Olympia Interiors Ltd. v. R., [1999] 3 CTC 305

Mackay J.:

This is an action against the defendant, Her Majesty the Queen in Right of Canada, claiming damages and declaratory relief for alleged torts by Her servants and for breaches of the plaintiffs’ rights as guaranteed by the Canadian Charter of Rights and Freedoms^ (the “Charter”).

In pre-trial proceedings it was directed that trial should first proceed on issues of liability raised by the plaintiffs’ action. These reasons concern the liability issues. Evidence was not heard on issues of damages claimed, matters left to be heard and argued only if liability is established in these proceedings, or in any appeal from my determination.

The claims arise from proceedings under the Excise Tax Act [2] (the “Act”), as it applied in the early 1980’s, including means taken to assess and collect tax said to be owed to the Crown, and also including criminal prosecution of the plaintiffs which was commenced and then stayed before it was completed. The claims as set out in the plaintiffs’ amended statement of claim concern alleged malicious prosecution, negligence, misfeasance and abuse of authority, and conspiracy by Crown servants. The corporate plaintiff claims it was deprived of “an entitlement” pursuant to s. 46 of the Act. Both plaintiffs, having filed and served Notices of Constitutional Question, also claim that their rights under ss. 7, 8, 11, 12 and 15 of the Charter, have been infringed.

After numerous preliminary proceedings and a substantial period of case management, the action came on for hearing, of issues of liability, over 16 days in October and December, 1998. Decision was then reserved. In the ordinary course, as pre-trial conference or case management judge, I would not have tried the case, but in accord with Rules 266 and 391 of the Court’s Rules, each party having consented that it was acceptable for me to also serve as trial judge, it was arranged that I should do so. Having carefully considered the submissions made and the evidence adduced, only during the course of the hearing, an Order was issued on March 31, 1999, dismissing the plaintiffs’ action for the reasons that follow.

Background

The plaintiff Mary David founded Olympia Interiors in 1964. Olympia Interiors Ltd. (“Olympia”), the corporate plaintiff in this action, was subsequently incorporated in Ontario pursuant to letters patent dated October 14, 1969, and later it was also registered to conduct business in Alberta. At all relevant times, Ms. David was Olympia’s principal shareholder, sole director and president.

Olympia designed, manufactured and installed customized architectural drapes and window coverings for commercial premises. By the early 1980’s Olympia was producing new products and was successful, in tender bidding processes, in securing contracts for supply and installation of window coverings in a number of major commercial building projects in Canada, mainly in the Toronto area and in Alberta. It had also provided window coverings for one or more building projects overseas, in the Middle East, it had participated with other suppliers in Ontario trade show promotions in the United States, and apparently it had also made sales there. In sum, by the early 1980’s, Olympia was a substantial supplier in its field with sales said to range up to $700,000 per year, or more.

The federal sales tax under the Act at all material times was a tax assessed against and payable by manufacturers in relation to their sales. The tax system depended upon voluntary compliance. The calculation of sales and of the taxes owing, as well as accounting for components on which tax was already paid, and for freight and installation costs paid by a manufacturer, a licensee under the Act, was the taxpayer’s responsibility. A manufacturer was required to submit, monthly, a federal sales tax (“FST”) return reporting its taxable sales for the preceding month and the tax payable on those sales. Failure to report taxable sales or FST owed constituted an offence under the Act.

In the 1970’s, by administrative policy and practice, the Excise Tax Branch, in appropriate cases, worked out a deduction allowance to be used in calculating sales and tax payable by licensees that provided manufactured products at a cost including freight and installation costs. This was intended to facilitate payment of tax on a regular basis, subject to verification by audit of records maintained by the manufacturer. Those arrangements were authorized by paragraph 26(6)(c), added by an amendment to the Act? [3] in 1980, which provided that in determining tax under the Act, the sale price of goods may exclude, in accord with regulations, an amount representing the cost of installation of goods incurred by the manufacturer where the goods are sold at a price including installation.

In the 1970’s Olympia apparently had the benefit of a special deduction rate worked out by the Excise branch with Olympia, or of a rate of 10% applicable in the case of manufacturers of drapes that sold the product including installation costs. The evidence is not clear [4] about the rate or the arrangements but there is no dispute that Olympia had enjoyed the benefit of such a deduction rate in the 1970’s and early 1980’s.

Ms. David says that in 1982 she or her staff telephoned Revenue Canada with inquiries regarding the appropriate installation deduction rate for its products, including new products it had introduced. She testified that she was busy in Calgary that year, and that representatives from Revenue Canada, some time late in 1982, told her to file “nil returns” pending the determination of the deduction values. However, the individuals who Ms. David alleged told her to file nil returns each testified that they had not done so or they would not advise a taxpayer to file nil returns unless they had no sales.

There is documentary evidence of Ms. David’s request for information regarding a deduction rate in a letter dated September 30, 1983 to Revenue Canada. In that letter Ms. David asked representatives of the Department “to make an overall percentage ruling on all four products that we manufacture in order to make our calculations easier.” Ms. Bosse, a representative from the Tax Interpretations Section of the Excise Branch at Revenue Canada, replied by letter dated November 17, 1983, and explained the tax rate payable on sales of Venetian and vertical blinds. To explain the concept of and method for deducting installation or erection costs, ET-205, a memorandum pertaining to goods erected or installed, was attached to the November 17 letter. That memorandum explained some of the concepts detailed in Erection or Installation Costs Regulations”. [5] It also provided that if a taxpayer wanted to deduct their actual installation costs according to what it referred to as “Method Two”, which was the procedure set out in the Regulations, those costs had to be “...established by verifiable cost data...”. In lieu of calculating installation costs a taxpayer might use a 10% deduction rate in relation to sales prices of the goods sold. In either case, ET-205 advised taxpayers to retain records on file “for examination by Excise auditors.”

Subsequently, on December 18, 1984, P. L. Estabrooks of the Excise Branch wrote again to Olympia to advise of the ruling to be applied, under ET 205, in calculating FST payable. That advice was ignored by Olympia, as had been the case with the advice received a year earlier from Ms. Bosse of the department.

On September 13, 1984, R. J. Masny, an auditor with Revenue Canada, wrote to Ms. David to confirm arrangements earlier discussed by telephone for him to visit Olympia on October 16 to conduct a federal sales tax audit. It was to be a regular routine audit under the Act. In his letter, Mr. Masny asked to delay the meeting by one day, and further he wrote:

In an effort to utilize our time in the most efficient and effective manner, I request that you have available at your offices the company’s general ledger, sales journal, sales invoices, sales orders, purchase journal, supplier’s invoices (accounts payable), financial statements and bank statements. Furthermore any working papers which you may have regarding sales tax calculations would be beneficial in reviewing and understanding your operations.

Mr. Masny attended at Olympia on October 18 and 19, 1984 to commence his audit. He took handwritten notes and also photocopied invoices that Olympia had sent to its clients. Mr. Masny found that he was unable to conduct a sufficient audit and he was told that most or at least many of Olympia’s financial records were in Calgary for the purposes of litigation there in which Olympia was involved. Mr. Masny concluded, based on the information he collected, that Olympia’s records were not adequate to apply “Method Two” from ET-205, to calculate federal sales tax owing by reference to actual sales and installation and freight cost records. Mr. Masny advised that “a visit be paid to the licensee to establish a combined Freight & Installation rate for their window coverings...” and he provided Ms. David’s contact information so that a representative of the Excise branch could visit Olympia. It was clear to Ms. David, when he completed his work on October 19, 1984 that Mr. Masny’s audit was not completed.

A letter from the Tax Interpretations Section of the Excise Branch dated December 18, 1984, earlier referred to, confirmed that Ms. David had informed Revenue Canada almost one month earlier that she was quite busy and would telephone to set a mutually convenient time to meet to discuss further the matter of a deduction rate. Ms. David was also told that she could contact Technical Services to set an installation deduction rate applicable to each invoice, otherwise she could claim 10%, in accord with ET- 205.

