CC Havanos Corp. Ltd. (Re), 2002 FCT 941

                                                                                                                                            Date: 20020906

                                                                                                                                         Docket: T-185-99

Neutral Citation: 2002 FCT 941

IN THE MATTER OF section 88 of the

Excise Act, R.S.C. 1985, c. E-14

AND IN THE MATTER OF some cigars, raw and manufactured tobacco and

other materials in stock, engines, machinery and utensils seized

[Application by CC Havanos Corporation Ltd.]

REASONS FOR JUDGMENT

ROULEAU J.

[1]                 This litigation has to do with an opposition by the plaintiff company, CC Havanos Corporation Ltd. ("CC Havanos") to an excise seizure carried out on December 17, 1998 by the Royal Canadian Mounted Police ("RCMP") under the provisions of the Excise Act, R.S.C. 1985, c. E-14 as amended ("the Excise Act"). In its notice of claim filed in the Court record pursuant to subsection 117(1) of the Excise Act, the plaintiff company is seeking an order declaring that its interest in the seized property is not affected by this seizure and that it is innocent of any complicity in the commission of the offences under the Excise Act resulting in the seizure, a remedy that is justifiable under section 88.2 of the Excise Act.

The Facts

[2]                 Dino Orsini is a businessman who decided to become involved in the manufacture of high-quality cigars. He spent two years developing his project. He incorporated his firm CC Havanos in May 1998 and retained on a recommendation the services of a management consultant, Mr. Marc Larochelle, for the purpose of preparing a business plan including a market study and an analysis of the legal aspect. The consultant contacted Revenu Québec, which informed him of the applicable taxes and the need to obtain a provincial cigar manufacturing and tobacco importing licence.

[3]                 Mr. Larochelle, the consultant, was directed by both Revenu Québec and Revenue Canada to Customs and Excise Canada. There, an official prepared a table for him of all the applicable taxes and duties and gave him the relevant documents. It appears from the evidence that he was told he did not need a federal manufacturing licence but that he should however pay the excise duties and taxes to the federal government. It was Mr. Larochelle's understanding, therefore, that in terms of cigar manufacturing it was Quebec law that applied. He made no inquiries as to whether it was necessary to stamp the tobacco products. Wherever he went, he explained that he was operating on behalf of a business for the manufacture of high-quality cigars. He did not consult a lawyer since he saw no need for this and wanted to reduce costs.

[4]                 Following the instructions of his consultant, Dino Orsini obtained his provincial tobacco importer's and manufacturer's licence and a federal tobacco import licence, but not the federal manufacturing licence required by the Excise Act for the manufacture of cigars. He undertook the renovation of some premises and in December 1998 opened a luxurious high-end cigar shop on Sherbrooke Street West in Montreal. Customers could savour in a lounge some cigars manufactured on site and make their selections within a vast humidor.

[5]                 However, the RCMP were keeping an eye on Mr. Orsini since they were planning to deploy a major search operation against a number of shops in the Montreal area that they suspected were manufacturing and selling imitation Cuban cigars. They were also aware that CC Havanos was to manufacture some cigars and that it had not obtained its cigar manufacturing licence. In the summer of 1998, while the premises were being renovated, some officers of the customs and excise division conducted an initial inspection.

[6]                 On December 15, 1998, Constable Marc Archambault was asked to return to CC Havanos shortly after the opening for a second inspection. He arrived on the scene around 12:01 p.m. and found two men who appeared to be of Hispanic origin sitting at a table rolling cigars. Behind them, Constable Archambault noticed what he thought to be about one hundred cigar boxes that did not bear any stamps confirming the payment of cigar manufacturing duties as required by subsection 240(1) of the Excise Act. It subsequently turned out that these were cigar moulds. He also noted on the wall that some provincial permits were posted - manufacturer's, importer's and collections officer's - as well as some certificates concerning the sales tax and tobacco tax.

[7]                 Constable Archambault, who did not identify himself as a police officer, said he was interested in the possibility of purchasing a box of Cuban cigars but that it was very expensive. One of the two men who appeared to be of Hispanic origin answered that the tobacco was imported from Cuba and that they were manufacturing the cigars on site in the shop and selling them at less expensive prices because there were no taxes or duties to pay. Later, the same man introduced Constable Archambault to the employer, a young white man who turned out to be Ian Orsini, the son of Dino Orsini, and he offered Constable Archambault a box of 25 cigars for $200.00. Constable Archambault also noted the presence on the premises of a large humidor, a specially designed container for regulating humidity for the purpose of preserving the cigars, which contained a large number of unstamped cigars spread out on a table. Since it was a Christmas gift, Mr. Ian Orsini suggested to Constable Archambault that he come back to get them on December 22 or 23, so they could be kept under cover in the humidor.

[8]                 On December 15, 1998, at around 2:20 p.m., Constable Archambault contacted Ms. Diane Demers of Revenue Canada, Montreal Excise Division, who confirmed, after a check in their commercial excise system, that as of December 14, 1998, CC Havanos had no cigar manufacturing licence and no steps had been taken by CC Havanos to obtain a licence pursuant to section 13 of the Excise Act.

[9]                 On December 17, 1998, acting pursuant to sections 88, 89, 226 and 240 of the Excise Act as excise officers, some members of the RCMP carried out a seizure of all the equipment located in the CC Havanos premises: the materials and equipment needed for the manufacture of cigars, a total of 3,106 cigars not stamped as required by the Excise Act, and 448 pounds of tobacco, and some documents proving that CC Havanos had been manufacturing cigars since at least October 1998. This seizure was conducted under a search warrant issued by Mr. Jean Charles Hamelin, a justice of the peace, based on an affidavit in which Constable Archambault stated that he had reasonable grounds to believe that the objects sought, identified on the document entitled "Schedule of Property Seized", were located on the premises of CC Havanos and would provide evidence in relation to the perpetration of the offences set out in sections 226(a) and 240(1)(b) of the Excise Act, namely, manufacturing cigars without the licence prescribed by the Excise Act and having in one's possession cigars that were not put up in packages and stamped in accordance with the Excise Act.

[10]            Mr. Dino Orsini, his son Ian and his wife Louise Lemire-Orsini were arrested at the site of the search and escorted to the RCMP headquarters. They refused to make a statement in writing on the advice of their lawyer, who personally appeared at the RCMP office. However, Mr. Dino Orsini told Constable Archambault orally that his business for the past month or so had been manufacturing cigars and that he thought he was in legal compliance with his provincial licences. Later, Dino Orsini, Ian Orsini and Louise Lemire-Orsini, none of whom wished to make any statement, were released and advised of the possibility that criminal charges could be brought against them in the near future.

[11]            It should be noted that at no point during their visits prior to the seizure of December 17, 1998 did the members of the RCMP inform Mr. Orsini of his failure to procure the federal manufacturing licence. On December 18, 1998, when Mr. Orsini learned for the first time that he had to obtain such a licence, he met with the licencing official of Revenue Canada, Montreal Excise Division, and explained to her that he wanted to obtain a federal licence for the manufacture of cigars. She gave him all the relevant information and a form. To get a licence, Mr. Orsini had to pay $50.00 in excise tax and obtain a bond from an insurance company, which he did. However, Mr. Orsini's application was rejected five months later, on April 16, 1999, for reasons of public policy. It was carefully explained to him that this decision would be reviewed once the criminal proceedings in the Superior Court of Quebec had been concluded.

[12]            On January 6, 1999, a check with the Quebec government by Constable Archambault confirmed the invalidity of the provincial permits owing to the fact that they were issued in 1997 for 575 Lomme Street in St-Jean sur Richelieu, the street address of Mr. Dino Orsini's personal residence, and that the government had never been notified of the place of business of CC Havanos, which was situated at 1541 Sherbrooke Street West in Montreal. This was an offence under section 14(a) of the Quebec Tobacco Tax Act, R.S.Q. c. I-2.

[13]            Mr. Dino Orsini and his son Ian were tried on the two aforesaid counts. In a decision handed down September 21, 1999 (docket no. 500-73-000980-991), Mr. Justice Sirois of the Superior Court of Quebec ruled that the accused had demonstrated by a preponderance of evidence that their error of law was the result of the advice solicited from a person in authority and of competent jurisdiction and consequently ordered a stay of proceedings on both counts.

