Date: 20011220
Docket: 2000-155-IT-G
BETWEEN:
ALLEN WARAWA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Order
Mogan J.
[1] The Appellant has filed a notice of appeal from assessments issued under the Income Tax Act for the taxation years 1985, 1986, 1987, 1988, 1989 and 1990. According to the pleadings (paragraph 13 of the Respondent's Reply), the assessments for the taxation years 1985, 1986, 1987 and 1988 were made after the "normal reassessment period" as that phrase is defined in subsection 152(3.1) of the Act. In a very different court proceeding, the Appellant was charged in an Information setting out 59 counts alleging that he had committed offences under paragraph 239(1)(a) or (d) of the Act. The offences are alleged to have occurred in the period 1985 to 1990.
[2] The criminal matter was heard by Mr. Justice C.P. Clarke of the Alberta Court of Queen's Bench. At all relevant times, the Appellant operated a farm in partnership with his wife, and operated his own business of providing accounting services to his clients. When Revenue Canada was investigating the tax affairs of the Appellant and some of his accounting clients, certain documents and oral statements were obtained from the Appellant by various employees of Revenue Canada. When the criminal matter came on for hearing before Justice Clarke, a number of issues arose in the course of a voir dire concerning the admissibility of the documents and oral statements obtained from the Appellant. The Appellant (i.e. the accused in the criminal matter) argued that the common law rules of voluntariness of a statement had been violated, and that his rights under sections 7 and 8 of the Charter of Rights and Freedoms had been violated.
[3] Sections 7 and 8 of the Charter state:
7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.
8. Everyone has the right to be secure against unreasonable search or seizure.
In lengthy reasons reported at 98 DTC 6471, Justice Clarke decided (i) that the Appellant's rights under section 7 of the Charter had been violated; and (ii) that the Appellant's rights under section 8 of the Charter had been violated. Having made those decisions, Justice Clarke further decided that all of the documents and oral statements obtained from the Appellant by employees of Revenue Canada would be excluded (under section 24 of the Charter) from the prosecution for alleged offences under paragraph 239(1)(a) or (d) of the Act. Section 24 of the Charter states:
24(1) Anyone whose rights or freedoms, as guaranteed by this Charter, have been infringed or denied may apply to a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances.
24(2) Where, in the proceedings under subsection (1), a court concludes that evidence was obtained in a manner that infringed or denied any rights or freedoms guaranteed by this Charter, the evidence shall be excluded if it is established that, having regard to all the circumstances, the admission of it in the proceedings would bring the administration of justice into disrepute.
After the documents and statements were excluded by Justice Clarke, the Crown abandoned its prosecution of the Appellant for alleged offences under paragraphs 139(1)(a) and (d) of the Income Tax Act.
[4] In his appeal to this Court with respect to assessments for the taxation years 1985 to 1990, inclusive, the Appellant has made a motion for the determination of the following questions:
Is it appropriate and just in the circumstances for the assessments of tax relevant to this reference to be vacated by virtue of subsection 24(1) of the Charter of Rights and Freedoms?
In the alternative, pursuant to subsection 24(2) of the Charter of Rights and Freedoms, should all of the evidence obtained as a result of the execution of search warrants referred to in this application be inadmissible in this proceeding, and further, should the Minister be excluded from relying upon any evidence or information obtained as a result of the execution of the search warrants?
The Appellant also seeks an order that he does not have to be produced for discovery. The Appellant's motion is made under section 58 of this Court's Rules of General Procedure. The relevant part of section 58 states:
58(1) A party may apply to the Court,
(a) for the determination, before hearing, of a question of law raised by a pleading in a proceeding where the determination of the question may dispose of all or part of the proceeding, substantially shorten the hearing or result in a substantial saving of costs, or
(b) to strike out a pleading because it discloses no reasonable grounds for appeal or for opposing the appeal,
and the Court may grant judgment accordingly.
58(2) No evidence is admissible on an application,
(a) under paragraph (1)(a), except with leave of the Court or on consent of the parties, or
(b) under paragraph (1)(b).
