Her Majesty the Queen (Respondent) AND: William Mori (Appellant), 2017 ONSC 1551

R. v. Mori, CITATION: 2017 ONSC 1551 COURT FILE NO.: 178/16 DATE: 2017/03/10 SUPERIOR COURT OF JUSTICE - ONTARIO BETWEEN: Her Majesty the Queen (Respondent) AND: William Mori (Appellant) BEFORE: Mr Justice Ramsay COUNSEL: Sébastien Lafrance for the Crown D. Milot for the appellant HEARD: March 7, 2017 at St Catharines ENDORSEMENT [1] This is an appeal under s.813 of the Criminal Code from convictions and sentences ordered by J.S. Nadel J. for offences underthe Income Tax Act. [2] The judge found the appellant guilty of evading income tax contrary to s.239(1)(

d) of the Act and making false statements inhis return contrary to s.239(1)(

a) of the Act for each of three taxation years, 2007, 2008 and 2009. He stayed the three convictions formaking false statements under the rule against multiple convictions and sentenced the appellant to four months imprisonment on each ofthe three counts of evading tax, to be served consecutively.

He also imposed fines on each count that added up to approximately$168,000, or 75% of the tax evaded. [3] With respect to the appeal from conviction the appellant argues that the judge erred a. by declining to exclude evidence obtained in a tax audit by the Canada Revenue Agency and b. in finding that the mental element of the offences had been proven. [4] With respect to sentence he argues that the sentence was clearly unfit and that the judge made errors of principle. The case [5] The appellant was the sole shareholder and director of 411279 Ontario Limited.

Mori Nurseries is a business owned by acorporation of which the appellant’s father is the main shareholder. [6] In the three years in question the appellant was the general manager of Mori Nurseries. After reading on the internet aboutParadigm, a tax protest movement, he decided to espouse their doctrine that every grown up citizen is capable of acting in two capacities– as a natural person (also called a private person) or as a statutory person. This has nothing to do with the corporation law. Rather thedoctrine states that money earned by a person in his private capacity is exempt from taxes. [7]

Section 2 of the Income Tax Act, of course, makes no distinction between types or capacities of person. Human beings andcorporations resident in Canada are liable to pay income tax: R. v. Klundert, 2008 ONCA 767, paragraph 19. [8] The appellant instructed Mori Nurseries no longer to pay him salary and deduct taxes, CPP and EI at source. They reluctantlypaid him once on the basis of an invoice for services. After the first invoice, their comptroller insisted that they would only pay him onthe basis of invoices to his corporation. In effect, they hired the corporation as general manager.

They paid 411729 Ontario for thoseservices. The appellant would submit invoices to Mori Nurseries. Mori Nurseries paid 411729; 411729 then paid the appellant, deductingthe amounts paid to him as expenses in calculating its net income. The appellant did not declare the payments to him on his personalreturn. As a result neither he nor 411729 paid tax on these amounts which actually represented employment income. [9] At the bottom of the invoice was a note that said that the amount reflected work done by a natural person.

Exclusion of evidence [10] The judge’s reasons on the pre-trial motion are reported at 2015 ONCJ 810 . [11] The appellant moved before the judge to exclude documents obtained in response to two audit queries (Query 1 and Query 2)and a search warrant. The judge excluded the documents from Query 2 but not the documents associated with Query 1 or the searchwarrant.

Only the documents from Query 1 are in issue in the appeal. [12] The appellant says that the audit provisions of the Income Tax Act should not have been used to procure the documents fromQuery 1 because when the query was made the auditor’s predominant purpose was to investigate an offence. The judge found that theauditor’s predominant purpose only became the penal investigation at some point on July 14, 2010 after the documents in Query 1 hadbeen produced.

[13] The relevant events all happened in 2010. In January the Canada Revenue Agency assigned an auditor to do a random audit ofMori Nurseries and 411279 Ontario. [14] On February 23 the auditor visited Mori Nurseries and copied a number of documents, including one of the invoices from411729 for consulting services. The same day the auditor spoke to the comptroller of Mori Nurseries about the invoice.

