Date: 19990512
Docket: T-291-99
Ottawa, Ontario, May 12, 1999.
Present:THE HONOURABLE MR. JUSTICE DENAULT
BETWEEN:
JEAN-ALAIN BISAILLON
and
HYPNAT LTÉE
and
HYPNAT LTÉE, BROKER,
Plaintiffs,
- and -
HER MAJESTY THE QUEEN
and
MINISTER OF NATIONAL REVENUE
and
CAROLE GOUIN, in her capacity as
Director of the Montreal Taxation Services Office,
Revenue Canada,
Defendants,
and
LAURENTIAN BANK OF CANADA,
Defendant.
ORDER
The motion seeking a stay of execution of a peremptory requirement of information or documents, made by Revenue Canada regarding Hypnat Ltée, Broker, on January 26, 1999, is dismissed with costs.
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PIERRE DENAULT
Judge
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Certified true translation
Bernard Olivier, LL. B.
[3] A brief review of the facts is necessary. Hypnat was assessed by the Minister of National Revenue for a sum of over $4 million for 1989 to 1992 and 1994. Objections were made to these assessments, except the one for 1994, where the amount owed currently amounts to over $232,000, which Revenue Canada is trying to collect. Information sent to Revenue Canada indicated to the latter that at the close of its fiscal year ending January 31, 1996 Hypnat Courtier, a company founded in 1993, owed Hypnat the sum of $1,664,078.76. Additionally, Hypnat Courtier had failed to file its tax return for its fiscal year ending October 1997. As a request for information made to Hypnat on June 5, 1998 received no answer, Revenue Canada on July 8, 1998 sent both a request for information to Hypnat and a formal demand for payment to Hypnat Courtier. As no payment was received from Hypnat Courtier Carole Gouin, director of the Revenue Canada Taxation Services Office in Montréal, on January 26, 1999 asked the Laurentian Bank to provide her with certain information within 30 days and to file documents regarding the affairs of its client Hypnat Courtier.
[4] This peremptory requirement of information and documents was made pursuant to s. 231.2(1)(a) and (b) of the Income Tax Act:
231.2(1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,
(a)any information or additional information, including a return of income or a supplementary return; or
(b) any document.
[5] The plaintiffs objected to the request, filing an action against the Crown, the Minister and Carole Gouin. Two principal arguments were made in the statement of claim. First, the plaintiff challenged the legality of the request for information and documents and asked that it be quashed on the ground that it was unnecessarily vague and in fact was only a fishing expedition, which is not authorized by s. 231.2(1)(a) and (b) of the Income Tax Act. The plaintiffs argued that the Minister was thus trying to collect evidence against Bisaillon and Hypnat, who since 1996 had been the subject of criminal charges by an indictment under s. 239(1)(a) and (d) of the Income Tax Act for the 1991 and 1992 taxation years. Secondly, pursuant to s. 24 of the Charter, the plaintiffs asked the Court to rule that s. 231.2(1) of the Act is of no force or effect as it authorizes unreasonable seizures within the meaning of s. 8 of the Charter.[2]
[6] This is the background against which the plaintiffs are seeking, by the time their action is heard, a stay of the request for information and documents.
[7] In their brief filed in connection with this motion the defendants made a preliminary objection, that the motion was inadmissible simply because the interlocutory remedy sought can only be obtained in an application for judicial review, not in the course of an action against the Crown. They argued that the courts could not issue an injunction or a stay order against the Crown.[3] This is unquestionably a sound argument[4] but since it was not made at the hearing - though counsel for the defendants did not withdraw the argument - I will not discuss it, particularly as it does not seem necessary to do so in order to dispose of the motion for a stay.
[8] It is well settled that a court asked to grant a motion to stay must dispose of it by considering the three tests regarding the issuing of an interlocutory injunction, namely:
(1)the plaintiff's action must present a serious question to be tried;
(2)the plaintiffs must show that without the measure sought they would suffer irreparable harm; and
(3)the balance of convenience must favour the plaintiffs.[5]
[9] In my opinion, the plaintiffs have met none of these tests in their motion for a stay.