[5] The Appellant is proceeding under paragraph 58(1)(a). Having regard to subsection 58(2), counsel for the Appellant made it clear that she was not attempting to introduce any evidence in support of her motion and that the Appellant's motion was based on two propositions:
(i) There was a question of law raised by the Appellant's pleading; namely: whether the reassessments under appeal (issued on October 6, 1999) should be vacated because they are based upon evidence obtained illegally in violation of the Appellant's rights under the Charter. See Notice of Appeal, paragraphs 23, 24, 25, 26, 27, 35, 36 and 37. See also the Reply, paragraphs 1 and 18(b).
(ii) The determination of the question of law may dispose of all or part of the proceeding, or substantially shorten the hearing.
[6] In Gregory v. The Queen, 2000 DTC 2027, Bowman A.C.J. referred to an application under Rule 58 as a two-step process stating at page 2029:
I agree with counsel for the respondent that an application for determination of a question under Rule 58 involves a two step process — first to decide whether the question put is one that should appropriately be dealt with under Rule 58 and then, if it is, to hear argument and decide the question. This seems self-evident.
When the Appellant's motion came on for hearing, counsel for the Respondent raised a preliminary objection arguing that the Appellant's questions were not questions of law and, accordingly, that the Appellant could not apply under Rule 58. After hearing a summary of the Respondent's position on the preliminary objection, I decided to hear the Appellant's counsel in full on both branches of the two-step process even though Respondent's counsel stated that he was prepared (at that time) to argue only the first branch concerning whether the Appellant could satisfy the conditions for an application under Rule 58.
[7] Having regard to Rule 58(1)(a) set out in paragraph 4 above, there must be "a question of law raised by a pleading". Counsel for the Appellant argues that the required question of law is raised in the following paragraphs from the pleadings:
Notice of Appeal
23. In 1993, the Appellant was charged for allegedly violating either paragraphs 239(1)(a) or (d) of the Act.
24. During the course of an investigation by Revenue Canada into the Appellant's affairs and affairs of clients of the Appellant, Revenue Canada gathered oral and documentary evidence.
25. During the course of a voir dire before Mr. Justice C.P. Clarke of the Court of Queen's Bench of Alberta, the admissibility of the oral and documentary evidence gathered by Revenue Canada was questioned. Mr. Justice Clarke held that certain oral and documentary evidence obtained from the Appellant was inadmissible at trial because Revenue Canada had breached the Appellant's rights under sections 7 and 8 of the Canadian Charter of Rights and Freedoms (the "Charter") in gathering the evidence and section 24 of the Charter did not override these breaches. Mr. Justice Clarke found that one Revenue Canada official had deliberately lied to the Appellant for the purpose of misleading him as to the true nature of his investigating activities and that another Revenue Canada official misled the Appellant by indicating that he was simply completing an audit. Therefore, Mr. Justice Clarke held that permitting evidence obtained under such circumstances to be used at trial would bring the administration of justice into disrepute.
35. The Appellant submits that the First and Second Reassessments were based on information illegally obtained from the Appellant in violation of his rights under sections 7 and 8 of the Charter.
36. As the Appellant's 1985 through 1989 taxation years were statute-barred at the time the First Reassessments were issued, the onus is on the Minister to prove the facts required to show that subparagraph 152(4)(a)(i) of the Act has been met for those taxation years. The Minister will be unable to discharge the onus without using the illegally obtained evidence. The Appellant submits that it is not appropriate nor just to force the Appellant, whose constitutional rights were violated by the Minister, to defend against the Second Reassessments when such reassessments were based on the evidence obtained by virtue of the Minister's own violations.
37. For any taxation year not statute-barred, the Appellant submits that the Second Reassessment of such taxation year should be vacated as it is based on the illegally obtained evidence.
Reply to the Notice of Appeal
1. The Respondent admits the allegations of fact stated in paragraphs 3, 4, 6, 19, 21, 22, 23, 24, and 25 of the Notice of Appeal.
18. The issues to be decided in this appeal are whether:
(a) ...
