Baron v. Canada, [1993] 1 S.C.R. 416

Her Majesty The Queen, the Attorney General of Canada and the Honourable Otto Jelinek in his capacity as Minister of National Revenue Appellants

v.

Berl Baron and Howard Baron, C.A. Respondents

and

The Attorney General for Ontario and the Attorney General of Quebec Interveners

Indexed as: Baron v. Canada

File No.: 22298.

1992: February 6; 1993: January 21.

Present: La Forest, L'Heureux‑Dubé, Sopinka, Cory, McLachlin, Stevenson* and Iacobucci JJ.

on appeal from the federal court of appeal

Income tax ‑‑ Enforcement ‑‑ Search and seizure ‑‑ Warrant authorizing search and seizure executed ‑‑ Provision of Income Tax Act authorizing issuance of warrants restricting judicial discretion to issue warrants ‑‑ Whether s. 231.3 of the Income Tax Act infringing ss. 7 and 8 of the Charter ‑‑ Income Tax Act, S.C. 1970‑71‑72, c. 63, s. 231.3 [ad. S.C. 1986, c. 6, s. 121] ‑‑ Canadian Charter of Rights and Freedoms, s. 8.

Revenue Canada officers believed certain documents belonging to the respondents could afford evidence of the commission of various alleged offences under the Income Tax Act. The Federal Court, Trial Division, issued warrants under s. 231.3 of the Act to search respondents' residences and business premises and a large number of documents were seized. This section provided that the judge hearing the application "shall issue the warrant" where the judge is satisfied that there are reasonable grounds to believe an offence under the Act has been committed, a document or thing that may afford evidence of the commission of the offence is likely to be found, and the place to be searched is likely to contain such a document or thing.

In 1989, respondents brought three motions and instituted an action in the Federal Court, Trial Division, seeking orders setting aside the search warrants, declaring s. 231.3 contrary to ss. 7, 8 and 15 of the Canadian Charter of Rights and Freedoms, ordering the return or destruction of the items seized and of any summaries, notes or diagrams made from those items, and prohibiting the department from using such material.

The proceedings were dismissed with a single set of reasons. The Federal Court of Appeal considered the four appeals together and held s. 231.3 of the Income Tax Act to be contrary to ss. 7 and 8 of the Charter, allowing the appeals and quashing the search warrants on the basis that s. 231.3 of the Act violated ss. 7 and 8 of the Charter. On consent, the Minister appealed only one of the Court of Appeal's judgments to this Court. The constitutional question before the Court queried whether s. 231.3 limited the rights and freedoms guaranteed by ss. 7 and 8 of the Charter.

Held: The appeal should be dismissed. Section 231.3 of the Income Tax Act violates s. 8 of the Charter and is of no force or effect.

A residual discretion in the judiciary to refuse to issue a search warrant in appropriate circumstances even though the statutory criteria for its issuance have been met is required by s. 8 of the Charter and s. 231.3(3) removed this residual discretion.

The exercise of a judicial discretion in the decision to grant or withhold authorization for a search warrant was fundamental to the scheme of prior authorization which is an indispensable requirement for compliance with s. 8. The decision to grant or withhold the warrant requires the balancing of two interests: that of the individual to be free of intrusions of the state and that of the state to intrude on the privacy of the individual for the purpose of law enforcement. The circumstances in which these conflicting interests must be balanced will vary greatly. The strength of the interests will be affected by matters such as the nature of the offence alleged, the nature of the intrusion sought including the place to be searched, the time of the search and the person or persons who are the subjects of the search. In order to take account of the various factors affecting the balancing of the two interests, the authorizing judge must be empowered to consider all the circumstances. No set of criteria will always be determinative or sufficient to override the right of the individual to privacy. It is imperative, therefore, that a sufficient degree of flexibility be accorded to the authorizing officer in order that justice be done to the respective interests involved. The requirement that the officer authorizing the seizure be independent and capable of acting judicially is inconsistent with the notion that the state can dictate to him or her the precise circumstances under which the right of the individual can be overborne.

Section 231.3(3) provides that a judge "shall" issue the warrant once satisfied that the three statutory conditions set out therein have been satisfied. The word "shall" is normally to be construed as imperative unless such an interpretation would be utterly inconsistent with the context in which it has been used and would render the sections irrational or meaningless. Nothing in the context of s. 231.3 renders an imperative interpretation of the word "shall" in s. 231.3(3) inconsistent with the balance of the section or makes it irrational or meaningless.

Due to this imperative language, the issuing judge's discretionary power to attach pre-conditions to the issue of the warrant cannot be exercised once the statutory criteria for the issue of the warrant have been met. Moreover, a judge's inherent power to prevent an abuse of the court's process or a violation of a constitutional right does not confer on an issuing judge the discretion to refuse to issue a warrant in those circumstances. If the conditions set out in the subsection are exhaustive of all the conditions precedent of a reasonable search, an application which meets all of those conditions cannot be an abuse of the process.

The removal of the discretion to refuse to issue a warrant when all statutory criteria are met takes away the issuing judge's "balance wheel" function. In order to fulfil properly the "balance wheel" role required by s. 8 of the Charter, a judge must be able to weigh all the surrounding circumstances to determine whether in each case the interests of the state are superior to the individual's right to privacy. By restricting the factors that a judge may consider, Parliament has improperly restricted a judge's ability to assess the reasonableness of a search.

Section 231.3(3) denies the issuing judge the discretion to refuse to issue a warrant where in all the circumstances a search or seizure would be unreasonable and, indeed, may require a judge to authorize an unreasonable search or seizure. By using the word "shall" the subsection violates s. 8 of the Charter.

Classifying a statute as regulatory, while it may affect the exercise of discretion by the authorizing judge, is not a basis for reading the requirement for a residual discretion out of s. 8. What is ultimately important are not labels (though these are undoubtedly useful), but the values at stake in the particular context. Given the intrusive nature of searches and the corresponding purpose of such a search to gather evidence for the prosecution of a taxpayer, there is no reason for a radical departure from the guidelines and principles expressed in Hunter v. Southam Inc., 1984 CanLII 33 (SCC), [1984] 2 S.C.R. 145. The effect of any lessened expectation of privacy by reason of the character of the Income Tax Act will affect the authorizing judge's exercise of discretion but cannot justify eliminating it.

The argument was rejected that the "reasonable grounds" standard in s. 231.3(3) is constitutionally insufficient as being a lower standard than "reasonable and probable grounds", while only the latter satisfies s. 8 of the Charter. Nothing turns on the omission of the word "probable" from s. 231.3(3). The standard that the subsection sets out is one of credibly based probability, which is the standard required by s. 8. "Reasonable" is the same as "reasonable and probable" and imports the same standard. "Reasonable" comprehends a requirement of probability. The use of an interpretative "gloss" on the word to make it conform to constitutional requirements is an unnecessary strain on the meaning of the word. The alleged distinction between the two phrases was a "refined distinction" of the type found in American constitutional jurisprudence and is to be avoided in the interpretation of s. 8 of the Charter.

Section 231.3(3)(b), requiring the authorizing judge to be satisfied that a document or thing which "may afford evidence" is "likely to be found", does not water down the minimum constitutional standard for the probability that the search will unearth evidence. The need to protect individuals against unreasonable searches in the form of "fishing expeditions" by the state has been recognized. A standard of credibly based probability rather than mere suspicion must be applied in determining when an individual's interest in privacy is subordinate to the needs of law enforcement. The formulation in s. 231.3(3)(b) meets the "credibly based probability" standard required by s. 8 through its use of the word "likely" which imports the criterion of probability. The use of the word "may" regarding the use of the thing found as evidence in a prosecution simply reflects one of the realities of the investigation of offences. It is impossible to know with certainty at an early stage in any investigation what particular items will provide evidence in a trial.

The issue of whether s. 231.3(5) allowed the same kind of "wholesale search and seizures" without prior authorization which was found under the predecessor legislation to violate s. 8 of the Charter should be left to be resolved until such time as this Court is presented with a situation in which the provision was relied upon to seize documents.

No analysis under s. 1 of the Charter was undertaken. The burden was on the government to establish that the law constituted a reasonable limit, and it made no attempt to do so.

