Whetung J. (orally)-The two co-accused in this matter are charged with offences under the Income Tax Act. For the purpose of the present ruling, it is not necessary that I consider the substantive elements of the offences alleged. If ultimately convicted, the maximum penalty for each offence could be fines of 200 per cent of the tax sought to be evaded, and a jail term of two years.
Now, Mr. Olah, I think I should speak to you about this. That’s my understanding of my reading of the section, but at one point you referred to a fine of $25,000?
MR. OLAH: Yes, sir, I think we were talking about several sections and I referred to sections 238 and 239, and I wonder if that’s where I’ve confused the issue, sir, and let me just pull that out.
THE COURT: Thank you.
My understanding is that the offence alleges under 239. Ms Jaffe?
MR. OLAH: 239, exactly and as a - I was looking at 238, and under 239, the fine of not less than fifty percent and not more than two hundred percent and imprisonment not exceeding two years, and under 238, the fine is $25,000 and imprisonment not exceeding twelve months, and that’s the one that I suggested flowed from a breach of 231.1.
THE COURT: Yes, certainly, and I understand. Thank you.
Both Mr. Olah for the applicant and Ms Jaffe for the Crown have provided me with a great deal of material, and I thank them for their consideration in so doing.
Prior to the commencement of proceedings, I met in Chambers with both counsel to discuss the progress of this matter. The matter had previously been pre-tried with an estimate of five days trial time deemed appropriate. Prior to the trial commencing, an application was brought on behalf of the accused, Norman Jurchison, only alleging possible breaches of section 8 of the Charter of Rights and Freedoms.
Based on my discussions with Mr. Olah this morning and with the Crown not consenting but not opposed, I have added to the application the corporate accused.
Mr. Olah’s material was lengthy, and I will not summarize it at this point in my ruling. Although served with notice of the Charter issue, I understand that the Provincial Crown will not be intervening at this stage.
I have indicated to counsel that pursuant to R. v. Kutynec (1992), 52 O.A.C. 59, 70 C.C.C. (3d) 289 (C.A), the Charter issue should be dealt with on a pre-trial basis and that as the motion was the motion of counsel for the applicant’s, he would have the choice of calling viva voce evidence or of relying on affidavit material. He has decided to call viva voce evidence on his Application, and I have heard from four persons, all of whom are either present or former Department of National Revenue employees. They are Isaac Persaud, Michael Lemon, William Chow and James Hart.
Isaac Persaud is a certified management accountant and began employment with the Department of National Revenue in September of 1990. He left that employment in September of 1991. It seems that on February 4, 1991, he was assigned the responsibility of conducting what appears to be a routine audit of the accused corporation. At that time, he had only done one prior audit. He testified that he understood he had access to the premises where the audit was conducted pursuant to subsection 231.1(1) of the Income Tax Act but only after he was referred to this section by counsel for the applicant.
The audit commenced at the business premises of the accountants of the two accused parties, the firm of Parsons &; Company. The physical attendance at these premises commenced April 4, 1991, with an interview, and the audit itself continued on four subsequent days, namely April 12, 17, and 19, 1991 and May 1, 1991.
Mr. Persaud testified that this audit disclosed what he felt was unreported income and on May 22, 1991, he referred his file to the Special Investigations office of his Department. The initial form referring this account to Mr. Persaud for audit is located at Tab 2 of Exhibit 1, his file memo is located at Tab 3, his referral to Special Investigations is located at Tab 8, and his audit query sheets are located at Tab 10.
As a result of this referral, the matter was dealt with at Special Investigations by Michael Lemon. Mr. Lemon became an employee of the department in June of 1989. In mid-July, 1991, the file concerning the accused was assigned to him and on July 31st, 1991, he formally accepted the file for preliminary investigation. As a result of this preliminary investigation, he felt that he did not have reasonable grounds to believe an offence had been committed and the matter was sent back to the Audit Department for additional work in September of 1991. There also appears to have been a note prepared by Mr. Lemon which 1s filed as Exhibit 2 which indicated specific information which he required.
Following the return of this file to the Audit Department, the file was assigned to William Chow. Mr. Chow is a certified management accountant and had been an auditor with the department since August of 1990.
He attended at the offices of Parsons &; Company on October 16, 1991, and made four subsequent visits to continue his audit there on October 17, 1991, November 27, 1991, and January 13 and 16, 1992.
