Court File and Parties

Court File No.: Central East - Newmarket 10-08216 Date: 2013-05-17 Ontario Court of Justice

Between: Her Majesty the Queen — And — Roy Smith

Before: Justice P.N. Bourque

Ruling on Jarvis Application

Released on May 17, 2013

Counsel:

• Ghazala Zaman/Mark Cullen for the Crown
• Megan Schwartzentruber for the accused Roy Smith

BOURQUE J.:

PART I - OVERVIEW

[1] In a scheme continuing for over 4 years between 2001 and 2005, a fraudster pretended to be a previously inactive company and filed a series of monthly requests to the Canada Revenue Agency ("CRA") for GST refunds of $190,000.00 or more. By the time the authorities decided to conduct an audit, the amount of the loss to the Canadian taxpayer was some $10 million.

[2] The Defendant is charged with two counts of fraud under the Criminal Code and 4 counts of evading taxes under the Income Tax Act. The Defendant has brought an application at the beginning of the trial and submits that certain evidence obtained by the Crown pursuant to search warrants should be excluded from the evidence at the trial pursuant to section 24(2) of the Charter. The Defendant claims that his rights under sections 7 and 8 of the Charter of Rights and Freedoms have been infringed.

[3] It is his assertion that pursuant to the doctrine enunciated in R. v. Jarvis, the audit function and the investigation function of the tax authorities have overlapped and the investigation persons have availed themselves of information obtained pursuant to the inspection and requirement powers under section 288 of the Excise Tax Act, which reads as follows:

288. (1) An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Part, inspect, audit or examine the documents, property or processes of a person that may be relevant in determining the obligations of that or any other person under this Part or the amount of any rebate or refund to which that or any other person is entitled and, for those purposes, the authorized person may

(a) subject to subsection (2), enter any premises or place where any business or commercial activity is carried on, any property is kept, anything is done in connection with any business or commercial activity or any documents are or should be kept; and

(b) require the owner or manager of the property, business or commercial activity and any other person on the premises or in the place to give to the authorized person all reasonable assistance and to answer all proper questions relating to the administration or enforcement of this Part and, for that purpose, require the owner or manager to attend at the premises or place with the authorized person.

[4] Specifically, the defendant asserts that the use of the "requirement powers" under the Excise Tax Act on October 31, 2005 to discover that the defendant was the owner of a post office box where the refund cheques were being delivered, and on November 4, 2005 to discover that the bank account that the GST refund cheques are being delivered was owned by a company that the defendant was an officer and director, are an improper use of that power, and the information obtained by subsequent warrants should be excluded from the evidence in the trial.

[5] As part of its response to this application, the Crown takes the position that the Defendant does not have standing to bring this application, since the government was in the process of auditing a company that the Defendant has no connection to. The Crown is also resisting the Jarvis application even if I find that the Defendant has some standing to bring this application. Finally, if I find a breach, I must apply section 24(2) of the Charter to determine whether to admit the evidence into the trial.

PART II - THE EVIDENCE

William Chong

[6] William Chong is an auditor with the CRA and deals with the Goods and Services Tax ("GST") returns. He had 12 years of GST audit experience. He was knowledgeable of the different roles of audit and investigation.

[7] He received a memo from his superior, Ron Persaud, on October 3, 2005. The company to be audited was NGW Natural Gas Wholesalers Inc. and it was the GST returns which were being audited. This was described as a priority and high risk audit.

[8] With regard to the issue of high risk, it was the witness's view that the assignment of "high risk" was done on several bases, sometimes just being the category of tax filer that the agency was interested in at that time. He also stated that the reference to a priority audit meant that he had to rearrange his normal workload of audits to accommodate this matter. The document also made reference that it had to be a field audit. It was his experience that all post audits had to be done on location (not by telephone on by correspondence) but it was not usual to have this written on the note.

[9] He stated that he looked up the corporate information and viewed the GST returns that had been filed. He noted the time period of the audit was 2000 to 2005 and was therefore a "post audit". He looked for a corporate tax return (T2) but the corporation had not filed in several years. He did not find this unusual nor did he find unusual the fact that for 5 years, the company had only filed claims for GST credit refunds and not listed any GST income. He stated that many related companies do this and it could also be a situation where the company sold its products out of the country. He did note that the amounts were quite high ($190,000.00 on a monthly basis).

[10] He noted that an audit was done on the company in 1998 and there were no difficulties then.

[11] The witness stated that he was trying to find documents to do an audit and he wished to make an appointment with the taxpayer. He saw that Amanda Singh was listed as the contact person. He called the number and it was Direct Energy Marketing Limited ("Direct Energy"). He spoke to a John Williams, who was the controller, on October 11, 2005. He stated that he thought Direct Energy had purchased the assets of NGW. He was referred to a Ms. Corsett on October 14, 2005. He left messages for Amanda Singh and spoke to her on October 12, 2005. She stated that no GST returns had been filed for the company for a long time and she mentioned the name of Roy Smith (this is the first reference to Roy Smith), and she stated that he had filed some fraudulent GST returns in the past. She did not know anything about the address of 155 Beaver Creek Richmond Hill, Ontario, and that was the address listed as receiving all of the CRA documents. He did not pursue any questions with Singh about Roy Smith.

[12] At this stage, the witness did not know anyone and was still just trying to obtain the documents of the company NGW so he could do an audit.

[13] In cross-examination, it was shown that after this discussion he sent an email to Ron Persaud telling him what Amanda Singh had said.

[14] He mentioned that his superior Ron Persaud had put a hold any further GST payments to this company.

[15] In the note to Ron Persaud (Tab 24 Exhibit Number 1 "A"), he stated "we may have to get direction from S.I." He was of the belief at that point that it was possible that Amanda Singh had filed the returns. He asked her about the address where the cheques were being mailed (155 East Beaver Creek, Richmond Hill, Ontario) and she did not know anything about that address. The notes in the file indicated that it was a mail box, but the witness did not find that unusual, many companies used mail boxes for their mail deliveries.

[16] At this point the witness said that a High Risk Assessment Team ("HRAT") got involved. The witness looked upon this team as a resource to him if needed. He spoke to Deborah Edyvean of HRAT. The witness said that he may need their help but did not ask for it now. He did not ask them to do any searches for him.

[17] He wanted to speak to Mark Silver who was a previous shareholder of the company and Mr Drummond who was an original director. The witness requested copies of the GST returns and cancelled cheques.

[18] The witness spoke to the previous accountant for the company and was promised the accounting records of the company, at least up to 2000. The accountant said that the company was inactive. The accountant also informed the witness about a previous lawsuit between the Defendant and the company, which was eventually settled. While the witness had now heard the name Roy Smith several times that name had yet to appear on any records; that he had seen the witness was still concentrating on somehow locating any records for this company, as he could not speak to anyone nor perform any audit until he had the records. At this point, the witness stated that he was not considering that there had been a fraud. At this time, the witness had received the cancelled cheques and noted that they were being deposited into an account at the DUCA Credit Union.

[19] He sought a requirement from DUCA under section 289 (1) (a) of the Excise Tax Act. A member of the HRAT team (Gilbert) came with him to serve the request upon the DUCA Credit Union for information about the account on November 4, 2005. He discovered that the account holder was Roy Smith and received the transaction history and discovered that everything into the account were the GST refund cheques. There were no deposits to the account. The account was in the name of NGW Inc. The cheques were in the name of NGW Natural Gas Wholesalers Inc. and the witness found that strange. He discovered that NGW Inc. was an incorporated company with the business registered name of NGW Natural Gas Wholesalers. The address of the company is 155 East Beaver Creek Richmond Hill. Roy Smith was president of the company. There was a phone number for Roy Smith. There is no indication from any of the documents that Roy Smith was a shareholder of the company.

[20] The witness called the number and left a message for Roy Smith. He received two phone calls, one on November 13th and one on November 19. The call on the 13th was from an unidentified person who said that Roy Smith was in Europe and would return. On November 19th, a person called and left a message saying that the company was a call centre in Calgary and they were reimbursed all of their expenses, except the GST refunds. The caller did not identify himself and did not leave a number to call. The witness did not refer the matter to investigations and stated that he was still waiting for information from the company accountant. He brought the second call to the attention of Mark Andrews at HRAT. He was of the opinion that the caller could have been Roy Smith. He interviewed the accountant and Mark Silver and Amanda Singh, on Jan 23, 2006.

[21] He issues no other requests for information under the Excise Tax Act and on February 23, 2006, he referred the matter to the special investigation unit.

[22] He took no further steps on the file other than two subsequent contacts with Tony Ing of investigations.

[23] The thrust of his evidence was that he was intent on getting the documentary material so he could perform an audit. He never did get the material and when he was unable to do so he referred the matter in February 2006 to the investigators. He stated that it was after the completed search of the DUCA records that he knew that there was a contact person and tried to call him but other than the phone messages he did not make contact. He met with Silver, Singh and Friedland and he did not issue any other requirements. He still did not get any documents and ultimately knew he could not do an audit.

[24] The defence in its cross-examination made the point that when he was first told by Singh that Roy Smith had filed false GST returns (on October 12th) that he should have known the audit function was over and that it was a fraud investigation at that point. It was further pointed out to the witness that by his meeting with the previous participants in NGW Natural Gas Wholesalers Inc. (Silver, Friedland and Singh) on November 2, 2005, that he had the following information about Smith:

(a) There was over $10 million paid out for GST refunds;

(b) Singh and Friedland stated that they had not filed any GST returns for NGW Natural Gas Wholesalers Inc.;

(c) Singh and Friedland have no knowledge of GST cheques and GST returns being sent to the address 155 East Beaver Creek Richmond Hill, Ontario;

(d) Singh said Smith had filed false GST returns in the past;

(e) Smith has knowledge and opportunity to commit a fraud with NGW Natural Gas Wholesalers Inc.;

(f) Direct Energy confirmed that it was not filing GST returns on behalf of NGW Natural Gas Wholesalers Inc.;

(g) Friedland and Silver said that Smith had misappropriated money from Silver and had gone to jail (until 2003) but had repaid it;

(h) NGW Natural Gas Wholesalers Inc. had sold its assets to Direct Energy in 2000 and the company was inactive;

(i) Silver gave him a letter where Silver accused Smith of making false GST claims in relation to his company in 2001.