On January 25, 1985, Mr. Leyton, an auditor with the Technical Services Unit of National Revenue, visited Olympia to assist in determining the installation deduction rate. Most of the records he sought were then in Calgary. Nevertheless on February 13, Mr. Leyton wrote to his supervisor to recommend “a combined percentage deduction of 50.0% for prepaid transportation and installation...”. On March 4, Mr. Leyton’s supervisor, Mr. Dickson, replied to Leyton’s recommendation by a handwritten memorandum that questioned the 50% rate and reminded Mr. Leyton that normally the rate was 10%. Mr. Leyton then revised the rate accordingly, to 10%. Subsequently, Mr. Dickson wrote to Olympia by letter dated April 22, 1985 which stated:

Mr. N. Leyton of our Technical Services Unit reviewed your records to determine an installation percentage for use in calculating your sales tax liability on commercial drapery and assorted window coverings of your manufacture sold on a supply and install basis.

As a result of this review, it was determined that your company should use the 10% installation deduction authorized in Circular ET 62.

At the later tax evasion proceedings against Ms. David and Olympia, Mr. Leyton testified that his supervisor worked the sales figures “backwards” to obtain the 10% rate, and he implied that he had been forced to agree with that rate. Whatever the reason, Mr. Leyton, who died before this action came on for trial, did not deny at that earlier trial that he ultimately concurred with the 10% rate in April 1985.

Olympia received the April 22 letter on April 25, 1985, when Mr. Masny returned to complete the audit he had begun in October 1984. Ms. David was not impressed by the April 22 letter and she refused to cooperate with Mr. Masny. She directed that he leave Olympia’s premises. Ms. David wrote on April 26, 1985 rejecting a 10% deduction rate because it did not accord with Olympia’s records or Mr. Leyton’s conclusions. By letter of April 30, 1985 the department advised that Olympia’s situation would be reviewed. Olympia did not apply the 10% rate thereafter.

While Ms. David was attempting to have established a more satisfactory installation deduction rate in early 1985, Olympia’s federal sales tax returns were withheld. Specifically, Olympia did not file FST returns in January, February or March of 1985. Ms. David was advised by a letter, dated April 16, 1985, of the requirement to file returns and she was warned that she could be prosecuted for failure to forward monthly returns. Subsequently, on September 9, 1985, Olympia was convicted for failing to report and to remit federal tax for those three months. Furthermore, after March of 1985, Olympia’s returns often stated that its sales and tax returns were “nil pending a ruling”, or words to that effect.

In accordance with the undertaking to review Olympia’s situation, Mr. Leyton telephoned Ms. David on June 28, 1985. He asked for copies of three supply and install contracts to be used to calculate the installation deduction rate. That request was renewed in an August 1985 letter from Mr. Martin, who had become Manager of the Technical Services Unit and Mr. Leyton’s supervisor. The requested contracts were not provided, according to a letter dated September 17, 1985 from Mr. Martin. That letter provided Ms. David with an October 31, 1985 deadline for forwarding the contracts. In late October, Ms. David telephoned Mr. Martin to inform him that she would not provide the contracts, which were in Calgary in connection with litigation there. Following that advice, Mr. Masny was directed by his supervisor to complete the Olympia audit, which had been initiated in the fall of 1984, as soon as possible.

By the fall of 1985, the Special Investigations Unit of Revenue Canada was involved in a review of Olympia’s operations in two respects. It was responsible for serving Ministerial Letters of Requirement requiring production of any book, record or other document or information, as a service to assist the audit and compliance section of the department. It was also responsible for investigations concerning possible tax evasion or criminal fraud activities arising from failure to account for and to pay taxes due.

Mr. Michael Schwantes, then a special investigator with Revenue Canada in Toronto, was directed to serve a Letter of Requirement on Olympia, which he tried to do on November 26, 1985. Ms. David, upon whom he served the Letter, refused to accept it, a fact noted by Schwantes on the face of the original. The Letter was in fact served, if not accepted. It directed that Olympia produce by December 12, 1985, any book, record, document or information relating to transactions of Olympia during the period October 1, 1980 to September 30, 1985, and it listed various classes of financial records and correspondence which were directed to be supplied. Ms. David apparently indicated that books and records could not be produced because some were in Calgary for purposes of litigation there. There was no compliance by Olympia with the Letter of Requirement.

Some preliminary consideration of a special investigation of Olympia for possible criminal prosecution had also been initiated by the Special Investigation Unit by late fall 1985. Schwantes was assigned to this investigation in December 1985. He testified the investigation was precipitated by various factors, including Olympia’s failure to report much in taxable sales since 1982, a period for which department auditors considered there were substantial sales and a substantial potential tax assessment. Other factors included: denying Mr. Masny access to Olympia’s records in April 1985, Olympia’s non-compliance with reporting requirements under the Act for which it was prosecuted and convicted in September 1985, and the refusal by Ms. David in October 1985 to provide information on three supply contracts. Finally, an anonymous telephone call had been received by Mr. Masny in June 1985, informing him that sales invoices of Olympia had been altered before his audit visit in October 1984, and this call had been reported by Mr. Masny.

In the course of his investigations Mr. Schwantes discovered that the telephone call to Mr. Masny was made by Ms. Marilese Spudik, who had been the accountant and bookkeeper at Olympia at the time of Mr. Masny’s audit visit in October 1984 and until she was dismissed in February 1985. According to Ms. Spudik, before Mr. Masny’s visit, Ms. David instructed her to put into drapery boxes files relating to recently completed contracts and accounts payable invoices. Ms. David was reported to have directed another staff member that the drapery boxes be taken from Olympia’s premises to her residence, a direction confirmed to Mr. Schwantes in the course of his investigation by the person formerly employed at Olympia who delivered the boxes to Ms. David’s home. At this trial Ms. David testified that the documents that she took from Olympia to her residence were irrelevant to Mr. Masny’s auditing duties and that journals and ledgers, on which an auditor would rely, never left Olympia’s premises.

As for the changes in Olympia’s copies of invoices, in the course of his investigation Schwantes was told that Ms. David instructed Ms. Spudik to alter some of Olympia’s file copies of invoices that had been sent to its customers. Ms. David admitted taking the copies of invoices and writing new descriptions of the work performed, describing the work as “supply and install”. One of the invoices altered by Ms. David was retained by Ms. Spudik and was ultimately turned over to Mr. Schwantes. Ms. David denied asking Ms. Spudik to retype the invoices to copy the amended descriptions. Rather, she testified that Ms. Spudik insisted on retyping the invoices to copy the handwritten changes because of Ms. Spudik’s conscientious nature for tidy records. Ms. David claims that her changes were intended to help the auditor, because the alterations accurately represented the work done at Olympia’s job sites. Ms. David did admit during her cross-examination that the original versions of the invoices, with her handwritten amendments, were stored in an accordion file and that Mr. Masny did not see those invoices when he visited Olympia in the fall of 1984.

While Mr. Schwantes’ investigation was ongoing, those concerned with audit and tax collection operations of the Excise Branch continued efforts to complete reviews of Olympia’s outstanding accounts. Mr. Leyton was sent to visit Olympia to try to complete the audit that Mr. Masny had not been able to finish.

Mr. Leyton attended Olympia’s premises in January of 1986. Based on the information provided to him during that review, which was incomplete, he recommended granting Olympia a 50% installation deduction. Mr. Martin, the manager of the Technical Services Unit at the time, testified at trial that Mr. Leyton was having difficulty obtaining information to use in calculating the rate and in completing the audit. Mr. Martin’s superior suggested that a provisional rate be set and that it be adjusted on a subsequent audit. On March 12, 1986, Mr. Martin wrote a letter to Olympia, which stated in part:

In accordance with instructions from Mr. R. J. Sanford, Regional Chief, Technical Services, Mr. N. Leyton has reviewed selected contracts and has recommended a tentative deduction rate. A combined deduction rate of 50.0% in lieu of prepaid transportation and actual installation costs is, therefore, provisionally authorized. This provisionally approved rate of 50.0% applies to your installed sales of roller shades and vertical blinds for the years ended October 31, 1981, 1982, 1983, 1984 and 1985. This provisional rate of 50.0% is subject to amendment if it is determined in the course of our audit that adjustment is required.

Mr. Martin testified that it was agreed that the provisional rate would be used for purposes of completing Olympia’s audit, instead of auditing actual costs of deductions for installations, but the provisional rate was subject to revision by later audit when records were available. In testimony, Mr. Kluger, who was subsequently the Regional Director of Excise for the Toronto region, stated that Mr. Leyton’s audit was not thorough and that the 50% installation deduction was not justifiable on the basis of records that had been provided to Leyton.

