[2000] 2 F.C. 292
A-50-97
Sandra Gernhart (Appellant)
v.
Her Majesty the Queen (Respondent)
Indexed as: Gernhart v. Canada (C.A.)
Court of Appeal, Rothstein, Noël and Sexton JJ.A.— Ottawa, September 21 and November 1, 1999.
Income tax — Seizures — Where taxpayer appeals assessment, ITA, s. 176(1) providing MNR must transfer all appellant’s tax documents to T.C.C., documents thereupon open to public scrutiny — Even though only small degree of privacy attaching to tax returns, Act, s. 176(1) unconstitutional as authorizing unreasonable seizure, contrary to Charter, s. 8 and unjustified by Charter, s. 1.
Constitutional law — Charter of rights — Unreasonable search or seizure — Income Tax Act, s. 176(1) providing MNR must, where taxpayer appeals assessment, transfer all appellant’s tax documents to T.C.C., documents thereupon open to public inspection — Even though only small degree of privacy attaching to tax returns, Act, s. 176(1), admittedly no longer serving useful purpose, unconstitutional as authorizing unreasonable seizure, contrary to Charter, s. 8 and unjustified under Charter, s. 1 — Seizure within Charter, s. 8 not limited to “investigative activities”.
Judges and Courts — Tax Court of Canada Rules (General Procedure), s. 124 treating documents transmitted by MNR as “part of the record of the Court” but not evidence unless tendered as such — Inappropriate for judge to examine record as may contain material not adduced in accordance with rules of evidence — In our adversarial system, trial not scientific exploration with judge acting as research director.
When the taxpayer appealed the assessment of her 1994 tax return to the Tax Court of Canada, subsection 176(1) of the Income Tax Act (ITA) required the Minister of National Revenue to transmit to the Tax Court copies of all returns, notices of assessment, notices of objections and notifications that were relevant to the appeal, and, by the operation of section 16 of the Tax Court of Canada Rules (General Procedure), all of those documents thereupon became available to the public at large.
The taxpayer, seeking to protect the confidentiality of its tax return, brought an application before the Federal Court, Trial Division for a declaration that subsection 176(1) of the ITA was unconstitutional because it authorized an unreasonable seizure, contrary to section 8 of the Charter. Having distinguished the leading cases in the Supreme Court of Canada on unreasonable seizure on the basis that they addressed the application of section 8 of the Charter during “investigative activities”, the Trial Division Judge found that the mere transfer of these documents to the Court for an appeal could not be construed as a seizure and dismissed the application. This was an appeal from that decision.
Held, the appeal should be allowed.
The first issue was whether the transfer of all of the documents from the MNR to the Tax Court pursuant to subsection 176(1) of the ITA constituted an unreasonable seizure, contrary to section 8 of the Charter.
When a taxpayer files a tax return, the taxpayer has a reasonable expectation of privacy, by reason of section 241 of the ITA. The MNR must hold a taxpayer’s confidential tax return subject to a duty to respect a taxpayer’s dignity and privacy.
Section 8 of the charter is not confined to circumstances where an investigation occurs. In the present case, a seizure took place by reason of the operation of subsection 176(1) of the ITA. Charter section 8 does not distinguish between seizures made during investigations and those made under other circumstances. There was no logic which would dictate such a differentiation.
The low expectation of privacy with respect to information about one’s income is tempered by an expectation that demands for information have limits, and will be administered under terms that are fair and reasonable: R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627. Subsection 176(1) of the ITA constitutes a significant intrusion on the privacy interests of an individual. Even if one assumes that only a small degree of privacy attaches to a taxpayer’s return, that small degree of privacy would inevitably be shattered by disclosing the taxpayer’s return to the world at large.
At a time when photocopies could not easily be made, subsection 176(1) provided a benign method of furnishing adjudicators with information about tax disputes that they were to hear. It was admitted that subsection 176(1) had, by reason of developments in the social, technological and legal fields, become an historical aberration that no longer served any useful purpose.
Subsection 176(1) permitted an unreasonable seizure. While the provision is contained in the ITA, and while a tax return is generally subject to a low expectation of privacy, the degree of intrusion on a taxpayer’s privacy interest is potentially enormous. Subsection 176(1) creates the potential for any person to view a taxpayer’s return, whether or not the return is eventually tendered as evidence at trial. Given the MNR’s admission that subsection 176(1) no longer served any valid purpose, this intrusion, in turn, was not counterbalanced by a sufficiently important government objective. One of the purposes of the Charter is to ensure that legislation keeps pace with the times.
The second issue was whether subsection 176(1) of the ITA constituted a reasonable limit within the meaning of section 1 of the Charter.
