Julie Guindon Appellant v. Her Majesty The Queen, 2015 SCC 41

SUPREME COURT OF CANADA Citation: Guindon v. Canada, 2015 SCC 41, [2015] 3 S.C.R. 3 Date: 20150731 Docket: 35519 Between: Julie Guindon Appellant and Her Majesty The Queen Respondent - and - Attorney General of Ontario, Attorney General of Quebec, Chartered Professional Accountants Canada and Canadian Constitution Foundation Interveners Coram: Abella, Rothstein, Cromwell, Moldaver, Karakatsanis, Wagner and Gascon JJ.

Joint Reasons for Judgment: (paras. 1 to 91) Rothstein and Cromwell JJ. (Moldaver and Gascon JJ. concurring) Joint Reasons Concurring That the Appeal Be Dismissed but Dissenting as to Whether the Court Should Exercise Its Discretion to Address the Merits of the Constitutional Issue: (paras. 92 to 142) Abella and Wagner JJ. (Karakatsanis J. concurring) Guindon v. Canada , 2015 SCC 41, [2015] 3 S.C.R. 3 Julie Guindon Appellant v.

Her Majesty The Queen Respondent and Attorney General of Ontario, Attorney General of Quebec, Chartered Professional Accountants Canada and Canadian Constitution Foundation Interveners Indexed as: Guindon v. Canada 2015 SCC 41 File No.: 35519. 2014: December 5; 2015: July 31.

Present: Abella, Rothstein, Cromwell, Moldaver, Karakatsanis, Wagner and Gascon JJ. on appeal from the federal court of appeal Constitutional law — Charter of Rights — Income tax — Penalty for misrepresentation — Individual assessed for penalties under s. 163.2 of Income Tax Act , which imposes monetary penalties on every person who makes false statement that could be used by another person for purpose of Act — Whether proceeding under s. 163.2 is criminal in nature or leads to imposition of true penal consequences — Whether individual assessed for penalties is person “charged with an offence” within meaning of s. 11 of Canadian Charter of Rights and Freedoms — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 163.2.

Constitutional law — Courts — Procedure — Notice of constitutional question given to attorneys general in this Court but not in courts below — Whether this Court should exercise its discretion to address merits of constitutional issue — Tax Court of Canada Act, R.S.C. 1985, c. T-2, s. 19.2 . The Minister of National Revenue assessed G for penalties under s. 163.2 of the Income Tax Act for statements she made in donation receipts issued on behalf of a charity, which she knew or would reasonably be expected to have known could be used by taxpayers to claim an unwarranted tax credit.

G appealed the Minister’s assessment to the Tax Court of Canada. In her oral submissions, she argued that the penalties imposed under s. 163.2 are criminal and that she is therefore a person “charged with an offence” who is entitled to the procedural safeguards of s. 11 of the Charter . In her notice of appeal, however, she did not raise any Charter issue and did not provide notice of a constitutional question to the attorneys general as required by s. 19.2 of the Tax Court of Canada Act . The Tax Court accepted G’s argument and vacated the penalty assessment.

The Federal Court of Appeal set aside that decision and restored the assessment against G. Held : The appeal should be dismissed. Per Rothstein, Cromwell, Moldaver and Gascon JJ.: This Court has a well-established discretion, albeit one that is narrow and should be exercised sparingly, to address the merits of a constitutional issue when proper notice of constitutional question has been given in this Court, even though the issue was not properly raised in the courts below.

That discretion should be exercised taking into account all of the circumstances, including the state of the record, fairness to all parties, the importance of having the issue resolved by this Court, its suitability for decision and the broader interests of the administration of justice. The burden is on the appellant to persuade the Court that in light of all of the circumstances, it should exercise its discretion. This is a case in which this Court’s discretion ought to be exercised. The issue raised is important to the administration of the Income Tax Act and it is in the public interest to decide it.

All attorneys general were given notice of constitutional question in this Court. Two intervened, the attorneys general of Ontario and Quebec. No provincial or territorial attorney general suggested that he or she was deprived of the opportunity to adduce evidence or was prejudiced in any other way. No one has suggested that any additional evidence is required, let alone requested permission to supplement the record. The attorneys general of Ontario and of Quebec addressed the merits of the constitutional argument.

This Court also has the benefit of fully developed reasons for judgment on the constitutional point in both of the courts below. Finally, there was no deliberate flouting of the notice requirement: G had advanced an arguable, although not ultimately successful, position that notice was not required in the circumstances of this case. As for the merits, or the constitutional issue itself, it should be decided in favour of the respondent. Proceedings under s. 163.2 of the Income Tax Act are of an administrative nature. They are not criminal in nature and do not lead to the imposition of true penal consequences.

Therefore, G is not a person “charged with an offence” and accordingly, the protections under s. 11 of the Charter do not apply. A proceeding is criminal in nature when it is aimed at promoting public order and welfare within a public sphere of activity. Proceedings of an administrative nature, on the other hand, are primarily intended to maintain compliance or to regulate conduct within a limited sphere of activity.

The focus of the inquiry is not on the nature of the act which is the subject of the proceedings, but on the nature of the proceedings themselves, taking into account their purpose as well as their procedure. The purpose of the proceedings in issue is to promote honesty and deter gross negligence, or worse, on the part of the preparers. Enacted in 2000, s. 163.2 contains two administrative penalties: the “planner penalty” in subs. (2) and the “preparer penalty” in subs. (4). The planner penalty is not at issue in this appeal. The preparer penalty is intended to apply when an individual has made,

participated in, assented to, or acquiesced in the making of a false statement. The preparer penalty is narrow: the false statement must bemade knowingly or in circumstances amounting to culpable conduct. Culpable conduct is defined in s. 163.2(1) as “conduct, whether anact or a failure to act, that (

a) is tantamount to intentional conduct; (

b) shows an indifference as to whether [the Income Tax Act] iscomplied with; or (

c) shows a wilful, reckless or wanton disregard of the law”. While there has been debate as to the scope of “culpableconduct”, the standard must be at least as high as gross negligence. The third party penalties are meant to capture serious conduct, notordinary negligence or simple mistakes on the part of a tax preparer or planner. With respect to the process itself, the analysis is concerned with the extent to which it bears the traditional hallmarks of acriminal proceeding.

Here, the Canada Revenue Agency auditors conduct a penalty audit, advise the preparer or planner in writing of theaudit, and consider any representation that the individual chooses to make before imposing the penalty. This administrative process canbe contrasted with the process which applies to criminal offences. No one is charged. No information is laid against anyone. No one isarrested. No one is summoned to appear before a court of criminal jurisdiction. No criminal record will result from the proceedings.

Atworst, once the administrative proceeding is complete and all appeals are exhausted, if the penalty is upheld and the person liable to paystill refuses to do so, he or she risks being forced to pay by way of a civil action. In addition to not being criminal in nature, the process under s. 163.2 of the Income Tax Act does not lead to the impositionof any “true penal consequence”. A true penal consequence is imprisonment or a fine which, having regard to its magnitude and otherrelevant factors, is imposed to redress the wrong done to society at large rather than simply to secure compliance.

A monetary penaltymay or may not be a true penal consequence. It will be so when it is, in purpose or effect, punitive. Whether this is the case is assessedby looking at considerations such as the magnitude of the fine, to whom it is paid, whether its magnitude is determined by regulatoryconsiderations rather than principles of criminal sentencing, and whether stigma is associated with the penalty. In this case, the penalties assessed against G do not impose a true penal consequence — the magnitude reflects the objectiveof deterring conduct of the type she engaged in.

The Tax Court found that G wrote and endorsed a legal opinion that she knew wasflawed and misleading: in the opinion, she stated that she had reviewed supporting material which had in fact never been provided to her.Later, when she signed donation receipts for charity, she chose to rely on her own legal opinion which she knew to be incomplete. Inshort, the Tax Court found that G’s conduct was indicative either of complete disregard of the law and whether it was complied with ornot or of wilful blindness.

Per Abella, Karakatsanis and Wagner JJ.: There is no ambiguity in the text of s. 19.2 of the Tax Court of Canada Act. Itexplicitly states that the court shall not adjudge a law to be invalid, inapplicable or inoperative unless the notice requirements aresatisfied. Because G failed to satisfy those requirements, the Tax Court judge was not entitled to deal with the constitutional issue. ThisCourt, however, has the discretion to entertain new issues.

The question in this case, therefore, is how that discretion should be exercisedwhen the new issue raised is a constitutional one which was subject to a mandatory notice requirement in the court or tribunal of firstinstance. The existence of such a notice requirement argues for the discretion being a very narrow one which should only sparingly beexercised to avoid the practice and perception that such mandatory provisions can be circumvented by raising constitutional arguments asnew issues and giving notice for the first time in this Court. As this Court explained in Eaton v.

