Woods, JA:—This is an appeal by the Crown from the dismissal by Macdonald, J [[1975] WWD 177] of an appeal by way of stated case from Bence, JMC. The charge against the respondent, George E Paveley, was laid on December 6, 1974 and was as follows:
The Informant says that he has reasonable and probable grounds to believe and does believe that GEORGE E PAVELEY, of the City of Regina, in the Province of Saskatchewan, between the 1st day of January, 1970 and the 30th day of April, 1973 wilfully evaded payment of taxes imposed by the Income Tax Act, RSC 1952, Chapter 148, and amendments thereto, with respect to income received by him in the amount of $33,053.06, contrary to Section 239(1 )(d) of the said Act.
The pertinent portion of paragraph 239(1 )(d) of the Income Tax Act, SC 1970-71-72, c 63, reads:
239. (1) Every person who has
(d) wilfully, in any manner, evaded . . . payment of taxes imposed by this Act . . .
is guilty of an offence . . .
Bence, JMC found the respondent not guilty. The facts stated in the appeal by way of stated case were as follows:
1. The facts established at trial were not in dispute. The Respondent, George E Paveley, a practising medical doctor, failed to file income tax returns for the taxation years 1970, 1971 and 1972, notwithstanding formal demands having been made of him that he file the returns and the fact that he was convicted of failing to file the 1970 and 1971 returns and paid the fines assessed in this regard. In addition, Robert Williams, who was in 1973 Chief of Verifications and Collection Branch, Department of National Revenue, Regina Taxation District testified that on September 25, 1973 he went to see the Respondent in his office and discussed at length the Respondent’s failure to file the 1970, 1971 and 1972 income tax returns. The Respondent at that time informed Mr Williams he would file the returns not later than the date agreed upon, but the returns were not forthcoming.
2. The Respondent’s problems with the Department of National Revenue did not start in 1970. He was assessed and reassessed for the taxation years 1967 to 1969 (both inclusive) and the last return he filed was in 1969. In January, 1971 the assessments owing totalled $11,570.00. The Department of National Revenue saw fit to take action to attach moneys due to the accused from the Medical Care Insurance Commission and an agreement was reached whereby a trustee was to receive the moneys due and accruing due from that source and divide them between the Department of National Revenue and the Bank of Montreal, to which the accused was also heavily indebted. It appears that some $17,000.00 was eventually paid to the Department of National Revenue in this way and that this met the accused's indebtedness up to January 1, 1970.
3. it was admitted on behalf of the Respondent at trial that the total taxable income of the Respondent during the relevant period was the amount set out in the Information.
4. The informant, an Officer of the Department of National Revenue, testified that he had prepared schedules of income and expenses of the Respondent for the 1970, 1971 and 1972 taxation years, and he produced such schedules at trial. To prepare the schedules it was necessary for the Informant to spend many hours checking the files of Saskatchewan Medical Care Insurance Commission, cancelled cheques and payment lists and records of the Respondent. Utilization fees were determined from books seized from the Respondent’s office as were sundry items of income. Expenses were determined from a summary of the Respondent’s expense journal and cross-checking banking transactions. The Informant also testified that it was necessary for him to contact third parties, such as the jockey clubs in Regina and in Winnipeg, because the Respondent was involved in horse racing.
5. The Crown conceded that there had been no subterfuge nor was there any scheme or device to mislead the taxation officials nor any suggestion of falsification or records but simply a deliberate failure to file. There was was no doubt that the Respondent acted wilfully because he had ample warning and offered no explanation for ignoring all requests to file the aforesaid income tax returns.
The question posed in the appeal was:
Did I err in law in concluding that the wilful refusal of the Respondent to file income tax returns, for the taxation years 1970, 1971 and 1972, as required by the Income Tax Act, RSC 1952, Chapter 148, and amendments thereto, did not constitute wilful evasion of payment of taxes imposed by the said Act on unreported taxable income of the Respondent during the said years in the amount of $33,053.06?
MacDonald, J accepted the decision of McLellan, Co Co J in Regina v Baker (1973), 26 CRNS 285; 16 CCC (2d) 126; 45 DLR (3d) 247; 6 NSR (2d) 38, and answered “no” to the question. Like the learned judge I am in substantial agreement with the reasoning and conclusions of that case.
