Her Majesty the Queen v. Gicleurs Astra Ltée, [1987] 1 CTC 161

Pinard, J. [Translation]:—By her action the plaintiff is claiming various amounts from the defendant as customs duties, sales tax and a penalty. The customs duty rate is set by the Customs Tariff Act, R.S.C. 1970, c. C-41, and the sales tax by the Excise Tax Act R.S.C. 1970, c. E-13. However, the duties, tax and penalty are claimed here, as they must be, pursuant to the provisions of the Customs Act, R.S.C. 1970, c. C-40.

In the ordinary course of its business the defendant, legally incorporated pursuant to the Canada Corporations Act, at various times between January 1, 1980 and May 30, 1982 imported into Canada goods consisting of sprinklers and spare parts.

The plaintiff first alleged that the defendant had failed to declare the true value of the goods in question for customs and sales tax purposes; in particular, the plaintiff alleged that the defendant had in respect of part of the goods failed to file bills of entry and cleared the goods through customs underestimating their value on the basis of false invoices.

The plaintiff then alleged that as the defendant had tried to defraud the Revenue department in this way, the goods in question became subject to seizure and forfeiture to the plaintiff pursuant to the provisions of subsection 192(1) of the Customs Act.

Subsection 192(1) of the Customs Act provides as follows:

192. (1) If any person

(a) smuggles or clandestinely introduces into Canada any goods subject to duty under the value for duty of two hundred dollars;

(b) makes out or passes or attempts to pass through the custom-house, any

false, forged or fraudulent invoice of any goods of whatever value; or

(c) in any way attempts to defraud the revenue by avoiding the payment of the duty or any part of the duty on any goods of whatever value;

such goods if found shall be seized and forfeited, or if not found but the value thereof has been ascertained, the person so offending shall forfeit the value thereof as ascertained, such forfeiture to be without power of remission in cases of offences under paragraph (a).

Finally, as such a seizure proved to be impossible since the goods in question had already been used, the plaintiff argued that the defendant had thus become liable to pay a penalty corresponding to their duty-paid value. This duty-paid value was first set at $1,131,801.04 in a notice of an ascertained forfeiture dated December 22, 1982. This notice was delivered the same day by the Customs and Excise investigator to the defendant's president, who immediately indicated in writing his intention to object to this proceeding and in due course provide the necessary evidence.

The notice of forfeiture was accompanied by form B17-1, containing two lists of imported goods, list A and list B. The first list concerned goods allegedly undervalued with the aid of false invoices, and the second list contained the remainder of the goods, allegedly not declared.

The following summary, given at the end of list A, is worth noting here:

The summary given at the end of list B should also be reproduced here:

Subsequently, after the discovery of certain bills of entry, list B was amended to give at the end the following amended summary:

It may be noted at once that the total of the summary on list A and the summary on the amended list B corresponds exactly to the sum of $291,301.05 claimed as a “penalty” in the case at bar.

On February 28, 1983 the Adjudications Division of Revenue Canada, Customs and Excise, after investigating sent the defendant an “official notice of seizure” issued pursuant to section 161 of the Customs Act and giving the defendant 30 days in which to submit any information it wished; this notice further drew the defendant's attention to sections 160 to 168 and 249 of the Customs Act, sections which were set out on the reverse.

Nearly a year later, on February 24, 1984, the chief of the Adjudications Division, acting for the Minister of National Revenue, sent the defendant by registered mail the Minister’s decision referred to in section 163 of the Customs Act. This decision was that the value of the goods imported by the defendant, set at $1,111,952.20, had been forfeited and that a remission of $820,651.15 had been granted, leaving the sum of $291,301.05 owing. This letter of February 24, 1984 also contained an official notification requiring the defendant to pay the Crown this sum of $291,301.05 within 30 days, otherwise it would take whatever action was necessary to recover the amount. Sections 160 to 167 of the Customs Act were also reproduced on the reverse of this letter.

