Federal Court of Appeal Decisions

Date: 20040317

Docket: A-565-02

Citation: 2004 FCA 110

CORAM:        DÉCARY J.A.

LÉTOURNEAU J.A.

NADON J.A.

                        IN A MATTER pursuant to the Excise Act, R.S.C., 1985, c. E-14

                                                                         AND:

                           IN A MATTER of cigars, manufactured tobacco, raw tobacco

                             and other material in stock, engines, machinery and utensils

                                                                             

BETWEEN:

                                                    HER MAJESTY THE QUEEN

                                                                                                                                            Appellant

                                                                           and

                                             CC HAVANOS CORPORATION LTD.

                                                                                                                                        Respondent

                                         Heard at Montreal, Quebec, on March 11, 2004.

                                 Judgment delivered at Ottawa, Ontario, on March 17, 2004.

REASONS FOR JUDGMENT BY:                                                                     LÉTOURNEAU J.A.

CONCURRED IN BY:                                                                                                  DÉCARY J.A.

                                                                                                                                      NADON J.A.

Date: 20040317

Docket: A-565-02

Citation: 2004 FCA 110

CORAM:        DÉCARY J.A.

LÉTOURNEAU J.A.

NADON J.A.

                        IN A MATTER pursuant to the Excise Act, R.S.C., 1985, c. E-14

                                                                         AND:

                           IN A MATTER of cigars, manufactured tobacco, raw tobacco

                             and other material in stock, engines, machinery and utensils

                                                                             

BETWEEN:

                                                    HER MAJESTY THE QUEEN

                                                                                                                                            Appellant

                                                                           and

                                             CC HAVANOS CORPORATION LTD.

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

LÉTOURNEAU J.A.

[1]                This is an appeal against a decision of a judge of the Federal Court (judge) who granted, in part, an information for the condemnation of goods seized and forfeited under the Excise Act, R.S.C. (1985), c. E-14 (Act). The goods were cigars, manufactured tobacco, raw tobacco and other material in stock, engines, machinery and utensils on the premises. They were seized pursuant to paragraphs 88(1)(a), (b) and (d) of the Act which makes their seizure and forfeiture mandatory:

                                                                                                                                 (Emphasis added)

[2]                The learned judge found that the forfeiture was valid, but ordered that the material which assisted in the manufacturing and conservation of cigars, such as moulds, boxes, tobacco presses or knives, work tables, humidifier, be released and remitted to the respondent. However, the tobacco itself, whether manufactured or raw, was condemned.

[3]                The issue before this Court is whether the judge had jurisdiction under subsection 116(2) of the Act to remit to the respondent part of the forfeited material as he did. It should be noted that the claim to property seized pursuant to section 116 is subject to specific conditions, including a limitation period. The section reads :

                                                                                                                                 (Emphasis added)

[4]                Within a month from the day of the seizure and forfeiture, the respondent gave notice to the appellant pursuant to subsection 117(1) of the Act that he intended to claim the goods. The appellant replied to this notice with a Notice of Information and Information pursuant to subsection 116(1) seeking an order for the condemnation of the goods seized and forfeited. The respondent then sought relief under subsection 116(2).

[5]                Counsel for the respondent did not file written submissions with the Court. At the hearing, he submitted that the judge had the authority to make a distinction as he did between the objects seized, namely between the tobacco itself and the rest of the material which was used in the manufacturing of the said tobacco. He also supported the judge's conclusion that section 116 was ambiguous and, therefore, should be interpreted in favour of the respondent. He shared the views of the judge that subsection 116(2) gave him jurisdiction to order the release of part of the material seized and forfeited.

[6]                With respect, I believe that the learned judge misconstrued and misapplied section 116 of the Act and its relationship with section 88.

[7]                The proceeding that was engaged pursuant to sections 88 and 116 is a proceeding in rem, that is to say "a proceeding against the thing": The King v. Krakowec et al., [1931] S.C.R. 134, at page 142. Such a proceeding seeks the condemnation of the thing itself seized and forfeited, not that of its owner or possessor. Section 88 identifies those things that are to be seized and forfeited in case of a violation of that section.

[8]                The learned judge having found that all the material had been properly seized and forfeited pursuant to section 88 of the Act, he had, according to a long and authoritative line of judgments, no discretion under subsection 116(2) to release any of the said material: see The King v. Krakowec et al., supra; Zarowney v. The Queen, [1956] Exchequer Court of Canada 16; The King v. Central Railway Signal Co., [1933] S.C.R. 555; Becta Transport Ltée v. Canada (1995), 93 F.T.R. 132; Daigneault v. Ministre du Revenu national (Douanes et Accise) (1990), 44 F.T.R.; Duchesne v. Ministre du Revenu national (Douanes et Accise) (1996), 120 F.T.R. 28; In re Excise Act & a 1970 Chrysler Automobile, [1972] F.C. 1053; Gosselin v. The Queen, [1954] Exchequer Court of Canada 658; Industrial Acceptance Corporation Ltd. v. The Queen, [1952] Exchequer Court of Canada 530; James v. The Queen, [1952] Exchequer Court of Canada 396; Lacourse v. Canada (1993), 65 F.T.R. 115; Lawson v. The Queen, [1980] 1 F.C. 767; Mayberry v. The King, [1950] Exchequer Court of Canada 402; Porter v. Canada, [1989] 3 F.C. 403; Pourvoirie Hart 2551-5651 Québec Inc. v. Canada (1992) 58 F.T.R. 114; Stacey, Re (1994), 87 F.T.R. 303; Thul Re (1995), 92 F.T.R. 295.

