Vernon Robert Milley Et Al v. Granby Construction & Equipment Lid Et Al, [1974] CTC 701, 74 DTC 6543

McFarlane, J (per curiam):—This is an appeal from the judgment of Bouck, J pronounced May 23, 1974, which directed that certain documents, books, records, papers and things “be replevied” to the respondents. Because the validity of income tax Regulation 900(5) was questioned before Bouck, J, he directed that notice be given to the Attorney General of Canada who thereafter intervened in the hearing of the replevin motion. The Attorney General was also represented at the hearing of this appeal by the same counsel who appeared for the appellants.

On September 18 and 19, 1973 a large number of documents, books, records, papers and other things was taken by the appellants (or some of them) from the possession of the respondents. Some of these documents, etc have been returned in the meantime. Others are now in the custody of the sheriff at Prince Rupert under the terms of an order of Gould, J made June 27, 1974, granting a stay of execution of the judgment of Bouck, J pending the determination of this appeal.

The appellants justify their seizure, taking and retention of documents, etc by an “authorization to enter and search” dated September 13, 1973, signed by J L Gourlay, Director, Special Investigations Division, Department of National Revenue, Taxation, and approved on September 17, 1973 by McClellan, CCJ, a judge of the County Court of Vancouver. Omitting portions immaterial for the present purposes, this authorization reads as follows:

AUTHORIZATION TO ENTER AND SEARCH

The Director, Special Investigations Division, Department of National Revenue, Taxation, hereby authorizes VERNON ROBERT MILLEY, VICTOR RUDOLPH REINERS, RODNEY LLOYD JAMIESON, RAYMOND J MACISAAC, BERNARD VELTKAMP, CHARLES OLOF SELMAN, EDWARD ARMSTRONG HEYES, R S OLNEY, C S HODSON, ANDRIES VAN HEUKELOM, W H SYMONS, and DONALD JUDSON WELLS, officers of the Department of National Revenue, or any of them, together with such members of the Royal Canadian Mounted Police or other peace officers as they, or any of them, may call on to assist them, or any of them, to enter and search, if necessary by force, the following premises and any receptacles or places therein:

(designated premises and safety deposit boxes)

for documents, books, records, papers or things which may afford evidence as to the violation of any provision of the Income Tax Act or a regulation and to seize and take away such documents, books, records, papers or things and retain them until they are produced in any court proceedings, and

(offices of a chartered accountant and of a firm of barristers and solicitors at Prince Rupert)

for documents, books, records, papers or things pertaining or relating to Granby Construction & Equipment Ltd, Raymond Alexander McLean, Bedrock Granby Contractors Ltd, Belliveau Enterprises Ltd, Belliveau and Company Contracting Ltd, Empress Ventures (1966) Ltd, Greene Clinic Holdings Ltd, Haida Construction Ltd, Haida Finance Company Ltd, MacKenzie Ventures Ltd, Prince Rupert Equipment Rentals Ltd, Seal Cove Properties Ltd, Tenmen Securities Lid, and Star Enterprises Ltd, which may afford evidence as to the violation of any provision of the Income Tax Act or a regulation and to seize and take away any such documents, books, records, papers or things and retain them until they are produced in any court proceedings.

GIVEN under my hand at the City of Ottawa, Province of Ontario, this 13th -: day of September, 1973.

“J L GOURLAY”

Director,

Special Investigations Division.

After having considered the application made by the Director of Special Investigations based on the affidavit of Vernon Robert Milley, I hereby approve of the above authorization, which approval is also indicated on the preceding page by my initials.

DATED at Vancouver, BC this 17th day of September, 1973.

Judge of the County Court of Vancouver.

It should be observed that the authorization was to enter, search, seize, take away and retain until produced in any court proceedings.

