R. v. Young, 2022 NSSC 58

SUPREME COURT OF NOVA SCOTIA Citation: R. v. Young, 2022 NSSC 58 Date: 2022-02-24 Docket: CRS. No. 504931 Registry: Sydney Between: Her Majesty the Queen v. Georgette Young, Lydia Saker, Nadia Saker, Angela MacDonald and Latatia Advertising Incorporated, The Spaghetti Benders Limited, 25132004 Incorporated, 25132002 Incorporated, Kishk Incorporated, Maddie and Bella’s Children’s Clothing Incorporated, Artisan Hair Loss Therapy Incorporated, Housewives in Heels Incorporated, Juliette and John Incorporated and New and Chic Incorporated Trial Decision s. 380 of the Criminal Code of Canada s. 327 (

a) and (

d) of the Excise Tax Act Judge: The Honourable Justice Robin C. Gogan Heard: June 17, 21, 22, 24, 25, 28, 29, 30, July 5, 6, 7, 8, 9, 12, 13, 14, 19, 20, 21, 22, 23, 27, 28, 30, 2021, in Sydney, Nova Scotia Counsel: Mark Donohue and Constantin Draghici-Vasilescu for the Crown Georgette Young, Angela MacDonald, Nadia Saker, Lydia Saker, self-represented Defendants By the Court : Introduction [ 1 ] Georgette Young, Angela MacDonald, Nadia Saker and Lydia Saker are self-represented accused.

They are co-accused in this proceeding, along with ten companies, charged with a multitude of offences contrary to both the Criminal Code of Canada and the Excise Tax Act . The offences are alleged to have occurred between January 1, 2011, and July 31, 2015. [ 2 ] A copy of the Indictment dated March 11, 2021, is attached as Appendix “A” to these reasons. Each of the four individual accused face a total of ten charges under s. 380(1) (

a) of the Criminal Code . These counts allege that these accused defrauded the Government of Canada in various amounts. The Indictment also contains a total of 20 charges against various combinations of accused under ss. 327(1) of the Excise Tax Act . Half of those charges allege false statements in Goods and Services Tax (“ GST ”) Returns, an offence under s. 327(1)(

a) of the Act . The remaining half allege offences under s. 327(1)(

d) of the Act , which involve obtaining or attempting to obtain refunds which they were not entitled to receive. [ 3 ] The trial of this matter began on June 17, 2021, and concluded on July 30, 2021. It involved a considerable volume of electronic and documentary evidence produced by the Crown. Much of this evidence came from production orders and searches conducted of various locations. The evidence included materials from a civil audit and working papers compiled by the investigator. [ 4 ] A number of previous decisions have been released in this proceeding. The first, R. v.

Young , 2021 NSSC 214 , dealt with Crown applications to have certain witnesses testify virtually under s. 714 of the Criminal Code . Many of these applications were allowed. The defendants applied for relief from delay pursuant to s. 11(

b) of the Charter but this application was formally abandoned by them on May 27, 2021.

[5] The individual accused brought a series of Charter applications seeking exclusion of evidence. Some of these survived aVukelich application brought by the Crown (oral decision dated June 16, 2021). The first of those alleged a breach of s. 8 Charter rightsrelating to the search of various locations on November 22, 2017. Those applications were dismissed in R. v. Young, 2021 NSSC 220. There was also a Jarvis application that was dismissed in R. v. Young, 2021 NSSC 361. These reasons should be read in conjunctionwith previous decisions. [6] What follows here is a decision in this matter.

I begin with some basic principles and a fairly brief review of the evidenceadduced by the Crown. I note here that none of the accused testified. I note as well that at the conclusion of the Jarvis application, allparties agreed that the evidence on that application would be trial evidence. [7] Identity and jurisdiction were not contested but I find are established on the evidence. Overview [8] At the outset, I wish to review some of the basic principles that guide my decision.

Basic Principles - The Presumption and Burden [9] The various accused in this matter enjoy the presumption of innocence, a presumption only displaced if the Crown proves guiltbeyond a reasonable doubt. Suspicion of guilt or a belief in probable guilt do not displace the presumption. Only proof beyond areasonable doubt can establish guilt. The Crown’s heavy onus of proving guilt beyond a reasonable doubt never shifts. [10] A reasonable doubt is based on reason and common sense which must be logically connected to the evidence or lack ofevidence.

Suspicion and probability fall far short of the reasonable doubt standard. Proof beyond a reasonable doubt falls much closer toabsolute certainty than it does to a balance of probabilities (R. v. Lifcus, (SCC), [1997] 3 S.C.R. 320 and R. v. Star,2000 SCC 40 , [2000] 2 S.C.R. 144). [11] The accused do not have to prove anything to be found not guilty. The burden always rests on the Crown to prove beyond areasonable doubt that each committed the essential elements of the offences charged against them. I note here however, that the burdenon the Crown does not extend to “negativing every conjecture” (R. v.

Paul, (SCC), [1977] 1 S.C.R. 181, at p. 191). [12] This is a largely circumstantial case. The elements of the offences and the evidence offered by the Crown will be reviewedbelow. Here, as a general proposition, I note that circumstantial evidence has the same evidentiary value as direct evidence. Reliance oncircumstantial evidence does not change the burden of proof. I remind myself of the direction of the Supreme Court of Canada in R. v.Villaroman, 2016 SCC 33, which confirmed that an inference of guilt drawn from circumstantial evidence should be the only reasonableinference that such evidence permits.

Cromwell, J. elaborated at p. 3 (headnote): … In assessing circumstantial evidence, inferences consistent with innocence do not have to arise from proven facts. The issue withrespect to circumstantial evidence is the range of reasonable inferences that can be drawn from it. If there are reasonable inferencesother than guilt, the Crown’s evidence does not meet the proof beyond a reasonable doubt standard. A certain gap in the evidence mayresult in inferences other than guilt.

But those inferences must be reasonable given the evidence and the absence of evidence, assessedlogically, and in light of human experience and common sense. When assessing circumstantial evidence, the trier of fact should considerother plausible theories and other reasonable possibilities which are inconsistent with guilt. The Crown thus may need to negative thesereasonable possibilities, but certainly does not need to disprove every possible conjecture which might be consistent with innocence.

Other plausible theories or other reasonable possibilities must be based on logic and experience applied to the evidence or the absence ofevidence, not on speculation. [13] More recently, the guidance in Villaroman was applied in a fraud context in R. v. Ross and Dawson, 2019 NSSC 275, at paras.345 – 347 (see also R. v. Calnen, 2019 SCC 6, and R. v. Murphy, 2018 NSSC 310 at paras. 32 – 33, citing R. v. Delege, 2018 BCCA200 and a pre-Villaroman decision involving similar charges R. v. Ingaham, 2016 NSPC 38).

Circumstantial evidence of intent is animportant aspect of this case and for this reason, I rely on the words of Chief Justice Cartwright in Lampard v.

The Queen, (SCC), [1969] S.C.R. 373 at p. 380: Unless the doer of the act has expressed his intention, the finding as to what that intention was will necessarily be founded on aninference drawn from all the relevant circumstances provided in evidence. [14] This guidance on the assessment of circumstantial evidence is important to the disposition of this case, especially in light ofsome arguments made and theories advanced by the defendants, none of which were supported by evidence. [15] None of the accused testified and there was no evidence tendered by any of the defendants in this case.

There is however,evidence of what was said by the individual accused during their civil audits, both in telephone conversations and interviews. There isalso evidence in the form of handwritten notations on documents submitted during reviews and audits. In some respects, it could be saidthat these statements, if accepted, are exculpatory. For this reason, I am subject to the direction of the Supreme Court of Canada in R. vW.(D.), (SCC), [1991] 1 S.C.R. 742. As recently stated in R. v. Mains, 2022 ONCJ 44, at para. 90: In R. v.

W(D.), (SCC), [1991] 1 SCR 742, at p. 758, Cory J. provided the well-known instructions on the relationshipbetween proof beyond a reasonable doubt and credibility. The applicability of the guidance provided by the Court in W(D.) is not limitedto cases where an accused person testifies. If, for example, a statement has an exculpatory aspect, a court must conducta W(D.) analysis: R. v. L.L., 2022 ONCA 50, at paras. 23-27.

