Date: 20060210
Dockets: A-640-05
A-641-05
A-642-05
A-643-05
A-644-05
Citation: 2006 FCA 59
Present: EVANS J.A.
BETWEEN:
A-640-05
BATHURST MACHINE SHOP LTD.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
A-641-05
MANDATE ERECTORS & WELDING LTD.
Appellant
and
HER MAJESTY THE QUEEN
Respondent
A-642-05
LEOPOLD THERIAULT
Appellant
and
HER MAJESTY THE QUEEN
Respondent
A-643-05
GERALD PITRE
Appellant
and
HER MAJESTY THE QUEEN
Respondent
A-644-05
KENNETH PITRE
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR ORDER
EVANS J.A.
[1] This is a motion by the appellants to stay an order of the Tax Court, dated January 10, 2006, directing them to re-attend for examination for discovery to answer the questions which they had refused, and to perform undertakings. The Motions Judge ordered that the examination of the appellants be completed no later than March 1, 2006. The appellants have appealed to this Court from the Motions Judge's order, but the appeal is unlikely to be heard until late this year.
[2] The underlying matter is an appeal to the Tax Court by the appellants of the Minister's 1996 assessments of their tax liability for the years 1988, 1989, 1990, and 1991.Their appeal to the Tax Court was filed in December 2002, and is being case managed by the Motions Judge since it has become mired in delay.
[3] In response to the Crown's motion before the Tax Court to order the appellants to answer the refused questions, the appellants argued that the Canada Revenue Agency ("CRA"), as it now is, had obtained documents and information in violation of their rights under sections 7, 8, and 10 of the Charter of Rights and Freedoms.
[4] They submitted that the material had been obtained by the CRA for the predominant purpose of advancing a criminal investigation of the appellants, not an audit. Consequently, the appellants said, requiring them to answer questions that could be linked back to the illegally obtained material would permit the Crown to gain an advantage by breaching their constitutional rights. In 1997, the appellants had been charged with criminal tax evasion, but the charges were stayed in May 2000 at the instance of the Crown.
[5] The Motions Judge declined to rule on either the constitutionality of the circumstances in which the material came into the possession of the CRA in the early 1990s, or its admissibility as evidence in the appeal. The Judge was concerned not to curtail the CRA's broad right of discovery in tax appeals or to usurp the role of the Tax Court Judge who hears the appeal. She said:
This Court, based in all the case law, I conclude should not engage in a determination of the admissibility of evidence in the absence of a factual basis.
In the present case, there is no agreement between the parties as to the relevant facts and to determine whether evidence obtained in breach of the taxpayer's Charter rights is admissible, this Court would be required, among other things, to examine the impugned evidence, the method by which it was obtained, the seriousness of the Charter breach, whether some of this evidence was already in the Crown's possession and witnesses would be questioned and cross-examined.
[6] It is common ground that this motion for a stay is to be determined on the basis of the three-part test established in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311.
(i) seriousness of the issue to be decided on the appeal
[7] Counsel for the appellants says that the serious issue to be decided by this Court when it hears the appeal from the Motion Judge's order is whether she should have determined if the CRA had unlawfully obtained the material from which the appellants believe the CRA derived the refused questions. He relies on Jurchison v. Canada, [2001] 3 C.T.C. 33, 2001 FCA 126, where it was said (at para. 16) that taxpayers are entitled to object to questions at an examination for discovery "felt to have their genesis in evidence if taken in breach of their Charter rights." Counsel for the appellants argues that the Motions Judge confused the right to refuse questions and the admissibility of evidence.
[8] The present case is distinguishable from Jurchison, where there had already been a ruling in a criminal proceeding that the CRA had obtained documents in breach of the taxpayer's Charter rights. Thus, if the taxpayer in Jurchison had refused a question, the Motions Judge would only have had to decide whether it was linked to the illegally obtained documents.
