T-6021-82
DOmenico Vespoli, ."recision Mechanics Ltd.,
80591 Canada Limited, and Paradis Vespoli Ltée
(Applicants)
v.
The Queen in right of Canada and the Attorney
General of Canada (Respondents)
and
Jacques Morel in his capacity as assistant sheriff
for the District of Montreal (Mis -en-cause)
Trial Division, Addy J.—Montreal, November 1;
Ottawa, November 19, 1982.
Income tax — Practice — Application to determine question
of solicitor-client privilege pursuant to s. 232 Income Tax Act
— Admittedly no solicitor-client privilege as documents com
prised of bank statements — Documents seized pursuant to s.
231 of Act — No connection between applicants and docu
ments — Applicants seeking return of documents on grounds
evidence seized irrelevant and seizure excessive and unreason
able contrary to s. 8 of Charter since documents not related to
applicants — Applicants also relying on s. 24(2) of Charter
requiring rejection of evidence liable to bring administration of
justice into disrepute — Application dismissed — In the
Matter of Hoyle Industries Ltd and Hoyle Twines Ltd., [1980]
C.T.C. 501 (F.C.T.D.) and In re Romeo's Place Victoria Ltd. et
al. (1981), 81 DTC 5295 (F.C.T.D.) not followed — Judge
having no jurisdiction to determine relevancy on application to
determine question of solicitor-client privilege — S. 232
enacted to deal solely with question of solicitor-client privilege
— Relevancy issue premature as no issue before judge in light
of which such issue to be decided No jurisdiction under s.
232 application to consider question of excessive seizure for
same reasons as relevancy question — Applicants having no
standing before Court as documents not belonging to them
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 231(1)(d),(4),(7),
(8),(11),(12),(13),(14),(15), 232(3),(4),(5), (9),(10) — Canadian
Charter of Rights and Freedoms, being Part I of the Constitu
tion Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11
(U.K.), ss. 8, 24(2).
Constitutional law — Charter of Rights — Application
under Income Tax Act, s. 232 re solicitor-client privilege in
documents — Whether seizure excessive as documents not
mentioned in search and seizure authorization — Whether
Charter s. 8 violated — Whether evidence excluded under
Charter s. 24(2) as bringing administration of justice into
disrepute — Judge without jurisdiction on s. 232 application
to consider whether excessive seizure — In any event, appli-
cants lack standing to request relief as admitting documents
not theirs — Canadian Charter of Rights and Freedoms, being
Part I of the Constitution Act, 1982, Schedule B, Canada Act
1982, 1982, c. 11 (U.K.), ss. 8, 24(2) — Income Tax Act, S.C.
1970-71-72, c. 63, s. 232.
Application pursuant to subsection 232(4) of the Income Tax
Act to determine whether applicants have solicitor-client privi
lege with respect to cancelled cheques and the attached bank
statements which were seized along with other documents
pertaining to the applicants' affairs. The entry, search and
seizure was made pursuant to subsection 231(4) of the Act.
Section 231 includes the power to enter upon and search any
property for evidence for any purpose related to the administra
tion or enforcement of the Act. The applicants were not
mentioned in any of the documents and there was no evidence
connecting them with the documents. The applicants argue that
the Court should order return of the documents on the grounds
that (1) the evidence so seized was irrelevant, and (2) since the
documents were not related to the applicants, the seizure on its
face was excessive and therefore unreasonable and unlawful
and contrary to section 8 of the Charter which guarantees
protection against unreasonable search and seizure. The appli
cant also invokes subsection 24(2) of the Charter which
requires that evidence be rejected where its admission is liable
to bring the administration of justice into disrepute.
Held, the application is dismissed. The applicants admit that
there is no question of solicitor-client privilege since the seized
documents consist of cheques and bank statements. In In the
Matter of Hoyle Industries Ltd and Hoyle Twines Ltd. and In
re Romeo's Place Victoria Ltd. et al. documents which admit
tedly were not subject to solicitor-client privilege were ordered
by this Court to be returned because they were irrelevant as
evidence concerning the financial affairs of the applicants.
