Esso Resources Canada Ltd. v. Canada, [1991] 1 CTC 121

Stone, J.A. (Marceau and MacGuigan, JJ.A. concurring):—This is an appeal from a judgment of Reed, J. in the Trial Division rendered September 28, 1988 [[1988] 2 C.T.C. 312; 88 D.T.C. 6469]. By that judgment, the respondent's claim against a decision of the Minister of National Revenue rejecting a refund of excise tax paid was allowed and the matter was referred back to the Minister for fresh consideration.

The principal question before the trial judge was whether the respondent was entitled to a refund of excise taxes paid between 1983 and 1985 pursuant to Part IV.1 of the Excise Tax Act, R.S.C. 1970, c. E-13 as amended ("the Act"). That part was enacted in 1982 by the Excise Tax Act, S.C. 1980-81-82-83, c. 68, section

43. In R.S.C. 1985, c. E-15, Part IV.1 became Part V and, like the trial judge, I shall so refer to it. The tax carries the title of “ Natural Gas and Gas Liquids Tax".

The taxing provisions relevant to this dispute are subsection 34(1), paragraph 34(2)(b) and section 35 of the Act. They read in part:

34. (1) There shall be imposed, levied and collected on the first receipt of natural gas liquids produced at a gas processing plant or a gas reprocessing plant for removal from the plant a tax at the rate specified in subsection 35(1).

(2) Notwithstanding subsection (1), no tax is payable under this section in respect of. . ..

(b) natural gas liquids injected as miscible flood material into a natural reservoir in Canada for the enhanced recovery of oil from that reservoir.

35. (2) The tax imposed under section 34 is payable

(a) at the time the natural gas liquids are first received for removal from the gas

processing plant or gas reprocessing plant where they were produced; and

(b) by the person who owns the natural gas liquids at the time described in paragraph (a).

Subsection 38(2) and subsections 40(1) and (3) provide mechanisms for collecting the tax:

38. (2) Every operator of a gas processing plant or a gas reprocessing plant is an agent of the Minister for the purpose of collecting tax under this Part and as such shall levy and collect the tax imposed by subsection 34(1) from any person who owns natural gas liquids produced at that plant at the time they are first received for removal from that plant.

40. (1) Every licensee who is required by this Part to collect or pay tax shall make each month a true return of all amounts payable, collected or collectible by him by way of tax imposed by this Part for the last preceding month, which return shall include such other information and be in such form as the Minister may prescribe.

(3) The return required by this section shall be filed and the taxes payable, collected or collectible by a licensee shall be remitted not later than the last day of the first month succeeding that in which the taxes were paid or became payable.

Provision for a refund of tax appears in paragraphs 68(1)(g) of this Act:

68. (1) A deduction from, or refund of, any of the taxes imposed by this Act may be granted . . .

(g) where the original receipt of . . . natural gas liquids was subject to tax

under Part V, but exemption is provided on subsequent use by that Part.

Part V enjoyed but a short lifespan. On May 23, 1985, the government of Canada gave notice, as part of its budget proposals, of an intention to repeal the Natural Gas and Gas Liquids Tax and, that same day, introduced into the House of Commons a Notice of Ways and Means Motion with resolutions signalling the intended repeal to be effective on June 1, 1985. Legislation implementing the repeal retroactive to that date was soon introduced and became law on March 4, 1986 as An Act to Amend the Excise Act and to Amend Other Acts in Consequence Thereof, S.C. 1984-85-86, c. 9. The repealing provisions are found in sections 14 and 23 which read in part:

14. (1) Part IV.1 of the said Act is repealed

(2) Subsection (1) shall be deemed to have come into force on June 1, 1985.

23. (1) Subsection 44(1) of the said Act is amended by. . . . repealing paragraph (g) thereof.

(4) Subsections (1) . . . shall be deemed to have come into force on June 1, 1985.

Paragraph 44(1)(g) became paragraph 68(1)(g) in R.S.C. 1985.

The dispute came about in this way. The respondent purchased quantities of natural gas liquids during the years 1983 to 1985 for use in a hydrocarbon miscible flood project. That gas was in fact used in that project between May 24, 1985 and December 31, 1985. It is not in dispute that the use made of the natural gas liquids met the requirements of paragraph 34(2)(b) of the Act as it stood prior to its repeal. It was not, however, until December 1,1986—some five months after the repealing legislation was adopted and some 17 months after the repeal had become effective—that the respondent submitted to the Minister an application for a refund of excise taxes paid in respect of the natural gas liquids in question. The ground taken by the Minister for rejecting the application was purely and simply that the former legislation had been repealed "with no provision for refund". [1] There appears no dispute that, but for the repeal, the amount claimed would have been refunded.

In allowing the respondent's claim, the learned trial judge was of opinion that as of March 4, 1986, when the repealing legislation was enacted, the respondent possessed an "accrued" or"accruing" right to the moneys held by the appellant within paragraph 43(c) of the Interpretation Act, R.S.C. 1985, c. 1-21. After discussing several cases including the decision of the Court of Appeal for Ontario in Re Falconbridge Nickel Mines Ltd. and Minister of Revenue for Ontario, [1981] C.T.C. 120; 121 D.L.R. (3d) 403, she said (at page 322 (D.T.C. 6476)):

I conclude that the plaintiff in this case had, as of March 4, 1986, a right accrued or accruing to the moneys held by the defendant. As was said by Mr. Justice Thorson in the Falconbridge case, an amount was paid as tax, in excess of what should have been paid; just because a refund was outstanding and no application for a refund had been made, one should not conclude that the right was merely "theoretical". A right is no less a right merely because all the steps necessary to be taken to ensure its enforcement have not yet been taken. In this case, the plaintiff had not yet filed an application for the refund but the right to the funds was the plaintiff's.

It remained for the learned judge to determine whether the repeal of paragraph 68(1)(g) had created an obstacle to the making of a refund in accordance with the accrued or accruing right she had already recognized. It was her view that a refund could be made pursuant to paragraph 68(1)(a) of the Act:

68. (1) A deduction from, or refund of, any of the taxes imposed by this Act may be granted

(a) where an overpayment has been made by the taxpayer;

The appellant disputes the correctness of the judgment below both with regard to the finding that the respondent possessed an “accrued” or "accruing" right to a refund that, notwithstanding the repealing legislation, was preserved by paragraph 43(c) of the Interpretation Act, and also with regard to her finding that the refund could be made pursuant to paragraph 68(1)(a) of the Act. I shall deal with these issues seriatim.