The invoice wasin the amount of $16,000 for two months’ services. [15] On March 10 the auditor visited Mr Momot, who acted as external accountant for Mori Nurseries and 411729 both, andpresented him a written query, “Query 1,” which asked for documents such as bank records relevant to 411729’s activities in 2008 and2009. [16] On April 29 the auditor wrote a “proposal letter” to Mori Nurseries in which he informed them that subject to any furtherinformation they could provide, he intended to disallow claims for $2.6 million worth of expenses for goods sold in 2009, $13,000 worthof professional fees in 2008 and $4,500 in expenses for the employee benefit package.

He did not mention the $16,000 in consultingservices to 411729. [17] By June 30 the auditor had determined that the appellant had declared taxable income in 2007 and 2008 in the neighbourhood of$25,000 for each year. [18] On July 14 the auditor visited the external accountant’s office and received the documents requested in Query 1. He alsoprovided a second written query. It was disputed at trial whether Query 2 was drafted before or after the auditor got the answers to Query1. [19]

Section 231.1 of the Income Tax Act provides: 231.1

(1) An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act, (

a) inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates ormay relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by the taxpayer underthis Act, and (

b) examine property in an inventory of a taxpayer and any property or process of, or matter relating to, the taxpayer or any other person,an examination of which may assist the authorized person in determining the accuracy of the inventory of the taxpayer or in ascertainingthe information that is or should be in the books or records of the taxpayer or any amount payable by the taxpayer under this Act, and for those purposes the authorized person may (

c) subject to subsection 231.1(2), enter into any premises or place where any business is carried on, any property is kept, anything isdone in connection with any business or any books or records are or should be kept, and (

d) require the owner or manager of the property or business and any other person on the premises or place to give the authorized personall reasonable assistance and to answer all proper questions relating to the administration or enforcement of this Act and, for that purpose,require the owner or manager to attend at the premises or place with the authorized person. [20] These powers may not be used where the predominant purpose of the inquiry is the determination of penal liability.

In R. v.Jarvis, 2002 SCC 73 , [2002] 3 SCR 757 the Court said: 84 Although the taxpayer and the CCRA are in opposing positions during an audit, when the CCRA exercises its investigativefunction they are in a more traditional adversarial relationship because of the liberty interest that is at stake. In these reasons, we refer tothe latter as the adversarial relationship. It follows that there must be some measure of separation between the audit and investigativefunctions within the CCRA.

Of course, having determined this, it remains for us to determine the bounds between the ITA audit andinvestigation and then to discuss the legal consequences. To this, we now turn. … 88 In our view, where the predominant purpose of a particular inquiry is the determination of penal liability, CCRA officials mustrelinquish the authority to use the inspection and requirement powers under ss. 231.1(1) and 231.2(1). In essence, officials "cross theRubicon" when the inquiry in question engages the adversarial relationship between the taxpayer and the state.

There is no clear formulathat can answer whether or not this is the case. Rather, to determine whether the predominant purpose of the inquiry in question is thedetermination of penal liability, one must look to all factors that bear upon the nature of that inquiry. 89 To begin with, the mere existence of reasonable grounds that an offence may have occurred is by itself insufficient to support theconclusion that the predominant purpose of an inquiry is the determination of penal liability.

Even where reasonable grounds to suspectan offence exist, it will not always be true that the predominant purpose of an inquiry is the determination of penal liability. In thisregard, courts must guard against creating procedural shackles on regulatory officials; it would be undesirable to "force the regulatoryhand" by removing the possibility of seeking the lesser administrative penalties on every occasion in which reasonable grounds existedof more culpable conduct.

