Federal Court Decisions

     T-1978-95

BETWEEN:

     MANDATE ERECTORS AND WELDING LTD.,

     BATHURST MACHINE SHOP LTD.,

     KENNETH PITRE, NANCY PITRE

     GERALD PITRE, BARBARA PITRE

     LEOPOLD THERIAULT, ALMA THERIAULT

     Plaintiffs

     - and -

     HER MAJESTY THE QUEEN

     Defendant

     REASONS FOR ORDERS

MacKAY, J.:

     These two applications came on for hearing in Fredericton, New Brunswick, on April 11, 1996 at which time I reserved my decision. Additional written submissions were thereafter invited from counsel for the parties and were received later in April and May. These are the reasons for the disposition of the applications, one by the plaintiffs and another by the defendant.

     The plaintiffs' application is for an order requiring that all copies of books, records, documents or things seized by the defendants on March 2, 1994 from the personal and business premises of the plaintiffs and from the offices of their accountants, together with all copies, summaries, notes, outlines or extracts thereof in the possession or control of the defendants be impounded and kept in sealed boxes in the custody of the Chief of Special Investigations of the District Taxation Office of Revenue Canada in Saint John, New Brunswick, until final disposition of the action, and that no use shall be made of those records and other documents until that time by the defendant.

     The defendant's application seeks an order directing that Claudette Miller, Marc Boudreau, M. Burchill, Terry LeBlanc, Barbara Dawe and Suzanne Ouellette, originally named as defendants, be removed from the statement of claim, and an order allowing the defendants to amend the statement of defence by adding, after the number "5", the words "only insofar as it refers to Her Majesty the Queen" in paragraph 1, line 5, and the words "5, insofar as it refers to the Attorney General and the Minister of National Revenue" in paragraph 2, line 2, after the number "4". The defendants also seek an order that the Attorney General and the Minister of National Revenue be removed from the statement of claim as defendants or alternatively, an order permitting the defendant to amend the statement of defence in paragraph 16 by deleting "and 18" and replacing that phrase with "18 and 18.1". The defendants also seek an order striking paragraphs 22(f), (g) and (h) from the statement of claim.

     The plaintiffs, Mandate Erectors and Welding Ltd. and Bathurst Machine Shop, are companies incorporated in the Province of New Brunswick. The remaining plaintiffs are all business persons, and/or their spouses, associated with those corporations. The corporate plaintiffs were audited under the Income Tax Act by agents and employees of the Minister of National Revenue for time periods during the 1990s. The plaintiffs claim that no notices of assessment were issued as a result of those audits, and that they cooperated fully with the defendants at all material times.

     Following the audits of the plaintiff corporations, Claudette Miller and Terry LeBlanc, employees of the Department of National Revenue, gathered information, and Ms. Miller later swore to an Information to Obtain Search Warrants alleging that she had reasonable and probable grounds to believe that certain books, accounting records, financial statements, banking records, correspondence, contracts, memoranda, and other documents belonging to the plaintiffs would provide evidence of the commission of violations of the Income Tax Act.

     On February 23, 1994, His Honour Judge Casey of the Provincial Court of New Brunswick issued search warrants pursuant to s. 487 of the Criminal Code for the purposes of searching the business and personal premises of the plaintiffs.

     On approximately March 2, 1994, Marc Boudreau, M. Burchill, Terry LeBlanc, Barbara Dawe and Suzanne Ouellette, who were also employees of the Department of National Revenue, executed the search warrants and seized books, documents, cheques, registers, papers and various other things from the defendants' premises. Those documents and records were eventually returned to the plaintiffs pursuant to an order of Judge Casey dated August 23, 1994, though the department retained copies of all documents.

     By statement of claim filed September 21, 1995 the plaintiffs allege that the search warrants should be declared of no force or effect because Claudette Miller, in the Information Sworn to Obtain the Warrants, had mischaracterized various transactions of the defendants, including a transaction involving the purchase and sale of tractors in which an unclaimed exchange of cash was said to have occurred. It is said, inter alia, that she failed to contact various persons who would have been available to properly explain any transactions of the plaintiffs, and to confirm the nature of the transactions, and further, that she failed to disclose the sources of some of her information. The plaintiffs allege that there was no basis for the Minister to utilize extreme measures and that use of the warrants was an abuse of power and a breach of the Minister's duty to act fairly. In the plaintiffs' view, the search warrants did not meet the minimal standards of specificity and should, therefore, be set aside. The plaintiffs by their statement of claim seek declaratory relief as well as damages for unlawful search and seizure and for trespass.