[ 16 ] Accordingly, if I accept these statements, there may be a basis for doubt on the required intent and an acquittal must follow. If I do not believe or accept this evidence, I must still consider whether it raises a reasonable doubt. If it does not, a conviction does not inevitably follow. In the end, I must be satisfied on the evidence I do accept that the Crown has proved each and every charge beyond a reasonable doubt. The Crown Theory – Providing Context for the Analysis [ 17 ] Before reviewing the evidence in this case, let me comment generally on the Crown theory in this case.

It is my hope that a brief outline of the Crown case will provide context and assist in understanding the reasons that follow. As the Indictment alleges, this matter involves four individual and ten corporate defendants who filed GST returns between January 1, 2011, and July 31, 2015. The four individual accused are related. Georgette Young, Nadia Saker and Angela MacDonald are sisters.

Lydia Saker is their mother. [ 18 ] Georgette Young was the sole officer and director, operating mind, recognized agent, and authorized representative of Latitia Advertising Incorporated (“ Latitia ”), 25132004 Incorporated (“ 2004 ”), 25132002 Incorporated (“ 2002 ”, a.k.a. “ Silverfish ”), Kishk Incorporated (“ Kishk ”), and Maddie & Bella’s Children’s Clothing Incorporated (“ Maddie & Bella ”). Angela MacDonald was owner, recognized agent, and the lone officer and director of Juliette & John Incorporated (“ Juliette & John ”) and lone officer and director for New & Chic Incorporated (“ New & Chic ”).

Nadia Saker was the owner, sole officer, director and recognized agent of Housewives in Heels Incorporated (“ Housewives in Heels ”) and Lydia Saker was the recognized agent and only officer and director of Artisan Hair Loss Therapy Incorporated (“ Artisan ”). The Spaghetti Benders Limited (“ Spaghetti Benders ”) was owned equally by Young, MacDonald and Nadia Saker, and all were directors along with Lydia Saker. Young was the recognized agent. [ 19 ] Over the period in question, Young became the bookkeeper for all the defendant companies.

She also became the authorized representative of each company for tax purposes. Over time, Canada Revenue Agency (“ CRA ”) came to consider all of the corporate defendants related. [ 20 ] On an escalating basis, the GST returns filed by the corporate defendants claimed refunds on the basis that their Input Tax Credits (“ ITCs ”) exceeded the tax liability. The allegation generally is that these claims were fraudulent. Some of the companies at one time or another had some small measure of legitimate business activity.

However, over time, the individual accused all participated in a scheme to file GST returns claiming entitlement to refund payments based on fictitious information. As the claims grew, the only way the scheme could work is if the accused worked in concert. [ 21 ] The Crown theory alleges that some of the companies were incorporated for the sole purpose of perpetuating this fraudulent scheme. In essence, one of the companies generated the GST liability by supplying the others, and the others claimed the cost of those supplies as ITCs, generating a potential refund.

The company that incurred the tax liability was then abandoned. The scheme involved all of the defendants claiming a large quantum of business amongst the related companies. The Crown is of the view that Young was the ring leader of the scheme and that the others had knowledge and actively participated. [ 22 ] The basics of the alleged scheme are technical but simple. It is the magnitude that is remarkable. The Crown theory is that the fraudulent claims in the early period were relatively small and survived various forms of CRA review.

With this success, the scheme grew exponentially and to a massive scale with the claims advanced having no relationship to any real economic activity. The scope of the scheme was only discovered when the related companies came under a consolidated civil audit by CRA beginning in April of 2015. The matter was referred to the Criminal Investigation Directorate (“ CID ”) of CRA and a formal investigation began in June of 2016.

Production orders and search warrants were subsequently obtained in 2017. [ 23 ] As a result of the criminal investigation, the Crown alleges that between January 1, 2011, and July 31, 2015, the ten companies, controlled by the four individual accused, filed GST returns claiming a combined refund of $20,628,805.06. Of that amount, CRA allocated $81,399.61 to existing corporate tax debt. The Receiver General of Canada paid refunds totalling $275,960.04.

Essentially, this means that the defendants were collectively paid $357,359.65, and claimed further payments totalling $20,271,445.40. [ 24 ] Charges were laid on February 1, 2019, and an Indictment followed on March 11, 2021. [ 25 ] As noted above, there are now a total of thirty charges before the court for determination. The charges can be organized into groups of three which reflects the Crown theory that all of the individual accused participated in the fraudulent scheme.

The corresponding Excise Tax Act charges flow from the various GST returns filed, for the most part, claiming refunds on the basis of false information.

The latter charges reflect the corporate organization and charge both the company and the individuals who served as the officers, directors and agents of each company. [ 26 ] To be clear, however, all of the charges have the same broad basis – a scheme amongst family members and a group of related companies to defraud the Government of Canada by giving false information in order to obtain GST refunds to which none of the companies were entitled. [ 27 ] Before analyzing the evidence offered in this case, I will review the issues and the positions taken by the parties.

Issue [ 28 ] The main issue in this case is whether the Crown has proven each and every count of the Indictment beyond a reasonable doubt. I will say here that the Crown offered an overwhelming amount of evidence that the statements made in the GST returns were

false. The real issue then becomes the determination of intent. [29] Before analyzing the main issue, I will deal with a preliminary issue raised by the defendants. Position of the Parties The Crown [30] The charges against the various accused in this proceeding can be divided into two groups. The first group, counts one to ten,are fraud charges contrary to s. 380(1)(

a) of the Criminal Code of Canada. The second group, counts 11 to 30, are charges broughtunder either ss. 327(1)(

a) or (

d) of the Excise Tax Act. The elements of each set of offences will be reviewed in more detail below. TheCrown submits that the evidence establishes the guilt of all of the accused beyond a reasonable doubt on all charges. [31] There is a common evidentiary basis for both sets of charges. The Crown theory was succinctly summarized in its pre-trialsubmission: In the case before the Court, the four individual defendants over the space of 4.5 years, created 10 defendant companies. The periodcovered by the investigation was January 1, 2011 to July 31, 2015 inclusive.

During this period, the four accused claimed false HST refunds for $3,628,805.00 (using the 10 corporations). The scheme was verysimple: designated corporations claimed false ITCs (Input Tax Credits) vastly exceeding the HST collected and almost exclusively basedon fabricated invoices, while large HST liabilities accrued in asset-less corporations against which collection would have beenunfeasible. Of this claimed amount, CRA paid $276,067.00. In addition, $81,399.00 was allocated as a credit to other amounts owing to CRA.

Anevolution of the documents provided by the taxpayers to the CRA during the audit conducted by Carol Power, led to a GST/HSTposition where nine of the corporations claimed the $3.6 million refund, and the defendant company 25132002 ended with an unpaidbalance of $1.7 million. The seized documentation from all sources uncovered in excess of $80 million in sales invoices. Of these, a total of $55.7 million, beforeHST, were inter company sales invoices between the corporations controlled/operated by the four women.

Of the sales invoices toexternal customers, $25.9 million could not be verified (because of insufficient information about the alleged customer) or weredetermined to be false as the named customers did not exist or the address provided was false. The investigation revealed only$59,000.00 in sales to outside customers. On the expense side, documents totalling $56.8 million were found. The vast majority of these documents – totalling $55.7 million –involved intercompany invoices that overlap with the sales above.

A review of the bank deposit information identified only $72,985.00in traceable transfers between five of the related corporations. Of the remaining 1.1 million in expenses, 1 million was determined aspurchases from merchants that do not exist. An additional $59,075 in alleged expenses was from two companies held by two of theparticipants’ spouses. The investigation concluded that only $6,305.00 were likely genuine eligible expenses. New & Chic, 25132004, and Artisan Hair Loss Therapy as a group had reported $9.1 million in sales, while none had an active corporatebank account.

Both Kishk and 25132002 opened bank accounts in September 2015 (after the period covered by the investigation) whilereporting a combined amount of $30.5 million in sales. Latatia Advertising, Housewives in Heels, Juliette and John, Maddie and Bella,and Spaghetti Benders reported a total of $16.3 million in sales, while the deposits identified as potential sales among the five companiestotalled only $25,917.00. [32] In its closing submissions, the Crown relied heavily on the analysis of the various forms of documentation.

On this basis, itargued that the evidence established only a miniscule level of real economic activity amongst the group of companies, and demonstrateda predatory scheme in which the participants took positive steps to fraudulently claim large amounts of money from the Government ofCanada. It claimed that the pivotal issue was the level of involvement of the individual participants and the corporations that theycreated and controlled. [33] It was the Crown’s view that the evidence established that the refunds paid were cashed or deposited and proceeds disbursed tothe benefit of the individual accused.