(b) whether (sic) any evidence obtained by the Department of National Revenue should be excluded by virtue of sections 7 and 8 and subsection 24(2) of the Charter of Rights and Freedoms (the "Charter").
There is no doubt about the Appellant's claims that certain documents and statements were obtained illegally; that such documents and statements should be excluded from evidence at the hearing of his appeals; and that the reassessments under appeal should be vacated. Also, the Appellant relies on the decision of Justice Clarke of the Alberta Court of Queen's Bench. The fact that these questions are raised in the Appellant's pleading does not necessarily mean that they are only questions of law.
[8] The Respondent argues that the questions put to this Court in the Appellant's motion are not questions of law but mixed questions of fact and law. If they are in part questions of fact, the prohibition against evidence in Rule 58(2)(a) would prevent this motion from proceeding under Rule 58 without leave of the Court or consent of the parties. At the commencement of her argument, counsel for the Appellant stated:
... We have sought the Minister's agreement as to facts, but were unable to obtain any agreement in that regard. ...
(Transcript, page 1, lines 23-25)
Counsel for the Appellant did not seek leave of the Court to admit any evidence in support of her motion, but relies on the Respondent having admitted the facts alleged in paragraphs 23, 24 and 25 of the Appellant's pleading. The Appellant argues res judicata and issue estoppel with respect to the Charter violations and the decision of Justice Clarke.
Analysis
[9] For the reasons set out below, I have concluded that the Appellant cannot succeed in any of the questions raised in the motion, and that the motion must be dismissed. In effect, the Appellant argues that his action in this Court (i.e. appeals from assessments under the Income Tax Act for the taxation years 1985 to 1990) is to be determined by the favourable decision which he obtained in the Alberta Court of Queen's Bench. See paragraphs 35, 36 and 37 of the Notice of Appeal set out in paragraph 7 above. The basic problem facing the Appellant is the significant difference between criminal litigation and civil litigation.
[10] In the relatively short period when the Charter has been part of our law, there are a number of significant decisions which limit the application of sections 7 and 8 of the Charter. In Thomson Newspapers Limited et al v. Director of Investigation and Research, Combines Investigation Act, Restrictive Trade Practices Commission and the Attorney General of Canada, [1990] 1 S.C.R. 425, the corporate appellant and several of its officers were served with orders to appear before the Restrictive Trade Practices Commission to be examined under oath and to produce documents. The purpose of the inquiry was to determine if there was evidence that Thomson Newspapers had committed an offence under the Combines Investigation Act. The orders had been issued under section 17 of that Act. The corporate appellant and its officers had applied to the Ontario Court for a declaration that the orders to appear and produce documents were not consistent with the provisions of sections 7 and 8 of the Charter. The five judges who heard Thomson Newspapers in the Supreme Court of Canada were not unanimous. LaForest J. and L'Heureux-Dubé J. held that the orders to appear and produce documents did not contravene section 7 or 8 of the Charter. Wilson J. held that the orders contravened both sections 7 and 8. Lamer J. held that the orders contravened section 8 but expressed no opinion on section 7. Sopinka J. held that the orders did not contravene section 8; the orders to produce documents did not contravene section 7; but the orders to appear and testify did contravene section 7. Wilson J. stated at pages 495-496:
Not all seizures violate s. 8 of the Charter; only unreasonable ones. Put another way, an individual is accorded only a reasonable expectation of privacy. At some point the individual's interest in privacy must give way to the broader state interest in having the information or document disclosed. However, the state interest only becomes paramount when care is taken to infringe the privacy interest of the individual as little as possible. It is because of this need for delicate balancing that Dickson J. in Hunter identified several criteria which must be met if a search in a criminal investigation is to meet the test of reasonableness. I think that these criteria were accurately summarized by Holland J. at trial as set out earlier in these reasons. I would agree, however, that these criteria are not hard and fast rules which must be adhered to in all cases under all forms of legislation. What may be reasonable in the regulatory or civil context may not be reasonable in a criminal or quasi-criminal context. What is important is not so much that the strict criteria be mechanically applied in every case but that the legislation respond in a meaningful way to the concerns identified by Dickson J. in Hunter. This having been said, however, it would be my view that the more akin to traditional criminal law the legislation is, the less likely it is that departures from the Hunter criteria will be countenanced. ...
