MacPherson C.J.:—Her Majesty the Queen as represented by the Attorney General of Canada (the"applicant") has applied pursuant to subsection 232(6) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") for an order that the sheriff of the Judicial Centre of Yorkton deliver certain documents to an officer of the Department of National Revenue (the" Department"). The facts are not complicated, but unfortunately, this cannot be said for the applicable sections of the Act.
The facts are set forth in the affidavit of James Knoblauch, an officer of the Department and in the Department's requirement notice and the respondent's letter annexed as exhibits. Apparently the Department was dissatisfied with the income tax return filed by the respondent lawyer Wasylyshen (the respondent") for the year 1989, and to some extent for the years 1987 and 1988. The Department therefore served the requirement notice on the respondent, and at the foot of this notice, the respondent certified that he had been personally served with the notice on October 25, 1990. This notice required the respondent, by November 30, 1989, to provide to the Department certain financial and other records relating, inter alia, to the respondent's law practice, and it stated that if the respondent so requested, an officer of the Department would attend at the respondent's office to receive and inspect the required documents.
Being concerned with the requirement of client confidentiality, the respondent referred the requirement notice to the Law Society of Saskatchewan for advice, and then on October 29, 1990 he wrote the letter to the Department (exhibit B to the Knoblauch affidavit) in which he raised the question of unnamed clients’ privilege in respect of the documents requested by the Department in para. (1) of the requirement notice, and stated that such documents “will be left in a sealed envelope and delivered to the local sheriff tomorrow in accordance with the provisions of Sec. 232 of the Income Tax Act”. The Knoblauch affidavit states that the sheriff confirmed receipt of a sealed envelope from the respondent, that it was in his custody, and that since receiving the envelope, the sheriff had received no application from the respondent or anyone claiming to be a client of the respondent for the return of any of the contents of the said envelope or to have the “issue of solicitorclient privilege decided". It was on the basis of these bare facts that the applicant mounts this application. Parenthetically, it is not surprising that the sheriff did not hear from any of the respondent's clients because there is nothing in the evidence to suggest that the clients had any knowledge of these events.
I have annexed as a schedule to this fiat [see Schedule to Fiat appended to judgment] the various sections of the Act which I will hereafter refer to or which are otherwise relevant.
As stated, this application is made pursuant to subsection 232(6) of the Act and the opening words of this subsection make it abundantly clear that it applies, and I have jurisdiction to hear the application, only where the documents in question have been "seized and placed in custody under subsection
(3) or where a document is being retained under subsection (3.1)". Only one of these prerequisites need be met, but it is my view, on the evidence before me, that neither of them has been met and consequently I am without jurisdiction to grant the order requested. My reasons for so finding are:
1. As to subsection 232(3), it speaks of an officer (as defined in subsection 232(1)(d)) who is “about” to seize a document in a lawyer's possession pursuant to section 231.3, and where the lawyer claims that his specifically named client has a solicitor-client privilege in respect of that document. Where these circumstances pertain, the officer must seize the document, place it in a sealed package and deliver it to the sheriff, who then becomes a "custodian" as defined in subsection 232(1)(b). Section 231.3 is the section empowering a judge to issue a warrant authorizing a search for, and seizure of, any document that may afford evidence of an offence under the Act. On the evidence before me, no such warrant ever issued. Further, the documents in question were placed in the sheriff's custody by the lawyer, and not the officer, so that the sheriff did not become a " custodian" within the meaning of subsection 232(6) and as defined in subsection 232(1)(b). Consequently, the documents in question were not “seized and placed in custody" under subsection 232(3) as the first prerequisite of subsection 232(6) requires.
2. (a) The second of the prerequisites in subsection 232(6) speaks of a document “being retained” under subsection 232(3.1). It provides for an officer “about to inspect or examine a document" in the lawyer's possession where the lawyer claims his named client has a solicitor-client privilege in respect of the document, and requires the lawyer under those circumstances to seal the document in a package and retain it and ensure that it is preserved", all of which is stated to be pursuant to subsection 231.1 and 231.2. It must first be pointed out that the requirements of subsection 232(3.1) have not been met because the respondent did not retain" the documents—he sent them to the sheriff. He may thereby have breached the Act and be guilty of some offence thereunder, but nonetheless, the requirement of the subsection has not been met. Further, this subsection 232(3.1) could have no application because the respondent made no claim of privilege in respect of a "named client".
(b) Sections 231.1 and 231.2 are somewhat confusing when read together—it is difficult to know whether they are alternative procedures, or whether the latter is intended to supplement the power in the former. In any event, the Knoblauch affidavit specifies that the Department proceeded only under section 231.2, and the first requirement in the requirement notice clearly requires production of documents “relating to one or more unnamed persons". Under subsection 231.2(2), this kind of requirement must not be imposed in the absence of "the authorization of a judge”, and there is no evidence of any such authorization. So, again, the necessary preconditions have not been met.
