COURT OF APPEAL FOR ONTARIO

ROSENBERG and MOLDAVER JJ.A. and SIMMONS J. (ad hoc)

DATE: 20001211

DOCKET: C33576

BETWEEN: )

) Paul D. Stern,

HER MAJESTY THE QUEEN ) for the appellants

Respondent )

• and - ) Robert F. Goldstein,

) for the respondent

WAYNE BUDD, LOIS BUDD and )

WAYNE BUDD INCORPORATED )

Applicants/ ) Heard: September 22, 2000

Appellants )

On appeal from the order of Justice Douglas J. Cunningham dated January 11, 2000

ROSENBERG J.A.:

[1] In January 1997, Cunningham J. issued six search warrants pursuant to the Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4^th Supp.). The warrants had been sought by Corporal Foley, a member of the R.C.M.P., at the request of the governments of the United States and the United Kingdom as part of an investigation into money laundering in those countries. Shortly after the warrants were executed, Poulin J. granted an application to impound the seized materials pending disposition of an application to quash the warrants. The hearing of that application began in June of 1997 before Cunningham J. but was adjourned to allow for further cross-examination of Corporal Foley. For reasons that are not material to this appeal, the application was only brought back on for hearing in April 1999. In January 2000, Cunningham J. released his reasons for quashing one of the warrants and upholding the other five. The appellants, whose property was seized pursuant to those five warrants, appeal from that ruling. The central issue on the appeal is whether Cunningham J. applied too narrow a test for reviewing the sufficiency of the warrants. The appellants argue that in the circumstances he should have considered de novo whether he would have issued the warrants having regard to evidence disclosed following execution of the warrants.

[2] For the reasons that follow, I would dismiss the appeal. In my view, any error by Cunningham J. concerning the proper test was not material. It is also my view that many of the arguments made by the appellants are more properly considered at the hearing mandated by s. 15 of the Act when the court must decide whether to send the seized materials to the requesting state. In view of this conclusion, it is only necessary to give a brief outline of the facts.

THE FACTS

[3] In January 1995, the United States Internal Revenue Service made a formal request to Revenue Canada Taxation to conduct a simultaneous criminal investigation under the terms of the United States – Canada Simultaneous Criminal Investigation Programme. Revenue Canada agreed and used its power under s. 231.2(1)(b) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th Supp.) to require the appellant Wayne Budd to provide certain information. Budd complied with the request and Revenue Canada seized the hard disk drive from his computer. It then shared information retrieved from that hard disk drive with the Internal Revenue Service. The United States authorities in turn shared that information with Corporal Foley of the R.C.M.P. Subsequently, Canadian, British and United States criminal investigators traded this information with each other. At the hearing before Cunningham J., counsel for the Attorney General of Canada, acting for the requesting states, conceded that Revenue Canada violated the appellants’ rights under the Charter of Rights and Freedoms by using the audit powers to conduct a criminal investigation for the United States authorities.

[4] In a similar fashion, the United States Securities and Exchange Commission had asked the Ontario Securities Commission for assistance. The O.S.C. used its subpoena powers under s. 11(1)(b) of the Ontario Securities Act, R.S.O. 1990 c. S-5 to compel Budd to provide information, which it then shared with the S.E.C. Counsel for the Attorney General of Canada also conceded that this was a breach of Budd’s Charter rights because the O.S.C. had used its powers in aid of a criminal investigation in the United States.

[5] In light of these concessions, counsel for the Attorney General also conceded that certain paragraphs of the informations sworn by Corporal Foley and used to obtain the search warrants should be deleted.

[6] After the warrants were executed, United States and British investigators, who had assisted in the searches, began to inspect the documents and the United States investigators made notes of the materials they reviewed. After Poulin J. made the impounding order, Corporal Foley became concerned that the United States investigators would make use of the information before a Canadian judge had made the determination under s. 15 of the Act as to whether the material should be turned over to the United States. Corporal Foley spoke to a United States prosecutor. He testified that he had the impression the prosecutor believed that she did not need to respect Canadian laws and that it did not matter how the evidence was obtained. Finally, I would note that there was a suggestion that the authorities had seized material not covered by the warrant or that could be seized under s. 13 of the Act[^1] and had not executed the warrant in accordance with its terms.

[7] It appears that counsel for the appellants made the following arguments at the hearing before Cunningham J.:

(1) After the material that was obtained as a result of the breach of the Charter is excised, the informations were not sufficient to support the warrants;

(2) The informations failed to establish that an evidence-gathering order under s. 18 of the Act would not have been appropriate;

(3) The warrants should be quashed because of an abuse of process by the United States authorities.

