Date: 20040505
Docket: T-1786-01
Citation: 2004 FC 663
Ottawa, Ontario, the 5th day of May 2004
Present: The Honourable Madam Justice Johanne Gauthier
BETWEEN:
CATA INTERNATIONAL INC.
Applicant
and
THE MINISTER OF NATIONAL REVENUE
Customs, Excise and Taxation
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1] Cata International Inc. is appealing a decision by the Minister of National Revenue to affirm the seizure and forfeiture of its 13 cases of Egyptian tobacco for hookahs, made on August 31, 2000.
[2] After a routine inspection when they arrived at the Canadian border in Windsor, Ontario, by truck, these cases were seized pursuant to section 110 of the Customs Act, R.S.C. 1985 (2d Supp.), c. 1 (the Act). The inspector made the seizure alleging that he had reasonable grounds to believe that, contrary to section 12 of the Act, Cata had not declared all the goods it was importing, and in particular that the invoice submitted to the customs officers, describing the content of the cases of tobacco, did not mention all the packages contained in two of those cases (8 kilos of undeclared tobacco in a total of 80 kilos imported).
[3] Further, the invoice submitted by the applicant's customs broker bore the following handwritten notation: "goods returning to Canada - not to order - products of Egypt", whereas in fact it was a purchase by Cata and the customs duties on the goods had never been paid. Finally, the additional documentation submitted by the broker did not support the conclusion that these cases had previously passed through Canada. The inspector concluded that Cata had also infringed section 13 of the Act by submitting this false information to him.
[4] The applicant argued that it never intended to make a false declaration. It submitted that its broker simply misunderstood its explanations and wrote this notation on the invoice by mistake. As to the undeclared goods, Cata submitted that this was a clerical error by its seller and it had no reasonable means of checking the content of this half-pallet of goods which it had ordered by telephone, before the shipment arrived at customs, and was declared based on the quantities indicated in the invoice from its seller, 5 Star Distribution (hereinafter 5 Star).
[5] The applicant argued that it had exercised due diligence and that the seizure should accordingly be quashed, since it had committed no breach of the Act.
[6] The respondent maintained that such a defence, of due diligence, did not apply since in its submission the offences charged were strict liability offences. Further, and in any case, the Minister submitted that even if this defence applied, in the circumstances Cata had not discharged its burden of proving that it had acted with diligence.
[7] An appeal from the Minister's decision is provided for by section 135 of the Act. It is by ordinary action in the Federal Court and is a trial de novo (Mercier v. Canada (Department of National Revenue), [2003] F.C.J. No. 992, para. 5).
[8] The applicant called only one witness, Majed Bishara, the owner of Cata. The respondent called two witnesses, Tom Foerstner, the customs inspector who inspected the goods and confiscated them, and Brian Woodcock, an employee of Livingston International, the applicant's customs broker.
[9] The parties filed by consent all the documents on which their arguments were based.
[10] Before considering the testimony and the documentary evidence, it should be noted that the goods which are the subject of this appeal were also seized pursuant to the Excise Tax Act, R.S.C. 1985, c. E-14, section 1, September 7, 2000, and no proceeding to challenge that seizure has been initiated in the Court. It would appear, therefore, that even if the seizure under the Act were to be quashed, the Court could not order that the cases of tobacco be returned.
[11] However, as for the reasons stated below the Court has come to the conclusion that there is no basis for allowing the appeal, there is no need to go further into that aspect.
Analysis
[12] In the pleadings, the applicant admitted that its broker had wrongly declared these cases of tobacco as goods returning to Canada. It further admitted that Mr. Woodcock had stated that the 13 cases were part of a cargo of 619 cases exported by the applicant to the U.S. in October 1999 in a sale to 5 Star (paragraphs 4 and 5 of the statement of claim and paragraph 7 of the reply).
[13] The Court is satisfied that the failure to declare the eight kilos of tobacco (the MouasseL Bahrani brand case of tobacco and the Fakhfafhina brand case contained 40 individual packets, instead of the 24 packets declared on the invoice) was proven by the uncontradicted testimony of Mr. Foerstner.
[14] In the circumstances, if as the respondent submitted the offences with which Cata is charged are strict liability offences, the Court is obliged to rule that the seizure is proper and valid.
[15] It is therefore important to determine whether Cata can rely on a due diligence defence.
[16] This question has been raised in the Court several times, but has never had to be finally decided (see e.g. Time Data Recorder International Ltd. v. Canada (Department of National Revenue), [1997] F.C.A. No. 475 (C.A.)).
