Roseland Farms Ltd. v. The Queen, 92 DTC 6417, [1992] 2 CTC 67 (FCTD)

Muldoon, J.:—In the plaintiff's motion, dated and filed on May 14, 1992, which came on for hearing in Winnipeg on June 30, 1992, the plaintiff seeks:

1. an order pursuant to section 179 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") as it existed prior to amendment in 1985 that the proceedings herein be held in camera, or in the alternative that the proceedings herein be held in camera under the existing legislation; and

2. such further or other order as the Court may deem just.

In support of the motion is filed the affidavit of Murdoch MacKay, Q.C., the president of the plaintiff corporation.

The action was instituted in this Court by the plaintiff, on February 26, 1986, as an appeal by way of proceedings de novo under the Income Tax Act. During the defendant's oral discovery of the plaintiff, represented therein by its president, Mr. MacKay, he declined to answer questions calculated to elicit the names, and other identifying characteristics of the deceased farm manager and two foreign principal investors in the plaintiff corporation. The plaintiff, in effect, accuses the defendant's counsel of simple bloody-mindedness in pressing for such identifying information to be placed in the record,“ although”, as Mr. MacKay deposes, such evidence was "divulged to the defendant and the taxing authorities.”

Whatever pejorative may be asserted against the defendant, when the plaintiff, in August, 1990, resisted the defendant's motion to compel answers to questions 28, 29, 30, 145 and 161, as well as to complete undertakings given in questions 45, 64, 65 and 118, and to produce the document referred to in questions 35 and 36, the defendant's motion was granted on August 23, 1990.

The plaintiff appealed against this Court's order to compel answers. The second executive paragraph of that order of August 23, 1990, contemplated the plaintiff's appeal and accorded a structured stay of proceedings in order to accommodate the appeal. The appeal was dismissed on May 12, 1992, substantially for the reasons expressed by the motions judge, Muldoon, J. In the Appeal Division’s unanimous reasons for judgment, delivered from the bench by Mr. Justice Stone, there are the following paragraphs:

In its amended memorandum, the appellant submits that section 179 of the Income Tax Act as it stood when its shareholders, apparently non-residents of Canada, made the subject investment in Canada and, indeed, when the matter was first brought forward by the appellant in the Tax Court of Canada from which the proceedings in the Trial Division were brought by way of appeal, entitled the appellant, upon making a simple request therefor, to nave the proceedings held in camera. A later amendment to that section, which became effective prior to the commencement of the proceedings in the Trial Division, requires a taxpayer wishing in camera proceedings to establish to the satisfaction of the court that the circumstances of the case justify in camera proceedings.

In our view, it is not at all to the point for this Court to determine at this time whether the former or revised text of section 179 will govern any request the appellant may make for in camera proceedings. If such a request should be made it could only be presented to the Trial Division rather than to this Court on the present appeal. This appeal is for the determination only of those issues which are raised against the judgment of August 23, 1990. No issue of entitlement to in camera proceedings was determined by that judgment. The fact of the existence of section 179 and that it may be invoked by the appellant, does not assist that party in its arguments on this appeal.

That is the genesis of the present motion.

Mr. MacKay's affidavit, in its pertinent passages, tells no more than this:

6. THAT the unnamed persons are nationals of a foreign country who would be jeopardized in that country for having Canadian investments.

7. THAT as a result of the defendants [sic] insistance [sic] upon naming the heretofore unnamed persons on the record Roseland Farms Ltd. does request that the proceedings in this matter be held in camera.

8. THAT I make this affidavit in support of a motion to this Honourable Court that the proceedings herein be continued in camera and all discoveries or documentation be sealed.

The previous legislation, which the plaintiff's counsel insists still applies to this tax litigation, runs as follows:

179. Proceedings under this division shall be held in camera upon request made to the Federal Court by the taxpayer.

The taxpayer was accorded an absolute right to complete control of the openness, or otherwise, of the proceedings. Not so now. The new version of section 179 to which Royal Assent was accorded on October 29, 1985, provides this:

179. Proceedings in the Federal Court under this division may, on the application of the taxpayer, be held in camera if the taxpayer establishes to the satisfaction of the Court that the circumstances of the case justify in camera proceedings.

