My peers sometimes think I am crazy for systematically pouring over recent judgments released by common law courts around the world. However, every once in awhile, there will be the shimmer of gold in my pan of rocks.

One of my favorites subjects are those surprisingly large number of Canadians who appear intent on challenging their personal income tax liability on the basis of religion, morality, natural or constitutional law.

I was in the Courtroom about a year ago when some fella stood up and told the judge that he could not be convicted under the Income Tax Act for failure to remit his income taxes because an original or certified copy of the Act was not present in the courtroom!

Justice Melvin of the Supreme Court of British Columbia, now retired, not one known for patience, nonetheless exhibited a considerable amount in advising the defendant that the courthouse library was one floor above and if he felt more comfortable with a copy of the Income Tax Act in the courtroom, he would adjourn the hearing and the defendant could go get it.

The judge even offered to call the library up to make sure that the relevant volume of the Revised Statutes of Canada could be lent out to the defendant.

The defendant, an unrepresented litigant, hesitated but then said that it was not his responsibility to produce a certified or original copy of the Act.

"Well," said Justice Melvin, "have it your way".

In the result, the defendant did not have his way.

Tax Return Just in Victoria alone, there are individuals who have done jail time to make a point on similar arguments.

A very dear friend of mine maintains that she has no personal contract with the Government of Canada and therefore, she is not liable to pay personal income taxes.

I am pleased to note that this is an academic argument she propounds; in fact, she pays her income taxes, presumably under protest.

These arguments are not novel but return to fashion from time to time, usually sparked by some new book or a successful argument.

Back in 1959, a tax case indexed as R v Hart, 59 DTC 1192, Gerald Hart had written to Revenue Canada as follows, explaining his unorthodox and largely deficient tax return, but sufficient enough to have the Manitoba Court of Appeal acquit him of the charge of failing to file a tax return :

"In reply to your letters ..., I beg to differ with you in connection with the statement in ... as a ... return was filed for 1956, whether you and your blood-hounds wish to admit it or not. However, I have taken the precaution of keeping copies this time, as it is a known fact that your huge overstaffed department have often mislaid documents and attempted to put the blame upon the docile public.

"You may not like or understand my method of completing these documents but as I explained to your henchmen, I am no accountant, and never wish or hope to be. Consequently, my answers are made in all sincerity and to the best of my ability and It is to be hoped that you will accept them as such."

We see these cases from time to time in our courtrooms. Part of us reaches out to the litigant wondering - almost hoping - if he or she is the discoverer of some dramatic new star-gate in the law. After all, Marconi had no relevant university degree when he invented wireless from simple trial and error.

But, I presume for most lawyers, the concluding emotion is usually one of "what’s he smoking?!"

Dirks v Canada, a 2007 decision of a registrar of the Saskatchewan Court of Queen's Bench is one of these cases.

Apparently, the Eldin and Olive Dirks, senior citizens and "bonded servants in life of Jesus the Christ in the kingdom of God Almighty", made some investment decisions in good faith but which resulted in significant tax liability to them.

The tax liability was one of the debts that caused the Dirks to be put into bankruptcy.

On their application for discharge, they argued that they "are not subject to the payment of income tax" and that they do not have "to pay income tax as there is no law ... which requires payment.  Mr. Dirks also does not believe in bankruptcy and for that matter questions the utility of trustees in bankruptcy."

The Dirks had written the bankruptcy creditor Canada Revenue Agency as follows, arguing "immaculate redemption":

"Greetings and salutations from Eldin and Olive Dirks, bonded servants in life of Jesus the Christ in the kingdom of God Almighty, redeemed by the sacrifice of his blood which covers us by His acceptance.

"His saving grace has redeemed us from the charge of any debt as a debtor to any claim. It has been offered to us by your agents ... that you have a claim for which they have come forward to notice us in the names of Eldin Dirks and Olive Dirks on assessments....

"We as living flesh and blood, man and woman, known as Eldin and Olive Dirks can only provide you with a true credit to settle and close the account as we are not debtors and do not deal in debt to discharge matters as that would be serving another master, the debtor (Satan) and we are bound and washed of debt by the blood of our Lord Jesus Christ who has redeemed us of all debt."

MadHatterOne possibly unique feature of the Dirks case is that they sought and obtained the assistance of Douglas Nagel, who the judge refused to allow at the hearing as either a representative for the Dirks or as a witness.

