A-390-88
Solvent Petroleum Extraction Inc., Organic
Research Inc., Organic Research Limited Part
nership, Becker Engineering Limited, Union Fars
Equipment, Inc., Seona Wilder, Dara Wilder,
Gerald Byerlay, C & C Auto Truck and Equip
ment Sales Inc., Diversified Machine Tool Inc.,
and Ronald Johnson (Appellants)
v.
Minister of National Revenue (Respondent)
INDEXED AS: SOLVENT PETROLEUM EXTRACTION INC. V.
M.N.R. (CA.)
Court of Appeal, Pratte, Stone and Desjardins
JJ.A.—Vancouver, May 9; Ottawa, June 29, 1989.
Income tax — Seizures — Business documents — S. 231.3
Income Tax Act — Validity of warrants — S.
231.3(3)(a),(b),(c) conditions met -- Application of "plain
view" doctrine.
Constitutional law — Charter of Rights — Criminal process
— Constitutional validity of s. 231.3 Income. Tax Act in view
of s. 8 of Charter of Rights — Search under warrants properly
issued reasonable search.
Audits and reviews of the appellants' activities were conduct
ed by the Minister who suspected a scheme to inflate scientific
research expenditures. Warrants under section 231.3 of the
Income Tax Act were issued to enter and search business
premises. This was an appeal from the refusal of a Motions
Judge to quash the search warrants.
Held, the appeal should be dismissed.
The issue was as to whether a search warrant meeting the
requirements of subsection 231.3(3) authorized a reasonable
search within the meaning of Charter section 8. The minimum
standard requirements found in section 8, as set out in Hunter
et al. v. Southam Inc., were met by subsection 231.3(3) and
since the warrants meet the requirements of subsection
231.3(3) for proper issuance, the search is a reasonable search
within the meaning of section 8 of the Charter. Furthermore,
the seizure of documents not covered by warrants meets the test
of reasonableness and therefore validity under the common law
"plain view" doctrine under which an officer executing a legal
warrant has power to seize anything he locates if he reasonably
believes that it constitutes evidence of the commission of a
crime.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Canadian Charter of Rights and Freedoms, being, Part I
of the Constitution Act, 1982, Schedule B, Canada Act
1982, 1982, c. 11 (U.K.), s. 8.
Criminal Code, R.S.C. 1970, c. C-34, s. 443.
Criminal Code, R.S.C., 1985, c. C-46, s. 489.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 231(4),(5)
(as am. by S.C. 1986, c. 6, s. 121), 231.3 (as added
idem).
U.S. Constitution, Amendment IV.
CASES JUDICIALLY CONSIDERED
APPLIED:
Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145; Print
Three Inc. et al. and The Queen, Re (1985), 20 C.C.C.
(3d) 392 (Ont. C.A.).
REFERRED TO:
Chic Fashions (West Wales) Ltd. v. Jones, [1968] 2 Q.B.
299 (C.A.); Ghani v. Jones, [1970] 1 Q.B. 693 (C.A.);
Kohli v. Moase et al. (1987), 86 N.B.R. (2d); 219 A.P.R.
15 (N.B.Q.B.); Kourtessis and Hellenic Import Export
Co. Ltd. v. M.N.R. et al. (1988), 89 DTC 5214
(B.C.S.C.); Minister of National Revenue v. Kruger Inc.,
[1984] 2 F.C. 535 (C.A.); R. v. Longtin (1983), 5 C.C.C.
(3d) 12 (Ont. C.A.); Re Regina and Shea (1982), 1
C.C.C. (3d) 316 (Ont. H.C.); Reynolds v. Comr. of
Police of the Metropolis, [1984] 3 All E.R. 649 (C.A.);
Texas v. Brown, 75 L.Ed. (2d) 502 (1983 U.S.S.C.);
Vespoli, D. et al. v. The Queen et al. (1984), 84 DTC
6489 (F.C.A.).
COUNSEL:
Malcolm Maclean for appellants.
Paul William Halprin, Q.C. for respondent.
SOLICITORS:
Davis & Company, Vancouver, for appellants.
Deputy Attorney General of Canada for
respondent.
The following are the reasons for judgment
rendered in English by
DESJARDINS J.A.: The issue raised in this
appeal concerns essentially the constitutional
validity of section 231.3 of the Income Tax Act,
R.S.C. 1952, c. 148, as added by S.C. 1986, c. 6, s.
