Corr v. The Queen, 87 DTC 5330, [1987] 2 CTC 104 (Ont CA)

Finlayson, J.A.: — This is an appeal from the judgment of the Honourable Mr. Justice Steele, sitting in Weekly Court, dated January 12, 1987, wherein he ordered Giuseppe Vettese to attend for cross-examination on affidavits sworn in support of four search warrants issued pursuant to section 231.3 of the Income Tax Act, S.C. 1970-71-72, c. 63, as amended by S.C. 1986, c. 6 (herein the "Income Tax Act").

The facts leading up to the motion before Steele, J. in Weekly Court are important and I will set them out in detail. On June 12, 1986, the Director General, Compliance Research and Investigations Directorate of the Department of National Revenue, Taxation signed four applications for search warrants pursuant to section 231.3 of the Income Tax Act for the purpose of obtaining judicial authorization to search various premises for evidence of offences contrary to the Income Tax Act alleged to have been committed by some of the respondents.

On june 16, 1986, upon reviewing the four informations sworn by the appellant, Giuseppe Vettese, Callaghan, A.C.J.H.C. issued four warrants to search the premises in question. These warrants were executed on June 17, 1986 and various documents were seized.

On August 20, 1986, the respondents, Thomas A. Corr, Cancor Computer Corp., Cancor Research Inc., Cancor Software Corp., George Wall, C.A., and Amcor Computer Corp., brought an application against Her Majesty The Queen in Right of Canada, the Minister of National Revenue, the Deputy Attorney General for Canada and Giuseppe Vettese stated to be under section 213.3 of the Income Tax Act, and pursuant to this court's inherent and implied powers and section 24 of the Canadian Charter of Rights and Freedoms (herein the "Charter"). The application was to quash the warrants to enter and search the premises in question on the grounds that the warrants were not issued in accordance with section 231.3 of the Income Tax Act and were inconsistent with sections 7, 8 and 15 of the Charter.

On November 19, 1986, the respondents served a notice of examination on Giuseppe Vettese requiring him to attend on December 8, 1986 at the offices of an official examiner in Toronto for an examination on his affidavits dated June 12, 1986. He was required by the notice to bring with him certain documentation relating to "the four affidavits sworn by [him] on June 12, 1986 that were filed with the Supreme Court of Ontario in support of an application for warrants to enter and search". Some of these documents are particularized. On December 8, 1986, a representative of the respondents attended at the offices of the official examiner and obtained a certificate of non-attendance.

On December 8, 1986, the respondents served a notice of motion. I will set out the operative parts in full:

THE MOTION IS FOR

1. an order to strike out four “INFORMATIONS TO OBTAIN A SEARCH WARRANT PURSUANT TO section 231.3 of the Income Tax Act" sworn by Giuseppe Vettese on the 12th day of June 1986 and as a result for an order to quash four "WARRANTS TO SEARCH (section 231.3 of the Income Tax Act)" dated the 16th day of June 1986 authorizing and requiring search and seizures on the 17th day of June 1986, signed by the Honourable Mr. Justice F.W. Callaghan A.C.J.H.C.;

2. in the alternative, an order:

(a) compelling Mr. Giuseppe Vettese to attend for cross-examination on his

affidavits at a time and place to be fixed before this Honourable Court; and

(b) an order requiring Mr. Giuseppe Vettese to bring to the examination and produce for inspection all documents and things specified in the Notice of Examination dated 18 November 1986;

3. an order to abridge time of service of this motion;

4. such further and other order as this Honourable Court will find just and equitable to render in the circumstances.

THE GROUNDS FOR THE MOTION ARE

1. that on 8 December 1986 the Respondent Giuseppe Vettese failed to attend for cross-examination on his four “INFORMATIONS TO OBTAIN A SEARCH WARRANT PURSUANT TO Section 231.3 of the Income Tax Act" at the time and place fixed in the Notice of Examination, attached as Exhibit "H" to the affidavit of Russell D. Laishley and to produce the documents or things he was required to produce by the said Notice of Examination;

2. that there is a right to cross-examine the Respondent Giuseppe Vettese on his affidavits in order to test their veracity and completeness;

3. that pursuant to subrule 34.15(1) of the Rules of Civil Procedure O. Reg. /84 as amended (herein referred to by rule number) this court ought to strike out all four affidavits made by the Respondent Giuseppe Vettese and as a result quash the warrants which were issued on the basis of those affidavits; and

4. that, in the alternative to striking out all four affidavits, pursuant to subrule 34. 15(1) this court ought to order the Respondent Giuseppe Vettese to attend at his own expense for cross-examination of his four affidavits.

