Date: 2006020
Docket: T-47-06
Citation: 2006 FC 788
Vancouver, British Columbia, June 20, 2006
PRESENT: The Honourable Mr. Justice Kelen
BETWEEN:
THE MINISTER OF NATIONAL REVENUE
Applicant
and
LINDA MAE MARSHALL
Respondent
REASONS FOR ORDER AND ORDER
[1] This is a motion by the Minister of National Revenue for an order finding Linda Mae Marshall in contempt of court for failing to comply with the order of Mr. Justice Michel Shore dated March 2, 2006, which required her to provide the applicant with information and documents within 30 days of that order.
FACTS
[2] On March 2, 2006, Mr. Justice Shore issued an order under section 231.7 of the Income Tax Act, R.S.C. 1985, c. 1, (5th Supp.), requiring the respondent, Linda Mae Marshall, to provide the Canada Revenue Agency with information and documents sought by the Minister of National Revenue under subsection 231.2(1) of the Income Tax Act.
[3] In the March 2, 2006 order, Justice Shore set out the background to this proceeding in paragraphs 2-4:
¶ 2 Linda Mae Marshall (the "Taxpayer") is the principal operator of a business known as "West Lake Housecleaning Ltd." ("Housecleaning") (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(a).)
¶ 3 The Canada Revenue Agency ("CRA") is attempting to determine the liability of Housecleaning for CPP and EI remittances for the taxation years 2000 to 2004. It is CRA's understanding that Housecleaning has been struck from the Registry and that it is operating as a sole proprietorship. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara. 5(b).)
¶ 4 As part of its investigation of the Taxpayer's and Housecleaning's affairs, the Minister issued four Requirements for Information (the "RFIs") pursuant to paragraphs 231.2(1)(a) and (b) of the ITA on February 16, 2005. (Affidavit of J. Durant, Applicant's Record, Tab 2, subpara.5(c).)
[4] The RFIs required the respondent to provide to the Minister, within 90 days of service, documents and information for the taxation years 2000 to 2004 including, inter alia:
i. books or books and records recording day to day business transactions of the respondent and/or West Lake Housecleaning Ltd.;
ii. complete details of all dealings between financial institutions and the respondent and/or West Lake Housecleaning Ltd.;
iii. complete details for all contracts entered into by the respondent and/or West Lake Housecleaning Ltd.;
iv. complete lists of all work-in-progress of the respondent and/or West Lake Housecleaning Ltd.;
v. complete lists of all personal guarantees, trust agreements and power of attorneys signed by the respondent and/or West Lake Housecleaning Ltd.; and
vi. complete copies of all financial statements, including but not limited to the Balance Sheet, Notes to the Balance Sheets, Income Statement, Statement of Retained Earnings, and Statement of Change in the Financial Position for the respondent and/or West Lake Housecleaning Ltd.
(collectively, the information and documents).
Compliance Order
[5] Justice Shore found that the respondent did not respond to the any of the RFIs. At paragraphs 19 to 23 of his March 2, 2006 order, Shore J. stated:
¶ 19 It is clear that the Taxpayer is a person who was required under subsection 231.2(1) of the ITA to provide the information and documents sought by the Minister.
¶ 20 The Taxpayer was given 90 days to provide the Minister with the Information and Documents. [...]
¶ 22 Although the Taxpayer was served with the RFIs on February 16, 2005, she has yet to provide the information and documents sought by the Minister. [...]
¶ 23 Lastly, it is clear that the information and documents sought by the Minister are not protected from disclosure by solicitor-client privilege. Such a privilege attaches only to communications passing between a solicitor and a client in professional confidence.
[6] Based on the foregoing, Justice Shore found that the requirements were met for granting an order against the respondent under section 231.7 of the Income Tax Act to provide the information and documents sought by the Minister under subsection 231.2(1) of the Income Tax Act, and issued the following compliance order:
THIS COURT ORDERS pursuant to section 231.7 of the Income Tax Act that the Respondent comply with the notice issued by the Minister and shall forthwith, and in any event not later than 30 days from the date of this Order, provide the Information and Documents to a Canada Revenue Agency officer acting under the authority conferred by the Income Tax Act or other person designated by the Commissioner of Customs and Revenue.
THIS COURT FURTHER ORDERS that the requirement for personal service of this Order pursuant to Rule 128 of the Federal Court Rules, 1998, be met.
THIS COURT FURTHER ORDERS that costs are awarded to the Minister in the amount of $500.00.
Respondent's failure to comply with the order of March 2, 2006
[7] The evidence before the court in the affidavit of Jacquelyn Durant sworn on April 10, 2006, and in the affidavit of service of Antoinette Valmonte sworn on March 8, 2006, is that:
i. the applicant complied with Shore J.'s order to effect personal service of that order on the respondent; and
ii. the respondent has not complied with Shore J.'s order because:
(a) she did not provide the information and documents to the CRA within 30 days of March 2, 2006; and
(b) she did not pay costs to the Minister in the amount of $500.
