Citation: 2013 TCC 209
Date: 20130624
Docket: 2003-3382(GST)G
BETWEEN:
506913 N.B. LTD.,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent;
AND BETWEEN:
Docket: 2003-3383(GST)G
CAMBRIDGE LEASING LTD.,
Applicant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
D’Arcy J.
[1]
The Appellants have
brought a motion for an Order excluding certain documents as evidence at the
hearing of their appeal. The specific wording of the motion is attached hereto
as Schedule A.
[2]
It appears that the
Appellants are asking the Court to exclude all evidence gathered by the CRA
during its audits and investigations of them. The specific documents include
all the documents listed in Schedule A of the Respondent’s List of Documents
(Partial Disclosure) and nearly all of the documents contained in the
disclosure list for a criminal trial involving the Appellants. The Notice of Motion
also refers to documents obtained by RCMP officers.
[3]
In Part II of their
Brief on Motion, the Appellants state that the issues to be addressed by the
Court are as follows:
1.
Whether the Appellants have
suffered a breach of their section 8 Charter of Rights and Freedoms (“the
Charter”) rights in the circumstances and, in particular, whether
the Minister’s agents, auditors and investigators improperly conducted a
criminal investigation under the guise of an exercise of audit powers.
2.
Whether the searches
and seizures of documents and records that were carried out under judicial
authorizations by the Minister’s auditors, investigators and RCMP officers were
illegal and therefore contrary to section 8 of the Charter because
they were based on illegally obtained evidence as set out in the Brief on
Motion, thus entitling the Appellants to an Order excluding the evidence under
subsection 24(2) of the Charter.
[4]
The Appellants relied
on affidavits sworn by Mr. David Daley on February 24, 2011 (the “Daley
Affidavit”) and Mr. Allen Skaling on January 27, 2012 (the “Skaling
Affidavit”). During the relevant period, Mr. Daley was the president and a
director of the Appellants and owned 50% of the shares of the Appellants.
During the relevant period, Mr. Skaling was the comptroller and
secretary-treasurer of the Appellants.
[5]
A number of documents
were attached to the Daley Affidavit and the Skaling Affidavit, including the
transcripts of the examination for discovery in this appeal of CRA official Mr.
Ron MacIntyre (the “Discovery of Ron Macintyre”) and the transcripts of a trial
voir dire held in the New Brunswick Provincial Court (the “voir dire”). The voir
dire occurred during the criminal trial of Mr. Daley and the Appellants, which
I will discuss shortly.
History of Proceedings
[6]
The Appellant 506913
N.B. Ltd. (“506913”) is appealing a reassessment issued by the Minister for its
GST reporting periods ending between May 1, 1998 and October 31, 2000. The
reassessment increased 506913’s net tax by $5,627,882. The Minister also
assessed penalties and interest of $1,253,746 and gross negligence penalties of
$1,374,854.
[7]
The Appellant Cambridge
Leasing Ltd. (“Cambridge”) is appealing an assessment issued by the Minister for
its GST reporting periods ending between November 1, 2000 and December 31,
2000. The assessment increased Cambridge’s net tax by $498,031. The Minister
also assessed penalties and interest of $51,934 and gross negligence penalties
of $124,508.
[8]
There are two other
relevant legal proceedings involving the Appellants. The Appellants, together
with Mr. Daley, were subjected to criminal proceedings before the New Brunswick
Provincial Court (the “Criminal Proceedings”).
[9]
Further, the Appellants
and their principals have brought a civil action against individual employees
of the Canada Revenue Agency (the “CRA”) and the Attorney General of Canada in
the Court of Queen’s Bench of New Brunswick (the “Civil Action”).
[10]
With respect to the
current appeal, a pre-trial conference was held before me on January 28, 2011.
On February 7, 2011, I issued an Order providing for the filing by the
Appellants of a motion to challenge the admissibility at trial of certain
documents. The Appellants filed a motion on February 28, 2011. The motion did
not comply with my February 7, 2011 Order.
[11]
On March 23, 2011, I
issued a second Order directing the Appellants to withdraw the motion they
filed on February 28, 2011 and to file a new motion consistent with my Order of
February 7, 2011. The Court also provided detailed directions with respect to
the content of the new motion. The Appellants then filed this motion with the
Court on February 3, 2012 (the “Main Motion”).
[12]
On March 15, 2012, the
Respondent filed a motion to have struck out certain affidavits filed by the
Appellants in support of the Main Motion or, in the alternative, to have struck
out certain specified paragraphs of the affidavits together with the associated
exhibits. The Respondent’s motion raised three issues:
1.
whether certain
documents should be excluded because they are subject to solicitor-client
privilege;
2.
whether the
Appellants were prohibited from using a transcript of the discovery of a CRA
official in the Civil Action; and,
3.
whether certain
portions of the various affidavits should be struck because of the nature of
the statements therein.
[13]
I heard the Respondent’s
motion over three days in April 2012 and rendered my oral decision on April 16,
2012. I found that:
1.
the actions of the
Respondent constituted an implied waiver of the solicitor‑client
privilege;
2.
the oral discovery
testimony of Mr. Ron MacIntyre in the Civil Action should be removed from the affidavits
since it was subject to the implied undertaking rule; and,
3.
numerous statements
contained in the affidavits should be struck, as they constituted speculation,
opinion, argument and/or legal conclusions.
[14]
After I rendered my
decision on the Respondent’s motion, Mr. Skaling and Mr. Daley were
cross-examined on their affidavits. The Appellants then requested an
adjournment of the Main Motion to allow them time to bring a motion in the
Court of Queen’s Bench of New Brunswick to have the implied undertaking rule
waived by that Court. I granted the adjournment request.
[15]
On July 3, 2012,
Justice Rideout of the Court of Queen’s Bench of New Brunswick dismissed
the Appellants’ motion to be “. . . excused from compliance with their implied
undertaking. . . .”
[16]
The first issue I will
address is whether the Minister’s agents, auditors and investigators conducted
a criminal investigation under the guise of an exercise of audit powers.
Audit v. Criminal Investigation Issue
[17]
The relevant sections
of the Charter are sections 8 and 24. Section 8 of the Charter
states that “[e]veryone has the right to be secure against unreasonable search
or seizure.” Section 24 of the Charter reads as follows:
(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.
(2)
Where, in proceedings under subsection (1), a court concludes
that evidence was obtained in a manner that infringed or denied any rights or
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.
[18]
I must first determine
whether there has been a section 8 breach. If I find there has been a breach, I
must then determine whether the Court should exclude evidence pursuant to
subsection 24(2) of the Charter.
The Law
[19]
There is a low
expectation of privacy with regard to business records relevant to determining
tax liability.
