further seven days consecutive on each and a $2,000 fine, for a total of 28 days and imposed an intermittent sentence. [ 14 ] McCullough , [2007] B.C.J. No. 710 . The accused here failed to file his 2002 income tax form and failed to abide by compliance orders. He also had a related record for doing the same sort of thing on previous occasions. The Crown sought a jail sentence because of a lengthy history of noncompliance on the part of Mr. McCullough.

The aggravating factors were the related history of noncompliance resulting in conviction, the failure to take any remedial steps, the continued failure to take those steps and the fact that there had been previous sentences and fines levied.

In McCullough at paragraph 20 the judge noted that the Crown had actually adjourned the sentencing matter to determine if the accused would pay the existing fines and file outstanding returns as the Crown submitted, and I quote as this was quoted by Judge Dhillon in the McCullough matter: Compliance was a central factor that would assist in determining what a fit and appropriate sentence should be . [ 15 ] At paragraph 21, Judge Dhillon also observed in McCullough's case that, and I quote: . . . the focus of tax prosecutions [was to have a person] voluntarily submit to reporting and compliance . . . [ 16 ] I just pause to note that from those quotes I take from Judge Dhillon that she believed that in applying the principles of sentence it would be a mitigating factor if at the time of sentence the accused had actually brought themselves into compliance because ultimately that would be serving the underlying goal, which is people voluntarily submitting to reporting and compliance. [ 17 ] Defence counsel provided me with a case called Maguire 1996 O.J.

No. 3502 . In that case the accused failed to file tax returns for years where no tax was owing. It was noted at paragraph 4 that the fact that no tax was owing did not afford a defence to the charge.

The court also noted that there was a significant difference between tax evasion and noncompliance, noting that tax evasion was a more serious offence than noncompliance but that did not derogate from the importance of compliance with taxation legislation inclusive of ensuring that individuals filed because, the court noted, that the integrity of a self-reporting tax system is challenged where people fail to comply with filing tax returns because it makes it more difficult for Revenue Canada to challenge the taxpayer's assertion that they owe no tax, for example.

The court characterized not filing tax returns as serious and it cited the need for general deterrence, specific deterrence. There was a record for similar behaviour but jail, the judge noted, was not the only way to meet the principles of sentence. The accused was fined $20,000 for five counts. No jail was imposed. The court noted the aggravating factors were the related record for disobeying a court order. In mitigation, the accused had pled guilty and he had ultimately complied with the requirements.

In the analysis, the court noted the accused had a related record for noncompliance with taxation requirements and in Canada that requires people to file tax returns annually. This was a serious offence because the integrity of the self-reporting tax system relies on people voluntarily complying with this requirement. Having said this, the accused is not charged with the more serious offence of tax evasion. [ 18 ] In the case before me, those factors are present here. In the case before me as well, the accused has a related record.

He pled guilty in 2010, he was fined for not filing and a compliance order was put in place. He did not comply. This gave rise to a plea in 2012 and a three-month conditional sentence order with no punitive conditions, and more fines on a subsequent compliance order. This gives rise to the third charge of March 2013 which was set for trial for June 2014, at which point in time the accused was not compliant. However, between then and now he has hired Barrett Tax Services and paid $25,000 and is now compliant.

That is, he has paid as I understand his fines, he has filed his tax returns, and been assessed and paid penalties. Those penalties were separately assessed by Revenue Canada and it is certainly within their jurisdiction and discretion to impose those penalties when people are noncompliant, in addition to any other sanction that the court may impose.

He has also lost a significant portion of the equity in his home as a result of paying off these fines and penalties. [ 19 ] I agree that disobeying a court order is a serious matter and that behaviour must be denounced and deterred, as to do otherwise contributes to undermining respect for the law. However, I must look at the moral culpability of the offender and the seriousness of the offence.

I must also be mindful of the comments of Judge Dhillon in McCullough where she observed at McCullough's sentencing that his sentencing had been adjourned to give him an opportunity to comply with the direction of the court to file tax returns and pay off fines. She noted, that is Judge Dhillon, that the Crown conceded in that case that compliance would be a significant factor in assessing the appropriateness of a sentence because after all, as Judge Dhillon noted at paragraph 21, “ . . . the focus of tax prosecutions is having

persons voluntarily submit to reporting and compliance . . .” I find that the accused has now done this. His reporting is up-to-date and he is compliant with the compliance order. I also accept that in addition to the consequences that previous courts have visited upon him by way of penalties and fines in the previous two convictions, he has also lost a significant portion of the equity in his home to pay this off, together with his other fines and penalties. He owes and has paid a $25,000 bill to Barrett Taxation to assist him in becoming compliant.

He has paid what he says is an additional $30,000 in penalties to Revenue Canada. In my view, I can consider those as consequences flowing from his conduct that are capable of at least in part addressing the principles of sentence of deterrence and denunciation, as they too, are a consequence of his action. In my view, I can consider those. They certainly do not fully address that principle, but they are factors I consider in that context. [ 20 ] In my view, in this case Mr. Dundas has had significant financial costs visited upon him by his own noncompliance.

He has, albeit in a tardy manner, ultimately complied with compliance orders and has done what is required to do. I view this as a significant factor on sentencing which does mitigate the need to impose, in my view, a further custodial sentence, as ultimately the goal of the taxation system is to ensure an individual is compliant and he now is.

I also note that his circumstances are different than the offenders in the Jakes and Yarwood cases who were still noncompliant at the time of sentencing and had not brought themselves into compliance in any meaningful way in either of those circumstances and those were factors that the court considered in assessing what was an appropriate penalty in terms of assessing the principles of deterrence and denunciation. [ 21 ] In my view, Mr. Dundas was at the time of the charge noncompliant with a court order.

That gives rise to the principles of sentence of deterrence and denunciation, but as noted, that need to address those by way of a significant custodial sentence is mitigated by his eventual full compliance. Accordingly, I sentence you as follows, sir. I impose a fine of $4,000 and a one day jail sentence without the necessity of you being booked in.

In my view, having regard to the factors that I have outlined, which were the long history of noncompliance but your eventual compliance with significant cost incurred by you to ensure your compliance, and the fact that you were in full compliance and the fact that as noted by Judge Dhillon the ultimate goal of the taxation system is to ensure compliance and voluntarily ensuring that individuals comply with that, that that addresses the principles of deterrence and denunciation.

I am further satisfied today that in terms of specific deterrence your position that you will continue to employ the services of Barrett Taxation at a cost to you demonstrates to me that you also do not wish to find yourself in this place again. So I impose that penalty together, as I have noted, with the one day jail sentence without the necessity of booking you in. How much time do you need to pay? [ 22 ] MR.

ALBERT: I've spoken to my client and he would ask for three to four months to pay that, Your Honour . [ 23 ] THE COURT: Okay, I'm going to give you just out of an abundance of caution six months to discharge the $4,000 penalty. Thank you. (REASONS FOR SENTENCE CONCLUDED)