When the Dirks letter failed to make any impression upon the creditor, CRA was then presented, through Nagel, with a promissory note with the guarantee being that "as citizens of Canada, they are entitled to a pro-rated share of the value of Canada which can be set off against the alleged debt."

The good registrar reacted to that evidence by calling it "unadulterated rubbish" and using something rarely seen in a judge's decision, but long-overdue, an exclamation mark!

But ever ruffled, the judge, like any good judge, quickly combed his hair and considered whether the Dirks had any legitimate claim for a discharge from bankruptcy. Given the "legal arguments" the Dirks advanced, the Court felt that "absolute discharges are simply out of the question. What a message that would send to other like-minded individuals...?"

These types of cases do not usually get published. However, from time to time, the courts will publish some of these decisions ostensibly to send a message to the public that, 1, kooky legal arguments will not wash and, 2, there is still credence in the expression that the only two things certain in life are death and taxes.

In R v Watson, a 2005 Provincial Court decision out of BC, Gordon Watson maintained that the Income Tax Act was unconstitutional.

His bread-and-butter argument was that Revenue Canada (now Canada Revenue Agency), in obliging him to file an income tax return, infringed his right to privacy and subject him to unreasonable search and seizure, both being protected in the Charter of Rights and Freedoms. Watson also tried to subpoena senior tax officials.

Previously, Watson had maintained that:

"When I started to be aware of the anti-abortion controversy, not being involved in it, I started to realize if my taxes are going to go to pay to kill unborn children, I am not cooperating."

In the result, all of Watson's legal arguments were dismissed.

In R v Dick, another British Columbia Provincial Court action, Ed Dick was represented by an agent who unsuccessfully argued that Canada was "lawless"; that:

"All of the federal laws of Canada made since the Statute of Westminster in 1931 are invalid, and of no force and effect, since there never has been created any constitutional authority or jurisdiction to appoint a Governor General in place of the royal prerogative which lapsed with the Statute of Westminster."

In yet another case, R v Klundert (2004), the justice system at first vindicated the eccentric legal arguments of the tax payer, an optometrist.

The Ontario Court of Appeal summarized the facts:

"By 1993... Dr. Klundert had formed the opinion that the federal government did not have the legislative power to impose or collect income tax. He stopped completing his returns and paying taxes owed under the Act."

Although initially acquitted by a jury, this was overturned by the Court of Appeal who ordered a new trial, on the grounds that the trial judge had misled the jury on a point of law. Klundert had argued that he held an honest belief as to his tax liability and had no intent to be deceitful or underhanded, which he said were inherent in the offence of tax evasion (as opposed to tax avoidance).

The Court found that tax evasion simply met a person who:

"... in any manner, evaded or attempted to evade . . . payment of taxes imposed by this Act."

These cases highlight several truisms which litigants would do well to consider.

First of all, consider these sobering stats presented in Lexpert magazine in May 2008, quoting a tax lawyer at McCarthy Tetreault.

"As it turns out, the Tax Court's decisions tend to stand up on appeal. The taxpayer is the appellant ... almost all the time but the Federal Court dismisses about 80% of all reported appeals. Otherwise, few tax cases get leave to the Supreme Court of Canada (SCC) and the Crown's (CRA) position has been upheld in 10 of the last 12 cases that the SCC heard."

It is highly unlikely that within a legal system developed over hundreds of years by thousands and thousands of lawyers, judges and politicians, that significant loopholes would exist.

The only event which could possibly open a sudden "loophole" would be the advent of unanticipated new circumstances which catches the law-maker flat-footed, such as, the quagmire intellectual property law is in as a result of the exponential expansion of the Internet.

While it is true that Big Brother or "The Government" is neither perfect nor easy to fight, armchair lawyer arguments to avoid personal income taxes properly fall on deaf ears unless the litigant secretly wishes to be a financial martyr or to see the experience the inside of a prison cell.

My advice: talk about it, argue about it, tell your family and the politicians about it, write web pages about it, but do not base your position with the Government or in Court - that you ought not to pay personal income taxes - on a personal revelation from God, an alien, or constitutional grounds without the support of a damn good and supportive lawyer.

Mad Hatter stuff just won't cut it.


► Re Dirks, 2007 SKQB 124 at
R v Watson, 2005 BCPC 0059 at
R v Dick, 2001 BCPC 0275 at (There are several interlocutory judgments in this case. This is just one of those.)
R v Klundert, 242 DLR 4th 644 (2004)
Melnitzer, J., "Still The Ones", Lexpert, May 2008.