When asked to provide support for the statements made in the GST returns, they relied onfabricated invoices. The support provided to CRA in the early stages of review was subsequently abandoned or withdrawn with a varietyof explanations only to be replaced by new invoices alleging enormous amounts of inter company business. None of these claims werebased on real transactions. All companies operated in unison and were collectively managed with the sole purpose of perpetuatingfraud. And as the Crown submitted, when the game was up, they all stopped playing.

There was no legitimate business reason to carryon operation. [34] The Crown relied on a number of key authorities that are reviewed below. One that bears noting here is the decision in R. v.Villaroman.

It was the Crown’s view that many of the arguments raised by the defendants were fully answered by the reasons in thatdecision. [35] Further, the Crown notified of its intention to rely on both similar fact evidence and post offence conduct, the particulars ofwhich were set out in its pre-trial conference form and pre-trial written submissions. [36] In its closing submission, the Crown raised the issue of multiple convictions for offences arising from the same transactionsand relied on the decisions in Kienapple v. The Queen, (SCC), [1975] 1 S.C.R. 729, and R. v.

Lempen, 2006 NBQB171 (appealed on other grounds at 2008 NBCA 86). Lempen is authority for the finding that a factual nexus can exist for offences underss. 327(1)(

a) and 327(1)(

d) of the Excise Tax Act such that the principle in Keinapple applies to conditionally stay some convictions. I

will address this issue at the conclusion of this decision. The Defendants [37] The various accused presented a common defence. It was their submission, and I paraphrase, that the Crown had notdischarged its burden.

In their closing position, they argued that the CRA civil auditor and criminal investigator had questionablecredibility and conspired to “make up this fictional event that never happened” and “there is no proof, just a story” and “they (meaningPower and Boudreau) could have easily manipulated everything to make an appearance of a fictional fraud that never happened”. [38] Continuing on, Young claimed that the case against them was wrong, saying, “We have not knowingly participated in a schemeto defraud the government of millions of dollars. It is simply not so. We are people with integrity and pride.

Housewives who makecupcakes. Certainly not gangsters or fraudsters. We did not file returns with false statements to defraud the government”. [39] I note here that the accused advanced a number of Charter applications seeking to exclude evidence obtained from the searchesand the civil audit. These challenges were unsuccessful. They also made numerous arguments and objections to procedural andevidentiary matters. It was their collective view that these irregularities vitiated the proceeding. Their argument that the CRA criminalreferral document was invalid was disposed of in the Jarvis decision.

I will address the other issues below. [40] Finally, I would note that although none of the accused testified, Young cross-examined key witnesses on a variety of points,theories, suggestions and accusations. These made their way into the final submissions. For example, Young argued that the GSTreturns could have been filed by anyone who had the Netfile access codes and these codes could have been obtained by stealing mail outof a mailbox.

She claimed that Boudreau may have manipulated the PDF form of the documentary evidence and that there was no proofof who wrote the “mountains of invoices” or where they came from. Young also pointed out that Boudreau could not exclude thepossibility that bank accounts existed other than those he examined. [41] In its reply, the Crown referred to these points as pure conjecture that were not a basis for reasonable inferences other than guilt(R. v. Villaroman).

Analysis [42] Turning now to my analysis, I will address preliminary issues raised by the parties, review and assess the evidence, identifykey findings, discuss the elements of the offences charged, and review conclusions. Preliminary Issues [43] There are several issues raised by the parties that are convenient to deal with at this point. (

a) The Arraignment [44] The defendants raised a multitude of procedural irregularities surrounding the Information and the Indictment. They wereasked to provide written submissions. The Crown responded. The only issue that remained at the conclusion of the trial related to theposition of the accused that they had never been arraigned. As the written submission received on June 30, 2021, indicated at paras. 12 -13: 12. There was never an arraignment performed to the defendants in the Provincial Court which started the prosecution against theaccused.

The purpose of the arraignment is to make a public declaration of the charges against the accused and to inform the accused ofthe exact allegations before he decides on plea and election. The defendants were denied this right which impinges on their Charterrights

Section 7 and 11. 13. The arraignment of an accused is a fundamental step in the court process where the charges are read to the accused in court. Thejudge asks the accused if they understand the charges and whether they pleas guilty or not guilty. We have been denied this fundamentalstep in the court process and therefore were not charged with the crimes to which we’ve been accused. [45] On this basis, the defendants now argue that the proceeding is a nullity. In response to this submission, the Crown relied uponthe decision of the Ontario Court of Appeal in R. v. Mitchell, (ONCA); 36 O.R. (3d) 643.

The defendants were askedif they wished to respond to this authority. They declined, but maintained this argument in their final submission to the Court. [46] The record reflects that the first appearance in this proceeding took place on January 30, 2019. I have no evidence as to thearraignment of the accused in the Provincial Court of Nova Scotia on this or any other date. [47] The matter was subsequently adjourned on several occasions at defence request. On July 22, 2019, the defendants elected trialby judge and jury and the preliminary inquiry was scheduled.

The defendants were present for a focus hearing, a pre-trial hearing, andvarious other appearances before the preliminary inquiry took place on March 1 and 3, 2021, following which they were committed tostand trial. For much of the provincial court process, including the preliminary inquiry, Young and Lydia Saker had legal counsel. [48] The first appearance in the Supreme Court of Nova Scotia was on March 22, 2021, at which time Young and Lydia Sakerdischarged counsel.

The second appearance took place on April 6, 2021, at which time the defendants changed their election to judgealone and the matter was assigned trial dates. During this appearance, the Chambers judge began the arraignment process at which timethe defendants said they were “familiar” with the charges and waived reading.

[49] Prior to trial, the defendants raised the issue of their arraignment not having taken place. They were then arraigned formallybefore this Court on June 17, 2021. [50] A similar argument was advanced in Mitchell, and dismissed. In its analysis, the Court there discussed the purpose andsignificance of the arraignment and concluded that the failure to properly arraign the accused was a procedural error. The reasoning at p.6 of the decision follows: It has been authoritatively established that the failure to arraign an accused is a “procedural irregularity” which can be cured by s. 686(1)(b)(iv) in the appropriate circumstances …Section 686(1)(

b) can be applied in this case if the failure to read the charges to the appellantdid not cause him any prejudice. Arraignment is intended to ensure that an accused is aware of the exact charges when he or she elects and pleads. Arraignment alsoensures that all parties to the proceeding have a common understanding of the charges which are to be the subject-matter of theproceedings which follow. The appellant was told in

summary form of the charges against him on his first appearance. Moreimportantly, he made numerous appearances between his first appearance and his purported election … and several more before his trialstarted … He was represented by the same counsel throughout. Disclosure had been made by the Crown and in some of the appearances… there was reference to the substance of the charges. I have no doubt that the Appellant and his counsel were well aware of the exactcharges … when counsel were asked to elect a mode of trial and … when the trial actually commenced.

There is no reason to think thatthe proceeding’s would have gone any differently had the charges been read to the appellant in February or August. The failure to readthe charges to the appellant as required by s. 536(2) did not cause the appellant any prejudice and should not vitiate the convictions. [51] In this case, the charges against the accused have been the same throughout the proceeding. Every word of every charge wasread to each of the defendants before their plea was entered in this court and before the trial began.

Having presided over a series of pre-trial conferences to prepare for this trial, and having now presided over a lengthy trial, I do not find any prejudice to the accused. Theyfulsomely contested all of the charges against them. It was and is abundantly clear that all were well aware of the nature of the charges. There is no question that this court had jurisdiction. [52] I find no basis to vitiate the proceeding or declare it a nullity. (

b) Evidentiary Issues [53] As noted above, the Crown gave notice prior to trial of its intention to rely upon similar fact evidence and post offenceconduct. The Crown is of the view that both forms of evidence are probative of intent. [54] In relation to similar fact evidence, the Crown seeks to rely on evidence of each count across all counts in the Indictment. It isthe view of the Crown that the totality of the evidence demonstrates a pattern of conduct, a continuing plan or a scheme to perpetuatefraud against the government.