On April 12, 1984, as no reply or reaction to the Minister's decision sent to the defendant had been received, an employee of Revenue Canada, Customs and Excise again wrote the defendant telling it that as the Minister's decision had not been acknowledged or refuted by it or on its behalf, the decision had become final pursuant to section 164 of the Customs Act; the letter added that a further 20-day period had been granted for payment of the sum of $291,301.05 in full, and that failing such payment, the Department of Justice would be asked to initiate proceedings to recover the amount in the Federal Court of Canada.

It was admitted in the pleadings and at the hearing that the defendant did not give the written notice contemplated by section 164 of the Customs Act within 30 days after it was notified of the Minister's decision. It was not until the final notification of April 12, 1984 that, through its counsel, the defendant wrote the Minister of National Revenue on April 17, 1984 indicating its intent to object to “the decision made by the Adjudications Division"; in this letter, counsel referred to some 150 charges “by indictment" laid against his client under the Customs Act in the Court of Sessions of the Peace for the district of St.-Francois; he further stated that the preliminary inquiry on this matter was to continue on May 4, 1984, and concluded that the decision made was unfair to the defendant, offering to submit arguments to this effect on or about May 15, 1984.

It is worth reproducing here sections 160 to 167 and 249(1) of the Customs Act, which are all relevant:

160. Whenever any vessel, vehicle, goods or thing has been seized or detained under this Act or any law relating to the customs, or when it is alleged that any penalty or forfeiture has been incurred under this Act or any law relating to the customs, the collector or the proper officer shall forthwith report the circumstances of the case to the Deputy Minister.

161. (1) The Deputy Minister may thereupon notify the owner or claimant of the thing seized or detained, or his agent, or the person alleged to have incurred the penalty or forfeiture, or his agent, of the reasons for the seizure, detention, penalty, or forfeiture, and call upon him to furnish, within thirty days from the date of the notice, such evidence in the matter as he desires to furnish.

(2) The evidence may be by affidavit or affirmation, made before any justice of the peace, collector, commissioner for taking affidavits in any court, or notary public.

162. After the expiration of the thirty days referred to in section 161, or sooner, if the person called upon to furnish evidence so desires, the Deputy Minister or such other officer as the Minister may designate may consider and weigh the circumstances of the case, and report his opinion and recommendation thereon to the Minister.

163. (1) The Minister may thereupon either give his decision in the matter respecting the seizure, detention, penalty or forfeiture, and the terms, if any, upon which the thing seized or detained may be released or the penalty or forfeiture remitted, or may refer the matter to the court for decision.

(2) The Minister may by regulation authorize the Deputy Minister or such other officer as he may deem expedient to exercise the powers conferred by this section upon the Minister.

164. If the owner or claimant of the thing seized or detained, or the person alleged to have incurred the penalty, does not, within thirty days after being notified of the Minister's decision, give him notice in writing that such decision will not be accepted, the decision is final.

165. If the owner or claimant of the thing seized or detained, or the person alleged to have incurred the penalty, within thirty days after being notified of the Minister's decision, gives him notice in writing that such decision will not be accepted, the Minister may refer the matter to the court.

166. (1) On any reference of any such matter by the Minister to the court, the court shall hear and consider the matter upon the papers and evidence referred and upon any further evidence which, under the direction of the court, the owner or claimant of the thing seized or detained, or the person alleged to have incurred the penalty, or the Crown, produces, and the court shall decide according to the right of the matter.

(2) Judgment may be entered upon any such decision, and the judgment is enforceable and shall be enforced in like manner as other judgments of the court.

167. The service of notice to produce evidence and of the Minister’s decision is sufficient, if it is effected by sending such notice by mail in a registered letter addressed to the owner or claimant at his address, as stated in the report of the seizure; and the thirty days allowed in respect of either of such notices shall, in case of such service by mail, be computed from the date of the mailing of such notification.

249. (1) All penalties and forfeitures incurred under this Act, or any other law relating to the customs or to trade or navigation, may, in addition to any other remedy provided by this Act or by law, and even if it is provided that the offender shall be or become liable to any such penalty or forfeiture upon summary conviction, be prosecuted, sued for and recovered with full costs of suit, in the Federal Court of Canada, or in any superior court having jurisdiction in that province of Canada where the cause of prosecution arises, or wherein the defendant is served with process.