These cases could not be followed in the instant case because a
judge does not have jurisdiction on this kind of application to
determine the issue of relevancy and because the relevancy
issue is premature. The purpose of enacting section 232 was to
allow the question of solicitor-client privilege to be determined
by a summary procedure. The special procedures provided for
in section 232 are solely for the purpose of dealing with the
issue of possible solicitor-client privilege. Even if jurisdiction
did exist, it could never be determined at this stage as there is
no issue in dispute in the light of which any such question must
necessarily be decided. Because section 232 authorizes a judge
to deal only with the question of solicitor-client privilege, there
is no jurisdiction under a section 232 application to even
consider the Charter of Rights argument question of excessive
seizure. Finally, the applicants do not have any standing before
the Court to request relief with respect to documents which
admittedly do not pertain to their affairs and are not their
documents.
CASES JUDICIALLY CONSIDERED
NOT FOLLOWED:
In the Matter of Hoyle Industries Ltd and Hoyle Twines
Ltd., [1980] C.T.C. 501 (F.C.T.D.); In re Romeo's Place
Victoria Ltd. et al. (1981), 81 DTC 5295 (F.C.T.D.).
COUNSEL:
Guy Du Pont and Guy Paquette for
applicants.
Yvan Roy for respondents.
SOLICITORS:
Verchère, Noël & Eddy, Montreal, for
applicants.
Deputy Attorney General of Canada for
respondents.
The following are the reasons for order ren -
dered in English by
ADDY J.: The applicants brought a motion
before The Honourable Mr. Justice Dubé [[1983]
1 F.C. 337 (T.D.)], the purpose of which was
expressed to be:
... to fix a date and a place for the determination of the
question whether the Petitioners (Applicants) have a solicitor-
client privilege in respect of documents, books, records and
other written things seized on 8 July 1982, at the premises of
Verchère, Noël & Eddy, lawyers, and kept under seal since that
time by Jacques Morel, assistant sheriff for the district of
Montréal;
The appointment was granted but, although it was
the intention of the applicants to file a formal
motion for the requested relief with the usual
affidavits in support for presentation at the time
and place appointed, this additional step was over
looked as counsel for the parties had been attempt
ing to settle the various questions raised.
Upon appearing before me, as most matters had
by that time been settled and several of the seized
documents had, on consent, been returned to the
applicants' solicitors and as the sole issue to be
determined was a question of law, there being no
dispute as to facts, it was urged upon me by all
parties that I proceed to determine it as if a formal
notice of motion had been made in writing. In
these exceptional circumstances and in order to
save time and avoid further costs, I agreed to
dispense with the formal notice of motion and
affidavit and to hear argument on the matter.
The only documents still subject to dispute were
several bundles of cancelled cheques attached to
monthly bank statements pertaining to the
cheques. They were all drawn on the same account
in the name of a third party in trust. None of the
applicants were in any way mentioned in any of
these documents and there was no evidence in any
way connecting them with the documents. It was
common ground, however, that the cheques and
the accompanying bank statements were located in
the office of the above-mentioned solicitors among
the documents pertaining to the affairs of the
applicants and that they were, for that reason,
surrendered by the solicitors to Mr. Morel as
custodian, pending the final determination of the
question of solicitor-client privilege by the Court.
It was also common ground that the entry and
search was made pursuant to an authorization to
that effect granted by The Honourable Mr. Justice
Gratton of the Superior Court of the Province of
Quebec, under the provisions of subsection 231(4)
of the Income Tax Act'. A copy of the said
authorization to enter and search was, upon con
sent, filed as an exhibit to these proceedings. The
present application was made for the determina
tion of the question mentioned in subsection
232(4) of that Act.
The relevant portions of the Income Tax Act
read as follows:
231. (1) Any person thereunto authorized by the Minister,
for any purpose related to the administration or enforcement of
this Act, may, at all reasonable times, enter into any premises
or place where any business is carried on or any property is
kept or anything is done in connection with any business or any
books or records are or should be kept, and
(d) if, during the course of an audit or examination, it
appears to him that there has been a violation of this Act or a
' S.C. 1970-71-72, c. 63.
regulation, seize and take away any of the documents, books,
records, papers or things that may be required as evidence as
to the violation of any provision of this Act or a regulation.