[11] Although Madame Justice Wilson found that section 17 of the Combines Investigation Act contravened both sections 7 and 8 of the Charter, she distinguished between what may be reasonable in a regulatory or civil context and in a criminal or quasi-criminal context. She stated at page 498 that the scheme of the Combines Investigation Act could well be imposed in the Criminal Code. Therefore, she saw section 17 as being in a criminal or quasi-criminal context. I see the Income Tax Act in a regulatory or civil context.
[12] The Supreme Court of Canada decision in McKinlay Transport Ltd. v. The Queen [1990] 1 S.C.R. 627, was issued on the same day as the decision in Thomson Newspapers. During an income tax audit of McKinlay Transport, Revenue Canada demanded certain information and the production of certain documents pursuant to subsection 231(3) of the Income Tax Act. When the taxpayer corporation did not comply with the demand, an Information was issued alleging that the corporation had breached subsection 238(2) of the Income Tax Act. The question was whether subsection 231(3) of the Income Tax Act authorized a seizure within section 8 of the Charter. The same five judges of the Supreme Court who were not unanimous in Thomson Newspapers were unanimous in McKinlay Transport holding that subsection 231(3) of the Income Tax Act did not violate section 8 of the Charter. Wilson J. stated at pages 645 and 646:
Since individuals have different expectations of privacy in different contexts and with regard to different kinds of information and documents, it follows that the standard of review of what is "reasonable" in a given context must be flexible if it is to be realistic and meaningful. I think the point is aptly made by A. D. Reid and A. H. Young in "Administrative Search and Seizure under the Charter" (1985), 10 Queen's L.J. 392, at pp. 398-400: ...
There is, therefore, a large circle of social and business activity in which there is a very low expectation of privacy. The issue is not whether, but rather when, how much, and under what conditions information must be disclosed to satisfy the state's legitimate requirements. Every person who files an annual tax return may be said to enjoy a low expectation of privacy with respect to information about his income. But that is surely tempered by an expectation that demands for information have limits, and will be administered under terms that are fair and reasonable. That is what section 8 of the Charter is all about.
And further at page 647:
I refer to these cases not to approve or disapprove the results achieved but rather as evidence of the need to take a flexible and purposive approach to s. 8 of the Charter. It is consistent with this approach, I believe, to draw a distinction between seizures in the criminal or quasi-criminal context to which the full rigours of the Hunter criteria will apply, and seizures in the administrative or regulatory context to which a lesser standard may apply depending upon the legislative scheme under review. ...
[13] Although the demand under subsection 231(3) in McKinlay Transport was less intrusive than the search and seizure with respect to Mr. Warawa, I would need evidence to demonstrate what documents in the possession of Revenue Canada were obtained prior to the search and seizure. According to the reasons delivered by Justice Clarke, there was a period of at least four years when Revenue Canada was reviewing the records of Mr. Warawa before the search and seizure was executed on July 22, 1992. The question of fact concerning what documents (including the Appellant's income tax returns) were in the possession of Revenue Canada prior to the search and seizure on July 22, 1992 would be a barrier to the Appellant's application under Rule 58.
