Her Majesty the Queen - v. -, 2015 SKPC 143

IN THE PROVINCIAL COURT OF SASKATCHEWAN Citation: 2015 SKPC 143 Date: October 15, 2015 Information: 40414023 Location: Saskatoon _____________________________________________________________________________ Between: Her Majesty the Queen - and - Ronald James Glubis Appearing: B. G. Millar For the Crown M. C. Phillips and N. Phillips For the Accused JUDGMENT Q. D. AGNEW , J [ 1 ] There are, no doubt, a fortunate few in this world to whom a quarter of a million dollars is mere pocket change.

There are people who are so wealthy that if they were to make an extra $200,000.00 or more in a year, they would not even notice. [ 2 ] Most of us, however, are not in that happy situation. For the vast majority of people, an extra quarter of a million dollars in one year would be quite noticeable. Indeed, it would seem to be almost impossible for most people not to notice that they had an extra quarter of a million dollars coming in in a single year. Even if that amount arrived in a year when the person otherwise had about $900,000.00 worth of income, one would think it would noticeable.

After all, this extra money would be almost an extra 30% of their income. If it were to be net income, at that, it might be expected to be even more noticeable: an extra quarter-million dollars in the pocket.

[ 3 ] Furthermore, if such a person had two sources of income, one of them much greater than the other and there was a huge increase in the amount of income coming in from the smaller source, this might be particularly noticeable. If, to pick a not-really- random example, one of this person’s sources of income was approximately $90,000.00 in one year, and somehow over $200,000.00 extra came in to them through that same source in that same year, one could perhaps be forgiven for thinking that the person should notice that change. [ 4 ] This is, in essence, the Crown’s case against Ron Glubis. Mr.

Glubis faces a number of charges [1] , all of them related to or arising out of him allegedly under-reporting amounts received by him. His response, in essence, is that he did his best, that he did not realize he had made this money, that he did not realize that he had failed to report these amounts and that accordingly he lacked the mens rea required for conviction. Background [ 5 ] The accused is 67. He and his wife, Jean Glubis, have for many years operated a farm near Strongfield, Saskatchewan.

For part of that time, including during the years in question here (2007, 2008 and 2009), the accused also operated a separate business selling tires. Both the farm and the tire business grew to quite substantial sizes. Unfortunately, the accused’s accounting acumen and bookkeeping skills did not grow to match. [ 6 ] The evidence is uncontroverted that during the time in question, the bookkeeping system used by the accused and his wife for both the farm and the tire business was, at best, rudimentary.

Cheques that came in were separated from their supporting documentation, and placed in a pile to be deposited when someone went to the bank. The supporting documentation was placed in another location, to be sorted and filed in due course. The risk that money could be deposited without supporting documentation being properly filed is obvious. With respect to tire sales specifically, the record-keeping was even more precarious, as invoices for sales were made out from any one of several receipt books in use at any given time. The books were sequentially numbered internally, but there was no sequence between books.

Furthermore, the accused was less than diligent about remembering to file the invoices for completed sales: at times, they might be found in a pocket of his clothes in the wash, or in his truck, or on his desk. As the invoices were not sequential, there was no way to determine whether or not any were missing from the couple’s records. [ 7 ] Cheques were all deposited into one account, the main account used by the accused and his wife for their farming operation, the tire business and their personal affairs. There was no reconciliation performed between (

a) the deposits into that account and (

b) the records showing receipt of funds and the reasons therefor. Come tax time, it was those records which were used to complete the couple’s tax returns. It was discrepancies between those records and the bank deposits that led CRA to the issues which are the basis of the current charges.

That is, CRA’s audit found considerably more money deposited than was reported. [ 8 ] Given the lack of checks or cross-references in the accused’s bookkeeping, it is certainly possible to assert that funds were deposited, with the records for the same going astray and thus not being reported, without any intention on the accused’s part so to do. This is his defence. The Crown urges me to conclude that the possibility of this, in light of the evidence, is so slight as to not even amount to a reasonable doubt as to his guilt.

CRA corrections [ 9 ] In the course of his testimony Kenneth Johnson, who was CRA’s investigator, the Crown’s primary witness and the Informant on the Information before me, identified three areas where he believed corrections should be made to the charges. These all have the effect of reducing the accused’s potential liability. [ 10 ] The first is with respect to land rent income from 2008, reported in 2009. This income was received from one of the accused’s sons, Ryan Glubis. The accused reported the income, but did not report the GST he had collected, being $640.00. In his testimony, Mr.

Johnson indicated that in his view the reporting of the income but not the GST is more likely indicative of an error, rather than “GST

fraud”. It is of course for me, rather than for any witness, to draw conclusions about the accused’s intention. In this case, however, I think Mr. Johnson’s conclusion is well-founded, and I agree with it. [ 11 ] As the cheque involved was dated April 2, 2009 and deposited May 5, 2009, this change affects count 15 of the Information. That allegation had been that the accused understated his GST collected for the period April 1 - June 30, both of 2009, in the amount of $969.62.

The maximum liability possible on this count is now $329.62. [ 12 ] The second correction had to do with two allegations of unreported tire sales in 2008. The first, a sale to Dutch Enterprises Ltd. on February 8, 2008, was for $788.57. The Crown alleges that the transaction involved income of $751.02 and GST of $37.55. There is no doubt but that the funds were received, and not reported. However, given where certain supporting documents were found, Mr.

Johnson concluded (after he swore the Information) that the accused may simply have been awaiting payment of the outstanding balance on that sale, and that the documents therefore had not yet made it to the location where the items of income were being kept - in other words, that the documents were in a “to be paid” pile rather than a “have been paid” pile. [ 13 ] The second allegation regarding unreported tire sales in 2008 had to do with a purchaser named Brian McPhee. Mr. McPhee had previously paid $500.00 ($476.19 purchase and $23.81 GST) toward a tire purchase by way of a cheque which subsequently bounced.

The balance of his payment was good, and was included in income by the accused. The $500.00 was made good by cheque dated January 31, 2008 and deposited March 7, 2008, but not reported in income. The documents relating to this transaction were located in a bundle of documents relating to collection problems, suggesting that (as suggested with respect to the Dutch Enterprises Ltd. matter referred to above) this was an error rather than a deliberate decision not to report. [ 14 ] Mr. Johnson testified that, were he drafting the Information now, he would not include these amounts in the allegations.

Again, I think his conclusions are well-founded, and accordingly the charge in count 10 now has a maximum liability of $354.48. Burden of proof [ 15 ] It is of course incumbent on the Crown to prove guilt beyond a reasonable doubt; it is not up to the accused to prove his innocence. This trite statement remains true even in situations where some commentators have referred to the “evidential” or “tactical” burden as shifting.

Some of the circumstances in the present case, as for example regarding BASF or crop levy refunds (referred to below), might seem to be of this nature: the Crown has adduced evidence which, it argues, shows not just specific transactions as being income, but is sufficient to shift the evidential burden to the defence to show that similar transactions are not income. I think the comments of Sopinka J. in the Supreme Court of Canada on this point are useful in instructing myself.

They are in the context of a civil case, but with appropriate changes apply equally in the present context: It is not strictly accurate to speak of the burden shifting to the defendant when what is meant is that evidence adduced by the plaintiff may result in an inference being drawn adverse to the defendant. Whether an inference is or is not drawn is a matter of weighing evidence. The defendant runs the risk of an adverse inference in the absence of evidence to the contrary. This is sometimes referred to as imposing on the defendant a provisional or tactical burden. . .

In my opinion, this is not a true burden of proof, and use of an additional label to describe what is an ordinary step in the fact-finding process is unwarranted. . . The legal or ultimate burden remains with the plaintiff, but in the absence of evidence to the contrary adduced by the defendant, an inference of causation may be drawn although positive or scientific proof of causation has not been adduced. [2] [ 16 ] It remains to the Crown to prove to me, beyond a reasonable doubt, that for example all BASF payments were of the same nature, and to be included in income.

