Her Majesty the Queen v. Amway of Canada Limited/Amway Du Canada Limitée and Amway Corporation, [1986] 1 CTC 138

Reed, J.:—These reasons pertain to several motions (two brought by the plaintiff, one brought by the defendant, Amway Corporation), which were all heard together and which are intertwined. A fourth was also heard at the same time but because further argument has been sought thereon it is not yet dealt with.

The plaintiff brought motions seeking, (1) to require the defendant, Amway Corporation, to file a list of documents which complies with rule 448 and, (2) to require the defendant, Amway Canada Limited, to produce some 33 documents listed in Schedule I, Part ll, Part B of its rule 448 list of documents (filed on August 6, 1985), for which it claims privilege on the ground of self-incrimination. The motion brought by the defendant, Amway Corporation, seeks to have the plaintiffs claim struck out as against it, pursuant to rule 419, or to have judgment entered in its favour, pursuant to rule 341, without further determination of the issues between the parties.

The main actions to which these motions relate are five in number seeking to enforce certain provisions of the Customs Act, R.S.C. 1970, c. C-40, as amended, particularly subsection 192(1). That section provides that when goods have been smuggled into Canada, or when false invoices have been made out with respect to goods, or when they have been undervalued, such goods shall be forfeited to the Crown. The subsection also provides that when the goods cannot be found, a sum of money equal to their value is forfeited to the Crown.* [1]

It is this provision which it is sought to apply and the total amount claimed by the plaintiff from the defendants is:

The statement of claims allege that: the defendants imported goods into Canada (paragraph 2); they were required to present, for customs purposes, invoices setting forth the fair market value of the goods (paragraph 3); the defendants provided false documentation in this regard to the Department of National Revenue (paragraph 4); the defendants made false declarations to customs regarding fair market value (paragraph 5); and in the alternative that they undervalued the goods and thereby defrauded the revenue of duty (paragraph 8).

Rule 448 List of Documents — Amway Corporation

An affidavit filed in support of the plaintiff’s motion discloses that on August 16, 1985, when Amway Corporation served its rule 448 list of documents on the plaintiff, that list was accompanied by a letter which stated:

. . . the only issue of fact as between the Defendant Amway Corporation and the Plaintiff is, in our view, the denial by paragraph 2 of the respective Defences of the allegation in paragraph 2 of the respective Statements of Claim that Amway Corporation imported goods into Canada, and that being the only issue of fact, it is the only “matter in question” relating to which there could be any documents that require to be listed by Amway Corporation to comply with Rule 448.

For the above reasons, we are satisfied, after very careful consideration, that the documents listed with reference to aforesaid aspect of each case are, in principle, all the documents “relating to any matter in question in the cause or matter” that are or have been in Amway Corporation’s possession, etc.

The plaintiff argues that implicit in this assertion is a recognition that there are further documents in Amway Corporation's possession which should have been produced but which were not produced because of counsel's interpretation of the "matter in issue".

It is trite law that on discovery every document which may either directly or indirectly enable the party seeking production either to advance his own case or damage that of his adversary's must be produced: Compagnie Financière et Commercial du Pacifique v. The Peruvian Guano Company (1882), 11 Q.B.C. 55; Boxer and Boxer Holdings Ltd. v. Reesor, Gillespie and Norvan Properties Ltd. (1983), 43 B.C.L.R. 352; R. v. Special Risks Holdings Inc., [1983] 2 F.C. 743; Everest & jennings Canadian Ltd. v. Invacare Corporation, [1984] 1 F.C. 856.

The defendant, Amway Corporation, does not contest this statement of the law but argues that on the basis of the plaintiff’s statements of claim the

(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).

only issue, as between the plaintiff and Amway Corporation is whether or not Amway Corporation imported goods into Canada. It is argued that because Amway Corporation has denied that it imported goods into Canada, it is required to produce only documents relating to that issue and not any documents which might relate to the providing of false documentation to the Department of National Revenue, false declarations to customs, or the undervaluing of goods.

