DAVID BROOKS, Appellant, v. HER MAJESTY THE QUEEN,, 2019 TCC 47

Docket: 2015-4697(IT)G BETWEEN: DAVID BROOKS, Appellant, and HER MAJESTY THE QUEEN, Respondent . Motion heard on November 19, 2018 at Vancouver, British Columbia Before: The Honourable Justice Diane Campbell Appearances : Counsel for the Appellant: Craig C. Sturrock, Q.C. Counsel for the Respondent: Christa Akey ORDER WHEREAS the Respondent brought a motion for an Order: 1. under

section 53 of the Tax Court of Canada Rules (General Procedure) (the " “ Rules ”): " " (

a) striking paragraphs 5, 6, 7, 10, 12, 14 and 23 of the Notice of Appeal; " " (

b) striking the portions of paragraph 22 of the Notice of Appeal that specifically reference sections 7 , 8 and 24 of the Canadian Charter of Rights and Freedoms (the “ Charter ”); and " " (

c) striking subparagraphs 18(a), 18(b), 18(c), 18(

d) and 18(

f) of the Notice of Appeal. " " 2. extending the time for the Respondent to file a Reply to the Amended Notice of Appeal to 60 days after the final disposition of this motion, under paragraph 8(b), subsection 12(1) and paragraph 44(1)(

b) of the Rules ; " " 3. awarding costs to the Respondent in any event of the cause; and " " 4. providing such further and other relief as this Court deems just. " AND UPON reading the material filed and hearing submissions from counsel for the Appellant and counsel for the Respondent; THIS COURT ORDERS THAT: 1. The Respondent’s motion is granted in order to strike the following from the Notice of Appeal " filed on October 19, 2015 and the Amended Notice of Appeal filed on November 16, 2018 " : (

a) paragraphs 5, 6, 7, 10, 12, 14 and 23; (

b) those portions of paragraph 22 that specifically reference sections 7 , 8 and 24 of the Charter ; and (

c) subparagraphs 18(a), 18(b), 18(c), 18(

d) and 18(f).

2. The Respondent is directed to file and serve a Reply to the Appellant’s pleadings that have not been struck within 60 days of the date of this Order. 3. " Costs in favour of the Respondent are fixed in the amount of $1,000, payable forthwith. " Signed at Ottawa, Canada, this 28th day of February 2019. “Diane Campbell” Campbell J. Citation: 2019 TCC 47 Date: 20190228 Docket: 2015-4697(IT)G BETWEEN: DAVID BROOKS, Appellant, and HER MAJESTY THE QUEEN, Respondent. REASONS FOR ORDER Campbell J. Introduction: " [ " " 1 " " ] " This motion was brought by the Respondent pursuant to

section 53 of the Tax Court of Canada Rules (the " “ Rules ”) for an order to strike portions of the Notice of Appeal filed on October 19, 2015 and the Amended Notice of Appeal filed on November 16, 2018 and more particularly: " " " 1. under

section 53 of the Tax Court of Canada Rules (General Procedure) (the " “ Rules ”): " " (

a) striking paragraphs 5, 6, 7, 10, 12, 14 and 23 of the Notice of Appeal; " " (

b) striking the portions of paragraph 22 of the Notice of Appeal that specifically reference sections 7 , 8 and 24 of the Canadian Charter of Rights and Freedoms (the “ Charter ”); and " " (

c) striking subparagraphs 18(a), 18(b), 18(c), 18(

d) and 18(

f) of the Notice of Appeal. " " 2. extending the time for the Respondent to file a Reply to the Amended Notice of Appeal to 60 days after the final disposition of this motion, under paragraph 8(b), subsection 12(1) and paragraph 44(1)(

b) of the Rules ; " " 3. awarding costs to the Respondent in any event of the cause; … " " (Notice of Motion, dated November 8, 2018) " " The Respondent’s Position " " [ " " 2 " " ] " The Respondent submits that it is plain and obvious that these paragraphs should be struck for several reasons. First, the Respondent contends that the Notice of Appeal pleads allegations, pertaining to the conduct of officials at Canada Revenue Agency ( " “CRA”), which are irrelevant to the correctness of a taxpayer’s assessment.