As the Supreme Court of Canada (the “SCC”) noted in R. v. Jarvis:
With respect to the consequences related to s. 8 of the Charter,
McKinlay Transport, supra, makes it clear that taxpayers have very
little privacy interest in the materials and records that they are obliged to
keep under the ITA, and that they are obliged to produce during an audit.
Moreover, once an auditor has inspected or required a given document under ss.
231.1(1) and 231.2(1), the taxpayer cannot truly be said to have a reasonable
expectation that the auditor will guard its confidentiality. It is well known,
as Laskin C.J. stated in Smerchanski, supra, at p. 32, that
“[t]he threat of prosecution underlies every tax return if a false statement is
knowingly made in it”. It follows that there is nothing preventing auditors
from passing to investigators their files containing validly obtained audit
materials. That is, there is no principle of use immunity that prevents the
investigators, in the exercise of their investigative function, from making use
of evidence obtained through the proper exercise of the CCRA’s audit function.
Nor, in respect of validly obtained audit information, is there any principle
of derivative use immunity that would require the trial judge to apply the “but
for” test from S. (R.J.), supra. If a particular piece of
evidence comes to light as a result of the information validly contained in the
auditor’s file, then investigators may make use of it.
[20]
However, the SCC
determined in Jarvis that compliance audits and tax evasion investigations
must be treated differently. The Court summarized its conclusions as follows:
. .
. While taxpayers are statutorily bound to co-operate with CCRA auditors for
tax assessment purposes (which may result in the application of regulatory
penalties), there is an adversarial relationship that crystallizes between the
taxpayer and the tax officials when the predominant purpose of an official’s
inquiry is the determination of penal liability. When the officials exercise
this authority, constitutional protections against self-incrimination prohibit
CCRA officials who are investigating ITA offences from having recourse to the
powerful inspection and requirement tools in s. 231.1(1) and 231.2(1). Rather,
CCRA officials who exercise the authority to conduct such investigations must
seek search warrants in furtherance of their investigation.
[21]
The decision of the SCC
in Jarvis relates to actions of CRA officials under the Income Tax
Act (the “ITA”). It is my view that the SCC’s conclusions apply
equally to actions of CRA officials under Part IX of the Excise Tax Act
(the “GST Act”).
[22]
The relevant portions
of the SCC’s decision in Jarvis focused on the inspection and
requirement tools provided to the CRA under subsections 231.1(1) and 231.2(1)
of the ITA. The wording of subsections 288(1) and 289(1) of the GST
Act is nearly identical to the wording of subsections 231.1(1) and 231.2(1)
respectively of the ITA. The purpose of the subsections is the same.
[23]
Subsections 288(1) and
289(1) of the GST Act read as follows:
288(1) An authorized person may, at all reasonable times, for any purpose
related to the administration or enforcement of this Part, inspect, audit or
examine the documents, property or processes of a person that may be relevant
in determining the obligations of that or any other person under this Part or
the amount of any rebate or refund to which that or any other person is
entitled and, for those purposes, the authorized person may
(a)
subject to subsection (2), enter any premises or place where any business or
commercial activity is carried on, any property is kept, anything is done in
connection with any business or commercial activity or any documents are or
should be kept, and
(b)
require the owner or manager of the property, business or commercial activity
and any other person on the premises or in the place to give to the authorized
person all reasonable assistance and to answer all proper questions relating to
the administration or enforcement of this Part and, for that purpose, require
the owner or manager to attend at the premises or place with the authorized
person.
. . .
289(1) Despite any other provision of this Part, the Minister may, subject
to subsection (2), for any purpose related to the administration or enforcement
of a listed international agreement or this Part, including the collection of
any amount payable or remittable under this Part by any person, by notice
served personally or by registered or certified mail, require that any person
provide the Minister, within any reasonable time that is stipulated in the
notice, with
(a)
any information or additional information, including a return under this Part;
or
(b)
any document.
[24]
In reaching its
decision in Jarvis, the SCC discussed the statutory context of the ITA,
focusing on the regulatory nature of the statute and the self-assessing and
self-reporting nature of the tax collection scheme under the ITA.
[25]
The statutory context
of the GST Act is very similar to that of the ITA. The GST Act
is a regulatory statute that controls the manner in which the federal GST is
calculated and collected. The process of GST collection relies primarily upon
self-assessment and self-reporting. GST registrants collect the tax as agents
for the government, claim input tax credits for the tax they pay on their
purchases of goods and services, calculate the amount of tax they are required
to remit (or the refunds they are entitled to claim) for a monthly, quarterly
or annual reporting period, and disclose this amount to the CRA in the GST
return they are required to file.
[26]
As with income tax, the
success of the administration of the GST depends upon taxpayer forthrightness.
In addition, as with income tax, the nature of the GST tax collection scheme
creates an obstacle in this regard. In fact, the problem is more acute in the
GST context. The problem relates to the portion of the GST return that shows
how the GST registrant determines the amount of tax it is required to remit or
the amount of refund it is entitled to receive. It comprises only four lines.
It will always be impossible, therefore, to determine from the face of a GST
return whether any impropriety has occurred in its preparation. For this
reason, consistent with the SCC’s findings in Jarvis, the CRA
must be given broad powers, in supervising this regulatory scheme, to audit GST
registrants’ GST returns and inspect all records which may be relevant to the
preparation of these returns.
[27]
The SCC in Jarvis
discussed the following sections of the ITA that provide the Minister
with the required powers for the supervision of the regulatory scheme under
that Act:
-
Subsection 230(1),
which sets out the requirement for taxpayers to maintain records and books of
account at their place of business or residence in Canada.
-
Subsection 231.1(1),
which allows a person authorized by the Minister to inspect, audit or examine a
wide range of documents and provides that the authorized person may, in the
course of the inspection, audit or examination, enter into any premises that are
not a dwelling-house (a warrant is required before the authorized person may
enter a dwelling‑house).
-
Subsection 231.2(1),
which allows the Minister, by written notice, to compel a person to produce any
information or document.
-
Subsection 238(1),
which provides that a summary conviction offence is committed where there is,
among other things, failure to file returns or maintain books and records.
-
Section 239, which
provides for such summary conviction offences as making false or deceptive
statements, destruction or alteration of documents, wilful evasion of income
tax, and conspiracy to engage in prohibited activities.
[28]
Subsections 286(1),
288(1) and 289(1), section 326, and subsection 327(1) of the GST Act
provide the Minister with similar if not identical powers to supervise the
regulatory scheme under the GST Act.
[29]
As a result of the
similar statutory context of the ITA and the GST Act, and the
similar powers vested in the Minister under the ITA and the GST Act,
it is my opinion that the SCC’s findings with respect to the application of section
8 of the Charter to the relevant provisions of the ITA apply
equally to the relevant provisions of the GST Act.