References to cases, lexicons and dictionaries show a range of meanings for “wilfully” from “intentionally” to “with evil intention”. Meanings for “evade” go from “avoidance” to “escape by artifice”. To apply the rule using the plain or ordinary meaning of the words provides a choice of answers.
Subsection 150(1) of the Act requires that a return shall be made for the income of each year for which tax is payable. Section 162 provides a penalty for failure to do so. Section 163 provides heavier penalties for:
163. (1) Every person who wilfully attempts to evade payment of the tax payable by him . . . by failing to file a return of income as and when required by subsection 150(1) . . .
Paragraph 239(1 )(d), as above set out, makes wilful evasion of payment an offence punishable by fine and imprisonment. It is under this latter section, of course, that the present proceedings are taken. Subsection 246(1) provides that where the Treasury Board decides that the main purpose of a transaction was improper avoidance or reduction of taxes it may give directions to counteract it.
Viewing paragraph 239(1)(d) in the context of the other provisions of the Act, and taking note that the provisions of the section are penal, it would seem to me that to fall within the section would require a scheme or artifice with intent to deceive. The facts in the case as stated makes it clear that such is not the case here.
The appeal is dismissed.
Brownridge, JA:—The facts of this case are set out in the judgment of my brother Woods and I need not repeat them. However, I should like to refer to the reasons given by Bence, JMC in paragraph 6 of the stated case:
6. The matter of the guilt or innocence of the Respondent appeared to me to be based on the answer to the simple question of whether wilful refusal to file income tax returns constituted wilful evasion of payment of taxes imposed by the Income Tax Act. I considered the dictionary definitions of the meaning of the word “evade” and conflicting judicial decisions involving the same question and concluded that the word “evade” is capable of being used in two senses, one of which suggests underhanded dealing and the other nothing more than the intentional avoidance of something disagreeable, and that In penal statutes it is the first of these two meanings in which the word is generally used and if not, there is doubt as to which meaning was intended. I concluded that in the penal provision any such doubt must be resolved in favour of the accused and I therefore acquitted the Respondent.
On the basis of the decision in Regina v Baker (1973), 26 CRNS 285; 16 CCC (2d) 126; 45 DLR (3d) 247; 6 NSR (2d) 38, the learned judge of the Magistrates’ Court did not err in law in acquitting the respondent in this case.
The real problem, however, in answering the question posed by the stated case is whether the interpretation placed on the word “evade” by the Baker case, that is, to ‘‘avoid by craft, stratagem or artifice’, should be approved and adopted. With the greatest respect I am not prepared to give unqualified approval to that decision.
! am not satisfied, for example, that there must be an attempt on the part of the respondent to conceal his income and, unless that is found, then his reasons for failing to file returns are not material. Likewise, I am not persuaded that there is no such thing as a temporary evasion. It may well be, as counsel for the appellant argued, that the deliberate failure or refusal to file income tax returns as and when required is itself a crude artifice or stratagem to attempt to evade the payment of taxes, even temporarily. If this is so, then the reasons for failing to file returns are not only relevant but vital.
In Thistle v The Queen, [1974] CTC 798; 74 DTC 6632 (Ont), Grossberg, Co Ct J found (p 799 [6633]):
The accused deliberately conceived and planned his failure to file returns to refrain and avoid paying income taxes and to evade the required yearly payments. I am unable to accept the contention that there was no evasion with paragraph 239(1 )(d).
Again in Regina v Greer (1973), 13 CCC (2d) 318 (Ont), Marshman. Prov J found the accused guilty of wilfully evading the payment of taxes contrary to paragraph 239(1 )(d) of the Income Tax Act, SC 1970-71-72, c 63, notwithstanding the evidence of the accused that his reason for failing to file returns was that he did not believe that he was taxable. The Court found such a belief to be unreasonable under the circumstances.
On the hearing, I drew to the attention of counsel the provisions of section 163 of the Income Tax Act which says:
163. (1) Every person who wilfully attempts to evade payment of the tax payable by him under this Part by failing to file a return of income as and when required by subsection 150(1) is liable to a penalty of 50% of the amount of the tax sought to be evaded. (The italics are mine.)