Second, the Notice of Appeal also contains allegations pertaining to violations of the Appellant’s rights under sections 7 and 8 of the Canadian Charter of Rights and Freedoms (the “ Charter ”) resulting from the exercise of civil audit powers used to gather records and information, which the Respondent argues disclose no

reasonable cause of action and have no reasonable prospect of success. Third, the Appellant seeks to vacate the reassessments pursuant tosection 24 of the Charter but there has been no violation of his rights under sections 7 or 8 of the Charter."" " "The Appellant’s Position " "[""3""] " "The Appellant’s position is based almost entirely on the

interpretation and application of the decision of ""the SupremeCourt of Canada in R. v. Conway, ""2010 SCC 22"", ""[2010] 1 SCR 765"".

The Appellant submits that ""based on the ""Conway""decision, this Court, being a court of competent jurisdiction, can consider Charter-based arguments where the Minister of NationalRevenue (the ""“Minister”) has violated a taxpayer’s rights under sections 7 and 8 of the Charter entitling that taxpayer to relief undersection 24 of the Charter."" " [4] Appellant counsel summarizes his position as follows: …The … entire argument … is based upon the principle that the Tax Court is a court of competent jurisdiction and can givefull-on Charter relief. That’s section 24(1).

Not limited to an O’Neill Motors type of situation, but in any case where there’sa Charter violation it can make remedies under 24(1) that is just and appropriate or appropriate and just in thecircumstances. If that’s not correct, then my friend is right, the impugned provisions in the Notice of Appeal would have to be struck. … (Transcript, line 21 on page 52 to line 4 on page 53) [5] The Appellant contends that Conway expanded the jurisdiction of this Court to grant remedies, including vacating an assessment,under

section 24 of the Charter: "This Honourable Court and the Federal Court of Appeal have held that although the Tax Court has jurisdiction to rule on aCharter violation with respect to the question of admissibility of evidence and also has jurisdiction to rule on theconstitutionality of

an Act or a statutory provision it, nevertheless, does not have jurisdiction under Charter section 24(1) toprovide as a remedy on a tax appeal an order vacating the assessment.”" (Appellant’s Argument, paragraph 5). Consequently, all of the caselaw from this Court and the Federal Court of Appeal, particularly since Conway, is wrong.

The motionshould be denied because the Respondent relies on jurisprudence that predates the Supreme Court of Canada decision in Conway andnow "“…should be totally discounted or ignored in light of … Conway” (Appellant’s Argument, paragraph 49)."" " "[""6""] " "Based on ""Conway"", it is not plain and obvious that the Appellant’s impugned pleadings, relying on the Charter and theremedies set forth in

section 24, have no chance of success as the Respondent alleges. As a result, the Minister is no longer correct inarguing that conduct of its officials is irrelevant to the validity of an assessment. The Appellant asks that the assessment be vacatedbecause of the conduct of CRA officials in their investigation of the Appellant and the violation of the Appellant’s rights under

section 7and 8 of the Charter."" " Analysis [7] The Respondent submits that the issues in this appeal, for the taxation years 2004 to 2008, are straightforward: 1. whether the Appellant made any misrepresentations attributable to neglect, carelessness or wilful default in relation to those taxationyears; 2. whether the Appellant failed to report business income; and 3. whether gross negligence penalties were properly assessed pursuant to subsection 163(2) of the Income Tax Act (the "“Act”)." "[""8""] " "The Appellant’s pleadings focus on the conduct of CRA officials and whether exercise of the Minister’s civil audit powers,used to gather oral and documentary evidence, violated the Appellant’s rights under sections 7 and 8 of the Charter.

The Appellantsubmits that this evidence can be excluded and the assessment vacated pursuant to

section 24 of the Charter. " "[""9""] " "The Respondent argues that these matters fall outside the jurisdiction of this Court and have no chance of succeeding as theyare frivolous, abusive and could cause delay in the conduct of the proceedings. " "[""10""] " "The test for striking pleadings has been restated by the Supreme Court of Canada in R. v.

Imperial Tobacco Canada Ltd.,""2011 SCC 42"", ""[2011] 3 RCS 45"", at paragraph ""17"", page 66"": " "[17] … A claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleadingdiscloses no reasonable cause of action: Odhavji Estate v. Woodhouse, ""2003 SCC 69"", ""[2003] 3 S.C.R. 263"", at para.""15""; Hunt v. Carey Canada Inc. " (SCC), "[1990] 2 S.C.R. 959"", at p. 980"". Another way of putting thetest is that the claim has no reasonable prospect of success.