In addition, Mr. Martin wrote to Olympia on March 17, 1986, authorizing on a provisional basis, subject to confirmation on later audit, a 33.3% installation deduction rate for installation of horizontal blinds. Then on March 26, 1986 Ms. David was provided with a summary of the excise audit results completed by Mr. Leyton, indicating more than $100,000.00 was then considered outstanding for taxes, penalties and interest. In early June 1986, Messrs. Leyton and Martin attended at Olympia to advise Ms. David of the assessment of Olympia, essentially affirming the audit results earlier communicated to her in March 1986, which results were based upon use of the provisional 50% deduction rate.

On July 16, 1986 a Notice of Assessment was issued to Olympia including a net assessment of taxes unpaid of $64,948.00, plus interest and penalties for a total amount unpaid in excess of $102,000.00. Ms. David later telephoned Mr. Martin, and she confirmed by letter of September 12, 1986 to another officer of the department, that she acknowledged that $54,057.00 was unpaid taxes, but she disputed assessment of interest and penalties. In response to that letter Mr. Kluger, the Regional Director wrote to remind Olympia that it had 90 days from the date of the assessment to file a Notice of Objection. No such notice was filed at any time.

Through the spring and early summer of 1986, the investigation of Olympia’s operations by Mr. Schwantes was continuing for the Special Investigations Unit. He concluded that Olympia had failed to report taxable sales, that Olympia had used an unauthorized method for calculating federal sales tax that was reported, that Olympia had altered invoices, that Olympia had claimed exaggerated costs of installation by representing that its manufactured products were substantially assembled at the point of installation, and that pertinent financial documents were taken to Ms. David’s residence.

Mr. Schwantes prepared, based on the results of his preliminary investigation, a Primary Report. It recommended a full investigation of Olympia, since Mr. Schwantes had grounds to believe that Olympia had deliberately acted contrary to the Excise Tax Act and that a search of Olympia’s records would yield evidence of such offences. The thoroughness of the Primary Report and the reasons for pursuing the matter further were reviewed by four excise officers, at increasing levels of seniority, each of whom agreed that investigation of operations of Olympia should be pursued, since it appeared the company had deliberately failed to comply with the Excise Tax Act. Approvals for further action were given by Schwantes’ immediate supervisor, the head of the Special Branch in Toronto, by the regional head of Technical Services, by Mr. Kluger, then Regional Director of Excise, and finally by the Director of the Special Branch, of Excise, in Ottawa.

Following approval of his Primary Report recommendations, Mr. Schwantes drafted an Information to Obtain a Search Warrant. That document detailed the documents which he believed were at Olympia’s premises, his grounds for that belief and the reasons why those documents were relevant to his investigation. In the Information, Mr. Schwantes also noted that he believed that Olympia had committed various offences under the Excise Tax Act. On August 21, 1986, a Justice of the Peace, accepting that Schwantes had reasonable grounds for his beliefs, granted a warrant to search Olympia’s premises and to seize documents. The search warrant was executed on August 26, 1986. Olympia’s documents were seized, and then were held under successive court orders pending the investigation and subsequent prosecution of the plaintiffs. Mr. Schwantes testified in this proceeding that his review of the seized documents confirmed the beliefs that he had detailed within the search warrant.

Ms. David claims, and it is not denied, that documents seized at Olympia’s premises included those of another company, Window Elegance Limited, then newly organized, and that loss of its documents more or less crippled its start in business. That company is not a party in this action and no claim on its behalf is here considered. I note that arrangements were made from time to time at the request of Ms. David for access to and for copies of particular records. While that may not have been very satisfactory there is no evidence that records of Window Elegance were requested and not provided in copy form while the documents were detained.

Following seizure of Olympia’s records and the correspondence about the assessment dated July 16, 1986, then counsel for Olympia, by cheque dated October 31, 1986, payable to the Receiver General of Canada, paid $5,000.00 in relation to Olympia’s F.S.T. liability. That was the only payment made on behalf of Olympia. Ms. David’s letter of September 12, 1986 was apparently taken as the basis for an informal review of the July 16, 1986 assessment. A regional appeal committee, comprised of representatives of several sections of the Excise Branch, not including the Special Branch, reviewed the assessment and ultimately recommended that the assessment be confirmed. By letter of July 16, 1987 the Regional Director, Mr. Kluger, wrote to Olympia, confirming the assessment, including interest and penalties.

That assessment was subsequently revised, following the laying of charges under the Excise Tax Act against both the plaintiffs. It was revised following a meeting of the Regional Director with Messrs. Leyton and Schwantes when Kluger expressed his concern about the differences in two assessments for Olympia, one based on Leyton’s review, and one based on Schwantes’ investigation, which was significantly higher. Kluger did not direct a particular assessment; rather he directed them to review their respective assessments and seek to explain any significant differences. After that review, subject to a minor change to which Schwantes agreed, Leyton agreed ultimately with the assessment as determined by Schwantes, whose calculations, based upon the seized records, were more thoroughly based. The review of Olympia’s records demonstrated that an installation deduction rate of 50% was not warranted and that relatively little of the goods used by Olympia for installation of its product were purchased tax paid.

Thus, two key aspects of Leyton’s earlier assessment were not established on the basis of the seized records and Leyton thereupon prepared an amended audit report, indicating Olympia’s F.S.T. liability exceeded $316,000.00, including penalties and interest. The amended assessment, signed by Martin, was sent to Olympia by Leyton on September 2, 1987. The formal Notice of Assessment establishing Olympia’s liability at the amended figure, was dated September 4, 1987, and it included an assessment for the period March I to July 31, 1982 and a reassessment for the period August I, 1982 to December 31, 1985. No Notice of Objection to that assessment was later filed despite a letter on September 12, 1987 from Kluger to Olympia reiterating the 90-day limit, from the date of the assessment, to appeal by objection. That assessment became the matter of a Certificate filed in this Court in Court file GST-41-92 pursuant to the Excise Tax Act, a matter thereafter of continuing concern to Ms. David but one which is not in issue in this proceeding.

On September 4, 1987 Mr. Martin also wrote to Olympia, revoking the provisional 50% deduction rate for freight and installation costs, and a second letter revoked the installation deduction rate of 33 /3% on horizontal blinds.

I return to trace the evolution of the special investigation and prosecution of the plaintiffs. Mr. Schwantes reviewed the documents seized from Olympia’s premises in August 1986 and interviewed former employees of Olympia. In the course of the investigation, Mr. Leyton’s recommended combined deduction rate for freight and installation and his method for calculating it were also reviewed. The investigators concluded that the information upon which Mr. Leyton relied to recommend the 50% rate, two supply and install contracts, was deceiving, and to the investigators it suggested that Olympia was attempting to evade taxes. Mr. Schwantes concluded that Olympia had failed to report taxable sales despite recording such sales in its books, and that any federal sales tax reported was calculated erroneously. Furthermore, the investigators confirmed that invoices had been altered, and records had been removed from Olympia’s premises. Finally, Mr. Schwantes considered, from conversations with former employees of Olympia, that the bulk of Olympia’s operations concerned manufacturing rather than installation and that most of the products obtained by Olympia and used in the installation of window coverings were purchased tax exempt, and were subject to tax. The investigation was fully reported in a second report initiated by Schwantes, a Prosecution Report, that was ultimately considered and approved by his four seniors in the chain of responsibility up to the Director of the Special Branch in Ottawa, following the same process as had been used in relation to the Primary Report in 1986 that led to the successful application for the warrant to search for and seize records.

In an effort to provide opportunity for Olympia to demonstrate that its lack of compliance with the Excise Tax Act was innocent, Mr. Schwantes contacted Ms. David to arrange a meeting in June of 1987. A letter from Mr. Schwantes to Ms. David’s lawyer, dated June 22, 1987, stated in part:

To date, we have explained to you our proposed recommendation to the Justice Department that charges be laid under ss. 56(2), 57(9)(a) and 62 of the Excise Tax Act. You have been provided with a computer printout listing all sales transactions of the corporate body for the said period, a schedule summarizing the alleged unreported sales and FST sought to be evaded and a two page listing that details the 31 altered documents.

As always, your client can have supervised access to the seized documents with reasonable notice. If your client requires additional photocopies of documents, again with reasonable notice, any reasonable requests can be met.