[14] In Fitzpatrick v. The Queen, (1995) 129 D.L.R. (4th) 129, the accused was a commercial fisher engaged in a licensed and commercial groundfish fishery in British Columbia under the Fisheries Act. He was charged with catching and retaining fish in excess of his quota. At trial, the Crown sought to admit reports compelled under section 61 of the Fisheries Act with respect to the species, time, place and poundage of fish caught. Failure to provide the reports could result in a fine or imprisonment (for second offence). The trial judge excluded the reports on the ground that they were self-incriminating and their admission would violate the accused's rights under section 7 of the Charter. The British Columbia Court of Appeal allowed the Crown's appeal and ordered a new trial. The Supreme Court of Canada dismissed an appeal by the accused. Laforest J. delivering Judgment for the full Court stated at pages 141 and 142:
At issue in this case is the ability of the government to enforce important regulatory objectives relating to the conservation and management of the groundfish fishery. To suggest that s. 7 of the Charter protects individuals who voluntarily participate in this fishery from being "conscripted" against themselves, by having information used against them that they were knowingly required to provide as a condition of obtaining their fishing licenses, would in my view be to overshoot the purposes of the Charter. The right against self-incrimination has never yet been extended that far; nor should it be. The Charter was not meant to tie the hands of the regulatory state.
In determining the ambit of the principle against self-incrimination in this case, it is important to consider the context in which the appellant's claim arises. This court has often stated that the context of a Charter claim is crucial in determining the extent of the right asserted: ... "a Charter right may have different scope and implications in a regulatory context than in a truly criminal one", and that "constitutional standards developed in the criminal context cannot be applied automatically to regulatory offences". These comments must be borne in mind in approaching the appellant's claims, for it is made in the context of a detailed regulatory regime that governs state conservation and management of the fishery. In this regulatory environment, we must be careful to avoid automatically applying rules that have been developed respecting self-incrimination in the criminal sphere.
And at page 149:
My conclusion that it is not abusive for the state to prosecute those who overfish, using their own hail reports and fishing logs as evidence of the offence, is strengthened by reference to this court's jurisprudence on the application of s. 8 of the Charter in the regulatory context. In applying a contextual approach under s. 8, this court has repeatedly emphasized that searches and seizures of documents relating to activity known to be regulated by the state are not subject to the same high standard as searches and seizures in the criminal context. This is because a decreased expectation of privacy exists respecting records that are produced during the ordinary course of business: ...
[15] In Fitzpatrick, the Supreme Court has again made the distinction between civil and criminal proceedings. In this Warawa motion, if Revenue Canada seized certain business records of the Appellant on July 22, 1992 and later returned those records, could Revenue Canada issue a subpoena duces tecum to the Appellant to bring those same records to Court when his appeals for 1985-1990 (a civil proceeding) are called for hearing? If the Appellant succeeds in this motion, those business records would not be admissible. Would it make any difference if the business records were required to be kept under section 230 of the Income Tax Act? In my view, these questions are better left to the trial judge.
[16] The decision of the Alberta Court of Appeal in Regina v. Jarvis (November 15, 2000) 193 D.L.R. (4th) 656, concerns a person charged with income tax evasion and claims that the rights of the accused under sections 7 and 8 of the Charter were breached. The facts are summarized in the headnote as follows:
The accused was charged with tax evasion. A Revenue Canada auditor interviewed the accused. The trial judge held that this was done to obtain information for the purpose of prosecuting the accused. The trial judge also held that the accused did not know that he had the right to silence resulting from being under investigation as opposed to being audited, and that the accused thought that he had a legal duty to provide information to Revenue Canada officials pursuant to s. 231.1(1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). The trial judge therefore found that the interview breached the accused's rights under s. 7 of the Canadian Charter of Rights and Freedoms and that the accused's utterances at that interview were not admissible. The trial judge also excised those portions of an information to obtain search warrants which were based on the accused's utterances as well as those portions which he determined to be false. The trial judge held that the search warrants could not have been issued on the basis of the surviving portions, such that the searches were warrantless and unreasonable and breached the accused's rights under s. 8 of the Canadian Charter of Rights and Freedoms. The trial judge excluded the evidence obtained through the searches as well as documentary banking evidence obtained by way of requirement letters issued pursuant to s. 231.2(1) of the Income Tax Act.
The Crown appealed. Although the summary conviction appeal court judge upheld the trial judge's ruling that the auditor's interview with the accused breached the accused's rights under s. 7 of the Charter, and that, once the tainted allegations were excised from the information to obtain the search warrants, the remaining evidence was not sufficient to support the issuance of the search warrants, he held that there was information available to the Crown which, if presented at the time of the original application, would have justified the issuance of the search warrants, such that they were valid and no s. 8 breach had occurred. The summary conviction appeal court judge also held that the bank statements obtained pursuant to s. 231.2(1) demands should have been obtained by way of a search warrant and confirmed that the trial judge's analysis of the bank evidence in light of s. 24(2) of the Charter was correct.
