R. v. Shalala, [1998] 3 CTC 272

Landry J. (Orally):

I will now give the Court’s decision on the defence motion challenging the constitutional validity of s.462.48 of the Code and the validity of an order made pursuant to that section by Chief Justice Richard on August 28 , 1992.

Defence counsel in a letter dated April 17 , 1997, and received by the Court on April 18 , 1997, gave a notice of motion in the following terms:

TAKE NOTICE that as a result of your orally confirming that as of today’s date you intend to seek to have admitted into evidence documents seized pursuant to an order made on August 28, 1991 by the Chief Justice of the Court of Queen’s Bench of New Brunswick pursuant to section 462.48(2) of the Criminal Code, I hereby confirm my oral notice to you that I will object to the admissibility of the said documents upon the grounds that-

Sections 462.48(2) (d) and 462.48 (3) (a) and (b) of the Criminal Code violate section 8 of the Canadian Charter of rights(sic) and Freedoms and pursuant to Section 52(1) of the Constitution Act 1982 is of no force or effect.

The basis on which the objection is made is as follows;

1. Sections 462.48 (2)(d) and 462.48 (3) (a) and (b) of the Criminal Code allow the. state to invade privacy of individuals without having to meet the minimum constitutional standard for searches established by The Supreme Court of Canada in Hunter & Southam Inc. (1984), 14 C.C.C. (3d) 197 thereby breaching Section 8 of the Canadian Charter or Rights and Freedoms.

2. Sections 462.48 (2) (d) and 462.48 (3) (a) and (b) of the Criminal Code with its ‘public interest’ component as a basis for allowing an invasion of the taxpayers privacy does so in terms that are vague and imprecise and as such breaches the principles of fundamental justice contrary to Section 7 of the Canadian Charter of Rights and Freedoms and the principles of law established by The Supreme Court of Canada in R. v. Morales (1992) 77 C.C.C. (3d) 91.

AND FURTHER TAKE NOTICE that I will object to the admissibility of the said documents on the basis that the order authorizing their seizure was obtained in a manner which breached Section 8 of the Canadian Charter of Rights and Freedoms and should be excluded from evidence pursuant to Section 24(2) of the Canadian Charter of Rights and Freedoms in that -

The affidavit sworn in support of the application to obtain the order did not reveal grounds of belief which complied with Section 8 of the Canadian Charter of Rights and Freedoms contrary to the principles of law established by the Supreme Court of Canada in Hunter v. Southam (1984) C.C.C. (3d) 97 and Collins v. R (1987) 33 C.C.C. (3d) 1.

AND FURTHER TAKE NOTICE that I will object to the admissibility of the said documents on the basis that Section 462.48 (15) of the Criminal Code precludes the disclosure of the said documents on a trial under Section 462.31 of the Criminal Code where the purposes of the investigation in relation to which the order was made did not include an investigation based on grounds for believing that offences had been committed.

IN ADDITION I will submit that the order authorizing the search for the documents is beyond the jurisdiction granted by Section 462.48 of the Criminal Code in that it authorized invasions of privacy of those not parties to the proceedings being investigated.

IN ADDITION I will submit that the documents in question are inadmissible for the reasons set out in the RULING UNDER S. 462.48 (16) OF THE CODE decided by Judge Harper on November 29, 1994.

The Court has received in evidence three exhibits relating to this motion, namely Exhibit P-187, the Application, Exhibit P-188, the Order to Disclose Income Tax Information, and Exhibit P-189, the Affidavit of Corporal Cormier.

Defence counsel referred the Court to the following cases: Canada (Director of Investigation & Research, Combines Investigation Branch) v. Southam Inc. (1984), 14 C.C.C. (3d) 97 (S.C.C.); R. v. Collins (1987), 33 C.C.C. (3d) 1 (S.C.C.); and R. v. Morales (1992), 77 C.C.C. (3d) 91 (S.C.C.).

Crown counsel referred the Court to the following cases: Slattery (Trustee of) v. Slattery (1991), 120 N.B.R. (2d) 4 (N.B. C.A.) and (1993), 139 N.B.R. (2d) 246 (S.C.C.); Tyler v. Minister of National Revenue (1988), 89 D.T.C. 5044 (Fed. T.D.); R. v. Snider (1952), 52 D.T.C. 1068 (B.C. S.C.) and Canada (A.G.) v. Thibault (1986), 87 D.T.C. 5085 (Que. C.A.).

