Date: 20011023
Docket: 2000-1084-IT-I
BETWEEN:
JOHN M. JANSSEN JR.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Teskey, J.
[1] The Appellant, in his Notice of Appeal wherein he appealed his assessment of income tax for the years 1994, 1995 and 1996, elected the informal procedure.
[2] The 1994 assessment added to the Appellant's income approximately $13,600, of which $8,000 was cash missing from a bank deposit bag on July 23, 1994 and stock of $5,600 missing from the Canadian Tire Store in Paris, Ontario, in which the Appellant was an employee.
[3] The 1995 assessment added to the Appellant's income the sum of approximately $38,800, of which $8,429 was cash arising from fraudulent merchandise return vouchers and $30,300 of stock missing from the store.
[4] The 1996 assessment is where Revenue Canada gave the Appellant a deduction of $8,000, being the $8,000 paid by way of restitution, and on consent, this appeal is dismissed.
[5] Factual cases such as this depend on the credibility of all the witnesses. I find that I can accept some of the testimony of the witnesses but must reject some of it.
[6] The Appellant started his employment at the Canadian Tire Store in October of 1993 as parts manager. In 1994, he was promoted to the position of store manager for one-half of the store and later as manager of the full store. The Appellant received his set of keys for the store approximately two weeks before July 23, 1994. His employment was terminated on the July 19, 1995.
[7] The owner of the store, Michael Wright ("Wright") is a well educated, articulate individual who gave his testimony from memory of events that took place six or seven years ago. At the conclusion of the first day of hearing and before cross-examination was to commence, the hearing was adjourned, mainly because Wright did not have many records with him so that when he re-attended, he could have all available records. Unfortunately, Wright did not bring any records with him at the continuation of the hearing. This created the position that some of his testimony was guestimate only on some things. Also, a great portion of his testimony was hearsay. I am satisfied that he would not deliberately mislead the Court in any way.
[8] When Wright purchased the Paris store on February 10, 1993, which was his first retail store, a complete inventory was taken of all the stock. When he sold the store in July 1996, again a complete inventory of all stock was taken. The actual figures for the total shrinkage for the period of February 1993 to July 1996 were never given.
[9] Wright guestimated that the shrinkage for the first period, i.e. February 1993 to August 1993, was $23,000, for the next period (his company's year end is August), August 1993 to August 1994, was $60,000 (the second period), and for the next period of May 1994 to August 1995, $60,000 (the third period), and for the next period of August 1995 to July 1996 (the final period, being 11 months) $40,000 to $50,000.
[10] The Court not having the actual year-end inventories of the stock or the final inventory figures of July 1996 when the store was sold, I conclude that many people were stealing from this store. The Appellant was not employed in either the first or final period.
[11] In this store, there were 99 product classes with some 18,000 different products. On an ongoing basis, from time to time a product class would be inventoried and shortage (shrinkage) would be taken into account and more product ordered. Also, when the computer would show a particular item in stock that could not be found, again an adjustment would be made and the item replaced.
[12] Wright does not know when the stock disappeared. I put to him this example: when he purchased the store in February of 1993, the stock contained five widgets and during the period of February 1993 to July of 1996, the store had purchased 100 more widgets and sold, over the same period, 100 widgets. The computer would show five widgets in stock. Then, an inventory of the stock in July of 1996 would reveal no widgets in the store, thus over the period of February 1993 to July of 1996, five widgets had been stolen. They could have been stolen individually or in bunches. They could have been the original five widgets or all of the new delivered widgets or some of both. All he would know is that five widgets were stolen between February 1993 and July 1996. Wright agreed with this.
[13] With the above in mind, given that Wright did not annually inventory all the stock in the store, and again not at the time the Appellant's employment was terminated, the shrinkage for the different periods is mostly guesswork, with possibly some slight degree of accuracy, because of the inventory of product classes taken from time to time. As the original inventory and closing inventory was never produced, the total actual shrinkage during Wright's total ownership period is not before the Court so that it could be reconciled against his guestimate shrinkage for each of the above mentioned periods.
[14] The problem is even though the actual figures are not before the Court, the missing inventory could have gone missing before the Appellant became an employee, and again before he had keys to the store and after his employment was terminated.
[15] A great deal was made that some of the closing inventory alleged to have been taken by the Appellant must have been when he was manager. Since he did not get his keys to the store until July 1994, and since the guestimated stock losses for the second and third periods were identical, I am not prepared to find that the Appellant took stock in the fall of 1994.
