Snell v. Haywood Et Al., [1947] CTC 401

Boyd McBride, J.:—The action here is a novel one. The main remedies sought in the statement of claim by plaintiff are an interlocutory and permanent injunction against the four defendants (who admittedly are employed in the service of His Majesty as officers of the Department of National Revenue, Income Tax Branch, of the Government of Canada) or any of them communicating or allowing to be communicated to any one not legally entitled thereto information obtained under the provisions of the Income War Tax Act, R.S.C. 1927, ch. 97, and amendments. In particular plaintiff seeks to enjoin defendants as witnesses for the crown from disclosing in evidence in open police court in Calgary income tax returns filed by her, etc., on the hearing of charges under the Act presently pending against her, the plaintiff, these charges being to the effect that she had made a false statement in an income tax return and had destroyed certain records.

The application before me is confined to an interlocutory injunction to restrain defendants until trial of the action and technically is ex parte defendants not being represented. As a courtesy to the court, however, Mr. Harold W. Riley, counsel for the National Revenue Department, who has the conduct of the prosecutions, appeared to state the position of the department in relation to the action herein and this application. The argument thereupon proceeded on the basis that if an injunction should be refused the avowed intention of the defendants was and is, when called as witnesses, to tender as evidence in open court to the police magistrate written statements furnished under the provisions of the Income War Tax Act.

The plaintiff pleaded not guilty before the police magistrate, and, relying on sec. 81 of the Act, her counsel thereupon moved for an order by the magistrate clearing his court and that the charges be heard in camera. See. 81 of the Act is the pertinent section, and it reads as follows:

"‘No person employed in the service of His Majesty shall communicate or allow to be communicated to any person not legally entitled thereto, any information obtained under the provisions of this Act, or allow any such person to inspect or have access to any written statement furnished unde the provisions of this Act.

"2.] Any person violating any of the provisions of this section shall be liable on summary conviction to a penalty not exceeding two hundred dollars.’’

The police magistrate, while feeling "great sympathy’’ for the motion, gave written reasons why he felt compelled to refuse it and why he considered that "‘under the law as it stands I have no power”.

Thereupon plaintiff caused to be launched a motion in this court for prohibition and a mandamus under the Crown Practice Rules seeking to compel the magistrate to try the charges in camera. This motion was argued before Clinton J. Ford, J. and I have had the advantage of perusing his written reasons for judgment delivered three days ago [ante, p. 392]. He holds— contrary, apparently, to the view of the police magistrate himself—that the police magistrate has jurisdiction and a discretion to close the court to the public and to try the charges in camera, the discretion, however, to be exercised under the provisions of the Criminal Code, R.S.C. 1927, ch. 36. He also holds that to orant either prohibition or mandamus would be to interfere with or prevent the magistrate exercising the discretion vested in him. Accordingly, he dismissed the application.

With respect, I entirely agree with his judgment. In it he, in discussing a regulation which declares that in proceedings relating to prosecutions under the Act a magistrate is to be deemed legally entitled to receive evidence from officers such as the defendants as to information or written statements obtained under the provisions of the Act, has this to say:

‘“The concession made that the magistrate presiding over the criminal court is entitled to receive the information or evidence intended to be given on behalf of the crown to prove the charges must, I think in fairness, be deemed to have been limited to the right to receive such if holding the trial in camera/ 9

And again, when discussing the substantive right claimed by plaintiff that information contained in an income tax return and pertinent written statements is confidential under sec. 81 and cannot be given to the public through the medium of an open court, he adds:

“If such a statutory right exists, it is not a right that can be enforced by mandamus against the magistrate. The section does not prohibit him from receiving the information in court. It is rather the officials of the department who are concerned when called as witnesses for the crown.’ 9

It is to be noted that the position taken by counsel for the department is mainly a neutral one. He presented his argument more as amicus curiae than in opposition to the application. He was careful to avoid placing the department in the position of attempting to circumvent the will of parliament as set out in sec. 81. His submission, accordingly, was that if sec. 81, as he says it probably does, confers a substantive right on a taxpayer to have his income tax return, etc. treated as confidential it is only in fields other than that of the criminal law, or again, to state the proposition in a slightly different way, he says that whatever may be the effect of sec. 81 when we get into the field of criminal law it does not apply. Broadly speaking, this submission summarizes the reasons upon which the police magistrate felt he was bound to rule the charges must be heard in open court. In the magistrate’s view sec. 81 was intended to apply to the administrative and not to the judicial field.

