Judgments

Decision Information

James Richardson and Sons Ltd. v. M.N.R.

Collection Judgments
Date 1981-06-11
Report citation [1983] 1 F.C. 3
File numbers T-2478-80
Subjects Administrative Law

Decision Content

T-2478-80 T-5461-80 T-5580-80
James Richardson and Sons Limited (Applicant and Plaintiff)
v.
Minister of National Revenue (Respondent and Defendant)
Trial Division, Smith D.J.—Winnipeg, December 10 and 11, 1980; June 11, 1981.
Judicial review — Prerogative writs — Certiorari — Applications for certiorari and action for declaration — Min ister seeking information from broker for use in checking on compliance by commodities futures traders with Income Tax Act — Broker declining to give information on ground that it was for use in test project rather than genuine enquiry into tax liability of specific person — Validity of Income Tax Act, s. 231(3), which empowers Minister to require information from any person questioned — Orders requiring information made by official rather than by Minister — Delegation of Minister's s. 231(3) powers intra vires — Technical argument that authorization invalid on its face since "Revenue Canada" non-existent and cannot have Deputy Minister cannot succeed — No requirement of reasonable and probable grounds in s. 231(3) cases — Taxation powers under s. 91, B.N.A. Act include taking steps to ascertain who owes taxes — Requiring broker to supply information falls within "administration or enforcement" of Act — Requirement for information not to be ruled against as "purely speculative in nature" — Applicabili ty of The Canadian Bank of Commerce v. The Attorney General of Canada, [19621 S.C.R. 729 to facts of instant case discussed — 'Specific person or persons" not meaning only "named person or persons" — In context of wide powers set out in s. 231(3), meaning "person or persons sufficiently described that they are readily identifiable" — Argument that Minister not making genuine and serious inquiry into specific tax liability fails — S. 231(3) in pith and substance falling under s. 91, B.N.A. Act and not invalidated if affecting prop erty and civil rights in Province — Requirement that informa tion be furnished "without delay" in sufficient compliance with statutory provision that requirement to state information to be given "within such reasonable time as may be stipulated therein" — Requirement for information not infringing right to enjoyment of property as declared to exist in Canadian Bill of Rights — Court having to weigh private rights of individual against necessity for efficient operation of government — Required information available only from brokers — Income Tax Act, S.C. 1970-71-72, c. 63, ss. 221(1)(/), 231(3) — Income Tax Regulations, SOR/73-390, as amended by SOR/ 75-298, s. 900(2)(b) — Department of National Revenue Act, R.S.C. 1970, c. N-15, ss. 2(1), 3(1) — The British North America Act, 1867, 30 & 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix II, No. 5], ss. 91(3), 92(13) — Canadian Bill of Rights, S.C. 1960, c. 44 [R.S.C. 1970, Appendix III], ss. 1(a), 2(e).
The applicant seeks certiorari to quash two orders requiring it to produce certain information concerning the commodities securities trading transactions of its customers. The applicant also seeks a declaration that the respondent's orders are invalid on the ground that subsection 231(3) of the Income Tax Act, which authorizes the Minister to require information or docu ments from any person for purposes related to the administra tion or enforcement of the Act, is contrary to the Canadian Bill of Rights. The respondent requested the information in ques tion in order to verify compliance with the Income Tax Act by traders in the commodities futures market. The information was provided on a test basis to enable the Department to determine the feasibility of the project. When the Department decided to proceed with the project, and requested more specif ic information to enable it to identify the transactions of each customer, the applicant objected on the ground that the infor mation was not related to "a genuine and serious inquiry into the tax liability of a specific person or persons", and therefore the Department did not have the authority to demand the information. The applicant submits that the requirements were invalid because they were not made by the Minister himself. Paragraph 221(1)(f) of the Income Tax Act enables the Gover nor in Council to make regulations authorizing a designated officer to exercise powers or perform duties of the Minister under the Act. Paragraph 900(2)(b) of the Income Tax Regu lations delegates the Minister's functions under subsections 231(2) and (3) to the Director-Taxation in a District Office. It is alleged that the Minister's functions under section 231 cannot be delegated because it is a judicial function. The applicant also argues that the requirements are invalid since the words "Revenue Canada Taxation", a non-existent entity, appeared at the top of the requirements. The applicant also submits that the respondent acted without jurisdiction because the orders were not issued for any purpose related to the administration or enforcement of the Income Tax Act and because there was no genuine and serious inquiry into the tax liability of a specific person or persons. It also argues that subsection 231(3) is ultra vires because it contravenes subsec tion 92(13) of The British North America Act, 1867, which gives the provinces exclusive legislative jurisdiction over prop erty and civil rights. In rebuttal, the respondent submits that the applicant failed to rebut the presumption enunciated in Hewson v. The Ontario Power Company of Niagara Falls (1905), 36 S.C.R. 596 that jurisdiction has not been exceeded. The applicant contends that subsection 231(3) infringes upon paragraph 1(a) of the Canadian Bill of Rights, which guaran tees the right to enjoyment of property and the right not to be deprived thereof except by due process of law, and paragraph 2(e), which prevents the construction of laws so as to deprive a person of the right to a fair hearing. Finally, subsection 231(3)
provides that the requirement shall state that the information or documents are required "within such reasonable time as may be stipulated therein". One of the requirements did not specify a date, but required that the information be provided "without delay". The applicant submits that the requirement is invalid because it did not comply with the statute.
Held, the applications are dismissed. The intention of Parlia ment in enacting paragraph 221(1)(/) was clearly to deal with the powers conferred and the duties imposed upon the Minister by the statute. Therefore the Governor in Council was empow ered to delegate the powers in the manner provided by Regula tion 900(2)(b), which is therefore intra vires. Although the words "Revenue Canada Taxation" appear at the top of the requirement letters, the context of the letters and all the preceding correspondence, discussions and things done leave no doubt that the letters were written by an official of the Depart ment of National Revenue. On the question of whether the words "administration or enforcement of this Act" include the respondent's actions, subsection 91(3) of the B.N.A. Act gives the Parliament of Canada exclusive legislative authority with respect to "The raising of Money by any Mode or System of Taxation". The word "raising" embraces the imposing and levying of taxes as well as ascertaining taxes owed and collect ing those taxes. Thus Parliament has wide powers of legislation in connection with the enforcement and administration of the Income Tax Act. The Minister is seeking information verifying the accuracy of income tax returns. This is clearly for purposes related to the administration or enforcement of the Act. The respondent may reasonably believe that there has been a failure to comply with provisions of the Income Tax Act by the applicant's clients, but cannot prove anything against a particu lar client without the information requested. It is the respond ent's duty to try to ascertain the facts and it should not be ruled against on the ground that the respondent's action is purely speculative. The applicant's claims that the requirements are discriminatory because other securities brokers are not required to provide such information, and that they are fundamentally unfair, fail because they are not supported by the evidence. The claim that the requirements breach the rules of natural justice fails because it is too general. On the question of whether there is a serious inquiry into the tax liability of a specific person or persons, "specific person or persons" means, in the context of the statutory provisions and the very wide powers set out in subsection 231(3), "person or persons sufficiently described that they are readily identifiable". They thus apply to all persons who are in a described or identified group. In the present case the described group is all clients of the applicant who had trading transactions in the commodities securities market during the years in question. The Minister seeks to verify the returns of each customer separately, each being a specific individual, as yet unnamed, whose liability to income tax is being investigated. The requirements should not be regarded as a "fishing expedition". The requirements were therefore serious inquiries into specific tax liability. Concerning the question of whether subsection 231(3) contravenes the B.N.A. Act, it has already been decided that the Minister, in making his requirements, did so for the purpose of administer ing and enforcing the Income Tax Act. There is no indication
that the real purpose of subsection 231(3) is to interfere with provincial power over property and civil rights. Subsection 231(3) is in its pith and substance concerned with taxation and is therefore valid under subsection 91(3) of the B.N.A Act. If federal legislation in its pith and substance falls under one or more of the heads of section 91, it is valid and its validity is not affected by the fact that matters under provincial legislative authority may be affected. Since subsection 231(3) has been found to be intra vires, the failure to rebut the presumption of jurisdiction supports such a finding. Subsection 231(3) gives to the Minister powers that are necessary to carry out his duties under the Act. As to the submission that subsection 231(3) must be construed strictly because it is a taxing statute, the rule does not apply where the meaning of legislation is clear. Subsection 231(3) authorizes the Minister, for any of the purposes described, to demand from any person any informa tion. These words mean precisely what they say, the only limitation being that the information must be related to income. It was submitted that the Minister was not acting for the purpose of the administration or enforcement of the Act because there was no investigation under way of a specific person or persons. There is no statement of law as to how far an inquiry must have proceeded before a requirement is author ized, nor even that it must have started. The word "related" is just as applicable to an intended inquiry as to one that is already under way. The fact that the Department has sought information about transactions of and profits made by com modities securities traders for years is conclusive evidence that it is a genuine and serious matter which can certainly be designated as an inquiry. With respect to the contention that subsection 231(3) contravenes the Canadian Bill of Rights, all the Minister is demanding is information. The requirements do not involve infringement of anyone's right to enjoyment of property nor do they threaten that anyone may be deprived of that right. In any case, the closing words of paragraph 1(a) "except by due process of law" are conclusive to negative the claim. The present hearing is hopefully the fair hearing protect ed by paragraph 2(e). Although the applicant's clients, whose right to privacy in relation to their securities transactions may be affected, are not parties to the proceedings, the Court is aware of their rights. Where there is a conflict between the rights of the individual and the need of the government to be efficient in carrying out its responsibilities, a balance between the two must be struck. The need for the Department to ascertain the facts of the situation is very real due to the potential loss to the national revenue. The only practical way to obtain the information sought is by the method followed. The respondent has undertaken to keep the requested information confidential. Thus the position of the individual traders is not as serious as that of the Department, and their right to privacy must yield to the need for efficient operation of government. The Canadian Bill of Rights has not been breached. Finally the requirement was not invalid for failure to comply with the statutory wording regarding time within which to comply with the requirement. The purpose of the statutory provision is to ensure that the person from whom the information is required will have a reasonable time to comply. A reasonable time is not exact, but it can be ascertained for the circumstances of a particular case. The Minister must satisfy the Court that a reasonable period of time for compliance elapsed before pro ceedings were started. Even where a specified period is stated, the Minister might have to satisfy the Court that it is a
reasonable time. Here, the purpose of the legislation is satisfied by the words "without delay".
CASES JUDICIALLY CONSIDERED
APPLIED:
Proprietary Articles Trade Association, et al. v. Attor- ney-General for Canada, et al., [1931] A.C. 310; Attor- ney-General for British Columbia v. Attorney-General for Canada et al., [1937] A.C. 368; Nykorak v. The Attorney General of Canada, [1962] S.C.R. 331; 33 D.L.R. (2d) 373; The Attorney General of Canada v. The Canadian Pacific Railway et al., [1958] S.C.R. 285.
DISTINGUISHED:
In re Solway, [1979] 2 F.C. 471; 79 DTC 5116; [1979] CTC 154 (F.C.T.D.); In re M.N.R. v. Paroian, Courey, Cohen & Houston (1980), 80 DTC 6077 (Ont. C.A.); Duma Construction Company Ltd. v. Her Majesty The Queen, [1975] 3 W.W.R. 286; 75 DTC 5273 (Alta. D.C.); In re The Insurance Act of Canada, [1932] A.C. 41; In re The Board of Commerce Act, 1919 and The Combines and Fair Prices Act, 1919, [1922] 1 A.C. 191.
CONSIDERED:
Attorney General of Canada v. Bélanger (1962), 63 DTC 1289 (Que. Q.B.); Granby Construction and Equipment Ltd. v. Milley (1974), 47 D.L.R. (3d) 427; 74 DTC 6300 (B.C.S.C.); Re Corsini and The Queen (1979), 49 C.C.C. (2d) 208 (Ont. H.C.); The Canadian Bank of Commerce v. The Attorney General of Canada, [1962] S.C.R. 729; 62 DTC 1236 (S.C.C.), affirming (1961), 62 DTC 1014; 31 D.L.R. (2d) 625 (Ont. C.A.), affirming (1961), 61 DTC 1264 (Ont. H.C.); Attorney-General for the Dominion of Canada v. Attorney-General for the Prov ince of Alberta et al., [ 1916] 1 A.C. 588.
REFERRED TO:
Granby Construction and Equipment Ltd. v. Milley (1974), 50 D.L.R. (3d) 115; [1975] 1 W.W.R. 730; 74 DTC 6543 (B.C.C.A.); Hewson v. The Ontario Power Company of Niagara Falls (1905), 36 S.C.R. 596; The Citizens Insurance Company of Canada v. Parsons (1881), 7 A.C. 96; The King v. Imperial Tobacco Com pany of Canada Limited, [1938] Ex.C.R. 177; His Majesty The King v. Imperial Tobacco Company of Canada Limited, [1939] S.C.R. 322; In the Matter of Three Bills Passed by the Legislative Assembly of Alberta At the 1937 (Third Session) Thereof Entitled Respectively: An Act Respecting the Taxation of Banks; An Act to Amend and Consolidate the Credit of Alberta
Regulations Act; An Act to Ensure the Publication of Accurate News and Information, [1938] S.C.R. 100; Attorney-General for Canada v. Attorney-General for Ontario et al., [1937] A.C. 355; The Queen v. Wel Holdings Ltd. et al. (1979), 79 DTC 5081; [1979] CTC 116 (F.C.T.D.).
APPLICATIONS. COUNSEL:
W. C. Kushneryk for applicant.
B. J. Meronek and B. H. Hay for respondent.
SOLICITORS:
Pitblado & Hoskin, Winnipeg, for applicant.
Deputy Attorney General of Canada for respondent.
The following are the reasons for judgment rendered in English by
SMITH D.J.: The applicant and plaintiff herein has launched several proceedings in which the same issues arise. In this Court three proceedings have been begun, namely:
1. An application by way of originating notice of motion, dated May 16, 1980 and filed May 20, 1980, for an order of certiorari to quash a decision or order of the defendant dated May 8, 1980 and served on the same day, requiring the plaintiff to produce to officers of the Depart ment of National Revenue:
(a) A complete listing of customer name and address, identifying each by the account number for the calendar year 1977,
(b) A complete listing of branch office locations, identifying each by the office number, for the calendar year 1977,
as used in the preparation of clients' commodity monthly statements for the Securities Division of the plaintiff.
2. An application by way of originating notice of motion, dated November 14, 1980 and filed November 20, 1980, for an order of certiorari to quash a similar decision or order of the defend ant, dated October 8, 1980, and served on the same day, requiring the plaintiff to provide simi lar information to the Minister for the calendar years 1978 and 1979. The requirement went
further in terms, than that of May 8, 1980, by requiring, in addition to the names, addresses and account numbers of all persons on whose behalf the plaintiff carried out trading in com modities during those calendar years, and the company's office through which such trading was carried out, production of the details of all monthly transactions resulting in a net gain or loss position for each calendar year for each such person as used in the preparation of clients' commodity statements for the Securities Divi sion.
3. An action by statement of claim issued on November 20, 1980, for declarations that the May 8, 1980, and October 8, 1980, decisions or orders of the defendant are invalid on several grounds. One of the declarations asked for is that paragraphs 231(3)(a) and (b) of the Income Tax Act, S.C. 1970-71-72, c. 63, infringe paragraphs 1(a) and 2(e) of the Canadian Bill of Rights, S.C. 1960, c. 44 [R.S.C. 1970, Appendix III]. No allegation of infringement of any provision of the Canadian Bill of Rights is contained in either of the originating notices of motion mentioned supra.
The applicant also, by originating notice of motion, dated May 16, 1980, applied for similar relief in the Manitoba Court of Queen's Bench. This motion was heard by Morse J. and on Octo- ber 30, 1980 was dismissed on the ground that the Court lacked jurisdiction. On November 27, 1980, the applicant appealed this decision to the Manito- ba Court of Appeal. This appeal was set down for hearing on January 6, 1981.
The application occasioned by the decision or order of May 8, 1980, no. 1 supra, came before me on June 2, 1980, and was adjourned sine die, with consent of both parties. It was again set down for hearing on December 10, 1980, as was the applica tion occasioned by the decision or order of October 8, 1980.
At the opening of the hearing in the present application on December 10, 1980, counsel for the applicant, pursuant to a notice of motion filed on
December 5, 1980, applied for the following orders:
1. An order consolidating for all purposes the originating notices of motion for orders of cer- tiorari to quash the decisions or orders of the defendant (respondent) dated May 8, 1980 and October 8, 1980, and the statement of claim issued in this Court on November 20, 1980, for declarations that those decisions or orders are invalid.
2. An order giving directions for the method of service on all interested parties of the appropri ate notice by or on behalf of the applicant, giving notice that the applicant wishes to bring in question the constitutional validity of para graphs 231(3)(a) and (b) of the Income Tax Act of Canada.
3. Adjournment of the hearing to allow cross- examination on affidavits of Herman Theodore Yaeger filed November 25, 1980, in this Court, in Court Nos. T-2478-80 and T-5461-80 (the files for the two originating notices of motion).
4. An order adjourning all of the above, pending the hearing and determination of this matter by the Manitoba Court of Appeal, scheduled for January 6, 1981, including any possible appeal or appeals therefrom.
Counsel for the respondent had no objection to the two originating notices of motion and the statement of claim being consolidated. This appeared to be the sensible thing to do and I so ordered.
Counsel for the respondent also had no objection to the application for order no. 2 (supra). No argument concerning this point was presented on behalf of either party.
Counsel for the respondent objected strongly to any adjournment for the purpose of cross-examin ing Mr. Yaeger on his affidavits, stating that Mr. Yaeger was in Court and could be examined on that day or the next. After a short argument counsel for the applicant stated he would be pre pared to cross-examine Mr. Yaeger that afternoon. I ordered that this cross-examination begin at 3 p.m. that day, December 10, 1980. It was com menced at that time and completed that afternoon.
Counsel for the respondent objected to any adjournment being granted pending the final determination of the matters being dealt with by the Manitoba Court of Appeal. A lengthy argu ment ensued. After considering the arguments of both counsel I came to the conclusion that the matters before me should continue, and I so ordered.
The situation which led to all the proceedings mentioned supra has developed over a long period.
In or about October, 1975, the respondent decided that it was necessary to check on compli ance with the Income Tax Act by traders in the commodities futures market, and that specific and independent information as to the dealings of such traders is available only from commodities futures market brokers. The applicant is among the largest of such brokers in Canada.
At the respondent's request the applicant agreed to maintain its clients' commodities monthly state ments in a machine sensitive form, commencing January 1, 1976. In February, 1977, the respond ent advised the applicant that the Department wished to have the file of such statements made available to it for use in an Income Tax Compli ance Project. The applicant had objections to doing so, but at the Department's request did agree to provide the Department with one month's commodities statements file to enable the Depart ment to determine whether the information on it could be used, as desired, in the form presented. The information was to be confidential and used only for testing purposes and was given subject to the condition that other investment dealers had been requested to provide similar information.
Correspondence and discussions ensued during the following two and a quarter years. On June 28, 1979, the respondent wrote the applicant, (Exhibit "H" to the affidavit of H. T. Yaeger of November 25, 1980), stating that the Department was now in a position to process the information on the files for all of the months of 1977 (except January, for which month the file had not been retained). The letter stated:
—the Department will guarantee the confidentiality of the data including assurances that no direct or indirect use will be made of any information obtained from the files during the test period.
—on completion of the test period:
(1) the Department will advise the corporation of any intent to use the information in an Income Tax compliance project and at that time, as discussed, we will serve a requirement for the information contained on these files.
(2) the Department agrees to treat the other Canadian Commodity brokers in a similar manner by also request ing their files and using the information as required in the project.
Copies of the 1977 files (except January) were supplied and translated for the project. However, they did not contain all the needed information. On December 21, 1979, the Department wrote the applicant, (Exhibit "J" to Mr. Yaeger's affidavit) stating that, for the next step in testing the infor mation, the following were required:
(1) A complete listing of office locations, identifying each by the office number.
(2) A complete listing of customer name and address, identify ing each by the account number.
On February 25, 1980, the applicant's solicitors, Pitblado & Hoskin, replied to this letter (see Exhibit "K" to Mr. Yaeger's affidavit), stating, in part:
It is our understanding that this information is required for a test project and is not related to a genuine and serious enquiry into the tax liability of any specific person or persons.
It appears that this exploratory project is being based on information from Richardsons alone and not from any other security house.
As solicitors for Richardsons, we have a real concern about the authority of the Department to demand this information and the right of Richardsons to provide it, except under clear statutory authority and a binding order or notice.
Richardsons have an obligation to keep confidential the business of their customers, and any voluntary breach of this obligation by Richardsons would be improper and would harm Richardsons name and competitive position if it became known.
In our opinion, neither Section 231(3) or any other section of the Income Tax Act authorizes the Department to request the information concerned unless it is related to "a genuine and serious enquiry into the tax liability of a specific person or persons".
The preceding words in quote are taken from the case of the Canadian Bank of Commerce vs Attorney General of Canada, Supreme Court of Canada June 25, 1962, 62 DTC 1236 at page 1238.
These two letters, of December 21, 1979, and February 25, 1980, indicate clearly the differing positions of the parties. On the one hand, each of the monthly statements which had been provided to the respondent contained the numbers of the accounts for which transactions had been com pleted in that month, the number of the office which had handled the transaction, and the amount gained or lost by the client as a result of the transaction, but did not give the name or address of the client, or the location of the office. The amounts of gain or loss shown on the state ments were of no assistance in the Income Tax Compliance Project unless they could be identified with the specific clients for whom the transactions had been made.
On the other hand the applicant was concerned that providing the names and addresses of the clients for whom the transactions had been made constituted a breach of the duty of confidentiality owed to those clients, and also that the practical effect of providing this information, if it became known, would be seriously detrimental to the applicant's name and competitive position. The parties had a further important difference in their view of the law. The respondent has, throughout the whole period, maintained that the Department has full legal right and power to require the appli cant to provide all the information asked, but the applicant has been equally strong in maintaining that the respondent has no such right or power.
No progress was made toward solving the differ ences between the parties. On May 8, 1980, by formal decision or order, the respondent required the applicant to provide the information in ques tion, for the year 1977, and the applicant launched the originating notice of motion, dated May 16, 1980, which was filed on May 20, 1980. As stated earlier, this matter was adjourned sine die on June 2, 1980. Subsequently, the respondent, by formal decision or order, dated October 8, 1980, required the applicant to provide similar information for the years 1978 and 1979, and the applicant launched the second originating notice of motion. The appli cant also, on November 20, 1980, issued a state-
ment of claim in an action in this Court, claiming the same relief as was asked for in the two notices of motion. Further, the applicant filed a notice, dated December 9, 1980, that in the action or proceeding it would bring in question the constitu tional validity of paragraphs 231(3)(a) and (b) of the Income Tax Act of Canada.
Subsection (3) of section 231 of the Income Tax Act reads as follows:
231... .
(3) The Minister may, for any purposes related to the administration or enforcement of this Act, by registered letter or by a demand served personally, require from any person
(a) any information or additional information, including a return of income or a supplementary return, or
(b) production, or production on oath, of any books, letters, accounts, invoices, statements (financial or otherwise) or other documents,
within such reasonable time as may be stipulated therein.
While the requirement order of May 8, 1980 states that it is made pursuant to paragraph 231(3)(b) of the Income Tax Act and that of October 8, 1980, indicates that it is made under paragraph 231(3)(a) of that Act, it is clear that the validity of the whole of subsection (3) is being called in question by the applicant (plaintiff).
The grounds on which the validity of the deci sions or orders of May 8, 1980 and October 8, 1980 is called in question are set out in almost identical terms in the two originating notices of motion in this Court, as follows:
1. That the Respondent acted without jurisdiction and in excess of its jurisdiction in issuing the Decision or Order referred to herein.
2. That the said Decision or Order:
(a) is not issued for any purpose related to the administra tion or enforcement of the Income Tax Act;
(b) is purely speculative in nature;
(c) is discriminatory;
(d) is fundamentally unfair;
(e) is contrary to the rules of natural justice;
(f) is not a genuine and serious inquiry into any specific tax liability.
3. That paragraph 231 (3) of the Income Tax Act which purports to authorize the making of such a Decision or Order contravenes the provisions of Section 92 (13) of the British North America Act 1867 as amended and is not within the legislative competence of Parliament under Section 91 or other wise of the said Act.
4. Such further and other grounds as counsel may advise and this Honourable Court may permit.
Paragraph 1 of these grounds is simply a general allegation of lack or excess of jurisdiction. Many of the detailed grounds alleged in support of it are contained in the six short subparagraphs lettered (a) to (f) inclusive of paragraph 2, and in para graph 3. However, some of the grounds are not contained in any of those subparagraphs or paragraph 3.
Counsel raised a question about the validity of the making of the decisions or orders requiring the information that was being demanded. These deci sions or orders were not made by the Minister himself, but by Mr. Stubel, Director-Taxation, Winnipeg office. Paragraph 221(1) (f) of the Income Tax Act provides:
221. (1) The Governor in Council may make regulations
(I) authorizing a designated officer or class of officers to exercise powers or perform duties of the Minister under this Act,
Paragraph 900(2)(b) of the Income Tax Regu lations, SOR/73-390, as amended by SOR/75- 298, enacted by Order in Council provides, in part:
900... .
(2) An official holding a position of Director-Taxation in a District Office of the Department of National Revenue, Taxa tion, may exercise the powers and perform the duties of the Minister under
(b) subsections ... 231(2) and (3) of the Act,
Counsel submitted that the Minister did not have the power to delegate the function of making decisions or orders under subsections 231(2) and (3) of the Act, because in making such decisions or orders he was acting judicially and a judicial func tion, as distinct from an administrative one, cannot be delegated. He relied on three cases, which cases
should be considered.
The earliest of these cases is Granby Construc
tion and Equipment Ltd. v. Milley (1974), 47 D.L.R. (3d) 427; 74 DTC 6300 (B.C.S.C.). In that case documents in a man's residence in Vancouver and in safety deposit boxes in his name in a bank in Prince Rupert were seized. The seizure was made under subsection 231(4) of the Income Tax Act, which provides that a search and seizure may,
with the approval of a County Court Judge, be authorized when the Minister has reasonable and probable grounds to believe that a violation of the Act has been committed. The authorization had been signed by the Director of the Special Investi gations Division, and approved by a County Court Judge. In an action of replevin of the documents seized, it was held by the Trial Court Judge that the motion for replevin was entitled to succeed and that the authorization was invalid, because subsec tion 231(4) conferred on the Minister a judicial function that could not be delegated without express statutory words. Paragraph 221(1)(f), per mitting delegation of "powers and duties" could not be construed to extend to a judicial function. Bouck J. said, beginning near the bottom of page 435 of the D.L.R. report:
The opening words of S. 231 (4) [of the Income Tax Act, 1972]—"When the Minister has reasonable and probable grounds to believe"—illustrate that Parliament intended the Minister to be satisfied on reasonable and probable grounds that a violation of the Act or a Regulation has been or is likely to be committed. Such a requirement was not contained in the earlier statute where Parliament described the acts of the Minister as being "for any purpose related to the administra tion or enforcement of this Act."
He went on to say:
The new section contemplates the Minister taking a more active role, if not the sole leading role, in any decision made to invoke the provisions of S. 231 (4), and changes the status of the Minister from being involved in the implementation of a mere ministerial act to that of applying a judicial discretion vested in him by Parliament.
At page 439 he said:
The authority to delegate as set out in S. 221 (1) (f) describes "powers" and "duties" but makes no express mention of the Minister's judicial function. The rule of statutory interpretation I must apply states that a judicial function cannot be delegated except by express words contained in the statute.
He held the authorization for search and seizure to be invalid. The decision was appealed to the British Columbia Court of Appeal, whose decision is reported in (1974), 50 D.L.R. (3d) 115; [1975] 1 W.W.R. 730; 74 DTC 6543 (B.C.C.A.). The Court of Appeal reversed the judgment of Bouck J. McFarlane J.A., delivering the judgment of the Court, said, at page 120 of the D.L.R. report:
Recognizing as I do that the exercise of the powers conferred by S. 231 (4) may involve serious interference with rights of property and privacy, I am of the opinion that the intention of Parliament is clearly stated in S. 221 (1) (f).
In my opinion, the powers and duties of the Minister intend ed to be dealt with are the powers conferred and the duties imposed on him by the statute, including the powers and duties described in S. 231 (4). This meaning being plain, it is idle, in my opinion, to attempt to attach adjectives such as administra tive, legislative, judicial or quasi-judicial to those powers and duties. I think, therefore, that S. 221 (1) (f) empowered the Governor in Council to delegate the exercise of the powers conferred and the performance of the duties imposed on the Minister by S. 231 (4) to the Director in the manner provided by Regulation 900 (5) which I therefore find to be Mira vires.
The same reasoning applies to delegation of the powers conferred on the Minister by subsection 231(3), which in my opinion is also intra vires.
The second case, chronologically, is: Re Corsini and The Queen (1979), 49 C.C.C. (2d) 208 (Ont. H.C.), a decision of Cory J. in the Supreme Court of Ontario. It is also a search and seize case. It was concerned, inter alia with what was submitted to be an error on the face of the record, that the authorization applied to an entity that did not exist. At the top left hand corner of the application and authorization there were the words "Revenue Canada Taxation" and below those words were the words "Deputy Minister". The submission was that there is no such entity as Revenue Canada Taxation.
Subsection 2(1) of the Department of National Revenue Act, R.S.C. 1970, c. N-15, provides:
2. (1) There shall be a department of the Government of Canada called the Department of National Revenue over which the Minister of National Revenue appointed by commission under the Great Seal shall preside.
Subsection 3(1) makes similar provision for two officers to be designated respectively as "the Deputy Minister of National Revenue for Taxa tion" and "the Deputy Minister of National Reve nue for Customs and Excise."
It was argued that since "Revenue Canada" does not exist, it cannot have a Deputy Minister, and as a result the authorization on its face is invalid. At page 215 Cory J. said:
The argument is a strong and cogent one. The applicable principle that a man's home is his castle has often been repeated. The right to enter, inspect, search and seize should be restricted to the terms of the enactment providing for such entrance, search and seizure.
The learned Judge then referred to two judg ments of Cattanach J. in the Federal Court of Canada, Trial Division, that had been cited to him in support of the foregoing argument. The first is: In re Solway, [1979] 2 F.C. 471; 79 DTC 5116; [1979] CTC 154 (F.C.T.D.). In that case the Court was considering the affidavit of a man made in support of an application to have Solway attend as a judgment debtor. Cattanach J., after setting out subsection 2(1) of the Department of National Revenue Act, stated in part, at pages 472-473 [Federal Court Reports]:
Therefore, Parliament in enacting section 2(1) (supra) as it did named this particular department of the Government of Canada the "Department of National Revenue". That 'being so the Department cannot be called by any other name such as "Revenue Canada, Taxation" unless such a change in name is authorized by Parliament by the enactment of an appropriate statute. This Parliament has not done. Accordingly the name of a department as is prescribed by a statute of the Parliament of Canada cannot be changed by any executive or administrative action as must have been the case in this instance, nor at the whim of some individual.
If the affiant, as he swears he is, is an employee of the Revenue Canada, Taxation, he would not be an employee of the Department of National Revenue and if he is not an employee of that Department then he is not entitled to have access to the information with respect to which he purports to swear.
The second case is: The Queen v. Wel Holdings Ltd. et al. (1979), 79 DTC 5081; [1979] CTC 116 (F.C.T.D.). It was to the same effect.
On the facts of the case before him Cory J. did not uphold the foregoing argument. He found that the officer who made the application, Mr. Brad- shaw, was described by his proper official title (Assistant Director General Compliance for Spe cial Investigations of the Department of National Revenue) in two places in the application. He did say, however:
I hasten to add that if the proper description of Mr. Bradshaw were not so clearly set out in the application, I would not have come to this conclusion.
In the present case the facts are to some extent similar to those in the Corsini case except for the important difference that it is not a search and seizure case, but merely a demand for information. It thus falls under subsection 231(3) of the Income Tax Act, not subsection 231(4). The only docu ments before me that are related to the Corsini situation are the two requirement letters of May 8, 1980 and October 8, 1980. Both of these docu ments have at the top left corner the following printed words, English and French:
Revenue Canada Revenu Canada
Taxation Impôt
The letter of May 8, 1980, has, below the signa ture of Mr. Stubel, his proper official title, viz: Director-Taxation, Department of National Reve nue. That of October 8, 1980, has, below his signature the words: Director-Taxation, Winnipeg District Office. On this document there is no mention of the Department of National Revenue, but in the first paragraph there are the words: ".. . you are aware that the Minister of National Reve nue wishes to obtain from you a listing of your clients for whom it is part of your business to engage in commodity transactions." In the context of the letter and all the preceding correspondence, discussions and things done there can be no doubt that the letter was written by the Director of Taxation, Winnipeg District Office of the Depart ment of National Revenue. There is no affidavit and no one is swearing, as Mr. Justice Cattanach said was the case in In re Solway, that he is an employee of Revenue Canada Taxation.
In my view this highly technical argument cannot succeed in the present case.
The third case referred to by counsel for the applicant is In re M.N.R. v. Paroian, Courey, Cohen & Houston (1980), 80 DTC 6077 (Ont. C.A.), a decision of the Ontario Court of Appeal. Like the two already discussed, it is an entry and search case. In such cases, as we have seen, subsec tion 231(4) requires that the Minister must have reasonable and probable grounds to believe that a violation of the Act or of a regulation has been committed or is likely to be committed and that his proposed action must have the approval of a judge before he can authorize entry, search and
seizure. In cases under subsection 231(3) neither of these requirements exist, no doubt because such cases do not involve invasion of private property. All that is required is that the demand for infor mation be made "for any purposes related to the administration or enforcement of this Act".
In my view, the views expressed by Morden J.A. in delivering the judgment of the Court in the Paroian case, cogent as they were to the kind of case he was dealing with, are not relevant to the issues in the case presently before me.
Counsel did refer to one case where subsection 231(3) was applicable. The case is Duma Con struction _Company Ltd. v. Her Majesty The Queen, [1975] 3 W.W.R. 286; 75 DTC 5273 (Alta. D.C.). In that case the requirement made by the Director of Taxation at Edmonton was that the appellant produce certain documents (para- graph 231(3)(b)) by forwarding them to the Dis trict Taxation Office at Edmonton. The District Court Judge (R. H. Belzil) held that the power to order production did not extend to requiring the documents to be sent somewhere. This would mean parting with the documents without any safeguard for their return.
In the present case the requirements do not demand that any documents in the possession of the applicant be forwarded anywhere. They ask only for information to be derived from documents and for lists of customers and branch offices. In my view this case does not assist the applicant.
•
In his argument supporting the constitutional validity of subsection 231(3) of the Income Tax Act, counsel for the respondent referred to several cases. The first was: Hewson v. The Ontario Power Company of Niagara Falls (1905), 36 S.C.R. 596. This case was cited as authority for the rule that, in construing an Act of the Parliament of Canada, there is a presumption in law that the jurisdiction has not been exceeded. Taschereau C.J. began his reasons for judgment, by stating that the first ground upon which the appellant attempted to support his case is that the Dominion Act incor porating the respondent company, 50 & 51 Vict.,
c. 120, is ultra vires and unconstitutional. He then proceeded to say [at page 603]:
Now, upon him was the burden of establishing the soundness of that contention; the presumption in law always is that the Dominion Parliament does not exceed its powers.
Counsel submitted that the applicant had failed to discharge that onus. I agree, but as I have already concluded that the enactment of subsec tion 231(3) was intra vires of the Canadian Parlia ment, I do so only to say that if my reasons for coming to that conclusion are not completely con vincing, in my opinion the applicant has not proved the contrary.
Other cases cited on behalf of the respondent included:
1. Attorney-General for British Columbia v. Attorney-General for Canada et al., [1937] A.C. 368. This case was also referred to by counsel for the applicant.
2. Nykorak v. The Attorney General of Canada, [1962] S.C.R. 331; 33 D.L.R. (2d) 373.
3. The Attorney General of Canada v. The Canadian Pacific Railway et al., [1958] S.C.R. 285.
All three cases are authorities for the general rule that if legislation enacted by Parliament is, in pith and substance legislation under one of the heads of section 91 of The British North America Act, 1867, 30 & 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix II, No. 5], it is valid, and its validity is not affected by the fact that it may affect property and civil rights or some other head of section 92, legislation about which is within the exclusive power of the provinces.
The first of these cases was concerned with the validity of section 498A of the Criminal Code. Lord Atkin, delivering the judgment of the Privy Council, said, at page 375:
The only limitation on the plenary power of the Dominion to determine what shall or shall not be criminal is the condition that Parliament shall not in the guise of enacting criminal legislation in truth and in substance encroach on any of the classes of subjects enumerated in S. 92. It is no objection that it does in fact affect them. If a genuine attempt to amend the criminal law, it may obviously affect previously existing civil rights.
The second case was concerned with section 50 of the Exchequer Court Act, R.S.C. 1952, c. 98, which dealt with the relationship of master and servant between the Crown and a member of the armed forces for the purpose of determining liabil ity in actions by and against the Crown. It was held to be valid legislation by Parliament, under head 7 of section 91 of The British North America Act, 1867, notwithstanding that it might inciden tally affect property and civil rights within the province.
The third case dealt with the validity of section 198 of the Railway Act, R.S.C. 1952, c. 234, which provided that no railway to which the Act applied, which acquired land, whether by purchase or compulsory taking, thereby acquired title to mines and minerals in the land, unless they were expressly purchased by and conveyed to it. The section was held to be valid legislation of Parlia ment relating to interprovincial railways, under exception (a) to head 10 of section 92, notwith standing that provincial legislation existed to the effect that a conveyance of land was to be deemed to include mines and minerals. I quote, in part, a paragraph from the judgment of Mr. Justice Rand, at page 290:
Powers in relation to matters normally within the provincial field, especially of property and civil rights, are inseparable from a number of the specific heads of s. 91 of the British North America Act under which scarcely a step could be taken that did not involve them. In each such case the question is primarily not how far Parliament can trench on s. 92 but rather to what extent property and civil rights are within the scope of the paramount power of Parliament.
Turning to paragraph 2 of the grounds on which the validity of the requirement orders is ques tioned, and first to subparagraph (a) it may be useful to begin by stating the power of Parliament in relation to taxation. Head 3 in section 91 of The British North AMerica Act, 1867 gives the Parlia ment of Canada exclusive legislative authority with respect to "The raising of Money by any Mode or System of Taxation". It would be dif ficult to find words that would confer wider or more all-embracing taxation power. Raising money by taxation of income clearly falls within
those words. To my mind the word "raising" embraces not only the imposing and levying of taxes but also the taking of steps both to ascertain whether individuals owe taxes and to collect those taxes. Thus Parliament has wide powers of legisla tion in connection with the administration and enforcement of the Income Tax Act.
In considering the allegation in subparagraph (a) of paragraph 2 the question to be answered is: What is comprehended by the terms "administra- tion and enforcement"? In relation to the present applications the circumstances narrow the question greatly. Do they include requiring a broker to supply the Department with the names and addresses of all his clients for whom he has bought or sold securities, together with the account number of each client and the amount of the gains or losses sustained by each client by those transac tions in each month of the year? Counsel for the applicant submits that they do not include the making of such a requirement.
In support of his submission, counsel supplied to the Court a volume which contained, in addition to sections 91 and 92 of The British North America Act, 1867 and subsections 231(2),(3) and (4) of the Income Tax Act, the judgments rendered in nine cases, mostly by the Privy Council. The nine cases were concerned with the constitutional valid ity or invalidity of provisions contained in certain federal and provincial statutes. A careful review of the judgments in the nine cases has led me to conclude that none of them dealt with a situation analogous to that which concerns us at this point, and that none of them affords any real assistance to determine the narrow point I am now consider ing, namely, whether the words "administration or enforcement of this Act" include the action taken by the respondent to obtain information from the applicant concerning the securities trading activi ties of its clients. They will be considered in con nection with the general issue of the constitutional ity of subsection 231 (3) of the Act.
The argument of counsel for the applicant on this point is not convincing. As counsel for the respondent said, what the Minister is seeking to obtain is information verifying or otherwise the accuracy of income tax returns. He is asking for
records of transactions that may attract tax. This is clear from the requirements themselves and also from the correspondence between the parties. In my opinion what he is doing is clearly for purposes related to the administration or enforcement of the Act. Therefore the argument of counsel for the applicant on this point fails.
Subparagraph (b) of paragraph 2 states that the decision or order is purely speculative in nature. This is true in the sense that the respondent has no ground to believe, and until the information asked for is obtained, will be unable to say that any particular client or clients of the applicant may have failed to report all his commodities securities transactions for the three calendar years in ques tion, as required by the Income Tax Act. If he had evidence now that such was the case he would probably be directing his attention to such person or persons.
The respondent may have good grounds for suspecting that one or more of the applicant's many clients, whose names are unknown to him, may have failed to report in his or their income tax returns all commodities securities transactions for those three years. Some support for thinking this to be true may be inferred from paragraph 2 of Mr. Yaeger's two affidavits of November 25, 1980, "That in or about October 1975 the Respondent decided that it was necessary to check on compliance with the Income Tax Act by traders in the commodities futures market." One is inclined to doubt that without some such grounds he would have embarked on the lengthy investiga tion we are here concerned with. It would obvious ly be improper for him to make any allegations of this kind without solid facts; mere suspicions would not do. On the other hand, having reason able grounds for thinking that some traders in securities may be failing to report properly in their income tax returns the profits and losses resulting from their trading activities, it would certainly be the respondent's duty to try to ascertain the facts.
The applicant stated at one time that there were other ways in which the respondent could obtain the information he is seeking. However, there is nothing in the evidence to indicate what these other methods might be, if in fact they do exist.
The only evidence on this point is found in para graph 3 of Mr. Yaeger's affidavit where he swears: "That specific and independent information as to the dealings of such traders is available only from commodities futures market brokers. The Appli cant is among the largest of such brokers in Canada."
Paragraph 21 of Mr. Yaeger's affidavit states further:
21. THAT without receipt of the information contained in the said requirements, it is virtually impossible for all practical purposes for the Minister to enforce the provisions of the Act in a serious and genuine attempt to ensure compliance by traders in the commodities futures market, where there is no other independent means of ascertaining the existence of these transactions.
In the result it is my view that the respondent's action in requiring the applicant to provide the information requested should not be ruled against on the ground that "it is purely speculative in nature."
Subparagraph (c) claims that the respondent's decision or order "is discriminatory". This claim arises from the applicant's belief that it is the only securities broker from whom information similar in kind is being sought. There is no evidence from which it can be concluded that such is the case. Mr. Yaeger was cross-examined by Mr. Kush- neryk on this point at some length.
At page 19 of the transcript of his cross-exami nation there are reported the following questions and answers:
Q. Isn't it so, Mr. Yaeger, that in fact it is only James Richardson & Sons Limited that your department is attempting to obtain this information and these records from?
A. No, that's not correct.
Q. Well, correct me.
A. We have made other enquiries from other brokerage
houses.
Q. From what other brokerage houses? A. In Toronto.
Q. What other brokerage houses?
A. Okay. I haven't got the document here. I have seen a memo that has crossed my desk. I have knowledge of the fact that there are other brokerage houses that have been enquired into.
Questioned further, he admitted that the Win- nipeg office of the Department, (which is the office where he works), was concerned, at the present time, in this project, only with James Richardson and Sons Limited. On re-examination he was asked one question only, by Mr. Meronek.
Q. Who was the subject matter of the commodities project with which the account was involved?
A. All commodities traders.
The applicant's claim that the respondent's deci sion or order is discriminatory fails.
Subparagraph (d) claims that the respondent's decision or order "is fundamentally unfair." It is clear that this claim rests on the same mistaken view of the facts as that in subparagraph (c), that the project was concerned with James Richardson and Sons Limited only. It fails for the same reason.
Subparagraph (e) claims that the respondent's decision or order is contrary to the rules of natural justice. This claim is too general. Neither in the pleadings nor in the argument of counsel was any indication given as to what rule or rules of natural justice are alleged to be infringed by the decision or order. Further, it is not my understanding of the law that rules of natural justice, even if definitely ascertained and clearly stated, can render invalid specific rules that fall within the jurisdiction of the legislature which enacts them. For these reasons this claim also fails.
Subparagraph (f) claims that the respondent's decision or order "is not a genuine and serious inquiry into any specific tax liability." On this claim is based one of the principal arguments of the applicant's counsel. For authority, counsel relies on the case of The Canadian Bank of Com merce v. The Attorney General of Canada, which was heard by Morand J. in the Supreme Court of Ontario, reported in (1961), 61 DTC 1264 (Ont. H.C.). It was appealed to the Ontario Court of Appeal, whose decision is reported in (1961), 62 DTC 1014; 31 D.L.R. (2d) 625 (Ont. C.A.); and further appealed to the Supreme Court of Canada, whose decision is reported in [1962] S.C.R. 729; 62 DTC 1236.
In the Bank of Commerce case, the Minister required information and production of documents from the Bank relating to the accounts of one of its customers, the Union Bank of Switzerland. This differs significantly from the factual situation in our case, since the transactions of only one account were being inquired into, and it was named, where as in our case information about all the transac tions of all the plaintiff's clients in the commodi ties securities futures field is being sought, and none of them has been named. They are described simply as clients or customers of the plaintiff (applicant) who have had trading transactions in the indicated field during the calendar years 1977 to 1979 inclusive. Each of them has an account number and they are readily identifiable by the plaintiff (applicant), as are their trading transac tions.
Morand J., in his judgment in the Supreme Court of Ontario in the Bank of Commerce case, said, at page 1265:
It was admitted on the hearing of this motion that the Minister was acting in good faith and that this requirement (for infor mation and production) relates to a genuine and serious inquiry into the tax liability of some specific person or persons; that the Minister had good reason to believe that such person or persons are among those referred to in the special case. The Minister refused to state who the person or persons were or to designate the person or persons in any way, shape or form.
I note that the parties had agreed to a special stated case, and that paragraph 11 of the special case included in the information sought much private information about the affairs of other per sons in addition to the Union Bank of Switzerland. These are the persons referred to in the latter portion of the quoted extract from Morand J.'s judgment.
He decided that the plaintiff must furnish the information and produce the documents as requested in the requirement.
The majority of the Ontario Court of Appeal came to the same conclusion, the judgment being written by Porter C.J.O. The headnote in the DTC report of the case states the decision as follows:
Held: The appeal was dismissed (one dissenting). The Appel lant bank was obligated to furnish the information and produce the documents requested in the Minister's requirement and was subject to the penalty for failure to comply therewith. Section
126 (2) provides that the Minister may, for any purpose related to the administration or enforcement of the Act, require from any person, any information, etc. [Note: Section 126 (2) was the number of the Section at that date. It is now Section 231 (3).] Although the appellant's own tax liability was not under investigation, the section conferred on the Minister, when acting for the specified purpose, the power to require from the appellant information and documents in its possession which might relate to the tax liability of third persons. It was conclu sively shown that the Minister was acting for purposes relating to the administration or enforcement of the Act and not for some other purpose unrelated to income tax liability. Since the Minister was acting for the purposes specified in the Act, his acts were administrative and not judicial, and as such were not subject to review. The question whether the Minister, in per forming his duties, placed upon the Appellant an unnecessarily onerous burden, was not subject to review.
Schroeder J.A. wrote a strong dissenting judg ment, based mainly on his view that Parliament did not intend to confer on the Minister or certain officials in his Department the full sweeping powers that a literal interpretation of paragraph 126(2)(b) would indicate, which provision, in his opinion should be construed as limited to authoriz ing a demand for information or production either with reference to a specified person or corporation or that it be otherwise particularized.
In the Supreme Court of Canada all nine judges were in agreement that the plaintiff's appeal should be dismissed. Two judgments were written, one by Chief Justice Kerwin, concurred in by Taschereau, Abbott and Judson JJ., the other by Cartwright J. [as he then was], concurred in by Locke, Fauteux, Martland and Ritchie JJ. One difference between them was that the Chief Jus tice was of the opinion, on the pleadings and agreed facts, that the Union Bank of Switzerland was "a person under investigation", whereas Cart- wright J. held that it might or might not be under investigation. The significance to the present case of the difference lies in the fact that the Union Bank of Switzerland was the only person named in the requirement for information (though many other individuals and corporations were referred to in the stated case). If the Union Bank was not under investigation, the situation in that case was more nearly parallel to that with which we are here concerned, where no person or corporation has been "named" as being under investigation.
The two judgments were in agreement that in addressing the requirement to the appellant the Minister was acting for purposes related to the administration or enforcement of the Income Tax Act and that the purpose of the requirement was to obtain information relevant to the tax liability of some specific person or persons whose tax liability was under investigation. Both judgments expressly agreed with significant findings of Porter C.J.O. in the Ontario Court of Appeal decision. Neither of them referred to the judgment of Schroeder J.A. in that Court, but it is obvious from the judgments that none of the Judges of the Supreme Court agreed with his conclusions.
One question still requires consideration, namely: what is meant by the words "specific person or persons" as used in the foregoing judg ments? Do they mean only "named person or persons"? I think not. In the Bank of Commerce case the Union Bank of Switzerland was the only person "named" in the requirement. Cartwright J.'s finding that that Bank might not be under investigation does not appear to have caused him any concern. It was sufficient that many other persons and corporations were "referred to" in the stated case, some of whom were under investiga tion and some not. In my view, in the context of the statutory provisions and the very wide power set out in subsection 231(3), these words mean "person or persons sufficiently described that they are readily identifiable." They may thus apply to all persons who are in a described or otherwise identified group. In the present case there is a described group, namely: all customers or clients of the applicant (plaintiff) who had trading trans actions in the commodities securities market during the three years in question. The Minister, by the requirement, is seeking information to verify the accuracy or otherwise of the income tax returns of each of those customers or clients for those three years. Each client's returns must be dealt with separately from those of all the others. In my view, each of them may be regarded as a specific individual, as yet unnamed, whose liability to income tax is being looked into along with that of each of the other members of the group. I therefore conclude that on the facts of this case the requirements for information made by the Minis ter should not be regarded as "a fishing expedi tion." My final conclusion is that the claim of the
applicant that the Minister's decisions or orders are not genuine and serious inquiries into any specific tax liability fails.
I turn now to the claim set out in paragraph 3 of the applicant's originating notices of motion that subsection 231(3) of the Income Tax Act contra venes the provisions of subsection 92(13) of The British North America Act, 1867, as amended and is not within the legislative competence of Parlia ment under section 91 or otherwise of the said Act. As indicated earlier in these reasons this will include consideration of judgments in some of the nine cases filed by counsel for the applicant.
The first of these cases is: In re The Insurance Act of Canada, [1932] A.C. 41. It was the last of a line of cases, decided by the Privy Council, involv ing the constitutional validity of insurance legisla tion, the first of which was The Citizens Insurance Company of Canada v. Parsons (1881), 7 A.C. 96. In this latest case the legislation in question was sections 11 and 12 of the Insurance Act of Canada, R.S.C. 1927, c. 101 and sections 16, 20 and 21 of the Special War Revenue Act, R.S.C. 1927, c. 179. Sections 11 and 12 of the Insurance Act prohibited any Canadian or foreign company and any alien person from carrying on insurance business in Canada unless under a licence from the Government of Canada. Other sections provided penalties for breach of section 11 or 12. Section 16 of the Special War Revenue Act required every person resident in Canada who insured any prop erty in Canada with any British or foreign com pany or underwriter, not licensed under the Insur ance Act, to pay a tax of five per centum of the net cost of such insurance to the Government of Canada. The Judicial Committee of the Privy Council held that all the sections were ultra vires the Canadian Parliament.
Viscount Dunedin, delivering the judgment of the Committee, reviewed the earlier cases and ended with the following paragraph:
Their Lordships cannot do better than quote and then para phrase a portion of the words of Duff J. in the Reciprocal
Insurers' case. He says: "In accordance with the principle inherent in these decisions their Lordships think it is no longer open to dispute that the Parliament of Canada cannot, by purporting to create penal sanctions under s. 91, head 27, appropriate to itself exclusively a field of jurisdiction in which, apart from such a procedure, it could exert no legal authority, and that if, when examined as a whole, legislation in form criminal is found, in aspects and for purposes exclusively within the Provincial sphere, to deal with matters committed to the Provinces, it cannot be upheld as valid." If instead of the words "create penal sanctions under s. 91, head 27" you substitute the words "exercise taxation powers under s. 91, head 3," and for the word "criminal" substitute "taxing," the sentence expresses precisely their Lordships' views.
I agree entirely with the law as stated in the quoted paragraph. In my opinion, however, it does not help the applicant, for as stated earlier, I have found that the Minister, in making his require ments for information, is doing so for the purpose of administering and enforcing the Income Tax Act. There is nothing in the circumstances of this case that suggests any other purpose. There is no indication that under the guise of administering or enforcing the Act the real purpose of subsection 231(3) is to interfere with the provincial power over property and civil rights under head 13 of section 92 of The British North America Act, 1867 or with provincial powers under any other provisions of that Act. The fact that the legislation affects civil rights does not render it invalid. This point is illustrated by the second case cited by counsel, namely, Proprietary Articles Trade Asso ciation, et al. v. Attorney-General for Canada, et al., [1931] A.C. 310.
In that case the issue was whether the Combines Investigation Act, R.S.C. 1927, c. 26 was invalid in whole or in part and whether section 498 of the Criminal Code was invalid.
Section 32 of the Combines Investigation Act made it an indictable offence, punishable by fine or imprisonment, to be a party to the formation or operation of a combine which was to the detriment of the public and restrained or injured trade or commerce.
Section 498 of the Code made it an indictable offence, punishable by fine or imprisonment, to conspire, combine, or agree to unduly limit trans-
portation facilities, restrain commerce, or lessen manufacture or competition.
The Privy Council held that all the legislation was infra vires the Parliament of Canada, under section 91, head 27 (criminal law) of The British North America Act, 1867. The headnote reads, in part:
The legislation being in its pith and substance within enumerat ed heads of S. 91 it was not material that it affected property and civil rights in the Provinces (S. 92, head 13), or if it affected, which it did not, the administration of justice in the Provinces (S. 92, head 14).
The judgment was delivered by Lord Atkin, who said at pages 326 and 327:
If then the legislation in question is authorized under one or other of the heads specifically enumerated in s. 91, it is not to the purpose to say that it affects property and civil rights in the Provinces. Most of the specific subjects in s. 91 do affect property and civil rights but so far as the legislation of Parlia ment in pith and substance is operating within the enumerated powers there is constitutional authority to interfere with prop erty and civil rights.
There is no doubt in my mind that subsection 231(3) of the Income Tax Act is, in its pith and substance concerned with taxation and is therefore valid under section 91, head 3 of The British North America Act, 1867.
The third case cited by counsel is an insurance case, earlier than the first case. It is Attorney- General for the Dominion of Canada v. Attorney- General for the Province of Alberta et al., [1916] 1 A.C. 588. Section 4 of the Canadian Insurance Act, 1910, 9 & 10 Edw. 7, c. 32, provided for a licence from the Government of Canada as a prerequisite for carrying on the business of insur ance in this country. Section 70 provided for a fine for the first offence of breach of this requirement and for imprisonment for a second offence. The judgment of the Privy Council contains a state ment of the applicable law that has been quoted and applied on many occasions since then. It was held [headnote, at pages 588-589]:
... that the legislation was ultra vires of the Parliament of Canada, since the authority conferred by the British North America Act, 1867, S. 91, head (2.), to legislate as to "the regulation of trade and commerce" does not extend to the
regulation by a licensing system of a particular trade in which Canadians would otherwise be free to engage in the provinces
It was further held:
... since it could not be enacted under the general power conferred by S. 91 to legislate for the peace, order, and good government of Canada as it trenched upon the legislative authority conferred on the provinces by S. 92, head (13), to make laws as to "civil rights in the province".
Whatever support this judgment might be thought to afford to the applicant's case is, in my opinion, on the facts of this case, completely nega tived by the extract, quoted supra from the judg ment in the Proprietary Articles case.
The fourth case cited by counsel is In re The Board of Commerce Act, 1919 and The Combines and Fair Prices Act, 1919, [ 1922] 1 A.C. 191. The first of these Acts established the Board of Com merce. The second authorized the Board to restrain and prohibit such trade combinations as it might consider to be detrimental to the public interest; power also to restrict accumulations of food, clothing and fuel beyond the reasonable needs of a private person for his household and of a trader for his business, and to require the surplus to be offered for sale at fair prices, with power to impose criminal sanctions for any breach of the Act.
The Privy Council held both Acts to be ultra vires the Parliament of Canada, because they interfered seriously with "property and civil rights in the Provinces", a subject reserved exclusively to the provinces under section 92, head 13 of The British North America Act, 1867. They were not authorized by anything in section 91, including head 2—Trade and Commerce, and head 27— Criminal Law.
Once again, in my opinion, this case does not assist the applicant, because of my finding that subsection 231(3) of the Income Tax Act is valid federal legislation under head 3 of section 91— Taxation.
The other cases cited by counsel are:
The fifth —The King v. Imperial Tobacco Company of Canada Limited, [1938] Ex.C.R. 177.
The sixth —His Majesty The King v. Imperial Tobacco Company of Canada Limited, [1939] S.C.R. 322, appeal to the Supreme Court of Canada from the Exchequer Court of the fifth case.
The seventh —Attorney-General for British Columbia v. Attorney-General for Canada et al., [1937] A.C. 368.
The eighth —In the Matter of Three Bills Passed by the Legislative Assembly of Alberta At the 1937 (Third Session) Thereof, Entitled Respec tively:
"An Act Respecting the Taxation of Banks";
"An Act to Amend and Consolidate the Credit of Alberta Regulations Act";
"An Act to Ensure the Publication of Accurate News and Information", [1938] S.C.R. 100.
The ninth —Attorney-General for Canada v. Attorney- General for Ontario et al., [1937] A.C. 355.
Having read the judgments in all these cases I deem it unnecessary to discuss them for the pur poses of the matters before me. In my view none of them assist the applicant (plaintiff).
What we are here concerned with is the validity of a portion of an Act of the Parliament of Canada, namely, subsection 231(3) of the Income Tax Act. In respect of such legislation the funda mental principle, long established, may be stated as follows: if legislation enacted by Parliament, in its pith and substance falls under one or more of the heads of section 91 of The British North America Act, 1867, it is valid, and its validity is not affected by the fact that some head or heads of section 92, for which legislative authority is vested exclusively in the provinces, may be affected by it. Example: head 13—Property and Civil Rights in the Province; head 16—Generally all Matters of a merely local or private Nature in the Province. On the other hand, if in form or in the guise of legislation under one or more heads of section 91, it is in pith and substance legislation on a subject- matter given exclusively to the provinces, it is invalid.
As indicated earlier in these reasons, in my view subsection 231(3) of the Income Tax Act clearly falls within head 3 of section 91—The raising of Money by any Mode or System of Taxation. It gives powers to the Minister of National Revenue that are necessary for the purpose of enabling him to carry out his duties and responsibilities under the Income Tax Act. The duty of the Department to administer and enforce the Act necessarily involves the duty and responsibility of ascertain ing, by every reasonable means who owes taxes and how much he owes. So far as the evidence goes, the only practical means of ascertaining what persons are trading in commodities securities, and which of them have made profits or sustained losses thereby, and the amounts of such profits or losses, is by getting the information from the brokers who handled the transactions. All the information required from the applicant is needed. In my view the two requirements made are valid and reasonable, and their validity is not prejudiced by the fact that they may cause the applicant a good deal of inconvenience and expense.
Two or three other points raised in argument by counsel require brief attention. Counsel for the applicant referred to the rule that a taxing statute is to be construed strictly, and cited several cases in which the rule was applied or discussed. I do not question the rule and I do not dispute the authority of the cases cited. However the rule does not mean that where the words used in a statute have a clearly expressed meaning they are to be construed in a narrower sense or to be given a meaning other than their natural grammatical meaning. I do not understand any of the cited cases as expressing a different view of the law.
In the present case, the meaning of subsection 231(3) of the Income Tax Act is quite clear. It authorizes the Minister, for any of the purposes described, to demand from any person any infor mation. In my view those words mean precisely what they say, the only limitation being that, as they are found in the Income Tax Act and as the purpose of the demand for information is the administration or enforcement of the Act, the information must be related to income.
Counsel for the applicant also submitted that in the present case there is no investigation under way, of the applicant, of any customer of the applicant, or of anybody, that therefore the Minis ter was not acting for the purpose of the adminis tration or enforcement of the Act. Counsel for the respondent replied by referring to Attorney Gener al of Canada v. Bélanger (1962), 63 DTC 1289 (Que. Q.B.). In that case a demand had been served for an income tax return to be filed, which demand had not been complied with. The Quebec Court of Queen's Bench reversed the judgment of the Trial Court, which had dismissed the charge of failing to file the return as demanded. Ouimet J. at page 1292, said:
(a) It is not necessary to prove that "the demand is made in the course of an investigation instituted by virtue of the Income Tax Act."
(b) A demand for a return of income in accordance with section 126 (2) [now 231(3)] can be made outside of the course of an investigation instituted by the Minister or another author ized person.
Counsel for the applicant pointed out that the Supreme Court decision in the Bank of Commerce case, supra, was given a few weeks after the Bélanger case and of course takes precedence over the Bélanger decision. I agree that to whatever extent they conflict, the Bank of Commerce deci sion prevails. The question is to what extent they conflict. What the Bélanger case actually decided was that it was not necessary to conduct an audit, seize books or documents or commence an investi gation before demanding an income tax return. I do not understand the Bank of Commerce decision to mean that that decision was wrong. In the Bank of Commerce case it was mutual ground that the requirement related to a genuine and serious inqui ry into the tax liability of some specific person or persons. This was a matter of fact. It was an important fact in leading the Court to conclude that the Minister was acting for purposes of the administration or enforcement of the Act.
Nowhere in any of the judgments in that case is there a statement of how far the inquiry must have
proceeded before a requirement is authorized, nor even that it must have started. The word "related" is just as applicable to an intended inquiry as to one that is already under way.
Quite apart from what I have said in the forego ing paragraph, in my opinion this is a genuine and serious inquiry which it was decided several years ago was necessary. Having been unable to obtain the needed information voluntarily the Minister is now formally seeking to obtain it by the means provided in subsection 231(3). From the beginning it has been clear that the Department was seeking information about the transactions of and profits made by commodities securities traders. The fact that this objective has been pursued for so many years and has reached this stage is pretty conclu sive evidence that it is a genuine and serious matter which can certainly be designated as an inquiry.
I have already expressed supra my view of the meaning, in the context of the Income Tax Act, of the words "specific person or persons."
Counsel for the applicant raised a technical point in connection with the requirement of May 8, 1980. Subsection 231(3) provides that the requirement shall state that the information or documents are required "within such reasonable time as may be stipulated therein". The require ment of October 8, 1980 specified that the infor mation be provided by December 8, 1980, which complied with the statutory provision. That of May 8, 1980, however, did not specify a date or period of time, but required that the information be provided "without delay". Counsel submitted that these words did not comply with the statute, which must be construed strictly, and that conse quently the requirement was invalid.
Counsel for the respondent contended that, in the context of the particular requirement, the words "without delay" meant "within a reasonable time"—"don't drag your feet"—"get on with it", and thus constituted sufficient compliance with the statute.
The purpose of the statutory provision is to ensure that the person from whom the information is required will have a reasonable time (which will vary considerably depending on the amount of information, the time required to collect and com pile it, and other circumstances) to comply, and that he will comply within that reasonable time. The words "without delay" do not comply strictly with the statute, but in the sense of "within a
reasonable time", which is the meaning courts have frequently held to be the correct meaning, and which in my opinion is the right meaning in the circumstances of this case, they afford the applicant all the protection intended by the stat ute. A reasonable time is not exact, as is a stated period or a terminating date, but it can be ascer tained for the circumstances of a particular case. If, in the present case, the information is not forthcoming and legal proceedings are begun, the Minister will have to satisfy the Court that a reasonable period of time for compliance with the requirement elapsed before the proceedings were started.
Even in respect of the requirement of October 8, 1980, wherein a period of two months was stated for compliance, the Minister might well have to satisfy the Court that two months was a reason able time. In my view this would be so if an objection were raised, soon enough, that the period allowed was not sufficient, and a prima facie case was made for a longer period.
In my view, in the circumstances of this case, the purpose of the statutory rule is sufficiently satisfied by the words "without delay" in the requirement of May 8, 1980. I very much doubt that the words "within such reasonable time as may be stipulated" in subsection 231(3) are intended to render totally invalid a requirement worded as is the one in question here, particularly since there is no ground for concluding that the applicant has been prejudiced by it or is likely to be prejudiced by it. My final conclusion is that the requirement of May 8, 1980 should not be declared invalid on this ground.
The only remaining matter that requires con sideration is the claim, in the action begun in this Court by statement of claim issued on November 20, 1980, that paragraphs 231(3)(a) and (b) infringe paragraphs 1(a) and 2(e) of the Canadian Bill of Rights. These paragraphs provide:
1. It is hereby recognized and declared that in Canada there have existed and shall continue to exist without discrimination by reason of race, national origin, colour, religion or sex, the following human rights and fundamental freedoms, namely,
(a) the right of the individual to life, liberty, security of the person and enjoyment of property, and the right not to be deprived thereof except by due process of law;
2. Every law of Canada shall, unless it is expressly declared by an Act of the Parliament of Canada that it shall operate notwithstanding the Canadian Bill of Rights, be so construed and applied as not to abrogate, abridge or infringe or to authorize the abrogation, abridgment or infringement of any of the rights or freedoms herein recognized and declared, and in particular, no law of Canada shall be construed or applied so as to
(e) deprive a person of the right to a fair hearing in accord ance with the principles of fundamental justice for the deter mination of his rights and obligations;
In respect of paragraph 1(a) the only thing to which the claim of infringement could possibly apply is "the right ... to . .. enjoyment of prop erty, and the right not to be deprived thereof." All the Minister is demanding is information. The requirements do not involve infringement of any- one's right to enjoyment of property nor do they involve or threaten that anyone will or may be deprived of that right. Even if that were not so, the closing words of paragraph 1(a), "except by due process of law", are conclusive, in my opinion, to negative the claim. It is clear from what has been said earlier that, as I view the facts and the law, the Minister in making these two requirements is acting in due process of law.
In respect of paragraph 2(e), if it has any application to the applicant, the present hearing of the two motions is designed to ensure a fair hear ing and I hope and think is doing so. Their clients, whose right to privacy in relation to their securities transactions may be affected if the motions are rejected, are not parties to these proceedings, but the Court is not unaware of their rights. Always in cases of this kind there is a conflict between the private rights of the individual and the purpose and need of government to be efficient in carrying out its responsibilities. Striking a balance between the two is necessary, but concluding which should prevail is often difficult.
In the present case the needs of the Department of National Revenue to ascertain and collect, wherever possible, the income tax which traders in commodities securities transactions have become liable to pay, resulting from profits made on those transactions, are important, possibly of serious proportions. There are many persons in Canada who engage in this trade, and sometimes very
substantial profits are made in the course of a year, and even on single transactions. From the number of cases in which charges of income tax fraud come before the courts it seems likely that on some occasions some trader or traders may yield to the temptation to not report one or more trading profits on their income tax returns. The temptation is no doubt greater in cases where the profits have been large. The temptation may easily be great because the risk of discovery may seem slight. Generally, only the trader and his broker know, or at least need know, what profits the trader has made, and only the trader knows, or at least need know, whether all the profits he has made from these trading transactions have been entered on his income tax returns. Whether the failure to report such profits is deliberate or results from oversight or some other accidental error, the end result is loss to the national revenue, part of which loss is borne by the provinces under the tax revenue sharing arrangements existing between Canada and the provinces. The loss in any year to the several governments may be nil, or insignifi cant, but on the other hand it may be quite substantial. Thus the need for the Department to ascertain the facts of the situation is very real. As mentioned earlier, the evidence of the respondent is that the only practical way in which the facts can be ascertained is by getting the information from the brokers. This is what the Minister's requirements of May 8 and October 8, 1980 are intended to do. No indication or suggestion of any other practicable way in which the needed infor mation can be obtained has been presented to the Court. I therefore accept the respondent's evidence on this point as correct.
The position of the client traders of the appli cant, who are not parties to these proceedings but may be affected by their result, is, in my opinion, not as serious. The right of the individual to privacy must yield to the need for efficient opera tion of government where the situation is suf ficiently serious to warrant it. Here, information is being asked, or demanded, concerning their secu rity trading transactions, which information the respondent has undertaken to keep strictly confi dential. To my mind, this means that only the departmental personnel who are necessarily required to deal with it will have any knowledge of what it contains. There should be very little or no
danger that any of it will become a matter of public knowledge. This undertaking, of course, does not extend to any case in which the informa tion obtained is such as to indicate that further proceedings should be taken. For example, if criminal or civil proceedings should be commenced against a trader, in which proceedings the infor mation which leads to it may be necessary evi dence, the trader's right to privacy would yield to the requirements of justice.
In my view, in the circumstances of this case, the Minister's requirements should not be held to constitute a breach of paragraph 2(e) of the Canadian Bill of Rights, with regard to the appli cant's trading clients. If subsequent proceedings are taken against any of them, resulting from the information obtained, they will be fully protected, under the law, in their right to a fair hearing.
The end result, arrived at with difficulty and not without doubt, is that the two applications, begun by the applicant herein by originating notices of motion dated respectively May 16, 1980 and November 14, 1980 and filed respectively May 20, 1980 and November 20, 1980, together with the claim in the action begun by the plaintiff (appli- cant in the two motions) by statement of claim dated and filed November 20, 1980, all of which proceedings were consolidated by order of this Court on December 10, 1980, are dismissed with costs. There will be only one set of costs for the hearing on December 10 and 11, 1980.
 You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.