[25] The witness responded that he had not sought any of this information but had noted it and indeed had passed it along to his team leader (Persaud) with an email. He stated that he was always looking for documents and part of his concern was that Singh and Friedland and Silver were reluctant to give him their documents although he stated that the reluctance may have been the difficulty in retrieving stored documents. He was also concerned that Silver and Singh were still working in the same location. It was his opinion that he needed to know who received the cheques and that is the only way he could ultimately see if there was any documentation so he could in fact do and audit on these GST claims.

[26] He was insistent that he was performing the audit function only and was not interested in any pursuit of Mr. Smith.

[27] In terms of this witness's general credibility, most of what he testified to was backed up by his notes and documents. Errors were pointed out by the defence in his recollection of certain emails and conversations with some of the persons in the HRAT team. When confronted, he readily admitted his mistake and did not in my opinion, seek to argue with counsel. Counsel pointed to a memo written by the HRAT team on October 14, 2005. It is clear from that note, that Roy Smith is not even mentioned and the only person mentioned is one Gary Drummond. The report also points out that on its face, the account is of a legitimate company. Clearly there is a list of factors (1 to 7 and admittedly known by the witness) and the memo states that there is a possibility that a once legitimate business could have used by someone with knowledge to continue filing GST returns.

[28] All of the prevailing information known to the witness by the time of the request to DUCA were put to him by defence counsel. It was the witness's assertion that there were several possibilities, including that Smith was doing a fraud but he was not in a position to deliver anything to investigations unless he had some documents, otherwise there would be in his opinion nothing to properly investigate. He was concerned that the three persons talking about the fraud were all involved in the company together and they said that they had documents to back up their position but had not as yet provided him anything. He was adamant that until he could see the cheques and the account where they were deposited, he could not really be sure of anything.

[29] The other issue raised in cross-examination was the degree of contact he had with HRAT and especially Debbie Edyvean. There are at least two emails where he is seeking copies of GST returns (as he is missing 3 returns) and he in one message makes reference to "many meetings". The witness said that between 2000 and the end of this audit he only met her two times. I do not doubt his assertions.

[30] I think that this witness especially in his e-mail to Persaud after the phone call with Singh (October 12th) was alert to the possibility of a fraud issue. However this witness is a credible witness and I accept his assertion that the focus of his efforts was to get documentation so he could indeed perform his job and actually do an audit of this company. I accept that his evidence and the documents produced show a man intent on doing his job. The fact that he was continuing to seek the records of the company and to continue to seek the author of the GST returns reinforce me in this belief. He stated that he had never in the past completed a post audit without speaking to the author of the GST returns. To him it was an integral part of the audit process. He kept his mind open to a lot of scenarios but wanted to see documents which he could use to verify any assertions. He was clearly frustrated by the fact that the previous accountant and bookkeeper for NGW Natural Gas Wholesalers Inc. were not getting him the documents that he was requesting. It appeared to reinforce his suspicion that if there was any misfeasance or errors it would be coming from that source. He made the request to the DUCA Credit Union because he felt that by seeing the account where the GST refund cheques were being deposited, that would lead him to the files and information and author of the GST returns so he could do his audit and make a determination of the bona fides or otherwise of these claims.

[31] On February 26, 2006, he prepared a document requesting that the matter be referred to investigation. He lists 16 items which he feels point to a fraud. Most of the items were known to him by November 2, 2005. In his mind it was the results of the bank request at DUCA which changed a series of "unusual" circumstances into some real indication that a fraud was being committed by Smith. At all times he resisted the suggestion (properly put to him by defence counsel) that from early on he was conducting an investigation of a fraud. He stated that at all times he was doing an audit.

[32] The email exchange at tab 44 Exhibit Number 1 "A" is interesting. It is the report to the audit manager Mark Andrews, who forwards it to the HRAT leader Jim Gilbert. It speaks of the information received by Chong in the phone message from Smith. It refers to an explanation for the GST returns of NGW Natural Gas Wholesalers Inc. The response from Gilbert seems to refer to the hope that the explanation is a reasonable one, which would support the position of the Crown that his was a legitimate audit process and was not an investigation in disguise. In fact the record contains many emails between the various members of the audit and HRAT personnel. There are suggestions that audits of the owner of NGW Natural Gas Wholesalers Inc. (Silver) were being audited for other matters and all of this could be interrelated. There is a reference to several other persons, including Amanda Singh, who may have more information than she is disclosing.

Ron Persaud

[33] Ron Persaud is a team leader in the audit department and referred the audit of NGW Natural Gas Wholesalers Inc. to Michael Chong. He has been an auditor for 15 years before becoming a team leader and has performed about 1500 audits in his career. His assignment of audits is based mainly on caseload.

[34] As part of his job function, he did not take contemporaneous notes, but sometime in 2009 he prepared a will-say statement. With the consent of the defence, I allowed him to refer to this statement in the course of his testimony.

[35] The witness stated that certain things triggered this audit including the amount of the refund claims and the fact that no T2 returns were being filed for this corporation. He stated generally the databases available to the auditors and his understanding of when an audit should be referred for investigation. He believed that a request is required when information cannot be obtained from the taxpayer or any other way. He thought that investigation should take place when the auditor determines that the information he has is not factual or not representative of an ongoing business or where the claims or records are fictitious. In an email from Chong after the meeting with Amanda Singh, he did not understand Chong's reference to "perhaps SI should be involved".

[36] He certainly did not take any action as a result.

[37] He left the auditors a lot of discretion to consult various bits of information including history and the log of action. He believed that HRAT was involved in this file, and he understood HRAT to be there to give assistance to the auditor when needed. He confirmed meeting with Friedland and Silver with Chong. He confirmed that would always like to attend at least one field visit on each file and would go along to observe. The auditor decides most of the visits and Persaud decided when he wanted to go along.

[38] He pointed out that it may be risky but it does not mean that the company does not exist. He stated "I assume that all claims are legitimate and there are factors to question the claim but I assume legitimate".

[39] In cross-examination the witness was pressed (as was the witness Chong) about whether he thought it was not a more probable outcome that this was a case of fraud and that Smith was the likely culprit. The witness was adamant that notwithstanding the assertions of Silver, Friedland and Singh, that without some documentation to back up any of this, it was nothing more than a "heightened suspicion". He particularly stated that without seeing who was cashing the cheques and filing the returns, they were not in a position to move beyond the "audit" position, as there were many different possible outcomes. The witness was vigorously cross-examined on the contention that the information received up to November 4, 2005 was consistent with a fraud, then why was this not a fraud investigation. The witness continued to resist and insisted that without "following the money" to ultimately speak with the person filing the documents and seeing some documents, they were not in a position to assert a fraud and there were possibilities that there was a legitimate claim.

[40] He stated that with regard to the instructions that he gave to Chong on October 3, 2005, he stated that most audits he assigns fall under the category of high risk. The important issue for him was that the amounts were high each month over a long term. It caused him to think but he did not have a conclusion.

[41] The witness acknowledged that he had been copied some emails between Chong and members of the HRAT. The ones shown to the court don't mention the Defendant and while acknowledging that there may be some malfeasance, they suggest other scenarios and they seem to imply that they will await the audit results. It also mentions possible scenarios which have nothing to do with the Defendant.

[42] I note that throughout the examination and cross-examination, he, like the witness Chong, took what I can only describe as an audit attitude. For them it was a search for documents so they could deal with the audit. The steps they took were ones of audit and not investigation. They seemed to me to be rigorous in their discipline.

Mark Andrews

[43] Mark Andrews is the manager of audits in the Toronto North CRA office and was the person that Ronald Persaud reported to. It was his evidence that he flagged this account and referred it to Ron Persaud.

[44] He also did not take notes and his evidence is based on his memory and the odd email or note from meetings. He stated that the HRAT was a special audit unit set up in 2001 with the purpose of assisting in high risk audits and providing technical information. He was shown documents from the Parliament of Canada and items on the CRA website that it was the function of the HRAT (amongst other things) to take a pro-active approach and deal with multi-celled entities and identify frauds. He did not agree with the notion that HRAT dealt with frauds at least not in any capacity similar to an investigation.

[45] He confirmed that team leaders would often attend on the first field visit of and auditor for a specific audit. He was not clear about when he became informed of certain aspects of the investigation as he indicated that most of his information was from Chong and Persaud and it was discussed in person. He acknowledged meetings and discussions with James Gilbert, the head of the HRAT and on occasion with Deborah Edyvean. He indicated (and this was confirmed by several documents) that he wanted HRAT to only provide technical assistance and not do their own audit. He identified several other messages where the status of the matter was referred to. It was also revealed that there were at the time, several other audit issues with persons who at one time may have had dealings with the subject audit here. For this witness, those other audits and the need to resolve them with some dispatch were, I believe part of the reason that this matter was marked "high priority".

[46] The witness was extensively cross-examined about his knowledge of Roy Smith, and when and how he obtained any knowledge of Smith. He was adamant that at the outset, the name was not familiar to him. He stated that he first became aware of Smith upon the report to him from Chong of his conversation with Amanda Singh of October 12th. This is consistent with Chong's testimony but not consistent with the notes of Deborah Edyvean who has him speaking to her and mentioning the name of Singh and Smith. He discounted the allegation that Smith was a fraudster, and it is clear that while he raised Smith's name with the HRAT, he was still looking at the companies and enterprises controlled by others. In support of that contention was the "investigation" served upon the post office box on October 31, 2005. It contained the names of several parties but not the name of the Defendant. In addition the requirement served upon the DUCA Credit Union on November 4, 2005 only referred to the registrant company NGW Natural Gas Wholesalers Inc. and did not refer to the Defendant or the company he was a director and officer of namely: NGW INC.