It would be possible for the accused to call no evidence whatsoever on the issue, and I still decide it in his favour; contrariwise, it would also be possible for the accused to call reams of evidence on the same issue, and I still decide it against him. This is nothing but a statement of the tactical issues which the accused and his counsel must consider in deciding how to present the case. They must choose what evidence to put forward.

Short of an express rule to the contrary, the choices they make in this regard have no effect on my view of the evidence: I do not consider a conclusion to be more or less likely because the accused did or did not call evidence with respect to it.

[ 17 ] The point of this lengthy exposition of the obvious is simply to make it clear that when I draw my conclusions regarding BASF, crop levy refunds or similar matters, I do so on the basis of the evidence before me, and that only. To the extent that the defence has brought information into evidence, it has been considered along with that put forward by the Crown.

I am of course not obliged to believe any particular document or testimony; my task is to weigh the evidence, draw conclusions therefrom, and decide whether or not the Crown has proven guilt beyond a reasonable doubt on the evidence I accept. [ 18 ] In the case of circumstantial matters, such as again BASF or crop levy refunds, guilt can be established only if it is the only rational conclusion which may be drawn from the facts I find. [3] This may have the effect, in the accused’s mind, of imposing on him a burden: if the accused is concerned that the evidence before me admits of only one rational conclusion, and he wishes to avoid me drawing that conclusion, then clearly he will have to consider whether or not to put forward other evidence from which I could draw a different rational conclusion.

It is important, however, to distinguish this from me drawing an inference from a failure of the accused to call evidence on a particular point. Facts [ 19 ] I am satisfied that Mr. Glubis’ income, reported and unreported, for the years in question can be summarised as follows: Table 1 Year Reported farm income Unreported farm income Reported tire sales Unreported tire sales 2007 $300,966.59 $38,972.23 $892,960.45 $12,121.50 2008 $90,703.29 $221,736.71 $790,474.05 $24,878.29 2009 $302,094.48 $67,696.08 $799,384.91 $24,722.20 [ 20 ] The unreported income is from a variety of sources.

I will review each of these sources in detail in subsequent pages.

The sources and amounts are as follows: Table 2 Year Unreported grain sales Unreported equipment rentals and custom work Unreported land rent Unreported refunds Unreported tire sales (net) Unreported truck sales (net) 2007 $37,902.32 $625.00 $0 $444.91 $11,188.44 $6,480.93 2008 $205,693.66 $2,525.00 $12,800.00 $918.05 $22,970.50 $4,500.00 2009 $50,115.87 $2,175.00 $12,160.00 $3,245.21 $22,978.57 $0 Total: $293,711.85 $5,325.00 $24,960.00 $4,408.17 $57,135.51 $10,980.93 [ 21 ] Various of these transactions included GST charged and collected by the accused, which he did not remit. Differences in

numbers between the above tables relate to what is alleged to be GST being included in some figures. Thus, for example, the 2009 figure for unreported tire sales in Table 1 is $24,722.20, whereas the comparable figure in Table 2 is $22,978.57. The former is the amount of the cheques allegedly for tire sales; the latter is the amount which CRA alleges is the “sale” component of those sales, less Goods and Services Tax (“GST”) (and, in some cases, possibly provincial sales tax (“PST”)) where CRA alleges those amounts were charged.

The amount which the accused received is, of course, the larger amount; the distinction with the lesser amount relates to whether the larger amount includes a portion which should be included in the allegations of failure to report GST. [ 22 ] GST allegedly collected but not reported totalled as follows: Table 3 Year Amount 2007 $2,824.51 2008 $2,751.09 2009 $2,522.68 Total: $8,098.28 [ 23 ] Additionally, the under-reporting of income in 2008 and 2009 resulted in a reported family income which was low enough that the accused’s wife, Jean Glubis was able to claim and receive Goods and Services Tax credits in excess of what she would have otherwise been entitled to, as follows: Table 4 Year GST credit (Jean Glubis) 2008 $496.00 2009 $500.00 Total $996.00 [ 24 ] In light of the accused’s defence, it is important to note that all of the unreported amounts were found by analysis of a single bank account.

The accused and his wife appear to have used this particular bank account as their main bank account, depositing virtually all funds into it and using it to pay virtually all expenses. Once an auditor from Canada Revenue Agency (“CRA”) reviewed the bank account records, it was immediately obvious that there was revenue that did not appear on the income tax returns. Further investigation revealed that the sources of some of these funds were legitimately non-taxable; others formed the basis for the current charges.

This is of significance because, if the non-reporting was deliberate, it was certainly not a sophisticated method of tax evasion. It may lend some credence to the accused’s claim of honest mistake rather than wilful action. Credibility of the accused [ 25 ] The accused takes the position that his failure to report income and GST was simply an error, or rather a series of errors, on the part of himself and his wife.

Their accounting “system” was barely worthy of the name, and had so many opportunities for mistakes to occur, documents to become misplaced and amounts to be overlooked, that it almost seems random to what extent income was

reported at all. The system, on the defence evidence, was chaotic and haphazard. In the defence submission, it was no wonder that errors were made, and were certainly made without any intention to deceive. [ 26 ] In assessing the credibility of this claim, it is of interest to note that according to CRA’s audit, this chaos, these errors applied only to the revenue side: that is, it seems that every expense available was claimed, whereas various items of income were unaccountably lost.

It is important not to overstate this, however, since necessarily the audit would normally only find the documentation for claimed expenses: lost documents for unclaimed expenses would not be likely to come to the auditor’s attention. Unreported income was located by examining the bank account and searching for documents related to each deposit; there is no similar record for expenses.

It is certainly conceivable that there were legitimate expenses which would have been available for the accused to claim, but which were not claimed because the documentation was lost and the accused therefore had no idea, when it came time to complete his returns, that the expense had ever existed or to determine its amount. [ 27 ] At the same time, the fact is that once the expense documents got to the point of entry into the accused’s rudimentary accounting system, every single one of them was subsequently properly reported (with one significant exception - see below under “Grain sales”), and the documentation filed in such a way that it could be found and correlated with the appropriate tax return.

The point, and although not too much should be made of it, it is nonetheless a valid one, is that the accused’s system was perfectly capable of tracking large collections of documents accurately, finding and reporting the appropriate amounts from those documents, and retaining them as required. It therefore seems odd, though not by itself determinative, that this meticulousness applied only to expenses and not to items of income. [ 28 ] The accused’s credibility was of considerable significance in the course of this trial.

In the face of the evidence led by the Crown, he presumably felt that he should respond, and provide some sort of explanation for events which might otherwise seem very damning. His evidence, to repeat, was to the effect that he had not intended to fail to report anything: it was simply a series of mistakes which had led to that result in so many cases. [ 29 ] The evidence, both from himself and from other witnesses, certainly supported this possibility. In some cases, I have concluded that it was even likely.

In some, it was doubtful but at least plausible; and in some, I did not believe the accused at all, and concluded that in fact he was outright lying, that he had done or failed to do certain things quite deliberately, with the intention of not paying the tax he owed (or remitting the GST collected). [ 30 ] Some of my observations and conclusions regarding the accused’s credibility are found within specific portions of these reasons, because they relate to those particular issues. Of course, findings of credibility or lack thereof on one issue play into the determination of the same on other issues.

There were also some matters which were telling about the accused’s overall credibility, which I will go through at this point. These are not exhaustive, but simply examples. [ 31 ] The first was that the accused seems to have a tenancy to exaggeration, or careless word use, which does not inspire confidence in his statements.