Also, in respect of both subsection 232(3) and (3.1), I do not think it can be said, on the evidence before me, that the officer was “about to seize a document" or "about to inspect or examine a document" in the respondent's possession. On the evidence, all that happened was that the requirement notice was sent to the respondent pursuant to subsection 231.2(1) whereupon the respondent sent certain of the requested documents to the sheriff in a sealed envelope and wrote the letter to the Department which is referred to above. On the evidence, the next step was Mr. Knoblauch's communication with the sheriff to learn that the sheriff had received the sealed envelope from the respondent and that as far as the sheriff knew, there had been no applications by the respondent or any of his clients to have any of the contents of the sealed envelopes returned to them, or that the issue of solicitor-client privilege be decided. The Department thus being aware that the respondent did not have the documents, it can hardly be said that anyone representing the Department was about" to examine or otherwise deal with documents in the respondent's possession. Interestingly, although probably irrelevant, there is no evidence that the Department or anyone else, prior to this application, made any effort to examine or deal with those documents while in the possession of the sheriff.
As stated above, in the applicant's notice of motion, it seeks an order under subsection 232(6)"that the Sheriff. . . deliver certain documents to an officer of the Department of National Revenue”. For the reasons set forth above, I hold that I do not have jurisdiction to make the order sought because, as required by subsection 232(6) the documents in question have not been "seized and placed in custody under subsection (3)" nor are the documents in question "being retained under subsection (3.1)".
I think I should mention that in cases of this kind where the Act provides for "an authorized person” to take some action (e.g., subsection 231.1(1)), there should be some proof that the Departmental person who has taken the action is in fact authorized by the Act to do so. In this case, subsection 231.2(1) states that the Minister can send the requirement notice, and subsection 900(2) of the Regulations authorizes a" Director-Taxation" to act on a Minister's behalf under this section. The requirement notice itself, which is exhibited to the Knoblauch affidavit, purports to be signed by"A.R. Kellett, Director-Taxation”, but there is nothing in the Knoblauch affidavit itself which confirms that Mr. Kellett is, in fact, a” "Director-Taxation". Similarly, if Mr. Knoblauch was an "officer" under subsection 232(3) or (3.1), as defined in subsection 232(1)(d), there should be proof thereof.
Although I have dismissed the present application, it does seem to me that them are other avenues open to the Department to secure the documents in question while ensuring that any issue as to solicitor-client privilege can be resolved without breaching any privilege that may exist. For example, if, as it appears, the respondent is genuinely concerned about his clients’ privilege, it should not be difficult for the Department and the respondent to agree on an arrangement whereby the documents will be returned by the sheriff to the respondent after which the procedure contemplated by subsection 232(14) of the Act could be followed.
Finally, I must note that the Law Society of Saskatchewan appeared by counsel on this application as an intervenor pursuant to Queen's Bench Rule
75. Apparently leave to intervene under that rule was granted on an earlier occasion although there is no formal order or other indication on the file that such leave was granted. The Law Society wished, as amicus curiae, to challenge those provisions of the Income Tax Act, which by affecting solicitorclient privilege, thereby infringe the Charter rights of affected clients. In the main application before me, since no client of the respondent has complained of its rights or freedoms under the Charter having being infringed or denied by any action of the Department under the provisions of the Income Tax Act, it is at least doubtful whether the Law Society could have any standing as amicus curiae. However, in view of my dismissal of the main application, there is no need for me to deal with the Law Society's position.
In accordance with subsection 232(9) there will be no order as to costs.
Crown's motion dismissed.
Schedule to Fiat
H.H. Stikeman, Q.C., Income Tax Act, Annotated, 20th ed. (Don Mills: Richard De Boo, 1990), at 920
231.1 (1) Inspections.—An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act,
(a) inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by him under this Act, and
(b) examine property in an inventory of a taxpayer and any property or process of, or matter relating to, the taxpayer or any other person, an examination of which may assist the authorized person in determining the accuracy of the inventory of the taxpayer or in ascertaining the information that is or should be in the books or records of the taxpayer or any amount payable by him under this Act,
and for those purposes the authorized person may
(c) subject to subsection (2), enter into any premises or place where any business is called on, any property is kept, anything is done in connection with any business or any books or records are or should be kept; and (d) require the owner or manager of the property or business and any other person on the premises or place to give him all reasonable assistance and to answer all proper questions relating to the administration or enforcement of this Act and, for that purpose, require the owner or manager to attend at the premises or place with him.