121 ("the Act") in view of section 8 of the
Canadian Charter of Rights and Freedoms [being
Part I of the Constitution Act, 1982, Schedule B,
Canada Act 1982, 1982, c. 11 (U.K.), s. 8.] ("the
Charter").
During the fiscal years 1984, 1985 and 1986,
the respondent conducted audits and reviews with
respect to the activities of the appellants suspect
ing that a scheme to inflate scientific research
expenditures had been carried on. For some time,
the appellants provided voluntarily information
and documents at the request of the respondent.
Then, on April 30, 1987, an application was made
by the respondent pursuant to section 231.3 of the
Income Tax Act for warrants authorizing a special
investigator of the Department of Revenue
Canada together with officers of the Department
of National Revenue to enter and search specific
places where the appellants were carrying on their
businesses. The warrants issued indicated the sec
tion of the Income Tax Act with regard to which
the deponent had reasonable grounds to believe
that an offence had been committed, the corpora
tions and individuals concerned, the place to be
searched and a list describing in general terms the
books, records, documents or things pertaining to a
specified period of time and belonging to the par
ties concerned.
The appellants applied on July 3, 1987 to have
the warrants quashed but were unsuccesssful.
Hence the present appeal from the decision of the
Motions Judge [Solvent Petroleum Extraction
Inc. v. Canada (M.N.R.), [1988] 3 F.C. 465.].
The appellants submit that the information in
support of the warrants failed to contain material
facts or misstated material facts such that the
issuing justice was unable to make a judicial deter
mination as to whether the warrants should have
issued. They add that there were alternative
sources for the information sought but that the
applicant failed to take any reasonable steps to
obtain the information from that alternative
source and failed to advise the issuing judge of
those facts. They submit that the warrants are too
general and too vague in relation to the informa
tion before the issuing judge. Finally, they say that
the authorizing legislation being section 231.3 of
the Income Tax Act is ultra vires on the basis that
it contravenes the Charter and cannot support the
warrants herein. Their attack is directed both
towards a seizure of things referred to in the
warrant (subsection 231.3(3)) and a seizure of
things not identified in the warrant which the
person executing the warrant "believes on reason
able grounds affords evidence of the commission of
an offence under this Act" (subsection 231.3(5)).
Section 231.3 of the Act (added by S.C. 1986, c.
6, s. 121) reads thus:
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.
(2) An application under subsection (1) shall be supported
by information on oath establishing the facts on which the
application is based.
(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 applica
tion is likely to contain such a document or thing.
(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 commit
ted the offence and it shall be reasonably specific as to any
document or thing to be searched for and seized.
(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.
(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.
(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 docu
ment 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.
(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.
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 sub
section 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.
In view of this, the appellants' submissions can
be reduced to the one issue as to whether a search
warrant which meets the requirements of subsec
tion 231.3(3) of the Act is a reasonable search
within the meaning of section 8 of the Charter.
Section 231.3 of the Act came as an amendment
resulting from court decisions holding that the
predecessors of that section, namely subsections
231(4) and 231(5) [as am. by S.C. 1986, c. 6, s.
121] were in violation of section 8 of the Charter.
Subsections 231(4) and 231(5), now amended,
read thus:
231... .
(4) Where the Minister has reasonable and probable
grounds to believe that a violation of this Act or a regulation
has been committed or is likely to be committed, he may, with
the approval of a judge of a superior or county court, which
approval the judge is hereby empowered to give on ex parte
application, authorize in writing any officer of the Department
of National Revenue, together with such members of the Royal
Canadian Mounted Police or other peace officers as he calls on
to assist him and such other persons as may be named therein,
to enter and search, if necessary by force, any building, recep
tacle or place for documents, books, records, papers or things
that may afford evidence as to the violation of any provision of
this Act or a regulation and to seize and take away any such
documents, books, records, papers or things and retain them
until they are produced in any court proceedings.
(5) An application to a judge under subsection (4) shall be
supported by evidence on oath establishing the facts upon
which the application is based.