Cases Cited

Considered: Hunter v. Southam Inc., 1984 CanLII 33 (SCC), [1984] 2 S.C.R. 145; R. v. McKinlay Transport Ltd., 1990 CanLII 137 (SCC), [1990] 1 S.C.R. 627; Descôteaux v. Mierzwinski, 1982 CanLII 22 (SCC), [1982] 1 S.C.R. 860; Canadian Broadcasting Corp. v. Lessard, 1991 CanLII 49 (SCC), [1991] 3 S.C.R. 421; Canadian Broadcasting Corp. v. New Brunswick (Attorney General), 1991 CanLII 50 (SCC), [1991] 3 S.C.R. 459; referred to: Kourtessis v. M.N.R., S.C.C., No. 21654, on appeal from (1989), 1989 CanLII 237 (BC CA), 39 B.C.L.R. (2d) 1; Solvent Petroleum Extraction Inc. v. Canada (M.N.R.), 1989 CanLII 9492 (FCA), [1990] 1 F.C. 20 (C.A.), aff'g 1988 CanLII 9447 (FC), [1988] 3 F.C. 465 (leave to appeal refused, [1989] 2 S.C.R. xi); Minister of National Revenue v. Kruger Inc., 1984 CanLII 5365 (FCA), [1984] 2 F.C. 535; R. v. Simmons, 1988 CanLII 12 (SCC), [1988] 2 S.C.R. 495; Re Print Three Inc. and The Queen (1985), 1985 CanLII 2073 (ON CA), 20 C.C.C. (3d) 392, leave to appeal refused, [1985] 2 S.C.R. x; Kohli v. Moase (1987), 1987 CanLII 7770 (NB KB), 86 N.B.R. (2d) 15, aff'd on other grounds (1989), 1988 CanLII 133 (NB CA), 55 D.L.R. (4th) 737; R. v. Thompson, 1990 CanLII 43 (SCC), [1990] 2 S.C.R. 1111; Minister of National Revenue v. Paroian, 1980 CanLII 1577 (ON CA), [1980] C.T.C. 131; Selye v. Quebec, [1982] R.D.F.Q. 173; Beauregard v. Canada, 1986 CanLII 24 (SCC), [1986] 2 S.C.R. 56; Re Manitoba Language Rights, 1985 CanLII 33 (SCC), [1985] 1 S.C.R. 721; R. v. Wholesale Travel Group Inc., 1991 CanLII 39 (SCC), [1991] 3 S.C.R. 154; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), 1990 CanLII 135 (SCC), [1990] 1 S.C.R. 425; R. v. Rao (1984), 1984 CanLII 2184 (ON CA), 12 C.C.C. (3d) 97, leave to appeal refused, [1984] 2 S.C.R. ix; R. v. Debot, 1989 CanLII 13 (SCC), [1989] 2 S.C.R. 1140, aff'g (1986), 1986 CanLII 113 (ON CA), 30 C.C.C. (3d) 207; Goguen v. Shannon (1989), 1989 CanLII 158 (NB CA), 50 C.C.C. (3d) 45; Nima v. McInnes (1988), 1988 CanLII 3201 (BC SC), 45 C.C.C. (3d) 419; Wiens v. The Queen (1973), 1973 CanLII 1634 (MB QB), 24 C.R.N.S. 341; R. v. Burnett, 1985 CanLII 6067 (ON SC), [1985] 2 C.T.C. 227; Danson v. Ontario (Attorney General), 1990 CanLII 93 (SCC), [1990] 2 S.C.R. 1086; MacKay v. Manitoba, 1989 CanLII 26 (SCC), [1989] 2 S.C.R. 357; R v. Edwards Books and Art Ltd., 1986 CanLII 12 (SCC), [1986] 2 S.C.R. 713; Slaight Communications Inc. v. Davidson, 1989 CanLII 92 (SCC), [1989] 1 S.C.R. 1038; Osborne v. Canada (Treasury Board), 1991 CanLII 60 (SCC), [1991] 2 S.C.R. 69; Schachter v. Canada, 1992 CanLII 74 (SCC), [1992] 2 S.C.R. 679.

Statutes and Regulations Cited

Canadian Bill of Rights, R.S.C., 1985, App. III, s. 2.

Canadian Charter of Rights and Freedoms, ss. 1, 7, 8, 11(d), 15.

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

Competition Act, R.S.C. 1970, c. C‑23.

Constitution Act, 1982, s. 52(1).

Criminal Code, R.S.C. 1970, c. C‑34, s. 443 [now R.S.C., 1985, c. C-46, s. 487].

Customs Act, R.S.C., 1985, c. 1 (2nd Supp.), s. 111(1).

Income Tax Act, S.C. 1970‑71‑72, c. 63, ss. 121, 231.3(1), (2), (3), (4), (5), (6), (7), (8) [ad. S.C. 1986, c. 6] [formerly s. 231(4)], 239(1)(c), (d), 443 [now R.S.C., 1985, c. C-46, s. 487].

Interpretation Act, R.S.C., 1985, c. I‑21, s. 11.

APPEAL from a judgment of the Federal Court of Appeal, 1990 CanLII 13083 (FCA), [1991] 1 F.C. 688, [1991] 1 C.T.C. 125 (1990), 91 D.T.C. 5055, 122 N.R. 47, supplementary reasons, 1991 CanLII 13540 (FCA), [1991] 1 F.C. 712, [1991] 1 C.T.C. 408 (1991), 91 D.T.C. 5134) granting an appeal from a judgment of Reed J., 1989 CanLII 9454 (FC), [1990] 2 F.C. 262, [1990] 1 C.T.C. 84 (1989), 30 F.T.R. 188, 90 D.T.C. 6040. Appeal dismissed. Section 231.3(3) of the Income Tax Act violates s. 8 of the Charter and is of no force or effect.

John R. Power, Q.C., Pierre Loiselle, Q.C., and Robert Frater, for the appellants.

Guy Dupont, Basile Angelopoulos and Ariane Bourque, for the respondents.

Janet E. Minor and Tanya Lee, for the intervener the Attorney General for Ontario.

Yves Ouellette, Judith Kucharsky and Diane Bouchard, for the intervener the Attorney General of Quebec.

//Sopinka J.//

The judgment of the Court was delivered by

Sopinka J. --

I. Introduction

This appeal was heard concurrently with Kourtessis v. M.N.R., S.C.C., No. 21654. Both appeals address the validity of search warrants issued and executed under s. 231.3 of the Income Tax Act, S.C. 1970-71-72, c. 63, as amended [hereinafter ITA]. In each case the persons subjected to search and seizure applied in court to have the searches and seizures invalidated and set aside, and the things seized returned, on the ground that s. 231.3 of the ITA violates ss. 7 and 8 of the Canadian Charter of Rights and Freedoms and that consequently, the section and the impugned warrants, searches and seizures are of no force or effect. Kourtessis also raises an additional issue as to the jurisdiction of the Court of Appeal and of this Court to hear the appeal. Judgment in that appeal will be released in due course.

The nub of this appeal is the ITA's limitation of the judicial discretion of the issuing judge by use of the word "shall" in s. 231.3(3). I conclude, for reasons I will state below, that s. 231.3 of the ITA violates s. 8 of the Charter in so far as it removes the residual discretion of the issuing judge to refuse to issue a search warrant in the proper circumstances, notwithstanding that the statutory criteria for its issuance have been met. By reason of this violation and pursuant to s. 52(1) of the Constitution Act, 1982, s. 231.3 is of no force or effect and the search warrants issued and executed thereunder against the respondents are also invalid and of no force or effect.

In my view, the appeal can be disposed of entirely on the basis of s. 8 of the Charter. It is therefore not necessary to consider the respondents' argument that s. 7 was also violated. Nor do I propose to consider separately the question of whether the impugned section improperly interferes with judicial independence. In my view, this is merely another ground which supports my conclusion with respect to the importance of a residual judicial discretion.

Neither the parties nor the interveners have made arguments or referred to any evidence either in this appeal or in Kourtessis in relation to s. 1 of the Charter or capable of demonstrating that the violation of s. 8 is justified within the meaning of s. 1. It will therefore not be necessary to consider whether this legislation permitting unreasonable searches can be demonstrably justified as a reasonable limit on the right to be secure against unreasonable searches.

II. The Facts

After an investigation, Revenue Canada officers formed the opinion that certain documents belonging to the respondents Berl and Howard Baron could afford evidence of the commission of various alleged offences under the ITA. The allegation was that Xentec Laboratories Inc. had made false or deceptive entries in its books of account and evaded or attempted to evade compliance with the ITA, in violation of ITA ss. 239(1)(c) and (d). On August 7, 1986, Strayer J. of the Federal Court, Trial Division, issued warrants to search the Barons' residences and business premises (the law firm Baron and Abrams, and the accounting firm Baron, Merton). The warrants were executed and a large number of documents were seized.

