Knox Contracting Ltd. v. The Queen, 86 DTC 6417, [1986] 2 CTC 194 (NBQB)

Dickson, J.:—This is an application by way of judicial review in which the applicants seek an order for the quashing of four warrants issued by a Provincial Court judge sitting at Saint John on November 8, 1985 to various officers of the federal Department of National Revenue, Taxation, and to members of the Royal Canadian Mounted Police, which warrants purported to authorize, under section 443 of the Criminal Code, the search of certain premises at or near Minto and the premises of a firm of chartered accountants at Fredericton for sundry documents, records and other material required for determining whether the applicants had been guilty of offences under the Income Tax Act, and for the quashing of certain detention orders or purported detention orders made by the same judge on December 9, 1985 in respect of various materials seized under the said warrants, and for other ancillary relief including an order for the return of all items seized, an order prohibiting the use of any information obtained from such items, an order for the destruction of any copies, extracts, etc. made from them and an order prohibiting the Provincial Court of New Brunswick from further proceeding in respect of pending applications by the respondent for orders authorizing their further detention.

The relevant portions of section 443 of the Code as that section read before December 4, 1985, provided:

443.(1) A justice who is satisfied by information upon oath in Form 1, that there is reasonable ground to believe that there is in a building, receptacle or place

(a) anything upon or in respect of which an offence against this Act has been or is suspected to have been committed,

(b) anything that there is reasonable ground to believe will afford evidence with respect to the commission of an offence against this Act, or

(c) . . .

may at any time issue a warrant under his hand authorizing à person named therein or a peace officer to search the building, receptacle or place for any such thing, and to seize and carry it before the justice who issued the warrant or some other justice for the same territorial division to be dealt with by him according to law.

(2) to (4) . . .

Section 446 of the Code at that time provided:

446.(1) Where anything that has been seized under . . . a warrant issued pursuant to section 443 is brought before a justice, he shall, unless the prosecutor otherwise agrees, detain it or order that it be detained, taking reasonable care to ensure that it is preserved until the conclusion of any investigation or until it is required to be produced for the purposes of a preliminary inquiry or trial, but nothing shall be detained under the authority of this section for a period of more than three months after the time of seizure unless, before the expiration of that period,

(a) a justice is satisfied on application that, having regard to the nature of the investigation, its further detention for a specified period is warranted and he so orders; or

(b) proceedings are instituted in which the thing detained may be required.

(2) to (7) . . .

Under an amendment to the Code enacted by 1985, c. 19 and which came into effect on December 4, 1985, the words “offence against this Act or any other Act of Parliament" were substituted for the words "offence against this Act" in clauses (a) and (b) of subsection (1) of section 443. Subsection (1) of section 446, as above quoted, was simultaneously amended but not in a fashion to be here of significance.

Section 27 of the Interpretation Act provides:

27(2) All the provisions of the Criminal Code relating to indictable offences apply to indictable offences created by an enactment, and all the provisions of the Criminal Code relating to summary conviction offences apply to all other offences created by an enactment, except to the extent that the enactment otherwise provides.

Section 231 of the Income Tax Act provides for search and seizure procedures for any purpose related to the administration or enforcement of that Act. The section as it formerly stood was amended substantially in February last, many of its former provisions having, particularly since enactment of the Charter of Rights and Freedoms, been struck down by Courts in various jurisdictions.

The circumstances surrounding the issue of the search warrants and subsequent events is not in dispute. On November 8, 1985 the Provincial Court judge signed four warrants to search, which were purportedly issued pursuant to section 443 of the Criminal Code. Each of the warrants authorized the search of a separate place on November 26, 1985 and was directed to 18 named officers of the Department of National Revenue, Taxation and to members of the R.C.M.P. Each warrant recites that it appeared on oath of one Clarke, an officer of the Department, that the things to be searched for would afford evidence with respect to the commission by each of the applicants of an offence under section 239 of the Income Tax Act by making false and deceptive statements in tax returns filed for certain taxation years. Again, each warrant was issued on the basis of an information sworn by Mr. Clarke on November 8. In each the informant deposed that the grounds for his belief as to the truth of the matters stated were derived from his inquiries into the financial affairs of the applicants under the authority of section 231 of the Income Tax Act.