Where a reasonable prospect of success exists, the matter shouldbe allowed to proceed to trial: see, generally, Syl Apps Secure Treatment Centre v. B.D., ""2007 SCC 38"", ""[2007] 3S.C.R. 83""; Odhavji Estate; Hunt; Attorney General of Canada v. Unuit Tapirisat of Canada, " (SCC),"[1980] 2 S.C.R. 735"". "

"This Court has repeatedly adopted and applied the “plain and obvious” test to a Rule 53 motion. " "[""11""] " "The decision in Ronald Ereiser v The Queen, ""2013 FCA 20"", at paragraph ""16"", sets out the standard of review to beused in dealing with a motion to strike: " "[16] The decision of a judge to grant or refuse a motion to strike is discretionary. This Court will defer to such a decision onappeal in the absence of an error of law, a misapprehension of the facts, a failure to give appropriate weight to all relevantfactors, or an obvious injustice: see"", for example, Collins v.

Canada, ""2011 FCA 140"" at paragraph ""12"", Domtar Inc.v. Canada, ""2009 FCA 218"" at paragraph ""24"", Apotex Inc. v. Canada (Governor in Council), ""2007 FCA 374"" atparagraph ""15"", Elders Grain Co. v. M.V. Ralph Misener (The), ""2005 FCA 139"", ""[2005] 3 F.C.R. 367"" at paragraph""13"", Mayne Pharma (Canada) Inc. v. Aventis Pharma Inc., ""2005 FCA 50"" at paragraph ""9"". " "[""12""] " "Bowman, C.J., at paragraph 4 of his reasons in Sentinel Hill Productions

(1999) Corporation et al v. The Queen, "2007TCC 742 , "2008 DTC 2544"", set out the following principles to be applied in a Rule 53 motion: " "[4] … " "(

a) The facts as alleged in the impugned pleading must be taken as true subject to the limitations stated in OperationDismantle Inc. v. Canada, " (SCC), "[1985] 1 S.C.R. 441"" at 455"". It is not open to a party attacking apleading under Rule 53 to challenge assertions of fact. " "(

b) To strike out a pleading or part of a pleading under Rule 53 it must be plain and obvious that the position has no hope ofsucceeding. The test is a stringent one and the power to strike out a pleading must be exercised with great care. " "(

c) A motions judge should avoid usurping the power of the trial judge in making determinations of fact or relevancy. Suchmatters should be left to the judge who hears the evidence. " "… " "[""13""] " "This Court has exclusive jurisdiction to determine the validity of tax assessments. However,"" its jurisdiction is limited bythe statutory provisions set out in the Act. Specifically,

section 171 of the Act sets out the parameters of this Court in dealing with ataxpayer’s appeal under the Act. In this regard, the Court may dismiss an appeal or allow it and vacate an assessment or vary it or refer itback to the Minister for reconsideration and reassessment. " "[""14""] " "There is a long line of jurisprudence both in this Court and the Federal Court of Appeal to support the Respondent’sposition that the conduct of the Minister and CRA officials is irrelevant in determining the validity and correctness of an assessment.

TheFederal Court of Appeal confirmed this principle in both Main Rehabilitation Co. Ltd. v. The Queen, ""2004 FCA 403"", and Ereiser.Sharlow J.A. ""in ""Ereiser"", at paragraph ""40"", concluded that: " "[40] … The fact that a seizure of documents is unlawful may affect the admissibility of evidence obtained as a result of theseizure, but wrongful conduct unrelated to an evidentiary matter generally is not relevant to the admissibility of evidence. …" "This Court has no jurisdiction to vacate an assessment on the basis of reprehensible conduct involved in the process leading up to thatassessment.

The Federal Court of Appeal in M.N.R. and C.R.A. v. J.P. Morgan Asset Management (Canada) Inc., ""2013 FCA 250"", atparagraph ""83"", stated"" this principle succinctly: " "[83]… If an assessment is correct on the facts and the law, the taxpayer is liable for the tax. " "[""15""] " "Recently, Webb J.A. ""in Johnson v. The Queen, ""2015 FCA 52"", ""[2015] FCJ No. 216"", at para. ""4"", reiterated theapproach that the Courts have taken:"" " "[4] … The motivation of the Minister in issuing such assessments or any collection action taken by the Minister in relationto such assessments is not relevant to this inquiry.

