ONTARIO
SUPERIOR COURT OF JUSTICE
SUMMARY CONVICTION APPEAL COURT
COURT FILE NO.: SCA(P) 1554/11
DATE: 20120622
BETWEEN:
HER MAJESTY THE QUEEN Respondent – and – DOUGLAS MCDONOUGH Appellant
C. Walsh, for the Respondent
Self-Represented
HEARD: June 18, 2012
[On appeal from the judgment of Clarke, J.
dated October 17, 2011]
MILLER, J.
[ 1 ] Douglas McDonough was, on October 17, 2011, found guilty of, on or between March 15, 2007 and April 24, 2011, inclusively, making false or deceptive statements in writing as required by the Accounting for Imported Goods and Payment of Duties Regulations SOR/86-1062 contrary to the Customs Act , and, between April 4, 2007 and April 27, 2007, inclusively, wilfully evading or attempting to wilfully evade compliance with the report of goods provisions of the Customs Act by falsely describing goods. The trial judge found that Mr. McDonough had falsely described the components of a single motor vehicle – a Caterham CSR 260 - as automobile parts and he was found guilty on both counts.
[ 2 ] Mr. McDonough appeals from these findings of guilt. In his Notice of Appeal Mr. McDonough cited 19 specific grounds of appeal. In his factum he cited 17 specific grounds of appeal but addressed in his argument, and in his argument before me, only four grounds of appeal. These are that the learned trial judge erred in interpreting the Accounting for Imported Goods and Payment of Duties Regulations ; the learned trial judge erred in interpreting the Report of Goods provisions of the Customs Act ; the learned trial judge erred in not recognizing the importer’s classification as protected by law; and, the trial judge erred in law resulting in the violation of the Appellant’s Charter of Rights .
[ 3 ] In effect, Mr. McDonough argues that the rules as set out in the Customs Act and Regulations permitted him to “organize” his shipment of the vehicle into two shipments such that he was able to accurately, and in accordance with the Accounting for Imported Goods and Payment of Duties Regulations describe the contents of the shipments as “parts” and therefore did not make any false statements nor did he falsely describe the goods. He argues that the trial judge failed to interpret the rules correctly.
[ 4 ] The Respondent takes the position, in response to the first two grounds argued, that the interpretation of the Customs Act and Regulations has no bearing on the finding that the Appellant fraudulently created documents that he used to misrepresent the goods imported. By participating in the creation of the fraudulent documents the Appellant committed the offence alleged in Count # 1 regardless of who was required to report the goods.
[ 5 ] The Respondent takes the position in respect of the third ground argued that the classification rules were immaterial to the finding that the Appellant misrepresented the true nature of the goods by fabricating invoices and by withholding complete information.
[ 6 ] The Respondent points out, in respect of the fourth ground argued, that the Appellant does not articulate which of his Charter rights were breached, nor how. The Respondent takes the position that the search the Appellant describes as “illegal” was authorized by a valid search warrant, properly granted, and that the trial judge did not err in finding that there were no Charter breaches.
The Evidence
[ 7 ] The facts as found by the trial judge were as follows:
Mr. David Fidani (hereinafter referred to as “Fidani”) was interested in purchasing a sports/racing car from a dealer in the United Kingdom. He was unable to do this on his own, as it required purchasing same through a registered broker and dealer in the province of Ontario.
The defendant was such a dealer, operating a business under the name Power Tech Industries. The defendant took Fidani’s order and structured the importation in two separate shipments to arrive at different times. However, one was addressed to Fidani himself and was declared as “Automotive Starter Assembly Kit”[March 15, 2007]. The other shipment was addressed to the defendant and reported as “Replacement Parts”[April 5, 2007].
The defendant sent Fidani a sales order for the particular car he requested, which was a Caterham CSR 260. The price was £39,000.00. At the direction of the defendant, Fidani wired £5,000.00 to Caterham and subsequently paid the balance of £34,000.00 to the defendant. The £5,000.00 was a deposit and was made before a single invoice had been issued from Caterham. The defendant then placed an order for the CSR 260 model. The invoice generated for this order included the upgrades and options ordered by Fidani. Within days of receiving the balance of £34,000.00, the defendant paid Caterham the amount shown on the invoice.
