Guindon v Canada

Guindon, a lawyer who specialized in family and wills and estates law, was approached in 2001 by promoters of a leveraged donation program which was said to operate in the following manner:

1. Each participant in the program would acquire timeshare units of a resort in the Turks and Caicos Islands.
2. The participants would donate these units to a charity at a fair market value greater than their cash payment for the timeshares.

Guindon agreed, for a fee, to provide an opinion letter on the tax consequences of this program on the basis of a precedent provided by the promoters. Although recommending that a tax lawyer and an accountant review her letter for accuracy, she proceeded to provide the letter to the promoters, knowing it would form part of their information package. The letter stated that the transactions would be implemented based on supporting documents that she had been provided with and had reviewed. However, she had not reviewed the supporting documents.[2]

A charity with which Guindon was connected agreed to become the recipient of the promoted timeshares. In reality, no timeshare units were created and no transfers from the donors to the charity occurred.[3] The Minister of National Revenue later disallowed the charitable donation tax credits claimed by the donors, and Guindon was assessed an administrative monetary penalty in 2008 for each of the tax receipts disallowed,[4] amounting in total to almost $600,000.[5]

Guindon appealed the assessment to the Tax Court of Canada, submitting that s. 163.2 of the Income Tax Act[lower-alpha 1] created a criminal offence, and thus was subject to the Charter protection afforded under s.11.[6]

The TCC held that s. 163.2 was "by its very nature a criminal proceeding" and "involve[d] a sanction that is a true penal consequence,"[7] and in consequence vacated the assessment. Protests by the Crown that the constitutional issue was raised without proper notice[lower-alpha 2] were overruled by the trial judge Bédard J.[8]

The Federal Court of Appeal allowed the appeal, set aside the TCC's judgment, and restored the assessment against Guindon. In his ruling, Stratas JA held that:[9]

1. Guindon’s failure to serve notice of a constitutional question was fatal to the Tax Court’s jurisdiction;
2. the TCC and the FCA, if asked to do so, could have exercised their discretion to adjourn the appeal to allow a notice to be served to address that matter, but Guindon did not make that request in either of the courts below; and
3. s. 163.2 of the ITA is not a criminal offence and therefore does not engage s. 11 of the Charter.

Leave to appeal to the SCC was granted in June 2013.

By a unanimous decision, the appeal was dismissed. However, the Justices split 4:3 as to whether the constitutional issue should have been considered without prior notice, and only the majority addressed the constitutional issue.

Several practical consequences were immediately apparent in Guindon:[22]

1. If constitutional litigation is to be conducted, procedural requirements as to notice must be followed.
2. The integrity and honesty of advisors, planners and tax preparers is equally important to the integrity of the self- reporting system.
3. The objectives of the Income Tax Act are such that, at least in general terms, very significant penalties will not be prohibited by constitutional principles.

Commentators generally agree that Guindon is only a first step in the development of the case law concerning administrative proceedings:

• It does not discuss the defences available against the imposition of AMPs nor the issue of the burden of proof,[23] but the matter has already been explored in a 2015 case in Quebec.[24]
• The Charter is not the only source of judicial protection in administrative proceedings, as procedural and substantive challenges on judicial review can ensure that the administration stays within the boundaries of legality.[25]
• The absence of s. 11 protection of the presumption of innocence is of great concern, although it is conceded that the legal system may grind to a halt if every allegation of misconduct could be tested in a full criminal proceeding.[26]
• It will be difficult to challenge other AMPs imposed in the absence of procedural safeguards.[27]
• The FCA provided more guidance in its judgment as to when an administrative penalty would be considered disproportionate,[28] and it would have been helpful if the SCC had expanded on the point.[5] However, in 2012 the Ontario Court of Appeal gave a reasoned evaluation for a monetary penalty that arose from a securities proceeding, which could be useful in future jurisprudence.[5][29]

• "IC 01-1: Third-Party Civil Penalties" (PDF). Canada Revenue Agency. 18 September 2001.
• Spiro, Peter S. (2013). "Narrowing the Gap between Regulatory and Criminal Offences in Canada". SSRN 2366435. {{cite web}}: Missing or empty |url= (help)
• Spiro, Peter S. (2015). "SCC Denies Charter Protection to Tax Adviser Hit with a Huge Monetary Penalty". thecourt.ca. Archived from the original on 7 September 2015. Retrieved 21 September 2015.
• Wilkie, J. Scott; Hogg, Peter W. (2015). "Tax Law with the Larger Legal System". Osgoode Hall Law Journal. Osgoode Hall Law School. 52 (2): 460–490.