The MNR’s admission also meant that subsection 176(1) of the ITA failed the first part of the requirements established in The Queen v. Oakes, [1986] 1 S.C.R. 103 with respect to section 1 of the Charter, which requires government to demonstrate that the unconstitutional provision meets “a sufficiently important objective.”
Even though the taxpayer sought only to challenge the public disclosure of her tax return, subsection 176(1) of the ITA should, in accordance with the Supreme Court of Canada decision in Schachter v. Canada, [1992] 2 S.C.R. 679, be struck down in its entirety.
It is inappropriate for judges to be examining the Court record, which may contain material that has not been adduced in accordance with the rules of evidence, in the presence of both parties. To do so is inconsistent with our adversarial system in which the role of the trial judge is not that of a research director: Phillips et al. v. Ford Motor Co. of Canada et al., [1971] 2 O.R. 637 (C.A.).
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], ss. 1, 8.
Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44], s. 52(1).
Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 169(1) (as am. by S.C. 1994, c. 7, Sch. II, s. 140), 176(1), 239(2.2) (as am. idem, Sch. VIII, s. 136), 241(1) (as am. idem, s. 137; 1998, c. 19, s. 236), (2) (as am. by S.C. 1994, c. 7, Sch. VIII, s. 137), (3) (as am. idem; 1998, c. 19, s. 236), (4)(a) (as am. by S.C. 1994, c. 7, Sch. VIII, s. 137; 1998, c. 19, s. 236).
Income Tax Act, S.C. 1970-71-72, c. 63, s. 231(3).
Privacy Act, S.C. 1980-81-82-83, c. 111, Sch. II.
Tax Court of Canada Rules (General Procedure), SOR/90-688, s. 16 (as am. by SOR/95-113, s. 2), 124.
CASES JUDICIALLY CONSIDERED
APPLIED:
R. v. Dyment, [1988] 2 S.C.R. 417; (1988), 73 Nfld. & P.E.I.R. 13; 55 D.L.R. (4th) 503; 229 A.P.R. 13; 45 C.C.C. (3d) 244; 66 C.R. (3d) 348; 10 M.V.R. (2d) 1; 89 N.R. 249; Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; (1990), 67 D.L.R. (4th) 161; 54 C.C.C. (3d) 417; 29 C.P.R. (3d) 97; 76 C.R. (3d) 129; 47 C.R.R. 1; 106 N.R. 161; 39 O.A.C. 161; R. v. Colarusso, [1994] 1 S.C.R. 20; (1994), 110 D.L.R. (4th) 297; 87 C.C.C. (3d) 193; 26 C.R. (4th) 289; 19 C.R.R. (2d) 193; 49 M.V.R. (2d) 161; 162 N.R. 321; 69 O.A.C. 81; Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145; (1984), 55 A.R. 291; 11 D.L.R. (4th) 641; [1984] 6 W.W.R. 577; 33 Alta. L.R. (2d) 193; 27 B.L.R. 297; 14 C.C.C. (3d) 97; 2 C.P.R. (3d) 1; 41 C.R. (3d) 97; 9 C.R.R. 355; 84 DTC 6467; 55 N.R. 241; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; (1990), 68 D.L.R. (4th) 568; 55 C.C.C. (3d) 530; [1990] 2 C.T.C. 103; 76 C.R. (3d) 283; 47 C.R.R. 151; 90 DTC 6243; 106 N.R. 385; 39 O.A.C. 385; R. v. Collins, [1987] 1 S.C.R. 265; (1987), 38 D.L.R. (4th) 508; [1987] 3 W.W.R. 699; 13 B.C.L.R. (2d) 1; 33 C.C.C. (3d) 1; 56 C.R. (3d) 193; 28 C.R.R. 122; 74 N.R. 276; The Queen v. Oakes, [1986] 1 S.C.R. 103; (1986), 26 D.L.R. (4th) 200; 24 C.C.C. (3d) 321; 50 C.R. (3d) 1; 19 C.R.R. 308; 65 N.R. 87; 14 O.A.C. 335; RJR-MacDonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199; (1995), 127 D.L.R. (4th) 1; 100 C.C.C. (3d) 449; 62 C.P.R. (3d) 417; 31 C.R.R. (2d) 189; 187 N.R. 1; Schachter v. Canada, [1992] 2 S.C.R. 679; (1992), 93 D.L.R. (4th) 1; 92 CLLC 14,036; 10 C.R.R. (2d) 1; 139 N.R. 1; R. v. Big M Drug Mart Ltd. et al., [1985] 1 S.C.R. 295; (1985), 60 A.R. 161; 18 D.L.R. (4th) 321; [1985] 3 W.W.R. 481; 37 Alta. L.R. (2d) 97; 18 C.C.C. (3d) 385; 85 CLLC 14,023; 13 C.R.R. 64; 58 N.R. 81; Phillips et al. v. Ford Motor Co. of Canada Ltd. et al., [1971] 2 O.R. 637; (1971), 18 D.L.R. (3d) 641 (C.A.).