[30]
The key issue in the
current motion is the determination of the predominant purpose of the inquiries
made by the CRA auditors during the audits of 506913 and Cambridge. As the SCC
stated in Jarvis,
In our view, where the predominant purpose of a particular inquiry
is the determination of penal liability, CCRA officials must relinquish the
authority to use the inspection and requirement powers under ss. 231.1(1) and
231.2(1). In essence, officials “cross the Rubicon” when the inquiry in
question engages the adversarial relationship between the taxpayer and the
state. There is no clear formula that can answer whether or not this is the case.
Rather, to determine whether the predominant purpose of the inquiry in question
is the determination of penal liability, one must look to all factors that bear
upon the nature of that inquiry.
[31]
I must determine
whether the CRA auditors who audited 506913 and Cambridge crossed the
Rubicon. The SCC provided the following guidance for the making of this
determination:
To reiterate, the determination of when the relationship between the
state and the individual has reached the point where it is effectively
adversarial is a contextual one, which takes account of all relevant factors.
In our opinion, the following list of factors will assist in ascertaining
whether the predominant purpose of an inquiry is the determination of penal
liability. Apart from a clear decision to pursue a criminal investigation, no
one factor is necessarily determinative in and of itself, but courts must
assess the totality of the circumstances, and make a determination as to
whether the inquiry or question in issue engages the adversarial relationship
between the state and the individual.
In this connection, the trial judge will look at all factors,
including but not limited to such questions as:
(a)
Did the authorities have reasonable grounds to
lay charges? Does it appear from the record that a decision to proceed with a
criminal investigation could have been made?
(b)
Was the general conduct of the authorities such
that it was consistent with the pursuit of a criminal investigation?
(c)
Had the auditor transferred his or her files and
materials to the investigators?
(d)
Was the conduct of the auditor such that he or
she was effectively acting as an agent for the investigators?
(e)
Does it appear that the investigators intended
to use the auditor as their agent in the collection of evidence?
(f)
Is the evidence sought relevant to taxpayer
liability generally? Or, as is the case with evidence as to the taxpayer’s mens
rea, is the evidence relevant only to the taxpayer’s penal liability?
(g)
Are there any other circumstances or factors
that can lead the trial judge to the conclusion that the compliance audit had
in reality become a criminal investigation?
Application of Law to Facts Relating to the Appellants
Summary of Facts
[32]
506913 was incorporated
on April 30, 1998
and began operations in May 1998. It is stated in the Amendment to the
Notice of Appeal filed September 26, 2003 that 506913 carried on business
as a dealer for the purchase, sale and export of automobiles.
[33]
506913 was a monthly
filer for GST purposes. 506913 claimed a refund of $320,000 in its first GST
return, which was for its monthly GST reporting period ending on May 31, 1998. When a
GST registrant claims a refund in its first GST return, it is the CRA’s normal
practice to audit the return. As a result, the CRA assigned Mr. George
LeBlanc to conduct the audit of 506913 in August 1998.
[34]
At the time Mr. LeBlanc
was assigned the audit of 506913, he was auditing a Moncton car dealer, Moncton
Chrysler Dodge (“Moncton Chrysler”) He had been assigned the audit of Moncton
Chrysler in June 1998. He left this audit in August to begin the audit of
506913.
[35]
Mr. LeBlanc audited
506913 until November 1998. During this period, he expanded the scope of his
audit to include the monthly GST returns filed by 506913 for June, July, August
and September 1998. 506913 claimed refunds exceeding $485,000 on these monthly
returns.
[36]
Mr. LeBlanc stopped
auditing 506913 in November 1998 and returned to the audit of Moncton Chrysler.
However, he retained responsibility for the audit of 506913. It also appears
that he authorized the payment of refunds to 506913. In December 1998, the
government paid GST refunds of approximately $600,000 to 506913. These refunds
comprised the amounts claimed by 506913 in its GST returns for its reporting
periods ending between May 1, 1998 and September 30, 1998 less a
$200,000 adjustment the CRA made for 506913’s May 1998 GST reporting
period.
[37]
506913 continued to
claim substantial refunds in its monthly GST returns. The CRA paid 506913
approximately $4.3 million in respect of refunds claimed by 506913 in its GST
returns filed for the reporting periods ending between October 1, 1998 and July
31, 2000. The $4.3 million represented the total amount claimed by 506913
during this period.
[38]
On February 17, 2000,
Mr. LeBlanc referred the audit of Moncton Chrysler to the CRA’s special
investigations group (the “SI Group”). The CRA assigned Mr. Ron MacIntyre,
a CRA special investigations officer, to the investigation of Moncton Chrysler. The New
Brunswick Provincial Court subsequently convicted the principal of Moncton
Chrysler of 30 offences under the GST Act.
[39]
In early April 2000, Mr.
LeBlanc accepted a new job at the CRA and ceased being a GST auditor. Mr.
Yvon Boudreau, a CRA auditor, replaced Mr. LeBlanc as the auditor of 506913.
[40]
Mr. Boudreau was also
assigned the audit of a Nova Scotia company owned by Mr. Daley and Mr. Kay,
Nautica Motors Inc. (“Nautica”). Mr. Boudreau elected to audit Nautica first.
He completed the audit of Nautica in mid-to late May 2000 and then began
the audit of 506913.
[41]
On October 25, 2000,
Mr. Boudreau and Ms. Claudette Miller, a member of the SI Group, met with Mr.
Daley and Mr. Skaling. Ms. Miller gave a verbal Charter warning to Mr.
Daley and Mr. Skaling with respect to answering questions regarding the activities
of Mr. Daley and 506913.
[42]
From October 26, 2000
to early December 2000, Mr. Boudreau continued his audit of 506913. I will
discuss the nature of his work later on in my reasons. Mr. Boudreau
transferred his audit files to Mr. MacIntyre of the SI Group on February 16,
2001.
[43]
By February 2001,
Cambridge had filed its first GST returns. These returns related to its
November and December 2000 reporting periods. Cambridge claimed large refunds in
both returns. The CRA assigned Mr. Boudreau the audit of these returns. He met
with Mr. Skaling and Mr. Daley in February 2001 to discuss the audit of
Cambridge’s returns. During this meeting, Mr. Boudreau became aware that
Cambridge and 506913 had sold vehicles to the same company. Mr. Boudreau
then stopped the audit. In early March 2001, he referred Cambridge to the
SI Group.
[44]
On November 15, 2001,
the Minister assessed 506913 for $8,256,482. The assessment was in respect of
506913’s GST reporting periods ending between May 1, 1998 and October 31,
2000.
