October 07, 2011

Chee K. Ling (Appellant) v. Her Majesty the Queen (Respondent) and The Attorney General for Ontario, the Attorney General of Quebec, and The Criminal Lawyers’ Association (Ontario) (Interveners)

2002 DTC 7572
Supreme Court of Canada
November 21, 2002

(Court File No. 28315.)

Offences – Tax evasion and making false or deceptive statements in returns – Admissibility of evidence – Whether evidence gathered by CCRA officials having been obtained during the course of an audit, or during the course of a criminal investigation, thus engaging taxpayer’s Charter rights – Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended, ss. 231.1, 231.2(1)(a), 239(1)(a), 239(1)(b), 239(1)(c), 239(1)(d), 239(1)(e), 239(1)(f), 239(1)(g) and 239(2) – Charter, ss. 7, 8 and 24(2).

The taxpayer was a doctor whose claimed farming loss deductions for 1987 through 1989 had been disallowed by the Minister. During the course of a routine follow-up audit, the taxpayer met in his office with two CCRA officials, and produced two receipt books. From such books, those officials deduced that some of taxpayer’s office income had not been reported. After further meetings with the taxpayer and his accountant, and after obtaining further information from the taxpayer, the CCRA auditors met with the taxpayer on December 18, 1995 at the Vancouver District Office for over three hours, and questioned him extensively about certain unidentified deposits and unreported income. During this meeting the taxpayer admitted that he had mistakenly failed to report certain amounts as income, but at no point during this meeting did the CCRA auditors inform him of any concern about tax evasion, or about any Charter rights which he might have. Following a meeting on December 29, 1995, the CCRA auditor, with the taxpayer’s consent, obtained further documents from certain brokerage firms and chartered banks. On February 28, 1996, the CCRA officials met with the taxpayer in his office, and read him a caution from a card advising him generally that he was not obliged to make any statements, and that he had a right to instruct a lawyer. The taxpayer answered no further questions, and was later charged with six counts of committing an offence contrary to subsection 239(1) of the Act (i.e. tax evasion, and the making of false or deceptive statements in returns). He was convicted at the Provincial Court level after the Provincial Court Judge dismissed a motion for an Order that evidence obtained from him by the CCRA auditors should be excluded because of his Charter rights. In allowing taxpayer’s appeal, Millward, J. of the Supreme Court of British Columbia concluded: (a) that the predominant purpose of the CCRA auditors’ actions after the December 18th meeting was to gather information to be used in their criminal investigation; and (b) that a new trial should be ordered on all counts, and in particular to consider the evidence obtained after the December 18 meeting in light of subsection 24(2) of the Charter. The Court of Appeal for British Columbia dismissed taxpayer’s appeal, which was based on the allegation that Millward, J. had erred in failing to make an Order excluding all evidence obtained pursuant to the requirement power under the Act, for use in criminal proceedings. The taxpayer appealed to the Supreme Court of Canada.

Held: The taxpayer’s appeal was dismissed. The audit had been conducted properly as an audit and not as an investigation up to and including the December 18 meeting. However, after that meeting, the CCRA officials began to investigate the taxpayer’s penal liability. Accordingly, all evidence gathered prior to and during the December 18 meeting had been properly obtained as part of the audit process, and thus could be shared with CCRA’s Special Investigations Section. However, all evidence gathered subsequent to the December 18 meeting from the taxpayer (prior to warning him that he was the subject of an investigation) violated his Charter rights, and thus had to be considered in light of subsection 24(2) of the Charter during the new trial.