Carrothers, J.A.:—This is a further appeal by the Crown from the judgment of the Honourable Judge Boyle, of the County Court of Vancouver, affirming on a summary conviction appeal to him the decision of His Honour Judge Bendrodt, of the Provincial Court of British Columbia.
Judge Bendrodt had acquitted the respondent of failing to provide information and produce documents as demanded and required pursuant to the provisions of subsection 231(3) of the Income Tax Act of Canada, thereby committing an offence contrary to the provisions of subsection 238(2) of that statute.
I consider the circumstances of the demand and of the refusal to be important and significant. The respondent Bruyneel is a chartered accountant of many years standing. A number of his clients, wishing to invest in an apartment project, entered into an assignment and pooling agreement and purchased an apartment building in Prince George which was later sold at a profit.
The profit accrued to the clients according to the shares provided for in the agreement. The individual clients wished to have their respective shares of profit from the sale filed for income tax purposes as a capital gain rather than as income from a venture in the nature of trade.
For some reason other than this group transaction one member of the group was being audited by the Department of National Revenue, which requested a copy of the assignment and pooling agreement relating to the apartment.
The respondent provided a copy of that agreement to the Department, having first obliterated the identity of the parties to the joint venture other than the member being audited.
The respondent received a letter from the Department of National Revenue which demanded a copy of the agreement, including the full names and addresses of each investor. The demand directed the respondent's attention to the penalty provided for in subsection 238(2) of the Income Tax Act for failure to comply. The respondent wrote to the Department stating:
I am not prepared to participate, regardless of the implications of s.231 and 238 of the Income Tax Act, in a fishing expedition. I am prepared to supply you without the necessity of demand information with respect to an audit on any of the clients of this office.
That simple narrative does not describe fully the nature of the demand. the trial judge in his reasons for judgment quoted the following passage from the transcript at trial. It is found in the examination in chief of the respondent, who was the only defence witness.
EXAMINATION IN CHIEF BY MR. ANDERSON
Q. Mr. Bruyneel, what is your occupation?
A. I'm a Chartered Accountant.
Q. Can you give us perhaps some background with respect to the matter at hand?
A. It relates to an investment in an apartment project in Prince George which was a building which was purchased at my behest by a group of clients of my office and there was about twelve units, investment units syndicated and the — the building was subsequently sold at a profit. The — to the best of my recollection all of my clients indicated their desire to file the gain on the sale as capital gain as opposed to a venture in the nature of trade income. Sometime subsequent to that one of my clients was audited and for no particular reason related to that building and that transaction was examined by the Auditors and there eventually in the exchange of information they asked me for copies of the joint venture agreement. They asked me for copies of the joint venture agreement, among other things and I provided them with a copy of that agreement with the names of the other members of the syndicate erased. They indicated at that time that they had made up their minds that my client was to be taxed as a venture in the nature of trade and that they wished to have the names of the other people involved. I indicated to them that I was not prepared to give them that information because of the confidential nature, in my opinion, of my relationship with my clients. They indicated that they would, if I did not provide the information, that they would assess my client on the full amount of the gain even though my client had a small interest in the building. They did, in fact, assess my client on the full amount of the gain of some forty-eight thousand dollars of tax on the thirty thousand dollar gain. I indicated to — I indicated by correspondence to the local Director of the Taxation Office my concern about that and he agreed with me that action shouldn't have been taken.
THE COURT: Do you mean to say the Income Tax Department said to you that if you don't provide this information as to who the other participants were in this joint venture —
A. Yes.
THE COURT: — then this one person that we're assessing is going to suffer an additional penalty and be assessed for the whole thing in spite of the fact that they are aware that it isn't his whole thing?
A. Yes, sir, yes, Your Honour. They said that to myself and to my client. They subsequently did assess that amount and the Director agreed with me that — that it was out of line completely. I indicated to him in a letter that I had never seen anything like it in twenty-five years of public practice. Subsequently, some months later after some considerable distress on my client’s part, the amount was reversed. They continued to take the position that her particular gain is income which we are fighting in the normal course and they indicated to me at the time they would look to me to provide them with the information as to the names of the other people and that led to the demand letter which was referred to earlier.