We have provided you with a description of the nature of the alleged offences and the evidence available (including documentary evidence, proposed testimony from potential witnesses and the elements of mens rea).

We invite a rebuttal from you (either written or oral) which will be given serious consideration as relates to our intended action.

Ms. David’s lawyer attended Mr. Schwantes’ office to discuss the matter, and Ms. David sent a letter dated June 28, 1987 to address Mr. Schwantes’ findings. She defended Olympia’s record: she claimed that she was told by Revenue Canada to file nil returns, that she was awaiting the ruling on the installation deduction rate before she paid tax, that invoices were altered for the benefit of Olympia’s clients and that Olympia had previously paid tax on some items that it installed for its clients. She repeated some of these explanations in testimony in these proceedings. With respect, her testimony was not entirely consistent once Ms. David was asked to explain it in cross-examination. While 1 have no doubt she may have considered these as explanations, there was no other evidence that she was advised to file nil returns, and even if she had been that would not excuse Olympia’s failure to meet obligations established under the Act for all licencees. In the mid-1980’s Olympia was not a newcomer to the regime of excise taxes.

Despite Ms. David’s rebuttals, Mr. Schwantes was not persuaded that Olympia’s failure to report sales and federal sales tax payable was innocent. Rather, he concluded that there were reasonable and probable grounds to believe that Ms. David and Olympia had violated provisions of the Excise Tax Act. Schwantes’ Prosecution Report was completed and approved by his supervisor, by the Regional Director of Technical Services, by the Regional Director Mr. Kluger, and by the Director of the Special Branch in Ottawa, Mr. Skogstad. As noted, the process was similar to that followed with the Primary Report, and each of the senior officers had to approve. Mr. Kluger testified that in his opinion the amount of tax owing by Olympia and the small portion paid over an extended period suggested that Olympia was engaging in criminal activity. He agreed with the report’s recommendation that there were reasonable and probable grounds for laying criminal charges against Olympia and Ms. David and he believed that there was a reasonable probability of obtaining a conviction.

The Prosecution Report was then referred by Mr. Kluger to Revenue Canada’s national headquarters for consideration by the Director of the Special Bureau of the Excise Branch, Mr. Skogstad. He conferred more than once with Schwantes and the report was amended in accordance with their discussions. Schedules were attached to the report that summarized the taxes which Olympia sought to evade. Separate schedules calculated this value, if a 10% installation deduction rate were used, as was the basis for Mr. Schwantes’ assessment, and alternatively, the value was calculated using the 50% rate recommended by Mr. Leyton after his audit, and provisionally approved. Mr. Skogstad testified that at the time he reviewed every Primary and Prosecution Report in detail for he was concerned that the reports and the recommendations be warranted. He had earlier advised private clients, before joining the department, and he was aware of the need for criminal enforcement processes to be thorough and fair. That was his method in dealing with reports on Olympia, and he approved the Prosecution Report.

On August 14, 1987 the Minister of National Revenue certified his belief that Olympia and Ms. David violated ss. 56(2), 57(9) and 62 of the Excise Tax Act. That certificate effectively recommended to the Department of Justice the prosecution of the plaintiffs. Once that recommendation was made the determination whether to prosecute or not was that of the Department of Justice. There was no doubt in the minds of Messrs. Schwantes, Kluger and Skogstad, as they testified at trial in this case, that the responsi- bility for initiation and carriage of any criminal prosecution was that of the Department of Justice.

Ms. Woolcott, a lawyer and prosecutor with the Department of Justice, recommended that prosecution proceed with charges against Olympia and Mary David after reviewing the case. Ms. Woolcott testified that it was her opinion at the time that the grounds necessary to convict Olympia and Ms. David could be proven. Thereafter Mr. Schwantes swore an information on August 25, 1987, which charged Olympia and Mary David with 73 counts of offences under the Excise Tax Act.

The matter went to trial before the Ontario Court (Provincial Division) commencing October 23, 1989, and trial continued intermittently until mid- 1990. Ms. Woolcott withdrew some ten charges under s. 62 of the Excise Tax Act at the beginning of the trial. Testimony from Crown witnesses was not completed when proceedings were adjourned in January 1990. On June 4, 1990, Ms. Woolcott, for the Crown, moved to stay the proceedings. Messrs. Skogstad, Kluger and Schwantes all testified that at the trial they preferred to complete the prosecution, which in their view would lead to conviction. Ms. Woolcott’s determination, she testified at trial, made in consultation with officers of the Departments of Justice, and Revenue Canada, was made in light of Ms. David’s declaration of personal bankruptcy earlier that year, Ms. David’s deteriorating health as it was perceived by Ms. Woolcott, the fact that Olympia was then out of business and its assets gone, and the likelihood that even if the prosecution were successful, no penalties would be recoverable. In the circumstances, with crowded court dockets, completion of the prosecution, then anticipated to require some ten days or more, was not a sensible use of court resources, in her opinion. Ms. David subsequently sought to have the stay lifted, to have her day in court and an opportunity to answer the charges, but the stay remained and the prosecution ended.

The transcript of testimony by Mr. Leyton at the criminal trial was deemed admissible, on principles of necessity and reliability, by a ruling from the bench [6] in these proceedings in circumstances where Mr. Leyton had died and could not be a witness in this trial. Mr. Leyton provided testimony upon which the plaintiffs base certain claims in the case at bar. Firstly, Mr. Leyton testified that, during the investigation by Mr. Schwantes, the latter suggested that Mr. Leyton was dating Ms. David. Fur- ther, he testified that Schwantes implied that Mr. Leyton got along well with Ms. David because both of them were of Jewish descent. During Mr. Leyton’s second audit, Ms. David alleges that on one occasion he asked her whether she was of Jewish descent. As earlier noted, he also testified that in April 1986, Mr. Dickson, then his supervisor, had inappropriately used figures to indicate the deduction rate for Olympia should only be 10%, and that he had forced Mr. Leyton to agree with that rate.

Mr. Schwantes denied making the statements attributed to him. Mr. Kluger testified that in his opinion Mr. Leyton did not tell the truth at the criminal trial. Leyton had been a staff association steward, aware of policies and procedures of the department for dealing with unwarranted or harassing comments or situations, and he had not raised them within those procedures. Moreover, one of the comments was said to have been made in an area where others would have heard them and no report was made by anyone who would ordinarily have been present.

In oral submissions at the conclusion of trial Ms. David based Olympia’s claim to harm or damages in tort substantially upon the difficulties it faced after seizure of its records and commencement of prosecution. In my opinion, whether damages lie for those difficulties depends upon whether they can be found to have been caused by some wrong committed by the servants of the Crown for which the defendant is liable under the Crown Liability and Proceedings Act [7] . Since I find no such wrong, there is, in my opinion, no liability of the defendant for any harm or loss experienced by Olympia after its records were seized and prosecution commenced.

Issues

The liability raised by the plaintiffs’ statement of claim may be considered in two general categories: claims in tort, for civil wrongs, and claims for alleged breaches of Charter rights of the plaintiffs. Primarily, the tort claim is one for malicious prosecution, but there are claims as well, for negligence, for abuse of authority and for conspiracy. The Charter rights said to be infringed include those provided by ss. 7, 8, 11, 12 and 15. For the latter claims, of Charter infringements, any appropriate remedy would only be considered if an infringement claimed is established.

The issues raised are dealt with in turn in the balance of these Reasons. Malicious Prosecution

In Nelles v. Ontario^, [8] the Supreme Court of Canada confirmed that, in addition to proving damages, a plaintiff must prove four necessary elements to maintain a successful action for malicious prosecution. Two of those elements are not here in dispute, that is that the proceedings were initiated by the defendant, and that they terminated in favour of the plaintiff. Here it is conceded that the second element is established by the stay of the criminal proceedings. The two other necessary elements are in dispute. The defendant urges that the plaintiffs have not proven either the absence of reasonable and probable cause for bringing the action, or malice, 1.e., a primary purpose other than that of carrying the law into effect.

In Nelles, the Supreme Court of Canada commented on the third element of the test for determining whether there was malicious prosecution:

Reasonable and probable cause has been defined as ‘an honest belief in the guilt of the accused based upon a full conviction, founded on reasonable grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinarily prudent and cautious man, placed in the position of the accuser, to the conclusion that the person charged was probably guilty of the crime imputed’...