The plaintiff's counsel avers that in the Tax Court proceedings the Crown agreed to the confidentiality of the foreign principals. He reported that Mr. MacKay had intimated in testimony that they are Italians; but such is the nature of the unspecified jeopardy they would suffer if their identities were revealed in the public domain that the plaintiff would simply have to desist from its appeal, if it had to make that revelation. That would hand to the Crown an easy, unearned victory according to counsel. If so, so be it.

The question of so-called "retroactivity" of legislation was much discussed by counsel. The defendant's counsel, noting that in common law, there is a general presumption against retroactive application to substantive vested rights, then cited the corollary stated in Maxwell on The Interpretation of Statutes, (12th ed.), London: Sweet & Maxwell, 1969. Found at page 222, it runs briefly thus:

The presumption against retrospective construction has no application to enactments which affect only the procedure and practice of the courts. No person has a vested right in any course of procedure, but only the right of prosecution or defence in the manner prescribed for the time being, by or for the court in which he sues, and if an Act of Parliament alters that mode of procedure, he can only proceed according to that altered mode [4] “Alterations in the form of procedure are always retrospective, unless there is some good reason why they should not be." [5] .

In Driedger, The Construction of Statutes, Toronto: Butterworths, 1974, at pages 139 to 148, the learned author seems to take issue with the misuse of the terms retroactive" and retrospective". In explaining his semantic concerns, he wrote, at page 140:

What is a retrospective or a retroactive statute? These words are derived from Latin root words meaning “ looking” or "operating", and “ backwards”. A retrospective statute must therefore be one that is operative with respect to a time prior to its enactment. A statute or a provision thereof may be made retrospective in one of two ways: either it is stated that it shall be deemed to have come into force at a time prior to its enactment; or it is expressed to be operative with respect to past transactions as of a past time, as, for example, the Act of Indemnity considered in Phillips v. Eyre, (1870), L.R. 6 Q.B. 1. Unless, therefore, a statute alters a right as of a prior time it cannot correctly be called retrospective within the normal meaning of that word.

Of course, one must always recognize that Parliament may change the law, not in the past, but for the future at a certain present time, which occurs on the day on which the statutory provision comes into force. Then everyone is affected by that new law at the same time and in the same way. The case of Minchau v. Busse, [1940] 2 D.L.R. 282 (S.C.C.), cited for the plaintiff, is not entirely in point here. Also, not entirely contrary but rather in accord with the reasoning here are the passages of the judgment of Sir Lyman Duff, C.J.C. at pages 304-05.

Parliament may also, of course, provide that certain existing rights or privileges affected by the new law may be preserved, or even merely continued until a future date. It is very sensitive of Parliament to do that so that the affected persons may take the opportunity to make reasonable preparations and adjustments. But Parliament is not lawfully bound to do so. Indeed, by means of the apt expression of parliamentary will, it may enact the exact opposite. When enacting procedural laws, Parliament may express its will in plain unvarnished language.

The new section 179 of the Income Tax Act is just such legislation. It is procedural. It is for immediate effect, not retroactive effect. If one could say that anyone had a vested taxpayer's right to in camera litigation, one must note that the new provision does not take it away or suppress it, but rather reasonably alters the procedure by which the"right" may be exercised. The taxpayer may exercise the “right” if the taxpayer establishes to the satisfaction of the Court that, in the circumstances, in camera proceedings are justified. If the prior legislation gave an ipse dixit, an unquestionable, absolute right”, the legislation could be said to have been unconstitutionally over-generous, for the notion of "open court" is the historic constitutional norm, if not imperative, of the Canadian tradition. McPherson v. McPherson, [1936] A.C. 177 (P.C.); Attorney-General for Nova Scotia v. Maclntyre, [1982] 1 S.C.R. 175, 132 D.L.R. (3d) 385, at page 185 (S.C.R.). Proceedings held in camera are the exception which must be satisfactorily justified—as is now provided in section 179.

The appeal division of this Court made reference to the MacIntyre judgment in considering the case of C.D. (applicant) v. M.N.R. (respondent), [1991] 1 C.T.C. 379, 91 D.T.C. 5210, .whose headnote, in part, suffices for some appreciation of the judgment of Mr. Justice Décary therein:

Prior to the hearing of his appeal before the Tax Court of Canada, the taxpayer applied under section 16 of the Tax Court of Canada Act for an order that the hearing be held in camera. The application was dismissed (unreported) and the taxpayer applied under section 28 of the Federal Court Act for an order reversing the Tax Court's finding.

