Her Majesty the Queen v. Robert Oldfield, [1986] 1 CTC 321

Davies, Prov. Ct., J.:—The accused stands charged:

COUNT 1

That on the 12th day of March, 1985, unlawfully failed to comply with the demand in a letter dated the 6th day of February, 1985, made upon him pursuant to paragraph 231(3)(b) of the Income Tax Act, in that he did not provide to the Minister of National Revenue, Taxation at Victoria, Province of British Columbia, Books and Records as indicated in the above said, Demand letter of the 6th day of February, 1985, contrary to subsection 238(2) of the Income Tax Act, R.S.C. 1952, Chapter 148, as amended.

COUNT 2

That on the 12th day of March, 1985, unlawfully failed to comply with the demand in a letter dated the 6th day of February, 1985, made upon him pursuant to paragraph 231(3)(a) of the Income Tax Act, in that he did not provide to the Minister of National Revenue, Taxation at Victoria, Province of British Columbia, information as indicated in the above said Demand letter of the 6th day of February, 1985, contrary to subsection 238(2) of the Income Tax Act, R.S.C. 1952, Chapter 148, as amended.

Following pleas of ‘‘not guilty" to both counts, and prior to hearing any evidence, the Crown and defence joined in an application that an issue be directed as to the constitutional validity of subsection 231(3) [now 231.2(1)] of the Income Tax Act, R.S.C. 1952, c. 148, as amended. Learned defence counsel seeking a ruling that the impugned section be declared ultra vires and of no force and effect it being in contravention of section 8 of the Canadian Charter of Rights and Freedoms, being Part 1 of the Constitution Act, 1982.

Acceptable notice has been served on both the Attorney General for British Columbia, pursuant to section 8 of the Constitutional Questions Act, R.S.B.C. 1979, c. 63, as amended, and neither appeared.

Both learned counsels cited numerous cases; all were read and considered. I found the following cases to be of the greatest help and guidance, namely:

1. Hunter et al v. Southam Inc., 14 C.C.C. (3rd) 96; 84 D.T.C. 6467 (S.C.C.).

2. Regina v. Robson, 41 C.R. (3rd) 68 (B.C.S.C.).

3. Regina v. Robson, 45 C.R. (3rd) 68 (B.C.S.C.).

4. Canadian Bank of Commerce v. A.-G. Canada, 62 D.T.C. 1236 (S.C.C.).

5. Bishop v. College of Physicians of British Columbia, [1985] 6, W.W.R. 234 (B.C.S.C.).

6. Alberta Human Rights Commission v. Alberta Blue Cross Plan, [1983] 6 W.W.R. 758 (Alta. C.A.).

7. Gersham Produce Co. Ltd. v. Motor Transport Board, 31 M.V.R. 66 (Man. Q.B.).

8. M.N.R. et al. v. Kruger Inc. et al. [1984] C.T.C. 506; 84 D.T.C. 6478 (F.C.A.).

9. The Queen v. Dorothy Dzagic, [1985] 1 C.T.C. 346; 85 D.T.C. 5252 (S.C.O.).

Subsection 231(3) of the Income Tax Act reads as follows:

The Minister may, for any purposes related to the administration or enforcement of this Act, by registered letter or by a demand served personally, require from any person

(a) any information or additional information, including a return of income or a supplementary return, or

(b) production, or production on oath of any books, letters, accounts, invoices, statements (financial or otherwise) or other documents.

within such reasonable time as may be stipulated therein.

Subsection 231(10) compliance:

No person shall hinder or molest or interfere with any person doing anything that he is authorized by or pursuant to this section to do, or prevent or attempt to prevent any person doing any such thing and notwithstanding any other law to the contrary, every person shall, unless he is unable to do so, do everything he is required by or pursuant to this section to do.

Section 238(2) states:

Every person who has failed to comply with or contravened subsection ... [inter alia,] 231 is guilty of an offence and in addition to any penalty otherwise provided is liable on summary conviction to

(a) a fine of not less than $200 and not exceeding $10,000.00 or

(b) both the fine described in paragraph (a) and imprisonment for a term not exceeding 6 months.

It should be made clear at the onset that the Court is concerned only with the validity of the impugned section; to determine whether the powers thereunder are so broad and draconian that it grants to the Minister powers far in excess of those required to effectually enable him to properly fulfil his duties to insure that we all assume our fair share of the tax burden. Specifically the Court is not concerned with the reasonableness, or otherwise, of the specific demands made in this case.

It must first be determined, therefore, if the demand, pursuant to this section is one that forces or compels production. Keeping in mind the serious penalties outlined in subsection 238(2) it is one that is supported by compulsion.

Is such a demand for production of information or of documents a form of search and seizure? It has been so held in Riech, supra [sic] at 697 —

The forced production of documents in civil proceedings or during an administrative inquiry is a ""seizure” within Section 8 of the Canadian Charter of Rights and Freedoms, guaranteeing the right to be secure against unreasonable search or seizure.

It has been so held in the Blue Cross case, at 763 —

We accept the view that a forced production of documents in civil proceedings or during an administrative inquiry, is a seizure.

It follows that I must conclude that a demand pursuant to subsection 231(3) is a search or seizure; does the impugned subsection authorize searches or seizures which are not reasonable and, if so, can such unreasonable searches or seizures be valid? Again, at the risk of being repetitive, it is not what is done, but what can be done that is in issue.

In Robson, His Lordship the Chief Justice of the Court of Appeal of British Columbia, dealing with the validity of subsection 214(2) of the British Columbia Motor Vehicle Act directed his mind to the possible abuses permitted by this very vague statute and stated:

The potential ramifications of this vaguely defined suspension power are far- reaching. The provision allows the suspension of the licences of the young, old or infirm at any time of day or night, not only in urban centres but on isolated country roads. It could leave drivers and passengers stranded without transportation regardless of the weather, with the attendant danger to their health and safety. Its vagueness is fatal inasmuch as it does not constitute a reasonable limit on a driver’s liberty as I have defined it.

and further:

Accordingly, it is my view that a statutory provision such as Section 214(2) which exhibits these characteristics cannot be a reasonable limit on the liberty right identified in this case.

In Southam an annotation provided at 99 [C.C.C.] is of some assistance:

Up until now there have been two schools of thought amongst our Courts as to the proper approach to interpreting the Charter. On the one hand some Courts have accepted the validity in this context of Viscount Sankey L.C.’s statement that Canadian constitutional interpretation must not proceed by “a narrow and technical construction” but by a “large and liberal interpretation”: Edwards v. A.G. Can., (1930) A.C. 124 at 136-37, (1929) 3 W.W.R. 479, (1930) I.D.L.R. 98 (P.C.). On the other hand, there have been powerful voices of caution as for example in Zuber J.A.’s oft quoted remark in R. v. Altseimer (1982), 38 O.R. (2d) 783, 29 C.R.

(3d) 276 at 282, 17 M.V.R. 8, 1 C.C.C. (3d) 246, 2 C.R.R. 119 (C.A.), that “the Charter does not intend a transformation of our legal system or the paralysis of law enforcement.” In Southam the Supreme Court of Canada enrolled all Canadian judges in the broader school. Courts are expected to give the Charter a broad, purposive analysis which interprets its specific provisions in the light of its larger objects. This is seen as a quite different task than that of interpreting a statute. The Courts are the guardians of the rights and freedoms the Charter enshrines. The Charter can be interpreted to constrain but never to authorize governmental action. The Courts are not to “read down"" legislation to make it comply with the Charter. Legislatures are to be left to rectify their legislation.”