On June 21, 1989 Berl and Howard Baron brought three motions and instituted an action in the Federal Court, Trial Division. The motions sought orders:

(a) setting aside the search warrants;

(b) declaring s. 231.3 ITA of no force or effect pursuant to s. 52 of the Constitution Act, 1982, because it is inconsistent with ss. 7, 8 and 15 of the Charter;

(c) ordering the return to the Barons of all the items seized and extracts or copies thereof;

(d) ordering the return of all summaries, notes or diagrams taken from the items seized;

(e) prohibiting the Department from using the items or summaries, notes, diagrams or information taken thereof; and

(f) ordering the destruction of all summaries, copies, notes or diagrams not returned to the Barons.

The ground for the motions was that the searches and seizures were unreasonable because s. 231.3 ITA is inconsistent with ss. 7, 8 and 15 of the Charter and consequently is of no force or effect.

The relief requested in the action instituted at the same time as the motions was to the same effect. The Barons sought a declaration that s. 231.3 ITA was inconsistent with ss. 7, 8 and 15 of the Charter and of no force or effect, and that the warrants and searches and seizures which followed were unreasonable and consequently of no force or effect. They also sought an order compelling the return, non-use or destruction of items seized and copies and summaries thereof corresponding to paragraphs (c) through (f) of the relief sought in the motions, above.

As the trial judge, Reed J., summarized, 1989 CanLII 9454 (FC), [1990] 2 F.C. 262, at pp. 266-67, the respondents contended that the search and seizure provisions in s. 231.3 were invalid because:

. . . (1) subsection 231.3(3) allows no discretion to a judge to guard against abusive searches and seizures -- it requires a judge to issue a warrant if satisfied that there are reasonable grounds to believe that an offence has been committed and that evidence of that offence is likely to be found in certain premises; (2) subsection 231.3(5) allows wholesale searches and seizures, without adequate authorization, and therefore does not meet the requirements of a constitutionally valid search and seizure power, as set out in Hunter v. Southam Inc., 1984 CanLII 33 (SCC), [1984] 2 S.C.R. 145, ... ; (3) the requirements under subsection 231.3(3) do not meet the requirements of Hunter v. Southam (supra) because they only require that there be reasonable grounds to believe that an offence has been committed -- this is a lesser test than one requiring that there be "reasonable and probable" grounds; (4) the provisions of section 231.3 offend section 15 of the Canadian Charter of Rights and Freedoms ... because there are two avenues by which warrants can be obtained ... and the appeal provisions differ depending upon which route is chosen .... [Emphasis in original.]

The respondents also attacked some of the warrants on the basis that they did not contain a clause protecting documents which were subject to solicitor-client privilege or which arose in the course of an accountant-client confidential relationship.

The motions and action for a declaration were dismissed with a single set of reasons by Reed J. These judgments were appealed to the Federal Court of Appeal, which allowed all four appeals: Baron v. Canada, 1990 CanLII 13083 (FCA), [1991] 1 F.C. 688. Hugessen J.A. (for the court) dealt with all four appeals together as they raised identical issues. He held that s. 231.3 violated ss. 7 and 8 of the Charter and was consequently of no force or effect, and quashed the search warrants. With the consent of the Barons, the Minister sought to appeal only one of the Court of Appeal's judgments to this Court. Leave to appeal to this Court was granted on May 16, 1991 at which time it was ordered that Baron be heard on the same day as Kourtessis.

III. The Issues

On June 20, 1991, Chief Justice Lamer stated the following constitutional question for the consideration of the Court:

Whether s. 231.3 of the Income Tax Act, S.C. 1970-71-72, c. 63, as amended by S.C. 1986, c. 6, limits the rights and freedoms guaranteed by ss. 7 and 8 of the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B of the Canada Act, 1982 (U.K.), 1982, c. 11, and is consequently of no force or effect pursuant to s. 52 of the Constitution Act, 1982, Schedule B, Canada Act, 1982 (U.K.), 1982, c. 11.

It is to be noted that only ss. 7 and 8 of the Charter are invoked before this Court. The argument based on the s. 15 equality guarantee has been abandoned as a basis on which to attack s. 231.3 and the warrants. Section 231.3 is alleged to infringe ss. 7 and 8 of the Charter in the following respects:

1. subs. (3) is invalid in that it removes from the authorizing judge a residual discretion;
2. subs. (3) is invalid in that "reasonable grounds" fails to meet the minimum constitutional standard of "reasonable and probable grounds";
3. subs. (3)(b) is invalid in that the words "may afford evidence" fail to meet the minimum constitutional standard for the discovery of evidence;
4. subs. (5) is invalid in that it authorizes a wholesale search and seizure.

IV. Pertinent Legislation

A. Income Tax Act, S.C. 1970-71-72, c. 63, as amended by S.C. 1986, c. 6, s. 121.

The provision under which the search warrants in both cases were sought and issued and which forms the centrepiece of the present litigation is s. 231.3 of the ITA, which I reproduce here in its entirety.

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.

(2) An application under subsection (1) shall be supported by information on oath establishing the facts on which the application is based.

(3) A judge shall issue the warrant referred to in subsection (1) where he is satisfied that there are reasonable grounds to believe that

(a) an offence under this Act has been committed;

(b) a document or thing that may afford evidence of the commission of the offence is likely to be found; and

(c) the building, receptacle or place specified in the application is likely to contain such a document or thing.

(4) A warrant issued under subsection (1) shall refer to the offence for which it is issued, identify the building, receptacle or place to be searched and the person alleged to have committed the offence and it shall be reasonably specific as to any document or thing to be searched for and seized.

(5) Any person who executes a warrant under subsection (1) may seize, in addition to the document or thing referred to in subsection (1), any other document or thing that he believes on reasonable grounds affords evidence of the commission of an offence under this Act and shall as soon as practicable bring the document or thing before, or make a report in respect thereof to, the judge who issued the warrant 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.

(6) Subject to subsection (7), where any document or thing seized under subsection (1) or (5) is brought before a judge or a report in respect thereof is made to a judge, the judge shall, unless the Minister waives retention, order that it be retained by the Minister, who shall take reasonable care to ensure that it is preserved until the conclusion of any investigation into the offence in relation to which the document or thing was seized or until it is required to be produced for the purposes of a criminal proceeding.

(7) Where any document or thing seized under subsection (1) or (5) is brought before a judge or a report in respect thereof is made to a judge, the judge may, of his own motion or on summary application by a person with an interest in the document or thing on three clear days notice of application to the Deputy Attorney General of Canada, order that the document or thing be returned to the person from whom it was seized or the person who is otherwise legally entitled thereto if the judge is satisfied that the document or thing

(a) will not be required for an investigation or a criminal proceeding; or

(b) was not seized in accordance with the warrant or this section.

(8) The person from whom any document or thing is seized pursuant to this section is entitled, at all reasonable times and subject to such reasonable conditions as may be imposed by the Minister, to inspect the document or thing and to obtain one copy of the document at the expense of the Minister.

B. Canadian Charter of Rights and Freedoms

8. Everyone has the right to be secure against unreasonable search or seizure.

V. Judgments Below

A. Federal Court, Trial Division (Reed J.)

Reed J. dealt with each of the respondents' attacks on s. 231.3 in turn. First came the issue of judicial discretion. She felt bound by the Federal Court of Appeal's decision in Solvent Petroleum Extraction Inc. v. Canada (M.N.R.), 1989 CanLII 9492 (FCA), [1990] 1 F.C. 20 (C.A.), aff'g 1988 CanLII 9447 (FC), [1988] 3 F.C. 465, leave to appeal refused, [1989] 2 S.C.R. xi [hereinafter Solvent Petroleum], in which Desjardins J.A. (Pratte and Stone JJ.A., concurring) said, at p. 24, that if the statutory conditions are met, the issuing judge must issue the warrant. Reed J. then cited other decisions and authorities on the interpretation of the word "shall", some holding it to be mandatory, others holding it to have been a slip by the legislature, which had intended to say "may". She then reproduced a long excerpt from the British Columbia Court of Appeal's reasons in Kourtessis v. M.N.R. (1989), 1989 CanLII 237 (BC CA), 39 B.C.L.R. (2d) 1, in which Locke J.A. concluded that while s. 231.3(3) deprives the issuing judge of the discretion to refuse a warrant once the statutory criteria are met, it preserves the judge's crucial "balance wheel" function of deciding whether the facts before him or her are sufficient to warrant an intrusion of privacy, and thus does not defeat the standards of Hunter v. Southam Inc., 1984 CanLII 33 (SCC), [1984] 2 S.C.R. 145. In any event, Locke J.A. held the judge may attach conditions to the execution of the warrant. Reed J. thought that perhaps s. 2 of the Canadian Bill of Rights, R.S.C., 1985, App. III, or the court's inherent control over the abuse of its own process, might allow an issuing judge to refuse to issue an abusive warrant. She agreed that certainly the issuing judge could attach conditions to the warrant. But ultimately she declined to decide the question of whether ss. 231.3(3) removed the issuing judge's discretion to refuse to issue a warrant where to do so would be abusive, since in her view no abusive search or seizure in violation of s. 8 of the Charter had occurred in this case and there was no factual underpinning for the argument (at p. 275).