Prior to commencing the audit, he reviewed the file prepared by Mr. Persaud, and he also knew that the matter had been previously referred to Special Investigations. He also had the note filed as Exhibit 2 and had spoken to Mr. Lemon prior to commencing work on the audit.
The material of Mr. Chow, which has been filed in Exhibit 1, may be summarized as follows: Tab 5, Memo for File, Tab 6, Auditor’s Report, Tab 10, Audit Query Sheet.
On February 28th, 1992, the procedure commenced to have the file
sent back to Special Investigations for further action.
On this return to Special Investigations the matter was assigned to James Hart. Mr. Hart testified that he has been employed by the department since 1977 and has been with Special Investigations since October of 1990.
He first became involved with the present matter in March of 1992 when he prepared the Case Update Report found at Tab 7 of Exhibit 1.
It seems that he had the benefit of virtually all material assembled by Messrs. Persaud, Lemon and Chow at that point. He also had oral communication with William Chow concerning the material acquired by Mr. Chow during has five days of audit, and on the basis of this and the file contents, he prepared the Information for Warrant filed as Exhibit 5. The search warrants which he obtained are filed as Exhibits 6A (for the residence of Norman Jurchison) and as Exhibit 6B (for the business premises of Parsons &; Cummings).
The information was sworn June 26, 1992, and the warrants were issued the same date and executed June 30, 1992.
Mr. Hart has made it clear that without the information (with a small "i") provided to him by Mr. Chow and obtained during the audit by Mr. Chow that he would not have had any grounds to obtain the warrants. In other words, on the basis of the evidence acquired solely by Mr. Persaud and Mr. Lemon, there were not sufficient grounds to either seek or obtain a warrant or to lay a charge in the opinion of Mr. Hart.
The materials obtained pursuant to the search warrants are itemized in Exhibit 7.
In this summary of facts, there should also be an indication of the understanding each of the persons involved in this matter had of the status of the audit file at the time it left their hands.
Firstly, Mr. Persaud has testified that at the time he commenced the audit he considered it a routine matter, but that he located what he felt was criminal activity and that at the time he referred the file to Special Investigations, he felt charges would be laid as he was of the opinion that there had been unreported income. He also testified that he was not sure if he had the power to lay charges and that Special Investigations did have such power.
Michael Lemon testified that at the time he sent the matter back for further audit, he was not satisfied that there was unreported income as he did not know who owned the bank account to which the suspected funds had been deposited, but that if ownership of the account lay in either of the accused before the Court, then there might be unreported income. He then sent the file back for this specific issue to be addressed and prepared the memorandum filed as Exhibit 2 which at that time was only the first page of same. Exhibit 2 is now presently two pages.
He denied that he felt that at the time the file was referred back that there was a good chance of charges being laid and testified that the initial referral by Mr. Persaud was premature.
Mr. Chow testified that at the time he received the file, he knew that it had already been sent to Special Investigations and that he knew there was an issue concerning undeclared income. He testified that he set out to answer the questions raised by Michael Lemon and that if he answered the questions, there was a possibility the matter would be referred back to Special Investigations and that they could lay charges. In fact, he went so far as to say that he understood there was a probability that charges could be laid.
At the time James Hart received the file, he understood there was a difficulty with unreported income and in his Case Update Report filed as Tab 7 in Exhibit 1, he indicates the approximate tax potential.
The above facts will operate as the general outline of this matter for the purpose of the issues before me at this time. As previously indicated, a Charter application has been brought on behalf on the accused, Normal Jurchison and the corporate accused.
In addition, with the consent of both counsel, the evidence which has been heard on the Charter application has also been accepted by counsel to apply on the voir dire concerning the sufficiency of the search warrant information and the warrants that flow from that information. I thank counsel for their consideration in this regard.
At the risk of simplifying the many issues raised by counsel for the applicant on his application, I would summarize the issues raised on the Charter application as follows:
1. That the evidence obtained during the audit by Mr. Chow was improperly obtained under section 231.1 of the Income Tax Act and that this violates section 8 of the Charter;
2. That all evidence obtained by the Department of National Revenue in this matter pursuant to Section 231.1 of the Income Tax Act was improperly obtained as Section 231.1 itself violates Section 8 of the Charter and should be declared void;
3. That all evidence obtained by the Department of National Revenue through its employees from third party premises pursuant to Section 231.1 of the Income Tax Act was improperly obtained pursuant to section 8 of the Charter as section 231.1 does not apply to third parties.
