ONTARIO
SUPERIOR COURT OF JUSTICE’
COURT FILE NO.: 10-20037
DATE: 2012-03-06
IN THE MATTER of the Tobacco Tax Act , R.S.O.1990, c.T. 10
B E T W E E N:
GRAND RIVER ENTERPRISES SIX NATIONS LTD.
Brian Duxbury, Amanda J. McInnis, Chantelle Montour and Ben Petten for the Applicant
Applicant
- and -
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and MINISTER OF FINANCE
Frank S. Stopar and Walter Kim for the Respondents
Respondents
HEARD: at Hamilton on January 17 and 19, 2012
REASONS FOR DECISION
CAVARZAN J.
[ 1 ] Grand River Enterprises Six Nations Ltd. (GRE) makes this application pursuant to subsections 24(5) and 29 (1.2) of the Tobacco Tax Act , R.S.O. 1990, c.T.10 (TTA) for declarations and other relief. This is a case primarily about the right to possess tobacco and, in particular, “unmarked” i.e., untaxed cigarettes.
[ 2 ] GRE seeks declarations that it has a right to possess a shipment of cigarettes seized by the authorities pursuant to s.24 of the TTA , and that the seizure in this case was unlawful.
[ 3 ] It appears that GRE has brought some eleven other such applications relating to subsequent seizures of tobacco products. Those applications have been adjourned sine die pending the outcome of this one. Also outstanding is a separate action, GRE et al. v. Her Majesty the Queen in which the constitutional validity or applicability of various provisions of the TTA and the Indian tobacco quota regulations under the TTA is challenged.
[ 4 ] Issues of constitutional validity or applicability are not engaged in this application other than the question of whether the search and seizure in this case conformed to the requirements of S. 8 of the Canadian Charter of Rights and Freedoms (the Charter).
Background
[ 5 ] The facts of the case are these. GRE was incorporated in April, 1996. Since 1997 it has manufactured tobacco products on the Six Nations of the Grand River Reserve. Among the products manufactured are unmarked cigarettes. GRE sells unmarked cigarettes to purchasers located on Six Nations Reserve, other First Nations reserves in Ontario, as well as customers in the United States, Mexico and Germany.
[ 6 ] In 2010, GRE held the following permits issued under the TTA in respect of the manufacture, sale, possession, storage, wholesaling and transportation of tobacco products to various Indian/First Nations reserves in Ontario:
Exporter Certificate under s. 5(1) TTA
Importer Certificate under s. 5(1) TTA
Manufacturer Certificate under s. 7(1) TTA
Interjurisdictional Transporter Certificate under s. 6(1) TTA
Permit under s. 9(1) TTA to purchase and sell unmarked cigarettes
Wholesaler’s Permit under s. 3(1) TTA .
[ 7 ] Since 1998, GRE has filed with the Ministry of Finance (the Minister of Finance is responsible for the administration of the TTA ), detailed monthly reports regarding the manufacture, transportation and sale of its tobacco products. The reports and accompanying invoices identify the reserve locations and retailers there who are purchasing GRE products.
[ 8 ] At about 4:50 a.m. on May 4, 2010, Constable Timothy Graham of the Ontario Provincial Police conducted an ordinary Highway Traffic Act stop of a cube van on a public highway about 10 kilometres from GRE’s location on the reserve.
[ 9 ] Constable Graham asked the driver of the cube van (Mr. Lyle Henry) [1] , “Where are you off to this morning?” Mr. Henry answered that he was going to “Hiawartha to drop off cigarettes.” Based on that answer, Graham then asked Henry whether he possessed permits for the cigarettes. Henry handed over a clipboard with various permits, one of which, the Interjurisdictional Transporter Registration Certificate (TR Certificate), had expired on December 31, 2009.
[ 10 ] When Constable Graham pointed out the expiry date to Henry, Henry advised him that a 2010 permit had been issued. Henry offered to have it brought to the stop location from GRE’s office a short distance away. Instead, Graham resorted to a flip chart provided by the Ministry and called a pager number which was not answered. Sometime later, he received a return call from Joseph Lau, a senior investigator with the Ministry of Revenue. Graham advised Lau of the stop and of the fact that there was an expired permit. He did not tell him about Henry’s offer to get the 2010 permit.
