R. v. Jarvis

R. v. Jarvis
Collection
Supreme Court Judgments
Date
2002-11-21
Neutral citation
2002 SCC 73
Report
[2002] 3 SCR 757
Case number
28378
Judges
McLachlin, Beverley; L'Heureux-Dubé, Claire; Gonthier, Charles Doherty; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis
On appeal from
Alberta
Subjects
Constitutional law
Taxation
Notes
SCC Case Information: 28378
Decision Content
R. v. Jarvis, [2002] 3 S.C.R. 757, 2002 SCC 73
Warren James Jarvis Appellant
v.
Her Majesty The Queen Respondent
and
The Attorney General for Ontario,
the Attorney General of Quebec and
the Criminal Lawyers’ Association (Ontario) Interveners
Indexed as: R. v. Jarvis
Neutral citation: 2002 SCC 73.
File No.: 28378.
2002: June 13; 2002: November 21.
Present: McLachlin C.J. and L’Heureux‑Dubé, Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel JJ.
on appeal from the court of appeal for alberta
Income tax — Administration and enforcement — Audits and investigations — Whether distinction can be drawn between audit and investigation under Income Tax Act — If so, circumstances in which tax official’s inquiry constitutes penal investigation — Whether evidence obtained during audit pursuant to ss. 231.1(1) and 231.2(1) of Income Tax Act can be used to further investigation or prosecution of offences under s. 239(1) of the Act without violating taxpayer’s Charter rights — Canadian Charter of Rights and Freedoms, ss. 7 , 8 — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 231.1 , 231.2 .
Income tax — Administration and enforcement — Audits and investigations — Sections 231.1(1) and 231.2(1) of Income Tax Act available “for any purpose related to administration or enforcement” of Income Tax Act — Whether “enforcement” of Income Tax Act includes investigation and prosecution of offences under s. 239 of Act — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 231.1(1) , 231.2(1) , 239 .
Constitutional law — Charter of Rights — Fundamental justice — Principle against self-incrimination — Extent to which taxpayer under investigation for offences under s. 239 of Income Tax Act benefits from principle against self‑incrimination — Canadian Charter of Rights and Freedoms, s. 7 .
Constitutional law — Charter of Rights — Unreasonable search or seizure — Taxpayer under investigation for offences under s. 239 of Income Tax Act — Whether documents obtained under ss. 231.1(1) and 231.2(1) of Income Tax Act after penal investigation has commenced violate taxpayer’s right against unreasonable search or seizure — Canadian Charter of Rights and Freedoms, s. 8 — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 231.1(1) , 231.2(1) .
Constitutional law — Charter of Rights — Exclusion of evidence — Tax evasion — Revenue Canada receiving information alleging that taxpayer had committed tax evasion — Statements and documents obtained during inquiry by tax auditor pursuant to ss. 231.1(1) and 231.2(1) of Income Tax Act transferred to investigator — Investigator obtaining further information with requirement letters to various banks and search warrant — Taxpayer charged with tax evasion — Whether evidence against taxpayer obtained in violation of his rights under Canadian Charter of Rights and Freedoms — If so, whether evidence should be excluded — Canadian Charter of Rights and Freedoms, s. 24(2) .
Revenue Canada began an inquiry following a tip that the appellant taxpayer had not reported sales of his late wife’s art in his tax returns for the 1990 and 1991 taxation years. In February 1994, the auditor sent letters to the taxpayer indicating that his file had been selected for audit and requesting certain books and records. The auditor visited art galleries and gathered enough information to determine that the tip had some validity. On March 16, she obtained further information by phone from the taxpayer and his accountant. On April 11, the auditor and her supervisor met the taxpayer to review his records. He was not cautioned. He answered questions, provided banking information, signed a bank authorization, and provided materials including records of sales and expenses related to the art. By late April, the auditor had obtained the additional records and information requested from the taxpayer and she concluded that he had grossly omitted revenues in the relevant returns. On May 4, the auditor referred her entire file to the Special Investigations Section of Revenue Canada, which began an investigation to determine whether prosecution for tax evasion was merited. Despite numerous requests concerning the status of the audit, the auditor deliberately did not inform the taxpayer that his file had been referred to the investigative section. After a review of the file, and on the basis of the books and records obtained from the taxpayer at the April 11 meeting, the investigator determined that reasonable and probable grounds existed to seek a search warrant to investigate for tax evasion. In November, a search warrant issued under the Criminal Code authorized the searches of a Revenue Canada’s office and the respective residences of the taxpayer and his accountant. In early 1995, requirement letters issued to various banks under s. 231.2(1) of the Income Tax Act by the investigator provided additional information.