[17] However, in Canada (Attorney General) v. Consolidated Canadian Contractors Inc., [1999] 1 F.C. 209 (C.A.), the Federal Court of Appeal dealt with a similar question regarding the administrative penalty mentioned in section 280 of the Excise Tax Act. It noted that in [1978] 2 S.C.R. 1299">R. v. Sault-Ste-Marie, [1978] 2 S.C.R. 1299, the Supreme Court of Canada acknowledged the existence of strict liability offences (which can be refuted by a defence of due diligence), without limiting them to public welfare offences or regulatory offences, and in principle this defence can be set up against administrative penalties (see Consolidated Canadian Contractors, supra, at paragraphs 20 and 24). This includes seizures like those mentioned in section 110 of the Act. The Federal Court of Appeal then indicated that the question of whether a specific administrative penalty implies absolute or strict liability depends on the interpretation of the wording of the relevant legislation. That interpretation entails analysing the Act in its context and in terms of its purpose. In this regard, copies of sections 12, 13 and 110 of the Act are set out as an appendix to my reasons, as are sections 122, 123, 129, 131 and 135, which are also relevant.
[18] As Robertson J. indicated in Consolidated Canadian Contractors Inc., supra, this analysis starts from the principle that there is a rebuttable presumption that Parliament did not intend to impose strict liability. That presumption may be overturned by unequivocal language imposing strict liability (such as the use of the word "automatically"), or if the penalty has only insignificant consequences. Finally, where there are no such indications the Court must consider whether a due diligence defence is inconsistent with the scheme of the provision or would defeat the purposes for which the penalty was imposed.
[19] In the case at bar, there is nothing in the specific wording of section 110 or of sections 12 and 13 of the Act to suggest that this is a provision imposing strict liability.
[20] It is clear that the seriousness of the penalty, the seizure and forfeiture of all the goods, is not insignificant. In fact, depending on the quantity of goods included in one declaration, it may even be Draconian and have a substantial impact on small or medium-sized businesses. As the Act further provides for the seizure and forfeiture of the conveyance used to import the goods, it may have a significant impact on certain carriers (an independently owned trucker or the owner of aircraft).
[21] The Minister submitted that the customs system depends entirely on the honesty of the persons mentioned in section 12 of the Act. In his submission, the system would collapse if such persons, including for example individuals arriving by air from travel abroad, were allowed to rely on a due diligence defence. He cited the case of a traveller who has forgotten to declare his or her purchases.
[22] To begin with, it appears that the respondent misunderstands the nature of the due diligence defence. It will not suffice to plead forgetfulness or an error made in good faith. A party wishing to rely on the defence must establish that he or she has taken all reasonable steps to ensure that the declarations are accurate. This is a difficult burden to discharge, and so far every time such a defence has been used it has been unnecessary for the Court to determine whether it applies, because the party using it was unable to establish due diligence.
[23] There is no reason to assume that the persons covered by sections 12 and 13 of the Act will be any less faithful in adhering to their obligations than those covered by the Excise Tax Act (Consolidated Canadian Contractors Inc., supra, at paragraphs 43 to 48). The Minister submitted no specific evidence in support of his position. It should also be noted that the Act provides for a review procedure to ensure that seizures carried out are justified. This due diligence defence may be assessed in such a review, since it is part of the group of relevant circumstances.
[24] I conclude that Cata could plead a due diligence defence in the case at bar. Accordingly, I must only determine whether it discharged its burden in this regard.
[25] According to Mr. Bishara there were two mistakes, that by his seller who wrongly indicated the quantities contained in two of the cases shipped, and that by his broker. In his submission, Cata had no means of avoiding these errors because:
(i) from the economic standpoint, it was impossible for it to send someone to check the quantities shipped by 5 Star: it had to rely on its seller; as it had not ordered a specific quantity of products (half-pallet), there was no information it could use to check the invoice; finally, there had been no problem with this procedure in another shipment from 5 Star;
(ii) he did everything to explain the situation clearly to his broker: as soon as he was informed that the latter had made an incorrect declaration, he at once sent the additional documentation to clarify the situation regarding the shipping of the 619 cases; if there was a breakdown in communications, it was an error made by his broker in good faith.
[26] As the Court indicated earlier, the question of whether the mistake was made in good faith is not relevant (He v. Canada, [2000] F.C. No. 93 (F.C.), at paragraphs 8 to 10).
[27] The Court further notes that, in addition to the two mistakes mentioned by Mr. Bishara, it appears that Mr. Woodcock also did not explain to the inspector that the additional documents he was giving the latter did not confirm the status of the 13 cases as "goods returning". Mr. Foerstner and his colleague lost a lot of time trying to establish some link between the 619 boxes described in the document and the 13 cases seized. Mr. Woodcock referred to this second misunderstanding in his letter of September 1 (see the handwritten note regarding what he called "the export documents".
