Evans, JA (concurred in by Gale, CJO and MacKay, JA):—This is an appeal by the Attorney General of Canada, with leave of the Court, from the acquittal of the respondent by His Honour Judge Graburn on November 1, 1970 on three charges, prosecuted on indictment, under paragraphs 132(1)(a) and (d) of the Income Tax Act, of making false or deceptive statements in his income tax returns for 1967 and 1968 and wilfully evading payment of income taxes in the amount of $10,879.44. The amount of income allegedly suppressed is $21,433.41.
The evidence at trial consisted of an agreed statement of facts together with schedules and a statement by the respondent admitting the receipt of money and benefits through “kickback” arrangements with certain subcontractors of the respondent’s employer, a general building contractor. The statement of facts is as follows:
The accused was employed by Milne and Nicholls Limited, a general building contractor in the City of Toronto, from 1943 to 1970. From 1965 to 1970 he was a director of the Company and was also its secretary-treasurer, comptroller and general office manager.
In his capacity as secretary-treasurer, comptroller and general office manager, Poynton was in charge of all the financial operations of the business and supervised the keeping of the books of financial record. His duties included the approval of invoices for payment, including invoices received by Milne and Nicholls Limited from its sub-contractors, and Poynton was personally responsible for the preparation of bills and invoices sent out on behalf of the Company.
At all material times the directors were: Roland H Nicholls, president, Winnifred Nicholls and Frederick E Poynton, secretary-treasurer.
Roland H Nicholls, Poynton and William McLaren, the general manager had signing authority in respect of cheques on behalf of the Company and one signature on a cheque was sufficient.
Poynton resigned from Milne and Nicholls Limited at the beginning of 1970 towards the conclusion of an investigation conducted by the Department of National Revenue.
In 1967, unknown to the other directors of Milne and Nicholls Limited, Poynton arranged with one Harry Jones for Jones to submit invoices to sub-contractors employed on certain jobs in which Milne and Nicholls Ltd were the General Contractors. It was not contemplated that Jones would perform any services or supply any materials to the sub-contractors. The invoices were to be fictitious. Upon payment of the fictitious invoices by the sub-contractors, Jones was to negotiate the cheques retaining 10% of the amounts for himself, giving the balance of the money to Poynton. At the material time Jones was an unemployed neighbour of Poynton.
Gymnasium Partitions Company was a sub-contractor for Milne and Nicholls Limited on a construction project for the MEPC Club in Don Mills. On October 14, 1966, Gymnasium issued an invoice to Milne and Nicholls in the amount of $11,188. On the same date, Milne and Nicholls Limited issued a cheque signed by Poynton to Gymnasium for the full amount.
Pursuant to the arrangement, (Poynton-Jones) Jones submitted an invoice dated January 27, 1967 to Gymnasium Partitions Company for $3995.00. Gymnasium issued a cheque to Jones dated February 23, 1967 for $2,500.00 in part payment of the invoice. No work was done by Jones for Gymnasium or Milne and Nicholls Limited. Jones cashed the cheque March 6, 1967 which he received from Gymnasium, kept $400.00 of the $2,500.00 for himself and paid the remaining $2,100.00 to Poynton.
In 1967, Poynton arranged with one Lapointe, President of Abel Metal Products Limited that Abel would accept and pay invoices from Harry Jones. Abel was a sub-contractor of Milne and Nicholls Limited at the time. Subsequently, in 1967 Jones issued seven invoices to Abel for a total of $17,281.00 on jobs on which Milne and Nicholls Limited was the general contractor and Abel a sub-contractor. Abel paid the amount of the invoices to Jones and Abel included the amount so billed in its invoices to Milne and Nicholls Limited. Poynton on behalf of Milne and Nicholls Limited approved payment in the amount stated to Abel and signed the cheques. Poynton received from Jones the proceeds of the cheques issued by Abel to Jones less $1,728.10 which was retained by Jones. Out of the monies received, Poynton paid Lapointe the approximate sum of $1,000.00, with the result that Poynton received a net amount of $14,552.90.