[9] In the present case, however, there has been no prior adjudication of the legality of the seizure, because the Crown stayed the criminal charges against the appellants. The question therefore is whether Jurchison also applies to a situation where the constitutionality of the seizure has not been determined already.
[10] Counsel for the appellants says that it does, and that a motions judge may have to decide the legality of a seizure of documents in order to determine the propriety of a refused question. In support of this position, counsel relies on Svastal v. Canada, [2002] 2 C.T.C. 2439, where, as in the present case, there had been no prior determination of the legality of the seizure. Unlike our case, however, the appellants in Svastal had not yet refused to answer specific questions. The motions judge in that case, Bowie T.C.J., said (at para. 9):
So far as examinations for discovery are concerned, the Appellants may object to answer questions that they believe to be inspired by illegally obtained evidence, in accordance with the judgment of the Federal Court of Appeal in Jurchison. Should that happen, then a motions judge may have to rule on the propriety of the question. Objections as to the admissibility if specific evidence will be dealt with by the trial judge, in due course.
[11] I am not sure that Bowie T.C.J. meant that, when the Crown moves to compel an answer to a refused question, a motions judge has to decide the legality of the seizure of the documents on which the question was allegedly based in order to determine the propriety of the question.
[12] First, Bowie T.C.J. said (at para. 4) that there were factual disputes relating to the investigation and issues concerning the appropriate Charter remedy, "the trial of [which] is likely to require several days of court time." Second, it would unduly complicate motions to compel if the judge hearing the motion had to decide disputed Charter issues. Third, Charter claims often involve disputed facts and difficult legal issues, which often cannot be appropriately resolved on the basis of a motion record.
[13] Nonetheless, whether Jurchison applies to the facts of the present case is not, in my opinion, a frivolous question. Similarly, it is arguable that the Motions Judge may have erred by thinking that, if she determined the legality of the seizure of the material on which the refused questions were allegedly based, and whether to compel the appellants to answer, she would be usurping the role of the judge hearing the appeal by, in effect, ruling on the admissibility of evidence, rather than merely deciding the propriety of the questions.
[14] Counsel for the appellants conceded that, even if Jurchison applies when the legality of a seizure has not been determined in an earlier proceeding, the Motions Judge was not bound to decide that question on a motion to compel. For example, she could exercise her discretion not to decide the issue, on the grounds that the record was inadequate, because the Charter question was posed in a factual vacuum, or there were complex and disputed issues of fact and law involved which could not be resolved satisfactorily without a trial.
[15] It is not altogether clear if the Motions Judge thought that she had jurisdiction to decide the legality of the seizure as part of her determination of the propriety of the refused questions, because there had been no prior ruling in the stayed criminal proceeding. Counsel says that whether the Judge erred in this respect is a serious question. In the alternative, he submits that the Judge erred in the exercise of her discretion because the record before her, particularly the affidavit sworn by an appellant, Kenneth Pitre, was an adequate basis for deciding the legality of the seizure.
[16] For present purposes, I am willing to assume that there is a serious issue as to whether the Motions Judge erred in law by failing to consider whether, in the exercise of her discretion, she should decide the legality of the seizure as an integral step in determining if the refused questions were proper. If this Court were to find that the Judge was in error in this respect, it could either send the matter back for re-determination, or exercise the Judge's discretion and decide the constitutional question for itself.
[17] At this point, it would become relevant to examine the record to see if it contains material from which it could be determined that the CRA had obtained the documents and other information in breach of the appellants' Charter rights, as they allege.
[18] Mr Pitre's affidavit comprises the principal source of evidence in the record to support the allegation that the Crown obtained material in breach of the rights of the appellants. Counsel for the Crown objects to the admissibility of large portions of it, on the grounds that, in reality, it is the evidence of Mr Pitre's lawyer, and contains speculation, legal argument and conclusions. I am not satisfied that the impugned paragraphs should be struck, although counsel's objections certainly indicate the frailties of the affidavit.