Each similar act is essentially part of the continuing fraud and involves one victim, the same method, andinvolves Young and some combination of the remaining defendants. The Crown argues that this evidentiary context is relevant to theassessment of each count charged. [55] The Crown relied on the decisions in R. v. Handy, 2002 SCC 56, R. v. Kirk, (ONCA), R. v. Garrick, 2012ONSC 7183, R. v. Babbar, 2017 ONCJ 862 and R. v. Tsigirlash, 2019 ONCA 650. Propensity evidence is generally excluded fromadmission as the probative value is outweighed by the prejudicial impact of the evidence.

It is recognized that in some instances, thebalance can change such that the probity outweighs prejudice. The onus lies with the Crown to establish a basis for admission on abalance of probabilities. [56] In R. v. Kirk, the accused was charged with six counts of fraud in relation to contracts entered into with various homeowners ina discreet period. At trial, evidence on one count was admitted across counts as probative of the element of intent.

The Crown arguedthat the totality of the evidence was “material and relevant to each count to prove motive, to negative the defence of lack of criminalintent, and to prove the existence of a plan, system, pattern, or scheme of fraud”. The admission and use of the evidence was upheld onappeal, noting the following: [15] In the circumstances of this case, the cogency of the evidence can be best expressed in the words of Doherty, J., as he then was,in R. v. Sahaidak, [1990] O.J.

No. 3228 (H.C.) at para. 150: In most cases where a multi-count indictment is before the Court, the evidence adduced on one count is not admissible for or against anaccused on the other counts.

Where, however, the events underlying the various counts are part of an ongoing course of dealings, andwhere those events are interwoven and interrelated so that as a matter of logic and common sense, the events underlying one count alsoenlighten and assist the trier of fact in understanding and assessing the evidence on the other counts, then evidence directly relevant toone count is admissible on the other counts as well. R. v. McNamara et al. (No. 1)(1981), (ON CA), 56 C.C.C. (2d)193 at 284 (Ont.

C.A.), aff’d without reference to this point (SCC), [1985] 1 S.C.R. 662. [57] The reasons in Babbar adopted this passage from Sahaidak. [58] In this case, as in Kirk, the defendants did not testify or call evidence. Nevertheless, they too relied upon the “overall picture”,saying, alternatively, that the case against them was fabricated by CRA employees, and that they had no intent to defraud theGovernment of Canada.

For this reason, intent is very much a pivotal issue this case. [59] In support of its view, the Crown makes the point that the methodology underlying each count is similar (if not identical) in thatthe defendants, employing companies that they incorporated, filed GST returns that claimed ITCs in excess of tax owed, resulting in

refunds due. When CRA requested support for the claims made, the various accused supplied invoices that related mostly to transactions between the related companies. Moreover, there is evidence that Young, as bookkeeper and authorized representative for each company, coordinated the dealings with CRA with the knowledge of the others. [ 60 ] The Crown says that both the claims made and the invoices filed in support were false and were a dishonest effort to benefit from a GST refund.

And I consider that there is evidence that, as this scheme progressed, it could only work because at all times, one of the group of companies was designated to absorb the GST liability for the group. This implies a level of coordination involving all of the defendants, individual and corporate, and is evidence relevant to knowledge and motive. This evidence also potentially negates any suggestion of coincidence, inadvertence, negligence, or some form of coordinated CRA fabrication.

I find evidence of a pattern of conduct across counts highly probative and I can identify little risk of prejudice associated with its use in the circumstances. [ 61 ] I find, on balance, that evidence of a potential pattern of conduct across counts is probative of knowledge and intent and its use is not outweighed by the potential prejudice.

The evidence admitted will be considered across counts. [ 62 ] On the issue of post offence conduct, the Crown says that there is evidence of conduct outside of the scope of the various charges which demonstrates a guilty conscious – evidence that the various defendants supplied false invoices and made amendments to their GST claims in response to reviews and audits. The Crown says that this evidence demonstrates an effort to cover up claims that were not based on genuine business activity. The inference sought is that the accused had knowledge that their GST claims were dishonest.

Such an inference would be circumstantial evidence of intent. [ 63 ] Many decisions deal with the issue of evidence of post offence conduct. The Crown relies on R. v. Calnen , 2019 SCC 6 , and R. v. Khan and Muellenbach, 2015 ONSC 7283 . Calnen , although much different on its facts, provides a recent statement from the Supreme Court of Canada on the admissibility and permitted use of such evidence (see the discussion on admissibility at paras. 107 – 118).

The basic tenets endure: [107] As with other types of evidence, evidence of after-the-fact conduct is admissible if relevant to a live, material issue in the case, its admission does not offend any other exclusionary rule, and its probative value exceeds its prejudicial effects. … [111] After-the-fact conduct is circumstantial evidence. Like other forms of circumstantial evidence, after-the-fact conduct allows a fact finder to draw particular inferences based upon a person’s words or actions.

This process of inductive reasoning is a cornerstone of the law of evidence, and is used frequently to draw inferences from circumstantial evidence, as well as to assess credibility and to determine the relevance and probative value of evidence. [112] In order to draw inferences, the decision maker relies on logic, common sense, and experience. As with all circumstantial evidence, a range of inferences may be drawn from after-the-fact conduct evidence.

The inferences that may be drawn “must be reasonable according to the measuring stick of human experience” and will depend on the nature of the conduct, what is sought to be inferred from the conduct, the parties’ positions, and the totality of the evidence … In most cases, it will be for the jury or judge to determine which inferences they accept and the weight they ascribe to them. “It is for the trier of fact to choose among reasonable inferences available from the evidence of after-the-fact conduct” … (citations omitted) [ 64 ] In R. v. Khan v.

Muellenbach , a father and son were charged with forgery, income tax fraud, and money laundering, all associated with a business that produced false identification. There, the Crown sought to rely on two items of post-offence conduct evidence. First, there was evidence that the ID production activity carried on outside the indictment period, albeit in changed circumstances. This evidence was admitted as evidence of concealment that demonstrated both intent and control of the business enterprise.

Second, there was evidence of the filing of income tax returns or “voluntary disclosures” for several tax years which were admitted as a basis to determine both knowledge and intent. [ 65 ] Having considered these authorities, I conclude that the post offence conduct evidence in this case is admissible. It is relevant to knowledge of the previous GST filings, intent to conceal previously dishonest conduct, and control of the various business operations. It is material evidence of live issues at trial and is probative of those issues.

In my view, the probative value significantly outweighs any possible prejudice from the use of this evidence. [ 66 ] Having addressed these preliminary issues, I turn now to a review and assessment of the evidence. Review and Assessment of the Evidence [ 67 ] I intend at this point to review the evidence presented in this case. My review is not intended to refer to all of the evidence, or even all of the significant evidence. I note here that I have reviewed and considered all of the evidence from the Crown witnesses, including the 83 exhibits.

Much of the substance of this case is contained in the documentary and electronic evidence and it is detailed, technical and voluminous. (

a) Preliminary Points [ 68 ] I begin with some general observations. This trial was conducted during the course of the COVID 19 pandemic and members of the public were not permitted in the courtroom. Anyone listening to the audio recording or reading a transcription may find it challenging to follow. Much of the documentation relied upon by the Crown was in an electronic format. In most, if not all instances, this provided a convenient format to navigate a large volume of financial information from various sources. It also alleviated some health concerns by eliminating the need to distribute paper in the courtroom and the movement and proximity that would require

between litigants. [ 69 ] In order to assist the defendants to follow the presentation of evidence, the Court set up individual computer monitors. Young maintained that she could not see the documents on her monitor and a larger monitor was installed and repeatedly adjusted to further assist her. At one point, in light of ongoing complaints, the Court took a view of the monitor set up and tested the display at Young’s station.

There were no issues noted during this test, which was conducted on the record, but in the absence of the parties, due to COVID 19 health restrictions. [ 70 ] There were two related issues that made the presentation of the evidence more trying. As items of evidence were introduced, the defendants consistently questioned receiving the information in their disclosure or denied receiving it. As a result, the Crown instituted a practice of introducing its evidence and also referencing its location in the disclosure materials.

Disclosure was digital and the description of each item was normally an electronic folder or file pathway. This was intended to benefit the accused but slowed the proceedings and burdens the audio record of proceedings. [ 71 ] A related issue arose when the defendants professed difficulty seeing the evidence on their computer monitors. In response to this concern, the Crown then distributed paper copies of the electronic documents which had a slightly different format and at times added a page reference to orient the defendants that is not part of the electronic evidence.

