IN THE MATTER OF THE RETAIL SALES TAX ACT
Court: Ontario Court of Justice, Caledon, Ontario
Judge: Quon J.P.
Pleas Entered: July 19, 2012
Sentence Hearing Held: May 24 and August 21, 2013
Sentence Rendered: November 29, 2013
PARTIES
Prosecutor: Her Majesty the Queen (Ministry of Finance of Ontario)
Defendants:
- Eugena R. Hayward
- 1146037 Ontario Limited operating as The Ascot Room
COUNSEL
- V. Hawkes, Prosecutor for the Ministry of Finance
- C. Hunter, counsel for Eugena Hayward and 1146037 Ontario Limited o/a The Ascot Room on pleas entered by defendants on July 19, 2012 (counsel's application to be removed as solicitor of record based on ethical grounds granted on May 24, 2013)
- Eugena Hayward, representing herself after application by counsel to be removed as solicitor of record had been granted on May 24, 2013
- Eugena Hayward, representing 1146037 Ontario Limited o/a The Ascot Room, after application by counsel to be removed as solicitor of record had been granted on May 24, 2013
CHARGES AND CONVICTIONS
Count 1 - Eugena Hayward
Eugena Hayward, charged and convicted for being an officer, director or agent of 1146037 Ontario Limited o/a The Ascot Room, a vendor under the Retail Sales Tax Act who willfully evaded or attempted to evade compliance with that Act between August 1, 2004 to February 23, 2009, by failing to disclose and remit to the Minister of Finance retail sales tax collections in the amount of $33,826.12 more or less, contrary to clause s. 32(4)(d) of Retail Sales Tax Act, R.S.O. 1990, c. R.31.
Count 2 - Eugena Hayward
Eugena Hayward, charged and convicted for being an officer, director or agent of 1146037 Ontario Limited o/a The Ascot Room, a vendor under the Retail Sales Tax Act who willfully evaded or attempted to evade compliance with that Act between August 1, 2004 to February 23, 2009, by failing to collect and remit to the Minister of Finance retail sales tax collections in the amount of $207,040.30 more or less, contrary to s. 32(4)(d) of Retail Sales Tax Act, R.S.O. 1990, c. R.31.
Count 3 - 1146037 Ontario Limited
1146037 Ontario Limited o/a The Ascot Room, charged and convicted for being vendor under the Retail Sales Tax Act who willfully evaded or attempted to evade compliance with that Act between August 1, 2004 to February 23, 2009, by failing to disclose and remit to the Minister of Finance retail sales tax collections in the amount of $33,826.12 more or less, contrary to s. 32(4)(d) of Retail Sales Tax Act, R.S.O. 1990, c. R.31.
Count 4 - 1146037 Ontario Limited
1146037 Ontario Limited o/a The Ascot Room, charged and convicted for being vendor under the Retail Sales Tax Act who willfully evaded or attempted to evade compliance with that Act between August 1, 2004 to February 23, 2009, by failing to collect and remit to the Minister of Finance retail sales tax collections in the amount of $207,040.30 more or less, contrary to s. 32(4)(d) of Retail Sales Tax Act, R.S.O. 1990, c. R.31.
REASONS FOR SENTENCE
1. INTRODUCTION
[1] Prior to July 1, 2010, and the harmonization of sales tax collection in Ontario with the federal government, vendors of certain goods and services in Ontario, by virtue of the Retail Sales Tax Act, R.S.O. 1990, c. R.31, had the legal obligation to collect provincial retail sales tax ("RST") on the goods and services they had sold or provided in Ontario and then report and remit that retail sales tax collected to the Minister of Finance of Ontario. And, to ensure that vendors would comply with their statutory obligation to collect, report, and remit the proper amount of retail sales tax to the Minister of Finance, the Ontario Legislature had bestowed the Retail Sales Tax Act with significant penalties that could be imposed against vendors who had been convicted of willfully evading or attempting to evade compliance with those legal obligations to collect, report, and remit that provincial retail sales tax. The penalties that could be imposed against such convicted vendors under the Retail Sales Tax Act include fines of up to 200% of the retail sales tax owing and/or a period of imprisonment for an individual of up to a maximum of two years.
[2] In this particular prosecution under the Retail Sales Tax Act, Ontario's Ministry of Finance (previously known as the Ministry of Revenue) had charged the defendants, Eugena Renae Hayward and 1146037 Ontario Limited, who were operating a women's retail apparel store in Belfountain, Ontario under the style name of "The Ascot Room", for not complying with their legal obligations under the statute and of committing offences in respect to willfully not remitting retail sales tax to the Minister of Finance during 54 reporting periods from August 1, 2004 to February 23, 2009. In total, 128 charges under the Retail Sales Tax Act had been laid against both defendants on three separate informations. Of those 128 charges, Hayward had entered guilty pleas to only two of the charges. Similarly, the corporate defendant had also entered guilty pleas to only two of the 128 charges.
[3] Specifically, on July 19, 2012, which is approximately two and a half years after the 128 charges were laid, both Hayward and the corporate defendant had voluntarily and in the presence of their legal counsel pled guilty to offences in respect of the corporate defendant being a vendor under the Retail Sales Tax Act, who had willfully failed to disclose and remit $33,826.12 of retail sales tax that had been collected by the corporate defendant during the period in question, and also for the corporate defendant's willful failure to collect and remit retail sales tax in the amount of $207,040.30, during that same period, which are offences contrary to s. 32(4)(d) of the Retail Sales Tax Act. Consequently, the total amount of the retail sales tax that the defendants had either collected, but not remitted, or that it had failed to collect and remit to the Minister of Finance, had been $240,866.42. Moreover, the Ministry of Finance contends that instead of remitting that retail sales tax, the defendant Eugena Hayward had used this money, which had being collected or ought to have been collected in trust for and belonging to the citizens of Ontario, for her own benefit and to support Hayward's lavish lifestyle.
[4] Furthermore, after the guilty pleas by the defendants had been accepted and convictions had been entered against both defendants for committing those four offences under s. 32(4)(d), the sentencing hearing had been adjourned on consent to November 15, 2012. However, on November 15th the sentencing hearing could not proceed, as the convicted defendant, Eugena Hayward, had supposedly been out of the country for a family emergency. The hearing was then adjourned to January 10, 2013. Through her legal counsel, the defendant had also been ordered to produce proof she had been out of the country on November 15, 2012, and proof of the family emergency. On January 10th, Hayward attended and did provide satisfactory proof of the nature of the emergency and that she had been physically out of the country. And, because a custodial sentence had been a possibility for Hayward, the sentencing hearing was then adjourned to May 24, 2013, so that a Pre-Sentence Report could be prepared and used at the sentencing hearing for Hayward. However, on May 24th, prior to the actual sentencing hearing commencing, the defendants' legal counsel brought an application to be removed as counsel of record for ethical reasons. The application was granted and the defendants' legal counsel was then permitted to get off the record and no longer represent the defendants. The defendants then sought an adjournment of the sentencing hearing to obtain new legal representation, which had been fervently opposed by the Ministry of Finance. After considering the numerous delays, the 25 court appearances already made in these proceedings since the first appearance of the defendants on February 22, 2010, the prejudice that would ensue to the Ministry of Finance if the matter was further delayed, and what appeared to be the defendants' lack of effort to proceed expeditiously in these proceedings, the defendants' application for an adjournment to obtain new legal representation was not granted and the sentencing hearing commenced on May 24, 2013, with the defendants representing themselves.
[5] Moreover, when the sentencing hearing finally commenced on May 24th, it had been nearly 3½ years after the date on which the first information had been sworn on December 16, 2009, and over 3 years since the second and third informations had been sworn on February 10, 2010. In regards to the hearing, the Ministry of Finance called Nick DeMaria, a Ministry of Finance investigator, as its first witness, as well as proffering documents as evidence during the first day of the sentencing hearing.
[6] After the Ministry of Finance and the defendants had completed the examination and cross-examination of the Ministry of Finance investigator, the hearing was then adjourned to August 21, 2013. The defendants were then advised that they could still retain legal counsel for the continuation of the sentencing hearing and that transcripts could also be ordered by the defendants in order to assist them. In addition, the Ministry of Finance had been also ordered to make DeMaria, the Ministry of Finance investigator, who had already completed his testimony, be available for the defendants to further cross-examine on August 21, 2013, if they so wished. On the resumption of the hearing on August 21st, the defendants had decided not to retain any legal representation, so the defendants proceeded with the sentencing hearing still representing themselves. The Ministry of Finance then called an additional witness, Lisa Liberty, an undercover Ministry of Finance investigator, to show that the defendant, Eugena Hayward, had been still involved in or working in the women's retail apparel store known as "The Ascot Room", when the undercover investigator had attended at the premises of "The Ascot Room" located at 17228 Olde Main Street in Belfountain, Ontario on August 9, 2013.
[7] Moreover, the individual defendant, Eugene Hayward, did not testify in the sentencing hearing, but had tried to proffer factual evidence during the sentencing hearing through oral submissions that were not given under oath or affirmation, even though she had been informed by the court that although sentencing hearings are less formal in nature and more flexible in regards to the rules of evidence, factual evidence that had not been given under oath or affirmation and not subject to cross-examination may be given very little weight as trustworthy and credible evidence.
[8] And, in their submissions on the appropriate sentence, the Ministry of Finance contends that to meet the objectives of denunciation and deterrence a custodial sentence of 60 to 90 days would be appropriate in the circumstances and should be imposed on the individual defendant, Eugena Hayward, as the operating mind of the defendant corporation, and that a fine of double the amount of retail sales owing should also be imposed against Hayward, since she had been one of the worst offenders in one of the worst cases of evading remitting retail sales tax. On the other hand, the Ministry submitted that they would be content with a suspended sentence for the corporate defendant, since the corporate defendant did not have any assets.
[9] In response to Ministry's submissions, the defendant, Eugena Hayward, submitted that she had always said she would pay and had never been running from any amount, and that she had not sold the property and then try to run and hide, nor had she tried to hide from any of this. More important, Hayward contends that she had not said that she was not going to pay, but just needed to know what the exact numbers were and not the assessments that the Ministry had been going by. Moreover, Hayward said she would still be willing to do that when she had received an accurate set of numbers to act on. In addition, Hayward contends emphatically that she had not been given any remuneration from any company and that she also does not even have a bank account. She also said that she just wants to have the correct numbers and that she wants to be able to pay and stop the assessments, penalties, and interest, which greatly takes over what the actual amounts are. Finally, she submitted that if the Ministry would like to accept a $50,000 fine from her to have these charges dropped and to clear things, then she would also be fine with that.
[10] After submissions on sentence were completed by both the Ministry of Finance and the defendants, the decision on sentence was reserved and the matter was then adjourned to November 29, 2013 for the court's decision. These are, therefore, my written reasons in respect to sentence:
2. STATUTORY PENALTIES
[11] As a consequence of both the individual defendant, Eugena Hayward, and the corporate defendant, 1146037 Ontario Limited, operating as The Ascot Room, being convicted of committing two counts each under s. 32(4)(d) of the Retail Sales Tax Act, R.S.O. 1990, c. R.31, they both face being sentenced to the following penalties, respectively, under s. 32(4.1)(1), of a minimum fine of the greater of $1000 or 50% of the retail sales tax that had been evaded or that should have been remitted to the Minister of Finance to a maximum fine of double the retail sales tax that that had been evaded or that should have been remitted to the Minister of Finance, if the maximum amount calculated is more than $1000. In addition, besides a fine that could be imposed against the individual defendant, Eugena Hayward, s. 32(4.1)(2) also provides that an individual could be sentenced to a maximum period of imprisonment of not more than two years:
False statements
32(4) Every person is guilty of an offence who has,
(d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act; or
Penalty, false statement
32(4.1) A person convicted of an offence under subsection (4) is liable to one or both of the following penalties in addition to any penalty otherwise provided by the Act:
1. A fine that is,
(i) a minimum of $1,000 or 50 per cent of the amount of tax that should have been remitted as collected or payable or that was sought to be evaded, whichever is greater, and
(ii) a maximum of double the amount of tax that should have been remitted as collected or payable or that was sought to be evaded, if the maximum so calculated is greater than $1,000.
2. Imprisonment for a term of not more than two years.
[12] Furthermore, s. 44(8) of the Retail Sales Tax Act provides that if a convicted offender is sentenced to pay a fine, the trial justice can also sentence the offender to serve a sentence of imprisonment for not more than one year in default of payment of that fine:
Default in paying fine
44(8) Where a fine provided for in this Act is imposed on any person as the result of the person's conviction for the commission of an offence against this Act, a sentence of imprisonment for not more than one year in default of payment of the fine may also be imposed on such person.
3. BACKGROUND
(a) The Corporate Defendant
[13] The corporate defendant, 1146037 Ontario Limited, had been incorporated in Ontario on September 5, 1995. Moreover, from the information required to be provided in an initial return under the Corporations Information Act, R.S.O. 1990, c. C.39, the corporate defendant's registered office address is listed as 36 Millward Street, Erin, Ontario, while its principal place of business is listed as 17228 Olde Main Street, Belfountain, Ontario. In addition, the corporate defendant had been operating as a women's apparel retail store under the style name of "The Ascot Room" at 17228 Olde Main Street in Belfountain, Ontario. Furthermore, as those Corporate Inquiry documents entered as Exhibit 3B indicate, the corporate defendant, 1146037 Ontario Limited, has not been dissolved and is still listed as an active corporation.
(b) The Operating Mind Of The Corporate Defendant
[14] In addition, from those Corporate Inquiry documents entered as Exhibit 3B, when the corporate defendant, 1146037 Ontario Limited, was incorporated on September 5, 1995, it is also indicated that its first and sole director was "G.R. Hayward", who is the individual defendant, and who had commenced as a director for the corporate defendant on September 5, 1995. Hayward's address had also been listed as 36 Millward Street, Erin, Ontario. In addition, Hayward had also been listed as the signing officer for the corporate defendant for the 2006 return year that had been received by the Companies Branch on July 19, 2007. Moreover, these Corporate Inquiry documents also indicate in the updated return filed for the corporate defendant on July 19, 2007, for the 2006 return year, that the sole director of the corporate defendant had been "Genie Hayward", who is the individual defendant.
[15] In addition, s. 42 of the Retail Sales Tax Act provides that any officer, director, or agent of a corporation, or any other person, who directed, authorized, assented to, acquiesced in or participated in the commission of any act by the corporation, which is an offence under the Retail Sales Tax Act, or the omission of any act which would constitute an offence under this Act, would also be guilty of an offence, and on conviction, would be liable to the punishment provided for the offence, whether or not the corporation has been prosecuted or convicted of any offence under the Retail Sales Tax Act. In addition, s. 43(1) of the Retail Sales Tax Act makes the persons, who were the directors of the corporation at the time the corporation had failed to collect retail sales tax, or had collected that tax, but had failed to remit that retail sales tax to the Minister of Finance, or at the time the corporation had failed to pay any interest or penalty relating to those taxes, jointly and severally liable with the corporation to pay those amounts:
Officers, etc., of corporation
42. Any officer, director or agent of a corporation, or any other person, who directed, authorized, assented to, acquiesced in or participated in the commission of any act by the corporation which is an offence under this Act, or the omission of any act the omission of which is an offence under this Act, is guilty of an offence and on conviction is liable to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted of any offence under this Act.
Directors
43 (1) Where a corporation has failed to collect tax or has collected tax and failed to remit the tax or has failed to pay any interest or penalty relating thereto, the directors of the corporation at the time the corporation was required to collect or remit the taxes or to pay the interest or penalty relating thereto, are jointly and severally liable, together with the corporation to pay such amounts.
Exception
43(2) A director of a corporation is not liable under subsection (1) unless,
(a) a warrant of execution for the amount of the corporation's liability as described in subsection (1) has been issued under clause 37(1)(b) and directed to the sheriff of the county or district in which any property of the corporation is located or situate and the warrant has been returned by the sheriff unsatisfied in whole or in part;
(b) the corporation becomes subject to a proceeding to which section 22 applies and a claim has been made under that section at any time from the date that the Minister should have been advised of the commencement of those proceedings to the date that is six months after the remaining property of the vendor has been finally disposed of;
Prudent director
43(3) A director of a corporation is not liable for a failure described under subsection (1) if the director exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.
(c) The Nature And Status Of The Business Known As "The Ascot Room"
[16] "The Ascot Room" is a women's retail apparel store located in the hamlet of Belfountain, Ontario. The store sells or retails women's apparel and shoes from Italy and Montreal. As indicated in ads or webpage links showing events involving "The Ascot Room" for April 28, 2013, April 19, 2013, and May 12, 2013, that were found by Nick DeMaria on an internet search and submitted as Exhibit 3C, "The Ascot Room" recently had held an outlet sale at Erin's Main Street Outlet located at 67 Main Street in Erin, Ontario, which is at a different location from its principal place of business in Belfountain, and that it had also been involved in holding Fashion shows at different locations in 2013.