The defence motion as outlined in defence counsel’s letter dated April 17th, 1997 contains five separate headings and I will now deal with each of those five submissions.

Number One

Allegation that sections 462.48(2)(d) and 462.48(3)(a) and (b) violate section 8 of the Charter and is of no force or effect

Section 462.48 deals with disclosure. It is entitled “Disclosure of Income Tax Information”. The law governing search or seizure and in particular section 8 of the Charter and Canada (Director of Investigation & Research, Combines Investigation Branch) v. Southam Inc., supra, does not apply to the provisions of section 462.48 which deals in a very specific way with disclosure by the Minister of National Revenue of information obtained under the Income Tax Act.

Defence counsel further argues that the “public interest” component as a basis for allowing an invasion of the taxpayers privacy does so in terms that are vague and imprecise and as such breach Section 7 of the Charter and the principles in R. v. Morales, supra.

Section 462.48(3) provides that the judge may issue the order in question but he has to be satisfied “that there are reasonable grounds for believing that it is in the public interest to allow access to the information or documents having regard to the benefit likely to accrue to the investigation if the access is obtained.”

The case at bar is distinguishable from the Morales case, supra, as the judge here does not look at public interest in a vacuum. The subsection in question specifically provide that the judge must have regard to the benefit likely to accrue to the investigation before deciding if it is best, that is, in the “public interest”, to issue the order.

Section 462.48 does not violate Section 7 of the Charter or the principle in the Morales case, supra.

For those reasons the constitutional validity of Section 462.48 of the Code is upheld.

Number Two

Allegation that the affidavit did not reveal grounds or belief which complied with Section 8 of the Charter contrary to the principles in Hunter v. Southam Inc. and Collins v. R., supra.

As mentioned above under the first heading the law governing search or seizure and in particular Section 8 of the Charter and Canada (Director of Investigation & Research, Combines Investigation Branch) v. Southam Inc., supra, do not apply to the provisions of section 462.48 or the application and affidavit thereunder.

Number Three

Allegation that disclosure is precluded on a trial under Section 462.31 relating to laundering proceeds of crime where the purposes of the investigation in relation to which the order was made did not include an investigation based on grounds for believing that offence had been committed.

Defence counsel in his summation before the Court argued as follows on this item:

And you’ll note that the order was made in respect of investigation into three offences 465.(1 )(c), conspiring to import a narcotic, laundering under 19.2 of the Narcotic Control Act and possessing property under 19.1 of the Narcotic Control Act. So obviously none of this information can be disclosed in an investigation involving 462.31. It wasn’t asked for that purpose, it wasn’t given for that purpose. And I submit cannot be used for that purpose and could not be used for that purpose.

It is important to note that disclosure is made to the investigators only and not the court.

Money laundering under s.19.2 of the Narcotic Control Act was the offence under investigation. The Crown proceeded by way of preferred indictment under section 462.31 of the Code in January 1996 after the Court had quashed the indictment under s.19.2 of the Narcotic Control Act.

I will not make any ruling concerning this item at this time and will ask counsel for further submissions if and when a decision becomes required.

Number Four

Allegation that the order is beyond the jurisdiction granted by Section 462.48 in that it authorizes invasions of privacy of those not parties to the proceedings being investigated.

In his summation to the Court defence counsel pointed to the Court the fact that the affidavit did not contain any allegation that Lise Shalala or Manon Veuilleux committed any offence, yet the order authorizes the invasion of their privacy.

The order refers to Lise Shalala and Manon Veuilleux as the spouses of Raymond Shalala and Albert Thibault respectively. Section 462.48 provides for disclosure of documents pertaining to persons who benefited from the commission of the alleged offences and the two spouses fall in that category.

Number Five

Allegation that the documents in question are inadmissible for the reasons set out in Judge Harper’s ruling dated November 29, 1994.

I will now deal with Judge Harper’s ruling referred to in the motion and to do so I will divide his ruling in three parts and comment on each separately.

In the first portion of Judge Harper’s ruling he says:

It is also a well accepted legal premise that any such order should indicate on its face that each and every of the conditions precedent set out in said statute have been satisfied.

and later he says:

The affidavit filed in support of said order was not produced and nowhere in the said order of Chief Justice Richard does it state that the Attorney General had either made or authorized said application to be made; nor does it state that Cpl. Paul J.A. Cormier was a person specially designated to make such application.

