COLIN MCCARTIE, Appellant, v. HIS MAJESTY THE KING,, 2024 TCC 16

Dockets: 2016-2716(IT)G 2016-2717(GST)G BETWEEN: COLIN MCCARTIE, Appellant, and HIS MAJESTY THE KING, Respondent . Appeal heard on September 20, 21, 22, 23, 2021 and on October 13, 14, 15, 2021 at Vancouver, British Columbia Before: The Honourable Justice Patrick Boyle Appearances : For the Appellant: The Appellant himself Counsel for the Respondent: Eric Brown Jamie Hansen ORDER In accordance with the attached written reasons, it is ordered that in this appeal: 1 .

The respondent cannot introduce or rely on any evidence that was first collected from the search and seizure at the McCarties’ home to establish the amount of tax owing. Further, the respondent’s assumptions set out in its reply do not enjoy any presumption of being correct nor impose any initial burden on Mr. McCartie to demolish them. 2 . The respondent cannot introduce or rely on any evidence that was first collected from the search and seizure at the McCarties’ home to justify reassessing after the normal assessment period had expired; and 3 .

The respondent cannot introduce or rely on any evidence collected from the second audit of the McCarties, or first collected from the search and seizure at the McCarties’ home, to support the penalties assessed. 4 . The Appellant is entitled to costs on this hearing Signed at Ottawa, Canada, this 6 th day of February 2024. “Patrick Boyle” Boyle J. Citation: 2024 TCC 16 Date: 20240206 Dockets: 2016-2716(IT)G 2016-2717(GST)G BETWEEN: COLIN MCCARTIE, Appellant,

and HIS MAJESTY THE KING, Respondent. REASONS FOR ORDER Boyle J. TABLE OF CONTENTS I. Précis 2 II. The Relevant Charter Provisions 4 III. Preliminary Matters 6 (

i) The subpoena of CRA’s Ms. Sundberg. 6 (ii) Scope of voir dire evidence. 7 (iii) Crown concession re 2009 ITA gross-negligence penalty. 8 IV. The Charter Breaches 8 (

i) McCartie 2013 BCPC 221 (“McCartie 2013-1”) (3-day voir dire hearing) 9 (ii) McCartie 2013 BCPC 289 (“McCartie 2013-2”) (3-day voir dire hearing) 11 (iii) McCartie 2014 BCPC 128 (“McCartie 2014”) (19-day voir dire hearing) 13 (iv) McCartie 2015 BCPC 66 , 2015 BCPC 066 (“McCartie 2015-1”) (2-day voir dire hearing) 22 (

v) McCartie 2015 BCPC 69 (“McCartie 2015-2”) 25 (vi) McCartie 2015 BCPC 233 (“McCartie 2015-3”) 34 (vii) McCartie 2015 BCPC 254 (“McCartie 2015-4”) 39 V.

Summary of the BC Court’s Charter breach findings and remedies 50 VI. This Voir Dire Proceeding 51 (

i) Mr. McCartie’s evidence 52 (ii) Annette Coles’ evidence 54 (iii) David McLachlan’s evidence 55 (iv) Angelina Loo’s evidence 56 (

v) Alan Jones’ evidence 57 VII. Law and analysis 59 VIII. The Grant Analysis and Conclusions 60 I. Précis [1] These are my reasons on a voir dire to determine whether a remedy is available, and if so what remedy is appropriate, in thisproceeding in respect of multiple violations of Mr. McCartie’s Charter rights in his related criminal proceedings arising out of CRA’saudit of him and his wife[1]. [2] In the underlying reassessments in issue, Mr.

McCartie is presumed by the Crown to have claimed natural person, sovereign citizentype deductions or non-inclusions to not include, or to significantly reduce, the amount of revenue he reported as taxable and subject toGST/HST. He was reassessed by Canada Revenue Agency (“CRA”) to deny those deductions and to impose gross negligence penalties.

[ 3 ] Mr. McCartie was also charged criminally with false reporting and evasion under the Income Tax Act (“ITA”) and with evasion under the Excise Tax Act (“ETA”) in respect of these claimed deductions or failures to include in income. His wife was also charged under the ITA with evading taxes. Their criminal cases proceeded together in the British Columbia courts. In a lengthy series of rulings, the BC Provincial Court clearly found that the McCarties’ Charter rights had been violated in multiple respects and on multiple occasions. This included their rights under both

section 7 and

section 8 of the Charter. The BC Court imposed

section 24 Charter remedies in respect of these breaches at several stages of the criminal proceedings. Both CRA Criminal Investigations Division and RCMP police were involved in the events giving rise to the breaches of the McCarties’ Charter rights. In the end, the BC Court stayed the criminal charges because it concluded that, in the circumstances, if there were to be a trial, it would not be possible for the McCarties to receive a fair trial as guaranteed by

section 11(

d) of the Charter. [ 4 ] The Charter violations found by the BC Court included breaches of sections 7 and 8 in respect of the search of their home and CRA’s unacceptably negligent loss of its notes and records. The BC Court described the breaches as significant and cumulatively very serious. [ 5 ] The Charter violations found by the BC Court are not being relitigated in this proceeding, and this Court has not been asked to decide if there were events giving rise to other Charter violations. The only Charter issues in this voir dire are whether a

section 24 remedy can be imposed by this Court in respect of Mr. McCartie’s tax appeal for the Charter breaches found by the BC Court in respect of which remedies were already granted in that court and, if so what remedy is appropriate in this Court. This includes possible remedies for breaches of

section 8 Charter rights that only exist with respect to criminal proceedings. [ 6 ] For the reasons that follow, I have decided that

section 24 of the Charter permits this Court to impose remedies if appropriate in respect of Charter breaches determined by another court in which a remedy is already being, or has been, imposed in respect of that court’s proceedings. I have concluded this could extend, if appropriate, to breaches of Mr. McCartie’s

section 7 and

section 11 Charter rights which can only be breached in the context of criminal proceedings. [ 7 ] I have concluded that, in Mr. McCartie’s particular circumstances, certain evidence will not be able to be used by the respondent in this proceeding for certain purposes, whether by way of tendering it in evidence, using it to impeach credibility, referring to it in any manner that is even implicitly suggestive that an adverse inference might be drawn, or otherwise.

The excluded evidence is set out below, and includes evidence subsequently obtained by the respondent as a result of having obtained evidence in breach of Mr. McCartie’s Charter rights. Nor can the respondent use the transcript in this voir dire or these reasons except, as permitted below, with respect to the evidence of the respondent’s witnesses on the substantive issues alone. [ 8 ] I do not and cannot address at this voir dire stage whether Mr.