REFERRED TO:
Comité paritaire de l’industrie de la chemise v. Potash; Comité paritaire de l’industrie de la chemise v. Sélection Milton, [1994] 2 S.C.R. 406; (1994), 115 D.L.R. (4th) 702; 91 C.C.C. (3d) 315; 4 C.C.E.L. (2d) 214; 94 CLLC 14,034; 21 C.R.R. (2d) 193; 168 N.R. 241; 61 Q.A.C. 241; British Columbia Securities Commission v. Branch, [1995] 2 S.C.R. 3; (1995), 123 D.L.R. (4th) 462; [1995] 5 W.W.R. 129; 4 B.C.L.R. (3d) 1; 97 C.C.C. (3d) 505; 7 C.C.L.S. 1; 38 C.R. (4th) 133; 180 N.R. 241.
AUTHORS CITED
Sopinka, John et al. The Law of Evidence in Canada. Toronto: Butterworths, 1992.
APPEAL from a Trial Division decision (Gernhart v. R., [1997] 2 C.T.C. 23; (1997), 97 DTC 5038; 132 F.T.R. 2) dismissing an application for a declaration that subsection 176(1) of the Income Tax Act was unconstitutional because it authorized an unreasonable seizure, contrary to section 8 of the Charter. Appeal allowed.
APPEARANCES:
Richard W. Pound, Q.C. and Pierre Martel for appellant.
SOLICITORS OF RECORD:
Stikeman, Elliott, Montréal, for appellant.
The following are the reasons for judgment rendered in English by
Sexton J.A.:
INTRODUCTION
[1] When Sandra Gernhart filed her income tax return for 1994, she expected that its contents would not be divulged by Revenue Canada. Income tax returns may contain such information of taxpayers as, their marital status or whether they are living common law, the sources and amounts of their income, their dependants, their ages and possible physical conditions if handicapped, the amounts and objects of charitable or political donations, and the details of pension arrangements. If tax credits are being claimed, details must be provided about whom the taxpayers employ and entertain if they seek to deduct the costs as business expenses.
[2] Sandra Gernhart’s income tax return would never have become subject to public scrutiny had she not disagreed with the income tax officials. When she launched an appeal of their decision, by operation of law, her income tax return became available to the public at large. Anyone could obtain copies of her return if they were able to pay the fee of $0.40 per page.
FACTS
[3] In April 1994, Sandra Gernhart appealed the Minister of National Revenue’s (the Minister’s) assessment of her tax return. The appeal was to be heard by the Tax Court of Canada.
[4] Once Ms. Gernhart began her appeal, subsection 176(1) of the Act [Income Tact Act, R.S.C., 1985 (5th Supp.), c. 1] required the Minister to:
176. (1) … cause to be transmitted to the Tax Court of Canada … copies of all returns, notices of assessment, notices of objection and notifications, if any, that are relevant to the appeal.
[5] Section 16 [as am. by SOR/95-113, s. 2] of the Tax Court of Canada Rules (General Procedure), SOR/90-688 (the General Procedure) generally permits “any person” to:
16….
(a) inspect any Court file relating to a matter before the Court and
(b) … obtain a photocopy of any document on a Court file.
[6] Ms. Gernhart brought an application before Dubé J. seeking a declaration that subsection 176(1) of the Income Tax Act was unconstitutional because it authorized an unreasonable seizure, contrary to section 8 of the Canadian Charter of Rights and Freedoms [being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]]. Dubé J. dismissed her application [[1997] 2 C.T.C. 23 (F.C.T.D.)]. Ms. Gernhart appeals from that decision.
[7] Ms. Gernhart argues that the combination of subsection 176(1) of the Act and section 16 of the General Procedure permit any member of the public to see a document in the Court file.
[8] Therefore, if a taxpayer chooses to appeal the Minister’s assessment of his or her return, any member of the general public has virtually unfettered access to a taxpayer’s income tax return.
[9] This unfettered access is available whether or not the documents are eventually tendered in evidence by any of the parties. Therefore, according to Ms. Gernhart, this virtually unfettered access to a taxpayer’s confidential documents violates section 8 of the Charter as being an unreasonable seizure.
[10] Ms. Gernhart also complains that the combination of subsection 176(1) [of the Act] and subsection 124(2) of the General Procedure permits a Tax Court of Canada judge to independently review material transmitted by the Minister, whether or not the parties choose to introduce that evidence.