Even assuming the defendant can mitigate the failure to give a notice of objection within the 30 days specified in section 164 of the Act by showing good cause, which in my opinion may not be done, the evidence is still conclusive in this regard.

At the hearing in this Court only the wife of the defendant’s president testified for the latter regarding this notification of the Minister’s decision on February 24, 1984. Explaining that she was then working for the defendant and that it was she who usually dealt with brokers, attorneys and accountants during the customs investigation, she gave vague and inaccurate testimony which indicated a rather selective memory. She did not remember seeing the official notice of seizure of February 28, 1983. She did not remember having received or seen the registered letter of February 24, 1984 containing the Minister’s decision and only recalled the notification of April 12, 1984, which she said she gave to the defendant’s counsel. She tried to explain the confusion by the criminal proceedings then under way against the defendant under the Customs Act, and by the almost daily presence of the defendant’s representatives in court which resulted from it. This does not appear to me to be a convincing excuse, especially as it is clear from the dates admitted by the parties for the criminal proceedings in question that the presence of the defendant’s representatives in court was not required before July 18, 1983, the date of the appearance, and was not necessary at the time the Minister’s notice was notified in February and March 1984. Reference to the documents seized might well take some time, but not to the point of preventing the defendant, which continued to do business, from examining its mail, especially registered mail.

Furthermore, it is surprising that the other witnesses for the defendant involved in administering its business affairs, including its president, had nothing to say about this question of the notification of the Minister’s decision of February 24,1984 and the failure to give a notice of objection to that decision within the time specified by the Act.

I conclude from this not only that the notice was duly sent on February 24, 1984, in accordance with sections 164 and 167 of the Act, which is admitted, but that in addition no valid explanation was provided of the defendant’s failure to react to this notice within the specified time in accordance with section 164 of the Act. In view of the evidence and all the circumstances, I consider that this failure is simply a matter of negligence.

However, in any case the 30-day deadline specified in section 164 of the Customs Act is peremptory and failure to observe it is fatal, whatever the reasons relied on by the importer.

In The Queen v. Climbing Crane Service Ltd., [1977] 2 FC 12, the Federal Court of Canada was as clear as it could be. In that case the plaintiff was arguing that the defendant had contravened paragraph 192(1)(b) of the Customs Act: proceedings were then initiated under sections 160 to 163 of the Act and as the defendant had given no notice of objection as provided in section 164 of the Act, the plaintiff initiated an action pursuant to subsection 249(1) of the Act to give effect to the Minister's decision, which had become final. After discussing the facts and concluding that section 164 of the Act applied to forfeiture, the Court said the following at 18 and 19:

I address myself now to the second of the defendant's positions which is to the effect that even if section 164 is applicable to forfeiture jurisdiction nevertheless rests in this Court. Counsel for the defendant submits that sections 249 and 250 of the Act are sufficiently broad to entitle the defendant to have the court determine in these proceedings all relevant matters including those which were subject matters of sections 160, 161, 162 and 163.

Those sections must be read together with sections 160, 161, 162, 163 and 164. Reading the sections together, it is my opinion that, while the plaintiff is entitled in these proceedings to implement, by judgment of this Court, the decision given under section 163, the defendant is not entitled to have opened up and adjudicated upon in this action those things which were the subject matters of and decided upon in the proceedings taken under sections 160, 161, 162 and 163. It is my opinion that the general wording of sections 249(1) and 250 is not sufficiently broad and encompassing to render nugatory nor to cut down what I consider to be the clear intention of Parliament in dealing with the specific situations which were the subject matters of sections 160, 161, 162, 163 and 164. Sections 249(1) and 250 are not in conflict with sections 160, 161, 162 and 163. They are, in respect of the matters dealt with in this action, complementary.

If the defendant had given the notice that the Minister’s decision would not be accepted as provided for in section 164, the Minister could have referred the matter to the Court and then the Court would have had jurisdiction (sections 165 and 166).

In my opinion, the defendant is not entitled under the circumstances to go behind the Minister's decision in these proceedings nor to have it reviewed here.

