Trainor, J.:—This stated case is a test of the constitutional validity of subsection 231(3) of the Income Tax Act, R.S.C. 1952, c. 148 (am. 1970-71-72, c. 63), as amended, when read in the light of section 8 of the Canadian Charter of Rights and Freedoms.
S. 231(3) The Minister may, for any purposes related to the administration or enforcement of this Act, by registered letter or by a demand served personally, require from any person,
(a) any information or additional information, including a return of income or supplementary return, or
(b) production, or production on oath, of any books, letters, accounts, invoices, statements (financial or otherwise) or other documents,
within such reasonable time as may be stipulated therein.
S. 8 Everyone has the right to be secure against unreasonable search or seizure.
On August 9, 1984 informations were laid by the Royal Canadian Mounted Police alleging that the respondents did :
at the City of Windsor in the County of Essex, or elsewhere in the Province of Ontario, between the 19th day of October, 1983, and the 19th day of January, 1984, fail to provide to the Minister of National Revenue, pursuant to a "requirement for information and production of documents" dated the 6th day of October, 1983 and served on the 19th day of October, 1983, the following . . .
The informations then listed the productions set out in two demands.
The prior demands made by the Minister required production of a multitude of documents alleged to be in the possession of the respondents and as well the preparation and production of specified reports not yet in existence. It is not in issue that the time for production, set out in the demand, was a reasonable time.
Subsection 238(2) of the Act calls for a fine on summary conviction for breach of subsection 231(3) ranging from $200 to $10,000 and in the discretion of the trier, in addition, imprisonment not to exceed six months.
The charges came on for hearing before Provincial Court Judge K.A. Langdon on March 21, 1985. At the outset and before plea, on a motion to quash that learned judge granted the motion finding that:
(a) service of a requirement under section 231(3) of the Income Tax Act was tantamount to a seizure,
(b) the seizure power was unreasonable,
(c) the powers conferred upon the Minister of National Revenue by section 231(3) of the Income Tax Act offended section 8 of the Canadian Charter of Rights and Freedoms, and
(d) section 231(3) of the Income Tax Act was of no force or effect.
His reasons are summarized in the stated case as follows:
(a) section 231(3) of the Income Tax Act contains no provision for prior authorization by a person other than the Minister,
(b) section 231(3) of the Income Tax Act contains no provision for review of the Minister's discretion,
(c) physical intrusion is not an essential ingredient of a search or seizure,
(d) the Crown led no evidence as to foreign laws or as to the reasonableness of section 231(3) of the Income Tax Act and failed to discharge the onus upon it under section 1 of the Canadian Charter of Rights and Freedoms, and
(e) a person prosecuted under section 238(2) of the Income Tax Act does not have the right to have the validity of his refusal to comply with a demand under section 231(3) of the Income Tax Act determined in any judicial proceedings.
The threshold issue before me, is whether the demand for information is a seizure and therefore within the ambit of section 8 of the Charter.
If it is a seizure, then I have no difficulty in agreeing with the learned judge that subsection 231(3) must be declared to be invalid as unreasonable for the reasons given by Dickson, J., now Dickson, C.J., in Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145; 84 D.T.C. 6467.
Those reasons were quoted at length by the judge below. In summary form the minimum requirements of section 8 call for the following:
(1) Prior authorization, where feasible, to seize.
(2) Provision for review by an impartial arbiter such as provided in section 231(4) of the Act.
(3) A statement under oath of reasonable and probable grounds for the seizure and the relevance of the productions sought.
I agree with Judge Langdon that not one of these minimum safeguards is present in this case.
The more difficult but essential element of this case is whether the demand is in fact a seizure. If it is not then the constitutional argument fails.
The leading case on the question of whether a demand for production, which carries with it penal sanctions for non-compliance, constitutes a seizure under section 8 of the Charter is Thomson Newspapers Limited et al. v. Director of Investigation and Research, Combines Investigation Act et al. (1986), 57 O.R. (2d) 257; 30 C.C.C. (3d) 145.
The validity of section 17 of the Combines Investigation Act, R.S.C. 1970, c. C-23, was at issue in that decision. The production of documents provisions of section 17 cannot be distinguished in any substantial way from those contained in subsection 231(3) except for subsection 17(3).
S. 17(3) A member of the Commission shall not exercise power to penalize any person pursuant to this Act, whether for contempt or otherwise, unless, on the application of the member, a judge of the Federal Court of Canada or of a superior or county court has certified, as such judge may, that the power may be exercised in the matter disclosed in the application, and the member has given to such person twenty-four hours notice of the hearing of the application or such shorter notice as the judge deems reasonable.