[45]
On November 22, 2001,
the Minister assessed Cambridge for $674,472. The assessment was in respect of
Cambridge’s GST reporting periods ending between November 1, 2000 and December
31, 2000.
[46]
On June 1, 2005,
criminal charges were laid against 506913, Cambridge and Daley. On July 30,
2008, the Provincial Court of the Province of New Brunswick granted the
three accused a stay of proceedings on the basis that the accused’s rights
under section 11(b) of the Charter had been infringed.
[47]
The evidence before this
Court indicates that the CRA conducted three inquiries regarding the
Appellants; the first was carried out by Mr. LeBlanc, the second by Mr.
Boudreau and the third by Mr. MacIntyre and other members of the SI Group (the “MacIntyre
inquiry”). The first step in the Charter analysis is to determine the
predominant purpose of each of these inquiries.
Application
of Law to the Facts
[48]
It is the Appellants’
position that each of the three inquiries was a criminal investigation. In
their Brief on Motion, they argue that the alleged audits conducted by Mr. LeBlanc
and Mr. Boudreau between August 1997 and February 2001 were part and parcel of
a criminal investigation.
[49]
I note that the
Appellants argue that a criminal investigation of 506913 began in the summer of
1997, nearly a year before 506913 was incorporated and began to carry on a
business. I do not understand how a criminal investigation of a corporation
could have begun a year before the corporation came into existence. Regardless,
I do not accept that Mr. LeBlanc’s and Mr. Boudreau’s audit activities were
part of a criminal investigation.
[50]
I have reached this
conclusion after considering the factors set out in Jarvis. I will now
discuss the application of these factors to the current motion.
Factor 1: Did the authorities have
reasonable grounds to lay charges? Does it appear from the record that a
decision to proceed with a criminal investigation could have been made?
[51]
The SCC provided the
following guidance with respect to the application of this factor:
To begin with, the mere existence of reasonable grounds that an
offence may have occurred is by itself insufficient to support the conclusion
that the predominant purpose of an inquiry is the determination of penal
liability. Even where reasonable grounds to suspect an offence exist, it will
not always be true that the predominant purpose of an inquiry is the
determination of penal liability. In this regard, courts must guard against
creating procedural shackles on regulatory officials; it would be undesirable
to “force the regulatory hand” by removing the possibility of seeking the
lesser administrative penalties on every occasion in which reasonable grounds
existed of more culpable conduct. . . . While reasonable grounds indeed
constitute a necessary condition for the issuance of a search warrant to
further a criminal investigation (s. 231.3 of the ITA; Criminal Code, s.
487), and might in certain cases serve to indicate that the audit powers were
misused, their existence is not a sufficient indicator that the CCRA is
conducting a de facto investigation. In most cases, if all ingredients
of an offence are reasonably thought to have occurred, it is likely that the
investigation function is triggered.
[52]
There is no evidence
before the Court to support a finding that Mr. LeBlanc was aware, during the
course of his audit of 506913, of any grounds for the laying of criminal
charges.
[53]
During the course of
his audit of 506913, he discovered that 506913 was purchasing vehicles from
certain Montreal companies that were not filing GST returns. However, Mr. LeBlanc
stated during the voir dire that this fact, in and of itself, was not evidence
that 506913 was involved in illegal activities. His specific comments were as
follows:
Well,
we know the problem lies with the non-filer. The non-filer has normally
collected more tax than he’s paid out and has not remitted. And we know that
the tax loss is going to be at the non-filer. The person selling to the
non-filer or the person buying from the non-filer, there’s no evidence that there’s
anything illegal there in and of itself. Now, once you begin an audit and do an
audit, you may run into indications that this can be some problems. However,
in and of itself, it’s not where the problem lies; the problem lies with the
non-filer.
[54]
Mr. LeBlanc noted that
during the period when he physically conducted the audit of 506913 - August
1998 to November 1998 - he saw no evidence to indicate that 506913 was involved
in illegal transactions. In fact, in November 1998 he approved the payment of
approximately $600,000 of refunds claimed by 506913 in its GST tax returns. The
fact that the CRA paid 506913 refunds of approximately $600,000 is strong
evidence that they did not suspect 506913, at that point in time, of any
criminal activity. In fact, it supports Mr. LeBlanc’s comments that he did not
see any problems with 506913’s GST filings.
[55]
It appears that Mr. LeBlanc’s
audit of 506913 did raise concerns in his mind with respect to Moncton
Chrysler. During his audit of 506913 he discovered that vehicles 506913
purchased from the Montreal non-filers originated with Moncton Chrysler. As a
result, in November 1998 he returned to his audit of Moncton Chrysler. As
previously noted, Moncton Chrysler and its principal owner were eventually
charged with and convicted of criminal offences.
[56]
There was no active
physical audit of 506913 between November 1998 and May 2000. However, during
this period, the CRA continued to pay substantial refunds to 506913 that were based
upon the GST returns 506913 filed during this period.
[57]
Upon taking over the
audit of 506913 in May 2000, Mr. Boudreau continued to conduct an audit of the
company to determine its civil liability under the GST Act. While
conducting his audit, he met with Mr. Skaling, Mr. Daley and other employees of
506913. It appears that he used the inspection powers and third party demand
powers provided in sections 288 and 289 respectively. During
this period, the CRA continued to pay substantial refunds to 506913.
[58]
The evidence before me
is that the first time Mr. Boudreau received an indication that 506913 might be
involved in criminal activities was in October 2000.
[59]
In October 2000, Mr.
MacIntyre informed Mr. Boudreau that he had evidence that he believed
implicated 506913 and Mr. Daley in a tax evasion scheme. In October 2000, Mr.
MacIntyre, in the course of his criminal investigation of Moncton Chrysler, met
with a Mr. Mike Levi. In the course of the meeting, which occurred at the
offices of Scott Fowler, a Moncton lawyer, Mr. MacIntyre received
information, which he believed implicated 506913 and Mr. Daley in a tax
evasion scheme.
He then contacted Mr. Boudreau and advised him that a Charter
warning would have to be given before Mr. Boudreau obtained any additional
information from 506913 or Mr. Daley.
[60]
Mr. MacIntyre did not
share the actual evidence obtained from Mr. Levi with Mr. Boudreau. Mr.
Boudreau and Mr. MacIntyre worked in separate CRA offices: Mr. Boudreau in the
Moncton office and Mr. MacIntyre in the Saint John office. Mr. Boudreau noted
that, at the time Mr. MacIntyre and another CRA official, Ms. Miller, came to
his office in Moncton in October 2008, he had no reason to believe 506913 was
engaged in fraudulent transactions.