In 1968, Jones sent a further invoice to Abel for $934.00 on a job on which Milne and Nicholls Limited was the general contractor. Abel paid the amount of the invoice to Jones and Abel included the amount so billed in its invoices to Milne and Nicholls Limited. Poynton on behalf of Milne and Nicholls Limited approved payment in the amount stated to Abel and signed the cheque. Poynton received from Jones the sum of $840.60, being the said sum of $934.00, less an amount of $93.40 retained by Jones.
In 1968, Poynton through Angus English, at the time an estimator employed by Milne and Nicholls, caused Jones Wood Specialties Limited, a sub-con- tractor working for Milne and Nicholls Limited in certain construction work for George Brown College, to supply certain materials to Poynton personally for use in additions to Poynton’s residence. Jones Wood Specialties Limited invoiced Milne and Nicholls Limited directly for $1,781.11 for these materials and this invoice was paid by Milne and Nicholls Limited. The invoice to Milne and Nicholls Limited purported to cover additional mill work in connection with the George Brown College job. Payment on behalf of Milne and Nicholls Limited was approved by Poynton. The whole transaction was effected by arrangement between English and one MacNally, an estimator employed at that time by Jones Wood Specialties Limited. The approximate value of the materials supplied was $1,700.00.
In 1968, Poynton arranged that payment would be made by Milne and Nicholls Limited for certain plumbing and heating work to be done on Poynton’s residence by Harold R Stark Limited of Oshawa, Ontario. The work was done by Stark, who then included the charge for this work as an extra in an invoice submitted to Milne and Nicholls Limited for work performed by Stark in the construction of the Oshawa City Hall for which Milne and Nicholls Limited was the general contractor and Stark a sub-contractor. Poynton approved payment of the invoice on behalf of Milne and Nicholls Limited and signed the cheque to Stark.
The total amount received by Poynton in 1967 was $16,652.90 and in 1968 $4,780.51, as shown on the attached schedule.
On March 4, 1971, a writ was issued in the Supreme Court of Ontario by Milne and Nicholls Limited against Poynton. The writ claimed the following:
“The Plaintiff's claim is for monies had and received to the use of the plaintiff, from 1966 to the present, damages for fraud, damages for breach of fiduciary duty, and an accounting of the financial relationships between the parties and of the defendant’s dealings to the plaintiff’s account, and for judgment accordingly.”’
In the statement of claim the Plaintiff claimed inter alia the sum of $21,433.41 being the amount referred to above, and exemplary damages.
Following negotiations for settlement of the action between the solicitors for Milne and Nicholls Limited and Poynton, the said sum of $21,433.41 was paid to the solicitors for Milne and Nicholls Limited on or about August 18, 1971 in settlement of the claim made in the proceedings. The solicitors for Milne and Nicholls Limited forwarded to the solicitors for Poynton a signed consent to the dismissal of the action and a general release, and arrangements are presently under way for the action to be dismissed and the release to be executed.
There is no dispute in the amount involved or the tax liability which it would attract if it were found to be “income’’, nor is there disagreement as to the manner in which the benefits were acquired by the respondent. I have accordingly not considered it necessary to set out either the statement made by the respondent or the schedules with details of the alleged income and tax thereon.
The issue on appeal is twofold, viz:—
(a) whether moneys which an employee-director has stolen from his employer are amounts required to be included in the computation of the employee-director’s income by virtue of sections 5 and 8 and subsection 137(2) of the Income Tax Act, RSC 1952, c 148; and
(b) whether the value of certain benefits conferred on an employeedirector by way of improvements to his residence, which by virtue of his fraudulent conduct had been paid for by funds appropriated unlawfully from his employer, are required to be included in the computation of his income by virtue of sections 5 and 8 and subsection 137(2) of the Income Tax Act.