RELEVANT STATUTORY PROVISIONS
Canadian Charter of Rights and Freedoms
1. The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.
…
8. Everyone has the right to be secure against unreasonable search or seizure.
[Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]].
52. (1) The Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect.
Income Tax Act [s. 169(1) (as am. by S.C. 1994, c. 7, Sch. II, s. 140), 239(2.2) (as am. idem, Sch. VIII, s. 136), 241(1) (as am idem, s. 137; 1998, c. 19, s. 236), (2) (as am. by S.C. 1994, c. 7, Sch. VIII, s. 137), (3) (as am. idem; 1998, c. 19, s. 236), (4)(a) (as am. by S.C. 1994, c. 7, Sch. VIII, s. 137; 1998, c. 19, s. 236)].
169. (1) Where a taxpayer has served notice of objection to an assessment under section 165, the taxpayer may appeal to the Tax Court of Canada to have the assessment vacated or varied after either
(a) the Minister has confirmed the assessment or reassessed, or
(b) 90 days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that the Minister has vacated or confirmed the assessment or reassessed,
but no appeal under this section may be instituted after the expiration of 90 days from the day notice has been mailed to the taxpayer under section 165 that the Minister has confirmed the assessment or reassessed.
…
176. (1) As soon as is reasonably practical after receiving notice of an appeal to the Tax Court of Canada, other than one referred to in section 18 of the Tax Court of Canada Act, the Minister shall cause to be transmitted to the Tax Court of Canada and to the appellant, copies of all returns, notices of assessment, notices of objection and notifications, if any, that are relevant to the appeal.
…
239. …
(2.2) Every person who
(a) contravenes subsection 241(1) …
…
is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months, or to both.
…
241. (1) Except as authorized by this section, no official shall
(a) knowingly provide, or knowingly allow to be provided, to any person any taxpayer information;
(b) knowingly allow any person to have access to any taxpayer information; or
(c) knowingly use any taxpayer information otherwise than in the course of the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act or the purpose for which it was provided under this section.
(2) Notwithstanding any other Act of Parliament or other law, no official shall be required, in connection with any legal proceedings, to give or produce evidence relating to any taxpayer information.
(3) Subsections (1) and (2) do not apply in respect of
…
(b) any legal proceedings relating to the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act or any other Act of Parliament or law of a province that provides for the imposition or collection of a tax or duty.
…
(4) An official may
(a) provide to any person taxpayer information that can reasonably be regarded as necessary for the purposes of the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act, solely for that purpose.
Tax Court of Canada Rules (General Procedure), SOR/90-688
16. Subject to any order that the Court, in special circumstances, may make restricting access to a particular file by persons other than the parties to a matter before the Court, any person may, subject to appropriate supervision, and when the facilities of the Court permit without interfering with the ordinary work of the Court,
(a) inspect any Court file relating to a matter before the Court; and
(b) on payment of $0.40 per page, obtain a photocopy of any document on a Court file.
…
124. (1) The party or parties applying to the Registrar to fix the time and place of the hearing shall, together with the application, file a hearing record containing the pleadings, the particulars, the admissions of fact or of documents, all directions respecting the conduct of the hearing, and all other documents filed in the Court which should be before the presiding judge.
(2) Where by an enactment, documents relevant to an assessment of tax under appeal have been transmitted by the Minister of National Revenue to the Court, the documents shall not be included in the hearing record, but shall be treated as part of the record of the Court.
(3) For greater certainty, it is declared that nothing in the documents referred to in subsection (2) constitutes evidence on any issue of fact that either the appellant or the respondent has raised in the appeal unless it is separately tendered during the hearing and accepted as evidence.
JUDGMENT BELOW
[11] Dubé J. held that subsection 176(1) of the Act did not constitute an “unreasonable seizure.” He distinguished cases such as Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 S.C.R. 425; Comité paritaire de l’industrie de la chemise v. Potash; Comité paritaire de l’industrie de la chemise v. Sélection Milton, [1994] 2 S.C.R. 406; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; and British Columbia Securities Commission v. Branch, [1995] 2 S.C.R. 3, all of which addressed “unreasonable seizures,” on the basis that those cases addressed the application of section 8 during “investigative activities.” He added that “[t]he mere transfer of these documents to the Court for an appeal cannot be construed as a seizure” (at paragraph 11 [page 28]).
[12] However, Dubé J. recognized the inequity of the situation. He said [at paragraphs 13-14, pages 28-29]:
That being said, I certainly agree with both parties that the taxpayer is entitled to a reasonable expectation of privacy, and that it is no longer necessary for the administration of justice that the whole taxpayer’s file become the Tax Court’s identified file. With the advance of modern technology, relevant documents can be identified, produced and reproduced instantaneously at relatively modest costs. Under the present system, the reluctance of some taxpayers to reveal to the whole world their personal affairs may possibly inhibit them from appealing an assessment of the Minister. For example, a taxpayer who is claiming heavy interest expense could be perceived as a person who is ruinously indebted.
Pursuant to subsection 176(1), once a notice of appeal is received by the Tax Court, the Minister must transmit all documents to the Tax Court where they can be accessed and copied by the general public, whether or not they are tendered in evidence at the trial. And the judge himself may peruse the file, whether or not the documents are eventually produced in evidence, which is inappropriate in the concept of civil litigation. A party to a litigation is entitled to know what evidence has been considered by the decision-maker. And the issues to be determined by him must be the ones that are crafted by the parties, consequently or otherwise.
ISSUES
[13] Does the transfer of all of the documents from the Minister of National Revenue to the Tax Court pursuant to subsection 176(1) of the Income Tax Act constitute an unreasonable seizure, contrary to section 8 of the Charter?
[14] Does subsection 176(1) constitute a reasonable limit within the meaning of section 1 of the Charter?
ANALYSIS
Does the operation of subsection 176(1) constitute a “seizure”?
[15] At the hearing of this appeal, counsel for Ms. Gernhart declined to argue that the initial preparation and filing of a tax return could constitute a seizure. Therefore, the Minister did not respond to this argument. In light of this, I express no opinion on whether the compulsory filing of a tax return by a taxpayer constitutes a “seizure.” In any event, it would appear obvious that such a seizure would be a “reasonable one.”
[16] I shall assume, for the purposes of this analysis, that the initial filing of an income tax return was done with the consent of the taxpayer and with the knowledge that the information would be kept confidential by reason of section 241 of the Act. The question which arises in this case is whether the action of the Minister in turning over the tax return to the Tax Court pursuant to subsection 176(1) upon the filing of an appeal of the Minister’s assessment can be classified as a seizure. It is clear that the taxpayer in this case did not consent to any disclosure of the contents of her tax return by the Minister.
[17] The Supreme Court of Canada has been faced with a similar question in the context of an analogous situation. In R. v. Dyment, [1988] 2 S.C.R. 417, a five-judge panel of the Supreme Court of Canada considered whether a doctor who collected a vial of free-flowing blood from an unconscious victim for medical purposes constituted an unreasonable seizure. After the doctor collected the blood from the victim, the doctor provided the blood to a police officer, who then tested it to determine whether the victim was intoxicated. While La Forest J.’s judgment was only concurred in whole by Dickson C.J., the other three members of the panel agreed with La Forest J.’s analysis of the nature of the “seizure” that occurred in that case (at pages 440-441).
[18] In his judgment, La Forest J. recognized that even if it had been possible for Mr. Dyment to have consented to the seizure of the blood by the doctor, any such consent would have been “restricted to the use of the sample for medical purposes” (at page 431) (emphasis added). Later, he added that “the protection of the Charter extends to prevent a police officer, an agent of the state, from taking a substance as intimately personal as a person’s blood from a person who holds it subject to a duty to respect the dignity and privacy of that person” (at page 432) (emphasis added). Still later in his decision, in response to the suggestion that the police officer was “merely given the evidence following a conversation with the doctor and did not demand or seize it,” (at page 434) La Forest J. again indicated that “when the officer took the sample from the doctor, he took something that the doctor held for medical purposes only, subject to a well-founded expectation that it was to be kept private” (at page 434) (emphasis added).
[19] In his majority judgment, Lamer J. (as he then was) explained (at pages 440-441):
For the reasons given by my brother La Forest J., the fact that the doctor, at the time he remitted the vial to the police, had in his possession the respondent’s blood subject to a duty to respect [the] respondent’s privacy is sufficient to qualify the receipt by the police of the vial of blood without the consent of the doctor’s patient as being a seizure as that term is meant in s. 8 of the Canadian Charter of Rights and Freedoms. [Emphasis added.]
[20] When a taxpayer files a return, the taxpayer has a reasonable expectation of privacy by reason of section 241 of the Act. The Minister must hold a taxpayer’s confidential tax return subject to a duty to respect a taxpayer’s dignity and privacy.
[21] In his decision, Dubé J. distinguished several cases involving acts which were held to constitute “seizures,” including R. v. McKinlay Transport Ltd., supra, on the basis that those cases addressed “investigative activities.” Dubé J. did not explain why “investigative activities” should be distinguished from other types of activities in determining whether or not an unreasonable seizure has taken place. He cited no authority for this proposition and no law has been cited to this Court to this effect. Nor does logic impel one to the conclusion that a seizure within the meaning of section 8 can only occur during an investigation.