The taxpayer was charged with tax evasion under s. 239 of the Act. The trial judge held that the audit had effectively become an investigation as of March 16, 1994. Since the auditor failed to caution the taxpayer at the April 11 meeting, the statements and documents gathered at that meeting were obtained in violation of his rights under s. 7 of the Canadian Charter of Rights and Freedoms and reference to that information in the Information to Obtain A Search Warrant was removed. The trial judge concluded that what remained did not provide “reasonable grounds” for a search warrant and, as a result, the execution of the searches violated the taxpayer’s s. 8 Charter rights. He also concluded that the banking records obtained by way of s. 231.2(1) in early 1995 violated the taxpayer’s s. 8 rights. Pursuant to s. 24(2) of the Charter , the 1995 banking information and the evidence obtained at the April 11 meeting and through the searches were excluded. The trial judge granted a motion for a directed verdict of acquittal. The summary conviction appeal judge ordered a new trial, holding that only the taxpayer’s statements during the April 11 meeting should have been excluded from the Information to Obtain and that the search warrant otherwise had been validly issued. The Court of Appeal dismissed a further appeal and affirmed the order for a new trial.
Held: The appeal should be dismissed.
Although the Income Tax Act relies upon self-assessment and self-reporting, the Minister of National Revenue has broad powers for the administration and enforcement of the Act. Under ss. 231.1 and 231.2, a person authorized by the Minister has the powers to: enter a taxpayer’s place of business or place of record keeping; require the taxpayer and third parties to answer questions put to them; and require the taxpayer and third parties to furnish information and documents upon request. To ensure compliance with the self-reporting requirements of the Act, s. 239 creates offences which carry significant penalties, including incarceration. Section 239 bears the formal hallmarks of criminal legislation and, even though the Act is a regulatory statute, non-compliance with its mandatory provisions will in some cases lead to criminal charges. In prosecution thereof, the state is pitted against the individual in an attempt to establish culpability. To conduct an appropriately contextual Charter analysis, the various regulatory and penal considerations must all exert some influence.
The scope of Charter rights and freedoms will vary according to the circumstances. This case concerns both s. 7 and s. 8 of the Charter and the exclusion of evidence under s. 24(2) of the Charter from a trial for offences under s. 239 . The taxpayer’s liberty interest under s. 7 was engaged by the introduction at his trial of statutorily compelled information. In giving expression to the principle against self‑incrimination, however, s. 7 does not envelop an abstract and absolute rule that prevents the use of statutorily compelled information in all contexts. A contextual analysis involves balancing the principle against self-incrimination with the principle that relevant evidence should be available to the trier of fact. The reasonable expectation of privacy guaranteed by s. 8 of the Charter also is context-specific. At some point, the public’s interest in being left alone by government must give way to the government’s interest in intruding on privacy to advance its goals. Generally, there is a diminished expectation of privacy in records produced during the ordinary course of regulated activities and there is a relatively low privacy interest in records relevant to a tax return.
A distinction can be drawn between the audit and investigative powers under the Income Tax Act . By their express terms, both ss. 231.1(1) and 231.2(1) are available for any purpose related to the “administration” or “enforcement” of the Act. Although this wording seems broad, when read in context, these sections do not include the prosecution of s. 239 offences. In particular, the existence of a prior authorization procedure under s. 231.3(1) where an offence is suspected implies that the separate statutory inspection and requirement powers are unavailable for the purpose of prosecutorial investigations. A warrant under s. 231.3 of the Act covers generally the same ground as does the Criminal Code ’s s. 487 warrant. When a tax official exercises his or her investigative function, the parties are in an adversarial relationship because of the liberty interest that is at stake. It follows that there must be some measure of separation between the audit and investigative functions.