Prior to launching into a consideration of the issues I wish to express my gratitude to all counsel for the depth of their research and to commend them for the excellence of their presentations.
The rule for the construction of a taxing statute, stated by Lord Cairns in Partington v Attorney General, LR 4 HL 100 at 122, and followed by Duff, J in Versailles Sweets Limited v Attorney General for Canada, [1924] SCR 466 at 468, is to the effect that there is no equitable construction in a taxing statute and in order for the Crown to fix the subject with liability for tax it must bring the subject within the letter of the taxing enactment.
The Crown seeks to bring the respondent within sections 5 and 8 and subsection 137(2) of the Income Tax Act, RSC 1952, c 148, the relevant portions of which are as follows:
5. (1) Income from office or employment. — Income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year plus
(a) the value of board, lodging and other benefits of any kind whatsoever (except the benefit he derives from his employer’s contributions to or under a registered pension fund or plan, group sickness or accident insurance plan, medical services plan, supplementary unemployment benefit plan, deferred profit sharing plan or group term life insurance policy) received or enjoyed by him in the year in respect of, in the course of, or by virtue of the office or employment; and . . .
8. (1) Appropriation of property to shareholders. — Where, in a taxation year,
(b) funds or property of a corporation have been appropriated in any manner whatsoever to, or for the benefit of, a shareholder, or
the amount or value thereof shall be included in computing the income of the shareholder for the year.
137. (2) Indirect payments or transfers. — Where the result of one or more sales, exchanges, declarations of trust, or other transactions of any kind whatsoever is that a person confers a benefit on a taxpayer, that person shall be deemed to have made a payment to the taxpayer equal to the amount of the benefit conferred notwithstanding the form or legal effect of the transactions or that one or more other persons were also parties thereto; and, whether or not there was an intention to avoid or evade taxes under this Act, the payment shall, depending upon the circumstances, be
(a) included in computing the taxpayer’s income for the purposes of Part I,
The question is, what quality must be attached to a profit, gain or benefit before it can be characterized as “income” for the purpose of taxation? There is no doubt that the word “income” in the Income Tax Act is sufficiently wide to include money other than that received from bona fide transactions. The fact that profits are derived from an illegal business does not make them immune to taxation (Minister of Finance v Smith, [1927] AC 193) and Courts have been equally consistent in allowing, as deductions from income, expenses which are tainted with illegality. In ascertaining the net profits of a business, items of expense which are of an illegal nature are nonetheless deductible if they come within the provisions of the Act as payments made wholly, exclusively and necessarily for the purpose of earning the income sought to be taxed (Espie Printing Company Limited v MNR, [1960] Ex CR 422: [1960] CTC 145; 60 DTC 1087).
The words of Lord Haldane in the Smith case (supra) have application in the present case when he stated at page 197:
Nor does it seem to their Lordships a natural construction of the Act to read it as permitting persons who come within its terms to defeat taxation by setting up their own wrong. There is nothing in the Act which points to any intention to curtail the statutory definition of income, and it does not appear appropriate under the circumstances to impart any assumed moral or ethical standard as controlling in a case such as this the literal interpretation of the language employed. There being power in the Dominion Parliament to levy the tax if they thought fit, their Lordships are therefore of opinion that it has levied income tax without reference to the question of Provincial wrongdoing.
There do not appear to be any reported Canadian cases in which the tax Department sought to levy a tax on the proceeds of money received by fraud or other theft and counsel for the Attorney General sought to establish his case by analogy and by reference to authorities in other jurisdictions.