If a Charter breach is found, then the remedy, if any, which flows from the breach may affect the status of the warrants on the voir dire.
As a first step in this process, I must first deal with the issue of standing as raised by the Crown.
Crown counsel takes the position that the Charter application brought by the applicant can have no merit insofar as any search of the premises of Parsons &; Company, or any premises other than the residence of the applicant or place of business of the applicant is concerned deals only with the expectation of privacy held by the owners or occupants of those premises and not by the applicant.
In support of this proposition, she has referred me to the cases of R v. Pugliesi (1992), 71 C.C.C. (3d) 275, 8 O.R. (3d) 259 (C.A.), and R v. Arason (1992), 78 C.C.C. (3d) 1, 21 B.C.A.C. 20 (C.A.).
In Pugliesi, the Court was concerned with the search of an apartment where drugs were found. The accused denied that he was the occupant of the premises and because there were drugs found there, this position was necessary to his defence. In other words, the accused could not admit ownership of the drugs or control of the premises without running the risk of damaging his trial defence if he were unsuccessful in having the search results excluded.
Crown counsel takes the position that Finlayson J.A. is of the opinion that section 8 is directed toward security of the person and not of the person’s property. However, it must be noted that this position is qualified by the analogy that a search may expose an individual to the consequences of the search and that it is here the protection of section 8 accrues.
If one examines the following comment made at page 301:
Accordingly, section 8 is available to confer standing on an accused person who had a reasonable expectation of privacy in the premises where the seizure took place, even though he had no proprietary or possessory interest in the premises or in the articles seized.
Further, the following comment is made at page 302:
That is not to say that property rights do not confer privacy rights in a given case. They obviously do. But the appellant must assert a personal privacy right, whatever be the foundation of his assertion. And, since this reasonable expectation of privacy is a Charter protected right, the burden of providing an evidentiary basis for any violation rests with the appellant.
Arason and De rosier does not present a situation significantly different from Pugliese insofar as the principles of section 8 are concerned.
On the issue of standing, counsel for the applicant was queried regarding the absence of evidence from the applicants concerning their ownership of items searched at the premises of Parsons & Company, or of any expectation of privacy that he might have had there.
Counsel for the applicant correctly indicated that evidence adduced had indicated that the nature of an accountant’s office is such that material held there and the dealings between clients and accountants are considered to have a degree of confidentiality which attaches to them. He also indicated the nature of the records which were dealt with, being financial records of Norway Insulation, work product, an oral statement from an accountant and bank records, all of which he submitted to be confidential in nature and therefore having a property interest in favour of the applicant which at-
taches to them. I must agree with his in this regard.
On the issue of standing, it is my opinion that the position expressed by the Federal Crown in this matter is too narrow and not reflected in case law cited. Therefore, the applicants do have the requisite standing in my opinion to bring the Charter application sought.
Prior to moving on, it should be indicated that this ruling is supported by the position taken by the Ontario High Court of Justice, as it then was, in New Garden Restaurant and Tavern Ltd. et al v. MNR, [1983] C.T.C. 332, 83 D.T.C. 5338, where Mr. Justice White stated the following at page 335 (D.T.C. 5341):
It is only when a tax investigator has formulated a belief of the taxpayer’s guilt based on reasonable and probable grounds, that the taxpayer’s expectation of privacy would reattach to his records and documents.
This would seem to indicate clearly that White J. contemplated that section 8 would attach to personal property, presumably wherever located.
As already indicated, there appear to be three broad aspects to the Charter application. I propose to deal first with the following aspect of the application which I have already paraphrased as follows:
1. That the evidence obtained during the audit by Mr. Chow was improperly obtained under section 231.1 of the Income Tax Act and that this violates section 8 of the Charter.
In his submissions on this ground of the application, counsel for the applicant has conceded that if section 231.1 is not void, which he does not concede, then the audit of Mr. Persaud was proper up to the point where he referred the file to Special Investigations. In addition, any information assembled by Mr. Lemon would also be properly assembled with the proviso that he only made inquiries and did not conduct a search.