231.2 (1) Requirement to provide documents or information.— Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,
(a) any information or additional information, including a return of income or a supplementary return; or
(b) any document
(2) Unnamed persons.—The Minister shall not impose on any person (in this section referred to as a" third party") a requirement under subsection (1) to provide information or any document relating to one or more unnamed persons unless he first obtains the authorization of a judge under subsection (3).
231.3(1) Search warrant.—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.
232(1) Definitions.—In this section,
(a) "judge".— Judge” means a judge of a superior court having jurisdiction in the province where the matter arises or a judge of the Federal Court of Canada;
(b) "custodian".—"custodian" means a person in whose custody a package is placed pursuant to subsection (3);
(c) "lawyer".— lawyer" means, in the province of Quebec, an advocate, lawyer or notary and, in any other province of Canada, a barrister or solicitor,
(d) “officer”.—’ officer” means a person acting under the authority conferred by or under sections 231.1 to 231.5; and
(e) "solicitor-client privilege".—"solicitor-client privilege" means the right, if any, that a person has in a superior court in the province where the matter arises to refuse to disclose an oral or documentary communication on the ground that the communication is one passing between him and his lawyer in professional confidence, except that for the purposes of this section an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such a communication.
(3) Seizure of certain documents where privilege claimed.—When, pursuant to section 231.3, an officer is about to seize a document in the possession of a lawyer and the lawyer claims that a named client of his has a solicitor-client privilege in respect of that document, the officer shall, without inspecting, examining or making copies of the document,
(a) seize the document and place it, together with any other document in respect of which the lawyer at the same time makes the same claim on behalf of the same client, in a package and suitably seal and identify the package; and
(b) place the package in the custody of the sheriff of the district or county in which the seizure was made or, if the officer and the lawyer agree in writing on a person to act as custodian, in the custody of that person.
(3.1) Examination of certain documents where privilege claimed.—Where, pursuant to sections 231.1 and 231.2, an officer is about to inspect or examine a document in the possession of a lawyer and the lawyer claims that a named client of his has a solicitor-client privilege in respect of that document, the officer shall not inspect or examine the document and the lawyer shall
(a) place the document, together with any other document in respect of which the lawyer at the same time makes the same claim on behalf of the same client, in a package and suitably seal and identify the package or, if the officer and the lawyer agree, allow the pages of the document to be initialed and numbered or otherwise suitably identified; and
(b) retain it and, ensure that it is preserved until it is produced to a judge as required under this section and an order is issued under this section in respect of the document.
(4) Application to judge.—Where a document has been seized and placed in custody under subsection (3) or is being retained under subsection (3.1), the client, or the lawyer on behalf of the client, may
(a) within 14 days after the day the document was so placed in custody or commenced to be so retained apply, on three clear days notice of motion to the Deputy Attorney General of Canada, to a judge for an order
(i) fixing a day, not later than 21 days after the date of the order, and place for the determination of the question whether the client has a solicitorclient privilege in respect of the document, and
(ii) requiring the production of the document to the judge at that time and place;
(6) Order to deliver or make available.—Where a document has been seized and placed in custody under subsection (3) or where a document is being retained under subsection (3.1) and a judge, on the application of the Attorney General of Canada, is satisfied that neither the client nor the lawyer has made an application under paragraph (4)(a) or, having made that application, neither the client nor the lawyer has made an application under paragraph (c) thereof he shall order
(a) that the custodian deliver the document to the officer or some other person designated by the Deputy Minister of National Revenue for Taxation, in the case of a document that was seized and placed in custody under subsection (3); or
(b) that the lawyer make the document available for inspection or examination by the officer or other person designated by the Deputy Minister of National Revenue for Taxation, in the case of a document that was retained under subsection (3.1).
(9) Costs.—No costs may be awarded upon the disposition of any application under this section.
(10) Directions.—Where any question arises as to the course to be followed in connection with anything done or being done under this section, other than subsection (2), (3) or (3.1), and there is no direction in this section with respect thereto, a judge may give such direction with regard thereto as, in his opinion, is most likely to carry out the object of this section of allowing solicitor-client privilege for proper purposes.
(12) Idem.—No officer shall inspect, examine or seize a document in the possession of a lawyer without giving him a reasonable opportunity of making a claim under this section.
(14) Waiver of claim of privilege.—Where a lawyer has, for the purpose of subsection (2), (3) or (3.1), made a claim that a named client of his has a solicitorclient privilege in respect of information or a document, he shall at the same time communicate to the Minister or some person duly authorized to act for the Minister the address of the client last known to him so that the Minister may endeavour to advise the client of the claim of privilege that has been made on his behalf and may thereby afford him an opportunity, if it is practicable within the time limited by this section, of waiving the claim of privilege before the matter is to be decided by a judge or other tribunal.