[14]            On April 24, 1999, CC Havanos, Dino Orsini, Louise Lemire-Orsini and Ian Orsini brought an action in damages in the Superior Court of Quebec against Her Majesty the Queen and various government employees for $25,000,000 (docket no. 500-05-049776-998). The plaintiff company's claim was based on its loss of business, the loss of its investment, income and profits, and the illegal and unreasonable nature of the seizure and confiscation by the RCMP of the property of its business. The CC Havanos claim was likewise based on the unreasonable refusal of the Revenue Canada officers, following the seizure, to issue a cigar manufacturing licence to it as required by the Excise Act. The individual claims were based on the personal and non-economic loss suffered as a result of the seizure, unlawful arrests, detentions, etc.

[15]            On January 15, 1999, CC Havanos, represented by its counsel, gave notice within thirty days of the seizure, pursuant to subsection 117(1) of the Excise Act, indicating that it intended to claim all of the seized property. On February 8, 1999, the Deputy Attorney General of Canada, on behalf of the defendant, filed in the record of this Court a notice of information and an information under subsection 116(1) of the Excise Act seeking the forfeiture of the things seized on December 17, 1998. On or about February 15, 1999, the plaintiff company commenced proceedings in this Court under subsection 116(2) and around March 17, 1999 the defendant filed its defence. The validity of the seizure made on December 17, 1998 by the RCMP is the subject of parallel proceedings in this Court and the Superior Court of Quebec.

The issues

[16]            I hasten to explain, as I stated at the hearing, that the action by the plaintiff company cannot by any means constitute in this case a justifiable proceeding under section 88.2 of the Excise Act, since that provision limits the appropriate proceeding to "any person, other than the person accused of an offence resulting in the seizure or person in whose possession the horse, vehicle, vessel or other appliance was seized". It is apparent from the record that all of the seized property belonged to and was in the possession of CC Havanos at all times during the seizure, and it is this company which is claiming the property. Furthermore, the purpose of this provision is to protect innocent third parties such as equipment rental companies, carriers, banks and other secured creditors, etc., which is not the case in this instance: Bank of Nova Scotia v. Canada (Minister of National Revenue - M.N.R.), [2000] 10 W.W.R. 641 (Sask. Q.B.), at par. 49. Accordingly, the statement of claim filed in the record of this Court by the plaintiff company seeks conclusions that are not proper to the action in claim provided in section 116 of the Excise Act, which is for the purpose of having the seized property released or condemned. Finally, even if this proceeding were available to the plaintiff company, which is not the case in this instance, the time for bringing it is prescribed, since the statement of claim was filed with the Court on February 12, 1999, close to 60 days after the seizure was made.

[17]            At trial, the plaintiff company attempted to show that the search warrant and the seizure executed under its authority, itself issued under section 487 of the Criminal Code, R.S.C. 1985, c. C-46, were void and unlawful, and it asked that the seized property be remitted to it. As no ground based on the Canadian Charter of Rights and Freedoms was cited in challenging the validity of the excise seizure, this action by the plaintiff company can only be based on section 116 of the Excise Act and necessarily consists of an action in rem to condemn the seized property. At trial, the plaintiff company simply sought to have the seizure of December 17, 1998 declared illegal by trying to demonstrate the void and illegal nature of the search warrant and the unreasonableness of the seizure itself. It did not emphasize its own innocence and its ignorance of the unlawful activity alleged against it, defences for which - unfortunately for the plaintiff company - evidence is irrelevant in an action in rem directed against property and which therefore cannot result in the return of the seized property any more than can a stay of criminal proceedings in the Superior Court of Quebec: see Daigneault v. Minister of National Revenue (Customs and Excise) (1990), 44 F.T.R. 226 (F.C.T.D.). In my opinion, the lawfulness of the seizure can be questioned only if the property was not ipso jure liable to forfeiture under the Excise Act.

[18]            In this context, this appeal raises only two very specific issues. First, was all of the property seized in the December 17, 1998 search liable to forfeiture ipso jure and through the application of the Excise Act? This question points to a further one. Should this first question be answered in the affirmative, would the fact that the possession of certain property at issue was not intrinsically unlawful be possible grounds for it to be legitimately returned to the plaintiff company even in the wake of a valid seizure under the Excise Act?

Submissions by the parties

[19]            The plaintiff company claims not only that the December 17, 1998 seizure was unlawful and unreasonable but that it was itself the object of a conspiracy that effectively put an end to its business.

[20]            First, the plaintiff company argues that the search warrant that was issued, and on which the seizure was based, was void and illegal since it was itself based on false allegations contained in the affidavit of Constable Archambault. For example, one of the reasons cited in the informations was that there were some boxes of cigars piled up in the CC Havanos commercial establishment that did not display the stamps required by the Excise Act, while in reality these were cigar moulds. Furthermore, the cigars located on the site, which according to the informations contained in Constable Archambault's affidavit were not packaged and stamped as required, were not yet ready for sale and consequently were not subject to excise. Thus, given these errors and the obvious insufficiency of the informations in support of the issuance of the search warrant, the plaintiff company argues that the warrant and the subsequent seizure were unlawful and void and consequently all the property that was seized should be returned to it.

[21]            Second, the plaintiff company claims that the acts of the RCMP members during the seizure were excessive and went far beyond the limits set by the legislation. For example, in executing the search warrant, the RCMP could have exercised some discretion which would have had the effect of mitigating the damages, by seizing only the cigars and tobacco rather than all the materials and equipment used in the manufacture of the cigars. This is particularly true, the plaintiff submits, when one considers the language of section 88(2) of the Excise Act, which stipulates that "all such goods, materials or apparatus may likewise be seized as forfeited".

[22]            Furthermore, the plaintiff company argues that it, along with Mr. Dino Orsini who was at all times the director, employer and majority shareholder of the firm, were misled in regard to the need to obtain the federal manufacturing licence and that they were peremptorily refused that licence when they requested one as well as later, after the stay of the criminal proceedings in the Superior Court of Quebec. Accordingly, the plaintiff company submits that this error of law defence, combined with the malicious conduct of the RCMP members during the seizure and subsequently, is a sufficient reason for this Court to vacate the seizure and order the return to it of all the property that was seized. In the alternative, it argues that this Court enjoys a certain latitude in the application of the Excise Act and asks that all of the seized property with the exception of the cigars and tobacco be restored to it.

[23]            The Minister, for his part, submits that all of the property seized on December 17, 1998 was seized through the application of the Excise Act and ipso jure forfeited to the Crown from the time when the plaintiff company manufactured cigars without the requisite licence under the Excise Act. Accordingly, this property was forfeited even before the seizure was made, and not by some subsequent action taken by the RCMP. The Minister argues that the seizure in execution of the search warrant was entirely legal under section 88 of the Excise Act since the offences under sections 226(a) and 240(1)(b) were committed by the plaintiff company. In these conditions, the RCMP members acting as excise officers not only could but had to seize the cigars, the tobacco, the materials and equipment being used in the manufacture, etc. under section 88(1) of the Excise Act. In any event, the Minister submits, the plaintiff has not demonstrated that the discretion exercised by the RCMP officers was unreasonable or that their conduct was malicious in the circumstances.

[24]            Furthermore, the Minister argues that the claim proceeding under section 117(1) is in the nature of a proceeding in rem and not in personam, and that neither ignorance of the law, the Excise Act, nor ignorance of certain facts could present an obstacle to the forfeiture of the property that was seized in this case, nor could they serve as a legal basis for this Court to order their return. Finally, the Minister submits that this Court has no discretion to mitigate the damages and asks that all of the seized property be declared forfeited.

Relevant statutory provisions

[25]            Before getting into the analysis, it would be worthwhile reproducing the relevant provisions of the Excise Act:

Analysis

1.    Was the seizure of December 17, 1998 illegal, which would justify the possible return of the seized property to CC Havanos?

[26]            To succeed on this point, the plaintiff company, which has the burden of proof under section 113 of the Excise Act, had to prove in full that the property seized in the December 17, 1998 search was not ipso jure liable to forfeiture by mere application of the Excise Act and consequently could not be seized. In my opinion, it has not done so.

