October 21, 1998

To:Emergency and Protective Services Committee

From:H.W.O. Doyle

City Solicitor

Subject:Request for amendments to By-law No. 20-85 of the former Metropolitan Council respecting pawnbrokers and second-hand goods shops

Purpose:

The purpose of this report is to respond to the request made by the Emergency and Protective Services Committee at its meeting of April 21, 1998 for a legal opinion on the recommendations contained in the report of March 18, 1998 from the Chair, Toronto Police Services Board, adopted by the Toronto Police Services Board at its meeting of February 26, 1998.

Funding Sources, Financial Implications and Impact Statement:

Not applicable.

Recommendations:

It is recommended that:

1.(a)if City Council wishes to enact a by-law requiring owners of second-hand goods shops to obtain photographic identification from customers, and/or

(b)if City Council wishes to request that the provincial legislature amend the Pawnbrokers Act to require pawnbrokers shops to obtain photographic identification from customers:

City Council defer consideration of this issue until such time as staff of the Toronto Licensing Commission and the Toronto Police report further on the forms of identification which would meet the needs of law enforcement personnel, having regard to those customers who, for whatever reason, may not be in possession of those forms of identification;

2.staff of the Toronto Licensing Commission and the Toronto Police report further on the technology or other means available for the recording and transmission of transaction registers, along with an assessment of the feasibility and costs of implementing the use of such technology in the City of Toronto; and

3.By-law No. 20-85 of the former Metropolitan Council not be amended to provide police officers search and seizure powers in respect of stolen property found at second-hand goods shops and pawnbrokers shops.

Council Reference/Background/History:

At its meeting of April 21, 1998, the Emergency and Protective Committee had before it a report dated March 18, 1998 from the Chair, Toronto Police Services Board advising that the Toronto Police Services Board on February 26, 1998 adopted the recommendations of the Chief of Police contained in his report of February 4, 1998. The Toronto Police Services Board recommended that Schedule 25 to By-law No. 20-85 of the former Metropolitan Council be amended to include the following:

a)regulation of second-hand goods shops;

b)a requirement of proper photo identification from customers;

c)a minimum age for customers;

d)stronger penalties for non-compliance; and

e)providing to police officers search, seizure and disposition authority for stolen property located at these businesses.

Comments and/or Discussion and/or Justification:

Amending By-law No. 20-85 to Regulate Second-Hand Goods Shops

By-law No. 20-85 of the former Metropolitan Council, as amended, ("By-law No. 20-85") is enacted under the authority of section 257.1 of the Municipal Act which delegates to City Council the authority to enact by-laws for the licensing and regulating of any business within the City of Toronto.

Owners of second-hand goods shops and pawnbrokers are both regulated by By-law No. 20-85. These businesses fall within separate categories of licences under the by-law.

A pawnbroker is defined under the by-law as "a person who exercises the trade of receiving or taking, by way of pawn or pledge, any goods for the repayment of money lent thereon". Second-hand goods are defined as including "waste paper, rags, bones, bottles, bicycles, automobile tires, old metal and other scrap material and salvage". From these definitions, the distinction between these types of businesses is that pawnbrokers are defined exclusively by way of the pledging of goods while second-hand goods dealers are defined by way of the nature of the goods themselves.

While By-law No. 20-85 requires pawnbrokers to be licensed by the Commission, the primary regulations governing pawnbrokers are contained in the Pawnbrokers Act S.O. 1990 c. P.6. By contrast, second-hand goods shops are regulated exclusively by By-law No. 20-85.

By subsections 2(14) and (43) of the by-law, collectors of second-hand goods and owners of second-hand goods shops and pawnbrokers shops are required to be obtain a licence from the Toronto Licensing Commission (the "Commission").

Attached as Appendix "A" is Schedule 25 to By-law No. 20-85 which contain specific regulations pertaining to collectors of second-hand goods and owners of second-hand goods stores. These regulations are in addition to the general regulations applicable to all persons licensed under the by-law.

The primary aspects of the regulations contained in Appendix "A" pertaining specifically to second-hand goods shops are as follows:

1.Persons subject to the regulations may not purchase or receive goods from any person who appears to be under the age of eighteen years or from any person under the influence of alcohol;

2.Persons subject to the regulations are not permitted to alter, repair, dispose of or in any way part with articles purchased until after the expiration of fifteen clear days, subject to certain specific exemptions. During this fifteen day period, the goods must remain on the premises and are subject to inspection at any time during business hours by any police officer or any person authorized by the Commission.

3.Persons subject to the regulations are required to keep a record of all goods received. This record must include a full description of the goods and full particulars of the identification and description of the person from whom the goods were obtained.

4.Where the goods are delivered by motor vehicle licensed by any Province of Canada or any State of the United States of America, the provincial or state licence number of the motor vehicle delivering the goods must be recorded.

5.Where a bicycle is purchased or received by a person subject to the regulations, the name of the maker of the bicycle and the manufacturer's number of the bicycle must be recorded, if known or ascertainable.

6.The records required to be kept under the by-law are open to inspection by persons authorized by the Commission.

7.Persons subject to the regulations are required to provide to the Chief of Police, on every week day, a record of the goods received on the previous business day.

8.Persons subject to the regulations are required to make every reasonable effort to obtain the name, address and description of any person offering to him goods or articles which he has cause to suspect have been stolen or otherwise unlawfully obtained. Such persons must report these facts, including the removal or defacement or apparent tampering with the serial numbers or model numbers to a police officer.