McCartie’s alleged under-reporting of his income and revenue in the years in question, was done “knowingly or under circumstances amounting to gross negligence” permitting the assessment of penalties, or whether it was a misrepresentation permitting reassessments beyond the normal reassessment period. Those issues have to be left until the hearing resumes on the substantive merits. II. The Relevant Charter Provisions

Legal Rights Life, liberty and security of person 7 Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice. Search or seizure 8 Everyone has the right to be secure against unreasonable search or seizure. Proceedings in criminal and penal matters 11 Any person charged with an offence has the right … (

c) not to be compelled to be a witness in proceedings against that person in respect of the offence; (

d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal; Enforcement Enforcement of guaranteed rights and freedoms 24

(1) Anyone whose rights or freedoms, as guaranteed by this Charter, have been infringed or denied may apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances. Exclusion of evidence bringing administration of justice into disrepute

(2) Where, in proceedings under subsection (1), a court concludes that evidence was obtained in a manner that infringed or denied any rights or freedoms guaranteed by this Charter, the evidence shall be excluded if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute. Garanties juridiques Vie, liberté et sécurité 7 Chacun a droit à la vie, à la liberté et à la sécurité de sa personne; il ne peut être porté atteinte à ce droit qu’en conformité avec les principes de justice fondamentale.

Fouilles, perquisitions ou saisies 8 Chacun a droit à la protection contre les fouilles, les perquisitions ou les saisies abusives. Affaires criminelles et pénales 11 Tout inculpé a le droit : …

c) de ne pas être contraint de témoigner contre lui-même dans toute poursuite intentée contre lui pour l’infraction qu’on lui reproche;

d) d’être présumé innocent tant qu’il n’est pas déclaré coupable, conformément à la loi, par un tribunal indépendant et impartial à l’issue d’un procès public et équitable; Recours Recours en cas d’atteinte aux droits et libertés 24 (1) Toute personne, victime de violation ou de négation des droits ou libertés qui lui sont garantis par la présente charte, peut s’adresser à un tribunal compétent pour obtenir la réparation que le tribunal estime convenable et juste eu égard aux circonstances. Irrecevabilité d’éléments de preuve qui risqueraient de déconsidérer l’administration de la justice

(2) Lorsque, dans une instance visée au paragraphe (1), le tribunal a conclu que des éléments de preuve ont été obtenus dans des conditions qui portent atteinte aux droits ou libertés garantis par la présente charte, ces éléments de preuve sont écartés s’il est établi, eu égard aux circonstances, que leur utilisation est susceptible de déconsidérer l’administration de la justice.

III. Preliminary Matters (

i) The subpoena of CRA’s Ms. Sundberg. [ 9 ] Prior to the hearing, the appellant sought to issue a subpoena for the lead CRA investigator of the McCarties in the years in question, Kathy Sundberg, who testified against them in the BC Court proceedings. Ms. Sundberg had since retired from CRA and the respondent did not want to disclose her address to the appellant. Following a trial management hearing, the respondent agreed it would subpoena Ms. Sundberg and call her as a witness. Attempts to serve Ms. Sundberg were not successful.

Based on the multiple process servers’ reports, I concluded prior to the trial date that Ms. Sundberg was very clearly evading service of the Crown’s subpoena. Accordingly, the Court had arrangements in place for the first day of hearing to promptly and effectively address Ms. Sundberg’s failure to accept service of the subpoena and to attend Court. [ 10 ] Prior to the first day of the hearing, the parties reached an agreement that Mr. McCartie would not require Ms.

Sundberg to testify if certain agreements and concessions were made with respect to her testimony and evidence before the BC Court and that Alan Jones would testify. Mr. Jones was the Team Leader of the CRA Criminal Investigations unit in Vancouver at the relevant times. [2] [ 11 ] In these circumstances, and for purposes of this proceeding, I will regard Ms. Sundberg’s evidence in the BC Court, and what that court wrote about it, as the most favourable version of events from the respondent’s point of view and Ms.

Sundberg’s, as it has not been the subject of further testimony from her or subject to cross-examination in this Court. I will similarly regard what her team leader Mr. Jones testified to in this proceeding regarding Ms. Sundberg as matters Ms. Sundberg would not disagree with as she has herself chose not to testify. Finally, any of Ms. Sundberg’s evidence from the BC Court proceedings can be challenged by Mr.

McCartie in this proceeding as is specified in the parties’ agreement, subject of course to issue estoppel, abuse of process and/or similar constraints. (ii) Scope of voir dire evidence. [ 12 ] This voir dire is to address the issue of what remedy, if any, should be imposed under

section 24 of the Charter in respect of the events and concerns giving rise to several breaches by the respondent of Mr. McCartie’s Charter rights. [ 13 ] Mr. McCartie is a self-represented litigant. In this appeal the onus/burden of proof is on the respondent with respect to both the statute-barred years and gross negligence penalty issues. [ 14 ] In the interest of efficiency of the appeal process as a whole, the parties were agreeable to the Crown witnesses on this voir dire also giving their evidence on the merits and substantive issues in these appeals.

In this decision on the voir dire addressing the issue of remedies, and having decided the remedy will include restrictions on evidence the Crown may submit on the substantive merits regarding these issues, I also need to identify what portion, if any, of their testimony in the voir dire can be used in the hearing on the merits. On this basis, all of the Crown witnesses in this proceeding have given evidence in chief, been cross-examined, and have answered my questions regarding their evidence.

Any further Crown evidence in this proceeding will require leave. [ 15 ] In the circumstances of this case, I would not allow Mr. McCartie to testify in this voir dire to the merits and substantive issues in his appeals. His evidence was limited to the Charter issues and evidence. It did not appear wise to allow an unrepresented appellant testify on a voir dire and submit to cross-examination on the substantive aspects of his appeal. The efficiency of the trial process should not be allowed to override the interests of justice and fairness. When his hearing resumes on the merits, Mr.

McCartie and his other witnesses will testify, be cross-examined and answer the Court’s questions at that time, once Mr. McCartie knows what Crown evidence is excluded. [ 16 ] I did allow Mr. McCartie to testify on a limited basis to facts pertaining to the substantive merits sufficient to provide me with the context he thought I needed to have before hearing the Crown witnesses. [ 17 ] This hearing lasted [7] days over a 3 month period. Written submissions from the parties were scheduled and received thereafter.