On December 9, 1986, an application was brought by the appellants for an order dismissing the notice of examination for Giuseppe Vettese. Both motions were heard by Steele, J. in Weekly Court on December 11 and 12, 1986. On January 12, 1987, Steele, J. made the following order:

1. THIS COURT ORDERS that Giuseppe Vettese attend for cross-examination of his affidavits dated 12 June 1986 at a time and place to be agreed upon by counsel, and failing agreement to be fixed by this court.

2. THIS COURT ORDERS that Giuseppe Vettese is to inform himself of the necessary information so as to properly answer relevant questions.

3. THIS COURT ORDERS that the Applicants are entitled to costs of one motion.

4. THIS COURT ORDERS that the balance of the motion be adjourned.

In the course of his reasons, Steele, J. made the following statements ((1987), 58 O.R. 528 at 531-32 [1987] C.T.C. 148 at 150-51):

The Act creates an offence and therefore, by virtue of s. 27(2) of the Interpretation Act, R.S.C. c.l-23, the provisions of the Criminal Code and the Rules thereunder are applicable. Criminal Rule 2 provides that the Rules of Civil Procedure apply with necessary modifications where no other express provision is made. There being no express provision, Rules 37.14, 39.01 and 39.02 of the Rules of Civil Procedure apply.

If the Criminal Code did not apply, then the same Rules of Civil Procedure would apply in the first instance.

In my opinion, Rule 37.14 permits Corr, who is affected by the order authorizing the search warrant, to move to set aside or vary that order.

Rule 39.02(1) provides as follows:

Where a party to a motion or application has served every affidavit on which the party intends to rely, he or she may cross-examine the deponent of any affidavit served by a party who is adverse in interest on the motion or application.

There is a prima facie right to cross-examine that can only be defeated by lack of reasonable diligence. There is no such lack of diligence in the present case.

Steele, J. concluded at page 534 (C.T.C. 152):

At the hearing of the motion, I heard extensive argument on the merits of the application so that I could understand the entire application of Corr. However, in view of my conclusion that Corr has a right to cross-examine, it would be inappropriate for me to comment thereon. That is a matter for the judge hearing the actual motion to set aside the order of Callaghan A.C.J.H.C. after cross-examination has taken place.

The learned judge did not have the benefit of the decisions of this court in Re Church of Scientology et al. and The Queen (No. 6) (1987), 31 C.C.C. (3d) 449 and Calvin S. Goldman et al. v. Hoffmann-La Roche Limited (a judgment of the Ontario Court of Appeal, released June 4, 1987, unreported). In addition we are advised that he was not referred to Re Herman et al. and Deputy Attorney-General for Canada (1979), 26 O.R. (2d) 520; 103 D.L.R. (3d) 491 (C.A.).

It is my opinion on the authority of the Herman and Goldman cases referred to above that there is no appeal from the issuance of a search warrant by a High Court judge under the Income Tax Act. As was said by Lacourcière, J.A. in the Herman case at p. 523, the authorizing sections of the Income Tax Act form a "complete code". While he was dealing with an order disposing of a claim of solicitor-client privilege, his remarks are appropriate with respect to the issuance of a search warrant (see Goldman, pp. 26-30). He stated at p. 530:

In my opinion, in determining the intention of Parliament under s. 232, in the context of the Income Tax Act as a whole, s. 241 provides further support for the conclusion that although Parliament has recognized the importance of preserving the taxpayer's right to confidentiality, Parliament has also recognized the need for administering the Act in an efficient manner. To this end, complete procedural guidelines have been provided in the Act for determining when and to what extent documentation should remain confidential, and rights of appeal have been specifically provided in appropriate cases.