Counsel's argument proceeds by taking paragraph two of the statements of claim and reading that paragraph as an integral part (or condition precedent) of every other paragraph in the statements of claim. Paragraph two states:

. . . the defendants imported into Canada, certain goods, of which they were the owners. The Defendants entered these goods under one hundred and eighty-two

(182) separate Customs entries.

Counsel for Amway argues that paragraph two must be read as describing the goods which were either imported severally by either Amway Corporation or Amway Canada, or jointly (by the two corporations acting in concert), but then makes a quantum leap in his argument by stating that the only issue to which Amway Corporation must respond is the allegation that it imported goods into Canada. This is not a reasonable interpretation of the statements of claim.

I find the argument completely without merit. The statements of claim, on their face, are composed of independent paragraphs, all of which allege that the defendants engaged in certain activities. Counsel's argument requires reading into each paragraph words that are not there. I do not read the statements of claim in that fashion, in fact it takes some linguistic gymnastics if not purposive misconstruction to do so.

There is nothing on a plain reading of the statements of claim which precludes, for example, the allegation of undervaluing as against Amway Corporation to be in relation to goods imported by Amway Canada. Whether this makes Amway Corporation legally liable under the Customs Act is another issue — one which will undoubtedly be addressed in argument at trial (see infra page 15).

Counsel does not contest that the other defendant, Amway Canada, must produce documents relating to the providing of false documentation, of false statements to Customs and of undervaluation (to the extent it has them). In his view this is because Amway Canada has admitted that it was an importer of the goods. To state the defendant's argument in this fashion makes it clear that it is based on the premise that a defendant can control the scope of discovery as against it by either denying or admitting the allegations made against it in a statement of claim. To state the argument thus, is to demonstrate its fallacy.

Alternatively, counsel for Amway Corporation invited the Court to determine the threshold question (as he characterized it) as to whether or not Amway Corporation was an importer of goods, pursuant to rule 476. I decline to do so. This is not an appropriate circumstance for the application of that rule.

Claim of Privilege on the Basis of Self-Incrimination — Amway Canada

The defendant, Amway Canada, claims in its list of documents filed pursuant to rule 448, privilege for certain documents so listed, on the ground that disclosure would involve self-incrimination.

The privilege in issue is not that accorded to a witness by subsection 5(2) of the Canada Evidence Act, R.S.C. 1970, c. E-10, now also by section 13 of the Canadian Charter of Rights and Freedoms * [2] This privilege does not excuse a witness from producing documents (or answering questions). It merely allows a person claiming thereunder to avoid having the evidence so given used against it in subsequent proceedings. This is not what is claimed in the present case. Indeed, subsequent criminal proceedings seem highly unlikely because both defendants have already been convicted, on November 10, 1983 in the Supreme Court of Ontario, of fraud in relation to the events which underlie the plaintiff’s present claim against them.

Amway Canada’s argument is that at common law, and now under the Canadian Charter of Rights and Fredoms, a person accused of an offence has a right to stand mute (i.e.: cannot be compelled to be a witness).

The argument based on common law is quickly answered. Any such privilege is overridden by statute. Section 170 of the Customs Act provides for the production of all invoices, documents, etc. for the purposes of any suit under the Act.

Paragraph 11(c) of the Canadian Charter of Rights and Freedoms provides:

Any person charged with an offence has the right

(c) not to be compelled to be a witness in proceedings against that person in respect of the offence;

Counsel's argument is that section 1921 [3] of the Customs Act is penal in nature (regardless of whether the forfeiture provisions or those providing for summary conviction or indictable offences are invoked). He contends that paragraph 11(c) of the Charter is applicable to all penal offences, regardless of the procedure used to enforce them. This requires reading the word “charged" in section 11 as broad enough to include the notice procedure under section 161 of the Customs Act.

In support of the contention that section 11 of the Charter encompasses actions that are truly penal in nature, not merely those in which the enforcement is by way of summary conviction or indictable offence, counsel cites: Peltari v. Director of Lower Mainland Regional Correctional Centre (1984), 42 C.R. (3d) 103 (B.C. Sup. Ct.); Russell v. Radley, [1984] 1 F.C. 543. He refers particularly to the analysis of Mr. Justice Gibbs at page 111 in the Peltari decision:

Upon reviewing other Charter cases, and upon careful analysis of the Charter, and particularly s. 11, it is my opinion that “offence” in s. 11(h) means conduct prohibited by law on pain of punishment.. . .