Further, he did not know why those two officials came to his office and told
him that 506913 should be given a Charter warning. Mr. Boudreau stated,
“I didn’t - - I didn’t know why he [Mr. MacIntyre] was approaching me. I had no
idea what - - what it related to . . . . I had an audit to do and I was going
to pursue my audit.”
[61]
As noted previously, on
October 25, 2000, Mr. Boudreau and Ms. Miller met with Mr. Daley and Mr.
Skaling. Ms. Miller gave a verbal Charter warning to Mr. Daly and Mr.
Skaling with respect to the activities of Mr. Daley and 506913.
[62]
I believe that Mr.
MacIntyre and Ms. Miller had reasonable grounds to proceed with a criminal
investigation by the latter part of October 2000. In fact, I believe that a
criminal investigation by the SI Group began when Ms. Miller issued the Charter
warning on October 25, 2000. During his examination for discovery, Mr. MacIntyre
acknowledged that, at that point in time, the SI Group had reasonable grounds
to believe that Mr. Daley and 506913 were involved in criminal activity.
[63]
The evidence before me
does not support a finding that the CRA had reasonable grounds to lay charges
before October 25, 2000. There is no evidence before me that Mr. LeBlanc had at
any time uncovered evidence that led him to believe or suspect that 506913 was
engaged in criminal activity.
[64]
As I just discussed, Mr.
MacIntyre informed Mr. Boudreau in October 2000 that a Charter warning should
be issued before he spoke with Mr. Daley or obtained information from 506913.
Clearly, this must have raised suspicion in Mr. Boudreau’s mind. However,
the SI Group did not provide Mr. Boudreau with the details of Mr. Daley’s and
506913’s alleged criminal activity. The first time that Mr. Boudreau obtained
direct evidence that 506913 may have been engaged in criminal activities was in
November 2000.
[65]
In November of 2000, Mr.
Boudreau received, from a car dealership in Toronto, information with respect
to five high-value SUV’s that did not appear to be consistent with information
provided by 506913. He then contacted a person who operated a car-auctioning
business in New Brunswick. The information he received from the Toronto car
dealer and the New Brunswick auction house led him to believe that certain
transactions recorded in 506913’s records may not have occurred. He then
concluded that it was time to refer the Appellant’s file to the SI Group.
[66]
There is no evidence
before me that Mr. Boudreau was aware, before November 2000, of any evidence
that would support the laying of criminal charges. Although the information he
obtained in November 2000 raised suspicion in Mr. Boudreau’s mind that an
offence had occurred, it is not clear from the evidence before me that this
information was sufficient to support the laying of charges. Regardless, the SI
Group began its criminal investigation in October 2000.
Factor 2: Was the general conduct of the
authorities such that it was consistent with the pursuit of a criminal
investigation?
[67]
On the basis of the
evidence before me, I have concluded that the conduct of Mr. LeBlanc and Mr.
MacIntyre was at all times consistent with the pursuit of a civil audit of the
Appellants. The conduct of Mr. MacIntyre and the other members of the SI Group
was consistent with the pursuit of a criminal investigation.
[68]
Counsel for the
Appellant argued that conduct of Mr. LeBlanc and Mr. Boudreau was at all
times consistent with the pursuit of a criminal investigation because they
reviewed each purchase and sale of an automobile made by 506913. He argued that
in a true audit the CRA would only audit a sample of a registrant’s purchases
and sales and then extrapolate using statistical sampling. Mr. Skaling stated
that 506913 and Cambridge completed 1,271 transactions between May 1998 and
December 2000.
[69]
I do not accept that
the review by a CRA auditor of each purchase and sale of an automobile made by
a GST registrant is consistent with the pursuit of a criminal investigation as
opposed to a civil audit.
[70]
As noted previously,
the CRA chose 506913 for audit because it had claimed a large refund in the GST
return it filed for May 1998, its first GST reporting period. My review of the
evidence before me, particularly Mr. LeBlanc’s and Mr. Boudreau’s
testimony during the voir dire, leads me to conclude that their actions were those
one would have expected from trained GST auditors auditing a registrant such as
506913.
[71]
From a CRA audit
perspective, 506913 was clearly a high-risk GST registrant. It was a new GST
registrant which, during its first two and a half years of operations, claimed
GST refunds of over $5.8 million dollars. It operated in an area involving
high-value taxable supplies, namely the purchase and sale of automobiles.
Further, Mr. LeBlanc determined during his audit that 506913 was purchasing
automobiles from GST registrants who were not filing GST returns and from
related companies.
The following voir dire testimony of Mr. LeBlanc shows that the presence of
non-filers had an impact on the audit techniques used by the CRA to audit
506913:
Q. And then comes June, July, August, and ultimately September, and
I think you’ve acknowledged that there was rather unusual procedures adopted
there of doing every month as they came, right?
A. Yes, it was a full scope audit that was assigned at that point.
Q. What I want to know now is, what sort of a purpose did you as an
auditor set for yourself.
A. Well the purpose of was, of course, to verify the accuracy of the
returns.
Q. Right.
A. And we knew that the vehicles were being purchased from a
non-filer, so we wanted to verify that indeed we should be paying these credit
returns and that Nautica [506913] was not involved, you know in the—with the
non-filers.
[72]
As noted previously,
after conducting this portion of his audit, Mr. LeBlanc concluded that 506913
was not involved with the non-filers, and authorized the payment of $600,000 of
the $800,000 of refunds claimed by 506913 at that point in time.
[73]
The audit of 506913 was
further complicated by the fact that 506913 was making taxable supplies of
automobiles that were potentially taxable at the 0% rate applicable to exports,
or at the 7% GST rate for supplies made in a non-participating province, or at the
15% HST rate for supplies made in a participating province. In fact, 506913 did
not collect GST on a number of sales of automobiles on the basis that the sales
were made outside of Canada, that the vehicles were sold in Canada for export
from Canada, or that they were sold to a status Indian and delivered on a
reserve.
The non-taxation of each of these sales is dependent on meeting the
requirements of numerous statutory provisions and on the production by the
supplier (506913) of very specific documentation for each sale.
[74]
In my view, it not
unusual for a GST auditor, when faced with such a high‑risk and
complicated audit, to review individual sales and purchases of the supplier,
particularly when the property being purchased and sold is a relatively high‑priced
product, such as an automobile. Mr. LeBlanc and Mr. Boudreau had to be satisfied
that the amounts that 506913 reported in its GST returns as its net tax for a
reporting period
were correct.
[75]
It is important to
remember that the portion of the GST return that shows how a GST registrant,
such as 506913, has calculated its net tax consists of four lines. The return
does not provide any details of the calculation, but merely shows the total GST
collected or collectable and the total input tax credits claimed. A GST auditor
can only determine if these numbers are correct by examining the books and
records of the GST registrant. In particular, since the GST is a transaction
tax levied on individual supplies of property and services, a GST auditor must
be satisfied that the net tax reported on the GST return is supported by the
individual transactions entered into by the GST registrant.