It seems to me that the learned trial judge was quite right in deciding that the respondent did possess a right" accrued” or" accruing" as of March 4, 1986, and hence that the right to a refund was preserved by the language of paragraph 43(c) of the Interpretation Act:

43. Where an enactment is repealed in whole or in part, the repeal does not

(c) affect any right, privilege, obligation or liability acquired, accrued, accruing or incurred under the enactment so repealed,

By the plain language of former paragraph 34(2)(b) of the Act" no tax is payable under this section in respect of . . . natural gas liquids injected as miscible flood material into a natural gas reservoir in Canada for the enhanced recovery of oil from that reservoir". The use made by the respondent of the natural gas liquids here in question plainly fell within that paragraph. By the wording of subsection 38(2) taxes had to be collected from the respondent. The respondent was never charged or assessed the taxes but merely paid amounts due to the working of the collection mechanisms contained in the legislation, and payment of those amounts was subject to the right of refund upon use of the gas for a tax exempt purpose. In this case the gas was purchased and was in fact used for an exempt purpose well before the repealing legislation was enacted. Upon such use being made of the gas, in my view, a right arose in favour of the respondent to a refund of the amounts paid in respect of these particular natural gas liquids. That right had "accrued" or was "accruing" at the time the repealing legislation was enacted.

It is true, of course, that it remained for the Minister to receive an application and to grant the refund, but this did not, as I see it, confer an unfettered discretion on the Minister to grant or to deny a refund as he saw fit. Once it was shown to his satisfaction that the gas had been used as required by paragraph 34(2)(b), the refund was automatically to follow. I therefore respectfully agree with the learned trial judge on this aspect of her judgment.

On the other hand, I have some difficulty in accepting that paragraph 68(1)(a) governs the making of the refund. With respect, I simply cannot read the word overpayment" as applying in the circumstances of this case when no overpayment" of tax was made by the respondent. The appellant attacks the decision below because paragraph 68(1)(a) was not pleaded and because the learned judge failed to afford an opportunity for submissions as to its applicability before reaching her conclusion. However that may be, the issue was fully addressed in this Court, as was the possible application of paragraph 68(1)(g) notwithstanding its repeal.

In my opinion the point is governed by paragraph 43(e) of the Interpretation Act. It reads:

43. Where an enactment is repealed in whole or in part, the repeal does not

(e) affect any investigation, legal proceeding or remedy in respect of any right, privilege, obligation or liability referred to in paragraph (c) or in respect of any punishment, penalty or forfeiture referred to in paragraph (d),

and an investigation, legal proceeding or remedy as described in paragraph (e) may be instituted, continued or enforced, and the punishment, penalty or forfeiture may be imposed as if the enactment had not been so repealed.

This paragraph appears to preserve from extinguishment "any . . . remedy in respect of any right. . . referred to in paragraph (c)". The "remedy" here is to be found in the refund provisions of paragraph 68(1)(g). Accordingly, the repeal of that paragraph did not affect the remedy in respect of the accrued or accruing right to a refund. The remedy in paragraph 68(1)(g) may, therefore, be instituted, continued or enforced for the purpose of effecting the refund to which the respondent is entitled by virtue of paragraph 43(c) of the Interpretation Act, notwithstanding the repeal of paragraph 68(1)(g) on March 4, 1986.

In the result, I would dismiss this appeal with costs.

Appeal dismissed.

Berl Baron and Howard Baron, C.A.

[Indexed as: Baron (B.) v. Canada (No. 1)]

Federal Court of Appeal (Pratte, Marceau and Hugessen, JJ.A.), November 28, 1990 (Court Nos. A-618-89/A-620-89 for the cases of the first appellant and A-619-89/A-621-89 and for those of the second appellants), on appeal from judgments of the Federal Court-Trial Division, reported [1990] 1 C.T.C. 84.

Income tax—Federal—Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72,

c. 63) and S.C. 1986, c. 6, section 121—231.3(1) to (5) incl.—Constitution Act, 1982—7, 8, III—2—Québec Professional Code, C-26—87(3)—Québec Chartered Accountants Code of Ethics, R.S.Q.

These appeals are from judgments of the Trial Division dismissing attacks upon searches and seizures effected under the authority of warrants issued pursuant to section 231.3. In that Court, the appellants' arguments were considered under five headings: (1) the judge issuing the warrants has no discretion under subsection 231.3(3); (2) under subsection 231.3(5) wholesale searches and seizures can take place without adequate authorization; (3) reasonable and probable grounds are not required, only the lesser test of reasonableness; (4) two avenues of obtaining warrants exist, one through provincial courts and the other through the Federal Court, and the appeal procedures differ; section 231.3 therefore offends section 15 of the Charter; and (5) warrants are invalid when they do not contain a clause protecting documents subject to solicitor-client privilege and/or accountant-client confidential relationship.

In the Trial Division, Reed, J. held that, as all but one of these arguments have been before various courts and some appeals had been filed, her decision might only serve to hold the arguments in abeyance until the appeals were decided. Nevertheless, she analyzed the issues in depth and found as follows: (1) as, in fact, there was no abuse in the present case, the point was academic; (2) the Print Three case, binding on the Trial Division, found that subsection 231.3 met the deficiencies earlier found in the provisions it was designed to replace and that subsection 231.3(5) met the test of reasonableness and is not in violation of the Charter; (3) " reasonable" subsumes "probable"; (4) such discrimination as there may be is not protected by the Charter; and (5) as proper procedures for execution of the seizures was followed and as applications for interpretation of the solicitor-client issue to the Superior Court of Québec were withdrawn, this argument was rejected. The net result was that the motions and applications of the appellants were dismissed.

HELD:

The procedures under examination were clearly criminal and full protection of the Charter applied. The word "shall" is uniquely used in the Income Tax Act. Normally this word is imperative, and the arguments presented for a more permissive reading are not sufficient in the constitutional scrutiny of a text adopted by Parliament. Nothing in the context of subsection 231.3(3) would render an imperative interpretation of "shall" inconsistent with the rest of the section or make it irrational or meaningless. The words "may" and "shall" are used in the section, evidently chosen deliberately. The section was changed from its predecessor which was permissive and the change must be regarded as intentional. The Bill of Rights, if it still has a role to play, can surely not validate legislation inadequate under the Charter. The absence of judicial discretion is determinative of contravention of the Charter. Thus section 231.3 is of no force or effect.

The standard of probability remains inherent in that of reasonableness and the Charter is not breached by the absence of the former.

There is a line, however narrow, between a reasonable belief that evidence may be found and a reasonable belief that evidence is to be found, and only the latter is acceptable in meeting the Charter’s demands. Paragraph 231.3(3)(b) is inadequate and inoperative.

The point about different routes of appeal for warrants from different sources being offensive to the equal rights provision of the Charter was not pursued.

The Court's decision in Solvent Petroleum is sound authority for rejecting the contention that the wording of subsection 231.3(5) is too broad and gives virtually unfettered discretion to the seizing officer.