[28] No evidence was presented regarding the method used by 5 Star to check that the quantities entered in the invoices actually corresponded to those shipped. The evidence also did not indicate that Cata took specific action to ensure that 5 Star had a reliable system in place for this purpose. 5 Star was a Cata customer, rather than one of its regular suppliers. The reference to another shipment made without problems is not sufficient evidence to establish that 5 Star did not lack diligence.
[29] Mr. Bishara's explanation that he had to control his risk by relying on 5 Star, that is, he could not spend more than the value of the shipment to ensure that the declarations made on his behalf were accurate, is not relevant. Further, such a decision by Cata implies that it was ready to assume the risk of an error, if any. Cata cannot simply shift the liability to someone else.
[30] As regards Mr. Woodcock, the Court was not satisfied that Mr. Bishara did not actually tell him that the cases were returning to Canada. The broker appears to have immediately assumed that no duty would have to be paid. He did not ask Cata to provide any documentation supporting this conclusion or a written confirmation to this effect. There is also nothing to indicate that he read the additional documentation sent by Cata to ensure that he understood the situation so he could communicate it correctly to the inspector.
[31] After reviewing the evidence as a whole, the Court concludes that Cata did not establish that it and the persons for which it was responsible acted with due diligence.
JUDGMENT
THE COURT ORDERS THAT:
The action be dismissed with costs.
Certified true translation
Suzanne M. Gauthier, C Tr, LLL
| Customs Act, S.C. (1985), C. 1
Report
12. (1) Subject to this section, all goods that are imported shall, except in such circumstances and subject to such conditions as may be prescribed, be reported at the nearest customs office designated for that purpose that is open for business.
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Loi sur les douanes, L.R. (1985), ch. 1
Déclaration
12. (1) Sous réserve des autres dispositions du présent article, ainsi que des circonstances et des conditions prévues par règlement, toutes les marchandises importées doivent être déclarées au bureau de douane le plus proche, doté des attributions prévues à cet effet, qui soit ouvert.
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| Obligation to answer questions and present goods
13. Every person who reports goods under section 12 inside or outside Canada or is stopped by an officer in accordance with section 99.1 shall
(a) answer truthfully any question asked by an officer with respect to the goods; and
(b) if an officer so requests, present the goods to the officer, remove any covering from the goods, unload any conveyance or open any part of the conveyance, or open or unpack any package or container that the officer wishes to examine.
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Obligations du déclarant
13. La personne qui déclare, dans le cadre de l'article 12, des marchandises à l'intérieur ou à l'extérieur du Canada, ou qu'un agent intercepte en vertu de l'article 99.1 doit :
a) répondre véridiquement aux questions que lui pose l'agent sur les marchandises;
b) à la demande de l'agent, lui présenter les marchandises et les déballer, ainsi que décharger les moyens de transport et en ouvrir les parties, ouvrir ou défaire les colis et autres contenants que l'agent veut examiner.
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| Seizure of goods or conveyances
110. (1) An officer may, where he believes on reasonable grounds that this Act or the regulations have been contravened in respect of goods, seize as forfeit
(a) the goods; or
(b) any conveyance that the officer believes on reasonable grounds was made use of in respect of the goods, whether at or after the time of the contravention.
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Saisie des marchandises ou des moyens de transport
110. (1) L'agent peut, s'il croit, pour des motifs raisonnables, à une infraction à la présente loi ou à ses règlements du fait de marchandises, saisir à titre de confiscation_:
a) les marchandises;
b) les moyens de transport dont il croit, pour des motifs raisonnables, qu'ils ont servi au transport de ces marchandises, lors ou à la suite de l'infraction.
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| Seizure of conveyances
(2) An officer may, where he believes on reasonable grounds that this Act or the regulations have been contravened in respect of a conveyance or in respect of persons transported by a conveyance, seize as forfeit the conveyance.
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Saisie des moyens de transport
(2) L'agent peut, s'il croit, pour des motifs raisonnables, à une infraction à la présente loi ou à ses règlements du fait d'un moyen de transport ou des personnes se trouvant à son bord, le saisir à titre de confiscation.
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| Seizure of evidence
(3) An officer may, where he believes on reasonable grounds that this Act or the regulations have been contravened, seize anything that he believes on reasonable grounds will afford evidence in respect of the contravention.