Fidani wanted a roadworthy car. He wanted a new one. He did not want one for track use and he told the defendant as much.
The defendant knew that Transport Canada regulations did not permit the CSR kit or vehicle into Canada. He told Fidani that the current rules did not allow the importation of a complete kit and so it was necessary to structure the build as indicated.
He provided guidance and wording for a letter of approval for a starter kit for Transport Canada. He was intimately and intricately involved in the approval process.
As well, the defendant directed a number of changes to the proforma invoice of November 15, 2006. The telling words include “change invoice number and date”; “change order number”; “change order to deliver to codes”; “add ‘replacement parts’ and ‘remove parts and chassis number is indicated’”. Furthermore, exhibit 34 discloses the contents of a letter from a managing director of Caterham, dated November 15, 2006, acknowledging the defendant’s order. The letter states that “your car is scheduled for delivery mid December, 2006”. The letter mentions the word “car” six times.
The Fidani starter kit came into Canada in one shipment. The defendant took all the steps to have it released. Fidani did not deal with the broker at East-West Customs. The defendant told Jakeman [The East-West brokerage employee]that previous shipments had been cleared using class No. 8708999922. Jakeman relied on the information from the defendant for the reporting and accounting of goods. He [Mr. McDonough] paid for the customs duties and services with a personal cheque. He faxed the necessary papers for the shipment including the invoice and Transport Canada approval letter. He even signed the signature of the importer on the “Agent’s Authority to Account for a Single shipment”. Upon release of the shipment, the defendant delivered it to Fidani.
The “replacement parts” shipment arrived in Canada separately. On April 10 and 11, 2007, the defendant told Margaret Fiske [the CBSA official] that the shipment was only parts and was for two cars.
On April 17, it was examined in a warehouse by CBSA and Transport Canada. Customs officers asked the defendant for a detailed breakdown of the contents of the shipment. He maintained that it contained only parts and it was not a car, as it did not include a frame or chassis.
Excerpts of the defendant’s interview with Mr. Jomm and Ms. Van Eerd [both CBSA investigators] on April 17, are quite telling. First of all, he denies that this is in reference to the importation of a Caterham vehicle. He maintains that they are parts and one would never be able to build a car with them because one would need a frame. Furthermore, he advised them that the parts were mostly for two vehicles. He further advised that he had a 1985 Caterham and that most of these parts were going to be on that particular car as he was rebuilding it for himself.
He [Mr. McDonough] is a relatively sophisticated businessman. The Court finds that he was taking advantage of perceived “loopholes” and that his actions and words were all in furtherance of a plan of deceit to circumvent the rules of the Customs Act , which he clearly understood. [The Court] finds that the defendant had actual knowledge or was at least reckless that his actions could have, as a consequence, the deprivation of another.
The Court finds that the defendant was duplicitous in the information he was providing to the agents for the CBSA, and others. Quite frankly, the Court finds that he was saying whatever he needed to say in an effort to satisfy his objective. On one hand, he told the authorities that the parts were for his own vehicle, when clearly this could not be the case, having regard to the totality of the evidence. On the other hand, he continued to try to convince the authorities that the two separate shipments did not constitute a complete car. Again, this position fails when pitted against the totality of the evidence.
The Court has carefully considered his [Mr. McDonough’s] position. He maintains that the starter kit or chassis had been approved by Transport Canada to be imported as a “part” but then the rules were changed once the chassis was imported. He maintains that the authorities intentionally fabricated evidence by not applying classification rules correctly, and distorting the facts and law to create offences against him. Furthermore, he submits that Fidani was, at all relevant times, the importer according to all the documentation. Therefore, he does not bear responsibility for this and should not have been the subject of these charges. The Court finds that this position advanced by the defendant does not reflect the reality of the situation, and goes contrary to the thrust of the evidence. In the result, it does not raise a reasonable doubt. The Court does not find that there was any “conspiracy” against the defendant or that the authorities either fabricated evidence against him or violated any of his Charter rights. In fact, quite the contrary. The authorities were meticulous in their approach to this investigation. They conducted their due diligence before jumping to any hasty conclusions before charges were brought against the defendant. All the necessary and required procedural steps including obtaining a search warrant were properly addressed. In fact, every procedural courtesy appeared to be extended to the defendant during the investigation. The Court was not left with the impression that this was either a vendetta or that the authorities had “tunnel vision” in making an example of the defendant.