Further on he adds:

Despite the absence of a claim of privilege entered by the Department at the time of service of the order pursuant to S. 462.48 (6) (b) of the Code, this Court none the less finds that said order was invalid on its face and of no legal effect either for the purpose of an investigation or a prosecution. Thus the said taxpayer information obtained as a result thereof is not admissible either under the Income Tax Act, Section 462.48 of the Code, or under Sections 24 to 26 of the Canada Evidence Act.

Before I give a ruling on whether the order is invalidated by the omission to state that the Attorney General had made or authorized the application and to state that Cpl. Cormier was a person specially designated, I wish to hear both counsel further on the matter. That is of course assuming that a decision in that respect is still required after the rulings herein.

The second part of Judge Harper’s ruling reads as follows, and I agree with his finding. He says:

In the alternative this Court finds that in any event said s.462.48 in its entirety is investigatory in nature and is of no assistance to the Crown in its attempts to adduce into evidence documents obtained thereunder in a prosecution based in whole or in part on information obtained as a result of an order under subsection

(3) thereof.

The third part of Judge Harper’s ruling is found at paragraphs 30 to 33 of his decision reads as follows:

30 In the further alternative this Court finds that whatever the meaning to be ascribed to S.241(3) of the Income Tax Act, (see para. 12 supra), said section is not of assistance to the Crown where the material sought to be adduced was obtained under the authority of an order under S. 462.48(3) of the Code. By virtue of S.241 (4) (e) (v) of the Income Tax Act, (supra, para 13) the USE OF THE information so disclosed is limited “solely for the purposes of an order made under §.462.48(3) of the Criminal Code” and by virtue thereof is not available to the Crown in a prosecution as said order is limited to investigations only.

31 S.462.47 of the Code appears under the heading: “DISCLOSURE PROVISIONS” and reads as follows:

462.47. For greater certainty, but subject to section 241 of the Income Tax Act, a person is justified in disclosing to a peace officer or the Attorney General any facts on the basis of which that person reasonably suspects that any property is proceeds of crime or that any person has committed or is about to commit an enterprise crime or a designated drug offence.

32 It is of note that the foregoing section does not specifically purport to be subject to 241 (3)(a) of the Income Tax Act and that whatever one might speculate to be the intended meaning of it, its clear wording indicates that it would not be justified for any person to disclose taxpayer information contrary to 241(2) of said Income Tax Act. It follows therefore that no person may give evidence acquired by virtue of an order s. 462.48 (3) of the Code and this Court so finds.

33 This Court further finds it of note that s. 241 (2) of the Income Tax Act, (see para. 8 supra) appears to be completely at odds with said s. 241 (3) (a) of the Act. This Court finds said section 241 (2) to be paramount in that it contains the phrase “Notwithstanding any other Act of Parliament or other law, NO OFFICIAL SHALL BE REQUIRED....” Such being the case, this Court finds that said s.241 (3) is of no assistance to the Crown in this prosecution.

I respectfully disagree with Judge Harper’s ruling in this third part.

Section 241 (3)(a) of the Income Tax Act clearly states that subsections (1) and (2) do not apply in respect of criminal proceedings under an Act of Parliament, and that includes the criminal proceedings in this trial. Revenue Canada officials are compellable in criminal proceedings such as this one.

Section 241(2) of the Income Tax Act is not at odds with section 241(3)(a) as suggested by Judge Harper. Section 241(2) deals with legal proceedings as opposed to section 241(3)(a) which deals with criminal proceedings. Section 241(3)(a) clearly states that subsection (2) which deals with legal proceedings does not apply with respect to criminal proceedings.

Judge Harper says that section 462.47 of the Code does not specifically purport to be subject to s.241 (3)(a) of the Income Tax Act. The words “but subject to section 241 of the Income Tax Act” in section 462.47 of the code are quite clear and there was no need of course to list all of the subsections. It is common practice not to do so.

It is important to differentiate between the purpose and role of section 462.48 of the code which deals strictly with disclosure and with the investigatory stage and the purpose and role of section 241(3)(a) of the Income Tax Act which deals with the compellability of Revenue Canada officials in criminal proceedings such as this one.

I do not agree with Judge Harper when he says that section 241 (3)(a) is of no assistance to the Crown in this prosecution.

That completes, for the time being, the Court’s ruling on the defence motion contained in the letter dated April 17 , 1997, referred to above.

Application reserved for further argument.