As justification for the making of the authorization by the Director, the appellants rely on paragraph 221 (1)(f) and subsection 231(4) of the Income Tax Act, RSC 1952, c 148 as amended by SC 1970-71-72, c 63, and on income Tax Regulation 900(5) made by the Governor in Council pursuant to the former subsection. Those provisions read:

221. (1) The Governor in Council may make regulations

(f) authorizing a designated officer or class of officers to exercise powers or perform duties of the Minister under this Act,

231. (4) Where the Minister has reasonable and probable grounds to believe that a violation of this Act or a regulation has been committed or is likely to be committed, he may, with the approval of a judge of a superior or county court, which approval the judge is hereby empowered to give on ex parte application, authorize in writing any officer of the Department of National Revenue, together with such members of the Royal Canadian Mounted Police or other peace officers as he calls on to assist him and such other persons as may be named therein, to enter and search, if necessary by force, any building, receptacle or place for documents, books, records, papers or things that may afford evidence as to the violation of any provision of this Act or a regulation and to seize and take away any such documents, books, records, papers or things and retain them until they are produced in any court proceedings.* [1]

900. (5) The Director, Special Investigations Division of the Department of National Revenue, Taxation, may exercise the powers and perform the duties of the Minister under subsections 150(2) and 231(3) and (4) of the Act.

By the judgment under appeal, Bouck, J held that Regulation 900(5) is ultra vires the Governor in Council to the extent that it purports to authorize the Director to decide whether reasonable and probable grounds exist to believe a violation has occurred or is likely. His expressed reason was that subsection 231(4) delegates to the Minister a judicial function and that the language found in paragraph 221 (1)(f) is not sufficiently express or implicit to permit further delegation by the Governor in Council. I accordingly interpret the finding of ultra vires to mean that as a matter of interpretation paragraph 221 (1)(f) does not include the powers and duties vested in the Minister by subsection 231(4).

The reasoning and the argument involve recognizing a distinction between “powers” and “duties”. It is said that the Minister has imposed upon him the duty to determine whether reasonable and probable grounds exist for his belief before he may exercise the power of authorizing a search and seizure; and that that duty involving a judicial or quasi-judicial function may not be delegated lawfully by the Governor in Council without more express authority than is found in paragraph 221(1)(f). This distinction between “powers” and “duties” was considered in a similar context by the Privy Council in Mungoni v Attorney General of Northern Rhodesia, [1960] AC 336. The regulation which had to be interpreted in that case was in these words:

16. (1) Whenever the Governor is satisfied that for the purpose of maintaining public order it is necessary to exercise control over any person, he may make an order (hereinafter called a detention order) against such person directing that such person be detained, and thereupon that person shall be arrested and detained.

Lord Denning delivering the judgment of the Privy Council put the question to be answered as follows:

Their Lordships would pause for a moment to notice that, under the regulation, the Governor cannot make a detention order unless he is first “satisfied” of what is there stated. In a sense that puts a duty on him to be “satisfied” before he makes an order. Can this duty be delegated by the Governor to someone else?

He then summarized the appellant’s argument that, because the Governor was empowered to delegate his powers but not specifically his duties, a purported delegation of the duty “to be satisfied” was unlawful and continued:

It seems to their Lordships that the arguments for the appellant proceed on this fallacy: they assume that the duty under regulation 16(1) is something separate and distinct from the power therein contained. Their Lordships cannot accept this view. In their opinion regulation 16(1) contains not so much a duty, but rather a power coupled with a duty. The power of the Governor to make a detention order can only be exercised when he is ‘satisfied’ that it is necessary. The requirement that he is to be satisfied— though in one sense a duty—is nevertheless also a condition or limitation on the exercise of the power. And when regulation 47 authorizes the Governor to delegate the power to any person, it authorizes him to delegate to such person the fulfilment of all the conditions and limitations attaching to it, even though they be also duties.

I think this reasoning should be applied in interpreting the statutory provisions and the regulation involved in this appeal.

As a guide to interpretation counsel referred to the judgment of the Court of Appeal for Ontario in Bathville Corporation Limited v Atkinson, [1965] 1 OR 340, where that Court applied to subsection 126(3) of the Income Tax Act, RSC 1952, c 148, as amended, the reasoning of the Supreme Court of Canada in Canadian Bank of Commerce v Attorney General of Canada, [1962] SCR 729. That subsection 126(3) was the predecessor of the present subsection 231(4) with what I consider a material difference. In the place of the words which I have underlined above in subsection 231(4), the former section read:

The Minister may, for any purpose related to the administration or enforcement of this Act, .