And to the conclusion of Mr. Justice Muldoon at page 565 of the Russell decision:

. . . Equally, there seems no doubt that the word “offence” in section 11 excludes a tort or a délit. What then is meant by “offence”? Surely it must mean conduct (truly, culpable misconduct) defined and prohibited by law, which, if found beyond a reasonable doubt to have been committed in fact, is punishable by fine, imprisonment or other penalty imposed according to law upon the culpable miscreant, the offender. . . .

The Supreme Court has held that the Charter should be liberally interpreted: Law Society of Upper Canada v. Skapinker, [1984] 1 S.C.R. 357; Southam Inc. v. Hunter et al., [1984] 2 S.C.R. 145; R. v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295.

Equally I am aware that in the United States, where, as is well known, a much broader definition of privilege against self-incrimination has developed than exists in Canada, that privilege has been held applicable in cases involving forfeiture. (McCormick on Evidence, West Pub. 1972 at pages 257- 58; Boyd v. United States 116 U.S. 616 (1886).)

It should be noted that if the defendant's argument is right and section 11 protections apply to the forfeiture action, not only would paragraph 11(c) become an issue, but paragraph 11(d) also. Paragraph 11(d) provides that a person is “to be presumed innocent until proven guilty .. .”. But subsection 248(1) of the Customs Act provides:

In any proceedings instituted for any penalty, punishment or forfeiture or. . . the burden of proof lies upon the . .. person whose duty it was to comply with this Act . . . and not upon her Majesty . . .

The plaintiff argues that the forfeiture proceeding is civil in nature; that forfeiture results in a debt owing to the Crown, which by its very nature is a civil matter; that section 11 of the Charter requires a criminal type procedure — it is specifically stated to apply where “any person is charged . . .”.

Mr. Justice Cattanach’s decision in Amway Canada v. Minister of National Revenue, (unreported decision of March 11, 1983, Court file number T- 9329-82) and that of the Ontario Supreme Court in Ng and Ng v. R. (1981), 24 C.R. (3d) 178 are cited. Neither of these are particularly helpful since neither deals with the scope of paragraph 11(c). In addition, while Mr. Justice Cattanach referred to forfeiture proceedings as civil he was obviously adopting the terminology used by counsel. Other passages in his judgment make it clear that he considered forfeiture to be a penalty arising out of the commission of an offence. In Ng, Mr. Justice Aberle did not find it necessary to decide for the purpose of his decision whether forfeiture proceedings were civil or “quasi-criminal”. The consequence of the plaintiff’s position is that if the Crown had proceeded against the defendant under paragraph 192(2)(b) by way of summary conviction (for which the maximum fine is $200) all the guarantees of section 11 of the Charter would apply, but since it proceeded under 192(2)(a) by way of forfeiture (for which $118,451,026 is sought) the Charter guarantees do not apply.

The Charter issue was raised by the defendants in response to the plaintiff's motion for production of documents. It was clear that it was unanticipated by the plaintiff. Therefore the exhaustive and considered response which the issue deserves was not available to me. While I might reopen the issue to allow for further argument I have decided not to do so because, in my view, the defendants’ position in any event cannot succeed.

Even if paragraph 11(c) applies to a forfeiture proceeding such as the present, and even if it applies to accord protection to corporations as well as to individuals, I do not think it can apply to preclude the production of documents in this case. The argument being made is that since an accused cannot be compelled to testify, the defendant corporation cannot be compelled to produce documents. Yet if an accused chooses to testify all relevant questions are required to be answered.* [1] In this case the defendant corporation has produced documents which support its position; it has not chosen to stand mute. Accordingly, even under the application of the rule it cannot now refuse to produce other relevant documents, those which do not support its position.

