R. v. Rosenberg, 87 DTC 5189, [1987] 1 CTC 385 (S.C.O.)

Steele J.:—This is an application under subsection 446(15) of the Criminal Code (the Code) by an officer of the Department of National Revenue to examine and, where necessary, make copies of items seized by the Ontario Provincial Police and detained pursuant to section 446 of the Code. He wishes to pursue an investigation under section 231.1 of the Income Tax Act (the Act). The respondents argue that the investigation is in fact a search under section 231.3.

It appears to me that the argument by both counsel ignored the separate purposes of 446(15) of the Code and the provisions of the Act. The powers of the Minister under the Act give status to bring an application under subsection 446(15), but this does not dispose of the entire matter. The function of subsection 446(15) is to protect from unreasonable inspection documents seized by the police in the course of their duties. Where a person has a proper interest such an order may be made. However, inspection may take place only if all other applicable authority also exists. In other words, the applicant must comply with both the Act and the Code.

Under the provisions of the Act an inspection for audit purposes is authorized under section 231.1. A specific demand for documents may be made under section 231.2 or a search warrant may be requested under section 231.3. This application is stated to be based on the former. It is stated to be for an inspection, audit or examination. It is not a demand or a search. If so, it is analogous to Re Belgoma Transportation Ltd. and Director of Employment Standards, 51 O.R. (2d) 509; 20 D.L.R. (4th) 156 where it was stated as follows, at 512 (D.L.R. 159):

The standards to be applied to the reasonableness of a search or seizure and the necessity for a warrant with respect to criminal investigations cannot be the same as those to be applied to search or seizure within an administrative and regulatory context. Under the Employment Standards Act, there is no necessity that the officer have evidence that the Act has been breached. In the course of carrying out administrative duties under the Act, what is commonly called a “spot audit” may be carried out, which helps ensure that the provisions of the Act are being complied with. The limited powers given for this purpose as set out in the section are not unreasonable. the "search or seizure” in the instant case, if such it is, is not aimed at detecting criminal activity, but rather, as indicated, in ensuring and securing compliance with the regulatory provisions of the Act enacted for the purpose of protecting the public interest.

So far as the citizen is concerned, there is protection afforded to him with regard to his dwelling under s. 45(2). As can be seen, this subsection prohibits an employment standards officer from entering a room or place used as a dwelling without the consent of the occupier, except under the authority of a search warrant. As stated, it does not appear to us to be unreasonable to permit such an officer to enter business premises and require production for inspection and copying of certain records, which request or demand can, of course, be refused without any search taking place or any documents or records being seized.

Under the Income Tax Act there is also a similar provision for protection from investigations that might take place in a residence.

I am satisfied that the applicant is an authorized person within the meaning of section 231.1 of the Act. I adopt the reasoning in Re Canequip Exports Ltd. and Smith et al., 8 C.C.C. (2d) 360, that, by virtue of the dictionary definition, interest includes a legal concern in a thing. In my opinion, by statute the applicant has an interest in the documents in question. He therefore has a right to bring this application. In my opinion, the decision in Linett v. The Queen, [1980] 1 F.C. 591 is not applicable because in that case prior authority was required, and also notice to the Attorney General of Canada was required. Part of the reasoning was that the Crown could not have been deemed a person interested because it would mean giving notice to itself. In the present case it is not the Attorney General of Canada that required notice but the Attorney General for Ontario, as provided in section 2 of the Code.

The respondent also submitted that the request was contrary to section 8 of the Canadian Charter of Rights and Freedoms (the Charter) because it is a seizure. It is not a seizure. It is a request to inspect under subsection 446(15) of the Code. Even if it was a seizure under section 231.3, if a proper demand was made under section 231.2, it would not be a violation of section 8 of the Charter (see Regina v. McKinlay Transport Limited et al., January 9, 1987, Trainor J. (unreported)).