[17] Furthermore, "The Ascot Room" had been operated by the corporate defendant, 1146037 Ontario Limited, until the Ministry of Finance issued bank demand or garnishment letters to the corporate defendant's bank to seize any money in the corporate defendant's bank accounts and to transfer the seized money to the Ministry. Once the money had been seized from the defendant's bank accounts as part of the Ministry's collection action against the corporate defendant, the corporate defendant's assets, including the business known as "The Ascot Room", were transferred in the early half of 2009 from the corporate defendant to a new corporation named, 2199970 Ontario Inc., that was controlled by Robert Venables, who happens to be the common-law husband of the individual defendant, Eugena Hayward.
[18] It further has been proven by the Ministry of Finance that this retail store known as "The Ascot Room" is still in business and that it has been in business for approximately 18 years and has been operating continuously at the same location of 17228 Olde Main Street in Belfountain since at least September 20, 1995, when "The Ascot Room" had been issued a R.S.T. vendor's permit, which is also shortly after the corporate defendant, 1146037 Ontario Limited, had been incorporated in Ontario on September 5, 1995.
[19] Moreover, the status of "The Ascot Room" as an ongoing concern had been confirmed by undercover Ministry of Finance investigator, Lisa Liberty, who had attended at 17228 Olde Main Street in Belfountain, Ontario, on August 9, 2013, and had testified to observing "The Ascot Room" on that date still in operation and still open for business as a women's apparel retail store.
(d) Eugena Hayward's Ongoing Involvement In The Business Known As "The Ascot Room"
[20] Eugena Hayward has submitted that she presently does not receive any compensation from any company and only volunteers at events or functions involving "The Ascot Room". Furthermore, in the Pre-Sentence Report entered as Exhibit 4, Hayward informed the probation officer who prepared the report that she is currently unemployed, does not have a source of income, and is being supported by her common-law spouse of 12 years. In addition, Hayward informed the writer of the report that her mother and her common-law spouse assist her with the necessities of life. Furthermore, she had informed the writer of the pre-sentence report that she had been self-employed from 1996 to 2009 at a ladies clothing store, but this employment had ended because she "fell behind with taxes, and the government closed the bank account".
[21] However, the Ministry of Finance in disputing Hayward's submission about not being employed and not having any involvement with the business known as "The Ascot Room" had called evidence to contradict her contentions. First, Nick DeMaria testified that he had found ads and webpage links when he conducted an internet search that has been entered as Exhibit 3C, that had revealed that Eugena Hayward's name had appeared in respect to a fund raising event held on April 28, 2013, at the Brampton Golf and Country Club which had indicated an event with "Fashions by Genie Hayward of The Ascot Room in Belfountain"; a Family Transition Place charity event held on April 19, 2013 at the Hockley Vallet Resort with "The Ascot Room" as a fashion show contributor; and an event entitled "Women Celebrating Women Fashion Show at The Caledon Country Club with fashions from "The Ascot Room".
[22] In addition, Lisa Liberty, a Ministry of Finance investigator, testified that while she had been posing as a customer inside the retail store known as "The Ascot Room" on August 9, 2013, located at 17228 Olde Main Street, Belfountain, Ontario, Liberty had been approached and served by the individual defendant, Eugena Hayward.
[23] Ergo, I find Eugena Hayward's contention that she is not involved with the retail store known as "The Ascot Room" not to be genuine, considering the evidence to the contrary that had been submitted by the Ministry of Finance in respect to the ads and webpage links entered as Exhibit 3C that mention Hayward's name in association with "The Ascot Room" and the evidence that Hayward had been serving Lisa Liberty, a Ministry of Finance investigator, while Liberty had been posing as a customer inside "The Ascot Room" on August 9, 2013.
(e) The Seizure Of Funds From The Corporate Defendant's Bank Accounts In Early 2009 By The Ministry Of Finance As Part Of Its Collection Action Against The Defendants
[24] As a consequence of the corporate defendant, 1146037 Ontario Limited, not filing returns and not remitting retail sales tax to the Ministry of Finance, and because of the unsuccessful efforts by the Ministry of Finance to get the corporate defendant to comply with the Retail Sales Tax Act and that the debt to the Minister of Finance had gone back to 1996, the Ministry commenced collection action against the corporate defendant and issued a bank demand or garnishment letter in February of 2009 to the bank or banks where the corporate defendant had its bank accounts. The money in the corporate defendant's bank accounts were then seized and forwarded to the Ministry of Finance. As indicated in the documents entered as Exhibit 3F, the Ministry of Finance in their collection action received from the corporate defendant's bank accounts, in respect to these bank demand letters, payments of $328.65 on February 24, 2009; $8,050,63 on March 16, 2009; $9721.95 on March 24, 2009; and $10,752.27 on April 9, 2009, which is a total of $28,853.50 of retail sales tax that had been owing to the Ministry of Finance.
[25] Moreover, Nick DeMaria, the Ministry of Finance investigator, testified that any moneys collected from or paid by the corporate defendant or by Eugena Hayward in respect to the retail sales tax owing by the corporate defendant is credited or applied chronologically first to the oldest reporting period that is still outstanding and to the amount owing for that particular reporting period. DeMaria also said that any of the moneys that had been collected from or paid in respect to the outstanding amount of retail sales tax owed by the corporate defendant to the Minister of Finance had not been applied or been credited to the offence period in question, of August 1, 2004 to February 23, 2009. In addition, since the defendants has been first charged on December 16, 2009, when the first information of the three informations had been sworn, Nick DeMaria testified that the defendants have not remitted or paid any retail sales tax owing towards or for that period covering August 1, 2004 to February 23, 2009.
[26] In addition, the Ministry's efforts to get the corporate defendant to comply with its statutory duties as a vendor had commenced and had been ongoing prior to May 15, 1998. This is indicated in Joan Clements' memorandum dated February 25, 2009, entitled "Accounts receivable strategy: enforcement of warrants of seizure and sale for seizure of cash, cheques & credit cards receipts where balance is equal to or exceeds $500,000", which is contained in Exhibit 3F:
Background:
This account was referred to the collections May 15, 1998 and the London Tax Office on November 11, 2008. The outstanding RST debt of $576,687.48 is a result of estimated assessments from August 1, 2004 to December 31, 2008 as well as non paid returns from August 1, 1997 to July 31, 2004. The outstanding CT [Corporation Tax] balance of $11,529.67 is a result of non paid returns for the period ends January 31, 2004 to January 31, 2006 and there are 2 returns in default for January 31, 2007 and January 31, 2008.
Collection Action:
Progressive collection action has been ongoing since June 18, 1998 including letters and legal actions. To date we have been unsuccessful in resolving the outstanding balance. A writ is registered with the Sheriff of the Regional Municipality of Peel and a lien is also registered. A bank demand was issued February 2, 2009 …
[27] Moreover, on May 22, 2009, the Ministry of Finance then implemented its next stage of trying to collect the retail sales tax owing from the corporate defendant by obtaining a writ for the Sheriff to seize the corporate defendant's assets.
(f) Transferring Assets From The Defendant Corporation To A New Corporation In Which Eugena Hayward's Common-Law Husband Is The New Corporation's Director And President
[28] In addition, Nick DeMaria, the Ministry of Finance investigator, had testified that after these funds had been seized from the corporate defendant's bank accounts through the bank demand or garnishment letters, a new corporation was incorporated and the corporate defendant's assets, including the business known as "The Ascot Room", were then transferred to this new corporation.
[29] Nick DeMaria also testified that when the Sheriff, who had a writ to seize the corporate defendant's assets in order to collect the retail sales tax owing to the Ministry, had attended at the premises where "The Ascot Room" was being operated at 17228 Old Main Street, Belfountain, Ontario, the Sheriff learned that the corporate defendant's assets had been transferred to a new corporation. The Ministry also received a Sheriff's report dated September 25, 2009, with a "certificate Of Nulla Bona", indicating that when a Sheriff's officer attended at the business premises located at 17228 Old Main Street, Belfountain, Ontario to serve the Notice of Seizure on the corporate defendant, the officer had noticed that the business at that location was now being operated by a corporation named 2199970 Ontario Inc.
[30] This new corporation, 2199970 Ontario Inc., had been incorporated on March 9, 2009, shortly after the first amount had been seized from the corporate defendant's bank accounts on February 24, 2009. In addition, the Corporate Inquiry for 2199970 Ontario Inc. indicates that its Registered Office address is listed as "care of Robert Venables, 6003 10th Line, P.O. Box 984, R.R. #1, Erin, Ontario" and that its principal office address in Ontario was listed as "care of Robert Venables, 6003 10th Line, P.O. Box 984, R.R. #1, Erin, Ontario". Furthermore, Exhibit 3D also lists the first and sole director and an officer of the corporation as "R. Venables" who commenced as a director and officer of this new corporation on March 9, 2009.
[31] Furthermore, DeMaria testified that Robert Venables is the common-law husband of the individual defendant, Eugena Hayward. Moreover, Exhibits 3J and 3K also indicate that Robert Venables and Eugena Hayward are the joint owners of a property with the municipal address of 6003 10th Line, P.O. Box 984, Erin, Ontario, which is the Registered Office address of 2199970 Ontario Inc.
[32] In addition, the Pre-Sentence Report dated May 14, 2013, that was prepared for the individual defendant, Eugena Hayward, also indicates that her common-law husband is self-employed as a carpenter and is also the owner of a retail company.
[33] Moreover, once the assets from the corporate defendant were transferred to the new corporation named, 2199970 Ontario Inc., the Ministry of Finance's collection endeavours and effort to seize the corporate defendant's assets to satisfy the retail sales tax owing were thwarted.
[34] In addition, DeMaria testified that the new corporation, 2199970 Ontario Inc., had not been registered as a vendor pursuant to the Retail Sales Tax Act.
[35] Furthermore, the individual defendant, Eugena Hayward, also had submitted and acknowledged that the probation office who had prepared the Pre-Sentence Report had also contacted Robert Venables in respect to the preparation of the report, but that Venables had not been able to reach that probation officer when Venables tried to return the telephone call.
[36] Moreover, there is no evidence that would contradict or show that Robert Venables is not the common-law husband of the individual defendant, Eugena Hayward.
(g) The Amount Of Retail Sales Tax The Corporate Defendant Collected and Failed To Remit Or Failed to Collect and Not Remit To The Minister Of Finance
[37] In addition, two documents had been entered as exhibits by the Ministry of Finance without objection by the defendants' legal counsel, referred to as Schedule A (Exhibit 2) and Schedule B (Exhibit 1) that showed there had been 54 months or 54 reporting periods in which retail sales tax had not been collected and not remitted or had been collected but not remitted to the Ministry of Finance. Schedule B (Exhibit 1) was in relation to count #1 for both informations numbered 103100 and 103099 and represented a period of nine months of retail sales tax that had been collected but not remitted of $33,826.12. On the other hand, Schedule A (Exhibit 2) was in relation to count #2 for both informations numbered 103100 and 103099 and represented a period of 45 months in which $207,040.30 of retail sales tax had not been collected and not remitted to the Ministry of Finance. The defendants' legal counsel stated that this had been substantially correct and admitted. Exhibits 1 and 2 also indicate in respective footnotes that the details of the retail sales tax collected in Exhibit 1 and the details of the retail sales tax not collected in Exhibit 2 had been obtained from Quickbooks and the corporate defendant's business records.
[38] Moreover, even though the individual defendant, Eugena Hayward, suggested in her sentencing submissions that the total numbers are not correct, the facts provided to the court by the Ministry after the guilty pleas had been entered by the defendants voluntarily and in the presence of the defendant's legal counsel, especially the two documents entered as Exhibits 1 and 2 showing the retail sales tax owing to the Minister of Finance had totaled $240,866.42, had been admitted as being substantially correct by the defendant's legal counsel. Furthermore, Exhibits 1 and 2 also indicate in respective footnotes that the details of the retail sales tax collected in Exhibit 1 and the details of the retail sales tax not collected in Exhibit 2 had been obtained from Quickbooks and from "the corporate defendant's business records". Moreover, only two reporting periods had no records from the corporate defendant's business records for the Ministry of Finance to calculate the retail sales tax owing, but that the Ministry had estimated the two amounts of tax owing to be $4,000 for each reporting period.
[39] Accordingly, there is no credible and trustworthy evidence submitted in the sentencing hearing by the defendants that would contradict the total amount of tax owing to the Minister of Finance that had been shown in Exhibits 1 and 2. Also, the defendants and their accountants have had over two years, since the first date the defendants had appeared in court to answer to these charges on February 22, 2010, to prepare and to contradict those amounts set out in Exhibits 1 and 2 before the guilty pleas were voluntarily entered by the defendants on July 19, 2012, in the presence of their legal counsel.
(h) Dividends Paid To Eugena Hayward By The Corporate Defendant For the Tax Years 2004 to 2008
[40] From Eugena Hayward's personal income tax returns she had filed, Hayward reported receiving taxable dividend income of $15,000 in her return for the tax year of 2004; taxable dividend income of $40,000 in her return for the tax year of 2005; taxable dividend income of $165,000 in her return for the tax year of 2006; taxable dividend income of $75,000 in her return for the tax year of 2007; and taxable dividend income of $131,250 in her return for the tax year of 2008, that had been received from the corporate defendant.
[41] Accordingly, the total taxable dividend income received from the corporate dividend that had been reported by the operating mind of the corporate defendant, Eugena Hayward, in her income tax returns for the tax years 2004 to 2008 had been $426,250.
[42] Furthermore, for the 2003 tax year, Hayward did not receive any dividend income from the corporate defendant, but did receive a T4 statement of remuneration paid that had been issued by the corporate defendant, 1146037 Ontario Limited, to "Genie Hayward", indicating in box 14 that Hayward received employment income of $54,700 from the corporate defendant. Also, in her 2003 income tax return Eugena Hayward reported receiving $14,400 in gross rents for the property she owns located at 17228 Olde Main Street in Belfountain, Ontario, which is where the corporate defendant had operated "The Ascot Room". Hayward also reported $14,612.41 in expenses related to that property, in which she further reported that she had a net loss of $212.41 in respect to renting out her property. It is also noteworthy that as part of the expenses claimed in respect to the rental income for Hayward's commercial property located at 17228 Olde Main Street is interest of $5,639.85, which could refer to interest related to a mortgage on the property.
[43] In addition, for the 2004 tax year, a T5 statement of investment income had been issued by the corporate defendant, 1146037 Ontario Limited, to "Genie Hayward", indicating in box 10 that the actual amount of dividends other than eligible dividends paid to Hayward was $12,000 and that in box 11 the taxable amount of dividends was $15,000 for Hayward. In other words, the actual dividend paid out by the corporate defendant to Hayward for the 2004 tax year is $12,000, which is then multiplied by 125% to determine the reported taxable dividend as $15,000.
[44] Also for the 2006 tax year, a T5 statement of investment income had been issued by the corporate defendant, 1146037 Ontario Limited, to "Genie Hayward" indicating in box 10 that the actual amount of dividends other than eligible dividends paid to Hayward was $132,000 and that in box 11 the taxable amount of dividends was $165,000 for Hayward. In other words, the actual dividend paid out by the corporate defendant to Hayward for the 2006 tax year is $132,000, which is then multiplied by 125% to determine the reported taxable dividend as $165,000.
[45] Hence, instead of the corporate defendant remitting the retail sales tax owing to the Minister of Finance for the tax years of 2004, 2005, 2006, 2007 and 2008, it instead paid out dividends to its operating mind, Eugena Hayward, of $12,000 for the 2004 tax year (based on a taxable dividend of $15,000); $32,000 for the 2005 tax year (based on a taxable dividend of $40,000); $132,000 for the 2006 tax year (based on a taxable dividend of $165,000); $60,000 for the 2007 tax year (based on a taxable dividend of $75,000); and $105,000 for the 2008 tax year (based on a taxable dividend of 131,250).
[46] In sum, the corporate defendant paid out $341,000 to Eugena Hayward in actual dividends for the tax years 2004, 2005, 2006, and 2008, while at the same time it had failed to remit the total of $240,866.42 in retail sales tax to the Minister of Finance for the 54 reporting periods from August 1, 2004 to February 23, 2009.