While it is true that the rules of this Court require the production of documents and require that those for which privilege is sought be so identified in the 448 list, that rule was not drafted by reference to the non-compellability rule, now set out in paragraph 11(c) of the Charter. It was drafted with reference to privilege claimed, for example, on the basis of a solicitorclient relationship or Crown immunity. Trying to apply the rule of noncompellability within the context of discovery proceedings, as the defendant asks me to do, demonstrates how awkwardly it applies, if it applies at all. But in any event, proceeding by analogy, an accused may refuse to testify, but if he does so, he is required to answer all questions, other than those to which a solicitor-client or other privilege might apply but not on the ground of a privilege against self-incrimination. Concomitantly, in this case the defendant might have sought, prior to filing a 448 list of documents, an order of the court (pursuant to section 252 of the Customs Act) adapting the rules to accommodate the Charter rights which are now asserted. This would have raised the issue of the compellability of the defendant prior to the commencement of the discovery. But that was not done. The defendant filed a list of documents in its favour. It must now file a list of the other relevant documents.

In addition, it is well settled that the non-compellability rule does not preclude the production of objective fact evidence, nor non-testimonial out-of-court statements: Curr v. The Queen, [1972] S.C.R. 889; Validity of Section 92(4) of the Vehicles Act, 1957 (Sask.), [1958] S.C.R. 608; Marcoux et al. v. The Queen, [1976] 1 S.C.R. 763. The documents in question in general, were prepared long before the trial proceedings. In my view, in the hands of a corporation they are much more analogous to the objective fact evidence which the Supreme Court dealt with in the Curr case, than they are to the testimonial type evidence to which paragraph 11(c) is addressed.

And lastly, if the defendants are right in the arguments which they have made and which I have not addressed, and if I am wrong with respect to the scope of protection flowing in any event from paragraph 11(c), there would still be section 1 of the Charter to consider. This would seem to be a most appropriate case for its application.

Motion to Strike out Amway Corporation as a Defendant

Amway Corporation seeks an order striking out paragraph two of the plaintiff's statement of claim pursuant to rule 419, and consequent thereon an order entering judgment dismissing the action as against it. The ground alleged is that paragraph two is scandalous, frivolous or vexatious, or otherwise an abuse of the process of the court. Alternatively an order is sought for judgment in Amway Corporation's favour pursuant to rule 341, on the ground that there are admissions in the examination for discovery and other documents justifying such an order.

The claim pursuant to rule 419 was not really seriously pursued and indeed it does not deserve serious consideration. In the first place paragraph two of the statement of claim has long been pleaded over. Secondly, even if paragraph two were attachable for vagueness that would not justify striking out the whole statement of claim. The obvious remedy would be to allow the plaintiff an opportunity to amend.

The argument made by Amway Corporation in support of both motions is that (1) the Customs Act imposes duties, liabilities and penalties only against importers of goods (sometimes also the owners or carriers); (2) the statement of claim as against Amway Corporation (as noted above, pages 4 and following) raises only the issue of whether or not it was an importer; (3) the evidence given so far on the examination for discovery of the plaintiff’s witness, Dwight St. Louis, discloses no factual basis for the Crown's allegation that Amway Corporation was an importer; and therefore the statement of claim should be struck out as against it or judgment should be entered in its favour.

It is not clear and obvious that the Customs Act imposes liabilities only on importers (owners and carriers). Subsection 192(1) on which the Crown's action is framed provides:

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). [Emphasis added.]

Counsel for Amway Corporation argues that subparagraph (b) should be interpreted as imposing a liability only on an importer (even though the section is framed as relating to "any person") because the duty of providing invoices is imposed elsewhere in the Act on the importer (sections 20 and 21). It is argued that paragraph (c) only imposes liability on importers because it is the importer which has the liability to pay duty (section 22).

This may be one possible interpretation of subsection 192(1) but equally the contrary and more general application of the subsection can be argued by reference to the fact that the subsection purports to apply to “any per- son”. Thus, it is clear that even if the facts as alleged by the defendant were true (that Amway Corporation was not an importer) there exists a contentious legal issue of statutory interpretation to be resolved. An issue for argument at trial, not one to be disposed of by a motions judge in a preliminary proceeding pursuant to rule 341. Refer: R. v. Garry Bowl Limited, [1974] 2 F.C. 146; [1974] C.T.C. 457 quoting from Thorp v. Holdsworth (1876), 3 Ch.