[17] When the accused appealed to the Alberta Court of Appeal, his appeal was dismissed. Berger J.A. delivering the judgment of the Court stated at pages 670-671:
It must be remembered, however, that both R. v. White, supra, and British Columbia Securities Commission v. Branch, supra, distinguish between oral admissions made under compulsion and documents containing communications made before such compulsion and independently thereof. Whereas in certain circumstances compulsion will impinge on the right to silence, the Court in British Columbia Securities Commission noted (at p. 525):
We know of no instance in which it was suggested that the common law right to silence which protected communications by a suspect to the police extended to documents of a suspect.
Indeed, the ongoing statutory requirements of the Income Tax Act for retention of books and records by every taxpayer and the corresponding obligation to make such available for later inspection and potential use in prosecution by the tax authorities are essential to the self-reporting income tax system; they impose no obligations that arise from Charter prohibited compulsion.
In May 2001, Jarvis was granted leave to appeal to the Supreme Court of Canada.
[18] O'Neill Motors Limited v. The Queen, 96 DTC 1486 came before this Court as a question for determination under section 173 of the Income Tax Act. The parties agreed to all relevant facts and, as Bowman J. stated at page 1487:
Counsel for the respondent very fairly admitted that the search and seizure under section 231.3 of the Act was a violation of the appellant's rights under section 8 of the Charter and that the information so obtained was fundamental to the making of the assessments that are now being appealed to this court.
In the circumstances of O'Neill Motors, Bowman J. answered the question under section 173 in a manner which vacated the assessments by virtue of subsection 24(1) of the Charter. Upon the Crown's appeal to the Federal Court of Appeal from the decision of this Court, Linden J.A. delivered the judgment of the Federal Court of Appeal (98 DTC 6424) and stated at page 6428:
I would like specifically to underscore the words of the Tax Court Judge, with which I fully agree, to the effect that this type of extreme remedy must not be considered to be an automatic one, being reserved only for cases of serious violations where other remedies are insufficient. He wrote:
I would not want my conclusion in this case to be taken as a wholesale sanctioning of the vacating of all assessments where some component of the Minister's basis of assessment was unconstitutionally obtained information. Other cases may arise in which a simple exclusion of evidence is sufficient, others in which the evidence is of little or no significance in the making of the assessments or where its introduction would not bring the administration of justice into disrepute, ... In the exercise of the discretion vested in the court under section 24 of the Charter one must be vigilant in balancing, on the one hand, the rights of the subject that are protected under the Charter, and on the other, the importance of maintaining the integrity of the self-assessing system. As each case arises these and, no doubt, other factors will play a role and all factors must be assigned their relative weight. In the circumstances of this case I have concluded that the most appropriate exercise of my discretion is to vacate the assessments.
[19] In this Warawa motion, there is no agreement between the parties or admission by the Respondent that the reassessments under appeal for 1985 to 1990 are totally dependent upon documents which were seized in violation of the taxpayer's rights under section 8 of the Charter, or upon statements obtained from him in violation of his rights under section 7 of the Charter. In the absence of an agreement or an admission, there would have to be evidence; this application could not be only a question of law; and the motion would no longer qualify under Rule 58.