[47] He indicated that he was consulted with and approved of the attendances at the mail box and at DUCA as being legitimate audit issues. When asked by defence counsel of the interest in Smith he described Smith (at that point) as a person of interest in terms of the civil and not criminal context.

[48] The witness attended a meeting on November 16, 2005 with members of HRAT and was briefed about several profiles of persons including, Smith, Singh, Haisell, and Disney. In an email setting up the meeting, the head of the HRAT referred to the meeting as being directed to recovery issues. He agreed that by February 2006 the matter should be referred to investigations.

[49] Like Persaud and Chong, he identified the initial factors that made this audit high risk and agreed that a fraud was a potential outcome. He stated that a "hold" would be a natural reaction with this information.

[50] He made an interesting comment concerning the role of audit in that potential recovery is always an issue and stated "If someone was bankrupt…why would we bother auditing that individual?"

[51] With regard to the allegations of fraud made by Singh, he stated: "We can't react on the mere fact that somebody…alleges fraud against another individual. We…openly receive calls where ex-spouses allege fraud against their former spouse, or ex-business partners allege fraud against a former business partner."

[52] Andrews recalls the reference in Chong's email of October 12, 2005 to "seeking direction from S.I.". He believed the issue was subsequently discussed before the bank seizure. He would not have sought any direction from S.I., as this is not allowed under R. v. Jarvis. No referral was made at that time, I presume with Andrews' consent.

Deborah Edyvean

[53] Deborah Edyvean was part of the HRAT team. The team consisted of about seven members. She stated that the HRAT team was to assist the audits and had access to information that the audit team did not have and they could also put time into matters that the audit team could not. She was called by Mark Andrews on October 7, 2005 (I believe that this date is incorrect) and was asked whether she knew Amanda Singh or Roy Smith. She prepared a memo of her search results (October 14, 2005) and provided it to Gilbert (her superior) and Andrews. Of note is that from the inquiries there was no reference to Roy Smith. There were several other names including Amanda Singh, Gary Drummond, Joen Diflaviano, and David Balaban. In her report, she made note of the high risk factors, including the mail box addresses. In one of her searches she made a reference to Singh's reference to previous dealings with GST returns by Smith. She does not recall when she made that notation.

[54] Her report definitely raises the possibility that these returns are not legitimate. It also raises a legitimate possibility for the discrepancies. The report mentions several persons with ties to this company but does not reference Smith. The witness was pressed in cross-examination about whether the focus of her inquiries was centering on the possibility of some fraud, but she always resisted that suggestion.

[55] She received copies of the GST returns and noted that there were several different signatures on the GST returns.

[56] As a result of her discussions and other information, she reviewed the GST returns and became aware that GST returns were going to a mail box number. She was aware that the existence of a mail box return address (along with other factors) was an indication of "high risk". She stated that issuing a request to see the information of the owner of a mail box number was not an unusual occurrence for her.

[57] She did a letter under Section 288 and 291 of the Excise Tax Act (Exhibit Number 1 "A") and sought the information from the mail box company. On the letter she listed the name of the company and several other names, but did not include the name of Roy Smith. She got information indicating that Roy Smith was the owner of the mail box and there were several company names (mainly travel businesses) which were listed for the account. She also got the name of Alan Haisell and his business card. She was informed that Haisell and Smith had access to the box. She then retrieved cheques and on November 2, 2005, she got copies of GST refund cheques From August 2001 to 2005. The payee was NGW Natural Gas Wholesalers Inc. and all cheques were endorsed by a stamp from the DUCA Credit Union indicating that they were to be deposited to "The Payee" and the account number at DUCA.

[58] She wrote a report on November 15, 2005 and attended a meeting on November 16, 2005. She had no further dealings with the matter until Feb 2006. She was not aware beforehand that the bank requirement at DUCA was being prepared or acted on. She was aware at the time of her report that the ownership of the bank account at DUCA had been established by the letter of requirement.

[59] Other than the request for the information about the ownership of mail box 118 she did not until March 2006 (when the matter had been refereed to investigation), do any further work on the file.

[60] She made comprehensive notes of her actions and they are contained in Exhibit Number 1 "A" at tab 5. This document was started by her on November 1, 2005 and up to November 1, 2005 is her recollection of the events between those dates. From November 1, 2005, the notes are contemporaneous.

[61] The witness was asked about the role of the HRAT team. She stated that the HRAT team was to identify high risk accounts and refer them to audit or investigation. She also indicated that they worked with both. She insisted that HRAT was part of the audit function. She agreed with the statement in Exhibit Number 9, the report of The Government to the Committed On Public Accounts, about the functioning of HRAT. She agreed that it had a pro-active function. She agreed that some of the matters identified were the result of frauds.

[62] She had made comprehensive notes of the matters she dealt with between October 4, 2005 and April of 2006. I note that her notes from October 4, 2005 to November 1, 2005 were made on November 1, 2005. That may explain some discrepancies, including the fact that her notes indicate that Andrews mentioned the name Smith to her on October 4th and Andrews states he did not hear the name until October 11th or 12th in his conversation with Chong. I also note that in her descriptions of her actions and searches, she only takes any searches dealing with Roy Smith after October 31, 2005, the date she discovered his name on the mail box. Clearly he did not bear upon any of her searches until after that date.

[63] In all of her profiling of companies and persons, she stated that most of the actions she took were routine, including getting the GST returns and the copies of the cheques.

[64] In her attendance at the Mail Boxes Etc. on October 31, 2005, she was extensively cross-examined about the results of her search. She stated that checking the mail box was routine and the letter she prepared did not even mention Roy Smith, but referred only to others. She admitted that the results of the search were consistent with her earlier stated alternative (in her report of October 14, 2005) that someone had taken over NGW Natural Gas Wholesalers Inc. and was filing returns. She did state that she needed to do a profile of the other person connected to the mail box, namely, Alan Haisell.

[65] She indicated that she reported to her supervisor Gilbert during all phases of her inquiries, including the results of the Mail Boxes Etc. search.

[66] Defence counsel on at least one occasion referred to the searches performed by this witness as an "investigation". The witness never accepted that terminology and always stated that she was doing her job of profiling. She also pointed out that there were other persons in the HRAT department who were doing profiling on other individuals including Amanda Singh.

[67] It is clear that after the information from the mail box request concerning Roy Smith, this witness began to look for more information on Roy Smith, it s also clear that she was looking very widely and pursing all information she had with regard to Alan Haisell (whom she had no information on before) and other and all relating entities and persons.

[68] On November 1, 2005, as a result of information learned from the mail box Et Cetera attendance, she was able to get a lot more information on Roy Smith. Included in this information was the fact that Roy Smith was the president of a company called NGW Inc. which had filed for GST refunds in 2001. The databases revealed that those refunds were disallowed after audit because the company was not carrying on business. There was also information discovered by her on November 1, 2005 that deposits to NGW Inc. by CRA in 2001 were the same account that GST deposits were being made to NGW Natural Gas Wholesalers Inc. in the present period. This is clearly some further information that there may be a connection with the present matter to Roy Smith and that if he had attempted to file false returns in 2001, he may be doing so now. She got some documents from the old file of NGW INC. audit that indicated that NGW Inc. (along with Smith) were being referred to S.I., and that Jim Gilbert was then aware of the connection.

[69] It is important to understand the role of Deborah Edyvean. Ms. Edyvean was researcher in the HRAT department. Clearly it was her function to comprehensively search the databases to find information. In this case, she started on October 7, 2005. At that point, there was little she discovered that linked the Defendant to any of this. Clearly the results of her mail box request on October 31, 2005, led to the Defendant and Haisell. Her searches and retrieval of information clearly began to make connections between the Defendant, and a company NGW Inc., and by November 4, 2005 she had seen documents which implicated the Defendant in a previous suspected fraud with NGW Inc. She was in contact with her superior Jim Gilbert and was clearly briefing him on certain items discovered. The question is does this make her an investigator, and was she "investigating" the Defendant. Even if that were the case, what was her relationship to the auditor William Chong. Upon review of her entire testimony, it is clear that she did not look upon herself as an investigator. She was aware of the separate functions of audit and investigation. She looked upon her role as a "miner of databases" for information which could be used as part of the audit and recovery function. The fact that lots of this information could ultimately be used for investigation purposes is something I must consider in this application. I do not find that she was an investigator.

James Gilbert

[70] He is the head of the HRAT team. He has experience with the CRA going back to April 1984. He became leader of the precursor team to HRAT in April 2000. He states that HRAT is now called Aggressive GST Planning ("AGP"). He did not have any self made notes of any of these matters and (like the witness Andrews) and was going from memory and was reminded by some of the documents.

[71] He believes that the mandate of HRAT is to develop methodology to identify intrusions into the tax process. It would appear that from a practical perspective he believes that their main focus is to identify identity theft issues and other audit risk issues added to the mandate, over and above identity based theft intrusion. He has a team of some 6 to 8 analysts. He stated that their work involved reviewing the many databases to determine and establish "linkages" between individuals and companies to see whether other GST accounts are linked to various activities. He described their work always as "profiling" the persons and accounts, to see if any linkages existed. Ultimately the goal was compliance. It is clear that his team was in the business of identifying things which could clearly lead to criminal prosecutions. They were not there to find the innocent mistakes and errors made by GST registrants. He was particularly concerned about "multi-cell" activities and that involved a continuing process of profiling persons and companies to see what linkages they have to others, and maintain this information. He was aware of the distinction between the audit and investigative function, but was (in my opinion) very honest about the practical blurriness in finding the practical distinctions. As he stated, all audits are a form of investigation, and ultimately lead to a decision concerning compliance whether, satisfaction, reassessment, or prosecution leading to criminal penalties.