Where the predominant purpose of an inquiry is the determination of penal liability, there exists an adversarial relationship between the taxpayer and the state. To determine whether the predominant purpose of an inquiry is the determination of penal liability, one must look to all factors that bear upon the nature of the inquiry. Apart from a clear decision to pursue a criminal investigation, no one factor is determinative. Even where reasonable grounds to suspect an offence exist, it will not always be true that the predominant purpose of an inquiry is the determination of penal liability. The following factors assist in ascertaining whether an inquiry’s purpose is to investigate penal liability: (a) Did authorities have reasonable grounds to lay charges or could a decision have been made to proceed with a criminal investigation? (b) Was the general conduct of the authorities consistent with a criminal investigation? (c) Did the auditor transfer his or her file to the investigators? (d) Was the auditor’s conduct such that he or she was acting as an agent for the investigators? (e) Does it appear that the investigators intended to use the auditor as their agent? (f) Is the evidence relevant to taxpayer liability generally or only to penal liability? and, (g) Do other circumstances or factors suggest that an audit became a criminal investigation?
Wherever the predominant purpose of an inquiry or question is the determination of penal liability, all Charter protections that are relevant in the criminal context must apply. When this is the case, investigators must provide the taxpayer with a proper warning. With respect to s. 7 of the Charter , the constitutional protections against self-incrimination prohibit tax officials who are investigating the offences from having recourse to the inspection and requirement powers under ss. 231.1(1) and 231.2(1) . Rather, tax officials who exercise the authority to conduct such investigations must seek search warrants under s. 231.3 of the Act or s. 487 of the Criminal Code in furtherance of their investigation. With respect to s. 8 of the Charter , taxpayers have very little privacy interest in materials they are obliged to keep under the Act or to produce during an audit. Once an auditor has inspected or required a document under ss. 231.1(1) and 231.2(1) , the taxpayer cannot be said to have a reasonable expectation that the auditor will guard its confidentiality. As a consequence, there is no general rule that prevents auditors from passing files containing validly obtained audit materials to investigators. Nor is there any reason that the CCRA cannot conduct parallel administrative audits and criminal investigations. However, if the CCRA simultaneously conducts an administrative audit and criminal investigation, investigators can avail themselves only of that information obtained pursuant to the audit powers prior to the commencement of the criminal investigation. They cannot avail themselves of information obtained pursuant to such powers subsequent to the commencement of the investigation into penal liability.
Whether an inquiry is in furtherance of an audit or a penal investigation is a question of mixed fact and law and is not immune from appellate review. The record in this case does not support a finding that the auditor used her misleading tactics to obtain information from the taxpayer or his accountant under ss. 231.1(1) and 231.2(1) for the predominant purpose of determining the taxpayer’s penal liability under s. 239. There was no investigation into penal liability prior to May 4, 1994. Accordingly, the material that the trial judge excluded from the Information to Obtain A Search Warrant owing to a Charter violation was in fact validly gathered pursuant to the auditor’s inspection and requirement powers. Since the searches were made pursuant to a valid warrant, the evidence obtained during these searches should be admissible in a new trial. The usage of the banking information obtained by the investigator pursuant to s. 231.2(1) requirement letters in early 1995, after the investigation was underway, violated the taxpayer’s s. 7 rights and should be excluded.
