R. v. Kleysen (H.) et al., (1996) 108 Man.R.(2d) 96 (QB)

• Judge: Schwartz, J.
• Court: Court of Queen's Bench of Manitoba (Canada)
• Case Date: February 02, 1996
• Jurisdiction: Manitoba
• Citations: (1996), 108 Man.R.(2d) 96 (QB)

R. v. Kleysen (H.) (1996), 108 Man.R.(2d) 96 (QB)

MLB headnote and full text

Her Majesty The Queen v. Hubert T. Kleysen, Kleysen Transport Ltd., 19546 Manitoba Ltd. and Riverside Gravel Company Limited

(File No. CR 93-01-13644)

Indexed As: R. v. Kleysen (H.) et al.

Manitoba Court of Queen's Bench

Winnipeg Centre

Schwartz, J.

February 2, 1996.

Summary:

Hubert Kleysen was the director of Kley­sen Transport and Riverside Gravel (the taxpayers). After claiming the full capital cost allowance, the taxpayers sold new and used equipment to Carib, a company in the Bahamas owned by Hubert Kleysen. Carib sold the equipment to Ritchie Bros. for a significant profit. The taxpayers were charged with making false statements on their returns by understating their income and tax evasion contrary to ss. 239(1)(a) and 239(1)(d) of the Income Tax Act, R.S.C. 1952, c. 148.

The Manitoba Court of Queen's Bench found the accused not guilty. The court held that the Crown failed to show that the taxpayers understated their incomes or evaded income tax.

Criminal Law - Topic 5314

Evidence and witnesses - Inferences - From silence of accused or failure to explain - The accused were charged with making false statements on their returns and tax evasion (Income Tax Act, R.S.C. 1952, c. 148, ss. 239(1)(a) and 239(1)(d)) - The accused did not testify - The Crown claimed that the court was entitled to draw an adverse inference from the accused's failure to testify - The Manitoba Court of Queen's Bench stated that it could not or ought not "to draw an adverse inference from the accused's refusal to answer suspi­cious circumstances. Only when the evi­dence establishes that the prosecution has met its obligation of proving both a guilty act and a guilty intent can such a charac­terization be made." - The court held that the Crown did not meet the standard and refused to draw an adverse inference - See paragraphs 364 to 375.

Income Tax - Topic 9341

Enforcement - Offences - Taxpayers were charged with making false statements on their return by understating their income and tax evasion (Income Tax Act, R.S.C. 1952, c. 148, ss. 239(1)(a) and 239(1)(d)) - The Manitoba Court of Queen's Bench stated that taxpayers should be entitled to take positions, report their transactions and defend them if necessary without the fear of coercion by threats of criminal proceed­ings - The court stated that taking posi­tions contrary to the revenue officials was not criminal, disgraceful or shady - The court stated that taxpayers should be en­couraged to claim and argue their respect­ive positions, in an environment of co-operation, openness and candor, to ensure the tax system is fair and equitable - See paragraphs 130 to 133, 189 to 198.

Income Tax - Topic 9350

Enforcement - Offences - False state­ments - Hubert Kleysen was the director of Kleysen Transport and Riverside Gravel (the taxpayers) - After claiming the full capital cost allowance (CCA), the tax­payers sold new and used equipment to Carib, a company in the Bahamas owned by Hubert Kleysen - Carib sold the equip­ment to Ritchie Bros. for a significant profit - The Crown claimed that there was no true sale or that the sale prices were false or low and the taxpayers avoided recapture of the CCA and reduced their taxable income - The taxpayers were charged with making false statements on their returns by understating their income and tax evasion (Income Tax Act, R.S.C. 1952, c. 148, ss. 239(1)(a) and 239(1)(d)) - The Manitoba Court of Queen's Bench held that the Crown failed to show that the taxpayers understated their incomes or evaded income tax.

Income Tax - Topic 9510

Tax evasion and tax avoidance - General principles - What constitutes evasion - [See Income Tax - Topic 9350 ].