There being no appeal, the respondents must rely on the inherent jurisdiction of the court to review its own orders. This has been discussed recently in connection with a "wire-tap" authorized by the Supreme Court of Canada in Wilson v. The Queen, [1983] 2 S.C.R. 594; 4 D.L.R. (4th) 577. Here McIntyre, J. in dealing with an authorization of a Superior Court judge in Manitoba stated at 599 (D.L.R. 597):

Where appeals have been exhausted and other means of direct attack upon a judgment or order, such as proceedings by prerogative writs or proceedings for judicial review have been unavailing, the only recourse open to one who seeks to set aside a court order is an action for review in the High Court where grounds for such a proceeding exist. Without attempting a complete list, such grounds would include fraud or the discovery of new evidence. [Emphasis added.]

We are not concerned on this appeal with whether it is appropriate to invoke the inherent jurisdiction of the court to review a judicial order authorizing the issuance of a search warrant, and if it is, what tests should be applied by the reviewing judge. That matter has been left open by Steele, J.

The only issue before us concerns the right to cross-examine the deponent Vettese on his affidavits sworn in support of the applications for the search warrants. Steele, J. took the position that there was a prima facie right to cross-examine under rule 39.04 of the Rules of Civil Procedure. In arriving at that conclusion he felt that he was not bound by the decision of Osler, J. in Re Church of Scientology and The Queen (No. 4) (1985), 17 C.C.C. (3d) 499 because, as he said, it dealt with a motion to quash a lower court order by way of certiorari. This court, in upholding the decision of Osler J. in this regard in Re Church of Scientology et al. and The Queen (No. 6), supra, did not restrict its approval to cases involving certiorari. It approved a threshold test for any cross-examination of a deponent on his affidavit in support of a search warrant where the object was to challenge the validity of the issuance of such search warrant.

The threshold test, stated by Osler, J. in Scientology (No. 4), supra, at 509-10, was specifically approved by this Court in Scientology (No. 6), supra at 518. It is:

The motion for leave [to cross-examine] must be based upon allegations of deliberate falsehood or omission or reckless disregard for the truth. Such allegations must be made out, as to the facts, to the extent of a prima facie case, which may be established by inspection of the material or by affidavit, unless in most exceptional cases. The deliberate falsity, omission or reckless disregard alleged must be that of the informant.

The position taken by the respondents before Steele, J. and in this court was that the civil rules applied notwithstanding he was hearing an application for review in what is essentially a criminal case. One argument was that the Income Tax Act, unlike the Competition Act, R.S.C. 1970, c. C-23, as amended, has its own constitutional authorization in subsection 91(3) (taxing power) of the Constitution Act, 1867 and need not rely upon the criminal law power of subsection 91(27). For this reason it is submitted, the "offences" under the Income Tax Act are not criminal offences but are enforcement provisions of what is essentially a civil statute. This, it is said, entitles the taxpayer affected by a search warrant to invoke the civil rules of practice in whatever province the search warrant is issued.

As authority for this position, the respondents relied on two decisions of the Supreme Court of Canada dealing with the authority of the Attorney General of Canada to prosecute offences in federal statutes other than the Criminal Code. Counsel quoted from Laskin, C.J.C. in Regina v. Wetmore and Attorney General of Ontario et al. (1983), 7 C.C.C. (3d) 507; 38 C.R. (3d) 161 where, in dealing with the federal Food and Drugs Act, R.S.C. 1970, c.F-27, he stated at 510-11 (C.R. 166) as follows:

It is relevant to point out that no mention is made of the criminal law nor, indeed, of the Criminal Code. I have pointed out in my reasons in the earlier case [A-G Can. v. Canadian National Transportation, Ltd., infra] that there seems to be a confusion in some courts at least, between the Criminal Code and the criminal law. It is only prescriptions under the former that assign prosecutorial authority to the provincial Attorney-General. Moreover, the assignment has depended and continues to depend on federal enactment. Federal legislation enacting penalties for violation of its provisions may be legislation in relation to the criminal law under s. 91(27) of the Constitution Act, 1867 although not included in the Criminal Code. Equally federal legislation, for example, bankruptcy laws, may have its own penal provisions without drawing nourishment from the Criminal Code or the criminal law. Moreover, although such legislation may incorporate by reference some provisions of the Criminal Code, it does not thereby become part of the Code or part of the criminal law. What is borrowed by way of reference remains part of the legislative scheme into which it has been incorporated.