     The plaintiffs rely on rule 470 of the Federal Court Rules, C.R.C. 1978, c. 663 in support of their application for the impounding and sealing of all documents, records and other things seized from the defendants pursuant to the search warrants. That rule provides:

470. (1) Before or after the commencement of an action, the Court may, on the application of any party, make an order for detention, custody or preservation of any property that is, or is to be, the subject-matter of the action, or as to which any question may arise therein; and any such application shall be supported by an affidavit establishing the facts that render necessary the detention, custody or preservation of such property and shall be made by motion upon notice to all other parties.

...

(4) An order under paragraph (1) shall identify the property to be detained, kept or preserved, shall state where, by whom, for how long and at whose cost, the property is to be detained, kept or preserved, and shall contain such other terms, if any, as seem just in the circumstances.

(5) An order under paragraph (1) shall have as its sole purpose the protection of the property pending suit.

     The plaintiffs also rely on s. 8 of the Charter of Rights and Freedoms in support of their application. That provision is:

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

     The plaintiffs urge that the search of their premises constitutes an unreasonable search because of the alleged deficiencies in the Information to Obtain Search Warrants sworn by Claudette Miller, and an alleged failure to disclose all relevant information to Judge Casey at the time the warrants were obtained. The plaintiffs also allege that the form of the Information did not comply with the rules under the Criminal Code. Thus, in the plaintiffs' view, a serious question has been raised for determination by the court.

     The plaintiffs submit that they will suffer irreparable harm if the application is not granted. They urge that permitting the defendants to keep and review the documents, seized under an unreasonable search, amounts to a continuing invasion of privacy, an invasion that constitutes irreparable harm. On that basis, the plaintiffs submit, the balance of convenience also lies in their favour.

     In my view, rule 470 of the Federal Court Rules was not intended to apply to protect documents for the purpose here sought by the plaintiffs. Rather, the purpose of that rule is to preserve goods or property which are themselves the subject matter of the suit. Here, there is no need to ensure the preservation of the property because it has already been returned to the plaintiffs pursuant to a court order. The defendants have retained copies of the documents and records seized, which the Crown says is authorized pursuant to s. 490 of the Criminal Code, as it applied at the relevant time, where an investigation is underway, as in these circumstances, regarding a possible criminal offence. That provision then stated, in part:

490. ...

(13) Where any document is returned or ordered to be returned, forfeited or otherwise dealt with under subsection (1), (9) or (11), the Attorney General may, before returning the document or complying with the order, make or cause to be made, and may retain, a copy of the document.

(14) Every copy made under subsection (13) shall, if certified as a true copy by the Attorney General, be admissible in evidence and, in the absence of evidence to the contrary, shall have the same probative force as the original document would have if it had been proved in the ordinary way.

     The order sought here by the plaintiffs is in the nature of a stay pursuant to s. 51 of the Federal Court Act, R.S.C. 1985, c. F-7, as amended. Accepting that there may be a serious issue here raised to be determined by the court at trial of the action, I am not persuaded that the plaintiffs have established that they will suffer irreparable harm if the application is denied. Serious as the apprehended invasion of privacy may be if the Crown's right to retain and use copies of documents seized in a criminal investigation is ultimately determined to be wrong, any harm the plaintiffs may suffer in the circumstances of this case is compensable in damages or by other relief, and in my opinion, does not constitute irreparable harm. For these reasons, the plaintiffs' application is dismissed.

     For the defendants originally named it is urged that the individuals named as defendants, Claudette Miller, Marc Boudreau, M. Burchill, Terry LeBlanc, Barbara Dawe and Suzanne Ouellette, should be struck from the statement of claim as defendants, pursuant to paragraph 419(1)(a) and s-s. 1716(2) of the Federal Court Rules. It is urged that in this Court no reasonable cause of action lies against them and thus they have been improperly or unnecessarily made parties to the action. The defendant submits that the causes of action against, and alleged liability of, the individual defendants are based on alleged wrongful search and seizure and trespass, that is, based upon tort law and not upon federal law. The court, in the defendant's view, has no jurisdiction over the claims against the individuals based on tort law in light of the requirements set out in I.T.O. - International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752, 68 N.R. 241, 28 D.L.R. (4th) 641. There Mr. Justice McIntyre set out a three part test for determining whether the Federal Court has jurisdiction over a particular matter, the second part of which requires that there be an "existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction". Here, it is said, the action against the individual defendants is not dependant on either the Criminal Code or the Income Tax Act, but, rather, is founded upon the law of tort.