" "[""16""] " "Paragraphs 5, 6, 7, 10, 12, 14 and 18(

d) reference various conduct of the CRA officials, including referral by the auditor tothe enforcement division while continuing with the civil audit to obtain information, search warrants being issued, documents seizedfrom various locations and the continuing involvement of the auditor with the Enforcement Division and the loss or destruction of thepaper tax returns for three taxation years.

While there may be alternate remedies for the wrongful conduct of CRA officials, such as anaction in tort for damages or an administrative law remedy, Parliament chose not to expand this Court’s jurisdiction in this manner."" " "[""17""] " "Applying the Supreme Court of Canada’s test for striking pleadings, and the long line of cases employing that test, it is""“plain and obvious”"" that the arguments contained in those paragraphs of the Appellant’s pleadings that relate to CRA conduct wouldhave no reasonable possibility of success at a hearing of the appeal and should be struck."" " "[""18""] " "Next are those paragraphs that the Respondent contends should be struck because they challenge the Minister’s authority togather evidence to be used in assessing a taxpayer’s tax liability because they violate the Appellant’s rights under sections 7 and 8 of theCharter and improperly seek relief pursuant to

section 24 of the Charter. Again, there are a number of authorities, beginning with theSupreme Court of Canada ""decision in The Queen v. Jarvis, ""2002 SCC 73"", ""[2002] 3 RCS 757"" and its companion ""case, TheQueen v. Ling, ""2002 SCC 74"", ""[2002] 3 SCR 814"", respecting the Minister’s inspection and requirement powers as they relate tothe Minister’s ability to obtain and examine records and documents of a taxpayer in verifying the information reported in that taxpayer’sreturn.

When the predominant purpose of an audit becomes penal in nature, the Minister is prohibited at that point from using itsstatutory compulsion powers to collect information to further the criminal investigation. However, according to the ""Jarvis"" test, ""theMinister may continue to conduct a parallel and simultaneous criminal investigation in addition to its audit investigation,"" "

"…[s]o long as the predominant purpose of the parallel investigation actually is the determination of tax liability, theauditors may continue to resort to ss. 231.1(1) and 231.2(1). … " "(""Jarvis"", at paragraph ""97"") " "[""19""] " "Since ""the decision in ""Jarvis"", the Federal Court of Appeal has adopted this approach based on the distinction betweena civil audit inquiry and a criminal investigation of an offence pursuant to

section 239. At paragraph 7 of Romanuk v. The Queen, ""2013FCA 133"", Webb, J.A., ""citing ""Jarvis"", made the following observation: " "[7] In paragraph 103 of Jarvis, the Supreme Court also confirmed that “…it is clear that, although an investigation has beencommenced, the audit powers may continue to be used, though the results of the audit cannot be used in pursuance of theinvestigation or prosecution”.

Since the audit powers may continue to be used, even though the results cannot be used inrelation to an investigation or prosecution, the results can be used in relation to an administrative matter, such as areassessment. " "[""20""] " "Even where the Minister may be contemplating a criminal investigation prior to issuing requirements for information in thecourse of its audit process, the Minister can still use that information obtained pursuant to the requirements to reassess a taxpayer(""Romanuk"", paragraph ""10"").

Ultimately, if information and documentation is obtained and used in an investigation and prosecutionunder

section 239 of the Act, then it is that particular criminal court, and not the Tax Court, which will be the proper forum fordetermining the predominant purpose of the exercise of the Minister’s powers. " "[""21""] " "In Piersanti v. The Queen, ""2014 FCA 243"", even where the requirements were issued by an investigator, not an auditor,as part of the criminal investigation, the Federal Court of Appeal concluded that the taxpayer’s rights under the Charter had not beenbreached even where the Minister used information gathered in the course of a criminal investigation to reassess the tax liability.