The following are some examples: a. on his use of vehicles: “I often make 100 trips a day”; [4] b. on how busy his tire shop was: “if that shop had been in the city doing that kind of volume, they would have had six employees, and I was doing it all myself”; [5] “[s]ometimes there’d be 100 phone calls in a day”; [6] c. his wife plants “enough garden for 50 people instead of just two”; [7] d. his wife “had a big garden, like I said before, that was enough for – to do the whole Town of Strongfield”. [8] [ 32 ] The accused also had a tendency to revise his previous testimony, even on unimportant matters, suggesting that he was not overly concerned with the accuracy of details: a. the quotation above about his shop being so busy as to require six people to run it was followed, about an hour later, by his

stating, “like I said, it was enough work for four or five people, but I ran it on my own” [9] . Of course, that was not what he had actually said; b. similarly, the two quotations above about his wife’s garden: in (d), he states that he has said this before; but in fact, he had said (c). [ 33 ] Both of the examples in the preceding paragraph are slight by themselves; perhaps the accused was trying to use vivid imagery to convey a certain impression.

The problem is that if he is willing to exaggerate for the sake of putting across his point on such minor matters, what else might he be exaggerating for effect? [ 34 ] The accused’s revisions to earlier statements is perhaps best shown by the following set of exchanges, in which he completely reverses himself in the space of just a few minutes: T1628, ll. 17 - 19 : Q. The next question I want to ask you is, I understood from your evidence you did not consider yourself to be an auto dealer; is that correct? A. No. That’s right. T1631, ll. 15 - 38 : Q.

What does it say in the – in the area under the title type of business? A. It claims – it says and states, which is true, that I am an auto dealer and tire and parts supplier. Q. So it’s true you’re an auto dealer? A Yes. I’m not disputing that [...] Q. Well I understood from your previous answers to me that you were not an auto dealer. A. You’re – Q. Now you’re telling me you are an auto dealer? A. You have yourself mixed up. T1632, ll. 32 - 35 : Q.

So – and I’m suggesting to you when you – you previous [ sic ]testified you did not consider yourself an auto dealer, you’re now saying, if that was your evidence – you’re now – A. I didn’t say that.

SaskPower [ 35 ] The Crown alleges that the accused received payments from SaskPower in each of 2007, 2008 and 2009 which were required to be reported, and were not. There were in fact payments received from SaskPower. It is unclear what the reason was for those payments in those years. [ 36 ] There is documentation from 2010 which may shed some light. During the years in question, the GST percentage changed. That makes comparing figures across years difficult, unless the GST is taken out. Performing that calculation with respect to the SaskPower payments reveals that they are all for the same amount.

In each year, there were two payments; net of GST, they were always $50.00 and $475.00 respectively. The 2010 documents indicate that the payments that year, in the identical amounts as in 2007- 2009, were for “weed control”. That is, in 2010 SaskPower paid the accused for weed control, in exactly the same amount as it paid him for unknown reasons in each of 2007, 2008 and 2009. [ 37 ] The accused, however, maintains that these payments were for an easement.

He says that the particular land in question originally belonged to his father, and that his understanding always was that SaskPower paid his father for its easement on the land. It was not clear to me whether or not the accused’s father, to the accused’s knowledge, either had or had not paid income tax on those payments. It is also not clear when the accused received the land.

The documents certainly indicate that GST was paid by SaskPower on the payment that was entered into evidence; I do not know whether or not the accused’s father was still the land owner when the GST came into force. [ 38 ] The accused does not disagree that the 2010 payment is of the same nature as those made in 2007, 2008 and 2009; rather, he disagrees that those payments are for weed control. He argues that they were for an easement which SaskPower has, he understands, over the land.

If in fact this is so, and even if payment was being made on such a basis, it is unclear to me why such a payment would not be taxable, or why the GST paid by SaskPower and collected by the accused would not be reportable. [ 39 ] On the latter point, the GST, I am not aware of any principle that would suggest that if the accused was paid for an easement, and GST paid to him on that payment, he would not be required to remit the GST.

Regardless of his understanding of the reason why he was being paid by SaskPower, it is difficult to believe that he could possibly have thought that he could keep the GST portion of the payment for himself. [ 40 ] That lack of credibility with respect to a portion of the payment necessarily plays into my assessment of the credibility of his assertion about the remainder of that payment, and his credibility as a whole. [ 41 ] I am satisfied that the SaskPower payments in 2007, 2008 and 2009 were for weed control, and as such should have been included in income. None of those payments were so included.

Thus, in each of the three years in question, the accused under-reported his income by $525.00 by not reporting the SaskPower payments. He also failed to report the GST paid by SaskPower in each of those years. Those amounts were $31.50 in 2007, $26.25 in 2008 and $26.25 in 2009. [ 42 ] It is difficult to see how the accused could have believed that the payments were for an easement, when they say on them that they are for “weed control”. Further, it is difficult to understand why the accused would have thought that he was not required to report the GST collected.

His response to all of this is, in essence, that this is what his father did; yet there is very little evidence that this is in fact what his father did. There is also no evidence that there is, or has ever been, a SaskPower easement on the land. No title information was filed, nor was a copy of any easement or other agreement which might have substantiated the accused’s purported belief. [ 43 ] I simply do not believe the accused.

Further, I am satisfied beyond a reasonable doubt to the contrary: he deliberately chose not to report either the income or the GST. [ 44 ] Accordingly, I find that the accused deliberately decided not to include in his income $525.00 in each of 2007, 2008 and 2009, and chose not to report or remit the GST amounts of $31.50 received April 25, 2007, $26.25 received April 28, 2008 and $26.25 received April 30, 2009.

Rentals [ 45 ] The Crown has identified several items that it characterizes as “rental income”. In the subject years, there were 11 cheques deposited to the accused’s account which indicated on them that they were for rental of certain pieces of equipment: “tractor”, “grain vac”, “bin crane rent”, etc. None of these deposits were reported as income. If they were indeed for rental of farm equipment, it would seem that they are income, and should have been reported. [ 46 ] The Crown also alleges that GST was charged on some of these rentals.

The assumption by the Crown is that, with three exceptions, rentals were charged in multiples of $100.00. If the rental amount was not an even multiple of $100.00, the Crown calculated whether or not there was a figure which would be an even multiple of $100.00, added the appropriate GST to it, and checked to see if that new figure was the amount of the cheque. Thus, while Clint Ringdal in 2007 paid $106.00 for “bin crane rent”, given the GST rate at that time, this would mean a rental rate of $100.00 and GST of $6.00.

Similarly, when in 2008 Cory Chomyshen paid $315.00 for “crane rent”, as GST was then 5%, this would work out to $300.00 for rent and $15.00 for GST. Even in 2009, when Dal Hauberg paid $787.50 for “crane rent”, this worked out to $750.00 plus $37.50 - which happens to be 5%, or the GST at the time. Conversely, when a rental figure was a more “even” number (2008's tractor rentals to Bradley Jess, of $500.00 each time, for example), the Crown assumes there was no GST charged. [ 47 ] I am satisfied that these rental amounts were not reported, and were required to be.

The Crown also urges me to find that these charges included GST which, if true, were not reported on the GST return. Although the amount unpaid would remain the same (for example, either $100.00 in unreported income and $6.00 in unpaid GST, or simply $106.00 in unreported income), it makes something of a difference in terms of the charges the accused faces. [ 48 ] After reviewing the evidence carefully, I have concluded that the only reasonable

interpretation is that the amounts identified by the Crown as GST were in fact such. The odd numbers, and how consistently they break down into the GST chargeable at the time, permit no other reasonable explanation. [ 49 ] Accordingly, I find that the accused under-reported his income by $100.00 in 2007, $2,000.00 in 2008 and $1,650.00 in 2009, and failed to report and remit GST collections of $6.00 in 2007, $50.00 in 2008, and $67.50 in 2009 with respect to these transactions. [ 50 ] The question, as always, is one of intent.

The accused’s response, again as always, is simply that his record-keeping system did not pick up these rentals, and therefore their omission is a matter of error rather than a deliberate decision by him. He says that some of these rentals may have been executed by one of his sons, with the money simply given to him by them, although this is nothing but speculation on his part. [ 51 ] I have already come to certain conclusions about the credibility of the accused as it relates to his grain sales and other matters; those conclusions necessarily colour my view of his entire testimony.