The respondent later made written submissions in respect of the subsequent January 2023 decision of juge Lafleur of this Court in Bellevue Félix , 2023 CCI 5 , to which the appellant was also given the opportunity to respond after being provided by the Court with the official English translation of juge Lafleur’s decision. (iii) Crown concession re 2009 ITA gross-negligence penalty. [ 18 ] At the outset of the hearing, the respondent conceded the issue of the assessment of a gross negligence penalty under the ITA for the year 2009. The appeal in respect of that 2009 ITA penalty is allowed. IV.

The Charter Breaches [ 19 ] There are a number of decisions of the BC Court in the years 2013 to 2015 involving the related tax evasion charges against the McCarties. That court found several breaches of the McCarties’ Charter rights under sections 7 and 8.

In the end, the BC Court judge stayed the charges against both McCarties in 2015 on the basis that, if he allowed the trial to continue without access to evidence relating to the date that CRA’s predominant purpose became an investigation of a potential crime, both because of CRA having lost most of the notes taken by the auditor who made notes of almost everything, and the failure of other auditors and/or investigators to make and/or keep notes, and because of the McCarties’ lack of access to the tax lead that may have given rise to the involvement of CRA Criminal Investigations because its contents and/or date might disclose the identity of the informer, would be to deny them to a fair trial and fundamental justice contrary to sections 8 and 11 of the Charter. [3] [ 20 ] The following BC Court decisions and reasons are relevant to this voir dire in Mr.

McCartie’s tax appeal. All of these are decisions

of Judge Gouge, and the McCarties were self represented at each of these hearings. There were at least four earlier decisions of the BCCourt in the McCarties’ proceedings dealing with, among other things, the McCarties’ disclosure request for CRA’s notes and records,the McCarties’ asserting of their rights to fairness in their trial, and the issue of informer privilege. (

i) McCartie 2013 BCPC 221 (“McCartie 2013-1”) (3-day voir dire hearing) [21] In the immediately preceding McCarties decision by another judge, the BC Court determined that informer privilege applied to“Any information which might give rise to a risk of disclosure of the identity of an informer in this case” and “the Crown aknowledgesthat the informer, while confidential, was not anonymous, and the Crown is aware of his or her identity”. [22] Before the BC Court, at this hearing after the trial had commenced, was the issue of whether certain evidence gathered by CRAusing its audit power should be admissible since it was asserted by the McCarties that it was obtained by compelled disclosure at a timethat the predominant purpose of CRA’s inquiries was to gather evidence for a criminal prosecution which is contrary to R. v.

Jarvis 2002SCC 73 , [2002] 3 SCR 757. Central to this issue was the foundational need for the McCarties to establish the date on which thepredominant purpose of CRA’s inquiries changed from audit to potential criminal prosecution which that court referred to, and as definedas, the Key Date. [23] The evidence regarding the Key Date depended primarily on oral evidence of CRA employees. The Crown asserted that “much ofthe evidence that would shed light on the Key Date would, if disclosed to Mr. and Ms. McCartie, give rise to a risk of disclosure of theidentity of the informer”.

The Crown asked Judge Gouge that hear that evidence in camera. [24] Judge Gouge’s

summary of the evidence in the trial prior to the commencement of the voir dire he was then deciding included thefollowing. [25] Jason Brown audited both McCarties’ 2002 and 2003 years in 2004. Mr. Brown submitted his audit report to his supervisor inMarch 2005. Reassessments of both years were issued to both taxpayers. Both McCarties appealed the reassessments and were“substantially successful” resulting in “significant reduction” to their reassessed taxes and the cancellation of penalties assessed. Prior toMarch 2005 Mr.

Brown had no communication with CRA Criminal Investigations relating to the McCarties. [26] In March 2005 Mr. Brown prepared the Penalty Recommendation Report. The penalty report stated that Mr. McCartie knowinglyclaimed specific business expenses that he knew were false having:

i) deducted a single expense twice; ii) deducted expenses incurred inCanada while he was not in the country; and iii) deducted amounts that were not even incurred. [27] Judge Gouge noted that, read grammatically, each of these three assertions is an allegation of criminal fraud by Mr. McCartie. Mr.Brown, however, denied that he intended to make such allegations. That penalty report was sent, as a matter of routine, to CriminalInvestigations.

Per Judge Gouge “That is because, in most cases, the circumstances which will justify the imposition of the penalty undersection 163(2) of the ITA raised at least the possibility of criminal misconduct” [28] In the next two months (prior to June 2005) the Assistant-Director of Criminal Investigations and one of her Investigatorssummoned Mr. Brown to a meeting with them to discuss whether there should be a criminal investigation of the McCarties. It wasdecided that they did not warrant a criminal investigation due to the amounts involved and the available evidence. Mr.

Brown flaggedthe McCarties’ audit files for follow-up in future years. [29] Mr. Brown transferred to Criminal Investigations for a period of six to seven months in 2007 and worked as an Investigatorthroughout that time. He could not recall if he took the McCarties’ audit files with him to Criminal Investigations, whether he couldaccess them electronically, or whether Criminal Investigations could access audit files electronically. [30] At the end of his seven months in Criminal Investigations, Mr. Brown returned to his duties in Audit. His reminder system broughtthe McCarties’ audit files forward for review.

He noted Mr. McCartie had made an assignment in bankruptcy and that his annualpersonal expenses reported to the trustee in bankruptcy could not have been funded from his income reported to CRA. [31] Mr. Brown’s supervisor and Team Leader in Audit also testified. His team conducted a series of audits of the McCarties during theperiods 2002 to 2007. His audit team prepared and printed on February 11, 2008 documents, a portion of which had been rubberstampedafter printing with the words “ADDITIONAL INFORMATION - SEE INVESTIGATIONS - DO NOT PLACE SCREEN 1 INTAXPAYER’S FILE”.

That rubberstamp is kept in the office of Criminal Investigations and used by Criminal Investigations. JudgeGouge wrote that “it appears at least likely that the stamp was applied after the Key Date”. When the judge asked his own question of thewitness about when such a stamp would be applied to documents generally by Criminal Investigations, the Crown objected on the basisan answer might reveal the date of the informer tip and assist the McCarties to identify the informer.

When Judge Gouge did not allowthe objection, the Crown asked for an in camera hearing to determine which questions the McCarties or the judge could put to CRAwitnesses in relation to the Key Date. [32] In his analysis, Judge Gouge described as “well settled” that the right to make full answer and defense is an aspect of the right tofundamental justice guaranteed by

section 7 of the Charter. He continued that one cannot make a full answer to evidence which one hasnot heard. He noted that this may be limited by other pressing juridical objectives and that the Supreme Court of Canada has held that theneed to protect informer confidentiality outweighs the right to fundamental justice. Judge Gouge concluded that an in camera hearingshould be held to determine the Key Date, but that another judge of the BC court should preside at the in camera hearing.