Cases Cited
Referred to: British Columbia Securities Commission v. Branch, [1995] 2 S.C.R. 3; R. v. Norway Insulation Inc. (1995), 23 O.R. (3d) 432, aff’g [1995] 2 C.T.C. 451; R. v. Araujo, [2000] 2 S.C.R. 992, 2000 SCC 65; Del Zotto v. Canada, [1997] 3 F.C. 40, rev’d [1999] 1 S.C.R. 3; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; Knox Contracting Ltd. v. Canada, [1990] 2 S.C.R. 338; 143471 Canada Inc. v. Quebec (Attorney General), [1994] 2 S.C.R. 339; R. v. Hydro-Québec, [1997] 3 S.C.R. 213; Smerchanski v. M.N.R., [1977] 2 S.C.R. 23; R. v. Wholesale Travel Group Inc., [1991] 3 S.C.R. 154; Comité paritaire de l’industrie de la chemise v. Potash, [1994] 2 S.C.R. 406; R. v. Grimwood, [1987] 2 S.C.R. 755; R. v. Ling, [2002] 3 S.C.R. 814, 2002 SCC 74; Re Ramm, [1958] O.R. 98; Hunter v. Southam Inc., [1984] 2 S.C.R. 145; General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641; R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606; Baron v. Canada, [1993] 1 S.C.R. 416; Edmonton Journal v. Alberta (Attorney General), [1989] 2 S.C.R. 1326; Symes v. Canada, [1993] 4 S.C.R. 695; R. v. Lyons, [1987] 2 S.C.R. 309; Canadian Broadcasting Corp. v. New Brunswick (Attorney General), [1991] 3 S.C.R. 459; Re B.C. Motor Vehicle Act, [1985] 2 S.C.R. 486; Reference re ss. 193 and 195.1(1)(c) of the Criminal Code (Man.), [1990] 1 S.C.R. 1123; R. v. S. (R.J.), [1995] 1 S.C.R. 451; R. v. P. (M.B.), [1994] 1 S.C.R. 555; R. v. Jones, [1994] 2 S.C.R. 229; R. v. Fitzpatrick, [1995] 4 S.C.R. 154; R. v. White, [1999] 2 S.C.R. 417; R. v. Plant, [1993] 3 S.C.R. 281; Smith v. Canada (Attorney General), [2001] 3 S.C.R. 902, 2001 SCC 88; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; R. v. Gladue, [1999] 1 S.C.R. 688; Canadian Bank of Commerce v. Canada (Attorney General), [1962] S.C.R. 729; James Richardson & Sons, Ltd. v. M.N.R., [1984] 1 S.C.R. 614; R. v. Multiform Manufacturing Co., [1990] 2 S.C.R. 624; R. v. Bjellebo, [1999] O.J. No. 965 (QL); R. v. Pheasant, [2001] G.S.T.C. 8; R. v. Chusid (2001), 57 O.R. (3d) 20; R. v. Roberts, [1998] B.C.J. No. 3184 (QL); R. v. Dial Drug Stores Ltd. (2001), 52 O.R. (3d) 367; Samson v. Canada, [1995] 3 F.C. 306, leave to appeal refused, [1996] 1 S.C.R. ix (sub nom. Samson v. Addy); R. v. Yip (2000), 278 A.R. 124, 2000 ABQB 873; R. v. Anderson (2001), 209 Sask. R. 117, 2001 SKQB 334; R. v. Seaside Chevrolet Oldsmobile Ltd. (2002), 248 N.B.R. (2d) 132, 2002 NBPC 5; R. v. Warawa (1997), 208 A.R. 81; R. v. Coghlan, [1994] 1 C.T.C. 164; Gorenko v. La Reine, [1997] R.J.Q. 2482, aff’d [1999] Q.J. No. 6268 (QL); Roncarelli v. Duplessis, [1959] S.C.R. 121; Babcock v. Canada (Attorney General), [2002] 3 S.C.R. 3, 2002 SCC 57; Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748.
Statutes and Regulations Cited
Act to amend the Income War Tax Act, S.C. 1944, c. 43, s. 11.
Business Profits War Tax Act, 1916, S.C. 1916, c. 11.
Canadian Charter of Rights and Freedoms, ss. 7 , 8 , 24 .
Criminal Code, R.S.C. 1985, c. C-46, s. 487 .
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 2 , 150(1) , 151 , 152(1) , (4) , 162 , 163 , 230(1) , 231.1 [am. 1994, c. 21, s. 107], 231.2, 231.3 [idem, s. 108 ], 238(1), 239(1), (2), 241 [am. 1994, c. 7, Sched. VIII, s. 137(1)].
Income War Tax Act, 1917, S.C. 1917, c. 28, s. 8.
Interpretation Act, R.S.C. 1985, c. I-21, s. 12 .
Authors Cited
Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Krishna, Vern. The Fundamentals of Canadian Income Tax, 6th ed. Scarborough, Ont.: Carswell, 2000.
Oxford English Reference Dictionary, 2nd ed. Edited by Judy Pearsall and Bill Trumble. Oxford: Oxford University Press, 1996, “enforce”.
APPEAL from a judgment of the Alberta Court of Appeal (2000), 149 C.C.C. (3d) 498, 271 A.R. 263, 234 W.A.C. 263, 87 Alta. L.R. (3d) 52, 193 D.L.R. (4th) 656, [2001] 3 W.W.R. 271, [2000] A.J. No. 1347 (QL), 2000 ABCA 304, affirming a judgment of Lutz J. (1998), 225 A.R. 225, 63 Alta. L.R. (3d) 236, 98 D.T.C. 6308, [1999] 3 W.W.R. 393, [1998] 3 C.T.C. 252, [1998] A.J. No. 651 (QL), allowing the Crown’s appeal from a judgment of the Provincial Court acquitting a taxpayer of tax offences and ordering a new trial. Appeal dismissed.