[27]            If we examine, first, the merits of the first submission by the plaintiff, the issue for determination is whether the record indicates that the 3,000 or so cigars seized by the RCMP were manufactured for commercial purposes and intended for sale. If that was the case, they could be seized under section 88(1) of the Excise Act as being subject to excise and requiring a manufacturing licence. By a preponderance of evidence, I find that they were so manufactured for sale or commercial use, as early as November 1998, and not for a personal use or to be given free of charge. Consequently, it was necessary to obtain a licence to manufacture them, as provided in section 10 of the Excise Act.

[28]            In regard to the argument based on the lack of evidence of the illegal and non-regulatory nature of the tobacco products seized in this case, I hasten to point out that after a careful review of the evidence filed in the Court record, including the testimony of the witnesses at the hearing, whose credibility I have no reason to doubt, I can say that the plaintiff company definitely, if only implicitly, acknowledges that these were cigars manufactured without a licence, and not packaged or stamped in accordance with the Excise Act, and that the excise duties in connection therewith had not been paid. Can any better and more definitive argument than that be imagined? Accordingly, this evidence generally persuades me that the ingredients of the offences set out in sections 226(a) and 240(1)(b) have been established, and this testifies to the illegal nature of the seized products. Finally, let us note that the plaintiff company at no time claimed to benefit from any of the exclusions set out in sections 239.1(2) and 240(2) of the Excise Act.

[29]            As to the sufficiency of the informations contained in the affidavits pursuant to which the search warrant was issued, I must confess that the plaintiff's submissions do not persuade me. It seems to me that in this case we are a long way from mere allegations of vague "suspicion" for the purpose of conducting a "fishing expedition", as in R. v. Kokesh, [1990] 3 S.C.R. 3, at p. 29. Indeed, the statement of facts in this case appears to me to justify the rationality of the belief that the offences contemplated in sections 226(a) and 240(1)(b) of the Excise Act were being committed in the CC Havanos facilities. As to the error in observation committed by Constable Archambault during his visit of December 15, 1998, this is entirely a bona fide error that cannot have the effect of invalidating the search warrant. In my opinion, the informations, the affidavit and the description of the things to be seized left Justice of the Peace Hamelin with enough information to validly exercise his judicial discretion in verifying the reasonableness of the grounds for issuing the search warrant, in accordance with section 74 of the Excise Act: see also Lavoie v. Godbout, [1994] R.L. 387 (C.A.), at par. 10-11.

[30]            The plaintiff further contends, citing the text of section 88(2) of the Excise Act, that in executing the search warrant the members of the RCMP had some discretion, which could be used to mitigate the damages suffered by the plaintiff; they could have seized only the cigars and tobacco instead of all the materials and equipment used in the manufacture of the cigars. The Minister's position is that section 88(2) of the Excise Act applies only to those assets that have been or are being used "[Translation] for the purpose of transporting in contravention of the Act or the Regulations thereunder", and that it therefore does not cover any of the assets seized on December 17, 1998. Thus, in the case at bar it is section 88(1) that would apply and it provides that all the things that are found in a place or premises where anything is being done that is subject to excise, and for which a licence is required under the Excise Act, but in respect of which no licence has been issued, shall be seized by any officer having a knowledge thereof and be forfeited to the Crown.

[31]            The Excise Act is divided into six parts and has some 260 sections. Part I, entitled "General", comprises sections 8 to 128. Many of these sections are preceded by a short description of their content. For example, section 88(1) is preceded by the head "Goods and apparatus forfeited if no licence", while section 88(2) is preceded by the head "Horses, vehicles, etc." This distinction turns out to be quite important in this case since these two provisions cover different classes of property.

[32]            In order to succeed, the plaintiff had to persuade the Court that the words "other appliances" used in subsection 88(2) encompass the manufacturing materials and equipment seized on December 17, 1998. However, a careful reading of this provision reveals that the "appliances" in question are things "that have been or are being used for the purpose of transporting ... goods subject to excise" or transporting "any materials or apparatus used or to be used in contravention of this Act or the regulations in the production of any goods subject to excise", or "in or on which are found any goods subject to excise". Thus, the presence of this restrictive language shows that this provision covers only the seizure of means of transportation and not the seizure of the items themselves. In the case at bar section 88(2) is inapplicable since no vehicle used in the transportation or storage of the unpackaged and unstamped cigars or the transportation of the materials and equipment used in their manufacture was seized.

[33]            I agree with the Minister's position that it is rather section 88(1) that applies to all the property seized in this case, since that section expressly provides that the raw tobacco, engines, machinery, utensils, tobacco presses or knives and manufactured cigars that were found in the CC Havanos premises where cigar manufacturing activities were being carried on for which a licence is required under the Excise Act, but in respect of which no licence had been issued, were to be seized by the excise officers. The RCMP officers had no discretionary authority during the seizure of December 17, 1998. Finally, even if the excise officers did have discretion to seize only the cigars and tobacco, I am far from being persuaded that the seizure of all the property that was carried out in this instance can be characterized as unreasonable, malicious or excessive.

[34]            That being said, what about the issue in dispute and the real problem posed in this case, namely, whether all the property seized on December 17, 1998 was forfeited as of right, which would justify its seizure under the Excise Act. This requires an analysis of the legal consequences of a finding that the offences in sections 226(a) and 240(1)(b) were committed by the plaintiff company.

[35]            The doctrine of forfeiture in the laws of Canada and more particularly in the Excise Act has remained unchallenged for many generations and been upheld by the courts even when challenged. It has become firmly rooted in our consciousness as a measure of both compliance with and regulation of certain activities and reflects age-old principles of the action in rem, connecting the offence primarily to the thing and entailing its forfeiture through the straightforward operation of the Excise Act, whether the offence is a malum in se or a malum prohibitum: Porter v. Canada, [1989] 3 F.C. 403 at p. 416 (F.C.T.D.). From the standpoint of the Excise Act, an action in rem is therefore very much a reality which, in a sense, creates a personality out of the res. That personality is such that the blameworthy or unblemished behaviour of its owner is of no concern to the Act. The forfeiture itself is a legal fiction created by the Act and not a physical reality. It pertains to the jurisdiction over tax revenues and is designed to protect the Crown's interest in the revenues collected through excise taxes. The theory holds that property becomes forfeited by right to the Crown once an offence is committed in regard to the property, and the subsequent seizure by the excise officers restores this property, which already belongs to the Crown, to the Crown's estate until the property is declared definitively forfeited or is returned by a competent authority: [1949] S.C.R. 367">Canada v. Bureau, [1949] S.C.R. 367, at p. 377; Allardice v. Canada, [1979] 1 F.C. 13, at p. 23 (F.C.T.D.) (although these decisions were rendered under the Customs Act, R.S. 1985, c. 1 (2^nd Supp.), the notions of "seizure" and "forfeiture" remain the same).

[36]            Section 88(1), under which all the property was seized in this case, in language identical to that in section 87(1) enacted in 1933, provides that all articles that are at any time found in any place or premises where anything is being done that is subject to excise, and for which a licence is required under the Excise Act, but in respect of which no licence has been issued, "shall be seized" by any officer having a knowledge thereof "and be forfeited to the Crown". The wording of this provision is hardly an example of precision and eloquence, and the somewhat clumsy language can certainly be confusing in regard to the time from which the forfeiture of these articles operates. However, this does not alter the fact that the forfeiture in regard to all the property seized on December 17, 1998 operated as of right once there was a manufacture of cigars without a licence and once the plaintiff company was in possession of cigars that had not been put up in packages and stamped in accordance with the Excise Act. It was only subsequently that the plaintiff was dispossessed of its property without its consent to the benefit of the Crown.

[37]            This is clear from an analysis of the various provisions of the Excise Act. Section 88(1) was enacted by reference to section 239.1(2), which provides that "Manufactured tobacco or cigars that are not put up in packages and stamped with tobacco stamps or cigar stamps as required by this Act and the ministerial regulations... shall be forfeited to Her Majesty in right of Canada and shall be seized by any officer and dealt with accordingly." Section 226(a) replicates the language of section 239.1(2) and stipulates that "all goods subject to excise found on the premises in which the offence is committed shall be forfeited to Her Majesty in right of Canada and shall be seized by any officer ...." Section 71 complements the two aforesaid provisions: "Where any stock, steam-engine, boiler, still, fermenting-tun, machinery, apparatus, vessel or utensil, boat, vessel, vehicle or other article or commodity is forfeited under this Act, for any contravention thereof, it may be seized by the collector or other officer, or by any other person acting on the authority of that officer, at any time after the commission of the offence for which it is forfeited...." Finally, section 117(1), a provision dealing with the final automatic forfeiture of the unclaimed property, is categorical that its area of application extends to "All vehicles, vessels, goods and other things seized as forfeited under this Act or any other Act relating to excise...". The expression "seized as forfeited" was, incidentally, construed as follows in [1933] S.C.R. 555">Canada v. Central Railway Signal Co., [1933] S.C.R. 555, a decision concerning the interpretation of section 125 of the 1933 Excise Act (former section 117), in which the Supreme Court of Canada held, at pp. 557-58 and 560-61:

It is not open to question on that evidence, that the goods were seized, and "seized as forfeited" for violation of the Excise Act. Nor is there any room for doubt as to the effect of such a seizure. It proceeds upon the assumption that the goods, having been forfeited ipso jure, in consequence of the violation of the Act, are at the time of seizure, and not as a consequence of it, the property of the Crown. There are several provisions of the statute under which forfeiture supervenes upon the commission of the offence, as a legal consequence of the offence, independently of any act on the part of the officers of excise or any conviction or other judgment of a court. [...]

There does not appear to be any ground of substance for imputing ambiguity or obscurity to this language or even doubt as to what it signifies. In light of the provisions of the statute the phrase "seized as forfeited" can have only one meaning, as already indicated. It can only mean a seizure in consequence of the goods having been forfeited, the title to which has, by virtue of the forfeiture, become vested to the Crown. The context shews also that it does not contemplate a forfeiture which has occurred in consequence of a condemnation, and beyond question it includes a forfeiture following, without any act or proceeding of the Crown's officers, the commission of the offence, in cases in which the statute under which the forfeiture takes effect so provides.

What then follows? "All ... goods ... seized as forfeited", the section declares, "shall be deemed and taken to be condemned and may be dealt with accordingly", unless the owner or the person from whom they are taken gives notice within one month that he intends to claim them. The consequence that the goods shall "be deemed and taken to be condemned" is declared, in unqualified words, to be the consequence of the seizure unless the notice provided for is given within the specified time. If the notice is given, the seizing officer may deliver up the goods to the owner on receiving security by bond with sureties for double the value of the goods, to be available in the event of condemnation. In the absence of notice within one month, condemnation follows by force of the statute. If notice is given, the statute contemplates the usual proceedings for establishing the grounds of forfeiture and condemnation accordingly.

[38]            Thus, in the case of the seizure in the case at bar, the prosecution is, at least according to the traditional theory, brought against the cigars, tobacco, materials and equipment themselves as articles liable to forfeiture to the Crown: in the case of the cigars, because of their unlawful manufacture and possession by the plaintiff and, in the case of the other articles and materials, because of their use in committing the Excise Act offences. As the case law hold, CC Havanos' innocence of any wrongdoing in this case, like the conduct of the RCMP officers following the seizure, debatable as it may be, has no influence over the fact that these things were by mere operation of the Excise Act ipso jure forfeited, from the day when the offences under the Excise Act were committed: R. v. Krakowec, [1932] 1 D.L.R. 316 at pp. 322-323; Porter, supra at pp. 411-413. The record having shown that the offences under sections 226(a) and 240(1)(b) of the Excise Act were committed on the CC Havanos premises, all of the property seized in the search of December 17, 1998 was ipso jure forfeited to the Crown and consequently the members of the RCMP, acting as excise officers, were entitled to seize them and even had to do so under section 88(1) of the Excise Act.

2.    Since the Federal Court's jurisdiction under section 116(2) of the Excise Act allows it to "release or condemn the goods or thing, as the case requires", does this Court have discretion to order that certain property be restored to its owner notwithstanding that it is forfeited ipso jure and notwithstanding a valid seizure?

[39]            The plaintiff company is trying to obtain from this Court a decision ordering the return of certain seized property, in this instance all materials and equipment used in the unlawful manufacture of the cigars, a remedy the existence of which inevitably depends on the interpretation of the Excise Act.

[40]            The Minister acknowledges that the Court has jurisdiction to rule on the issue of the restitution of the seized property, but he argues that it should refuse to grant the remedy requested by the plaintiff company on the ground that since the proceeding is an action in rem in condemnation of seized property, the Court cannot alleviate the effects of a forfeiture and a seizure carried out in accordance with the Excise Act. As I understand the argument, only a seizure that is declared unlawful by this Court would erase the effects of the forfeiture of the property and be cause for their restitution. However, should the Court conclude that both the forfeiture and the seizure of the plaintiff company's property were consistent with the Excise Act, then it has no discretion to order the return of particular property and has no alternative but to condemn all of the seized property without exception. I do not agree.

[41]            In support of his position, the Minister cites a number of court decisions holding that there was no discretionary authority to allow a court to grant relief to the bona fide owner of a vehicle or the person whose conviction for the transportation of illicit alcohol or tobacco was ultimately set aside. For example, in the Krakowec decision, supra at pp. 321-23, the Supreme Court of Canada had the following to say in regard to the scope of the courts' power in matters involving the forfeiture of property under the Excise Act:

[...] Upon the bare words of the enactment it must, therefore, follow that any vehicle used for the purpose of removing spirits unlawfully manufactured or imported is subject to the forfeiture therein prescribed, unless, something be found in the context or in the general scope of the Act to justify a departure from the well known rule that the intention of the Legislature must be determined from the words it has selected to express it. Here we find nothing of the kind in the context or in the subject-matter of the statute.

[...]

Whether such a thing exists as what is referred to by Lord Cairns (in Partington v. Attorney-General [(1869) L.R. 4 H.L. 100, at 122.]) as the "equitable construction" of a statute, we cannot see that this is a case for its application, and we find no reason why we should not simply adhere to the words of the enactment.

It is not for the court to say if, in some cases, -- such as, for example, when the vehicle utilized was stolen from its owner -- the forfeiture may effect a hardship. Such cases are specially provided for in subs. 2 of sec. 133 of the Excise Act. The power to deal with them is thereby expressly vested in the Governor in Council thus leaving full play to the operation of sec. 91 of the Consolidated Revenue and Audit Act (c. 178 of R.S.C., 1927), for the remission of forfeitures. We are unable to agree with the decision in Le Roi v. Messervier [(1928) Q.R. 34 R.L.n.s. 436.], already referred to, that the discretionary power is also vested in the court under sec. 124 of the Act. In our view, that section means nothing more than this:

After the vehicles, vessels, goods and other things have been seized as forfeited under sec. 181, the person from whom they were seized, or the owner thereof, may prevent the automatic condemnation of the said vehicles, etc., by giving notice as provided for in sec. 125 "that he claims or intends to claim the same"; whereupon, an information for the condemnation of the vehicles, etc., having been filed (as was done in this case), the court may hear and determine the claim made by the person from whom they were seized or from the owner, and the court may release or condemn the vehicles, etc., as the case requires, i.e., according as they come or not under the provisions of the Act. The court thereunder is vested with no discretion, it must decide according to law. [Emphasis added]

[42]            In Mayberry v. Canada, [1950] Ex.C.R. 402, the Exchequer Court went even further in circumscribing the scope of the courts' power in such cases. At pp. 407, 409 and 410 it states:

The facts of the matter in my opinion are those stated by the claimant, but unfortunately that finding does not entitle him to the relief which he now claims. This matter is in the nature of a proceeding in rem and, if it be established - as I think has been done in the instant case - that the vehicle "had been or was being used for the purpose of transporting spirits unlawfully manufactured" the court is vested with no discretion in the matter, but must declare the vehicle condemned as forfeited, and that is so even when the owner had no knowledge that such spirits were carried in his vehicle. The only exception to that statement is the partial relief afforded under the provisions of section 169(A), which section is not available to the claimant herein, inasmuch as the vehicle was seized in his possession.

[...]