[72] He was shown the Governments response to the Public accounts committee which gives a description of the role of HRAT. He disagreed strongly with the portion of the document which stated that HRAT will work closely with prosecution and enforcement. He elaborated that there was no contact between his department and unless there was a referral to investigations. He was of the view that information they may obtain after a referral could only be obtained by them with a warrant.

[73] He recalls being contacted by Andrews about NGW Natural Gas Wholesalers Inc. He does not recall any names given initially. He recalls having three to four of his analysts, including Deborah Edyvean working on profiling. He was probably aware that Chong was assigned to the audit and he was with Chong on the DUCA bank requirement on November 4, 2005. He states that he had nothing to do with the preparation of the requirement but was asked to go along to facilitate the dealings with the bank manager as he had some experience in that area. He was adamant that if he was given any names initially, they were names to be all followed up to see what if any linkages there were to other accounts.

[74] He was shown documents (Exhibit Number 27) which indicated that another company NGW Inc. had been audited in 2001 and as a result, the file had been referred to him. He stated that the referral had never been made to him, and was adamant that but for the bank request on November 4, 2005, he was not aware of any connection between NGW Natural Gas Wholesalers Inc. and NGW Inc.

[75] He stated that Deborah Edyvean would have kept him up to date about her profiling and would have advised him immediately about the information she received from her mail box request on the October 31st.

[76] He was of the view that there would be no restrictions in passing information between his HRAT people and the auditors, although he felt most information would go through him to Andrews. He stated there were some three meetings with Andrews, and Chong could have been present at one or two of them.

[77] With regard to the bank requirement by Chong, he stated that he was asked by Andrews to assist Chong, who had never done a bank requirement before. He reviewed the report from Edyvean of October 17, 2005. He agreed with its contents and would have reviewed it at the time.

[78] He was pressed repeatedly by defence counsel about the role of the profiling by his analysts. In all cases while he admitted that their involvement was in the high risk cases (lots of money) and often involved issues of identity theft, there was nothing in his evidence that spoke to of a role in prosecutions. He stated:

Normal work of high risk is to profile and identify linkages in high risk accounts to put refund limits on accounts until audit could determine whether monies were or were not owing, and to determine whether there are other linkages where there is leakage.

[79] The witness agreed with the Crown that a previous request in 2001 to refer NGW INC. to investigations upon the opinion of the auditor was a reasonable one. The factors cited by this auditor are very similar to the factors being found out in 2005 and known by October 31, 2005.

[80] The email exchange of October 19th and 20th (Tab 25) is somewhat instructive in several issues. It is clear that Gilbert understands that Andrews does not want a very active role of HRAT in this matter. That confirms Gilbert's general impression and Andrews' testimony. It is also clear that at this time Smith is by no means a target of any of these auditing functions. In fact it appears that Gilbert has no preconceptions at all when he says: "I am not sure where the chips will be falling when all is said and done.". He also referred to an obscure reading of the BCA but that was in the context of a legal point, and did not seem to be related in any way to Smith.

[81] The witness seemed to be aware that there was the possibility that Andrews may cross the line and use audit powers for investigative purposes. He stated that he thought the line was crossed when Andrews showed him the copy of the letter from Silver to the CRA dated February 1, 2001. He is not sure when he saw that letter. To him that was a factor that pointed strongly to the fact that this could now be a criminal investigation of Smith.

[82] This witness was shown a great number of documents from the various CRA databases. He could not say if he had seen them other at times to say that some of this information should have been passed along to him, although he cannot say when he may have seen it. Specifically he was shown documents related to the audit of NGW Inc. in 2001, which have the name of Smith on them and their banking and other particulars. He cannot say he saw any of them contemporaneously but Edyvean may have shown them to him or told him about it during the 2005 profiling.

[83] He was shown the reports of Eweret (Exhibit #1, Tabs 39, 40 and 41), from November 15, 2005 which he says were probably shown on the November 16th meeting with the audit and HRAT people. Many of the reports detail information about Smith and Haisell.

[84] The witness was a thoughtful person and gave considered replies to the questions asked of him. He has only a very vague memory of any of the actions taken by him or his analysis team in October/November 2005. He relied upon Edyvean and to a lesser extent his other analysts. He said that he never looked at data bases himself, but relied on the analysts to bring information to him. In that regard Edyvean's notes and recollections are probably more accurate chronology of her involvement and information sharing with him.

[85] He repeated over and over again, that his team was to pursue any and all leads for the purpose of seeking "linkages" between people under audit and other related persons or companies in order to be able to see if refunds were going out to others. In other words, they were a pro-active group, which when given information by auditors, looked to see if there were other related entities which should be looked at.

[86] Most of their information gathering was through the many data bases kept by the CRA. It is a testimony to their size and complexity, that he needed a team of analysts to look at and discover information that the CRA already had. In this regard, he confirms that these databases are not as readily accessible as one may think. Chong did not (in his evidence) really make much use of them.

[87] What I did not get from him was that he was directing a concerted effort to investigate Roy Smith. However, when the Smith name arose (to Edyvean sometime in late October) he supervised a perusal of all leads and linkages.

[88] His evidence concerning the bank seizure is instructive about his role. He was there to facilitate Chong's efforts. When the information obtained that day contained references to Roy Smith, he had no reaction, as I believe that was not the focus of his efforts.

Tony Ing

[89] Tony Ing is the investigator who was assigned this matter. He received it with the Chong referral in April 2006. At some point he also got the Edyvean report.

[90] He performed many searches to obtain independently from the auditors the information from the various CRA and outside databases, without using any CRA requests or requirements. He swore several ITO's to obtain information. Two ITO's sworn on March 20, 2007 (Tab 62 and 63 of Exhibit Number 1) were to obtain the mail box information, the DUCA banking information for the deposit account of the GST refund cheques, and an account at the Bank of Nova Scotia. The Affidavits are some 48 paragraphs long with much detailed information.

[91] Within each ITO is a series of paragraphs which contain information from the auditors after October 12, 2005. Those paragraphs are differentiated from the other paragraphs in the ITO by being in italics. The introductory paragraph states that the following information is not being used by the affiant to form his grounds, and thus should not be used by the issuing justice in seeing whether sufficient grounds exist for the issuing of the warrant.

[92] The witness in May 2006, served notices upon the Defendant that he was under investigation and that reassessments were underway.

[93] He met with the collections department (who usually don't get involved until after the investigation is complete) to discuss exchanges of information. The witness stated that in this case because they had all the documents (GST returns and cancelled refund cheques) and because of the amount of money, then collections would want to proceed at once.

[94] In cross-examination the defence brought out some occasions where the witness did use the mail box and bank information namely in giving information to collections and another occasion he sent the notices (he had sent them to Smith home address in May) that had been returned to the mail box address. He noted that the mail was not returned from the mail box address.

[95] Also in cross-examination it was confirmed that the auditor Chong spoke to him in April 25, 2006 about a related matter. The witness said it was not something that he would be dealing with. While the defence may argue that this is some evidence of directing the auditor in contravention of the Jarvis principle, I note this discussion was well after the audit ended. I don't think this changes the fact that there was no audit going on while investigation was happening.

[96] It is clear from his several reports during the course of his investigation that he used the mail box information and the DUCA information to support his contention that the investigation should continue and that he believed that offences had been committed. However it is also clear, that he performed his own searches in the CRA and other databases to get all of the material referred to in the ITO save the information referred to in the italicized paragraphs.

[97] Of note is that this witness has notes of a meeting with Mr. Chong in July 2006, which seems to indicate that Mr. Chong thought as of October 31, 2005 that there was a fraud being carried on and as of the result of the bank requirement of November 4, 2005 that the culprit was Smith (Chong denied that he told Ing that he thought the fraud was shown as of October 31, 2005).

[98] The witness was shown his report of April 28, 2008 which contained his recommendations for a prosecution of the Defendant. He lists many factors but lists 16 separate factors which show the Defendant's "mens rea". Upon review of those factors, much of that information was contained in the databases of CRA and important matters were known to Chong (as per his evidence) and other important matters known to Edyvean (as per her evidence) by the time of at least the bank requirement. Certainly items 1, 7, 8, 10 were known to Chong before the mail box request and the mail box info was known to him at the time of the bank request. Edyvean had more information which she obtained between the mail box request and November 4, 2005. Chong relates that very little of this information got to him.

[99] Of interest was Exhibit 1 "A" Tab 25, which was a form filed in 2001 by Smith requesting that the GST number of NGW Natural Gas Wholesalers Inc. be rescinded. Obviously that was never acted upon, because this fraud could not have been committed if the GST number had been cancelled. This perhaps shows somewhat the level of common knowledge (or lack of common knowledge) in the CRA.

[100] The witness was cross-examined extensively about the uses he made of information from the audit files. He stated that he did a complete investigation of all the information.

[101] It is clear that he reviewed the audit file sent to him by Chong. He clearly followed up all of the information but he did get it on his own.

PART III - THE PROCESS OF THE AUDIT AND FINDINGS OF FACT

[102] I find that Mark Andrews, the head of audits at the North York branch was actively supervising several accounts of individuals (not the Defendant Smith). As part of that audit, he became aware that a company, NGW Natural Gas Wholesalers Inc., related to some of these individuals was filing large GST refund returns. The refunds claimed over almost 5 years was upwards of $9 mil. There were other factors which fit the CRA's definition of high risk. The factors included, a mail box address, no tax returns or payroll indicators in the period, and a steady stream of consistently high refunds for the past several years.