This point was clearly stated in McKinlay Transport, supra, at p. 648, where Wilson J. wrote: "The Ministermust be capable of exercising these [broad supervisory] powers whether or not he has reasonable grounds for believing that a particulartaxpayer has breached the Act." While reasonable grounds indeed constitute a necessary condition for the issuance of a search warrant tofurther a criminal investigation (s. 231.3 of the ITA; Criminal Code, s. 487), and might in certain cases serve to indicate that the auditpowers were misused, their existence is not a sufficient indicator that the CCRA is conducting a de facto investigation.

In most cases, ifall ingredients of an offence are reasonably thought to have occurred, it is likely that the investigation function is triggered. 90 All the more, the test cannot be set at the level of mere suspicion that an offence has occurred. Auditors may, during the course of

their inspections, suspect all manner of taxpayer wrongdoing, but it certainly cannot be the case that, from the moment such suspicion is formed, an investigation has begun. On what evidence could investigators ever obtain a search warrant if the whiff of suspicion were enough to freeze auditorial fact-finding? The state interest in prosecuting those who wilfully evade their taxes is of great importance, and we should be careful to avoid rendering nugatory the state's ability to investigate and obtain evidence of these offences. 91 The other pole of the continuum is no more attractive.

It would be a fiction to say that the adversarial relationship only comes into being when charges are laid. … 93 To reiterate, the determination of when the relationship between the state and the individual has reached the point where it is effectively adversarial is a contextual one, which takes account of all relevant factors. In our opinion, the following list of factors will assist in ascertaining whether the predominant purpose of an inquiry is the determination of penal liability.

Apart from a clear decision to pursue a criminal investigation, no one factor is necessarily determinative in and of itself, but courts must assess the totality of the circumstances, and make a determination as to whether the inquiry or question in issue engages the adversarial relationship between the state and the individual. 94 In this connection, the trial judge will look at all factors, including but not limited to such questions as: (

a) Did the authorities have reasonable grounds to lay charges? Does it appear from the record that a decision to proceed with a criminal investigation could have been made? (

b) Was the general conduct of the authorities such that it was consistent with the pursuit of a criminal investigation? (

c) Had the auditor transferred his or her files and materials to the investigators? (d)Was the conduct of the auditor such that he or she was effectively acting as an agent for the investigators? (

e) Does it appear that the investigators intended to use the auditor as their agent in the collection of evidence? (

f) Is the evidence sought relevant to taxpayer liability generally? Or, as is the case with evidence as to the taxpayer's mens rea, is the evidence relevant only to the taxpayer's penal liability? (

g) Are there any other circumstances or factors that can lead the trial judge to the conclusion that the compliance audit had in reality become a criminal investigation? [ 21 ] The trial judge is said to have misapplied these principles in two ways: first, he made two palpable and overriding errors of fact, and second, he erred in failing to find that determination of penal liability was the primary purpose of the investigation even on the facts as he found them. Whether a given inquiry is an audit or an investigation into penal liability is a question of mixed fact and law: Jarvis , paragraph 100 .

The first alleged error of fact: “Bill is in a lot of trouble.” [ 22 ] The external accountant, Mr Momot, testified that during the meeting of March 10, 2010 in the context of the invoice for his services as general manager, the auditor said, “Bill is in a lot of trouble.” The judge did not believe him, even though, during protracted cross-examination, the auditor said that it was “possible” that he had said such a thing although he doubted it. [ 23 ] The judge’s reason for so finding: a. The auditor made notes of the meeting but the accountant did not. b.

The accountant failed to recall several pertinent things and was acting under certain misunderstandings. For example, he thought that the audit of 411279 was started because of information that came to light in the audit of Mori Nurseries, when in fact the auditor was assigned both audits at once in January 2010. c. The accountant had a tendency to confabulate. For example he recalled that Query number 2 was brought to his office on July 14 already printed until he was reminded that the auditor travelled with a portable printer, at which point he conceded that his memory may well have been mistaken.

