Knox Contracting Ltd. v. Canada, [1990] 2 S.C.R. 338

Knox Contracting Limited and Harold Hazen Knox Appellants

v.

Her Majesty The Queen,

the Minister of National Revenue,

the Attorney General of Canada,

the Deputy Attorney General of Canada,

the Attorney General for New Brunswick,

John Byron Clarke and Bernard Gerard Gillis Respondents

indexed as: knox contracting ltd. v. canada

File No.: 21271.

1989: December 7; 1990: August 16.

Present: Wilson, La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory and McLachlin JJ.

on appeal from the court of appeal for new brunswick

Income tax ‑‑ Search warrants ‑‑ Offences alleged as defined in s. 239 of Income Tax Act ‑‑ Search warrants issued under s. 231.3 of Income Tax Act ‑‑ Application to quash ‑‑ Whether or not issuing judge had jurisdiction to review ‑‑ Whether or not ss. 231.3 and 239 of the Income Tax Act derive their constitutional validity from the federal government's taxing power or from its criminal law power ‑‑ Income Tax Act, S.C. 1970‑71‑72, c. 63, ss. 231.3(1), 239(1), (2) ‑‑ Constitution Act, 1867, ss. 91(3), (27) ‑‑ Judicature Act, R.S.N.B. 1973, c. J‑2, s. 8(3).

Courts ‑‑ Jurisdiction ‑‑ Search warrants ‑‑ Offences alleged as defined in s. 239 of Income Tax Act ‑‑ Search warrants issued under s. 231.3 of Income Tax Act ‑‑ Application to quash ‑‑ Whether or not issuing judge had jurisdiction to review ‑‑ Whether or not ss. 231.3 and 239 of the Income Tax Act derive their constitutional validity from the federal government's taxing power or from its criminal law power.

Constitutional law ‑‑ Division of powers ‑‑ Taxation and criminal law powers ‑‑ Offences alleged as defined in s. 239 of Income Tax Act ‑‑ Search warrants issued under s. 231.3 of Income Tax Act ‑‑ Application to quash ‑‑ Whether or not issuing judge had jurisdiction to review ‑‑ Whether or not ss. 231.3 and 239 of the Income Tax Act derive their constitutional validity from the federal government's taxing power or from its criminal law power.

As a result of alleged offences contrary to s. 239 of the Income Tax Act, search warrants issued for appellants' premises following an ex parte application by the Ministry of National Revenue pursuant to s. 231.3 of that Act. Appellants brought an application to quash before the judge who had issued the search warrants. The judge determined that he had an inherent jurisdiction as a judge making an ex parte order to review or rescind an ex parte order. He then considered the matter on the merits, found that the search warrants were validly issued and dismissed the application. The Court of Appeal dismissed the appeal and vacated the order sealing the documents.

At issue here was whether or not ss. 231.3 and 239 of the Income Tax Act derive their constitutional validity from the federal government's taxing power or from its criminal law power. If the constitutional authority for the provisions were derived from the criminal law power, no appeal would lie to the Court of Appeal from the decision of a Superior Court judge to issue the search warrants because no such right of appeal was given by the statute.

Held (L'Heureux‑Dubé, Sopinka and McLachlin JJ. dissenting): The appeal should be dismissed.

Per Wilson, Gonthier and Cory JJ.: The criminal law embraces acts which the law, with appropriate penal sanctions, forbids because of some evil or injurious or undesirable effect upon the public against which the law is directed. The criminal law has also been defined as laws prohibiting, with penal consequences, acts or omissions considered to be harmful to the State, or to persons or property within the State.

The offences described in s. 239 (fraud, deception, destruction and alteration of documents, false statements, false documents and the wilful evasion of income tax) are criminal in nature and are clearly harmful to the State. These offences may be prosecuted upon indictment and substantial prison terms may be imposed. The Act, which depends on the integrity of the taxpayer, imposes a public duty and a breach of that fundamentally important public duty should constitute a criminal offence. The fact that the Act is concerned with taxation does not prevent its penal provisions from also being characterized as criminal law.

The jurisdiction and the procedures to be followed by a court in the application of laws enacted by the federal government fall within the paramount jurisdiction of the federal government. This is particularly true of criminal law. The provisions of s. 92(14) of the Constitution Act, 1867 cannot be construed to include jurisdiction over the conduct of criminal prosecutions.

Any right to appeal the issuance of a search warrant under that Act must be found within a statute. No common law right to appeal in interlocutory matters in criminal cases exists. A right of appeal cannot be founded upon the provincial Judicature Act, which is concerned with civil procedures, because ss. 231.3 and 239 constitute an exercise of the criminal law jurisdiction. The Income Tax Act does not provide for an appeal from such an order.

An accused is not without remedies. The Criminal Code provides wide powers for a person from whom articles are seized pursuant to a search warrant to make a speedy application for their return. If the matter should proceed to trial, the accused may attack the search warrant in any way he or she considers appropriate, including the allegation that it infringes the provisions of s. 8 of the Canadian Charter of Rights and Freedoms. If the matter should not go to trial, a party may still seek civil damages for compensation. No injustice arises from the absence of a right to appeal the order issuing the search warrants.

The fact that the legislative authority for the enactment of these statutes may arise under both the criminal law power and the federal taxation power does not mean that the provisions in them creating offences and imposing penal sanctions are not criminal law. An otherwise predominantly regulatory piece of legislation may contain criminal prohibitions and sanctions and a challenge to specific provisions in the statute under the division of powers must be directed at the challenged provisions, not at the statute as a whole. To the extent the legislation makes the filing of a fraudulent and dishonest return an offence punishable by fine or imprisonment, it is just as clearly legislation in relation to criminal law.