[103] On October 3, 2005, he referred the matter to Ron Persaud, an audit team leader at the North York office. Persaud then assigned the matter to William Chong, (an auditor of some 12 years experience), and one of auditors under his supervision. The audit was (in the email correspondence) marked as high risk, and also noted to be "high priority". Chong took this to mean that he was to arrange his audit workload to accommodate this matter. The audit was a post audit, meaning that the refunds claimed had already been paid out, and was for the years 2002 through to 2005.

[104] By this point either Persaud or Andrews had put a "hold" on any further GST refunds to this company. I do not think this is of great relevance. The huge amount of refund was enough to trigger this.

[105] At the time that he received the audit instructions, Chong looked up the corporate records of the company and the corporate tax returns. He noted that the company had not filed returns in many years, did not list any GST income and had only filed for refunds. He did not find this unusual as many related companies do this especially when they sell products outside of the country. He noted a previous audit of the company in 1998 and noted there were no difficulties. I believe that this was important to Chong's thinking. In assessing Chong's actions, I believe that it is instructive to look at the form of the GST returns. Unlike an income tax return, they contain very little information. Only the name of the claimant, the date and the amount claimed are on the form. There is a space for a signature (without the necessity of printing in the name), and in our case, some of the returns do not have a signature. In this context, I do not find it all surprising that the auditor needs to find the documents of the filing company to perform any sort of audit whatsoever.

[106] On October 4, 2005, he began to make contact with persons who may be related to the account, but did not find out any relevant information.

[107] On October 12, 2005, Chong spoke to Amanda Singh, who had been related to the company. It was in that conversation that he heard the name of Roy Smith, and Amanda Singh told him that Smith had filed some fraudulent GST returns in the past. He had learned that Natural Gas Wholesalers Inc. had sold its assets to Direct Energy in 2000. She was not aware of the listed contact address of "155 East Beaver Creek Drive".

[108] He reported to Persaud by email. In that email he makes reference to "seeking direction from SI". He stated that was because he thought that Amanda Singh may have been filing the GST returns. In any event Persaud did not do anything with that comment, and neither did Andrews. I find that these comments from Chong certainly indicate that he thought that fraud was a possibility, but as he stated many times, his main focus was to get documentation from the company so he could do an audit. I find that he is credible in this belief. I find that Singh's comments to him about Smith fall into the same category, that is there is an allegation from an interested person, and can only be treated as such. I do not find that at this stage there was any referral to investigations and neither, was Chong conducting an investigation. Persaud's lack of comments back is telling in that he clearly did not think it was appropriate to do so. The allegation by Singh was as much admission as anything else. The auditors were still (properly, I believe) looking at the people who controlled the company. The defence latches onto Chong's comments that a claim can be denied when documents are not forthcoming. That is so but that does not mean any denial is a conversion into a fraud investigation. This was Chong's (in 12 years experience) first case of a referral to investigation. He had made many more denials to investigations.

[109] At some point Andrews makes contact with the HRAT ("High Risk Audit Team"). He believes that he contacted HRAT after October 12, 2005. Deborah Edyvean of HRAT believes it was on October 7th. Gilbert has no recollection of dates. I find that the phone call from Andrews to Edyvean (and subsequently to Gilbert) happened on or after October 12th as he refers to a call that Chong made to Singh on October 12, 2005. Deborah Edyvean's notes, while comprehensive, were made a month after the events she speaks about. I also note that she does not do any profiling of Singh or Smith until after October 31, 2005. I specifically find that Deborah Edyvean did not have any real knowledge of Roy Smith until after the "mail box request" of October 31, 2005. She certainly did not do any profiling of Roy Smith until after October 31, 2005.

[110] It is clear that Andrews wishes some assistance from HRAT with regard to the "profiling" of individuals which may be related. It is clear from his later correspondence with Gilbert, that he wants to keep HRAT at arm's length and wants to limit their involvement. This refutes somewhat the defence contention that Gilbert and Andrews were orchestrating a concerted "fraud" investigation.

[111] It is also my belief that at this point in the audit process, Andrews views are that the issues with NGW Natural Gas Wholesalers Inc. is very much related to another taxpayer (not Smith) who is having various personal and corporate accounts under audit. Smith, is not on the radar of anyone in the audit or HRAT departments.

[112] I believe this is borne out by the report prepared by Deborah Edyvean on October 14, 2005, (Exhibit Number 1, Tab 16). She mentions at lot of information and individuals but Smith is not one of them. Her concluding remarks begin with the phrase, "at first glance this account appears to be a legitimate company, although somewhat non-compliant". She goes on to indicate that an audit would clear up various items of confusion and states: "Further inquiries by audit could clarify this situation resulting in audit contacting the relevant individuals who would handle NGW's account". This I believe would support Chong's assertion that he is looking for the proper contact person with which to be able to get information for an audit.

[113] However, as indicated in her conclusions to the report, the possible scenario of fraud is a real and distinct possibility. She had shared her report with her superior Gilbert and he agreed with her all of her views, and would include the possibility of both scenarios.

[114] The auditors, Andrews, Persaud and Chong were more circumspect in their assessment. For Chong he stated that he was wanted to get the documentation from the owners of NGW Natural Gas Wholesalers Inc. For Persaud, he stated that the situation may fit the high risk categories (large refunds with no payroll or corporate tax returns and a post office box address) but that does not mean that the company did not exist. He further stated that "I assume that all claims are legitimate and there are factors to question but I assume legitimacy."

[115] This can be contrasted to the attitude in the HRAT. I think this difference can be seen in that HRAT does not deal with the day to day audits. When they get a referral it is almost always high risk and they, I believe take the view that there may be identity theft and they need to make "identifications of intrusions into the tax process". Their attitude from the beginning is to probably assume a potential of some misfeasance and they see their main function as to check for linkages, as a result of "multi-cell" activities. In other words, they assume the worst when high risk factors are present and seek to begin profiling immediately to see if there are any other related companies or entities that should have a hold put on refunds until an audit can be performed. I specifically find, based on the evidence of all parties, that HRAT is not masquerading as "investigators" insofar as the word is defined in R. v. Jarvis. I find that they are indeed partially in a supporting role to "regular audit" and partially in a pro-active role to stop GST refunds being paid out to any entities which may be related to any high risk situations until further audits (or other actions can be undertaken). The only hallmark of investigators is their attempt to assess the assets of persons whom they may feel would have to re-pay (for whatever reasons) any amounts to the CRA.

[116] Defence counsel asserts that HRAT was effectively an investigative body and thus they stand in the place of investigations. In assessing all of the evidence of James Gilbert, and Deborah Edyvean, I believe that their function in this case can be distilled as follows:

(a) they were involved in matters which were described as "multi-cell" identity thefts. These are frauds dealing with GST refunds on a large scale and involve (usually) several different entities;

(b) they would provide profiling services to auditors on their request and they had a great expertise in "mining" the many and varied CRA databases for information;

(c) The sharing of information with the auditors was not a regular flow. They responded to specific requests from the auditor, but clearly on the facts of this case did not provide a steady flow of information;

(d) they would be very concerned about whether there were other linked accounts with a view to stopping further refunds going out to such linked matters. The history showed that often there were more than one account linked to a person or persons who were doing the same things at the same time;

(e) notwithstanding the suggestion made several times by defence counsel, I don't see them as performing profiling to assist in the criminal prosecutions. Certainly some of their eventual information could be used by prosecutions but I believe that there function was to stop further losses;

(f) they did have a role in "RECOVERIES" in identifying sources of assets where it may be possible to recover improperly taken funds. This appeared to be ancillary to their profiling work and had a civil recovery aspect to it. This work would have been potentially less useful to any prosecution.

[117] At this point, I believe, from an objective view, that the auditors are sincere in their statement that the audit is continuing.

[118] I have found that there was something of an irregular flow of information between the auditors and HRAT. This is borne out by Andrews wish to keep HRAT at "arms length". There was contact between Edyvean and Chong, but I find that it was limited to the times and issues as revealed by the parties. I contrast this with the sharing of information between Edyvean and Gilbert which must have been on an almost daily basis.

[119] For the auditor Chong, he wished to get the GST returns and the copies of the cancelled checks while he was still seeking information and documentation from the owners of the company. I accept his assertion in that regard. Even accepting that, he was clearly having suspicions and by October 12, 2005, he was aware that Singh was implicating Smith in a previous fraud upon NGW Natural Gas Wholesalers Inc. He was aware of the address changes. He was aware of the lack of returns for payroll or taxes, and he was aware that the former contact person (Singh) indicated that she was not aware of any GST returns being filed at all on behalf of the company.

[120] I do not disbelieve Chong when he stated that he was not terribly believing of Singh (and eventually Silver and Friedland) as they clearly could have been speaking out of self interest, and did not provide him any of the books and paperwork of the company, even though they were promising it to him. I believe him when he said that he had nothing to substantiate any suspicions of Smith (or anyone else) and for him the audit was continuing.

[121] At the time of the October 14, 2005 report from Edyvean, Chong was still no further ahead and he asked Edyvean to help him get the cancelled refund cheques.

[122] Chong got three of the GST refund cheques. Other than the bank stamp from DUCA there was no information about any endorsements. Edyvean was still doing profiling of all and sundry including Mark Silver and one of his companies. She had not done any profiling of Smith. Between October 13th and October 20th, Edyvean was looking at the subject company and direct energy affiliations. Getting the refund cheques and GST returns was not easy as they had to get these documents from other locations. Both Chong and Edyvean stated that getting cheques was a normal audit item.

[123] Chong requests that Edyvean do profiling for him on Amanda Singh. Chong at this time was still looking for the GST returns of the subject company. At this point Chong thought that the claims may be legitimate. Edyvean is reviewing a lot of CRA database screens. The defence urges that because in this period Edyvean may have seen a scam stating that a Roy Smith had a past authorization for NGW Natural Gas Wholesalers Inc. in the past, therefore Smith was now on the radar and this information went out to all. There is no indication this happened, and the names on the Mail Box request letter (and the bank requirement for that matter) are a clear statement that Smith was not a focus of anyone's suspicions.