Judge Gougealso noted that, while the onus to prove a Charter breach on a balance of probabilities normally falls on the party alleging the breach, inthis case the Crown may carry that onus as the facts pertaining to the Key Date are within the exclusive knowledge of the Crown. (ii) McCartie 2013 BCPC 289 (“McCartie 2013-2”) (3-day voir dire hearing) [33] A judge of the Supreme Court of British Columbia had held that Judge Gouge had erred in deciding that another BC ProvincialCourt judge should preside at an in camera hearing and determine the Key Date. The matter was sent back to Judge Gouge.

[ 34 ] Judge Gouge wrote in his background paragraphs that the McCarties explained that they were unable to afford counsel and had been refused legal aid. He continued “they are intelligent, articulate, well educated people, but have no legal training.

As a result, the complex procedural issues now under discussion are difficult for them to understand”. [ 35 ] In deciding what procedure would best accommodate to the greatest extent the McCarties’ right to a fair trial and give them a fair opportunity to present their case for exclusion of alleged evidence compelled after the Key Date, given the state’s interest in protecting the identity of a confidential informer, Judge Gouge concluded: a .

An adversarial hearing in which all of the evidence is presented by the Crown, and in which no one is entitled to cross-examine the Crown witnesses, is not a fair hearing; b . An adversarial hearing in which one party, who may bear the onus of proof, is excluded while the other party presents all of the material evidence would be an “extremely unfair hearing”. c . That, if Judge Gouge were to ask questions of the Crown witnesses on behalf of the McCarties, but without any ability to get instructions from them or to review all of the Crown disclosure to them, that process would be “grossly unfair”. [4] d .

There should be no in camera hearing to determine the Key Date in the course of the trial, unless and until the Crown identifies that information relevant to the confidential informer identity is about to be, or may be revealed. At that time, the hearing of the trial would proceed in camera until the judge decides the risk has passed. e . While the trial is heard in camera , the judge would ask questions of counsel and witnesses as he thinks appropriate which may include a “searching cross-examination” of a witness, and f .

While excluded from any witness’ testimony, the McCarties could offer suggestions to the judge, in the presence of the Crown but not the witness, as to areas of evidence he ought to explore with each witness and suggestions for cross-examination by the judge when the in camera testimony of the Court continued. [ 36 ] Judge Gouge noted that he was not confident his procedure would result in a fair trial and that he could only assess that later in the trial.

If he were to conclude the trial was not fair, it would then be necessary for him to decide whether it should be allowed to proceed, despite the unfairness, or whether a stay of proceedings should be ordered by him. [ 37 ] He further noted that, as the standard of proof in proving the Key Date was a balance of probabilities, and given that determinations to such a standard rarely depend on who bears the onus, it might never be necessary to decide where the onus lies in this case. (iii) McCartie 2014 BCPC 128 (“McCartie 2014”) (19-day voir dire hearing) [ 38 ] Judge Gouge begins by noting that, at this stage, he is at 19 days of a voir dire hearing since resuming the trial after McCartie 2013- 2 had started and that the voir dire is incomplete.

He suspended this voir dire after he asked the parties if it should be suspended to allow him to hear and decide an application by the McCarties for a stay of judicial proceeding filed months earlier after McCartie 2013-2. The grounds advanced for the stay were that the McCarties had been denied a fair opportunity to prove their case on the voir dire as a result of CRA’s loss of the notes prepared by Annette Coles, a CRA auditor, during the CRA audit of the McCarties for 2005 to 2007. The parties all agreed that the stay application should be heard at that time. However, after Mr.

McCartie made their submissions, and just before the Crown was to make its submissions, the McCarties said that they had reconsidered, that they wanted to finish calling their witnesses in the Jarvis voir dire and defer further consideration of the stay application until that had been completed.

Judge Gouge decided that it was not appropriate to continue hearing a stay application until either: 1) All of the evidence on the Jarvis voir dire had been heard; or 2) All of the parties agreed that enough evidence had been heard on the Jarvis voir dire to return to hear and decide the stay application. [ 39 ] Further evidence/facts in this decision: Judge Gouge’s

summary of the evidence heard to that date was as follows. [ 40 ] CRA has separate departments for civil audits and for Criminal Investigations that have separate offices, separate staff and separate files. When an auditor suspects that a criminal offence has been committed, they are required to report their suspicions to their team leader. If the team leader considers it appropriate, the team leader reports the facts to Criminal Investigations, which then decides whether to launch a criminal investigation.

If it decides to launch a criminal investigation, Audit hands over its file to Criminal Investigations and ceases to have any role with the case. [ 41 ] The evidence of CRA’s note-taking policies was from two auditors involved with the McCarties’ audits—Ms. Coles mentioned above, and David McLachlin, who took over the audits from Ms. Coles (and who also testified in the voir dire I am now deciding). The evidence of these two auditors diverged on this topic. Judge Gouge summarized Ms. Coles’ evidence; it included: [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. [ 42 ] Judge Gouge’s

summary of Mr. Brown’s evidence included: [18] Shortly after issuing his notice of reassessment [for the earlier years 2002-2003 in 2005], 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 [respondent counsel] 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. [5] 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. (Emphasis added) [ 43 ] Mr. Brown’s T-133 Tax Lead was first assigned to auditor Ian Chabot.

After making a request to the McCarties for documents related to 2005 to 2007, Mr. Chabot fell ill which is when Ms. Coles became the auditor for the McCarties. Judge Gouge’s

summary of Ms. Coles evidence included: [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. [6] 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. [ 44 ] Judge Gouge’s

summary of Mr. McLachlan’s evidence included: [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 theadditional responses received after April provided the missing information about Mr. McCartie’s business expenses. Asnoted 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 ofroutine. That was done in this case. On March 4, 2010, Ms. Biggar signed a document entitled “Referral to EnforcementDivision”, 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 McCartiehas 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 searchwarrant and seized his file. That seemed to him to be an unusual procedure. In the ordinary case, if a file was to be referredto the Investigations Department, the file would simply be handed over without a warrant. [45] The McCarties asked Judge Gouge to compel a number of CRA witnesses to testify in the Jarvis voir dire along with one Justicelawyer.

The CRA witnesses requested were those involved in CRA’s Project Fable, a Canada-wide program of targeted prosecutions ofCanadians CRA believed to be tax protesters. They could provide evidence whether, and if so when, the McCarties became targets ofProject Fable. The Justice lawyer was requested to provide evidence regarding a letter he sent to the McCarties in 2013 about the lostaudit notes (including the ones Ms. Coles knew she had written). The Justice lawyer wrote “We understand that T2020 notes areordinarily kept during the course of an audit. We have made inquiries in this regard.