On November 26, 1985 a large number of documents and other articles were seized from the various premises referred to in the warrants. By four documents, each dated December 6, 1985 and signed by one of the Departmental officers named in the original warrants, the respective officers reported to the Provincial Court judge that each of the premises had been searched and that certain documents and records, as enumerated in appendices attached to the reports, had been seized and were presently detained "to be dealt with according to law’. Two of the reports appear somewhat irregular in that, while the reports themselves are dated December 6 the inventory lists annexed as appendices indicate that they were prepared only on December 31, but this irregularity is not of particular significance in the circumstances.

On or about December 9, 1985 four documents which on their face are somewhat irregular were signed by the Provincial Court judge. Each appears to represent some sort of order, made presumably under section 446 of the Code, providing for detention of the articles seized under the respective warrants for a period of three months from the date of seizure and for their detention in the custody of Mr. Clarke. The irregularity flows from the fact that each of these documents is framed as an affidavit of Mr. Clarke, in which he ostensibly deposes to certain facts, viz., the issue of the search warrant on November 6, its execution on November 26, preparation of a report on December 6 including a listing of items seized, and the necessity, including sundry reasons, for their detention. The affidavit is neither signed nor sworn to by the deponent. The jurat is struck out and the document concludes with the following paragraphs under which the Provincial Court judge affixed his signature:

And whereas I am satisfied that the detention of the said items seized is required for the purposes of an investigation.

It is hereby applied for an Order that the said things as listed in A Report To A Judge of the Provincial Court of New Brunswick, filed, be detained in the custody of John B. Clarke, Saint John, New Brunswick District Office of the Department of National Revenue, Taxation, for a period of three months from the date of seizure.

Dated at the City of Saint John in the Province of New Brunswick, this 9 day of Dec., 1985.

There is nothing in the material before this Court to indicate what steps, if any, were taken to satisfy the Provincial Court judge of the necessity for detention of the material seized, as required by the amended version of section 446 of the Code which came into effect several days before the making of the purported order.

On February 11, 1986 notice was given by the Crown to the applicants of an application before the Provincial Court for a “further detention order" detaining items seized pursuant to three of the four warrants, although no notice was given in respect of those articles seized under the fourth warrant. The hearing on that application was postponed from February 24 to March 11 by consent of the parties and on the latter date the validity of the warrants and the detention order was contested by the applicants. Written arguments were submitted on March 21.

On April 4, the hearing before the Provincial Court not having resumed and no ruling on the validity of the detention orders or warrants having been received, the applicants gave notice of preliminary motion to extend the time for judicial review. Proceedings in the Provincial Court were on the same date stayed by order of Stevenson, J. of this Court, pending final disposition of the intended application for judicial review. On April 14 a consent order was taken out extending until April 25 the time for commencing the present application for judicial review, and providing for the impounding of the articles seized and any summaries or extracts therefrom and prohibiting the use of the impounded documents by the respondent pending final disposition of the application. The application herein was filed on April 24.

Counsel for the applicants succinctly sets out as follows in his pre-hearing brief the grounds upon which he relies for a finding that the warrants were invalidly issued and that they should be quashed:

(a) Section 43 of the Criminal Code does not authorize the issuance of warrants in respect of offences against federal enactments other than the Criminal Code;

(b) Even if subsection 27(2) of the Interpretation Act, R.S.C. 1970, c. 1-23, extends the scope of s. 443 of the Criminal Code to offences against certain other federal statutes, it does not extend the application of s. 443 to investigation of offences against the Income Tax Act;

(c) Alternatively, the warrants are invalid because the documentary and other material on which the informant relied was obtained illegally in contravention of ss. 7 and 8 of the Canadian Charter of Rights and Freedoms;

(d) Alternatively, if the warrants were found to be validly issued pursuant to s. 443 of the Criminal Code, they are invalid for failure to be specific;

and the following grounds for his contention that the detention orders are invalid and should be quashed:

(e) There was nothing put before the learned Provincial Court Judge upon which he could be satisfied that a detention order should issue;

(f) No detention order was ever signed by the learned Provincial Court Judge seized with the matter resulting in loss of jurisdiction; and

(g) A detention order made in respect of articles seized pursuant to an invalid warrant is a nullity.