Fidani told the defendant that he wanted a new vehicle. The defendant told him about bringing in a starter kit because a car could not be imported as a whole. He suggested that they start by bringing in a chassis. The defendant sent in some paperwork and helped Fidani with the wording. He submitted the documentation to Ottawa. It was Fidani’s understanding that the chassis would be registered in his name. However, the second shipment would go to the attention of the defendant. It was Fidani’s understanding from the defendant that the chassis would be put in Fidani’s name in order to make him the importer of record, but also to allow him to obtain an easier “roll-over” once the vehicle was assembled and became roadworthy. He understood from the defendant that he would have to first take possession of the chassis and then the other parts would follow. Fidani stated that he was unable to do this on his own. Had he done so, he would have made arrangements for a single shipment. Margaret Fiske recalls the defendant telling her that these were car parts and that they would be going on two separate vehicles. Hugh Gallup’s evidence was to the effect that when he first became involved in this matter his initial opinion is that these parts did not constitute a vehicle. This position changed, however, once he attended at the warehouse. Upon further consideration, he now believed that this was, in fact, a “kit car” in a “knockdown condition” meaning that it contained everything necessary to make a car. On the face of things, sending separate shipments would make it look like these were considered as parts. However, it should have been more aptly described as a car in knockdown, that is, unassembled condition. It was incumbent on the defendant, therefore, to properly declare this as a whole vehicle in unassembled condition, and not merely as parts.
The Court makes the following findings:
Importers sometimes mislead the CBSA regarding the true nature of the goods. One commonly encountered method of avoidance is the use of a false description for highly regulated goods to avoid detection and examination, and thus, facilitate the entry of the controlled goods in Canada.
Another commonly encountered method of evasion is to import the goods in split shipments, where goods, although forming the subject of one transaction between a buyer and seller, are not released from Customs in a single shipment, but are imported in partial or successive shipments.
The defendant used both of these methods of evasion and falsely described an unassembled vehicle as automotive parts. Accordingly, he wilfully evaded compliance with the Customs Act by falsely describing an unassembled vehicle as automotive parts to allow for entry into Canada.
In all cases, the importer maintains the ultimate responsibility for the accurate reporting of goods.
Kit cars are considered to be complete motor vehicles, whether or not they are presented for importation as a fully assembled vehicle, or as an unassembled vehicle in a kit format. Kit cars are not considered admissible to Canada. Most new vehicles sent to Canada by kit car manufacturers often fail to meet the safety standard set out by Transport Canada for such things as crash testing to ensure the safety standards are met.
The defendant was interviewed by a representative of the CBSA at which time he asserted that he was not importing a complete vehicle. Ms. Van Eerd asked the defendant if the shipment parts were intended for different vehicles than different customers, to which the defendant replied that this was the case. However, he made a further statement later on in the interview to the effect that the parts were all for his own 1985 Caterham. These contradictory statements raised the suspicions of the investigators.
A “car kit” or “starter kit” is a collection of vehicle parts. These may be imported into Canada, usually by car building hobbyists for the purposes of merging the kit with a used donor car or other donor parts, sourced entirely in Canada, from sources unrelated to the kit manufacturer, to build one’s own car. The importation of the car kit which may be merged with donor parts is not subject to the Act , because no vehicle was imported. Once the car kit is completed, it is registered with the province as a “home-built” car and is assigned a particular serial number after a provincial safety check is carried out. The key distinction for the purposes of the Act is that these parts do not have the capability of being driven, nor can they be certified by the manufacturer because there are too many parts missing from the car kit that the original manufacturer does not supply. Therefore, it does not fit the definition of “vehicle” and therefore the parts do not fall under the Act .