Brant County Board of Education, (SCC), [1997] 1 S.C.R. 241,provisions that require litigants to file notice of a constitutional question serve two central purposes: extending a full opportunity togovernments to defend their legislation and ensuring that an evidentiary record that is the result of thorough examination is before thecourt. Eaton remains the only case in which this Court has explicitly and fully considered the policy and evidentiary consequencesof the failure to give the requisite notice of a constitutional issue in the court or tribunal where it was required.

With the exception ofcases where de facto notice was given or the Attorneys General consented to proceeding in the absence of notice, the Court concludedthat such notice provisions were mandatory and failure to give the notice invalidates a decision made in its absence. There was, the Courtheld, no need to show actual prejudice since absence of notice is in itself prejudicial to the public interest. Prejudice is assumed from thefailure to give notice since it means that a party entitled to make representations has been denied the opportunity to do so.

In Eaton, this Court declined to hear the constitutional issue because the required notice had not been given in previousproceedings. There is no suggestion in any subsequent decision of this Court that the notice issue was wrongly decided in Eaton. As aresult, as Eaton directs, the mandatory language of s. 19.2 of the Tax Court of Canada Act and its underlying policy rationales supportthe conclusion that this Court should not, absent exceptional circumstances, adjudicate the constitutionality of s. 163.2 of the Income TaxAct in the absence of notice in the Tax Court.

Notice provisions play a particularly crucial role in Charter litigation, where, if an applicant successfully establishes aviolation of an enumerated right, the burden shifts to the government to demonstrate on a balance of probabilities that the legislation inquestion is justified under s. 1 of the Charter. Notice provisions therefore protect the public interest by giving Attorneys General anopportunity to present evidence so that a court can assess the constitutionality of the law fully and fairly.

Bypassing this crucialevidentiary step in a first instance forum where the evidence can be properly tested and challenged, erodes not only the credibility of theoutcome, but also public confidence that Charter compliance will be robustly reviewed. And notice is essential not just for the AttorneyGeneral whose legislation is being challenged, but also for the other Attorneys General whose legislation may be incidentally affected bythe outcome of the case and who, as a result, may wish to intervene. Prejudice to the public is presumed from the failure to have fullCharter scrutiny when it is first required.

The central role notice provisions play in our constitutional democracy is reflected in the factthat every province and territory has a law requiring that notice of a constitutional question be served on the provincial and territorialAttorneys General, and, at times, also requiring that the Attorney General of Canada be served. The failure to notify Attorneys General in the forum where notice is required and doing so only for the first time in thisCourt undermines the purposes underlying the notice provisions.

Most significantly, it undermines public confidence because itextinguishes the legislative assurances that this Court will have the benefit of a complete and tested record when scrutinizing theconstitutionality of legislation.

Moreover, if this Court arrogates to itself a broad authority to retroactively remedy a failure to give notice in the Tax Courtwhere it is required, the mandatory character of s. 19.2 is eroded. Permitting the artifice of notice at this Court to replace notice in theforum from which an appeal is taken would, in effect, permit parties to do an “end run” around these mandatory notice provisions. Suchan approach would have the effect of replacing Eaton’s presumption of prejudice with an assumption of no prejudice if notice iseventually given in this Court.

Not only does this send the message that compliance with mandatory notice provisions is merely optional,it also has the effect of making them essentially discretionary. The mandatory wording of the Tax Court of Canada Act and the policy reasons underlying notice provisions therefore leadto the conclusion that, in addition to the two exceptions set out in Eaton — de facto notice and the consent of the Attorneys General —absent exceptional circumstances, this Court should not entertain a constitutional argument where notice was not properly provided in thecourt or tribunal of first instance.

Exceptional circumstances include those where the constitutional issue has an overwhelming urgencyor public importance that justifies hearing it in this Court, or where the party bringing the constitutional challenge had little choice but toraise it for the first time in this Court. In this case, G failed to serve notice of a constitutional question before the Tax Court. She once again failed to serve thenotice required by s. 57 of the Federal Courts Act in proceedings before the Federal Court of Appeal. Before this Court, G filed noticefor the first time.

She attempted to bring her case outside the scope of s. 19.2 by arguing that she was merely asserting her Charter rights,as opposed to seeking a declaration of invalidity, inapplicability or inoperability. Having raised a constitutional argument, however, Gwas bound by the notice requirements that govern its determination. The protections set out in s. 11 of the Charter cannot simply be readinto the regulatory scheme without rendering s. 163.2 invalid, inapplicable or inoperative. The Income Tax Act provides a set ofprocedures and processes that are distinct from those set out in the Criminal Code.

Section 34(2) of the

Interpretation Act, as a result,does not apply. Neither exception from Eaton applies in this case. Nor are there any exceptional circumstances: there is no particularurgency or overwhelming public importance that distinguishes this case from other constitutional cases, and there is virtually noexplanation for why notice was not given where required in the prior proceedings.

At the Tax Court, the Attorney General of Canada objected to G’s constitutional argument, arguing that notice was required.Neither the Attorney General of Canada, nor the provincial Attorneys General whose own regulatory schemes could clearly be affectedby the outcome, had the opportunity to fully participate in building the necessary evidentiary record before the Tax Court. And two ofthe three Attorneys General who participated in this Court objected to the failure to provide notice at the Tax Court.

Far from concedingthat there was no prejudice, the Attorney General of Canada in fact insisted that there was prejudice to the public from the failure toprovide notice. The burden of showing the contrary is on G, not on the Attorneys General. Moreover, it is impossible in the absence of afull evidentiary record and argument, to conclude that this Court has the benefit of full developed reasons for judgment on theconstitutional point from both of the courts below.

To consider the constitutional issue in this case, as the majority does, essentially means that it could be exercised in any casewhere the Court is sufficiently attracted by the constitutional issue, notwithstanding the public importance of notice provisions, thewording of s. 19.2, and the binding precedent of Eaton. G knew that the Attorney General of Canada had objected to her failure to filenotice before the Tax Court when she made her closing argument, yet even in the Federal Court of Appeal, she failed to file the requirednotice.

Essentially, she took the risk of gambling with public resources, rather than simply complying with plain statutory requirements. Cases Cited By Rothstein and Cromwell JJ. Applied: R. v. Wigglesworth, (SCC), [1987] 2 S.C.R. 541; Martineau v. M.N.R., 2004 SCC 81, [2004] 3S.C.R. 737; discussed: Eaton v. Brant County Board of Education, (SCC), [1997] 1 S.C.R. 241; referred to: Morine v.Parker (L &

J) Equipment Inc., 2001 NSCA 53, 193 N.S.R. (2d) 51; Mohr v. North American Life Assurance Co., (SKCA), [1941] 1 D.L.R. 427; Citation Industries Ltd. v. C.J.A., Loc. 1928 (1988), (BC CA), 53 D.L.R. (4th) 360; R. v.Brown, (SCC), [1993] 2 S.C.R. 918; Corporation professionnelle des médecins du Québec v. Thibault, (SCC), [1988] 1 S.C.R. 1033; Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678;Bank of Montreal v. Hall (1985), (SK KB), 46 Sask.

R. 182, rev’d (SCC), [1990] 1 S.C.R. 121;Artell Developments Ltd. v. 677950 Ontario Ltd., (SCC), [1993] 2 S.C.R. 443, aff’g (1992), (ONCA), 93 D.L.R. (4th) 334; Tseshaht v. British Columbia, S.C.C., No. 23234, May 2, 1994 (Bulletin of Proceedings of the Supreme Courtof Canada, 1994, p. 756), notice of discontinuance filed, [1995] 1 S.C.R. xi; Penetanguishene Mental Health Centre v. Ontario (AttorneyGeneral), 2004 SCC 20, [2004] 1 S.C.R. 498, rev’g (2001), (ON CA), 158 C.C.C. (3d) 325; Pinet v. St. ThomasPsychiatric Hospital, 2004 SCC 21, [2004] 1 S.C.R. 528, rev’g ; Kirkbi AG v.

Ritvik Holdings Inc., 2005 SCC 65,[2005] 3 S.C.R. 302; Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3 S.C.R. 53, rev’g 2011 NLCA 42, 308Nfld. & P.E.I.R. 1; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559; R. v. Kapp, 2008 SCC 41, [2008] 2S.C.R. 483; Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87; R. v. Shubley, (SCC), [1990] 1 S.C.R. 3; R. v.McKinlay Transport Ltd., (SCC), [1990] 1 S.C.R. 627; Venne v. The Queen, (FC), [1984] C.T.C.223; Sirois (L.C.) v. Canada, 1995 CarswellNat 555 (WL Can.); Keller v. Canada, 1995 CarswellNat 569 (WL Can.); Sidhu v.