[19] Having carefully reviewed the record, I am of the view that it is very unlikely that this Court would interfere with the Motions Judge's decision not to decide the Charter issues relating to the legality of the circumstances in which the CRA obtained the documents and other information. Mr Pitre's affidavit describes information obtained by the appellants as a result of Crown disclosure. It is far from compelling. In my opinion, it was plainly open to the Motions Judge to conclude that a Charter ruling could not reliably be made in this case without calling witnesses who could be cross-examined to resolve disputes about the facts.
[20] Determining the adequacy of a written record as the basis for deciding a Charter challenge is within the domain of a motions judge, particularly when, as here, the facts are sparse and in dispute, and it is in the public interest that the matter proceed to trial without further delay. In my opinion, there is no more than the merest possibility that this Court would either determine the Charter questions for itself on the basis of the appeal record, or remit it to the motions judge with a direction to decide on the basis of a record that she justifiably regarded as inadequate.
[21] If the chances of a successful appeal are not so remote as to make the appeal frivolous, which I doubt, then the appellants have only barely met the serious question requirement.
(ii) irreparable harm
[22] Counsel for the appellants says that if a stay is not granted and the appellants are required to answer the refused questions, their right of appeal will be rendered nugatory. This is not altogether true. An adjudication that the questions were improper because they were derived from material that was obtained illegally would greatly assist the appellants to have both the seized material, and their answers, held inadmissible under subsection 24(2) when the appeal to the Tax Court is heard.
[23] Counsel says, however, that the exclusion of illegally obtained evidence is not a complete remedy for the harm that the appellants may sustain if required to answer the refused questions. Their answers may enable the CRA to gain an advantage from the use of illegally obtained material by providing valuable information or insights which the CRA would not tender as evidence. This, counsel contends, constitutes irreparable harm, which is not necessarily remedied by a right to ask the Tax Court judge hearing the appeal to exclude illegally obtained evidence.
[24] The problem with this argument is that counsel did not seek to demonstrate that the appellants were likely to suffer this kind of harm. Counsel did not, for example, refer to any of the refused questions, or to anything else, to prove his point. A finding of irreparable harm must be based on more than bare assertion and speculation.
(iii) balance of convenience
[25] The question, here, is whether the appellants would suffer more harm by being required to answer the refused questions than the Crown would suffer if the Motions Judge's order were stayed pending the disposition of the appeal by this Court. Counsel for the appellants argues that, if no stay is granted, the appellants answer the questions, and they win their appeal, the damage will have been done. On the other hand, if the matter is stayed and the appeal is unsuccessful, the Crown will still be able to ask the questions.
[26] However, it is also relevant that the CRA is already in possession of the allegedly illegally seized documents and is aware of their content. The power of the court to exclude illegally obtained documents and its "fruit", including compelled answers to questions based on it, also reduces the degree of the appellants' harm. Nor is it irrelevant in this context that the proceeding in issue is an appeal to determine tax liability, not a criminal proceeding in which the right to liberty and security of the person may be at stake.
[27] As for the Crown, the public interest in the due administration of justice, including the determination of tax liability, is harmed by undue delay. There have been inordinate delays already in moving this matter forward. The assessments in question were made in 1996, and relate to the tax years 1988, 1989, 1990, and 1991. The notice of appeal to the Tax Court was filed in December 2002. Since the appellants took no further step after the respondent filed a reply in April 2003, a status review was held in February 2004, and new timelines have been set for the completion of the pre-hearing steps. If a stay is granted, discoveries will not necessarily be completed by this time next year, February, 2007.
[28] Taking all these factors into consideration, including my findings on the serious issue and irreparable harm elements of the test for determining applications for a stay, the balance of convenience favours the respondent.
[29] For all these reasons, the motion for a stay will be denied, with costs in the cause.
"John M. Evans"
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