Shaker v. Canada (Minister of National Revenue), 2001 FCT 230

                                                                                                                                Date:    20010322

                                                                                                                    Docket No.:    T-1264-99

                                                                                                       Neutral Citation: 2001 FCT 230

Ottawa, Ontario, this 22^nd day of March, 2001

PRESENT:      THE HONOURABLE MR. JUSTICE BLANCHARD

BETWEEN:

ABDALLAH N. SHAKER,

SHAKER ASSOCIATES,

CHARLES MICHELS OF SWITZERLAND (INTERNATIONAL) LIMITED

                                                                                                                                             Plaintiffs

                                                                         - and -

                                 THE MINISTER OF NATIONAL REVENUE (MNR)

                                                                                                                                           Defendant

                                            REASONS FOR ORDER AND ORDER

[1]                Abdallah N. Shaker, Shaker Associates and Charles Michels Of Switzerland (International) Limited, hereinafter the plaintiffs, have appealed, by way of a trial de novo, the decision of the deputy minister of National Revenue rendered on April 15, 1999, justifying the seizure of 19 watches pursuant to s.135 of the Customs Act.^[1]

FACTS

[2]                On or about January 23, 1998, the plaintiffs imported thirteen (13) watches from Switzerland, through UPS. These watches were samples for which Customs duties, Excise Tax and GST were all paid through UPS.

[3]                On or about February 4, 1998, the plaintiffs imported two (2) watch samples from Dubaï in the United Arab Emirates, through UPS. Customs duties, Excise Tax and GST were all paid through UPS^[2].

[4]                In March 1998, The plaintiffs took the 15 imported watches to M. Serge Froment, to photograph the watches in order to prepare a catalogue that would eventually be used for promotional purposes in Canada.

[5]                On March 30, 1998, Mr. Shaker left Canada on a trip that would take him to visit his ailing mother in Lebanon and to a "Watch Fair" in Dubaï in the United Arab Emirates with a stop over in Switzerland.

[6]                On March 30, 1998, while on the stop over in Switzerland, Mr. Shaker purchased 78 watches from the watchmaker EPOS.

[7]                Mr. Shaker left Canada on March 30, 1998 and returned on April 12, 1998. When he returned to Canada, Mr. Shaker signed his E311 form declaring that:

1-        He was bringing into Canada goods worth 500 $;

2-        That the purpose of the trip was personal;

3-        That he didn't carry any samples.^[3]

[8]                On April 12, 1998 a seizure officer of the defendant searched the Plaintiff's luggage and found 19 watches, which he seized. The seized watches were allegedly the 15 samples aforementioned and four watches bought during Mr. Shaker's trip.

[9]                On May 4, 1998, the plaintiffs requested a decision of the Minister under section 131 by giving notice in writing to the seizing officer pursuant to section 129 of the Customs Act.

[10]            On April 15, 1999, the Minister rendered his decision pursuant to section 131 of the Customs Act, and upheld the seizure officer's decision to seize 17 of the 19 watches. Two of the watches seized where returned to Mr. Shaker as part of his personal exemption of $500 claimed upon returning to Canada on April 12, 1998. The other 17 watches have since been returned to the plaintiffs after payment of duty and penalty assessed by the defendant.

[11]            On April 2, 1999, the plaintiffs paid $2,469.42 in duty and $4,938.84 in penalties to obtain the release of the said watches.

[12]            On July 13, 1999, the plaintiffs filed the within action pursuant to s. 135 of the Customs Act.

Relevant Statutory Provisions

[13]            It is useful to reproduce the following relevant sections of the Customs Act at this point:

129. (1) Any person

129. (1) Les personnes suivantes peuvent, dans les trente jours suivant la saisie ou la signification, en s'adressant par écrit à l'agent qui a saisi les biens 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) from whom goods or a conveyance is seized under this Act,

        a) celles entre les mains de qui ont été saisis des marchandises ou des moyens de transport en vertu de la présente loi;                       

        (b) who owns goods or a conveyance that is seized under this Act,

       b) celles à qui appartiennent les marchandises ou les moyens de transport saisis en vertu de la présente loi;          

        (c) 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

       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) on whom a notice is served under section 109.3 or 124

may, within thirty days after the date of the seizure or the service of the notice under section 109.3 or 124, request a decision of the Minister under section 131 by giving notice in writing 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 the notice was served.

d) celles à qui a été signifié l'avis prévu aux articles 109.3 ou 124.