Alan D. Macleod, Q.C., and Wendy K. McCallum, for the appellant.
S. David Frankel, Q.C., Bruce Harper and Janet Henchey, for the respondent.
Trevor Shaw, for the intervener the Attorney General for Ontario.
Gilles Laporte and Monique Rousseau, for the intervener the Attorney General of Quebec.
Scott K. Fenton, for the intervener the Criminal Lawyers’ Association (Ontario).
The judgment of the Court was delivered by
1 Iacobucci and Major JJ. -- Is there a distinction between the Canada Customs and Revenue Agency’s (“CCRA”) audit and investigative functions under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .) (“ITA ”)? If it is indeed correct to draw such a distinction, when does the CCRA exercise its audit function and when does it exercise its investigative function? Finally, what are the legal consequences for the taxpayer when the CCRA exercises its investigative function?
2 Ultimately, we conclude that compliance audits and tax evasion investigations must be treated differently. While taxpayers are statutorily bound to co-operate with CCRA auditors for tax assessment purposes (which may result in the application of regulatory penalties), there is an adversarial relationship that crystallizes between the taxpayer and the tax officials when the predominant purpose of an official’s inquiry is the determination of penal liability. When the officials exercise this authority, constitutional protections against self-incrimination prohibit CCRA officials who are investigating ITA offences from having recourse to the powerful inspection and requirement tools in ss. 231.1(1) and 231.2(1) . Rather, CCRA officials who exercise the authority to conduct such investigations must seek search warrants in furtherance of their investigation.
3 Here, the material that the trial judge excluded from the Information to Obtain A Search Warrant owing to a Charter violation was in fact validly gathered pursuant to the auditor’s inspection and requirement powers. Accordingly, the searches ultimately carried out were authorized by warrant, and no s. 8 violation occurred. Therefore, we would dismiss the appeal and confirm the Court of Appeal of Alberta’s order of a new trial.
I. Factual Background
4 The appellant, Warren Jarvis, is a farmer in Alberta. His wife, Georgia Jarvis, was, until the time of her death, an artist earning income from the sale of her works. Mrs. Jarvis reported this income on her annual individual tax returns.
5 Mrs. Jarvis died on October 22, 1990. A few of her original works and a number of limited edition prints remained unsold at the time; as well, it appears that the appellant may also have had some additional prints created subsequent to his wife’s death. The appellant was therefore able to continue the sale of his late wife’s art, which he did. In 1992, as art sales began to dissipate, the appellant, in an apparent attempt to put the past behind him, moved into a rural log cabin, roughly 80 kilometres north-west of Calgary.
6 Early in 1994, an anonymous informant addressed a typewritten letter (“the lead”) to the Chief of Audit in the Calgary District Taxation Office of what was then Revenue Canada. For reasons of confidentiality, the lead is not in evidence in this case. We do know, however, that the lead alleged that the appellant had failed to report substantial income related to the 1990 and 1991 taxation years. Furthermore, the lead listed six Calgary art galleries that had purchased Mrs. Jarvis’s art work from the appellant.
7 Although internal departmental policies identified all tax leads from informants as being the responsibility of the Special Investigations Section, the lead was in fact referred to the Business Audit Section. There, it was assigned to Donna Goy-Edwards, an experienced business auditor. Goy-Edwards took sole control over the file, reporting to her supervisor, John Moriarty.
8 On February 16, 1994, Goy-Edwards prepared an “Audit Plan,” consisting of three separate tasks:
1) Clear lead.
2) Review disposition of all assets at date of death in Oct/90. Review all tax consequences.
3) Audit accordingly.
Not all leads received by the CCRA are substantiated; hence, “clearing” a lead refers to a process whereby the auditor reviews source documents for the purpose of determining the validity of the allegations contained in the lead. To this end, Goy-Edwards attempted on February 16 and 17 by telephone to reach the appellant and the accountant, Tom Burke, who had prepared the 1990 and 1991 tax returns. She was unable to reach either, but left two voice messages on the appellant’s telephone answering machine.