(i) There were 128 Charges Laid In Total Under The Retail Sales Tax Act Against The Defendants
[47] The first information numbered "093735" was sworn on December 16, 2009, and contained one charge against the corporate defendant, 1146037 Ontario Limited, operating as The Ascot Room, of being a vendor who "failed to remit retail sales tax collections of $33,826.12 more or less to the Minister of Finance between August 1, 2004 and February 23, 2009, at the Town of Caledon, contrary to s. 13(1) of the Retail Sales Tax Act, R.S.O. 1990, c. R.31. A summons was also issued on this information to the corporate defendant requiring it to appear on February 22, 2010.
[48] For the second information numbered "103099", it had been sworn on February 10, 2010, and contained 63 charges under the Retail Sales Tax Act against the vendor 1146037 Ontario Limited, operating as The Ascot Room, between August 1, 2004 and February 23, 2009, at the Town of Caledon. A summons was also issued to the corporate defendant requiring it to appear on February 22, 2010.
[49] And, for the third information numbered "103100", it had been sworn on February 10, 2010, and contained 64 charges under the Retail Sales Tax Act against Eugena Renae Hayward, as an officer, director, or agent of the vendor 1146037 Ontario Limited, operating as The Ascot Room, between August 1, 2004 and February 23, 2009, at the Town of Caledon. A summons was also issued to the defendant, Eugena Renae Hayward, requiring her to appear on February 22, 2010.
(j) The Four Offences Under the Retail Sales Tax Act That The Defendants Had Entered Voluntary And Informed Guilty Pleas To And For Which They Were Convicted of Committing
[50] The individual defendant, Eugena Hayward, on July 19, 2012, voluntarily and while being represented by legal counsel entered guilty pleas to committing two offences under the Retail Sales Tax Act in respect to information no. 103100, namely counts #1 and #2:
(1) that Eugena Renae Hayward, 17228 Old Main Street, Belfountain, ON, being an officer, director, or agent of 1146037 Ontario Limited, operating as The Ascot Room, a vendor under the provisions of the Retail Sales Tax Act, R.S.O. 1990, c. R.31 (as amended), did, between August 1, 2004 and February 23, 2009, at the Town of Caledon in the Regional Municipality of Peel, or elsewhere in the Province of Ontario, willfully evade or attempt to evade compliance with the said Act, in that they did fail to disclose and remit to the Minister of Finance retail sales tax collections in the amount of $33,826.12 more or less, such being an offence pursuant to clause 32(4)(d) of the said Act,
(2) and further, the said Eugena Renae Hayward, being an officer, director, or agent of 1146037 Ontario Limited, operating as The Ascot Room, a vendor under the provisions of the Retail Sales Tax Act, R.S.O. 1990, c. R.31 (as amended), did, between August 1, 2004 and February 23, 2009, at the Town of Caledon in the Regional Municipality of Peel, or elsewhere in the Province of Ontario, willfully evade or attempt to evade compliance with the said Act, in that they did fail to collect and remit to the Minister of Finance retail sales tax collections in the amount of $207,040.30 more or less, such being an offence pursuant to clause 32(4)(d) of the said Act.
[51] As for the corporate defendant 1146037 Ontario Limited, operating as The Ascot Room, Eugena Hayward, a director of the corporation, on July 19, 2012, voluntarily and while being represented by legal counsel entered guilty pleas on behalf of the corporation to the corporate defendant committing two offences under the Retail Sales Tax Act in respect to information no. 103099, namely, counts #1 and #2:
(1) that 1146037 Ontario Limited, operating as The Ascot Room, being a vendor under the provisions of the Retail Sales Tax Act, R.S.O. 1990, c. R.31 (as amended), did, between August 1, 2004 and February 23, 2009, at the Town of Caledon in the Regional Municipality of Peel, or elsewhere in the Province of Ontario, willfully evade or attempt to evade compliance with the said Act, in that it did fail to disclose and remit to the Minister of Finance retail sales tax collections in the amount of $33,826.12 more or less, such being an offence pursuant to clause 32(4)(d) of the said Act,
(2) and further, the said 1146037 Ontario Limited, operating as The Ascot Room, being a vendor under the provisions of the Retail Sales Tax Act, R.S.O. 1990, c. R.31 (as amended)), did, between August 1, 2004 and February 23, 2009, at the Town of Caledon in the Regional Municipality of Peel, or elsewhere in the Province of Ontario, willfully evade or attempt to evade compliance with the said Act, in that it did fail to collect and remit to the Minister of Finance, retail sales tax collections in the amount of $207,040.30 more or less, such being an offence pursuant to clause 32(4)(d) of the said Act;
[52] The individual defendant, Eugena Hayward and the corporate defendant, 1146037 Ontario Limited, operating as The Ascot Room, after entering guilty pleas to two counts of committing an offence under s. 32(4)(d) of the Retail Sales Tax Act, R.S.O. 1990, c. R.31, were then convicted of willfully evading or attempting to evade compliance with the Retail Sales Tax Act and the payment of retail sales tax that had totalled $240,866.42 between August 1, 2004 to February 23, 2009. Section 32(4)(d) provides that:
False statements
32(4) Every person is guilty of an offence who has,
(d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act; or
(k) Statement Of Facts Provided By The Ministry Of Finance On July 19, 2012, After The Guilty Pleas Were Entered By The Defendants
[53] After the guilty pleas were entered on July 19, 2012, the Ministry of Finance provided a factual basis for the guilty pleas, which were:
(1) that the corporate defendant, 1146037 Ontario Limited, is a corporation registered under the laws of Ontario, which operates a women's apparel retail store under the trade name of "The Ascot Room" at 17228 Olde Main Street, Belfountain, Ontario and it retails women's clothing and shoes from Italy and Montreal.
(2) that the corporation, 1146037 Ontario Limited, received its Articles of Incorporation on September 5, 1995;
(3) that the sole director of the corporation, 1146037 Ontario Limited, is listed as Genie R. Hayward;
(4) that "The Ascot Room" was issued R.S.T. Vendor Permit number 1911-1819 on September 20, 1995, and that the vendor permit is still active;
(5) that Eugena Hayward is the sole director, and as a result, the operating mind of the corporation, 1146037 Ontario Limited, operating as "The Ascot Room";
(6) that Eugena Hayward is actively involved in the business on a daily basis and makes the decisions for the corporation;
(7) and, as the sole operating mind, Eugena Hayward is responsible for ensuring the collection of, reporting, and remitting of retail sales tax;
(8) that after the investigation commenced against Eugenia Hayward, but before any debt collection could take place [defence counsel added that some level of collection had already been started by both levels of government and that money had already been taken from some accounts and that accounts had already been seized and that new accounts had been opened so that the business could continue to operate], Hayward transferred all of the assets of the corporation, 1146037 Ontario Limited, to a new corporation named, 2199021 Ontario Inc.
(9) that the matter in respect of the corporation, 1146037 Ontario Limited, and Eugena Hayward had been referred to the Investigations Branch by the Revenue Collections Branch of the Ministry of Finance.
(10) that search warrants, as a result of the referral to the Investigations Branch, had been granted for the business premises of Robinson, Loft and Brohman (now RLB L.L.P.) at Guelph, Ontario under the authority of s. 159 of the Provincial Offences Act, and that the team seized bank statements, credit card statements, financial statements, reconciliation details, general ledgers, blank retail sales tax returns, G.S.T. returns, "The Ascot Room" sales and tax statements, and correspondence for the periods of the investigation, which was August 1, 2004 to June 30, 2009 inclusive.
(11) that, as a result of that investigation, two schedules, Schedule A and Schedule B, which sets out 54 months whereby tax was either not collected and not remitted or tax was simply collected and not remitted, and which is how the total numbers were calculated.
(12) that for count #1 for both defendants, Schedule B, which is marked as Exhibit 1, sets out for a total of nine months that retail sales tax was collected, but not remitted in the amount of $33,826.12.
(13) that for count #2 for both defendants, Schedule A, which is marked as Exhibit 2, sets out for a total of 45 months that retail sales tax was not collected and not remitted in the amount of $207,040.30.
[54] In addition, legal counsel for the defendants had informed and stated to the court that the Ministry's statement on the relevant factual background for the guilty pleas by the defendants had been substantially correct and admitted, but added that in respect to the Ministry's statement of facts that the bank accounts and the name of the business had been transferred after the investigation began but prior to any collection taking place, that however in fact, there had already been collections started or taking place from both levels of government and that money had been taken out of some bank accounts and that accounts were being seized so debt collection on some level had already begun, and that in order to continue on with the business, new bank accounts were opened.
[55] After the guilty pleas had been made by both defendants and convictions entered against both defendants on July 19, 2012, legal counsel for the defendants, with the consent of the Ministry, had asked for an adjournment of the sentencing hearing to allow the defendants to put a plan in place, since they would need a little bit of time to do that. The adjournment of the sentencing hearing was then granted for approximately four months to November 15, 2012.
(l) Adjournment Of Sentencing Hearing That Had Been Scheduled For November 15, 2012
[56] On November 15, 2012, the sentencing hearing could not proceed as the defendant, Eugenie Hayward, was out of the country on a family-related emergency. The hearing was then adjourned to January 10, 2013. Because of the concern on whether the absence of Hayward was genuine, the defendant was ordered through her legal counsel to produce proof she had been out of the country on November 15, 2012, and to also provide proof of that family emergency.
[57] On January 10th, Hayward appeared with such proof and the court was satisfied that the nature of the emergency that required Hayward to be physically out of the country on November 15, 2012, was an excusable absence.
[58] In addition, the court was informed by the defendants' legal counsel that a pre-sentence report would be prepared for Eugenie Hayward because a custodial sentence had been a possibility for Hayward and that it would be available before May 24, 2013. The sentencing hearing was then adjourned until May 24, 2013.
(m) Defence Counsel's Application to Be Removed As Solicitor Of Record On May 24, 2013
[59] On May 24, 2013, legal counsel for the defendants brought an application to be removed as solicitor of record because of ethical grounds, which had arisen the night before the sentencing hearing was to commence on May 24, 2013. The application by the defendants' legal counsel to be removed as solicitor of record for the defendants on ethical grounds based on R. v. Cunningham, 2010 SCC 10 was then granted.
(n) Defendants' Application For An Adjournment To Retain New Counsel And For Their New Accountant To Prepare Financial Documents And To Withdraw Their Guilty Pleas Were Not Granted And Submissions On Sentence Commenced on May 24, 2013
[60] The defendants then sought an adjournment to retain new legal counsel and permission to withdraw or retract their guilty pleas entered on July 19, 2012. The defendants' request for an adjournment to retain new counsel was not granted as it had appeared that the defendant had not been dealing with these proceedings with diligence or in good faith and the adjournment to retain counsel would further delay the proceedings that had already been going on since the defendants' first appearance in court on February 22, 2010, and in which there had already been 25 court appearances, including May 24, 2013. Furthermore, an adjournment to retain new legal counsel would have severely prejudiced the Ministry of Finance and the societal interest in having this proceeding completed in an expeditious manner.
[61] In addition, the defendants' request to retract or withdraw their guilty pleas were also not allowed, since the defendants had been represented by capable legal counsel on July 19, 2012, when the defendants had voluntarily entered their guilty pleas. In R. v. Pauchay (2003), 35 M.V.R. (4th) 247, [2003] S.J. No. 221 (QL) (S.Q.B.), at para. 13, the court hearing the sentence appeal held that the onus is on the accused to prove their plea had not be voluntary, unequivocal or informed and that the onus on the accused to establish that their pleas had been invalid would be particularly difficult when it had been entered in the presence of and with the benefit of counsel:
… The trial judge has the discretion to expunge a guilty plea. But the onus is on the accused to prove that his plea was not voluntary, unequivocal or informed. Where the guilty plea was entered with the benefit of counsel, the onus on the applicant to establish that it is invalid is particularly difficult.
[62] Moreover, the individual defendant, Eugena Hayward, further submitted that they needed an adjournment because the defendants' new accountant had been preparing new financial statements to show that the defendants did not commit the offences, but again, this further request for adjournment had been rejected as the defendants had more than sufficient time to have an accountant prepare financial documents in this proceeding, since the defendants had made their first court appearance on these charges on February 22, 2010, and that the request to withdraw their guilty pleas had not appeared to have been a request made in good faith, as well as there had been no evidence or an evidentiary basis that an accountant was doing such work nor documentary evidence that would support such a submission, considering that the total amount of the retail sales tax owing had been determined by the Ministry of Finance from the corporate defendant's own financial records that had been seized earlier by the Ministry and set out in schedules entered as Exhibits 1 and 2. Furthermore, it appeared that this further request for an adjournment for her supposedly new accountant to prepare financial documents was another insincere attempt by the defendants to delay the proceedings, considering there had already been 24 court appearances up to that point and that these proceedings had been going on for approximately 3 years and 3 months, as of the defendants' first appearance date of February 22, 2010.
[63] After the defendants' multi-faceted application for an adjournment had been denied, the Ministry of Finance then began their sentencing submissions and the calling of viva voce evidence on May 24, 2013.
[64] To support their submissions for a custodial sentence and a 200% fine based on the retail sales tax owing for Eugena Hayward, the Ministry of Finance called Nick DeMaria, a Ministry of Finance investigator, as its first witness, as well as proffering documentary evidence during the first day of the sentencing hearing.
[65] However, the sentencing hearing could not be completed on May 24th, so after the Ministry of Finance and the defendants had completed the examination and cross-examination of Nick DeMaria, the hearing was then adjourned to August 21, 2013. The defendants were also advised by the court that they could still retain legal counsel for the continuation of the sentencing hearing and that transcripts could also be ordered by the defendants in order to assist them for the resumption of the hearing. In addition, the court also ordered the Ministry of Finance to make Nick DeMaria, the Ministry of Finance investigator, who had already completed his testimony, to be available for the defendants for further cross-examination on August 21, 2013, if they so wished.
[66] This also allowed the defendants to retain legal counsel, if they wished, to prepare the defendants' sentencing submissions and order transcripts of the Ministry's sentencing submissions and evidence presented on May 24th. The sentencing hearing then resumed on August 21, 2013, but the defendants' had not retained legal counsel to prepare sentencing submissions, nor did they provide proof on that date that the defendants' new accountant had been preparing new financial documents, nor did the defendants call their new accountant to testify in the continuation of the sentencing hearing.
[67] On the resumption of the hearing on August 21st, as the defendants did not appear with new legal counsel or with any legal representation, the defendants proceeded with the resumption of the sentencing hearing still representing themselves. The Ministry of Finance on the resumption of the hearing then called an additional witness, Lisa Liberty, an undercover Ministry of Finance investigator. Lisa Liberty testified she had been posing as a customer in the women's retail apparel store known as "The Ascot Room" located at 17228 Olde Main Street in Belfountain, Ontario on August 9, 2013, and had been approached and served by Eugena Hayward.
(o) What Is Total The Number Of Appearances From The Date The Informations Were Sworn Until The Sentencing Hearing Was Completed?
[68] For the present proceeding, three informations were sworn by Senior Investigator Nick De Maria from the Ministry of Revenue (as the Ministry of Finance was called then), in respect to charges under the Retail Sales Tax Act, R.S.O. 1990, c. R.31, against both 1146037 Ontario Limited, operating as The Ascot Room, and against its sole director, Eugena Hayward.
[69] The first information numbered "093735" was sworn on December 16, 2009, and contained one charge against the corporate defendant, 1146037 Ontario Limited, operating as The Ascot Room, of being a vendor who "failed to remit retail sales tax collections of $33,826.12 more or less to the Minister of Finance between August 1, 2004 and February 23, 2009, at the Town of Caledon, contrary to s. 13(1) of the Retail Sales Tax Act, R.S.O. 1990, c. R.31. A summons was also issued on this information to the corporate defendant requiring it to appear on February 22, 2010.
[70] For the second information numbered "103099", it had been sworn on February 10, 2010, and contained 63 charges laid under the Retail Sales Tax Act against the vendor 1146037 Ontario Limited, operating as The Ascot Room. A summons was also issued to the corporate defendant requiring it to appear on February 22, 2010.
[71] And, for the third information numbered "103100", it had been sworn on February 10, 2010, and contained 64 charges laid under the Retail Sales Tax Act against Eugena Renae Hayward, as an officer, director, or agent of the vendor 1146037 Ontario Limited, operating as The Ascot Room. A summons was also issued to the defendant, Eugena Renae Hayward, requiring her to appear on February 22, 2010.