The trial judge in acquitting the respondent found that his action constituted a fraud against his employer and that while the moneys obtained thereby were a gain, albeit temporarily, in the hands of the respondent, that such moneys did not have the quality of income and therefore taxable because the respondent did not hold them ‘“by entitlement without any restriction by operation of law or otherwise on his disposition, use or enjoyment” thereof and that the “said moneys were clearly impressed with a trust in favour of his employer”. In so holding counsel for the taxpayer submits that he accepted as the test to be applied that stated by Mr Justice Brandeis in Brown v Helvering (1934), 291 US 193 at 199 and restated by Thorson, J in Kenneth B S Robertson Limited v MNR, [1944] Ex CR 170; [1944] CTC 75; (1941-46), 2 DTC 655, at page 182 [91].
Is his right to it absolute and under no restriction, contractual or otherwise, as to its disposition, use or enjoyment?
Both cases dealt with insurance commissions and the right of the taxpayer to set up a reserve fund to provide for refunds in event of cancellations and which reserve fund the taxpayer sought to have designated as a deduction from income. In Brown v Helvering (supra), the taxpayer, a fire insurance agent, deducted from accrued commissions and transferred to a reserve account an amount which, on the experience of earlier years, would be returnable because of cancellations. The question for decision by the Court was whether the taxpayer had discharged the burden upon him of establishing that the reserve amount fell within the scope of a proper deduction from income under section 214 of the Revenue Act (US). The Court held that it was not a proper deduction and must be included as income subject to taxation. The Court recognized that each commission carried with it an obligation — a contingent liability — to return a proportionate part in case of policy cancellation. It also held the mere fact some portion might have to be refunded in some future year did not affect its quality as income. The Court continued at page 199:
When received, the general agent’s right to it was absolute. It was under no restriction, contractual or otherwise, as to its disposition, use or enjoyment.
The matter before the Court was whether a certain item, the reserve fund, was a deduction under the Act. There was no dispute that the fund was part of the taxpayer’s gross income.
In the Robertson case (supra), the taxpayer was an agent for English underwriters dealing with American brokers who sold liability insurance to employers. The premium was based on the employer’s actual payroll during the term of the contract and could not be ascertained until its expiry. An advance fee, based on the employer’s estimated payroll, was paid at the commencement of the contract and was to be held as a deposit and applied to premium or refunded when the proper amount of the premium was ascertained. There was also provision for a minimum fee which was not related to the payroll amount. The taxpayer set up in its books “a reserve for unearned commissions” to provide for refunds arising from cancellations or overestimation of payroll. Some policies were for a period of more than one year and the taxpayer sought to allot to each fiscal year the proportion of commission applicable to the premium of that year even though the commission received during the year covered premium payments for more than one year. The reserve fund included part of the advance fee which under the contract was to be held as a deposit and applied against the audited fee in the annual adjustments.
We are concerned only with that part of the judgment dealing with the advance fee, a portion of which, in excess of the minimum fee, Thorson, J held not to be income. In his words:
. . . Can an amount in a taxpayer’s hands be regarded as an item of profit or gain from his business, as long as he holds it subject to specific and unfulfilled conditions and his right to retain it and apply it to his own use has not yet accrued, and may never accrue?
In his opinion the advance fee (less the minimum fee) was a deposit to be disposed of in a certain manner spelled out in the contract and since it was subject to a restriction it lacked the “quality of income” referred to by Mr Justice Brandeis.
In Dominion Taxicab Association v MNR, [1954] SCR 82; [1954] CTC 34; 54 DTC 1020, Cartwright, J, in dealing with money paid pursuant to a contract by taxicab owners to the Association whereby the cab owners became members and the Association provided certain services, had to decide whether such payments of $500 each constituted “profits” and therefore taxable in the hands of the Association. He held that the payments did not represent profits as they did not become the absolute property of the Association so long as there remained an unextinguished liability to the cab owners. He further states at page 85 [37-8, 1021]:
The expression “profit” is not defined in the Act. It has not a technical meaning and whether or not the sum in question constitutes profit must be determined on ordinary commercial principles unless the provisions of the Income Tax Act require a departure from such principles. In the case at bar the main question is as to the respective rights of the appellant and its members in regard to the deposits of $500 made in pursuance of the contracts in the form quoted above. It is well settled that in considering whether a particular transaction brings a party within the terms of the Income Tax Act its substance rather than its form is to be regarded.