In Minister of National Revenue v. Kruger Inc.,
[1984] 2 F.C. 535 (C.A.), at page 549 decided
before the Supreme Court of Canada rendered its
decision in Hunter et al. v. Southam Inc., [ 1984] 2
S.C.R. 145, this Court held that subsection 231(4)
contravened section 8 of the Charter in that it gave
the minister, when he believed one particular
offence has been committed, the power to author
ize a general search and seizure relating to the
violation of any of the provisions of the Act or
regulations made under it. (See also Vespoli, D. et
al. v. The Queen et al. (1984), 84 DTC 6489
(F.C.A.) rendered the same day.)
In Print Three Inc. et al. and The Queen, Re
(1985), 20 C.C.C. (3d) 392 (Ont. C.A.), decided
after Hunter et al. v. Southam Inc., additional
reasons were given by the Ontario Court of Appeal
in support of the conclusion that subsection 231(4)
was in contravention of section 8 of the Charter. It
was said at page 396:
In our view, there are additional reasons to those relied upon
by the Federal Court of Appeal for holding the subsection to be
in breach of s. 8. It is clear that to meet the standards of
reasonableness there must first be an independent arbiter
(judge) who is satisfied that there are reasonable grounds for
believing that an offence has been committed (see Hunter et al
v. Southam Inc., supra). In s. 231(4) and (5), it is the Minister
who has to have the reasonable and probable grounds and there
is no standard or conditions precedent set out for the judge on
which to base his assessment of whether the Minister's belief is
properly founded. Mr. Kelly argued that the only reasonable
construction of s.s. (5) is that facts must be laid before the
judge so he can be satisfied that the Minister has reasonable
and probable grounds. Even if the subsection could be so
construed, there are, as we have noted, additional flaws in s.
231(4) and (5). There is no requirement that the Minister have
grounds to believe that evidence is likely to be found at the
place of the search and there is no requirement that he present
such grounds to the judge. There is, equally, no direction as to
what is to be issued by the judge in granting his "approval". It
is the Minister who issues what is, in essence, the warrant.
Finally the Minister is not required in the authorization to
specify the things to be searched for. [Underline added.]
The present subsection 231.3(3) requires that
the judge, who issues the warrant, be satisfied that
the Minister has reasonable ground to believe that
an offence has been committed, that specified
things are to be searched for and that the evidence
is likely to be found at the place of the search
indicated in the application. These conditions meet
the deficiencies noted in the above decision with
regard to the former subsections 231(4) and
231(5).
Section 8 of the Charter reads thus:
8. Everyone has the right to be secure against unreasonable
search or seizure.
In Hunter et al. v. Southam Inc., supra,
Dickson J. (as he then was) stated at page 168 the
minimum standard requirements set by that
section:
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. In so far
as subss. 10(1) and 10(3) of the Combines Investigation Act do
not embody such a requirement, I would hold them to be
further inconsistent with s. 8.
He also stated at page 162:
For such an authorization (search and seizure) procedure to be
meaningful it is necessary for the person authorizing the search
to be able to assess the evidence as to whether that standard has
been met, in an entirely neutral and impartial manner [ ... ]
The person performing this function need not be a judge, but he
must at a minimum be capable of acting judicially. [Emphasis
added.]
There is no doubt that subsection 231.3(3)
meets these minimum standards.' I add that the
possible difference between the words "reasonable
and probable grounds" in the former subsection
231(4) and the words "reasonable grounds" in
subsection 231.3(3) was not argued as such before
' See Kohli v. Moase et al. (1987), 86 N.B.R. (2d); 219
A.P.R. 15 (N.B.Q.B.).
us as it was before Lysyk J. in Kourtessis and
Hellenic Import Export Co. Ltd. v. M.N.R. et al.
(1988), 89 DTC 5214 (B.C.S.C.). I have no dif
ficulty with the conclusion at which Lysyk J. has
arrived. Having noted that the then section 443 of
the Criminal Code [R.S.C. 1970, c. C-34] 2 spoke
about "reasonable grounds" and that the Fourth
Amendment to the U.S. Constitution' is different
from section 8 of the Charter, the learned Judge
concluded at page 5218 of the decision:
The sole standard explicity supplied by s. 8 of the Charter is
that of reasonableness. Authority does not establish and, in my
view, principle does not commend the proposition contended for
by the petitioners to the effect that absence of a statutory
requirement for probable as well as reasonable grounds for
belief is constitutionally fatal.