[72] The following table sets out the number and date of the appearance, as well as the purpose of the adjournment:
| Appearance | Date | Purpose |
|---|---|---|
| 1 | February 22, 2010 | First appearance in court by defendants. |
| 2 | March 22, 2010 | Adjourned to be spoken to. |
| 3 | May 17, 2010 | Adjourned to be spoken to. |
| 4 | July 5, 2010 | Legal representative appears on record and matter adjourned to be spoken to. |
| 5 | August 16, 2010 | Legal representative appears on record and matter adjourned to be spoken to. |
| 6 | September 13, 2010 | Legal representative appears on record and matter adjourned to be spoken to. |
| 7 | October 25, 2010 | Legal representative appears on record and matter adjourned to be spoken to. |
| 8 | November 25, 2010 | Legal representative appears on record and matter adjourned for judicial pre-trial. |
| 9 | January 19, 2011 | Judicial pre-trial commenced. |
| 10 | January 31, 2011 | Judicial pre-trial continued and agent for legal counsel C. Hunter appears on record. |
| 11 | February 14, 2011 | Agent for legal counsel C. Hunter appears and matter adjourned to be spoken to. |
| 12 | April 27, 2011 | Agent for legal counsel C. Hunter appears and matter adjourned to be spoken to. |
| 13 | July 27, 2011 | Agent for legal counsel C. Hunter appears and matter adjourned to be spoken to. |
| 14 | September 7, 2011 | Legal representative appears and matter adjourned to be spoken to. |
| 15 | October 31, 2011 | Legal representative appears and matter adjourned to be spoken to. |
| 16 | December 12, 2011 | Legal representative appears and trial dates scheduled for four days: April 24, 26, May 1, May 3, 2012. |
| 17 | March 5, 2012 | Legal representative appears and matter adjourned to be spoken to. |
| 18 | March 15, 2012 | Legal representative appears and matter adjourned to be spoken to. |
| 19 | April 5, 2012 | Legal representative appears and matter adjourned to be spoken to. |
| 20 | April 26, 2012 | Legal representative appears and trial dates scheduled for three days: July 19, 24, 26, 2012. |
| 21 | June 4, 2012 | Legal representative appears and trial dates confirmed for three days: July 19, 24, 26, 2012. |
| 22 | July 19, 2012 | Defendants appear with legal counsel, C. Hunter, and enter guilty pleas to 4 charges of the 128 total charges. |
| 23 | November 15, 2012 | Defendant fails to appear for sentencing hearing and hearing adjourned. Defendant Hayward ordered to bring proof she had been out of country for family emergency. |
| 24 | January 10, 2013 | Proof defendant Hayward had been out of country for family emergency provided and hearing adjourned so pre-sentence report for Hayward can be prepared for sentencing hearing. |
| 25 | May 24, 2013 | Counsel C. Hunter appears with defendants and applies to be removed as counsel of record. Application granted. Defendants' application for a further adjournment denied and sentencing hearing commences. Sentencing hearing not completed and hearing adjourned. |
| 26 | August 21, 2013 | Defendants appear without legal counsel or legal representation and sentencing hearing completed. Decision on sentence reserved and matter adjourned. |
| 27 | November 29, 2013 | Written judgment on sentence released. |
4. SUBMISSIONS ON SENTENCE
[73] The convicted defendants in this proceeding face the following penalties provided under s. 32(4.1) of the Retail Sales Tax Act for committing offences under s. 32(4)(d) of a minimum fine of the greater of $1,000 or 50% of the amount of the tax owing to a maximum fine of 200% of the tax owing if the maximum calculated would be greater than $1000. In addition, for the individual defendant, Eugena Hayward, she would also face a potential penalty of a term of imprisonment of not more than two years:
Penalty, false statement
32(4.1) A person convicted of an offence under subsection (4) is liable to one or both of the following penalties in addition to any penalty otherwise provided by the Act:
1. A fine that is,
(i) a minimum of $1,000 or 50 per cent of the amount of tax that should have been remitted as collected or payable or that was sought to be evaded, whichever is greater, and
(ii) a maximum of double the amount of tax that should have been remitted as collected or payable or that was sought to be evaded, if the maximum so calculated is greater than $1,000.
2. Imprisonment for a term of not more than two years.
(a) Submissions by the Ministry of Finance
[74] For the two convictions in respect to the individual defendant, Eugena Hayward, who is the sole director and operating mind of the corporate defendant, the Ministry of Finance contends that in order to address the sentencing objectives of general and specific deterrence and denunciation it submits the appropriate sentence the court should impose on Hayward is a period of imprisonment between 60 to 90 days and a fine of $481,732.84 which is 200% of $240,866.42, which is the total amount of the retail sales tax not remitted in question. The Ministry further contends that the period of imprisonment and the 200% fine is appropriate to address the objectives of deterrence and denunciation, as Hayward, instead of complying with the Retail Sales Tax Act and remitting the proper amounts of retail sales tax to the Minister of Finance for the 54 reporting periods from August 1, 2004 to February 23, 2009, had used the unreported and unremitted tax to finance her lavish lifestyle.
[75] The Ministry of Finance also submitted that for the offences Eugena Hayward committed under s. 32(4)(d) of the Retail Sales Tax Act, Hayward, as the operating mind of the corporate defendant, is one of the worst offenders in one of the worst cases in committing the two offences of willfully evading or attempting to evade compliance with the payment of taxes imposed under the Retail Sales Tax Act.
[76] And, for the corporate defendant, 1146037 Ontario Limited, operating as The Ascot Room, the Ministry of Finance submits that it is content with a suspended sentence being imposed, since the corporate defendant has no assets.
(b) Submissions by the defendants
[77] The individual defendant, Eugena Hayward, submitted that she had always said she would pay and had never been running from any amount. Hayward also said she had not sold the property and then tried to run and hide, nor had she tried to hide from any of this. In addition, Hayward submits that she had not said that she was not going to pay and that she had been willing to pay, but that she just needed to have an accurate set of numbers so that she would know what the exact numbers were and not the assessments that the Ministry had been going by. More important, Hayward emphatically contends that she presently has not been given any remuneration from any company nor does she even have a bank account. Hayward further submitted that she just wants to have the correct numbers and that she wants to be able to pay and stop the assessments, penalties, and interest, which greatly take over what the actual amounts are. Finally, Hayward submitted that if the Ministry would like to accept a $50,000 fine from her to have these charges dropped and to clear things, then she would be fine with that outcome.
[78] Additionally, Hayward submits she has to take care of her father, who had a recent stroke and now resides with her, and that she also has a seven-year old son, who has a learning disability and that she and her common-law husband have to take their son to the United States for an assessment in November of 2013.
5. APPLICATION OF THE OBJECTIVES AND THE PRINCIPLES OF SENTENCING
[79] First of all, since the Ministry of Finance is only seeking a suspended sentence for the corporate defendant, then the determination of the appropriate sentences to impose on the convicted defendants will only concentrate on the sentence that will be imposed on the individual defendant, Eugena Hayward.
[80] Moreover, in determining the appropriate sentence to impose on Hayward, consideration should begin with R. v. M.(C.A.) (1996), 105 C.C.C. (3d) 327, in which Lamer C.J.C. for the Supreme Court of Canada, at p. 370, wrote that the principal duty of a sentencing judge is to apply the established principles of sentencing in determining a just and appropriate sentence which reflects the gravity of the offence committed and the moral blameworthiness of the offender:
the overarching duty of a sentencing judge is to draw upon all the legitimate principles of sentencing to determine a "just and appropriate" sentence which reflects the gravity of the offence committed and the moral blameworthiness of the offender.
[81] Furthermore, Lamer C.J.C confirmed, at p. 367, in R. v. M.(C.A.), that a majority of the Supreme Court in R. v. Jones (1994), 89 C.C.C. (3d) 353 at p. 397, had approved the following as the fundamental purpose of sentencing for criminal matters, which would also be applicable for regulatory matters, is to preserve the authority of and promote respect for the law through the imposition of just sanctions:
In furtherance of the overall purpose of the criminal law of maintaining a just, peaceful and safe society, the fundamental purpose of sentencing is to preserve the authority of and promote respect for the law through the imposition of just sanctions.
[82] In addition, at p. 369 in R. v. M.(C.A.), Lamer C.J.C. held that the objectives of retribution, deterrence, denunciation, rehabilitation and the protection of society are legitimate objectives of sentencing:
Accordingly, the meaning of retribution must be considered in conjunction with the other legitimate objectives of sentencing, which include (but are not limited to) deterrence, denunciation, rehabilitation and the protection of society.
(a) What Are The Objectives Of Sentencing For Regulatory Or Public Welfare Offences?
[83] Although the Provincial Offences Act, R.S.O. 1990, c. P.33, the governing procedural statute for the prosecution of regulatory offences in Ontario, has not expressly set out the principles and objectives of sentencing for regulatory matters like that which has been codified in the Criminal Code under ss. 718, 718.1, and 718.2, Kukurin J. in R. v. Kirk (c.o.b. B.A. Holdings), 2005 ONCJ 352, at para. 16, has reasoned that, despite this lack of specific statutory guidance in the Provincial Offences Act, a sentence is not chosen arbitrarily from the pool of sentence options available in any particular case. Therefore, Kukurin J. surmised that an offence created by provincial statute or a federal statute or one that qualifies as a crime under the Criminal Code is subject to universal principles of sentencing that apply to all offences, so that a sentencing court would be bound to apply those universal sentencing principles that are particularly relevant and that the sentencing principles set out in section 718, section 718.1 and section 718.2 of the Criminal Code would consequently apply to regulatory offences because those sections have general applicability to all offences:
The Provincial Offences Act is subdivided into ten parts. Part IV deals with trials and sentencing. There is no provision in the POA that is analogous to section 718, section 718.1 or section 718.2 of the Criminal Code of Canada. … In other words, there is no specific statutory guideline within the POA that directs the court to general purposes and principles of sentencing. Notwithstanding this lack of specific statutory guidance, it is evident that a sentence cannot just be chosen arbitrarily from the pool of sentence options available in any particular case. Whether an offence is created by a provincial statute, or by federal statute or qualifies as a crime under the Criminal Code, it is subject to universal principles of sentencing that apply to all offences. As a sentencing court, the court imposing the sentence on the defendant Kirk was bound to apply those sentencing principles that were relevant. For purposes of this appeal, I adopt section 718, section 718.1 and section 718.2 of the Criminal Code as provisions that have applicability to the offences in this case for which the defendant was convicted, not because the POA specifically imports these by its own terms, but rather because the provisions of these sections have general applicability whether an offence is a crime or is an offence created by a provincial statute.
[84] Equally, in the textbook entitled, "Stewart on Provincial Offences Procedure in Ontario (3ed.)", Toronto, Canada: Earlscourt Legal Press, Inc., 2011, at p. 371, the author reiterated that the Provincial Offences Act does not contain a complete sentencing code, including sentencing principles, but that the common-law and criminal law jurisprudence on sentencing applies to regulatory or provincial offences, such that a sentencing court will consider general and specific deterrence, aggravating or mitigating factors (such as a plea of guilty), the protection of the public, denunciation, the gravity and consequences of the offence, any rehabilitation and remorse, proportionality, the offender's record, and an offender's ability to pay a fine:
Unlike the Criminal Code, the Provincial Offences Act does not contain a complete sentencing code, including sentencing principles. Instead, common law and criminal law jurisprudence applies. For example, s. 718.1 of the Criminal Code provides that sentencing must be proportionate to the gravity of the offence and the degree of the responsibility of the offender. This principle applies equally to sentencing for a provincial offence.
In addition, to the statutory provisions and sentencing jurisprudence, the court will consider general and specific deterrence, aggravating or mitigating factors (such as a plea of guilty), the protection of the public, denunciation, the gravity and consequences of the offence, any rehabilitation and remorse, proportionality, the defendant's record, and ability to pay a fine.
[85] Ergo, when sentencing an offender in respect of a regulatory offence, the sentencing court may take into account the objectives of denunciation, specific and general deterrence, separation of the accused from society if necessary, rehabilitation, reparation to victims and to society, and promoting a sense of responsibility in offenders, as well as the other principles of sentencing set out in ss. 718, 718.1, and 718.2 of the Criminal Code:
718. The fundamental purpose of sentencing is to contribute, along with crime prevention initiatives, to respect for the law and the maintenance of a just, peaceful and safe society by imposing just sanctions that have one or more of the following objectives:
(a) to denounce unlawful conduct;
(b) to deter the offender and other persons from committing offences;
(c) to separate offenders from society, where necessary;
(d) to assist in rehabilitating offenders;
(e) to provide reparations for harm done to victims or to the community; and
(f) to promote a sense of responsibility in offenders, and acknowledgment of the harm done to victims and to the community.
Fundamental principle
718.1 A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.
Other sentencing principles
718.2 A court that imposes a sentence shall also take into consideration the following principles:
(a) a sentence should be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or the offender, and, without limiting the generality of the foregoing,
(i) evidence that the offence was motivated by bias, prejudice or hate based on race, national or ethnic origin, language, colour, religion, sex, age, mental or physical disability, sexual orientation, or any other similar factor,
(ii) evidence that the offender, in committing the offence, abused the offender's spouse or common-law partner,
(ii.1) evidence that the offender, in committing the offence, abused a person under the age of eighteen years,
(iii) evidence that the offender, in committing the offence, abused a position of trust or authority in relation to the victim,
(iii.1) evidence that the offence had a significant impact on the victim, considering their age and other personal circumstances, including their health and financial situation,
(iv) evidence that the offence was committed for the benefit of, at the direction of or in association with a criminal organization, or
(v) evidence that the offence was a terrorism offence
shall be deemed to be aggravating circumstances;
(b) a sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances;
(c) where consecutive sentences are imposed, the combined sentence should not be unduly long or harsh;
(d) an offender should not be deprived of liberty, if less restrictive sanctions may be appropriate in the circumstances; and
(e) all available sanctions other than imprisonment that are reasonable in the circumstances should be considered for all offenders, with particular attention to the circumstances of aboriginal offenders.
[86] Furthermore, the author in the textbook, "Stewart on Provincial Offences Procedure in Ontario (3ed.)", at p. 371, also referred to the Supreme Court of Canada's decision in R. v. Solomon, 2008 SCC 62, where it had been held that the maximum sentence is not always reserved for the worst crime committed in the worst circumstances and that it may be imposed if warranted in light of sentencing principles applied in an individualized context and for the circumstances of the offence that had been committed. The author also emphasized in her textbook that it is the finding of fact at trial that governs the sentencing hearing, since the facts that constitute the essential elements of an offence do not lose their relevance on sentencing and would always be part of the consideration on sentencing:
Where a fine is imposed, appellate courts generally have declined to vary the sentence on the grounds that a fine is particularly within the discretion of the trial judge and should not be lightly interfered with. In R. v. Solomon, the Supreme Court of Canada rules that the "worst case, worst offender" principle no longer operates as a constraint on the imposition of a maximum sentence or penalty where the maximum would otherwise be appropriate. The maximum sentence is not always reserved for the worst crime committed in the worst circumstances, and it may be imposed if warranted in light of sentencing principles, applied in an individualized context and the circumstances of the offence. The sentence must be proportionate to the gravity of the offence and the degree of the responsibility of the offender. The consequences of the commission of the offence, of themselves, do not elevate an offence to the "worst offence". A maximum sentence, as with any other sentence, is subject to appellate intervention only where the trial court applied the wrong sentencing principles or the sentence was clearly excessive in the circumstances.
It is the finding of fact at trial that govern the sentencing hearing. The facts that constitute essential elements of an offence do not lose their relevance on sentencing and will always be part of the consideration on sentencing. … An accused must know what he is convicted of when making submissions on sentencing and only needs to make submissions based on the facts as found by the trial justice.
(b) The Category Of Offences Committed
[87] The regulatory offences for which the defendants were charged and convicted of committing under s. 32(4)(d) of the Retail Sales Tax Act are "mens rea" offences, since that provision sets out that the act of evading or attempting to evade compliance with the payment of taxes imposed under the Retail Sales Tax Act has to be conducted in a "willful" manner, which means that intent or mens rea is an element of the offence:
32(4) Every person is guilty of an offence who has,
(d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act; or
(c) The Nature And Circumstances Of The Offences Committed By Eugena Hayward
[88] In respect to the nature of the offence of tax evasion, Justice Hambly referred to such offence in general in R. v. Witen, [2012] O.J. No. 3226 (QL), 2012 ONSC 4151 (S.C.J.O), at para. 13, and adopted Justice Cory's comments in R. v. Knox Contracting, [1990] 2 S.C.R. 338 (S.C.C.), that those who evade the payment of tax not only cheat the State of what is owing to it, but it also inevitably increases the burden on honest taxpayers, and yet those who evade paying taxes think nothing of availing themselves of the innumerable services which the State provides by means of taxes collected from others. Also, Hambly J., at para. 14 in R. v. Witen, referred to R. v. Coffin (2006), 2006 QCCA 471, 210 C.C.C. (3d) 227, in which the Quebec Court of Appeal had particularly commented that defrauding the government is equivalent to stealing from one's fellow citizens:
R. v. Knox Contracting, [1990] 2 S.C.R. 338 (S.C.C.)
17 It is fitting and appropriate that the s. 239 offences be considered as criminal law. The Income Tax Act is a major source of funds for the federal government. Its provisions are applicable to most adult Canadians. The vast majority pay their income tax by way of payroll deduction with little or no opportunity for evasion or misstatement. Those who do evade the payment of income tax not only cheat the State of what is owing to it, but inevitably increase the burden placed upon the honest taxpayers. It is ironic that those who evade payment of taxes think nothing of availing themselves of the innumerable services which the State provides by means of taxes collected from others.