This test contains both a subjective and objective element. There must be both actual belief on the part of the prosecutor and that belief must be reasonable in the circumstances.

Later in the judgment, Lamer C.J. noted that this element requires the plaintiff to establish a negative, the absence of reasonable and probable cause.

In Jose Pereira E Hijos S.A. v. Canada (Attorney General)^, [9] in accord with the decision in Nelles, I struck out an allegation of malicious prosecution because the plaintiff did not plead the absence of reasonable and probable cause for bringing the action. Even if it were pleaded, the tort could not have been established because during the disputed incident, the defendant acted pursuant to the Coastal Fisheries Protection Regulations^, [10] legislation that had not been found invalid.

in my opinion the evidence before me establishes there was reasonable and probable cause for the Crown to commence the prosecution against Olympia and Ms. David. From the review leading to his Primary Report and the search and seizure of Olympia’s documents, the review of those records, his Prosecution Report and the information setting out the charges against the plaintiffs, Mr. Schwantes concluded that Olympia and Ms. David had deliberately violated the Excise Tax Act. That conclusion was entirely reasonable in all the circumstances as previously described. Before prosecution commenced his reports were reviewed by three more senior representatives from the Excise Branch, in the Toronto Regional office and by Revenue Canada’s National Director of its Special Branch. The prosecution was only commenced after the certification by the Minister of the day that in his view prosecution was warranted, and after approval by the Department of Justice before charges were laid. Any of the parties in that chain of authority could have expressed their concern if they felt that a prosecution should not proceed. There is no evidence that anyone questioned proceeding with the charges.

Rather, at trial Mr. Schwantes himself, Mr. Kluger, the Toronto Regional Director, and Mr. Skogstad, Director of the Special Branch in Ottawa Headquarters, all testified, for reasons they stated, that they believed there were reasonable and probable grounds for prosecution, and further that a prosecution would lead to conviction. Finally, prosecutor Woolcott, who reviewed the information and the evidence available before approving the initiation of prosecution, affirmed at trial her own judgment, which was similar to that of the excise officers, before the prosecution commenced. Though Ms. Woolcott decided to withdraw the s. 62 charges, she proceeded with the prosecution of charges pursuant to s-ss. 56(2) alleging the filing of false returns, and 57(9), altering or making false or deceptive entries on sales invoices.

I find that Crown servants concerned had reasonable and probable cause for commencing and proceeding with the criminal charges. I find that particularly in the case of Ms. Woolcott, who as prosecuting officer had the ultimate responsibility. There was evidence supporting her assessment as reasonable, and her assessment that prosecution would probably succeed. Clearly the plaintiffs have not established the absence of reasonable and probable cause for the prosecution.

The fourth element of the Nelles test, that the defendant proceeded maliciously or without the primary purpose of bringing the law into effect, was described thus:

The required element of malice is, for all intents, the equivalent of “improper purpose”. It has according to Flemming, a “wider meaning than spite, ill-will or a spirit of vengeance, and includes any other improper purpose, such as to gain a private collateral advantage...”

In Roncarelli v. Duplessis^ [11] Rand J. characterized malice by a public body as “simply acting for a reason and purpose knowingly foreign to the administration...”. The plaintiffs have a difficult task to establish the element of malice as the reason and purpose of the action by public officials.

The malicious element here appears based partly upon comments alleged by Leyton to have been made to him by Mr. Schwantes. The first implied that Mr. Leyton was dating Ms. David, and the second concerned Mr. Leyton’s and Ms. David’s alleged common Jewish heritage. In testimony at trial Mr. Schwantes, in cross-examination by defendant’s counsel, denied that he had so commented to Mr. Leyton and Ms. David did not refer to the testimony of Leyton at the criminal proceedings in her re-exam- ination of Mr. Schwantes at trial. In the course of that re-examination, Ms. David did ask whether, when she was attempting to access some of Olympia’s seized documents, Mr. Schwantes had blown smoke in her face. He denied any such claim and Ms. David did not pursue the matter. As earlier noted Mr. Kluger testified that he would have expected Mr. Leyton to report at the time any inappropriate comments, if they had been made. No such report was made despite Mr. Leyton’s familiarity with departmental processes for dealing with such circumstances.

In my view, there is simply no evidence of maliciousness on the part of any Crown servant. Mr. Schwantes cannot be faulted for pursuing his investigation with vigour, where there were circumstances indicating his conclusion was reasonable, that is, that there were reasonable and probable grounds for prosecuting the plaintiffs. On the evidence before me I do not find that Mr. Schwantes made the comments alleged by Mr. Leyton. Even if he had, that would not demonstrate malice on the part of those with ultimate responsibility for the prosecution, in this case Mr. Skogstad within the department, the Minister of the day, Justice officers and ultimately, prosecutor Woolcott.

In this case one other possible basis for questioning the purposes of the Crown’s prosecution arises from Ms. David’s perception that the criminal proceedings were initiated to compel payment of taxes, a civil matter. It is not surprising that a litigant who is not a lawyer is confused by proceedings on the civil enforcement side, to assess and compel payment of taxes owed, and proceedings of a criminal nature under the Act to impose penalties by fine or imprisonment for tax evasion, fraud or flagrant disregard of a taxpayer’s obligations. Both sorts of proceedings are provided under the Excise Tax Act, and in this case both were directed to deal with Olympia’s situation, concurrently, at least for some time.

Since this case was heard, Mr. Justice Mackenzie of the Ontario Court of Justice (General Division) granted a stay of proceedings in R. v. Sap- lys^, [12] a case involving prosecution, apparently under the Excise Tax Act, where it was found, inter alia, that the Crown had failed to meet its obligations to disclose evidence to be relied upon, thus compromising the defendant’s right to a fair trial, and that the conduct of its investigation and prosecution of the charges was so unfair as to contravene fundamental notions of justice and to undermine integrity of the judicial process. In the result, the proceedings were stayed on application of the defendant.

The circumstances in Saplys are different and the remedy sought was different from those here pursued. In only one aspect might it appear to the plaintiffs that the case is supportive of their claims, that being the finding that one particular process followed was an abuse of process, i.e., the use in the investigative phase by the audit and enforcement unit of an audit to seek information to support a stalled special investigation for possible criminal prosecution. In the case at bar the plaintiffs allege that the criminal prosecution was an abuse of process because it was for the purpose of collecting a civil remedy, taxes, interest and financial penalty outstanding. There is no evidence to support that as the purpose of the prosecution. Here the routine audit process was underway before any special investigation was commenced for possible criminal prosecution. Once the latter was underway the investigation went forward quite independently and expeditiously on reasonable and probable grounds that supported the warrant authorizing search and seizure and, subsequently supporting prosecution. Those in the technical and regular audit services were not involved in or kept informed of the investigation, and the prosecutor Ms. Woolcott testified that she declined to be involved in the civil process.

I find there was no abuse of process. In particular, I find that the prosecution in this case was for the purpose of criminal prosecution under the Act, not for purposes of collecting outstanding taxes and interest, or monetary penalties applicable to outstanding tax payable balances.

I find that the plaintiffs have not proven the absence of reasonable and probable cause for the prosecution, and they have not proven malice to be the purpose for which the prosecution was instituted. There is no evidence upon which to base a finding of malice or improper purpose in the prosecution of the plaintiffs. There is no basis for finding that the prosecution was malicious.

Misfeasance/Abuse of Authority

Unlawful administrative action motivated by actual malice constitutes misfeasance in public office. Roncarelli provides a good example of the operation of this tort. The plaintiff/appellant, a Jehovah?s Witness, lost his liquor licence when the respondent, then the Prime Minister of Quebec, directed the Quebec Licensing Commission to revoke the licence. Under the statute governing liquor licensing, the Commission, which consisted of a manager only, had the discretion to cancel the licence. The evidence indicated that the Prime Minister was motivated by the fact that the plaintiff had been furnishing bail for other Jehovah’s Witnesses charged with violating municipal by-laws. The court held that whenever a public authority exercises any discretion, it must be done in accordance with the statutory limits and in good faith.

In Gershman v. Manitoba (Vegetable Producers' Marketing Board)^, [13] the Manitoba Court of Appeal stated that Roncarelli stands for the proposition that “...a citizen who suffers damages as a result of flagrant abuse of public power aimed at him has the right to an award of damages in a civil action in tort.”