[22] I am satisfied that a “seizure” can occur even where no investigation is taking place. In Dyment, supra, La Forest J. defined “seizure” as “the taking of a thing from a person by a public authority without that person’s consent” [at page 431]. In Thomson Newspapers, supra, La Forest J. explained that he saw “little difference between taking a thing and forcing a person to give it up” (at page 505). He did not premise a seizure on the presence of an investigation.
[23] The reason why most seizures do occur during investigations is that, understandably, seizures may greatly assist investigations. For instance, in Dyment, supra, the Supreme Court held that the transfer of blood taken by a doctor and given to a police officer in circumstances where the doctor took the blood subject to a duty to keep information confidential constituted a “seizure.” However, suppose instead that a statutory provision required all Canadians to provide a blood sample to the Department of Health, and government admitted that it had no real purpose for doing so. In my view, it would be odd indeed to prohibit such a law from being challenged merely because the “seizure” was not made in the course of an investigation. In both Dyment and the hypothetical situation presented above, a thing is taken from a person who has a reasonable expectation of privacy in the thing.
[24] Indeed, it is natural that most seizures occur during investigations, since investigations permit state actors to narrowly focus the target of a seizure. That salutary idea should not be turned on its ear to then prevent the application of section 8 of the Charter in circumstances where state actors do not engage in investigations. In my view, that conclusion would permit state actors to actively obtain private information for non-investigatory purposes and to indiscriminately broadcast that information, despite the fact that people nevertheless have a reasonable expectation of privacy in that information.
[25] Such a result would be inconsistent with the majority decision of the Supreme Court in R. v. Colarusso, [1994]_1 S.C.R. 20, where La Forest J. explained that “the principal right protected by section 8 is individual privacy, and the provision must be purposively applied to that end” (at page 60). He then quoted and highlighted [at pages 60-61] the following extract from decision in Dyment [at pages 429-430], where he drew a parallel between “privacy in relation to information” and the Privacy Act [S.C. 1980-81-82-83, c. 111, Sch. II]:
Finally, there is privacy in relation to information. This too is based on the notion of the dignity and integrity of the individual. As the Task Force put it (p. 13): “This notion of privacy derives from the assumption that all information about a person is in a fundamental way his own, for him to communicate or retain for himself as he sees fit.” In modern society, especially, retention of information about oneself is extremely important. We may, for one reason or another, wish or be compelled to reveal such information, but situations abound where the reasonable expectations of the individual that the information shall remain confidential to the persons to whom, and restricted to the purposes for which it is divulged, must be protected. Governments at all levels have in recent years recognized this and have devised rules and regulations to restrict the uses of information collected by them to those for which it was obtained; see for example, the Privacy Act, S.C. 1980-81-82-83, c. 111. [Emphasis not contained in the Dyment judgment, but added by La Forest J. in the Colarusso judgment.]
[26] I am therefore satisfied that section 8 of the Charter is not confined to circumstances where an investigation occurs and that in the present case, a seizure takes place by reason of the operation of subsection 176(1). Section 8 itself does not distinguish between seizures made during investigations and those which do not. There is no logic which would dictate such a differentiation.
Does the operation of subsection 176(1) constitute an “unreasonable” seizure?
[27] Since section 8 of the Charter only prohibits “unreasonable” searches or seizures, a court must determine whether a particular search or seizure is “reasonable.” An “unreasonable” seizure is one that violates a citizen’s reasonable expectation of privacy. For instance, in Hunter et al. v. Southam Inc., [1984] 2 S.C.R. 145, at pages 159-160, Dickson J. (as he then was) explained:
The guarantee of security from unreasonable search and seizure only protects a reasonable expectation. This limitation … 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.]
[28] The standard of review of reasonableness will vary, depending on the context. In R. v. McKinlay Transport Ltd., supra, Wilson J. explained (at page 645):
Since individuals have different expectations of privacy in different contexts and with regard to different kinds of information and documents, it follows that the standard of review of what is “reasonable” in a given context must be flexible if it is to be realistic and meaningful.
[29] With that context in mind, the “state interest in monitoring compliance with the legislation must be weighed against an individual’s privacy interest” (R. v. McKinlay Transport Ltd., supra, at page 649). Or as Wilson J. also noted, “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” (R. v. McKinlay Transport Ltd., supra, at page 649).
[30] Therefore, in this part of my reasons, I will balance the taxpayer’s privacy interest in his or her tax returns against the state’s interest. After that balancing process is complete, I will determine whether the seizure that occurred in these circumstances was “reasonable.”
Taxpayer’s privacy interest—is there a privacy interest in the documents at issue?