Then came the issue of wholesale search and seizure under s. 231.3(5). Reed J. referred to the general requirement of prior authorization enunciated in Hunter, supra, and the Federal Court of Appeal's judgment in Minister of National Revenue v. Kruger Inc., 1984 CanLII 5365 (FCA), [1984] 2 F.C. 535, striking down as too wide and general the search power in s. 231.3's predecessor (s. 231(4), which allowed the seizure of anything that may afford evidence of the violation of any provision of the ITA or a regulation). She then quoted extensively from Solvent Petroleum, supra, in which the Federal Court of Appeal held that the "plain view" seizure permitted by the ITA met the test of reasonableness and therefore of validity. Reed J. held that decision to be binding on her.

The next issue was whether it was sufficient to require only "reasonable grounds to believe" (s. 231.3(3)) instead of "reasonable and probable grounds". Reed J. referred extensively to the British Columbia Court of Appeal's decision in Kourtessis, supra, which held that "reasonable" in the context of s. 231.3(3) satisfied the "more-probable-than-not test" required by Hunter, supra. She then referred to R. v. Simmons, 1988 CanLII 12 (SCC), [1988] 2 S.C.R. 495, at p. 523, which stated the Hunter test to be "reasonable and probable grounds", and juxtaposed that with the conclusion reached in Solvent Petroleum, supra (adopting Lysyk J.'s conclusion in Kourtessis, supra) that the absence of a statutory requirement for probable as well as reasonable grounds for belief was not constitutionally fatal since the only explicit requirement in s. 8 is that of reasonableness which comprehended a requirement of probability.

Reed J. then went on to reject the respondents' s. 15 argument and their arguments based on solicitor-client or accountant-client privilege. She dismissed the application with one set of costs.

B. Federal Court of Appeal (Hugessen J.A., Pratte and Marceau JJ.A., concurring)

Hugessen J.A. wrote the reasons for the court's decision. He started by considering the characterization of the search and seizure provisions of the ITA for the purposes of determining the taxpayer's reasonable expectation of privacy under s. 8 of the Charter. He rejected the contention that the procedures constituted an administrative enforcement mechanism as described in R. v. McKinlay Transport Ltd., 1990 CanLII 137 (SCC), [1990] 1 S.C.R. 627, holding instead that they were concerned with the detection and prosecution of crime. No easing of Charter standards was therefore justified; on the contrary, "nothing less than the full panoply of Charter protection is appropriate" (at p. 694).

Hugessen J.A. then broached the substantive issues. On the first question of judicial discretion and the use of the words "shall issue" in s. 231.3(3), he held that any text which specifically excludes the residual discretion to refuse to issue a warrant where the circumstances do not justify an invasion of privacy "will, for that reason alone, run afoul of sections 7 and 8 of the Charter as authorizing an unreasonable search and seizure and one that is in breach of the principles of fundamental justice" (at pp. 694-95). He rejected the trial judge's suggestion that s. 231.3(3) could be "read down" to preserve a residual discretion and held that the context of s. 231.3 and the fact that the section's use of "shall" is unique in Canadian search warrant legislation show that the word was intended to be mandatory and imperative. He referred to but rejected the British Columbia Court of Appeal's holding in Kourtessis, supra, that the judge's discretion to determine whether the statutory criteria are met satisfies the Hunter standard and that in any event the issuing judge may attach conditions to the warrant. He placed considerable emphasis on this Court's decision in Descôteaux v. Mierzwinski, 1982 CanLII 22 (SCC), [1982] 1 S.C.R. 860, deriving from that case the proposition that the existence of judicial discretion is a prerequisite to the reasonableness of a search and to our notions of fundamental justice. Moreover, in his view, Descôteaux establishes that any legislative attempt to define exhaustively when a search will be reasonable is impossible. He concluded that the ultimate protection for the citizen against unreasonable searches resides in the power to refuse to issue a warrant even when all the conditions prescribed by Parliament are met.

Hugessen J.A. went on to consider the other grounds of appeal. He cited, inter alia, Dickson J.'s (as he then was) statement in Hunter, supra, at p. 167, that the standards in s. 443 of the Criminal Code, R.S.C. 1970, c. C-34, ("reasonable ground") and the U.S. Fourth Amendment ("probable cause") are identical. From this he held at p. 707 that the words "reasonable grounds" in s. 231.3(3) met the "more likely than not" standard of probability required for a search to be reasonable. Next, he held at p. 708 that s. 231.3(3)(b) did not pass constitutional muster, since by using the words "may afford evidence" it failed to meet the standard of Hunter, supra that there be reasonable grounds to believe that evidence will be found. Finally, he held that there was no reason to interfere with the court's previous holding in Solvent Petroleum, supra, that s. 231.3(5) does not authorize unreasonable "wholesale" searches and seizures. As a result, the appeals were allowed, s. 231.3 was declared of no force or effect and the search warrants were quashed.

VI. Analysis: The Constitutional Validity of s. 231.3

A. Legislative History

Section 231.3 was enacted by Parliament in 1986 in response to a number of appellate court decisions finding that the previous search warrant provisions of the ITA violate s. 8 of the Charter. The predecessor to s. 231.3 read as follows:

231. ...

(4) Where the Minister has reasonable and probable grounds to believe that a violation of this Act or a regulation has been committed or is likely to be committed, he may, with the approval of a judge of a superior or county court, which approval the judge is hereby empowered to give on ex parte application, authorize in writing any officer of the Department of National Revenue, together with such members of the Royal Canadian Mounted Police or other peace officers as he calls on to assist him and such other persons as may be named therein, to enter and search, if necessary by force, any building, receptacle or place for documents, books, records, papers or things that may afford evidence as to the violation of any provision of this Act or a regulation and to seize and take away any such documents, books, records, papers or things and retain them until they are produced in any court proceedings.

(5) An application to a judge under subsection (4) shall be supported by evidence on oath establishing the facts upon which the application is based.

In Minister of National Revenue v. Kruger Inc., supra, s. 231(4) was held to contravene s. 8 of the Charter in that it gave the Minister, when he or she believed one offence to have been committed, the power to authorize a general search and seizure relating to the violation of any of the provisions of the Act or its regulations. The Ontario Court of Appeal agreed with this holding in Re Print Three Inc. and The Queen (1985), 1985 CanLII 2073 (ON CA), 20 C.C.C. (3d) 392, leave to appeal refused [1985] 2 S.C.R. x, and found additional reasons that the section violated s. 8 (at p. 396):

In our view, there are additional reasons to those relied upon by the Federal Court of Appeal for holding the subsection to be in breach of s. 8. It is clear that to meet the standards of reasonableness there must first be an independent arbiter (judge) who is satisfied that there are reasonable grounds for believing that an offence has been committed (see Hunter et al v. Southam Inc., supra). In s. 231(4) and (5), it is the Minister who has to have the reasonable and probable grounds and there is no standard or conditions precedent set out for the judge on which to base his assessment of whether the Minister's belief is properly founded. Mr. Kelly argued that the only reasonable construction of s-s. 5 is that facts must be laid before the judge so he can be satisfied that the Minister has reasonable and probable grounds. Even if the subsection could be so construed, there are, as we have noted, additional flaws in s. 231(4) and (5). There is no requirement that the Minister have grounds to believe that evidence is likely to be found at the place of the search and there is no requirement that he present such grounds to the judge. There is, equally, no direction as to what is to be issued by the judge in granting his "approval". It is the Minister who issues what is, in essence, the warrant. Finally, the Minister is not required in the authorization to specify the things to be searched for.