R., 2004TCC 174, [2004] 2 C.T.C. 3167; Canada (Attorney General) v. United States Steel Corp., 2011 FCA 176, 333 D.L.R. (4th) 1; Rowan v.Ontario Securities Commission, 2012 ONCA 208, 110 O.R. (3d) 492; Lavallee v. Alberta Securities Commission, 2010 ABCA 48, 474A.R. 295; Canada (Commissioner of Competition) v. Chatr Wireless Inc., 2013 ONSC 5315, 288 C.R.R. (2d) 297. By Abella and Wagner JJ. Applied: Eaton v. Brant County Board of Education, (SCC), [1997] 1 S.C.R. 241; referred to: R. v.Wigglesworth, (SCC), [1987] 2 S.C.R. 541; Corbiere v.

Canada (Minister of Indian and Northern Affairs), (SCC), [1999] 2 S.C.R. 203; Canada (Attorney General) v. Bedford, 2013 SCC 72, [2013] 3 S.C.R. 1101; MacKay v. Manitoba, (SCC), [1989] 2 S.C.R. 357; Northern Telecom Ltd. v. Communications Workers of Canada, (SCC),

[1980] 1 S.C.R. 115; Bekker v. Minister of National Revenue, 2004 FCA 186, 323 N.R. 195; B.C.T.F. v. British Columbia (AttorneyGeneral), 2009 BCSC 436, 94 B.C.L.R. (4th) 267; Paluska v. Cava (2002), (ON CA), 59 O.R. (3d) 469; Maurice v.Crédit Trans Canada Ltée, (QC CA), [1996] R.J.Q. 894; R. v. Nome, 2010 SKCA 147, 362 Sask. R. 241; D.N. v. NewBrunswick (Minister of Health and Community Services) (1992), (NB CA), 127 N.B.R. (2d) 383; Gitxsan TreatySociety v. Hospital Employees’ Union, (FCA), [2000] 1 F.C. 135; Mercier v. Canada (Correctional Service), 2010FCA 167, [2012] 1 F.C.R. 72; R. v.

Lord, 2011 BCCA 295, 307 B.C.A.C. 285; Ardoch Algonquin First Nation v. Canada (AttorneyGeneral), 2003 FCA 473, [2004] 2 F.C.R. 108; R. v. Brown, (SCC), [1993] 2 S.C.R. 918; Quan v. Cusson, 2009 SCC62, [2009] 3 S.C.R. 712; Re:Sound v. Motion Picture Theatre Associations of Canada, 2012 SCC 38, [2012] 2 S.C.R. 376; CanadianUnion of Public Employees, Local 963 v. New Brunswick Liquor Corp., (SCC), [1979] 2 S.C.R. 227; Reference reRemuneration of Judges of the Provincial Court of Prince Edward Island, (SCC), [1997] 3 S.C.R. 3; Morine v. Parker(L &

J) Equipment Inc., 2001 NSCA 53, 193 N.S.R. (2d) 51; Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65, [2005] 3 S.C.R. 302;Penetanguishene Mental Health Centre v. Ontario (Attorney General), 2004 SCC 20, [2004] 1 S.C.R. 498; Pinet v. St. ThomasPsychiatric Hospital, 2004 SCC 21, [2004] 1 S.C.R. 528; Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3S.C.R. 53. Statutes and Regulations Cited Banks and Banking Law Revision Act, 1980, S.C. 1980-81-82-83, c. 40, s. 178(3). Canadian Charter of Rights and Freedoms, ss. 1, 11, 15, 25. Code of Civil Procedure, CQLR, c. C-25, art. 95. Competition Act, R.S.C. 1985, c. C-34, s. 36,

Part VI. Constitution Act, 1867, s. 92(15). Constitutional Question Act, R.S.B.C. 1996, c. 68, s. 8. Constitutional Questions Act, C.C.S.M., c. C180, s. 7(2). Constitutional Questions Act, R.S.N.S. 1989, c. 89, s. 10(2). Constitutional Questions Act, R.S.Y. 2002, c. 39, s. 2(1). Constitutional Questions Act, 2012, S.S. 2012, c. C-29.01, s. 13. Controlled Drugs and Substances Act, S.C. 1996, c. 19. Courts of Justice Act, R.S.O. 1990, c. C.43, s. 109. Criminal Code, R.S.C. 1985, c. C-46. Federal Courts Act, R.S.C. 1985, c. F-7, s. 57(1). Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.),

Part I, Division I, ss. 163(2), 163.2, 165, 169,

Part XV, ss. 220(3.1), 238, 239, 244.

Interpretation Act, R.S.C. 1985, c. I-21, s. 34(2). Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.). Judicature Act, R.S.A. 2000, c. J-2, s. 24(1). Judicature Act, R.S.N.B. 1973, c. J-2, s. 22(3). Judicature Act, R.S.N.L. 1990, c. J-4, s. 57. Judicature Act, R.S.N.W.T. 1988, c. J-1, s. 59(2). Judicature Act, S.N.W.T. (Nu.) 1998, c. 34, s. 58(1). Judicature Act, S.P.E.I. 2008, c. J-2.1, s. 49(1). Limitation of Civil Rights Act, R.S.S. 1978, c. L-16. Securities Act, R.S.A. 2000, c. S-4. Securities Act, R.S.O. 1990, c. S.5, ss. 122(1), 127(1)9, 134(4). Supreme Court Act, R.S.C. 1985, c. S-26, s. 43(1.1).

Tax Court of Canada Act, R.S.C. 1985, c. T-2, s. 19.2. Workplace Health, Safety and Compensation Act, R.S.N.L. 1990, c. W-11. Youth Criminal Justice Act, S.C. 2002, c. 1.

Authors Cited Aylward, Stephen, and Luisa Ritacca. “In Defence of Administrative Law: Procedural Fairness for Administrative Monetary Penalties” (2015), 28 C.J.A.L.P. 35. Brown, Henry S. Supreme Court of Canada Practice 2015 , 15th ed. Toronto: Thomson/Carswell, 2014. Canada. Canada Revenue Agency. “Third-Party Civil Penalties”, IC 01-1, September 18, 2001 (online: http://www.cra- arc.gc.ca/E/pub/tp/ic01-1/ic01-1-e.pdf). McLeod, Doug. “Facing the Consequences: Should the Charter Apply to Administrative Proceedings Involving Monetary Penalties?” (2012), 30 N.J.C.L. 59. Osborne, Philip H. The Law of Torts , 4th ed.

Toronto: Irwin Law, 2011. Roach, Kent. Criminal Law , 5th ed. Toronto: Irwin Law, 2012. APPEAL from a judgment of the Federal Court of Appeal (Noël, Gauthier and Stratas JJ.A.), 2013 FCA 153 , [2014] 4 F.C.R. 786, 285 C.R.R. (2d) 220, 298 C.C.C. (3d) 304, [2013] 5 C.T.C. 1, 360 D.L.R. (4th) 515, 2013 DTC 5113, 446 N.R. 154, [2013] F.C.J. No. 673 (QL), 2013 CarswellNat 1832 (WL Can.), setting aside a decision of Bédard J., 2012 TCC 287 , 2012 DTC 1283, [2013] 1 C.T.C. 2007, [2012] T.C.J. No. 272 (QL), 2012 CarswellNat 3708 (WL Can.). Appeal dismissed. Adam Aptowitzer , Alexandra Tzannidakis , Arthur B. C.

Drache , Q.C. , and Kenneth Jull , for the appellant. Gordon Bourgard and Eric Noble , for the respondent. S. Zachary Green , for the intervener the Attorney General of Ontario. Written submissions only by Abdou Thiaw , for the intervener the Attorney General of Quebec. Dominic C. Belley and Vincent Dionne , for the intervener Chartered Professional Accountants Canada. Written submissions only by Darryl Cruz , Brandon Kain and Kate Findlay , for the intervener the Canadian Constitution Foundation. The judgment of Rothstein, Cromwell, Moldaver and Gascon JJ. was delivered by Rothstein and Cromwell JJ. — I.

Introduction [ 1 ] Income tax law is notoriously complex and many taxpayers rely on tax advisors to help them comply.

Given the important role played by tax advisors and other individuals involved in transactions affected by income tax considerations, Parliament enacted s. 163.2 of the Income Tax Act , R.S.C. 1985, c. 1 (5th Supp.) (‟ ITA ˮ), which imposes monetary penalties on every person who makes a false statement that could be used by another person for the purpose of the Act. [ 2 ] Julie Guindon, the appellant, was assessed penalties under s. 163.2(4) totalling $546,747 in respect of false statements made by her in donation receipts issued by her on behalf of a charity which, it is alleged, she knew or would reasonably be expected to have known could be used by taxpayers to claim an unwarranted tax credit. [ 3 ] Ms.