What counsel for the applicant does take issue with is any search or seizure conducted by Mr. Chow after the file was referred back to the Audit Department by Special Investigations. In the mind of counsel for the applicant, there 1s no significance to the fact that the file was referred back to a person other than Isaac Persaud and on this point only, I will agree with him at this time.
Counsel for the applicant suggests that any search conducted by Mr. Chow under section 231.1 was not proper as at that time, and from the time that Mr. Persaud formed his opinion that an offence had been committed, the Department of National Revenue and its staff handling this matter were no longer operating in the regulatory fashion contemplated by section 231.1, but had, in fact, embarked on an investigation which was designed to assemble evidence for the purpose of a prosecution.
Crown counsel takes a different position and indicates that this is not what happened.
She suggests that while Mr. Persaud had taken a position that could not be substantiated by his investigation to that date, that both Mr. Lemon and Mr. Chow were simply continuing in their statutorily authorized administrative and regulatory duties and that this process continued pursuant to section 231.1 of the Act, until such time as Mr. Chow obtained information which led him to believe the audit was complete at which time the matter was immediately referred back to Special Investigations and Mr. Hart properly obtained search warrants to, as he put it, "preserve evidence".
Counsel for the applicant takes the position that the audit conducted by Mr. Chow was a separate and distinct audit from that conducted by Mr. Persaud. Crown counsel takes the position that there was a single ongoing audit.
In stating their respective positions, I have summarized and simplified their positions insofar as is necessary for the analysis which will follow.
In order to embark on this analysis, one must first start with the premise that section 231.1 of the Income Tax Act is valid legislation and that the powers contained therein do not violate section 8 of the Charter. Based on authority provided to me, it seems that such is clearly the case so long as the purpose for which the powers contained in section 231.1 are exercised is for a regulatory or administrative function. I therefore have no reason to disagree with the following cases cited as authority for this broad proposition by Crown counsel.
The cases are: Re: Belgoma Transportation Ltd. and Director of Employment Standards (1985), 20 D.L.R. (4th) 156, 51 O.R. (2d) 509 (C.A.); R v. Quesnel (1985), 24 C.C.C. (3d) 78, 53 O.R. (2d) 338 (C.A.); R v. Grosky (1991), 5 W.W.R. 547, 77 Man. KR. (2d) 124 (Q.B.).
However, in the present fact situation, was this in fact the capacity in which Mr. Chow was acting after the file was referred back to the Audit Department?
With all respect to the able submissions of Crown counsel in this regard, I cannot accept this as being the capacity in which Mr. Chow was actually acting. Rather, it is my opinion that from the time that Mr. Persaud reached the conclusion, mistakenly as it turned out, that the Department of National Revenue had sufficient evidence of an offence having been committed, the entire thrust of the staff who dealt with this matter was not merely regulatory in nature.
Particularly with regard to Mr. Chow, it was clear to him that he knew from the beginning that there was a particular area of suspicion in this matter and that he had, in fact, been given specific requests for particular information required by Mr. Lemon. Mr. Lemon has testified that the answers provided to these areas of concern would determine if an offence had been committed. Mr. Chow has gone so far as to indicate that if the proper information was uncovered that charges were probable.
Therefore, if the nature of the acts undertaken by the department staff in this matter had changed in this fashion, does that mean that the regulatory powers concerning warrantless searches which have been approved by cases such as Re Belgoma also come to an end? Counsel for the applicant suggests that this is in fact the case, and Crown counsel suggests that the powers persist regardless.
Before addressing this issue, I will first state that in my opinion the legislation being dealt with here is quasi-criminal in nature and not merely regulatory.
In support of her position that the Income Tax Act is merely regulatory, Crown counsel has referred me to the comments of Madam Justice Wilson at page 641 (C.T.C. 110, D.T.C. 6248) of The Queen v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627, 2 C.T.C. 103, 90 D.T.C. 6243.
However, I must contrast the position taken by Madam Justice Wilson with the broader analysis taken of the nature of the Income Tax Act in Baron v. Canada, [1993] 1 S.C.R. 416, 1 C.T.C. Ill, 93 D.T.C. 5018, where Justice Sopinka adopts the following comment from Justice LaForest in R v. Wholesale Travel Group Inc., [1991] 3 S.C.R. 154, 84 D.L.R. (4th) 161, wherein he says the following at page 444 (C.T.C. 124, D.T.C. 5027) of Baron'.
...what is ultimately important are not labels (though these are undoubtedly useful) but the values at stake in the particular context.