Federal penal provisions are not inevitably to be assigned to the criminal law in the s. 91(27) sense of the Constitution Act, 1867. They may have their own particularization, as would be the case, for example, in federal legislation of a regulatory character, which may have a penal aspect but not be at the same time part of the prohibitory criminal law.

The other case relied upon is The Queen v. Hauser, [1979] 1 S.C.R. 984; 98 D.L.R. (3d) 193 the judgment of Pigeon, J. at 996 (D.L.R. 207):

However, as is made abundantly clear by head 29 of s. 91, there can be no doubt as to the existence of federal power to provide for the imposition of penalties for the violation of any federal legislation, entirely apart from the authority over criminal law. That a distinction is to be made, appears clearly from the many cases holding that the criminal law power is really not unlimited, that it cannot be used as a device for any purpose.

The point taken in both cases is quite narrow. It is also dealt with in R. v. Hoffmann-La Roche Ltd. (Nos. 1 and 2) (1981), 33 O.R. (2d) 694; 62 C.C.C. (2d) 118 (Ont. C.A.) and Attorney General of Canada v. Canadian National Transportation, Ltd. et al. (1983), 7 C.C.C. (3d) 449; 38 C.R. (3d) 97 (S.C.C.). The criminal law power of the Constitution cannot be used as the justification for non-criminal legislation simply because that legislation creates offences for non-compliance with the said legislation. On the other hand, as was said in the latter two cases, and in Goldman, supra, at pages 16-20, it does not follow that because the Income Tax Act can be supported constitutionally under a non-criminal law power such as the taxing power, that both enumerated heads of the Constitution Act, 1867 cannot be invoked as support for offences created by the Income Tax Act. In any event, for the purposes of this appeal, it is evident that all offences under the Income Tax Act are to be prosecuted by the use of the procedures of the Criminal Code (see subsection 27(2) of the Interpretation Act, R.S.C. 1970, c.l-23). This being the case, Steele, J. was sitting as a Weekly Court judge in a criminal matter and the procedures governing his conduct are to be found in the Income Tax Act and the Rules Respecting Criminal Proceedings of Ontario (criminal rules passed pursuant to section 438 of the Criminal Code. The applicable criminal rules are:

Rule 1

1. In this Part,

(a) "Code" means the Criminal Code;

(b) “judge” means a judge of the High Court of Justice, and in Rules 9 to 11

includes a justice of appeal acting as a judge of the High Court of Justice;

(c) "registrar" includes local registrar;

(d) the interpretation sections of the Code apply.

Rule 2

2. (1) Where no other express provision is made in this Part, the Rules of Civil Procedure [O. Reg. 560/84] with respect to applications apply with necessary modifications to proceedings under this Part.

3. Proceedings in criminal matters by way of certiorari, mandamus and prohibition shall be brought by application to a judge, and may include an application to quash a conviction, order, warrant or inquisition, and an application for discharge of a person in custody.

The Court heard considerable argument by counsel for the respondents to the effect that these new criminal rules (enacted August 21,1985) made it clear that the civil rules applied in all criminal matters and were not restricted to the prerogative remedies as before. Whether this argument is sound or not, it is apparent from a reading of rule 39.02(1), (quoted in reasons of Steele, J. supra), that the rule has no application to orders of High Court judges authorizing the issuance of search warrants. There is no provision for a search warrant in the rules of civil procedure. The civil equivalent is a subpoena duces tecum, which is not a search and seizure but a demand to produce (see Goldman v. Hoffmann-La Roche, supra, for discussion at pages 31-32).

When a search warrant is issued ex parte as in the case on appeal, there are no parties, much less parties adverse in interest. The Director General is in the process of conducting an investigation and charges may be laid subsequently against some or all of the respondents to this appeal, or they may be laid against strangers to this appeal, or they may not be laid at all. There is as yet no proceeding in which the Crown as prosecutor can be considered one "party" with named accused as the other "parties". The only "motion" within the meaning of rule 39.02(1) is the application brought by the respondents to quash the issuance of the search warrant. Such an application can only be made, if it can be made at all, by invoking the inherent jurisdiction of the court in a criminal proceeding to review its own orders. If the judge hearing the application is asked to permit cross-examination on any affidavits supporting the issuance of the search warrants, he should apply the threshold test enunciated by Osler, J. in Scientology (No. 4), supra. The invocation of this inherent jurisdiction does not convert the issuance of the search warrant by Callaghan, A.C.J.H.C. into an ex parte order within the meaning of the civil rules. Section 39.02 has no application and Steele, J. was in error in relying on it.