In other words, he had drawn an inference as opposed to actually remembering. d. It would not have been within the auditor’s usual practice to make the sort of remark that was attributed to him. Also he never referred to the appellant as “Bill.” e. The accountant did not tell the appellant that the auditor thought he was in a lot of trouble even though he was the appellant’s company’s accountant. [ 24 ] In

summary convictions the appeal court has jurisdiction over questions of fact as well as questions of law and questions of mixed law and fact. But the appeal court owes the trial judge the same deference that is given to the trier of an indictable case by the Court of Appeal. The judge’s finding of fact was reasonably available to him on the evidence and it was adequately explained. It is not open for me to overturn such a finding in these circumstances. Nor would an error with respect to this fact have been overriding: it was not essential to the judge’s reasons, as he said at paragraph 126.

The second alleged error of fact: Query #2 was drafted after Query #1 was answered. [ 25 ] It was the position of the defence that the predominant purpose of the investigation was penal in nature before July 14, 2010. The auditor knew what he needed in order to know that the appellant had committed an offence. A significant proof is the fact that the

auditor came to the meeting with Query 2 printed out, before he saw the answer to Query 1. The prosecution argued that the auditorwrote up and printed out Query 2 after seeing the answer to Query 1. It was the answer to Query 1 that told the auditor for the first timethe number and dollar amounts of all the invoices for consulting services by 411279. [26] On July 14 the auditor met the accountant at the accountant’s office. Query 2 consists of a table with numbered requests fordocuments.

Printed in typescript are a request (#1) for 411279’s financial statements for the year ending 2010 and a request (#2) for bankstatements and cancelled cheques for the same year. The effect of these two requests was to extend the audit period by one year. Writtenby hand were requests #3a and 3b, which sought the calculations of two sums pertinent to housing benefits received by the appellant.The appellant submits that the fact of handwritten requests added to printed request shows that Query 2 was drafted before the documentsproduced in Query 1 were reviewed by the auditor.

That is, the auditor must have brought Query 2 with him in printed form, and thenadded to it in handwriting at Momot’s office. But given the auditor’s habit of using his own portable printer, that conclusion was notinevitable. The auditor could just as well have printed Query 2 at the accountant’s office after reviewing the results of Query 1, and thenadded to it in handwriting as the meeting progressed. [27] On this point the judge accepted the evidence of the auditor that he briefly reviewed the answers to Query 1 before typing andprinting Query 2 and then adding to it in handwriting.

The evidence was not contradicted because Momot, the accountant, did notremember. The judge found the auditor’s account to be consistent with common sense and the auditor’s usual practice. Moreover, sincethe added amounts had to do with housing benefits, it seemed that the invoices for consulting as general manager were still not theauditor’s main concern. [28] This finding, too, was reasonably available on the evidence and thoroughly explained. I cannot say that it was erroneous.

Alleged misapplication of Jarvis to the facts [29] The appellant submits that even on the facts found by the trial judge, it was not reasonably open to him to have found that theauditor’s primary purpose became an investigation of penal liability as late as July 14, 2010. This ground of appeal is argued as amisapplication of the law to the facts but it is really an allegation that the judge’s finding of facts was unreasonable and cannot besupported by the evidence.

The judge undoubtedly applied the correct law, set out in Jarvis, to the facts that he found. [30] Essentially, the judge found that by June 30, 2010 the auditor knew about one invoice from 411279 for consulting services. Theauditor by then had questioned whether it was legitimate if not declared as income on the appellant’s personal return. He saw thenotation on the invoice that said it was income earned as a natural person. He did not know about natural person doctrine, but he wascurious. It was discussed with the external accountant to some extent on March 10.

And on June 30, the auditor knew that the appellant’sdeclared personal income for 2007 and 2008 was in the neighbourhood of $25,000 each year. [31] The appellant submits that if the auditor had taken the $16,000 invoice as evidence of undeclared income of $8,000 a month, hewould have had ample reason to believe that the appellant was committing an offence. [32] The judge, however, did not find that he did so. The judge found that the auditor only knew about one $16,000 invoice. It was aone off as far as he knew and was not the focus of his audits.