The Court added the following note at the foot of page 19:

This is not to say that a decision given pursuant to section 163 cannot be reviewed by the Court of Appeal pursuant to section 28 of the Federal Court Act. Whether or not it would be reviewable would, of course, be for the Court of Appeal to decide. In any event such a proceeding would be quite different from that here.

Moreover, in an earlier decision in J. C. Groendyke Co. v. The King, 35 D.L.R. 404, the Exchequer Court of Canada went even further, since it considered that the Minister's decision was final if, after receiving the notice of objection, the Minister did not refer the matter to the Court; at 408 and 409 the Court said the following:

Sec 178 of the Customs Act (R.S.C. 1906, c. 48) provides:

If the owner or claimant of the thing seized or detained, or the person alleged to have incurred the penalty, does not, within thirty days after being notified of the Minister’s decision, give him notice in writing that such decision will not be accepted, the decision shall be final.

Supposing no notice had been given, could a petition of right lie after a decision which is final?

Sec. 179 provides:

If the owner or claimant of the thing seized or detained, or the person alleged to have incurred the penalty, within thirty days after being notified of the Minister’s decision, gives him notice in writing that such decision will not be accepted, the Minister may refer the matter to the Court.

In this particular case the Minister declined to refer the matter to the Court. I would have thought that his decision remained final. The Court could not review the decision of the Minister and there is no attempt in the present case to appeal from him, and I would not have jurisdiction to entertain such an appeal.

It may be noted that sections 178 and 179, referred to by the Exchequer Court, now correspond essentially to sections 164 and 165 of the Customs Act.

Accordingly, there can be no question here of examining the Minister’s reasons or of a trial de novo as happens when the question is referred to the Court under sections 165 and 166 of the Customs Act.

The purpose of the plaintiff’s action is, first, to give effect to the Minister’s decision which has become final, and it is thus based on subsection 249(1) of the Act. This seems clear from the earlier notices and the entire procedure followed pursuant to sections 160 to 168 of the Act, as well as being supported by the allegations of the amended statement of claim.

The plaintiff was also correct in claiming the penalty separately from the amounts of customs duties and sales tax; this combination of remedies was justified in view of section 102 of the Act, which provides:

102. The true amount of customs duties payable to Her Majesty with respect to any goods imported into Canada or exported therefrom, from and after the time when such duties should have been paid or accounted for, constitutes a debt due and payable to Her Majesty, jointly and severally, from the owner of the goods at the time of the importation or exportation thereof, and from the importer or exporter thereof, as the case may be; and such debt may, at any time, be recovered with full costs of suit, in any court of competent jurisdiction, and any goods afterwards imported or exported by the owner are subject to a lien for such debt and may be withheld from delivery by customs until such debt is paid.

In The Queen v. Martin Trailer Ltd., a judgment of the Federal Court of Canada on January 15, 1982, not yet reported, Dubé, J says at 3:

Under the provisions of s. 163 of the Customs Act, the Minister may give his decision in the matter and may, at his discretion, indicate the terms upon which the things seized may be released or the fine remitted. This discretionary power of the Minister in no way invalidates his rights of recovery at any time as provided in s. 102.

In the case at bar, however, it is clear from the summaries at the bottom of list A and the amended list B, in support of the notice of forfeiture, that the customs duties and sales tax are separated, that they are added to the penalty and that they are thus included in the total sum of $291,301.05 which is the subject-matter of the forfeiture. By reducing the amount of the forfeiture as he did, pursuant to section 163 of the Act, the Minister could lay down the conditions of the remission and the Court has to conclude that he regarded the payment of $291,301.05 by the defendant as including the payment of customs duties and sales tax.

The plaintiff was also justified, as her counsel explained, in protecting herself and claiming the amounts of customs duties and sales tax separately in the event that the Court decided to ignore the lack of notice under section 164 of the Act and in addition dismissed the action for a penalty; however, as these events have not occurred, and in view of the reasons given above, the plaintiff cannot obtain here any more than the sum of $291,301.05.