Mr. Justice Sopinka then goes on to say:
..and held that the potential five year prison term upon conviction of the offence was a deprivation of liberty requiring much greater safeguards to conform with subsection 7 or 11 (d) than the provisions at issue in Thomson Newspapers Ltd. v. Director of Investigation and Research, [1990] 1 S.C.R. 425, 67 D.L.R. (4th) 161.
In the present situation, a conviction could result in a substantial fine and a two-year jail term. This would lend itself to a belief that the present offence is quasi-criminal in nature in my opinion.
Having accepted this position, then I must consider the argument presented by counsel for the applicant and the cases of Hunter v. Southam Inc., [1984] 2 S.C.R. 145, 84 D.T.C. 6467 and Baron, supra.
The broad premises of these two cases can be taken to require that a form or prior approval is required when powers of search are exercised in quasi-criminal matters, as held in Hunter, and that an appropriate discretion lie in this granting party as held in Baron.
Both of these issues require a balancing of the interests of the individual in privacy and of the state in accomplishing public objectives, but the root principle appears to be the same, that in matters of a quasi-criminal nature, unfettered state interference with a reasonable expectation of privacy is not permissable. In addition, counsel for the applicant suggests that there are degrees of intrusiveness as indicated by Justice Sopinka at page 444 (C.T.C. 124, D.T.C. 5027) of Baron where he says the following:
Physical search of private premises (I mean private in the sense of private property regardless of whether the public is permitted to enter the premise to do business) is the greatest intrusion of privacy short of a violation of bodily integrity, it is quite distinct from compelling a person to appear for examination under oath and to bring with them certain documents under a subpoena duces tecum, (Thompson Newspapers, supra) or to produce documents on demand, (McKinlay Transport, supra) both Justices La Forest and L’Heureux-Dube acknowledge in Thompson Newspapers, supra, at page 520 and 594 (D.L.R. 230 and 288) respectively, that the power to search premises is more intrusive of an individual’s privacy than the mere power to order the production of documents.
It therefore follows that the greater the degree of intrusiveness, the greater the safeguards to be provided.
I am unable to find any authority cited by Crown counsel which would serve to rebut this position as put forward by counsel for the applicant.
However, before I can deal with this point, I must consider the case of R v. Coghlan, [1994] 1 C.T.C. 164 (Ont. Prov. Div.), decision of Judge Ratushny of this Court, delivered June 16, 1993.
This case, on the face of it, seems to be virtually on all fours with the present fact situation insofar as the ability of the Department to conduct ongoing audits and warrantless searches under section 231.1 is concerned. The issue arose in part because Baron was delivered during the course of that trial, and as section 231.3 was struck down in Baron, an evidentiary issue arose before Judge Ratushny.
Crown counsel suggests that Judge Ratushny’s decision in Coghlan, wherein she admitted evidence obtained from the warrantless searches conducted under section 231.1 of the Act where such searches were conducted after the searchers had suspicion of offences, but before charges had yet been laid, is the proper position to be taken by myself in the present matter.
While I do not necessarily disagree with the conclusion reached by Judge Ratushny based upon her analysis of the law as presented to her and presumably reflected in her judgement, I must make my decision based upon the authorities presented to me, some of which were either not cited at all by Judge Ratushny or were cited in a different context.
Firstly, Judge Ratushny accepts the position taken by Justice Wilson in McKinlay Transport concerning the regulatory nature of the Income Tax Act. She does not refer to the portion of Baron where Justice Sopinka, at page 444 (C.T.C. 124 D.T.C. 5027), comments on this subject and where he subsequently adopts the already read quotation of Justice LaForest in Wholesale Travel.
As previously indicated, I am of the opinion that the present prosecution is of a quasi-criminal nature. Secondly, Judge Ratushny makes no mention of the issue raised by counsel for the applicant in R v. Moran (1987) 36 C.C.C. (3d) 225 (Ont. C.A.), wherein that Court made a distinction between a general investigation and an accusatory questioning, which I would take to be synonymous with an accusatory investigation as opposed to a regulatory investigation as contemplated by Judge Ratushny. On these grounds, I am of the opinion that Coghlan is distinguishable from the present situation insofar as the legal principles to be considered are concerned, and I will differ from Judge Ratushny in my ruling.