As far as the judge was concerned, it was only on receipt of the answer toQuery 1 that the auditor had knowledge of all the invoices and all the amounts. In the judge’s view, at that point his predominant purposemust have changed. [33] The ultimate finding on the pre-trial motion required a highly contextual analysis of the auditor’s conduct. The judge conductedsuch an analysis and thoroughly explained it in his reasons. It was open to him reasonably to find that the auditor’s primary purpose wasstill a civil audit until he reviewed the answer to Query 1 on July 14, 2010.

There was nothing inevitable about the contrary position.Indeed, once the judge found that Query 2 was made after Query 1 had been answered it was hardly a stretch to conclude that theauditor’s predominant purpose in making Query 1 was not the investigation of an offence. On the facts as he saw them the judge madeno error in deciding the issue as he did. Mens rea [34] The reasons for judgment are reported at [2016] O.J. No. 2350. [35] The commission of the actus reus for each offence was not in issue. The appellant understated his income on the three returnsand evaded the tax payable on those amounts.

The case turned on whether the appellant had the requisite mens rea. He testified that heacted under the belief that the income in question was exempt because he earned it in his capacity as a natural or private person. He stillprofesses this view.

He has been told the contrary by his accountant, the CRA and the Minister of National Revenue but according to himthey are all wrong. [36] The appellant testified to this effect about Paradigm theory: You're the only one that's allowed to decide what entity you want to be and how you decide is by writing to Revenue Canada orhaving this contract saying I do not want to take any benefits or anything from the public funds or public money and that I will not, thatI'm keeping my money as a private person under common law, because it's your money when you make it.

The only way that RevenueCanada has an opportunity to come after you for taxes is if you become an officer and I believe that it's a lot of tricky going on in, in theCRA with how they entrap people to become an officer through deeming. Now, deeming is mentioned over 3,000 times in less than3,000 pages of the Income Tax Act, which means that because you didn't say anything, that you didn't want to become an officer, thatyou are deemed to be an officer because they get you to take CPP. The CPP officer is the same as the income tax officer. [37] The offences under s.239 (1) (

a) and (

d) of the Income Tax Act are true criminal offences. Negligence is not sufficient. [38] As Doherty J.A. explained in R. v. Klundert, (ON CA), [2004] O.J. No. 3515, generally speaking ignoranceof the law is not an excuse for crime, but if the offence requires doing

an act that is intended to evade the application of the law,

ignorance of the law can negate the mens rea: 59 A person's mistaken belief that a statute is invalid or is otherwise not applicable to that person's conduct is a mistake of law. It is,however, a mistake of law that is irrelevant to the existence of the fault requirement in s. 229(1) (d). Nor can that kind of mistake of lawprovide a freestanding excuse for the commission of a crime: Criminal Code, s. 19; R. v. Jones (1991), (SCC), 66C.C.C. (3d) 512 at 516-517 (S.C.C.); R. v. Watson (1999), (NL CA), 137 C.C.C. (3d) 422 at 431-33 (Nfld.

C.A.). 60 There are solid policy reasons for drawing a distinction between an accused who mistakenly believes that he or she is complyingwith the Act and an accused who knowingly violates the Act, but mistakenly believes that the Act is invalid. The former is trying tocomply with the law. Particularly where the law is complex, a mistake concerning the applicable law can logically negate theblameworthiness of the person's conduct.

The latter is not trying to obey the law, but is instead deciding which laws should be obeyed.An acquittal based on a mistaken belief as to the validity of a law would undermine the rule of law. [39] The judge considered the evidence of the appellant and made the following significant finding: … I reject Mori's contention that he was trying to obey the law but was mistaken about its application to his situation. Mori purportedlycontracted with 411 as a natural person. He wrote to the Minister to plead his case as a natural person.