All of this was to benefit the defendants and support a fair trial for the self-represented co-accused. [ 72 ] For the benefit of these reasons and to ensure clarity for the record, all references to evidence here follow only the exhibited references. There are no corresponding references here to other evidence formats or disclosure locations. (

b) A General Overview [ 73 ] Turning now to a review, I note that the evidence offered by the Crown fell into four broad categories, each of which I will touch on here. [ 74 ] The first was a group of independent business people who testified about the extent of business, if any, that they had with any of the accused. The second was a group of professional CRA witnesses called to speak to continuity of evidence. The third was the evidence obtained from the civil audit work of Carol Power. Power worked with the Aggressive Tax Planning Unit at CRA. Last was the investigation and analysis of Michael Boudreau.

Boudreau was the Lead Investigator with the Criminal Investigation Directorate (“ CID ”) of CRA. [ 75 ] There was no defence evidence. [ 76 ] As I turn to an assessment, I note that what I am reviewing largely emanates from independent or professional witnesses, acting in their various capacities – for the most part business people, accountants, and auditors all involved in this matter as a result of their business or employment.

The vast majority of evidence related to the GST refund claims filed by the defendants including the documentary basis of those claims and an assessment of the actual bona fide economic activity generated by the companies. It is a document driven exercise skewed heavily toward financial analysis. [ 77 ] In this context, the assessment of credibility and reliability has less significance that it normally would.

That said, the defendants did call into question the credibility of both Power and Boudreau, going so far as to suggest the possibility of collusion or fabrication of evidence, as well as other types of allegations going to character. As noted earlier, the evidence also included purported statements, both oral and written, made by the individual defendants during the audit process. All of the evidence must be considered and assessed.

I note here that on such and assessment, I am free to accept all, some or none of any witness testimony. [ 78 ] Generally, cross-examination of the Crown witnesses did not bear much fruit. Some cross-examination was not remotely relevant to the issues to be determined. Some witnesses were cross-examined with irrelevant, inflammatory, and scandalous accusations or baseless speculative theories that did not assist me in the disposition of any part of this matter. The self-represented accused were given latitude that would not otherwise have been available.

They were frequently encouraged to obtain legal advice, given information to assist, and extra time to prepare or seek counsel. (

c) Review of the Crown Evidence [ 79 ] The first group of witnesses included a number of business people. Lauchie MacLean is the President of Glenora Distillery in Cape Breton. He testified that he had purchased some items from Juliette & John that were offered for sale in the Distillery gift shop. MacLean was able to produce invoices for the items purchased with payment confirmation ( Exhibit 4 ). MacLean denied doing any business with any of the other defendant companies. MacLean was shown an invoice from Juliette & John for “corporate gifts” dated September 19, 2014, in the amount of $1200.00 ( Exhibit 5 ).

He denied the order or giving anyone permission to pay the invoice. [ 80 ] Carmella Young worked at printing company in 2011. She created quotations for labels for Juliette & John in September of 2011 ( Exhibit 6 ). After that, she did no further business with Juliette & John, although she acknowledged that others in her company may have had contact. [ 81 ] Brenda Legge is a manager with Salty’s restaurant in Halifax, Nova Scotia. She has worked there for 29 years. In all of that time, the restaurant has never sold cookbooks, operated in Sydney, or had any contact with Young or Nadia Saker.

It has never made a purchase from or been invoiced by Kishk. Legge was shown a series of invoices as follows: Exhibit 5 (p. 3) – Invoice to “Salty R” from Juliette & John dated August 4, 2014 for “10 boxes – total amount: $960.00; Exhibit 7 (p. 12) – Invoice No. 20 from Kishk to “Salty’s” dated April 29, 2015 for cases of dressing, kishk and balsamic vinegar – total amount: $40,060.59;

Exhibit 8 (p. 8) – Invoice No. 22 from Kishk to “Salty’s – 209 Widad Lane, Sydney, NS” dated May 7, 2015 for 75 cases of dressing – total amount:$7,500.00; Exhibit 9 (p. 26) – Invoice No. 36 from Kishk to “Salty’s – 209 Widad Lane, Sydney, NS” dated June 30, 2015 for 50 cases (item not specified) – total amount: $5,000.00; Exhibit 10 (p. 20) – Invoice No 47 from Kishk to “Salty’s – 209 Wadid Lane, Sydney, NS” dated July 26, 2015 for 50 cases of dressing – total amount: $5,000.00; [ 82 ] Legge said that she had never heard of Juliette & John or Kishk, and had never before seen these invoices. [ 83 ] Johanna Gallipeau operates Sweet Pea Boutique, a women’s clothing store in Halifax, Nova Scotia.

She was shown what purported to be 2015 sales summaries from Juliette & John. Exhibit 11 (pp. 5 and 7) is a

summary indicating the sale of one pallet of salad dressing for $10,000.00 (on February 11 th ) and 20 cases of books for $7,875.00 (on February 9 th ) both to Sweet Pea Boutique. Exhibit 12 (pp. 5 and 7) is another

summary indicating the sale of three pallets of salad dressing for $30,000.00 (on March 10) to Sweet Pea Boutique and invoice no. 2432317 for the same transaction. Gallipeau said that she did not know anything about these transactions, that she never purchased cookbooks or salad dressing from Juliette & John, and never dealt with MacDonald or Young. [ 84 ] Ron Marks is the owner of Italian Market located on Young Street in Halifax, Nova Scotia. He does the purchasing for his company. He testified that all his stock comes from Italy. He never purchased anything from Artisan, Juliette & John or New & Chic.

He never dealt with Young, MacDonald, Nadia or Lydia Saker. He did not know of a Bigoli’s Italian Market and thought he would know of a competitor with a similar name. He said his main competitor would be Pete’s Fruitique. Marks was asked about the following records: Exhibit 12 (p. 5) – Sales

summary for Juliette & John for March 2015 showing sale of four pallets of salad dressing totalling $40,000.00 to “The Italian Market”; Exhibit 13 (p. 4) – Invoice No. 0007 from Juliette & John to “Italian Market” for “50 pallets” and “200 cases of books” for a total amount of $578,750.00; Exhibit 14 (p. 7) – Invoice No. 542386 dated February 25, 2015 from Artisan to “Bigoli’s Italian Market, 503 Hostmann Ave” for 195 cases of lasagna totalling $70,000.00; Exhibit 15 (p. 3) – Invoice No. 0046 dated July 30, 2015 from New & Chic to “Italian Market, 1515 Monserrat Ave, NS” for 108 cases of balsamic vinegar and olive oil and 599 cheese wheels totalling $575,000.00. [ 85 ] It was his evidence that he did not buy any of the products in these invoices, that he makes his own salad dressings in small quantities, and he had never purchased 50 pallets of anything or 195 cases of lasagna in his life. [ 86 ] Wade Langham of Cape Breton Fudge Co., Chris Livingston of Granny’s Country Cottage and David Farmer of Breton Ability Center all testified along similar lines, confirming some small scale of legitimate business with Juliette & John, but denying the purchases recorded in various invoices ( Exhibit 5, pp. 2 and 3; Exhibit 17, pp. 10, 16 and 17 ).

It is important to note the origin of the invoices contained in the exhibits - all were provided to CRA as part of the various reviews and audits that took place during the period under Indictment. [ 87 ] Scott Evans was an interesting witness. He is the Manager – Operations Contact Center, Transportation and Infrastructure Renewal.

In August of 2018, he was contacted by Boudreau and asked to confirm whether a list eleven of street names ever existed in Nova Scotia ( Exhibit 24 – Asrar Ave, Bishr Street, Fadilah Street, Hissiem Street, Hostmann Avenue, Kardawiyah Street, Monserrat Avenue, Rakshan Street, Seinburg Avenue, and Widad Lane ). These addresses were taken from the invoices supplied to CRA during the audits or from the invoices seized from the search locations. Evans testified that he checked the road listing database, his GIS contact map and also googled the street names.

He could not find any record of any of these road names ever existing in Nova Scotia. [ 88 ] The next group of witnesses included Jennifer Jones, Bruce McCabe, Mike Lovell, Christina Loreirio, Jeff Rafuse, Mike Lemon, Troy Stevens, Stacey-Quinlan MacNeil, and Patti MacKinnon, all of whom played some role in the searches conducted on November 22, 2017, in Sydney, North Sydney, Leitch’s Creek, Halifax and Kentville, Nova Scotia, and St. John’s, Newfoundland. These witnesses all testified about the items seized (computers, documents, electronics) and spoke to the issue of continuity.