Unfortunately, we understand that due to designissues of the relevant CRA databases, the T2020 entries were not retained in this matter. We understand that you have all available T-2020 Notes/Memo for File notes that have been retained”. (iv) McCartie 2015 BCPC 66 2015 BCPC 066 (“McCartie 2015-1”) (2-day voir dire hearing)[7] [46] In his opening

summary of the “long and complex procedure history” of the prosecution of the McCarties, J. Gouge included thatCrown counsel had informed the Court that the evidence obtained by the exercise of CRA’s statutory audit powers from the McCarties’banks “is crucial to the Crown case”. Judge Gouge’s full

summary is attached to these reasons as Appendix A. This hearing addressedMs. Coles missing audit notes (the “Coles Notes”) in the context of the request to have the previous Justice lawyer testify regarding hisletter to the McCarties that the Coles Notes were not retained following, and as a result of, a digitisation conversion of records by CRA. [47] Judge Gouge wrote: [4] Ms.

Coles said that she had been instructed by her superiors to make notes, in every audit, of the substance of allmeetings with her team leaders and with representatives of the Investigations Department, and to record in those notes thesubstance of the discussion and of any decisions or conclusions reached at the meeting. She understood that the preparationand retention of those notes was one of the duties of her employment. Notes of that kind are admissible in evidence pursuantto

section 26 of the Canada Evidence Act RSC 1985, c C-5, which provides: … [5] Ms. Coles acknowledged that her recollection of her meetings with other CRA employees was vague. Her notes mayhave contained a record of comments made by other CRA employees respecting suspicion of tax evasion on the part of Mr.or Ms. McCartie or the intentions of those other CRA employees respecting prosecution for such an offence. Of course, onecould not say that with confidence without first seeing the notes.

I observe that, at common law, an out-of-court statementby a person of that person’s motivation or intention is admissible as evidence of that person’s motivation or intention, if suchmotivation or intention is a fact in issue and the statement is tendered by a party adverse in interest. Such out-of-courtstatements by other CRA employees could be proven by Ms. Coles’ notes. [6] Mr. McFadgen’s point, as I understand it, is that the intentions or motivations of CRA’s staff are not facts in issue in theprosecution, but only on the application by Mr. & Ms. McCartie to exclude the bank records from evidence.

The nub of hissubmission is that the Crown’s duty to preserve and disclose evidence is limited to evidence bearing on the issue of guilt orinnocence, and does not extend to evidence bearing on an alleged infringement of a Charter right. Mr. McFadgen referredme to no authority in which such a limitation is expressly stated, and I am not aware of any. [7] I do not think that the Crown’s duty to preserve and disclose evidence should be limited as proposed by Mr.

McFadgen.It seems to me unreasonable to suggest that evidence which may assist the accused to prove an infringement of a Charterright, and so to support an application for a judicial stay of the prosecution, is less important or less worthy of preservationthan evidence which may assist the accused to establish a substantive defence to the charge or to impugn the credibility ofCrown witnesses. I observe that the duty to preserve evidence was described in Regina vs La as a logical extension of theduty to disclose established by Regina vs Stinchcombe.

It is well-settled that the disclosure obligation is not confined todocuments which would be admissible in evidence, but extends to documents, like witness statements, which might be usefulto the defence in other ways.

To take another example, a police recording of an interrogation of the accused must bedisclosed because it may assist the accused to challenge the voluntariness of any statements made by the accused or toestablish an infringement of his Charter rights during the interrogation. [8] However, I think it important to acknowledge that the Crown’s obligation to preserve evidence relevant to infringementsof Charter rights is subject to the same limitations as the Crown’s obligation to preserve evidence relevant to the substantive

elements of the offence. For example, in Regina vs La at paragraph 21, Sopinka, J said: The police cannot be expected to preserve everything that comes into their hands on the off-chance that it will be relevant in the future. In addition, even the loss of relevant evidence will not result in a breach of the duty to disclose if the conduct of the police is reasonable. But as the relevance of the evidence increases, so does the degree of care for its preservation that is expected of the police. I have not yet heard submissions on the question whether it would be reasonable to expect CRA to preserve Ms.

Coles’ notes in this case. … [10] Mr. McFadgen says that Ms. Coles’ notes are not “… fruits of the investigation …” because they are not records of information obtained from others, but rather records of CRA’s internal proceedings. Ms. Coles describes her notes as including both types of information. However, the purpose for which they are presently sought is to assist in determining the state of mind of CRA staff at the relevant times. [11] It is difficult to answer the question without seeing the notes. In light of Ms.

Coles’ evidence, it is reasonable to infer that the notes might contain one or more of the following: a. references to information obtained by CRA from outside sources which might reasonably lead the reader to conclude that Mr. or Ms. McCartie had committed an offence of tax evasion; b. notes of oral statements by CRA employees to the effect that they had, or had not, reached such a conclusion, firmly or tentatively; c. expressions of intention by CRA employees in relation to possible prosecution of Mr. or Ms. McCartie.

References of the first kind might support an inference that, as at the date of the meeting recorded in the note, CRA intended to prosecute, because any reasonable person in possession of such information would form that intention. Notes of the second or third kind might be direct evidence of such an intention. References of the first kind might be properly described as “… fruits of the investigation …”. Notes of the second or third kind would not.

THE THIRD QUESTION [12] In Regina vs La at paragraph 20, Sopinka, J said: 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. That passage seems to me to place on the Crown the onus of proving how the missing documents came to be lost.

In the absence of any admissible evidence on the point, the court is bound to infer that they were lost deliberately or by unacceptable negligence . [Emphasis added] (

v) McCartie 2015 BCPC 69 (McCartie 2015-2) [ 48 ] This was an application by the McCarties for a judicial stay of their prosecution on the basis that, in their particular prevailing circumstances, it was impossible for them to have a fair trial as they are entitled to under

section 11(

d) of the Charter. [ 49 ] Judge Gouge’s

summary of the issues, prevailing circumstances and questions, are attached, along with his

summary of evidence, as Appendix B. [ 50 ] Judge Gouge decided the application on the basis that the McCarties had the onus to prove the facts they alleged and most importantly that CRA’s predominant purpose in December 2008 was to gather evidence for use in a criminal prosecution when they made the December 2008 Request For Information (“RFI”) from the McCarties’ banks, following a November 2008 meeting with the McCarties. [ 51 ] He went on to summarize the McCarties’ hypotheses that: [15] Ms. Coles said that, when she issued the demands to the banks, she had no interest in a criminal investigation.