Had I any authority under the Act to exercise any discretion in dealing with the established facts I would unhesitatingly have granted relief to the claimant and directed that his car be returned to him. But no such authority exists and it is my duty to apply the law as found in the statute and in the light of the interpretation placed on it in the case which I have cited. I must therefore find that as the Crown has established the fact that the vehicle was used in the transportation of spirits admittedly of unlawful manufacture, judgment must go declaring the said automobile condemned as forfeited to the Crown by virtue of the provisions of the Excise Act.

Counsel for the claimant submitted that while the vehicle undoubtedly was used "in the transportation" of spirits unlawfully manufactured, it could not be said that it was used "for the purpose" of transporting spirits unlawfully manufactured. He argued that as the driver and owner had no knowledge of the presence of spirits in his car, he therefore lacked the intention or purpose of using his car for such transportation. I am unable to interpret the section in that way. The obvious purpose under the Act is to provide something more drastic in the way of penalties than fines or imprisonment and to provide for the forfeiture of vessels and vehicles illicitly engaged in the liquor traffic. If in such proceedings the Crown officers [page 410] had to prove the intention or purpose of the owner or driver of such vehicle in transporting the illicit spirits they would face a very difficult task and the whole intention of the subsection might readily be evaded.

The finding which I have made will doubtless work a great hardship to the claimant. I realize also that it could create very substantial difficulties for motorists who may "give a lift" to strangers who may be in possession of a very small quantity of illicit spirits, concealed possibly on their persons.Notwithstanding the lack of any discretion in the court under the Excise Act as it now stands, there is power to deal with such cases of hardship under the Consolidated Revenue and Audit Act, 1931, c. 27, s. 33, such powers for the remission of forfeitures being expressly reserved to the Governor in Council under s. 124 of the Excise Act. I cannot leave the matter without suggesting that this is a case where consideration might well be given to any such claim as may be advanced by the claimant herein. [Emphasis added]

See also Koshuk v. Canada, [1950] Ex. C.R. 332; James v. Canada, [1952] Ex. C.R. 396; Gosselin v. Canada, [1954] Ex. C.R. 658.

[43]            In R. v. Zarowney, [1956] Ex. C.R. 16, a decision in relation to sections 114 and 115 of the Excise Act then in force (former sections 116 and 117), the Exchequer Court stated, at pp. 21-23:

Were I dealing with an application under section 164 of the Excise Act I would have no hesitation in ordering that the claimant's interest be not affected by the seizure. The situation is different, however, when considering a claim under sections 114 and 115 under which the claimant has chosen to proceed. The statutory enactment must be adhered to. Sections 114 and 115 confer on the Court no discretionary power such as is contained in section 164. I must release or condemn the truck "as the case requires".

The words of section 163(3) of the Excise Act are unequivocal. The fact that the use of the truck for the purpose of transporting unlawfully manufactured spirits was without the consent or knowledge of the owner or of the driver of the truck cannot affect the application or effect of section 163(3) of the statute. Condemnation is mandatory. There is no room for doubt as to the meaning of the words, "all vehicles that have been used for the purpose of transporting the spirits so manufactured shall be forfeited to the Crown."

[...]

As my brother Cameron did under somewhat similar circumstances in Mayberry v. The King, (1950) Ex. C.R. 402, I must apply the words of the statute and order the condemnation of the truck. [Emphasis added]

[44]            The Supreme Court decision in Krakowec was also cited by Mahoney J. in Lawson v. The Queen, [1980] 1 F.C. 767 (F.C.T.D.), a decision concerning an application for review of the forfeiture of a truck and another vehicle by the Minister under the Customs Act, R.S. 1985, c. 1 (2^nd Supp.). At pp. 771-72 of the decision, Mahoney J. noted:

In considering an application to vacate a forfeiture, the Court is bound to consider all grounds under which the evidence discloses the goods might have been forfeited. It cannot limit its consideration only to the stated grounds of the forfeiture [reference omitted]. The Court is, however, limited to a determination of whether or not the goods were, in fact and law, liable to forfeiture [reference to the Krakowec decision]. The power to remit a forfeiture lies only with the Governor in Council [reference omitted]; the Court can only order a release of the goods or declare that they remain forfeited. [Emphasis added]

[45]            A fair number of more recent decisions have applied the principles laid down in the afore cited decisions and refused to restore the seized property even if this imposed a heavy loss on the applicants: R. v. Martins, [1981] 36 A.R. 337 (N.W.S.C.); Lacourse v. Canada, [1993] 65 F.T.R. 115 (F.C.T.D.); Becta Transport Ltd v. Canada, [1995] 93 F.T.R. 132 (F.C.T.D.); Duchesne v. Canada, [1996] 120 F.T.R. 28 (F.C.T.D.); Cohen v. Canada (Department of National Revenue, Customs and Excise - D.N.R.), [1998] F.C.J. No. 1204 (QL) (F.C.T.D.); House of Giftwares Ltd. v. Canada (Minister of National Revenue - M.N.R.), [1998] 153 F.T.R. 269(F.C.T.D.). In short, all of these decisions show that the Excise Act required and still requires that the vehicle used for the transportation of illicit alcohol or tobacco products is declared forfeited to the Crown by the courts once the essential ingredients of the offence have been proved.

[46]            However, I am not disposed to accept the interpretation given by these decisions to the courts' forfeiture power under the scheme of the Excise Act as determinative of the issue in this particular case. The decision of the Supreme Court of Canada in Krakowec, on which the subsequent decisions of the Exchequer Court are based, was rendered before section 169A (former section 88.2) was inserted in the Excise Act in 1934. It is in fact conceded that since that judgment the Excise Act has been amended to allow a bona fide innocent third party to apply to a court for an order declaring his or its interest in the seized property, thus marking the passage from a position of complete rigidity to a relatively reasonable and fair position. Moreover, the Supreme Court was not confronted with an application for restitution of certain property like the one with which we are concerned here, and the remarks made at the very end of the decision are, to say the least, ambiguous and in any event constitute only obiter dictum. I do not, therefore, consider this decision to be conclusive as to the issue with which we are confronted. As to the subsequent decisions of the Exchequer Court and this Court, they are in my opinion based on a very restrictive interpretation of the Supreme Court's remarks in Krakowec and do not address in any detail the issue of the courts' power in matters involving the forfeiture of property seized under the prescriptive and regulatory scheme of the Excise Act. Indeed, there is to my knowledge no decision bearing directly on the question of the interpretation of section 116(2). In any event, those decisions are not binding on this Court.

A. Principles of statutory construction of the Excise Act

[47]            As mentioned previously, the scope of the courts' discretionary authority in matters involving forfeiture under the Excise Act, if such authority exists, has already been examined in some decisions which, in my opinion, remain vestiges of a time when the principles of statutory interpretation were employed in a rigid and mechanical way by the courts. This approach, while once employed, is clearly in conflict with the contemporary theory of interpretation of legislation, which consists of examining the purpose of statutes. However, this is the first time that this Court has been directly called on to interpret and apply section 116(2) of the Excise Act, which gives it the power to "release or condemn the goods or thing, as the case requires". In tax matters, the dominant tendency has traditionally favoured an interpretation that is both literal and restrictive, in the interest of favouring the taxpayer. It now seems trite law that tax statutes such as the Excise Act must be construed in the same way as other statutes but so applied, in case of ambiguity or reasonable doubt, as to favour the taxpayer: Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3 at p. 20. This turning point in the evolution of the principles of interpretation of Canada's tax laws was motivated by the observation that the purpose of taxation statutes is no longer confined solely to the raising of funds to cover government expenditures. It is acknowledged that these laws are also used for purposes of social and economic policy.