A “kit car” on the other hand, is a “passenger car” within the broader definition of “vehicle”. These are complete vehicles often shipped partially disassembled to facilitate shipping. These are deemed to be motor vehicles, assembled or disassembled and, therefore, subject to the Act . The main concern of the regulators in Canada is that these do not comply with most motor vehicle safety standards. In other words, the vehicles are not manufactured to the same safety standards required of these vehicles produced by all other manufacturers. Kit car companies are not necessarily interested in complying with safety standards mainly because in most cases, the primary focus is on aesthetic appeal, performance and replication, rather than engineering. The apparent “loophole” therefore, is that these kit cars, minus an engine, can be imported without complying with the necessary safety standards.
By their very nature, the distinction between a car kit and a kit car is not held to any fixed standard. Rather, these are concepts that sit along a spectrum. On one end is a collection of vehicle parts, while at the other end is a complete vehicle. The procedure to determine what constitutes what involves decision making on a case-by-case basis. Therefore, the homebuilder can buy parts in the form of a starter kit, which usually needs a donor car, as long as the homebuilder is not importing a disassembled motor vehicle. If it reaches the point, however, where the homebuilder imports too many parts, it can be defined as a motor vehicle, in which case it is subject to the Act .
[ 8 ] The documentary evidence – some of which was recovered from a search, pursuant to a search warrant, of Mr. McDonough’s business premises and computer – revealed that on September 27, 2006 Mr. McDonough had enquired of the Caterham international sales manager whether the CSR vehicle was available as a starter kit. He was told it was not. On the same date Mr. McDonough arranged for the purchase of a complete CSR 260 and arranged for separate shipments of the components. He e-mailed the Caterham billing department asking for separate invoices for each crate in which the car’s components would be packaged – Mr. McDonough specifically requested that the invoices not include serial numbers or refer to a complete kit. On October 11, 2006 Mr. McDonough e-mailed the billing department asking that the shipping name and address be changed to Mr. Fidani’s. Mr. McDonough on November 15, 2006 Mr. McDonough further directed changes to the invoices specifying that the chassis number be removed. A letter from Caterham to Mr. McDonough of the same date advises him that his “car” is scheduled for delivery.
[ 9 ] Mr. McDonough spoke to Customs officials April 10, 11 and 17, 2006 making verbal statements about the goods contained in the shipments.
The Law
[ 10 ] Section 6 of the Motor Vehicle Safety Act SC. 1993 c.16 prescribes and proscribes importation of certain vehicles into Canada. It is this provision that would have prevented Mr. McDonough from importing the Caterham CSR 260 into Canada.
[ 11 ] The Customs Act R.S.C., 1985, c. 1 (2nd Supp.) provides at s . 153 that (a) no person shall make or participate in the making of false or deceptive statements made orally or in writing, and (c) no person shall wilfully, in any manner, evade or attempt to evade compliance with any provision of the act or evade or attempt to evade the payment of duties.
[ 12 ] Section 7.1 of the Act provides that any information provided to an officer in the administration or enforcement of the Act shall be true, accurate and complete.
[ 13 ] Section 12(3) of the Act provides that goods shall be reported by the person on behalf of whom the goods are imported.
[ 14 ] Section 58 of the Customs Act , upon which Mr. McDonough relies, applies to the “origin, tariff classification and value for duty of imported goods” and provides in s. 58 (3) that “A determination made under this section is not subject to be restrained, prohibited, removed, set aside or otherwise dealt with except to the extent and in the manner provided by sections 59 to 61”.
[ 15 ] Sections 59 to 61 of the Customs Act provide for the process for redetermination of the origin, tariff classification or value for duty of imported goods.
Analysis
[ 16 ] This was not a case about classification. It was a case about whether Mr. McDonough knowingly made false statements, orally and in writing, to customs officials about these two shipments.