[31] In R. v. McKinlay Transport Ltd., supra, Wilson J. quoted an excerpt from a journal article, which explained that “[e]very person who files an annual tax return may be said to enjoy a low expectation of privacy with respect to information about his income” (at page 646) (emphasis in original). However, that statement was made with the following proviso:
The issue is not whether, but rather when, how much and under what conditions information must be disclosed to satisfy the state’s legitimate requirements…. [The low expectation of privacy with respect to information about one’s income] is surely tempered by an expectation that demands for information have limits, and will be administered under terms that are fair and reasonable. That is what section 8 of the Charter is all about. [Emphasis in original removed.]
[32] Indeed, toward the conclusion of her judgment, she held that the seizure contemplated by subsection 231(3) of the Act [Income Tax Act, S.C. 1970-71-72, c. 63] was reasonable and did not violate section 8 of the Charter, in part because “the taxpayer’s privacy interest is protected as much as possible since section 241 of the Act protects the taxpayer from disclosure of his records or the information contained therein to other persons or agencies” (at page 650). Thus, there clearly is a privacy interest in the contents of an income tax return.
[33] Subsection 176(1) of the Act is the pivotal enactment which eventually permits the world at large to obtain copies of a taxpayer’s return. All documents transmitted by the Minister to the Tax Court are potentially available to be inspected by the general public, whether or not they have been tendered into evidence by any of the parties to the action.
[34] In my view, subsection 176(1) of the Act constitutes a significant intrusion on the privacy interests of an individual. Even if one assumes that only a small degree of privacy attaches to a taxpayer’s return, that small degree of privacy would inevitably be shattered by disclosing the taxpayer’s return to the world at large.
State’s interest
[35] Counsel for the Minister attempted to explain the purpose of subsection 176(1) of the Act. He explained that wording similar to subsection 176(1) has been contained in various income taxation statutes since 1917. He said that subsection 176(1) simply served as a means to provide adjudicators of tax disputes with relevant material upon which to base their decision. Since photocopies could not be easily made until approximately twenty years ago, subsection 176(1) was simply a benign method to provide adjudicators with information about tax disputes that they were due to hear.
[36] In his factum, counsel for the Minister also conceded that “the impugned provision … has by reason of developments in the social technological and legal field become a historical aberration.” He admitted “that there is a troublesome appearance arising from the requirements of subsection 176(1) of the Income Tax Act” in that the Minister provides documents to the Tax Court in the absence of the other party. In oral argument, it was again conceded that subsection 176(1) did not serve any useful purpose. Nevertheless, it was argued, the mere fact that legislation does not keep pace with the times “does not make it violative of Charter values.”
[37] The Minister’s submissions are inconsistent with both section 52 [of the Constitution Act, 1982] and section 8 of the Charter. Section 52 establishes the Constitution of Canada as the supreme law of Canada. It also states that “any law inconsistent with the Constitution is, to the extent of the inconsistency, of no force or effect.” Indeed, section 52 demonstrates that one of the purposes of the Charter is to ensure that legislation keeps pace with the times: see e.g. R. v. Big M Drug Mart Ltd. et al., [1985] 1 S.C.R. 295. Therefore, the Minister’s submissions based on the mere historical presence of various versions of subsection 176(1) in the Act should be rejected.
[38] Moreover, the Minister’s submissions are inconsistent with the text of section 8 of the Charter. In Hunter et al. v. Southam Inc., supra, Dickson J. (as he then was) explained the origins of the protections afforded by section 8 of the Charter. He explained that limitations on the right guaranteed by section 8 may be expressed “positively as an entitlement to a ‘reasonable’ expectation of privacy” (at page 159).
[39] In R. v. Collins, [1987] 1 S.C.R. 265, Lamer J. (as he then was) held that “a search will be reasonable if it is authorized by law, if the law itself is reasonable and if the manner in which the search was carried out is reasonable” (at page 278) (emphasis added).
[40] Therefore, section 8 of the Charter provides a positive entitlement to a reasonable expectation of privacy, in situations where the statutory provision compelling disclosure is found to be unreasonable.
Conclusion on “unreasonable seizure”
[41] In my view, subsection 176(1) permits an “unreasonable seizure.” While the subsection is contained in the Income Tax Act, and while a tax return is generally subject to a low expectation of privacy, the degree of intrusion on a taxpayer’s privacy interest is potentially enormous. Subsection 176(1) of the Act creates the potential for “any person” to view a taxpayer’s return, whether or not the return is eventually tendered as evidence at trial. This intrusion, in turn, is not counterbalanced by a sufficiently important government objective. Indeed, counsel for the Minister admitted that subsection 176(1) no longer served any valid purpose.