Therefore, having conducted the several analyses noted above, I am of the opinion that in the circumstances of the present case, any warrantless search conducted by William Chow in this matter was not conducted for a regulatory purpose and was intrusive in nature and conducted without any form of prior approval or residual authority exercised by an appropriate party. He therefore acted without authority for such search.
The next issue to be dealt with is what remedy, if any, should accrue to the applicant herein. The remedy sought by counsel for the applicant is exclusion of all such evidence obtained and a quashing of the search warrants which flow from such evidence. Crown counsel suggests that the evidence should not be excluded. section 24 of the Charter reads as follows:
24(1) Anyone whose rights or freedoms, as guaranteed by this Charter, have been infringed or denied may apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances.
Where, in proceedings under subsection (1), a Court concludes that evidence was obtained in a manner that infringed or denied any rights of freedoms guaranteed by this Charter, the evidence shall be excluded if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute.
In support of their respective positions, both Crown and defence counsel have referred to the well known case of R v. Collins, [1987] 1 S.C.R. 265, 38 D.L.R. (4th) 508.
The majority decision was given by Justice Lamer, as he then was. In addition, he mentions at page 288 (D.L.R. 529) his concerns regarding the different tests set out in French and English versions of the Code and prefers the lower test of the French version where he translates the final test to be "Could bring the administration of justice into disrepute".
Crown counsel suggests that as the evidence obtained here was real evidence obtained with the only reasonably available investigatory technique and that as any violation of the rights of the accused is minor, that exclusion of the evidence would bring justice into greater disrepute than admission. Therefore, in her opinion, the evidence should be admitted.
Counsel for the applicant has, in addition to Collins, referred to the more recent case of Kokesch v. Canada, [1990] 3 S.C.R. 3, 61 C.C.C. (3d) 207 wherein in addition to reviewing Collins, the Court also considers the application of Collins in R v. Jacoy, [1988] 2 S.C.R. 548, 45 C.C.C. (3d) 46, where the following excerpt is read at page 21 (C.C.C. 221) of Kokesch:
First, the Court must consider whether the admission of evidence will affect the fairness of the trial. If this inquiry is answered affirmatively, "the admission of evidence would tend to bring the administration of justice into disrepute and, subject to a consideration of other factors, the evidence generally should be excluded" page 284 (D.L.R. 526). One of the factors relevant to this determination is the nature of the evidence; if the evidence is real evidence that existed irrespective of the Charter violation, its admission will rarely render the trial unfair.
The second set of factors concerns the seriousness of the violation. Relevant to this group is whether the violation was committed in good faith, whether it was inadvertent or of a merely technical nature, whether it was motivated by urgency or to prevent the loss of evidence, and whether the evidence could have been obtained without a Charter violation.
Finally, the Court must look at factors relating to the effect of excluding the evidence. The administration of justice may be brought into disrepute by excluding evidence essential to substantiate the charge where the breach of the Charter was trivial. While this consideration is particularly important where the offence is serious, if the admission of the evidence would result in an unfair trial, the seriousness of the offence would not render the evidence admissible.
This quotation lies within the dissent of Justice Dickson in Kokesch, but does reflect the majority position of the Supreme Court of Canada in Jacoy. The majority decision in Kokesch was delivered by Justice Sopinka.
Applying the appropriate test as outlined by Justice Sopinka to our present situation, I note the following:
Trial fairness:
The evidence sought to be excluded is both real evidence and self- incriminatory evidence (called derivative evidence in R v. Strachan, [1988] 2 S.C.R. 980, 56 D.L.R. (4th) 673.
For instance, while there is real documentary evidence, there is also work product and comments obtained from the accountant’s office. In my opinion, the mixed nature of this evidence would make it difficult to distinguish with great particularity which category some pieces of evidence fall into. In addition, the matter of sufficient grounds seems to hinge largely on a comment which the auditor elicited from Michel Rochon, an accountant. In my opinion, this 1s clearly derivative evidence.
Seriousness of the violation:
The sole determining factor is not to be availability of other techniques for obtaining evidence which may have been available. Counsel for the applicant suggests that other portions of section 231 allow for other methods which may be less intrusive to obtain evidence.
Crown counsel suggests that these may in fact be more intrusive. This position seems contrary to that taken in Regina and Baron.
However, it seems clear that regardless of whether other methods were more or less intrusive, there were other methods available to obtain evidence and the auditor involved, namely Mr. Chow, seems not to have been aware of them.