Having dealt with the correctness of the decision of Steele, J. in applying rule 39.02(1) to the application before him, the next and most pressing consideration before the Court is what action to take with respect to that decision. The respondents took the position that there was no jurisdiction in the Court of Appeal to hear the matter and relied on Goldman, supra. Counsel's first position was that Steele, J.'s order was made in a criminal proceeding and right or wrong, there is no appeal since none is provided by the Income Tax Act or the Criminal Code. I do not think it lies in the mouth of the respondents to take this position since earlier they had asked Steele, J. to invoke the Rules of Civil Procedure and the Courts of Justice Act, 1984, S.O. 1984, c. 11, which provides such a right of appeal from a final order of a judge of the High Court (paragraph 17(1)(b)). It is true that in Goldman v. Hoffman-La Roche, supra, and in Herman v. The Queen, supra, this court has held that orders involving the issue and return of search warrants are not appealable under the Courts of Justice Act, 1984, supra, and ordinarily I do not think that an appeal would lie from a Weekly Court judge's order when exercising the inherent jurisdiction of the court as described in Wilson v. The Queen, supra. However, where as here, the learned Weekly Court judge has invoked the civil process in making an order preparatory to embarking on a review of the order of Callaghan, A.C.J.H.C., the appellate procedures of such civil process are available to the appellant.

The legal conundrum revolves around the way the appellants' counsel puts his case. He submits that Steele, J. was sitting as a criminal judge and had no jurisdiction to make orders as a civil judge under the Courts of Justice Act, 1984. However, if he is sitting as a criminal judge there is no statutory right of appeal from his order and therefore no appeal. Counsel for the respondents agrees, and argues that since he is a High Court judge, his order cannot be quashed by reference to any of the prerogative remedies. In either case, it is submitted that the decision is not properly before us and we have no jurisdiction to hear it. This approach ignores the fact that Steele, J., as a judge of the High Court sitting in Weekly Court, has plenary jurisdiction over matters both civil and criminal. There is likewise no limit to the jurisdiction of this Court. When Steele, J. purports to assert his powers as a judge of the civil process, then clearly the most convenient way of questioning his order is on appeal through the very process he has invoked. Once the matter is before us, there is no reason to limit the scope of the appeal so as to exclude questions relating to the propriety of his reliance upon the rules of civil procedure. In the instant case, his authority to act was restricted to the inherent power of a judge to review an order of a judge of co-ordinate jurisdiction made at the investigative stage of a criminal proceeding. When this Court holds, as I think it should, that he had no more right to invoke the civil rules of procedure than did Callaghan, A.C.J.H.C., we have the power to correct him.

The second position taken by the respondents is that if the Courts of Justice Act, 1984 applies, the order of Steele, J. is not a final order within the meaning of paragraph 17(1 )(b) of that Act. I do not agree. The order is final so far as Giuseppe Vettese is concerned. It compels him to submit to the entire panoply of civil procedures respecting the affidavits he swore. In ordering Vettese "to inform himself of the relevant information so as to properly answer relevant questions" prior to submitting himself to cross-examination, Steele, J. has changed Vettese's status from an informant in a criminal proceeding to an officer or agent of the Minister of National Revenue in a civil proceeding. The burden of obeying the order falls on Vettese and he is subject to contempt procedures if he fails to do so. He is a named respondent in the application before Steele, J. and a named appellant in this Court. He is entitled to appeal the order made against him as a final order under paragraph 17(1)(b) of the Courts of Justice Act, 1984.

Accordingly, for the reasons given, the appeal is allowed, the order of Steele, J. is set aside, and the respondents' application for review of the issuance of the four search warrants is remitted to be disposed of in Weekly Court.

Appeal allowed.