R. v. Carter Date:, 2011 BCPC 253

Citation: R. v. Carter Date: 20110616 2011 BCPC 0253 File No: 26500-1 Registry: Prince George IN THE PROVINCIAL COURT OF BRITISH COLUMBIA REGINA v. DONALD CARTER ORAL REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE D. J. O'BYRNE Federal Crown Counsel: H. B. Kaun Defence Counsel appearing by teleconference: J. Drove Place of Hearing: Prince George, B.C.

Date of Judgment: June 16, 2011 A corrigendum was released by the Court on October 20, 2011; the corrections have been made to the text and the Corrigendum is appended to this document. [ 1 ] THE COURT: All right, so what I intend to do, Gentlemen, is I will proceed and give the decision on Carter and in part because I have used what is in Carter on Logan, I will next go on to the Logan decision. [ 2 ] So starting first with the Donald Carter matter, this is Information 26500, Donald Carter stands charged with six counts of failing to comply with a demand under the Income Tax Act to file completed and signed tax returns for the years 2001, 2002, 2003, 2004, 2005, and 2006 contrary to s. 238(1) of the Income Tax Act . [ 3 ] Two days of evidence were heard, exhibits were filed, and written submissions were forwarded by counsel.

The Crown had one witness and filed Exhibit 1, and that basically was the Crown's case, it set out all the documentary evidence, and the one Crown witness was called primarily to prove identity. [ 4 ] It is common ground that Mr. Carter did not file his completed and signed tax returns for the years specified. It is also not disputed that demands to file his returns for the subject years were served upon him on June 6th, 2007. (See Exhibit 1).

[ 5 ] It was equally uncontroversial that while unsigned nil returns were filed on June 20th, 2008, they were rejected as not complying with a demand pursuant to s. 231.2(1) of the Income Tax Act . [ 6 ] Amended signed copies of the tax returns were finally filed in July 2008.

According to the bookkeeper, who prepared the signed returns, they showed "very low income" and "the government owed him personal GST credits." (See the evidence of Susan Knudson, the transcript of July 12th, 2010, Page 29, Lines 21 to 24). [ 7 ] Further, after being reviewed, the notices of assessment showed as nil assessments after being assessed. (See the same transcript location, Line 30). [ 8 ] Mr. Carter and his bookkeeper, Susan Knudson, testified. Mr. Carter told me that he was 62, a metallurgical researcher and consultant.

He testified that upon receipt of the demands to file returns he faxed them to his bookkeeper , Ms. Knudson. [ 9 ] Mr. Carter also told me that in April 2006, slightly over one year before the demands were served in June 2007, he suffered a stroke, which caused "enormous memory loss" and therefore affected his ability to comply with the demand to file of June 2007. [ 10 ] Accordingly, testified Mr. Carter, he forwarded all his materials to Ms. Knudson to prepare and file his income tax returns. As to why he had not filed his tax returns previously, Mr.

Carter advised that it was his belief that if he owed no money, he was not required to file. (See transcript, July 12th, Page 18, Lines 2 and 3). [ 11 ] As well, Mr. Carter proferred as a reason for not filing "as a layman, it was my understanding that if I did not owe any money I was not required to file." (Transcript, July 12th, Page 22, Lines 16 to 20). [ 12 ] (I pause to note at this point that Mr. Carter is not charged with failing to file income tax returns, but rather failing to comply fully with a notice of requirement to file a completed and signed individual income tax return. See Exhibit 1). [ 13 ] Ms.

Susan Knudson testified for the defence. She confirmed that the accused and his company were clients of her tax preparation business from March 2006. As to the events of June 2007, she agreed that shortly after the notices of requirement to file, or demands were served on Mr. Carter, she was notified of this and sent copies. Ms. Knudson testified that she was aware of Mr.

Carter's health issues and memory loss after his April 2006 stroke and, as a result, sought an extension of time from the 90 days set out in the demand due to this fact, as well as the amount of time and work it was going to take to prepare numerous years of books with all supporting materials. [ 14 ] According to Ms. Knudson this request for an extension was refused. The evidence of Ms. Knudson accorded with that of Mr.

Carter, that almost one year later in June 2008 unsigned nil returns were submitted and subsequently rejected as not complying with the notice of requirement for "completed and signed returns." [ 15 ] It was her, Ms. Knudson testified, who physically had the amended income tax returns she prepared signed by Mr. Carter in July 2008. She confirmed that she forwarded these returns to Revenue Canada for assessment. Issues [ 16 ] In his written argument, Mr. Drove, counsel for Mr. Carter, raised a number of issues, which were reframed by Federal Crown Counsel, Mr.

Kaun , in his argument and are now restated by me as follows: 1. Was the tax liability of Carter subject to a genuine and serious inquiry by the Minister of National Revenue? 2. Did Carter exercise due diligence in filing his tax returns in response to the notices of requirement to file? 3. Is the imposition of a minimum penalty of $1,000 per count cruel and unusual punishment, thereby violating s. 12 of the Charter ? 4. Is the decision of the Minister to proceed with charges of failure to comply with the notices pursuant to s. 231.2(1) and (1)(

a) of the Act rather than with charges of failure to file within a reasonable time contrary to s. 150(1) and 162 cruel and unusual punishment contrary to s. 12 of the Charter ?’ ? Discussion [ 17 ] Dealing first with number three above, the minimum penalty and s. 12 of the Charter of Rights , this clearly is an issue, which must await a verdict of guilt or innocence, as it only applies to any penalty that may be imposed after a conviction, if any.