As to privilege between solicitor and client, it must be recognized in fact and in practice but it need not be expressed in the warrant. The confidentiality between accountant and client, on the other hand, is only a provision of Québec law and is irrelevant to federal income tax legislation. On these points the trial judge was correct.

Section 231.3 is of no force or effect as it is inconsistent with sections 7 and 8 of the Charter. The judgment of the trial judge reversed. Appeals allowed.

[For an Editorial Note to this case, see page 3801.]

Guy Du Pont and André Serero for the appellant.

Pierre Loiselle for the respondent.

Cases referred to:

Knox Contracting Ltd. v. Canada, [1990] 2 C.T.C. 262; 90 D.T.C. 6447; 110 N.R.

171;

McKinlay Transport Ltd. v. Canada, [1990] 1 S.C.R. 627; [1990] 2 C.T.C. 103; 90

D.T.C. 6243;

Solvent Petroleum Extraction Inc. v. M.N.R., [1989] 2 C.T.C. 177; 89 D.T.C.

5381;

Hunter v. Southam, [1984] 2 S.C.R. 145; 11 D.L.R. (4th) 641;

Julius v. Bishop of Oxford (1880), 5 A.C. 214;

Reference re Language Rights under Manitoba Act, [1985] 1 S.C.R. 721; 19

D.L.R. (4th) 1;

Kruger Inc. v. M.N.R., [1984] 2 F.C. 535; [1984] C.T.C. 506; 84 D.T.C. 6478;

Singh v. Canada (M.E.I.), [1985] 1 S.C.R. 177; 17 D.L.R. (4th) 422;

Kourtessis v. M.N.R., [1990] 1 C.T.C. 241; 89 D.T.C. 5464;

Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860; 141 D.L.R. (3d) 590;

Goguen v. Shannon, 50 C.C.C. (3d) 45 (N.B.C.A.);

Nima v. Mclnnes, [1989] 2 W.W.R. 634 (B.C.S.C.);

Canada v. Aquarius Computer, [1989] O.J. No. 1935 (Ont. H.C.J.).

Hugessen, J.A.:

Introduction

These four appeals are from judgments of the Trial Division dismissing a series of attacks upon searches and seizures effected on the authority of warrants issued under section 231.3 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). Three of the proceedings in the Trial Division attacked the warrants themselves while the fourth sought a declaration of invalidity of the statutory provisions under which they were issued. All raised the same questions and were dealt with by a single set of reasons in the Trial Division. It is convenient to do likewise here.

For ready reference I reproduce here in its entirety the statutory text under which the search warrants were issued and which lies at the centre of this litigation:

231.3 (1) A judge may, on ex parte application by the Minister, issue a warrant in writing authorizing any person named therein to enter and search any building, receptacle or place for any document or thing that may afford evidence as to the commission of an offence under this Act and to seize and, as soon as practicable, bring the document or thing before, or make a report in respect thereof to, the judge or, where the judge is unable to act, another judge of the same court to be dealt with by the judge in accordance with this section.

231.3 (1) Sur requête ex parte du ministre, un juge peut décerner un mandat écrit qui autorise toute personne qui y est nommée à pénétrer dans tout bâtiment, contenant ou endroit et y perquisitionner pour y chercher des documents ou choses qui peuvent constituer des éléments de preuve de la perpétration d'une infraction à la présente loi, à saisir ces documents ou choses et, dès que matériellement possible, soit à les apporter au juge ou, en cas d'incapacité de celui-ci, à un autre juge du même tribunal, soit à lui en faire rapport, pour que le juge en dispose conformément au présent article.

(2) An application under subsection (1) shall be supported by information on oath establishing the facts on which the application is based.

(2) La requête visée au paragraphe (1) doit être appuyée par une dénonciation sous serment qui expose les faits au soutien de la requête.

(3) A judge shall issue the warrant referred to in subsection (1) where he is satisfied that there are reasonable grounds to believe that

(a) an offence under this Act has been committed;

(b) a document or thing that may afford evidence of the commission of the offence is likely to be found; and

(c) the building, receptacle or place specified in the application is likely to contain such a document or thing.

(3) Le juge saisi de la requête décerne le mandat mentionné au paragraphe (1) s’il est convaincu qu'il existe des motifs raisonnables de croire ce qui suit:

a) une infraction prévue par la présente loi a été commise;

b) il est vraisemblable de trouver des documents ou choses qui peuvent

constituer des éléments de preuve de la perpétration de l'infraction;

c) le bâtiment, contenant ou endroit précisé dans la requête contient vraisemblablement de tels documents ou choses.

(4) A warrant issued under subsection (1) shall refer to the offence for which it is issued, identify the building, receptacle or place to be searched and the person alleged to have committed the offence and it shall be reasonably specific as to any document or thing to be searched for and seized.

(4) Un mandat décerné en vertu du paragraphe (1) doit indiquer l'infraction pour laquelle il est décerné, dans quel bâtiment, contenant ou endroit perquisitionner ainsi que la personne accusée d’avoir commis l'infraction. Il doit donner suffisamment de précisions sur les documents ou choses à chercher et à saisir.

(5) Any person who executes a warrant under subsection (1) may seize, in addition to the document or thing referred to in subsection (1), any other document or thing that he believes on reasonable grounds affords evidence of the commission of an offence under this Act and shall as soon as practicable bring the document or thing before, or make a report in respect thereof to, the judge who issued the warrant or, where the judge is unable to act, another judge of the same court to be dealt with by the judge in accordance with this section.

(5) Quiconque exécute un mandat décerné en vertu du paragraphe (1) peut saisir, outre les documents ou choses mentionnés à ce paragraphe, tous autres documents ou choses qu'il croit, pour des motifs raisonnables, constituer des éléments de preuve de la perpétration d’une infraction à la présente loi. Il doit, dès que matériellement possible, soit apporter ces documents ou choses au juge qui a décerné le mandat ou, en cas d'incapacité de celui-ci, à un autre juge du même tribunal, soit lui en faire rapport, pour que le juge en dispose conformément au présent article.

(6) Subject to subsection (7), where any document or thing seized under subsection (1) or (5) is brought before a judge or a report in respect thereof is made to a judge, the judge shall, unless the Minister waives retention, order that it be retained by the Minister, who shall take reasonable care to ensure that it is preserved until the conclusion of any investigation into the offence in relation to which the document or thing was seized or until it is required to be produced for the purposes of a criminal proceeding.

(6) Sous réserve du paragraphe (7), lorsque des documents ou choses saisis en vertu du paragraphe (1) ou (5) sont apportés à un juge ou qu'il en est fait rapport à un juge, ce juge ordonne que le ministre les retienne sauf si celui-ci y renonce. Le ministre qui retient des documents ou choses doit en prendre raisonnablement soin pour s'assurer de leur conservation jusqu'à la fin de toute enquête sur l'infraction en rapport avec laquelle les documents ou choses on été saisis ou jusqu’à ce que leur production soit exigée aux fins d’une procédure criminelle.