Q. Now, Mr. Bruyneel, the specific charge here relates to you as Director of Bruyneel Management, now can you explain the relationship there?
A. Bruyneel Management is a — I’m the only Shareholder and Director of Bruyneel Management. It was used in this matter as a bare trustee to hold the property in trust for the beneficial owners for purposes of facility of land registration and dealing with the properties and so forth, a fairly standard procedure in these matters.
Q. Does it possess any information other than the information that you have as Accountant?
A. No.
While the matter of the irregular assessment was corrected by the Director and is not strictly before us, the conduct of the assessor generated uneasiness and lack of confidence in the bona fides of the purpose of the demand. This conduct undoubtedly influenced the respondent to take the position he did.
As I said at the outset, the respondent was then charged with failing to provide information and to produce documents as required. He was acquitted at trial in the Provincial Court, a decision which was affirmed in the County Court. The Crown appeals this affirmation to us.
The relevant sections of the Income Tax Act are as follows:
Sec. 231(3)
(3) Idem. The Minister may, for any purposes related to the administration or enforcement of this Act, by registered letter or by a demand served personally, require from any person
(a) any information or additional information, including a return of income or a supplementary return, or
(b) production, or production on oath, of any books, letters, accounts, invoices, statements (financial or otherwise) or other documents.
within such reasonable time as may be stipulated therein.
Sec. 231(10)
(10) Compliance. No person shall hinder or molest or interfere with any person doing anything that he is authorized by or pursuant to this section to do or prevent or attempt to prevent any person doing any such thing and, notwithstanding any other law to the contrary, every person shall, unless he is unable to do so, do everything he is required by or pursuant to this section to do.
Sec. 238(2)
(11) Idem. Every person who has failed to comply with or contravened subsection 116(3), 127(3.1) or (3.2), 153(1), 227(5), 230.1(1) or 230.1(2), or section 230 or 231 is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to
(a) a fine of not less than $200 and not exceeding $10,000, or
(b) both the fine described in paragraph (a) and imprisonment for a term not exceeding 6 months.
The pivotal issue is whether the respondent, as a chartered accountant in the particular circumstances of this case, is compelled to identify his clients as potential taxpayers.
The trial judge based his reasoning upon the case of Canadian Bank of Commerce v. Attorney-General of Canada, [1962] S.C.R. 729, as discussed in James Richardson & Sons Ltd. v. M.N.R., [1984] C.T.C. 345; [1984] 4 W.W.R. 577.
In a judgment of the Supreme Court of Canada delivered by Madam Justice Wilson, speaking for six judges, including herself, it was held that the above quoted subsection 231(3) is only available to the Minister to obtain information relevant to the tax liability of some specific person or persons if the tax liability of such person or persons is the subject of genuine and serious enquiry.
What is sought by the Minister in this case is not information relating to tax liability, but the very identity of a specific taxpayer or taxpayers. The Minister already has the same information relating to tax liability with respect to each member of the investment group and what the Minister is asking the respondent to do is to identify the specific taxpayer.
The irregular threat of excessive assessment and the actual excessive assessment to persuade the respondent to abandon his position of confidentiality speaks for itself regarding the bona fides of the request for information.
The respondent, in a letter to the Department, made it abundantly clear that he was ready and willing to provide tax liability information in response to a request relating to specific taxpayers.
I am of the opinion that this case, on its particular facts, falls within the limitations of the authority of the Minister to make demands for information as set out in the case of James Richardson & Sons Ltd. v. M.N.R.
In the result, I would dismiss this appeal.
Nemetz, C.J.B.C.: I agree.
Esson, J.A.: I agree. I think this is not a case that raises any real question of principle, but falls to be decided on its own peculiar facts.
Nemetz,C.J.B.C.: I agree with my brother Esson as well. The appeal is dismissed.
Appeal dismissed.