Nonetheless, I am unable to conclude beyond a reasonable doubt that the accused deliberately omitted these rentals from his income tax, or that he deliberately chose to not report the GST which he collected. These are small transactions, few in number, which the accused may not have been personally involved in. I certainly have my suspicions about the accused’s non-reporting of these amounts, but suspicion is not sufficient to ground a conviction.

Refunds [ 52 ] Among the documents seized from the accused’s records were documents which, the Crown alleges, prove that the accused received various refunds from certain government bodies. They were not included in income, as they should have been if they were what the Crown alleges they were. [ 53 ] By law, producers of certain crops in Saskatchewan must pay a proportion of the value of the sale of such crops to various commissions involved in research regarding such crops.

Thus, for example, there exist the Saskatchewan Flax Development Commission (also known as “SaskFlax”), the Saskatchewan Canola Development Commission (“SaskCanola”), and the Saskatchewan

Mustard Development Commission (“Sask Mustard”), all of which receive a proportion of the sale price of those respective crops, paid directly by the buyers. Those amounts are referred to as levies. Those levies can, however, be refunded to the farmer upon application by him or her. [10] [ 54 ] In other words, when a farmer sells some of those crops, the buyer does not pay the farmer the entire value of the crop; rather, a small fraction of the purchase price is instead sent to the appropriate commission, and can be retrieved by the farmer upon application.

The sale price can in essence be paid in two installments: (1) the amount of the cheque paid to the farmer at the time of sale; and (2) the balance by refund from the commission of the levies, if the farmer applies for the refund. [ 55 ] It is clear, therefore, that refunds of the levies are income: they are actually part of the price obtained by the farmer for the sale of the crop.

If the refund is not applied for, then presumably the levy would not be chargeable as income (or is income with a corresponding expense); when applied for and received, however, the levy refund is income and must be reported as such. [ 56 ] During the years under review, the accused received cheques from the three Commissions referred to above. In 2007, he received a cheque for $40.41 from SaskCanola; in 2008, he received a cheque for $92.38 from SaskFlax; and in 2009, he received a cheque for $33.07 from Sask Mustard and one for $421.26 from SaskCanola.

None of those cheques specify on them that they are for levy refunds. If I understand the accused’s position correctly, he acknowledges that these amounts are for levy refunds. In the event that I am mistaken about his position, however, I will indicate my reasoning in concluding that they are in fact such refunds. [ 57 ] The Crown points to a letter seized from the accused, dated April 15, 2011. That letter, from SaskFlax to the accused, refers to the levy and an attached refund cheque. It should be noted, however, that this letter and the refund are outside of the time frame applicable to these charges.

The Crown says that this letter indicates that the accused was aware of the levy and refund. [ 58 ] I do not find the letter to be of any assistance. On the one hand, it shows that the accused had notice of the levy and applied for the applicable refund at a period after the time under review here. His knowledge at a later date is of limited use in ascribing knowledge to him at an earlier date.

Moreover, I would expect that any producer selling these crops would be aware of the levy: it is an amount being deducted from the sale price, and I would be surprised to have a farmer claim that they passively allowed a buyer to deduct amounts from the money payable to the farmer without the farmer being satisfied that such amounts were properly deductible.

Indeed, the accused testified that he was aware of the levies for the various crops, and that he routinely applied for the refunds; although, he stated, he often could not recall what he had sold and therefore applied for the refunds even in situations where, it would turn out, he had not sold any such crops. [ 59 ] Indeed, I note that, for example, in 2008 the evidence shows that the accused applied for and received a refund of the canola deduction (or the “canola check-off”, as it is referred to on the form from the Saskatchewan Canola Development Commission).

In his tax documents for 2008, there was found a copy of his application for this refund, and his bank account shows a matching deposit from the Saskatchewan Canola Development Commission. He reported this amount on his 2009 T1 as farm income. [ 60 ] The Crown of course has to prove that the amounts noted above were in fact refunds of these levies. In this regard, there is a document seized from the accused from “SK Flax Development Commission” which unequivocally shows that the amount the accused received in 2008 from SaskFlax was a refund of the levy.

It shows two amounts under the heading “Levy”, with a notation beside each saying “Refunded”, and the amounts total $92.38, which is the amount (as noted above) which the Crown alleges was a levy refund from SaskFlax to the accused in 2008. I am satisfied that this amount was in fact a refund of the SaskFlax levy, and should have been included in the accused’s income for 2008. [ 61 ] Having reviewed all of the above, I find that there were unreported crop levy refunds as follows: Table 5 2007 2008 2009

Canola refund $40.14 $421.26 Flax refund $92.38 Mustard refund $33.07 [ 62 ] I am further satisfied that those amounts should have been included in income. The question is whether or not the accused had the necessary mens rea with respect to those amounts. [ 63 ] In this regard, it is instructive to note the accused’s evidence in cross-examination. He testified that he could never recall whether or not he had sold any of the grains which were subject to levy, so every six or 12 months he would apply for refunds to all of these commissions.

Apparently, if a refund is payable then it will be calculated and paid; and if not, then not. He seems to have been willing to accept the commissions’ determinations, as he never double-checked against his own records. This is certainly consistent with his entire approach to record-keeping during the subject period. It seems odd, however, that receiving a cheque from one of the commissions would not alert him to the fact that he had recently sold that type of crop. His response to that suggestion? “Why would I bother looking?” [ 64 ] It is one thing to genuinely forget to include something in income.

When one deliberately chooses not to consider a reminder, however, it raises some doubts about just how genuine the forgetfulness truly is.

The fact that he reported one of these refunds inclines me to find that he is genuine in his statement that he did not report the others simply because his flawed bookkeeping system did not catch them; but his general lack of credibility, not to mention his response quoted in the previous paragraph, argues strongly in favour of a finding of deliberate evasion, or at best wilful blindness. [ 65 ] I am of the view that the accused was aware of these payments, was aware that they should be reported as income, and chose not to keep track of them for income tax purposes.

If circumstances forced him to acknowledge their existence then he would report them; but if he could overlook them, he was perfectly willing to do so. Wilful blindness being sufficient for mens rea for tax evasion [11] , I am convinced of his guilt with respect to these payments, specifically for $40.14 in 2007, $92.38 in 2008, and $454.33 in 2009. BASF rewards program [ 66 ] The Crown argues that the accused received monies from BASF Canada Inc. (“BASF”) which should have been included in his income, and were not. The latter statement, at least, is uncontroverted.

The position of the accused is that he was not required to claim these amounts as income, as they were “rewards”. [ 67 ] BASF is a farm chemicals company. During the years in question, it had a program whereby farmers would receive money from BASF based on their purchases of BASF products during the calendar year. Those purchases were not made from BASF directly, but rather from retailers selling BASF products. The program related to such products as herbicides, fungicides and other farming-related chemicals.

The cost of such chemical inputs are, of course, deductible from a farmer’s gross revenues in determining taxable income. [ 68 ] As part of this BASF program, the accused received $2,790.88 in 2009. This amount was in effect a rebate of amounts paid by the accused to retailers for the purchase of BASF products. As noted above, the cost of those products would be deductible as expenses. Any refund or rebate would accordingly reduce such expense claim, such that either the expense claim should be net of the rebate, or the full expense should be claimed and the rebate added to income. The accused did neither.

Although the evidence does not otherwise specifically show these expenses, I am satisfied on the basis of the BASF documents, and the accused’s own testimony, that he made the purchases referred to therein, and claimed them as expenses on his 2009 T-1, but without either netting out the rebate, or adding it to his income. He has therefore under-reported his income for 2009 by $2,790.88. [ 69 ] There are no comparable BASF documents for 2007 or 2008. There are, however, comparable deposits. In December of both

of those years, the accused’s bank records show deposits of $404.77 and $625.67 respectively from BASF. Neither of those amounts were reported, although again there were chemical expenses claimed (with no set-off of these amounts). The Crown suggests that, based on the evidence from 2009, I should conclude that the payments in 2007 and 2008 from BASF were similarly rebates, and include them in income for those years. I accept that position, which was not seriously disputed by the accused. [ 70 ] The accused’s position is that these amounts did not have to be included in income because they were “rewards”.