She said that her job was to conduct civil audits of tax returns, and that was what she did in relation to Mr. & Ms. McCartie. Mr. & Ms. McCartie tell me that they do not challenge Ms. Coles’ veracity. However, they do advance the following hypothesis: a. In 2005, Mr. Brown, Ms. Etches and Mr. Chan formed the opinion that Mr. & Ms. McCartie were guilty of tax evasion, but that CRA lacked the evidence to support a prosecution.

b. Mr. Brown recommended a further audit in 2007 for the purpose of gathering the necessary evidence. c. Ms. Coles was the unwitting tool of the Investigations Department, and was used by the Investigations Department to procure the evidence from the banks. [ 52 ] Judge Gouge went on to a detailed

summary of Ms. Coles’ evidence regarding her notes involving the McCarties’ audit and her interactions with Criminal Investigations and with Mr. McLachlan. Ms. Coles followed her normal note-taking practice throughout the McCarties’ audits, she entered her T2020 notes of the McCarties audit on CRA’s computer system, and she gave her handwritten notes to Mr. McLachlan when she transferred the file to him in 2009. She believes that she may not have met with her predecessor Mr. Chabot when she assumed conduct of the audits from him, as would have been her practice.

If they did meet, she would have entered her notes of the meeting on a T2020 also. Ms. Coles met with Mr. Brown at an early stage of her McCartie audit and made detailed notes of that meeting on a T2020. Ms. Coles attended at Criminal Investigations when she was first assigned to the file to review the informer tip, that she said she did not discuss it with anyone in Criminal Investigations and did not have any other communications with Criminal Investigations regarding the McCarties until after Mr. McLachlan formally referred their file to Criminal Investigations. Upon receipt of Mr.

McCartie’s letter of August 2008 espousing a natural person tax exemptions theory, she probably reviewed it with her Team Leader at a meeting, and, if so, she would have recorded the substance of their discussion and the conclusion reached in the T2020. Following a November 2008 meeting of the McCarties with Ms. Coles and her colleague Mr. Lecznar, Mr. Lecznar gave Ms. Coles his handwritten notes of the meeting which she used along with her own to write notes to prepare her T2020. These handwritten notes are among the Coles’ Notes that CRA has lost. Ms.

Coles also prepared the T2020 of her meeting with her Audit colleague, Mr. Lidster, at which they decided to issue requirements to the McCarties’ bankers. Ms. Coles did not prepare a T2020 following her April 2009 meeting with Mr. McLachlan to acquaint him with the McCarties’ files as responsibility had been reassigned to him when she was transferred to other duties in late 2009 and she expected Mr. McLachlan would do that. [ 53 ] When Ms. Coles was asked to produce her notes, including her T2020 notes, she looked for them but could not find them. She last saw them when she handed her file to Mr. McLachlan.

Some of her handwritten notes relating to the McCarties’ audit have been produced but none of her T2020 notes. Judge Gouge was informed by counsel appearing on the application that they had been “lost”. [ 54 ] Judge Gouge summarized the evidence regarding the loss of the Coles Notes and other CRA notes as follows: [32] In a letter to Mr. & Ms. McCartie dated August 15, 2103, Mr. Gibson, then Crown counsel, 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. In a letter to Mr. Preshaw (who succeeded Mr. Gibson as Crown counsel) dated July 18, 2014, Mr. Gibson said: I now understand that the McCarties interpreted my correspondence as confirmation that further notes did exist, were not disclosed, and were lost through the database design. I do not know if this was the case. I cannot verify what notes were originally created by CRA.

My primary concern, upon drafting the letter, was to indicate that there were no further materials to provide and to advise the McCarties of the possibility that notes may have been deleted. Questions as to whether notes were actually lost should be directed to the relevant CRA employees. Ms. Coles was quite clear in her evidence that she did make T-2020 notes of the McCartie audit. Mr. McFadgen was equally clear in his assertion at the hearing before me that they have been lost. The source of Mr.

Gibson’s assertion that the notes were lost “… due to design issues of the relevant CRA databases …” has not been identified. No other information has been provided to assist in determining how or when the notes came to be lost. [ 55 ] Judge Gouge went on to address documents that CRA might be expected to have created but may never have existed, and their relevance to the stay application he was deciding. Neither the Assistant Director of Criminal Investigations Ms. Etches, nor Investigator Chan had yet testified.

The Crown advised that neither of them had any recollection of their meeting with Auditor Brown in 2005 and that “no notes of that meeting exist”. All parties asked that the stay application not await further testimony of Ms. Etches and Mr. Chan, and the Court proceeded on that basis in fairness to the accused McCarties.

The McCarties’ assertion on the stay application was that the failure to make notes of that meeting by Etches, Chan and Brown impairs the McCarties’ ability to effectively cross-examine any of Brown, Etches or Chan as to their intentions and motives, and this has the effect of denying them their right to a fair trial. [ 56 ] In his reasons, Judge Gouge emphasised that appropriate pre-trial disclosure is essential to a fair trial, and that a failure to make such disclosure may render the trial unfair.

He framed the questions he was deciding on this application as “whether, in light of what CRA did, or did not do, in relation to making and retaining notes, the trial upon which I am now engaged is as fair as it could reasonably be expected to be. If the answer to that question is “no”, then Mr. and Ms. McCartie are denied their right to a fair trial. Such a conclusion does not necessary imply a finding of misconduct on the part of CRA”. [ 57 ] Judge Gouge wrote of Ms. Coles and her notes as follows: [43] I accept, as do Mr. & Ms. McCartie, that Ms.

Coles was a truthful witness, who did her best to recount accurately the events in which she participated. It necessarily follows that her intention or motivation was solely to conduct a civil audit of Mr. & Ms. McCartie’s returns. That fact does not preclude the possibility that she was used by others to gather evidence for a prosecution. The present question is whether there is a reasonable possibility that her lost notes would assist in proving that fact. I think that there is . [44] In paragraph 6, above, I quote certain passages from Mr.

Brown’s contemporaneous notes which cast doubt on his assertion that, in 2005, he suspected Mr. & Ms. McCartie of gross negligence in the preparation of their returns, but not of fraud. In paragraph 10, I quote his recommendation to initiate the second audit, in the course of which CRA obtained the bank records. In my view, that document is consistent only with a suspicion on the part of Mr. Brown that Mr. & Ms.

