Kourtessis v. M.N.R.  2 S.C.R. 53: Income tax -- Enforcement -- Search and seizure -- Warrant authorizing search and seizure quashed but material seized not returned --Second warrant issued with respect to retained material but subject to right to challenge -- Appellants challenging warrant by bringing application for declaration that search warrant and enabling legislation unconstitutional and for order quashing warrant -- Application dismissed -- Court of Appeal finding no right to appeal because search and seizure effected under federal criminal law power and no right to appeal existing in Criminal Code or Income Tax Act -- Whether or not appeal could be effected under provincial procedures -- Whether or not search and seizure unreasonable contrary to s. 8 of Charter
Present: La Forest, L'Heureux-Dubé, Sopinka, Cory, McLachlin, Stevenson and Iacobucci JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA
Income tax -- Enforcement -- Search and seizure -- Warrant authorizing search and seizure quashed but material seized not returned --Second warrant issued with respect to retained material but subject to right to challenge -- Appellants challenging warrant by bringing application for declaration that search warrant and enabling legislation unconstitutional and for order quashing warrant -- Application dismissed -- Court of Appeal finding no right to appeal because search and seizure effected under federal criminal law power and no right to appeal existing in Criminal Code or Income Tax Act -- Whether or not appeal could be effected under provincial procedures -- Whether or not search and seizure unreasonable contrary to s. 8 of Charter -- Income Tax Act, S.C. 1970-71-72, c. 63, as amended by S.C. 1986, c. 6, ss. 231.3, 231.3(7), 239 -- Canadian Charter of Rights and Freedoms, s. 8.
Courts -- Jurisdiction -- Right of appeal -- Income tax -- Enforcement -- Search and seizure -- Warrant authorizing search and seizure quashed but material seized not returned -- Second warrant issued with respect to retained material but subject to right to challenge -- Appellants challenging warrant by bringing application for declaration that search warrant and enabling legislation unconstitutional and for order quashing warrant -- Application dismissed -- Court of Appeal finding no right to appeal because search and seizure effected under federal criminal law power and no right to appeal existing in Criminal Code or Income Tax Act -- Whether or not appeal could be effected under provincial procedures.
Courts -- Procedure -- Income tax -- Enforcement -- Search and seizure -- Warrant authorizing search and seizure quashed but material seized not returned -- Second warrant issued with respect to retained material but subject to right to challenge -- Appellants challenging warrant by bringing application for declaration that search warrant and enabling legislation unconstitutional and for order quashing warrant -- Application dismissed -- Court of Appeal finding no right to appeal because search and seizure effected under federal criminal law power and no right to appeal existing in Criminal Code or Income Tax Act -- Whether or not appeal could be effected under provincial procedures.
Officers of Revenue Canada believed that appellants were evading or attempting to evade tax by making false and deceptive statements in income tax returns contrary to s. 239 of the Income Tax Act (ITA). The British Columbia Supreme Court issued warrants to search for and seize documents which could afford evidence of the alleged violations. These warrants were subsequently quashed by another judge of that court. The items that had been seized, however, were not returned and McEachern C.J.S.C. issued a search warrant for the seizure of relevant documents located at the Department's premises, provided that everything seized be sealed and that appellants have thirty days to challenge the warrant.
Appellants instituted proceedings in the B.C. Supreme Court by way of originating
petition challenging the warrant under s. 231.3(7) of the ITA, s. 24(1) of the Canadian
Charter of Rights and Freedoms, and the inherent jurisdiction of the court. The relief
sought was an order quashing the warrant and the search and seizure executed under it,
ordering the return of the material seized, prohibiting its use and ordering its
destruction and declaring s. 231.3 of the ITA to be contrary to ss. 7, 8 and 15 of
The entire application was dismissed by the B.C. Supreme Court in two judgments -- one dealing with non-constitutional issues and one with constitutional issues. On appeal to the Court of Appeal, appellants, unsure whether leave was required, gave both notice of appeal and notice of application for leave to appeal. The Minister brought a motion to quash on the ground that no appeal lay from the B.C. Supreme Court's judgment. The Court of Appeal allowed the motion to quash, holding that it had no jurisdiction to hear the appeal. It reasoned that the litigation in question was a criminal proceeding subject to Parliament's exclusive jurisdiction to prescribe criminal procedure and no right of appeal could be found in the ITA or the Criminal Code. The Court of Appeal would in any event have dismissed the appeal on the merits.
The preliminary issue to be decided here was whether the British Columbia Court of Appeal had jurisdiction to entertain the appellants' appeal. The constitutional question before the Court queried whether s. 231.3 of the ITA infringed ss. 7 and 8 of the Charter.
Held: The appeal should be allowed. Section 231.3 of the Income Tax Act infringes s. 8 of the Charter.
Per La Forest, L'Heureux-Dubé and Cory JJ.: Section 231.3 was held to violate s. 8 of the Charter in Baron v. Canada,  1 S.C.R. 416. The procedural issues, nevertheless, have very important implications for the working of the enforcement provisions of the ITA and other federal statutes to which federal criminal procedures apply.
An appeal is not available because no appeal has been provided by the relevant legislative body and courts of appeal have no inherent rights to create appeals. Only superior court judges appointed under s. 96 of the Constitution Act, 1867 have inherent jurisdiction. The appellants, however, may pursue an action for a declaration, to which the ordinary rules of procedure in civil actions apply, including provisions for appeal.
Various policy reasons underlie enacting a procedure that limits rights of appeal. Sometimes the opportunity for more opinions does not serve the ends of justice. There should not be unnecessary delay in the final disposition of proceedings, particularly proceedings of a criminal character. This is especially applicable to interlocutory matters which can ultimately be decided at trial. As well, there is the simple value of a final decision to resolve a dispute without the costs, in time, effort and money, of further hearings.
The offence created by s. 239 of the ITA is constitutionally supportable under both Parliament's criminal law power and its taxing power. The procedure to secure its enforcement is that set forth in the Criminal Code which notably provides only limited rights of appeal. Section 34(2) of the Interpretation Act provides that the provisions of the Criminal Code are to apply to offences created by Parliament unless the statute creating the offence provides otherwise. No right of appeal from an order issuing a search warrant is provided in the Criminal Code. Section 231.3 of the ITA was enacted for search warrants as contemplated by s. 34(2) of the Interpretation Act. It also makes no provision for appeal other than the review process set forth in s. 231.3(7).
Parliament, in the exercise of a federal head of power, may provide procedures for the enforcement of the measures it has enacted. That is a matter within its exclusive competence. Parliament can adopt provincial procedures for that purpose, and such an adoption will be assumed where it is necessary to give effect to a right. When Parliament selects a specific and integrated procedure, however, there is no room for the operation of provincial law. The enforcement provisions of the ITA form part of the uniform and integrated procedure for the investigation and prosecution of offences under the Act. No federal adoption was made or can be assumed here. Barring such adoption it is constitutionally unacceptable to read in appeals for other interlocutory proceedings or to adopt other provincial rules of procedure.
The admixture of provincial civil procedure with criminal procedure could result in an
unpredictable mish-mash. In dealing with procedure, and particularly criminal procedure,
it is important to know the precise steps to be pursued. Parliament accordingly adopted a
comprehensive procedure under the Criminal Code and adopted that procedure for the
enforcement of penal provisions in other statutes, including the ITA.
A number of pre-trial remedies are available to a person who has been the subject of a search. Section 231.3(7) provides for review and the Criminal Code makes provision for a speedy application for the return of seized goods. If the matter should proceed to trial, the accused may attack the search warrant in any way he considers appropriate, including the allegation that it infringes the provisions of s. 8 of the Charter. If the matter should not go to trial, a party may still seek civil damages for compensation.
The general right of appeal set forth in the Federal Court Act should not be assumed to apply to a proceeding provided in a separate statute that is a mere adjunct to a general system of criminal procedure where appeals of this nature are not provided. Parliament arguably did not intend by this minor grant of jurisdiction to the Federal Court (in what is for it an untypical jurisdiction) to have had in contemplation the general right of appeal devised for quite different types of proceedings. There may, in other words, be no anomaly at all.
The declaration does not constitute a review of a decision taken in a criminal proceeding because it merely states the law without changing anything. It should not be widely used as a separate collateral procedure to, in effect, create an automatic right of appeal where Parliament has, for sound policy reasons, refused to do so. Another procedure need not be provided as long as a reasonably effective procedure exists. A reasonably effective procedure has not been provided here, however. Section 231.3(7) and other procedures afford a measure of protection to the appellants but do not provide an adequate statutory provision for constitutional review of a search warrant.
Where a search is being conducted at the pre-trial stage, there is no trial judge and unlike the situation after the charge, no express Charter guarantee that proceedings must take place within a reasonable time. An investigation can go on indefinitely in continuing breach (if the search provisions are unconstitutional) of the appellants' Charter rights for an extensive period. The property of the individual subject to the search may remain in the custody of the state for a protracted period in violation of Charter norms.
The power to issue a search warrant under the ITA is vested in a superior court judge and at common law a decision of a superior court judge cannot be the subject of collateral attack. The judge issuing the warrant is not in a position to review for constitutionality at an ex parte hearing, and may not have the jurisdiction to do so on a later review of the ex parte order. An action for a declaration would not be barred, even if on later review the judge is competent to review the warrant and the empowering legislation on the basis of constitutionality, because that remedy would not provide sufficient constitutional protection.
The appellants should be permitted to pursue an action for a declaration. Since the action for a declaration is a discretionary remedy, however, the judge, in the exercise of his or her discretion, should consider the specific circumstances presented and refuse to entertain the action if satisfied that criminal proceedings against the accused would be initiated within a reasonable time. This would avoid the overlap and delay that have been among the major informing considerations in devising the rules for the governance of the discretion to allow or not to allow an action for a declaration to proceed.
A declaration should issue declaring s. 231.3 of the ITA and the search warrant issued thereunder to be of no force or effect. The appellants, in light of that declaration, are also entitled to the return of their documents and other property and all copies and notes thereof.
While an action for a declaration is an appropriate remedy at this stage of the proceedings, certiorari generally appears to be a more suitable instrument for reviewing the constitutionality of the action, and the possibility that it might have issued in this case should be left open. At common law certiorari does not lie against a decision of a superior court judge, but what is alleged here is a breach of a constitutional right which may call for an adaptation of the inherent powers of a superior court to make the procedure conform to constitutional norms. If certiorari might have issued, there would appear to be little use for the declaratory action in this context.
Per L'Heureux-Dubé J.: The reasons of La Forest J. were joined given that the
majority decision in Knox Contracting Ltd. v. Canada,  2 S.C.R. 338, applied.
Per Sopinka, McLachlin and Iacobucci JJ.: Section 231.3 of the ITA violates the reasonable search guarantee found in s. 8 of the Charter for the reasons given in Baron v. Canada,  1 S.C.R. 416.
The offence and search warrant provisions of the ITA are referrable to both the federal criminal law and taxation power, and jurisdiction to legislate procedure in matters relating to these provisions is shared between the provinces and the federal government, subject to federal paramountcy in the event of conflict between federal and provincial legislation. Parliament is free to assign jurisdiction to any tribunal it chooses, whatever the source of its legislative power. If federal legislation is silent, the ordinary rule is that a litigant suing on a federal matter in a provincial court takes the procedure of that court as he or she finds it. This does not mean that provincial legislation does not apply unless "adopted" by federal legislation. The authorities make it clear that a province has legislative authority to adjudicate federal matters and that such legislation is only ousted if it conflicts with federal legislation. The fact that there is alleged to be a comprehensive procedure contained in federal legislation is only relevant to determine whether provincial legislation is ousted because it conflicts with federal legislation. It is not ousted in relation to declaratory relief, which includes the right of appeal conferred by provincial legislation, and should also extend to ancillary relief which enables the Court to give effect to the declaration.
Knox Contracting Ltd. v. Canada,  2 S.C.R. 338, should be distinguished so as not to foreclose an appeal in proceedings relating to a declaration that the statute authorizing a search warrant violates the Constitution, coupled with an application to set aside the search warrant. These two remedies can be exercised, in combination, prior to the laying of charges, and the result of such exercise may be appealed.
An application under s. 231.3(7) would be a wholly inappropriate proceeding to test the constitutional validity of the provision under which the seizure is made. It applies only if the judge is satisfied that the documents seized are not needed for an investigation or prosecution or were not seized in accordance with the warrant. Section 231.3(7) can only be resorted to if both the warrant and the statutory provision under which the warrant was issued are valid. Not only is subs. (7) not an appropriate forum with respect to a constitutional challenge of the search and seizure provision, but a judge would also not have jurisdiction to deal with such a challenge upon a plain reading of the words of the subsection.
In the alternative, Knox Contracting can be distinguished on the basis that the procedure relating to proceedings for declaratory relief on constitutional grounds cannot be characterized as criminal law so as to exclude a right of appeal. In Knox Contracting the proceeding taken was a motion to quash. There was no constitutional challenge to legislation in that case. Here, the proceeding taken was not simply to quash the warrant but an action for a declaration that s. 231.3 was invalid on constitutional grounds. A motion to quash, when not combined with an action for declaratory relief, may take its character for the purpose of division of powers from the underlying proceeding which it attacked. On the other hand, an action for a declaration as to the constitutional validity of a statute does not necessarily partake of the character of the statute which is attacked. It has a life of its own.
An action to declare a statutory provision unconstitutional is not transformed from a
civil remedy to a criminal remedy merely because the declaration relates to a criminal
statutory provision. It cannot be used as a substitute for an application to the trial
judge in a criminal case in order to acquire a right of appeal. By virtue of s. 24(1) of
the Charter, there are some proceedings available to an accused in the context of a
criminal case in respect to issues that could be the subject of an action for a
declaration. The superior courts have jurisdiction to entertain such applications even if
the superior court to which the application is made is not the trial court. However, a
superior court has a discretion to refuse to do so unless, in the opinion of the superior
court, given the nature of the violation and the need for a timely review, it is better
suited than the trial court to deal with the matter. The superior court would therefore
have jurisdiction to entertain an action for a declaration seeking this kind of relief but
subject to the same discretion to refuse to exercise it. The court is justified in
refusing to entertain the action if there is another procedure available in which more
effective relief can be obtained or the court decides that the legislature intended that
the other procedure should be followed.
As a general rule, the court should exercise its discretion to refuse to entertain declaratory relief when such relief is sought as a substitute for obtaining a ruling in a criminal case. This will be the apt characterization of any declaration which is sought with respect to relief that could be obtained from a trial court which has been ascertained. The same considerations apply before a trial court has been ascertained if the relief sought will determine some issue in pending criminal proceedings and does not have as a substantial purpose vindication of an independent civil right. In such circumstances, the mere fact that relief was sought in the guise of an action for a declaration would not confer a right of appeal from the refusal to entertain the action.
No issue was raised here in respect of the British Columbia Supreme Court's jurisdiction or in respect of the exercise of its discretion to entertain the appellants' application by way of originating petition. There was no trial court because no charge was laid. The attack on the validity of the statutory provision authorizing the search, while it would affect the admissibility at trial of the things seized, was also vital to the taxpayers' civil interests. The search warrant would not only authorize a trespass but also seizure of personal property. The petition for a declaration was therefore properly entertained under the British Columbia rules of procedure. Those rules which clearly applied at first instance should also apply to permit an appeal here. If Parliament did not intend to exclude a petition for a declaration under provincial rules, it cannot have intended to exclude an appeal pursuant to the same rules.
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