9 Goy-Edwards then sent two letters to the appellant on February 17. The letters were addressed simply “General Delivery, Cremona, Alberta”. One letter dealt with the appellant in his capacity as executor of his wife’s estate, indicating that “[t]he file of the Late Georgia Jarvis has been selected for audit for the [1990] taxation year” and that “this letter will serve as a formal notice of the audit in progress”. The other letter concerned the appellant in his personal capacity, and specified that his file had “been selected for audit for the taxation years 1990 & 1991”, adding again that the letter constituted formal notice of the audit. In each instance, the appellant was requested to make available certain enumerated books and records. Finally, the letters stated that the respective files would be held in abeyance for a 15-day period to allow the appellant “an opportunity to contact the writer and make arrangements to have the books and records made available for the audit”.
10 On March 7, 1994, shortly after the 15-day period elapsed without word from the appellant, Goy-Edwards commenced contact with third-party sources. She researched departmental library services for written information on Mrs. Jarvis’s art work, to obtain facts about her works and discover where they were being displayed. Through these efforts, she was able to locate three additional galleries, not listed in the lead, that had purchased art from the appellant. Goy-Edwards then personally contacted or visited all nine galleries. She identified herself as a Revenue Canada employee and requested that she be granted access to certain of their books and records pertaining to art sales.
11 Between March 7 and 16, Goy-Edwards was able to obtain information from each of the galleries regarding the sale of Mrs. Jarvis’s works. From the particulars contained in purchase invoices and cancelled cheques, the auditor determined that the appellant had grossed $358,409 from sales to the nine galleries between October 23 and December 31, 1990. For the 1991 calendar year, the figure was $221,366. Endorsements found on the reverse side of the cheques also disclosed information regarding the appellant’s banking arrangements. Independently, Goy-Edwards calculated that, for sales accruing to Mrs. Jarvis from January 1, 1990 until her death, the cost of sales was 29.5 percent of gross. Based on all of this information, along with the appellant’s tax returns for the 1990 and 1991 taxation years, Goy-Edwards determined that the lead had some validity.
12 Twice on March 8, the appellant attempted to reach Goy-Edwards by telephone, leaving messages that he had called. These calls were not immediately returned. On March 16, Jarvis’s accountant, Burke, telephoned Goy-Edwards, who explained the audits that she was conducting, advised of the taxation years concerned, and made some enquiries as to the appellant’s financial affairs. Burke informed the auditor that the file was likely to be in disarray, owing to the appellant’s poor record-keeping skills and the general apathy towards financial and taxation matters that the appellant had exhibited since Mrs. Jarvis’s death; in fact, Burke had seen no source documents, since the appellant was in the habit of providing only summaries of his income.
13 Burke explained that, for taxation purposes, after Mrs. Jarvis’s death the income accruing from the sale of her art, net of expenses, was reported as part of the appellant’s farming income. According to the accountant, the appellant netted somewhere in the vicinity of $58,000 for art sold in the 1990 taxation year, and precisely $43,061.79 for 1991. Goy-Edwards requested that Burke submit copies of the income summaries that the appellant had provided him. Burke replied that he would first have to speak to the appellant and obtain his authorization to release the information.
14 Later the same afternoon, Burke called back to advise Goy-Edwards that he had spoken to the appellant, and to pass on instructions for Goy-Edwards personally to call the appellant concerning the audit. The auditor immediately telephoned the appellant, confirmed that the latter was to gather the documentation requested in the February 17 letters, and made arrangements to meet at the appellant’s farm on April 11, 1994 to “commence a review of the books and records”. The record indicates that the parties might have chosen this date in order to provide the appellant with sufficient time to amass the documentation, since many of his belongings were still packed up from his move.
15 Goy-Edwards made no mention of the fact that she had already contacted third party sources. In response to one of her questions, however, the appellant confirmed the $58,000 figure relative to 1990 net art sales income. Finally, Goy-Edwards advised the appellant that she would be accompanied by an assistant during the audit. The appellant stated that he would not have any difficulties with this.
16 On April 11, Goy-Edwards was in fact accompanied to the appellant’s residence by her supervisor, Moriarty, whom she introduced on this occasion as her “team leader”. The judge at first instance expressly disbelieved Goy-Edwards’ explanation that Moriarty came along to provide navigational assistance because of her lack of familiarity with the area in which the appellant lived. The supervisor was present in an observational role.
17 During the interview, Moriarty did not actively take notes. Moreover, Goy-Edwards took the lead in all discussions, with Moriarty interjecting only occasionally to obtain clarification.