[16] In regard to the $8,000 in the overnight deposit bag, the evidence against the Appellant is as follow:
Shelly Walters ("Walters")
"I would do the deposit in the morning and as usual, I would put it in the safe and I would lock the safe. We have keys to the little door at the bank to deposit it in the bank at night."
When questioned about why she had said she may have left the deposit bag on the counter, she gave this answer:
"I could have, yes. Yes, I have said that to people. There could be numerous people, I don't know".
[17] I really question that the night deposit would be made up in the morning on a busy Saturday morning.
Marilyn Cameron ("Cameron")
[18] She said in chief: "I am not sure exactly when it would have been placed in, but probably around three or maybe before. And near the end of the day, which could be six o'clock, I went to the safe, which was locked and I opened it up and there was no bank bag in there". She was asked this question:
"You mentioned that the bag was put in the safe at three o'clock in the afternoon. Did you see it put in the safe"?
The answer was "No". And to the question, at some other point, "Did she tell you that she may have left it out on the counter"?
The answer was "Yes".
[19] The Appellant was not under any suspicion at the time and it was only in July 1995, a year later, that allegations were made that the Appellant had taken the night deposit.
[20] Cameron's evidence that the deposit would be made up around three o'clock is probably a little more accurate. There is no evidence that the Appellant was still in the store, only a statement to the effect that he left early. I strongly suspect the night deposit would be made up much later than three o'clock as the store would be making sales right up to six o'clock.
[21] Counsel for the Respondent produced to the Appellant in cross-examination his bank statement dated March 22, 1995 and suggested that a $7,000 entry was a deposit. Then, in argument, he suggested that was part of the money from the deposit that disappeared on July 23, 1994 that he deposited in March 1995. However, the $7,000 entry is not a deposit. Just previous to that, the balance is shown on the statement as $11,684.15 and, after the $7,000 entry, the balance is $4,684.15. The $7,000 entry was either a withdrawal or a cheque written on this account, it was not a deposit. With the Appellant's fierce denial of this, I find on a balance of probability that in the year 1994, he did not steal the bank deposit, as well as any stock.
[22] The year 1995 presents a problem. In July 1995, when his father's van was parked at the back door, the Appellant smashed the burglar alarm. At the time, he had the keys to the back door and the code to the alarm. He claims he only took several cans of paint and stain that were not saleable.
[23] When questioned in cross-examination on this point as to whether he did it or admitted to Wright that he did it, the questions and answers were:
Q. Now I understand that on occasion, sir, when the alarm was on, you opened the door for your own purposes, for purposes of removing merchandise and that on that particular occasion, just put an end to the alarm by either using a crowbar or a sledgehammer. Do you remember that?
A. No, I don't.
Q. And you explained to Mr. Wright that you had to put an end to the alarm. This was an event, an occasion that you openly discussed with Mr. Wright. Your honesty and integrity was not in issue in those days and you frankly admitted to him that you were the one who broke the alarm. Do you remember that?
A. No, I don't remember that.
Q. Now, it's my understanding, sir, that you often on Tuesday and Wednesday nights you were regularly the last one to leave the store; the one to close the store?
A. Yes, it could be.
[24] There were several people other than the Appellant in the stockroom that evening, namely John Wilton, the parts manager, and the Appellant's mother and father. None of these people were called as witnesses. I am driven to the conclusion that their testimony would have been detrimental to the Appellant.
[25] From July 1994, the Appellant had access to large items. But, the total shrinkage for the store during Wright's ownership does not vary that significantly from his guestimates for the various periods.
[26] I accept Wright's testimony that the Appellant admitted that he smashed the alarm.
[27] Having said that, I find Wright a truthful, fair, intelligent, well educated person and do believe, as a new store owner, that he was learning on the job and that as time went on, he was more and more security conscious. I also believe that more than just the Appellant was stealing from Wright. The fraud that the Appellant pleaded guilty to was deliberate and someone acting in this manner undoubtedly would steal merchandise.
[28] If there had been annual inventories taken and an inventory taken immediately after the Appellant's dismissal, determining the true facts would have been substantially easier.