Held: The taxpayer's application (which was held in camera) was dismissed. As Dickson, J. of the Supreme Court of Canada pointed out in A.G. (Nova Scotia) v. McIntyre when speaking of in camera hearings, covertness is the exception and openness is the rule. In this way, public confidence in the integrity of the court system and public understanding ofthe administration of justice are fostered. With the advent of the freedom of the press provisions of paragraph 2(b) of the Charter, moreover, openness of the courts became an even better recognized and protected principle than it had been at common law. In addition, Cory, J. of the Supreme Court of Canada indicated in Edmonton Journal v. Alberta (A.G.), [1989] 2 S.C.R. 1326, 64 D.L.R. (4th) 577, that the rights enshrined in section 2(b) of the Charter should only be restricted in the clearest of circumstances. Against this background, therefore, the taxpayer could not be heard to say that his fear of professional disciplinary proceedings, should the facts of his appeal become public knowledge, constituted sufficient justification for an in camera hearing. Indeed, to accede to this argument would be to afford the taxpayer a protection not even afforded to witnesses fearing criminal proceedings. Accordingly, in the absence of any error of law on the part of the Tax Court of Canada, the taxpayer's application was dismissed.

Clearly section 179 does not deal with a vested or a substantive right, but rather with procedure, the manner in which the Court conducts its proceedings. It is as much a matter of procedure as are the currently over-used and counter-constitutional “ confidentiality orders" so favoured by litigation counsel in commercial and intellectual-property cases. Section 179 is for immediate effect, and obedience, upon coming into force.

Finally, counsel for the plaintiff stated that in proceedings before the Appeal Division it had been remarked that the matter in issue bears on important matters of high principle. He asserted that this matter of such importance could not, therefore, reside in merely procedural legislation. That is not so. Indeed matters of the highest importance reside in “ mere” procedures. Professor A.V. Dicey, in his classical 1885 opus, updated unto its 10th edition in 1959 and reprinted at least into the 1970's, An Introduction to the Study of the Law of the Constitution, in Chapter V," The Right to Personal Freedom”, wrote of habeas corpus. Habeas corpus is not unimportant! Here are passages on pp. 220-21:

The whole history of the writ of habeas corpus illustrates the predominant attention paid under the English constitution to "remedies" that is, to modes of procedure by which to secure respect for a legal right, and by which to turn a merely nominal into an effective or real right. The Habeas Corpus Acts are essentially procedure Acts.

[Emphasis added.]

It surely does not follow that important principles are never confined to merely procedural legislation. Habeas corpus is entrenched by paragraph 10(c) of the Charter of Rights and Freedoms, which enunciates many another right, each an important principle, residing in mere procedure.

Accordingly, the first application for relief, to resurrect and to apply section 179 of the Income Tax Act as it existed prior to the amendment in 1985, must be dismissed. The Appeal Division, as noted, dismissed the plaintiff's appeal from this Court's order of August 23, 1990, whereby answers were to be compelled. The execution of that order should not be attempted, obviously, until there be some definitive resolution of the second prong of the plaintiff's motion.

The second, alternative prong received little, if any attention either in Mr. MacKay's affidavit, or in the oral submissions of counsel. Toward the end of the hearing, the plaintiff's counsel asked for the opportunity to present further and better affidavit evidence to support the application to invoke the version of section 179 now in force. The Court is inclined to grant that request, in the interest of fairness. The plaintiff is accorded time until close of business in the registry on Thursday, August 21, 1992, in which to file and serve that further affidavit evidence. The plaintiff's application is adjourned until the first motions day in Winnipeg on or after September 8, 1992. The parties by counsel may agree in writing, to be filed, upon more convenient dates, subject to what follows.

The Court as presently constituted is not seized of the plaintiff's adjourned application to hold the proceedings herein under the post-amendment version of section 179. Indeed, this judge has now been more than sufficiently involved in this case, which would benefit from the fresh approach of another judge to be deployed by the Associate Chief Justice.

Order accordingly.