The new version addresses these defects. Subsection 231.3(3) now makes it clear that prior to the issuance of a search warrant under the Act a judge must be satisfied that there are reasonable grounds to believe that a particular offence has been committed under the Act and that a document or thing that may afford evidence of the commission of that offence is likely to be found in the building, receptacle or place specified in the application. Moreover, s. 231.3(4) requires particulars to be stated within the warrant as to what may be searched for and seized.

The constitutionality of s. 231.3 of the ITA has been considered in a number of lower court and appellate court decisions. The majority of these have upheld s. 231.3: see for example Kohli v. Moase (1987), 1987 CanLII 7770 (NB KB), 86 N.B.R. (2d) 15 (Q.B.), aff'd on other grounds (1989), 1988 CanLII 133 (NB CA), 55 D.L.R. (4th) 737 (N.B.C.A.), Solvent Petroleum, supra, and Kourtessis, supra. In my view, however, the amended legislation is still inadequate.

B. Applying Section 8 of the Charter

(1) Denial of Residual Discretion: Subs. (3)

This issue requires a decision as to whether legislation which authorizes a search or seizure must provide for a residual discretion in the judicial officer who issues the warrant. It is contended by the respondents and the Federal Court of Appeal so held that legislation that fails to do so violates s. 8 of the Charter. Reliance is placed on this Court's decision in Hunter, supra, and cases that have followed it. The appellants contend that this was not one of the conditions laid down by Hunter, that if it was it does not apply here and in any event the impugned section does provide a discretion that satisfies the dictates of s. 8.

In my view, an analysis of the principles on which Hunter was based shows that the exercise of a judicial discretion in the decision to grant or withhold authorization for a warrant of search was fundamental to the scheme of prior authorization which Dickson J. prescribed as an indispensable requirement for compliance with s. 8 in that case. The judgment makes very clear that the decision to grant or withhold the warrant requires the balancing of two interests: that of the individual to be free of intrusions of the state and that of the state to intrude on the privacy of the individual for the purpose of law enforcement. At pages 158-60 of the judgment, Dickson J. stated:

In my view the interests protected by s. 8 are of a wider ambit than those enunciated in Entick v. Carrington. Section 8 is an entrenched constitutional provision. It is not therefore vulnerable to encroachment by legislative enactments in the same way as common law protections. There is, further, nothing in the language of the section to restrict it to the protection of property or to associate it with the law of trespass. It guarantees a broad and general right to be secure from unreasonable search and seizure.

Like the Supreme Court of the United States, I would be wary of foreclosing the possibility that the right to be secure against unreasonable search and seizure might protect interests beyond the right of privacy, but for purposes of the present appeal I am satisfied that its protections go at least that far. The guarantee of security from unreasonable search and seizure only protects a reasonable expectation. This limitation on the right guaranteed by s. 8, whether it is expressed negatively as freedom from "unreasonable" search and seizure, or positively as an entitlement to a "reasonable" expectation of privacy, indicates that an assessment must be made as to whether in a particular situation the public's interest in being left alone by government must give way to the government's interest in intruding on the individual's privacy in order to advance its goals, notably those of law enforcement. [Emphasis in original.]

The circumstances in which these conflicting interests must be balanced will vary greatly. The strength of the interests will be affected by matters such as the nature of the offence alleged, the nature of the intrusion sought including the place to be searched, the time of the search and the person or persons who are the subjects of the search. The variability of the factors affecting the decision of the authorizing judge was stressed by Lamer J. (as he then was) in Descôteaux v. Mierzwinski, supra. This was a pre-Charter case in which this Court held that s. 443 (now s. 487) provided for a discretion when a warrant is sought before a justice under the Criminal Code. At page 889 Lamer J. said:

I come down on the side of the discretion, as it allows more effective judicial control of the police. Searches are an exception to the oldest and most fundamental principles of the common law, and as such the power to search should be strictly controlled. It goes without saying that the justice may sometimes be in a poor position to assess the need for the search in advance. After all, searches, while constituting a means of gathering evidence, are also an investigative tool. It will often be difficult to determine definitively the probative value of a particular thing before the police investigation has been completed. Be that as it may, there are places for which authorization to search should generally be granted only with reticence and, where necessary, with more conditions attached than for other places. One does not enter a church in the same way as a lion's den, or a warehouse in the same way as a lawyer's office. One does not search the premises of a third party who is not alleged to have participated in the commission of a crime in the same way as those of someone who is the subject of such an allegation.

In order to take account of the various factors affecting the balancing of the two interests, the authorizing judge must be empowered to consider all the circumstances. No set of criteria will always be determinative or sufficient to override the right of the individual to privacy. It is imperative, therefore, that a sufficient degree of flexibility be accorded to the authorizing officer in order that justice be done to the respective interests involved.

In Canadian Broadcasting Corp. v. Lessard, 1991 CanLII 49 (SCC), [1991] 3 S.C.R. 421, and Canadian Broadcasting Corp. v. New Brunswick (Attorney General), 1991 CanLII 50 (SCC), [1991] 3 S.C.R. 459, this Court considered the factors that should be taken into consideration by a justice of the peace when determining whether to issue a warrant for the search of the premises of a media organization pursuant to s. 487 of the Criminal Code, R.S.C., 1985, c. C-46. It was submitted that two requirements were constitutionally entrenched, namely that the Justice of the Peace must be satisfied that there was no investigative alternative for obtaining the material and, if one existed, that it had been pursued. In the course of rejecting the constitutional entrenchment of these two requirements, a majority of this Court stressed the importance of evaluating the reasonableness of a search in light of all the surrounding factors. Cory J. stated in Canadian Broadcasting Corp. v. New Brunswick (Attorney General), at p. 475:

Any search of premises is certain to be disquieting and upsetting. The invasion of privacy rights which a search entails is an important concern for all members of a democratic society. Some searches are obviously more intrusive and upsetting than others. For example, the search of a residence is likely to have graver consequences than a search of commercial premises which may be subject to statutory regulation and inspection. Because of its intrusive nature, a warrant to search any premises must only be issued when a justice of the peace is satisfied that all the statutory requirements have been met. In those situations where all the statutory prerequisites have been established, the justice of the peace should still consider all of the circumstances in determining whether to exercise his or her discretion to issue a warrant. It is not a step that can be taken lightly. This is particularly true when a warrant is sought to search the offices of a news media organization, where the consequences are likely to be disruptive of the media's role of gathering and publishing news. [Emphasis added.]

Moreover, in response to the argument that these two requirements are constitutionally entrenched prerequisites to the search of media offices, Cory J. commented at p. 478:

In my view, the assessment of the reasonableness of a search cannot be said to rest only upon these two factors. Rather all factors should be evaluated in light of the particular factual situation presented. The factors which may be vital in assessing the reasonableness of one search may be irrelevant in another. Simply stated, it is impossible to isolate two factors from the numerous considerations which bear on assessment of the reasonableness of a search and label them as conditional prerequisites. The essential question can be put in this way: taking into account all the circumstances and viewing them fairly and objectively can it be said that the search was a reasonable one?

It is the overall reasonableness of a search which is protected by s. 8 of the Charter. Certainly the potentially damaging effect of a search and seizure upon the freedom and the functioning of the press is highly relevant to the assessment of the reasonableness of the search. Yet neither s. 2(b) nor s. 8 of the Charter requires that the two factors set out in Pacific Press [Re Pacific Press Ltd. and The Queen (1977), 1977 CanLII 1922 (BC SC), 37 C.C.C. (2d) 487 (B.C.S.C.)] must always be met in order for a search to be permissible and constitutionally valid. It is essential that flexibility in the balancing process be preserved so that all the factors relevant to the individual case may be taken into consideration and properly weighed. [Emphasis added.]

In some situations this discretion will only be exercised subject to specified conditions being met and subject to restrictions and conditions with respect to the execution of the warrant that are specified in the authorization. This would apply, for example, in the case of the prospective search of a private dwelling. I referred to this in R. v. Thompson, 1990 CanLII 43 (SCC), [1990] 2 S.C.R. 1111, in connection with authorizations to wiretap in a dwelling. The authorizing judge must consider imposing conditions. The importance of the power to impose conditions and restrictions was emphasized by Lamer J. in Descôteaux at p. 891, the exercise of which was dependent on the existence of a residual discretion.