It was unrealistic, for purposes of deciding whether or not there was an appeal from a refusal to quash a search warrant, to divorce s. 231.3 from the offences sought to be uncovered by the search and to characterize the former as a matter of civil procedure and the latter as criminal law. It was not necessary to explore aspects of the case arising from the fact that ss. 231.3 and 239 may be constitutionally justified under the general taxing power. These sections are truly criminal in their nature, and criminal procedure is expressly excluded from provincial jurisdiction.

Per La Forest J.: Notwithstanding a general preference for Sopinka J.'s approach to the juristic character of the relevant provisions, the appeal should be dismissed. In choosing a criminal sanction and applying all the provisions of the Criminal Code "except to the extent that the enactment otherwise provides", Parliament has shown a disposition to adopt the ordinary procedures of the criminal law for their enforcement, subject to any variations spelled out in the Income Tax Act.

Per L'Heureux‑Dubé, Sopinka and McLachlin JJ. (dissenting): Sections 231.3 and 239 of the Income Tax Act are supportable under both the criminal law power and the federal taxation power. Since s. 92(14) of the Constitution Act, 1867 confers jurisdiction on the province to legislate in respect of procedure in civil matters, an appeal lies not only under federal legislation but also under New Brunswick's Judicature Act. Absent conflict, both forms of legislation are valid on the basis of the double aspect doctrine. Provision for enforcement, including the creation of severe penalties, does not mean that the legislation is necessarily criminal.

Provincial procedure is not ousted because the procedures to be followed by a court in the application of federal laws are within the paramount jurisdiction of Parliament. The provincial courts are competent to and do adjudicate in relation to federal law and apply their procedure unless that law prescribes otherwise.

A motion to review the issuance of a search warrant takes its character from earlier proceedings out of which it arises. The motion for review cannot therefore be characterized as exclusively criminal for the purpose of determining rights of appeal ‑‑ no charges were laid and indeed may not be laid. Nothing in the nature of the application can convert the proceeding into an exclusively criminal proceeding.

Finally, the appellants may find themselves without a remedy. If the matter should proceed to trial (assuming charges are laid), the problems arising out of Wilson v. The Queen, which precludes a collateral attack on an order made by a court having jurisdiction to make it, make it doubtful that the trial judge would have jurisdiction to set aside an order of a superior court judge. Sections 490(7), (10) and (17) of the Criminal Code, if applicable to a seizure under the Income Tax Act, have no application where the search is alleged to be unlawful and it is sought to prevent or terminate the search. If the matter does not go to trial, an action for damages, grounded on conduct of the authorities pursuant to an order of the superior court which had not been set aside, is highly unlikely.

Cases Cited

By Cory J.

Referred to: Wilson v. The Queen, [1983] 2 S.C.R. 594; Scowby v. Glendinning, [1986] 2 S.C.R. 226; Reference re Validity of Section 5(a) of the Dairy Industry Act (Margarine Reference), [1949] S.C.R. 1; R. v. Hauser, [1979] 1 S.C.R. 984; Re Ramm (1957), 120 C.C.C. 44; Attorney-General of Quebec v. Attorney-General of Canada, [1945] S.C.R. 600; Reference re Validity of the Combines Investigation Act and of s. 498 of the Criminal Code, [1929] S.C.R. 409; Attorney General of Canada v. Canadian National Transportation, Ltd., [1983] 2 S.C.R. 206; R. v. Hoffmann‑La Roche Ltd. (1981), 33 O.R. (2d) 694; Mills v. The Queen, [1986] 1 S.C.R. 863; R. v. Meltzer, [1989] 1 S.C.R. 1764; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; Stelco Inc. v. Canada (Attorney General), [1990] 1 S.C.R. 617.

By Sopinka J. (dissenting)

Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161; R. v. Hauser, [1979] 1 S.C.R. 984; R. v. Wetmore, [1983] 2 S.C.R. 284; General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; Board v. Board, [1919] A.C. 956; Attorney General of Canada v. Canadian National Transportation, Ltd., [1983] 2 S.C.R. 206; R. v. Meltzer, [1989] 1 S.C.R. 1764; R. v. Cass (1985), 1985 ABCA 128, 71 A.R. 248; Poje v. A.G. for British Columbia, [1953] 1 S.C.R. 516; In re Storgoff, [1945] S.C.R. 526; Hunter v. Southam Inc., [1984] 2 S.C.R. 145, aff'g (1983), 1983 ABCA 32, 3 C.C.C. (3d) 497, rev'g (1982), 68 C.C.C. (2d) 356; Wilson v. The Queen, [1983] 2 S.C.R. 594; R. v. Komadowski (1986), 27 C.C.C. (3d) 319, leave to appeal denied [1986] 1 S.C.R. x; Re Zevallos and The Queen (1987), 37 C.C.C. (3d) 79.

Statutes and Regulations Cited

Canadian Charter of Rights and Freedoms, s. 8.

Combines Investigation Act, R.S.C. 1970, c. C‑23, s. 17.

Courts of Justice Act, 1984, S.O. 1984, c. 11.

Constitution Act, 1867, ss. 91(3), (27), 92(14).

Criminal Code, R.S.C., 1985, c. C‑46, s. 490(7), (8), (10), (17).

Federal Court Act, R.C.S., 1985, c. F‑7.

Income Tax Act, R.S.O. 1980, c. 213, ss. 38, 43.

Income Tax Act, S.C. 1970‑71‑72, c. 63, ss. 231.3(1), 239(1), (2).

Interpretation Act, R.S.C., 1985, c. I‑21, s. 34(2).

Judicature Act, R.S.N.B. 1973, c. J‑2, s. 8(3).

Public Accountancy Act, R.S.O. 1950, c. 302.

Rules of Civil Procedure, O. Reg. 560/84.

Authors Cited

Hogg, Peter W. Constitutional Law of Canada, 2nd ed. Toronto: Carswells, 1985.

Laskin, Bora. "The Constitutional Systems of Canada and the United States: Some Comparisons" (1967), 16 Buffalo L. Rev. 591.