The respondent also argued that an order should not be granted because there has been no evidence submitted of a serious tax investigation of the companies or persons in question, and relies on James Richardson & Sons, Limited v. M.N.R., [1984] 1 S.C.R. 614; [1984] C.T.C. 345. In my opinion, that case dealt with a search warrant under section 231.3 and is not applicable to this application under subsection 446(15) of the Code.

The respondent further submitted that because section 231.5 of the Act authorized copies to be made where there was an examination under section 231.1, and that such copies could be used as evidence of the originals, the inspection has the same probative force as the original, and therefore is a search. While I agree that you cannot do indirectly what you cannot do directly, this is not a disguised search or seizure under section 231.3. Section 231.1 is for an entirely different purpose of a routine investigation and there is ample authority for Parliament to have authorized copies to be made where appropriate. In any event, such an argument is irrelevant to an application under subsection 446(15) of the Code.

The respondent also argued that the Act contains its own provisions with respect to investigations, search and seizure and therefore that section 443 of the Code is inapplicable. I agree with the basic principle that specific provisions of an Act preclude a general provision. However, subsection 27(2) of the Interpretation Act, R.S.C. 1972, c. 1-23 provides for the application of section 443 to all enactments "except to the extent that the enactment otherwise provides". The Act is silent on the question of how the Minister is to inspect when documents have been seized by police and taken from the normal place of business. I find nothing conflicting between the Act and the Code, and therefore there is nothing to prohibit the present application. In this regard, I agree with the decision in Multiform Manufacturing Co. Ltd. et al. v. Sa Majesté La Reine, Quebec Superior Court, January 30, 1987, Boilard J., (unreported).

I see no merit in the respondents' contention that because a representative of the Department of National Revenue was allowed to partially inspect the records without an order that, when it became obvious that an order was desirable and should be obtained, none can subsequently be granted. This is not a case of illegally obtained evidence being submitted to the court. It is a case where inspection has been made to ascertain that the documents are in fact the types of documents contemplated by section 231.1 of the Act and to show that subsection 446(15) of the Code can be properly invoked. There is no reason to exclude the affidavit evidence in support of this application on the grounds that it was illegally obtained. In this respect I agree with Steele, J. in Smallwood v. Attorney-General of Canada et al., 8 C.C.C. (3d) 55 at 64-66.

I have been referred to the decision of the Federal Court of Appeal in Royal American Shows, Inc. v. McClelland and M.N.R., [1977] C.T.C. 52; 77 D.T.C. 5052, which held that a police station was not a place of business within the meaning of section 231.1. I am not bound by that decision, and I agree with the dissenting opinion of Pratte J. at 61 (D.T.C. 5058), as follows:

Moreover, I consider that the seizure could legally be made at the Edmonton City Police Station. In my view, if subsection 231(1) indicates the places where the right of entry can be exercised, it does not circumscribe the power of seizure to those places.

In any event, that case dealt with a retention order made after a seizure. It was not an application for examination under subsection 446(15) of the Code.

I have concluded that an order should issue under subsection 446(15) of the Code but this does not give an automatic right to inspect the documents. If the books and records were at a place of business the respondents could refuse to permit their inspection. In that case, the applicant would be required to make a demand under section 231.2 or apply for a search warrant under section 231.3. In the present case, where the documents are at a police station, the respondents could give their permission to allow their inspection. If they refuse so to do, then, as in a normal situation, the Minister must either make a demand under section 231.2 or apply for a search warrant under section 231.3, in addition to the present application under subsection 446(15) of the Code.

For these reasons, subject to the Minister obtaining consent of the respondents or a proper search warrant under section 231.3 of the Act, there will be an order authorizing an officer of the Department of Revenue to examine and, where necessary, make copies of the material seized by the Ontario Provincial Police as requested in the application. This order is subject to the provision that such inspection shall take place at the Ontario Provincial Police offices and that no original material shall be removed therefrom. Costs to the applicant.

Order accordingly.