(2) The burden of proof that notice was given under subsection (1) lies on the person claiming to have given the notice.

(2) Il incombe à la personne qui prétend avoir présenté la demande visée au paragraphe (1) de prouver qu'elle l'a présentée.

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

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) 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;

       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) 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;

       b) le motif d'utilisation des moyens de transport en cause dans le transport de marchandises ayant donné lieu à une 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) in the case of a penalty under section 109.1 assessed against a person for failure to comply with a regulation referred to in that section or with the terms and conditions on which a licence was issued under section 24, whether the person so failed to comply with the regulation or the terms and conditions of regulations were so contravened.

       c) le motif de non-conformité à un règlement visé à l'article 109.1 ou à une condition d'octroi d'un agrément en vertu de l'article 24 pour justifier l'établissement d'une pénalité pour non-conformité au règlement ou à la condition en question;

        (d) in the case of a penalty under section 109.2 assessed against a person for a contravention of this Act or the regulations as described in that section, whether this Act or the regulations were so contravened.

       d) le motif d'infraction à la présente loi ou à ses règlements pour justifier l'établissement d'une pénalité en vertu de l'article 109.2 pour perpétration de l'infraction prévue à cet article.

(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.

(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.

(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).

(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).

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.

(2) The Federal Court Act and the Federal Court Rules 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.

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.

(2) La Loi sur la Cour fédérale et les Règles de la Cour fédérale 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.

ISSUES

[14]            The following three issues must be addressed in this case:

            (1)        Did Mr. Shaker fail to declare the seized watches upon his return to Canada on April 12, 1998 pursuant to s. 12 of the Customs Act?

            (2)        Were the seized watches the same watches that were previously imported by the plaintiffs and for which duty had already been paid?

            (3)        Did the defendant properly evaluate the seized watches?

ANALYSIS

[15]            The plaintiffs argued that since they had already paid all Customs duties, Excise Tax and GST on the seized watches when they were originally imported to Canada, the plaintiff, Mr. Shaker, did not have to declare the watches under section 12 of the Customs Act upon his return to Canada on April 12, 1998.

[16]            Counsel for the respondent submits that due to the fact Mr. Shaker failed to declare the watches upon his arrival in Canada, he violated Section 12 of the Customs Act.

[17]            Whether the watches seized were the same watches for which duty had been previously paid, as alleged by the plaintiffs, is not pertinent to the first issue to be determined. Indeed, even if it can be shown by the plaintiff that they are the same watches, which issue will be considered later in these reasons, the Customs Act requires that they be reported, in any event, since the seized watches are deemed to be imported goods under s. 12 of the Customs Act..

[18]            Subsections 12(1) and 12(3.1) of the Customs Act provide as follows:

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.

(...)

(3.1) For greater certainty, for the purposes of the reporting of goods under subsection (1), the return of goods to Canada after they are taken out of Canada is an importation of those goods.

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.

(...)

(3.1) Il est entendu que le fait de faire entrer des marchandises au Canada après leur sortie du Canada est une importation aux fins de la déclaration de ces marchandises prévue au paragraphe (1).

[19]            The Customs Act therefore makes it abundantly clear that the watches in question should have been declared by Mr. Shaker upon his return to Canada on April 12, 1998. Subsection 12(3.1) specifically addresses the return of goods taken out of Canada and imposes the obligation of reporting such goods.

[20]            Section 95 of the Customs Act further provides for declaration of goods prior to removal from Canada. There is no evidence that such a declaration was made by the plaintiffs in the case at bar.

[21]            The evidence is clear that the plaintiff, Mr. Shaker, failed to declare the watches as required by s. 12 of the Customs Act. Although he did not attempt to hide or conceal the watches, they were only discovered after a search of Mr. Shaker's luggage by the customs officer.