He viewed them as being optional on the part of BASF, which played into his view that they were not taxable. Although he was wrong, his testimony to that point had struck me as credible and believable. Then he said that he had telephoned “the chemical companies” and was told that “it didn’t have to be reported”. [12] As this point, my credulity began to wear a bit thin. It seems very odd that “the chemical companies” would be providing tax advice. Furthermore, the accused seemed to be very vague about just when this had occurred.

No other details, which might have bolstered the credibility of this assertion, were offered. Given my other doubts about his credibility, I have concluded that the accused was at best choosing to overlook the question of whether or not these payments should be included in income. Once again, wilful blindness being sufficient, I find that the accused had the requisite mens rea for tax evasion with respect to these three payments, being $404.77 in 2007, $625.67 in 2008 and $2,790.88 in 2009. Grain sales [ 71 ] The vast majority of the unreported income is made up of crop sales.

It is interesting to consider the accused’s pattern of reported versus unreported crop sales over the three years in question. Table 6 Year Total crop sales Reported crop sales [13] Unreported crop sales Proportion of unreported to total 2007 $321,780.32 $283,878.00 $37,902.32 11.78% 2008 $272,639.66 $ 66,946.00 $205,693.66 75.45% 2009 $325,860.87 $275,745.00 $50,115.87 15.38% [ 72 ] One striking conclusion from the above table is how much more consistent the “total crop sales” column is than the “reported crop sales” column.

That is, the accused’s actual crop sales were relatively consistent throughout, whereas his reported crop sales varied wildly. This obviously has implications for his credibility when he says, in effect, that he did not notice the crop sales that went unreported.

Had the amount, or proportion, of unreported crop sales remained reasonably consistent, his assertion might have been more believable; as it is, it is difficult to understand how, for example, in 2008 he can possibly have thought his crop sales were down by roughly 3/4 from the previous year, when the cash coming in from those sales was down by perhaps 1/6. His crop income that year was literally four times what he reported it to be: over $200,000.00 of extra crop sales. Furthermore, since all of his expenses were offset against his reported income, this was over $200,000.00 of pure profit. Net income.

Cash in hand. [ 73 ] The accused says he never noticed. [ 74 ] It is true that crop sales were not the only source of farm income for the accused, but certainly that was the main category of farm income: non-crop farm income (as reported by the accused) was just $17,075.00 in 2007, $23,756.00 in 2008 and $26,350.00 in 2009. Those figures, although not insubstantial, are overall quite small compared with the unreported crop sales. [ 75 ] It could be suggested that the scale of the tire operation overshadowed this “lost” crop income, and it is true that the tire

revenue was much larger than the farm income (see Table 1). However, the accused had to report farm income separately in his tax returns; indeed, the returns require a listing of crop sales. The form thus specifically required the accused to put his mind to his crop sales for that year. Furthermore, the accused listed the sales by type of grain in his T1, and the evidence shows that the numbers for those listings were compiled by adding up the individual delivery records for those crops. In preparing the T1s, therefore, attention had to be paid directly to each individual grain delivery.

In 2007, for example, the accused received three payments for deliveries of feed grain to Big Sky Farms over the space of under two months (in October and November), totalling over $20,000.00; one would think that, when the accused went to prepare his taxes just a few months later, he might have recalled getting some money from Big Sky Farms. None of those payments, however, made it into his 2007 T1. [ 76 ] In addition to the sheer dollar value of the unreported grain sales, an additional oddity emerges from a review of those sales.

Explanation of this oddity requires some background information regarding crop types. [ 77 ] Farmers, of course, grow a variety of crops. Many, perhaps even most, grow different crops at the same time, on different fields. A farmer may also have crops from previous years stored in bins but not yet sold.

As crop sales are reported on a cash basis rather than an accrual basis - the revenue from a crop only has to be reported in the year it is actually sold, rather than the year in which it is grown - this means that a farmer may sell, and therefore report, quite a variety of different types of crops in a single year. [ 78 ] The Prairies are known for producing wheat and, perhaps to a lesser extent, rye, barley and canola. There are also lesser- known crops, including mustard, canary seed, lentils and flax. There are also different grades, or quality, of each crop: the better the quality, the higher the price.

At the bottom end of the quality scale is “feed” quality; “winter wheat” is likewise of a lesser quality. [ 79 ] Looking at the accused’s crop sales for the three years in question with the above information in mind, one pattern becomes apparent: any sale of good-quality wheat, rye, barley or canola was reported by the accused; every sale of poor quality crop (feed, or winter wheat), or of mustard, canary seed, lentils or flax, was not.

This pattern is absolute, and completely consistent across all three years under review; there is not a single exception among the 26 unreported and 62 reported sales in those three years. [14] [ 80 ] The number of reported versus unreported sales is also interesting.

The following table summarizes that pattern by year [15] : Table 7 Reported wheat Reported rye Reported canola Reported barley Total reported Unreported 2007 6 12 5 7 30 6 2008 7 0 3 0 10 13 2009 1 0 21 0 22 7* Total 62 26 *Not including a sale to Cargill in October, the nature of which was not determined. [ 81 ] It is clear in reviewing Table 7 that the unreported sales were not an inconsequential number compared to the reported deliveries.

In 2007, in terms of number of deliveries, the unreported were 20% of the reported; in 2008, they actually exceeded the reported deliveries, being 130% of reported deliveries; and in 2009, they were 32% of reported deliveries. Overall, in the three years in question, the accused had 88 grain sales, of which 26, or roughly 30%, were unreported. These are significant, even astonishing, numbers on which to base allegations of “I forgot” or “I didn’t notice”.

[ 82 ] There are therefore three issues which arise from the evidence of grain sales reviewed thus far: (1) the amount of money which was not reported. Whether in absolute terms or as a percentage of reported crop sales, the amounts are far beyond trivial. Further, they constituted net profit, making a very substantial difference to the accused’s bottom line from farming in each year; (2) the pattern of grain sales.

The stark divide between poorer-quality crops and specialty crops, on the one hand (not reported in any of the three years), and good-quality wheat, etc., on the other hand (always reported), is absolutely striking; (3) the numbers of deliveries of crop in each year. If the unreported sales arose from a single delivery, it might be relatively easy to forget. If the unreported deliveries were even a very small proportion of the total number in a year, again they might be easy to overlook months later.

It is clear, however, that neither of those are the case here. [ 83 ] The accused’s position is, in essence, that these patterns are merely coincidences. He says that the failure to report these grain sales was inadvertent, caused by his poor record-keeping. He simply forgot about these crop sales. Some of them may have been done for him by one or the other of his sons.

For whatever reason, he had no documentation regarding those grain sales, and therefore nothing to remind him about them come tax time. [ 84 ] That assertion, however, is challenged by one small bundle of paper found by the Crown in the myriad filed with the Court. [ 85 ] Certain grain sales were made through a broker, which charged a fee for that service. Such fees are legitimate expenses and are deductible from income. The evidence shows the accused being invoiced directly for such brokerage fees, and paying the same directly to brokers.

In the accused’s 2008 records were found several such invoices, together with adding-machine tapes. Jean Glubis testified that the notations on them were in her writing - they are noted as “consulting fees”, with the total indicated, exactly the same as similar expenses were noted for other years. The 2008 broker invoices were prepared, labelled and packaged exactly as all other expenses claimed on the 2008 tax return, and indeed the same as for the other years; the difference, however, is that in 2008 these invoices were not claimed.

By her testimony, these invoices would have been located, added up and labelled at the time Mrs. Glubis was working on the 2008 tax returns. In other words, these invoices were collected and added up at the time the tax returns were being prepared, specifically so that they could be claimed as expenses, exactly as they were in other years; but then they were not claimed. This seems odd - why would a taxpayer not claim legitimate expenses? [ 86 ] It is not by coincidence that I mention here that according to Mrs.