[124] Throughout this period of time, there existed within the various data banks of the CRA several important pieces of information about Smith and especially with regard to a previous claim he had made in 2000 for GST refunds for the company NGW Inc. That claim had been audited by one Wagner. He denied the claims and based upon his interview with Smith, recommended that it be referred to Gilbert (who was in investigation at the time) for further investigation. No investigation was ever carried out and Gilbert denies ever seeing the auditor's report and denies ever receiving a request to investigate. I believe him in this assertion. I believe that the first time he (or Edyvean) actually became aware of NGW Inc. was after October 31, 2005 (the mail box request).

[125] As a result I find that none of the auditors, either regular or HRAT were actually aware of that previous matter until after October 31, 2005. Just because there was a lot of information on Smith and NGW Inc. in the data banks, that does not mean it was in the minds of the auditors. Information about Smith only started to be mined after October 31, 2005. The profiling of others never stopped.

[126] Chong, between October 24, 2005 and October 28, 2005 spoke to Friedland who was the accountant of NGW Natural Gas Wholesalers Inc. and was still being promised documents.

[127] The general impression I have at this point is that there is a lot of confusion in the minds of the various auditors. The e-mail exchange between Chong, Edyvean, Gilbert and Andrews is instructive. (Exhibit Number 1, Tab 25, of October 20, 2005). What starts off as a request from Chong for a profiling of Amanda Singh, becomes a statement from Gilbert that Andrews did not want him to "undertake any review or supporting actions pertaining to this matter" to Andrews discussing a whole lot of facts which never materialized (i.e. "the principal is also currently seeking a $1 million refund on a jet purchase on a related account....."), to Gilbert discussing the finer points of the Business Corporations Act. I believe no one has a clear idea at all of what this will be all about, and while fraud is always in the background, there is no mention of anything criminal.

[128] Edyvean prepared a letter of request, and attended at Mail Boxes Etc. (155 East Beaver Creek) on October 31, 2005. She had discussed the matter with Gilbert who concurred and on whose authority the task was being carried out. Edyvean looked upon this request as not unusual. Upon review of 288 (1) Excise Tax Act, the request need not be with a letter, but letters are prepared as a matter of practise, to give some comfort to the third party. I think it is instructive that the request mentions several names but not Roy Smith. This confirms the confusion in audit and confirms that the audit team is not at all focussed upon Roy Smith.

[129] The mail box being sought was the mail box for which the cheques were being sent from the CRA. It was also the address which had been given to the CRA by Smith, in 2001. It was 155 East Beaver Creek, Richmond Hill, Ontario, Box 118. As a result of that request, Edyvean learned that Roy Smith was the owner of the box and was using it with one Alan Haisell.

[130] Edyvean meets the next day (November 1, 2005) with Gilbert and gives him the information. At this point Edyvean then begins a very comprehensive "profiling" of Roy Smith and the several other corporate and business names which were on the mail box account. Her profiling leads her to NGW Inc. and the fact that NGW Inc. has the same bank account that some of the NGW Natural Gas Wholesalers Inc. cheques are being deposited to. The audit (referred to above) is seen.

[131] As far as Edyvean and Gilbert are concerned there is now a connection between Roy Smith, the fact that he attempted a previous bogus GST claim and the fact that the GST refund cheques for NGW Natural Gas Wholesalers Inc. are going into a mail box owned by him.

[132] There is no evidence that this information was as yet given to Chong. On November 2, 2005, Chong (along with Persaud) meets with Silver and Friedland and Singh. Chong is informed of Smith's past fraud against NGW Natural Gas Wholesalers Inc. and is given a copy of a letter that Silver wrote to the CRA detailing this fraud, on February 1, 2001.

[133] Chong then prepares the bank requirement to the DUCA credit union and specifically the account stamped on the back of the GST refund cheques. The bank requirement is marked as Exhibit Number 1, Tab 35. Upon review of the bank requirement there is no reference to Roy Smith. I believe this shows that Chong, at the time he prepared the bank requirement, was not aware of the result of the mail box request by Edyvean on October 31, 2005. This is confirmed by Exhibit #2, Tab 7, where Chong set out the factors for getting approval for the requirement. There is no reference to any of the information learned by Edyvean, including the mail box information. Chong is aware of the claims made by silver about Smith by virtue of his meeting November 2nd.

[134] Gilbert attends with Chong at the DUCA bank on November 4, 2005. Gilbert says that he was asked to assist Chong with the bank requirement as he had some experience getting the proper information quicker (Andrews suggest that Gilbert asked to go along).

[135] It is difficult to know how Chong would not have been informed by Gilbert about the mail box info, but there is no evidence from either that the information was passed to Chong.

[136] As a result of the attendance at the bank, Chong obtains the important information that the account into which the cheques for NGW Natural Gas Wholesalers Inc. are being deposited, is an account owned by NGW Inc. Given to Chong are some copies of corporate documents of NGW Inc. which shows Roy Smith as a director and officer of NGW Inc. The documents also indicate that NGW Inc. has a business name of "NGW (Natural Gas Wholesalers)".

[137] There was no evidence given as to how DUCA allowed cheques for NGW Natural Gas Wholesalers Inc. to be deposited into an account of NGW Inc. It was the evidence of Chong that upon receiving this information, he believed that there had been a fraud committed upon the CRA and it had been committed by Roy Smith. The notes of Ing during a subsequent meeting with Chong indicate that Chong told Ing that it was the mail box request that led him to the conclusion it was fraud. Chong denies making that statement. Ing has no present memory of the statement. On balance, I accept Chong's assertion that he only became convinced of fraud after the bank seizure.

[138] It is at this point that without doubt, the primary focus of the matter is indeed a criminal investigation. There are two telephone messages received by Chong in November which may be from the defendant. One of them provides an explanation for the refunds which would be legitimate. Clearly Chong does not like it and after a meeting with Silver and Friedland in the new year, prepares the file for investigation. He forwards the file to investigation after the Chong referral.

[139] The investigation Ing speaks to Chong (on two occasions) and to Deborah Edyvean (at least once). Chong sough clarification of another matter not directly related to this audit. Ing sought some clarification. Ing had in his possession all of the information from Chong, including the results of the mail box (October 31st) and DUCA bank seizures (November 4th). He however, proceeded to do all his own searched of the CRA data base. He recommended to his superiors that an investigation continue based on all of that information known to him.

[140] When it came to obtaining the mail box and banking information, he obtained search warrants. He disclosed his Affidavit that this information was already obtained but he did not rely upon it (and by implication, the issuing justice should not rely on it). He adopted this procedure as a result of legal advice and in fact did not rely on information from October 12th forward.

[141] Ing then used the result of these seizures to obtain further production orders and warrants.

PART IV - THE ISSUES

Does the defendant have any standing to bring this application?

[142] The defendant has not filed an Affidavit with this application and has not testified. The evidence to show whether he has standing to bring this application comes from the evidence of the CRA officials and the documents.

[143] His counsel asserts that the documents retrieved from the mail box at 155 East Beaver Creek, connects him directly to the mail box. I accept that. He was the owner and the main user of the mail box, although there was another user named Alan Haisell. He paid for the mail box and is listed as the owner. It is clear that he has a connection to the mail box. The request did not extend to the contents of the mail box.

[144] The connection asserted by the defendant to the bank account #3578702 (which is owned by NGW Inc. which has a registered business name of NGW (Natural Gas Wholesalers), is more tenuous.

[145] Exhibit Number 4 are various corporate documents which indicates that Roy Smith is a director and officer of NGW Inc. The company was incorporated pursuant to the Business Corporations Act (not the Corporations Act) and thus by section 118 (2), a director need not be a shareholder. I have not seen the shareholder register, and as stated above, the defendant has presented no evidence where he asserts that he is a shareholder.

[146] The defendant is clearly not associated in any (legal) way with the entity NGW Natural Gas Wholesalers Inc. The assets of the company had been sold to Direct Energy. Cheques from the Canada Revenue Agency, made out in the name of NGW Natural Gas Wholesalers Inc. were deposited into an account of NGW Inc. They were then negotiated into bank accounts in the name of the defendant.

[147] The Crown argues that in these circumstances, the defendant has no standing to assert the relief as set out in R. v. Jarvis. To the Crown, the defence has not established any connection to the company who was the subject of the audit and the investigation. Hence the relief in Jarvis is not available. The Crown asserts that the defendant has stolen the personality of the corporation and by deception, kept up the charade that the corporation is operating and generating GST input Tax Credits, when in fact it is inactive and the legal owners of the corporation have not taken any steps to file for any GST credits. The Crown asserts that only NGW Natural Gas Wholesalers Inc. would have standing to bring this application.

[148] Looking at Jarvis carefully, the case first deals with the Income Tax Act and not the provisions of the Excise Tax Act. The acts are so similar in their powers and respective audit and investigation powers that the Crown concedes that for these purposes, they should be treated the same. Notwithstanding that, Jarvis refers to the basic philosophy behind the system of self-reporting of income that makes up a system of tax collection. At paragraph 49:

Every person resident in Canada during a given taxation year is obligated to pay tax on his or her taxable income…The process of tax collection relies primarily upon taxpayer self-assessment and self-reporting: taxpayers are obliged to estimate their annual income tax payable …and to disclose this estimate to the CCRA in the income return that they are required to file.

[149] At paragraph 50, it states: "For example, in promotion of the scheme's self-reporting aspect, s. 162 of the ITA creates monetary penalties for persons who fail to file their income returns." As noted in paragraph 51: "It follows from the tax scheme's basis self-assessment and self-reporting characteristics that the success of its administration depends primarily upon taxpayer forthrightness."