In my opinion “income” could be substituted for “profit” in the above quotation from Cartwright, J without doing violence to the proposition stated by him.
The appellant contends that the trial judge erred in that the test applied by him is in substance different from that stated by Thorson, J in the Robertson case (supra) and that the proper test is one which has regard to the realities of the situation and is concerned with whether the taxpayer in question had in fact the actual use and enjoyment of the amounts in question and not with the ownership of the income. This test was applied in the majority judgment in James v United States (1961), 366 US 213. I propose to deal later with the American authorities and for the moment concern myself with the appellant’s submission that this test has been approved by the Supreme Court of Canada in Sura v MNR, [1962] CTC 1; 62 DTC 1005, and Curlett v MNR, 62 DTC 1320. The facts in the latter case are fully reported in [1961] Ex CR 427; [1961] CTC 338; 61 DTC 1210 and indicate that Curlett bought mortgages at a discount which he then sold at face value to a private company in which he had absolute control and undisputed ownership. The trial Court held that the bonus money retained by the taxpayer was income from a business venture carried on personally by him and completely separate from that carried on by the private company. Curlett sought to escape liability on the basis that his actions constituted a fraud on the private company and that the proceeds of the discounted mortgages lacked the essential quality of income in his hands, as his right to them was not absolute, and that he was under a duty to account and pay over same to the company. The Court noted that several years had passed during which Curlett had made no effort to pay over the discounts to the company which he controlled. There can be no doubt that the taxpayer was in breach of his fiduciary duty to the company and that the company was entitled to the discounts which were improperly retained by Curlett. The Court in holding that the moneys constituted income in the hands of Curlett did so in the face of his defence that he was under a duty to account and that his entitlement was not absolute. The principle to be elicited from the judgment, as I apprehend it, is that strict legal ownership is not the exclusive test of taxability but that a court in determining what is income for taxation purposes must have regard to the circumstances surrounding the actual receipt of the money and the manner in which it is held. The fact that the Court stated that the money was “income from a business” indicates the scope and extent of the operation but does not affect the basic finding that money accruing in such a manner, whether as the result of an isolated transaction or from a series of transactions, is taxable income. The Supreme Court of Canada, on October 10, 1962, dismissed an appeal from the Bench and adopted the conclusion reached by the trial judge.
In both the Robertson and Dominion Taxicab cases the courts were dealing with moneys subject to obligations and restrictions set out in written contracts. I believe them to be readily distinguishable on the facts from Curlett and the case at bar. If one receives money under a trust for another, he is under an obligation to turn over the proceeds to his cestui que trust. If he does so then he fulfils his duty and no question of taxability qua trustee arises. If however, in breach of his duty to account, the trustee converts to his own use he is taxable, not on the basis that the quality of the money or his entitlement thereto has changed, but on the basis that the manner of holding has altered. The moneys are still trust moneys and the trustee is liable in law to account but because of the theft or conversion the trustee in reality holds the money for his own account. The fact that a defaulting trustee may be called upon to return his ill-gotten benefits flows from his relationship to his cestui que trust while his taxability results from the manner in which he actually holds the benefit.
It was argued on behalf of the respondent that there is something repugnant in the taxation of moneys in the hands of a thief because it places the rightful owner in contestation with government over money which properly belongs to him. Whatever merit there may be in such argument, it hardly lies in the mouth of the thief to advance it. The solicitude of a thief for the financial welfare of his victim must be viewed with suspicion and my only observation is that in practice the likelihood of such a contestation would infrequently arise and in any event it is a legislative rather than a judicial problem.