The very real difference between the two acts is the safeguard requirement of an independent arbiter prior to prosecution for non-compliance with a demand.
The significance of an arbiter is explained by Dickson, C.J. in Hunter et al., supra, in these words [page 160 S.C.R.] :
If the issue to be resolved in assessing the constitutionality of searches under s. 10 were in fact the governmental interest in carrying out a given search outweighed that of the individual in resisting the governmental intrusion upon his privacy, then it would be appropriate to determine the balance of the competing interests after the search had been conducted. Such a post facto analysis would, however, be seriously at odds with the purpose of s. 8. That purpose is, as I have said, to protect individuals from unjustified state intrusions upon their privacy. That purpose requires a means of preventing unjustified searches before they happen, not simply of determining, after the fact, whether they ought to have occurred in the first place. This, in my view, can only be accomplished by a system of prior authorization, not one of subsequent validation.
The respondent makes its submission in these words:
. . . an unrestricted right to demand coupled with prosecution and penalty for failure to comply is akin to a seizure unless the statutory scheme gives the person required to produce a reasonable opportunity to dispute the Order and prevent the surrender of the documents. Otherwise, to use an analogy, if the State were unable to obtain a search warrant under Section 443 of the Criminal Code, it might very well be lawful for Parliament, in the exercise of its criminal law jurisdiction, to authorize the Attorney General of Canada for any purposes related to the administration or enforcement of the Criminal Code, by registered letter or by demand served personally, to require from any person that he produce any document or thing.
As the Charter must be approached on a purposive basis, it would be untenable to find that the state could obtain by forced production what it could not obtain through the exercise of a valid search warrant.
Grange, J.A., writing for the Ontario Court of Appeal, made reference to the search and seizure provisions of section 10 of the Combines Investigation Act that had been declared invalid by the Supreme Court of Canada in Hunter et al. v. Southam Inc., supra. He said [page 268 O.R.]:
“Seizure” is traditionally and etymologically the forcible taking of possession of property. Clearly the taking under s. 10 amounts to a seizure. As I have said, if an order under s. 17 to produce documents is simply an indirect way of accomplishing a seizure under s. 10, then the former section subject to the test of reasonableness must be struck down as well. I think the addition of s-s. (3) to s. 17 referred to above is relevant not only to the question of whether the section effects a seizure but also if it does whether the seizure is reasonable.
At page 18 of the reasons [page 268 O.R.] Grange, J.A. continues:
What happens under s. 17 is that an order is issued. An order is of course to be obeyed and if it is obeyed then the consequence is much the same as a seizure under s. 10. But if it is not obeyed no penalty can be imposed without the matter being considered by an impartial judicial arbiter. Moreover, as appears from Director of Investigation & Research v. Restrictive Trade Practices Com'n. et al., . . . the order can be attacked on motion to review before it takes effect. The result of the order is really no different from that consequent upon the issuance of a subpoena duces tecum which can be issued in either civil or criminal proceedings without any requirement of assessing its reasonableness and the conflicting interests of the parties.
He then concludes [page 269 O.R.]:
. . . It is not necessary to formulate a general rule as to what constitutes a seizure; it is sufficient to say that the s. 8 prohibition does not encompass an order requiring the production of documents so long as the section authorizing the order (or the law apart from that section) gives the person required to produce a reasonable opportunity to dispute the order and prevent the surrender of the documents. That in my view is precisely the position under s. 17.
[Emphasis is mine.]
Counsel for the respondent argues that the words of Grange, J.A., "a reasonable opportunity to dispute the order", must be read to include not only a reasonble time to dispute the demand before prosecution, which subsection 231(3) does stipulate, but a forum that has jurisdiction, discretion and independence to determine the issues between the parties.
Counsel argues that it is illusory to say the taxpayer can seek a declaration or certiorari as the courts do not have the discretion that is given to a judge under provisions such as subsection 17(3) of the Combines Investigation Act. Mr. Shanoff says the illusion is highlighted by the following passage from the decision in James Richardson & Sons, Limited v. The Minister of National Revenue, [1984] C.T.C. 345; 84 D.T.C. 6325. Wilson, J., writing for a unanimous court, said [pages 349-50 C.T.C.]:
The language of subsection 231(3) of the Income Tax Act is unquestionably very broad and on its face would cover any demand for information made to anyone having knowledge of someone else's affairs relevant to that other person's tax liability. It would, in other words, if construed broadly, authorize an exploratory sortie into any taxpayer's affairs and require anyone having anything to contribute to the exploration to participate. It would not be necessary for the Minister to suspect noncompliance with the Act, let alone to have reasonable and probable grounds to believe that the Act was being violated as required in subsection 231(4). Provided the information sought had a bearing (or perhaps even could conceivably have a bearing) on a taxpayer's tax liability it could be called for under the subsection.