18 The entire system of levying and collecting income tax is dependent upon the integrity of the taxpayer in reporting and assessing income. If the system is to work, the returns must be honestly completed. All taxpayers have the right to know that it is a criminal violation to commit any of the offences described in s. 239. The Act imposes a public duty. A breach of that fundamentally important public duty should constitute a criminal offence.
R. v. Coffin, (2006) 2006 QCCA 471, 210 C.C.C. (3d) 227 (Que. C.A.)
43 It is generally recognized that the nature and gravity of the offence are fundamental considerations in sentencing. Every sentence must be proportionate to the offence committed, given its nature and the surrounding circumstances.
44 The Crown prosecutor is correct: this type of fraud risks provoking cynicism in citizens and particularly taxpayers with respect to the public institutions that are the very foundations of democratic life.
45 Taxes are levied to collect the funds necessary to fulfil the needs of citizens, particularly the most impoverished.
46 The fallacious argument that "stealing from the government is not really stealing" cannot be used to downplay the significance of this crime. The government of the country has no assets itself; rather, it manages sums common to all of its citizens. Defrauding the government is equivalent to stealing from one's fellow citizens.
47 The respondent drew up 373 fraudulent invoices, one by one, over a period of more than five years. This cannot be dismissed as a momentary lapse of judgment. We also should not lose sight of the total amount stolen nor of the additional fact that the respondent has made only partial restitution. Finally, even though the respondent's actions do not amount to a breach of trust within the meaning of section 336 Cr.C., the fact remains that he illegitimately took advantage of his privileged position to misappropriate public funds for his own personal use.
(1) Breach of trust circumstances
[89] Moreover, the Ministry of Finance submits that the corporate defendant and its operating mind, Eugena Hayward, had collected and not remitted, as well as not collected and not remitted retail sales tax, which had been collected or should have been collected from its customers in trust for the people of Ontario and that instead of remitting the proper amount of retail sales tax to the Minister of Finance, the corporate defendant had paid out substantial dividends to Eugena Hayward during the tax years of 2004 to 2008 and that Hayward had lived extravagantly during that period.
[90] In respect to these breach of trust circumstances, the Retail Sales Tax Act in s. 22(1) expressly designates or deems the amount of money collected or collectable as retail sales tax by a vendor, such as the corporate defendant, to be held in trust of Her Majesty in right of Ontario and is required to be held separate and apart from the property of the vendor:
Trust for money collected
22 (1) Any amount collected or collectable as or on account of tax under this Act by a vendor shall be deemed, despite any security interest in the amount so collected or collectable, to be held in trust for Her Majesty in right of Ontario and separate and apart from the vendor's property and from property held by any secured creditor that but for the security interest would be the vendor's property and shall be paid over by the vendor in the manner and at the time provided under this Act and the regulations.
Extension of trust
(2) Despite any provision of this or any other Act, where at any time an amount deemed by subsection (1) to be held in trust is not paid as required under this Act, property of the vendor and property held by any secured creditor of the vendor that but for a security interest would be property of the vendor, equal in value to the amount so deemed to be held in trust shall be deemed,
(a) to be held, from the time the amount was collected or collectable by the vendor, separate and apart from the property of the vendor in trust for Her Majesty in right of Ontario whether or not the property is subject to a security interest; and
(b) to form no part of the estate or property of the vendor from the time the amount was so collected or collectable whether or not the property has in fact been kept separate and apart from the estate or property of the vendor and whether or not the property is subject to such security interest.
Same
(3) The property described in subsection (2) shall be deemed to be beneficially owned by Her Majesty in right of Ontario despite any security interest in such property or in the proceeds of such property, and the proceeds of such property shall be paid to the Minister in priority to all such security interests.
[91] As for the circumstances of the offences committed by Eugena Hayward, Hayward as the operating mind of the corporate defendant, who is a vendor under the Retail Sales Tax Act, had allowed 1146037 Ontario Limited, operating as The Ascot Room from August 1, 2004 to February 23, 2009, which covers 54 reporting periods, not to file returns and not to declare or remit or not collect and remit $240,866.42 in retail sales tax to the Minister of Finance.
[92] It also appears that the 52 of the 54 retail sales tax returns for the period in question had been late filed with the Ministry of Finance on either February 24, or February 25, 2010, after the first information had been sworn on December 16, 2009, and the corporate defendant had been served with a summons on December 16, 2009. However, for the August 31, 2008 and September 30, 2008 return periods no returns had been filed and the Ministry had to estimate the amount of tax owing as $4000 for each of those two periods.
[93] Moreover, instead of reporting and remitting the $240,866.42 of retail sales tax, 1146037 Ontario Limited, operating as The Ascot Room, continued to use the undeclared and unremitted tax to operate its business. This provided an unfair advantage for the corporate defendant over other competitors who acted lawfully and who had complied with the Retail Sales Tax Act and remitted the proper retail sales tax to the Minister of Finance.
[94] Furthermore, the amount of the retail sales tax owing by 1146037 Ontario Limited, operating as The Ascot Room, had been accumulated over 54 months, despite numerous requests and calls from the Ministry of Finance to the corporate defendant or to Hayward to comply with the Retail Sales Tax Act. Rather than remit the proper amount of retail sales tax of $240,866.42 to the Minister of Finance, the corporate defendant paid out $341,000 in dividends for the 2004 to 2008 tax years to its operating mind, Eugena Hayward.
[95] More important though, is that the tax in question had been or would have in law been paid by the public in trust to the Province of Ontario. The corporate defendant had collected that tax (or had failed to collect it) and would have been holding that retail sales tax in trust for the Ministry of Finance. As a consequence of the corporate defendant not collecting, not reporting, and not remitting the tax owing, the citizens of Ontario ultimately become double victims of the present offences, as the public benefits from taxes collected and reallocated to such programs as health care, the maintenance of roads, and to education, which may not receive enough funding because of willful tax evaders, while citizens paying the sales tax to a vendor believe they are paying sales tax to the Ontario government and not actually enriching the pockets of vendors who do not remit the retail sales tax collected from those citizens. Furthermore, it was not as if the tax owing had been money earned by the corporate defendant or money owed to the corporate defendant. This had been money paid by the public as retails sales tax with the belief that it was going to government coffers to be used for the public benefit or greater good.
[96] Furthermore, there is no evidence that the corporate defendant or Hayward has paid back any of the retail sales tax owing for the 54 months covering the period in question to the Minister of Finance.
[97] Moreover, in R. v. Chan, 2012 ABPC 272, [2012] A.J. No. 1023 (QL) (Alta. Prov. Ct.), at paras. 32 and 33, Fradsham J. decided that denunciation of unlawful conduct and general deterrence are the primary sentencing objectives when dealing with the mens rea type of regulatory offences, which "if not a species in the family of fraudulent conduct are a close cousin", and are examples of regulatory offences which involve a greater degree of moral blameworthiness on the part of the offender, so that the penalties imposed should reflect that greater moral blameworthiness:
In the case at bar, the sentencing objectives which apply are: (1) to denounce unlawful conduct; (2) to deter Mr. Chan and other persons from committing offences; (3) to assist in rehabilitating the offender; (4) to provide reparation for harm done to the community; and (5) to promote a sense of responsibility in the offender, and acknowledgment of the harm done to the community. The primary sentencing objectives are denunciation and deterrence, followed by rehabilitation of the offender (including the promotion in him of a sense of responsibility for his offending behaviour). The restitution orders sought by the Crown, and not opposed by Mr. Chan, will address the objective of providing reparation for the harm done.
In concluding that general deterrence is one of the primary sentencing objectives, I am mindful that the offences to which Mr. Chan has pleaded guilty are regulatory offences. In R. v. Kreft (2006), 2006 ABPC 258, 407 A.R. 376, I had occasion to discuss the jurisprudence on the sentencing of regulatory offences. I continue to be of the view I set forth in paragraph 47 of Kreft:
47 In my view, the jurisprudence, including the cases of R. v. Wholesale Travel Group Inc., supra, [1991] S.C.J. No. 79, R. v. Beach Motors Inc., supra, [2002] O.J. No. 4458 R. v. Virk., supra, [2002] O.J. No. 4102 and R. v Kirk (c.o.b B.A. Holdings), supra, 2005 ONCJ 352, [2005] O.J. No. 3316, when read together, lead to these conclusions:
- One starts with the general proposition that:
"[t]he objective of regulatory legislation is to protect the public or broad segments of the public ... from the potentially adverse effects of otherwise lawful activity. Regulatory legislation involves a shift of emphasis from the protection of individual interests and the deterrence and punishment of acts involving moral fault to the protection of public and societal interests. While criminal offences are usually designed to condemn and punish past, inherently wrongful conduct, regulatory measures are generally directed to the prevention of future harm through the enforcement of minimum standards of conduct and care.
... [R]egulatory offences are directed primarily not to conduct itself but to the consequences of conduct. ... The concept of fault in regulatory offences is based upon a reasonable care standard and, as such, does not imply moral blameworthiness in the same manner as criminal fault. Conviction for breach of a regulatory offence suggests nothing more than that the defendant has failed to meet a prescribed standard of care" (R. v. Wholesale Travel Group Inc., supra).
However, regulatory offences form a continuum ranging from the less serious to the very serious. As one approaches the "very serious" end of the continuum, one is dealing with offences which are designed to address "inherently wrongful conduct" and for which there is a greater degree of moral blameworthiness on the part of the offending defendant. Those regulatory offences which "if not a species in the family of fraudulent conduct are a close cousin" are examples of regulatory offences which involve a greater degree of moral blameworthiness on the part of the offender, and the penalties for them will reflect that.
Having said that, regulatory offences which do not involve inherently wrongful conduct (with its attendant moral blameworthiness) can still attract significant penalties. Regulatory legislation has as its goal adherence to a particular standard of care by those involved in the regulated activity, and the severity of the consequences of a failure to meet the legislated standard of care will vary with the regulated activity involved and nature of the failure. A defendant who commits an offence under a regulatory statute may cause little, if any, actual damage as a result of his or her particular actions. In other words, the acts of the defendant, while violating a provision of a regulatory statute, may not in a particular case result in any significant actual harm. However, the provision of the regulatory statute which the defendant violated may be such that violations of it in general have the potential to cause serious harm to the public. Therefore, in the case of little, or no, actual harm arising from the offence, the penalty for the violation may still be substantial so as to deter others from violating the statute because the consequence of a future violation could be very serious. As noted earlier, regulatory offences are directed at the consequences of failing to abide by the legislated standards of care, not at the actual actions which constituted the violation. "Consequences" include not only actual harm resulting from the specific actions which constituted the offence, but also that which could potentially result from the commission of the offence. Sentences for regulatory offences must similarly take into account the potential consequences of committing the particular offence. Examples of this concept are often found in environmental law sentencing cases such as R. v. Van Waters & Rogers Ltd. (1998) 1998 ABPC 55, 220 A.R. 315 (Alta. Prov. Ct.) and R. v. Terroco Industries Ltd. (2005) 2005 ABCA 141, 367 A.R. 1 (Alta. C.A.).
[98] In addition, my colleague Madigan J.P. in R. v. Virk, [2002] O.J. No. 4102 (O.C.J.), at paras. 52 to 56, had considered the sentencing scheme for regulatory offences and had noted a different approach and application of sentencing objectives in the sentencing of regulatory offences in comparison to criminal offences. Madigan J.P. had also confirmed that absolute or strict liability offences do not involve moral blameworthiness, and that for absolute or strict liability offences the rehabilitation of the offender and public protection become more important in sentencing. On the other hand, Madigan J.P. noted that in regards to the continuum of offences, as a regulatory offence approaches or becomes more like a criminal offence where there is an element of mens rea or moral blameworthiness, then the objectives of denunciation, retribution and deterrence gain more importance in sentencing:
R. v. Wholesale Travel Group Inc. (1991), 67 C.C.C. (3d) 193 (S.C.C.) is authoritative caselaw in which the Supreme Court of Canada addresses the distinction between regulatory offences and criminal offences at pages 237-238. To paraphrase Justice Cory, criminal law is intended to punish "inherently wrongful conduct", whereas regulatory offences are aimed at enforcement of "prescribed standards of care" which society wishes to establish and promote. Further, public welfare offences are "directed not to conduct itself but to the consequences of conduct" and do not imply "moral blameworthiness" in the same manner as criminal fault.
Most public welfare offences are properly classified as either absolute liability or strict liability offences. Very few regulatory offences require the Crown to prove wrongful intention or knowledge in addition to the prohibited conduct.
Not all public welfare offences are equal in gravity. Some are more serious than others. Those requiring proof of wrongful intention or knowledge are more serious, for sentencing purposes, precisely because the prosecution has proven a guilty mind in addition to the prohibited conduct. Convictions for absolute liability and strict liability offences usually suggest "…nothing more than the defendant has failed to meet a prescribed standard of care". However, offences like those alleged and proven in this case tend to involve an element of fault or moral blameworthiness in that they prohibit conduct which is inherently wrong. Quite undeniably, the intention to defraud and the intention to lie qualify as morally blameworthy.
On a continuum of offences running from public welfare offences to true criminal offences, the offences of which Mr. Virk has been found guilty are much more serious and therefore more comparable to criminal offences than to public welfare offences. Obviously, this has significance for sentencing.
In the case of most regulatory offences, the sentencing court usually attempts to balance the competing considerations in favour of rehabilitation of the offender and protection of the public. However, in cases involving proof of mens rea, the balance must favour the objectives of denunciation, retribution, and deterrence. Whereas mens rea offences involve some degree of moral blameworthiness or fault, absolute liability and strict liability offences do not. This distinction justifies the difference in approach to sentencing.
[99] Furthermore, the Court of Appeal for Ontario in R. v. Cotton Felts Ltd. (1982), 2 C.C.C. (3d) 287, at p. 295, reiterated that the deterrent aspect of a sentence for a public welfare offence must be given paramount consideration, and that deterrence is essential for the proper functioning of society and to protect the physical, economic and social welfare of the public:
deterrence is not to be taken only in its usual negative connotation of achieving compliance by threat of punishment. Recently my brother Zuber in R. v. Ramdass, a judgment pronounced on November 17, 1982 [since reported, 2 C.C.C. (3d) 247], referred to deterrence in a more positive aspect. There he was dealing with a driving offence and he quoted an earlier unreported decision of this court in R. v. Roussy, unreported, released December 15, 1977 [summarized 2 W.C.B. 72], where the court stated:
But in a crime of this type the deterrent quality of the sentence must be given paramount consideration, and here I am using the term deterrent in its widest sense. A sentence by emphasizing community disapproval of an act, and branding it as reprehensible has a moral or educative effect, and thereby affects the attitude of the public. One then hopes that a person with an attitude thus conditioned to regard conduct as reprehensible will not likely commit such an act.
This aspect of deterrence is particularly applicable to public welfare offences where it is essential for the proper functioning of our society for citizens at large to expect that basic rules are established and enforced to protect the physical, economic and social welfare of the public.
(d) Should A Fine And/Or Imprisonment Be Imposed On Eugena Hayward?
[100] The penalty provisions under s. 32(4.1) allow for the imposition of imprisonment of a term of not more than two years and a fine. On the other hand, the range of the fine that can be imposed is from a minimum fine of $1000 or 50% of the retail sales tax owing if greater than $1000 and up to a maximum fine of 200% of the amount of the tax owing if the maximum calculated would be greater than $1000. Therefore, in this case, the minimum fine that the court could impose is $120,433.21 while the maximum fine the court could impose is $481,732.84.
[101] Furthermore, the general principles for imposing fines has been summarized by Clayton Ruby in his textbook, "Sentencing (2ed)" (Toronto, Canada: Butterworths, 1980), at page 262-263, and includes the notion that an offender should not gain from their wrongdoing; that the amount of the fine must not be excessive; that the amount of the fine should reflect the offence only and not extraneous factors; that the amount of the fine must be applied without reference to the wealth of the offender; and that the imposition of a fine must not be seen as licence to commit the offence:
There are several principles which provide the foundation for fines. They can be summarized briefly: the offender must not gain from his or her wrongdoing; the amount fined must not be excessive; the amount fined should reflect the offence only and not extraneous factors; the amount fined must be applied without reference to the wealth of the offender; and the imposition of a fine must not be seen as licence to commit the offence.