(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.
232... .
(4) Where a document has been seized and placed in custody
under subsection (3), the client or the lawyer on behalf of the
client, may
(a) within 14 days from the day the document was so placed
in custody, apply, upon 3 days' notice of motion to the
Deputy Attorney General of Canada, to a judge for an order
(i) fixing a day (not later than 21 days after the date of the
order) and place for the determination of the question
whether the client has a solicitor-client privilege in respect
of the document, and
(ii) requiring the custodian to produce the document to the
judge at that time and place;
(b) serve a copy of the order on the Deputy Attorney General
of Canada and the custodian within 6 days of the day on
which it was made, and, within the same time, pay to the
custodian the estimated expenses of transporting the docu
ment to and from the place of hearing and of safeguarding it;
and
(c) if he has proceeded as authorized by paragraph (b),
apply, at the appointed time and place, for an order deter
mining the question.
It is of some importance to note also that section
231, which, as above-mentioned, includes the
power to enter upon and search any property or
premises for evidence "for any purpose related to
the administration or enforcement of this Act,"
also contains provisions relating to special inquiries
pursuant to which a special inquirer of the Depart
ment has the power to inquire "as he may deem
necessary with reference to anything relating to
the administration or enforcement of this Act." It
is difficult to conceive broader powers to enter
upon what may quite fairly be labelled an evidenti-
ary fishing expedition. The evidence so seized or
gathered may be used at such inquiry. (Refer
subsections (7), (8), (11), (12), (13), (14) and
(15) of section 231.)
Counsel for the applicants readily admitted that
there could be no question of solicitor-client privi
lege involved in the documents under consider
ation, since they consisted solely of cheques and
bank statements. He, however, argued that the
Court should order that they be returned to the
applicants by the custodian on two grounds:
1. That the evidence so seized was irrelevant.
2. That since the documents were not mentioned
in the authorization to seize and search and
since they do not in any way purport to relate to
any of the applicants, who were the only persons
mentioned in the authorization as persons whose
affairs are subject to investigation, the seizure
was on its face excessive and, therefore, unrea
sonable and unlawful. He thus seeks to have the
seizure nullified as contrary to the provisions 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.)] which guarantees protection against
unreasonable search and seizure. He also, for
that same reason, invokes the provisions of sub
section 24(2) of the Constitution Act, 1982
which requires that the evidence be excluded
and rejected where its admission is liable to
bring the administration of justice into disre
pute.
Dealing with the first point raised, that is, the
question of relevancy, the applicants rely on two
fairly recent decisions of this Court, namely, In the
Matter of Hoyle Industries Ltd and Hoyle Twines
Ltd. 2 and In re Romeo's Place Victoria Ltd. et
al. 3 .
As in the case at bar, both these decisions
resulted from applications made pursuant to sub
section 232(4) of the Income Tax Act and con
cerned claims for solicitor-client privilege over
2 [1980] C.T.C. 501 (F.C.T.D.).
3 (1981), 81 DTC 5295 (F.C.T.D.).
documents of the applicants seized from the
possession of their solicitors. In both cases, certain
documents, which admittedly would not be subject
to solicitor-client privilege, were ordered to be
returned to the lawyers solely on the grounds that
they were completely irrelevant as evidence con
cerning the financial affairs of the applicants.
Reluctantly, I find myself unable to follow those
decisions for the following reasons: the purpose of
section 232, in my view, has been enacted exclu
sively and solely to allow the question of solicitor-
client privilege to be determined by a special sum
mary procedure which includes the creation of a
custodian without court order. In the first place, it
deals only with documents that are in the posses
sion of or under the control of a lawyer as therein
defined. Thus, a document that might be found in
the possession of an accountant or other party or
in the possession of the taxpayer is not covered by
the section. The wording of subsection (3) which
details the procedure to be followed at the time of
attempted seizure, deals only with the case where
the document is in the possession of a lawyer,
where the latter claims that it relates to a named
client and also claims that that particular person
enjoys a solicitor-client privilege with regard to the
document. Subsection (4) lays down the procedure
for fixing a time and place "for the determination
of the question whether the client has a solicitor-
client privilege in respect of the document ...."