While a purpose related to the administration or enforcement of the Act appears to me to denote a more broad and comprehensive condition or limitation than a belief that a violation has been or is likely to be committed, I think that some assistance in interpretation can be derived from the views expressed by the Supreme Court of Canada in the Canadian Bank of Commerce case (supra). It will be seen that I am paraphrasing the words of Lord Denning in the Mungoni case and those of Kerwin, CJC in the Canadian Bank of Commerce case.

Recognizing as I do that the exercise of the powers conferred by subsection 231(4) may involve serious interference with rights of property and privacy, I am of the opinion that the intention of Parliament is clearly stated in paragraph 221 (1)(f).

In my opinion, the powers and duties of the Minister intended to be dealt with are the powers conferred and the duties imposed on him by the statute, including the powers and duties described in subsection 231(4). This meaning being plain, it is idle, in my opinion, to attempt to attach adjectives such. as administrative, legislative, judicial or quasi-judicial to those powers and duties. I think, therefore, that paragraph: 221(1)(f) empowered the Governor in Council to delegate the exercise of the powers conferred and the performance of the duties imposed on the Minister by subsection 231(4) to the Director in the manner provided by Regulation 900(5) which I therefore find to be intra vires.

Counsel for the appellants and for the Attorney General of Canada submitted in the alternative that the Supreme Court of British Columbia has no jurisdiction to order replevin of the documents, etc taken by the appellants and asserted that the jurisdiction to so order is now vested exclusively in the Federal Court of Canada. In support of this submission counsel was obliged to take the position that the documents, etc are in the complete care and control of the Minister on behalf of the Crown and that the defendants (appellants) have no control over or even access to them. I have already noted that the authorization given to these appellants was to enter, search, seize, take away and retain until produced in any court proceecings. The position taken by counsel, if correct, means necessarily, that the defendants (appellants) have acted in breach of their authorization to retain the documents. I agree with the argument of the counsel for the respondents that neither the appellants nor the Attorney General of Canada should be permitted at this stage to assert that wrongdoing in order to attempt to oust the jurisdiction of the Supreme Court of British Columbia. In this connection it must not be forgotten that the seizure was made in 1973 and that no proceedings have yet been instituted in any court against any of the respondents. Reference may also be made as Bouck, J did to paragraph 17(4)(b) of the Federal Court Act conferring concurrent jurisdiction on the Federal Court in the proceedings of the nature there described. I also mention by way of caveat only the inherent jurisdiction of the Supreme Court of this Province referred to recently by Berger, J in Regina v Black, [1973] 6 WWR 371. I express no opinion on that subject here since that jurisdiction was not invoked and its possible aoplicability was not argued.

Counsel for the respondents submitted that the evidence does not disclose reasonable and probable grounds for a belief by the Director that a violation had been or was likely to be committed when he signed the authorization and obtained the approval of a County Court Judge and that this condition is objective. Counsel for the appellants, while asserting the condition is subjective, argued that reasonable. and probable grounds are shown sufficiently by an affidavit of Vernon Robert Milley sworn September 7, 1973 which was before the Director when he signed the authorization and was before McClellan, CCJ when he granted approval. I think the question whether the condition is subjective or objective, ie whether the Court is entitled to examine the reasonableness and probability of the grounds, need not be decided in this case because the appellants have produced the information which was before the Director when he acted. Upon a careful examination of the affidavit and having regard to the able analysis of it made by Mr Pitfield I am of the opinion that it does disclose reasonable and probable grounds for the Director to believe that a violation of the Act or of a regulation had been committed. The only doubt I have felt in this connection is as to the grounds for believing there was a violation committed or likely to be committed by the respondents other than Granby Construction & Equipment Ltd and McLean. As counsel did not seek to make this distinction and treated all respondents alike in their arguments I do not consider that aspect further.

I cannot leave this appeal without stating my opinion that on the evidence before this Court the powers conferred by subsection 231(4) have been exercised in a high-handed and oppressive manner which I feel sure was never contemplated by Parliament. That, however, does not affect the legal validity of the authorization and cannot be allowed to influence my interpretation of the statute and regulation.

In the result I am of the opinion that the appeal must be allowed and the replevin order set aside.