It is likely that the principle that the amount of the fine must not be excessive was part of the common law even before it was enunciated in the English Bill of Rights. There is mention of it as far back as Magna Carta, 1215: "for a trivial offence, a freeman shall be fined only in proportion to the degree of his offence, and for a serious offence correspondingly, but not so heavily as to deprive him of his livelihood."
[102] In regards to a sentence of imprisonment as the appropriate sentence, it has generally been regarded as a sentencer's last resort and this principle has been codified in the Criminal Code in s. 718.2. Moreover, Clayton Ruby in his book entitled, "Sentencing (2ed)", at pages 284-285 surmised that custodial sentences are necessary where the offences themselves are so serious that no other measure will adequately express the condemnation which society directs at the crime or offence or where the element of deterrence to others demands a sentence of imprisonment:
Nevertheless there are offences and offenders for whom there is no other alternative consistent with the judicial responsibility to protect the public. Thus, when one examines the factors determining the imposition of imprisonment, one should bear in mind that imprisonment acts almost entirely as punishment and contains little if any reformative aspect.
There is a general conviction, perceivable over the years and increasing in strength, that custodial sentences ought to be imposed only as a last resort and where all other measures either have failed or cannot reasonably be expected to succeed. In addition, custodial sentences are necessary where the offences itself is so serious that no other measure will adequately express the condemnation which society directs at the crime., or where the element of deterrence to others demands a sentence of imprisonment.
(1) The circumstances of the defendants
(a) the corporate defendant
[103] Although 1146037 Ontario Limited, operating as The Ascot Room, is still listed as an active company its assets had been transferred to another corporation named 2199970 Ontario Inc., which had occurred sometime after this corporation had been incorporated on March 9, 2009, as a consequence of the Ministry of Finance effecting its collection action in February of 2009 against the corporate defendant by seizing funds in the corporate defendant's bank accounts. Ergo, the corporate defendant, 1146037 Ontario Limited, is no longer operating the retail store known as "The Ascot Room" and has no assets. The total retail sales tax owing to the Ministry of Finance appears unlikely to be collectible from the defendant corporation as it has no assets to pay a fine.
(b) The Individual defendant, Eugena Hayward
[104] The individual defendant, Eugena Hayward, is 44 years old. From the Pre-sentence Report prepared on May 14, 2013, the writer of the report indicates that Hayward had informed the writer that she resides with her common-law spouse of 12 years. She also informed the writer of the report that she has a seven-year-old son who also resides with Hayward. Hayward also submitted that her son has a learning disability and submitted in her sentencing submissions that she has to take her son to the United States for an assessment in November of 2013.
[105] Furthermore, Hayward informed the writer of the report that her father also resides with her because her father had a stroke in November of 2012 and that she has to take care of her father.
[106] In addition, Hayward informed the writer of the report that she currently has two dependents, her father, who had a stroke in November of 2012, and her 7-year-old son, who has a learning disability, but that she had no means to support them.
[107] Moreover, Hayward is listed as the owner or co-owner of two properties in Ontario. She is on title as the owner for the property located at 17228 Olde Main Street, Belfountain, which is where the retail store known as "The Ascot Room" is still being operated. She is also listed as the co-owner of a property located at 6003 Tenth Line, P.O. Box 984, Erin, Ontario, which is where she resides with Robert Venables, her common-law spouse, and her son and her father as well. The other co-owner is Robert Venables, her common-law spouse.
[108] Furthermore, in the Pre-Sentence Report the writer of the report indicates that Eugena Hayward had told the writer of that report that she had graduated from high school and is unemployed and has no source of income and is supported by her common-law husband, who is a self-employed carpenter and the owner of a retail company. The report also indicates that Hayward's father recently had a stroke and now resides with Hayward in the house owned by her common-law spouse. However, the Municipal Property Assessment Corporation documents obtained by the Ministry of Finance and entered as Exhibits 3J and 3K contradicts what Hayward told the writer of the Pre-Sentence Report and indicates that Hayward is also a co-owner with her common-law husband of the property at 6003 Tenth Line, P.O. Box 984, in Erin, Ontario, as of May 21, 2013.
[109] Hayward also made a submission in response to Nick DeMaria's testimony on DeMaria finding ads, events, and webpage links from an internet search which had been entered as Exhibit 3C, which revealed that Eugena Hayward's name had appeared in respect to a fund raising event held on April 28, 2013, at the Brampton Golf and Country Club that had also indicated that there would be an event with "Fashions by Genie Hayward of The Ascot Room in Belfountain"; a Family Transition Place charity event held on April 19, 2013 at the Hockley Vallet Resort with "The Ascot Room" as a fashion show contributor; and an event entitled "Women Celebrating Women Fashion Show at The Caledon Country Club with fashions from "The Ascot Room". In her response, Hayward submitted that she only volunteers at functions in which "The Ascot Room" is involved in, but is not employed nor receives compensation from any company.
[110] In addition, DeMaria also found in his internet search other information or webpages entered as Exhibit 3C, that Hayward's name also appeared in conjunction with "The Ascot Room" in the Autumn 2011 issue of the Caledon West "SouthFields Village Voice", at p. 30, in which it states that when Hayward is not at the store herself then the store is staffed by her family and people Hayward genuinely trusts to carry forward her vision and that Hayward of "The Ascot Room" makes regular trips to Germany and New York to bring fashions to Belfountain:
Genie Hayward of The Ascot Room makes regular trips to Germany and New York to bring fashions to Belfountain that would normally be reserved for the highest end boutiques in Toronto. Some of the selection is so exclusive that it is available only at six other boutiques across Canada. When she is not at the store herself, it is staffed by family and people she genuinely trusts to carry forward her vision. Genie promises "this fall's private label collection under the Ascot Room Collection line will really have customers talking!"
(i) the pre-sentence report
[111] In respect to pre-sentence reports, Renaud J. at para. 21 in R. v. P.H.H (No. 2), reaffirmed the principle that a positive pre-sentence report is a mitigating factor for sentencing:
It is a well recognized sentencing principle that a positive presentence report, as was submitted in this case, is a mitigating factor in sentencing.
[112] For Eugena Hayward, the pre-sentence report recommends that she report as required to the Probation Officer.
[113] However, I am not convinced that she has been forthright with the court or that she shown significant remorse, except for her guilty plea (which she tried to retract on May 24, 2013), for her willful actions in evading or attempting to evade compliance with the Retail Sales Tax Act in not remitting the proper retail sales tax to the Minister of Finance or that she has actually acknowledged or taken responsibility for her willful and unlawful actions. Moreover, I do not accept her contention that she only volunteers for events involving "The Ascot Room", and despite her name not appearing on any corporate documents for 2199970 Ontario Inc., it can still be reasonably inferred that Eugena Hayward, based on the Ministry of Finance evidence, is still playing a central and significant role in the operation of the retail store known as "The Ascot Room".
(2) The guilty pleas entered by Eugena Hayward is evidence of remorse
[114] Generally, a guilty plea is a mitigating circumstance. Both the corporate defendant and its operating mind, Eugena Hayward, entered guilty pleas on July 19, 2012, which is approximately a little over two years and four months after the defendants made their first appearance on February 22, 2010, although the defendants had tried to retract their guilty pleas ten months later on May 24, 2013, after their counsel had applied to be removed as the defendants' solicitor of record.
[115] In R. v. P.H.H (No. 2), [1997] O.J. No. 4234 (QL) (Ont. Ct. (Prov. Div.)), at paras. 13 to 15, Renaud J. considered the effect of a guilty plea and surmised that a guilty plea entitles an offender to be considered a serious candidate for rehabilitation by their resolve to act responsibly. He also confirmed that a trial judge commits an error of law in discounting a guilty plea or in refusing to acknowledge it as a significant mitigating factor:
The offender pleaded guilty to the accusation and is entitled to be considered as a serious candidate for rehabilitation by reason of this resolve to act responsibly. Firstly, I note that in R. v. Faulds et al. (1994), 79 O.A.C. 313 (C.A.) at para 14, the Court of Appeal provides useful instruction respecting the weight to be assigned to a guilty plea: "The effect of a guilty plea in setting the appropriate sentence will vary with the circumstances of each case. In some cases, a guilty plea is a demonstration of remorse and a positive first step towards rehabilitation. In other cases, a guilty plea is simply a recognition of the inevitable. ... Even where the plea is not a manifestation of genuine remorse, it may still save valuable judicial resources and provide a degree of finality from the perspective of the victims which would not exist without the plea."
Secondly, I note as well the guidance provided by the Court of Appeal in R. v. Santos (1993), 67 O.A.C. 270 (C.A.) to the effect that a trial judge commits an error of law in discounting a guilty plea or in refusing to acknowledge it as a significant mitigating factor by reason of the overwhelming evidence against him. No less weight is to be assigned, though the offender "has been inescapably caught". Refer to para. 2 and as well to R. v. Bruce (1982), 35 Nfld. & P.E.I.R. 530, 99 A.P.R. 530, 28 C.R. (3d) 247, (P.E.I.S.C.), at pp. 252-253 [C.R.].
And, thirdly, there is a public interest in the saving of valuable trial time, as made plain above, and in R. v. Johnston and Tremayne, [1970] 4 C.C.C. 64 (Ont. C.A.), applying R. v. de Haan, [1967] 3 All E.R. 618.
[116] Furthermore, in R. v. Rosenberg, [1993] O.J. No. 3260 (QL) (Ont. Ct. (Gen. Div.)), Watt J. said at para. 19 that in general terms, the earlier the plea is made the greater the indication of remorse and the saving of expense and inconvenience would be exist, although, he also recognized that even a late guilty plea saves the community expense and inconvenience and should rightly carry significant weight:
The mitigating influence of a plea of guilty should be seen as operating upon a continuum. The precise weight to be attributed to it is incapable of exact calibration. It is a variable, not a constant. In general terms, the earlier the plea, the greater the indication of remorse, the saving of expense and inconvenience, hence the impact in mitigation. Later pleas of guilty are often but acquiescence to the inevitable, a realization that guilt is or will be plainly established. Nonetheless, even a late guilty plea saves the community expense and inconvenience. … What is lost by the passage of time before the plea is more than offset by savings of time and resources as a result of it. Significant weight is rightly laid on the mitigating effect of these pleas of guilty.
[117] Hence, it is a mitigating factor that both the corporate defendant and the individual defendant, Eugena Hayward, have plead guilty to four offences on July 19, 2012, although it had not been at the first opportunity, but they had done so after 24 court appearances and approximately 29 months after the defendants' first appearance on February 22, 2010.
[118] On the other hand, the defendants have not been fully cooperative with Ministry of Finance officials with respect to complying with the Retail Sales Tax Act, based on collection notes of Joan Clements in Exhibit 3F, which shows that the Ministry of Finance has been trying to get the defendants to comply with the Retail Sales Tax Act since at least 1998.
[119] However, even though the defendants had not been fully cooperative with the Ministry of Finance, nor have they repaid any of the $240,866.42 of retail sales tax owing for the period of August 1, 2004 to February 23, 2009, before sentencing, the late guilty pleas are nonetheless a mitigating circumstance.
(3) There are no previous convictions for the defendants
[120] There is no evidence that either 1146037 Ontario Limited, operating as The Ascot Room, or Eugena Hayward had previously been convicted of an offence under the Retail Sales Tax Act. The absence of previous wrongdoing under this Act is a mitigating circumstance in favour of both defendants.
(4) Eugena Hayward's awareness and knowledge about the corporate defendant's non-compliance with reporting, filing returns, and remitting retail sales tax since 1998
[121] The defendant corporation and its operating mind, Eugena Hayward, were well aware of their obligations of collecting, reporting and filing returns, and remitting the proper amount of retail sales tax to the Minister of Finance since at least 1998, as indicated by Joan Clements' collection history notes in Exhibit 3F, which indicates that many telephone calls and tax collection strategies were employed against the corporate defendant to collect the retail sales tax owed to the Minister of Finance as far back as 1998. There is also an indication that Hayward would stall the Ministry of Finance, deflect responsibility to her accountants, and that she would not fulfill her promises to the Ministry that she would file returns or remit the retail sales tax owing.
[122] Furthermore, the defendants had acted willfully in collecting retail sales tax and not reporting and remitting the retail sales tax owing and for not collecting and not remitting the retail sales tax owing from August 1, 2004 to February 23, 2009, inclusive. This period covered 54 reporting periods in which returns had to be filed and the proper amount of retail sales tax remitted. The collection history notes of Joan Clements contained in Exhibit 3F also indicate that the defendants had been contacted on many occasions since 1998 by Ministry of Finance officials and that the defendants' non-compliance and non-cooperation with the Ministry of Finance led to the Ministry obtaining writs of seizure and sale and to issue bank demand and garnishment letters to the corporate defendant's bank to seize funds, yet the defendants still did not comply fully with their statutory duties under the Retail Sales Tax Act to collect, report, and remit the proper amounts of retail sales tax to the Minister of Finance.
[123] The defendants had no excuse for why the retail sales tax was not reported and remitted to the Minister of Finance. The length of the period in question of 54 months is a relatively long period to not comply with their legal obligations under the Retail Sales Tax Act and the amount of $240,866.42 that had not been reported and not remitted is a significantly large amount.
[124] In addition, there is no mitigating circumstance that would significantly diminish Hayward's fault or moral blameworthiness in committing the offences in respect to willfully collecting retail sales tax and not reporting and remitting the retail sales tax owing and for not collecting and not remitting the retail sales tax owing from August 1, 2004 to February 23, 2009.
(5) Summary of the aggravating and mitigating factors
[125] Moreover, a sentence may be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or to the offender. In respect to the offences committed by the defendants and in respect to Eugena Hayward the following are aggravating and mitigating factors that will be considered in arriving at the appropriate sentence for Hayward:
(a) aggravating factors
[126] The defendants failed to remit $240,866.42 in retail sales tax, which had been or should have been collected in trust for the Ontario government and the people of Ontario. By willfully evading the payment of this significant amount of retail sales tax to the Ontario government and the people of Ontario, the Ontario government and the people of Ontario were in essence defrauded of that $240,866.42. Moreover, the defendants, especially Eugena Hayward, has personally benefitted from the evasion of or failure to remit that $240,866.42 to the Province of Ontario.
[127] Furthermore, the customers of the defendants, when paying for items at "The Ascot Room" had paid for those items believing that the total amount of what they had paid for the item would have included or contained provincial sales tax which goes to the Ontario government and that this tax they had paid or should have been paid would be then remitted to the Ontario government. By keeping the tax that had been paid by the defendants' customers, who had believed they were paying taxes to the Ontario government on the items they had purchased, not only enriched the defendants, but it had also been at the expense of the citizens of Ontario who are then required to carry more of the burden for services provided by the Ontario government, such as maintaining roads; providing schools; providing special education teachers for students with learning disabilities; providing hospitals; providing medical care for its citizens, such as providing medical care for persons who have had strokes; as well as providing for the security of its citizens.
[128] In addition, Hayward had breached the trust that the Ontario government puts on vendors to collect retail sales tax on goods or services the vendor provides and then to report and remit the proper amount of retail sales tax collected to the Ontario government.
[129] Moreover, there are many honest vendors who do collect retail sales tax from its customers and then remit the proper amount of taxes to the Ontario government. However, those honest vendors would not be competing on an even playing field with vendors that keep the collected taxes or who fail to remit the proper amount of taxes collected to the Ontario government. Therefore, when Hayward had willfully failed to report and remit the proper amount of retail sales taxes that had been collected or that should have been collected by the corporate defendant to the Ontario government, then the burden for providing public services would be increased on those who honestly collect, report, and remit the proper amount of taxes to the Ontario Government. It also puts the honest vendors at a disadvantage in terms of cash flow and in carrying more of the burden to pay for public services.
[130] In addition, this proceeding has taken 25 court appearances and has taken many resources of the Ministry of Finance to investigate, prosecute, and in attempting to collect the retail sales tax owing from the corporate defendant and from Eugena Hayward.
[131] Furthermore, Hayward has not made any restitution towards the retail sales tax owing for the period in which the charges have arisen, even though she is the owner and co-owner of two properties located in Ontario that are presently assessed to be worth $343,500 and $877,475 respectively.