D. 637 in relation to rule 341:

The rule was not meant to apply when there is any serious question to be argued.

And at page 149 of the Garry Bowl decision, per Chief Justice Thurlow:

. . . when the material facts are clearly admitted and the result of the application of the law to them is not in doubt so that it is apparent that a plaintiff is entitled ex debito justitiae to the relief which he claims in the action or that a plaintiff is entitled to judgment dismissing the action against him, as the case may be, a motion under Rule 341 is an appropriate procedure to obtain such relief immediately in lieu of allowing the action to proceed to a trial which in the end can have no other result.

See also: Cyrus J. Moulton Ltd. v. The Queen, [1976] 1 F.C. 437; [1975] C.T.C. 631 and Diamond Shamrock Corporation v. Hooker Chemicals & Plastics Corp. et al. (1982), 66 C.P.R. (2d) 145.

While this reason alone would justify denial of the defendants’ motion I will consider the other elements of its argument.

With respect to the defendants' interpretation of the plaintiff's statement of claim, I have already indicated that I do not read it as restrictively as counsel for Amway Corporation urges (see supra: pages 5 and following). In my opinion, the statement of claim does more than raise as against Amway Corporation the issue of whether or not that corporation was an importer of the goods.

With respect to counsel's argument that the discovery proceedings so far disclose no factual basis for the plaintiff's allegation that Amway Corporation was an importer of the goods — indeed he argues that the Crown's witness has admitted that fact — these arguments are without foundation.

Counsel's conclusions in this regard are based largely on questions he repeatedly put to the plaintiff's witness concerning the documents, which have so far been produced. He asked, with respect to each, who, according to the documents, was listed thereon as the importer. It was, of course, Amway Canada. This is not surprising; but, nor is it determinative of the issue as to who was and who was not in reality the importer.

Secondly, the conclusion that counsel asks me to draw (i.e. that Amway Corporation was not an importer) involves a weighing of the evidence given by the Crown's witness on discovery, an evaluation and assessment of the affidavit evidence given by certain independent customs brokers on deportation proceedings brought against Messrs. VanAndel and DeVos with respect to the fraud charges, and the making of conclusions and inferences from documents the Crown sent to Amway Corporation and Amway Canada, including the report to the Minister given pursuant to sections 162 and 163 of the Act. These are clearly matters to be determined at trial, by the trial judge, after all the evidence, including presentation of the Crown's case, has been heard. It is premature for a motions judge to embark on that endeavour. This is not a case where the discoveries clearly disclose the disappearance of the issue to which the claim relates.

Thirdly, it strikes me as a rare species of effrontery for the defendant, having discovered the plaintiff's witness, while refusing to produce all relevant documents in its own possession and while refusing to allow discovery of its own officers, to seek to have judgment rendered in its favour, on the ground that the answers to questions on discovery do not sufficiently prove the facts in issue as against it. The questions asked of the witness on discovery were completely in the control of the defendant's counsel. The Crown has had no opportunity to present its case.

Fourthly, counsel's representations that the plaintiff has admitted in the examination for discovery that the defendant, Amway Corporation was not an importer of the goods is simply not substantiated by the record. See: Examination for Discovery Exhibit A, volume I; page 60, lines 15-25; pages 62-63; page 69, lines 22-27; page 73, lines 15-22; pages 74-78; page 145; page 150 and page 205 Exhibit A, volume III, pages 515-517; page 546. While counsel often indulge in a certain amount of overstated rhetoric in pleading their client's case, the obviously incorrect generalizations made in this case were not useful.

Conclusion

Accordingly, the motion seeking a proper rule 448 list of documents from Amway Corporation and the motion requiring Amway Canada to produce the documents listed in schedule B for which it has claimed privilege are allowed. The motion seeking to have the plaintiff's statement of claim struck out as against Amway Corporation is denied.

Plaintiff's motions allowed; Defendants’ motion denied.