Guindon says that the penalty imposed under s. 163.2(4) is criminal and that she is therefore a person “charged with an offence” who is entitled to the procedural safeguards provided for in s. 11 of the Canadian Charter of Rights and Freedoms . Accordingly, she argues that the matter should not have proceeded in the Tax Court of Canada and that the penalty against her should be vacated. [ 4 ] She was successful in the Tax Court of Canada but the Federal Court of Appeal set that decision aside. Her final appeal to this Court raises two issues, one procedural and one substantive.

The procedural issue concerns the consequences of Ms. Guindon’s failure in the courts below to give the required notice of constitutional question in relation to her claims under s. 11 of the Charter . Proper notice has been given in this Court.

The substantive issue is whether s. 163.2(4) creates a true criminal offence and therefore engages the protections provided for under s. 11 . [ 5 ] In our view, this Court has a well-established discretion, albeit one that is narrow and should be exercised sparingly, to address the merits of the constitutional issue when proper notice of constitutional question has been given in this Court, even though the issue was not properly raised in the courts below. We would exercise that discretion in this case. However, we would decide the substantive issue in favour of the respondent.

In our view, proceedings under s. 163.2 are of an administrative nature. Ms. Guindon therefore is not a person “charged with an offence” and accordingly the protections under s. 11 of the Charter do not apply. In the result, we would dismiss the appeal. II. Facts and Judicial History [ 6 ] Julie Guindon is a lawyer, practising mainly in the area of family law and wills and estates; she has no expertise in income tax law. In May 2001, she was approached by promoters of a leveraged donation program. Each participant in the program would acquire timeshare units of a resort in the Turks and Caicos Islands.

The participants would donate these units to a charity at a fair market value greater than their cash payment for the timeshares. Ms. Guindon agreed, for a fee of $1,000, to provide an opinion letter on the tax consequences of this program on the basis of a precedent provided by the promoters. She recommended that the promoters have a

tax lawyer and an accountant review her opinion to ensure its accuracy, as the opinion did not fall within her field of expertise, butnonetheless provided the letter knowing that it was intended to be part of the promotional package for the scheme. She wrote that thetransactions would be implemented based on supporting documents that she had been provided with and had reviewed. She had notreviewed the supporting documents. [7] Ms. Guindon was also the president and administrator of a registered charity, Les Guides Franco-CanadiennesDistrict d’Ottawa.

In November 2001, this charity agreed to become the recipient of the donated timeshares. The promoters would thensell the timeshares on behalf of the charity which would receive a minimum of $500 per unit sold. [8] The scheme was a sham: no timeshare units were created and no transfers from the donors to the charity occurred.The promoters prepared 135 tax receipts, which were issued by the charity and signed by Ms. Guindon and the treasurer of the charity.The total receipted amount was $3,972,775. The Minister of National Revenue disallowed the charitable donation tax credits claimed bythe donors.

On August 1, 2008, the Minister assessed Ms. Guindon for penalties under s. 163.2 of the ITA for each of the tax receiptsissued on the basis that she knew, or would have known but for wilful disregard of the ITA, that the tax receipts constituted falsestatements. [9] Ms. Guindon appealed this assessment to the Tax Court of Canada. Her counsel, for the first time, relied on s. 11 ofthe Charter during his oral submissions. It was submitted that s. 163.2 created a criminal offence and that, as a result, Ms. Guindon was aperson “charged with an offence” entitled to the protections of s. 11 of the Charter.

Her notice of appeal to the Tax Court did not raiseany Charter issue and she did not provide notice of a constitutional question to the Attorney General of Canada and the provincialattorneys general as required by s. 19.2 of the Tax Court of Canada Act, R.S.C. 1985, c. T-2. The respondent objected to the Charterpoint being raised, but was overruled. [10] The Tax Court found that Ms.

Guindon’s conduct was culpable within the meaning of s. 163.2 of the ITA, butvacated the penalty assessment, ruling that the provision is both “by its very nature a criminal proceeding” and “involves a sanction thatis a true penal consequence”: 2012 TCC 287, 2012 DTC 1283, at para. 53. However, the Tax Court also found that, if the penalty were acivil one, it would be applicable to Ms. Guindon, as she engaged in culpable conduct. [11] Before the Federal Court of Appeal, Ms. Guindon failed to give notice of a constitutional question to the provincialand federal attorneys general.

She argued that no notice of constitutional question was required as she was not questioning the“constitutional validity, applicability or operability” of s. 163.2 of the ITA: Tax Court of Canada Act, s. 19.2. Instead, she claimed that s.34(2) of the

Interpretation Act, R.S.C. 1985, c. I-21, operates such that s. 163.2 of the ITA can be interpreted in a constitutionallycompliant manner. Section 34(2) reads: All the provisions of the Criminal Code [R.S.C. 1985, c. C-46] relating to indictable offences apply to indictable offences created byan enactment, and all the provisions of that Code relating to

summary conviction offences apply to all other offences created by anenactment, except to the extent that the enactment otherwise provides. By applying Criminal Code procedures to the penalty instead of the administrative procedures provided for in the ITA, the penalty in s.163.2 can be preserved as a criminal offence. [12] The Federal Court of Appeal allowed the appeal, set aside the judgment of the Tax Court, and restored theassessment against Ms. Guindon: 2013 FCA 153, [2014] 4 F.C.R. 786. Stratas J.A., writing for the court, found that Ms.

Guindon’sfailure to serve notice of a constitutional question was fatal to the Tax Court’s jurisdiction. He noted, however, that the Tax Court andthe Federal Court of Appeal, if asked to do so, could have exercised their discretion to adjourn the appeal to allow a notice to be served toaddress that matter. Ms. Guindon did not make that request in either of the courts below.

The Federal Court of Appeal nonetheless wenton to address the substantive issue and concluded that s. 163.2 of the ITA is not a criminal offence and therefore does not engage s. 11 ofthe Charter. [13] The Chief Justice stated the following constitutional questions: 1. Does s. 163.2 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), infringe s. 11 of the Canadian Charter of Rights andFreedoms? 2.

If so, is the infringement a reasonable limit prescribed by law as can be demonstrably justified in a free and democraticsociety under s. 1 of the Canadian Charter of Rights and Freedoms? [14] The result is that the Attorney General of Canada and all provincial and territorial attorneys general have been givenformal notice of the constitutional issue which the appellant seeks to raise in this Court. III. Analysis A. Notice [15] The first issue concerns the impact on this appeal of Ms. Guindon’s failure to give notice, in the courts below, of theconstitutional issue that she raised.

We agree with the Federal Court of Appeal and our colleagues, Abella and Wagner JJ., that noticewas required in this case. We also agree with our colleagues that, proper notice having now been given in this Court, we have adiscretion to consider and decide the constitutional issue. We

part company with our colleagues, however, on the question of whether weshould exercise that discretion in this case. In our view, this is a compelling case to do so in light of an analysis and weighing of therelevant considerations that we will discuss in detail. [16] To begin, we read Eaton v. Brant County Board of Education, (SCC), [1997] 1 S.C.R. 241,differently than do our colleagues. Eaton was a case in which no notice or any equivalent had been given and the respondents hadspecifically disavowed the intention to raise the constitutionality of any provision. The Attorney General of Ontario relied on this

position and made no submissions on the constitutionality of the statute in question and had no opportunity to adduce evidence or makesubmissions on this point. The Court of Appeal addressed the question ex proprio motu. In short, Eaton was a case of actual prejudice tothe Attorney General and was expressly decided on that basis. [17] The main legal debate in Eaton concerned conflicting authority about whether the absence of notice makes thedecision invalid, as one strand of authority held, or whether the absence of notice makes the decision voidable upon a showing ofprejudice, as held by the other strand.

Sopinka J., writing for the Court on this point, expressly declined to decide between these twocompeting strands of authority. In other words, he did not foreclose the possibility that the constitutional issue could be decided even inthe absence of notice. He wrote: It is not, however, necessary to express a final opinion on these questions in that I am satisfied that under either strand of authority thedecision of the Court of Appeal is invalid. No notice or any equivalent was given in this case and in fact the Attorney General and thecourts had no reason to believe that the Act was under attack.

Clearly, [the notice requirement] was not complied with and the AttorneyGeneral was seriously prejudiced by the absence of notice. [Emphasis added; para. 54.] [18] Justices Abella and Wagner do not explain how a notice provision like the one in issue here can be mandatory, asthey say that it is, and yet also be subject to exceptions that have no basis in the statutory language. In our respectful view, Eaton doesnot support our colleagues’ approach. [19] Before turning to the other points, we should be clear what the issue is and what it is not.

The issue is not whetherthis Court (or for that matter the courts below) can proceed to adjudicate a constitutional question without notice ever having been givento the attorneys general. Notice requirements serve a vital purpose in ensuring that courts have a full evidentiary record beforeinvalidating legislation and that governments are given the fullest opportunity to support the validity of legislation: see Eaton, at para.48. Notice has now been given in this case.