But, as the Court of Appeal notedin 2008, (and as Mori was repeatedly told in 2007) the ITA does not distinguish between persons and natural persons. The definition of"person" in s. 248 (1) in the ITA includes human beings of which specie Mori belongs. Justice Doherty's decision in 2004 was confirmed and echoed by MacFarland J.A. in 2008.

Justice MacFarland found that the essence ofKlundert's argument was that "the Act does not apply to me because I choose to have it not apply to me." That is the position that Moritook here. [40] The judge then went on to find as a consequence that the appellant’s mistake of law was legally irrelevant. Charging himself inthe terms suggested by Doherty J.A. in Klundert 2004, the judge found the appellant guilty on all six charges. [41] The judge made a point of abstaining from deciding whether the appellant actually believed his theory. In doing so I think heacted correctly.

If the judge had inquired into the honesty of the appellant’s mistake of law he would have been making the same errorthat caused Dr Klundert’s first two acquittals to be reversed on appeal in 2004 and 2008. [42] On the evidence it was clearly reasonably for the judge to find that the appellant’s conduct fell into the category described inKlundert. The appellant was not trying to obey the law. He was deciding which laws should be obeyed. He decided that the Income TaxAct did not apply to him on its terms. It only applied to him on his terms.

It is contrary to public policy for the courts to entertain this sortof argument. The trial judge was right not to do so. The appeal from sentence [43] The three offences for which the appellant was sentenced are punishable on

summary conviction by fines of not less than halfnor more than double the tax evaded and imprisonment not exceeding two years in addition to the fine. A conditional sentence inaddition to the minimum fine would have been available under s.742.1 of the Criminal Code. [44] The standard of review is set out succinctly by Watt J.A. in R. v. Bains, 2015 ONCA 677 : First, we must accord great deference in reviewing sentencing decisions made by trial judges.

In the absence of an error in principle, afailure to consider a relevant factor or an over or under emphasis of appropriate factors, we should only interfere to vary a sentence if thesentence is demonstrably unfit. [45] At trial the Crown sought a sentence in the range of 12 to 16 months imprisonment and fines equal to the tax evaded. Thedefence submitted that an appropriate sentence would be a conditional sentence of imprisonment for one year and fines equal to half thetax evaded.

The judge sentenced the appellant to four months imprisonment on each count consecutive (12 months in total), plus finesequalling three quarters of the tax evaded. The tax evaded in total was $223,313. The fines added up to a bit less than $168,000. [46] The appellant submits that the judge made errors in principle and arrived at a sentence that was clearly unfit. [47] The appellant identifies 10 errors in principle: a. The judge incarcerated a first offender for a non-violent crime. b. He ignored similar cases in which conditional sentences were imposed, notably the third and final Klundert, 2011 ONCA 646. c.

He characterized the appellant’s offences as “motivated by greed” in the absence of evidence of the appellant’s financial situationor other proof that the appellant is greedy. d. He considered case law that provides that custodial sentences are the norm in cases of large scale fraud. e. He failed to give sufficient weight to the low level of deceit involved in the offences. f. He failed to give sufficient weight to the fact that unlike many tax protesters, the appellant was always respectful of the court andfully cooperative. g. He failed to consider the impact of the breach of the appellant’s Charter rights. h.

He failed to consider the extent of the appellant’s medical issues.

i. He gave no reasons for imposing consecutive sentences. j. He failed to consider the civil reassessment of 411279. [ 48 ] I do not think that the judge made any errors of principle. I think it more to the point to assess the fitness of the sentence taking into account all the relevant factors. We cannot know just how much weight the judge attributed to any single factor. But given the way the appellant has argued the case, I make the following specific observations: a. The judge recognized that the appellant was a mature first offender with a general history of pro-social behaviour.

He did not, however, consider it decisive. b. He considered Klundert and distinguished it. c. The effect of the appellant’s offences was to let him keep more money. It was open to the judge to ascribe this to greed. d. The judge did not purport to equate tax evasion with fraud. In the impugned portion of his reasons his point was that in tax evasion, as in fraud, the amount in question is relevant. e. The low level of deceit could work both ways. The less deceitful the appellant’s conduct, the more brazen it was. f. The less cooperative tax protesters were not punished for the conduct of their trials.