Show cause order
[8] The applicant moved to commence contempt proceedings against the respondent. On May 8, 2006, Mr. Justice Barnes ordered the respondent, pursuant to Rule 467 of the Federal Courts Rules, SOR/98-106, to appear before a judge of the Federal Court to show cause why she is not in contempt of court under Rule 466 for failing to comply with Justice Shore's compliance order of March 2, 2006. The show cause order charged the respondent with specific acts, as follows:
THIS COURT ORDERS that:
1. The Respondent appear before a judge of the Federal Court in the City of Vancouver, in the Province of British Columbia on the 19th day of June, 2006, at 9:30 a.m. to hear proof of the following acts, purportedly committed by her, with which she is charged herein and to be prepared to present any defence that she may have to the charge that she is guilty of contempt of the Honourable Court and in breach of the Order of the Honourable Mr. Justice Shore dated March 2, 2006:
a. by Order of the Federal Court dated March 2, 2006 (the "Compliance Order"), the Respondent was ordered to provide the information and documents sought by the Applicant pursuant to 231.2(1) of the Income Tax Act (the "Information and Documents");
b. the Compliance Order was personally served on the Respondent on March 6, 2006; and
c. the Respondent has not provided the Information and Documents as required by the Compliance Order within a reasonable time, or at all. [...]
ISSUE
[9] The issue raised on this motion is whether the respondent Linda Mae Marshall is guilty of contempt of court beyond a reasonable doubt.
ANALYSIS
Onus and burden of proof
[10] Paragraph 466(b) of the Federal Courts Rules provides that a person is guilty of contempt of court who disobeys an order or process of the court. Rule 469 provides that a finding of contempt shall be based on proof beyond a reasonable doubt. The onus to prove contempt on the criminal standard lies on the party charging the alleged contemnor, in this case the Minister.
The Respondent had notice of the show cause and compliance orders
[11] To be found in contempt of court, the Court must find that the respondent had notice of the orders with which she is charged to have failed to comply. On a request for directions from the applicant, on May 26, 2006, I directed that service of the show cause order dated May 8, 2006 may be proven by way of an affidavit of service, subject to the deponent of that Affidavit being available by telephone conference at 11:00 a.m. on June 19, 2006, to answer any questions which may arise with respect to the service. The affidavit of service of Antonette Valmonte sworn on May 29, 2006 on behalf of the applicant confirmed that on May 26, 2006, the respondent was served by a process server with:
1. the show cause order of Barnes J. dated May 8, 2006;
2. the affidavit of Jacquelyn Durant sworn on April 10, 2006;
3. the affidavit of service of Antonette Valmonte sworn on March 8, 2006; and
4. Shore J.'s compliance order dated March 2, 2006.
[12] The respondent did not appear on the return of her show cause order, and no questions arose with respect to proof of service at this hearing held on June 19, 2006. On the evidence before the Court, I find that the applicant proved it personally served the respondent with the above documents on May 29, 2006, and that the respondent had notice of the same.
Evidence
[13] The evidence before the Court was given orally in accordance with subrule 470(1) of the Federal Courts Rules. The applicant's witness was Jacquelyn Durant, the officer of the Canada Revenue Agency (CRA) with carriage of this file since September 2004. Ms. Durant's evidence was that the respondent has not complied with the either the Minister's RFIs or Justice Shore's compliance order, and that the respondent has not contacted the CRA at any time since the compliance order was issued on March 2, 2006.
[14] The uncontested evidence before the Court from Ms. Durant and Ms. Valmonte is that the respondent knew of Justice Shore's order requiring her to disclose the cited information and documents within 30 days of March 2, 2006, that she failed to do so, and that she has still not done so to date. Based on the evidence before me, I am satisfied beyond a reasonable doubt that the respondent is guilty of contempt by failing to provide the CRA the documents and information set out in the Minister's RFIs, ordered provided by Mr. Justice Shore on March 2, 2006, and which were the acts specified in Mr. Justice Barnes' show cause order of May 8, 2006.
Sentence
[15] First principles of sentencing applicable to findings of contempt of court were considered by Mr. Justice François Lemieux for this Court in Lyons Partnership, L.P. v. MacGregor (2000), 5 C.P.R. (4th) 157 (F.C.T.D.). At paragraphs 21 to 23, Lemieux J. stated:
¶ 21 In Cutter (Canada) Ltd., supra, Urie J.A. said in assessing the amount of the fine what was relevant was "the gravity of the contempt in the context of the particular circumstances of the case as they pertain to the administration of justice" (page 562). The Federal Court of Appeal endorsed the reasons of the trial judge that the amount of the fine should reflect "the severity of the law and yet sufficiently moderate to show the temperance of justice". The level of the fine, Urie J.A. indicated, could not be a token fine because this would "be inconsistent with the gravity of the contraventions and might serve to encourage others to flout the law if it is to their financial advantage to do so".