The question is one of whether this Court should address the matter now that notice has beengiven, not whether this Court or any other can proceed in the absence of notice: see, e.g., Morine v. Parker (L &

J) Equipment Inc., 2001NSCA 53, 193 N.S.R. (2d) 51; Mohr v. North American Life Assurance Co., (SK CA), [1941] 1 D.L.R. 427 (Sask.C.A.); Citation Industries Ltd. v. C.J.A., Loc. 1928 (1988), (BC CA), 53 D.L.R. (4th) 360 (B.C.C.A.). [20] The principles that must be applied here are essentially those that govern whether this is a suitable case to hear aconstitutional issue that is properly before the court for the first time on appeal. The issue is “new” in the sense that the constitutionalissue, by virtue of the absence of notice, was not properly raised before either of the courts below.

Whether to hear and decide aconstitutional issue when it has not been properly raised in the courts below is a matter for the Court’s discretion, taking into account allof the circumstances, including the state of the record, fairness to all parties, the importance of having the issue resolved by this Court,its suitability for decision and the broader interests of the administration of justice. [21] The Court has many times affirmed that it may, in appropriate circumstances, allow parties to raise on appeal anargument, even a new constitutional argument, that was not raised, or was not properly raised in the courts below: see, e.g., R. v.

Brown, (SCC), [1993] 2 S.C.R. 918; Corporation professionnelle des médecins du Québec v. Thibault, (SCC),[1988] 1 S.C.R. 1033; Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678. TheCourt has even done so of its own motion, as we shall see. [22] The test for whether new issues should be considered is a stringent one. As Binnie J. put it in Sylvan Lake, “TheCourt is free to consider a new issue of law on the appeal where it is able to do so without procedural prejudice to the opposing party andwhere the refusal to do so would risk an injustice”: para. 33.

While this Court can hear and decide new issues, this discretion is notexercised routinely or lightly. [23] New constitutional issues engage additional concerns beyond those that are considered in relation to new issuesgenerally. In the case of a constitutional issue properly raised in this Court for the first time, the special role of the attorneys general inconstitutional litigation — reflected in the notice provisions — and the unique role of this Court as the final court of appeal for Canadamust also be carefully considered.

The Court must be sure that no attorney general has been denied the opportunity to address theconstitutional question and that it is appropriate for decision by this Court. The burden is on the appellant to persuade the Court that, inlight of all of the circumstances, it should exercise its discretion to hear and decide the issue. There is no assumption of an absence ofprejudice.

The Court’s discretion to hear and decide new issues should only be exercised exceptionally and never unless the challengershows that doing so causes no prejudice to the parties. [24] There are many examples of the Court’s practice reflecting this approach both before and after Eaton. [25] The Court has adjudicated a constitutional issue despite notice not having been served at the court of first instance.For example, in Bank of Montreal v. Hall (1985), (SK KB), 46 Sask.

R. 182, the Saskatchewan Court of Queen’sBench found that the question as to the constitutional validity of s. 178(3) of the [Banks and Banking Law Revision Act, 1980, S.C. 1980-81-82-83, c. 40],and the question as to whether the relevant provisions of [The Limitation of Civil Rights Act, R.S.S. 1978, c.

L-16] are ultra vires insofaras they might purport to affect chartered banks, are not questions which have been properly brought into issue in this case. [para. 12] On appeal to this Court, despite the lack of notice of this constitutional question before the Court of Queen’s Bench, this Court statedconstitutional questions and decided the constitutionality of s. 178(3) of the Banks and Banking Law Revision Act, 1980 and the relatedprovisions of The Limitation of Civil Rights Act: (SCC), [1990] 1 S.C.R. 121, at pp.152-53. [26] In Artell Developments Ltd. v. 677950 Ontario Ltd., (SCC), [1993] 2 S.C.R. 443, Lamer C.J. stateda constitutional question and this Court went on to answer that question, despite the fact that the Ontario Court of Appeal had notconsidered any constitutional issues in its decision: (1992), (ON CA), 93 D.L.R. (4th) 334. [27] In Tseshaht v.

British Columbia, S.C.C., No. 23234, May 2, 1994 (S.C.C. Bulletin, 1994, at p. 756), the Court stated

a constitutional question with respect to an issue not raised in the courts below and granted both parties proprio motu leave to adducenew evidence.[1] [28] In the companion cases of Penetanguishene Mental Health Centre v. Ontario (Attorney General), 2004 SCC 20,[2004] 1 S.C.R. 498, and Pinet v. St.

Thomas Psychiatric Hospital, 2004 SCC 21, [2004] 1 S.C.R. 528, the Chief Justice statedconstitutional questions and gave the parties leave to file supplementary evidence on legislative facts relevant to those questions eventhough the Ontario Court of Appeal’s decisions in these matters had not dealt with constitutional issues: see (2001), (ON CA), 158 C.C.C. (3d) 325, and respectively. [29] In Kirkbi AG v.

Ritvik Holdings Inc., 2005 SCC 65, [2005] 3 S.C.R. 302, as the respondent had not raised theconstitutional question before the Federal Court of Appeal, the parties were informed that they could apply to adduce additional evidencein this Court: August 12, 2004, File No. 29956. [30] Recently, in Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3 S.C.R. 53, this Courtconsidered the constitutional applicability and operability of Newfoundland and Labrador’s Workplace Health, Safety and CompensationAct, R.S.N.L. 1990, c. W-11.

Notice of the constitutional issue had not been given to the Attorney General of Newfoundland andLabrador either at the hearing before the Workplace Health, Safety and Compensation Commission or in the trial court.

Section 57 of theJudicature Act, R.S.N.L. 1990, c. J-4, provides that a constitutional challenge “shall not be heard until notice has been given to theAttorney General for Canada and to the Attorney General for the province”.

The Court of Appeal for Newfoundland and Labradordetermined that notice of the constitutional question should have been provided under s. 57, but that “failure to give the requisite noticein this case does not result in the court having to declare all previous proceedings a nullity because there is no prejudice to the Crown inproceeding to hear the appeal”: 2011 NLCA 42, 308 Nfld. & P.E.I.R. 1, at para. 23. We also note that, in that case, the Court of Appealexpressed the view that this Court’s decision in Eaton did not definitively decide the issue of the legal effect of failure to give notice:para. 45.

In the end, the fact that there was no notice at first instance did not prevent this Court from stating constitutional questions anddeciding them on the merits. [31] Justices Abella and Wagner are of the view that Penetanguishene, Pinet, Kirkbi, and Ryan Estate are notauthoritative on the issue of notice given that these cases are silent on why Eaton was not “followed”.

In our view, the absence of anyreference to Eaton in these cases is explained by the fact that Eaton, as we have explained, does not stand for the proposition that thisCourt cannot consider a constitutional issue unless it was properly raised in courts below. There was no need to consider, distinguish, orreverse Eaton in these cases. [32] Further, the approach adopted by Abella and Wagner JJ. risks putting appellants at a disadvantage vis-à-visrespondents, given that the Court has previously held that respondents can raise and the Court can address on appeal new constitutionalissues requiring notice.

In Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, the respondents proposed aconstitutional question that was not adjudicated in the courts below. Iacobucci J. found that wide latitude in formulating constitutionalquestions “is especially appropriate in a case like the present, where the motion to state constitutional questions was brought by therespondents: generally, a respondent may advance any argument on appeal that would support the judgment below” (para. 58).

However,Iacobucci J. noted that this general rule is subject to the same limitation that applies to all new issues on appeal: “A respondent, like anyother party, cannot rely upon an entirely new argument that would have required additional evidence to be adduced at trial . . .” (ibid.(citations omitted)). Thus, this Court may answer a constitutional question that was not even considered in the courts below.

However,Abella and Wagner JJ. would prevent this Court from considering constitutional issues even where these issues were considered andextensively discussed by the courts below, as they were in this case. [33] Beyond new constitutional questions proposed by parties, this Court has occasionally asked parties, prior to hearingan appeal, to address new constitutional issues. R. v. Kapp, 2008 SCC 41, [2008] 2 S.C.R. 483, is an example. In the lower courts, thecase had been argued on the basis of ss. 15(1) and 25 of the Charter; the prosecution did not attempt to defend the law on the basis of s.15(2).

After leave was granted but before factums were filed, this Court asked that ss. 15(1), 15(2), and 25 be “fully canvassed” inwritten and oral submissions: December 15, 2006, File No. 31603. The Court ultimately found that s. 15(2) of the Charter protected theimpugned communal fishing license program: see H. S.