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Saisie des moyens de preuve
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| (3) L'agent peut, s'il croit, pour des motifs raisonnables, à une infraction à la présente loi ou à ses règlements, saisir tous éléments dont il croit, pour des motifs raisonnables, qu'ils peuvent servir de moyens de preuve de l'infraction.Notice of seizure
(4) An officer who seizes goods or a conveyance as forfeit under subsection (1) or (2) shall take such measures as are reasonable in the circumstances to give notice of the seizure to any person who the officer believes on reasonable grounds is entitled to make an application under section 138 in respect of the goods or conveyance.
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Avis de la saisie
(4) L'agent qui procède à la saisie-confiscation prévue au paragraphe (1) ou (2) prend les mesures convenables, eu égard aux circonstances, pour aviser de la saisie toute personne dont il croit, pour des motifs raisonnables, qu'elle a le droit de présenter, à l'égard des biens saisis à titre de confiscation, la requête visée à l'article 138.
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| Forfeitures accrue automatically from time of contravention
122. Subject to the reviews and appeals established by this Act, any goods or conveyances that are seized as forfeit under this Act within the time period set out in section 113 are forfeit
(a) from the time of the contravention of this Act or the regulations in respect of which the goods or conveyances were seized, or
(b) in the case of a conveyance made use of in respect of goods in respect of which this Act or the regulations have been contravened, from the time of such use,
and no act or proceeding subsequent to the contravention or use is necessary to effect the forfeiture of such goods or conveyances.
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Confiscation d'office à compter de l'infraction
122. Sous réserve des révisions, réexamens, appels et recours prévus par la présente loi, les marchandises ou moyens de transport saisis à titre de confiscation dans le délai fixé à l'article 113 sont confisqués :
a) soit à compter de l'infraction à cette même loi ou à ses règlements qui a motivé la saisie;
b) soit à compter de l'utilisation des moyens de transport qui ont servi au transport des marchandises ayant donné lieu à pareille infraction.
Il n'est besoin de nul acte ni de nulle procédure postérieurs à l'infraction ou à l'utilisation pour donner effet à la confiscation.
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| Review of forfeiture
123. The forfeiture of goods or conveyances seized under this Act or any money or security held as forfeit in lieu of such goods or conveyances is final and not subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with except to the extent and in the manner provided by sections 127.1 and 129.
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Conditions de révision
123. La confiscation des marchandises ou des moyens de transport saisis en vertu de la présente loi, ou celle des sommes ou garanties qui en tiennent lieu, est définitive et n'est susceptible de révision, de restriction, d'interdiction, d'annulation, de rejet ou de toute autre forme d'intervention que dans la mesure et selon les modalités prévues aux articles 127.1 et 129.
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| Request for Minister's decision
129. (1) The following persons may, within ninety days after the date of a seizure or the service of a notice, request a decision of the Minister under section 131 by giving notice in writing, or by any other means satisfactory to the Minister, to the officer who seized the goods or conveyance or served the notice or caused it to be served, or to an officer at the customs office closest to the place where the seizure took place or closest to the place from where the notice was served:
(a) any person from whom goods or a conveyance is seized under this Act;
(b) any person who owns goods or a conveyance that is seized under this Act;
(c) any person from whom money or security is received pursuant to section 117, 118 or 119 in respect of goods or a conveyance seized under this Act; or
(d) any person on whom a notice is served under section 109.3 or 124.
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Demande de révision
129. (1) Les personnes ci-après peuvent, dans les quatre-vingt-dix jours suivant la saisie ou la signification de l'avis, en s'adressant par écrit, ou par tout autre moyen que le ministre juge indiqué, à l'agent qui a saisi les biens ou les moyens de transport ou a signifié ou fait signifier l'avis, ou à un agent du bureau de douane le plus proche du lieu de la saisie ou de la signification, présenter une demande en vue de faire rendre au ministre la décision prévue à l'article 131 :
a) celles entre les mains de qui ont été saisis des marchandises ou des moyens de transport en vertu de la présente loi;
b) celles à qui appartiennent les marchandises ou les moyens de transport saisis en vertu de la présente loi;
c) celles de qui ont été reçus les montants ou garanties prévus à l'article 117, 118 ou 119 concernant des marchandises ou des moyens de transport saisis en vertu de la présente loi;
d) celles à qui a été signifié l'avis prévu aux articles 109.3 ou 124.
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| Burden of proof
(2) The burden of proof that notice was given under subsection (1) lies on the person claiming to have given the notice.
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Charge de la preuve
(2) Il incombe à la personne qui prétend avoir présenté la demande visée au paragraphe (1) de prouver qu'elle l'a présentée.