Counsel for the respondent contends, basically, that by virtue of subsection 27(2) of the Interpretation Act, the authority under section 443 of the Code is extended to the investigation of offences under the Income Tax Act; that such is the case notwithstanding the decision of the New Brunswick Court of Appeal in Re Purdy (1972), 4 N.B.R. (2d) 848; 28 D.L.R. (3d) 720 (referred to below), inasmuch as the weight of authorities decided in other jurisdictions is contrary to the findings in the Purdy case; and that the exclusionary clause in subsection 27(2) of the Interpretation Act, viz. "except to the extent that the enactment otherwise provides”, is here of no application as the search and seizure provisions contained in section 231 of the Income Tax Act (as of the date of issue of the warrants) have been substantially struck down by various courts as being ultra vires and should therefore be considered as non-existent.

In my view the Purdy decision is determinative of the issues here involved. In that case the trial judge had set aside search warrants purportedly issued under section 429 of the Code (now section 443) in respect of documents and records sought in respect of alleged offences under the federal Broadcasting Act. In upholding the decision at trial the Court of Appeal held, inter alia, that, notwithstanding subsection 27(2) of the Interpretation Act, section 443 (as it then stood) could only have specific application to the Criminal Code and is incapable of being read to apply to any other Acct.

That decision of the Court of Appeal is binding on this Court, to the exclusion of contrary decisions in other jurisdictions. Its effect is of course just as applicable to the investigation of suspected offences under the Income Tax Act as to those under the Broadcasting Act. It follows that in issuing the search warrants which he did on November 8 the Provincial Court judge did so without jurisdiction and that the said warrants must be quashed. It further follows that anything done in pursuance of the warrants and subsequent to their issue must be held to be a nullity. This would of course include the searches and seizures made, the reporting thereon, the subsequent application for orders for detention, the orders for detention themselves made on December 9 (if they can indeed at all be considered valid), and the subsequent application for extension of those orders.

In view of my findings it becomes unnecessary to rule upon other issues raised in the application, viz., as to whether the warrants may have been invalid either due to a failure to be sufficiently specific in their terms or because the documentary and other material on which the informant relied in taking them out may have been obtained illegally in contravention of sections 7 and 8 of the Charter of Rights and Freedoms, or as to whether the purported detention orders dated December 9 did in fact amount to valid detention orders. In this latter regard I may say that it seems most questionable that they were in fact valid or effective orders.

It similarly becomes unnecessary for me to determine whether or not the existence of the search and seizure provisions in section 231 of the Income Tax Act at the date in question would have brought into play the exclusionary clause of subsection 27(2) of the Interpretation Act. In that regard I may say that, were that question pertinent, I would have difficulty in finding that they would not have done so, having regard to the continued presence of those provisions in the Income Tax Act and quite regardless whether some or most of them may have been struck down in various court decisions.

The applicants here seek also the return of the documents and other articles seized and other related relief. In the Purdy case the Court of Appeal, particularly because of the rules relating to the type of application there made, determined that it could not order the return of the articles there seized. In light of the present reading of section 446 of the Code, since its amendment in December last, and of the provisions of the Charter of Rights and Freedoms, enacted subsequent to the Purdy decision, I am satisfied that this Court now has not only the jurisdiction but the duty to grant the relief sought in that respect. In fact the respondent has conceded that, should it be found that the warrants were invalidly issued, such should be the case.

In summary I find and/or order that:

A. The four warrants issued out of the Provincial Court of New Brunswick at Saint John on November 8, 1985 be and they hereby are quashed;

B. The four detention orders or purported detention orders dated December 9, 1985 be and they hereby are quashed;

C. All items seized by or on behalf of the respondent pursuant to the said warrants, together with all copies, summaries, notes and outlines thereof and all extracts therefrom, be forthwith returned to the applicants;

D. The servants and agents of the respondent be prohibited from using the above-mentioned items or any copies, summaries, notes or outlines thereof or any extracts or information obtained therefrom (unless hereafter the same may be obtained under due process of law);

E. The Provincial Court of New Brunswick be prohibited from proceeding further in the matter of the pending applications by the respondent to detain or further detain things seized pursuant to the warrants issued on November 8, 1985.

It is further ordered that the respondent pay to the applicants their costs of the application which I fix in the sum of $1,000.

Order accordingly.