All described their part of the process that ultimately delivered the items to the Halifax Tax Services Office bond room for secure storage. [ 89 ] In my view, no issues around the continuity of any items arose from this evidence (or the continuity evidence of Boudreau which came later in the trial). All of the items seized during the various searches were in the courtroom as exhibits or available for inspection. [ 90 ] The next evidence came from Carol Power, a CRA Aggressive Tax Planning unit auditor. Power expanded on the evidence she gave during the Jarvis application.

By this point, Power had already testified for almost three days and it was agreed that her voir dire testimony would be trial evidence. A

summary of the Jarvis evidence is found in R. v. Young , 2021 NSSC 361 at paras. 19 – 46 . Powers T2020 notes, Interview Questions and Interview notes were admitted, as past recollection recorded ( Exhibits 25 – 50 ) (see R. v. Wilks , 2005 MBCA 99 ). The T2020 notes document Power’s interaction with the individual defendants including statements made in response to her audit inquiries (see R. v. Jarvis , R. v. Fitzpatrick , 1999 SCC 44, R. v. White , 1999 SCC 689, R. v. McMahon , 2012 ABPC 296 and R. v. Martin , 2017 NSCA 39 ).

[ 91 ] I note that a complete inventory of all documentation received and reviewed by Power during her audit work (including the date of various amendment requests) is in evidence ( Exhibit 29 ). This inventory was prepared by Power at the request of Boudreau after the criminal investigation began. For the record, Power denied fabricating any of the documentation. [ 92 ] Power gave evidence about the process she employed to record her interviews with the individual defendants. She prepared Interview Questions in advance as a guide to her interview ( Exhibits 43 – 50 ).

As she conducted each interview, she took handwritten notes on her guide. She later transcribed her notes into a T2020 form by using both the handwritten notes and her memory of the interviews. This process was complete within days after the interviews. [ 93 ] During the course of Power’s examination, it became clear that the handwritten notes she took during the interviews had not been disclosed by the Crown. Power could not say what had happened to the handwritten notes. None of the defendants requested formal relief on the basis of the missing notes.

That said, the missing notes were raised repeatedly, including in the final arguments as a basis to question Power’s credibility and the accuracy of her records. Having considered the totality of her evidence, I am satisfied that these missing notes are not a basis to impugn Power’s credibility. I am also satisfied that the T2020s were admissible in spite of the missing notes and are an accurate record of the interviews (see R. v. Wilks and R. v.

F.C.B. 2000 NSCA 35 ). [ 94 ] When cross-examined, Power confirmed that she did not review any GST returns for Latitia or Spaghetti Benders, nor did she request any information from those companies. She did recall receiving invoices that indicated they had been from Latitia but that company had been scratched off and another company name entered on the invoice. Power explained how she used audit software on her work computer to upload all of the information on the various reviews.

Once the audit was complete, it was stored on the CRA computer system in a read-only format – no further changes could be made to the records. She believed that she was the only person who could change her T2020. Her T2020 could be accessed by her Team Leader to review but not change. [ 95 ] Power was asked about registrants making mistakes in their returns. Power said mistakes happen. She said she had no way of knowing who prepared the documentation that she received. She was asked if she thought things in general were “bizarre” (relating to the period May – July, 2015).

She said that she has to accept what the registrant sends into CRA. [ 96 ] Power denied being told that company records were destroyed in a flood in April 2015 other than the records for Housewives in Heels. She acknowledged that she was expecting Nadia Saker to try and obtain replacement documentation for any records lost in a flood. She said that banking records would normally be a good starting point to document the sales and expenses. She acknowledged that this exercise may result in omissions in the records. In terms of what was ultimately sent, she just received, reviewed, and documented it.

She had no information on how the registrant produced it other than one instance where she documented Nadia Saker telling her that some records had been found in “another location”. [ 97 ] Power was asked about information available on the CRA database for the various companies. She said that she had access to summaries of the returns filed on the registration database. She could request previous audit records from the audit database but did not do that as part of her review. The T2020s document any reviews she did of prior credit return information.

In the event a file was transferred to her from the Refund Integrity Program, she would receive any information sent into the refund integrity officer (see for example the documents contained in Exhibits 51, 52, 53 and 54 ). If Power received documentation of this kind, she would have scanned it into her electronic files. [ 98 ] When Power left in November 2015, her electronic file inventory was cleared and she no longer had access to it. The electronic files for this matter were transferred to Helena Evans.

Power had no personal knowledge as to how these files were subsequently accessed by Boudreau. [ 99 ] As noted in the Jarvis decision, Power interviewed the individual defendants on October 6 and 7, 2015. These interviews were in person at the business locations. Power’s T2020 notes document these interviews. In my view, this evidence is significant, as is the substance of her all her interaction with the registrants as documented in the T2020 notes ( Exhibits 32 to 50 ). As I noted in the voir dire decision, Power was a strong witness.

Nothing about her trial evidence changed my assessment or called into question her credibility. She was a seasoned auditor with previous experience in investigations and her evidence was direct and eminently professional. I have a high degree of confidence in the accuracy of her work and in the recording of the details of her interactions with the accused. In my view, the totality of her evidence deserves considerable weight in the overall assessment of evidence. [ 100 ] The final Crown witness was Michael Boudreau. Boudreau testified over nine days.

He was assigned the investigation of this matter on June 8, 2016. His work began with the referral document that listed eight companies. After some research, he found two more related companies and broadened the scope of his investigation. His goal was to verify the substantial sales, and the collection of GST and ITCs as reported by the companies in their credit returns. [ 101 ] Boudreau’s initial review indicated that the related group of companies claimed a total of $53 million in sales and $39 million in expenses.

In order to determine whether these transactions were legitimate and accurate, Boudreau reviewed a large volume of documentation. The bulk of his evidence dealt with outlining the information he reviewed, the source of that information and explaining his analysis and extensive efforts to verify transactions. His analysis is shown in various working papers.

The working papers clear and easy to cross-reference to primary documentation. [ 102 ] Boudreau began by speaking to the referral auditor and downloading previous audits on these companies from the CRA computer database ( Exhibit 66 – Boudreau testified about a number of items from previous audits contained in this exhibit, including high value invoices, barter agreements and property purchase agreements on which he focused his attempts to verify ).

He researched various public sources to confirm the owners and corporate information for each company and viewed the relevant T2 returns (see Exhibits 60 and 61 ). [ 103 ] Boudreau requested and received a copy of all GST returns filed by the various registrants in the Indictment period ( Exhibit 57 ). All of these returns were electronically filed except one which was a paper filing. A

summary of the GST returns is in evidence showing refunds claimed and received by each company for the entire period ( Exhibit 68 –

summary by company and overall

summary at

summary/refund tab, induvial summaries in excel tabs labelled by company name ).

[ 104 ] It was Boudreau’s evidence, that in the period from January 1, 2011, to July 31, 2015, the total GST refund claimed by all companies was $3,628,805.06. Of this total, refunds were paid totalling $275,960.84 and $81,399.61 was allocated to existing tax debt. This left a balance claimed but not paid of $3,271,444.62. To be clear, these amounts were based upon the initial GST returns filed and refunds sought, and not on subsequent amendments. Boudreau later traced the disbursement of the refunds paid with reference to the bank statements and records from the Public Works Directorate ( Exhibits 58, 59 and 70 ). [ 105 ] I pause here to highlight the relationship between the

summary of GST claims ( Exhibit 68 –

summary/refund tab ) and the various counts in the Indictment. The charges are based upon the total refund sought by each company in all GST return periods covered by the Indictment. For example, for Spaghetti Benders, the total refund claimed is $52,900.42 ( Exhibit 68

summary/refund tab, line 4 ). That total is broken down by period ( Exhibit 68 - TSBL HST

Summary tab ) with further details provided ( Exhibit 68, TSBL Detail tab ) and the GST returns are available electronically to support the amounts in Boudreau’s working paper ( Exhibit 57 ) as are the RBC banking records ( Exhibits 58 and 59 ) and the Public Works Cheque Directorate records of cancelled cheques ( Exhibit 70 ). But the total amount of the refund claimed by company is the basis for the amount set out in counts 10, 29 and 30 of the Indictment. [ 106 ] Based on this approach, what follows is a

summary, from smallest to largest refund claims, by company, referenced to the Indictment: Company GST refund claimed Indictment Latitia $40,637.58 Counts 7, 11 and 12 Spaghetti Benders $52,900.43 Counts 10, 29 and 30 2004 $125,467.00 Counts 2, 13 and 14 Maddie and Bella $243,139.08 Counts 8, 19 and 20 Artisan $282,198.50 Counts 3, 21 and 22 2002 $315,323.80 Counts 1, 15 and 16.