[29] Taking Wright's estimated figures of shrinkage of $40,000 to $50,000 for the last 11-month period when the Appellant was not in the store and assuming the shrinkage to be constant, the 12-month period would have been $50,000. There is only $10,000 less than the previous period where the Respondent claims that the Appellant fraudulently stole $8,500 cash using false return vouchers and $30,000 in inventory. Yet, the total shrinkage for that year is only $60,000. After deducting the $8,500 from the $60,000, that means stock lost was somewhere near $51,500.
[30] Obviously, many people were stealing from the Canadian Tire Store in Paris, Ontario, when Wright was the owner.
[31] The Respondent's position is that since the Appellant has admitted to fraudulently stealing $8,429 in cash, he should be presumed to be responsible for stealing all the large unusual items that went missing sometime during the ownership of the store by Wright. I disagree.
Onus of proof
[32] The leading case on this issue is the Supreme Court of Canada decision by Laskin, C.J., in the Continental Insurance Company v. Dalton Cartage Co., [1982] 1 S.C.R. 164. At page 168, he said:
Admittedly, the standard of proof that was applicable in the criminal Court was proof beyond a reasonable doubt that Morkin was the thief. The standard of proof in the civil case has been repeatedly held to be somewhat less, and how much less is a matter that depends on all the circumstances and the gravity of the accusation.
He then said, at page 170, when dealing with the trial judges' comments:
... In my opinion, Keith J. in dealing with the burden of proof could properly consider the cogency of the evidence offered to support proof on a balance of probabilities and this is what he did when he referred to proof commensurate with the gravity of the allegations or of the accusation of theft by the temporary driver. There is necessarily a matter of judgment involved in weighing evidence that goes to the burden of proof, and a trial judge is justified in scrutinizing evidence with greater care if there are serious allegations to be established by the proof that is offered. I put the matter in the words used by Lord Denning in Bater v. Bater, supra, at p. 459, as follows:
It is true that by our law there is a higher standard of proof in criminal cases than in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard. Many great judges have said that, in proportion as the crime is enormous, so ought the proof to be clear. So also in civil cases. The case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject-matter. A civil court, when considering a charge of fraud, will naturally require a higher degree of probability than that which it would require if considering whether negligence were established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature, but still it does require a degree of probability which is commensurate with the occasion.
[33] The only conclusion I can come to is that the Appellant smashed the alarm when he, Wilton and his mother and father were in the stock room to cover up theft that would be considered an outside job rather than an inside job by a person with keys and the code. I find that the Appellant's assessment for 1995 should be reduced to $5,000 for stock stolen from the store at the time the alarm was smashed as that is probably all the van would hold, together with the vouchers that were not in dispute in the amount of $8,429. There is just no other acceptable evidence against the Appellant.
[34] There will be an order issued where the 1996 appeal is dismissed on consent. The 1994 and 1995 appeals are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the assessments are to be reduced by the sum of $13,663 for 1994 and by the sum of $25,366 to $13,434 for 1995. There will be no award of costs.
Signed at Ottawa, Canada, this 23rd day of October 2001.
"Gordon Teskey"
J.T.C.C.
COURT FILE NO.: 2000-1084(IT)I
STYLE OF CAUSE: John M. Jansen Jr. and The Queen
PLACE OF HEARING: London, Ontario and
Hamilton, Ontario
DATES OF HEARING: April 12, 2001 in London, Ontario and
October 17, 2001 in Hamilton, Ontario
REASONS FOR JUDGMENT BY: The Hon. Judge Gordon Teskey
DATE OF JUDGMENT: October 23, 2001
APPEARANCES:
Counsel for the Appellant: William Glover
Counsel for the Respondent: Roger Leclaire
COUNSEL OF RECORD:
For the Appellant:
Name: William Glover,
Firm: William Glover,
Barrister & Solicitor
St.Thomas, Ontario
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1084(IT)I
BETWEEN:
JOHN M. JANSSEN JR.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on April 12, 2001 at London, Ontario and on
October 17, 2001 at Hamilton, Ontario, by
the Honourable Judge Gordon Teskey
Appearances
Counsel for the Appellant: William Glover
Counsel for the Respondent: Roger Leclaire
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1994 and 1995 years are allowed and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the assessments are to be reduced by the sum of $13,663 for the year 1994 and by the sum of $25,366 to $13,434 for the year 1995. There will be no award of costs, all in accordance with the attached Reasons for Judgment.
The appeal for the year 1996 is dismissed on consent.
Signed at Ottawa, Canada, this 23rd day of October, 2001.
|
"Gordon Teskey" |
J.T.C.C.