Glubis, she prepared most of the rough draft of the tax returns but the accused had the final say in what was reported and claimed. In other words, it would be within their practice for the accused to have decided not to claim certain expenses, including the 2008 consulting fees. [ 87 ] It is also not by coincidence that I mention here that the “consulting fees” calculated by Mrs. Glubis but not claimed by the accused on his 2008 tax return all relate to grain sales which he also did not report on that tax return.

That is, all of the expenses in this bundle, legitimate deductions which could have been claimed and offset against income, related solely to the grain sales which the accused did not report on his 2008 return. [ 88 ] It seems, then, that the accused is incorrect when he says that he had no records which would have reminded him about the unreported 2008 grain sales.

It appears that there were, in fact, records of expenses related to precisely those sales; it appears that those records were kept, and the expenses added up at precisely the time the 2008 return was being prepared; but those expenses did not make their way into the 2008 return. [ 89 ] As a separate matter, but still on the subject of records for grain sales, all of the witnesses representing grain purchasers testified as to the documentation routinely provided with the cheques for grain purchases.

It might be possible for some of that paperwork to go astray; it would not strain credulity to suggest that some of the paperwork could have been delivered to one of the accused’s sons if they had actually delivered the grain to the purchaser. However, even the long arm of coincidence can only stretch so far, and the notion that all documentation went astray with respect to 26 of 88 sales over the course of three years, without the accused even noticing, is too long a reach.

[ 90 ] In light of all of the above regarding unreported grain sales, I find it impossible to give any credence to the accused’s story. The sheer amount of money which the accused claims not to have noticed makes it unbelievable. The number of times grain left his bins without, he says, him noticing or remembering is difficult to accept, even with his partial explanation that sometimes his sons might have dealt with the actual transportation and sale. Even more damning is the pattern of reported versus unreported sales. Lastly is the evidence of the unclaimed brokerage expenses.

Any one of these would be suspicious; any two would be telling; any three of them are enough for me to conclude that the accused is lying; but the four of them together is absolutely conclusive. The evidence admits of no possible conclusion except that the accused knew of the grain sales and chose not to report them. [ 91 ] In an attempt to explain some of the unreported grain sales, the accused spoke specifically to the 12 made to a purchaser called Big Sky Farms. Big Sky was involved in 12 of the 27 unreported grain sales in the three years in question.

The accused had dealt with them for quite a few years prior to the years in question here. Although the evidence is unclear, it appears that Big Sky began not paying farmers in full for their crop.

A number of farmers, including the accused, got together and investigated the possibility of a class- action lawsuit, as well as making a complaint to the RCMP. [ 92 ] According to the accused, although he received 12 payments from Big Sky during the subject period, he did not consider that he had to report those payments because “it was in – in litigation” [ sic ]. [16] [ 93 ] The accused’s story with respect to Big Sky suffered from a number of problems. Firstly, it made no coherent sense. Secondly, a great deal of it was led by his counsel, decreasing its credibility in my eyes.

Thirdly, his evidence was that he expected to report the income once he had been “paid out” [17] , but could not give any intelligible response to whether or not that had ever happened, or even what exactly that event had been or might be. Fourthly, there was no rational explanation ever offered as to why partial payments would not be taxable when received, but only when payment in full was received. Even reviewing the transcript and my notes of his evidence do not assist in making his position intelligible or believable. There was in fact no litigation. The RCMP closed their file without laying any charges.

The accused was never required to give anyone his documentation regarding Big Sky. The entire Big Sky episode concluded with the accused receiving partial payment of the amounts owed to him, and reporting none of it. [ 94 ] Ultimately, the accused’s ramblings regarding Big Sky were utterly unpersuasive, even to the minimal amount required to raise a reasonable doubt. [ 95 ] Accordingly, I find that the accused deliberately chose not to report crop sales in 2007 in the amount of $37,902.32, in 2008 of $205,693.66 and in 2009 of $50,115.87.

Unreported land rent [ 96 ] The accused rented land to his sons, Allan and Ryan. Some land was rented on a crop-share basis, which I am not dealing with under this heading as it would be subsumed in the crop income. However, some land was rented on a cash basis. It appears that the payments made by Allan were properly reported, but not two payments made by Ryan. Ryan made out a cheque dated December 13, 2007 in the amount of $13,568.00 to the accused for the rent of a half-section of land in 2007. I am satisfied that this amount comprised $12,800.00 rent and $768.00 GST.

Neither of those amounts were reported by the accused. That cheque was deposited by the accused or someone on his behalf on April 4, 2008. Similarly, Ryan appears to have paid his 2008 land rental on May 2, 2009: there is a “sales order” as part of Exhibit P-911, which is dated that date, for $12,800.00 plus $640.00 GST, which indicates that it is for “2008 Land Rent”, identifies two quarter-sections and notes that it was paid by cheque. That document appears to be signed by both Ryan and the accused. [ 97 ] It seems from the evidence that Ryan was frequently late with his rent payment.

A cheque would be proffered at different times of each year, on at least one occasion was not paid at all, and as noted above sometimes was either not given in the year to which it referred or, possibly, was written but not cashed, possibly at Ryan’s request.

[ 98 ] Given that this was a recurring receipt, it is obvious that the accused should have noticed its absence had he thought to look for it. His response is, in essence, that he simply overlooked it. Given the pattern of Ryan’s payments, it is not unreasonable to think that a payment, or even two, could have been made but forgotten. While I may have some doubts, I cannot conclude beyond a reasonable doubt that the accused chose not to report these amounts, or even was wilfully blind as to whether or not they had been reported.

Tire sales [ 99 ] After unreported grain sales, unreported tire sales were the largest component of unreported income. The following summarizes the situation regarding tire sales [18] : Table 8 Year Value of total tire sales Value of reported tire sales Value of unreported tire sales Proportion of unreported to total 2007 $904,148.89 $892,960.45 $11,188.44 1.24% 2008 $813,444.55 $790,474.05 $22,970.50 2.82% 2009 $822,363.48 $799,384.91 $22,978.57 [19] 2.79% [ 100 ] It is immediately noticeable that the situation for tire sales is very different than that for grain sales.

The amounts unreported are markedly less, and the amounts as a proportion of the total are far smaller than the corresponding figures for grain sales. [ 101 ] The accused’s accountant, Gary Mang, prepared an analysis of the tire sales, among other matters. I have commented elsewhere in these reasons about certain aspects of Mr. Mang’s report, but I have no reason to think that his figures or calculations are incorrect.

He concluded as follows with respect to the number of reported versus unreported sales [20] : Table 9 Year Total number of tire sales Number of reported tire sales Number of unreported tire sales Proportion of unreported to total 2007 1,162 1,128 34 2.93% 2008 1,730 1,678 52 3.01% 2009 1,053 1,002 [21] 51 4.84% [ 102 ] The accused’s explanation is, once again, that his record-keeping system was so flawed that these invoices were lost, and therefore not available for review when tax time came around.

Because the invoices were kept separate from the payments for them, and no cross-reference made, loss of an invoice was unrelated to loss of the payment. All of these unreported sales were found by CRA painstakingly checking each deposit into the accused’s bank account, so it is certain that each of the payments shown as unreported were

made. It is conceivable that there were transactions for which the accused managed to lose both the invoice and the payment. Since the invoice numbers were not sequential [22] , nor were they checked, cross-referenced or reconciled, the accused actually had no way of knowing whether or not he had been paid for all of his sales. Although most sales were paid for at the time of the sale, there were at least some for which payment was to be made later. The accused’s method of tracking those was as haphazard as his method of tracking the sales themselves.

The evidence was, and I accept, that the accused kept several different invoice books running at the same time, writing invoices from whatever one was handiest at the time of a sale; he would place his copy of the invoice and payment into his pocket, or in a drawer at his shop in town, or somewhere in his truck, or perhaps wherever else seemed convenient at the time; and he would sometimes forget to retrieve them. The evidence was that Mrs.