Brown, Supreme Court of Canada Practice 2015 (15th ed. 2014), at pp. 374-75.While here s. 15(2) could presumably only be used to support the validity of legislation, this case demonstrates that this Court has takenthe opportunity to raise constitutional issues notwithstanding that they were not raised in the courts below. [34] In our view, this is a case in which our discretion to hear and decide the constitutional issue ought to be exercised inlight of an analysis and weighing of a number of considerations. [35] The issue raised on appeal is important to the administration of the ITA and it is in the public interest to decide it.There is no indication that any attorney general has suffered prejudice by having the question of the constitutionality of s. 163.2 of theITA decided.

The Attorney General of Canada does not assert that it would have adduced different evidence before the Tax Court had itreceived notice of the constitutional question in that court. In this Court, counsel for the respondent invoked Sopinka J.’s obiter remarksin Eaton that the absence of notice is inherently prejudicial in order to submit that, in the current case, there is prejudice to the publicinterest.

As we have explained, the proper approach to the exercise of this Court’s discretion is that if the challenger can demonstrate theabsence of prejudice, it may, in appropriate circumstances, consider the new constitutional issue. On this point, counsel for therespondent candidly conceded that he could point to no actual prejudice in this case resulting from the absence of notice: transcript, at p.48. All attorneys general were given notice of constitutional question in this Court. Two intervened, the attorneys general of Ontario andQuebec.

Only the Attorney General of Quebec addressed the notice requirement, stating that the Tax Court of Canada should not havepronounced on the constitutional question, without commenting on this Court’s jurisdiction to hear the matter: see I.F., at para. 10. Noprovincial or territorial attorney general suggested that he or she was deprived of the opportunity to adduce evidence or was prejudiced inany other way.

No one has suggested that any additional evidence is required, let alone requested permission to supplement the record.The attorneys general of Ontario and of Quebec addressed the merits of the constitutional argument. We also have the benefit of fullydeveloped reasons for judgment on the constitutional point in both of the courts below. Finally, there was no deliberate flouting of thenotice requirement: the appellant advanced an arguable, although not ultimately successful, position that notice was not required in thecircumstances of this case.

[ 36 ] We are struck by the enormous waste of judicial resources that would result from this Court declining to hear and decide the merits. As the Court pointed out in Hryniak v. Mauldin , 2014 SCC 7 , [2014] 1 S.C.R. 87, at para. 24 , “undue process . . . with unnecessary expense and delay, can prevent the fair and just resolution of disputes” (emphasis in original).

Insisting on the notice provision in the lower courts where, as here, it would serve no purpose to do so constitutes “undue process” and refusing to address the merits leaves the main issue unresolved after the expense and time devoted to it through three levels of court. [ 37 ] We must respectfully indicate our disagreement with two specific contentions of Abella and Wagner JJ. They assert that since all constitutional issues are important, our approach would lead “essentially to entertaining all constitutional arguments raised in this Court for the first time”: para. 137.

This is not the case: it ignores the other considerations relevant to the exercise of this Court’s discretion. History shows that this Court has only agreed to consider new constitutional issues in rare cases. While we agree that urgency may be a factor in deciding to hear a constitutional issue in this Court where no notice was served below, it is not the only consideration. The point is that all relevant considerations should be taken into account. [ 38 ] Our colleagues also maintain, without any factual basis in the record and without any submission of this nature having been made, that Ms.

Guindon failed to file notice “without explanation”, and sought to “evade” “the statutory obligation . . . by advancing the excuse” of her notice argument by employing “linguistic tactics at the expense of the public interest”: paras. 94, 96, 97 and 136. [ 39 ] Ms. Guindon did not fail to explain why she did not give notice. She advanced the argument that notice was not required and the Tax Court judge decided that issue.

Bédard J. did not require notice of constitutional question to be served because he did not issue a declaration of invalidity following his conclusion that s. 163.2 constituted a criminal offence. Instead, he allowed the appeal and vacated the assessment. The learned Tax Court judge did not dismiss Ms. Guindon’s argument on the basis of “semantics”. The Federal Court of Appeal did not accept Ms. Guindon’s position on this point. But it devoted several paragraphs of its judgment to the issue and did not characterize Ms. Guindon’s position as merely “linguistic” or as an attempt to “evade” the notice requirement.

No party or intervener at any point has advanced the

interpretation of Ms. Guindon’s conduct on which our colleagues rely and there is no support for it — none — in the record. [ 40 ] We will now proceed to address the constitutional issue. B. Merits

(1) Overview [ 41 ] The substantive issue in this appeal is whether Ms. Guindon, by virtue of having been assessed a penalty under s. 163.2 of the ITA , is a “person charged with an offence” within the meaning of s. 11 of the Charter . If she is, then either she is entitled to the numerous protections accorded by that

section or, if s. 163.2 cannot be read as providing for those protections, it would be constitutionally invalid. The basic question is whether, as Ms. Guindon submits, s. 163.2 creates “an offence” for the purposes of s. 11 and the answer depends, as we shall explain, on whether s. 163.2 is criminal in nature or provides for true penal consequences. In our view, neither is the case and s. 11 does not apply to these proceedings. [ 42 ] We will first set out a brief overview of the legal principles, consider and reject some criticisms of this framework and then apply the principles to s. 163.2.

(2) Wigglesworth and Martineau Set Out the Tests to Determine Whether

Section 11 of the Charter Is Engaged [ 43 ]

Section 11 of the Charter provides: 11. Any person charged with an offence has the right (

a) to be informed without unreasonable delay of the specific offence; (

b) to be tried within a reasonable time; (

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

d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal; (

e) not to be denied reasonable bail without just cause; (

f) except in the case of an offence under military law tried before a military tribunal, to the benefit of trial by jury where the maximum punishment for the offence is imprisonment for five years or a more severe punishment;

(

g) not to be found guilty on account of any act or omission unless, at the time of the act or omission, it constituted an offence underCanadian or international law or was criminal according to the general principles of law recognized by the community of nations; (

h) if finally acquitted of the offence, not to be tried for it again and, if finally found guilty and punished for the offence, not to be tried orpunished for it again; and (

i) if found guilty of the offence and if the punishment for the offence has been varied between the time of commission and the time ofsentencing, to the benefit of the lesser punishment. [44] This Court has deliberately adopted a “somewhat narrow definition of the opening words of s. 11” in order to avoidhaving to craft differing levels of protection under s. 11 for different sorts of proceedings: R. v. Wigglesworth, (SCC),[1987] 2 S.C.R. 541, at p. 558. The Court has also acknowledged the difficulty in formulating a precise test to identify particularproceedings which give rise to s. 11 protections: see p.

Section 11 protections are available to those charged with criminal offences,not those subject to administrative sanctions: see Wigglesworth, at p. 554; Martineau v. M.N.R., 2004 SCC 81, [2004] 3 S.C.R. 737, atpara. 19. The two parts test for determining which statutory infractions are criminal offences and which are administrative penalties wasset out in Wigglesworth, at pp. 559-62.

Additional analytical criteria were subsequently elaborated in Martineau, at paras. 19-24 and 57.As will be explained, an individual is entitled to the procedural protections of s. 11 of the Charter where the proceeding is, by its verynature, criminal, or where a “true penal consequence” flows from the sanction. [45] A proceeding is criminal by its very nature when it is aimed at promoting public order and welfare within a publicsphere of activity.

Proceedings of an administrative nature, on the other hand, are primarily intended to maintain compliance or toregulate conduct within a limited sphere of activity: see Martineau, at paras. 21-22; Wigglesworth, at p. 560. The focus of the inquiry isnot on the nature of the act which is the subject of the proceedings, but on the nature of the proceedings themselves, taking into accounttheir purpose as well as their procedure: Martineau, at paras. 24 and 28-32; R. v. Shubley, (SCC), [1990] 1 S.C.R. 3, atpp. 18-19.

Proceedings have a criminal purpose when they seek to bring the subject of the proceedings “to account to society” forconduct “violating the public interest”: Shubley, at p. 20. [46] A “true penal consequence” is “imprisonment or a fine which by its magnitude would appear to be imposed for thepurpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within [a] limited sphere ofactivity”: Wigglesworth, at p. 561; see also Martineau, at para. 57.

There is inevitably some overlap between the analysis of the purposeof the scheme and the purpose of the sanction, but the jurisprudence has looked at both separately to the extent that is possible,recognizing that the proceeding will be an offence for s. 11 purposes if it meets either branch of the test, and that situations in which aproceeding meets one but not both branches will be rare: ibid. [47] We will elaborate these principles further as we apply them to the provision in issue here. But first we turn toconsider some of the criticisms of this approach to the analysis.

(3) Criticisms of the Wigglesworth/Martineau Tests [48] The Wigglesworth/Martineau tests have been subject to criticism. It has been said that the distinction between thecriminal in nature and true penal consequence tests is unclear, the reasoning is circular, or the tests cannot properly account for theparticular context of modern administrative monetary penalties. (See, e.g., D. McLeod, “Facing the Consequences: Should the CharterApply to Administrative Proceedings Involving Monetary Penalties?” (2012), 30 N.J.C.L. 59; factum of the intervener the CanadianConstitution Foundation (“CCF”); S. Aylward and L.