Laskin, Bora. The British Tradition in Canadian Law. London: Stevens & Sons, 1969

APPEAL from a judgment of the New Brunswick Court of Appeal (1988), 94 N.B.R. (2d) 8, 46 C.C.C. (3d) 75, 89 DTC 5075, [1989] C.T.C. 174, dismissing an appeal from a judgment of Turnbull J. (1987), 35 C.C.C. (3d) 466, dismissing an application to revoke an ex parte order for search warrants issued by him. Appeal dismissed, L'Heureux‑Dubé, Sopinka and McLachlin JJ. dissenting.

Guy Du Pont and R. Bruce Eddy, for the appellants.

John R. Power, Q.C., and Douglas L. Richard, Q.C., for the respondents.

Cory J.

The judgment of Wilson, Gonthier and Cory JJ. was delivered by

CORY J. -- The question presented in this case is whether a Court of Appeal has jurisdiction to hear an appeal from the decision of a Superior Court judge not to quash a search warrant which that judge had earlier issued upon an ex parte motion pursuant to s. 231.3 of the Income Tax Act, S.C. 1970-71-72, c. 63, as am.

Factual Background

On July 5, 1986, Turnbull J. of the Court of Queen's Bench of New Brunswick heard an ex parte application brought by officials of the Ministry of National Revenue to issue a search warrant pursuant to s. 231.3 of the Income Tax Act. At the conclusion of the hearing, Turnbull J. issued search warrants for the premises occupied by Knox Contracting Ltd. as well as for the home and garage of the corporation's President, Harold Hazen Knox. On July 22, 1986, further search warrants were issued for the offices of their auditors. When the warrants were executed the appellants, Knox Contracting Ltd. and its President, brought an application before Turnbull J. seeking to quash the warrants on the ground that they were invalid and to impound the material seized until the disposition of the matter. On August 22, 1986, it was ordered that all the documents seized pursuant to the warrants were to be impounded and sealed pending a decision on the application.

Turnbull J. considered the matter carefully. He determined that he had jurisdiction to review the ex parte order on the ground that there is an inherent jurisdiction in a judge who makes an ex parte order to revoke or rescind it. He then considered the matter on the merits. He found that the search warrants were validly issued and dismissed the application on March 3, 1987.

The appellants then appealed. The Court of Appeal once again ordered that the documents be impounded and sealed pending its decision on the matter. The court held that Turnbull J. did not have jurisdiction to review the issuing of the search warrants. It found that while a trial judge has jurisdiction to review his or her own orders, there was no order in existence which could be reviewed or appealed. A distinction was drawn between the ordering of the issuance of a search warrant and the mere act of issuing the warrant. It was held that no order had been given and that the issuing of the search warrants was an administrative process which could not be reviewed. The appeal was dismissed and the order sealing the documents was vacated.

Position of the Parties

At the outset, the respondents very properly conceded that the Court of Appeal was in error in holding that the issuance of search warrants was not an ex parte order. There can be no question that the issuing of the search warrant pursuant to s. 231.3 of the Income Tax Act, must be considered to be an order of the judge. Since it is an ex parte order, it was properly reviewable pursuant to the inherent jurisdiction of trial judges to review such an ex parte order. See for example, Wilson v. The Queen, [1983] 2 S.C.R. 594. It still must be determined whether or not the Court of Appeal had jurisdiction to review or to hear an appeal from the review of the ex parte order.

The appellants contended that s. 231.3 derives its constitutional validity from the taxing power of the federal government pursuant to s. 91(3) of the Constitution Act, 1867. It is argued that the constitutional basis for the impugned section rests upon the taxation power for the federal government and not upon the criminal law power provided by s. 91(27). As a result, the appellants argued that the province, pursuant to s. 92(14), had the constitutional authority to dictate the appropriate routes, methods and procedures of appeal. This, it was said, had been done in the present case by means of s. 8(3) of the Judicature Act, R.S.N.B. 1973, c. J-2, as amended, which granted jurisdiction to the Court of Appeal to entertain the appeal.

The respondents took the position that s. 231.3 is purely criminal in nature in that it authorizes search warrants to obtain documents which may afford evidence of the commission of an "offence" as defined in s. 239 of the Act. It is said that the offences described in that section should be considered to be criminal in nature and that, therefore, search warrants issued to obtain evidence for the prosecution of those offences should also be considered criminal in nature. The respondents submitted that criminal law and criminal procedure come within the exclusive jurisdiction of the federal government, and this must include the authority to legislate regarding provisions for appeals.

The respondents argued that since s. 231.3 must be considered to be criminal in nature and no appeal procedure from the issuance of search warrants is provided in the Income Tax Act, it is then necessary to look to the Criminal Code to determine whether the decision may be appealed. The Code does not provide for an appeal from an order issuing search warrants and thus it is said the appellants cannot appeal the order of Turnbull J. If ss. 231.3 and 239 are, as I believe them to be, criminal in nature, then this submission must prevail.

Are ss. 231.3 and 239 of the Income Tax Act in their Essence Criminal Law?

This appeal can be resolved by determining but one issue, namely, whether the provisions of ss. 231.3 and 239 of the Income Tax Act are by their nature criminal law. If they are, then no appeal lies to the Court of Appeal from the decision of a Superior Court judge to issue the search warrants.

These sections of the Income Tax Act read as follows:

231.3 (1) A judge may, on ex parte application by the Minister, issue a warrant in writing authorizing any person named therein to enter and search any building, receptacle or place for any document or thing that may afford evidence as to the commission of an offence under this Act and to seize and, as soon as practicable, bring the document or thing before, or make a report in respect thereof to, the judge or, where the judge is unable to act, another judge of the same court to be dealt with by the judge in accordance with this section.

239. (1) Every person who has

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

(b) to evade payment of a tax imposed by this Act, destroyed, altered, mutilated, secreted or otherwise disposed of the records or books of account of a taxpayer,

(c) made, or assented to or acquiesced in the making of, false or deceptive entries, or omitted, or assented to or acquiesced in the omission, to enter a material particular, in records or books of account of a taxpayer,

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

(e) conspired with any person to commit an offence described by paragraphs (a) to (d),

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

(f) a fine of not less than 25% and not more than double the amount of the tax that was sought to be evaded, or

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

(2) Every person who is charged with an offence described in subsection (1) may, at the election of the Attorney General of Canada, be prosecuted upon indictment and, if convicted, is, in addition to any penalty otherwise provided, liable to imprisonment for a term not exceeding 5 years and not less than 2 months.

As a point of commencement, it may be helpful to consider what constitutes criminal law. While, like a work of art, it is something that may be easier to recognize than define, some guidelines have been established. It would be going too far to say that a law needs only to prohibit an act with penal consequences to be criminal. Such an overly wide definition would permit Parliament to "colourably invade areas of exclusively provincial legislative competence": Scowby v. Glendinning, [1986] 2 S.C.R. 226, at p. 237.

A very helpful definition of criminal law can be found in the Reference re Validity of Section 5(a) of the Dairy Industry Act (Margarine Reference), [1949] S.C.R. 1. In that case Rand J. stated at p. 49:

A crime is an act which the law, with appropriate penal sanctions, forbids; but as prohibitions are not enacted in a vacuum, we can properly look for some evil or injurious or undesirable effect upon the public against which the law is directed. That effect may be in relation to social, economic or political interests; and the legislature has had in mind to suppress the evil or to safeguard the interest threatened.

Dickson J., as he then was, in dissenting reasons in R. v. Hauser, [1979] 1 S.C.R. 984, defined the subject in this way at p. 1026:

Head 27 of s. 91 of the British North America Act empowers Parliament to make substantive laws prohibiting, with penal consequences, acts or omissions considered to be harmful to the State, or to persons or property within the State.

Section 239 and its investigative arm s. 231.3 fall within these definitions.

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

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

The criminal nature of making false or deceptive statements on income tax returns has long been recognized. In Re Ramm (1957), 120 C.C.C. 44, the Ontario Court of Appeal considered whether the Public Accountants Council could revoke the appellant's licence to practise after he had been convicted of making a false or deceptive statement on an income tax return. This was dependent upon whether the conviction constituted a "criminal offence" under the Public Accountancy Act, R.S.O. 1950, c. 302. The court held that a conviction for such an offence under the earlier Income Tax Act would be a criminal offence. As stated by LeBel J.A. at p. 47:

. . . we are convinced that to make false or deceptive statements in a return filed or made as required by either tax Act is to commit a crime, and a serious crime, rather than to contravene a statutory law not ordinarily regarded as criminal.

It is fitting and appropriate that the s. 239 offences be considered as criminal law. The Income Tax Act is a major source of funds for the federal government. Its provisions are applicable to most adult Canadians. The vast majority pay their income tax by way of payroll deduction with little or no opportunity for evasion or misstatement. Those who do evade the payment of income tax not only cheat the State of what is owing to it, but inevitably increase the burden placed upon the honest taxpayers. It is ironic that those who evade payment of taxes think nothing of availing themselves of the innumerable services which the State provides by means of taxes collected from others.

The entire system of levying and collecting income tax is dependent upon the integrity of the taxpayer in reporting and assessing income. If the system is to work, the returns must be honestly completed. All taxpayers have the right to know that it is a criminal violation to commit any of the offences described in s. 239. The Act imposes a public duty. A breach of that fundamentally important public duty should constitute a criminal offence.

Federal Jurisdiction Flowing from Criminal Law Authority

The appellants submitted that the Income Tax Act must derive its constitutional validity from the taxing provision set out in s. 91(3) of the Constitution Act, 1867 and not the criminal law powers provided in s. 91(27). The submission is not appropriate when considering ss. 231.3 and 239 of the Act. It is no doubt correct that the Act is concerned with taxation, but that does not prevent its penal provisions from also being characterized as criminal law. And for the reasons I have set out earlier, I am convinced that ss. 231.3 and 239 are truly criminal in their nature. They must be considered as enacted pursuant to the exclusive federal jurisdiction in the domain of criminal law.

The relevant provisions of the Constitution Act, 1867 are as follows:

91. It shall be lawful for the Queen, by and with the Advice and Consent of the Senate and House of Commons, to make Laws for the Peace, Order, and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces; and for greater Certainty, but not so as to restrict the Generality of the foregoing Terms of this Section, it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say, --

92. The Criminal Law, except the Constitution of Courts of Criminal Jurisdiction, but including the Procedure in Criminal Matters.

93. In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subject next hereinafter enumerated; that is to say, --

94. The Administration of Justice in the Province, including the Constitution, Maintenance, and Organization of Provincial Courts, both of Civil and of Criminal Jurisdiction, and including Procedure in Civil Matters in those Courts.

It has long been held that although a court may be provincially organized and maintained, its jurisdiction and the procedures to be followed by such a court in the application of laws enacted by the federal government are within the paramount jurisdiction of the federal government. This is particularly true of criminal law.

In Attorney-General of Quebec v. Attorney-General of Canada, [1945] S.C.R. 600, Taschereau J. stated at p. 602:

It is also well established that, although a court may be provincially organized and maintained, its jurisdiction and the procedure to be followed for the application of laws enacted by the Parliament of Canada, in relation to matters confided to that Parliament, are within its exclusive jurisdiction. That applies to criminal law and procedure in criminal matters which by subsection 27 of section 91 of the B.N.A. Act are subject to the legislative powers of the Dominion.

Still earlier, Duff J. set forth the same principle in Reference re Validity of the Combines Investigation Act and of s. 498 of the Criminal Code, [1929] S.C.R. 409, at p. 418:

The authority in relation to the Criminal Law and Criminal Procedure given by s. 91(27) would appear to confer upon the Dominion, not as an incidental power merely, but as an essential part of it, the power to provide for investigation into crime, actual and potential.

It has been made quite clear that the provisions of s. 92(14) of the Constitution Act, 1867 cannot be construed to include jurisdiction over the conduct of criminal prosecutions. Laskin C.J. in Attorney General of Canada v. Canadian National Transportation, Ltd., [1983] 2 S.C.R. 206, at p. 223 stated:

Section 92(14) grants jurisdiction over the administration of justice, including procedure in civil matters and including also the constitution, maintenance and organization of civil and criminal provincial courts. The section thus narrows the scope of the criminal law power under s. 91, but only with respect to what is embraced within "the Constitution, Maintenance, and Organization of Provincial Courts . . . of Criminal Jurisdiction". By no stretch of language can these words be construed to include jurisdiction over the conduct of criminal prosecutions. Moreover, as a matter of conjunctive assessment of the two constitutional provisions, the express inclusion of procedure in civil matters in provincial Courts points to an express provincial exclusion of procedure in criminal matters specified in s. 91(27).

In that same case Laskin C.J. expressly adopted the reasons of Martin J.A. in R. v. Hoffmann-La Roche Ltd. (1981), 33 O.R. (2d) 694, where it was held that legislation which in pith and substance pertains to criminal procedure is within the exclusive competence of Parliament. The investigation and prosecution of offences under the Income Tax Act is thus a valid exercise of the exclusive criminal law power of the federal government.

Any right to appeal the issuance of a search warrant under that Act must be found within a statute since at the least a right to appeal in interlocutory matters in criminal cases does not exist at common law: Mills v. The Queen, [1986] 1 S.C.R. 863, at p. 958. However, because ss. 231.3 and 239 constitute an exercise of the criminal law jurisdiction, a right of appeal cannot be founded upon the provincial Judicature Act, which is concerned with civil procedures. Nor does the Income Tax Act itself provide for an appeal from such an order.

Section 34(2) of the Interpretation Act, R.S.C., 1985, c. I-21, states that the provisions of the Criminal Code are to apply to indictable and summary conviction offences created by an Act of Parliament unless the enacting statute provides otherwise. It reads:

34. . . .

(2) All the provisions of the Criminal Code relating to indictable offences apply to indictable offences created by an enactment, and all the provisions of that Code relating to summary conviction offences apply to all other offences created by an enactment, except to the extent that the enactment otherwise provides.

The Criminal Code does not provide for an appeal from the issuance of a search warrant. Thus Parliament has refrained from providing for an appeal of such an order and the Court of Appeal therefore lacked jurisdiction to hear the appeal.

This does not mean that an accused is left without remedies. Wide powers are provided in the Criminal Code for a person from whom articles are seized pursuant to a search warrant to make a speedy application for their return. See Criminal Code, R.S.C., 1985, c. C-46, s. 490(7), (8), (10) and (17). If the matter should proceed to trial then of course the accused may attack the search warrant in any way he considers appropriate, including the allegation that it infringes the provisions of s. 8 of the Canadian Charter of Rights and Freedoms. If, for any reason, the matter should not go to trial, a party may still seek civil damages for compensation. No injustice arises from the absence of a right to appeal the order issuing the search warrants.

In summary, the issuance of search warrants is an interlocutory procedure. Appeals from interlocutory orders by the parties in criminal proceedings must be based upon a statutory provision. No such statutory provision exists and thus no appeal lies to the Court of Appeal. It is appropriate that the Code provides no avenue for appeal from these procedures, as such appeals are neither desirable nor necessary and should not, as a general rule, be encouraged. See Mills v. The Queen, supra, and R. v. Meltzer, [1989] 1 S.C.R. 1764.

It is unnecessary to consider the effect of s. 8 of the Canadian Charter of Rights and Freedoms as no submission was advanced that the proceedings before the judge of first instance on the issuance of the search warrants infringed in any way s. 8.

Since preparing the above, I have had the benefit of reading the reasons of my colleague, Sopinka J. and would add the following observations.

In R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627, Wilson J. indicated, for the majority of the Court, that the Income Tax Act, R.S.C. 1952, c. 148, was essentially administrative and regulatory in nature since it put in place a self-reporting and self-assessing system which depended upon the honesty and integrity of taxpayers for its effectiveness. In this respect she carefully contrasted the Income Tax Act with the Combines Investigation Act, R.S.C. 1970, c. C-23, dealt with in Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425, and Stelco Inc. v. Canada (Attorney General), [1990] 1 S.C.R. 617, which was essentially a policing statute designed to uncover and punish anti-competitive behaviour.

L'Heureux-Dubé J., relying on Attorney General of Canada v. Canadian National Transportation, Ltd., supra, held in Thomson that the combines legislation was supportable under the federal trade and commerce power. Sopinka J. in the present case similarly asserts that the Income Tax Act was passed pursuant to the federal taxing power. I take no issue with my colleagues as to the legislative authority for the enactment of these statutes. This does not mean, however, that the provisions in them creating offences and imposing penal sanctions are not criminal law. The Income Tax Act, for example, to the extent it creates a regulatory scheme for the calculation and payment of taxes by taxpayers and authorizes spot audits to ensure that voluntary compliance is working, is not criminal law. It is clearly tax law. But to the extent the legislation makes the filing of a fraudulent and dishonest return an offence punishable by fine or imprisonment, it just as clearly appears to be legislation in relation to criminal law. Those provisions recognize that not all taxpayers can be trusted to report their incomes accurately and that the self-reporting and self-assessing system has to have some teeth in it in order to deal with miscreants. While it is, of course, possible to view these provisions as part of administration or regulation in that they may have a deterrent effect on those disposed in the future to stray from the straight and narrow path, they are more than that. They deal with deliberate misconduct that has already taken place by characterizing it as an offence punishable on summary conviction or by indictment. They are aimed at the suppression of an evil and an injury to the public interest. In that sense they are quintessential criminal law. There is, in my view, nothing unusual or inconsistent about an otherwise predominantly regulatory piece of legislation containing criminal prohibitions and sanctions and a challenge to specific provisions in the statute under the division of powers must, in my view, be directed at the challenged provisions, not at the statute as a whole.

In this case the question is whether, in the absence of any right of appeal in either the Income Tax Act or the Criminal Code from a decision of a superior court judge not to quash a search warrant issued pursuant to s. 231.3 of the Income Tax Act, the province can confer such a right pursuant to its power under s. 92(14). It seems fairly clear that the purpose of the search contemplated in s. 231.3 of the Income Tax Act is to gather evidence of an offence under s. 239. Such offence may be proceeded on by way of summary conviction under s. 239(1) or by way of indictment under s. 239(2) at the election of the Attorney General of Canada. It is, in my view, unrealistic, for purposes of deciding whether or not there is an appeal from a refusal to quash a search warrant, to divorce s. 231.3 from the offences sought to be uncovered by the search and to characterize the former as a matter of civil procedure and the latter as criminal law. Thus, although ss. 231.3 and 239 may be constitutionally justified under the general taxing power, it is not necessary for the purposes of this case to explore that aspect. These sections are truly criminal in their nature, and criminal procedure is expressly excluded from provincial jurisdiction: see Attorney General of Canada v. Canadian National Transportation, Ltd., supra, at pp. 216-23.

Conclusion

In the result, the appeal must be dismissed although for reasons that are different from those of the Court of Appeal.

La Forest J.

The following are the reasons delivered by

LA FOREST J. -- I have had the advantage of reading the reasons of my colleagues, Sopinka and Cory JJ. While I generally prefer Sopinka J.'s approach to the juristic character of the relevant provisions, I would dispose of the appeal in the manner proposed by Cory J. for the following reason. In choosing a criminal sanction and applying all the provisions of the Criminal Code "except to the extent that the enactment otherwise provides" (see Interpretation Act, R.S.C., 1985, c. I-21, s. 34(2)), Parliament, it seems to me, has shown a disposition to adopt the ordinary procedures of the criminal law for their enforcement, subject to any variations spelled out in the Income Tax Act, S.C. 1970-71-72, c. 63. It is unnecessary to consider whether a province could, in other circumstances, constitutionally deal with procedure respecting a penal provision conjointly supportable under the criminal law power and some other head of federal legislative power.

Sopinka J. (dissenting)

The reasons of L'Heureux-Dubé, Sopinka and McLachlin JJ. were delivered by

SOPINKA J. (dissenting) -- I have had the advantage of reading the reasons for judgment herein of my colleague, Cory J., but I am unable to agree with either his reasons or his disposition of this appeal.

The appellants claim that the trial judge erred in refusing to quash search warrants under s. 231.3 of the Income Tax Act, S.C. 1970-71-72, c. 63, as amended. Without considering the merits of their claim, the Court of Appeal determined that the trial judge, Turnbull J., did not have the jurisdiction to review the s. 231.3 search warrants. While the respondents now concede that the trial judge did have such jurisdiction, they contend that there was no appeal from the trial judge's decision.

The issue in this appeal, therefore, is whether an appeal lies from the decision of a superior court judge not to quash a search warrant issued pursuant to s. 231.3 of the Income Tax Act. Cory J. finds that ss. 231.3 and 239 of the Income Tax Act are supportable under s. 91(27) of the Constitution Act, 1867 and that appeal procedures are therefore within the federal government's exclusive jurisdiction over criminal procedure. In his opinion, since the Income Tax Act and the Criminal Code are silent with respect to appeals from an order regarding search warrants, then necessarily no appeal lies.

In my opinion, these provisions are supportable under both the criminal law power and the power in relation to federal taxation. Accordingly, an appeal lies under New Brunswick's Judicature Act, R.S.N.B. 1973, c. J-2.

While I accept that ss. 231.3 and 239 are supportable under the power over criminal law and procedure, that does not end the inquiry. If these provisions are also supportable under s. 91(3) of the Constitution Act, 1867, the federal taxation power, then the jurisdiction to provide for an appeal is not exclusively federal. Section 92(14) of the Constitution Act, 1867 confers jurisdiction on the province to legislate in respect of procedure in civil matters. Accordingly, if ss. 231.3 and 239 are supportable under two heads of power, one criminal and one civil in nature, a right of appeal can be conferred by either federal or provincial legislation. In the absence of conflict, both forms of legislation are valid on the basis of the double aspect doctrine: see Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161.

The notion that a statute is supportable under two heads of legislation is well established: see R. v. Hauser, [1979] 1 S.C.R. 984; R. v. Wetmore, [1983] 2 S.C.R. 284. The fact that provision is made for enforcement, including the creation of severe penalties, does not mean that the legislation is necessarily criminal. For example, the Combines Investigation Act, R.S.C. 1970, c. C-23, which contains provision for the issue of search warrants and creates indictable offences, has been held by this Court to be supportable under the trade and commerce power: see General Motors of Canada Ltd. v. City National Leasing, [1989] 1 S.C.R. 641. In R. v. Hauser, supra, Pigeon J. stated, at p. 1000:

The mere fact that severe penalties are provided for violations cannot of itself stamp out a federal statute as criminal law. Such is the case for most revenue acts which are clearly a class of statutes founded on legislative authority other than head 27. [Emphasis added.]

Similar enforcement provisions, including powers of search and seizure, are found in provincial taxing statutes. See Income Tax Act, R.S.O. 1980, c. 213, ss. 38 and 43. Could it be suggested that these are ultra vires the province because they create penalties by way of fines and imprisonment?

The nature of the Income Tax Act is such that it was undoubtedly passed under the federal taxation power. Most of its provisions have nothing to do with the criminal law power. In R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627, we held that the Income Tax Act is a taxation statute and not criminal in nature. Wilson J. states, at p. 641:

Section 231(3) is not criminal or quasi-criminal legislation. The Income Tax Act is essentially a regulatory statute since it controls the manner in which income tax is calculated and collected. This Court pointed out in R. v. Grimwood, [1987] 2 S.C.R. 755, at p. 756, that "the purpose of ss. 231(3) and 238(2), when read together, is not to penalize criminal conduct but to enforce compliance with the Act".

McKinlay dealt with the Income Tax Act as it stood before the amendment which added s. 231.3 in its present form -- S.C. 1986, c. 6, s. 121. But as pointed out by La Forest J. in his reasons in Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425, the offence sections do not remove the Act from the regulatory, administrative sphere. He stated, at pp. 516-17:

All of these offences relate to conduct that might well be discovered by the exercise of the power to order the production of documents which s. 231(3) confers on the Minister of National Revenue. This has not prevented this Court from characterizing s. 231(3) as a regulatory or administrative power of investigation; see R. v. McKinlay Transport Ltd., supra.

. . . the degree of privacy that can reasonably be expected within the investigative scope of the Act is akin to that which can be expected by those subject to other administrative and regulatory legislation, rather than to that which can legitimately be expected by those subject to police investigation for what I have called "real" or "true" crimes.

While I agree with the statement of Cory J. that the procedures to be followed by a court in the application of federal laws are within the paramount jurisdiction of Parliament, it does not follow that in the absence of conflict, provincial procedure is ousted. The provincial courts are competent to and do adjudicate in relation to federal law and apply their procedure unless that law prescribes otherwise. The contrary view would leave a huge hiatus in the procedure to be followed because federal laws seldom specify either the court or the procedure by which they are to be administered. In the absence of a provision in the Federal Court Act, R.S.C., 1985, c. F-7, conferring exclusive jurisdiction on that court, provincial courts have jurisdiction, and in that case apply their own procedure.

Professor P. W. Hogg, in Constitutional Law of Canada (2nd ed. 1985), summarizes this set-up as follows, at p. 135:

The general jurisdiction of the provincial courts means that there is no need for a separate system of federal courts to decide "federal" questions. Nor does the power to decide federal questions have to be specifically granted to the provincial courts by the federal Parliament. On the contrary, if federal law calls for the exercise of adjudication, but is silent as to the forum, the appropriate forum will be the provincial courts.

The learned author refers in support to Board v. Board, [1919] A.C. 956; Laskin, "The Constitutional Systems of Canada and the United States: Some Comparisons" (1967), 16 Buffalo L. Rev. 591, at p. 592; and Laskin, The British Tradition in Canadian Law, at p. 114.

There is nothing in Attorney General of Canada v. Canadian National Transportation, Ltd., [1983] 2 S.C.R. 206, that conflicts with this view. That case dealt with the power to legislate with respect to the prosecution of offences under the Combines Investigation Act. Parliament had legislated to confer on the Attorney General of Canada concurrent jurisdiction with the Attorney General of a province over prosecution of offences under that Act. In upholding the legislation, Laskin C.J. opined that the federal government had exclusive legislative jurisdiction in relation to the prosecution of all federal offences. This obiter dictum, concurred in by three judges, has been criticized. See Hogg, supra, at p. 430. It is clear, however, that the exclusivity of federal legislation depended on the fact that Parliament had legislated. Laskin C.J. explained why the province did not have concurrent jurisdiction in the following passage (at pp. 226-27):

It is patent that neither the respondents nor their supporting interveners view the present case as pointing to possible concurrency. Since Parliament has in fact legislated, that would defeat their contention without more. Yet there is good reason to say that even if there is merit in the respondents' position, there is at least equal merit in the assertion of parliamentary authority to control prosecution for violation of the federal criminal law. The issue, put in these terms, is not a new one. The Privy Council explained the matter in terms of the so-called trenching doctrine in Tennant v. Union Bank of Canada, [1894] A.C. 31, as supporting a privileged encroachment on provincial legislative authority to give effect to exclusive and paramount federal power in relation to the classes of subjects assigned to Parliament under the enumerated heads of s. 91. The obverse view arises, as shown in the Assignments and Preferences case, Attorney-General of Ontario v. Attorney-General of Canada, [1894] A.C. 189, when there is an absence of federal legislation to supersede the lawful enactment of provincial legislation within one of its assigned powers. [Emphasis added.]

In the present case, Parliament has not legislated and concurrency does arise. The obverse view referred to by Laskin C.J. therefore applies.

The operation of the constitutional scheme referred to above is illustrated by this very case. The application to quash the search warrants was made to Turnbull J. of the New Brunswick Court of Queen's Bench. No procedure for such an application is prescribed in the Income Tax Act. In dealing with the application, the judge applied the procedure applicable on a motion to a judge of that court. The propriety of so doing is not contested. The rule that a judge may review an ex parte order is itself a rule inhering in a superior court judge of the province, and is often the subject of a specific rule of procedure. For an example one may refer to R. 37.14 of the Ontario Rules of Civil Procedure, O. Reg. 560/84. It would be anomalous if provincial procedure applied in first instance but ceased to apply thereafter. I know of no constitutional principle which would distinguish between proceedings at first instance and appeal with respect to the legislative jurisdiction over procedure.

Provincial law of procedure is inapplicable only in respect of proceedings that are exclusively criminal in nature. By virtue of s. 91(27) of the Constitution Act, 1867, Parliament is given exclusive legislative power over criminal law and procedure. Matters arising out of a statute enacted exclusively under the criminal law power must be dealt with under federal laws, including laws of procedure. A recent example can be found in R. v. Meltzer, [1989] 1 S.C.R. 1764. This Court held that no appeal lay from the decision of a judge renewing a wiretap authorization. In so doing, McIntyre J., for the Court, adopted the following passage from R. v. Cass (1985), 1985 ABCA 128, 71 A.R. 248:

In my view it cannot be argued that a wire tap authorization, or a review of it, or an appeal from such a review, is anything other than a criminal matter. Indeed, Parliament's authority in the field of interception of private communications derives from its criminal law jurisdiction. An Alberta statute or rule of court relating to civil matters purporting to govern an appeal from the review of an authorization would be ultra vires. [Meltzer, at pp. 1769-70.]

Poje v. A.G. for British Columbia, [1953] 1 S.C.R. 516, and In re Storgoff, [1945] S.C.R. 526, contain further examples of proceedings that are exclusively criminal in nature.

As previously stated, a matter arising under a federal statute that is supportable under another head of power in addition to the criminal law power can have two aspects: one criminal and one civil. A provincial court which is seized of the matter may validly apply its own rules of civil procedure unless resort thereto is precluded by federal legislation or the matter is clearly related to a criminal proceeding. This is particularly true of proceedings to review a search warrant or other process issued under federal legislation that is supportable under a head of power other than the criminal law power.

In General Motors of Canada Ltd. v. City National Leasing, supra, this Court found the Combines Investigation Act as a whole supportable under the trade and commerce power as well as the criminal law power. That Act contains provision for searches and seizures pursuant to warrants to search. The sections authorizing the issue of search warrants were found to violate s. 8 of the Charter in Hunter v. Southam Inc., [1984] 2 S.C.R. 145, and were struck down. The proceeding to review the warrant was by way of interlocutory injunction to a judge of the Court of Queen's Bench of Alberta. The appeals were taken and eventually reached this court. The proceedings by way of interlocutory injunction and the appeal were taken in accordance with the procedure applicable to civil proceedings in the Alberta Court of Queen's Bench and Court of Appeal: see (1982), 68 C.C.C. (2d) 356, and (1983), 1983 ABCA 32, 3 C.C.C. (3d) 497.

Similarly, in Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), supra, the proceeding to quash, on Charter grounds, orders issued under s. 17 of the Combines Investigation Act for the attendance of witnesses and production of documents could not have reached this Court but for the provisions of the Ontario Courts of Justice Act, 1984, S.O. 1984, c. 11, and the Ontario Rules of Civil Procedure.

A motion to review the issuance of a search warrant, like a prerogative proceeding, takes its character from earlier proceedings out of which it arises. In Storgoff, supra, Kellock J. stated, at pp. 585-86 and 588:

In my opinion, all the members of the Court approach the matter first from the standpoint of the situation with regard to the nature of certiorari as it was understood before the Judicature Acts were passed, and they determine that its nature depends upon the character of the earlier proceedings to which the proceeding by way of certiorari is directed.

In my opinion, all these authorities are based on the view that habeas corpus, being procedural, partakes of the nature of the earlier proceeding, as a result of which it has been invoked, and that this view of its nature is not dependent upon anything enacted in England by the Judicature Acts but was well recognized long before their enactment.

I have explained above that in my opinion the provision out of which this proceeding arises has both a civil and criminal aspect. The motion for review cannot therefore be characterized as exclusively criminal for the purpose of determining rights of appeal. This is particularly so in view of the fact that no charges have been laid and indeed may not be laid. The main purpose of the application is stated in the Notice of Application as follows:

5. The Applicants seek the order for return of the documents and things that were seized from the Applicants and from Thorne Riddell on July 7, 1986 and July 23, 1986, respectively, and all extracts therefrom, on the following grounds . . . .

There is nothing therefore in the nature of the application itself to convert the proceeding into an exclusively criminal proceeding.

Finally, I am concerned that, contrary to the views expressed by my colleague, the appellants and others in the same position will find themselves without a remedy. If the matter should proceed to trial (assuming charges are laid), it is doubtful that the trial judge would have jurisdiction to set aside an order of a superior court judge. In New Brunswick, the trial would be before a provincial court judge. The applicant would be faced with this Court's decision in Wilson v. The Queen, [1983] S.C.R. 594, which precludes a collateral attack on an order made by a court having jurisdiction to make it. The application of this principle to an attempt to review a search warrant at trial is illustrated by the case of R. v. Komadowski (1986), 27 C.C.C. (3d) 319 (leave to appeal to the Supreme Court of Canada denied, [1986] 1 S.C.R. x). O'Sullivan J.A. stated, at p. 325:

Since the search was conducted under a search warrant, which is valid on its face and which has not been quashed or set aside in a proceeding directly attacking it, the search warrant should be upheld.

He dismissed an appeal from the trial judge who refused to reject evidence obtained as a result of the execution of a search warrant which was attacked at trial by the appellant.

Although Wilson, supra, may have no application where the attack on a previous order is based on Charter grounds, it presents grave difficulties for an applicant who seeks to attack a search warrant on traditional grounds for the first time at trial. Apart from Wilson, it has been suggested that where the purpose of the motion is to obtain the property seized and not a rejection of the evidence obtained, the trial judge may not be the appropriate forum. See Re Zevallos and The Queen (1987), 37 C.C.C. (3d) 79, at pp. 86-87.

Furthermore, if ss. 490(7), (10) and (17) of the Criminal Code, R.S.C., 1985, c. C-46, have any application to a seizure under the Income Tax Act, they have no application where it is alleged that the search is unlawful and it is sought to prevent or terminate the search.

On the other hand, if the matter does not go to trial, I fail to see how an action for damages could be pursued grounded on conduct of the authorities pursuant to an order of the superior court which had not been set aside.

I would therefore allow the appeal and remit the matter to the Court of Appeal to hear the appeal on its merits.

Appeal dismissed, L'HEUREUX‑DUBÉ, SOPINKA and MCLACHLIN JJ. dissenting.

Solicitors for the appellants: Phillips & Vineberg, Montréal.

Solicitor for the respondents: John C. Tait, Ottawa.