[132] In regards to these two properties, Hayward and her common-law husband, Robert Venables had purchased a property as co-owners in Erin, Ontario on November 1, 2001 for $390,000. The value of that property as of May 21, 2013, is now assessed at $877,475. In addition, Hayward is still the sole legal owner of the commercial property in which "The Ascot Room" business is being operated at 17228 Olde Main Street in Belfountain, Ontario. Its appraised value as of May 21, 2013 is $343,500. During the time that the $240,866.42 in retail sales tax had been owed to the Minister of Finance, the values of Hayward's two properties have increased significantly in value.
[133] Moreover, the Ministry of Finance has been trying to get the corporate defendant and Hayward to comply with the Retail Sales Tax Act since at least 1998, which is approximately 15 years.
[134] Also, Hayward has not demonstrated any significant or genuine remorse or demonstrated a sense of responsibility for what she has done, except for entering a guilty plea on the 25th court appearance in these proceedings.
[135] Furthermore, Hayward was convicted of committing these offences for a period that commenced on August 1, 2004 and ended on February 23, 2009, which had covered 54 returns or reporting periods or 54 months in duration.
[136] Hayward also had moved the assets from the corporate defendant to another corporation controlled by her common-law husband to evade or thwart the collection efforts of the Ministry and is also hiding behind the corporate structure to hide her involvement in running or operating "The Ascot Room".
[137] In addition, Hayward in her closing submissions also made what sounded like an offer to the Ministry of Finance to pay a $50,000 fine in order to close things and for the Ministry to go away.
[138] Moreover, Hayward attempted to place the blame for the failure to remit the proper amount of retail sales tax to the Minister of Finance on her accountants or on Ministry officials, even though it was she who is ultimately responsible as the operating mind of the corporate defendant to ensure that the corporate defendant complies with the Retail Sales Tax Act. However, the corporate defendant and ultimately Hayward have not been complying with the Retail Sales Tax Act since at least 1998, when the Ministry of Finance first began its efforts to get the corporate defendant to comply with the Act and to remit the proper amount of taxes to the Minister of Finance.
[139] Furthermore, there has been a substantial amount of time and resources used by the Ministry of Finance in trying to get Hayward and the corporate defendant to comply and to remit the tax owing.
[140] In addition, the failure to report and remit the proper amount of retail sales tax that had been collected or ought to have been collected in trust for the Ontario government and not reported and not remitted to the Minister of Finance, but used for Hayward's personal benefit amounted to a breach of trust.
(b) mitigating factors
[141] As for the mitigating factors that can be considered, Hayward did enter a guilty plea voluntarily and in the presence of legal counsel. She had therefore invited the court, through her lawyer, to convict her on an agreed statement of facts. This had relieved the Ministry of Finance of substantial time and expense, which would have been required to prove the case.
[142] In addition, Hayward's father appears to have suffered a stroke and since her father suffered the stroke has resided with Hayward and with her son and her common-law husband. Hayward also submits that she takes care of her father. Her imprisonment would also deprive her father of Hayward's care. This may serve as a hardship for Hayward's father.
[143] Moreover, Hayward's incarceration will not likely end the women's retail apparel business known as "The Ascot Room".
[144] Hayward also submitted that her seven-year old son has a supposed learning disability and that she and her common-law husband have to take their son to the United States for an assessment in November of 2013.
[145] Furthermore, Hayward is a first time offender and had no previous convictions under the Retail Sales Tax Act.
(6) Eugena Hayward's ability to pay a fine
[146] In R. v. Ward (1980), 56 C.C.C. (2d) 15, at p. 18, the Ontario Court of Appeal held that if a fine is appropriate as a penalty, then the amount of the fine should reflect the means of the offender and whether the fine can be paid within a reasonable time:
We would also observe that, where a fine is an appropriate penalty, a fine of such magnitude should not be imposed, that having regard to the means of the offender, it cannot be paid within a reasonable time.
[147] In respect to the corporate defendant's ability to pay a fine, it is insolvent, as all its assets had been transferred to another corporation in 2009, in order that the Minister of Finance, who had started collection action against the corporate defendant, could not seize any more money from the corporate defendant's bank accounts for the retail sales tax owing or to seize and sell any of the corporate defendant's assets.
[148] As for the individual defendant's ability to pay a fine, Eugena Hayward submits that she is unemployed and that her common-law husband supports her and that she is not an employee of any company or at the retail store known as "The Ascot Room", and that any evidence that the Ministry proffered in the hearing which shows that she is somehow involved or working for "The Ascot Room" had been contended by Hayward, that for those events, she had only been volunteering at those public events.
[149] However, Lisa Liberty, a Ministry of Finance investigator, had testified that she had attended on August 9, 2013, at the retail store known as "The Ascot Room" located at 17228 Olde Main Street, Belfountain, Ontario in an undercover capacity posing as a customer and had been actually approached and served by Eugena Hayward when Liberty had entered that women's retail apparel store.
[150] Moreover, copies of what Ministry of Finance investigator Nick DeMaria had found on an internet search of "The Ascot Room" and entered as Ex. 3C, indicates that Eugena Hayward's name is still attached to the business known as "The Ascot Room" and that Hayward evidently appears to still play a central role in the operation of that women's apparel retail store, despite her claim that she only volunteers at those advertised events or functions that DeMaria had found in his internet search and that she does not receive any compensation from any company.
[151] Furthermore, the evidence of Hayward's involvement in "The Ascot Room" and her action serving Ministry of Finance investigator Lisa Liberty, who had been posing as a customer on August 9, 2013, contradicts Hayward's contention that she is unemployed and not involved with "The Ascot Room" retail store. Moreover, her attempt to diminish her role in the operation of "The Ascot Room" does affect her credibility and the trustworthiness of any of her submissions in the sentencing hearing. Moreover, Hayward had not testified under oath or affirmation nor did she subject herself to cross-examination on those submissions about being a volunteer, yet relies on her submissions as being trustworthy and credible evidence. However, based on the Ministry's evidence in respect to the ads and webpage links that show Hayward's central role in "The Ascot Room" in charity events and sale campaigns in 2013 and in light of Lisa Liberty's testimony about observing Hayward in the retail store named "The Ascot Room" and being approached and served by Hayward when Lisa Liberty had been posing as a customer, I find Hayward has been disingenuous in the picture she is trying to paint about herself being impecunious and being supported by her common-law spouse, especially when the assets and business known as "The Ascot Room" had been transferred to a corporation controlled by her common-law spouse and that "The Ascot Room" is still in business and in which she had been observed in serving a customer. Moreover, "The Ascot Room" had been Hayward's business since an R.S.T. vendor number had been issued to it in 1995, and in trying to hide her involvement in "The Ascot Room" from the tax authorities by hiding behind a corporate structure where her name does not appear anywhere in respect to the new corporation does not mean she does not have an active role in its day to day operation. In addition, there is no evidence that another individual, except Eugena Hayward, actually runs the day to day operations of the "The Ascot Room".
[152] Moreover, Hayward's disengenuity and her attempt to misinform the court about her actual role with "The Ascot Room" has shown Hayward to lack any credibility and further undermines her submissions that she is not involved with "The Ascot Room" except as a volunteer and is unemployed and is only being supported by her common-law husband. Moreover, the evidence from Ex. 3C and 3R and from Lisa Liberty's observations instead shows that Hayward is still integrally involved in the women's apparel retail store called "The Ascot Room located" at 17228 Olde Main Street, Belfountain, even though her name does not appear in the corporate documents of 2199970 Ontario Inc., the corporation that had received the assets from the corporate defendant when the Ministry had seized funds in the corporate defendant's bank accounts in February of 2009.
[153] Furthermore, Hayward's submissions that she is unemployed and impecunious and that she has not been employed since the Ministry of Finance had closed the corporate defendant's bank accounts and seized funds in those accounts, had conveniently occurred at about the same time that the corporate defendant's assets were transferred to another corporation being controlled by her common-law husband, Robert Venables.
[154] In addition, in response to the ads and webpages identified by Nick DeMaria and submitted as Exhibit 3C, from which the Ministry contends is evidence that shows Eugena Hayward is still actively involved in and running the retail store named "The Ascot Room", Hayward submitted that she is a just a volunteer at those events mentioned in the ads and does not receive any compensation from any company. However, despite Hayward's denial of involvement in the operation of the business known as "The Ascot Room" and even though Hayward is not listed as an officer and director of the corporation presently operating "The Ascot Room", Hayward is still an integral part of the operation of "The Ascot Room".
[155] Moreover, Fish J., writing for the Supreme Court of Canada, in R. v. Topp, [2011] S.C.J. No. 43 (QL), 2011 SCC 43 (S.C.C.), held at para. 7, that where there is no evidence or explanation of what happened to the money that been obtained by fraud, the trial judge has the discretion to impose a fine in the absence of such explanation, and that the past receipt of illegally obtained funds can support the inference that the offender still possesses sufficient funds to pay a fine at the time of sentencing:
Past receipt of illegally obtained funds does not impose an evidential burden on offenders to prove they no longer possess their ill-gotten gains. In the absence of a credible explanation, however, it will often be open to the court to infer that the offender is able to pay a fine. But the court is not legally bound to do so. The probative weight of the inference will depend on the circumstances, and therefore vary from case to case.
[156] Furthermore, Fish J. in R. v. Topp, held at para. 20, that there must be an affirmative finding that an offender is able to pay before a fine can be imposed. In the absence of evidence capable of supporting that finding, the party seeking a fine cannot succeed:
An affirmative finding that an offender is able to pay is therefore required before a fine can be imposed. In the absence of evidence capable of supporting that finding, the party seeking a fine cannot succeed.
[157] And, more important, in respect to Eugena Hayward's ability to pay a fine, is that Exhibits 3H, 3I, 3J, and 3K show that Hayward is the legal co-owner of a residential property located at 6003 Tenth Line, P.O. Box 984, R.R. #1 in Erin, Ontario, that had been assessed to be worth $877,475 on May 21, 2013, and that Hayward is the sole legal owner of the commercial property at 17228 Olde Main Street, Belfountain, where the retail store known as "The Ascot Room" is being still operated, and which has been assessed to be worth $343,500 on May 21, 2013. Furthermore, the Ministry submits that the mortgages on the two properties that Hayward owned or co-owned have been paid with the retail sales tax monies that had been owed to the Minister of Finance and that this property has also appreciated in value while the $240,866.42 is still owed to the Minister of Finance. Therefore, besides her evident involvement in the operation of "The Ascot Room", which is an ongoing concern, Hayward still has a substantial amount of assets legally in her own name and at her disposal. As such, she is not impecunious and has the means and ability to pay a fine that could be imposed.
[158] Moreover, as the owner of the property at 17228 Olde Main Street in Belfountain, where the business "The Ascot Room" is being operated at, Hayward could still collect rent for that property in her personal capacity, which has also been reflected in her income tax return filed for the 2003 tax year, which revealed Hayward had been collecting rent on the commercial property she owns in Belfountain, Ontario.
(a) profits from the wrongdoing
[159] As contended by the Ministry of Finance, the corporate defendant and its operating mind, Eugena Hayward, benefited from the retail sales tax not reported or remitted over a period of 54 months. This failure to remit the retail sales tax to the Minister of Finance gave 1146037 Ontario Limited, operating as The Ascot Room, an unfair advantage during that period over its competitors, who had been lawfully complying with the Retail Sales Tax Act. Not reporting or forwarding $240,866.42 over a period of 54 months would have given a significant advantage and benefit to the corporate defendant in operating the business, in covering expenses, in financing inventory, in purchasing more advertising and promotion, and in maintaining a higher cash flow.
[160] Moreover, the retail store known as "The Ascot Room" is presently still in business. In addition, the use of the unremitted tax of $240,866.42 had been both a benefit to 1146037 Ontario Limited, operating as The Ascot Room, as well as for Eugena Hayward, who had received dividends totalling $341,000 from the corporate defendant for the 2004 to 2008 tax years, which roughly covers the same 54-month period in which Hayward, as the director of the corporate defendant, had failed to ensure that the corporate defendant had collected, reported, and remitted the proper retail sales tax to the Minister of Finance.
[161] Furthermore, Hayward was the owner or co-owner of two properties during the period of August 1, 2004 to February 23, 2009. Hayward is the sole owner of the property located at 17228 Olde Main Street, Belfountain, Ontario, which increased in value from $185,000 on July 1, 1999, when it was purchased by Hayward to $343,500 on May 21, 2013, and the co-owner of the property located at 6003 Tenth Line, P.O. Box 984, Erin, Ontario, which also increased in value from $390,000 on November 1, 2001, when it had been purchased by Hayward and Robert Venables as co-owners, to $877,475 on May 21, 2013. It is also noteworthy that Hayward and Robert Venables have co-owned this property in Erin, Ontario for approximately 12 years and the Pre-Sentence Report indicates that they have been common-law spouses for about the same 12 years.
[162] And, if there were mortgages on those two properties in which Hayward is either the owner or the co-owner, then the dividends of $341,000 that Hayward had received from the corporate defendant for the years 2004 to 2008, instead of the corporate defendant remitting the $240,866.42 of retail sales tax that is owed to the Minister of Finance, could have easily been used to pay down or meet the mortgage payments on both properties, which would have personally benefitted or increased Hayward's net worth.
(7) Should the individual defendant Eugena Hayward also receive a sentence of imprisonment?
[163] The Ministry of Finance contends that a period of imprisonment between 60 to 90 days is appropriate in this case and should be imposed on Eugena Hayward to address the objectives of general and specific deterrence as well as denunciation in respect to Hayward's willful and unlawful conduct in evading or attempting to evade compliance with the Retail Sales Tax Act and for not remitting retail sales tax of $240,866.42 to the Minister of Finance. Moreover, the Ministry submits that Hayward had been required to collect the retail sales tax in trust for the Ontario government and for the people of Ontario and that by not remitting this tax Hayward had been in breach of that trust relationship.
[164] Moreover, the Ministry of Finance submits that Hayward is one of the worst offenders in one of the worst cases, and therefore, imprisonment is called for to address the objectives of deterrence and denunciation.
[165] In addition, the Ministry contends that instead of remitting the retail sales tax to the Minister of Finance, Hayward had taken the $240,866.42 owed to the Minister of Finance and used it to support her lavish lifestyle and to pay for the mortgages on the two properties she was either the registered owner or registered co-owner of and for the numerous vehicles that were registered to Hayward and her common-law husband, Robert Venables. However, Hayward submitted that many of those vehicles the Ministry had referred to were no longer owned by Hayward, nor working, but Hayward did admit that she still owned the properties and did not sell the properties so she could run and hide.
[166] Therefore, being mindful of the principle of restraint in imposing a sentence of imprisonment and that imprisonment should only be imposed as a last resort when no other form of punishment would be reasonable or appropriate for the circumstances and the relevant sentencing objectives, should a period of imprisonment be imposed on Hayward to address the sentencing objectives of denunciation and specific and general deterrence?
(a) imprisonment imposed where there are breach of trust circumstances in committing the offence
[167] In regards to offences being committed that involve breach of trust circumstances, such as in R. v. Seto, [2010] O.J. No. 5438 (QL) (O.C.J.), the sentencing court there had imposed a period of imprisonment where there had been serious financial loss, the offences involved breach of trust circumstances, and no restitution had been made by the accused. In that case, the accused Seto had pled guilty to eight counts of failing to deposit trust monies into a trust account as required by the Real Estate and Business Broker's Act, as well as admitting that he and his company had diverted to his own account over $534,000 in funds he had received from clients as deposits on agreements of purchase and sale, which had subsequently resulted in $133,000 of consumer losses. The sentencing court then imposed a fine $20,000 on the company while also sentencing the offender to "one year of imprisonment". Moreover, at paras. 5, 9, and 10 in R. v. Seto, Young J. sitting as the appeal court, had upheld the sentencing court and found that it had not erred and that a breach of trust is an "aggravating factor" in sentencing and that it is important to get a clear message out to real estate brokers that if they violate their trust they may go to prison and that a range of sentence for the eight counts might be from 8 or 9 months to 16 months (comprising of 1 to 2 months of imprisonment for each count) and that the one year sentence in total that had been imposed by the sentencing court had been within that range. In addition, the offender Seto had made no restitution:
… The prosecution and defence counsel before me, both properly concluded that this case is a breach of trust situation.
Breach of trust is considered an aggravating feature in sentencing and it is important to get a clear message out to real estate brokers that if they violate their trust, as happened here, they may go to prison, I suggest the range of sentence might be from 8 to 9 months to 16 months, (that is to say, 1 to 2 months per count), and the Justice of the Peace sentence of one year is within that range.
Mr. Seto seems to want every consideration in his favour, including probation, despite the serious loss and breach of trust circumstances and no restitution.