[ 11 ] Mr. Lau was able to confirm that GRE had indeed been issued a 2010 permit. He did not communicate this discovery to Constable Graham. In his affidavit of July 9, 2010, Joseph Lau deposed as follows at paras. 8 to 14:
I was informed by Constable Graham that the driver (Henry Lyle) told him that he was transporting tobacco products to an Indian reserve.
I was informed by Constable Graham that the driver (Henry Lyle) was unable to produce a valid permit for the tobacco being transported.
I then discussed the matter with Jill Eymann, Senior Manager, Tobacco Operations.
At 5:35 a.m. I contacted Constable Graham, and pursuant to Section 24 of the TTA , authorized him, Constable Steven Haist, and Constable Sylvie Brotherton to search the vehicle and seize any tobacco products, cell phones, GPS equipment, and documents related to the tobacco products.
I was informed by Constable Graham that there were approximately 125 cases of cigarettes.
I then authorized Constable Graham to issue the driver (Henry Lyle) and a passenger (Lester Martin) a Part III Summons for possession of unmarked cigarettes contrary to subsection 29(1) of the TTA .
I am a delegate of the Minister for the purpose of authorizing a search and seizure pursuant to section 24 of the TTA . Attached hereto and marked as “Exhibit B” is a copy of the Delegation of Authority under the TTA.
[Underlining added]
[ 12 ] The underlined portions of the above statements reflect Mr. Lau’s (and perhaps the respondents’) view of the scope of authority delegated to Ministry officials.
[ 13 ] As discussed below, this purported exercise of delegated authority by remote control of police officers in the field is problematic.
[ 14 ] The tobacco seized by Constable Graham included the following brands: Sago, DK’s, Ménage, Putters, Gold Leaf and Wild Honey. Invoices seized by Graham indicate that some of the unmarked cigarettes did not belong to GRE, but rather were owned by Arrow Express Inc. Arrow Express Inc. did not hold any licences, permits, designations or registrations under the TTA .
[ 15 ] GRE was not designated as a supplier of unmarked cigarettes by any reserve retailer as required by O. Reg. 649/93 under the TTA . Of the 12 reserve retailers to whom cigarettes were being delivered only 5 had the requisite designation under the TTA as a reserve retailer.
[ 16 ] Many of the permits issued to GRE contained conditions and restrictions. The section 9 permit to purchase and sell unmarked cigarettes contained conditions and restrictions as follows:
GRE is authorized to possess unmarked cigarettes for sale to authorized First nations retailers located on reserves in Ontario.
The sales contemplated in 1) above must not exceed each retailer’s allocation established by the allocation system authorized by the Tobacco Tax Act and its regulations.
The permit to purchase and sell unmarked cigarettes is for “Sago” brand cigarettes.
[ 17 ] Prior to being issued permits, GRE entered into an agreement with the Minister on October 6, 1998 wherein it agreed to comply with the requirements of the TTA , including the allocation system imposed by O. Reg. 649/93 .
[ 18 ] The totality of the evidence on this application confirms the respondents’ view that GRE has never intended to comply with the requirements of the TTA or O. Reg. 649/93 . Subsequent to the dates of the above agreement and of the issuing of the permits in question, GRE began to produce and sell new brands such as Dk’s, Putters, Wild Honey and Ménage.
[ 19 ] Upon cross-examination of GRE’s president, Steve Williams, on his affidavit of May 14, 2010 in support of the application, he confirmed that:
a) GRE does not ascertain whether a First Nations purchaser is an authorized retailer.
b) GRE does not ascertain whether a First Nations purchaser has designated GRE as a supplier pursuant to O. Reg. 649/93 .
c) GRE does not ascertain or track whether a First Nations purchaser is within its allocation amount.
d) GRE’s sales to authorized reserve retailers are far in excess of the allocation available to the retailers.
e) GRE is indifferent to whether or not a reserve retailer had designated someone else as its supplier, yet purchased from GRE.
f) GRE takes the position that the allocation system is illegal and that it does not need to comply with the requirements of O. Reg. 649/93 .
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