[76]
In the current appeal,
Mr. LeBlanc and Mr. Boudreau had to determine if a new company, with few
employees, had charged tax on its supplies at the proper rate (0%, 7% or 15%)
or paid tax at the proper rate. In most instances, the proper rate was
dependent on where the automobile was delivered or, in the case of certain zero-rated
export sales and inter provincial sales, on where and how the property was
transported after its was delivered to the recipient of the supply. In such a
situation, the determination whether the GST registrant has properly calculated
its net tax requires the CRA auditor to review specific documentation for each
individual transaction.
[77]
The transcripts from
the voir dire indicate that, with respect to sales made by 506913, Mr. LeBlanc
and Mr. Boudreau focused most of their efforts on obtaining documentation to
support 506913’s filing position with respect to a specific supply. For
example, Mr. LeBlanc and Mr. Boudreau appear to have spent a significant amount
of time obtaining documentation to support 506913’s position that a significant
number of the automobiles sold were exported from Canada. With respect to the
input tax credits claimed by 506913, it appears that Mr. LeBlanc’s and Mr.
Boudreau’s efforts were focused on obtaining documentation for individual
purchases of automobiles that satisfied the statutory GST input tax credit
documentary requirements.
[78]
In short, their conduct
was consistent with the conduct of any GST auditor who is attempting to
determine the net tax of a registrant who is involved in the purchase and sale
of automobiles that are taxed at various rates, including the 0% rate for
exports.
Factor 3: Had the auditor transferred his
or her files and materials to the investigators?
[79]
This factor is not
helpful since I have found that Mr. MacIntyre and other members of the SI Group
began a criminal investigation on October 25, 2000. Mr. Boudreau did not
transfer the audit files for 506913 and Cambridge to Mr. MacIntyre until
February and March of 2001 respectively.
Factors 4 and 5: Was the conduct of the
auditor such that he or she was effectively acting as an agent for the
investigators? Does it appear that the investigators intended to use the
auditor as their agent in the collection of evidence?
[80]
Mr. Boudreau
transferred the audit files to special investigations on February 16,
2001. There is no evidence before me that, before February 16, 2001,
either Mr. LeBlanc or Mr. Boudreau shared their audit files with Mr. MacIntyre
or any other CRA special investigations officer. Mr. LeBlanc was not involved
with the SI Group during his audit of 506913. Mr. Boudreau did not meet with anyone
from special investigations until late October 2000. As I will discuss shortly,
he did continue his audit after the October 2000 meeting; however, his conduct
was that of a CRA auditor conducting an audit, not that of someone acting as an
agent for the SI Group.
Factor 6: Is the evidence sought relevant
to taxpayer liability generally? Or, as is the case with evidence as to the
taxpayer’s mens rea, is the evidence relevant only to the taxpayer’s
penal liability?
[81]
As I have already
noted, the information sought by the auditors related to the determination of
506913’s and Cambridge’s net tax as reported in their GST returns. It did not
relate to mens rea.
Factor 7: Are there any other circumstances
or factors that can lead the trial judge to the conclusion that the compliance
audit had in reality become a criminal investigation?
[82]
Counsel raised three
other factors that the Court considers relevant: the CRA’s knowledge of
car-flipping schemes involving non-filers, the RCMP’s investigation of
car-flipping schemes, and the maintenance by a Nova Scotia CRA office of a
database containing motor vehicle information. I will consider each of these
factors.
CRA’s Knowledge of Car-Flipping Schemes
[83]
The numerous exhibits filed
by the Appellants show that by early 1997 the CRA was aware of fraudulent
transactions in the automotive industry involving car‑flipping, purchases
and sales of automobiles by non-filers, and alleged fraudulent sales of
automobiles to status Indians.
Further, the evidence shows that the CRA took various steps to train its
auditors to recognize these schemes and identify non-filers and parties who
were working with the non-filers. This is illustrated by Mr. LeBlanc’s
experience during the relevant period.
[84]
At the time Mr. LeBlanc
audited 506913, he knew that car-flipping schemes were a serious problem for
the CRA. This can be seen from the following:
−
In the fall of 1997,
Mr. LeBlanc attended an Ottawa CRA conference on car-flipping.
−
In July 1997, Mr. LeBlanc
began a GST audit of Canadian Auction Group. He referred the audit to the CRA’s
SI Group in April 1998.
−
Between 1998 and 2000,
an auditing co-ordinating committee was established by the CRA offices in the
four Atlantic Provinces. The purpose of the committee was to discuss audits of
car dealerships, the focus being on potential car-flipping schemes. The
committee was composed only of auditors. Mr. MacIntyre stated that he “had no
interest in it. This is audit stuff.”
−
In February and March
1999, Mr. LeBlanc participated in a CRA “Auto Reach” program. The purpose of
the program was to educate new- and used-car dealers on car-flipping schemes
and to attempt to learn from the dealers what was happening in the market. The
CRA had carried out similar programs in the past in the construction,
hospitality and fishing sectors.
−
In September 2001, Mr.
LeBlanc attended a national CRA conference on car flipping.
[85]
I assume that Mr.
Boudreau had similar experiences.
[86]
The fact that the CRA
took steps to educate its auditors with respect to the existence of
car-flipping schemes involving non-filers does not mean that the auditors could
no longer do their job. Clearly, the purpose of the education was to allow a
GST auditor to recognize whether a GST registrant that he or she was auditing
was participating in a fraudulent scheme. As Mr. LeBlanc noted, once he became
aware that a registrant was participating in such a scheme, he stopped auditing
and referred the file to special investigations. He did
not conclude that there was any such participation when he was auditing 506913.
The RCMP’s Investigation of Car-Flipping Schemes
[87]
The CRA informed the
RCMP in late 1999 of the car-flipping schemes. In response to the CRA’s information, the
RCMP prepared, in February 2000, a detailed report, entitled Project
Annotation, that recommended a national investigation of car-flipping
schemes involving organized crime (the “Project Annotation Report”). The
report noted that there was no active investigation during the preparation of
the report
and that the investigation would be the “first national, multi-jurisdictional,
multi-agency attempt at attacking the criminal organization through the seizure
and forfeiture of assets, based on their involvement in the GST fraud.” It
appears that the Project Annotation Report envisaged the use of the new
investigation powers Parliament granted to police in May 1997 under federal
organized crime legislation.
[88]
An RCMP officer,
Sergeant T.G. Shean, prepared, in July 2000, a second report, entitled GST
Fraud, Province of New Brunswick (the “New Brunswick RCMP report”).