The hearing of the charges has been set for this afternoon. Counsel for the department has however given an undertaking not to call the witnesses until I have had time to dispose of this application. Having given the problem thus presented as careful consideration as the circumstances permit, I have come to the conclusion that the plaintiff is entitled to an interlocutory injunction against the defendants testifying in open court but only when the evidence has reached a point where there would be a violation of sec. 81. I find myself unable to accept the submissions advanced by counsel for the department as to the suggested limitation of the right or protection conferred by sec. 81. In my view this right, i.e., to have income tax returns and pertinent material treated as confidential, is a substantive right and it was so intended by parliament. In Kaufman v. McMillan [1939] O.W.N. 415, [1939] 3 D.L.R. 446, to have an income tax return, when filed, treated as confidential, is described by Rose, C.J.H.C., Ontario, as a ""privilege . . . created by Parliament”. I adopt, in preference, the phrase "‘substantive right’’ from the judgment of Clinton J. Ford, J., supra. I am unable to agree that this right is limited to administrative fields or that parliament intended there be an exception and that the taxpayer should be deprived of the protection afforded in civil or criminal proceedings. If that had been the intention one might well have expected it to have been set out in express language. I am also unable to agree that the hearing of charges such as this in camera is repugnant to the spirit of the authorities cited in argument, Scott v. Scott (No. 1) [1913] A.C. 417, 82 L.J.P. 74, and I am of opinion that full force and effect should be given in a criminal court to sec. 81 by excluding all members of the public at that stage in the proceedings where the violation of the section would otherwise take place. Indeed, the principle laid down in Norman v. Mathews (1916) 85 L.J.K.B. 857, 82 T.L.R. 305, affirmed 32 T.L.R. 369, as referred to by Clinton J. Ford, J., would require, in the interests of justice, that that course be adopted by the police magistrate to the end that the full evidence would be before him, otherwise there would be the possibility that from lack of sufficient evidence a guilty person might escape.

Furthermore, what is under consideration is a taxing statute and machinery and penalties for its enforcement. It is a well- known rule of interpretation that it is to be construed strictly against the taxing authority. It seems to me consonant with the intention of parliament, as expressed in sec. 81, that plaintiff’s application for an interlocutory injunction should be granted, otherwise there might well occur the very mischief which parliament intended to prevent. The court must be vigilant to pro- tect a taxpayer against any attempt on the part of departmental officers charged with the responsibility of enforcement, however much in good faith, to whittle down what appears to be a definite right conferred on the taxpayer by parliament and not, in my opinion, merely a piece of administrative mechanism enacted for convenient and efficient departmental operation. It is not difficult to see that if the charges against the plaintiff are tried in open police court, and the plaintiff be found not guilty, grave injustice is almost certain to be done, an injustice or injury which, according to Rose, C.J.H.C., in Kaufman v. McMillan, supra, at the foot of p. 453, falls within the category of irreparable injury; see also Kerr on Injunctions, 6th ed., at pp. 17 et seq., and remedy in damages certainly, in my view, would be inadequate.

These are the reasons which, on meagre material, have moved me to grant the interlocutory injunction. In the language of Kerr, supra, at p. 12, I do not profess to anticipate the determination of the right, but I merely give it as my opinion that there is a substantial question to be tried, that there is a substantive right in plaintiff which prima facie the defendants threatened to injure or destroy and as to which there should be no change allowed in the present position until the question has been disposed of.

The interlocutory order will go accordingly. The question of costs is reserved.

Judgment. accordingly.