With respect to subsection 231.3(5), the appel
lants submit that a parallel cannot be drawn be
tween section 489 of the Criminal Code, R.S.C.,
1985, c. C-46 and subsection 231.3(5) of the
Income Tax Act in that the doctrine of "plain
view" is inapplicable to a situation such as the
present one where complex business documents are
involved. Unlike a case where, upon entry, a police
officer may see narcotics in open view, documents
such as those contemplated by subsection 231.3(5)
would require detailed examination by the authori
ties to determine whether they support a violation
of the Act. Therefore the subsection provides for a
"wholesale search" of a citizen's home which is a
principle repugnant to the provisions of sections 7
and 8 of the Charter.
The common law rule with regard to the "plain
view" doctrine is that where, during the course of
executing a legal warrant, an officer locates any
thing which he reasonably believes is evidence of
the commission of a crime, he has the power to
seize it (Ghani v. Jones, [1970] 1 Q.B. 693 (C.A.),
2 Now section 489 of the Criminal Code, R.S.C., 1985, c.
C-46.
' The Fourth Amendment to the U.S. Constitution reads
thus:
The right of the people to be secure in their persons,
houses, papers, and effects, against unreasonable searches
and seizures, shall not be violated, and no Warrants shall
issue, but upon probable cause, supported by Oath or affir
mation, particularly describing the place to be searched, and
the persons or things to be seized.
Lord Denning M.R., at page 706; Chic Fashions
(West Wales) Ltd. v. Jones, [1968] 2 Q.B. 299
(C.A.), Diplock L.J., at page 313; Reynolds v.
Comr. of Police of the Metropolis, [1984] 3 All
E.R. 649 (C.A.) pages 653, 659, 662; Re Regina
and Shea (1982), 1 C.C.C. (3d) 316 (Ont. H.C.)).
The principle is known here and in the United
States (Texas v. Brown, 75 L.Ed. (2d) 502 (1983
U.S.S.C.)). 4 Seizure done in such a fashion has
been held valid by the following Courts: R. v.
Longtin (1983), 5 C.C.C. (3d) 12 (Ont. C.A.), at
page 16; Re Regina and Shea (1982), 1 C.C.C.
(3d) 316 (Ont. H.C.), at pages 321-322.
In- any event, the context in which the search for
and seizure of "plain view" documents appears in
the Act i.e. in the course of searching for and
seizing business documents under a warrant which
would obviously involve examination of documents
by the searcher in order to determine whether
their seizure is authorized by that warrant, sug
gests that the authority to seize other business
documents not covered by the warrant meets the
test of reasonableness and therefore of validity. In
addition, the provision as drafted meets the consti
tutional test of reasonableness since it contains two
important safeguards: namely, that the executing
officer believes on reasonable grounds that the
document or thing seized affords evidence of the
commission of an offence under the Act and that,
° In Texas v. Brown, supra, four justices of the United States
Supreme Court adopted as a point of reference for further
discussion (at page 511) the plurality's view of Coolidge v. New
Hampshire, 403 US 443 (1971). At page 510, Rehnquist J. for
himself and for the Chief Justice Burger, Justice White and
Justice O'Connor said that the "plain view" doctrine permits
the warrantless seizure by the police of private possessions
where three requirements are satisfied:
First, the police officer must lawfully make an "initial intru
sion" or otherwise properly be in a position from which he
can view a particular area. Id., at 465-468, 29 L Ed 2d 564,
91 S Ct 2022. Second, the officer must discover incriminat
ing evidence "inadvertently", which is to say, he may not
"know in advance the location of [certain] evidence and
intend to seize it," relying on the plain-view doctrine only as
a pretext. Id., at 470, 29 L Ed 2d 564, 91 S Ct 2022. Finally,
it must be "immediately apparent" to the police that the
items they observe may be evidence of a crime, contraband,
or otherwise subject to seizure. Id., at 466, 29 L Ed 2d 564,
91 S Ct 2022.
as soon as practicable, he brings the seized matter
before a judge for judicial control.
The Trial Judge came to the conclusion that the
information before him met the requirements of
section 231.3 of the Act. I see no reason to disturb
his finding in that regard.
I would dismiss the appeal with costs.
PRATTE J.A.: I agree.
STONE J.A.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.