Subsection (5) provides that the hearing will be in
camera and that the judge shall "determine the
question" and "decide the matter summarily."
This must obviously refer to the matter or question
covered by subsection (4). Subsection (10), which
gives the judge powers to make other directions
concerning the matter, specifically restricts the
power to give further direction to one which is
"most likely to carry out the object of this section
of allowing solicitor-client privilege for proper
purposes."
In the several other subsections, the issue of
solicitor-client is mentioned but at no place what
soever in those provisions is any other issue either
mentioned directly or alluded to in any way.
I must conclude that the special procedures
provided for in section 232, including the obliga
tion of the officer seizing the document to refrain
from looking at it, to seal it in a package and to
place it in the hands of a sheriff of the county or
the district concerned as a custodian, as well as the
powers granted to the judge are all enacted solely
and exclusively for the purpose of dealing with the
issue of possible solicitor-client privilege and for no
other purpose. The judge has not on an application
of this kind, the jurisdiction to deal with an issue
of relevancy of the evidence or any other substan
tive issue whatsoever, for that matter.
Secondly, even if jurisdiction did exist to deter
mine a question of relevancy, it could never be
determined at this stage as there is no issue in
dispute before the judge in the light of which any
such question must necessarily be decided. Section
231 which authorizes the entry and seizure pro
vides that the entry and seizure may be made "for
any purpose related to the administration or
enforcement of this Act." (Refer subsection (1)
quoted above.) Paragraph 231(1)(d) (also quoted
above) provides that the document may be used as
evidence as to the violation of any provision of the
Act or a regulation and subsection (4) gives the
right to enter and seize the evidence in the event of
a belief in the possible future violation of the Act
or regulations. When one considers the innumer
able possible violations and resulting issues and
side issues, both present and future which might
arise, and when one considers that they are in no
manner fixed or determined at present, it is, in my
view, absolutely impossible to make any proper
judicial ruling at this stage on whether a particular
document is or will eventually prove to be relevant.
For the above reasons, I decline to consider the
question of whether or not the cheques or bank
statements in issue are relevant.
I will now consider the second argument of the
applicants to the effect that the seizure of the
documents constituted an unreasonable and unau
thorized seizure and thus constituted a fundamen
tal violation of their rights.
In the first place, for the reasons previously
mentioned regarding the question of whether the
documents would be relevant, I find that I have
not the jurisdiction in an application under section
232 to even consider the question of excessive
seizure as section 232 authorizes me to deal only
with the question of solicitor-client privilege.
Remedies exist for those seeking a redress from
searches and seizures that are excessive and unrea
sonable for many reasons other than the fact that
they might constitute an evasion of a solicitor-cli
ent privilege, but such redress can neither be
sought nor enforced under the authority of section
232 of the Income Tax Act.
Finally, since the basis of the claim regarding
excessive seizure or unauthorized seizure is that
the documents do not pertain to the affairs of the
applicants and are not their documents, then none
of the applicants has any standing before this
Court to request any relief regarding those docu
ments. It is only those persons who have an inter
est in them who may be heard on any issue affect
ing the documents. No such person is before the
Court. Thus, even if I did have jurisdiction to
decide that issue and I have already held that I do
not, it could not be decided at the request of the
present applicants.
For the above reasons, the cheques and bank
statements, which I personally resealed following
the hearing and turned over for safekeeping to the
District Administrator of this Court in Montreal,
will be turned over to the solicitor for the Attorney
General for Canada or his duly authorized repre
sentative to be dealt with in accordance with the
provisions of the Income Tax Act.
Subsection 232(9) provides that no costs may be
awarded upon the disposition of any application
under section 232.
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.