Evenwhere information, obtained in the course of a criminal investigation, is used to reassess a taxpayer’s tax liability, there is no violation ofthe rights of that taxpayer under sections 8 and 9 of the Charter. The question of whether the Minister could properly use information toprosecute the taxpayer for criminal offences will be irrelevant to the civil audit process (""Piersanti"", paragraph ""9""). Where evidenceobtained through the audit process is used in the prosecution of an offence under

section 239 of the Act, then the particular court that ispresiding over that offence will be tasked with determining the predominant purpose of the Minister’s powers in gathering theinformation or documents (""Romanuk"", paragraph ""8""). " "[""22""] " "In Bauer v. The Queen, ""2018 FCA 62"", at paragraph ""13"", the Federal Court of Appeal held that even though acriminal investigation had commenced that could lead to charges under

section 239 of the Act, ""“…this did not preclude the CRA fromusing requirements to obtain information or documents that could be used only in relation to the reassessments”. The Federal Court ofAppeal went on, at paragraph 14, to state the following respecting the admissibility in this Court of evidence acquired pursuant torequirements:"" " "[14] While using requirements under

section 231.2 of the ITA to obtain information or documents after an investigation hascommenced may result in that information or those documents not being admissible in a proceeding related to theprosecution of offences under

section 239 of the ITA, it does not preclude that information or documents from beingadmissible in a Tax Court of Canada proceeding where the issue is the validity of an assessment issued under the ITA. It isthe use of the information or documents that is relevant, not who at CRA issued the requirement for information ordocuments. " "[""23""] " "According to ""the reasons in ""Bauer"", taxpayers, appealing an assessment that is based on documents receivedfollowing the issuance of a requirement under

section 231.2 of the Act, should be in no better position than other taxpayers simplybecause they were also under criminal investigation pursuant to

section 239 of the Act (""Bauer"", paragraph ""16""). " "[""24""] " "The fact scenarios ""in ""Piersanti"", Romanuk and Bauer are almost identical to the facts presented in the Appellant’spleadings in the motion before me. Based on the conclusions ""in the decisions of ""Piersanti"", Romanuk and Bauer, those paragraphsin the Appellant’s pleadings that challenge the admissibility of evidence obtained during the audit process should be struck, as it is plainand obvious that the facts pleaded disclose no Charter violations under

section 7 or 8 and, consequently, no remedy under

section 24.The Appellant’s pleadings place into issue the actions and conduct of CRA officials and the Charter challenges, respecting theinformation obtained during the course of an investigation and subsequently used to raise an assessment. There are no facts that wouldallow me to distinguish this case from those ""decisions in ""Piersanti"", Romanuk and Bauer.

" "The Appellant’s Conway Argument " "[""25""] " "Appellant counsel submits that ""this Court, in ""Bauer"", was presented with the same argument and submissionsrespecting the Supreme Court of Canada ""decision in ""Conway"" as in the present motion but that this Court did not address it. In myopinion, the ""Conway"" decision ""does not extend the jurisdiction of this Court in the manner suggested by the Appellant, nor does itchange the existing jurisprudence of this Court or of the Federal Court of Appeal. " "[""26""] " "Prior to 2010, several cases culminating in Cuddy Chicks Ltd. v.

Ontario (Labour Relations Board), "(SCC), "[1991] 2 SCR 5"", concluded"" that specialized tribunals have the authority to decide Charter issues and award Charterremedies related to their statutory mandate. ""The Supreme Court of Canada, in ""Conway"", was asked again in 2010 to consider thesame issue of whether tribunals, in hearing allegations of Charter violations, can render Charter remedies. The Court consolidated itsprior decisions and formulated a two-part test to determine if a tribunal has jurisdiction to decide questions of law and if the legislationintended to exclude the Charter from its jurisdiction.

The Court merged the existing law and took a more expansive approach inconcluding that administrative tribunals should hear and determine ""“stand alone”"" Charter issues, thereby avoiding bifurcated claimswhere Charter issues would have to be heard by a superior court rather than the tribunal. Conway now obligates tribunals to deal withCharter issues and by extension, this Court, as it is a specialized court. "

"[""27""] " "The Federal Court of Appeal in Martin v. Canada (Attorney General), ""2013 FCA 15"", ""[2014] 3 FCR 117"", atparagraphs ""94 and 95"", discussed"" the effect of the Supreme Court ""decision in ""Conway"" on the current state of the law: " "[94] ""In ""Conway"", the Supreme Court merged the subsection 24(1) and the

section 52 inquiries into a single line ofinquiry that considers the same foundational concepts in a unified approach. Under the framework developed ""in""Conway"", the relevant question remains whether a tribunal has the statutory authority to consider questions of law. " "[95] As such, it does not serve as a true departure point from the earlier jurisprudence on questions of constitutionalinterpretation. It is more helpful in considering whether tribunals have authority to grant remedies under subsection 24(1).