Neither was the appellant entitled to be rewarded for his cooperation. Aside from treating a guilty plea as a mitigating factor, the conduct of the trial is not a relevant consideration. g. The judge did consider the breach of the appellant’s Charter rights. All evidence found to have been obtained by a breach of the appellant’s rights was excluded. In the circumstances, and given the nature of the breach it was open to the judge not to give a remedy twice over. h. The judge considered the appellant’s medical issues and found that their impact was not such as to have a significant impact on his decision.

That finding of fact was open to him on the evidence. i. When three offences are committed one year apart one would expect consecutive sentences. It would have been just as appropriate to impose concurrent sentences. It is obvious from his extensive reasons that the judge imposed sentences that he thought fit taken as a whole. The real question is whether they were fit, not what form they took. j.

The judge considered the effect of the reassessment of the appellant’s company and in consequence decided to impose fines equal to 75% of the tax evaded rather than the 100% he would otherwise have thought appropriate. [ 49 ] Again, I see no errors in principle. To me the question is whether the total sentence was unfit in all the circumstances. In Klundert 2011 the offender, who evaded quite a bit more tax than the appellant, was sentenced at trial in proceedings on indictment to a fine of 150% of the amount evaded and 12 months imprisonment.

The Court of Appeal varied the imprisonment portion of the sentence by making it conditional. The Court found two categories of error in principle on the part of the trial judge: first, he was of the view that a conditional sentence is not appropriate for tax evasion as a rule. There is no such rule. Second, he applied as aggravating factors a number of considerations that were not truly aggravating. The trial judge here did neither. He gave anxious consideration to the fitness of a conditional sentence.

And he did not take into account anything he should not have. [ 50 ] The Court of Appeal in Klundert 2011 concluded as follows: 33 Given the errors noted above, the trial judge's decision on a fit and proper sentence is not entitled to deference. I agree with the trial judge to this extent: this is a unique case where the appellant's behaviour was not as deceitful, nor as fraudulent as the average evasion case.

When the mitigating and aggravating factors are properly weighed and considered, it seems to me that the interests of justice can be served by a conditional sentence. 34 First, the appellant will not pose a danger to the public if he is allowed to remain in the community. Second, in the unique circumstances of this case, a conditional sentence can address the purposes and principles of sentencing, which in this case are predominantly specific and general deterrence. [ 51 ] The predominant purposes and principles of sentencing in a case such as this, then are specific and general deterrence.

Klundert’s offences, which he committed between 1992 and 1998, are no longer unique. The appellant is one of a growing number of defendants who have used the same theory to evade taxes. Natural person theory is spread on the internet and by “educators” who are actively propagating it. It is espoused by people who want to make it difficult to collect taxes. Several reported cases involving the same or similar conduct were cited to the trial judge. [ 52 ] Our tax system is based to a considerable extent on self-reporting.

If large numbers of taxpayers who can avoid deduction at source get the idea that the government cannot collect taxes without an audit and that a resulting criminal prosecution will only result in a fine or conditional imprisonment, they will have reason to take the chance of not being caught. They will not all be caught. This will impose an unfair burden on the honest taxpayer, who already feels burdened.

The courts should do what is necessary to protect the revenue, deter the irresponsible and prevent the honest from becoming demoralized. [ 53 ] Moreover, there is ample evidence on the record to show that the appellant unlike Klundert was warned that his conduct was wrong in law, not only by the authorities but by his own accountant and the comptroller of his father’s company. [ 54 ] Having found no errors in principle it is not for me to determine what would be a fit sentence in my opinion. I have only to say whether the sentence imposed by the trial judge was clearly unfit.

In the circumstances I do not think so.

Conclusion [ 55 ] The appeals from conviction and sentence are dismissed. J.A. Ramsay J. Date: March 10, 2017