Not only is the existence of a discretion indispensable to the balancing of interests which Hunter envisaged but the requirement that the officer authorizing the seizure be independent and capable of acting judicially is inconsistent with the notion that the state can dictate to him or her the precise circumstances under which the right of the individual can be overborne. I agree with the statement of Morden J.A. in Minister of National Revenue v. Paroian, 1980 CanLII 1577 (ON CA), [1980] C.T.C. 131, at p. 138 that "The function of the judge is the most important safeguard. It is implicit in the provision that the judge is not to act as a rubber stamp." This statement was quoted with approval in Selye v. Quebec, [1982] R.D.F.Q. 173, at p. 176. This statement, which was made in a pre-Charter case, would apply with greater force in the era of the Charter. The concept of a rubber stamp role would be completely inconsistent with the role assigned to the judiciary as expressed by Dickson J. in Beauregard v. Canada, 1986 CanLII 24 (SCC), [1986] 2 S.C.R. 56, at p. 72:

Secondly, the enactment of the Canadian Charter of Rights and Freedoms (although admittedly not relevant to this case because of its date of origin) conferred on the courts another truly crucial role: the defense of basic individual liberties and human rights against intrusions by all levels and branches of government. Once again, in order to play this deeply constitutional role, judicial independence is essential.

Having found that a residual discretion is a constitutional requirement, the next question is whether s. 231.3(3) removes or impermissibly restricts this discretion. It is clear to me that the answer is yes. I would adopt the reasoning of the Federal Court of Appeal on this point, in preference to that of the British Columbia Court of Appeal in Kourtessis, supra. Section 231.3(1) states that, on an ex parte application, a judge "may" issue a warrant for the search of premises. However, s. 231.3(3) provides that a judge "shall" issue the warrant once satisfied that the three statutory conditions set out therein have been satisfied. As Hugessen J.A. pointed out, the word "shall" is normally to be construed as imperative. This rule of construction is embodied in s. 11 of the Interpretation Act, R.S.C., 1985, c. I-21. The plain effect of the use of the word in s. 231.3(3) is as the Federal Court of Appeal held in Solvent Petroleum, supra, at p. 24 (excerpted in Baron at p. 695):

Subsection 231.3(1) states that "A judge may". Subsection 231.3(3) states that "A judge shall". It would therefore appear from the language of subsection 231.3(3) that if the issuing judge comes to the conclusion that the conditions of paragraphs 231.3(3)(a), (b) and (c) are met, he need not nor is he permitted to consider whether there has been a previous substantive voluntary compliance by the taxpayer, whether further documents might be remitted voluntarily, or whether the applicant for the warrants has taken all reasonable steps to obtain the information from an alternative source before applying for the warrants. In brief, if the conditions are met, he must issue the warrant.

As this Court said in Re Manitoba Language Rights, 1985 CanLII 33 (SCC), [1985] 1 S.C.R. 721, at p. 737, the presumption that the word "shall" is intended to be mandatory should be followed unless:

such an interpretation of the word "shall" would be utterly inconsistent with the context in which it has been used and would render the sections irrational or meaningless.

Hugessen J.A. found no reason to depart from the presumption, and I would adopt what he said in this regard, at p. 697:

There is, as it seems to me, absolutely nothing in the context of section 231.3 of the Income Tax Act which would render an imperative interpretation of the word "shall" in subsection 231.3(3) inconsistent with the balance of the section or make it irrational or meaningless. Indeed, I can see nothing in the section which would point to a permissive or discretionary meaning for "shall". On the contrary, the draughtsman has clearly used the permissive "may" where this is appropriate (as for example in subsection 231.3(1) and (5)) and the use of "shall" in subsection 231.3(3) (as well, it may be noted, as in subsection 231.3(6)) has every appearance of being a deliberate choice.

Furthermore, the whole of section 231.3 represents a change from the previous law [s. 231(4)] which was couched in terms that were clearly permissive and left a discretion in the hands of the judge authorizing the seizure. Also, as noted above, the text of subsection 231.3(3) is unique and differs remarkably from all other Canadian search warrant provisions [which are invariably permissive]. I cannot view such a change from both previous and current practice as being anything but intentional.

I also agree with Hugessen J.A. that the existence of a discretion is indispensable to the imposition of conditions to the issue of the warrant. As he states, this conclusion follows from what was said by Lamer J. in Descôteaux, supra. Although I would not go so far as to hold that Parliament had, in the absence of express language, removed the power to specify the terms upon which the warrant is executed, I agree that the power to attach pre-conditions to the issue of the warrant cannot be exercised once the statutory criteria for the issue of the warrant have been met.

Moreover, I do not accept the position taken by Reed J. at trial and adopted by the appellants that a judge's inherent power to prevent an abuse of the court's process or a violation of a constitutional right continues to confer on an issuing judge the discretion to refuse to issue a warrant in those circumstances. As Hugessen J.A. concluded, at p. 698, if the conditions set out in the subsection are exhaustive of all the conditions precedent of a reasonable search, "an application which meets all of those conditions cannot be an abuse of the process".

Finally, I observe that the British Columbia Court of Appeal held in Kourtessis, supra, that s. 231.3(3) preserved the crucial "balance wheel" function of the issuing judge, and the removal of the discretion to refuse to issue a warrant when all statutory criteria are met is of no consequence. I agree with Hugessen J.A. in rejecting this line of reasoning. As I have already indicated, in order to fulfil properly the "balance wheel" role required by s. 8 of the Charter, a judge must be able to weigh all the surrounding circumstances to determine whether in each case the interests of the state are superior to the individual's right to privacy. By restricting the factors that a judge may consider, Parliament has improperly restricted a judge's ability to assess the reasonableness of a search. For example, as Reed J. noted, s. 231.3(3) precludes a judge from taking into consideration whether reasonable alternative sources for obtaining information sought from the search of a lawyer's office exist, notwithstanding the requirement in Descôteaux, supra, that this factor be considered before a search warrant under what is now s. 487 of the Criminal Code, R.S.C., 1985, c. C-46, is issued.

Bearing all this in mind, I conclude that s. 231.3(3), by using the words "shall issue", denies the issuing judge the discretion to refuse to issue a warrant where in all the circumstances a search or seizure would be unreasonable. In fact, the subsection makes it possible for a judge to be statutorily bound to authorize an unreasonable search or seizure. For this reason the use of the word "shall" brings s. 231.3(3) into conflict with s. 8 of the Charter.

It was submitted, however, that the above conclusion, while it might be correct in a Hunter v. Southam Inc. situation, has no application to the ITA because it is a regulatory statute and the criteria of Hunter must be relaxed. I accept that the majority characterized the ITA as a regulatory statute in McKinlay Transport Ltd. v. The Queen, supra. In my opinion, however, in the very different circumstances of this case, while that classification may affect the exercise of discretion by the authorizing judge, it is not a basis for reading the requirement for a residual discretion out of s. 8. The distinction between the nature of the state intrusion in McKinlay and this case was clearly drawn by Wilson J. in her majority reasons. At pages 649-50, she states:

In my opinion, s. 231(3) [sic] provides the least intrusive means by which effective monitoring of compliance with the Income Tax Act can be effected. It involves no invasion of a taxpayer's home or business premises. It simply calls for the production of records which may be relevant to the filing of an income tax return.

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

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

The point is that the characterization of certain offences and statutory schemes as "regulatory" or "criminal", although a useful factor, is not the last word for the purpose of Charter analysis. In R. v. Wholesale Travel Group Inc., 1991 CanLII 39 (SCC), [1991] 3 S.C.R. 154, a case in which the false/misleading advertising offence in the Competition Act, R.S.C. 1970, c. C-23, as amended, was attacked under ss. 7 and 11(d) of the Charter, Justice La Forest said at p. 209 that "what is ultimately important are not labels (though these are undoubtedly useful), but the values at stake in the particular context", and held that the potential five-year prison term upon conviction of the offence was a deprivation of liberty requiring much greater safeguards to conform with s. 7 or 11(d) than the provisions at issue in Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), 1990 CanLII 135 (SCC), [1990] 1 S.C.R. 425.

This logic, in my view, applies in the present case. Section 231.3 contemplates and authorizes the physical entry and search, against the will of the occupant, of private premises, even those occupied by innocent third parties against whom no allegation of impropriety is levelled. The purpose of the search is to provide evidence to be used in the prosecution of ITA offences. Physical search of private premises (I mean private in the sense of private property, regardless of whether the public is permitted to enter the premises to do business) is the greatest intrusion of privacy short of a violation of bodily integrity. It is quite distinct from compelling a person to appear for examination under oath and to bring with them certain documents, under a subpoena duces tecum (Thomson Newspapers, supra), or to produce documents on demand (McKinlay Transport, supra). Both Justices La Forest and L'Heureux-Dubé acknowledged in Thomson Newspapers, supra, at pp. 520 and 594, respectively, that the power to search premises is more intrusive of an individual's privacy than the mere power to order the production of documents.