(7) Where any document or thing seized under subsection (1) or (5) is brought before a judge or a report in respect thereof is made to a judge, the judge may, of his own motion or on summary application by a person with an interest in the document or thing on three clear days' notice of application to the Deputy Attorney General of Canada, order that the document or thing be returned to the person from whom it was seized or the person who is otherwise legally entitled thereto if the judge is satisfied that the document or thing

(a) will not be required for an investigation or a criminal proceeding; or

(b) was not seized in accordance with the warrant or this section.

(7) Le juge à qui des documents ou choses saisis en vertu du paragraphe (1) ou (5) sont apportés ou à qui il en est fait rapport peut, d'office ou sur requête sommaire d’une personne ayant un droit dans ces documents ou choses avec avis au sous-procureur général du Canada trois jours francs avant qu'il y soit procédé, ordonner que ces documents ou choses soient restitués à la personne à qui ils ont été saisis ou à la personne qui y a légalement droit par ailleurs, s’il est convaincu que ces documents ou choses:

a) soit ne seront pas nécessaires à une enquête ou à une procédure criminelle;

b) soit n'ont pas été saisis conformément au mandat ou au présent article.

(8) The person from whom any document or thing is seized pursuant to this section is entitled, at all reasonable times and subject to such reasonable conditions as may be imposed by the Minister, to inspect the document or thing and to obtain one copy of the document at the expense of the Minister.

(8) La personne à qui des documents ou choses sont saisis conformément au présent article a le droit, en tout temps raisonnable et aux conditions raisonnables que peut imposer le ministre, d'examiner ces documents ou choses et d’obtenir reproduction des documents au frais du ministre en une seule copie.

The Nature of the Search and Seizure Authorized by Section 231.3

As a preliminary matter, it is as well to make clear at the outset that in my opinion we are dealing with procedures that are criminal in their nature. It is not necessary at this stage to characterize in constitutional terms the source of Parliament’s legislative power, a question on which the Supreme Court has recently divided and which awaits a definitive resolution by a majority of the members of that Court. (See Knox Contracting Ltd. v. Canada, [1990] 2 C.T.C. 262; 90 D.T.C. 6447; 110 N.R. 171.)

It is enough simply to read the section under attack and its repeated reference to " offence" to realize that the section is concerned with the detection and prosecution of crime, albeit a limited category of crime, namely offences under the Income Tax Act. This makes the legislation different in kind from the type of administrative enforcement mechanisms found in adjacent sections of the Income Tax Act such as were upheld by the Supreme Court in McKinlay Transport Ltd. v. Canada, [1990] 1 S.C.R. 627; [1990] 2 C.T.C. 103; 90 D.T.C. 6243.

The requirements of a self-reporting and self-assessing income tax system may justify an easing of Charter standards where the primary purpose of a search is simply to ensure that taxes are paid as and when due. Where as here, however, we are dealing with provisions whose stated aim is the discovery and preservation of evidence "for the purpose of a criminal proceeding" nothing less than the full panoply of Charter protection is appropriate.

With that background in mind, I now turn to those grounds of attack argued by the appellants with regard to which we called on the respondents to reply.

The Denial of Judicial Discretion in the Issuance of the Search Warrant

The appellants’ first and most serious attack concentrates on the use of the word “ shall” in the first line of subsection 231.3(3). The appellants say, and the respondents admit, that this is unique in the Canadian Statute book; all other texts purporting to authorize a judicial officer to issue a search warrant are couched in permissive language, leaving to that officer the ultimate discretion as to whether or not the circumstances justify an invasion of privacy. Any text which specifically excludes such residual judicial discretion in the issuance of a search warrant will, for that reason alone, run afoul of sections 7 and 8 of the Charter as authorizing an unreasonable search and seizure and one that is in breach of the principles of fundamental justice. I agree.

There can be no doubt that the use of the word “ shall” is normally imperative [1] .

Furthermore, this Court, in dealing with precisely the same statutory provision, has already held that the words of subsection 231.3(3) leave no discretion in the judge. In Solvent Petroleum Extraction Inc. v. M.N.R., [1989] 2 C.T.C. 177; 89 D.T.C. 5381, Desjardins, J.A., speaking for the Court, said (at page 179 (D.T.C. 5382-83)):

Subsection 231.3(1) states that"A judge may. . .”. Subsection 231.3(3) states that"A judge shall. . .". It would therefore appear from the language of subsection 231.3(3) that if the issuing judge comes to the conclusion that the conditions of paragraphs 231.3(3) (a), (b) and (c) are met, he need not nor is he permitted to consider whether there has been a previous substantive voluntary compliance by the taxpayer, whether further documents might be remitted voluntarily, or whether the applicant for the warrants has taken all reasonable steps to obtain the information from an alternative source before applying for the warrants. In brief, if the conditions are met, he must issue the warrant.

The respondents, for their part, argue that the following passage from the trial judge's reasons (page 92 (D.T.C. 6045)) is a better reading of the law and should now be followed:

If it is clear that the intention of Parliament was to leave discretion in a judge to refuse to issue a warrant when the search would offend section 8 of the Charter, then that interpretation would prevail, over the general rule of interpretation set out in section 11 of the Interpretation Act.

There is considerable jurisprudence which holds that “shall” can be either directory or mandatory. This jurisprudence might be relevant to the interpretation of subsection 231.3(3). More importantly, however, the Bill of Rights might play a role so as to require subsection 231.3(3) to be interpreted so as to preserve for a judge discretion, to refuse warrants, in the case of abusive searches and seizures. Section 2 of the Act when read together with section 1 requires:

Every law of Canada shall . . be so construed and applied as not to abrogate, abridge or infringe . . . the right of the individual to life, liberty, security of the person. . .

Alternatively the Court's inherent power to control the abuse of its own process might operate to enable a judge to refuse to issue an abusive warrant. See generally: R. v. Young (1984), 13 C.C.C. (3d) 1 (Ont. C.A.); R. v. Miles of Music Ltd. (1989), 48 C.C.C. (3d) 96 (Ont. C.A.) and section 50 of the Federal Court Act. These are all speculative arguments, however, and have not been addressed by counsel. Certainly, it seems to me a judge would strive against issuing an abusive warrant which offended subsection 8 of the Charter, if he or she knew, at the time the request was made, that the warrant was abusive. At the very least, I do not think subsection 231.3(3) precludes a judge from adding terms and conditions to a warrant sought. There is nothing in subsection 231.3(3) which says that a judge must issue a warrant in the exact terms in which it is sought.

With respect, it seems to me that there are several things wrong with the interpretation proposed by the trial judge.