[48]            Here is how Professor Ruth Sullivan states the applicable and now authoritative principle in statutory interpretation, at p. 131 of her work, Driedger on the Construction of Statutes (3^rd ed., 1994):

There is only one rule in modern interpretation, namely, courts are obliged to determine the meaning of legislation in its total context, having regard to the purpose of the legislation, the consequences of proposed interpretations, the presumptions and special rules of interpretation, as well as admissible external aids. In other words, the courts must consider and take into account all relevant and admissible indicators of legislative meaning. After taking these into account, the court must then adopt an interpretation that is appropriate. An appropriate interpretation is one that can be justified in terms of (a) its plausibility, that is, its compliance with the legislative text; (b) its efficacy, that is, its promotion of the legislative purpose; and (c) its acceptability, that is, the outcome is reasonable and just. [Emphasis added]

[49]            This Court has on many occasions favoured the modern rule of statutory interpretation proposed by Driedger, and in various contexts including in tax cases: Falconbridge Nickel Mines Ltd. v. Minister of National Revenue, [1971] C.F. 471, aff. [1972] F.C. 835 (F.C.A.); Lor-Wes Contracting Ltd. v. R. (1985), 85 D.T.C. 5310 (F.C.A.); Egg Canada Ltd. v. Canada, [1987] 2 F.C. 415 (F.C.T.D.). I would also point out that in so far as federal legislation is concerned, the soundness of the rule favoured by this Court is reinforced by section 12 of the Interpretation Act, R.S.C. 1985, c. I-21, which provides that every enactment "is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects." Other principles of interpretation - such as the strict construction of taxation statutes against the taxing authorities and in favour of the taxpayer since they place restrictions on the enjoyment and ownership of property - apply only if the meaning of a provision is ambiguous or if some reasonable doubt subsists as to its meaning. And we should not be quick to find ambiguity. It is therefore necessary, in every case, "for the court charged with interpreting a provision to undertake the contextual and purposive approach set out by Driedger, and thereafter to determine if 'the words are ambiguous enough to induce two people to spend good money in backing two opposing views as to their meaning'": 2002 SCC 42">Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42 at par. 29-30.

2. Application to the facts of this case

[50]            Since the primary objective of tax legislation is the collection of revenue for the Crown, a method of construction of section 116(2) focussed on the objectives of the Excise Act will tend to work in favour of the taxing authority, while the prevalence of the literal meaning of the provision will instead tend to favour the taxpayer. Since it is difficult in this case to choose between the meaning of the rule suggested by the ordinary meaning of the words and the meaning of the rule that would best ensure the achievement of its objectives, I would assign equivalent weight to these arguments. Accordingly, in the context of this appeal, my analysis is presented under three major heads.

(a) The ordinary and grammatical meaning

[51]            Before beginning my analysis, I wish to point to an important aspect that is peculiar to the forfeiture of seized property under the scheme of the Excise Act. As mentioned, forfeiture is the act of taking, on behalf of and for the benefit of the taxing authority, property that belongs to someone through a punitive measure or security precaution: see G. Cornu, Vocabulaire Juridique, 8^th ed. (Paris: P.U.F., 2000). It operates at two specific moments: (a) by operation of law or ipso jure from the time when an offence is committed in regard to the property, which can appropriately be referred to as a "temporary forfeiture", and which gives rise to the "legal" seizure of the property; and (b) it also operates judicially when a competent authority declares the property forfeited after verification, which can appropriately be referred to as "permanent forfeiture". For example, under subsection 116(2) of the Excise Act, a court may hear and determine any claim that has been duly made and rule definitively on whether seized property has been "condemned" or not.

[52]            Essentially, section 116(2) of the Excise Act is a provision that empowers a court hearing a claim for things seized to release or condemn these things. Since our Court is not a superior court of inherent jurisdiction, any power conferred on it under the Excise Act must be express or by necessary implication.

[53]            If I clearly understand this provision, it confers authority on the Court and is drafted in terms which, prima facie, appear to imply no constraint, no obligation whatsoever to exercise the authority in question ("the court... may"). Moreover, it spells out the nature ("release or condemn ..., as the case requires") and the object ("the goods or thing"). It should be noted that the object of this judicial authority is not accompanied by any qualification or limitative language (is it all the seized property, or also certain property at the court's discretion?). Both the English and French versions of this provision include these four elements, in the same order.

[54]            Parliament's intention must be inferred from the words it has elected to use. In the case at bar, however, it is impossible in my view to decipher the meaning of this provision by analyzing separately the various items contained in section 116(2) since they are closely related and interdependent, and extreme prudence is advisable in making this analysis. In the first place, if the words "the goods or thing" is to mean all of the goods or things that were seized, without exception, which is a completely plausible interpretation, the use of the word "may" as opposed to "shall" in this provision seems to indicate that Parliament wished to confer some discretion on the court to decide to release certain property. In practice, however, it can often be concluded from the context or object of the statute or provision that the authority is not absolutely discretionary. It may be that an authority is accompanied by a duty to exercise the authority in question in a specific way when certain circumstances exist in combination.

[55]            This is what happens, for example, when the words in question are jurisdictional in nature. In the instant case, then, it may very well be that Parliament intended to prescribe a remedy whereby a person could appear before a court charged with condemning the seized property, in a context in which the court would have no discretion to exercise but would have to release the property if and only if the essential ingredients of the offences giving rise to the forfeiture did not exist to the court's satisfaction. In other words, through the remedy under this provision, the Minister would apply to the court asking that it uphold the temporary forfeiture of the seized property once it had been demonstrated to the court's satisfaction that this property was in fact forfeited by right and thus lawfully seized. However, it may also be the case that Parliament actually intended to give the court discretion to release certain property seized as forfeited even when all the essential ingredients of the offences giving rise to the forfeiture did exist. Both of these interpretations of the court's authority in matters of forfeiture are completely reasonable, but neither appears a priori determinative.

[56]            Moreover, the juxtaposition of the words "as the case requires" with "release or condemn the goods or thing" is also open to two interpretations that differ according to the meaning one chooses to give to the words "the goods or thing". If, as mentioned earlier, these words mean "all the goods or things without distinction" then the only two conceivable cases would be, on the one hand, that the Court release all the seized property, and on the other that it condemn all the property. However, if these words mean "some or all of the goods or things seized as forfeited, as the case requires", then a spectrum of possibilities can be conceived, each requiring different decisions by the court, which would be vested with discretionary authority to release certain property and condemn the remainder, or to release all the property, or to condemn all of it, as the case might be. It should in fact be noted that if Parliament intended to limit the applicability of section 116(2) to all of the seized property and render its forfeiture mandatory under certain circumstances, it could have expressly said so.

[57]            I cannot help seriously questioning, however, the logic that would underlie the option of strictly limiting the function of a court hearing a property claim under the Excise Act to verifying whether in fact an offence had been committed in regard to that property, in which case the court would have no choice but to condemn the property definitively. Is that really what Parliament intended to do when it gave the court the power to "release or condemn the goods or thing, as the case requires"? Would it not be more logical to conclude that the express choice of these words instead of such imperative words as "shall release or condemn all of the goods or things, as the case requires" denotes an intention by Parliament to give the courts not only a power of forfeiture but a power that is discretionary? For example, section 16 of the Controlled Drugs and Substances Act, S.C. 1996, c. 19, the language of which is identical to that in section 490.1 of the Criminal Code, provides that "where a person is convicted of a designated substance offence" the court has the power to order that the offence-related property be forfeited to the Crown. There is moreover nothing discretionary about this power, since it is inherent in the object and true nature of this legislation, which is to denounce, dissuade and prevent the commission of such acts as the trafficking, production and possession of drugs: see R. v. Houle, [2000] J.Q. no. 719 (QL) (C.Q.), at par. 27, 30. See also subsections 41(1) and (2) of the Tobacco Act R.S.C. 1997 c. 13 pertaining to an analogous non-discretionary power of forfeiture conferred upon the courts in relation to seized tobacco products. I reproduce the text of section 16 for ease of reference:

[58]            If we adopt a strict construction of section 116(2) of the Excise Act, the language of which clearly differs from that of the afore cited provisions, this would be giving the court an authority that is not actually an authority but resembles more a disguised obligation to act in a precise sense as dictated by the circumstances of the case.

[59]            In the final analysis, I conclude that an interpretation of the words used in section 116(2) according to their ordinary and grammatical meaning leads inevitably to some ambiguity concerning the nature and scope of the power conferred on the courts in matters involving the forfeiture of property seized under the Excise Act, an ambiguity that I would attempt to dispel by examining the legislative context of the Excise Act and this particular provision of the Act.