And also to the provisions of subsection 239(3) which reads:
239. (3) Where a person has been convicted under this section of wilfully, in any manner, evading or attempting to evade payment of taxes imposed by Part J, he is not liable to pay a penalty imposed under section 163 for the same evasion or attempt unless he was assessed for that penalty before the information or complaint giving rise to the conviction was laid or made. (The italics are mine.)
Under section 163 it is an offence to wilfully attempt to evade payment of tax by failing to file a return as and when required. Why should the word “evade” as used in paragraph 239(1 )(d) bear a different meaning than the same word as used in subsection 163(1)? And yet, as pointed out in Regina v Baker (supra) at page 132, the Department of National Revenue itself has accepted the definition which was adopted by the Court in that case.
In my opinion “wilfully” should be interpreted as “with an evil intention”: Regina v Miller, [1944] 1 WWR 415 at 417; 81 CCC 110; [1944] 1 DLR 802 (Sask), so that the question in this case becomes not, was the wilful refusal to file income tax returns as required by the Act “evasion” under paragraph 239(1 )(d), but rather: Did the respondent in wilfully refusing to file income tax returns, as and when required, do so with the intention of evading or attempting to evade the payment of taxes? If the answer to that question is either “no” or If the issue cannot be resolved beyond a reasonable doubt, then the respondent is entitled to an acquittal. But if the question is answered in the affirmative there should be a conviction even if there is no intention to deceive within the meaning of Regina v Baker.
However, because of the doubt which he expressed and which, in my opinion, Is well founded, ! agree that the respondent must be given the benefit of that doubt.
The appeal is dismissed.
Bayda, JA:—The charge and facts relating to this appeal by way of stated case are set forth in the judgment of my brother Woods. In addition, the judgment of my brother Brownridge quotes paragraph 6 of the stated case, in which the learned judge of the Magistrates’ Court detailed his reasons for the disposition he made.
The material part of paragraph 239(1 )(d) of the Income Tax Act, SC 1970-71-72, c 63, under which the respondent was charged is as follows:
239. (1) Every person who has
(d) wilfully, in any manner, evaded . . . payment of taxes imposed by this Act . . .
is guilty of an offence . . .
The question posed is as follows:
Did I err in law in concluding that the wilful refusal of the Respondent to file income tax returns, for the taxation years 1970, 1971 and 1972, as required by the Income Tax Act, RSC 1952, Chapter 148, and amendmenis thereto, did not constitute wilful evasion of payment of taxes imposed by the said Act on unreported taxable income of the Respondent during the said years In the amount of $33,053.06?
The trial judge concluded that for there to be an evasion of payment of taxes there must be present an "underhanded dealing". (It is common ground that this is simply another way of describing an artifice or scheme.) The wrongdoing proved against the respondent was a “wilful refusal” to file his 1970, 1971 and 1972 income tax returns. The trial judge found that such a wrongful act, or, more precisely, such a wrongful omission, ought not be classified as an underhanded dealing and thus acquitted the respondent. In arriving at his decision he appears to have been influenced by Regina v Baker (1973), 26 CRNS 285; 16 CCC (2d) 126; 45 DLR (3d) 247; 6 NSR (2d) 38.
The learned chambers judge who heard the appeal in the Court of Queen's Bench [[1975] WWD 177] agreed with the reasoning in Regina v Baker and dismissed the appeal. The Crown has now appealed to this Court.
In argument before us counsel dwelt considerably on whether there should or should not be proof of an artifice or scheme for a conviction to take place under paragraph 239(1)(d) of the Act. This approach hinges upon the interpretation to be placed upon the word “evaded" contained in that subsection.
Both counsel also argued the issue from another standpoint: What proof must there be of the necessary mens rea for a conviction to take place, and particularly, is proof of the “wilful refusal” to file tax returns alone sufficient proof of mens rea or must there be something more? This latter approach does not isolate the word “evade” and place emphasis on its construction as does the first approach, but instead recognizes the use of the word “wilfully” in relation to a prohibited act and concentrates on the consequences which flow from the conjunctive use of these two words, “wilfully evaded”. The approach does not involve drawing nice distinctions between the different shades of meaning of the word “evade”.
In my respectful view the proper approach to determine the answer to the question posed is the second approach.