New and Chic $322,940.99 Counts 9, 27 and 28 Housewives $440,719.97 Counts 4, 23 and 24 Juliette and John $585,344.71 Counts 5, 25 and 26 Kishk $1,220,133.00 Counts 6, 17 and 18 [ 107 ] Boudreau also did a T4 search to determine if any of the companies had paid employees during the period under investigation. It was his evidence that the high number of sales suggested significant production resources. Boudreau tried to assess this by determining the number of employees paid by each company. His T4 search returned only four T4s for the three and a half year period.

The T4s were for Young, MacDonald and Nadia Saker, and were from Spaghetti Benders in 2011 and 2012 ( Exhibit 67 –

summary at tab 1 ). [ 108 ] On November 22, 2017, searches were conducted at a number of locations and the relevant documentation seized is in evidence ( Exhibit 62 – CRA Tax Services Office, Newfoundland and Labrador – 40,000 series scan documents, Exhibit 63 – 77 Stanley Street/Georgette Young residence – 10,000 series scan documents, Exhibit 64 – 342 Leitches Creek/Nadia Saker residence – 20,000 series scan documents, Exhibit 65 – 85 Terra Nova/Angela MacDonald residence – 30,000 series scan documents ).

Boudreau subsequently analysed the material seized in order to find support for the claimed business activity of each company. [ 109 ] Boudreau did credit searches, and in combination with the information seized at the various search sites, obtained Production Orders for Royal Bank of Canada on January 31, 2018, and March 23, 2018. The information returned from the Royal Bank is in evidence ( Exhibits 58 and 59 ). Eight of the companies had bank accounts with RBC. New & Chic and 2004 did not have accounts at RBC and no accounts were found elsewhere.

Boudreau looked at both the business and personal accounts (including investments and mortgages) in order to determine if the business activity claimed in the returns could be verified in any of the account activity. [ 110 ] Boudreau’s work to analyze the information sources was assembled into various working papers that summarized aspects of his investigation (see for examples Exhibit 68 - tracing the sales and ITCs reported by each company in each period as well as tracing the GST refunds to allocation, deposit or cash and to cancelled cheque with endorsement, Exhibit 71 – tracing invoices from various sources to GST return for each company, and Exhibit 72 – analyzing bank account activity by company) .

Much of his testimony focused on these working papers and their relationship to the source documents, such as banking documents, seized documents, public documents, or documents filed by the various defendants with CRA. These working papers were an aid to navigating the source documentation. [ 111 ] It was Boudreau’s evidence that each of the companies could establish some minimal business activity but that neither the documentation obtained nor the banking records supported the claims in the returns filed. He went so far as to say that the claims advanced in the returns bore no connection to reality.

Neither did the invoices later produced to support those claims. [ 112 ] Boudreau also gave evidence relevant to knowledge and participation in the overall scheme. He began by giving examples of the distribution of various deposits. The first was a deposit into Young’s personal account on January 16, 2012, in the amount of $3,083.00 by way of banking machine ( Exhibit 59, folder 63, p. 9 ). The evidence indicated that this deposit was a cheque from Cape Breton Fudge Company payable to Juliette & John.

A second deposit into Young’s account from Housewives & Heels was made on November 24, 2011, in the amount of $ 2,933.00. The Crown later offered these as small examples of how the parties shared the proceeds of actual

sales and how they operated as a group. [ 113 ] Boudreau focused some of his evidence on Nadia Saker. He reviewed a number of amendment requests respecting returns previously filed, accompanied by a card signed by Nadia Saker ( Exhibit 62, items 41256 – 41264 amendment requests for Housewives in Heels for periods ending January 31, 2015, February 28, 2015, November 30, 2014, December 31, 2014) . [ 114 ] These amendment requests are significant for a number of reasons. First, they were made shortly after contact from auditor Power.

They were received by the processing center on June 1, 2015, shortly after Power initiated contact with Saker respecting the GST claims made by Housewives in Heels. [ 115 ] Second, in each case, the request is to reduce sales, eliminate the ITCs claimed and eliminate the refund claim. The evidence establishes that this amendment was clearly part of a wider pattern involving all of the related companies (discussed below). Third, the requests were made to the GST processing center and not to Power who was then conducting the audit and seeking support for the existing claims.

Fourth, the form of the amendments are significant in that they were made on a printed copy of the original return meaning whomever filed the original return had ongoing knowledge and control over the submission of amendments. [ 116 ] Boudreau made a number of other significant points in relation to Housewives in Heels. The first GST filing period for this company ended September 30, 2011, and the return, filed only days after the end of that period, claimed a refund of $8,854.69 ( Exhibit 71 – HST filing to docs tab ).

The Housewives in Heels bank account was opened on August 25, 2011, and the first transaction in the account was on September 1, 2011 ( Exhibit 72, folder 3 – this transaction was a small service charge ). [ 117 ] On September 26, 2011, there is a deposit into the account of $58,000.00. This amount corresponds to the sales claimed in the first credit return ($57,341.00). The evidence then showed an GST refund was issued in the amount of $8,860.03 ( Exhibit 68 - Housewives in Heels details tab ). This was deposited into the Housewives in Heels bank account on December 9, 2011, and endorsed by Saker.

On the same day there was a cheque out of the account for $34,000.00 payable to and endorsed by Saker followed by another cheque of $24,000.00 on January 31, 2012, payable to Saker without endorsement. [ 118 ] Boudreau traced these transactions noting that the two cheques equalled the original deposit of $58,000.00. He reviewed Nadia Saker’s line of credit account ( Exhibit 59 – folder 35/36 ) and confirmed that the original amount was debited from the line of credit on September 26, 2011, credited to the business account, and then later returned to the credit line with two payments of $34,000.00 and $24,000.00.

I pause here to note that a strong inference arises that this series of transactions was partial cover for the claims made in the HST return which netted a return of $8,860.03. And this occurred in relation to the very first return filed by Housewives in Heels. Moreover, the transactions were clearly tied to various accounts over which Nadia Saker had knowledge and control. [ 119 ] After reviewing this information, Boudreau noted that company bank account showed virtually no other activity, let alone evidence of business activity.

There was no support in the bank account for the activity claimed in the GST return in this period ( Exhibit 71 – folder 5/Housewives, GST filing - $57,341.00 in sales and $8,854.69 in ITCs ). Boudreau testified that the ITCs claimed in this period would be the equivalent of $67,885.00 (a conservative estimate assuming a 15% tax rate – some food items, books etc. would attract lower or zero rate of tax). There was no activity in the bank account reflecting the payment of any expenses, let alone $67,000.00 in expenses. The only real activity was the deposit and withdrawal of funds from Saker’s credit line.

Boudreau confirmed that he looked at all known bank accounts for evidence that they were used to pay for business expenses and could not find any. This evidence was uncontested. [ 120 ] The Crown later argued that a strong inference was available that the person depositing the GST refund cheque of $8,860.03 into the business account would know that there was no economic activity in the business to support the receipt of refund. The only activity, as counsel put it, was the “cameo” appearance of the funds from the line of credit.

The final point was that the amount of funds transferred from the credit line corresponded almost exactly to the amounts claimed as sales in the return. But, there were clearly no real sales. [ 121 ] Boudreau reviewed various amendment requests made for various periods in 2015 for Housewives in Heels, Kishk, New & Chic, Artisan, Juliette & John, Maddie & Bella and 2002. He observed that the amendments were made on a printed copies of the “netfile” confirmation sheet, in most instances printed the same day they were netfiled. These documents came from the search of the Newfoundland tax office.

The documents at the Newfoundland tax office were the documents sent in response to Power’s audit inquiries. In all instances, the amendments reduced or eliminated the tax collected and increased the refund claimed. ( Exhibit 62 – 40804 to 40821 ). Some amendment requests were handwritten. For example, the amendment request for Kishk for April 2015 ( 40810 ).