[20] In Donovan v. The Queen et al, 2000 DTC 6339, Revenue Canada added substantial amounts to the taxpayer's reported income and imposed penalties. Mr. Donovan appealed claiming that certain evidence supporting the assessments was obtained through an illegal seizure which violated his rights under section 8 of the Charter. The taxpayer obtained only partial relief in the Federal Court of Appeal when Linden J.A. (writing for the Court) stated at page 6342-43:
In this case, what is being urged is that the "co-operation" between the audit branch and S.I.U. in the early stages of the investigation should lead to the vacating of the tax reassessments or to the exclusion of evidence in a civil proceeding, just as it would in a criminal one. I include in the category of a civil proceeding a matter involving a civil penalty to be exacted for a tax law infraction. In my view, the use of tainted evidence in a criminal proceeding is a much more serious matter than in a civil proceeding, so that the discretion of a Court might well be exercised more liberally in a criminal case, where the liberty of the subject is in issue. However, such discretion might well be used with more restraint in civil matters, where such liberty is not threatened and what is at stake is simply the duty to pay taxes.
And further at page 6344:
... In other words, before a reassessment can be vacated, it must be shown that the lesser remedy of the exclusion of evidence was inadequate to vindicate the Charter violation. In addition, for it to be "appropriate and just" to vacate a reassessment, it should be clear that the evidence illegally obtained was so "fundamental" to the reassessments that they could not be sustained without it (O'Neill Motors, supra, at 1493 T.C.C.). In short, this type of "extreme remedy", as I wrote in O'Neill Motors, is reserved only for "serious violations where other remedies are insufficient" ...
[21] A recent decision of the Federal Court of Appeal (The Queen v. Jurchison, et al 2001 DTC 5301) confirms my view that the Appellant cannot succeed in this motion under Rule 58. Mr. Jurchison and his Company were charged with tax evasion under section 239 of the Income Tax Act. When the criminal charges came before the Ontario Provincial Court, the hearing judge concluded that Mr. Jurchison's right to be secure against unreasonable search and seizure had been infringed; he quashed the search warrants and excluded certain evidence obtained by a "second investigation"; and he acquitted the taxpayer. The Provincial Court judge was upheld on appeal but it was not clear what evidence was obtained in breach of the Charter.
[22] Mr. Jurchison appealed from a reassessment for the 1990 taxation year - the same year for which he had been charged with tax evasion. Mr. Jurchison brought a motion before this Court under section 58 of the General Procedure Rules seeking an order vacating the reassessment or, in the alternative, excluding certain evidence. Upon hearing the motion, my colleague Bowie J. granted the taxpayer's motion and ruled that Mr. Jurchison should not be examined on discovery (2000 DTC 1660). The Federal Court of Appeal allowed an appeal by the Crown from Judge Bowie's order. Sexton J.A. delivering the judgment of the Court stated at page 5304:
[10] Normally, the admissibility of evidence is a matter best left to the Trial Judge who, having all the circumstances and evidence before him can make the most informed decision. Of course, there are situations such as that before Bowman, J. in O'Neill Motors Ltd. v. The Queen, 96 DTC 1486, which particularly lend themselves to such determination before trial. It must be kept in mind, however, that in that case, the question to be determined came before the Court by agreement of the parties under s. 173 of the Income Tax Act which provides for determination of questions of law, fact or mixed law and fact upon agreement between the Minister and the taxpayer. Unlike the present case, there was an agreed statement of fact by the parties.
[11] It is necessary in deciding whether the evidence obtained in breach of the taxpayers' Charter rights in the present case is admissible, to consider the different standards for search and seizure for the purposes of criminal prosecution and for the purpose of civil enforcement of the Income Tax Act as set forth by the Supreme Court of Canada in R. v. McKinlay Transport, [1990] 1 S.C.R. 627. It is conceivable that the evidence might be inadmissible for purposes of a criminal prosecution, but admissible for purposes of a civil trial. See Donovan v. The Queen, [2000] 4 F.C. 373 (C.A.). Such a determination would require an examination of the impugned evidence and the method by which it was obtained, an inquiry into the seriousness of any Charter breach and a consideration of whether the evidence was already in possession of the Crown or would have been discovered in any event. See R. v. Stillman, [1997] 1 S.C.R. 607 at 664. It would appear impossible to make such a determination in the absence of a factual base. In the present case, there is no agreement between the parties as to the relevant facts.
[12] Thus, I would allow the appeal and dismiss the cross-appeal with respect to the motions brought under Rule 58. The questions regarding the admissibility of evidence and upon whom the onus rests with respect to the validity of the assessments are to be left to the judge hearing the appeals of the reassessments.