In the first place, and if I understand her correctly, what she is suggesting in the first part of the quoted passage is precisely the kind of "reading down" against which the Supreme Court has warned. (See for example, Hunter v. Southam, [1984] 2 S.C.R. 145; 11 D.L.R. (4th) 641 at 168 (D.L.R. 659.)

Secondly, while there is indeed "considerable jurisprudence" going back to the old case of Julius v. Bishop of Oxford (1880), 5 A.C. 214, to the effect that words of empowerment ('may") can in certain circumstances import obligation ("shall"), there is very little the other way round: "shall" is rarely interpreted to mean may".

We are here dealing not with a piece of subordinate legislation or a statutory instrument but with the constitutional scrutiny of a text adopted by Parliament itself. As was said by the Supreme Court of Canada in Reference re Language Rights under Manitoba Act, [1985] 1 S.C.R. 721; 19 D.L.R. (4th) 1 at 737 (D.L.R. 13-14):

As used in its normal grammatical sense, the word” shall” is presumptively imperative. See Odgers' Construction of Deeds and Statutes 5th ed. (1967) at p. 377; The Interpretation Act, 1867 (Can.), c. 1, s. 6(3); Interpretation Act, R.S.C. 1970, c. 1-23, s. 28 ("shall is to be construed as imperative".) It is therefore incumbent upon this Court to conclude that Parliament, when it used the word “shall” in s. 23 of the Manitoba Act, 1870 and s. 133 of the Constitution Act, 1867, intended that those sections be construed as mandatory or imperative, in the sense that they must be

obeyed, unless such an interpretation of the “shall” would be utterly inconsistent with the context in which it has been used and would render the sections irrational or meaningless: see, e.g. Re Public Finance Corp. and Edwards Garage Ltd. (1957), 22 W.W.R. 312 (Alta. S.C.) at p. 317.

[Emphasis added.]

There is, as it seems to me, absolutely nothing in the context of section 231.3 of the Income Tax Act which would render an imperative interpretation of the word “shall” in subsection (3) inconsistent with the balance of the section or make it irrational or meaningless. Indeed, I can see nothing in the section which would point to a permissive or discretionary meaning for” shall”. On the contrary, the draughtsman has clearly used the permissive "may" where this is appropriate (as for example in subsections (1) and (5)) and the use of "shall" in subsection (3) (as well, it may be noted, as in subsection (6)) has every appearance of being a deliberate choice.

Furthermore, the whole of section 231.3 represents a change from the previous law [2] which was couched in terms that were clearly permissive and left a discretion in the hands of the judge authorizing the seizure. Also, as noted above, the text of subsection 231.3(3) is unique and differs remarkably from all other Canadian search warrant provisions [3] . I cannot view such a change from both previous and current practice as being anything but intentional.

With respect, I must also take exception to the trial judge's use, in the passage quoted above, of the Bill of Rights. While there is clearly room for debate as to the extent to which the Bill may still have a role to play in post- Charter Canada (see Singh v. Canada (M.E.I.), [1985] 1 S.C.R. 177; 17 D.L.R.

(4th) 422), that role surely cannot be one of validating, by interpretation, legislation which is otherwise inadequate on Charter grounds.

For constitutional and historical reasons, the Bill of Rights employs an interpretative technique for the purpose of preserving and protecting the rights which it enshrines; it would be a sorry irony indeed if it were now to be used to rescue infringing legislation from the effect of the entrenchment of those same and other rights in the Charter.

My final comment on the quoted passage of the trial judge's reasons has to do with her invocation of the Court's power to control abuse of the process, or to add conditions to a warrant. With respect, it seems to me that this begs the question. If, as the respondents contend, paragraphs (a), (b) and (c) of subsection 231.3(3) are exhaustive of all the conditions precedent to a reasonable search, an application which meets all those conditions cannot be an abuse of the process. By the same token, if the word “shall” in the opening part of subsection 231.3(3) is to be given its normal imperative construction, there can be no power in the judge to attach conditions to the warrant beyond those specifically set out in the statute itself. Subsections 231.3(1) and 231.3(4) set out the contents of the warrant with considerable detail but do not, in any way, suggest any residual discretion in the issuing judge to attach other terms or conditions.

In their defence against the attack on the mandatory nature of section 231.3, the respondents also rely, as did the trial judge, on the obiter dictum of the British Columbia Court of Appeal in the case of Kourtessis v. M.N.R., [1990] 1 C.T.C. 241; 89 D.T.C. 5464.

In that case, the court unanimously dismissed on jurisdictional grounds an appeal against a decision at first instance which had upheld the validity of section 231.3.

A majority of the Court went on, however, to deal with the substantive grounds of attack. On the question which concerns us at the present, Locke, J.A., after quoting the text of subsections (1),(2), and (3) of section 231.3 had this to say (at page 261 (D.T.C. 5478)):

I am of the opinion these three subsections must be read together. The crucial function of the judge is to decide whether the facts before him are sufficient to warrant an intrusion of privacy. This is discretionary in the judge. In order to exercise his discretion, the guidelines are set out in subsection (3). If the evidence fails the standards of subsection (3), he will not be satisfied and will decline to issue the warrant. If the evidence is sufficient, the statute says he "shall" issue the warrant.

It is said that this deprives the judge of a discretion. It does not deprive him of the discretion as to whether the warrant should issue at all, and as to which he fulfils his balance wheel function. It does deprive him of a discretion as to whether the warrant in fact issues after he makes the primary essential decision.

One might ask rhetorically, and why not? Having made the primary decision, surely the figurative stamping of the piece of paper is unimportant. What the mandatory word does is to deprive the judge of the discretions argued for in Paroian—that it was unnecessary to issue the process because the Minister already had enough material. This is not for the court to say, but I do not feel that the standards of Hunters. Southam have been defeated. The judge's crucial role has been fulfilled and nothing remains except to stamp the piece of paper. It is thus true that discretion has been impaired in an administrative aspect, but not at all to impair the judge's primary function. It is also plain he can always attach conditions to the manner of execution of the warrant, and this of his own motion under the doctrine of inherent jurisdiction.

With respect to the last sentence of the quoted passage, I can only repeat what I have already said: I do not see how a judge acting under an imperative statutory provision can invoke an inherent jurisdiction to refuse to do precisely that which the legislation has declared to be reasonable and has commanded him to do. The attachment of conditions as to either the issuance or the excution of the warrant is not authorized by the text.

The earlier part of the quoted passage, if I understand it correctly, seems to argue that judicial discretion is retained in so far as the determination of the conditions set out in paragraphs (a), (b) and (c) is concerned, but that once the judge is satisfied as to their existence he has no further discretion. One might quibble with the first of those propositions on linguistic grounds; I do not think it proper to characterize the formation of an opinion as to the existence of reasonable grounds for belief in certain facts as being in any way the exercise of a discretion. It is of course part of a judicial decision-making function as to which, in any given case, there may be differences of view, but that surely does not make it a matter of discretion any more than, say, a finding of negligence is a matter of discretion.