The plaintiff has thus presented evidence of the Minister’s decision under section 163 of the Act; she has further established that the defendant was notified of this decision pursuant to sections 164 and 167 of the Act, and she has clearly established the defendant’s failure to inform the Minister within the time specified in section 164 of the Act that his decision would not be accepted. The Minister’s decision has therefore become final and the plaintiff’s action to give effect to it in accordance with subsection 249(1) of the Act is valid in the amount of the forfeiture, namely $291,301.05 and costs.

In any case, even if in the circumstances the failure to give the notice of objection within the time specified in section 164 of the Act were not fatal, and the Court could re-examine the matter, I consider that the defendant has not rebutted the presumption and shifted the burden of proof resulting from sections 247 and 248 of the Customs Act. Those sections provide as follows:

247. The production or proof of the existence of any invoice, account, document or paper made or sent by any person or by his authority, wherein the goods or any of them are charged or entered at or mentioned as bearing a greater price than that set upon them in any other invoice, account, document or paper intended to cover the same goods or any part thereof, made or sent by the same person or by his authority, or in which the goods or any of them are given a different name or description from that stated in any other such invoice, account, document or paper, or in which the goods are falsely described, is prima facie evidence that the invoice, account, document or paper wherein is stated a lesser price, or the false or incorrect name or description of the goods, was intended to be fraudulently used for customs purposes; but such intention or the actual fraudulent use of such invoice, account, document or paper may be proved by any other legal evidence.

248. (1) In any proceedings instituted for any penalty, punishment or forfeiture or for the recovery of any duty under this Act, or any other law relating to the customs or to trade and navigation, in case of any question of, or relating to the identity, origin, importation, lading or exportation of any goods or the payment of duties on any goods, or the compliance with the requirements of this Act with regard to the entry of any goods, or the doing or omission of anything by which such penalty, punishment, forfeiture or liability for duty would be incurred or avoided, the burden of proof lies upon the owner or claimant of the goods or the person whose duty it was to comply with this Act or in whose possession the goods were found, and not upon Her Majesty or upon the person representing Her Majesty.

(2) Similarly, in any proceedings instituted against Her Majesty or any officer for the recovery of any goods seized or money deposited under this Act or any other such law, if any such question arises, the burden of proof lies upon the claimant of the goods seized or money deposited, and not upon Her Majesty or upon the person representing Her Majesty.

Determining the amount of the claim required a highly complex calculation. The investigator Daniel St. James, employed by Revenue Canada, Customs and Excise, first had to distinguish between goods which had not been declared and those which were undervalued using false customs invoices.

In the first case, he produced purchase invoices and said that he was unable to trace the corresponding customs declarations, despite a thorough investigation lasting nine months, four months of which were spent at the defendant’s place of business.

In the second case the situation was more complicated. The investigator first had to agree with the defendant’s representatives on a detailed list of prices for the goods in question, and he in addition referred to the defendant's various commercial invoices; he then established four separate categories of undervalued goods, referring to some 137 customs invoices.

In any case, the investigator filed a total of some 170 detailed work sheets with supporting invoices and documents.

The witness Daniel St. James was never fundamentally contradicted. There was no doubt as to his credibility, which was admitted by all concerned. He meticulously investigated the complicated facts and was able to submit a clear and detailed report: the method used by him and the elaborate calculations he submitted with supporting documentation amply justify the plaintiff's arguments and claim.

The defendant, for its part, sought to establish its good faith, evidence which as a general rule is not relevant in a question of forfeiture under the Customs Act, and which under section 192 of the Act is not always sufficient.

In The Queen v. Mondev Corp. Ltd., 33 C.P.R. (2d) 193, Addy, J. of the Federal Court of Canada said the following at 199-200:

Proceedings in forfeiture are proceedings in rem and the forfeiture, therefore, operates from the moment of importation and defects in notification procedure cannot affect the right of the Crown . . . It follows also that the good faith of the owner or person claiming the title for the goods is immaterial once an offence under the Act has been committed and the goods are forfeited .. . This, of course, does not mean that good faith and a lack of any intention to deprive the Crown from any revenue would not be an answer to certain offences under the Act. It merely means that, once an offence has been committed, good faith or lack of intent to deprive the Crown of duty payable or lack of involvement in the offence on the part of the owner or other person interested in the goods, is not an answer to forfeiture proceedings taken by the Crown.