Mr. Shanoff argues that because the section is so broad the taxpayer would have little chance of success in opposing a demand by seeking a declaration or an order in the nature of certiorari.
I have now had an opportunity of reading this decision in its entirety. As often happens, the passage quoted must not be read out of context.
Firstly, the demand in the case was successfully attacked by an action in the Federal Court for certiorari and for a declaration of invalidity. The attack made by the Richardson company was on four grounds:
1) the Requirements are not authorized by s. 231(3) of the Act;
2) section 231(3) of the Act is ultra vires the Parliament of Canada;
3) the Requirements are void under the provisions of the Charter of Rights and Freedoms; and
4) the Requirements are void under the provisions of the Canadian Bill of Rights.
The case was decided on the first ground and as a consequence the Charter argument under section 8 was not dealt with.
Secondly, and more importantly, Wilson, J., immediately following the passage dealing with the scope of subsection 231(3), said this [page 350 C.T.C.]:
The Canadian Bank of Commerce case, however, makes it clear that the subsection is not to be construed that broadly. It establishes through the majority judgment written by Mr. Justice Cartwright that:
(a) the test of whether the Minister is acting for a purpose specified in the Act is an objective one and has to be decided on the proper interpretation of the subsection and its application to the circumstances disclosed;
(b) the obtaining of information relevant to the tax liability of some specific person or persons whose liability to tax is under investigation is a purpose related to the administration or enforcement of the Act;
(c) it is not necessary that the person from whom the information is sought be one whose liability to tax is under investigation;
(d) the fact that the giving of the information may disclose private transactions involving persons who are not under investigation and may not be liable to tax does not invalidate the Requirement.
The learned judge concluded that subsection 231(3) could not be used by the Minister to conduct a fishing expedition and she declared the demand to be invalid.
Grange, J.A., in Thomson Newspapers, supra, states that section 8 does not invalidate an order for production as long as the authorizing legislation or the law otherwise affords the recipient a reasonable opportunity to dispute the demand or order before production or prosecution. He referred to the case of Director of Investigation and Research v. Restrictive Trade Practices Commission et al. (1985), 4 C.P.R. (3d) 59; 18 D.L.R. (4th) 750 (F.C.A.), as an example of a remedy available in the law generally.
One of my concerns during argument was that the section was so broad that the relevance, or reasonableness, of the Minister's demand could not reasonably be argued by the taxpayer on a motion for certiorari or for a declaration of invalidity. However, it appears from the decision in James Richardson & Sons, Limited, as well as other decisions including Director of Investigation and Research, and from evidence called by both sides on the original motion in this case, that this was not simply a fishing expedition. The issue between the parties was delineated. It is whether the Revenue Canada auditors were obstructed or prevented from carrying on their audit and as a consequence require the productions demanded to complete the audit.
The recipient of a demand under subsection 231(3) can successfully attack such demand before prosecution for failure to comply on a number of grounds including the following:
(1) That a reasonable time for production has not been afforded.
Re Joseph et al. and Minister of National Revenue, [1985] 2 C.T.C. 164; 85 D.T.C. 5391; 51 O.R. (2d) 658.
(2) That the Minister is engaged in a fishing expedition and not a genuine and serious enquiry as to some taxpayer's liability.
(3) That the documents demanded are not germane or relevant to the issues between the parties.
(4) That the documents are privileged.
There are no doubt many other grounds of attack available, dependent on the circumstances. For example, I would think that where a demand is made and where the issues between the parties are not clearly identified, unlike a case where charges have been laid, that it would be incumbent on the Minister to set out the grounds for the demand in order that relevance could readily be ascertained, in the first instance by the recipient of the demand and later, if necessary, by the court.
These avenues of attack cannot be said to be illusory. They create substantial defences and are an answer to many of the concerns raised during argument about ministerial excesses and oppressive conduct.
I therefore answer both questions stated in the negative. A subsection 231(3) demand is not a seizure within section 8 of the Charter.
Appeal allowed.