In Francoeur v. R. [14] ‘4, Mr. Justice Wetston considered abuse of authority. In his view, a claim for misfeasance in public office and a claim for abuse of authority appear to be synonymous. In that case the plaintiff alleged that a customs official erroneously represented how duty would be calculated, leading to violations of the Customs Act'5 [15] and an eventual seizure of some property and business records. Charges were laid and the plaintiffs were eventually discharged after a preliminary inquiry. One plaintiff claimed that the defendant’s actions precipitated the decline of his business and his per- sonal bankruptcy, as a result of the customs officer’s abuse of his statutory authority to seize goods.

Wetston J . set out the elements of two separate categories of the tort of abuse of power:

First, if one can show that the public officer acted with malice or an intent to injure, then the act of the public officer which is purported to be undertaken pursuant to a power conferred by statute becomes unlawful and the plaintiff who suffers damages as a direct result of that act will be entitled to damages. Secondly, if one can show that the statutory actor or public officer knowingly undertook an action for which he or she had no authority in law, and he or she could foresee that their action would cause harm to the plaintiff, then the tort will establish [citation omitted]. It is important to note that in many cases the facts will be such that these two categories of cases will overlap....

In Francoeur, the Court dismissed the plaintiffs’ claim for abuse of authority, concluding the tort was not established. The customs officer had the authority and a duty, pursuant to the Customs Act, to seize the forfeited goods and therefore did not act outside of his authority. Moreover, there was no element of malice proven. Rather, the official’s motivation for seizure were his reasonable grounds for believing that there was a statutory violation, and there was no evidence of an improper motive.

The evidence here does not support a claim for abuse of authority. The claim is based on alleged improper conduct of Mr. Schwantes. There is not evidence to prove that Mr. Schwantes acted maliciously or took action without authority. He acted pursuant to the Department of National Revenue Act^ [16] and the Excise Tax Act. Mr. Schwantes’ testimony at trial was that he had reasonable grounds to conduct the search and seizure and reasonable and probable grounds to believe that the plaintiffs had violated the Excise Tax Act. In my view, those conclusions, which I have found were reasonable in the circumstances, rather than any malice, motivated Mr. Schwantes’ behaviour.

One particular allegation of misfeasance or abuse of authority is set out in the Amended Amended Statement of Claim in the following terms:

25. Fraud charges were created by using a 10% allowance for a freight and installation rate, rather than the 50% rate set by the auditors Norm Leyton and Alexander Martin. The increased liability was then established by the Special Bureau by applying 10% overall deduction as an allowable percentage for both freight and installation on all of Olympia’s construction contracts. This 10% freight and installation rate was established illegally by persons within the Department...

In my opinion the facts established by the evidence do not support this allegation.

Rather, the evidence shows that the 50% rate set by auditors Leyton and Martin was set on a provisional basis in order to complete an audit of Olympia’s tax liability for the period from 1991 to 1995, and specifically was made “subject to amendment if it is determined in the course of our audit that adjustment is required”, as Olympia was advised in writing. It was the same auditors who advised of the reassessment in September 1997, admittedly after criminal charges were laid and after the Special Branch, by Mr. Schwantes’ assessment on the basis of seized records, had established to its satisfaction that there was no basis from Olympia’s records to support a 50% deduction rate. Messrs. Leyton and Martin then reviewed the matter and established the reassessment, based on a 10% deduction rate. That was the rate to which Olympia was entitled to operate under ET 205 and the Erection or Installation Costs Regulations then applicable. The only other deduction rate available under the Act and the regulations was one based on actual costs as evidenced in the manufacturers’ records. Olympia’s records did not support a deduction rate other than the standard 10% rate available for all manufacturers whose records upon audit did not demonstrate another rate was appropriate.

In my view, the reassessment in September 1987 was not established illegally, as the plaintiffs allege but it was established in accord with lawful regulations. That reassessment was not then objected to by the plaintiffs as they were entitled to do by following the process established by the Act for questioning or appealing the reassessment. That reassessment was not an act of misfeasance or an abuse of authority.

Negligence

The plaintiffs allege negligence on the part of Mr. Martin, and by Ms. Woolcott as prosecutor.

In Reynen v. /?. [17] the motions judge struck out a claim for negligence in a statement of claim alleging negligence by Customs and R.C.M.P. officers, comparing them by analogy to prosecutors who owe no duty of care to an accused. The Federal Court of Appeal reversed the ruling in that respect but recognized, albeit as obiter, the immunity of Crown prosecutors against claims for negligence in the conduct of a prosecution. Here, while the plaintiffs allege negligence on the part of Ms. Woolcott, no facts are pleaded and none were established in evidence as a basis to find that a duty of care was owed to the plaintiffs, or that any duty of care owed to them was breached. There is no evidence of negligence by prosecutor Woolcott.

The plaintiffs allege within their statement of claim that Mr. Martin acted negligently by “revoking a freight and installation rate by his two letters dated September 4, 1987, thereby disregarding a duty of care owed by [him] to the Plaintiffs”. In my opinion, revoking the provisional installation deduction rates was done in circumstances where a duty of care is not established, or if such a duty existed it was not breached. Mr. Martin’s testimony demonstrates that he followed departmental procedure by sending the September 1987 assessment, and revoking the provisional installation deduction rates because the rates were found to be unwarranted upon review of documentary evidence, i.e. Olympia’s own records. By revoking the rates provisionally granted, which were subject to revision on the basis of audit, and reverting in the reassessment to a 10% deduction rate, Martin was implementing the Erection or Installation Costs Regulations. The validity of those regulations under the Act was not questioned. Thus, in my view, Mr. Martin did not breach any duty of care, rather he was acting pursuant to valid legislative authority.

There is no basis established to warrant a finding of liability of the defendant on the basis of any negligence by any of the defendant’s servants. No negligence is here established.

Conspiracy

Conspiracy is a business or economic tort. Dubé J. held, in Gold v. Canada^, [18] that there are three essential elements to the tort of conspiracy: an agreement to cause damage to another person, a concerted action carried out in pursuance of that agreement and actual economic damage resulting from a direct causal connection to that action.

In Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd. [19] , the Supreme Court of Canada held that the defendants must establish that the defendant knew its conduct would injure the plaintiff. The predominant purpose of the action agreed upon must have been to injure the plaintiff, and where the defendant’s conduct is unlawful, the defendant should reasonably know that injury to the plaintiff is likely to, and does, result. Estey J. noted that “the action may have lost much of its usefulness in our commercial world and survives in our law as an anomaly”. [20]

No evidence was led of an agreement between two or more public servants in this action. The Amended Amended Statement of Claim filed February 11, 1998 alleges that Messrs. Kluger and Martin participated in a conspiracy to lay false charges, a conspiracy in which others, and the Government of Canada, participated, but neither the agreement nor false charges were here established in evidence.

The plaintiffs allege that Mr. Kluger, Mr. Schwantes and Mr. Martin each acted to deprive them of a statutory entitlement pursuant to s. 46 of the Excise Tax Acr [21] , which provides, in part:

46. For the purpose of determining the consumption or sales tax payable under this Part,

(c) in calculating the sale price of goods manufactured or produced in Canada, there may be excluded

(ii) under such circumstances as the Governor in Council may, by regulation, prescribe, an amount representing

(A) the cost of erection or installation of the goods incurred by the manufacturer or producer where the goods are sold at a price that includes erection or installation, or

(B) the cost of transportation of the goods incurred by the manufacturer or producer in transporting the goods between premises of the manufacturer or producer in Canada, or in delivering the goods from the premises of the manufacturer or producer in Canada to the purchaser, where the goods are sold at a price that includes those costs of transportation, determined in such manner as the Governor in Council may, by regulation, prescribe.

There is no known tort of deprivation of statutory benefits and a claim for breach of statutory duty has not been recognized, following the decision of the Supreme Court of Canada in Saskatchewan Wheat Pool v. Canada [22] . Even if one could consider this claim as an aspect of a claim in negligence, or the sort of harm that might be included under the tort of a conspiracy, no harm could be assumed where the loss alleged results simply from coordinated action, pursuant to statute, to fulfil lawful responsibilities, by public servants.

