In assessing the taxpayer, CRA presumed that he had claimed “natural person” deductions to reduce the amount of revenue he reported as taxable, so that it denied those deductions and imposed gross negligence penalties. In addition, the taxpayer and his wife were charged with tax evasion under the ITA and (in the case of the taxpayer) the ETA. The BC Provincial Court in the criminal proceedings found that (i) the failure of CRA investigators to make notes, and the negligent loss of detailed notes made by another auditor, denied them of the right to a fair trial contrary to s. 11 of the Charter, and (ii) the failure by the CRA investigators to produce a copy of search warrant when asked was a significant breach of s. 8 of the Charter. The BC Court imposed remedies under s. 24 of the Charter in respect of these breaches at several stages of the criminal proceedings and, in the end, stayed the criminal charges on the basis that it would not be possible for the couple to receive a fair trial. The CRA assessments were based principally on bank records which CRA had collected pursuant to its statutory powers in an audit (the “second audit”) conducted by civil auditors but which had been prompted by a suspicion that the taxpayers had engaged in tax fraud.
In this voir dire, Boyle J referenced the principles in Grant (2009 SCC 32) including (at para. 68 thereof) that s. 24(2) “looks to whether the overall repute of the justice system, viewed in the long term, will be adversely affected by admission of the evidence.” He held that s. 24 of the Charter permitted him to impose remedies for Charter breaches determined by another court for which it had already imposed its own remedy. This extended to breaches of the taxpayer’s rights under ss. 7 and 11 of the Charter, even though they could only be breached in the context of criminal proceedings. Boyle J exercised his discretion under s. 24(2) to determine that the Crown could not, in the context of the Tax Court proceedings, introduce or rely on any evidence that was (i) first collected from the search and seizure at the taxpayer’s home to justify (a) the amount of tax owing, or (b) reassessments after the normal assessment period had expired, and (ii) collected from the second audit of the taxpayers, or first collected from the search and seizure at their home, to support the penalties assessed. In addition, the Crown’s assumptions of fact set out in its Reply would not have the benefit of being presumed to be correct in the absence of being “demolished” by the taxpayers.
He stated (at para. 153) that “CRA investigators blatantly breached their Charter rights on multiple occasions” and “this Court [should] clearly impose consequences in the form of section 24 remedies to avoid Canadians losing faith in their Canadian justice system’s commitment and obligation to ensure that our shared tax burden is both lawfully shared by taxpayers, and lawfully administered and collected by our revenue authorities… .”