[150] In other words the court is pointing out that these obligations are imposed upon the taxpayer. He has no choice but to enter into this system, which can by its self-reporting nature, lead to the person to make statements (orally or through documentation) that incriminate themselves. Does the rationale behind the analysis still apply to a fraud artist who is not dealing with any self reporting obligation but simply chooses to make false reports for an entity that he has no interest in? He is not compelled to enter the process to comply with his legal and civic duty. He engages in the process in order to defraud the government.

[151] Jarvis uses the word "taxpayer" over and over again to describe the defendant (as do most of the other cases that follow it). In our fact scenario, the term taxpayer could only be applied to this defendant after the investigation of the false GST returns filed for NGW Natural Gas Wholesalers Inc. The assessment of his personal return only occurred after the authorities discovered the fraud surrounding NGW Natural Gas Wholesalers Inc.

[152] I can find no case law dealing with a similar fact situation. In R. v. Tiffin, the Ontario Court of Appeal was dealing with an audit/investigation of a taxpayer who was suspected of grossly understating his income, in the context of an investment scheme which, it was alleged, had the purpose of defrauding members of the public. While there is some similarity to our case, there is, in my opinion, more significant distinctions, the important one being that the focus of the audit/investigation from the CRA perspective was an underreporting of the taxpayer's income. In our case, as mentioned above, the audit/investigation was of a corporation unrelated to the defendant until his illegal involvement became known. His illegal involvement became conclusively known with a documentary link after the request for information served upon the DUCA Credit Union on November 4, 2012.

[153] The case of R. v. Edwards stands for the proposition that the Section 8 Charter right is a protection for people and not places. Where drugs are found at a woman's home, her boyfriend could not claim standing as he did not live there and claimed no interest in the property seized. In R. v. Lauda, the court held that a person who trespassed upon another's real estate to grow marijuana, has no standing to raise a Charter challenge to the search and seizure of the plants by the police. Is trespassing upon someone else's land to grow marijuana analogous to trespassing upon someone else's corporation in order to commit a fraud? Edwards sets out many factors which may include:

(a) presence at the time of search (no);

(b) possession or control of the property or place (this was not a search of the contents of a mail box but only the ownership and other information as revealed to the proprietors of the mail box) (The bank account was a limited company and the defendant was a director and officer);

(c) historical use (the defendant and Haisell attended the box) (with regard to the company, we know little to nothing about any legitimate use);

(d) the ability to regulate access (certainly the defendant had the key to the box, but again, this is only information about the renter of the box) (the defendant was accessing the corporate bank account);

(e) the existence of a subjective expectation of privacy (more detail below);

(f) the objective reasonableness of the expectation (more detail below).

[154] The significant question is whether there remains to the defendant any "privacy" interest in the places (the mail box and bank) account which have been the subject of the search. The defendant provided documents to the CRA which said that the address of NGW Natural Gas Wholesalers Inc. is 155 East Beaver Creek Rd. Suite 24-118, Richmond Hill, Ontario. As against the CRA, how can he now assert any privacy interest in the ownership interest of the mail box? Like the landlord who has leased out a premise to another, how can he assert any privacy right to that premise as to that other person?

[155] With regard to the bank account, I believe that the same analogy applies. The bank account documents provided to the bank described the owner of the account as NGW Inc. (NGW Natural Gas Wholesalers), which may technically be his company but presented in a fashion so that cheques payable to NGW Natural Gas Wholesalers Inc. could be deposited into that account. In addition, all of the cheques were endorsed in effect to the payee, at that bank and into that account. Surely by doing that, the owners of NGW Inc. have given up any privacy interest in that account in favour of NGW Natural Gas Wholesalers Inc. The bank, by negotiating these cheques, ran the risk of being liable for conversion. No explanation was provided by the defendant as to why the combined corporate and business name of NGW Inc. was so very close in appearance to NGW Natural Gas Wholesalers Inc. Without such an explanation, I will draw the inference that it was intentional and designed for the obvious purpose of "fooling" the bank into allowing their deposit into the NGW Inc. account.

[156] I note that by being a director and officer of NGW Inc., the defendant would in any event be one further step away from asserting the privacy interest (noted above to the mail box).

[157] In both cases, only NGW Natural Gas Wholesalers Inc. could have any real proprietary interest in the account which only receives cheques payable to them. By pretending to be something else, I believe that the defendant has given up any possible privacy right to the entity that he is claiming to be.

[158] I also note that Jarvis reiterates that an "individual has a diminished expectation of privacy in respect of records and documents that he or she produces during the ordinary course of regulated activities" (para. 72). I therefore conclude that the defendant has no standing to bring this application. In the event I am incorrect in that assessment, I will deal with the other issues raised in this application.

Has the defendant established a breach of his Section 7 or 8 rights?

[159] The defendant relies upon the decision of R. v. Jarvis and states that he has established upon a balance of probabilities that the factors enumerated in that case are sufficient to establish that audit had become an investigation before the powers to obtain third-party information by way of the "request" powers in the Excise Tax Act. As stated in Jarvis the factors to consider are the following:

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?

[160] The court reviewed previous jurisprudence and discussed situations (as is present here) where there are suspicions of potential criminal activity:

89. To begin with, the mere existence of reasonable grounds that an offence may have occurred is by itself insufficient to support the conclusion that the predominant purpose of an inquiry is the determination of penal liability. 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. In this regard, courts must guard against creating procedural shackles on regulatory officials; it would be undesirable to "force the regulatory hand" by removing the possibility of seeking the lesser administrative penalties on every occasion in which reasonable grounds existed of more culpable conduct. This point was clearly stated in McKinlay Transport, supra, at p. 648, where Wilson J. wrote: "The Minister must be capable of exercising these broad supervisory] powers whether or not he has reasonable grounds for believing that a particular taxpayer has breached the Act." While reasonable grounds indeed constitute a necessary condition for the issuance of a search warrant to further a criminal investigation (s. 231.3 of the ITA; Criminal Code, s. 487), and might in certain cases serve to indicate that the audit powers were misused, their existence is not a sufficient indicator that the CCRA is conducting a de facto investigation. In most cases, if all 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.

[161] In our case, the Crown concedes that after the bank requirement was served and the information from the requirement was received, the predominant purpose of the matter became a criminal investigation.

[162] The defence submits that the "rubicon" was crossed sometime before that, at least by the 12th of October, 2005. I will deal with each of the Jarvis factors here.

(a) Did authorities have reasonable grounds to lay charges or could a decision have been made to proceed with a criminal investigation?

[163] The following clear factors were known to auditor Chong by October 31, 2005. The GST refund claim was upwards of $10 million. There were no payroll or tax accounts for the company, the principals of the company denied there had been any GST claims, they pointed the finger at one Roy Smith. He also knew that the principals of the company were not forthcoming with any information, he had only a few refund cheques and GST returns to look at, and he knew the company had passed an audit some 6 or 7 years before. Does this go beyond a suspicion? Chong certainly did not think so, and I would agree with him. Certainly, just about any suspicious circumstance could be immediately sent to investigations, but I don't think that is the test.

[164] My decision in this matter is based on the following findings.

[165] Smith was not the focus of anyone's thoughts at audit when this matter was first referred by Andrews. Until Edyvean began to actively profile Smith after October 31, 2005, the wealth of information about NGW Inc., Smith's past fraud, and his dealings with NGW Natural Gas Wholesalers Inc. were unknown except through the statements of Singh on October 12, 2005, and then the follow up statements of Silver and Freidland on November 1, 2005.

[166] Suspicions were obviously heightened as shown by the Edyvean memo of October 14, 2005, but I believe that it went no further than that, and Smith still had not been profiled and all of the later information was still safely in the databases. At this point, they had some previous wrongdoing by Smith and the unsubstantiated allegations of Singh and the company principals. Charges could not have been laid without much more (at this point, it is conceivable that the principals of the company were more at risk for charges).

[167] Based upon all of the evidence and the timelines, I believe that the first possible time that the authorities could have laid a charge would have been after they discovered that the refund cheques for NGW Natural Gas Wholesalers Inc. were being received into a mail box address which was definitively controlled by someone other than someone known to be related to the company. While the principals of NGW Natural Gas Wholesalers Inc. protested before this date that they did not know of the mail box address, the auditor did not have any conclusive information. The principals were not forthcoming in their handing over of documents. There was raised the suspicion that it could be someone else, and that the person could be Smith, there was nothing known to the auditor about a real connection.

[168] The finding of the mail box could be that connection. Even accepting that, it is clear that Edyvean and Gilbert knew the mail box information by the 1st of November. Chong may have been aware of it, at least by the 4th of November when he went with Gilbert to the DUCA bank branch. Exhibit #2 (Tab 7), is revealing about Chong's statement of knowledge when he applied for permission to undertake the DUCA bank requirement. He lists 12 factors and none of them contain any reference to "Smith", to the mail box information, or NGW Inc. In other words, none of Edyvean's information has been passed to Chong. There is no date on the document but I believe it was probably prepared shortly before the bank attendance on November 4, 2005. The information discovered at the bank changes the situation.

[169] I believe that the fact that once it became known that the GST refund cheques were being deposited into a corporate account with some connection to Smith, then it was objectively clear that the matter would now become a criminal matter.

[170] In coming to this conclusion, I reject the defence suggestion that Chong (in particular) and the others (in general), were not being forthcoming to this court about what information he had and what conclusions he was coming to. I reject the notion that the evidence discloses that this entire audit procedure (at least after October 12, 2005) was an investigation in disguise.

(b) Was the general conduct of the authorities consistent with a criminal investigation?

[171] In my opinion, Chong, Persaud and Andrews were conducting an audit. The only question is whether the actions of Edyvean and Gilbert at HRAT, changed this. I don't believe so. Theirs was a different agenda to be sure, but it was an agenda to see that further monies were not paid out in refunds. They may have had some relationship with collections (doing the drive by etc.) but not to investigations, and certainly not to the seeking of criminal penalties.