Ritacca, “In Defence of Administrative Law: Procedural Fairness forAdministrative Monetary Penalties” (2015), 28 C.J.A.L.P. 35.) [49] When the criminal in nature test is understood as considering only the nature of the proceedings, the independentvalue of each test becomes clear. The criminal in nature test identifies provisions that are criminal because Parliament or the legislaturehas provided for proceedings whose attributes and purpose show that the penalty is to be imposed via criminal proceedings.

The truepenal consequence test, on the other hand, looks at whether an ostensibly administrative or regulatory provision nonetheless engages s.11 of the Charter because it may result in punitive consequences.

While there is inevitably some overlap in the analysis, the importantthing is to consider all relevant factors, acknowledging that only rarely, as in Wigglesworth, will the two branches of the test lead todifferent conclusions. [50] Moreover, the analysis is not circular: both tests ask distinct questions that evaluate the two different ways in which aprovision could be a criminal offence for the purpose of s. 11. The criminal in nature test focuses on the process while the penalconsequences test focuses on its potential impact on the person subject to the proceeding.

(4) Is the Proceeding Under

Section 163.2 “Criminal in Nature”? (

a) Principles [51] The criminal in nature test asks whether the proceedings by which a penalty is imposed are criminal. The test is notconcerned with the nature of the underlying act. As Wilson J. stated in Wigglesworth, the test is whether a matter “fall[s] within s. 11 . . .because by its very nature it is a criminal proceeding”: p. 559 (emphasis added).

This was confirmed in Shubley, at pp. 18-19, whereMcLachlin J. (as she then was) stated explicitly: “The question of whether proceedings are criminal in nature is concerned not with thenature of the act which gave rise to the proceedings, but the nature of the proceedings themselves” (emphasis added). Fish J., writing forthe Court in Martineau, reaffirmed the conclusion in Shubley that the criminal in nature test is concerned solely with the proceedingsthemselves: see paras. 18-19. The text of s. 11 supports this conclusion. As Wilson J. noted in Wigglesworth:

Section 11 contains terms which are classically associated with criminal proceedings: “tried”, “presumed innocent until proven guilty”,“reasonable bail”, “punishment for the offence”, “acquitted of the offence” and “found guilty of the offence”. Indeed, some of the rightsguaranteed in s. 11 would seem to have no meaning outside the criminal or quasi-criminal context. [p. 555] [52] Various indicia are useful in determining whether the proceedings are criminal in nature.

Fish J., in finding that thecivil forfeiture provision at issue in Martineau was not criminal in nature, observed that three criteria may be helpful in reviewing thecase law in relation to the nature of the proceeding: the objectives of the legislation, the objectives of the sanction and the processleading to the imposition of the sanction (para. 24). This case deals with an administrative monetary penalty, not a civil collectionmechanism as was the case in Martineau, and the analysis of the objectives of the sanction must be undertaken as part of consideringwhether the sanction is a true penal consequence.

In order to avoid unnecessary repetition, we find it convenient to consider the first andlast of these criteria here but leave consideration of the objectives of the sanction until we address the question of whether the sanction isa true penal consequence. We will look at how these criteria relate to the proceeding under s. 163.2 in turn. (

b) Application (

i) The Legislative Scheme and the Provision in Issue [53] The question is whether the objectives of the proceedings, examined in their full legislative context, have aregulatory or a penal purpose. As Wilson J. put it in Wigglesworth, “if a particular matter is of a public nature, intended to promotepublic order and welfare within a public sphere of activity, then that matter is the kind of matter which falls within s. 11”: p. 560.

Shenoted, by way of example, that proceedings of an “administrative nature instituted for the protection of the public in accordance with thepolicy of a statute” or which impose disqualifications “as part of a scheme for regulating an activity in order to protect the public” aregenerally not the sort of proceedings that engage s. 11: ibid. [54] The ITA is “a self-reporting and self-assessing [scheme] which depends upon the honesty and integrity of thetaxpayers for its success” in order to carry out its ultimate purpose, the raising of government revenues: R. v.

McKinlay Transport Ltd., (SCC), [1990] 1 S.C.R. 627, at p. 636. Nonetheless, it contains a number of enforcement measures, including both civiland criminal penalties. Civil penalties are found in

Part I, Division I, of the ITA, “Returns, Assessments, Payment and Appeals” and areassessed by the Canada Revenue Agency (‟CRAˮ). Criminal offences, on the other hand, are found in

Part XV, “Administration andEnforcement” and are prosecuted before a court of criminal jurisdiction. [55] This appeal focuses on s. 163.2 of the ITA. Enacted in 2000, it contains two administrative penalties: the “plannerpenalty” in subs. (2) and the “preparer penalty” in subs. (4). The planner penalty is not at issue in this appeal. The preparer penalty reads:

(4) Every person who makes, or participates in, assents to or acquiesces in the making of, a statement to, or by or on behalf of, anotherperson (in this subsection, subsections (5) and (6), paragraph (12)(

c) and subsection (15) referred to as the “other person”) that theperson knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement thatcould be used by or on behalf of the other person for a purpose of this Act is liable to a penalty in respect of the false statement. [56] The CRA explains that the preparer penalty is intended to apply when an individual has made, participated in,assented to, or acquiesced in the making of a false statement.

A specific person who could use the false statement must be identified (theprovision uses the term “the other person”). According to the CRA, the penalty could apply, for example, to an individual preparing afraudulent tax return for or providing deceptive tax advice to a specific taxpayer. (See CRA’s information circular IC 01-1, “Third-PartyCivil Penalties” (September 18, 2001 (online)), at paras. 6-7 and 9.) [57] The preparer penalty is narrow: the false statement must be made knowingly or in circumstances amounting toculpable conduct. Culpable conduct is defined in s. 163.2(1) as conduct, whether

an act or a failure to act, that (

a) is tantamount to intentional conduct; (

b) shows an indifference as to whether this Act is complied with; or (

c) shows a wilful, reckless or wanton disregard of the law. [58] This is clearly a high standard. “[W]ilful, reckless or wanton disregard of the law” refers to concepts well known tothe law, commonly encountered as degrees of mens rea in criminal law: see, e.g., K. Roach, Criminal Law (5th ed. 2012), at pp. 180-84and 191-92.

The use of such terms evinces a clear intention that “culpable conduct” be a more exacting standard than simple negligence. [59] The expressions “shows an indifference as to whether this Act is complied with” and “tantamount to intentionalconduct” originated in the jurisprudence on the gross negligence penalty applicable directly to taxpayers in s. 163(2) of the ITA, whichstates:

(2) Every person who, knowingly, or under circumstances amounting to gross negligence, has made or has participated in, assented to oracquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer (in this

section referred to asa “return”) filed or made in respect of a taxation year for the purposes of this Act, is liable to a penalty of . . . . [Penalty calculationsomitted.]

[60] The Minister states in her factum that “culpable conduct” in s. 163.2 of the ITA “was not intended to be differentfrom the gross negligence standard in s. 163(2)”: para. 79. The Federal Court in Venne v. The Queen, (FC), [1984]C.T.C. 223 (T.D.), in the context of a s. 163(2) penalty, explained that “an indifference as to whether the law is complied with” is morethan simple carelessness or negligence; it involves “a high degree of negligence tantamount to intentional acting”: p. 234. It is akin toburying one’s head in the sand: Sirois (L.C.) v.

Canada, 1995 CarswellNat 555 (WL Can.) (T.C.C.), at para. 13; Keller v. Canada, 1995CarswellNat 569 (WL Can.) (T.C.C.). The Tax Court in Sidhu v. R., 2004 TCC 174, [2004] 2 C.T.C. 3167, explaining the decision inVenne, elaborated on expressions “tantamount to intentional conduct” and “shows an indifference as to whether this Act is compliedwith”: Actions “tantamount” to intentional actions are actions from which an imputed intention can be found such as actions demonstrating “anindifference as to whether the law is complied with or not”. . . .

The burden here is not to prove, beyond a reasonable doubt, mens rea toevade taxes. The burden is to prove on a balance of probability such an indifference to appropriate and reasonable diligence in a self-assessing system as belies or offends common sense. [para. 23] [61] Therefore, while there has been debate as to the scope of “culpable conduct” (as argued before the Tax Court in thismatter), the standard must be at least as high as gross negligence under s. 163(2) of the ITA.

The third party penalties are meant tocapture serious conduct, not ordinary negligence or simple mistakes on the part of a tax preparer or planner. [62] We can conclude that the purpose of this proceeding is to promote honesty and deter gross negligence, or worse, onthe part of preparers, qualities that are essential to the self-reporting system of income taxation assessment. (ii) The Process [63] With respect to the process, the heart of the analysis is concerned with the extent to which it bears the traditionalhallmarks of a criminal proceeding.