The real nub of the matter, however, lies in the second proposition. To sustain it, one must argue, as Counsel for respondents did, not merely that Parliament is entitled to set the standards as to what is reasonable and in accordance with the principles of fundamental justice, but also that, in doing so, it may exclude any other consideration as being irrelevant to those standards. In my view, this cannot be the law.

Counsel for respondents lays great stress on the fact that in the landmark decision of Hunter v. Southam, supra, the Court carefully and in detail laid down the conditions of a reasonable search and seizure pursuant to section 8; nowhere amongst them did the Court specifically include a condition that the judicial officer issuing the warrant should retain a discretion to refuse to do so .

The question now is to know whether a requirement of judicial discretion is nonetheless implicit in the standards of reasonability set out in Southam or, even if it is not, whether it forms part of the principles of fundamental justice protected by section 7. In my view, it is both.

In the first place, it will be recalled that in Southam the Court was dealing with a legislative provision which, however inadequate on other grounds, left a discretion with the officer authorizing the seizure^.

Secondly, and as previously noted, at the time of the Southam decision, all other provisions authorizing searches and seizures in Canada were couched in permissive language. Furthermore, as the Court was unquestionably aware, historically this had always been the case both by statute and at common law.

Finally and most importantly, the Court in Southam laid great emphasis on the requirement that the officer authorizing the seizure be independent and capable of acting judicially in balancing the competing interests of the state and the citizen. That requirement, as it seems to me, given the context in which Southam was decided, necessarily implies an ability and a need to exercise a judicial discretion in the authorization process.

Accordingly, I conclude that a requirement for a residual judicial discretion to refuse to issue a search warrant, or to attach conditions to a warrant when issued, is implicit in the decision in Southam as a prerequisite to a reasonable search and seizure in accordance with section 8 of the Charter.

Even more important than Southam for the purposes of the present discussion, however, is the decision of the Supreme Court in Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860; 141 D.L.R. (3d) 590. That was a pre-Charter case and concerned the issuance of a search warrant under the Criminal Code to search a lawyer's office. Lamer, J. (as he then was), speaking for a unanimous Court, discussed at length the role of judicial discretion in the issuance of search warrants. The following passage from his reasons is critical (page 888 (D.L.R. 615-17)):

Some say that the justice of the peace has no discretion to refuse to issue a search warrant or to impose terms of execution once the requirements of form and substance in s. 443 have been met. They would argue that in s. 443 the word“ may" means "must" and does not confer any discretion. According to this interpretation, the justice of the peace may issue a warrant only if he is satisfied that there is reasonable ground to believe that one of the things provided for in s. 443(1) is to be found in the place sought to be searched, but must do so as soon as he is so satisfied, and the only condition of execution on the premises that he may impose is set out in s. 444 of the Code:

444. A warrant issued under section 443 shall be executed by day, unless the justice, by the warrant, authorizes execution of it by night.

Others, on the contrary, would say that generally the justice of the peace has the discretion to refuse the warrant, so long as this discretion is exercised judicially

This fact itself serves to limit the scope to be put on this Court's decision in Solvent Petroleum Extraction Inc. v. M.N.R., supra. The point now being discussed was not argued in that case. Thus, when Desjardins, J.A. said (at page 181 (D.T.C. 5384)) "there is no doubt that subsection 231.3(3) meets these minimum standards", she was referring to the standards specifically enumerated by the Court in Southam from which she had just quoted.

Subsection 10(3) of the Combines Investigation Act which provided that an authorization to search may be granted" by a member of the Restrictive Trade Practices Commission.

and so long as the decision to refuse the warrant is not capricious or arbitrary (Carter, R.F., The Law Relating to Search Warrants (1939) at p. 52; Fontana, J.A., The Law of Search Warrants in Canada (1974) at pp. 7 and 51 et seq. ; Re Pacific Press Ltd, and the Queen (1977), 37 C.C.C. (2d) 487, 38 C.R.N.S. 295, [1977] 5 W.W.R. 507).

I come down on the side of the discretion, as it allows more effective judicial control of the police. Searches are an exception to the oldest and most fundamental principles of the common law, and as such the power to search should be strictly controlled. It goes without saying that the justice may sometimes be in a poor position to assess the need for the search in advance. After all, searches, while constituting a means of gathering evidence, are also an investigative tool. It will often be difficult to determine definitively the probative value of a particular thing before the police investigation has been completed. Be that as it may, there are places for which authorization to search should generally be granted only with reticence and, where necessary, with more conditions attached than for other places. One does not enter a church in the same way as a lion’s den, or a warehouse in the same way as a lawyer's office. One does not search the premises of a third party who is not alleged to have participated in the commission of a crime in the same way as those of someone who is the subject of such an allegation. (See on this subject Fontana, J.A., The Law of Search Warrants in Canada, p. 174.)

The justice of the peace, in my view, has the authority, where circumstances warrant, to set out execution procedures in the search warrant; I would even go so far as to say that he has the right to refuse to issue the warrant in special circumstances, such as those found in Re Pacific Press Ltd., and the Queen, supra.

That case involved a search of a newspaper office for information gathered by the newspaper staff. Neither the newspaper staff nor the newspaper itself were accused of having been involved in the commission of an offence. In view of the special situation of a newspaper in light of ss. 1(f) and 2 of the Canadian Bill of Rights, R.S.C. 1970, App. Ill, Nemetz, C.J. of the British Columbia Supreme Court quashed the search warrant issued by the justice of the peace, concluding as follows (at page 495):

The issuing of any search warrant is a serious matter, especially when this issuance against a newspaper may have, as it did, the effect of impeding its publication. To use the words of my distinguished predecessor in United Distillers Ltd. (1948), 88 C.C.C. 338, [1947] 3 D.L.R. 900, the Justice of the Peace “should have reasonable information before him to entitle him to judicially decide whether such warrant should issue or not". -In my opinion, no such reasonable information was before him since there was no material to show:

1. whether a reasonable alternative source of obtaining the information was or was not available, and

2. if available, that reasonable steps had been taken to obtain it from that alternative source.

In my opinion, the bringing of an application for a search warrant in these circumstances was an abuse of the process of the Court. I, therefore, quash the warrants.

Re Pacific Press Ltd. involved a search for things provided for in para. (b) of s. 443 (1), that is, evidence; it goes without saying that the same requirements do not apply in the case of things provided for in para. (a) and (c) of s.443(1).