McCartie were guilty of tax fraud. Mr. Brown and Ms. Coles met at the inception of her audit. She has now no independentrecollection of that meeting. It is reasonably probable that, at the meeting, Mr. Brown told her what he had discovered in thecourse of his earlier audit and what conclusions he had reached. If he had done so, Ms. Coles, in accordance with her usualpractice, would have recorded those remarks in her T-2020 notes. It would be instructive to compare: (

i) what Mr. Brownsaid in his 2005 notes (quoted in paragraph 6 above); (ii) what Mr. Brown said in his 2007 recommendation (quoted inparagraph 10, above); (iii) what Mr. Brown said to Ms. Coles (which would have been recorded in Ms. Coles lost notes); and(iv) Mr. Brown’s evidence at this trial. [45] Ms. Coles attended at the offices of the Investigations Department at the inception of her audit to review the informertip. She says that she did not speak with anyone in the Investigations Department about the file.

Of course, that cannot beliterally true - someone in the Investigations Department must have pulled the tip from the file and given it to her to review.Some words must have been exchanged. Ms. Coles’ memory of the event is, understandably, vague. It would beunreasonable to exclude the possibility that a discussion took place which was recorded in the lost notes. Accepting, as I do,Ms. Coles’ honesty, there may well have been something in that discussion which would be of assistance to the defence,although Ms. Coles attributed no significance to it at the time. [46] Ms. Coles met with her team leader, Mr.

Lidster, after she and Mr. Leczner met with Mr. & Ms. McCartie and beforeMs. Coles issued her statutory demands to the banks. The purpose of the meeting was to seek Mr. Lidster’s authorization toissue the demands. Ms. Coles’ lost notes contained a record of that meeting. It is possible that Mr. Lidster made commentssimilar to those quoted in paragraph 10. If so, they would be capable of supporting an inference that Mr. Lidster suspectedMr. & Ms. McCarty of fraud. That, in turn, might support an inference that Mr.

Lidster was interested in a prosecution whenhe authorized the demands to be issued to the banks. [47] I conclude that there is a real possibility that Ms. Coles’ notes would have been of assistance to the defence and that theCrown has not discharged its onus of proving that they were not lost by unacceptable negligence. It follows from those twoconclusions that there has been an infringement of Mr. & Ms. McCartie’s Charter rights.

In R vs Carosella @ paragraph 37,Justice Sopinka said: The right to disclosure of material which meets the Stinchcombe threshold is one of the components of the right to make fullanswer and defence which in turn is a principle of fundamental justice embraced by s. 7 of the Charter. Breach of thatobligation is a breach of the accused's constitutional rights without the requirement of an additional showing of prejudice. Toparaphrase Lamer C.J. in Tran, the breach of this principle of fundamental justice is in itself prejudicial.

The requirement toshow additional prejudice or actual prejudice relates to the remedy to be fashioned pursuant to s. 24(1) of the Charter. [48] In this case, the Crown has offered no explanation for the loss of Ms. Coles’ notes. There is no basis upon which Icould conclude that they were not lost by unacceptable negligence. Accordingly, I must conclude that there has been abreach of Mr. & Ms. McCartie’s rights under

section 7 of the Charter. (Emphasis added) [58] Judge Gouge wrote of the absence of note taking by all other than Ms. Coles, and their impact on the fairness of the trial to theMcCarties, as follows: [49] Mr. & Ms. McCartie say that the omission by Mr. Brown, Mr. Lidster, Ms. Etches and Mr. Chan to make notes of theircommunications is a breach of Mr. & Ms. McCartie’s rights under sections 7 and 11 of the Charter. During argument, theparties characterized this issue as raising the question whether those individuals had a duty to make notes in thecircumstances pertaining. Mr. & Mrs.

McCartie also complained of the failure of Mr. McLachlan to make notes. However, Iconsider that to be of no significance because the question is CRA’s motive or intention in December, 2008, when noticeswere delivered to compel disclosure of the bank documents, and Mr. McLachlan had no role in the case until the spring of2009. [50] Mr. & Ms. McCartie say that the duty to make notes arises from two sources: a. They say that there is a legal duty, of general application, on police officers to make notes, and the same duty shouldapply to CRA investigators. b.

They refer to many entries in CRA policy manuals and training materials, which instruct CRA investigators to make andretain detailed notes. [51] In support of the first proposition, they rely on Wood vs Schaeffer 2013 SCC 71 , [2013] 3 SCR 1053.However, I note that Wood vs Schaeffer was concerned with the application of a particular Ontario regulation, having theforce of statute, which expressly imposed specific obligations on Ontario police officers to make notes in specificcircumstances. I was referred to no statute which imposes a similar obligation on CRA staff.

In the absence of such a statute,I think that the legal position was correctly stated in Regina vs Davidoff 2013 ABQB 244; i.e. note-taking is a prudent andresponsible police practice, but not a legal obligation. [52] I do consider CRA’s policies and training manuals to be of significance. I discuss that issue in paragraphs 60 - 61,below. However, they do not create legal duties: Hewko vs British Columbia 2006 BCSC 1638; [2006] BCJ #2877 @paragraphs 313 – 318. [53] I conclude that the CRA staff were under no legal obligation to make notes. TRIAL FAIRNESS

[54] Having addressed the application on the basis advanced by the parties, I return to my own view of the matter. To my mind, there are two questions : a. Does the absence of contemporaneous notes materially impair the fairness of this trial ? b. If so, is it reasonable to expect that CRA would have prepared and preserved such notes ? I think that the first question is mandated by

section 11(

d) of the Charter and the second question by Thomson Newspapers @ paragraphs 170 – 178. If the answer to each question is “yes”, there has been an infringement of Mr. & Ms. McCartie’s Charter right to a fair trial. [55] These are different questions from the question whether CRA staff had a legal duty to take notes. As I have said, I do not think that they did. I find nothing in

section 11(

d) to support the inference that an unfair trial constitutes a denial of the Charter right only where the unfairness results from a breach of a legal duty by a government agent.

Section 11(

d) simply says that an accused person is entitled to a fair trial. If the trial is unfair, having regard to the principle that it need only be as fair reasonably possible, the right to a fair trial is infringed. There may be cases in which a fair trial is precluded by some unfortunate accident which is the fault of no one. In such a case, it may be that an unfair trial cannot be allowed to proceed, subject always to the balancing of public and private interests described in Thomson Newspapers . In this case, if it would have been reasonable to expect Mr. Brown, Ms. Etches and Mr.