The Crown and respondent both agree that for a conviction to take place there must be proof of two ingredients: first, the “manner” through which the evasion was accomplished (the actus reus) and second, the intention to accomplish an evasion of payment of taxes in the sense of accomplishing something forbidden by or in defiance of the law (mens rea). Learned counsel for the Crown submits that where the “manner” is the wilful refusal to file returns, as it is here, the proof of the “manner” is proof not only of the actus reus but also of the mens rea. The Crown, he submits, need prove nothing moie. He argues that upon proof of such wilful refusal to file returns, the Court is bound in law to infer that the accused intended to evade payment of his taxes for that is the natural and probable consequence of a wilful refusal to file returns. He asks: ‘‘What other reason could the accused possibly have for refusuing to file his returns?”
Learned counsel for the respondent, on the other hand, submits that the Court, to decide whether the accused intended to evade payment of his taxes, must have reference to all the evidence and should draw such inferences from the evidence as appear proper in the circumstances. He asserts that in certain situations the court may draw, from the fact of a wilful refusal to file returns, an inference of intention to evade payment of taxes but it is always up to the trier of fact to decide whether in the particular circumstances such an inference is warranted. In the present case, he argues, the trier of fact chose not to draw the inference and that must end the matter.
The submission of the Crown brings into sharp focus the distinction referred to by Ritchie, J in Regina v George, 34 CR 1; [1960] SCR 871, which must be borne in mind when dealing with the issue of mens rea. He said at page 890:
In considering the question of mens rea, a distinction is to be drawn between “intention” as applied to acts done to achieve an immediate end on the one hand and acts done with the specific and ulterior motive and intention of furthering or achieving an illegal object on the other hand. Illegal acts of the former kind are done “intentionally” in the sense that they are not done by accident or through honest mistake, but acts of the latter kind are the product of preconception and are deliberate steps taken towards an illegal goal. The former acts may be purely physical products of momentary passion, whereas the latter involve the mental process of formulating a specific intent.
Is the illegal act under consideration in the present case of the first class mentioned by Ritchie, J or the second class? If it is of the kind where to simply describe the behaviour is to describe the behaviour as intentional, then It is of the first class. In a case of assault, for example, evidence establishing that A hit B is really evidence establishing that A hit B intentionally (in the sense that it was not done by accident or honest mistake): Regina v George (supra). On the other hand if the illegal act under consideration is of a kind which requires conduct carried out with a particular purpose, then it is of the second class. In a case of murder, for example, to say that A pulled the trigger of a gun and killed B is not to say that A murdered
B. It is necessary to prove that A pulled the trigger with a particular purpose—with a particular intent (eg, the intent to kill).
The offence contemplated by the subsection under consideration is the wilful evasion of payment of taxes. There is a mass of authorities defining the terms “wilful” and “wilfully”, as used in various contexts, but in my research I was unable to find any authority which defines the expression “wilfully evaded” or “wilful evasion” or, apart from Regina v Sumarah, 10 CRNS 169; [1970] 5 CCC 317; 70 DTC 6164 (NS), any authority which defines “wilfully” where it is used in conjunction with the word “evaded”. In Sumarah, O’Hearn, Co Ct J found that the word “wilfully” where it is used in paragraph 132(1)(d) of the income Tax Act, RSC 1952, c 148 (the predecessor of the present paragraph 239(1 )(d)) “is the equivalent of the phrase ‘with intent to do so’ (p 6168).
To appreciate the significance of the use of the word “wilfully” when used in relation to a statutory prohibition, it is helpful to consider and pay heed to the following observation made by Brett, J in Regina v Prince (1875), LR 2 CCR 154 (of no less value by reason of the fact that it appears in a dissenting judgment or the fact that it appears in a nineteenth century decision) at page 161:
“Wilfully” is more generally applied when the prohibited acts are in their natural consequences not necessarily or very probably noxious to the public interest, or to individuals; so that an evil mind is not the natural inference or consequence to be drawn from the doing of the acts. The presence of the word requires somewhat more evidence on the part of the prosecution to make out a prima facie case, than evidence that the prisoner did the prohibited acts.