Ifanything, it seems to adopt reasoning very similar to that of Martin, thus collapsing any residual distinction in the differenttypes of constitutional inquiry. " "[""28""] " "It is my view that the Appellant’s proposed ""interpretation of ""Conway"" and its applicability to this Court cannot becorrect within the context of the relevant statutory provisions and existing jurisprudence. The jurisdiction of this Court is qualified by thepowers set out in its overriding statutory legislation. It cannot deal, for example, with discretionary fairness relief or with provincial taxdisputes.

In addition, the legislative intent was also to withhold the power to grant to taxpayers relief such as damages. This Court’spower is limited by statute to a determination of how much tax, if any, is payable. Both Appellant and Respondent counsel agreed thatthis Court is a court of competent jurisdiction with the power to decide questions of law relating to Charter issues, including whether aprovision is valid or not. However, the available remedies to this Court are designated in subsection 171(1) of the Act and are specificallylimited to those.

Contrary to what the Appellant suggests, this Court’s remedial powers are restricted by the legislation. This Court doeshave the authority to address Charter issues that are connected to issues that are properly before it. Conway focussed primarily onspecialized tribunals but although its reasons can be logically extended to this Court, its applicability is limited by the statutoryprovisions that govern this Court. Conway cannot override that legislative intent. " "[""29""] " "The Appellant cited the decision in O’Neil Motors Ltd. v. The Queen, ""96 DTC 1486"", as an example of this Court’sjurisdiction under

section 24 to grant Charter remedies. In that case, Bowman J. (as he was then) concluded that an exclusion ofevidence alone would be insufficient and he went on to vacate the taxpayer’s reassessment. The Federal Court of Appeal upheld thisdecision on the basis that this Court had jurisdiction to award the remedy it did in those particular circumstances (""see " (FCA), "[1998] 4 FC 180""). However, O’Neill can be distinguished from the present motion in that the documents in O’Neill hadbeen seized under an invalidly issued search warrant.

Records were seized pursuant to a provision in the Act that was subsequently foundto be unconstitutional. The facts before me are in line, not with O’Neill, but with the fact scenarios ""in ""Piersanti"", Romanuk andBauer. Consequently, even though this Court has the power to grant remedies under

section 24 of the Charter in accordance with itsgoverning statutory scheme, it is plain and obvious that I cannot grant a remedy in these circumstances because the Appellant’s rightshave not been violated under sections 7 and 8. " "[""30""] " "To conclude, the Respondent’s motion is granted in order to strike the following: paragraphs 5, 6, 7, 10, 12, 14 and 23;portions of paragraph 22 that specifically reference sections 7, 8 and 24 of the Charter; and subparagraphs 18(a), 18(b), 18(c), 18(

d) and18(f). " "[""31""] " "The Respondent is directed to file and serve a Reply to the Appellant’s pleadings that have not been struck within 60 daysof the date of this Order. " "[""32""] " "Costs in favour of the Respondent are fixed in the amount of $1,000, payable forthwith. " Signed at Ottawa, Canada, this 28th day of February 2019. “Diane Campbell” Campbell J.

CITATION: 2019 TCC 47COURT FILE NO.: 2015-4697(IT)GSTYLE OF CAUSE: DAVID BROOKS and HER MAJESTY THE QUEENPLACE OF HEARING: Vancouver, British ColumbiaDATE OF HEARING: November 19, 2018REASONS FOR ORDER BY: The Honourable Justice Diane CampbellDATE OF ORDER: February 28, 2019 APPEARANCES: Counsel for the Appellant: Craig C. Sturrock, Q.C.Counsel for the Respondent: Christa Akey COUNSEL OF RECORD: For the Appellant:

Name: Craig C. Sturrock, Q.C. Firm: Thorsteinssons LLP Vancouver, British Columbia For the Respondent: Nathalie G. Drouin Deputy Attorney General of Canada Ottawa, Canada