The Sura case (supra) deals with a husband and wife domiciled in Quebec and, as there was no marriage contract, the law as to community property applied and the husband and wife were in law coowners. The husband sought to divide the income from such property between himself and his wife and thereby lessen the tax liability. The Court held that the quality of ownership in the wife was a limited right during the lifetime of the husband and that under the law of Quebec the husband alone administers the community property and he alone can dispose of the income as, in law, he holds it on his own account and not as an agent or fiduciary for the benefit of his wife. The total income was therefore held to be taxable in the hands of the husband who had the absolute enjoyment and right to it. Mr Justice Taschereau, speaking for the Court, adopted the oft-stated principles that income tax liability is imposed on the person not on the property and that the statute does not address itself to capital or ownership of property but to the person and the amount of tax is determined by the benefits the person receives.
The majority judgment in MNR v Atlantic Engine Rebuilders Limited, [1967] SCR 477; [1967] CTC 230; 67 DTC 5155, held that unredeemed refundable deposits made by car dealers to the company (which in fact were redeemed 96% of the time) were not trading receipts and therefore not subject to inclusion in determining profits of the company. The Court acknowledged that the company became the legal owner of the deposits but considered that circumstance to be irrelevant in the light of the realities of the situation. While this case is concerned with trading receipts in the operation of a business it is plain that the Court rejected the theory that legal ownership per se created liability for taxation and followed the principle that in determining taxability an assessment and analysis of all the relevant circumstances, including the rights and obligations, whether contractual or otherwise, was necessary.
Many of the numerous cases, both Canadian and English, to which we were referred, concerned moneys received subject to a trust created either by contract or by implication of law. In my view, income, for the purposes of the Act, is not necessarily determined by such considerations. The same comment applies to situations in which the question for determination was whether a certain item was deductible under the Act. It does not necessarily follow that because money is stolen by an employee that the loss is a proper deduction. If it falls within the definition it is allowable; otherwise it is not and in determining that question all the circumstances must be considered. The same reasoning applies to income; the manner of receipt, the control over it, the liabilities and restrictions attaching to it, the use made of it by the holder, the person to whom the benefits accrue. These are but some of the circumstances to be weighed.
I am of the opinion that there is no difference between money and money’s worth in calculating income. They are both benefits and fall within the language of sections 3 and 5 of the Act, being benefits received or enjoyed by the respondent in respect of, in the course of, or by virtue of his office or employment. I do not believe the language to be restricted to benefits that are related to the office or employment in the sense that they represent a form of remuneration for services rendered. if it is a material acquisition which confers an economic benefit on the taxpayer and does not constitute an exemption, eg loan or gift, then it is within the all-embracing definition of section 3.
In view of the above finding I do not consider it necessary to refer in detail to paragraph 8(1 )(b) and subsection 137(2). These provisions would appear to refer to those situations in which the taxpayer obtains a benefit with the knowledge and consent of the donor-employer and would have no application in the present factual situation. The benefits sought to be taxed did not accrue to Poynton nor were they conferred upon or received by him qua director, qua officer or qua shareholder but qua thief.