In considering the meaning of the words “to make out a false invoice” in the context of s. 192 of the Customs Act one must consider the general character of the words creating other offences in the same section. All of these words imply something fraudulent, something furtive or an intention to deprive the Crown of revenue. From the fraudulent element contained in all of these expressions, it appears that Parliament intended the word “false” to include an element of blameworthy intention and did not intend the word to be merely synonymous of “incorrect” or “erroneous”. It would seem, therefore, that in order to result in forfeiture under s. 192, there must exist an intention on the part of a person to deprive the Crown of some duty. Altogether apart from s. 248 of the Act, which relates to onus, the intention required in s. 192 would normally be implied by the mere fact that the declaration as to value was not a true one, if no evidence were led by the defendant which would tend to contradict or negate any wilful or improper conduct or intention on the part of the person importing the goods.

Even if proof of good faith or of an innocent intent would exempt a person from the operation of s. 192, it seems clear to me that, once undervaluation for duty purposes has been established, the defendant would be obliged to adduce some credible evidence of good faith and lack of blameworthy conduct on its part.

In The Queen v. Caisses Enregistreuses Métro Canada Ltée, a judgment of the Federal Court of Canada on April 2, 1986, [1986] 1 C.T.C. 462, Teitelbaum, J., referring to Mondev above, says at 468:

I am satisfied that mens rea, a guilty intent, is not a required element in “blameworthy intention”. What is required is an act of obvious negligence. The broker, in making the false declaration for which the defendant is responsible in law as if he himself made it, has been obviously negligent if we are to assume that there was no criminal intent to defraud the plaintiff of the sales tax.

Here the defendant explained that importing constitutes a large part of its activities and the underpaid duties were barely 7.5 per cent of all the customs duties paid by it during the period in question. It added that as a result of its special relations with the exporter Firematic Sprinkler Devices Inc., goods purchased elsewhere in the U.S. were delivered to Firematic and some of these goods might well never cross the Canadian border; in any case, the defendant pointed out that imported goods arrived in its warehouse on an average of a week before its customs broker sent it the applicable customs invoices, which prevented it from maintaining an effective control of the actual quantity of goods imported. The defendant further argued that if part of the goods were undervalued, a significant part had also been overvalued, which the investigator should have taken into account, and incidentally the defendant had given the investigator its cooperation. It may be noted at once, in connection with this overvaluation, that the defendant cannot rely on that here as it never made use of the provisions of section 46 of the Customs Act to request a new ruling or valuation; furthermore, what it allegedly overpaid is not the subject of a separate claim or of a counterclaim. Finally, the defendant placed the blame on its own customs broker, explaining that the latter was swamped with work and it had simply “rubber-stamped” by accepting amounts and values as submitted by the shipper of the goods.

In the circumstances, these explanations cannot be allowed: on the contrary, they contribute to establishing negligence by the defendant, which should have done what was necessary to maintain better control over its imports and provide its own customs broker, for whom it is responsible, with better information. Moreover, I prefer to believe the witness St. James, who using information provided to him at the start of the investigation by the defendant's purchasing clerk, Mrs. Sparks, described the latter’s importing procedure; in so doing, the investigator stated that Mrs. Sparks had told him that a Firematic Sprinkler Devices Inc. employee consulted her regularly before the prices and values of goods were entered on the relevant invoices by the exporter.

Bearing in mind the scheme and spirit of the Customs Act, taking into consideration its subsection 2(3), which recommends that its wording be given the interpretation that will best ensure the protection of the revenue, and also taking into account its sections 247 and 248 set out above, it does not appear that, in view of the persuasive evidence presented by the plaintiff, the defendant here has credibly established both its good faith and unobjectionable conduct, at least conduct free of obvious negligence.

For all these reasons judgment will be rendered allowing the plaintiff's action in the amount of $291,301.05 with costs against the defendant.

Action allowed.