Section 1 of the Charter
[42] The quintessential section 1 Charter analysis was established by Dickson J. (as he then was) in The Queen v. Oakes, [1986] 1 S.C.R. 103. The first part of the Oakes requirements requires government to demonstrate that the unconstitutional provision meets “a sufficiently important objective.” Dickson J. explained the analysis in this way (at pages 138-139):
… the objective, which the measures responsible for a limit on a Charter right or freedom are designed to serve, must be “of sufficient importance to warrant overriding a constitutionally protected right or freedom.” … [The objective must] relate to concerns which are pressing and substantial in a free and democratic society before it can be characterized as sufficiently important.
[43] Similarly, in RJR-Macdonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199, McLachlin J. explained that (at page 328):
… to be saved under s. 1 the party defending the law … must show that the law which violates the right or freedom guaranteed by the Charter is “reasonable”.
McLachlin J. also held (at page 329) that:
… the courts must … insist that before the state can override constitutional rights, there [must] be a reasoned demonstration of the good which the law may achieve in relation to the seriousness of the infringement.
[44] As previously noted, counsel for the Minister did not attempt to attribute a valid government objective to subsection 176(1). Therefore, in my view, subsection 176(1) fails the first part of the Oakes analysis, since it does not address a sufficiently important objective to warrant overriding a Charter right.
Remedy
[45] On the appeal, Ms. Gernhart only sought to challenge the public disclosure of her tax return. She did not address whether the public disclosure of “copies of all … notices of assessment, notices of objection and notifications,” which are also required to be transmitted by the Minister pursuant to subsection 176(1), ran contrary to section 8 of the Charter. In theory, therefore, this Court could dispose of the appeal simply by severing the word “returns” from subsection 176(1).
[46] In Schachter v. Canada, [1992] 2 S.C.R. 679, Lamer C.J. explained that “where the legislation or legislative provision does not meet the first part of the Oakes test, in that the purpose is not sufficiently pressing or substantial to warrant overriding a Charter right,” (at page 703) (emphasis added) the inconsistent portion “[will almost always] be struck down very broadly” (at page 703). By referring to “legislative provisions” that fail the first part of the Oakes test, Lamer C.J. recognized that specific provisions contained in otherwise constitutional legislation may fail the first part of the Oakes test. According to Lamer C.J., such legislative provisions should nevertheless generally be struck down “very broadly” (at page 703).
[47] In my view, it would be nonsensical to read down a legislative provision that admittedly has no valid purpose. In the circumstances, to sever the word “returns” from subsection 176(1) of the Act would not further a legislative objective. Therefore, in my view, subsection 176(1) of the Act should be struck down in its entirety.
Availability of Court Record to Judge
[48] Subsection 124(2) of the General Procedure treats documents transmitted by the Minister of National Revenue as “part of the record of the Court.” Subsection 124(3) of the General Procedure explains that those documents do not constitute “evidence on any issue of fact … unless it is separately tendered during the hearing and accepted as evidence.” Accordingly, in my view, it is inappropriate for judges to be examining the Court record, which may contain material that has not been adduced in accordance with the rules of evidence, in the presence of both parties. Our system “is an adversarial one where fact presentation is controlled by the litigants and their counsel” (see J. Sopinka et al., The Law of Evidence in Canada (Toronto: Butterworths, 1992), at page 2)). In Phillips et al. v. Ford Motor Co. of Canada Ltd. et al., [1971] 2 O.R. 637 (C.A.), at page 657, Evans J.A. well described the method of trial procedure used in Canada:
Our mode of trial procedure is based upon the adversary system in which the contestants seek to establish through relevant supporting evidence, before an impartial trier of facts, those events or happenings which form the bases of their allegations. This procedure assumes that the litigants, assisted by their counsel, will fully and diligently present all the material facts which have evidentiary value in support of their respective positions and that these disputed facts will receive from a trial Judge a dispassionate and impartial consideration in order to arrive at the truth of the matters in controversy. A trial is not intended to be a scientific exploration with the presiding Judge assuming the role of a research director; it is a forum established for the purpose of providing justice for the litigants. Undoubtedly a Court must be concerned with truth, in the sense that it accepts as true certain sworn evidence and rejects other testimony as unworthy of belief, but it cannot embark upon a quest for the “scientific” or “technological” truth when such an adventure does violence to the primary function of the Court, which has always been to do justice, according to law. [Quoted in R. J. Delisle, Evidence: Principles and Problems, 5th ed. (Scarborough: Carswell, 1999) at p. 1)].
[49] The appeal is allowed. Since the appellant requested that costs should not be awarded, none will be.
Rothstein J.A.: I concur.
Nöel J.A.: I agree.