[10] It should first be mentioned that in several judgments in which the Supreme Court of Canada has had to rule on the legality of requests for information and documents or taxation seizures, it has always carefully circumscribed the factual background of the cases, in an administrative or criminal proceeding, before ruling on the reasonable expectation of privacy.[6] In the case at bar counsel for the plaintiffs dwelt at length on the tests applied in 143471, in which the Supreme Court, in a majority judgment, ordered the impounding of the documents seized until the legality of the legislation authorizing the searches was determined in light of the Charter. It should be noted that in that case there were "intrusive searches of residential and business premises" of the respondents. Cory J., speaking for the majority, however wrote:
Obviously, searches of private property are far more intrusive than a demand for production of documents. The greater the intrusion by the searches into the business premises and private residences, the greater weight should be attached to the provisions of s. 8 of the Charter. Thus, although the privacy interest of an individual in business documents pertaining to a regulated field is relatively low, there remains a very real and significant privacy interest in maintaining the inviolability of residential premises, and to a lesser extent of business premises.
[11] In the case at bar the request to the bank for information was made in an administrative context in which reasonable expectations of privacy are much lower than in a criminal context. In The Queen v. McKinlay Transport Ltd., in which the constitutionality of s. 231(3) - the forerunner of the present s. 231.2(1) - was reviewed by the Supreme Court, Wilson J. concluded that the section authorized "seizures" that were valid and not "unreasonable", as these did not infringe s. 8 of the Charter. In her view the meaning of the word "unreasonable" in s. 8 of the Charter should be interpreted less strictly in an administrative and regulatory situation. As the Income Tax Act is regulatory legislation, a request pursuant to s. 231.2(1) thus does not need to meet the very strict standards applicable in a criminal situation, as set out by the Supreme Court in Hunter v. Southam.[7] In so far as the scope of s. 231.2(1) has been limited by application of the rules of interpretation to situations in which the information claimed by the Minister is useful in determining a person's tax debt, therefore, the seizure in the case at bar is valid.
[12] The plaintiffs argued, on the other hand, that the action raised a new point not considered in McKinlay, namely the question of protecting litigants already involved in criminal proceedings as the result of indictments from Revenue Canada against direct and derivative evidence obtained by Revenue Canada. In their submission, they have a higher expectation of privacy.
[13] In view of its purely speculative nature, I do not think this argument can be sustained in the case at bar. There is no factual basis for the allegation. There is nothing to indicate that the Minister's intent in requesting this information about Hypnat Courtier from the bank was to obtain evidence against Bisaillon and Hypnat. The information sought by the bank about Hypnat Courtier can only be subsequent to 1993, the year in which the company was founded, whereas the criminal charges against Bisaillon and Hypnat concerned the 1991 and 1992 taxation years. If this evidence were to prove incriminating against Hypnat and Bisaillon and the defendants decided to use it, counsel for those two parties could eventually object to its being admitted as evidence. In his affidavit Jean-Pierre Lemay, complex cases officer with the Department of National Revenue, stated that the purpose of the peremptory demand was the collection of Hypnat's undisputed tax debt, an entirely legitimate purpose under the Income Tax Act. There is thus, first, no nexus between the request to the bank for information regarding Hypnat Courtier and the criminal charges laid against Bisaillon and Hypnat. Further, the measure used, characterized in McKinlay by Wilson J. as "the least intrusive means by which effective monitoring of compliance with the Income Tax Act can be effected", was held to be reasonable and not in breach of s. 8 of the Charter.
[14] I therefore feel that the action in the case at bar raises no serious question to be tried.
[15] As regards the irreparable harm which the plaintiffs may suffer, counsel, who made a sworn statement on their behalf in support of the motion, did not allege any. He noted, of course, that the information and documents held by the bank are confidential in nature. However, I feel that this allegation is far from sufficient. There is nothing to show in the case at bar that the information and documents held by the bank could provide incriminating evidence that could be passed to the Criminal Investigations Division and serve to convict Bisaillon and Hypnat, quite apart from the fact the latter could then, if the information and the documents were set up against them, ask that they excluded pursuant to s. 24(2) of the Charter, citing an infringement of their rights. In short, I feel the question is raised prematurely and there has been no evidence of irreparable damage.
[16] As regard the balance of convenience, I feel that in the case at bar this is in the government's favour in view of its legitimate interest in recovering a debt which might be compromised by a delay in obtaining information.
[17] For these reasons, the plaintiffs' motion is dismissed with costs.
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PIERRE DENAULT
Judge
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Ottawa, Ontario
May 12, 1999
Certified true translation
Bernard Olivier, LL. B.
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