The intrusive nature of a physical search has been acknowledged by this Court on various occasions: see for example Canadian Broadcasting Corp. v. New Brunswick (Attorney General), supra. Warrants for the search of any premises constitute a significant intrusion on the privacy of an individual that is both upsetting and disruptive. Confidences, unrelated to the offence being investigated, may be subject to scrutiny by strangers. One should not lose sight of the fact that s. 231.3 allows for the search not only of business premises but also of the homes of the taxpayers as well as the premises of innocent third parties. Moreover, the premises of individuals whose relationship with the impugned taxpayer may be subject to professional privileges and whose offices may also contain confidential information regarding other individuals might also be subject to a search.

Given the intrusive nature of searches and the corresponding purpose of such a search to gather evidence for the prosecution of a taxpayer, I see no reason for a radical departure from the guidelines and principles expressed in Hunter, supra. The effect of any lessened expectation of privacy by reason of the character of the ITA will no doubt affect the exercise of discretion by an authorizing judge but cannot justify elimination of it.

This is enough to dispose of the appeal. I will go on, however, to consider the other grounds on which the section was attacked and defended, as these were fully argued. The resolution of these additional grounds could affect the remedy which is appropriate.

(2) "Reasonable Grounds" to Believe: Subs. (3)

The second argument raised by the taxpayers in these two appeals revolves around a distinction between "reasonable grounds" and "reasonable and probable grounds". The argument is that the requirement in s. 231.3(3) of "reasonable grounds" to believe the statutory criteria are met is constitutionally insufficient, since it is a lower standard than "reasonable and probable grounds", and only the latter will satisfy s. 8. The argument owes its (precarious) existence in part to passages in Hunter, supra, which are invoked by both sides. On the one hand, Dickson J. (as he then was) said, at p. 168, that "reasonable and probable grounds, . . . constitutes the minimum standard". On the other, he said, at p. 167, that the phrases "reasonable grounds to believe" in s. 443 of the Criminal Code, R.S.C. 1970, c. C-34 (now R.S.C., 1985, c. C-46, s. 487) and "probable cause" in the American Fourth Constitutional Amendment were identical.

In my view nothing turns on the omission of the word "probable" from s. 231.3(3). The standard that the subsection sets out is one of credibly based probability, which is the standard required by s. 8 of the Charter. I respectfully disagree with Locke J.A.'s holding in Kourtessis, supra, that "reasonable" is not the same as "reasonable and probable", and I find that his use of an interpretative "gloss" on the word to make it conform to constitutional requirements is an unnecessary strain on the meaning of the word. I prefer the reasoning of Lysyk J. in the British Columbia Supreme Court on this point. Lysyk J. noted that Hunter, supra, cast no doubt on the formulation "reasonable grounds" in s. 443 (now s. 487) of the Criminal Code, which is identical in that respect to s. 231.3(3) of the ITA. He held that the distinction relied on by the taxpayers was a "refined distinction" of the type found in American jurisprudence under the Fourth Amendment, with its "probable cause" warrant clause, to be avoided in the interpretation of s. 8 of the Charter: R. v. Rao (1984), 1984 CanLII 2184 (ON CA), 12 C.C.C. (3d) 97 (Ont. C.A.), leave to appeal refused, [1984] 2 S.C.R. ix.

To my mind, Hunter, supra, does not give rise to legitimate controversy on this point. That decision required reasonable "and probable" grounds and simultaneously established that the two words import the same standard. "Reasonableness" comprehends a requirement of probability. As Wilson J. said in R. v. Debot, 1989 CanLII 13 (SCC), [1989] 2 S.C.R. 1140, at p. 1166, aff'g (1986), 1986 CanLII 113 (ON CA), 30 C.C.C. (3d) 207 (Ont. C.A.), at p. 219, the standard to be met in order to establish reasonable grounds for a search is "reasonable probability". It appears that the normal statutory phrase in Canada is "reasonable grounds", and that some of the remaining exceptions requiring "reasonable and probable grounds" have been amended in recent years, one imagines for the sake of uniformity, by deleting "and probable": see Locke J.A.'s reasons in Kourtessis, supra, at pp. 24-25. This use of "reasonable grounds" as the basis for the issuance of search warrants is not constitutionally fatal. Rather, it meets the requirements of s. 8.

(3) Standard for the Discovery of Evidence: Para. (3)(b)

The next point raised by the taxpayers is that s. 231.3(3)(b) waters down the minimum constitutional standard for the probability that the search will unearth evidence. This argument was accepted by the Federal Court of Appeal. The taxpayers rely on the following passage from the reasons of Dickson J. in Hunter, at p. 167:

The problem is with the stipulation of a reasonable belief that evidence may be uncovered in the search. Here again it is useful, in my view, to adopt a purposive approach. The purpose of an objective criterion for granting prior authorization to conduct a search or seizure is to provide a consistent standard for identifying the point at which the interests of the state in such intrusions come to prevail over the interests of the individual in resisting them. To associate it with an applicant's reasonable belief that relevant evidence may be uncovered by the search, would be to define the proper standard as the possibility of finding evidence. This is a very low standard which would validate intrusion on the basis of suspicion, and authorize fishing expeditions of considerable latitude. It would tip the balance strongly in favour of the state and limit the right of the individual to resist, to only the most egregious intrusions. I do not believe that this is a proper standard for securing the right to be free from unreasonable search and seizure.

This passage underscores the need to protect individuals against unreasonable searches in the form of "fishing expeditions" by the state. This Court established in Hunter that a standard of credibly based probability rather than mere suspicion should be applied in determining when an individual's interest in privacy is subordinate to the needs of law enforcement.

In my view, the taxpayers' argument and Hugessen J.A.'s holding that s. 231.3(3)(b) fails to meet this criterion is based on a misreading of the paragraph. There are important differences between the statutory language at issue here and in Hunter. The impugned section in Hunter provided that where the Director of Investigation and Research of the Combines Investigation Branch believed there "may be evidence" relevant to an inquiry, officers may search for and seize anything that "may afford ... evidence": Combines Investigation Act, R.S.C. 1970, c. C-23, s. 10(1). The provision at issue in the present litigation requires reasonable grounds to believe, inter alia, that something that "may afford evidence" is "likely to be found". This formulation does not make the standard the "possibility of finding evidence", which was rejected as too low in Hunter (at p. 167; emphasis in original). Rather, it meets the "credibly based probability" standard required by s. 8. The paragraph, by using the word "likely" in respect of the chance of finding the thing sought, imports the criterion of probability. The legislation in Hunter, supra employed the lower threshold of "may" in respect of the chance of finding the thing sought, which was held to be unacceptable. When Dickson J. stated that at a minimum there must be reasonable and probable grounds to believe there is evidence to be found at the place of search (at p. 168), it must be remembered that he was addressing himself to the legislative requirement that "evidence may be found", which made mere possibility of finding evidence the criterion. Dickson J.'s reasons in Hunter make it clear that the controlling standard is credibly-based probability, not mere possibility. The word "likely" meets this standard. Its use in s. 231.3(b) is reinforced by the explicit terms of s. 231.3(c).

The word "may" is used in a different sense in s. 231.3(3)(b), namely regarding the evidential value of the thing sought. The use of the word "may" regarding the use of the thing found as evidence in a prosecution does not detract from the standard of probability of finding the thing sought; rather, it recognizes the nature of the investigative process. The concern in Hunter was with the probability of finding the things sought, not with the certitude that the things found will be used as evidence. The taxpayers do not restrict their argument to Hunter, however. They also refer to decisions striking down s. 111(1) of the Customs Act, R.S.C., 1985, c. 1 (2nd Supp.), which employed the words "there may be found": see, for example, Goguen v. Shannon (1989), 1989 CanLII 158 (NB CA), 50 C.C.C. (3d) 45 (N.B.C.A.); Nima v. McInnes (1988), 1988 CanLII 3201 (BC SC), 45 C.C.C. (3d) 419 (B.C.S.C. in Chambers). Their reliance on these decisions is misplaced, however. The objectionable language in the Customs Act had to do with the standard for finding the things sought, not for affording evidence of the offence.