REASONS OF CUNNINGHAM J.

[8] As indicated, except for one of the warrants, Cunningham J. dismissed the application to quash the warrants. He held that even after the improperly obtained material was excised, the informations were sufficient to establish the requisite grounds for the search. He was also satisfied that an evidence-gathering order would not have been appropriate. Finally, he held that taken cumulatively, the admitted breaches of the Charter and the impugned conduct of the United States authorities did not require that the warrants be quashed as an abuse of process.

ANALYSIS

[9] On the appeal, the appellants raise essentially the same issues that were dealt with by Cunningham J. However, they have slightly recast the abuse of process argument. Central to all of the arguments is the nature of the role of a judge who is required to review his or her own decision to issue warrants under the Mutual Legal Assistance in Criminal Matters Act.

[10] The relevant sections of the Act are the following:

2. (1) “judge” means

(a) In Ontario, a judge of the Ontario Court (General Division) [now the Superior Court of Justice]

11. (1) When the Minister approves a request of a state or entity to have a search or a seizure carried out in Canada regarding an offence with respect to which the state or entity has jurisdiction, the Minister shall provide a competent authority with any documents or information necessary to apply for a search warrant.

(2) The competent authority who is provided with the documents or information shall apply ex parte for a search warrant to a judge of the province in which the competent authority believes that evidence of the commission of the offence may be found.

12. (1) A judge of a province to whom an application is made under subsection 11(2) may issue a search warrant authorizing a peace officer named therein to execute it anywhere in the province, where the judge is satisfied by statements under oath that there are reasonable grounds to believe that

(a) an offence has been committed with respect to which the state or entity has jurisdiction;

(b) evidence of the commission of the offence or information that may reveal the whereabouts of a person who is suspected of having committed the offence will be found in a building, receptacle or place in the province; and

(c) it would not, in the circumstances, be appropriate to make an order under subsection 18(1).

(2) A judge who issues a search warrant under subsection (1) may subject the execution of the warrant to any conditions that the judge considers desirable, including conditions relating to the time or manner of its execution.

(3) A judge who issues a search warrant under subsection (1) shall fix a time and place for a hearing to consider the execution of the warrant as well as the report of the peace officer concerning its execution.

(4) A search warrant issued under subsection (1) may be in Form 5 in Part XXVIII of the Criminal Code, varied to suit the case, and must

(a) set out the time and place for the hearing mentioned in subsection (3);

(b) state that, at that hearing, an order will be sought for the sending to the state or entity of the records or things seized in execution of the warrant; and

(c) state that every person from whom a record or thing is seized in execution of the warrant and any person who claims to have an interest in a record or thing so seized has the right to make representations at the hearing before any order is made concerning the record or thing.

15. (1) At the hearing to consider the execution of a warrant issued under section 12, after having considered any representations of the Minister, the competent authority, the person from whom a record or thing was seized in execution of the warrant and any person who claims to have an interest in the record or thing so seized, the judge who issued the warrant or another judge of the same court may

(a) where the judge is not satisfied that the warrant was executed according to its terms and conditions or where the judge is satisfied that an order should not be made under paragraph (b), order that a record or thing seized in execution of the warrant be returned to

(i) the person from whom it was seized, if possession of it by that person is lawful, or

(ii) the lawful owner or the person who is lawfully entitled to its possession, if the owner or that person is known and possession of the record or thing by the person from whom it was seized is unlawful; or

(b) in any other case, order that a record or thing seized in execution of the warrant be sent to the state or entity mentioned in subsection 11(1) and include in the order any terms and conditions that the judge considers desirable, including terms and conditions

(i) necessary to give effect to the request mentioned in that subsection,

(ii) with respect to the preservation and return to Canada of any record or thing seized, and

(iii) with respect to the protection of the interests of third parties.

(2) At the hearing mentioned in subsection (1), the judge may require that a record or thing seized in execution of the warrant be brought before him.

17. (1) When the Minister approves a request of a state or entity to obtain, by means of an order of a judge, evidence regarding an offence with respect to which the state or entity has jurisdiction, the Minister shall provide a competent authority with any documents or information necessary to apply for the order.

(2) The competent authority who is provided with the documents or information shall apply ex parte for an order for the gathering of evidence to a judge of the province in which the competent authority believes part or all of the evidence may be found.

18. (1) A judge to whom an application is made under subsection 17(2) may make an order for the gathering of evidence, where he is satisfied that there are reasonable grounds to believe that

(a) an offence has been committed with respect to which the state or entity has jurisdiction; and

(b) evidence of the commission of the offence or information that may reveal the whereabouts of a person who is suspected of having committed the offence will be found in Canada.

[Emphasis added.]

[11] In summary, the Minister of Justice may approve a request from a foreign state to have a search or seizure carried out, in which case an application may be made to a judge for a search warrant under s. 12. Alternatively, the Minister may approve a request of a foreign state to obtain evidence by a judge’s order. In that case, an application may be made for an evidence-gathering order under s. 18. Under s. 12, before granting the search warrant, the judge must be satisfied that there are reasonable grounds to believe that an offence has been committed with respect to which the foreign state has jurisdiction, that inter alia evidence will be found and that, in the circumstances, it would not be appropriate to make an evidence-gathering order under s. 18. A submission made before Cunningham J. and repeated on appeal is that this last requirement had not been met. In my view, there is no merit to that submission. On any test, the material in the informations demonstrated that an evidence-gathering order would not have been appropriate.[^2]

[12] After the warrant has been executed, a hearing is held before a judge under s. 15 of the Act. At that hearing, the judge must determine whether the items seized are to be returned to their owners or sent on to the requesting state. The circumstances under which the judge may refuse to order the material be sent to the requesting state are cast in relatively broad terms:

where the judge is not satisfied that the warrant was executed according to its terms and conditions or where the judge is satisfied that an order should not be made

[13] I will return to the interpretation of that part of the Act since it is important in considering the nature of the test on review of a warrant.

The test on review of a warrant

[14] Parliament has not explicitly provided for a review of the sufficiency of the warrant. An application for the review of the warrant may, nevertheless, be made to either the judge who granted the warrant or another judge of the court: R. v. Wilson (1983), 1983 35 (SCC), 9 C.C.C. (3d) 97 (S.C.C.) at 123. In a proper case the judge may set aside the warrant.

[15] In R. v. Garofoli (1990), 1990 52 (SCC), 60 C.C.C. (3d) 161 (S.C.C.) at 188, Sopinka J. described the grounds upon which a reviewing court may set aside a wiretap authorization:

The reviewing judge does not substitute his or her view for that of the authorizing judge. If, based on the record which was before the authorizing judge as amplified on the review, the reviewing judge concludes that the authorizing judge could have granted the authorization, then he or she should not interfere. In this process, the existence of fraud, non-disclosure, misleading evidence and new evidence are all relevant, but, rather than being a prerequisite to review, their sole impact is to determine whether there continues to be any basis for the decision of the authorizing judge. [Emphasis added.]

[16] He subsequently held that this test also applied to a review of search warrants: R. v. Grant (1993), 1993 68 (SCC), 84 C.C.C. (3d) 173 (S.C.C.) at 195. While this test is easily stated, its application where there have been significant deletions from the information is more problematic. For example, in R. v. Shalala (2000), 2000 20260 (NB CA), 224 N.B.R. (2d) 118 (C.A.) at 185 the court seems to suggest a more robust review in such cases:

When there are deletions or excisions to that affidavit, the trial judge is called upon to exercise jurisdiction on the basis of a record that is different from the one which was before the authorizing judge. In such a case, it is no longer open to the reviewing judge to sustain the warrant or the authorization on the basis that the issuing judge could have ordered that they issue. When the evidentiary record is less substantive, the reviewing judge cannot logically justify his or her decision on the basis of deference for the discretion of the issuing judge. The reviewing judge must exercise his or her own judgment and rule whether, despite the deletions and excisions, there remains a sufficient basis to find that the impugned search warrant or authorization could reasonably have issued. [Emphasis added.]

[17] To a similar effect is the earlier decision in R. v. Allain (1998), 1998 12250 (NB CA), 205 N.B.R. (2d) 201 (C.A.) at 217:

In any case where material parts of the information have been excised, the issue is no longer whether there was some evidence upon which the issuing judge could act, but whether the warrant would have issued on the basis of the evidence which remains. [Emphasis added.]

[18] In support of this statement, the court referred to the decisions of the Supreme Court of Canada in Grant, R. v. Evans (1996), 1996 248 (SCC), 104 C.C.C. (3d) 23 and R. v. Leipert (1997), 1997 367 (SCC), 112 C.C.C. (3d) 385 and this court’s decision in R. v. Breton (1994), 1994 939 (ON CA), 93 C.C.C. (3d) 171. I am not satisfied, however, that either the Supreme Court or this court has adopted a different test. For example, in Grant at pp. 195-96, the court held as follows:

The constitutional test for the sufficiency of information underlying a warrant was stated by this court in R. v. Garofoli (1990), 1990 52 (SCC), 60 C.C.C. (3d) 161 at p. 188, [1990] 2 S.C.R. 1421, 80 C.R. (3d) 317, as follows:

The reviewing judge does not substitute his or her view for that of the authorizing judge. If, based on the record which was before the authorizing judge as amplified on the review, the reviewing judge concludes that the authorizing judge could have granted the authorization, then he or she should not interfere.

In Kokesch, supra, [R. v. Kokesch (1988), 1988 3284 (BC CA), 46 C.C.C. (3d) 194] this court determined that evidence obtained during a search under warrant had to be excluded under s. 24(2) of the Charter where the warrant was procured through an information which contained facts solely within the knowledge of police as a result of a Charter violation. However, in circumstances such as the case at bar where the information contains other facts in addition to those obtained in contravention of the Charter, it is necessary for reviewing courts to consider whether the warrant would have been issued had the improperly obtained facts been excised from the information sworn to obtain the warrant: Garofoli, supra. In this way, the state is prevented from benefiting from the illegal acts of police officers, without being forced to sacrifice search warrants which would have been issued in any event. Accordingly, the warrant and search conducted thereunder in the case at bar will be considered constitutionally sound if the warrant would have issued had the observations gleaned through the unconstitutional perimeter searches been excised from the information. [Emphasis added.]

[19] The Supreme Court applied this test in the subsequent decision in Evans and there is no suggestion of any different test in the Leipert decision. In Breton, this court applied the Garofoli test. It is not apparent to me that the Supreme Court intended to depart from the Garofoli test where there have been deletions from the information because some of the material used to support the information was obtained by unconstitutional means. In particular, I have some difficulty attaching significance to the use of the word “would” in some places in the Grant decision where in the same passage the court expressly refers to the Garofoli test. It seems to me that if Sopinka J., who authored Garofoli, Grant and Evans, intended to apply a different standard of review he would have been more explicit.

[20] The reasons of Sopinka J. in R. v. Bisson (1994), 1994 46 (SCC), 94 C.C.C. (3d) 94 (S.C.C.) at 95‑6 also support the narrow scope of review:

The trial judge found that the affidavit material presented to the authorizing judge contained an error of non-disclosure relating to the retraction of Eric Lortie, a failure to state his age, and an error in including him as a target and accomplice. Having found such errors, the trial judge proceeded to vitiate the wire-tap authorization, finding that the police officer deliberately misled the authorizing judge. In so doing, the trial judge fell into error.

As stated in R. v. Garofoli (1990), 1990 52 (SCC), 60 C.C.C. (3d) 161, [1990] 2 S.C.R. 1421, 80 C.R. (3d) 317, errors in the information presented to the authorizing judge, whether advertent or even fraudulent, are only factors to be considered in deciding to set aside the authorization and do not by themselves lead to automatic vitiation of the wire-tap authorization as was done by the trial judge. The trial judge should have examined the information in the affidavit which was independent of the evidence concerning Eric Lortie, in order to determine whether, in light of his finding, there was sufficient reliable information to support an authorization. [Emphasis added.]

[21] Thus, even fraud in the obtaining of the warrant does not automatically invalidate the warrant. The improper material is excised and a determination made as to whether “sufficient reliable information” remains.

[22] I also do not accept the appellants’ argument that in this case the reviewing judge was entitled to conduct a de novo hearing of the sufficiency of the informations because he was reviewing his own orders. It would not be sensible to have different standards of review depending upon the identity of the reviewing judge.

[23] To conclude, it is my view that in reviewing the sufficiency of a search warrant issued under the Act, the reviewing court must apply the Garofoli test. Cunningham J. applied this test and found that the informations, with the necessary deletions, could support the issuing of the warrants. I agree with that decision.

Abuse of process

[24] Finally, the appellants argue that Cunningham J. erred in applying a test of abuse of process that focused on the conduct of the United States officials in considering whether the warrants should be quashed. They argue that the real concern is with the conduct of the Canadian authorities. It is not entirely clear that the argument made on appeal was made to Cunningham J. In any event, as I read his reasons, Cunningham J. dealt with both the Charter violations by the Canadian authorities and the alleged abuse of process by the United States authorities. He found that the cumulative effect of the conduct was not sufficient to lead to a quashing of the warrants.

[25] As indicated, on appeal, however, the focus of the argument was on the conduct of the Canadian authorities and their admitted improper use of the procedures under the Income Tax Act and the Ontario Securities Act. Put simply, the appellants submit that even if the warrants are valid applying the Garofoli test, Cunningham J. had the power to quash the warrants because of the violations of Budd’s Charter rights. Cromwell J.A. suggests that a reviewing court has such a power in R. v. Morris (1998), 1998 NSCA 229, 134 C.C.C. (3d) 539 (N.S.C.A.) at 553:

This does not mean that errors, particularly deliberate ones, are irrelevant in the review process. While not leading to automatic vitiation of the warrant, there remains the need to protect the prior authorization process. The cases just referred to do not foreclose a reviewing judge, in appropriate circumstances, from concluding on the totality of the circumstances that the conduct of the police in seeking prior authorization was so subversive of that process that the resulting warrant must be set aside to protect the process and the preventive function it serves. As I will discuss later in these reasons, the integrity of the prior authorization process is also protected by the approach on review to fraudulent or intentionally misleading material placed before the Justice. [Emphasis added.]

[26] I would point out that in Morris, Cromwell J.A. was considering the jurisdiction of a trial judge. In my view, questions of alleged abuse of process by Canadian authorities and the impact of alleged Charter violations should be considered on the s. 15 hearing where the judge is exercising a jurisdiction akin to that of a trial judge and not at the stage where the reviewing judge is considering the sufficiency of the warrant.

[27] In R. v. Gladwin (1997), 1997 1288 (ON CA), 116 C.C.C. (3d) 471 (leave to appeal to S.C.C. refused August 21, 1997) at 474-75 this court considered the nature of the hearing under s. 15 of the Act. Finlayson J.A. recognized that the judge is required to consider all that has transpired and has a discretion to consider all relevant factors:

In my opinion, despite the awkward language of this section, couched as it is in negatives and coupled with the disjunctive "or" instead of the conjunctive "and", this section imposes a double burden upon the judge called upon to make an order under s. 15(1)(b) of the Act sending the material seized to the foreign state. He or she is obliged under s. 15(1)(a) to review what has transpired to the date of the return of the application. Before he can order that the record or thing seized be sent to the foreign state, the reviewing judge must be satisfied, first, that the warrant was executed according to its terms and conditions and, second, that he is satisfied that there is no reason why the order should not be made. The respondent submits, and I agree, that the inherent nature of this second condition necessarily bestows discretion on the reviewing judge to consider all relevant factors bearing on the application.

In both of these instances, the reviewing judge is exercising a jurisdiction akin to that of a trial judge considering the admissibility into evidence of the things seized pursuant to a search warrant. In the case in appeal, the reviewing judge had to consider the conduct of the police in the execution of the warrant and whether the search warrant was facially valid. The validity has been questioned because the warrant did not name the peace officer who was authorized to execute it, nor did it set out in detail the nature of the offences said to have been committed within the jurisdiction of the foreign state. [Emphasis added.]

[28] Thus, when the judge decides whether or not to send the seized materials to the requesting states at the hearing under s. 15 of the Act, the judge may consider the conduct of the Canadian authorities in obtaining the material used to support the information. It will be for the judge at the s. 15 hearing to decide whether an order should be made sending the material to the requesting states in view of the conduct of the Canadian authorities and the alleged Charter violations. In making that determination, the judge will also take into consideration the need to ensure that Canada’s international obligations are honoured and to foster cooperation between investigative authorities in different jurisdictions. See United States of America v. Dynar (1997), 1997 359 (SCC), 115 C.C.C. (3d) 481 (S.C.C.)at 527.

DISPOSITION

[29] Accordingly, I would dismiss the appeal.

(signed) “M. Rosenberg J.A.”

(signed) “I agree M. J. Moldaver J.A.”

(signed) “I agree J. Simmons J. (ad hoc)”

RELEASED: December 11, 2000

[^1]: Section 13 allows for the seizure of other things not specified in the warrant if the officer executing the warrant believes on reasonable grounds that they will afford evidence of an offence.

[^2]: In his reasons on this aspect of the case, Cunningham J. appears to have used evidence not included in the information but disclosed during the cross-examination of Corporal Foley to bolster the decision that an evidence-gathering order would not have been effective. While there is some support for this approach, see R. v. Araujo (1998), 1998 6287 (BC CA), 127 C.C.C. (3d) 315 (B.C.C.A.) (currently on reserve in the S.C.C.), I should not be taken as agreeing with this aspect of Cunningham J.’s reasons. There was sufficient material in the informations themselves to show that an evidence-gathering order would not have been sufficient.