[13] I would, however, express the view that, in any event, the Tax Court Judge did not err in refusing to vacate the assessments entirely, correctly noting that the Crown was to be given the opportunity to make its case with the untainted evidence collected by the initial audit
The Federal Court of Appeal also allowed the Crown's appeal and ordered that Mr. Jurchison be examined for discovery.
[23] In my view, unless the parties are in agreement with respect to all relevant facts, section 58 of the Rules of General Procedure does not permit one party by motion to pre-empt the role of the trial judge who will ordinarily determine what evidence is admissible for the purpose of deciding the issues at trial. In this Warawa motion, there is no agreement between the parties with respect to any facts. In particular, the Notice of Motion seeks to exclude "all of the evidence obtained as a result of the execution of search warrants referred to in this application". Even if I were inclined to grant some relief to the Appellant (and I am certainly not so inclined), I cannot determine what evidence was obtained by executing the search warrants; whether certain documents obtained through the search warrants were already in the hands of the Minister of National Revenue; and whether certain documents obtained through the search warrants were records and books of account which the Appellant was required to keep under section 230 of the Income Tax Act and which would be admissible under the authority of McKinlay Transport and Fitzpatrick.
[24] On the principle of res judicata, counsel for the Appellant argued that the Crown is indivisible whether it be the Attorney General prosecuting a person for income tax evasion under section 239 of the Income Tax Act or the Minister of National Revenue assessing tax under section 152 of the same Act. That argument may be well founded as a constitutional theory but the rights and expectations of a person like Mr. Warawa when he is brought to court charged with an offence under section 239 are very different from his rights and expectations when he comes to court to institute an appeal under section 169 seeking relief from an assessment. In a criminal proceeding for income tax evasion, a particular taxpayer has the right to remain silent. If that same taxpayer institutes an appeal in this Court under the General Procedure, Rule 146 permits the Respondent to call the taxpayer as a witness, and to cross-examine the taxpayer.
[25] I stated in paragraph 9 above that the Appellant's basic problem is the significant difference between criminal litigation and civil litigation. That difference has been referred to many times in various cases by the Supreme Court of Canada and the Federal Court of Appeal. The Appellant's motion is dismissed on every question. Following the lead of the Federal Court of Appeal in Jurchison, Mr. Warawa may be examined for discovery subject to his right to object to any question which may have its genesis in evidence taken in breach of his Charter rights. The Respondent is awarded costs in the cause.
Signed at Ottawa, Canada, this 20th day of December, 2001.
"M.A. Mogan"
J.T.C.C.
COURT FILE NO.: 2000-155(IT)G
STYLE OF CAUSE: Allen Warawa and Her Majesty the Queen
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: June 20 and 21, 2001
REASONS FOR ORDER BY: The Honourable Judge M.A. Mogan
DATE OF ORDER: December 20, 2001
APPEARANCES:
Counsel for the Appellant: Cheryl A. Gibson and Allison Downey
Counsel for the Respondent: L.A.T. Williams and Deborah Horowitz
COUNSEL OF RECORD:
For the Appellant:
Name: Cheryl A. Gibson
Firm: Fraser Milner Casgrain
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-155(IT)G
BETWEEN:
ALLEN WARAWA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion heard on June 20 and 21, 2001, at Edmonton, Alberta, by
the Honourable Judge M.A. Mogan
Appearances
Counsel for the Appellant: Cheryl A. Gibson and Allison Downey
Counsel for the Respondent: L.A.J. Williams and Deborah Horowitz
ORDER
Upon motion by the Appellant under section 58 of the Tax Court of Canada Rules (General Procedure) for the determination of certain questions;
And upon reading the pleadings and other material filed;
And upon hearing counsel for the parties;
It is ordered that the Appellant's motion is dismissed with costs to the Respondent in the cause.
Signed at Ottawa, Canada, this 20th day of December, 2001.
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"M.A. Mogan" |
J.T.C.C.