The remarks of His Lordship, Mr. Justice Dickson, at 111 (D.T.C. 6472) are most helpful —

I begin with the obvious. The Canadian Charter of Rights and Freedoms is a purposive document. Its purpose is to guarantee and to protect, within the limits of reason, the enjoyment of the rights and freedoms it enshrines. It is intended to constrain governmental action inconsistent with those rights and freedoms; it is not in itself an authorization for governmental action. In the present case this means, as Prowse, J.A. pointed out, that in guaranteeing the right to be secure from the unreasonable searches and seizures s. 8 acts as a limitation on whatever powers of search and seizure the federal or provincial governments already and otherwise possess. It does not in itself confer any powers, even on “reasonable"" search and seizure, on these governments. This leads, in my view, to the further conclusion that an assessment of the constitutionality of a search or seizure, or of a statute authorizing a search or seizure, must focus on its “reasonable"" or “unreasonable"" impact on the subject of the search or the seizure, and not simply on its rationality in furthering some valid government objective.

The remarks of His Lordship, Mr. Justice Dickson, at 121 (D.T.C. 6477), are directly on point —

While the Courts are guardians of the Constitution and of individuals’ rights under it, it is the legislature’s responsibility to enact legislation that embodies appropriate safeguards to comply with the Constitution’s requirements. It should not fall to the Courts to fill in the details that will render legislative lacunae constitutional. Without appropriate safeguards, legislation authorizing search and seizure is inconsistent with s. 8 of the Charter. As I have said, any law inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect.

and further:

Section 1 of the Charter provides:

1. The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.

The phrase ‘‘demonstrably justified" puts the onus of justifying a limitation on a right or freedom set out in the Charter on the party seeking to limit.

It is noted that subsection 231(4) has been declared ultra vires and of no force and effect in Kruger and paragraph 231 (1)(d) has been declared ultra vires and of no force and effect in Dzagic; wherein the Court said:

As Dickson C.J. did in Southam, I must note at the outset that the concern on this stated case is the constitutional validity of the section and not the reasonableness of the manner in which the statutory authority was carried out.

In order to determine whether the case at hand differs from Southam in substance, it is necessary to look at the approach taken by the Court in that case. It spoke of an entitlement to a “reasonable expectation of privacy.” This indicated to the court that an assessment had to be made “as to whether in a particular situation the public’s interest in being left alone by government must give way to the government's interest in intruding on the individual’s privacy in order to advance its goals, notably those of law enforcement.

Section 231 of the Act is an investigation section and it should not contain powers of adjudication except upon satisfying the usual safeguards of probable cause as determined judicially by an independent person. Only then were intrusions on privacy traditionally sanctioned by law. Subsection 4, which is in truth a seizure provision, has been struck down by the Federal Court in M.N.R. v. Kruger Inc., et al, [1984] C.T.C. 506; 84 D.T.C. 6478. It will no doubt be re-written in a manner that conforms with the Charter in the event that the Supreme Court of Canada upheld the Federal Court of Canada ruling. The only remaining seizure provision contained in paragraph 231(1)(d) should now be declared unconstitutional.

My reading of Southam leads me to view paragraph 231(1)(d) as offensive in the same manner as was described and for the same reasons as given in the Southam case that declared section 10 of the Combines Investigation Act of no force and effect. The degree only of encroachment on privacy may be different. But since there are no safeguards, the potential for abuse even on a plain reading of the whole of subsection 231(1) is enormous in the hands of an unscrupulous official.,

Subsection 231(3) provides no safeguards for the citizen. There is no requirement of personal responsibility, legal or moral, to provide the information, save by virtue of the Act itself. The information sought can concern anyone, anywhere. If the accused is aware of the existence and location of such documents, and has access, lawful or not, he must produce or risk up to six months’ imprisonment. The sought-for information may be within the knowledge of thousands, more responsible morally or legally to assist the Ministry. There is no requirement that anyone of a judicial nature be satisfied the sought for information, if necessary at all, should be provided by the accused. The logic and reasoning that required the courts to declare paragraph 231(1)(b) and subsection 231(4) ultra vires and of no force and effect apply with even greater force to subsection 231(3).

It is the finding of the Court that subsection 231(3) of the Income Tax Act is in contravention of section 8 of the Charter and the Charter must prevail. Subsection 231(3) of the Income Tax Act is, therefore, found to be ultra vires and of no force and effect.

Rule accordingly.