[22]            The failure to declare goods that were removed from Canada and subsequently returned, was considered in Kong, where Collier J. stated:

I have somewhat reluctantly come to the conclusion that the position of the Crown in this matter is correct in law and that the plaintiff's action cannot succeed. The automatic nature of forfeiture, for failure to declare under s. 18,[currently s. 12] is well established: see King v. Bureau [1949], 55 C.C.C. 1, [1949] S.C.R. 367">[1949] S.C.R. 367; Nader v. The Queen, [1973] F.C. 898, and The Queen v. Sun Parlor Advertising Co. et al., [1973] F.C. 1055. Failure to declare the goods as required by s. 18 is not excused by the fact that the goods had previously been in Canada prior to their removal therefrom and were returned to Canada on the occasion of the failure to declare: see Marun et al. v. The Queen, [1965] 1 Ex. C.R. 280, [1964] C.T.C. 444, 64 D.T.C. 5238; Shaikh v. The Queen (1982), 4 C.E.R. 123.^[4]

[23]            I therefore find that the plaintiffs failed to declare the seized watches and are in contravention of s. 12 of the Customs Act. Their belief that duty was previously paid on the seized watches, and I make no such finding that it was paid, is not helpful in any event, and does not afford a defence to the plaintiffs' failure to declare.

[24]            I find it useful at this point to deal briefly with the burden of proof in issues such as those before this Court. Section 152 is particularly pertinent in considering the remaining two issues I will deal with. Section 152 of the Customs Act^[5] provides that the burden of proving the identity or origin; manner, time or place of importation; or the payment of duties on any goods, lies on the person who is a party to the proceeding and not the Crown. In the case at bar, this burden of proof lies on the plaintiffs.

[25]            It could well be argued that the second issue I have outlined for consideration is moot at this point. A finding has been made that the plaintiff, Mr. Shaker, did contravene s. 12 of the Customs Act by not declaring the goods and that the defendant appropriately seized the watches. However, at trial, the testimony of Suzanne Reagan, of the Adjudication Division of the defendant Minister's Appeals Branch, outlined a policy followed by the defendant that would see the duty waived in such cases if it can be shown that duty on the imported goods had been paid previously. For this reason I feel compelled to address the second issue outlined earlier.

[26]            I find that the plaintiffs have failed to meet the onus of proving that the watches seized were indeed the same watches that the plaintiff, Mr. Shaker, had previously removed from the country, for which duty had been paid. I find the testimony of Mrs. Reagan particularly helpful in coming to this determination.

[27]            I find that the plaintiffs failed to establish positively that the watches seized on April 12, 1998 were the same watches which were imported on January 23, 1998 and allegedly removed from Canada. The evidence before this Court favours the defendant:

            (a)        The watches do not bear any serial numbers which would have facilitated the process. Mr. Shaker admits that the reference numbers found on the samples were numbers that referred to a model and that there may well be many different watches with the same reference number. This was clearly borne out by the evidence.

            (b)        Mr. Froment, the plaintiffs' photographer, was not able to confirm that the sample watches he photographed were the same watches that were seized.

            (c)        Mr. Reagan's affidavit of documents reveals numerous discrepancies in invoices and other documentation such as the reference numbers of the samples declared by Mr. Shaker which were different from those found on certain of the seized watches.

            (d)        The failure by Mr. Shaker to declare his stop-over in Switzerland in his E311 form where he purchased 78 watches for a business trip to Dubaï.

            (e)        The failure of Mr. Shaker to convince me that all of the 78 watches were accounted for as he alleges. I reach this conclusion based not only on discrepancies in the documents as mentioned in subparagraph 27(c) hereof, but also on discrepancies in Mr. Shaker's testimony when he attempted to explain his documentary evidence.

All of these facts considered lead me to conclude that the plaintiffs have not discharged the burden of proving that any of the seized watches were the same watches as those imported on January 23, 1998 and for which duty and taxes had been previously paid.

[28]            I am satisfied that Mrs. Reagan conducted a thorough review of the invoices and other documentation provided by the plaintiffs. I am also satisfied that she appropriately concluded that she was satisfied that any of the watches seized were not among those watches imported by way of UPS on January 23, 1998.