[ 17 ] A review of the trial judge’s Reasons for Judgment, which are lengthy and detailed, reveal that the trial judge understood and carefully considered Mr. McDonough’s arguments with respect to classification.
[ 18 ] The trial judge relied on the evidence of the customs officials, in particular, the evidence of Hugh Gallup, a senior trade compliance officer, who although not found to be an expert in tariff classifications, had extensive experience and training in the area. Mr. Gallup testified that he initially agreed with Mr. McDonough’s characterization of the second shipment, until he was able to consider that the two shipments together comprised the components of one single motor vehicle and not simply “parts”.
[ 19 ] It is clear from the Reasons for Judgment that the trial judge considered and rejected as inconsistent with the evidence that Mr. McDonough’s argument that Mr. Fidani rather than Mr. McDonough was the importer of the goods in question.
[ 20 ] It is clear from the Reasons for Judgment that the trial judge understood and carefully considered Mr. McDonough’s argument that his ss. 2(b) , 7 , 8 and 15(1) Charter rights were violated. The trial judge considered and dismissed as unfounded Mr. McDonough’s evidence and argument to the effect he had been unfairly targeted by Customs officials and that they had fabricated evidence against him.
[ 21 ] The trial judge found Mr. McDonough’s evidence to be implausible and improbable. The trial judge engaged in a careful analysis of Mr. McDonough’s evidence and the case against him pursuant to the direction of the Supreme Court of Canada in R. v. W. (D.) 1991 93 (SCC) , [1991] S.C.J. No. 26 . The trial judge found that he did not believe Mr. McDonough’s evidence that he honestly believed he was complying with the importation rules by describing the shipment as parts rather than a complete vehicle. The trial judge was not left with any reasonable doubt by Mr. McDonough’s evidence or his classification argument. The trial judge was satisfied beyond a reasonable doubt on the evidence he did accept that the Crown had proven Mr. McDonough’s actus reus and mens rea for the fraudulent acts of making false declarations in writing and in person in the time frame alleged in the information.
[ 22 ] I do not find that the trial judge erred in his interpretation of the law on importation of goods. I do not find that the trial judge erred in finding that the Charter rights were not violated. I do not find that the trial judge misapprehended the evidence or erred in his analysis as to the credibility and reliability of Mr. McDonough’s testimony.
[ 23 ] I do not find that the trial judge erred in his application of the law to the evidence. There was ample evidence upon which the trial judge could reasonably conclude that Mr. McDonough made false statements in writing and falsely described the goods as parts when they comprised a complete vehicle, the importation of which was prohibited.
[ 24 ] I have considered Mr. McDonough’s argument that the process for re-determination of the origin, tariff classification and value for duty of imported goods as provided for in sections 58 - 61 of the Customs Act and in particular the privative clause therein should stand in the way of a prosecution for making false statements pursuant to s.153 . I do not find that the re-determination process would prevent the laying of charges for making false statements contrary to s.153. The essential elements of s.153, as found to have been proven by the trial judge here, go far beyond an error in classification as contemplated by ss.58-61. I find that the trial judge reasonably concluded that those essential elements had been proven.
[ 25 ] Mr. McDonough’s position that he never made a false declaration and was complying with the rules as he understood them does not stand with his statement to customs officials that the pieces in the second shipment were meant for his own vehicle. He would have had no reason to make such a statement if he genuinely believed he had acted in accordance with the rules. The elaborate steps Mr. McDonough took in “organizing” the shipments are telling in respect of his intent to deceive. Mr. McDonough’s position that he was targeted and framed with fabricated evidence is not borne out and is untenable.
[ 26 ] The appeal is dismissed.
MILLER, J.
Released: June 22, 2012
R. v. McDonough, 2012 ONSC 3712
COURT FILE NO.: SCA(P) 1554/11
DATE: 20120622
ONTARIO SUPERIOR COURT OF JUSTICE SUMMARY CONVICTION APPEAL COURT HER MAJESTY THE QUEEN – and – DOUGLAS MCDONOUGH REASONS FOR JUDGMENT MILLER, J.
Released: June 22, 2012