It could be advanced that the two conditions set out by Nemetz C.J. should be met before a warrant is issued whenever a search is sought to be conducted, under 443(1)(b), of premises occupied by an innocent third party which are not alleged by the information to be connected in any way with the crime. It is not necessary for purposes of this appeal to decide that point. It is sufficient to say that in situations such as the one in Re Pacific Press Ltd., where the search would interfere with rights as fundamental as freedom of the press, and, as in the case at bar, a lawyer's client's right to confidentially, the justice of the peace may and should refuse to issue the warrant if these two conditions have not been met, lest he exceeds the jurisdiction he had ab initio. I would add one qualification to these two conditions. The reasonable alternative referred to is not an alternative to the method of proof but to the benefits of search and seizure of the evidence. As I have already stated, a search warrant is not only a means of gathering evidence but also an investigative tool. Therefore a determination of what is reasonable in each case will take into account the fact that a search makes it possible not only to seize evidence but also to ascertain that it exists, and even sometimes that the crime was in fact committed and by whom. Seizure makes it possible to preserve the evidence.

Moreover, even if the conditions are met, the justice of the peace must set out procedures for the execution of the warrant that reconcile protection of the interests this right is seeking to promote with protection of those the search power is seeking to promote, and limit the breach of this fundamental right to what is strictly inevitable. This is also true of searches under 443(1)(a) or (c), as soon as they threaten a fundamental right.

[Emphasis added.]

I derive from this passage the proposition not only that the attaching of conditions to a search warrant is a necessary and essential part of the exercise of judicial discretion but, even more importantly, that the very existence of such discretion is a prerequisite to the reasonableness of the search and to our notions of fundamental justice.

Descôteaux, supra, also establishes, in my view, that any legislative attempt to exhaustively define and circumscribe the limits of what may be a reasonable search is doomed to failure. In the passage quoted, Lamer, J. dealt specifically with searches of lawyers' offices and newspaper offices and held that in those circumstances the justice "may and should refuse to issue the warrant" if certain conditions were not met.

Clearly, however, Lamer, J. did not suggest that this list of circumstances was limitative. On the contrary, he expressly left it open (‘in situations such as . . ."). In my view, the categories of unreasonable searches are not closed and can never be so.

Legislating closed categories of unreasonableness is not only impossible; it is also likely, through the operation of simple human fallibility, to give rise to absurdities. The search and seizure provisions of the Income Tax Act provide an excellent example. In section 488 of the Criminal Code, Parliament has enshrined the old common law rule that, without special authorization, no search warrant shall be executed at night. The reason for this must surely be that the law views, and has always viewed, night searches as an unreasonable invasion of the citizen's privacy unless there are special circumstances making such searches permissible. Section 488, however, by its very terms, only applies to search warrants issued under sections 487 and 487.1 of the Criminal Code. There is no equivalent limitation on the execution of search warrants issued under section 231.3 of the Income Tax Act. The absurdity to which the respondents' position leads us, therefore, is that, in Parliament’s view, a night search for terrorist bombs is prima facie unreasonable while one for books of account is not. Indeed, although the point was not raised before us, it is at the least arguable that section 231.3 is invalid on the sole ground that it allows night searches without specific judicial authorization.

Parliament, in my opinion, is both legally and factually incapable of exhaustively defining unreasonable searches. The ultimate protection for the citizen against such searches lies in the vigilance of the issuing judge and in his power to refuse to issue the warrant even where all the conditions established by Parliament have been met. For Parliament to say and to mean that the judge "shall" issue the warrant no matter what the circumstances is to sanction unreasonable searches and seizures and is contrary to our long-established principles of fundamental justice. Section 231.3 is accordingly of no force or effect.

The foregoing is enough to dispose of the present appeal. However, since in my view the legislation must be rewritten, it would be useful to discuss briefly the other grounds argued by the appellants.

The Elimination of the Standard of Probability

It will be recalled that the standard set by subsection 231.3(3) is that of "reasonable grounds to believe”. The appellants argue that this is not good enough. The minimum standard must be” "reasonable and probable grounds”. The appellants focus on the following passage from the decision in Southam, supra, at page 168 (D.L.R. 659):

In cases like the present, reasonable and probable grounds, established upon oath, to believe that an offence has been committed and that there is evidence to be found at the place of the search, constitutes the minimum standard, consistent with s. 8 of the Charter, for authorizing search and seizure.

By eliminating the word "probable" from the legislative standard, it is argued, Parliament has suppressed the "more likely than not” standard of proof to be applied by the issuing judge. I do not agree.

In the first place, it seems to me that, as a matter of simple linguistic construction, the word "probable" in the phrase “reasonable and probable grounds to believe” adds nothing. In this connection, it is convenient to refer to the standard dictionary definition in both official languages.

The Shorter Oxford Dictionary gives the following modern meaning:

Probable

2. Such as to approve itself to the mind; worthy of acceptance or belief; rarely in bad sense, specious, colourable. (Now merged in 3.)—1872. 3. Having an appearance of truth; that may reasonably be expected to happen, or to prove true; likely 1606.

[Emphasis added.]

Even more interesting is Robert's indication of an archaic definition for the French "probable":

Probable

1. Vx. Opinion probable, qui sans exclure la possibilité d'une autre opinion, ne présente cependant rien de contraire à la raison.—Relig. Opinion probable: opinion fondée sur des raisons sérieuses quoique non décisives.

[Emphasis added.]

This may very well explain how the word has come to be associated historically by lawyers with the word reasonable”. Like the second member of such other hallowed English legal phrases as "null and void", "good and valid”, “last will and testament" etc., it does nothing.

Second, and more significant, this view of the matter is confirmed by the judgment in Southam itself. In a passage preceding by a few lines the one quoted, supra, Dickson, J., (as he then was) speaking for the Court said this at page 167 (D.L.R. 658):

The common law required evidence on oath which gave "strong reason to believe” that stolen goods were concealed in the place to be searched before a warrant would issue. Section 443 of the Criminal Code authorizes a warrant only where there has been information upon oath that there is" reasonable ground to believe” that there is evidence of an offence in the place to be searched. The American Bill of Rights provides that “no Warrants shall issue, but upon probable cause, supported by Oath or affirmation. . .". The phrasing is slightly different but the standard in each of these formulations is identical.

[Emphasis added.]

Finally and even if I am wrong in my view as to the force to be given to the word "probable" in the phrase "reasonable and probable”, it is my further opinion that a grammatical analysis of subsection 231.3(3) shows that in fact the evidentiary burden of "more likely than not" has been met or exceeded.

Eliminating the unnecessary words for the purpose of this analysis, the subsection provides for the issuance of a warrant when a judge:

. . . is satisfied that there are reasonable grounds to believe that:

(a) an offence. . . has been committed;

(b) a document . . . is likely to found; and

(c) a building . . . is likely to contain such a document.

There can surely be no objection to the standard set in paragraphs (b) and (c) for the word “likely” must have the effect of importing the standard of probability or "more likely than not".