     The defendant also submits that it is unnecessary for the plaintiffs to name the Attorney General of Canada and the Minister of National Revenue, and that those parties ought to be struck pursuant to s-s. 1716(2) and para. 419(1)(a), because Her Majesty the Queen has already been named in the suit and is the only necessary party.

     The plaintiffs submit that the claims against the individual plaintiffs ought not to be struck because both the Criminal Code and the Income Tax Act are existing bodies of federal law which are essential to the disposition of the case. The plaintiffs cite Marshall v. Her Majesty the Queen et al., [1986] 1 F.C. 437 at 447-450 (T.D.), where the court suggested that a claim against a private individual that is intimately intertwined with a claim against the Crown may be within s-s. 17(1) of the Federal Court Act, which may support jurisdiction over the entire cause of action. In my view that suggestion has been rejected by the Court of Appeal in Varnam v. Canada (Minister of National Health and Welfare), [1988] 2 F.C. 454, 84 N.R. 163, 50 D.L.R. (4th) 44 (C.A.), and in Wilder v. Canada, [1988] 2 F.C. 465, 89 N.R. 135 (C.A.). Further, the plaintiffs submit that the Attorney General and the Minister ought not to be struck from the statement of claim without each having personally made an application to that effect. Moreover, the plaintiffs urge that it is necessary to name these persons for the purposes of cross-examination on discovery in the action.

     I am persuaded that the individual defendants should be removed as parties defendants to this action and an order now issues directing their names be so removed and removed from the style of cause. In my view, this court does not have jurisdiction to determine the personal claims against them as individuals, because those claims are grounded in the law of tort, not in federal law. (See, Tomossy v. Hammond, [1979] 2 F.C. 232 (T.D.); Stephens' Estate v. Minister of National Revenue et al. (1982), 40 N.R. 620, (1982), C.T.C. 138, (1982), 26 C.P.C. 1 (F.C.A.)). I am not persuaded that either the Criminal Code or the Income Tax Act are essential to the disposition of the claims made against the individual defendants, at least in terms of the test set out by the Supreme Court in I.T.O., supra. However, in my opinion, the names of these individuals should not be struck from paragraphs in the statement of claim where the plaintiff sets out facts on which it intends to rely in support of its claim to relief in its action against the Crown, even though the individuals are no longer defendants in the action. Thus, the order here issued removes the individual defendants from the style of cause, and as named defendants in the text of the statement of claim.

     Further, in my opinion, the Attorney General and the Minister of National Revenue should be struck as defendants in this action. It appears from the statement of claim that relief is not sought against them in their personal capacities. If it were, the claims would be based in tort and, as in the case of the other individuals, would not be within the jurisdiction of this Court. Pursuant to s-s. 1716(2) of the Federal Court Rules I strike the ministers as defendants because they are unnecessary parties to the action. S. 48 of the Federal Court Act effectively provides that proceedings against the Crown are to be initiated against Her Majesty the Queen:

48. (1) A proceeding against the Crown shall be instituted by filing in the Registry of the Court the original and two copies of a document that may be in the form set out in the schedule... .

In the form referred to in that section the defendant named is Her Majesty the Queen.

     In Kealey v. Canada, [1992] 1 F.C. 195; (1991), 46 F.T.R. 107 (T.D.), my colleague Mr. Justice Teitelbaum stated that:

I am satisfied that if it is not the intention to sue the Attorney General personally, then it is redundant to include the Attorney General of Canada as a party; it is sufficient to name Her Majesty the Queen as Defendant.

On that basis, Mr. Justice Teitelbaum struck the Attorney General from the proceedings.

     In my view, the Federal Court Act here requires that Her Majesty be named as a defendant. On that basis, in my opinion, it is redundant to name the Attorney General and the Minister of National Revenue in the circumstances of this case. Where there can be no claim against the defendants in their personal capacity, as is the case here, there is no basis for including them as defendants. The plaintiff's right to cross-examine in discovery is limited to one who is a party defendant in the sense of one defending against an order or judgment sought against that named party. Insofar as the Crown, Her Majesty the Queen, is the defendant as a result of the activities of officers or servants purporting to act within the scope of their lawful duties, the plaintiff may cross-examine in discovery only an officer or officers named by the Crown as its representative or representatives.