Cases Noticed:

McClurg v. Minister of National Revenue, [1990] 3 S.C.R. 1020; 119 N.R. 101; 91 D.T.C. 5001, refd to. [para. 122].

Indalex Ltd. v. Minister of National Rev­enue (1987), 83 N.R. 185; 88 D.T.C. 6053 (F.C.A.), refd to. [para. 124].

R. v. Esskay Farms Ltd., 76 D.T.C. 6010 (F.C.T.D.), refd to. [para. 127].

Denison Mines Ltd. v. Minister of Nation­al Revenue, [1971] F.C. 295; 71 D.T.C. 5375 (T.D.), affd. [1972] F.C. 1324; 72 D.T.C. 6444 (F.C.A.), affd. [1976] 1 S.C.R. 245; 3 N.R. 61; 74 D.T.C. 6525, refd to. [para. 141].

Smith, Stone & Knight v. Birmingham Corp., [1939] 4 All E.R. 116, refd to. [para. 143].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241; 84 D.T.C. 6305; [1984] C.T.C. 294, refd to. [para. 149].

Snook v. London and West Riding Invest­ments, [1967] 1 All E.R. 518 (C.A.), refd to. [para. 149].

Irving Oil Ltd. v. Minister of National Revenue (1991), 126 N.R. 47; 91 D.T.C. 5106 (F.C.A.), refd to. [para. 151].

Continental Bank of Canada v. R., 94 D.T.C. 1858 (T.C.C.), refd to. [para. 152].

Bradford v. Pickles, [1895] A.C. 587, refd to. [para. 182].

Inland Revenue Commissioners v. West­minster (Duke), [1936] A.C. 1, refd to. [para. 182].

Central Canada Forest Products v. Minister of National Revenue, 52 D.T.C. 359, refd to. [para. 327].

Hofert (J.) Ltd. v. Minister of National Revenue, 62 D.T.C. 50, refd to. [para. 327].

R. v. Lepage (J.P.), [1995] 1 S.C.R. 654; 178 N.R. 81; 79 O.A.C. 191; 95 C.C.C.(3d) 385, refd to. [para. 365].

R. v. Johnson (1993), 61 O.A.C. 189; 79 C.C.C.(3d) 42 (C.A.), refd to. [para. 372].

R. v. Ishmael (J.A.) (1993), 83 Man.R.(2d) 225; 36 W.A.C. 225; 79 C.C.C.(3d) 530 (C.A.), refd to. [para. 376].

R. v. Brydon (J.L.) (1995), 55 B.C.A.C. 6; 90 W.A.C. 6; 95 C.C.C.(3d) 509 (C.A.), refd to. [para. 379].

R. v. Théroux (R.), [1993] 2 S.C.R. 5; 151 N.R. 104; 54 Q.A.C. 184; 79 C.C.C.(3d) 449; 19 C.R.(4th) 194; 100 D.L.R.(4th) 624, refd to. [para. 383].

Statutes Noticed:

Canadian Charter of Rights and Freedoms, 1982, sect. 24(2) [para. 393].

Income Tax Act, R.S.C. 1952, c. 148, sect. 15(1), sect. 56(2) [para. 119]; sect. 69(1), sect. 69(3) [para. 330]; sect. 239(1)(a), sect. 239(1)(d) [para. 7].

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 15(1), sect. 56(2) [para. 119]; sect. 239(1)(a), sect. 239(1)(d) [para. 7]; sect. 245(2) [para. 119].

Authors and Works Noticed:

Côté, Pierre-André, The Interpretation of Legislation in Canada (2nd Ed. 1992), p. 279 [para. 333].

Revenue Canada, Information Circulars, Information Circular No. 87-2, generally [para. 333].

Revenue Canada, Technical Notes (1985), generally [para. 333].

Counsel:

D. Margolis, Q.C., and E. Gordon, for the Crown;

R.H.G. Flett, Q.C., J.A. Weinstein, Q.C., J.G. Penner and J.N. Freedman, for the accused.

This case was heard by Schwartz, J., of the Manitoba Court of Queen's Bench, Winnipeg Centre, who delivered the following judg­ment on February 2, 1996.