[172] There was not an attempt to rush this to investigation. In fact the auditor Chong followed up on some further factors (interviewing Freidland and still seeking the records of the company) before referring the matter to investigation. In other words, there did not seem to be any collective cry of "eureka" among the auditors. This is, in my opinion a further factor indicating that the auditing and investigative functions were separate from each other, and certainly that investigations was not driving this process.

(c) Did the auditor transfer his or her file to the investigators?

[173] The file was eventually transferred to the investigators, in February, 2006. As I have noted, it was not transferred immediately, but waited until Chong had finished speaking to the principals of the company.

(d) Was the auditor's conduct such that he or she was acting as an agent for the investigators?

[174] There was no investigation opened until after Chong referred the matter to them in February. I have already found that HRAT was not an investigative arm. In any event, HRAT, in this case was following its own agenda and gave some support to the auditors.

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

[175] The answer to this question is the same as the above.

(f) Is the evidence relevant to taxpayer liability generally or only to penal liability?

[176] In this case, the audit was trying to determine the status in law of the GST refunds paid out to NGW Natural Gas Wholesalers Inc. over a 5 year period. At the beginning of the audit, every issue was in play. Eventually, after November 4, 2005, it became apparent that the company had been used as a cover by a fraudster to steal from the GST fund. In many ways, the audit as of November 4, 2005, was able to perform its principle function, that is, it exonerated the subject company.

(g) Do other circumstances or factors suggest that an audit became a criminal investigation?

[177] This matter is different from any of the other reported cases, in that a fraudster was lurking behind the shell of a company and using it to defraud the GST fund. Defence urges upon me, that this was an obvious fact to the auditors from the beginning. I disagree. While the people at HRAT may have shown some cynicism, based on their mandate and experience, the auditor, Chong was in my opinion, genuinely attempting to perform the task of an audit. He was aware always of the possibility of fraud, but until he had the documents to show it, he always considered other plausible options. I believe he was probably surprised at how audacious this scheme was, and how simple it's execution. However, there is no indication that anyone involved had set out to find the necessary information to get Smith. As I have already stated, Smith was not on anyone's radar (at the CRA) until the mail box request. Even then I find that it was not until the information came from the bank request that this matter could have gone to investigation.

[178] His superiors, Persaud and Andrews were alive to the issues of the separation between the audit and investigative functions. As stated by Andrews, they were of the belief that the bank requirement was an audit function.

[179] Ultimately, I must decide if the "predominant purpose" of the inquiry in question was the determination of a penal liability. This is an objective test and does not rely on the subjective feelings of the auditors.

[180] In assisting me in this process I think it may be instructive to look at the facts in Jarvis. The matter began with a "tip" that the defendant was underreporting his income. That would constitute and offence under the Income Tax Act. The auditor met with the defendant and obtained statements and documents from the taxpayer. The auditor made several misstatements to the taxpayer. The auditor actually lied to the taxpayer about the status of his file. The meeting with the taxpayer was actually the auditor "seeking confirmation of a suspicion that she held that tax evasion may have occurred". The court found that notwithstanding the above, "There is no suggestion that she was seeking information to be used in an eventual prosecution...".

[181] I also note the comments of LaForme J.A. in R. v. Tiffin:

123 The second significant aspect of the test is that it is not a matter of choosing between two evenly balanced alternatives: whether the predominant purpose of the inquiry is penal investigation or whether the predominant purpose of the inquiry is regulatory enforcement. The test is one-sided. The task is to determine whether the predominant purpose of the inquiry is the determination of penal liability of the taxpayer.

125 Moreover, a trial judge should resolve any uncertainty in favour of CRA's continued recourse to the inspection and requirement powers. It must be apparent that the predominant purpose is criminal investigation before the Charter is engaged.

[182] Based on all of the information that I have, I am of the opinion that this matter's predominant purpose, up to November 5, 2005 was that of an audit and not one to determine penal liability.

SECTION 24 ANALYSIS

[183] I have not found a Section 7 or 8 breach. However, I will still asses the Section 24 issue, in case I am found to have erred. The two pieces of information are the mail box request and the bank seizure.

[184] R. v. Grant requires me to assess that If were to find the breach, would I excise those two pieces of information, and any derivative information (if any) from the information to obtain the search warrants. The question is would the admission of this information into evidence in the trial of Roy Smith bring the administration of justice into disrepute.

[185] The first issue is the seriousness of the charter infringing state conduct. For the mail box information, the conduct was extremely benign. I say that because, the auditor had documentation before him linking the defendant to the GST refunds. The actions taken by the HRAT person, Edyvean, was something of a usual item of profiling, and she was seeking it to lead to other sources of leakage. Her main purpose was not a criminal investigation although she was alive to the issue of fraud. For Chong's purposes, he was looking for information to do an audit.

[186] I have found that HRAT is not an investigative tool. I do not find their actions in "profiling" and trying to stop further leakages as being contrary to or tainting the auditing function. The defence asserts that the "Jarvis" training of the auditors was insufficient and that I should consider this in their entire conduct. All of the persons involved in this matter had some type of briefing on the "Jarvis" case. All were aware of the existence of this need for separation of audit and investigation. That not all were able to completely "flush it out", does not surprise me. It is one easy thing to say, but much more difficult to apply. Even if they applied it incorrectly, that does not make the training defective or the potential breach more serious.

[187] The second item, namely the bank seizure is probably more serious, as the auditor would now have some documentary connection between Smith and the GST refunds for this company. In any event, such information would have come on the eve of the bank requirement. It was not a cavalier action and the audit team leader had considered it as an appropriate audit function. While more serious than the mail box request, it still does not rise to a high level.

[188] The second issue is to determine the charter protected interests of the defendant. I have already commented on the fact that this defendant had told the CRA that the mail box was the place to send the GST refund cheques of the subject company. He clearly was giving up some privacy interest in doing that. As a further matter, in Jarvis, the court stated: "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". The defendant had already disclosed this location to the CRA, and identified it as being connected to the subject company. It is hard to see how any privacy interest remained in any information in relation to the mail box. In any event, once CRA had fully reviewed their databases, much of this information was discoverable.

[189] While banking information stands on a higher level, in this case we are dealing with a bank account that had also been compromised by the defendant who intentionally wanted it to so resemble the name of the subject company, that cheques to the company could be deposited. In addition, we are dealing with a corporate account where the connection to the defendant was as a director and officer. Even if he were a shareholder, there was no evidence given as to how this company was used by him (other than for fraudulent purposes).

[190] Even if the Section 7 Charter right does not involve any privacy interest, I note that this did not involve a statement made by the defendant to the auditors. While documents are also part of the Section 7 right, I look upon a conscripted statement by the defendant against his own interest as being on a higher level of misconduct as obtaining a document which is already in existence. In R. v. Branch, it was held that there is a distinction between documents that came into existence as a result of compulsion and those that were pre-existing. Pre-existing documents, which as seized does not violate the right against self-incrimination. It does not affect trial fairness in the way conscripted information does.

[191] I am also motivated by the fact that when the Investigator Ing swore the ITO's to obtain the same information, he specifically excluded the results of these requirements and a great deal more information. For the purpose of the Section 24(2) analysis that shows the good faith of the CRA.

[192] Finally I must assess society's interest in an adjudication of the case on its merits. This is highly reliable evidence. It is evidence which could have been (and ultimately was) obtained by non infringing conduct.

[193] This was not a "confession" or indeed getting the defendant to implicate himself in any fashion. No documents were taken from his hands. The sheer magnitude of this fraud clearly speaks to a need to have it determined on the merits. This factor is very strong in coming to the conclusion that on balance, the admission of this mail box and bank information would not bring the administration of justice into disrepute.

The ITO's of March 20, 2007

[194] The investigator Ing swore out two information's on March 20, 2007, to obtain the mail box information and banking information from DUCA and The Bank of Nova Scotia.

[195] Both are almost identical. Of importance is the fact that while the ITO sets out all of the information learned by the auditors from October 13th onwards, that ITO specifically stated that it did not form part of their information and belief. Therefore, even if there had been breaches aforesaid (the mail box request and band seizure) would that have an effect upon the final result in this case, which is, should the warrant have been issued based upon the information that was left in the warrant? The defence appears to argue that once the rubicon has been passed, any information obtained by the audit which is passed to the investigators can never be used even if the investigators obtain that information independently through a valid search warrant.

[196] I don't see how I can accept that. At the end of the day, what I must determine is whether the searches which occurred pursuant to the warrants which were issued, were carried out on a valid warrant. As set out by Justice Langdon in R. v. Foy in paragraph 104:

It remains now for me to assess whether the search warrant of May 31, 1999, could have been issued based only on the information that was lawfully available to Project Phantom at that time.

[197] As set out in R. v. Jarvis, at paragraph 104, the ultimate discussion is whether the impugned information made it into the warrant and therefore whether the warrant was validly issued. I have not found any bad faith on the part of the authorities. Even if the information obtained on the mail box requisition or the band requirement broke the rules in Jarvis, the warrant to obtain the information which specifically excluded a consideration of this information is sufficient for the Justice to issue the warrants.

[198] The warrant executed at the home (which of course has a high priority interest) was also validly issued, based on the information obtained from the previous warrants, which I find were validly issued.

CONCLUSION

[199] I find that the evidence obtained by the search warrants and production orders is admissible into evidence on the trial of the defendant upon these charges.

Footnotes

[1] 2002 SCC 73, [2002] 3 S.C.R. 757.

[2] 2008 ONCA 306, [2008] O.J. No. 1525.

[3] , [1996] 1 S.C.R. 128 (S.C.C.).

[4] .

[5] Halsbury's Laws of Canada, Bank and Finance (1st ed.) pages 146-147.

[6] 2008 ONCA 306, [2008] O.J. No. 1525.

[7] See: R. v. Tiffin, supra.

[8] [2003] O.J. No. 6109.