With respect to paragraph (a), the standard is set even higher; the requirement is for reasonable grounds to believe that an offence has been committed. Here, the reasonable belief is tied to the actual commission of the offence and not to a lower standard of mere probability.

In the upshot, therefore, I find this ground of attack to be without merit.

The Dilution of the Standard with Respect to the Probability of Finding Evidence

The appellants’ attack here concentrates very narrowly on the wording of paragraph 231.3(3)(b), which it is convenient to reproduce:

231.3 (3) A judge shall issue the warrant referred to in subsection (1) where he is satisfied that there are reasonable grounds to believe that

(b) a document or thing that may afford evidence of the commission of the offence is likely to be found; and . . .

[Emphasis added.]

The argument is that the use of the word "may" allows the issuance of a search warrant on showing of reasonable grounds to believe in a mere possibility that the thing to be found will afford evidence of a crime. The following passage from the judgment in Southam, supra, is relied on (at page 167 (D.L.R. 658)):

The problem is with the stipulation of a reasonable belief that evidence may be uncovered in the search. Here again it is useful, in my view, to adopt a purposive approach. The purpose of an objective criterion for granting prior authorization to conduct a search or seizure is to provide a consistent standard for identifying the point at which the interests of the state in such intrusions come to prevail over the interests of the individual in resisting them. To associate it with an applicant's reasonable belief that relevant evidence may be uncovered by the search, would be to define the proper standard as the possibility of finding evidence. This is a very low standard which would validate intrusion on the basis of suspicion, and authorize fishing expeditions of considerable latitude. It would tip the balance strongly in favour of the state and limit the right of the individual to resist, to only the most egregious intrusions. I do not believe that this is a proper standard for securing the right to be free from unreasonable search and seizure.

The argument seems to me to be quite simply unanswerable. The point is an extremely narrow one but the Court could not have used clearer words to indicate that a belief that evidence may be found is not good enough.

The courts of three provinces have struck down subsection 111(1) of the Customs Act whose English (but not the French) version contained a some- what similar wording. See Goguen v. Shannon, 50 C.C.C. (3d) 45 (N.B.C.A.); Nima v. McInnes, [1989] 2 W.W.R. 634 (B.C.S.C.); Canada v. Aquarius Computer, [1989] O.J. No. 1935 (Ont. H.C.J.).

While in practice, the line must be very thin between a reasonable belief that evidence may be found and a reasonable belief that evidence is to be found, the Supreme Court has made it very plain that only the second meets the requirements of the Charter. The text of paragraph 231.3(3)(b) is inadequate and therefore inoperative.

Other Grounds

In conclusion and for completeness' sake, it is as well to mention three grounds argued by appellants’ Counsel upon which we did not call on the respondents.

The first of such grounds was based on subsection 231.3(5):

231.3 (5) Any person who executes a warrant under subsection (1) may seize, in addition to the document or thing referred to in subsection (1), any other document or thing that he believes on reasonable grounds affords evidence of the commission of an offence under this Act and shall as soon as practicable bring the document or thing before, or make a report in respect thereof to, the judge who issued the warrant or, where the judge is unable to act, another judge of the same court to be dealt with by the judge in accordance with this section.

Counsel contended that the broad wording of this text gave a virtually unfettered discretion to the seizing officer and thereby vitiated any warrant issued under section 231.3.

We did not agree.

In the first place, it seemed to us that subsection 231.3(5) was clearly severable from the rest of the section and could not have the effect contended for by Counsel: at the very most, it could give rise to a declaration of invalidity of the subsection and of any seizure effected in purported compliance therewith.

Second and even more critical, this Court's judgment in Solvent Petroleum, supra, deals expressly with the same ground or attack and finds that subsection

(5) "meets the test of reasonableness and therefore of validity”. We were not persuaded that there was any good reason for us to revisit this finding.

Counsel's final two points dealt with the question of privilege: solicitorclient and accountant-client.

With regard to the solicitor-client privilege, the trial judge said at page 108 (D.T.C. 6056):

. . there seems little doubt that appropriate execution procedures were, in fact, followed. The reports made to Mr. Justice Strayer pursuant to section 231.3 of the Income Tax Act, indicate that a lawyer was present when the search was made and that claims for privilege were made pursuant to section 232 of the Income Tax Act. The documents for which privilege was claimed, by the lawyer, were placed in an envelope and turned over to the Regent Doré as custodian. An application for determination as to whether the documents were properly subject to solicitorclient privilege was filed in the Superior Court of Québec. That application was subsequently withdrawn. In this regard see the Affidavit and report to a judge of Yvon Demers, dated October 30, 1986 (paragraphs 3(d) and 4) and the affidavit and report to a judge of Gilles Thériault, dated June 2, 1987, both on file T-1798-86. In such circumstances it cannot seriously be thought that the warrants in question should be declared invalid. My understanding or Mr. Justice Lamer's statements in Descôteaux is that what is required is that the proper procedure is in fact followed. That the procedure was not set out on the face of the warrant is not itself determinative.

As far as the claim for accountant-client privilege is concerned, a claim based on a number of provisions of Québec law, the trial judge said at page 105 (D.T.C. 6054):

Even if I accept that the law of Québec provides for an accountant-client privilege in the context of litigation. I am not persuaded that such a rule has been adopted with respect to federal income tax litigation. If such a rule was intended to apply one would expect to find it expressly so provided in either the Canada Evidence Act or the Income Tax Act.

and again at page 105 (D.T.C. 6054):

It is not at all strange that solicitor-client communications are privileged in so far as compellable evidence before the courts is concerned, while those between an accountant and client are not. The purpose of the solicitor-client privilege is to ensure free and uninhibited communications between a solicitor and his client so that the rendering of effective legal assistance can be given. This privilege preserves the basic right of individuals to prosecute actions and to prepare defences. As Mr. Justice Lamer indicated, in Descôteaux v. Mierzwinski, [1982] 1 1S.C.R. 860 at 883, the privilege is recognized because it is necessary for the proper administration of justice. I do not think there is an overriding policy consideration, of this nature, in the case of accountant-client communication. An accountant may, as a matter of professional ethics, be required to keep communications and other information concerning his or her client confidential. But this is not founded upon a need to ensure an effective system of the administration of justice.

We could see nothing to criticize in her treatment of either matter and accordingly did not require to hear from the respondents.

Conclusion

For all the foregoing reasons, I would allow the appeals, set aside the judgments of the Trial Division and substitute for them judgments quashing the search warrants and ordering the return of everything seized in virtue thereof; I would also give a declaration that section 231.3 of the Income Tax Act is of no force or effect because it is inconsistent with sections 7 and 8 of the Charter. I would give the appellants their costs both here and in the Trial Division, but one set of costs only.

Appeals allowed.

Pratte, J.A.:—I agree.

Marceau, J.A.:—I agree.