     Moreover, in my view, it is not necessary, as the plaintiffs urge, for the Attorney General and the Minister to individually bring applications to be removed as parties where there is no jurisdiction over the claims against the Minister in his or her personal capacity. It is sufficient in these circumstances that Her Majesty the Queen, as a defendant, initiates an application for removal of parties who are improperly impleaded in the action.

     Finally, the defendants also made application for an order that subparagraphs 22(f), (g) and (h) to be struck from the statement of claim on the basis that they constitute an abuse of process of the Court for, it is said, in essence orders in the nature of mandamus or certiorari are here sought, though they are cast in terms of declaratory relief. In addition, the defendants urge that a claim for declaratory relief against a federal board, commission or other tribunal is available only in judicial review proceedings. Moreover, the defendant submits that the relief sought by the plaintiffs in those paragraphs is not available against the Crown under the Crown Liability and Proceedings Act but, rather that relief is only available on judicial review in relation to decisions of a federal board, commission or tribunal.

     The plaintiffs seek a variety of declaratory orders, as part of the relief sought in the action, as outlined in paragraph 22 of the statement of claim. A number of the declarations they seek concern findings of fact or law. Subparagraphs 22(f), (g) and (h) are somewhat different; they provide:

(f)      that a Declaration issue from this Honourable Court declaring that the Defendants and all of them must return forthwith to the Plaintiffs all documents, books, records, papers or other things seized by the Defendants, as well as all extracts or copies thereof;

(g)      that a Declaration issue from this Honourable Court declaring that the Defendants must return forthwith all summaries, notes or diagrams taken from the documents, books, records, papers or other items seized by the Defendants;

(h)      that a Declaration issue from this Honourable Court declaring that the Defendants cannot use the said document, books, records, papers or other items, or all summaries, notes, diagrams or information taken from said items;

The plaintiffs urge that in view of the action here set out in the statement of claim the relief sought as described in these paragraphs should be available, in the interests of justice, if they ultimately succeed in their action in other respects. The declaratory relief here questioned is intended to reinforce other relief sought, and to ensure that the plaintiffs' rights against unreasonable search and seizure are meaningful.

     In my opinion, subparagraphs 22(f), (g) and (h) of the statement of claim ought not to be struck in the circumstances of this case. In Williams v. Thomas, Unreported, Court file A-649-95 (February 5, 1996) (F.C.A.), the Court of Appeal found that this court does not have jurisdiction to grant declaratory or injunctive relief in an action against a federal board, commission or other tribunal; pursuant to s. 18 of the Federal Court Act, such relief is available against such a body only upon originating motion to the Court pursuant to s. 18.1. However, in the circumstances here, the action is not against a "federal board, commission or other tribunal" as set out in s. 18 of the Federal Court Act, rather the action is against Her Majesty the Queen, particularly as the other defendants are now to be struck, as I have found in response to the first parts of the Crown's motion. In my opinion, declaratory or injunctive relief is available against a defendant to an action where the defendant is not a federal board, commission or other tribunal, including declaratory, but not injunctive relief in an action against Her Majesty. Whether the relief sought is in reality a declaration, or an order of mandamus or an injunction which would not be available against the Crown, as the defendant submits, may depend upon the argument and the form of declaratory relief actually sought at trial. Rule 1723 of the Court's Rules provides "No action shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the Court may make binding declarations of right whether or not any consequential relief is or could be claimed". At this stage, I am not prepared to strike paragraphs 22(f), (g) and (h) of the statement of claim.

     For these reasons, orders issue, dismissing the plaintiff's application, and dismissing the defendant's application to strike paragraphs 22(f), (g) and (h) of the statement of claim, but allowing the defendant's motion in relation to striking some of the original defendants named in the action. Thus, it is directed that the individual respondents, and the Attorney General and the Minister of National Revenue are struck as parties defendant and from the style of cause, which style of cause shall hereafter be as set out at the commencement of these reasons.

     The defendant is directed to file an Amended Statement of Defence, which reflects changes appropriate in the text as well as the style of cause, in accord with the terms of the Order. In view of the directions for striking individuals originally named as defendants and also the ministers named as defendants from this action as parties defendant, counsel for the plaintiffs is directed to file an Amended Statement of Claim consistent with those directions.

_____________________________________

JUDGE

OTTAWA, Ontario

August 28, 1996.