(b) sentences of imprisonment for tax evaders in Canada
[168] In R. v. Tyskerud, 2013 BCPC 277, [2013] B.C.J. No. 2183 (QL) (B.C. Prov. Ct.), at para. 70, MacCarthy J., in deciding whether to impose a custodial sentence on a convicted tax evader, had reviewed and summarized several cases where tax evaders had been given conditional sentences or sentences of imprisonment. These summaries of the cases included the length of the jail term imposed, the fine imposed as a percentage of the tax evaded, the amount of tax that had been evaded and other extenuating circumstances, such as whether the offender had cooperated with authorities, had entered an early guilty plea, or had made restitution:
Crown refers to a number of specific cases in order to support their sentencing position. The following is a summary. I will provide the case, the amount evaded, the length of imprisonment, the amount of fine, and the extenuating circumstances as the heading and then provide the information below each of these headings.
Loosdrecht: Amount evaded: $98,211.36. Length of imprisonment: effective sentence of 20 months jail. Amount of fine: 100 percent. Extenuating circumstances: tax protestor.
Sydel: Amount evaded: $253,000 approximately. Length of imprisonment: 18 months jail. Amount of fine: first count, 75 percent; following four counts of 100 percent. Extenuating circumstances: tax protestor.
Amell: Amount evaded: Heidi Keyzer, $16,415.38 plus approximately $15,000 child tax credits and $1,300 GST; Robert Amell, $18,686.81 plus $1,700 GST; Douglas Amell, $172,397.50. Length of imprisonment: Heidi Keyzer, five months jail (upheld on appeal); Robert Amell, three months in jail; Douglas Amell, 16 months jail (upheld on appeal). Amount of fine: 100 percent for all. Extenuating circumstances: tax protestors.
Porisky: $208,681 for Porisky; $27,434.56 for his spouse Gould. Length of imprisonment: Porisky, 18 months jail on evasion but 4.5 years total; Gould, six months' conditional sentence order. Extenuating circumstances: Porisky was the founder of Paradigm and counselled others. The sentence was part of a joint submission. Gould's sentence was also part of a joint submission.
Kobelt: Amount evaded: $512,867.67. Length of imprisonment: two years less a day (upheld on appeal). Amount of fine: 100 percent. Extenuating circumstances: tax protestor.
Chobotar: Amount evaded: $162,513. Length of imprisonment: six months jail. Amount of fine: 100 percent. Extenuating circumstances: tax protestor.
Luoma: Amount evaded: $60,960 income tax and evasion of $15,403.95 GST. Length of imprisonment: 90 days jail turned into a 12-month CSO by the Court of Appeal. Amount of fine: $45,000 which was not 100 percent of the amount sought to be evaded. Extenuating circumstances: not a tax protestor, frail health, suicidal, remorseful, no risk to re-offend.
Turnnir: Amount evaded: $148,823. Length of imprisonment: 18-month CSO. Amount of fine: 100 percent. Extenuating circumstances: tax protestor, agreed to certain facts which shortened the trial.
Jung: Amount evaded: $27,434.56. Length of imprisonment: probation for 14 months and 40 hours of community work service. Amount of fine: 100 percent. Extenuating circumstances: renounced Paradigm views, paid a significant amount of tax debt prior to sentencing.
[169] From those cases summarized by MacCarthy J. in R. v. Tyskerud, tax evaders who did not receive sentences that involved imprisonment were generally ones that had pled guilty early, had frail health, had been remorseful, had agreed to certain facts which shortened the trial, and had paid a significant amount of the tax debt owing prior to being sentenced. In addition, the courts in those summarized cases set out in R. v. Tyskerud had, for the most part, only imposed fines on the offender of up to 100% of the tax owing.
[170] Furthermore, the convicted offender's conduct in evading the payment of income tax in R. v. Chobotar (2012), unreported (Man. Prov. Ct.), which had been summarized in R. v. Tyskerud, is not unlike the circumstances found in the case at bar. In particular, the accused Chobotar was a chiropractor who worked out of a clinic in Manitoba where it had been determined by Canada Revenue Agency investigators that she had owed $162,513 in income tax for the years 2002 to 2007, and that the convicted offender Chobotar had earned more than $800,000 from 2002 to 2007, but had paid zero income tax during that period. Chobotar had also received more than $50,000 a year in billings from Manitoba Health, Manitoba Public Insurance, and the Workers Compensation Board, all of whom benefit from government funding that is provided by taxpayers. In addition, the trial justice had sentenced Chobotar to six months in jail, even though Chobotar had no criminal record, but it had been otherwise determined by the trial justice that a conditional sentence of imprisonment would not be an appropriate sentence, since the trial justice did not believe that Chobotar would comply with any conditions that would be imposed in a conditional sentence order. Furthermore, the trial justice had noted that Chobotar had shown no remorse, that Chobotar would be a risk to reoffend, and that imposing a jail sentence on Chobotar had been to meet the objectives of deterrence and denunciation. In addition, the trial justice had commented that Chobotar did not choose to live on an island, but had still benefited from taxpayer-funded services such as roads, police and fire protection, and schools, yet Chobotar did not want to pay her fair share and did not care if others would have to pay more. Moreover, the trial justice had given Chobotar four years to pay her fine of $162,513, with the first instalment of $50,000 due one year after the sentence had been imposed.
[171] Moreover, the Court of Appeal for Ontario in R. v. Drabinsky, 2011 ONCA 582, [2011] O.J. No. 4022 (QL), at paras. 166 to 168, commented that an early guilty plea by an accused, coupled with full cooperation with the police and regulators and bona fide efforts to compensate those harmed by the frauds committed has considerable value to the administration of justice and that the presence of these factors may merit sentences outside or below the range of custodial sentences that would be usually applicable for the particular offence:
It is impossible to catalogue the factors that in combination could justify a sentence below the usually applicable range. We would, however, make two observations. First, the investigation and prosecution of crimes like these is difficult and expensive. It places significant stress on the limited resources available to the police and the prosecution. An early guilty plea coupled with full cooperation with the police and regulators and bona fide efforts to compensate those harmed by the frauds has considerable value to the administration of justice. The presence of those factors, depending of course on the other circumstances, may merit sentences outside of the range.
Second, individuals who perpetrate frauds like these are usually seen in the community as solid, responsible and law-abiding citizens. Often, they suffer personal and financial ruin as a result of the exposure of their frauds. Those factors cannot, however, alone justify any departure from the range. The offender's prior good character and standing in the community are to some extent the tools by which they commit and sustain frauds over lengthy time periods. Considerable personal hardship, if not ruin, is virtually inevitable upon exposure of one's involvement in these kinds of frauds. It cannot be regarded as the kind of unusual circumstance meriting departure from the range.
In holding that prior good character and the personal consequences of the fraud cannot push the appropriate sentence outside of the range, we do not suggest that they are not relevant mitigating factors. They must be considered in determining where within the range the sentence should fall.
[172] In addition, even though the offender in R. v. Witen, 2012 ONSC 4151, [2012] O.J. No. 3226 (QL) (S.C.J.O), had been a tax preparer and had pled guilty to defrauding the federal government of $1.2 million in a scheme in which the offender Witen had prepared false tax returns for taxpayers that resulted in the taxpayers evading the payment of the proper amount of taxes and in which Witen had profited personally in the amount of $448,018, Witen had still received a three-year prison sentence for count 1 and one-year prison sentence for count 2, to be served concurrently, despite evidence that Witen had been caring for his wife who had been suffering from a progressive debilitating disease. In addition, Witen had also been required to pay a fine of $448,000 within 3 years after being released. And, in default of payment of the fine Witen would have been required to serve a sentence of 3 years consecutive to the other sentences. Furthermore, Hambly J. at para. 34 of R. v. Witen had also found in arriving at the appropriate sentence that the aggravating factors had overwhelmed the mitigating factors.
[173] For the aggravating factors in R. v. Witen, Hambly J., at para. 33, had determined them to include the factors that Witen had breached the trust the federal government had put on self-employed taxpayers to set out their real income and expenses; that people who have their taxes deducted at source have their burdens increased in providing for public services through their tax payments; that the delay in bringing the case to trial did not prejudice Witen financially; that Witen had been aware that the Canada Revenue Agency had been aware of his fraudulent scheme for over eight years, and despite a significant annual income, Witen did not pay anything in restitution; that Witen had demonstrated no remorse or a sense of responsibility for what he had done; and that Witen had been convicted of defrauding the federal government for over a period of nine years:
Witen breached the trust that the federal government puts in self-employed taxpayers to set out their real income and expenses. It is an honour system. The government cannot possibly monitor the preparation and filing of tax returns by all self-employed people. By failing to set out properly the income and expenses of not only his clients but also himself, Witen breached that trust.
Most people receive salaries and have their taxes deducted at source. Witen failed to pay taxes voluntarily for himself and on behalf of his clients. This increases the burden for providing public services on those who have their taxes deducted at source.
Witen conceded on his application for a stay based on an alleged breach of his right guaranteed by section 11(b) of the Charter to be tried within a reasonable time that the delay in bringing the case to trial did not prejudice him financially. Witen knew that CRA had discovered his fraudulent scheme from the time of the first search on February 11, 2004. This was over eight years ago. Witen knew that Revenue Canada had discovered the full reach of his fraudulent activity from the time of the second search on February 22, 2006. This was over six years ago. He was charged with the expanded Witen charges on June 6, 2007, which is over five years ago. Notwithstanding a substantial annual income, Witen has paid nothing in restitution.
Witen has demonstrated no remorse or sense of responsibility for what he has done.
Witen has been convicted of defrauding the federal government between January 1, 1998 and March 31, 2007. This is a period of 9 years.
Witen was previously convicted on June 23, 1994 of failing to file his personal tax return and as a director of failing to file six corporate tax returns. He was fined a total of $10,500.
[174] On the other hand, Hambly J. at para. 33 in R. v. Witen, had determined the mitigating factors in that case included Witen's guilty plea, which had relieved the Crown of the substantial time and expense that would have been required to prove the case, and that Witen had been caring for his wife who was suffering from a progressive debilitating disease, and that his incarceration would be a hardship for his wife:
Witen did enter a "no contest not guilty plea". He invited the court, through his lawyer, to convict him on an agreed statement of facts. This relieved the crown of the substantial time and expense which would have been required to prove the case.
Witen's wife, Jennifer Witen, suffers from a progressive debilitating disease. Witen cares for her. His incarceration will deprive her of his care and companionship. This will be a hardship on her.
[175] Moreover, in R. v. Beach Motors, [2002] O.J. No. 4458 (QL) (O.C.J.), in which this court at para. 75 had to determine the appropriate sentence to impose on the individual offender, who was the President of the corporation that had been convicted of failing to remit $125,765.32 in retail sales tax to the Minister of Finance, and concluded that a sentence of imprisonment had not been appropriate as there had been mitigating factors of an early guilty plea; the offender had shown remorse and had cooperated with the authorities; a significant amount of the tax debt had been paid by the offender to the Minister of Finance before the sentencing hearing; and the fine imposed on the offender of $24,000 had been based on the offender's ability to pay:
Although the defendants' actions are reprehensible and the amount of the tax not reported is substantial, the scope of the offence had not been of the worst kind. Furthermore, I do not agree with the Ministry's submission that the aggravating factors outweigh the mitigating circumstances. On the contrary, I find that the mitigating circumstances are substantial and carry significant weight in the outcome of the defendants' sentences. The mitigating circumstances that include the guilty pleas, the defendants being first-time offenders, their cooperation with the Ministry, the repayment of just under $35,000, and no evidence that the defendants had tried to disguise or conceal the tax owing, overrides the need for heavy reliance on the retribution and denunciation aspects of sentencing. … .
[176] In short, based on the tax evader cases that had been summarized in R. v. Tyskerud and in R. v. Witen, and as had been decided by this court in R. v. Beach Motors, the circumstances under which convicted tax evaders had not received a jail sentence are unfortunately not present in the circumstances of the case at bar nor applicable to Eugena Hayward. Specifically, Hayward has not pled guilty at the earliest opportunity, Hayward is not of frail health, Hayward has not expressed remorse for her unlawful conduct, except as evidenced by her guilty plea (which she had also tried to revoke), and Hayward had not paid a significant amount of the tax debt owing to the Minister of Finance prior to being sentenced.
[177] As for the aggravating factors that are applicable to Eugena Hayward, these include the factors that there has been a lack of significant cooperation on Hayward's part with the Ministry of Finance to comply with the Retail Sales Tax Act and to remit the retail sales tax owing; that the offences committed by Hayward had covered a long period comprising of 54 months and not just for a few months; that the Ministry of Finance had been trying to get Hayward to comply with the Retail Sales Tax Act since at least 1998, which is 13 years ago; that there has been no repayment of any of the $240,866.42 of retail sales tax owing even though Hayward is the owner and co-owner of two properties assessed in 2013 to be worth at $343,500 and $877,475, respectively; that there is evidence that Eugena Hayward had transferred the corporate defendant's assets to a corporation controlled by her common-law husband when the Ministry had started its collection actions and had seized funds in the corporate defendant's bank accounts, which then foiled the Ministry's attempts to collect the total amount of the tax owing from the corporate defendant; that the proceeding has taken over 25 court appearances; that the defendants did not proceed diligently or expeditiously in this proceeding; that guilty pleas were not entered until the 25th appearance of the defendant in court; that there has been the general lack of genuine remorse from Hayward in respect to her unlawful and willful actions in not remitting retail sales tax to the Minister of Finance; and that Hayward had benefitted greatly from not remitting the retail sales tax and had also taken the money in the form of dividends from the corporate defendant that had been from money that had been collected in trust for the people of Ontario.
[178] Furthermore, the defendants' actions in not remitting or filing returns over a period of 54 months and the $240,866.42 in retail sales tax not remitted to the Minister of Finance puts the scope of the offences within ones that can be classified as one of the worst offenders in one of the worst cases.
[179] In addition, there is very little in mitigating circumstances in the case at bar that weigh favourably against imposing a sentence of imprisonment to address the objectives of deterrence and denunciation, but includes Eugena Hayward's guilty pleas, Hayward being a first-time offender, Hayward having a son who is 7 years old with a supposed learning disability, and that Hayward has been caring for her father, who had a debilitating stroke in November of 2012.
[180] Ergo, the aggravating factors present in this case significantly outweigh the mitigating factors. And, since the aggravating factors are substantial and outweigh the mitigating factors, then these aggravating factors will carry significant weight in the outcome of the sentence for the individual defendant, Eugena Hayward.
6. DISPOSITION
[181] Therefore, after considering all the relevant aggravating and mitigating factors, including the guilty pleas, and applying the principles and objectives of sentencing and considering the circumstances and gravity of the offences committed and of the moral blameworthiness and personal circumstances of the individual offender, Eugena Hayward, and that imprisonment should be used as the last resort, the appropriate sentence for Eugena Hayward, especially to address the objectives of denunciation and general and specific deterrence, is to serve a sentence of imprisonment of 50 days for each of the two counts to be served concurrently, which is significantly lower than the periods of imprisonment given generally to major tax evaders in Canada, as Hayward had been. Moreover, there is no other form of punishment or sanction that would be reasonable or appropriate for the circumstances and the relevant sentencing objectives.
[182] In addition, based on her ability to pay the fine, which I find exists despite her contention she does not receive any income from any source, the offender Eugena Hayward, who I find still has a key involvement in the operation of the retail store known as "The Ascot Room" and who is the owner and co-owner of two properties in Ontario of significant value, is also sentenced to pay a fine of $250,000 in total for both convictions ($34,000 for count #1 and $216,000 for count #2), which does not include the victim fine surcharge, and which is approximately 100% of the retail sales tax owing that is also in line with the 100% fines imposed generally against tax evaders as set out in the cases listed in R. v. Tyskerud, 2013 BCPC 277, [2013] B.C.J. No. 2183 (QL) (B.C. Prov. Ct.), at para. 70. In addition, Eugena Hayward shall pay this $250,000 fine by making monthly payments of $4000 on the first day of each month commencing on April 1, 2014, until the fine of $250,000 is paid in full.
[183] Furthermore, Eugena Hayward will also be sentenced to serve a sentence of imprisonment of 10 months to be served consecutively to the other sentences of imprisonment in default of payment of the $250,000 fine, pursuant to s. 44(8) of the Retail Sales Tax Act.
[184] For the corporate offender, 1146037 Ontario Limited, operating as The Ascot Room, the corporate defendant will receive a suspended sentence, since it has no assets.
[185] As for the remaining 124 counts, they were withdrawn by the Ministry of Finance.
Dated at the Town of Caledon on November 29, 2013
QUON J.P.
Ontario Court of Justice