Grimmer, J, speaking for the New Brunswick Supreme Court, Appeal Division, in Rex v Griffin, 63 CCC 286; [1935] 2 DLR 503; 9 MPR 84, in construing the word “wilfully” in the context of section 167 (the section dealing with the wilful obstruction of a peace officer) of the Criminal Code, RSC 1927, c 36, said at page 290:
. . . “wilful” imports design, intention and purpose and that when applied to the intent with which an act Is done implies a purpose or willingness to commit the act. This also applies when it is used in criminal or penal statutes or criminal law in respect to a violation of which it has been said the word “wilfully” has an understood and accepted, unrestricted or well defined meaning and is to be given some force, implying as it does a dellberate purpose to accomplish something forbidden, a determination to execute one’s own will in spite of and in defiance of law.
In Rex v Duggan (1906), 16 Man R 440; 12 CCC 147; 4 WLR 481, the Manitoba Court of Appeal considered the meaning of the word “wilfully” in relation to an election offence. Richards, J A at page 160 stated:
if the word “wilfully” only meant “voluntarily” or “knowingly” the argument would perhaps have more substance. But I think the word, when used as a part of the definition of a crime, means more than that. Its true meaning in such a case seems to me to be that given it by Mr Justice Wuriele In Ex parte O’Shaughnessy (1904), 13 Que KB 178; 10 RLNS 38; 8 CCC 136, at the top of page 139. The learned Judge says there: “Wilfully means not merely to commit an act voluntarily, but to commit it purposely with an evil intention, or in other words it means to do so deliberately, intentionally and corruptly and without any justifiable excuse.”
The word “wilfully”, as used in the subsection under consideration, carries a distinct connotation of deliberate purpose and ulterior motive. To ascribe to the word a meaning which negates or overlooks that purpose or motive is to dilute the meaning of the word to a point where its use is rendered completely unnecessary. I have no hesitation in concluding that the offence with which the appellant is charged falls into the second class of offence mentioned by Ritchie, J. It follows then that for a conviction to take place under paragraph 239(1)(d) of the Act there must be proof of the actus reus, the “manner”, to use the word of the statute, in which the alleged offence was committed, and also proof of a specific intent, that is to say, proof that the act which constitutes the “manner” was done with a particular purpose— the purpose of evading the payment of tax. (I use the term “specific Intent” in the sense in which the courts generally have used the term and not in the narrower, and perhaps more precise, sense in which some academic writers have chosen to use the term.)
The Crown’s submission, as I understand it, is that a finding that the offence is of the second class—one requiring specific intent— presents no particular problem in this case. It is submitted that where the “manner” of committing the offence is such that its natural consequence produces a result certain, the Court must infer, from the “manner” of committing the act, a specific intention to produce that result. Here the “manner” is one of wilful refusal to file returns. Its natural consequence, it is said, produces a result certain, namely, evasion of payment of tax. It follows, so it is argued, that the Court must draw the necessary inference of a specific intent to accomplish an evasion of tax.
With respect, that appears not to be the law. This Court, speaking through Culliton, JA (as he then was) in Regina v Patrygura (1960), 129 CCC 333, adopted (at p 335) the principles stated by Goddard, CJ in Rex v Steane, [1947] KB 997 at 1004; 32 Cr App R 61; [1947] 1 All ER 813, as follows:
The important thing to notice in this respect is that where an intent is charged in the indictment, the burden of proving that intent remains throughout on the prosecution. No doubt, if the prosecution prove an act the natural consequence of which would be a certain result and no evidence or explanation is given, then a jury may, on a proper direction, find that the prisoner is guilty of doing the act with the intent alleged, but if on the totality of the evidence there is room for more than one view as to the Intent of the prisoner, the jury should be directed that it is for the prosecution to prove the intent to the jury’s satisfaction, and if, on a review of the whole evidence, they either think that the intent did not exist or they are left in doubt as to the intent, the prisoner is enitled to be acquitted. (The italics are mine.
By adopting those principles this Court expressed itself unequivocally that in those cases where a particular purpose or a specific intent is an essential element of the offence, then proof of the act the natural consequence of which would be a certain result and no explanation is given, entitles, but does not bind, the court hearing the matter to find the accused guilty of doing the act with the necessary intent.