Apparently, the Project Annotation Report did not apply in New Brunswick. The New
Brunswick RCMP report noted that the first step in the New Brunswick
investigation would be to focus on the background of the identified targets “in
order to allow sound recommendations to be made.” A second report would be
prepared once the viability of a full-fledged investigation was determined.
[89]
The New Brunswick RCMP
report identified Cambridge Leasing Ltd. and Nautica Motors as the subjects of
interest in New Brunswick.
It appears the RCMP identified these two companies because they had been paid
significant GST refunds.
[90]
I find the naming of
Cambridge Leasing Ltd. in the report somewhat confusing. It is my
understanding, in light of the information before me, that the first GST return
in which Cambridge Leasing Ltd. claimed a refund was its GST return for the
reporting period from November 1, 2000 to November 30, 2000, that is, four months
after the New Brunswick RCMP report was prepared. However, I accept that the
reference to Nautica Motors is a reference to 506913, which carried on business
under the name Nautica Motors.
[91]
Both the Project
Annotation Report and the New Brunswick RCMP report indicate that the CRA could
not share with the RCMP any information that it collected from registrants and
third parties unless the RCMP and the CRA signed a memorandum of understanding.
[92]
In the latter half of
2000, Sergeant Shean met with various members of the CRA’s SI Group to discuss
how a joint investigation could be carried out. (the
“New Brunswick investigation”). During the voir dire, he testified that he did
not deal with either Mr. LeBlanc or Mr. Boudreau or any other GST auditors in
the course of the New Brunswick investigation.
[93]
In February 2001,
Sergeant Tim Feeney of the RCMP was approached about taking over the New Brunswick
investigation.
On April 26, 2001, the RCMP and the CRA had signed the required memorandum of
understanding.
In late May 2001, after the RCMP and the CRA had signed the memorandum of
understanding, Sergeant Feeney met Mr. MacIntyre for the first time.
[94]
The RCMP withdrew from
the joint investigation in August 2003 when they realized they could no longer
seize assets relating to offences under the GST Act.
[95]
The RCMP’s national
investigation of car-flipping schemes was carried on separate and apart from
Mr. LeBlanc’s and Mr. Boudreau’s audit of 506913 and Cambridge. The Project
Annotation Report did not apply to New Brunswick.
[96]
The evidence before me
is that Mr. LeBlanc and Mr. Boudreau, the auditors of the Appellants, were not
involved with either Project Annotation or the New Brunswick investigation.
Further, the RCMP did not have access to the CRA audit files until April 26,
2001, nearly two months after Mr. Boudreau stopped auditing the Appellants.
[97]
Mr. Boudreau did meet
with an RCMP officer in May or June 2000. The RCMP requested Mr. Boudreau’s
assistance with respect to the value of two vehicles that had been imported
into the Czech Republic.
It appears that the RCMP was seeking information requested by Interpol in June
1999 with respect to vehicles imported into the Czech Republic. The
Interpol request appears to relate to an investigation of a third party in the
Czech Republic.
Database Maintained by Nova Scotia CRA Office
[98]
A CRA office in Nova
Scotia established a database that traced the sales history of certain
vehicles. A CRA official could access the information by inputting a vehicle’s
VIN (vehicle identification number). It appears that most of the information
originated from CRA auditors in Nova Scotia and New Brunswick.
[99]
The use of this
database does not indicate that the auditors were involved in criminal
investigations. In my view, it is a good auditing tool that allowed auditors to
efficiently obtain information that was relevant for the purpose of determining
ownership and the place of supply of a vehicle.
Mr. Boudreau’s Parallel Investigation
[100]
The last relevant
factor that I must consider is Mr. Boudreau’s activities after the members of
the SI Group began their criminal investigation on October 25, 2000.
[101]
After the October 25,
2000 meeting between Mr. Boudreau, Ms. Miller, Mr. Daley and Mr. Skaling,
Mr. Boudreau continued his audit of 506913.
[102]
However, during this
period he did not meet with Mr. Daley or any other employee or officer of
506913. He also did not obtain any documentation from 506913. He focused his
audit on information that he received during this period from the Ontario and
Quebec departments of motor vehicle registration. He also discussed vehicle
purchases with third parties. Some of these third parties faxed him
information. He did not speak with any financial institutions.
[103]
He stopped his audit in
November of 2000 when he obtained the information discussed previously with
respect to five high-value SUV’s.
[104]
In early December 2000,
Mr. Boudreau met with Mr. MacIntyre
in Moncton to discuss the transfer of the 506913 audit file to special
investigations. Mr. Boudreau and Mr. MacIntyre decided to defer the transfer of
the file until Mr. Boudreau received all of the vehicle information from
the provincial departments of motor vehicles. Mr. Boudreau transferred the
files to Mr. MacIntyre on February 16, 2001.
[105]
On the basis of the
evidence before me, I have concluded that Mr. Boudreau’s activities
between October 25, 2000 and February 16, 2001 constituted an administrative
audit that he conducted at the same time as the SI Group was conducting
its criminal investigation. The SCC in Jarvis recognized the legitimacy
of such parallel inquiries as follows:
The predominant purpose test does not thereby prevent the CCRA from
conducting parallel criminal investigations and administrative audits. The
fact that the CCRA is investigating a taxpayer’s penal liability, does not
preclude the possibility of a simultaneous investigation, the predominant
purpose of which is a determination of the same taxpayer’s tax liability. . . .
[106]
In the present appeal,
there is no section 8 Charter breach as a result of the parallel
inquiries. The predominant purpose of Mr. Boudreau’s inquiry during the
aforementioned period did not change: it was to determine 506913’s tax
liability under the GST Act.
Conclusion
[107]
For the foregoing
reasons, I have concluded that the Appellants did not suffer a breach of their
rights under section 8 of the Charter. The predominant purpose of the
inquiries carried out by Mr. LeBlanc and Mr. Boudreau was, at all times, the
determination of 506913’s and Cambridge’s civil liability under the GST Act.
They did not conduct, as the Appellants allege, a criminal investigation under
the guise of exercising audit powers.
[108]
Having found that there
was not a section 8 Charter breach, I do not need to consider the
question of the application of subsection 24(2) of the Charter.
Search Warrant Issue
[109]
In May, June and September 2004,
Judge Michael McKee of the New Brunswick Provincial Court issued a number
of search warrants (collectively referred to as the “Search Warrants”) pursuant
to the relevant provisions of the Criminal Code. Some of the Search
Warrants allowed authorities to search for certain business records of 506913
and Cambridge at Mr. Daley’s home, at the business offices of 506913 and at the
business offices of another numbered company (053999 NB Ltd.). Judge McKee also issued
general warrants that allowed the collection of financial information from
certain financial institutions.