It contained a notation saying “ receipts were written in error with wrong business name on them so sales were calculated in error and also HST ”. [ 122 ] Boudreau then reviewed a number of documents related to 2002 ( Exhibit 62 – 40769 to 40771 ), all of which sought amendments based upon purported increased sales. In April, May, June and July, 2015, the total claimed sales increased by about $2 million dollars. These amendments were also found amongst the documents seized from the Newfoundland tax office.

I note that the handwritten amendment for the period April, 2015 ( Exhibit 62 - 40771 ), contains an explanation saying that the “ changes were due to an invoicing oversight involving Kishk ”. A similar handwritten note was contained on the amendment for May, 2015 ( Exhibit 62 -40773), “invoiced the difference to the wrong company using the wrong invoice pad”.

The amendment for July, 2015 had a similar handwritten explanation, “discrepancy … billed to the wrong company by the wrong company using the incorrect invoice pads” ( Exhibit 62 - 40777) . [ 123 ] It was the Crown view that these amendments were post offence conduct providing constructive evidence of knowledge and intent. To be clear, it was the Crown submission that both the original claims and the amendments had no relationship to reality. I would add that this evidence speaks to the fact that the companies clearly operated under one management umbrella. [ 124 ] This evidence must be considered in context.

The amendment requests were being made as Power’s audit progressed and continued even into the interviews conducted in October 2015. Power’s T2020 notes document a discussion with Georgette Young during the interview for 2004 on October 7, 2015 ( Exhibit 49 – Interview notes, p. 3 ). The discussion was about the quantity of

amendment requests that now reflected 2002 was the company supplying all the other family companies. Power recorded the conversation with Young as follows: I told her that I would have to look at the legislation and determine if 2002 should be reporting sales and claiming all the ITCs as she was now telling us that 2002 provides the finished product, most of which are zero-rated, to the other family companies to resell.

We suggested that if 2002 is selling finished products that are zero rated or only GST to family-related companies, then 2002 should not be charging tax or only GST to the family-related companies on zero-rated products and children’s clothing. The family-related companies would, therefore, not have any ITCs or only GST to claim as is being presented now; 2002 would claim the ITCs on the materials it purchases to provide the final products. This would decrease the ITCs substantially for the family-related companies, keeping in mind there could be some G/HST paid to 2002 for non-zero rated sales.

With the ITCs being claimed by 2002, it would decrease the amount of G/HST collectible 2002 owes to CRA. She said that she did not care how much 2002 owed to CRA but questioned us to clarify that none of the family-related companies would receive the refunds that she expected. We told her that could be correct with this scenario … She was quite taken aback. (Emphasis added) [ 125 ] The picture emerging here is that the family-related companies were acting in concert and that Young was the conductor.

The interviews conducted by Power on October 6 and 7, 2015, confirm that MacDonald, Nadia Saker and Lydia Saker were all aware of the scheme. Other evidence shines light on their level of participation. [ 126 ] On this point, Boudreau’s evidence was highly relevant. He provided further insight into Housewives in Heels activity with focus on its last three filing periods, May, June and July, 2015. These periods saw a massive increase over previous periods in the claims made for sales, HST collected, ITCs and refunds claimed ( Exhibit 71 – folder 5 – HST filing to docs tab ).

In these three periods, claimed sales reached a total of $3.4 million dollars, with $225,000.00 in tax collected. [ 127 ] Boudreau compared these claims with the documents seized from Nadia Saker’s home. The total invoiced amounts for May, 2015 was $1.5 million ( Exhibit 64 for examples of the seized zero rated invoices ). Here, there were a series of invoices from Housewives in Heels for frozen food catering for various groups of 500 people, each in the amount of $50,000.00.

Boudreau looked on the dates on the invoices and noted that there were invoices for catering to 1000 people (Oliver and Payne parties) for May 1, 2015 ( Exhibit 64 – 21117 ). The total of zero rated invoices was $1,000,000.00. There were similar invoices for June and July, 2015 ( Exhibit 71 – folder 5 – May, June, July, 2015 tabs for summaries of invoices in this period ). This evidence ties into the evidence from Power, recorded in her T2020s, that the defendants advised they were filing amendments consisting of zero rated sales and essentially moving everything over to 2002.

Power declined to receive these amendments. It supports that the original filings had no integrity and Power’s audit triggered a massive effort to hide that reality. [ 128 ] In terms of MacDonald, as an example, the Crown relied on a review conducted by auditor Taryn Smith on Juliette & John for the period January, 2015 ( Exhibit 75 ). The contact letter dated March 24, 2015, was addressed to MacDonald at 77 Stanley Street, North Sydney (Young’s home address). A reply was received April 14, 2015, accompanied by a handwritten card signed by MacDonald.

The reply indicated that Juliette & John had sold books, frozen catering services and dressing in the period under review. A series of invoices were attached, none of which Boudreau could verify (Island Book Distributors, Halo Distributors, Tycoon Books, Bigoli’s, Big Idea Book Distribution - no addresses or other contact information on any invoices). There was also a list of catering services to individuals on various dates and various amounts and a

summary of book and dressing sales. Finally, there was a list of mall book sales indicating daily books sales ranging from 20 to 200 books a day in the month of January, 2015. There were also a series of expense invoices, all from related companies, Housewives in Heels, 2002 or New & Chic. [ 129 ] It was Boudreau’s testimony that the end result of the Smith review for this period was that a refund was paid to Juliette & John in the amount of $25,992.54 ( Exhibit 68 – J & J detail tab ).

It was the Crown’s view that this kind of evidence demonstrated the vulnerability of a tax system that relied on accurate self-reporting. What had happened here was that the GST return had been filed and then flagged for review. The reviewing auditor requested support and MacDonald sent these documents. The documents were accepted at face value and the refund paid. [ 130 ] Boudreau then traced the path of several of the refunds paid to Juliette & John ( Exhibit 68 – J & J

summary tab - $12, 241.52 paid November 30, 2014, $25,992.54 paid on January 31, 2015 and $35,868.44 paid on February 28, 2015 ). The evidence was that the total of three refunds, $74,102.50, was deposited into the business bank via teller on October 7, 2015, one day after the interview with auditor Power. All cheques were endorsed by MacDonald.

The same day, there is a cheque from the business account to Young’s husband, John Young, in the amount of $74, 102.50. [ 131 ] Boudreau then looked at the bank statement for Juliette & John in the same period ( Exhibit 59 – statements for period October, 2014 to March, 2015 ) which showed only minimal activity. At the end of the period, the bank account balance was -$5.70. Essentially, the refunds went into the accounts and were immediately distributed.

The refunds were claimed, paid and deposited when the person doing so knew that the claims were false. [ 132 ] In another example, Juliette & John received a refund in the amount of $16,228.68 on September 30, 2014 and $26,662.76 on October 31, 2014 ( Exhibit 68 – J & J

summary tab ). Both these refunds were deposited into the business account as one deposit of $42,891.44 on April 6, 2015 ( Exhibit 59, p. 79 ). The bank account for the relevant periods once again showed no activity in the bank other than service charges. On May 17, 2015, there is a cheque payable to John Young from the account in the amount of $40,000.00 ( Exhibit 59, folder 17, p. 82 ). This amount was then endorsed by John Young and deposited. [ 133 ] Auditor Power asked about this payment to John Young during her interview with MacDonald and Young on October 6, 2015.

She questioned the payment as there was no invoice from John Young to support an expense claim. Power recorded the conversation in which MacDonald and Young admitted that the payment was made Young’s husband to avoid a payment to either of them personally. When Power asked about the fact that sales had been reported in May of 2015 but no deposits into the bank, MacDonald answered that

she did not receive any payment for any of the sales. [ 134 ] Boudreau went on to testify about other examples involving New & Chic. This company had no known bank account and no refunds claimed were paid. The total refund amount claimed was $322,940.00 ( Exhibit 71 ). New & Chic made a series of amendment requests, reducing sales, ITCs, and eliminating the refund claim. Consistent with other instances involving other companies, the amendment requests were made on the netfile confirmation pages ( Exhibit 62 – 40940 to 40944 ).

The series of amendment requests in evidence were sent with a card signed by MacDonald apologizing for her errors in the original filing. It was received by CRA on April 24, 2015, proximate in time to the beginning of the Power audit. The envelope indicated that it had been mailed from Young’s home address. [ 135 ] The Crown’s evidence on points o

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