The use of the word "may" regarding the use of the thing found as evidence in a prosecution simply reflects one of the simple realities of the investigation of offences. It is impossible to know with certainty at an early stage in any investigation what particular items will provide evidence in a trial. I concede that in some police or other official investigations there will be some items the evidential value of which is known beforehand and of which it can be said with confidence that "this thing will probably be found and if found, will be used as evidence at trial". But this standard cannot be expected of every item that may be relevant to the commission of the offence. Moreover, even in what appear to be the clear cases, it is often impossible to know with certainty the evidential value of the things sought. That will often depend on further investigation and analysis after the search warrant is executed. Accordingly, to exact a higher standard would unduly restrict investigation and could not have been intended as a prerequisite to a valid search and seizure.

I conclude, therefore, that the standard "may afford evidence", when coupled with a requirement of credibly based probability that the things sought are likely to be found, passes constitutional muster. I find support for this conclusion in the fact that, at common law, "may afford evidence" was considered a sufficient test for the issue of a warrant. As one judge put it in a fraud case:

It is not necessary for the magistrate to satisfy himself that the documents sought to be searched in the case before this Court can prove the fraud alleged to have been committed. He need not adjudicate upon the question whether the offence was committed at the time he issued the search warrant, nor does he need to adjudicate on the question whether the documents sought can in fact assist in establishing the commission of the offence. He need only satisfy himself that there were reasonable grounds for believing that such documents could be of assistance in establishing the commission of the offence and that they were in the premises in respect of which the search warrant is sought. [Wiens v. The Queen (1973), 1973 CanLII 1634 (MB QB), 24 C.R.N.S. 341 (Man. Q.B.), at p. 347.] [Emphasis added.]

Although counsel for the Attorney General of Canada is right in conceding, as he does in his factum, that the common law standard cannot dictate the constitutional standard, I agree with his submission that the logic of the common law decisions applies with added force to the complex commercial fraud and tax evasion cases of the modern era. As Hartt J. said in R. v. Burnett, 1985 CanLII 6067 (ON SC), [1985] 2 C.T.C. 227 (Ont. H.C.), at pp. 238-39:

Where the alleged misconduct is of a complex nature in which funds are allegedly funnelled through a number of interrelated companies with a view to hiding their disposition, it seems to me that the number of documents that may afford evidence of such a violation may well be very great indeed. In such a case, an entire class of documents may in fact be necessary to trace the transactions. Granted, many documents in a file may not, in the final analysis, be relevant to any tax violation. However, it may be impossible to preclude their relevance without a detailed examination of all the documents seized.

And, in Re Print Three Inc., supra, at p. 397, McKinnon A.C.J.O. for the court (Martin and Thorson JJ.A. concurring) stated:

... because of the extent and complexity of business affairs, made possible by modern technology and merchandising methods, it is impossible to define with exact precision the documents sought in cases involving fraud or tax evasion.

Given the inherent problems in specifying the particular items sought to be seized and determining how they fit into a complex pattern of economic activity, the appropriateness of the "may afford evidence" standard in the context of income tax investigations is apparent.

I therefore respectfully disagree with Hugessen J.A.'s accession to the taxpayers' argument on this point (at p. 708), and hold that the language of s. 231.3(3)(b) is consistent with the right to be secure against unreasonable search or seizure in s. 8 of the Charter.

(4) Wholesale Search And Seizure: Subs. (5)

Finally, s. 231.3(5) is attacked for allowing the same kind of "wholesale search and seizures" without prior authorization found under the predecessor legislation to violate s. 8 of the Charter. The Attorney General of Canada and the interveners argued that given the nature of the documents involved the provision is a reasonable extension if not a reflection of the "plain view" doctrine permitting the seizure of articles in plain view. The taxpayers submit that s. 231.3(5) goes beyond plain view seizures since it will rarely be apparent whether a particular document constitutes evidence of a violation of the ITA. The difficulty in dealing with this question is that we face it in a factual vacuum since there is no indication that documents were seized in reliance on this provision. We are always loathe to adjudicate constitutional issues in the absence of a factual foundation: Danson v. Ontario (Attorney General), 1990 CanLII 93 (SCC), [1990] 2 S.C.R. 1086; MacKay v. Manitoba, 1989 CanLII 26 (SCC), [1989] 2 S.C.R. 357, at pp. 361 and 366; R v. Edwards Books and Art Ltd., 1986 CanLII 12 (SCC), [1986] 2 S.C.R. 713, at pp. 762 and 767-68. I think the issue should be left to be resolved until such time as this Court is presented with a situation in which the provision was relied upon to seize documents. In view of the remedy which I have adopted, s. 231.3 will have to be re-enacted and therefore the terms of this subsection may warrant reconsideration. Moreover, I believe that the provision is couched in language that is susceptible to interpretation so as to confine it within constitutional limits on the basis outlined by Lamer J. (as he then was) in Slaight Communications Inc. v. Davidson, 1989 CanLII 92 (SCC), [1989] 1 S.C.R. 1038, at p. 1078. On this basis, the authority to seize might be limited to documents that could be seized on the basis of the "plain view" doctrine with appropriate refinements to comport with the special circumstance of income tax investigation.

C. Section 1

As I said at the outset of my reasons, I do not intend to engage in any s. 1 analysis since neither the appellants nor the interveners in this appeal, nor, indeed, the respondent or the interveners in Kourtessis, have made any submissions or directed us to any evidence capable of demonstrating that s. 231.3, if unreasonable for the purposes of s. 8, is yet reasonable and demonstrably justified for the purposes of s. 1. The burden was on the government to establish that the law constituted a reasonable limit, and it has made no attempt to do so. As observed by Dickson J. in Hunter, it is problematic as to "what further balancing of interests, if any, may be contemplated by s. 1, beyond that envisaged by s. 8" (at pp. 169-70). Presumably for the same reason, other cases in this Court which have considered s. 8 of the Charter have not addressed s. 1.

D. Remedy

The Federal Court of Appeal by its formal order quashed the search warrants and declared and ordered the return of the documents seized under the authority of the warrant. The reasons, however, include "a declaration that s. 231.3 of the Income Tax Act is of no force or effect". This declaration is omitted from the formal judgment but I assume this was an oversight. No submissions were made by the appellants to the effect that, if the appeal failed, the relief granted by the Court of Appeal should be varied. The order sought in the appellants' factum is that "the appeal be allowed, with costs, and the application to set aside the search warrant be dismissed". The Attorney General of Canada also submits that the constitutional question be answered in the negative. Technically, therefore, the issue of a remedy other than that which was granted by the Court of Appeal is not properly before us.

Furthermore, there is no question that striking out s. 231.3 is an appropriate, if not the most appropriate remedy. The subsection I have found constitutionally inadequate is the one prescribing the conditions precedent for the issuance of a warrant. Issuing the warrant is the linchpin of the whole scheme, and all the other parts of the section depend for their relevance upon, and are inextricably caught up with, the valid issuance of a search warrant. Without the power to issue a warrant, the rest of the section is meaningless. "Reading down" by amending the clear intent of a statutory provision may be appropriate in some cases. The decision to do so requires a determination that this remedy will constitute the lesser intrusion into the role of the legislature consistent with upholding the values and objectives of the Charter. See Osborne v. Canada (Treasury Board), 1991 CanLII 60 (SCC), [1991] 2 S.C.R. 69, at p. 104, and Schachter v. Canada, 1992 CanLII 74 (SCC), [1992] 2 S.C.R. 679, at p. 707. This is a determination that I am not prepared to make in the absence of submissions by the Attorney General of Canada on behalf of the Government of Canada that reading down will constitute a lesser intrusion.

VII. Disposition

I would dismiss the appeal with costs. The judgment of the Court of Appeal is restored but its formal order should be amended to include the declaration with respect to the invalidity of s. 231.3. I would answer the constitutional question as follows:

Question: Whether s. 231.3 of the Income Tax Act, S.C. 1970-71-72, c, 63, as amended by S.C. 1986, c. 6, limits the rights and freedoms guaranteed by ss. 7 and 8 of the Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B of the Canada Act, 1982 (U.K.), 1982, c. 11, and is consequently of no force or effect pursuant to s. 52 of the Constitution Act, 1982, Schedule B, Canada Act, 1982 (U.K.), 1982, c. 11.

Answer: Yes, in that s. 231.3(3) violates s. 8.

Appeal dismissed with costs. Section 231.3(3) of the Income Tax Act violates s. 8 of the Charter and is of no force or effect.

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

Solicitors for the respondents: Phillips & Vineberg, Montreal.

Solicitor for the intervener the Attorney General for Ontario: The Attorney General for Ontario, Toronto.

Solicitor for the intervener the Attorney General of Quebec: The Attorney General of Quebec, Montreal.

• Stevenson J. took no part in the judgment.