At page 29 (C.C.C. 227) of Kokesch, Mr. Justice Sopinka says the following:
Where the police have nothing but suspicion and no legal way to obtain other evidence, it follows that they must leave the suspect alone, not charge ahead and obtain evidence illegally and unconstitutionally. Where they take this latter course, the Charter violation is plainly more serious than it would be otherwise, not less. Any other conclusion leads to an indirect but substantial erosion of the Hunter standards. The Crown would happily concede section 8 violations if they could routinely obtain admission under subsection 24(2) with the claim that the police did not obtain a warrant because they did not have reasonable and probable grounds. The irony of this result is self-evident. It should not be forgotten that ex post facto justification of searches by their results is precisely what the Hunter standards were designed to prevent. (See Hunter, supra per Dickson J. as he then was, at page 160 (D.T.C. 6474) in Greffe, supra, per Lamer J., at pages 187-88 and 193-94).
From the point of view of individual privacy which is the essential value protected by section 8 of the Charter, this illegal intrusion onto private property must be seen as far from trivial or minimal. Even before the enactment of the Charter, individuals were entitled to expect that their environs would be free of prowling government officials unless and until the conditions for the exercise of legal authority are met.
He then goes on to refer to a line of authority in that regard.
He then states:
The elevation of that protection to the constitutional level signifies its deep roots in our legal culture.
Justice Sopinka then goes on to consider the issue of good faith in the violation before himself and reviews a portion of the evidence given at trial, concluding from that that there was a lack of good faith on the part of the witness, namely, a police officer.
This is analogous to the present situation where Mr. Chow appears to have executed what he understood were his powers under section 231.1 to conduct a five day audit at the premises of Parsons &; Company when he could simply have exercised his powers under paragraph 231.1(1)(d) to request the information. In fact, he appears to have not been aware that he could have simply made such a demand. He ought to have known that he had this ability and considered his options prior to exercising his power to search.
The effect of exclusion on the reputation of the administration of justice:
Simply put, if exclusion would cause greater disrepute than admission, the evidence should be admitted.
In Kokesch, the evidence was excluded for reasons particular to that case. In the present situation, the charges are serious and the facts are unusual. Also, the effect of exclusion on the public purse may be substantial if the Crown’s case ultimately fails as the result of exclusion. However, the breaches noted are also serious.
In considering this matter, I suspect the public would be concerned about the lack of knowledge of their myriad of powers which has been expressed by Department staff in this matter and the procedures that this staff took which were unauthorized by law, disruptive, time consuming and it seems, largely unnecessary, based upon other powers available to them of which they were unaware.
In addition, there appears to be a public interest to be served in ensuring that public officials who possess the ability to lay charges in quasi-criminal matters not be allowed unfettered powers of collecting evidence beyond the point where they have turned their minds from mere administration or regulation to prosecution.
Accordingly, I do not feel that I could put it any better than in the general words that Justice Sopinka has stated at page 26 (C.C.C. 232) of Kokesch, and I will adopt his general form of wording and conclude, not without great reluctance, that the administration of justice would suffer far greater disrepute from the admission of this evidence than from its exclusion. This Court must not be seen to condone conduct of this sort evidenced by the facts of the present case on the part of officials who wield substantial power over private citizens and who do not exercise this power in a thoughtful or knowledgeable fashion, and in fact do so in an overt fashion without full knowledge of the powers available to them which are less overt and who do so in a fashion which is oppressive to the rights of individuals.
Therefore, pursuant to subsection 24(2) of the Canadian Charter of Rights and Freedoms, the evidence obtained by William Chow pursuant to section 231.1 of the Income Tax Act in the course of his audit of the applicant which commenced October 22, 1991, is excluded for the purpose of this proceeding and trial. This evidence, having been excluded, the search warrants based on such information obtained during the audit are therefore without basis and are quashed.
Having made this ruling, there is no need for me to proceed further and deal with other issues raised on the Charter application of the applicant, and I will not do so, save and except to add that the consideration of section 231.1 which I have made in the present ruling would, in my opinion, be equally applicable to a consideration of the same section on other issues raised by the application.
So Ms Jaffe, there we have it, ma’am. The warrant, based upon my ruling, the evidence having been excluded, is quashed.
Appeal dismissed.
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