Therefore, I will not deal with it at this time. [ 18 ] Before going on to discuss the evidence, I must take note of the fact that the accused gave evidence and called an additional witness. Therefore, I must instruct myself in the principles of W .( D.) as to the defence evidence as follows: 1. If I believe the accused and his evidence raises a defence, I must acquit. 2. If I do not believe his evidence, but the defence evidence as a whole raises a defence I must acquit. 3.

It is only after I have rejected the evidence of the accused and the defence witness that I may examine the case for the Crown to see if they have proved their case beyond a reasonable doubt. [ 19 ] Number one: Was the tax liability of Mr. Carter the subject of a genuine and serious inquiry by the Minister of National Revenue? [ 20 ] This argument arises as a result of the decision of the Supreme Court of Canada in James Richardson v. the Minister of National

Revenue, (SCC), [1984] 1 S.C.R. 614. [21] In that case the Supreme Court of Canada examined the scope of what is now s. 231.2(1) and concluded the Minister cannot goon a "fishing expedition," but rather the

section is only available to be used if the Minister is seeking information relevant to the taxliability of a specific person, and that person is the subject of a genuine and serious inquiry. (My

summary). [22] In the Richardson case, the Minister was trying to check out compliance by traders in the commodities futures market, but theMinister did not know the identity of the customers of the appellant commodities broker. Justice Wilson writing for the court found thatthis type of broad general inquiry without being related to a specific person's tax liability was not a serious and genuine inquiry. Therequirement to file cannot be used as "a subterfuge for some other purpose." (See Canadian Bank of Commerce v. the Attorney Generalof Canada, (SCC), [1962] S.C.R. 729 and R. v.

Dakus, (AB KB), 1988 AJ, No. 608). [23] Further the B.C. Court of Appeal in R. v. Van Egmond, 2002 BCCA 226, commented on this issue as follows in the words of Mr.Justice Braidwood: Mr. Van Egmond, as a result of his not having filed his own tax returns for a considerable number of years, was under legitimateinvestigation. (See also R. v. Sharma, [1995] B.C.J.

No. 2113). [25] On the evidence that I have before me, especially the running notes and history contained in Exhibit 1, there is ample evidence tosupport the conclusion that Revenue Canada was conducting a serious and genuine inquiry into the tax liability, if any, of Mr. Carter. Todetermine this, the Minister needed Mr. Carter to complete and sign a tax return for each of the years set out in the Indictment. [26] The notice of requirement to file commenced the process of determining what, if any, income tax was owing by Mr. Carter. Mr.

Carter failed to comply with the notice of requirement to file for over a year, well beyond the 90-day time limit set out in the notice. (See Exhibit 1). [27] The defence argument that because there were no taxes owing by Mr. Carter at the time the demand was served on him andtherefore there was no genuine and serious inquiry, is circular at best. [28] In the case of R. v. Packard, 2006 BCSC 719, the court held that tax liability is not a pre-requisite to issuing a valid notice ofrequirement. [29] The only way the correct tax liability of Mr.

Carter could be determined was by assessing completed and signed returns. Mr. Carter failed to do that as required. I find there was a genuine and serious inquiry in this case for each of the taxation years. [30] Number two: Did Carter exercise due diligence in filing his tax returns in response to the notice of requirement? [31] These offences under s. 238 of the Income Tax Act are offences of strict liability where the defence of due diligence is availableto the accused on a balance of probabilities.

In strict liability offences the Crown must only lead evidence the accused has not done whathe was required to do by performing some duty or fulfilling some obligation. [32] Once that is established the offence is proven unless the accused can show on a balance of probabilities that he has takenreasonable steps to comply with the Income Tax Act requirements and the notice of requirement to file. (See R. v. Rolin, 2 C.R.R. 166,and the case of Sault Ste. Marie, (1978) (SCC), 40 C.C.C. (2d) 353, (S.C.C.)). [33] If the accused can show he took all reasonable steps then he may argue that he exercised due diligence.

In support of the duediligence defence, the defence points out in part: 1. On receipt of the notice Carter faxed them to Knudson. 2. Carter's stroke in April 2006 affected his memory and hampered his ability to comply with the 90-day requirement in the notice ofrequirement to file. 3. Revenue Canada refused to grant an extension of the 90-day time limit. [34] Counsel for Mr.

Carter submits that his client did comply with the requirements and that the 90-day time limit was unreasonablein these circumstances; therefore, submits the defence, the unsigned nil returns were filed in June 2008 and this constituted due diligenceon the facts in the case at bar. [35] The first thing I would note is that these charges were not laid until April 14th, 2008 some 10 months after the notice ofrequirement was personally served on Mr. Carter.