(b) The expanded legislative context

[60]            Although the Excise Act unfortunately has no provision spelling out its purpose, it obviously fits within a wider framework. As Joyal J. relevantly notes, in Porter, supra, it provides a means of protection by the taxing authority of the Crown's revenues through the mechanism of ipso jure forfeiture and the so-called judicial forfeiture of property that is illegally manufactured or in regard to which one or more offences have been committed: see also R. v. Tanaka (1997), 38 O.T.C. 36 (Ont. Gen. Div.) at par. 9. It simply constitutes a legislative provision for the regulation of certain activities adopted under the federal power of taxation which also includes enforcement provisions, and is not intended to impose punishment in the strictly conceptual sense: Crédit Ford du Canada Ltée v. Ministère du Revenu national, [1996] R.J.Q. 2154 (C.A.), at par. 16, 19; Canada. Department of Finance, Excise Act Review: a proposal for a revised framework for the taxation of alcohol and tobacco products, Ottawa: Government of Canada, 1997.

[61]            A reading of the above decisions in which offences under the Excise Act had been committed through the use of a vehicle, for example the illicit importation of cigarettes or alcohol, it is revealing, to say the least, that in none of these was this article restored to its owner. There is, however, a certain absurdity in attributing complicity to a vehicle or a piece of equipment in a proceeding in rem for the purpose of having them condemned by a court. If one of the principal functions of the Excise Act was indeed to regulate the transportation of illicit alcohol and tobacco products, the best way to achieve this objective would be to guarantee forfeiture in every case, irrespective of the guilt or innocence of the owner or driver of the vehicle. Yet, even if it is true, as we noted earlier, that the forfeiture is not based on a conviction but rather, through the Excise Act, on the fact that the vehicle is used to transport illicit products, it is clear that the legislation itself provides, in the interest of respecting the economic rights of innocent third parties, a means of enabling the owner or lien-holder who is entirely bona fide and innocent of any collusion or complicity to escape the consequences that he would otherwise suffer. Nevertheless, all of the above decisions seem to have held that the theory of forfeiture was too solidly anchored in the country's law enforcement and reformatory jurisprudence to now attenuate the drastic effects by distinguishing among classes of property, all legally seized as forfeited, according to whether they are a malum in se or a malum prohibitum.

[62]            Perhaps Parliament intended that the court's power of forfeiture should reach all property used for illicit purposes, that is, in contravention of the Excise Act, and this supports a strict and absolute construction of the provisions pertaining to forfeiture, including section 116(2). Thus, according to this interpretation, the Excise Act would not only avoid making any distinction between different classes of property - i.e. between property of an illegal nature and property used in the commission of an offence - but it would also avoid any distinction between a person who is morally blameless and one who is not. The Excise Act, through its permanent forfeiture mechanism, is not as obviously regulatory as one might be inclined to think, but it does contain a punitive aspect: [1953] 2 S.C.R. 273">Industrial Acceptance Corp. Ltd. v. Her Majesty the Queen, [1953] 2 S.C.R. 273, at p. 278. However, there is reason to question the necessity for a measure as draconian as the forfeiture of all of the plaintiff company's materials and equipment in the case at bar when the company has already lost the cigars and tobacco that were seized owing to their possession and manufacture without a licence. Isn't the State's interest in preventing individuals from manufacturing or being in possession of things that are in contravention of the Excise Act, in frustrating criminal undertakings and in guaranteeing the Crown's revenues, out of social and economic policy considerations, adequately served by their judicial forfeiture, without the need to extend the latter to property that was used only once to commit an illegal act, particularly when the offender was acting in good faith? Doesn't such forfeiture actually constitute double punishment for the same offence? In the case of a vehicle or piece of equipment used to commit an offence under the Excise Act, can it not be said that in some circumstances it would be appropriate to restore this property to its owner since it has never been unlawfully possessed or owned? These observations inevitably bring us right back to square one. If the forfeiture of cigars manufactured without a licence or of alcohol illegally imported into Canada is primarily designed to regulate such activities and protect the Crown's revenues, that is one thing. If the forfeiture of an individual's vehicle or manufacturing materials used to illegally import alcohol or manufacture cigars without a licence is designed simply to punish the offenders, that is quite another thing which, to my way of thinking, is not at all compatible with Parliament's actual purpose in enacting the Excise Act, i.e. to protect the revenues the Crown derives from excise duties: see, in this sense, the comments of Mr. Justice Dysart in Northwest Mortgage Co. v. Commissioner of Excise, [1944] 3 D.L.R. 273 (Man. K.B.), aff'd [1945] 1 D.L.R. 561.

[63]            How to interpret the provision giving the courts the power to "release or condemn the goods or thing, as the case requires" is not an easy judgment call to make, to be sure. Having reviewed the overall context of section 116(2) of the Excise Act and construed the words therein according to their ordinary and grammatical meaning, in accordance with the legislative framework surrounding this provision and the purpose of the provision, I conclude that it contains an ambiguity. In my opinion it is unlikely, or at least I am unable to conclude with certainty, that Parliament intended to impose an absolute prohibition on the courts on exercising some discretion in their assessment of the facts of each case and deciding, for example, to release certain property the possession of which does not in any way contravene the Excise Act. It is therefore necessary, in the circumstances, to resort to one or another of the subsidiary principles of statutory interpretation.

(c)    The subsidiary principles of statutory interpretation

[64]            Since a reasonable doubt not resolved by the ordinary rules of interpretation subsists in regard to the interpretation of section 116(2) of the Excise Act, that doubt will be settled by recourse to the presumption that if the taxation statute is not explicit, any reasonable uncertainty or ambiguity in the facts resulting from the lack of clarity in the statute shall favour the taxpayer: Pierre-André Côté, The Interpretation of Legislation in Canada, 3^rd ed. (Toronto: Carswell, 2000), at pp. 497-99. This residuary principle shall apply by way of exception in regard to taxation statutes such as the Excise Act that have the effect of forfeiting property since the courts will insist that a legislature that wishes to forfeit seized property and limit the enjoyment of such property must express itself very clearly to that effect. The application of this principle is particularly recommended in a case such as the instant one, in which the Court is obliged to choose between two valid interpretations of the judicial authority over forfeiture under a taxation statute, the more restrictive of which would lead to an unfair and unreasonable result for the plaintiff company. Although this fact by itself is not sufficient to dispose of the question of interpretation, it does eliminate the problem of whether the Excise Act includes, as a basic precept, a punitive intention or regulatory objective. I am therefore of the opinion that section 116(2) of the Excise Act must be given a generous and liberal interpretation according to which a court hearing a claim for seized things has the discretion to order the restoration of certain property that was lawfully seized, depending on the circumstances in each case.

[65]            Normally, the power to order the restitution of seized property is incidental to the power to vacate the seizure: Dobney Foundry Ltd. v. R. (1985), 19 C.C.C. (3d) 465 (B.C.C.A.), at p. 474. However, the cases hold increasingly that the unlawfulness of a seizure will not always entail the restitution of the property in question, particularly when such restitution would amount to indirectly acknowledging the unlawfulness of the initial possession of the seized property by the person from whom it was taken away, as for example in the case of clearly immoral, illicit or hazardous products per se such as narcotics, prohibited weapons, counterfeit money and other things used in the commission of certain crimes, although this possibility may not be the sole consideration: Re Regina and Largie (1981), 63 C.C.C. (2d) 508 (Ont. C.A.); Lagiorgia v. R., [1987] 3 F.C. 28 (F.C.A.) at p. 32; Vincent v. Canada (Attorney General), [1996] R.J.Q. 2128 (C.A.); R. v. Henderson, [1997] B.C.J. No. 3168 (QL) (B.C. Prov. Ct.); R. v. Spindloe, [2002] 5 W.W.R. 239 (Sask. C.A.). That being said, I am of the opinion that these principles governing the decision whether or not to return seized property are equally applicable under the scheme of the Excise Act and more particularly section 116(2) of the Act, independently of the validity of the seizure. As mentioned earlier, this provision seems to give this Court a discretion which in my opinion authorizes it to take into account the illegal nature of the possession of the seized property in its assessment of the facts for the purpose of determining whether it will "release or condemn the goods or thing, as the case requires". Indeed, this discretion must be exercised judiciously in light of the public policy objectives of the Excise Act, one of which is of course to prevent an offender from profiting from the proceeds of the offences he has committed, in accordance with the maxim ex turpi causa non oritur actio.