18 The appellant was not cautioned as to his rights. He answered all of the auditor’s questions, which dealt primarily with the art sales but which also touched upon his farming operations. The appellant stated that all information pertaining to art sales was contained in the contracts and receipt books he kept. He provided information about his banking arrangements, and indicated that he would take steps to access the records pertaining thereto. In addition, the appellant signed a bank authorization for an account held with the Bank of Montreal, the existence of which he had not disclosed until Goy-Edwards posed a question about it: the auditor knew of the account from her third-party source investigations. She agreed to hold the authorization in abeyance for a short while in order to give the appellant the opportunity personally to obtain the documentation.
19 Goy-Edwards enquired into the inventory of originals and prints at the date of Mrs. Jarvis’s death, as well as the appellant’s role in selling the art. Her purpose with these lines of questioning was to compare the responses given by the appellant to the information that she had previously obtained from the departmental library. Finally, the appellant provided the auditor with art sale-related materials, including the two receipt books tracking sales and a number of other receipts documenting expenses. Goy-Edwards removed these books and records for later examination.
20 A few days after the interview, on April 15, Burke telephoned Goy-Edwards for an updated report on the state of the file. Goy-Edwards briefed the accountant as to the April 11 meeting, and stated that she would keep him apprised of the audit’s progress.
21 In late April 1994, Goy-Edwards obtained many of the records and much of the information requested from the appellant. Subsequently, she performed various calculations to determine whether all the income related to the art sales had been properly reported. As a result of these calculations, Goy-Edwards noted a discrepancy of approximately $700,000 between the appellant’s earned and reported income over the two taxation years in question. On this basis, the auditor concluded that the appellant had grossly omitted revenues, suggesting that fraud was a possibility, and that further action was warranted.
22 Therefore, rather than completing the audit, on May 4, 1994, Goy-Edwards prepared a “Form T134” to refer the matter -- along with her entire file, which contained records of all contacts, conversations, and calculations made in respect of the matter -- to the Special Investigations Section of Revenue Canada. This latter division was charged in the present case with determining whether further investigation with a view to possible prosecution for tax evasion was merited. The record indicates that, in general, not every referral from the Business Audit Section necessarily results in charges being laid, and that files are on occasion returned to the Business Audit Section after Special Investigations makes a decision not to proceed with a criminal investigation.
23 Goy-Edwards did not attempt to contact the appellant or Burke to advise them that the file was no longer under her control. Two days later, on May 6, the appellant’s son Jim left a telephone message with the auditor, indicating that he would be sending the requested Bank of Montreal statements on the following Monday. The statements were in fact delivered on that date, and were passed on to Special Investigations. Again, the appellant, his son and his accountant were not notified that the appellant’s file had been referred to the investigative section.
24 Inside Special Investigations, the appellant’s file was assigned to investigator Diane Chang. Chang met with Goy-Edwards for one to two hours towards the end of May 1994 in order to discuss the file. At some point shortly thereafter, Chang had to contact Goy-Edwards again in order to clarify certain of the notations contained in the auditor’s file. There may have been one or two conversations of this nature, but there is nothing in the record that would suggest that Chang, or any other investigator, ever instructed or requested Goy-Edwards, under the guise of an audit, to obtain further information from or about the appellant.
25 The investigator then reviewed Goy-Edwards’s files, performed her own calculations and analyses, and gathered some information from other internal sources in order to determine if there were reasonable and probable grounds to obtain a search warrant to further an investigation into tax evasion. In June 1994, Chang determined that such reasonable and probable grounds did exist, and began preparing an Information to Obtain A Search Warrant. For the next several months, Chang worked on the Information to Obtain and sought approval from her supervisors in Special Investigations to attend before an issuing justice. Departmental approval was not granted until November 1994, despite the fact that very little new information was received in the intervening period.
26 Meanwhile, Burke had been attempting to reach Goy-Edwards to obtain updates on the audit. As a consequence, Goy-Edwards contacted Chang. Goy-Edwards asked what an appropriate response would be. Chang told the auditor “to stall”: she did not want the appellant to discover that his file had been referred to Special Investigation. Contrary to departmental policy, which specifies that all contacts about a file should be recorded on “Forms T2020”, Chang did not record this conversation with Goy-Edwards.