Glubis had occasionally come across a forgotten document when doing the laundry. [ 103 ] With such a system of document-keeping, the accused says, it is hardly surprising that a small proportion inadvertently went astray and were not reported. Neither the absolute numbers of the missing invoices nor the proportion of those to the totals, both in numbers and in value, give obvious lie to the accused’s claim. [ 104 ] The Crown points to what it sees as a pattern within the unreported tire sales.

This pattern, it alleges, is more than coincidental, and is indicative of deliberate planning on the part of the accused and, thus, mens rea . [ 105 ] The pattern alleged requires certain assumptions to be made about the unreported sales. It also requires a certain knowledge of the tax treatment of tires, and the history of the GST. [ 106 ] Typically, a sale of tires attracts both GST and PST. However, purchases of tires by farmers do not attract PST. During the years in question, PST was 5%; GST was either 6% (in 2007) or 5% (thereafter).

It seemed to be a universal habit of the accused to charge for tires in round numbers, to which the applicable tax(es) would then be applied. [ 107 ] In analysing the deposits to the accused’s bank account, CRA was able to obtain copies of the cheques which were deposited. Additionally, CRA contacted many of the individuals whose cheques had been deposited. Between those two mechanisms, it was possible to determine that many of those deposits were for tires.

Sometimes this was because the cheque actually had a notation on it to that effect; sometimes the purchaser would still have their copy of the accused’s invoice to them. [ 108 ] For deposits for which no such positive information could be found, CRA calculated to see if, by taking out either GST alone or by taking out the combined GST and PST, the principal amount of the cheque could be reduced to a round number. Thus, for example, a 2007 deposit of $321.90 could be calculated to be a principal amount of $290.00, GST of $17.40 (at 6%) and PST of $14.50 (at 5%).

If such a calculation could be done and resulted in a round number for the principal amount, then CRA concluded that the deposit was for a tire sale. If such calculation did not result in a round number, then CRA did the same calculation again, taking out only the GST; again, if the principal turned out to be a round number, then CRA concluded that the deposit was for a tire sale.

It then added the principal amount into unreported income, and the GST into unreported GST collections. [ 109 ] For unknown deposits which were round numbers, without any other identifying characteristics, CRA assumed that they were tire sales on which the accused had forgotten to charge GST.

CRA then assumed that such transactions would have been subject to GST, calculated what the applicable division would have been between principal and GST, and then concluded that the calculated amounts should have been included in income and GST collections respectively. [ 110 ] Having characterized all of these unreported transactions into categories of tire sales, whether with GST, with GST and PST, or without any indication of GST, CRA then compared those transactions with the reported transactions. [ 111 ] CRA found that in 2007, of 1,141 reported sales, 47% included both GST and PST, while 53% included only GST.

In other words, there was roughly an equal split between reported tire sales which involved both PST and GST, and those which involved GST alone. However, CRA found, of the 25 unreported sales in 2007 (not including those where the deposit was a round number), 15 included both GST and PST, while only 10 included just GST: a split of 60% to 40%. [ 112 ] Applying this same analysis to the three years in question, of the 3,116 reported tire sales, 1,412 (or roughly 45%) included both GST and PST, and 1,714 (or roughly 55%) included just GST. At the same time, of the 112 unreported sales (not including the 28 which

were round numbers), 86 (or approximately 77%) were calculated to include both GST and PST, while 26 (or approximately 23%) were calculated to include just PST. [ 113 ] The Crown argues that this difference between reported and unreported tire sales is significant, and shows evidence of planning on the part of the accused. The Crown argues that, if the missing invoices had simply been lost randomly, one would expect that the proportion of GST-only to GST/PST invoices in the lost group would be similar to the proportion in the larger, reported group.

The Crown further argues that it is more beneficial to the accused to “lose” invoices on which he charged both GST and PST rather than just GST, as he would collect an extra 5% from the “lost” PST. As will be noted, the unreported sales are overwhelmingly sales which include both GST and PST. Furthermore, this is a pattern which occurs in all three years under review.

The Crown argues that this is evidence of deliberate planning on the part of the accused, not just to fail to report some sales, but to fail to report sales which were of a higher value to him. [ 114 ] This argument, although intellectually enticing, fails to persuade. There are several difficulties with it. [ 115 ] The first difficulty is that the figures for unreported tire sales are, in part, creations of the Crown.

In some cases, the Crown has taken an unexplained deposit and concluded it was a tire sale purely on the basis that it could be divided out to produce a round number plus either GST alone or GST and PST. That is hardly conclusive that these were in fact tire sales. [ 116 ] Secondly, there are transactions which do not fit neatly into any of the Crown’s categories. For example, there is a cheque dated January 22, 2007 made by Susan Haduik in the amount of $181.49. There is no reference on the cheque to what it is for.

The principal amount of the cheque is obviously not a round number, nor can either GST (6% at the time) or combined GST and PST (11% in total) be broken out to leave a combined total: yet the Crown still includes this transaction in its list of unreported tire sales, arguing that the principal amount was $181.49 and GST was $10.27. [23] [ 117 ] The oddity of including the above transaction as a tire sale, in the face of CRA’s own explanation of round numbers as indicative of tire sales, is illustrated by the example of another cheque from the same Susan Haduik, less than a week prior.

That cheque, dated January 16, 2007, was for $321.90, a number which divides neatly into $290.00 principal, $17.40 GST (6%), and $14.50 PST (5%). That cheque too had no indication on it what it was for, but based on the neatness of the division, the Crown argues that it was a tire sale to which GST and PST applied. [ 118 ] CRA’s rationale for Ms. Haduik’s second cheque, namely the even division, makes it even stranger that it applied the same logic to Ms. Haduik’s first cheque, where nothing divides out evenly.

However, I am urged by the Crown to find, on this information alone, that both of these were tire sales on which the accused either charged or was required to charge GST of $10.27 and $17.40 respectively.

I am then urged by the Crown to find that those amounts were not in fact reported or remitted, and accordingly to convict the accused for failing to report the same on his T-1 and his GST return. [ 119 ] Thirdly, there is no evidence that this alleged pattern holds in those unreported sales where the Crown was able to find invoices (from the purchasers, presumably), and could thus confirm where GST was charged alone, and where both GST and PST were charged. If the pattern seen by the Crown was deliberate, then it should hold in approximately the same proportions on such invoices.

No such evidence was shown to me. [ 120 ] Fourthly, the fact is that any such scheme would be an elaborate way of making the accused a relatively small amount of extra money. If the Crown is correct, the accused was deliberately losing a preponderance of invoices on which he charged both GST and PST. The effect of so doing, as opposed to losing an invoice on which he charged just GST, would be to allow him to pocket an additional 5% of the principal.

Thus, for a sale for $100.00 with GST, if the accused “lost” the invoice he would pocket $105.00 (or $106.00, in 2007), whereas if he “lost” a $100.00 invoice which included both GST and PST, he would pocket $110.00 (or $111.00, in 2007). The result of the scheme alleged by the Crown would be an extra $5.00 to the accused. It is clear that it would be much simpler for the accused simply to “lose” one more invoice - for example, if all invoices were for the principal amount of $100.00, it would take him 20 lost invoices to garner the same amount via PST as he could obtain simply by losing one more.

Certainly, he ends up with more money, but the complications are much greater. This plays directly into the final difficulty with this theory: the accused himself.

[ 121 ] It has taken me several pages to explain this scheme the Crown suggests the accused concocted. The accused’s defence throughout has been, to phrase it gently, that he is too unsophisticated to be guilty of any of the allegations against him; that he is a straightforward and uncomplicated person. Having observed the accused on the witness stand, I am inclined to give some credence to this characterization.

As I have indicated elsewhere in these reasons, I also believe that he lied to me about certain matters, most spectacularly grain sales: but I have some difficulty seeing him making the calculations suggested by the Crown in order to maximize his return on his “lost” invoices. The grain sales scheme is hardly devious, or even clever; it is in fact quite obvious and blatant. The suggestion that the accused moved from that style of tax evasion on large amounts to a much subtler form of tax evasion for much smaller amounts is one I have difficulty accepting.