The plaintiffs’ claims of breach of Charter rights

In a Notice of Constitutional Questions filed October 24, 1997 in this proceeding the plaintiffs “challenge the administrative interpretation of the validity and applicability of the Excise Tax Act, R.S.C. 1985, c. E-15 and Circular ET-62” with respect to the following matters:

a) the purported authority for criminal charges to be laid against the plaintiffs;

b) the matter of an assessment by the Minister of National Revenue against Olympia Interiors Ltd. GST-41-92, dated December 3, 1992; and

c) the purported authority for a search and seizure operation against the plaintiff Olympia and Window Elegance Sales Inc.

They also question “the validity and applicability and interpretation of the Income Tax Act, Canada Pension Plan, Unemployment Insurance Act,... in

the matter of an assessment, ITA-8447-92” against the corporate plaintiff.

The last matter, the assessment within Court file ITA-8447-92, and the matter of an assessment by the Minister, GST-41-92, dated December 3, 1992 are not matters before the Court in this proceeding. The respective Acts referred to, while authorizing assessments, provide a process for objection or review within a defined time, and for appeals thereafter. This Court in this proceeding has no jurisdiction to deal with the assessments referred to or the bases on which they were made.

By their Notice filed October 24, 1997, the plaintiffs urge that the Excise Tax Act “ought to be retroactively declared invalid”, but no evidence was adduced, and no other submissions were made, with reference to the consti- tutional validity of any of the statutes referred to above in the Notice of Constitutional Questions. The application of the Excise Tax Act in the circumstances of the plaintiffs and certain of their rights claimed under the Charter are raised by the plaintiffs’ pleadings and the Notices, and I turn to discussion of these, in relation to ss. 7, 8, 11, 12 and 15 of the Charter.

Section 7 rights

Section 7 provides:

Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

Section 7 is the first and most general of the “legal rights” protected by the Charter. The subsequent provisions, up to s. 23, address specific deprivations of the right to life, liberty and security of the person enunciated in s. 7 23 [23]

In Irwin Toy Ltd. c. Quebec (Procureur général)^, [24] the Supreme Court of Canada excluded corporations from the purview of s. 7, since a corporation cannot be deprived of life, liberty or security of the person. In this case, s. 7 issues can only be raised by the plaintiff Ms. David, not by the corporate plaintiff.

The law also limits the interests protected under s. 7, which protects an individual’s physical liberty rather than her or his economic liberty. In MacPhee v. Nova Scotia (Pulpwood Marketing Board)^, [25] the Nova Scotia Court of Appeal held that s. 7 did not apply to economic or proprietary interests. In Reference re s. 94(2) of the Motor Vehicle Act (British Columbia)^ [26] Lamer J. (as he then was) found that a law imposing merely a fine rather than imprisonment was not subject to s. 7 scrutiny because it does not deprive an offender of liberty.

From the Notices of Constitutional Questions, it appears a claim is made that the defendant’s actions have resulted in the loss of Ms. David’s business and the loss of Olympia’s assets. The Supreme Court has held that economic rights as generally encompassed by the term property are not protected by s. 7. [27] In my opinion, the economic interests claimed by Ms. David in the case at bar are not protected by s. 7. The notices of assessment issued to Olympia did not threaten Ms. David’s personal liberty. Prosecution could only have raised s. 7 concerns if she had been convicted and ordered to be detained, so that her liberty was adversely affected. It is urged that the elimination of all requirements of fault from the elements of an offence violates s. 7, but even if this is the case there is no basis for concluding the element of fault was not to be established in the prosecution under the Excise Tax Act.

I conclude that there is no basis in the evidence before me, or on arguments based upon that, to find that Ms. David’s rights as protected by s. 7 of the Charter were infringed.

Section 8 rights

Section 8 provides that:

Everyone has the right to be secure against unreasonable search or seizure.

In Canada (Director of Investigation & Research, Combines Investigation Branch) v. Southam Inc.^, [28] the Court held that s. 8 guarantees to individuals a reasonable expectation of privacy. Rights protected by s. 8 may be affected when an official, suspecting that an offence has been committed, seeks to get evidence for the prosecution of that offence. In Canada (Director of Investigation & Research, Combines Investigation Branch), Dickson C.J. formulated a three-prong test for determining whether a search and seizure is reasonable. The judge must first determine if the search was undertaken in compliance with a statutory power, a power that requires a prior warrant before its exercise, a warrant that is issued by an impartial arbitrator on a sworn showing of reasonable and probable cause. There must be the exercise of judicial discretion in granting the warrant. In R. v. Col- lins^, [30] the Supreme Court of Canada stated that:

A search will be reasonable if it is authorized by law, if the law itself is reasonable and if the manner in which the search was carried out is reasonable.

In this case the search of Olympia’s premises was authorized by a warrant pursuant to s. 443 of the Criminal Code which provided at that time, in part:

443. (1) A justice who is satisfied by information upon oath in Form 1, that there is a reasonable ground to believe that there is in a building, receptacle or place

(a) anything on or in respect of which any offence against this Act or any other Act of Parliament has been or is suspected to have been committed,

(b) anything that there is reasonable ground to believe will afford evidence with respect to the commission of an offence against this Act or any other Act of Parliament, or

(c) anything that there is reasonable ground to believe is intended to be used for the purpose of committing any offence against the person for which a person may be arrested without warrant, may at any time issue a warrant under his hand authorizing a person named therein or a peace officer

(d) to search the building, receptacle or place for any such thing and to seize it, and

(e) subject to any other Act of Parliament, to, as soon as practicable, bring the thing seized before, or make a report in respect thereof to, the justice or some other justice for the same territorial division in accordance with section 445.1.

The constitutional validity of s. 443 has been upheld in Marquis Video Corp. v. R.>', [31] where the Ontario Court of Appeal held that it did not violate s. 8 of the Charter. On that basis, a search authorized under that section is one authorized by law, the validity of which law has been upheld.

The only question is as to the reasonableness of the search. The measures taken in advance to ensure that the search is warranted have some bearing on its efficacy. Mr. Schwantes prepared a Primary Report based on his preliminary investigation. The soundness of that report was reviewed and approved by senior officials. Mr. Schwantes thereafter set out the basis for seeking the warrant in the information sworn, for consideration, and here acted upon, by the Justice of the Peace who granted the search warrant. In my opinion, the latter had evidence before him upon which he could reasonably conclude there were reasonable grounds to issue the warrant.

There is no evidence suggesting that the search was carried out in an unreasonable manner. As to the reasonableness of the seizure and retention of records, the records were detained in anticipation of and preparation for the criminal proceedings. Ms. David claimed that one reason for Olympia’s inaccurate returns after the seizure was her inability to access her records and that the loss of records caused damages to Olympia. But access to the records was provided to Ms. David on request and some of the records were copied for her. Retention of the records for some months following the stay of prosecution proceedings was not unreasonable in the circumstances since the stay did not preclude an application to resume proceedings. I conclude there is not evidence that the search or the resulting seizure violated Ms. David’s or Olympia’s rights under s. 8 of the Charter.

Section 11 and 12 rights

In the Amended Amended Statement of Claim the plaintiffs state they rely upon, inter alia, ss. 11(b), 11(d), 11(f), (11(g), (11(h) and 12 of the Charter. In a Notice of Constitutional Question, Ms. David alleges that her s. 1 rights were violated. The paragraphs of s. 11 and s. 12 referred to, provide:

11. Any person charged with an offence has the right

(b) to be tried within a reasonable time;

(d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal;

(f) except in the case of an offence under military law tried before a military tribunal, to the benefit of trial by jury where the maximum punishment for the offence is imprisonment for five years or a more severe punishment;

(g) not to be found guilty on account of any act or omission unless, at the time of the act or omission, it constituted an offence under Canadian or international law or was criminal according to the general principles of law recognized by the community of nations;

(h) if finally acquitted of the offence, not to be tried for it again and, if finally found guilty and punished for the offence, not to be tried or punished for it again; and

12. Everyone has the right not to be subjected to any cruel and unusual treatment or punishment.

In my view, the only s. 11 rights that could be raised from the evidence at the hearing are those detailed in paragraphs (b) and (d). They provide that any person charged with an offence, (b) has the right to be tried within a reasonable time, and (d) the right to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal. I note there is no argument about violation of s. 12 rights and on the facts established no issue arises under s. 12.