Had the Crown proceeded with these charges on the 91st day after the day of service Imight give some weight to this argument; however, I find that over 10 months even in these circumstances is more than reasonable timeto comply with the notice. [36] As tragic as the aftermath of Mr. Carter's stroke was, the courts have rejected the submission that some attempts to comply,together with compassion, equate to due diligence. (See Mr. Justice Hood in R. v. Adair, 2000 BCSC 861, at Paragraph 18.) [37] Further the Indictment covers the years 2001 to 2006 and Ms.

Knudson, the bookkeeper, was retained in March 2006 before thestroke occurred. There was no evidence of any health issues for Mr. Carter in the years 2001 to 2005 when he failed to file his incometax returns for those years. [38] In R. v. Kemnay, 27th of November 2001, unreported, Port Coquitlam Registry 6200701T in the B.C. Provincial Court, the courtthere commented that [as read in]:

Citizens of Canada have both rights and duties. One of those duties being the filing of income tax returns. The failure to file is bothblameworthy and culpable.(See Paragraph 13 of that decision). [40] As further evidence of a lack of due diligence, the Crown points out that even when the returns were filed in 2008 they were notsigned, nor were they completed as they just had the words "Nil" written on them. [41] The notice of requirement served on Mr. Carter sets out plainly what is required; that is, completed and signed tax returns foreach of the years set out.

The filing of nil or not applicable returns has been held not to constitute compliance with a notice ofrequirement. (See Jacques v. HMTQ, 2000 BCSC 430). [42] The defence argument that the Canada Revenue Agency does not absolutely require all income tax returns to be signed by thetaxpayer is answered by the fact that the notice of requirement does have this obligation clearly and plainly set out. [43] In the case of R. v. Euerby, 1992 B.C.J. No. 396, the court had this to say in the words of Mr.

Justice Murphy: I only wish to note that the charge is not one of failing to file a return but failing to comply with a notice to file a return. In the notice,sufficient time is given to comply and as well the consequences of failing to comply are set out. A person receiving such a notice is wellaware of the consequences of failing to comply, and therefore has the opportunity to avoid the consequences. [44] Even if I reject none of the defence evidence, here I find the accused has failed to establish on a balance of probabilities duediligence. [45] Number four.

Is the decision of the Minister to proceed with charges of failing to comply with the notices of requirementpursuant to s. 231.2(1) and 238 of the Act rather than with charges of failure to file within a reasonable time contrary to s. 150(1)and 162, cruel and unusual punishment contrary to s. 12 of the Charter? [46] The defence submissions on this argument are unclear as to what remedy, if any, they are seeking assuming they establish abreach of s. 12 on a balance of probabilities.

Further this defence argument seems to be predicated on the assumption that the Minister ofNational Revenue, rather than the Director of Public Prosecutions, makes the prosecutorial decisions in cases like this. [47] I think I can take judicial notice of the fact that while the Canada Revenue Agency may investigate offences like this, they do notprosecute them. It is also trite law that prosecutorial decisions made by the Crown are, absent egregious conduct, susceptible to limitedjudicial review.

However, while the Supreme Court of Canada in Krieger v. the Law Society of Alberta, 2002 SCC 65 , [2002]3 S.C.R. 372, makes it clear some decisions of the Crown are not a true exercise of prosecutorial discretion and therefore open to judicialreview, these instances will by their very nature be rare. [48] For example, tactical decisions about the conduct of a trial versus prosecutorial discretion about whether or not to lay a chargewill be treated differently. (See R. v.

DeZen et al, 2010 ONSC 974, Ontario Supreme Court.) [49] In the case at bar, I find that this decision of the Director of Public Prosecutions is one of those decisions that is not open tojudicial review. There is no evidence of any improper motive or conduct on the part of the Crown. Accordingly, there is no evidence tothe standard on a balance of probabilities to hold that Mr. Carter's s. 12 Charter rights have been breached.

I dismiss that argument. [50] Accordingly and for the reasons given, I find the accused guilty as charged on all six counts. [51] All right, I will deal now with the matter of the decision in Logan and then we can go back and discuss the next steps in Carter. (REASONS CONCLUDED) CORRIGENDUM – Released October 20, 2011 In the Oral Reasons for Judgment dated June 16, 2011, the following change has been made: [1] In paragraph 16, reference to s. 231.2(2)(

a) of the Income Tax Act should have been to

section 231.2(1)(a). Paragraph 16 nowreads: [16] In his written argument, Mr. Drove, counsel for Mr. Carter, raised a number of issues, which were reframed by Federal CrownCounsel, Mr. Kaun, in his argument and are now restated by me as follows: 1. Was the tax liability of Carter subject to a genuine and serious inquiry by the Minister of National Revenue? 2. Did Carter exercise due diligence in filing his tax returns in response to the notices of requirement to file? 3. Is the imposition of a minimum penalty of $1,000 per count cruel and unusual punishment, thereby violating s. 12 of the Charter? 4.

Is the decision of the Minister to proceed with charges of failure to comply with the notices pursuant to s. 231.2(1) and (1)(

a) of theAct rather than with charges of failure to file within a reasonable time contrary to s. 150(1) and 162 cruel and unusual punishmentcontrary to s. 12 of the Charter?