¶ 22 This last statement by Urie J.A. echoes the words of Justice Rouleau of this Court in Montres Rolex S.A. et al. v. Herson et al., 15 C.P.R. (3d) 368 (F.C.T.D.) "that the primary purpose of imposing sanctions is to ensure compliance with orders of the court". Dubé J. of this Court in Louis Vuitton S.A. v. Tokyo-Do Enterprises Inc. et al., 37 C.P.R. (3d) 8, (F.C.T.D.), also stressed the importance of deterrence as the principal factor in ensuring that those orders will not be breached again because "if those who get caught were to get away unscathed that would encourage such activities and consequently destroy the intended effect of the laws that have been passed" (page 13, line b). Dubé J., in assessing a fine, took into account the value of the counterfeit goods sold. He also ordered solicitor-client costs capped to a maximum.
¶ 23 To close off on the issue of first principles, other relevant factors to be taken into account are whether the contempt offence is a first offence (R. v. De L'Isle et al. (1994), 56 C.P.R. (3d) 371 (F.C.A.)) and the presence of any mitigating factors such as good faith or apology (Baxter Travenol Laboratories, supra).
[16] To summarize, the factors relevant to determining a sentence in contempt proceedings are:
i. The primary purpose of imposing sanctions is to ensure compliance with orders of the court. Specific and general deterrence are important to ensure continued public confidence in the administration of justice;
ii. Proportionality of sentencing requires striking a balance between enforcing the law and what the Court has called "temperance of justice";
iii. Aggravating factors include the objective gravity of the contemptuous conduct, the subjective gravity of the conduct (i.e. whether the conduct was a technical breach or a flagrant act with full knowledge of its unlawfulness), and whether the offender has repeatedly breached orders of the Court; and
iv. Mitigating factors might include good faith attempts to comply (even after the breach), apologize or accept responsibility, or whether the breach is a first offence.
[17] This is a case where the respondent has ignored the RFIs. The respondent has provided no information to the Minister and has expressed no willingness to cooperate with the Minister or to meet the CRA's representatives. Nor has the respondent appeared before this court to account for her failure to comply with Shore J.'s compliance order. Nor has the respondent indicated remorse for her conduct or given her undertaking to comply with the compliance order. I can only conclude that the respondent's conduct is attributable to ill will to the CRA or the Minister and/or a disregard for this Court's authority requiring her to provide the requested documents and information. I conclude there is a need for specific deterrence in this case to ensure that the respondent does not again breach the orders of this Court. To the Court's knowledge, however, this is the first finding of contempt on which the respondent has been found guilty.
[18] I therefore conclude that the circumstances of this case require the respondent to pay a fine, to pay the applicant's costs, and comply with the March 2, 2006 order of Mr. Justice Shore within 30 days of these reasons for order and order, by providing the documents and information set out in the RFIs to the CRA.
ORDER
1. The respondent is guilty of contempt of this Court's order dated March 2, 2006, and shall pay a fine of $3,000.00 within 30 days from the date of service of this Order, and shall pay the applicant's legal costs in the amount of $2,000.00 within 30 days from the date of service of this Order. Failure to pay this fine and the legal costs within 30 days shall subject the respondent to 30 days' imprisonment.
2. The respondent shall also provide the information and documents set out in the Court's order dated March 2, 2006 within 30 days from the date of service of this Order, or provide the Minister with a full explanation why the respondent does not have this information and these documents, failing which the respondent shall be imprisoned for 10 days, such term to run consecutive to any other term of imprisonment imposed by this Order.
3. The respondent shall not be imprisoned for failure to pay the fine or the legal costs if within 30 days from the date of service of this Order the respondent arranges with the Minister for an oral examination under oath and provides evidence satisfactory to the Court that she is not able to pay the fine or the legal costs, or that she needs an extended time period in which to pay.
4. If the Minister informs the Court by affidavit that payment of either the fine or the legal costs has not been made within 30 days from the date of service of this Order, and that the respondent has not arranged with the Minister for an oral examination under oath with respect to her ability to pay the fine or the legal costs, the Court shall issue a warrant for the imprisonment of the respondent for 30 days.
5. If the Minister informs the Court by affidavit that the respondent has not provided the information and documents set out in the Court's order dated March 2, 2006, within 30 days from the date of service of this Order or provided the Minister with a full explanation why the respondent does not have this information and these documents, then the Court shall issue a warrant for the imprisonment of the respondent for a term of 10 days, such term to run consecutive to any other term of imprisonment imposed by this Order.
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
STYLE OF CAUSE: THE MINISTER OF NATIONAL REVENUE and LINDA MAE MARSHALL
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: June 19, 2006
REASONS FOR ORDER AND ORDER: KELEN J.
APPEARANCES:
| Mr. Jason Levine
|
|
| No one
|
SOLICITORS OF RECORD:
| John H. Sims, Q.C. Deputy Attorney General of Canada
|
|
| n/a
|