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| Decision of the Minister
131. (1) After the expiration of the thirty days referred to in subsection 130(2), the Minister shall, as soon as is reasonably possible having regard to the circumstances, consider and weigh the circumstances of the case and decide
(a) in the case of goods or a conveyance seized or with respect to which a notice was served under section 124 on the ground that this Act or the regulations were contravened in respect of the goods or the conveyance, whether the Act or the regulations were so contravened;
(b) in the case of a conveyance seized or in respect of which a notice was served under section 124 on the ground that it was made use of in respect of goods in respect of which this Act or the regulations were contravened, whether the conveyance was made use of in that way and whether the Act or the regulations were so contravened; or
(c) in the case of a penalty assessed under section 109.3 against a person for failure to comply with subsection 109.1(1) or (2) or a provision that is designated under subsection 109.1(3), whether the person so failed to comply.
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Décision du ministre
131. (1) Après l'expiration des trente jours visés au paragraphe 130(2), le ministre étudie, dans les meilleurs délais possible en l'espèce, les circonstances de l'affaire et décide si c'est valablement qu'a été retenu, selon le cas :
a) le motif d'infraction à la présente loi ou à ses règlements pour justifier soit la saisie des marchandises ou des moyens de transport en cause, soit la signification à leur sujet de l'avis prévu à l'article 124;
b) le motif d'utilisation des moyens de transport en cause dans le transport de marchandises ayant donné lieu à une infraction aux mêmes loi ou règlements, ou le motif de cette infraction, pour justifier soit la saisie de ces moyens de transport, soit la signification à leur sujet de l'avis prévu à l'article 124;
c) le motif de non-conformité aux paragraphes 109.1(1) ou (2) ou à une disposition désignée en vertu du paragraphe 109.1(3) pour justifier l'établissement d'une pénalité en vertu de l'article 109.3, peu importe s'il y a réellement eu non-conformité.
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| Exception
(1.1) A person on whom a notice is served under section 130 may notify the Minister, in writing, that the person will not be furnishing evidence under that section and authorize the Minister to make a decision without delay in the matter.
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Exception
(1.1) La personne à qui a été signifié un avis visé à l'article 130 peut aviser par écrit le ministre qu'elle ne produira pas de moyens de preuve en application de cet article et autoriser le ministre à rendre sans délai une décision sur la question.
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| Notice of decision
(2) The Minister shall, forthwith on making a decision under subsection (1), serve on the person who requested the decision a detailed written notice of the decision.
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Avis de la décision
(2) Dès qu'il a rendu sa décision, le ministre en signifie par écrit un avis détaillé à la personne qui en a fait la demande.
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| Judicial review
(3) The Minister's decision under subsection (1) is not subject to review or to be restrained, prohibited, removed, set aside or otherwise dealt with except to the extent and in the manner provided by subsection 135(1).
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Recours judiciaire
(3) La décision rendue par le ministre en vertu du paragraphe (1) n'est susceptible d'appel, de restriction, d'interdiction, d'annulation, de rejet ou de toute autre forme d'intervention que dans la mesure et selon les modalités prévues au paragraphe 135(1).
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| Federal Court
135. (1) A person who requests a decision of the Minister under section 131 may, within ninety days after being notified of the decision, appeal the decision by way of an action in the Federal Court in which that person is the plaintiff and the Minister is the defendant.
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Cour fédérale
135. (1) Toute personne qui a demandé que soit rendue une décision en vertu de l'article 131 peut, dans les quatre-vingt-dix jours suivant la communication de cette décision, en appeler par voie d'action devant la Cour fédérale, à titre de demandeur, le ministre étant le défendeur.
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| Ordinary action
(2) The Federal Courts Act and the rules made under that Act applicable to ordinary actions apply in respect of actions instituted under subsection (1) except as varied by special rules made in respect of such actions.
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Action ordinaire
(2) La Loi sur les Cours fédérales et les règles prises aux termes de cette loi applicables aux actions ordinaires s'appliquent aux actions intentées en vertu du paragraphe (1), sous réserve des adaptations occasionnées par les règles particulières à ces actions.
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FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1786-01
STYLE OF CAUSE: Cata International Inc. v. The Minister of National Revenue
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: March 2, 2004
REASONS FOR JUDGMENT
AND JUDGMENT BY: The Honourable Madam Justice Gauthier
DATED: May 5, 2004
APPEARANCES:
Robert Doré FOR THE APPLICANT
Jean-Robert Noiseux FOR THE RESPONDENT
SOLICITORS OF RECORD:
ROBERT DORÉ FOR THE APPLICANT
715 Victoria Square, Bureau 510
Montréal, Quebec
MORRIS ROSENBERG FOR THE RESPONDENT
Minister of Justice and
Deputy Attorney General
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