Chan to make notes, and they did not, and the result is an unfair trial, the consequence may be that the trial cannot proceed. … [57] In order to assess the effect of the lost and missing notes on trial fairness, it is necessary to consider the formidable task which Mr. & Ms. McCartie face on the Jarvis issue. They carry the onus of proving, in 2015, the states of mind of three hostile witnesses (Mr. Brown, Ms. Etches and Mr. Chan) in 2005 – 2007.

If the question were whether a witness performed some physical act 10 years ago, one might hope to find an independent witness to the event or some physical evidence that the act occurred. In some cases, the state of mind of a witness can be proven by reference to actions taken or omitted by the witness. For example, a person who is angry with another rarely seeks the company of the other. In this case, it is difficult to imagine how the state of mind of Ms. Etches, Mr. Brown or Mr. Chan could be proven except by leading evidence of words which they uttered.

The Crown asserts, and the defence accepts for the purpose of this application, that they have no present recollection of what they said in 2005 . Even assuming that they would be completely candid when cross-examined, it would not be possible to prove their state of mind because they don’t remember what they said. The only avenue of cross- examination open to Mr. & Ms. McCartie would be to put to the witnesses the proposition that, in 2005, they suspected Mr. & Ms. McCartie of tax evasion and launched the second audit in search of evidence to prove it.

It seems safe to assume that the witnesses would deny any such intention. There would be no further question which the cross-examiner could usefully ask. [58] By contrast, if notes had been made, the notes might well offer ammunition to the cross-examiner. By way of example, I refer to the documents authored by Mr. Brown (paragraphs 6, 10, above). [59] Of course, one cannot say whether the notes would have been helpful to the defence unless one has seen the notes. In that circumstance, the question is whether there is a real possibility that they would have been: Regina vs Carosella @ paragraphs 30 – 36.

I conclude that such a real possibility exists in this case, and so conclude that the first of my two questions should be answered in the affirmative . [60] The next question is whether it would be reasonable to expect Mr. Brown, Ms. Etches and Mr. Chan to make and retain notes of their communications. Two items of evidence cause me to answer that question in the affirmative . a. Ms. Coles did, as a matter of routine. There was nothing in her evidence to indicate that she found the practice to be burdensome or impractical. If she had attended the 2005 meeting, rather than Mr.

Brown, she would have made a detailed T- 2020 note of the meeting, including the substance of the discussion, the decision taken and the reasons for the decision. Nothing in the evidence supports the conclusion that it would have been more difficult for Mr. Brown, Ms. Etches or Mr. Chan to do so. b. CRA’s policy and training manuals contain many instructions to CRA staff to make and retain detailed notes.

To take only the most apposite of many examples, CRA’s training manual for investigators recommends that the investigator interview the auditor after reviewing the auditor’s file and before deciding to proceed with an investigation. In relation to that interview, the manual states: Take notes of the interview. It is imperative that notes be taken during the interview or as soon after as possible. Those notes should be as accurate as possible . They can be handwritten or typed. However, your handwritten notes must be retained for future reference .

They could possible (sic) be called into question during the trial. It seems to me that it cannot be unreasonable to expect CRA investigators to comply with the instructions of their management on the point in question. [61] I hasten to say that, in my view, the reasonableness of an expectation that an investigator take and retain notes is highly fact-specific.

For example, very different factors would require consideration in the case of a police officer conducting a traffic stop or executing a search warrant at a crack house. [62] Having answered both of my questions in the affirmative, I conclude that Mr. & Ms. McCartie have been denied their right to a fair trial .

(Emphasis added) [ 59 ] See also the close of paragraph 68 dealing with costs and whether these were extraordinary circumstances wherein Judge Gouge repeats that this was not a case of misconduct on the part of CRA. “It has failed to discharge its onus of proof in relation to the loss of Ms. Coles’ notes, but there is no evidence from which I could infer deliberate destruction of those notes, or culpable negligence causing their loss. The omission of Mr. Brown, Ms. Etches and Mr. Chan to make notes was not culpable—they were under no obligation to make them.

The omission to make and keep them has prevented Mr. and Mrs. McCartie from exercising their rights to a fair trial , but that does not render their omission culpable. I do not consider this an exceptional case in which the omission to make notes rises to the level of an abuse of process ”. (Emphasis added) [ 60 ] Judge Gouge went on to conclude that the appropriate remedy in the McCarties’ particular circumstances was not to stay the proceedings at that time, but to restrict what evidence the Crown could rely on: [66] The only alternative remedy suggested by Mr.

McFadgen is the possibility that, when assessing the credibility of Mr. Brown, Ms. Etches and Mr. Chan, I should take into account the loss of Ms. Coles’ notes and the omission of the others to make notes. In my view, that remedy would be inadequate to address the prejudice to Mr. & Ms. McCartie. They carry the onus of proving CRA’s motive and intentions. That onus can be discharged only by affirmative evidence. An adverse inference may assist in corroborating or reinforcing affirmative evidence, but is not a substitute for affirmative evidence.

For that reason, it has been held that “…an adverse inference will not be drawn where the effect of drawing such an inference is to reverse the onus of proof …”: McIlvenna vs Viebeg 2012 BCSC 218 ; [2012] BCJ #292 @ paragraph 70. At present, the only affirmative evidence of CRA’s motive and intentions consists of: (

i) Mr. Brown’s notes, quoted in paragraphs 6, 10, above; and (ii) the notable circumstance that Mr. Brown proposed the second audit of Mr. & Ms. McCartie’s returns, in the course of which the bank documents were procured, within a month or so of his return to the Audit Department from the Investigations Department. Coupled with an adverse inference, that evidence might support a conclusion that the hypothesis advanced by Mr. & Ms. McCartie is correct , but it is not a strong case for the defence. By comparison , if Ms. Etches and Mr.

Chan had kept notes, and if they had expressed themselves in a manner similar to Mr. Brown, the notes might have presented a compelling case for the McCartie hypothesis. [67] However, I do not think that a judicial stay of the prosecution is necessary. The prejudice to Mr. & Ms. McCartie can be remedied by excluding from evidence all documents procured by CRA by the exercise of its statutory powers during the second audit. If the Crown can prove its case without those documents, it should do so . … [69] All documents procured by CRA by the exercise of its statutory powers during the second audit (conducted by Ms.

Coles and Mr. McLachlan) will be excluded from evidence . (Emphasis added) (vi) McCartie 2015 BCPC 233 (“McCartie 2015-3”) [ 61 ] In this application Judge Gouge was deciding whether Ms. McCartie’s

section 8 Charter rights were infringed during a search of the McCarties’ home by CRA Criminal Investigations agents and the RCMP in August of 2010. Ms. McCartie was at home w

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