Fish J. referred to some of the relevant considerations in Martineau, including whether the processinvolved the laying of a charge, an arrest, a summons to appear before a court of criminal jurisdiction, and whether a finding ofresponsibility leads to a criminal record: para. 45.

The use of words traditionally associated with the criminal process, such as “guilt”,“acquittal”, “indictment”, “summary conviction”, “prosecution”, and “accused”, can be a helpful indication as to whether a provisionrefers to criminal proceedings. [64] The fact that the penalty is imposed by a judge in a criminal court is, of course, another sign that the offence iscriminal in nature. But whether a proceeding is criminal by nature does not depend on the actual penalty imposed.

For example, parkingtickets can involve relatively small fines, but where they are imposed in conformity with the general criminal process (e.g. pleadingguilty or contesting the fine before a judge, prosecution by a Crown attorney), s. 11 rights apply: Wigglesworth, at para. 559.

Offences inthe Criminal Code, the Youth Criminal Justice Act, S.C. 2002, c. 1, the Controlled Drugs and Substances Act, S.C. 1996, c. 19, andquasi-criminal offences under provincial legislation are the type of proceedings which are criminal in nature: see the Constitution Act,1867, s. 92(15); Wigglesworth, at p. 560; Martineau, at para. 21. [65] If, considering all of these factors, the process is criminal in nature, it engages s. 11 of the Charter. [66] The process leading to the imposition of the penalty is described in the CRA’s IC 01-1, at paras. 79-89.

CRAauditors conduct a penalty audit, advise the preparer or planner in writing of the audit, and consider any representation that the individualchooses to make before making a recommendation to the Third-Party Penalty Review Committee. If this Committee agrees with therecommendation to impose the penalty, it will give the planner or preparer another opportunity to make representations before making itsdecision. [67] This administrative process can be contrasted with the process which applies to criminal offences in the ITA: ss. 238and 239.

Unlike the administrative penalties in s. 163.2, the criminal sanctions are imposed by a court of criminal jurisdiction after thelaying of an information or complaint: see s. 244. For ease of reference, we repeat the criteria from Martineau. Just as in that case, in thecontext of s. 163.2: No one is charged . . . . No information is laid against anyone. No one is arrested. No one is summoned to appear before a court ofcriminal jurisdiction. No criminal record will result from the proceedings.

At worst, once the administrative proceeding is complete andall appeals are exhausted, if the [penalty] is upheld and the person liable to pay still refuses to do so, he or she risks being forced to payby way of a civil action. [para. 45] Similarly, under s. 163.2(4), if the assessment is upheld and payment is not made, the Minister may only invoke civil collectionprocedures under the ITA. [68] Ms. Guindon submits that where the same conduct can lead to either an administrative monetary penalty or acriminal sanction, the proceedings will be criminal in nature.

Here, conduct which may form the basis of an administrative penalty unders. 163.2 could also be the basis for criminal prosecution under s. 239 of the ITA: see the Tax Court’s reasons, at paras. 44-50. However,the same act could have more than one aspect. It follows that the fact that the same conduct which could form the basis of anadministrative penalty could also lead to a criminal conviction is irrelevant to the characterization of the administrative penalty.

Asexplained earlier, the test is that set out in Wigglesworth and Martineau. [69] Should an individual be assessed an administrative monetary penalty and subsequently face criminal prosecution forthe same conduct (or vice versa), that individual may argue that bringing the second proceedings in the particular circumstances is anabuse of process.[2] As nothing in the record before this Court indicates that Ms. Guindon is facing criminal prosecution, that issue is notbefore us. [70] Ms. Guindon argues that s. 163.2(4) is not an administrative offence because it is not restricted to the regulated class

in the ITA (taxpayers) and departs from the general purpose of the Act: the collection of tax. While the individuals targeted by s. 163.2(4) of the ITA are not the taxpayers themselves, this does not detract from the provision’s administrative nature. The ITA regulatory scheme encompasses more than those who pay taxes: employers, banks, brokers, charities, and other entities are required to file information returns and to produce information in order to verify taxpayer compliance.

Provisions, such as administrative monetary penalties, that encourage compliance by these non-taxpayers are integral to the ITA ’s regulatory regime and are not criminal in nature simply because the target is not the taxpayer. [ 71 ] Ms. Guindon also submits that the use of the term “culpable conduct” in s. 163.2(4) indicates a mens rea requirement, which is classically criminal in nature. This is irrelevant to the analysis because, as discussed, the criminal in nature analysis is concerned with the process, not the conduct.

The simple fact that there is a mental element that must be present in order for the penalty to be imposed does not render the provision criminal. For example, intentional torts require proof of intention, commonly understood as a subjective desire to cause the consequence of one’s action: see P. H. Osborne, The Law of Torts (4th ed. 2011), at p. 251. In addition, some non-criminal statutory causes of action include mental elements such as recklessness or knowledge. For example, the statutory cause of action in s. 134(4) of Ontario’s Securities Act , R.S.O. 1990, c. S.5, includes a knowledge requirement.

Also, s. 36 of the Competition Act , R.S.C. 1985, c. C-34, creates a cause of action for those who have suffered loss or damage as a result of conduct contrary to

Part VI, which contains the Act’s criminal offences. Given that these are criminal offences, all contain a mens rea element, but that does not render s. 36 proceedings criminal. [ 72 ] While some regulatory penalties are imposed without consideration of the person’s state of mind, in other cases it is rational that the state would only wish to impose a penalty on those who engage in misconduct knowingly, recklessly, or with a particular intention. Providing a due diligence defence or including a mental element as a component of the penalty does not detract from the administrative nature of the penalty. (See the Federal Court of Appeal’s reasons, at para. 48.) (

c) Conclusion on the “Criminal in Nature” Test [ 73 ] We conclude that the s. 163.2 process is not criminal in nature.

(5) The True Penal Consequence Test (

a) Introduction [ 74 ] As we have explained, the preparer penalty is designed to apply when an individual engages in conduct such as preparing a fraudulent tax return, conduct which undermines the self-reporting and self-assessing scheme which depends on honesty and diligence of taxpayers and those whom they engage to assist them. For the reasons that follow, we conclude that the penalty is not a true penal consequence. (

b) Principles [ 75 ] Administrative monetary penalties are designed as sanctions to be imposed through an administrative process. They are not imposed in a criminal proceeding. Thus, the issue of whether a person who is the subject of an ostensibly administrative regime is in reality “charged with an offence” is addressed by the second Wigglesworth / Martineau test: Does the sanction impose a true penal consequence?

Wigglesworth teaches that a true penal consequence is imprisonment or a fine which, having regard to its magnitude and other relevant factors, is imposed to redress the wrong done to society at large rather than simply to secure compliance: see p. 561. [ 76 ] Imprisonment is always a true penal consequence. A provision that includes the possibility of imprisonment will be criminal no matter the actual sanction imposed: see Wigglesworth , at p. 562. A monetary penalty may or may not be a true penal consequence. It will be so when it is, in purpose or effect, punitive.

Whether this is the case is assessed by looking at considerations such as the magnitude of the fine, to whom it is paid, whether its magnitude is determined by regulatory considerations rather than principles of criminal sentencing, and whether stigma is associated with the penalty: see, e.g., Canada (Attorney General) v. United States Steel Corp. , 2011 FCA 176 , 333 D.L.R. (4th) 1, at paras. 76-77 . [ 77 ] The magnitude of the sanction on its own is not determinative.

However, if the amount at issue is out of proportion to the amount required to achieve regulatory purposes, this consideration suggests that it will constitute a true penal consequence and that the provision will attract the protection of s. 11 of the Charter . This is not to say that very large penalties cannot be imposed under administrative monetary penalty regimes. Sometimes significant penalties are necessary in order to deter non-compliance with an administrative scheme: see Rowan v. Ontario Securities Commission , 2012 ONCA 208 , 110 O.R. (3d) 492, at para. 49 .

The amount of the penalty should reflect the objective of deterring non-compliance with the administrative or regulatory scheme. (

c) An Upper Limit on Administrative Penalties? [ 78 ] Ms. Guindon and the intervener the Canadian Constitution Foundation suggest that there should be an upper limit on the amount of an administrative monetary penalty. Citing the Ontario Court of Appeal decision in Rowan , at para. 54 , which considered the imposition of an administrative penalty under the Ontario Securities Act , Ms. Guindon submits that the maximum amount that can be imposed under an administrative monetary penalty should be one fifth of the penalty which can be imposed by criminal prosecution.

The CCF submits that there should be a monetary threshold beyond which administrative penalties are presumed to be criminal, suggesting $10,000 for an individual and $100,000 for a corporation: I.F., at para. 32. [ 79 ] We c

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