Lord Denning in Hosegood v Hosegood (1950), 66 TLR 735 at 738, in a civil case, put it this way:
When people say that a man must be taken to intend the natural consequences of his acts, they fall Into error: there is no “must” about #; it is only "may”. The presumption of intention is not a proposition of law but a proposition of ordinary good sense. It means this: that, as a man is usually able to foresee what are the natural consequences of his acts, so it is, as a rule, reasonable to infer that he did foresee them and Intend them. But, while that is an inference which may be drawn, it is not one which must be drawn. If on all the facts of the case it is not the correct inference, then it should not be drawn.
See also the Ontario Court of Appeal decisions in Regina v Glannotti, 23 CR 259; [1956] OR 349; 115 CCC 203; Regina v Ortt, 6 CRNS 233; [1969] 1 OR 461; [1970] 1 CCC 223; 11 Cr LQ 328; Regina v Mulligan (1974), 26 CRNS 179; 18 CCC (2d) 270, and the British Columbia Court of Appeal decision in Regina v Crawford (1970), 1 CCC
(2d) 515.
It is plain, therefore, that upon proof of a “wilful refusal” to file an income tax return—the “manner” in which it is alleged the offence under paragraph 239(1)(d) of the Income Tax Act is committed—the Court may, not must, infer that the accused committed the act with the intent to evade payment of taxes. If on the whole evidence the Court reaches the conclusion that it is proper to draw that inference, then it may do so. If it reaches the conclusion that it is not proper to do so, or is left in reasonable doubt, then it should not draw the inference.
Learned counsel for the Crown laid stress upon the fact that here we are dealing with a “wilful refusal” to file tax returns and not a mere "failure” to file returns. That, he submits, makes a difference as to whether the necessary inference of intent must or only may be drawn from the actus reus. With respect I am not able to give effect to that argument. The expression “wilful refusal” when used in relation to the phrase “to file income tax returns” is nothing more than part of the description of the actus reus. It is not a declaration of the presence of the required intent. To say that A “wilfully” pulled the trigger of a gun and killed B may eliminate the possibility of mistake or accident in pulling the trigger but it is not to say that A murdered B. Even if the trigger were “wilfully” pulled it would still be necessary to say that A pulled the trigger with the particular purpose or intent of, for example, killing B, for there to be a murder. The principle of law which states that an inference of intent may, and not must, be drawn from the act in question is equally applicable to an act consisting of a “wilful refusal” to file a return as to one consisting of a simple “failure" to file a return. That, of course, is not to say that it may not be easier, in the former case than in the latter, to draw the necessary inference of intent.
It follows from what I have said to this point that I am not prepared to go so far as to say that only in those cases where there is an artifice or a scheme can there be a conviction for evasion under this subsection. The presence of an artifice or scheme would tend to make it easier to draw the necessary inference of intent to evade payment of taxes, but in my respectful view it cannot be said that the existence of an artifice or scheme is a necessary element of the offence created by this subsection. Where the necessary intent is present, then the "manner" in which the intent is carried out is not important. The plain words of the subsection specify it may be done “in any manner”. That the Act does not contemplate an artifice or scheme to be the only manner in which an “evasion” may be accomplished is further evidenced by subsection 163(1) which clearly enacts that an attempted evasion under that subsection can take place by simply "failing to file a return of income”. To the extent that Regina v Baker (supra) holds that an artifice or scheme is a necessary element of an offence under paragraph 239(1)(d) of the Act, I find, with respect, that it does not correctly state the law.
My answer to the question posed is “No”. I give that answer on the basis that a plain reading of the question requires that it be read this way:
Did I err in law in concluding that [proof of] the wilful refusal of the Respondent to file income tax returns [the actus reus] . . . did not [by itself] constitute [proof of] wilful evasion of payment of taxes?
Were I to read the question this way (a reading suggested by the trial judge’s reasons):
Did I err in law in concluding that the wilful refusal of the Respondent to file income tax returns . . . did not [by reason of the failure to prove an artifice or scheme] constitute a wilful evasion of payment of taxes?
I would have answered the question “Yes”. It is hardly necessary to add that an appellate court in an appeal by way of stated case is not required to pass upon the correctness of the reasoning used by the judge of the summary conviction court in arriving at his ultimate decision but only upon his ultimate decision. Thus it is possible for an appellate court to adopt the ultimate decision of the summary conviction court but at the same time not adopt entirely or, indeed, reject entirely his reasons for arriving at that decision.
The appeal is dismissed.