[66]            The plaintiff company acknowledges that in some cases at least the very unlawfulness of the possession of the seized property can constitute an absolute bar to its restitution. Indeed, it is the fundamentally unlawful or offence-related nature of the possession of an unpackaged, unstamped tobacco product manufactured without the licence required by the Excise Act, and concerning which the excise duties have not been paid in accordance with section 240(1), which prohibits the restitution thereof to its owner. In the case at bar, the restitution of the cigars and tobacco products cannot be justified and therefore cannot be ordered or authorized by the Court, since their possession is otherwise unlawful. The decision to condemn these offence-related goods is related not to the fact that they were used to commit an offence under the Excise Act, but rather to the fact that their initial possession is intrinsically unlawful. I am far from being persuaded that the lack of an absolute prohibition on the possession of cigars and tobacco products demonstrates its legal or inoffensive character: see R.J.R. Macdonald v. Attorney General of Canada, [1995] 3 S.C.R. 199. On the contrary, the preoccupation with the security of the Crown's revenue arising from excise duties, hallowed by an ancient doctrine of forfeiture and historical legitimacy, is clear ground in my opinion for the courts to condemn such property, albeit reluctantly. This seizure and forfeiture taxation statute is harsh, and has some requirements that are not widely known, but Parliament clearly intends to eliminate an abuse. This is the kind of deference the Court owes to Parliament, which down through the years has considered the forfeiture of such property, draconian as it may appear to be from time to time, to be a measure that it is right and necessary to retain.

[67]            However, I do not wish to be taken as saying that judicial restraint in regard to the forfeiture of seized property should preclude the courts from rushing in where others might otherwise fear to tread. For example, the illegality of the possession of certain property, independently of the validity of the seizure under the Excise Act, is a factor that in my opinion opens the way to an important distinction between, on the one hand, the cigars and tobacco the illegality of which results from mere non-compliance with the tax provisions and the non-payment of the revenue taxes imposed by regulation and, on the other hand, the materials and equipment used in their manufacture that are not prohibited in themselves, are innocent in themselves, and whose possession is otherwise lawful. In ordering that the latter be restored to their owner, the court would not be putting that owner in a position that is contrary to the Excise Act. It would be erroneous, in my opinion, or at least incongruous, considering the intended purpose of the Excise Act, to hold that the mere fact that such property was used to commit an offence under the Excise Act absolutely requires that the Court condemn it without being given an opportunity to assess all the facts surrounding its seizure. Rather, proof of the unlawfulness of the possession of the seized property constitutes in my opinion a restrictive consideration of public policy and public interest which requires that the property be condemned by a court just as the absence of illegality of the possession seems to me to constitute an exceptional circumstance authorizing the court to release it, at its discretion, under the Excise Act.

[68]            I need not determine here all the situations in which a court might exercise its discretion and order the restitution of certain property. In the case at bar, the fact that the possession of the materials and equipment used in the manufacture of the cigars in contravention of the Excise Act can at no time be unlawful is a factor that this Court may consider in deciding whether it will order the property released or condemned. The mere possibility that these things may, on the one hand, enable the plaintiff company to obtain the manufacturing licence and operate in complete legality and, on the other hand, be reseized after their restitution should they again be used to commit offences under the Excise Act is an argument in my opinion in favour of their restitution. Furthermore, the fact that the plaintiffs Dino Orsini and Ian Orsini were successful in their defence of error of law in the criminal prosecutions brought against them and that they were at all times innocent and morally blameless, combined with the questionable conduct of the RCMP officers prior to the seizure and subsequently during the processing of the licence application, likewise argues in favour of the restitution of the materials and equipment that were seized in this case.

[69]            There is at present no possibility that the plaintiff company, if such was ever its intention, can continue to manufacture cigars in its premises after procuring the federal manufacturing licence required by the Excise Act. Irrespective of the strict construction of the Excise Act that the afore cited decisions may have provided, I think it is important in this case that the materials and equipment be returned to the plaintiff company; otherwise, how could it take the appropriate steps to obtain the manufacturing licence which it is still being denied? Accordingly, the special circumstances disclosed by the evidence prompt me to allow the request of the plaintiff company. It would therefore be appropriate and just, bearing in mind the spirit of the Excise Act, to order the restitution of all the materials and equipment used in the manufacture of the plaintiff company's cigars, although they were forfeited as of right and lawfully seized.

[70]            Without attempting to probe the innermost thoughts of Parliament, it seems to me, on the contrary, that such a generous and liberal interpretation of the judicial authority in matters of forfeiture would thereby give section 116(2) a meaning that adequately allows the achievement of the obvious purpose of the Excise Act, while not unduly discriminating against the individual. I am far from convinced that the exercise of discretion on a forfeiture by a court hearing a claim for seized property would have the harmful effects Parliament sought to avoid. I think instead that this Court, in redefining the legislative policy underlying the Excise Act, is establishing a correct balance between the private rights of individuals not to be unjustifiably deprived of the enjoyment of their property and Parliament's interest in imposing excise taxes as an instrument for the control and regulation of the distribution and consumption of tobacco products and ensuring the protection of the Crown's tax revenues through the forfeiture mechanism.

[71]            To conclude, I want to restate some of the comments I made at the hearing. I have difficulty understanding the attitude of the members of the RCMP and the other departments concerned in this case. The record show that we have here an honest businessman who starts up a legitimate business with the assistance of a management consultant who clearly had no knowledge in this field. He informs the RCMP officials of his project and, through his consultant, seeks the assistance and advice of the officials, which is not unknown to the RCMP, since in the summer of 1998, when the business is preparing to start up, he is placed under surveillance. He is never notified that he does not have the manufacturing licence he needs to operate, which, I am convinced, would have prevented Dino Orsini from committing an offence, especially since he had all the other permits and licences required by law and was remitting all the provincial and federal taxes he thought were required. Instead, he is left to invest substantially in his project and, once he opens his business to the public before the Holiday season, all the materials, equipment and goods are seized and his business is shut down.

[72]            Once he realized the unlawful nature of his undertaking, on December 18, 1998, Dino Orsini applied for a federal licence, and five months later it was refused on grounds of public policy. He was told that this decision would be reviewed once the criminal proceedings had been concluded. Notwithstanding the stay of the proceedings owing to the error in law resulting from the opinion solicited from a person in authority, he was still refused the licence on the ground that his business no longer had the equipment or materials used in the manufacture of cigars and thus did not meet the requirements of the Excise Act. If the aim was to frustrate completely the sale and illegal manufacture of imitation Cuban cigars in Montreal, there was no need to wait until Mr. Orsini, in good faith, committed an offence in order to so inform him, especially since this was not a case of some smuggler circumventing the law but of an honest citizen trying to comply with it by operating his business with complete openness. This was, to say the least, a questionable, if not reprehensible, way to proceed.

Conclusion

[73]            For these reasons, I am therefore of the opinion that the plaintiff company's action in claim should be allowed in part. Accordingly, I declare forfeited to the Crown and condemn all of the tobacco products seized on December 17, 1998 with the exception of the following products, which shall be restored to the plaintiff company forthwith. These will be identified as they appear on the "Schedule of Property Seized":

[74]            In view of the circumstances, there will be no award as to costs.

                                  Judge

OTTAWA, Ontario

September 6, 2002

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L

       FEDERAL COURT OF CANADA

           TRIAL DIVISION

NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD

COURT FILE NO.:     T-185-99

STYLE OF CAUSE:    Excise Act v. Cigars Manufactured Tobacco

PLACE OF HEARING: Montreal, Quebec

DATE OF HEARING: May 28, 29 and 30, 2002

REASONS FOR JUDGMENT AND JUDGMENT OF THE HONOURABLE

MR. JUSTICE ROULEAU

DATED: September 6, 2002

APPEARANCES:

Mr. Bruce TaubFOR THE PLAINTIFF

Mr. Jacques MimarFOR THE DEFENDANT

SOLICITORS ON THE RECORD:

Mr. Bruce Taub                                     FOR THE PLAINTIFF

644 Dè Courcelle

Montreal, Qc

H4C 3C5

Mr. Morris Rosenberg     FOR THE DEFENDANT