27 On September 8, Burke again phoned Goy-Edwards to inquire about the file. She told him that she had been unable to make progress with the audit because of an injury; Goy-Edwards later testified that, shortly before that time, she had tumbled hard off of her bicycle, sustaining injuries to her head, torso, and legs. Goy-Edwards did not mention to Burke that she had referred the file to Special Investigations back in May. Burke left the appellant a message on the same day, keeping him abreast of what news the auditor had provided.
28 Burke left another message for Goy-Edwards on October 21, 1994, while the auditor was out of her office. Upon returning at the beginning of November, Goy-Edwards informed Moriarty that Burke had called. Moriarty, in turn, spoke to the Chief of the Special Investigations Section early on November 2 about how best to handle the issue. They determined, based on departmental policy, that if Goy-Edwards was asked about the file, she would have to “inform the [taxpayer] that the issue has been referred” to Special Investigations.
29 Also on November 2, and very shortly after this discussion, Goy-Edwards returned Burke’s call. The auditor left a message with the accountant’s wife to the effect that she had been out of town and that she “ha[d] nothing to report on the file”. In addition, Goy-Edwards asked that Burke be informed that “the file has been in a holding pattern due to other work demands including other projects”; the auditor later acknowledged that it was a mistake to use these terms to describe the status of the file.
30 Goy-Edwards recorded the details of the November 2 call on a Form T2020, which she then delivered to Chang. Concerned about the message Goy-Edwards had left for Burke, and troubled by the fact that she had personally given Goy-Edwards the instructions to stall, Chang approached her section manager.
31 Chang, the section manager, and the Chief of Special Investigations all met on November 3 to discuss the policy regarding disclosure to the appellant. Departmental policy was confirmed to be that, if Goy-Edwards or any other Revenue Canada official were asked anything about the appellant’s file, that person should explain that the file was in Special Investigations. All parties were aware of the message that Goy-Edwards had left for Burke on the previous day, and the section manager and the chief expressed bewilderment as to why the auditor had spoken as she did. Still, subsequent to this meeting, no remedial steps were taken to advise either Burke or the appellant of the file’s transfer.
32 On November 23, 1994, Chang swore the Information to Obtain before Fradsham Prov. Ct. J. in Calgary. Chang based her grounds for belief that the appellant had committed offences, in part, upon analyses that she had conducted from the books and records that the appellant had provided to Goy-Edwards at the April 11 meeting.
33 A warrant was issued under s. 487 of the Criminal Code, R.S.C. 1985, c. C-46 , authorizing searches of the appellant’s residence, Burke’s residence (place of business), and the Calgary office of Revenue Canada (in order to seize the books and records that Goy-Edwards had borrowed from the appellant during the April 11 meeting). The warrant was executed at all three locations on November 29. The fruit of the searches ultimately served as a substantial portion of the respondent Crown’s evidence at the appellant’s trial.
34 In early 1995, Chang drew up requirement letters pursuant to s. 231.2(1) of the ITA . These were issued to the appellant’s various banking institutions, which complied with the requirements and provided Chang with the documentation which she sought.
35 The appellant was brought to trial on three counts of making false or deceptive statements in an income tax return (s. 239(1) (a) of the ITA ) and two counts of wilfully evading or attempting to evade payment of taxes (s. 239(1) (d) of the ITA ). The respondent sought to tender documents seized pursuant to the warrant. The appellant objected, and two separate voir dires were held to determine the admissibility of the documents.
36 Coincidentally, the issuing justice, Judge Fradsham, was also the trial judge. He felt that the audit had effectively become an investigation as of March 16, 1994, and excluded all information obtained by ss. 231.1(1) and 231.2(1) from that day forward: (1997), 195 A.R. 251 (Prov. Ct.) and (1997), 204 A.R. 123 (Prov. Ct.). Judge Fradsham granted the appellant’s motion for a directed verdict of acquittal on August 7, 1997. The respondent’s appeal to the Court of Queen’s Bench of Alberta was successful, and a new trial was ordered: (1998), 225 A.R. 225. The Court of Appeal of Alberta dismissed a further appeal, and affirmed the summary conviction appeal judge’s order for a new trial: (2000), 271 A.R. 263. The appellant was granted leave to appeal to this Court on May 17, 2001: [2001] 1 S.C.R. xii.
II. Relevant Statutory and Constitutional Provisions
37 Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .)
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 or may 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 under this Act, and
(b) examine property in an inventory of a taxpayer and any property or process of, or m