It appears that all of the Search Warrants were executed.
[110]
On October 13, 2004, the
Appellants and Mr. Daley brought, in the Court of Queen’s Bench of New Brunswick, an application for judicial review, seeking an order quashing the search
warrants issued in May and June 2004. In the alternative, they sought an order
excising certain paragraphs contained in the information in the same search
warrants.
[111]
On October 14, 2004, Justice David
Russell issued his decision dismissing the application. He noted that the grounds
for the judicial review were as follows:
(a) seventeen material nondisclosures by the informant,
Ronald MacIntyre, in the Information To Obtain Search Warrants dated May 20 and
31, 2004 as well as nondisclosure of the applicant’s co-operation during the
audit;
(b) the borrowing of documents by officers, agents and
employees of the Minister of National Revenue which is alleged to be contrary
to the stated policy of the Department;
(c) that during the search of the various locations, the
officers of the Canada Revenue Agency searched for and allegedly seized
documents that were outside the time frame and parties specified in the search
warrants;
(d) Ronald MacIntyre seized various computers rather than
printing the material;
(e) CRA
seized documents that were solicitor/client privileged;
(f) the Information To Obtain Search Warrants does not set out
a nexus between electronically stored records and the offences specified;
(g) the Information To Obtain Search Warrant lack [sic] specificity
with respect to information electronically stored;
(h) the
seizure of computer equipment is alleged to be a “fishing expedition”[;]
(i) the description of documents set out in paragraphs 1(d)
and 2(d) of the search warrants are [sic] too general;
(j) it is alleged that the applicants were not provided with
a police caution until at or about May 3, 2001;
(k) the CRA used audit powers in the course of an
investigation contrary to sections 7, 8, 10 and 11 of the Canadian Charter of
Rights & Freedoms;
(l) the applicant, David Daley’s pick up truck was searched
without a warrant.
[112]
Justice Russell indicated that a
search warrant may only be quashed by a superior court judge for jurisdictional
error. He found that there had not been any jurisdictional error with respect
to the Search Warrants.
[113]
Similar to what had
been done on the application in the Court
of Queen’s Bench of New Brunswick, the Appellants argued before this Court numerous
grounds for the relief they seek, including the following:
−
The information to
obtain the search warrants did not reference section 487 of the Criminal
Code.
−
The information to
obtain must comply with the Criminal Code, failing which the judge lacks
jurisdiction to issue the warrant.
−
The informant (Mr. MacIntyre)
failed to disclose important information to the issuing judge.
−
The search warrants or the
information with respect to Mr. Daley simply referred to “his” business papers,
not the business papers of the Appellants herein.
−
The information to obtain was
deficient with respect to the things to be searched for and the nexus between
them and the alleged crimes.
−
The warrant for Mr. Daley’s
residence should have referred to the location within his premises that was to
be searched.
−
There was no basis for the issuing
of a warrant under section 487 of the Criminal Code.
−
The presiding judge failed to
require adequate information in the information to obtain; this was a section
24 Charter breach and a breach of the sanctity (privacy) of the home.
−
The Information to obtain failed
to establish a nexus between the computer information seized and the alleged
crimes.
−
The warrants were tainted as the “CRA
conducted an investigation of the Appellants and obtained documents, oral
statements and other material from them even after the CRA’s Special
Investigations branch and the RCMP became involved with the file, to pursue a
criminal investigation as the predominant purpose.”
[114]
During the hearing, I had a very
difficult time understanding exactly what counsel for the Appellants was
requesting from the Court. In the first instance he argued that this Court
should either quash the warrants issued by the New Brunswick Provincial
Court or rule that the searches carried out pursuant to the warrants
constituted an unreasonable search and seizure and a Charter breach.
[115]
After I raised concerns that this
may constitute a collateral attack, he changed his argument and argued as
follows: “. . . we’re not
asking you to necessarily quash it [the warrant], but we are asking you to
treat the information that has been obtained from it as being illegally
obtained, and in that regard, you can look at the warrant to see if there was
jurisdiction to issue it.”
[116]
In my view, regardless
of how counsel for the Appellants frames his argument, he is asking me to
collaterally attack an order of a New Brunswick court.
[117]
The issue of collateral
attack was recently addressed by the Federal Court of Appeal in Canada (AG)
v. Blerot.
That appeal addressed whether the parties could bring an application in the
Federal Court seeking relief with respect to search warrants issued by a
justice of the peace for the Province of Saskatchewan and a search warrant
issued by a judge of the Alberta Provincial Court. The relief sought by the
Applicant included quashing the search warrants, an order under section 24 of
the Charter excluding the evidence obtained by means of the warrants,
and a declaration that the individuals who obtained the search warrants were
not duly authorized at law to apply for such warrants.
[118]
In reaching its
decision the Federal Court of Appeal reviewed the doctrine of collateral attack
and stated:
The substance of the doctrine of collateral attack is set out by the
Supreme Court of Canada in R v. Wilson, [1983] 2 S.C.R. 594 at pages
599-600:
It
has long been a fundamental rule that a court order, made by a court having
jurisdiction to make it, stands and is binding and conclusive unless it is set
aside on appeal or lawfully quashed. It is also well settled in the authorities
that such an order may not be attacked collaterally – and a collateral attack
may be described as an attack made in proceedings other than those whose
specific object is the reversal, variation, or nullification of the order or
judgment. 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.
[119]
The Federal Court of
Appeal then found that, on the facts of the case before it, the search warrants
issued by the provincial authorities were orders. It then applied the doctrine
of collateral attack and concluded: “. . . Those orders must be challenged in
the forum in which they were made, using the procedure available in that forum.
. . . ”
[120]
It is clear from the
facts before me that the search warrants issued by the judge of the Provincial
Court of New Brunswick were orders. The challenging of these orders in this
Court is a collateral attack. Under the doctrine of collateral attack, the
Appellants can only challenge these orders in the New Brunswick courts. It is
not for this Court to quash the warrants or decide that the New Brunswick
courts did not have jurisdiction to issue them.
[121]
Counsel for the
Appellant also argued that if I do not quash the warrants or decide that the New Brunswick courts did not have jurisdiction to issue the warrants, then I should still exclude
the evidence obtained in the course of executing the warrants on the basis that
the Appellants’ rights under section 8 of the Charter were infringed.
This point is moot since I have found that the actions of the CRA officials did
not constitute a breach of section 8 of the Charter.
[122]
For the foregoing
reasons the Appellants’ motion is dismissed with costs to the Respondent.
Signed at Ottawa, Canada, this 24th day of June 2013.
“S. D’Arcy”
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