The plaintiffs adduced no evidence said to be specifically related to the rights secured by paragraphs 11(b) and (d). Nevertheless, I review the evidence that is before me. In regard to s. 11(b), though the Supreme Court of Canada has refused to set a fixed period of time within which a trial must be held, it has ruled there are four factors to weigh in determining whether a delay was unreasonable: the length of delay, whether the accused waived any time periods, the reasons for the delay and the prejudice suffered by the accused. [32] The length of the delay is calculated from when the charge is laid so that delay arising in the investigatory stage, before charges are laid, is generally irrelevant. [33]

Whether the delay is reasonable may depend upon its causes. For example, delay that is inherent to the proceedings, such as delay to accommodate the schedules of counsel, is not unreasonable [34] . Systemic delays caused by congestion, or delays attributable to the Crown do not extend the period of reasonableness, while those attributable to the defence may lengthen the period.

Finally, the court will also consider the prejudice suffered by the accused to determine whether delay has been unreasonable. In R. v. Askov^, [35] Cory J. said that there was a “...presumption of prejudice to the accused resulting from the passage of time”, especially where there were long delays. However, R. v. Morin^ [36] suggests that one may not automatically presume that the accused is prejudiced by delay in a particular case.

In this case Ms. David and Olympia were charged on August 25, 1987 and the matter proceeded to trial on October 23, 1989. Thus, the trial did not commence until two years and two months after the charges were laid. There is no evidence that this delay was beyond the norm for such proceed- ings in the busy court in Brampton. The plaintiffs did not lead evidence during the hearing to prove that they were prejudiced by the delay, though that matter was implicit in some questioning, and in some argument of Ms. David. She questioned Ms. Woolcott about delays that occurred after the trial commenced. Ms. Woolcott explained that after evidence was heard in January 1990, the trial was scheduled to resume in April, the earliest possible date then available, and it was subsequently adjourned from April to June when the Court could not accommodate its resumption in April. In my opinion, the evidence establishes that the trial was delayed somewhat but there is no evidence that the delay itself prejudiced the plaintiffs, or that it was caused by the Crown.

In argument Ms. David submitted that loss to her and to Olympia resulted from the delay in the return of documents seized by the Crown. I have referred to this earlier but in this connection there simply was not evidence before me of the prejudice claimed by the plaintiffs. I cannot assume that it was significant or that the delay arising from retention of the documents seized after the prosecution was stayed, can be said to be unreasonable.

Ms. David testified that she considered that her Charter rights were violated when the Crown stayed the criminal proceedings. [37] Her testimony indicates that she did not understand what the stay meant or its legal effect. Specifically, it seems that she was concerned that the stay implied that she “made a deal” with the Crown, or that she might be perceived as guilty of the criminal offenses charged. In particulars filed September 24, 1992, she expressed infringement of her rights and her frustration with not being able to answer the charges against her. She seemed concerned that the stay implied some guilt on her part, when the Court had not reached a decision and, indeed, the Court had not heard all of the Crown’s evidence when the stay was ordered. Whatever the perception may be, Ms. David was not proven guilty. She continues to be presumed innocent. Because a stay of proceedings does not constitute a finding of guilt, there could be no violation of paragraph 11 (d) of the Charter.

Section 15 rights

Section 15(1) states that:

Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

Section 15 of the Charter, like s. 7, provides protection only to natural persons, [38] The corporate plaintiff may not claim protection under this provision.

To establish a violation of s. 15 the plaintiff Ms. David must establish that a distinction is made based on a personal characteristic which results in denial to the plaintiff of one of the four basic equality rights protected by s- s. 15(1), that is, equality before the law, equality under the law, equal protection of the law and equal benefit of the law. The focus at this stage is whether the law has distinguished between the claimant and others based on personal characteristics. Secondly, the plaintiff must establish that the denial of the right results in discrimination on one of the prohibited grounds or an analogous ground. [39]

Two bases for possible discriminatory treatment were suggested by Ms. David. First, was the comments attributed by Mr. Leyton to Mr. Schwantes about the possible shared religious faith of Ms. David and Mr. Leyton. I have not been persuaded on the evidence that those comments were made. I note that Ms. David did not question Mr. Schwantes’ motives in relation to the alleged comments during her examination-in-chief or re-examination while he was on the stand. Thus, there is no evidence that he acted, or that he was motivated in acting, on some ground discriminatory within s-s. 15(1).

In argument Ms. David suggested that Olympia was not provided with an appropriate deduction rate when she requested one because she was considered by excise officers as a woman with a sewing machine. There was no evidence that she was so considered or was so treated.

No basis for finding a violation of equality rights assured to Ms. David under s-s. 15(1) of the Charter was established by evidence adduced at the hearing.

Conclusion

In this action the plaintiffs each claim substantial general, special and exemplary damages, and by the Amended Amended Statement of Claim it is said that as a result of the tortious actions of Crown servants Ms. David suffered personal bankruptcy, lost her livelihood, and suffered severe emotional pain and distress. As noted at the beginning of these Reasons the proceedings here dealt with concern only the issues of liability.

The nature of the primary claims, in tort, raised by the plaintiffs are generally difficult to establish, in any case. That may be particularly so where, as here, the plaintiffs rely at trial on testimony of witnesses who are or were public servants, or a Crown witness, in earlier prosecution proceedings of the plaintiffs. Any difficulty of proving the claims ought to be carefully assessed by the plaintiffs before trial for that difficulty cannot affect the burden of proving their claims if matters proceed to trial. If a plaintiff persists, she or he has a right to have her or his claims heard where those claims lie in the jurisdiction of the Court, but at trial the plaintiff, to succeed, must meet the burden of proving the claims brought before the Court.

Having heard the plaintiffs’ claims and the evidence presented, I sum up my conclusions. In regard to the claims in tort for alleged wrongs of public servants, I find there is no evidence that would support a conclusion that any of those involved committed an actionable wrong, a tort, for which the defendant could be liable under the Crown Liability and Proceedings Act. There is not evidence that the prosecution of the plaintiffs was malicious or that it was undertaken in the absence of reasonable and probable cause. There is not evidence of misfeasance, abuse of authority or abuse of process that would support any award in damages. There is not evidence of negligence by the prosecutor or by any other person acting in the course of their public service duties on behalf of the defendant. There is no evidence of any wrongful conspiracy by those involved.

In regard to the plaintiffs’ claims arising from alleged breaches of their rights claimed under ss. 7, 8, 11, 12 and 15 of the Charter, there is not evidence to support a finding that any rights claimed by the plaintiff, Mary David, under those five sections of the Charter, or any rights claimed by the corporate plaintiff Olympia under ss. 8 and 11, were breached by actions of the servants of the defendant.

Since I find that none of the claims of the plaintiffs are established, no liability arises for the defendant to meet any claim for damages. Thus, a Judgment issued on March 31, 1999, dismissing the plaintiffs’ action.

Both parties ask for costs in their respective pleadings, the defendant asking for costs on a solicitor and client basis. At the conclusion of the hearing little was said about costs but counsel for the defendant did say that if the Court accepted his submissions to dismiss the plaintiffs’ action, the plaintiffs should not be awarded any costs. In my opinion there is no basis on which I should follow other than the usual practice of the Court to award costs following the result of the proceeding. None of the other factors listed in Rule 400(3) of the Court’s Rules, to be considered in exercising discretion to award costs, was commented upon by the parties. I do note that in acting for herself, and for the corporate plaintiff as she was entitled to do by Order of the Court, Ms. David did not have counsel or legal advice and, in my opinion, this resulted in initiatives and proceedings in preparations for trial that would be unnecessary in the normal relations between counsel for two parties. That in turn would be expected to increase costs for both parties.

Despite that, I acknowledge that counsel for the defendant did not comment on this, and it is not for me to weigh that aspect without submissions. I acknowledge that after the trial commenced Ms. David and counsel for the defendant both worked effectively, and even co-operatively, to complete the hearing.

I am not persuaded that in this case any basis is established for an award of costs on a solicitor and client basis, even if a litigant, who is not a lawyer, acting for herself and her corporation, may cause more than ordinary costs for the defendant, Her Majesty the Queen. In the circumstances, I award costs to the defendant, on the usual party and party basis, unless by agreement the parties settle the matter of costs on some other basis.

Action dismissed.