I now turn to a consideration of the American cases in which the taxing statute is not dissimilar and in one of which the factual situation is almost identical to the case under appeal. I believe I can state with some confidence that until recently the American decisions suffered from a lack of uniformity and that the earlier decisions of the United States Supreme Court in Commissioner of Internal Revenue v Wilcox et al, 327 US 404, has now been overruled by James v United States (supra). Wilcox was decided in 1915 and held that embezzled moneys did not constitute taxable income in the hands of the embezzler presumably on the principle that in order for a gain to be taxable there must exist in the taxpayer a claim or right to the alleged gain and that there must co-exist the absence of a definite unconditional obligation to repay or return that which would otherwise constitute a gain. In Rutkin v The United States (1952), 343 US 130, it was held by the US Supreme Court that money obtained by extortion was taxable income in the hands of the extortioner. The alleged distinction between the two cases appears to be that in Wilcox the employer was unaware that moneys had been stolen from him and upon becoming informed sought recovery while in Rutkin the extortion money had been paid over with the knowledge of the victim and the Court considered that in view of the illegal activities engaged in by the victim there was slight likelihood that he would demand the return of the money from Ruikin. The confusion in American lower courts which resulted from their attempts to reconcile the two decisions is clearly recorded in many reported cases. This unhappy situation continued until James v United States (supra) was decided in 1961. In James, the taxpayer, a union officer, had embezzled in excess of $738,000 over a four-year period from his employer and an insurance company with which the employer did business. The Supreme Court, in a majority decision, held the embezzled funds to be part of the taxpayer’s gross income for the year in which the embezzlement took place. Mr Justice Black delivered a strong dissent in James confirming the position he had stated in Rutkin. The main argument advanced by the respondent in this Court is based to a considerable extent on the dissenting judgments of Mr Justice Black which held that embezzled or extorted moneys do not constitute income for taxation purposes for the reason that the embezzled or extorted property belongs, and is known to belong, to the rightful owner. These opinions expressed with great vigour have the merit of consistency but failed to carry the majority of his court. I am likewise not persuaded. The Wilcox decision had been emasculated to a great extent by Rutkin and whatever authority remained was overruled in James. While decisions of American Courts are not binding on me, I am persuaded that the ratio decidendi of the majority opinion in James v United States is sound and is equally applicable to the present case.
The fact that here the stolen money was repaid by Poynton following the institution of a civil action by his employer does not affect the result as the repayment was not made in the years in which the funds were misappropriated and in which they were sought to be taxed. Whether the moneys would attract tax if repaid during the year in which they were misappropriated; whether the taxpayer is entitled to claim a deduction in the year in which repayment is made or whether the employer would be taxable on the repayment are not matters for consideration and determination in the instant case.
It cannot be questioned that mens rea is an essential element to be proved by the Crown in order to support a conviction: The Queen v Regehr, [1968] CTC 122, and The Queen v Kipnes, [1971] 2 CCC 56.
Although the question of mens rea does not appear to have been argued at trial and is not referred to in the factums it is evident from a careful scrutiny of the reasons for judgment of the trial judge that he was prepared to find mens rea if he had concluded the money was income. As I have reached the conclusion that it is income, the proper inference to be drawn from all the circumstances is that the respondent, in certifying that the information in his return was complete, had a guilty mind when he failed to report the amounts now in issue which he described as “kickbacks”. One is driven to the irresistable conclusion that the conduct of the respondent in all the circumstances, including the absence of any explanation, was of such a nature that an inference of guilty intent must follow.
I would, therefore, allow the appeal of the Crown, set aside the verdicts of acquittal and direct the entry of a verdict of guilty on each count. As no representations have been made with respect to sentence, I would defer sentence until the Court has had an opportunity to hear representations by and on behalf of both appellant and respondent.
G W Ainslie, QC and D Rutherford for the Appellant.
L T Forbes and J A Ronson for the Respondent.
Evans, J A (orally, for the Court):—We have considered the representations made to us with respect to sentence and it is our view that a sentence of one year concurrent should be imposed on each count. It is not the intention of the Court to impose a fine in addition to a gaol term in view of the fact that the money illegally appropriated has been repaid and that a penalty of some $4,200 has been imposed upon the respondent under the provisions of the Income Tax Act.
We are of the view that we are dealing leniently with the respondent. The minimum penalty is two months imprisonment and the maximum is five years plus a fine. The respondent is a married man, 49 years of age, with four children, and it appears that his action was motivated by greed as he was obtaining a substantial income from his employer Milne and Nicholls Limited at the time of the commission of these offences. The respondent has no previous record of any consequence and accordingly the sentence imposed will, we believe, properly reflect the seriousness of the offence and will serve as a deterrent to him and to others.
These offences were committed over a considerable period of time and involved many others in their commission. We feel that a sentence of one year on each count to run concurrently is a lenient penalty under the circumstances.