[9]                There is no lack of sympathy in many of these cases towards the persons whose property has been condemned: see for example Porter v. Canada, supra; Daigneault v. Ministre du Revenu national, supra. Indeed, courts have alluded from time to time to the severity of forfeiture provisions in taxation statutes or their stern and draconian aspect: see Porter v. Canada, supra, at pages 407 and 420; James v. The Queen, supra, at page 404; Gosselin v. The Queen, supra.

[10]            However, they have also stressed their great importance as law enforcement tools to ensure compliance in matters relating to revenue. In Porter v. Canada, supra, the plaintiff constitutionally challenged the validity of subsection 163(3) of the Act on the basis that the subsection offended sections 8, 11 and 12 of the Charter of Rights and Freedoms (Charter). Joyal J. rejected the plaintiff's submissions and, in any event, expressed the view that the legitimacy of forfeiture could easily be justified as a reasonable measure to frustrate further criminal enterprise, protect the public welfare and secure the Crown revenue in the public interest. At page 423, he wrote:

Parliament may justifiably be given some latitude in determining the appropriate remedy to ensure compliance in matters relating to revenue (including customs, excise and income tax) where voluntary disclosure is the rule and inspection and enforcement by the state the exception.

[11]            Words to the same effect can be found in the reasons for judgment of Rand J., of the Supreme Court of Canada, in Industrial Acceptance Corporation v. The Queen, supra, at page 277:

The forfeiture of property used in violation of revenue laws has for several centuries been one of the characteristic features of their enforcement and the considerations which early led to its adoption as necessary are not far to seek. Smuggling, illegal manufacture of liquors, illegal sale of narcotics and like activities, because of their high profits and the demand, in certain sections of society, for them, take on the character of organized action against the forces of law; and with the techniques and devices, varying with the times, that have been open to these enemies of social order, the necessity to strike against not only the persons but everything that has enabled them to carry out their purposes has been universally recognized.

At page 278, he went on to add, after a review of the legislative history of forfeiture provisions, that "from this uniform legislative judgment, it is at once apparent that forfeiture has from the beginning been treated as one of the necessary conditions for compelling substantial obedience to revenue laws".

[12]            No constitutional challenge as to the validity of section 88 and 116 of the Act has been raised in the present instance although I am very much inclined to believe, like Joyal J. did, that, if found to be in breach of the Charter, these provisions would be saved under section 1 of the Charter. I note in passing that Parliament, in its never ending struggle to ensure compliance with the law, has seen fit to introduce recently in the Criminal Code the concept of offence-related property and provide for their forfeiture by means, inter alia, of an application for an in rem forfeiture: see section 2 which defines offence-related property as a property by means or in respect of which an indictable offence is committed or that is used or is intended for use in the commission of an indictable offence and sections 490.1 to 490.9 which deal with the forfeiture itself.

[13]            The text of section 116 of the Act is, in essence, almost word for word, the text of former section 124 which was considered by the Supreme Court of Canada in The King v. Krakowec et al., supra:

                                                                                                                                 (Emphasis added)

[14]            In interpreting former section 124, the Supreme Court of Canada ruled that, where the goods have been properly seized and forfeited, as they were in this case pursuant to section 88, "the court thereunder is vested with no discretion, it must decide according to law": see page 143. Both former subsection 124(2) and new subsection 116(2) stipulate that the court must act "as the case requires". This means that, when the goods have been legally seized and forfeited, the court is left with no other option than to condemn them. It cannot release them. It would have the authority to release them if the seizure and forfeiture were found to be illegal.

[15]            I cannot agree with counsel for the respondent that subsection 116(2) is ambiguous, especially after the Supreme Court of Canada clearly stated what the powers of the Court are under that subsection. If ever it could be said at one time that the meaning of that subsection was ambiguous, this is no longer the case. As Rinfret J. said in Krakowec, supra, at page 142, "even penal statutes must not be construed so as to narrow the words of the statute to the exclusion of cases which those words, in their ordinary acceptation, would comprehend... and it is surely not for the judge so to mould a statute as to make it agree with his own conception of justice": see also the statement of Cameron J. to the same effect in Industrial Acceptance Corporation Ltd. v. The Queen, supra, at page 544.

[16]            The interpretation given to subsection 116(2) of the Act does not leave a person whose property has been condemned without remedy. The authority to grant relief in such circumstances is vested with the Governor in council pursuant to subsection 23(2) of the Financial Administration Act, R.S.C. (1985), c. F-11: see The King v. Krakowec et al., supra, at page 143; Lawson v. The Queen, [1980] 1 F.C. 767, at page 772 (Fed. Ct. T.D.). The Governor in Council may remit any forfeiture, whether in whole or in part, where it considers that the enforcement of the forfeiture is unreasonable or unjust or that it is otherwise in the public interest to remit the forfeiture: see the definition of penalty in subsection 23(1).

[17]            For these reasons, I would allow the appeal without costs and set aside the decision of the Federal Court. Rendering the judgment that should have been rendered, I would dismiss with

costs the action in claim of the respondent and I would condemn all the material seized and forfeited pursuant to section 88 of the Act.

                                                                                                                               "Gilles Létourneau"               

                                                                                                                                                      J.A.

"I agree

Robert Décary J.A."

"I agree

Marc Nadon J.A."

                                                  FEDERAL COURT OF APPEAL

                            NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                          A-565-02

STYLE OF CAUSE:                          HER MAJESTY THE QUEEN v. CC HAVANOS CORPORATION LTD.

PLACE OF HEARING:                    Montreal, Quebec

DATE OF HEARING:                      March 11, 2004

REASONS FOR JUDGMENT:       LÉTOURNEAU J.A.     

CONCURRED IN BY:                     DÉCARY J.A.

NADON J.A.

DATED:                                             March 17, 2004

APPEARANCES:

SOLICITORS OF RECORD: