Judgments

[1997] 2 F.C. 428

T-2022-93

Angelo Del Zotto and Herbert B. Noble (Plaintiffs)

v.

Her Majesty the Queen in right of Canada, the Minister of National Revenue, John Edward Thompson and D. Reilly Watson (Defendants)

Indexed as: Del Zotto v. Canada (T.D.)

Trial Division, Rothstein J.—Toronto, September 3, 1996; Ottawa, January 24, 1997.

Constitutional law — Charter of Rights — Life, liberty and security — Del Zotto suspected of tax evasion — Inquiry convened under Income Tax Act, s. 231.4 into his financial affairs — Del Zotto entitled to attend, representation by counsel — Noble subpoenaed to attend, give evidence, produce documents — Del Zotto not subpoenaed — Inquiry adjourned before any witness giving evidence — Neither s. 231.4 nor inquiry contravening Charter, s. 7 — Principles of fundamental justice under s. 7 encompassing protection against self-incrimination in some circumstances, related principles i.e. Crown must establish case before accused required to respond, right to silence, right to claim exception under s. 7 where Crown engaging in fundamentally unfair conduct — S. 7 not applicable as Del Zotto not subpoenaed, not conscripted against self; Noble not facing criminal charges, not compelled to testify as to own affairs — Right not to speak to police not recognized principle of fundamental justice under s. 7.

Constitutional law — Charter of Rights — Criminal process — Del Zotto suspected of tax evasion — Inquiry convened under Income Tax Act, s. 231.4 into his financial affairs — Entitled to attend, representation by counsel — Noble subpoenaed to attend, give evidence, produce documents — Del Zotto not subpoenaed — Inquiry adjourned before any witness giving evidence — Neither s. 231.4 nor inquiry contravening Charter, s. 8 — Hunter et al. v. Southam Inc. standards to determine reasonableness of search, seizure not applicable — Categorization of context of search, seizure but one factor to be considered — All circumstances fully weighed — Determination of intrusiveness of search, seizure based on scale of interests ranging from bodily integrity to requests for production of documents — Tax inquiry lesser form of intrusion than search of private premises — Expectation of privacy pertaining to business affairs relatively low compared to matters of intimate, personal nature — Determination of reasonable expectation of privacy not dependent on personal preference.

Income tax — Enforcement — Inquiries — Del Zotto suspected of tax evasion — Inquiry convened under Act, s. 231.4 into his financial affairs from 1979 to 1985 — Entitled to attend, representation by counsel — Noble subpoenaed to attend, give evidence, produce documents — Del Zotto not subpoenaed — Inquiry adjourned before any witness giving evidence — Neither s. 231.4 nor inquiry contravening Charter, ss. 7, 8 — Principles of fundamental justice encompassed by s. 7 canvassed — S. 7 not applicable as no self-incrimination, Del Zotto not being subpoenaed to give evidence, Noble not charged, not giving evidence against self — As to reasonableness of search, seizure, Hunter et al. v. Southam Inc. standards not applicable — Intrusiveness of search depending on scale of interests ranging from bodily integrity to requests for production of documents — Tax inquiry lesser form of intrusion than search of private premises.

This was a constitutional challenge to Income Tax Act, section 231.4. Plaintiff, Del Zotto, was suspected of tax evasion and in 1992 an inquiry was convened under section 231.4 into his financial affairs for the taxation years 1979 to 1985. Del Zotto was notified that he was entitled to be present and to be represented by counsel. Plaintiff, Noble, was served a subpoena to attend, give evidence and produce documents at the inquiry. Del Zotto was not subpoenaed to attend or give evidence. The inquiry was adjourned before any witness gave evidence and eventually stayed by the Federal Court of Appeal.

The plaintiffs argued that section 231.4 and the inquiry contravened Charter, sections 7 and 8. Charter, section 7 guarantees 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. Section 8 guarantees the right to be secure against unreasonable search and seizure. Section 231.4 permits the Minister to authorize any person to make such inquiry as he may deem necessary with reference to anything relating to the administration or enforcement of the Act. A hearing officer appointed to conduct an inquiry has all the powers conferred on a commissioner by Inquiries Act, sections 4 and 5. With respect to section 7, the plaintiffs relied on the right against self-incrimination, the “case to meet” principle, the right to silence, the principle of fundamental unfairness, and the argument that the hearing officer in a section 231.4 inquiry is analogous to a police officer armed with subpoena powers which in the course of a criminal investigation is said to be constitutionally impermissible.

The issues were whether either section 231.4 or the inquiry infringed Charter, sections 7 or 8.

Held, the action should be dismissed. Neither section 231.4 nor the inquiry convened herein breached Charter, section 7 or 8.

(1) Section 7 did not apply.

(i) Charter, section 7 has been found in some circumstances to afford protection against self-incrimination although it does not expressly provide for the right against self-incrimination. Individuals facing possible criminal or quasi-criminal charges are not compellable if the predominant purpose for seeking their evidence is to make a case for convicting them in their own proceedings. The section 7 protection against self-incrimination is not engaged if the predominant purpose of an inquiry is the administration and enforcement of its authorizing Act. As Del Zotto had not been subpoenaed to appear and testify at the inquiry, the right against self-incrimination was not directly engaged. With respect to the testimony of Noble, the principle of self-incrimination protects individuals against being conscripted against themselves, not against incrimination by another witness. That Noble was compelled to testify as to the affairs of Del Zotto did not engage section 7 with respect to self-incrimination.

(ii) The “case to meet” principle did not provide the plaintiffs with a foundation on which to claim the protection of section 7. The “case to meet” principle is that the Crown must establish a “case to meet” before there can be any expectation that the accused should respond. It too is strongly connected with the broad concern against self-incrimination. An accused should not be forced into assisting in his or her own prosecution. An essential link was missing in the submission that section 231.4 and the inquiry infringed the “case to meet” principle on grounds that an inquiry under section 231.4 constituted a discovery against an individual in a criminal context. On the facts, there was no individual being conscripted against himself. The “case to meet” principle does not protect an individual against revealing the defence strategy of an accused or another individual facing the prospect of criminal charges. There was no evidence indicating that Noble was facing the possibility of charges under Income Tax Act, section 239. If any “defence” was at risk of being revealed it pertained to Del Zotto. Given that Noble was argued to be at risk of disclosing a defence that was not his own, there was no link to self-conscription.

(iii) The principle of the right to remain silent did not arise. The right to silence has been adopted as a principle of fundamental justice under section 7. It protects an individual from being required to answer the police when under criminal investigation, and bears a close relation to the principle of self-incrimination, in so far as it protects an individual under investigation from self-conscription. The trigger of the right to silence is founded on an adversarial relation between the state and an individual in which the individual is put at risk of incriminating himself. The concern underlying the right to silence is specific to the circumstances of the individual who is “pitted against” the prosecution. Although Del Zotto is under investigation, he has not been summoned to give testimony or produce documents at the inquiry, and has not been asked any questions at the inquiry. He was thus not “pitted against” the authorities. There was no effort on the part of the state to conscript Del Zotto against himself.

(iv) The plaintiffs were not availed of the protection of section 7 on the grounds of fundamental unfairness. A witness may be entitled to claim an exception under section 7 from the principle that the state was entitled to every person’s evidence if it is established that the Crown was engaging in fundamentally unfair conduct. Fundamentally unfair conduct will occur when the Crown is seeking, as its predominant purpose, rather than incidentally, to build or advance its case against that witness instead of acting in furtherance of those pressing and substantial purposes validly within the jurisdiction of the body compelling the testimony. But the test of fundamental unfairness is also strongly connected with the principle of self-incrimination. Since Del Zotto has not been subpoenaed and Noble is being compelled to testify as to Del Zotto’s affairs and not his own, the grounds of fundamental unfairness could not be invoked.

(v) The plaintiffs provided no support for the proposition that the right not to speak was a right afforded by section 7 of the Charter. Based on the common law right not to speak to the police, the plaintiffs argued that it was unconstitutional for a hearing officer conducting a section 231.4 inquiry to compel innocent third parties to testify against a taxpayer who is undergoing the equivalent of a criminal investigation. Although the right not to speak to the police has been adopted in Canada at common law, it has not been recognized as a principle of fundamental justice for the purposes of section 7. Iacobucci J.’s observation in R. v. S. (R.J.) that the police cannot have subpoena power was rooted in a concern based on the principle of self-incrimination rather than a general right not to speak to the police. Del Zotto was not subpoenaed. The plaintiffs had no ground on which to invoke section 7 in respect of the observation that the police did not have subpoena powers.

(2) Neither section 231.4 nor the inquiry was unconstitutional under section 8. In Hunter et al. v. Southam Inc., the Supreme Court of Canada articulated standards under which a search and seizure may be established as reasonable. The issue was whether the Hunter standards applied. The Supreme Court has held that it was consistent with a flexible and purposive approach to section 8 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. A determination of the applicability of the Hunter standards is not based solely on the categorization of the context of the search and seizure as “criminal” or “regulatory”, although that is a factor to be considered. A full weighing of all the circumstances is required. The determination as to intrusiveness of a search and seizure takes place on a scale of interests, ranging from bodily integrity to requests for the production of documents. The greater the intrusion into the privacy interests of an individual, the more likely that safeguards against unreasonable search and seizure will be required. A tax inquiry is a lesser form of intrusion than a search of private premises. Also the expectation of privacy pertains to business affairs, which is relatively low in comparison with matters of a personal or intimate nature or an expectation of privacy based on personal integrity and dignity which provides the core of the need to protect individuals from unreasonable searches and seizures. The inquiry would not require application of the Hunter standards. Inquiries under which individuals are required to give evidence under oath and to produce documents do not have a degree of intrusiveness which require the application of the Hunter standards. The determination as to a reasonable expectation of privacy and when the Hunter standards apply is not dependent on what an individual prefers.

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.) [R.S.C., 1985, Appendix II, No. 44], ss. 7, 8, 13.

Combines Investigation Act, R.S.C. 1970, c. C-23, s. 10(1).

Income Tax Act, R.S.C. 1952, c. 148 (as am. by S.C. 1970-71-72, c. 63, s. 1), ss. 163(2) (as am. by S.C. 1978-79, c. 5, s. 7; 1980-81-82-83, c. 48, s. 90; 1984, c. 1, s. 87), 231.3 (as enacted by S.C. 1986, c. 6, s. 121), 231.4 (as enacted idem), 239(1)(a), (d), (f) (as am. by S.C. 1988, c. 55, s. 182), (g).

Inquiries Act, R.S.C., 1985, c. I-11, ss. 4, 5.

Securities Act, S.B.C. 1985, c. 83, s. 128(1).

CASES JUDICIALLY CONSIDERED

APPLIED:

Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; (1990), 65 D.L.R. (4th) 161; 54 C.C.C. (3d) 417; 29 C.P.R. (3d) 97; 76 C.R. (3d) 129; 47 C.R.R. 1; 106 N.R. 161; 39 O.A.C. 161; R. v. Beare; R. v. Higgins, [1988] 2 S.C.R. 387; (1988), 55 D.L.R. (4th) 481; [1989] 1 W.W.R. 97; 71 Sask. R. 1; 45 C.C.C. (3d) 57; 66 C.R. (3d) 97; 36 C.R.R. 90; 88 N.R. 205; R. v. Hebert, [1990] 2 S.C.R. 151; [1990] 5 W.W.R. 1; 47 B.C.L.R. (2d) 1; 57 C.C.C. (3d) 1; 77 C.R. (3d) 145; 49 C.R.R. 114; 110 N.R. 1; Baron v. Canada, [1993] 1 S.C.R. 416; (1993), 99 D.L.R. (4th) 350; 78 C.C.C. (3d) 510; 18 C.R. (4th) 374; 13 C.R.R. (2d) 65; [1993] 1 C.T.C. 111; 93 DTC 5018; 146 N.R. 270.

DISTINGUISHED:

R. v. S. (R.J.), [1995] 1 S.C.R. 451; (1995), 121 D.L.R. (4th) 589; 177 N.R. 81; 78 O.A.C. 161; British Columbia Securities Commission v. Branch, [1995] 2 S.C.R. 3; R. v. P. (M.B.), [1994] 1 S.C.R. 555; (1994), 113 D.L.R. (4th) 461; 89 C.C.C. (3d) 289; 29 C.R. (4th) 209; 21 C.R.R. (2d) 1; 165 N.R. 321; 70 O.A.C. 161; R. v. Woolley (1988), 40 C.C.C. (3d) 531; 63 C.R. (3d) 333; 37 C.R.R. 126; 25 O.A.C. 390 (Ont. C.A.); Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145; (1984), 55 A.R. 291; 11 D.L.R. (4th) 641; [1984] 6 W.W.R. 577; 33 Alta. L.R. (2d) 193; 27 B.L.R. 297; 14 C.C.C. (3d) 97; 2 C.P.R. (3d) 1; 41 C.R. (3d) 97; 9 C.R.R. 355; 84 DTC 6467; 55 N.R. 241.

CONSIDERED:

R. v. B. (K.G.), [1993] 1 S.C.R. 740; (1993), 79 C.C.C. (3d) 257; 19 C.R. (4th) 1; 148 N.R. 241; 61 O.A.C. 1; Rice v. Connolly, [1966] 2 All E.R. 649 (Q.B.); Rothman v. The Queen, [1981] 1 S.C.R. 640; (1981), 121 D.L.R. (3d) 578; 59 C.C.C. (2d) 30; 20 C.R. (3d) 97; 35 N.R. 485; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; (1990), 68 D.L.R. (4th) 568; 55 C.C.C. (3d) 530; [1990] 2 C.T.C. 103; 76 C.R. (3d) 283; 47 C.R.R. 151; 90 DTC 6243; 106 N.R. 385; 39 O.A.C. 385; Knox Contracting Ltd. v. Canada, [1990] 2 S.C.R. 338; (1990), 106 N.B.R. (2d) 408; 73 D.L.R. (4th) 110; 265 A.P.R. 408; [1990] 2 C.T.C. 262; 58 C.C.C. (3d) 65; 90 DTC 6447; 110 N.R. 171.

REFERRED TO:

Del Zotto v. Canada, [1994] 2 F.C. 640 [1994] 1 C.T.C. 254; (1994), 94 DTC 6170; 71 F.T.R. 1 (T.D.); Del Zotto v. Canada, [1993] 2 C.T.C. 46; (1993), 93 DTC 5271 (F.C.A.); R. v. Khan, [1990] 2 S.C.R. 531; (1990), 59 C.C.C. (3d) 92; 79 C.R. (3d) 1; 113 N.R. 53; 41 O.A.C. 353; R. v. Smith, [1992] 2 S.C.R. 915; (1992), 94 D.L.R. (4th) 590; 75 C.C.C. (3d) 257; 15 C.R. (4th) 133; 139 N.R. 323; 55 O.A.C. 321; Moore v. The Queen, [1979] 1 S.C.R. 195; (1978), 90 D.L.R. (3d) 112; [1978] 6 W.W.R. 462; 43 C.C.C. (2d) 83; 5 C.R. (3d) 289; 24 N.R. 181; Dedman v. The Queen et al., [1985] 2 S.C.R. 2; (1985), 20 C.C.C. (3d) 97; 46 C.R. (3d) 193; 34 M.V.R. 1; 60 N.R. 34; Baron v. Canada, [1990] 2 F.C. 262 [1990] 1 C.T.C. 84; (1989), 90 DTC 6040; 30 F.T.R. 188 (T.D.).

AUTHORS CITED

Beaudoin, G.-A. and E. Ratushny, eds. The Canadian Charter of Rights and Freedoms, 2nd ed. Toronto: Carswell, 1989.

ACTION for declaration that Income Tax Act, s. 231.4 and the inquiry convened thereunder into the financial affairs of plaintiff, Del Zotto, breached Charter, ss. 7 or 8. Action dismissed.

COUNSEL:

Edward L. Greenspan, Q.C. and David W. Stratas for plaintiff Angelo Del Zotto.

Alan D. Gold and Tristram J. Mallett for plaintiff Herbert B. Noble.

Ivan S. Bloom, Q.C., Gordon S. Campbell and John Vaissi-Nagy for defendants Her Majesty the Queen in right of Canada, the Minister of National Revenue and John Edward Thompson.

Graham F. Pinos, Q.C. for defendant D. Reilly Watson.

SOLICITORS:

Greenspan, Rosenberg & Buhr, Toronto, and Osler, Hoskin & Harcourt, Toronto, for plaintiff Angelo Del Zotto.

Gold and Fuerst, Toronto, for plaintiff Herbert B. Noble.

Deputy Attorney General of Canada for defendants Her Majesty the Queen in right of Canada, the Minister of National Revenue and John Edward Thompson.

Graham F. Pinos, Q.C., Toronto, for defendant D. Reilly Watson.

The following are the reasons for judgment rendered in English by

Rothstein J.:

INTRODUCTION

This case involves a constitutional challenge to the “inquiry” provision, section 231.4 [as enacted by S.C. 1986, c. 6, s. 121] of the Income Tax Act, R.S.C. 1952, c. 148 as amended [as am. by S.C. 1970-71-72, c. 63, s. 1] (the Act). The plaintiff, Angelo Del Zotto, came under suspicion of tax evasion following an audit in 1985 by the Audit Branch of Revenue Canada. In 1986, an investigation was commenced into Del Zotto’s financial affairs by the Special Investigations Branch of Revenue Canada, which led to the initiation in 1992 of an inquiry into Del Zotto’s financial affairs for the years 1979 to 1985 inclusive, convened under section 231.4 (the inquiry).

At the opening of the inquiry, the plaintiffs argued for and received an adjournment pending the outcome of an application brought by the plaintiffs to the Federal Court Trial Division to stay the inquiry. A stay of the inquiry was granted by this Court [Del Zotto v. Canada, [1994] 2 F.C. 640. It was ordered that the inquiry would resume, if it was constitutionally permitted to resume, 30 days from a determination as to the constitutional validity of section 231.4 of the Income Tax Act and/or the inquiry.

ISSUES

The issues in this case are whether:

(a) section 231.4 of the Income Tax Act (the inquiry provision) infringes either section 7 or 8 of the Canadian Charter of Rights and Freedoms;

(b) if section 231.4 is constitutional, on the facts of this case, the inquiry convened into the financial affairs of the plaintiff Angelo Del Zotto infringes either section 7 or 8 of the Charter.

RELEVANT CONSTITUTIONAL AND

STATUTORY PROVISIONS

The plaintiffs are relying on sections 7 and 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.) [R.S.C., 1985, Appendix II, No. 44]:

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 and seizure.

The impugned law is section 231.4 of the Income Tax Act:

231.4 (1) The Minister may, for any purpose related to the administration or enforcement of this Act, authorize any person, whether or not the person is an officer of the Department of National Revenue, to make such inquiry as he may deem necessary with reference to anything relating to the administration or enforcement of this Act.

(2) Where the Minister, pursuant to subsection (1), authorizes a person to make an inquiry, the Minister shall forthwith apply to the Tax Court of Canada for an order appointing a hearing officer before whom the inquiry will be held.

(3) For the purposes of an inquiry authorized under subsection (1), a hearing officer appointed under subsection (2) in relation thereto has all the powers conferred on a commissioner by sections 4 and 5 of the Inquiries Act and that may be conferred on a commissioner under section 11 thereof.

(4) A hearing officer appointed under subsection (2) in relation to an inquiry shall exercise the powers conferred on a commissioner by section 4 of the Inquiries Act in relation to such persons as the person authorized to make the inquiry considers appropriate for the conduct thereof but the hearing officer shall not exercise the power to punish any person unless, on application by the hearing officer, a judge of a superior or county court certifies that the power may be exercised in the matter disclosed in the application and the applicant has given to the person in respect of whom he proposes to exercise the power 24 hours notice of the hearing of the application or such shorter notice as the judge considers reasonable.

(5) Any person who gives evidence in an inquiry authorized under subsection (1) is entitled to be represented by counsel and, on request made by him to the Minister, to receive a transcript of the evidence given by that person.

(6) Any person whose affairs are investigated in the course of an inquiry authorized under subsection (1) is entitled to be present and to be represented by counsel throughout the inquiry unless the hearing officer appointed under subsection (2) in relation to the inquiry, on application by the Minister or a person giving evidence, orders otherwise in relation to the whole or any part of the inquiry on the ground that the presence of the person and his counsel, or either of them, would be prejudicial to the effective conduct of the inquiry.

Pursuant to subsection 231.4(3), a hearing officer appointed to conduct an inquiry has all the powers conferred on a commissioner by sections 4 and 5 of the Inquiries Act, R.S.C., 1985, c. I-11, which state:

4. The commissioners have the power of summoning before them any witnesses, and of requiring them to

(a) give evidence, orally or in writing, and on oath or, if they are persons entitled to affirm in civil matters on solemn affirmation; and

(b) produce such documents and things as the commissioners deem requisite to the full investigation of the matters into which they are appointed to examine.

5. The commissioners have the same power to enforce the attendance of witnesses and to compel them to give evidence as is vested in any court of record in civil cases.

Paragraphs 239(1)(a) and (d) of the Income Tax Act are also relevant [paragraph 239(1)(f) (as am. by S.C. 1988, c. 55, s. 182)]:

239. (1) Every person who has

(a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation,

…

(d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act, or

…

is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to

(f) a fine of not less than 50%, and not more than 200%, of the amount of the tax that was sought to be evaded, or

(g) both the fine described in paragraph (f) and imprisonment for a term not exceeding 2 years.

FACTS

The plaintiff Angelo Del Zotto is currently Chairman and Chief Executive Officer of Tridel Enterprises Inc., a public company, and Chairman and Chief Executive Officer of Tridel Corporation. He has been prominently engaged in the business of planning and obtaining financing for construction and marketing real estate projects. The plaintiff Herbert Noble is a lawyer and a business executive. There is no evidence of Noble’s relationship with Del Zotto.

In October 1985, representatives of the Audit Branch of Revenue Canada began making inquiries regarding Del Zotto’s financial affairs. Specifically, Revenue Canada was concerned about the exercise of stock options by Del Zotto in a company called Night Hawk Resources Ltd. Revenue Canada’s position was that the benefit Del Zotto received from the exercise of the stock options was $290,250 and that the benefit was not reported. In addition to seeking payment of $290,250, Revenue Canada considered levying a penalty under subsection 163(2) [as am. by S.C. 1978-79, c. 5, s. 7; 1980-81-82-83, c. 48, s. 90; 1984, c. 1, s. 87] of the Income Tax Act of up to 25% of the amount owing because the non-reporting was done knowingly or through gross negligence. Del Zotto admitted liability, but submitted that no penalty should be levied.

In January 1986, the Del Zotto file was referred by the Audit Branch of Revenue Canada to the Special Investigations Branch.[1] It is apparent from the referral document that by the time of referral to Special Investigations, the Audit Branch had concluded Del Zotto had also failed to report $90,000 of interest income for 1980, and $4,500 of other income for 1983, bringing the total undeclared amount to $384,750.

During the period of 1986 to 1990, several discussions took place between Revenue Canada and Del Zotto or his representatives, and Noble or his representatives. On May 3, 1990, Revenue Canada wrote to Herbert Noble asking for particulars, including Noble’s business relationship with Angelo Del Zotto, with Tridel and with Supra Investments Inc. By letter dated May 23, 1990, counsel for Noble declined to provide the information sought by Revenue Canada.

On April 19, 1991, at a meeting with officials of the Special Investigations Branch of Revenue Canada, counsel for Del Zotto was advised that Revenue Canada proposed to charge Del Zotto with income tax evasion under paragraphs 239(1)(a) and (d) of the Income Tax Act.

On November 19, 1991, the Toronto District Special Investigations Branch wrote to head office of Special Investigations Branch requesting that a commission of inquiry be appointed pursuant to section 231.4 of the Income Tax Act. In this communication, it was specified that Del Zotto was under suspicion of failing to report $5,081,519 of stock profits during the taxation years 1983 to 1984, and that the amount of tax sought to be evaded by Del Zotto was $1,669,062.

On or about September 30, 1992, Robert Roy, Assistant Deputy Minister, Taxation Programs Branch, forwarded a memorandum dated September 30, 1992 to Pierre Gravelle, Deputy Minister of Revenue Canada Taxation which set out particulars of the alleged contravention of the Act by Del Zotto, and requested authorization for an inquiry under subsection 231.4(1) of the Act into the financial affairs of Del Zotto. A Globe and Mail article dated September 9, 1987 and correspondence were sent to Gravelle along with the memorandum.

After Gravelle received the memorandum from Roy, Gravelle and Roy met to discuss its contents. Gravelle read and relied on the memorandum and its attachments and enclosures in signing an authorization for the inquiry, dated October 9, 1992, in which he authorized the defendant John Edward Thompson, Q.C., with the assistance of such counsel as he should choose, to make an inquiry into the financial affairs of Del Zotto for the taxation years 1979 to 1985 inclusive. The authorization was made under subsection 231.4(1) of the Act, and was not based on a reading of evidence given under oath.

By an order signed December 2, 1992, Chief Judge Couture appointed the defendant D. Reilly Watson as the hearing officer for the inquiry. The order was not based on a reading of evidence given under oath. Chief Judge Couture informed Gravelle of the order by letter dated December 2, 1992, and delivered the order to Watson by letter dated December 2, 1992.

The inquiry was fixed to commence on May 6, 1993. Del Zotto was sent notice of the inquiry by a letter dated April 21, 1993. The letter advised Del Zotto that Thompson had been authorized to make an inquiry into his financial affairs for the taxation years 1979 to 1985 inclusive, and that Watson had been appointed as the hearing officer. The letter specified the time and place of the inquiry and provided that Del Zotto was “entitled to be present and to be represented by counsel, subject to the provisions of subsection 231.4(6) of the Income Tax Act”.

On or about April 26, 1993, pursuant to subsection 231.4(3) of the Act, Noble was served a subpoena to attend and give evidence and produce documents at the inquiry commencing on May 6, 1993. Del Zotto was not subpoenaed to attend or give evidence or produce documents at the inquiry.

The inquiry started on May 6, 1993 with Watson presiding as the hearing officer. The inquiry proceedings were being recorded on videotape so as to comply with the case R. v. B. (K.G.)[2] concerning the admissibility in court of videotaped evidence. There was also in attendance Jim Davies and David Wood (investigators and members of the Special Investigations Section), and officers Jim McGinis and Tom Anderson (from the RCMP Tax Unit).

At the commencement of the inquiry, Edward Greenspan, Q.C., appearing on behalf of Del Zotto, made submissions that the inquiry should be adjourned. Argument took place on the adjournment application. On the morning of May 7, 1993, Watson adjourned the inquiry pending stay proceedings regarding the inquiry brought in the Federal Court Trial Division by Del Zotto.

The stay was granted in the Federal Court of Appeal by Hugessen J.A. on May 28, 1993 [Del Zotto v. Canada, [1993] 2 C.T.C. 46]. The inquiry has not proceeded beyond the point at which it was adjourned by Watson on May 7, 1993. As a result, no witness has testified or produced documents at the inquiry.

SECTION 7

Section 7 of the Charter has been found in some circumstances to afford protection against self-incrimination, although it does not expressly provide for the right against self-incrimination. The right against self-incrimination is expressly provided for in section 13 of the Charter, which states:

13. A witness who testifies in any proceedings has the right not to have any incriminating evidence so given used to incriminate that witness in any other proceedings, except in a prosecution for perjury or for the giving of contradictory evidence.

The right against self-incrimination under section 13 is narrow. Under section 13, individuals are protected against the use of self-incriminating testimony at a proceeding against them, but not against being compelled to give such testimony at proceedings other than their own trial. Thus, the courts turned to section 7 to address the question of whether, as a matter of fundamental justice, individuals are afforded a residual right against self-incrimination at the point of being compelled to testify at a proceeding other than their own trial.

The Supreme Court of Canada in R. v. S. (R.J.), [1995] 1 S.C.R. 451, addressed the issue of whether individuals who might subsequently be charged with a criminal or quasi-criminal offence could be compelled to give evidence and produce documents at the trial of another person. A young offender was charged with break and enter, and a second young offender, who was to be tried separately for the same offence, was being compelled to testify at the trial of the first young offender. The Supreme Court ruled that the latter young offender was compellable as a witness because he was afforded “use immunity” (his testimony could not be used against him at his own trial pursuant to section 13 of the Charter), and “derivative use immunity” (evidence gained as a result of his testimony could not be used against him at his own trial, pursuant to section 7 of the Charter).

The Supreme Court went on in S. (R.J.) to observe that in some circumstances the protections of “use immunity” and “derivative use immunity” would not be enough to protect individuals who are compelled to testify at a proceeding other than their own trial. There were varied opinions on the precise test for determining in what circumstances an exemption from being compellable would be granted. However, the general proposition emerged that individuals facing possible criminal or quasi-criminal charges would not be compellable if the predominant purpose for seeking their evidence was to make a case for convicting them in their own proceedings. This proposition was affirmed by Sopinka and Iacobucci JJ. writing for the majority in British Columbia Securities Commission v. Branch, [1995] 2 S.C.R. 3, at pages 14-15:

The common feature of the respective compellability tests proposed in the reasons of S. (R.J.) is that the crucial question is whether the predominant purpose for seeking the evidence is to obtain incriminating evidence against the person compelled to testify or rather some legitimate public purpose.

In Branch, the Supreme Court upheld the constitutionality of an inquiry under subsection 128(1) of the B.C. Securities Act, S.B.C. 1985, c. 83, in which two former officers of the company under investigation had been subpoenaed to testify and produce records. The protections of section 7 against self-incrimination were held not to be engaged if the predominant purpose of an inquiry was the administration and enforcement of its authorizing Act, as opposed to building evidence for a criminal prosecution. This test is stated by Sopinka and Iacobucci JJ., at pages 15-16:

Where evidence is sought for the purpose of an inquiry, we must first look to the statute under which the inquiry is authorized. The fact that the purpose of inquiries under the statute may be for legitimate public purposes is not determinative. The terms of reference may reveal an inadmissible purpose notwithstanding that the statute did not so intend: see Starr v. Houlden, [1990] 1 S.C.R. 1366. Indeed, even if the terms of reference authorize an inquiry for a legitimate purpose in some circumstances, the object of compelling a particular witness may still be for the purpose of obtaining incriminating evidence.

It would be rare indeed that the evidence sought cannot be shown to have some relevance other than to incriminate the witness. In a prosecution, such evidence would simply be irrelevant. There may, however, be inquiries of this type and it would be difficult to justify compellability in such a case. In the vast majority of cases, including this case, the evidence has other relevance. In such cases, if it is established that the predominant purpose is not to obtain the relevant evidence for the purpose of the instant proceeding, but rather to incriminate the witness, the party seeking to compel the witness must justify the potential prejudice to the right of the witness against self- incrimination.

In the case at bar, the plaintiffs have made extensive submissions to challenge section 231.4 and the inquiry based on the reasons of the Supreme Court in S. (R.J.) and Branch. The thrust of their submissions is that section 231.4 bears the unconstitutional purpose of authorizing inquiries that build cases for prosecution under section 239 of the Income Tax Act, which they say is a criminal provision.

However, the case at bar is distinguishable on its facts from S. (R.J.) and Branch in a key respect. Both S. (R.J.) and Branch involved the compel-lability of individuals who were under investigation. In the case of S. (R.J.), the young offender who was facing the same charges as the accused was being compelled to testify as a witness at the trial of the accused. In Branch, the former directors of the company under investigation had been summoned and required to testify and produce records. The central issue in those cases turned on whether the individuals who were themselves under investigation could be compelled. However, in the case at bar, Del Zotto has not been summoned to testify or produce documents at the inquiry. While the plaintiff Herbert Noble has been summoned to the inquiry, he is not facing possible charges under the Income Tax Act. Moreover, Noble is being required to testify with respect to the financial affairs of Del Zotto, not with respect to his own financial affairs.

In view of the fact that Del Zotto has not been subpoenaed to appear and testify at the inquiry, the right against self-incrimination is not directly engaged in this case.

With respect to the testimony of Noble, the principle of self-incrimination cannot apply directly. The principle of self-incrimination protects individuals against being conscripted against themselves, not against incrimination by another witness. In Branch, Sopinka and Iacobucci JJ., writing for the majority, observed, at page 29: “[I]t is the self-conscriptive effect of compulsion which the Charter guards against” (emphasis in the original). With this observation in mind, it is difficult to see how the fact that Noble is compelled to testify as to the affairs of Del Zotto can serve to engage the protection of section 7 with respect to self-incrimination.

Therefore, on the facts, the present case does not fall neatly within the protection of section 7 against self-incrimination recognized by the Supreme Court in S. (R.J.) and Branch. Nonetheless, the position of the plaintiffs is that section 7 is engaged on other grounds than self-incrimination. Namely, the plaintiffs are relying on the case to meet principle, the right to silence, the principle of fundamental unfairness, and the argument that the hearing officer in a section 231.4 inquiry is analogous to a police officer armed with subpoena powers, which in the course of a criminal investigation is said to be constitutionally impermissible.

“Case to Meet”

The plaintiffs submit that a violation of the “case to meet” principle is sufficient to engage the plaintiffs’ rights under section 7. They maintain that the “case to meet” principle received fresh constitutional nourishment in S. (R.J.) and can be applied broadly to the circumstances of the present case. They maintain that section 231.4 provides for inquiries in which the predominant purpose is to conduct the equivalent of a civil discovery against individuals who are facing criminal charges under the Income Tax Act. The plaintiffs allege that this directly infringes the “case to meet” principle which forbids the Crown from obtaining discovery of the defence in a criminal proceeding. The plaintiffs also submit that if Herbert Noble is compelled to testify, he may reveal the defence strategies of Del Zotto, which is a concern underlying the “case to meet” principle.

The question arises, therefore, whether the “case to meet” principle can be applied to the circumstances of the present case. This question relies for the most part on whether the “case to meet” principle can be applied independently from the principle of self-incrimination.

The “case to meet” principle was first adopted by the Supreme Court in R. v. P. (M.B.), [1994] 1 S.C.R. 555. In P. (M.B.), the accused was being tried for sexually assaulting his niece. At trial, just after the Crown closed its case, the defence made brief submissions to the effect that the accused was going to be using an alibi defence. Following the opening statement of the defence, there was an adjournment. When the trial resumed, the Crown wanted to reopen its case, having changed its case according to the information gained from the opening statement of defence that the defence was going to be using an alibi. Chief Justice Lamer, writing for the majority, ruled that the Crown would be infringing the right of the accused against self-incrimination by using the opening statement of the defence as a discovery to make out a case against him. In applying the principle, Chief Justice Lamer observed, at page 579:

… the Crown must establish a “case to meet” before there can be any expectation that the accused should respond.

All of these protections, which emanate from the broad principle against self-incrimination, recognize that it is up to the state with its greater resources, to investigate and prove its own case, and that the individual should not be conscripted into helping the state fulfil this task.

The principle of “case to meet” was thus held to “emanate” from the broad principle of self-incrimination. The direct concern in P. (M.B.) was not broadly that the disclosure of the defence strategy had been revealed, but that the defence strategy had been conscripted from the accused himself.

In S. (R.J.) the “case to meet” principle was adopted by Iacobucci J. (La Forest, Cory and Major JJ. concurring) as underlying the principle of self-incrimination. It was also adopted and summarized by Chief Justice Lamer, who had first applied the principle in P. (M.B.). Chief Justice Lamer stated in S. (R.J.), at page 469:

As I observed in P. (M.B.), supra, at p. 577, “[p]erhaps the single most important organizing principle in criminal law is the right of an accused not to be forced into assisting in his or her own prosecution”— the “case to meet” principle. This principle, I noted, “is perhaps best described in terms of the overarching principle against self-incrimination, which is firmly rooted in the common law and is a fundamental principle of justice under s. 7 of the Canadian Charter of Rights and Freedoms”.

The observation of Chief Justice Lamer that the principle of “case to meet” is “perhaps best described in terms of the overarching principle against self-incrimination”, is yet another indication that the principle of “case to meet” is strongly connected with the broad concern against self-incrimination.

In turning to the submissions in the present case, I find that an essential link is missing in the plaintiffs’ broad submission that section 231.4 and the inquiry convened to investigate Del Zotto infringe the “case to meet” principle on grounds that an inquiry under section 231.4 constitutes a discovery against an individual in a criminal context. On the facts in the case at bar, there is no individual being conscripted against himself. With respect to the absence of the overarching concern of self-conscription, La Forest J. stated in Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission) , [1990] 1 S.C.R. 425, at page 538: “one should not automatically accept that s. 7 comprises a broad right against self-incrimination on an abstract level”. La Forest J. went on to cite R. v. Beare; R. v. Higgins, [1988] 2 S.C.R. 387, at page 401:

Like other provisions of the Charter, s. 7 must be construed in light of the interests it was meant to protect. It should be given a generous interpretation, but it is important not to overshoot the actual purpose of the right in question ….

Therefore, the broad attack on section 231.4 and the inquiry convened with respect to Del Zotto based on the “case to meet” principle is without foundation.

I find that the plaintiffs’ submission that Noble may be conscripted to disclose the defence strategy of Del Zotto is also without foundation. The interest against the disclosure of a defence strategy, as it first arose in P. (M.B.) and was reiterated by Chief Justice Lamer in S. (R.J.), is an interest against self-conscription. Thus, the “case to meet” principle does not protect an individual against revealing the defence strategy of an accused or another individual facing the prospect of criminal charges. On the facts in this case, there is no evidence indicating that Noble is facing the possibility of charges under section 239 of the Income Tax Act. If any “defence” is at risk of being revealed, it clearly pertains to Del Zotto. Given that Noble is argued to be at risk of disclosing a defence that is not his own, there is no link to self-conscription. Therefore, in the circumstances of this case, the “case to meet” principle does not provide the plaintiffs with a foundation on which to claim the protections of section 7.

“Right to Silence”

The right to silence has been adopted by the Supreme Court of Canada as a principle of fundamental justice under section 7 of the Charter. As it was adopted by Cory J. in R. v. Woolley (1988), 40 C.C.C. (3d) 531 (Ont. C.A.) and discussed in S. (R.J.), the right to silence protects an individual from being required to answer the police when under criminal investigation.

The plaintiffs argue that section 231.4 and the inquiry infringe the “right to silence”, and on this ground the plaintiffs are afforded the protections of section 7. The basis for this submission is that the purpose of a section 231.4 inquiry is criminal because it seeks to build a case for prosecuting individuals under section 239 of the Income Tax Act, which they say is a criminal provision. The plaintiffs maintain that since the context of the inquiry is criminal, the target of an inquiry must be afforded the right to silence. In turn, section 231.4 is argued to infringe the right to silence on grounds that subsection 231.4(3) of the Income Tax Act provides for the hearing officer at an inquiry to require an individual, including the target taxpayer, to testify and answer questions.

Under this line of submissions, the question arises as to whether the right to silence is triggered and is therefore available to the plaintiffs as a right under which to bring their challenge under section 7 in the circumstances of this case.

As stated, the right to silence was adopted as a principle of fundamental justice by the Ontario Court of Appeal per Cory J. in Woolley. In Woolley, the accused had been charged with the theft of a motor vehicle. After laying charges against him, the police asked the accused several times where the keys to the stolen vehicle were. They told him he would have to pay for new tumblers for the locks on the vehicle if he did not produce them, and that they would keep him in custody until he did so. Cory J. found that the accused was protected from incriminating himself by not having to answer the question. With respect to the right of silence, Cory J. noted, at page 539:

At the very least, it is clear that an accused person is under no legal obligation to speak to police authorities and there is no legal power in the police to compel an accused to speak: ….

Therefore the right to silence protects an accused under investigation from having to answer the police. Much as with the “case to meet” principle, the right to silence bears a close relation to the principle of self-incrimination, in so far as it protects an individual under investigation from self-conscription.

As to when the right to silence is triggered, it was held by Sopinka J., writing a concurrent judgment in R. v. Hebert, [1990] 2 S.C.R. 151, at page 201 that:

The right to remain silent, viewed purposively, must arise when the coercive power of the state is brought to bear against the individual—either formally (by arrest or charge) or informally (by detention or accusation)—on the basis that an adversary relationship comes to exist between the state and the individual. The right, from its earliest recognition, was designed to shield an accused from the unequal power of the prosecution, and it is only once the accused is pitted against the prosecution that the right can serve its purpose.

Thus the trigger of the right to silence is founded on an adversarial relation between the state and an individual in which the individual is put at risk of incriminating himself. As with the principle of self-incrimination, the concern underlying the right to silence is not broad or abstract, but specific to the circumstances of the individual who is “pitted against” the prosecution.

Although on the facts of the present case Del Zotto is clearly under investigation by the Special Investigations Branch of Revenue Canada, he has not been summoned to give testimony or produce documents at the inquiry, and has not been asked any questions at the inquiry. He is thus not “pitted against” the authorities in the sense that he is not being compelled to answer questions or produce documents in a manner analogous to the accused in Woolley , who was confronted with questions by the police designed to conscript the accused against himself. There is no effort on the part of the state to conscript Del Zotto against himself. In such circumstances it is hard to understand how the principle of the right to remain silent arises in this case.

Therefore, assuming that the inquiry convened to investigate the financial affairs of Del Zotto is being conducted for the purposes of convicting him pursuant to section 239 of the Income Tax Act, and assuming that section 239 is a criminal provision, there is still no “coercive power of the state” brought to bear against Del Zotto that would require the protection of the right to silence. I find that the plaintiffs’ submissions with respect to the right to silence are without foundation.

“Fundamental Unfairness”

In S. (R.J.), L’Heureux-Dubé J. wrote a concurring judgment with respect to the general rule of compellability. She differed from the majority by adopting a test of “fundamental unfairness” as the basis of exemption from compellability in circumstances where individuals are facing the prospect of criminal or quasi-criminal charges and are compelled to testify at a proceeding other than their own trial. She stated the test, at page 608, in the following way:

A witness may be entitled to claim an exception under s. 7 from the principle that the state is entitled to every person’s evidence if it is established that the Crown is engaging in fundamentally unfair conduct. …

Fundamentally unfair conduct will most frequently occur when the Crown is seeking, as its predominant purpose (rather than incidentally), to build or advance its case against that witness instead of acting in furtherance of those pressing and substantial purposes validly within the jurisdiction of the body compelling the testimony. The Crown will be predominantly advancing its case against the accused when, by calling the witness, it is engaging in a colourable attempt to obtain discovery from the accused and, at the same time, is not materially advancing its own valid purposes.

On the basis of this test, the plaintiffs submit that section 231.4 and the inquiry are fundamentally unfair because an inquiry convened under section 231.4 is conducted for the purpose of building a case for prosecuting individuals pursuant to section 239, which the plaintiffs say is a criminal offence.

However, the same impediment arises here as it did with respect to the plaintiffs’ submissions under the “case to meet” principle and the right to silence in that the test of fundamental unfairness was adopted by L’Heureux-Dubé J. to address circumstances in which individuals are being conscripted against themselves. In articulating the fundamental unfairness test, L’Heureux-Dubé J. observed in S. (R.J.), at pages 614-615:

… it is trite law to say that there is no constitutional protection against being conscripted to testify against others. Only when a witness is predominantly being conscripted to testify against himself do we bring to bear the arsenal of protections collectively massed within s. 7 of the Charter.

In light of her observation, it is clear that the test of fundamental unfairness is also strongly connected with the principle of self-incrimination. I find that since Del Zotto has not been subpoenaed, and Noble is being compelled to testify as to Del Zotto’s affairs and not his own, the plaintiffs are not availed of the protection of section 7 on the grounds of fundamental unfairness.

“Subpoena Powers”

As a corollary to the “case to meet” principle, the question arose in S. (R.J.), at page 536: “are we prepared to arm the police with subpoena powers?” The question was posed by Iacobucci J., who answered “I do not think that we are”. Chief Justice Lamer agreed with Iacobucci J. in the matter (see S. (R.J.), at page 472).

On the basis of the obiter of Iacobucci J., the plaintiffs submit that section 231.4 and the inquiry are constitutionally invalid. They maintain that a section 231.4 inquiry is a forum by means of which the Special Investigations Branch of Revenue Canada can subpoena innocent third parties in conducting an investigation aimed to convict a taxpayer under section 239 of the Income Tax Act, which is alleged to be a criminal provision. Special Investigations may thus obtain subpoenas to compel witnesses to testify in the course of a criminal investigation, which the plaintiffs say is contrary to the holding of Chief Justice Lamer and Iacobucci J. in S. (R.J.) that police cannot be armed with subpoena powers.

According to the plaintiffs, the spectre of the police conducting a criminal investigation armed with subpoenas is highly persuasive with respect to the need for section 7 protections. The courts have often identified as a crucial rationale for section 7 that the principles of fundamental justice are meant to guard society from the slippery slope of becoming a police state. Certainly, the idea of a suspect being caught in a double bind at the hands of the police in the investigative stage—facing contempt if he is silent, and the risk of assisting to convict himself if he speaks, is evocative of a society that has slid the greater part of the unwanted distance.

The plaintiffs are arguing that I should embark on what seems to be a straightforward comparison between a section 231.4 inquiry and a criminal investigation conducted by the police. They say a section 231.4 inquiry is de facto a criminal investigation because it is convened for the purposes of building a case for the prosecution of a taxpayer under section 239. Thus they say the power of a hearing officer to subpoena witnesses would be analogous to a police officer being armed with subpoena powers. Presumably, if the analogy may be drawn between a hearing officer conducting a section 231.4 inquiry and a police officer conducting a criminal investigation, then according to the dicta of Iacobucci J., the powers of the hearing officer to subpoena would be constitutionally impermissible.

However, I find there is a troubling ambivalence at the root of this submission. I am not satisfied that the plaintiffs are relying on any recognized principle of fundamental justice under section 7. While the observation of Iacobucci J. that the police cannot be armed with subpoena powers can be taken as a restatement of the principle of self-incrimination (including the principles of “case to meet” and the right of a suspect to remain silent at the investigative stage of the criminal process) the plaintiffs are arguing on another basis. The plaintiffs say Iacobucci J.’s observation about the police not having subpoena powers also refers to a more general right, namely, the right not to speak to the police. This must be their position because Del Zotto has not been subpoenaed. Their point is that third persons who are subpoenaed have a fundamental right under section 7 not to speak to the police.

The right not to speak to the police was acknowledged to exist at common law in the English case Rice v. Connolly, [1966] 2 All E.R. 649 (Q.B.) in which a police officer questioned a man who was behaving suspiciously in a location where a break and enter had recently occurred. The man refused to answer where he was going or where he had come from, and refused to give his name and address. He refused to accompany the officer to a police box for the purposes of being identified. The police officer arrested him on a charge of obstructing a constable when in the execution of his duty. It was held that no obstruction was established. In making this finding, Lord Parker C.J. stated, at page 652:

It seems to me quite clear that though every citizen has a moral duty or, if you like, a social duty to assist the police, there is no legal duty to that effect, and indeed the whole basis of the common law is that right of the individual to refuse to answer questions put to him by persons in authority, and a refusal to accompany those in authority to any particular place, short, of course, of arrest.

It is on the basis of this right that the plaintiffs are arguing it is unconstitutional for a hearing officer conducting a section 231.4 inquiry to compel innocent third parties to testify against a taxpayer who is undergoing the equivalent of a criminal investigation.

I note that although the right not to speak to the police has been adopted in Canada at common law,[3] it has not received recognition as a principle of fundamental justice for the purposes of section 7. Clearly, it would be inadequate to rely on an out-of-context reading of Iacobucci J.’s comment about police subpoena powers to decide that he was broadly conferring constitutional stature on the right not to speak to the police, rather than making the observation merely to further his discussion in S. (R.J.) of the principle of self-incrimination.

If Iacobucci J., in making the observation, was merely furthering his discussion of self-incrimination, then the plaintiffs have no basis for their submission for the same reasons that they could not rely on the principle of “case to meet”, right to silence and fundamental unfairness, namely that they have no factual underpinning to assert self-incrimination in this case. However, if the observation of Iacobucci J. can be construed more broadly to encompass the right not to speak to the police, then I must turn to entertain whether the plaintiffs are afforded the protection of section 7 on this basis. It is therefore important to look to the context in which Iacobucci J. made the observation.

In S. (R.J.), Iacobucci J. posed the question whether the police could have subpoena powers in the context of discussing the need for extra protection beyond a general compellability rule providing “use immunity” and “derivative use immunity”. He stated his primary concern, at page 535:

For if it be accepted that a person can always be compelled as a witness and that protection by way of evidentiary immunity will always be sufficient, then it must also be accepted that we have gone considerable distance toward diluting the principle of the case to meet without ever having said so.

Iacobucci J. was therefore raising the prospect that an absolute compellability rule would have significant effects on the “case to meet” principle. He went on to identify the brunt of the problem by quoting from Beaudoin and Ratushny, The Canadian Charter of Rights and Freedoms, 2nd ed., (Toronto: Carswell, 1989), at page 535 (which is worthwhile to quote in part here):

The basic problem is that many of the protections provided by the criminal process may be subverted by calling the suspect or accused as a witness at some other proceeding prior to his criminal trial.

It is true that such a witness may prevent his testimony from being introduced at a subsequent criminal trial. However, the damage may be done in other ways. The earlier hearing might be used as a `fishing expedition’ to subject the witness to extensive questioning with a view to uncovering possible criminal conduct. The questioning might also be used to investigate a particular offence.

It was in this context that Iacobucci J. stated in S. (R.J.), at page 536:

To put the matter another way, the Charter’s structure as described above is founded upon the Crown’s obligation to make a case, but it also assumes a general rule of compellability coupled with evidentiary immunity. If, however, the Charter places no limits on when this structure may be invoked, then the Charter could, in fact, condone an inquisition of the most notorious kind. Such condonation would bespeak an impossible dualism. To ask a question by paraphrasing a concern voiced in Thomson Newspapers, supra, at p. 606 (per Sopinka J.): are we prepared to arm the police with subpoena powers?

I do not think that we are, but the difficulty lies in fashioning an acceptable response. Because the status of individuals cannot be manipulated in any meaningful way to confine the reach of a general compellability rule, one is left with the difficult task of focusing on the character of proceedings at which testimony is sought to be compelled. This is a task which I do not relish, but it seems absolutely demanded by the structure of the Charter.

Upon reading the observation as it was put in S. (R.J.), it becomes clear that Iacobucci J. posed the question “are we prepared to arm the police with subpoena powers?” in the context of a concern that the state may use a proceeding to circumvent the protections that are afforded to a suspect or an accused in the criminal process. The underlying concern is that an individual should not be compellable to testify against himself at a proceeding that is a criminal investigation, whether the investigation is a straightforward one conducted by the police, or it is de facto a criminal investigation conducted in some other guise, ostensibly as a public inquiry, or as a preliminary hearing, or the trial of another person.

In terms of whether such an ostensible use of a section 231.4 inquiry would be possible, if it were the case that a hearing officer issued a subpoena to a taxpayer who was under investigation pursuant to section 239 of the Income Tax Act, the taxpayer could challenge whether he was compellable not merely on the basis of an observation that the police cannot have subpoena powers, but also pursuant to the predominant purpose test laid out by the Supreme Court in Branch. Branch stands for the proposition that police cannot have subpoena powers because, according to the predominant purpose test, the authorities cannot hide behind the veneer of a nominally administrative proceeding in order to conscript an individual who is the target of a criminal investigation into giving self-incriminating testimony. If the predominant purpose of the inquiry is that of building a case against the taxpayer for the purposes of a criminal or quasi-criminal prosecution, then the taxpayer will receive constitutional protection under section 7 from being conscripted against himself by means of the subpoena based on the principle of self-incrimination.

Therefore, the observation as to the police having power to subpoena is rooted in a concern based on the principle of self-incrimination rather than a general right not to speak to the police. In the case at bar, if Del Zotto had been subpoenaed, I would have been obliged to make a finding, not by testing the soundness of an analogy between the hearing officer and a police officer in the course of a criminal investigation, but by using the predominant purpose test in Branch to answer the question whether Del Zotto would be exempted from being compelled by the protection afforded by section 7 based on the principle of self-incrimination. However, Del Zotto has not been subpoenaed.

I conclude that the obiter of Iacobucci J. is not based on the right not to speak to the police. Thus, I find the plaintiffs have no ground on which to invoke section 7 in respect of the observation of Iacobucci J. that the police do not have subpoena powers.

As to whether the plaintiffs can bring a challenge to section 231.4 and the inquiry based purely on the right not to speak to the police, independently of any connection with the dicta of Iacobucci J. in S. (R.J.), I find that the plaintiffs have provided no support for the proposition that the right not to speak to police is a right afforded by section 7 of the Charter. While they have asserted that the right not to speak to the police is a constitutional right, they have made no substantive submissions to this effect (except that the dicta of Iacobucci J. gave it such a status, which is a submission I have already dispensed with), nor have they attempted to show how the right would apply in this case. It is clear that Del Zotto is not being asked any questions by the police or any person in authority in the context of the inquiry, so the right cannot apply to protect him. Nor have they explained how or why Noble is entitled to section 7 protection in this case.

In conclusion, I can identify no basis under section 7 on which the plaintiffs can make out a challenge against subsection 231.4 of the Income Tax Act, or the inquiry convened to investigate the financial affairs of Del Zotto, or the subpoena issued to Noble by the respondents. I find, therefore, that section 7 has no application in this case.

SECTION 8

Section 8 of the Charter was given an interpretive foundation in Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145, in which the Supreme Court established that section 8 guaranteed a broad and general right for individuals to be secure from unreasonable searches and seizures. In Hunter, several combines investigation officers entered the business premises of the respondents to examine and seize documents pursuant to subsection 10(1) of the Combines Investigation Act, R.S.C. 1970, c. C-23, which provided that the Director of Investigation and Research of the Combines Investigation Branch could authorize searches and seizures. The issue before the Supreme Court was whether the search and seizure powers under subsection 10(1) of the Combines Investigation Act were inconsistent with section 8. Dickson J. (as he then was), writing for the majority, laid out the foundation of section 8 analysis, at pages 159-160:

The guarantee of security from unreasonable search and seizure only protects a reasonable expectation. This limitation on the right guaranteed by s. 8, whether it is expressed negatively as freedom from “unreasonable” search and seizure, or positively as an entitlement to a “reasonable” expectation of privacy, indicates that an assessment must be made as to whether in a particular situation the public’s interest in being left alone by government must give way to the government’s interest in intruding on the individual’s privacy in order to advance its goals, notably those of law enforcement.

Dickson J. went on to articulate the Hunter standards under which a search and seizure conducted against an individual with a reasonable expectation of privacy may be established as a reasonable search.[4]

In 1990, the Supreme Court further developed the application of the safeguards provided by the Hunter standards in two cases decided at the same time: Thomson Newspapers (supra), and R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627. In both cases the Supreme Court observed that the Hunter standards had been developed in a criminal or quasi-criminal context, and addressed the question whether the same standards applied to searches and seizures conducted in a regulatory or administrative context.

In Thomson, several officers of the corporation under investigation were summoned before the Restrictive Trade Practices Commission to testify and produce documents pursuant to section 17 of the Combines Investigation Act. The compulsion to produce documents before the Commission was found to constitute a “seizure” for the purposes of section 8. The Supreme Court held, however, that the seizure was not unreasonable, and there was therefore no breach of section 8. In addressing the matter of the distinction between regulatory or administrative and criminal or quasi-criminal contexts, La Forest J., writing for the majority, observed at page 506:

The application of a less strenuous and more flexible standard of reasonableness in the case of administrative or regulatory searches and seizures is fully consistent with a purposive approach to the elaboration of s. 8.

In McKinlay, two companies under audit by Revenue Canada were served with letters demanding the production of a broad array of documentation pursuant to section 231.3 [as enacted by S.C. 1986, c. 6, s. 121] of the Income Tax Act for the purposes of the audit. This was also held to be a seizure within the meaning of section 8. With respect to the significance of the context in which the seizure took place, Wilson J., writing for the Court (concurring reasons were written by La Forest, L’Heureux-Dubé, and Sopinka JJ.), observed, at page 647:

It is consistent with this [a flexible and purposive] approach [to section 8], 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.

In the case at bar, the issue under section 8 is whether the Hunter standards apply to section 231.4 of the Income Tax Act and the inquiry.

The plaintiffs have submitted that section 231.4 infringes section 8 because subsection 231.4(3) provides to a hearing officer the power to subpoena witnesses duces tecum, which constitutes a seizure conducted without a warrant or reasonable or probable grounds. They maintain that when section 231.4 is used to investigate the financial affairs of a taxpayer in order to build a case for prosecution under section 239 of the Income Tax Act, the context of the seizure is clearly criminal and therefore the Hunter standards must apply.

The plaintiffs have made extensive submissions to the effect that section 239 of the Income Tax Act is a criminal provision. They have drawn especially on the decision in Knox Contracting Ltd. v. Canada, [1990] 2 S.C.R. 338 in which Cory J., writing for the majority, observed, at pages 348-349:

Section 231.3 provides for the issuance of search warrants where they may afford evidence of an “offence” under the Act. Section 239 describes those offences. They are by their very nature criminal. Upon reading s. 239 the key descriptive words spring from the page, such as: “false or deceptive statements”, “to evade payment of a tax imposed by this Act, destroyed, altered, mutilated, secreted … records”, “false or deceptive entries” and “wilfully … evaded”. The section speaks of fraud, deception, destruction and alteration of documents, false statements, false documents and the wilful evasion of income tax.

It is readily apparent that those who commit these offences have deliberately committed acts which by their very nature come well within the definition of what constitutes criminal law. The offences described in s. 239 are “clearly harmful to the State”. The fact that these offences may be prosecuted upon indictment and that terms of imprisonment of up to 5 years may be imposed serves to further strengthen the conclusion that these offences are criminal in nature.

The plaintiffs have also presented extensive evidence from T.O.M. to establish that the Special Investigations Branch of Revenue Canada is conducting a “criminal” type of investigation when it instigates a section 231.4 inquiry to investigate a taxpayer. Moreover, they have closely examined the statutory history of section 231.4 and have shown how, although the provision began as a regulatory instrument, it has for a considerable number of years been re-oriented by amendment and employed by Revenue Canada solely as a criminal investigatory instrument.

I note that a finding that section 239 is “criminal” does not mean, as the plaintiffs have argued, that the seizure made against Del Zotto is ipso facto unreasonable, requiring application of the Hunter standards to a section 231.4 inquiry. Perhaps if it was a matter of choosing categorically between a regulatory or administrative context on one hand (in which the standards do not apply) and a criminal or quasi-criminal context on the other (in which the standards always apply), the plaintiffs might establish a breach of section 8 simply on the basis that the context is criminal or quasi-criminal, for it is not in dispute that subsection 231.4(3) provides for warrantless seizures contrary to the Hunter criteria. However, the determination is not based solely on the categorization as between regulatory or administrative and criminal or quasi-criminal contexts.

In keeping with the flexible and purposive approach taken to section 8, the Supreme Court clarified the matter of the significance of the distinction between regulatory and criminal contexts in Baron v. Canada, [1993] 1 S.C.R. 416. In Baron officers of Revenue Canada sought and were granted a search warrant pursuant to section 231.3 of the Income Tax Act from the Federal Court, Trial Division [[1990] 2 F.C. 262. The issue was whether section 231.3 infringed section 8 on the ground that the wording of the section (that a judge “shall issue the warrant”) left no residual discretion for the judge to refuse to issue the warrant. The Supreme Court struck down section 231.3 of the Income Tax Act on the ground that the wording of the section removed the residual discretion that was required by section 8. On the issue of the context of the search and seizure, Sopinka J., writing for the majority, observed at pages 443-444:

At page 649 [McKinlay Transport], Wilson J. recognized that relaxation of the Hunter standards with respect to the demand provisions by reason of the characterization of the statutory provision as regulatory would not validate all forms of searches and seizures under the ITA. She continued:

The state interest in monitoring compliance with the legislation must be weighed against an individual’s privacy interest. The greater the intrusion into the privacy interests of an individual, the more likely it will be that safeguards akin to those in Hunter will be required. Thus, when the tax officials seek entry onto the private property of an individual to conduct a search or seizure, the intrusion is much greater than a mere demand for production of documents. (Emphasis added.)

The point is that the characterization of certain offences and statutory schemes as “regulatory” or “criminal”, although a useful factor, is not the last word for the purpose of Charter analysis. [Emphasis added.]

Thus, a determination of the applicability of the Hunter standards does not hinge on whether the context of the search and seizure is “criminal” or “regulatory”, although that is a factor to be considered. A full weighing of all the circumstances is required. For this task, the Supreme Court developed a scale of interests as discussed by Sopinka J. in Baron, at pages 444-445:

Physical search of a private premises … is the greatest intrusion of privacy short of a violation of bodily integrity. It is quite distinct from compelling a person to appear for examination under oath and to bring with them certain documents, under a subpoena duces tecum (Thomson Newspapers, supra), or to produce documents on demand (McKinlay Transport, supra). Both La Forest and L’Heureux-Dubé JJ. acknowledged in Thomson Newspapers, supra, at pp. 520 and 594, respectively, that the power to search premises is more intrusive of an individual’s privacy than the mere power to order the production of documents.

The determination as to intrusiveness of a search and seizure takes place on this scale, starting with bodily integrity as the greatest intrusion, and ranging to the least form of intrusion, namely, requests for the production of documents. In keeping with McKinlay [at page 649], “[t]he greater the intrusion into the privacy interests of an individual, the more likely it will be that safeguards akin to those in Hunter will be required”.

I find that on the facts, the case at bar resembles the case of Thomson, in the sense that the modus operandi of a tax inquiry involves “compelling a person to appear for examination under oath and to bring with them certain documents, under a subpoena duces tecum”. For the purposes of the scale of interests articulated in Baron, this would place the inquiry as a lesser form of intrusion than a search of private premises. The present case also resembles Thomson in that the plaintiffs’ expectation of privacy pertains to business affairs, which is relatively low in comparison with matters of a personal or intimate nature (see Thomson, at page 517) or an expectation of privacy based on personal integrity and dignity which provides the core of the need to protect individuals from unreasonable searches and seizures. In keeping with Thomson, the inquiry would not require the application of the Hunter standards.

However, to distinguish Thomson, the plaintiffs have submitted that their concern is not merely against an intrusion in the form of a subpoena duces tecum under which witnesses would be obliged to produce business records, and against which the witnesses would have relatively little expectation of privacy. Rather, they maintain that the inquiry taken as a whole constitutes an intrusion of Del Zotto’s privacy in the setting in which he conducts his business affairs. They maintain that Del Zotto will suffer serious prejudice in conducting his business affairs because his relationships with his business acquaintances will be upset if those acquaintances are subpoenaed to testify and produce documents at the inquiry. Along this line, they say that on a comparative basis, the inquiry constitutes a greater intrusion to Del Zotto’s privacy than a search of his home. Thus, their position is that in respect to the scale of interests articulated in Baron, an inquiry is more intrusive, and Del Zotto’s expectation of privacy is more considerable than a physical search of private premises, and on this basis the Hunter standards must apply.

The submission by the plaintiffs that a seizure under section 231.4 will cause prejudice to Del Zotto’s relationships in his business community is a concern that La Forest J. addressed in Thomson, at pages 507-508:

For reasons that go to the very core of our legal tradition, it is generally accepted that the citizen has a very high expectation of privacy in respect of such [criminal] investigations. The suspicion cast on persons who are made the subject of a criminal investigation can seriously, and perhaps permanently, lower their standing in the community. This alone would entitle the citizen to expect that his or her privacy would be invaded only when the state has shown that it has serious grounds to suspect guilt …. The stigma inherent in a criminal investigation requires that those who are innocent of wrongdoing be protected against overzealous or reckless use of the powers of search and seizure by those responsible for the enforcement of the criminal law. [Emphasis added.]

La Forest J. went on to find that the expectation of privacy of the directors subjected to the requirements of an inquiry conducted pursuant to section 17 of the Combines Investigation Act was less than that of persons under criminal investigation. La Forest J. observed that the Combines Investigation Act regulated conduct on the basis of broad economic or utilitarian concerns rather than moral reprehensibility. He stated, at page 510:

It is, in short, not conduct which would be generally regarded as by its very nature criminal and worthy of criminal sanction. It is conduct which is only criminal in the sense that it is in fact prohibited by law …. It is conduct which is made criminal for strictly instrumental reasons.

To support his finding as to the juristic character of the Combines Investigation Act, La Forest J. compared it with the Income Tax Act, at pages 515-516:

As a final comment, I would point out that the Combines Investigation Act is not, as regards sanctions, unlike the Income Tax Act. Under section 239 of the latter Act, a taxpayer can be liable to imprisonment to a term “not exceeding 5 years”, provided he is, at the election of the Attorney General of Canada, proceeded against by way of indictment. The offences in relation to which this punishment can be imposed are defined in s. 239(1)…. All of these offences relate to conduct that might well be discovered by the exercise of the power to order the production of documents which s. 231(3) confers on the Minister of National Revenue. This has not prevented this Court from characterizing s. 231(3) as a regulatory or administrative power of investigation; see R. v. McKinlay Transport Ltd., supra. I do not see why we should regard the possibility of imprisonment as having a different effect in the case of s. 17 of the Combines Investigation Act.

To recapitulate, the relevance of the regulatory character of the offences defined in the Act is that conviction for their violation does not really entail, and is not intended to entail, the kind of moral reprimand and stigma that undoubtedly accompanies conviction for the traditional “real” or “true” crimes. It follows that investigation for purposes of the Act does not cast the kind of suspicion that can affect one’s standing in the community and that, as was explained above, entitles the citizen to a relatively high degree of respect for his or her privacy on the part of investigating authorities. [Emphasis added.]

As already stated, Baron has shifted the emphasis of a section 8 analysis away from a discussion which labels an investigation as “administrative” or “criminal”, and thus the reasoning in Thomson is to some extent tempered in this regard. In Baron, Sopinka J. did not find it necessary to decide whether section 239 was criminal. Instead, he focused on the degree of intrusiveness of the search and seizure, and relied on Thomson to distinguish between the high degree of intrusiveness of a search and seizure on the taxpayer’s premises and an inquiry in which a seizure is conducted in the form of a subpoena duces tecum.

In Baron, Sopinka J. made no mention of Knox. More specifically, he did not comment on Cory J.’s finding that section 239 of the Income Tax Act was a criminal provision (Cory J. sat on the Court in Baron and made no dissent in the matter). I take it, therefore, that in adopting Thomson which established the scale of interests as to the intrusiveness of searches and seizures, Sopinka J. affirmed the Supreme Court’s findings in Thomson to the effect that inquiries under which individuals are required to give evidence under oath and to produce documents do not have a degree of intrusiveness which require the application of the Hunter standards. The fact that in Thomson, La Forest J. makes an explicit link between sanctions in what was then the Combines Investigation Act and section 239 of the Income Tax Act tends to reinforce the application of Thomson to the present case.

The plaintiffs’ submission that Del Zotto will suffer prejudice in his business relations as a result of the inquiry pursuant to section 231.4 does not further their case with respect to the degree of privacy that may be reasonably expected. Nor are the plaintiffs assisted by the argument that Del Zotto would find Revenue Canada entering his home and conducting a search less intrusive than Revenue Canada conducting an inquiry and issuing subpoenas to individuals with whom he is conducting business. Baron and Thomson indicate that the determination as to a reasonable expectation of privacy and when the Hunter standards apply is not dependent on what an individual prefers. The expectation of privacy an individual is entitled to expect regarding a home compared with that regarding a place of business and the production of business documents was set out by La Forest J. in Thomson, at pages 521-522:

The proposition that those associated with a business have a greater privacy interest in the physical integrity of their homes than in the records and documents of that business should require no demonstration. But this hardly means that a significant privacy interest does not also subsist in relation to one’s business premises. While it can fairly be said that business records do not usually contain information relating to one’s personal affairs, opinions and associations, the same cannot be said with confidence of everything that may be found or observed in business files or premises. People who work in offices (the type of workplace that would typically be searched under combines legislation) think of their own offices as personal space in a manner somewhat akin to the way in which they view their homes, and act accordingly. In part this reflects an understandable need to humanize an environment in which people spend a good deal of their waking hours. It may in part reflect the simple reality that human life is not divisible into mutually exclusive compartments of professional and personal which correspond with the office and the home. Indeed, an office may actually be more private than the home in so far as one’s relations with family are concerned. Whatever the reason, it is a fact that in an office one is likely to find personal letters, private telephone and address directories, and many other indicators of the personal life of its occupant. The requirement to submit to a search of business premises by agents of the state can therefore amount to a requirement to reveal aspects of one’s personal life to the chilling glare of official inspection. It seriously invades the right to be secure against unreasonable search and seizure. This is not the case with a power to order the production of records and documents relevant to the investigation of anti-competitive offences; there the eyes of the state can see no further than the business records it is entitled to demand. [Emphasis added.]

In keeping with Baron and Thomson, the degree of privacy that the plaintiffs can expect against the inquiry with respect to their business affairs is relatively low, and does not require the protections afforded by the Hunter standards. Therefore, neither section 231.4 nor the inquiry are unconstitutional under section 8 of the Charter.

CONCLUSION

I find that section 231.4 of the Income Tax Act, and the inquiry convened to investigate the financial affairs of Del Zotto do not infringe either section 7 or 8 of the Charter. The action is dismissed. At the close of trial, costs were reserved. Any party wishing to pursue the matter of costs may contact the Registrar to arrange a convenient time for submissions to be made, probably by conference call.

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