[29]            Therefore I find that the plaintiffs have failed to discharge its onus of proving that these were indeed the watches on which he had previously paid duty.

[30]            Once it has been determined that the seizure was appropriate under the Customs Act, the remaining issue requires consideration of the valuation of the seized watches. Mr. Justice MacKay in Mattu^[6] notes that this Court will not readily vary such decisions appealed from and sets out the circumstances required for the Court to intervene.

Section 135 of the Customs Act does not set out in any detail the requirements or the nature of the appeal that is provided from the decision of the Minister, and those matters were not argued in this appeal. My interpretation of the section is that it provides for a trial de novo in the sense that the Court is not limited to consideration of evidence that was before the Minister. At the same time, as in the case of appeals from other administrative decisions or decisions of quasi judicial bodies established by statute this Court will not readily vary the decision appealed from unless it is persuaded that the Minister or his agents failed to observe a principle of natural justice or failed to act within his or her statutory discretion, or that a the decision is based on an error in law, or is based on a finding of fact that is perverse or capricious or without regard to the evidence before the Minister.^[7]

[31]            In the case at bar, the Court heard from two expert witnesses on the valuation of the seized watches. Mr. Steve Saikaley testified for the plaintiffs. His expertise was largely from his years of experience in the retail trade.

[32]            On more than one occasion Mr. Saikaley stated that the valuation process was largely a numbers game. The methodology he advanced in appraising the value of a watch was essentially adding up the acquisition cost of the different components of a watch and applying a mark-up to the total cost obtained. On more than one occasion Mr. Saikaley did not provide satisfactory explanations to discrepancies in his analysis. Mr. Saikaley's testimony did not convince me that his valuation of the seized watches should be substituted for that of the expert upon which the valuation of the Minister was based.

[33]            Indeed, I find the testimony of Mr. Jocelyn Gonthier, the defendant's expert witness, to be clear. His analysis was coherent and objectively sustained by his arguments. I note that Mr. Gonthier is a certified gemologist with many years experience in the valuation of watches. as well as in the retail trade.

[34]            After careful review of the testimony of both expert witnesses, I must conclude that the test, as set out in Mattu, for a Court to intervene in such matters, has not been met. The plaintiffs have failed to discharge the onus of establishing that the Minister's valuation of the seized watches is patently unreasonable.

[35]            I accept the valuation of Mr. Gonthier as proper and representing a fair valuation of the value of the seized watches for the purpose of the Customs Act.

[36]            I am left with the conclusion that the defendant is in compliance with the provisions of the Customs Act, that the seizure of the watches was appropriate, and that the duty and penalty imposed should not be interfered with.

[37]            Denault J. of this Court, in Time Data Recorder^[8] states that in a section 135 appeal, the Court may not interfere with the quantum of the penalty imposed by the Minister, and I agree with my learned colleague.

[38]            For these reasons the appeal pursuant to s. 135 of the Customs Act is dismissed with costs.

                                                                       ORDER

THIS COURT ORDERS that:

1.                   The appeal pursuant to s. 135 of the Customs Act is dismissed with costs.

                                                                                                                        "Edmond P. Blanchard"                 

                                                                                                                                                   Judge                

FEDERAL COURT OF CANADA

TRIAL DIVISION

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                          T-1264-99

STYLE OF CAUSE:                   Abdallah N. Shaker and others v.

The Minister of National Revenue (MNR)

PLACE OF HEARING:              Ottawa, Ontario

DATE OF HEARING:                 January 29 and 30, 2001

REASONS FOR ORDER AND ORDER OF:

The Honourable Mr. Justice Blanchard

DATED:                                       March 22, 2001

APPEARANCES:

Mr. Abdallah N. ShakerFOR THE PLAINTIFF

Mr. Louis SébastienFOR THE DEFENDANT

SOLICITORS OF RECORD:

Mr. Morris Rosenberg                                                       FOR THE DEFENDANT Deputy Attorney General of Canada

Ottawa, Ontario