I suspect the accused would be considerably more inclined simply to “lose” his higher-value invoices, a much simpler and more lucrative scheme for which there is no evidence whatsoever. [ 122 ] As anyone who has ever tossed dice or flipped a coin knows, in a large enough sample size patterns will emerge. A coin flipped twice will not automatically come up heads one time and tails another. A coin flipped a hundred times may well come up five heads in a row.

I agree that the pattern shown by the Crown regarding tire sales is suspicious, but for all of the above reasons I do not find it persuasive, any more than a run of five heads on a hundred flips of a coin would persuade me that the coin was not true. It should be recalled that the suspicious transactions are just 112 transactions out of a total of 3,228.

The pattern is there; but the evidence is not strong enough to persuade me that what is seen is anything more than a normal variance. [ 123 ] Given the relatively small number of tire sales unreported, and the evidence of the accused’s haphazard dealings with not only his sales records but even payments, I am not convinced that any of the tire sales were deliberately not reported. I agree that it is suspicious; I have to take into account that the accused’s credibility is poor, considering my findings regarding his crop sales and other matters; but I am not satisfied beyond a reasonable doubt.

Used truck sales [ 124 ] There are three issues which I will deal with under this heading. There was a purchase and sale of a 1997 Freightliner highway tractor, and the purchase of six pickup trucks at auction and the subsequent sale of two of them. Additionally, the Crown sought to make mileage from its allegation that the accused was a car dealer. [ 125 ] The Freightliner was purchased on June 2, 2007 from an auction house for $11,000.00 plus GST of $660.00. [24] The accused intended to use it for hauling grain, but found it unsuitable.

He subsequently sold it on May 2, 2008 for $15,500.00 plus GST of $775.00. [25] He did not report the profit, nor did he report the GST he collected. He agrees that the GST should have been reported, and in fact suggested that it might have been. It is not clear to me whether or not he had claimed the GST on the purchase as an input credit. It is clear from his testimony that the Freightliner was purchased for farm use, and was sold after it proved to be unworkable in that role. [ 126 ] The accused also purchased at auction six used pickup trucks for use on his farm and in his tire business.

These were purchased on October 28, 2006 for a total price of $52,650.00 plus GST of $3,159.00. The invoice from the auction house specified the amount for each truck. [ 127 ] The accused paid $6,100.00 plus GST of $366.00 for one of those trucks, a 2001 Dodge, which he sold on August 30, 2007 for $10,500.00 plus GST of $540.00.

The odd GST figure is because the accused also accepted a 1988 truck in trade for part-payment of the purchase price; obviously the accused knew to charge GST only on the cash portion of the sale. [ 128 ] It appears, in fact, that the accused ultimately sold two of the six trucks he purchased on October 28, 2006. He did not report the income or GST collected on either of them. His reason was that he “bought them all as personal.” [ 129 ] His testimony in this regard is similar to, and overlapped with, his testimony regarding a similar purchase in 2005, of five trucks, most of which were subsequently sold.

His view expressed throughout was that these transactions were somehow “private” and that therefore he could charge GST and report neither the GST nor the profit he made on these vehicles. He justified this on the basis that he had never claimed capital cost allowance on any of the vehicles, had not completed the log books necessary to do so, and had not claimed the GST when he purchased them. He did, however, claim the expenses of “miscellaneous repairs” [26] to them.

[ 130 ] The Crown showed that the accused had a licence as an auto dealer. The accused said that he never acted as such, that he simply maintained the licence because it gave him certain advantages in dealing with suppliers in his tire business. I did not find the matter of the accused’s auto dealer status to be of any assistance to me. [ 131 ] In its brief, the Crown argues that the accused sold three trucks in 2007 and 2009 for a profit of $10,980.93. These sales are not particularized, and I have not been able to locate details on any more than the Freightliner and the Dodge referred to above.

There is no doubt but that the accused made a profit on those two sales, that he charged GST on those two sales, and that he reported neither the profit nor the GST which he had collected. There is also no doubt but that he was required to do so. The question is whether or not his failure was intentional. [ 132 ] As indicated, the accused takes the position that he was not required to report the Dodge sale or GST because that transaction was “personal”. The bill of sale for it is even marked “personal sale”. [27] That characterization is of course not determinative, or even particularly useful.

The accused acknowledges that the GST on the Freightliner should have been reported. It was not. [ 133 ] With respect to the pickup trucks, I am satisfied that the accused knew precisely what he was doing: he was running what amounted to a sideline business of buying vehicles at auction and subsequently selling them for profit. The evidence shows that he purchased five used trucks on December 17, 2005, and subsequently six more on October 28, 2006. He sold most of the former, and two of the latter.

Any suggestion that he needed to purchase 11 pickup trucks within the space of 10 months purely for farm use is clearly ludicrous. He deliberately chose not to report those sales, so as to avoid paying income tax on the transactions. He used his farm income to pay for maintenance on them, deducting those expenses against his income. He chose not to report the GST collected, in order to pocket that as well.

His suggestion that if he had to report those amounts, he would also be entitled to report the use of the other vehicles and would end up money behind is not a valid one: whether or not the finances would have worked out that way, the fact is that he chose not to do so, and his suggestion is nothing but a rationalization. I find that he knew he was required to report both the profit and the collected GST, and did not do so in order to keep it for himself. [ 134 ] My findings are the same with respect to the Freightliner.

I am satisfied that the accused made a deliberate choice not to report the profit or the GST collected on the sale, in order to avoid paying tax (and remitting GST). [ 135 ] Having said that, I can find only these two transactions confirmed in the evidence. Accordingly, I find that on August 30, 2007, the accused sold the 2001 Dodge and chose not to report income of $4,400.00 and GST of $366.00; on May 2, 2008, he sold the Freightliner and chose not to report $4,500.00 plus GST of $775.00.

Other issues [ 136 ] There are several other matters which I wish to address, but which have no bearing on my determination of the accused’s guilt. I include them under this heading simply as a matter of convenience, not because they are related - other than by their lack of connection to my verdict. (

i) Mr. Mang ’s report [ 137 ] Evidence was given on behalf of the defendant by Gary Mang. I accepted Mr. Mang as an expert in the field of proper accounting practice. This does not, of course, mean that I have to accept all, some or any of his evidence; it simply means that he was entitled to provide his opinion to me in that field. The weight that I give to his opinion is still for me to determine. That weight can be affected by, amongst other considerations, the extent to which his opinion is based on assumptions or facts which are not proven in the evidence. [ 138 ] Mr.

Mang’s testimony is summarized in his report, D-11. Unfortunately, Mr. Mang either misunderstood the role he was being put forward to play, or was tasked with preparing a report which contained a great deal of unhelpful content. An expert witness is not an

advocate. [28] Mr. Mang’s report, however, reads more like a

summary of the accused’s position on the facts than like an impartial opinion by an expert. There is a great deal of hearsay in it, which is unobjectionable to the extent that it is put forward to show the basis of the opinion. However, some of the hearsay seems to be put forward as a form of oath-helping, that is, to bolster the credibility of the defendant and his wife in asserting certain claims in the evidence. [29] Other parts of the report are straight advocacy. I will cite examples; these are necessarily out of context, but I do not believe the context changes the

interpretation I have placed on them: a. “Neither Mr. nor Mrs. Glubis have any formal accounting or bookkeeping training” (page 1 [30] ). This is not relevant to Mr. Mang’s expert conclusions, and is obviously not something of which he has first-hand experience. This appears to be oath-helping, an attempt to buttress the accused’s claim to having no such training; b. “If grain sale cheques are received and there is no invoice or support paperwork received, some of these items could be missed” (page 1). This is not a matter of expertise. Although this is an opinion, it is not one which Mr.

Mang is entitled to express. This is a matter of argument, not evidence, and is an example of Mr. Mang straying into advocacy; c. “Albeit Mr. Glubis is being accused of deliberately failing to report income, it a

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