Photo identification of customers of pawnbrokers shops and second-hand goods shops

The identification of customers of pawnbrokers shops is governed by section 9 of the Pawnbrokers Act. This provision requires pawnbrokers to keep a record of "the full name, address and a description of the person delivering the article for pawn reasonably sufficient to identify such person, including sex, and estimated age, height, complexion and full particulars of identification if produced..."

The Pawnbrokers Act does not specifically require pawnbrokers to obtain any particular form of identification from customers. In fact, the Act contemplates non-production of identification by subsection 9(2) which states that "where a person tendering an article for pawn refuses or is unable to produce any identification, the pawnbroker shall enter in the [record] a note thereof, which shall be deemed to constitute compliance with the identification requirement of [the Act]."

As the identification of customers at pawnbrokers shops is governed by the Pawnbrokers Act, it is my opinion that City Council lacks the authority to enact a by-law requiring pawnbrokers to obtain photo identification from customers. Such a by-law would be in conflict with the Pawnbrokers Act which expressly permits pawnbrokers to conduct business with persons who refuse or fail to provide identification.

In my opinion, a requirement that pawnbrokers obtain photographic identification of customers would have to be implemented by an amendment to the Pawnbrokers Act by the provincial legislature.

The identification of customers at second-hand goods shops is not similarly limited. As these businesses are exclusively regulated by By-law No. 20-85, City Council may, under the authority delegated to it by the Municipal Act, enact a by-law requiring owners of second-hand goods shops to obtain from customers photographic identification.

Members of my staff have been advised by the Special Investigation Services, Morality Section of the Toronto Police ("S.I.S.") that other jurisdictions such as Winnipeg, Vancouver, Regina and Calgary have current or proposed regulations that prohibits transactions unless specified forms of identification are produced by the customer.

If City Council wishes to enact a by-law requiring owners of second-hand goods shops to obtain from customers photographic identification, or if City Council wishes to request that the provincial legislature amend the Pawnbrokers Act to require pawnbrokers shops to obtain such identification, it is recommended that staff of the Toronto Licensing Commission and the Toronto Police report further on the forms of identification which would meet the needs of law enforcement personnel.

Because not all persons have the commonly used forms of identification such as driver's licences, to ensure that members of the public are not prohibited from using the services of pawnshops merely because they lack such identification, it is recommended that the further report from staff of the Toronto Licensing Commission and the Toronto Police address options for alternative methods of identification for those customers who, for whatever reason, may not be in possession of commonly used forms of identification.

Minimum Age for Customers

By clause 8(a) of the Pawnbrokers Act and by section 8 of Schedule 25 to By-law No. 20-85 pawnbrokers and owners of second-hand goods shops may not purchase or receive pledges or goods from persons who appear to be under the age of eighteen years.

It is my opinion that if City Council decides to change this age limit for customers at second-hand goods stores, City Council may do so by by-law.

As the age limit for customers at pawnbrokers shops is governed by the Pawnbrokers Act, it is my opinion that City Council lacks the authority to enact a by-law imposing an age limit different from that contained in the Pawnbrokers Act. Such a by-law would be in conflict with this provincial legislation. Accordingly, it is my opinion that any changes to the age limit for customers at pawnbrokers shops would have to be implemented by amendment to the Pawnbrokers Act by the provincial legislature.

Strengthening the penalties for non-compliance with the regulations

By section 29 of the Pawnbrokers Act, a person convicted of a contravention of the Act is liable to a maximum fine of $2000.00. It is my opinion that any increases to this maximum fine would have to be implemented by amendment to the Pawnbrokers Act by the provincial legislature.

By section 29 of the General Provisions to By-law No. 20-85, persons convicted of a contravention of the by-law are liable to a maximum fine of $25,000.00 and corporations convicted of a contravention of the by-law are liable to a maximum fine of $50,000.00.

Section 29 of By-law No. 20-85 is enacted under the authority of section 329 of the Municipal Act which prescribes the maximum fine upon conviction of a contravention of a business licensing by-law. Accordingly, it is my opinion that an increase of the maximum fine which may be imposed upon conviction of a breach of the by-law provisions relating to the second-hand goods shops would require an amendment to the Municipal Act.

Search, seizure and disposition of stolen property located at pawnbrokers shops and second-hand goods shops

In his report to the Toronto Police Services Board dated February 4, 1998, the Chief of Police identifies the search warrant procedure under the Criminal Code as the means by which search and seizure of stolen property may be effected without the consent of the owner of the business. The difficulty identified by the Chief of Police with this procedure under the Criminal Code is that "the police must have evidence stronger than mere suspicion, to secure a search warrant. Without close scrutiny of property held in these premises by police officers or at the very least, detailed and exact reporting by the proprietors, the ability of the police to recognize and recover property is severely diminished."

It is my opinion that the existing provisions of the Pawnbrokers Act and By-law No. 20-85 provide a means by which police officers may obtain sufficient evidence to secure a search warrant under the Criminal Code.

With respect to the ability of police officers to obtain "close scrutiny" of property at these businesses, both the Pawnbrokers Act and Schedule 25 of the by-law provide to the police the authority to inspect goods in the possession of pawnbrokers and second-hand goods dealers.

Under section 10 of Schedule 25 to the by-law, police officers may inspect goods in the possession of second-hand goods dealers at any time during business hours. These provisions are enacted under the authority delegated to City Council by clause 257.2(2)(f)(iii) of the Municipal Act by which City Council may impose, as a condition on a licence, a requirement that persons engaged in the business allow the municipality to inspect the business premises and the equipment and personal property used in connection with the business.

Similarly, by section 15 of the Pawnbrokers Act, "every police officer shall at all times be given access to and may inspect a pawnbroker's books, papers and pledges, and when so engaged may have with him or her such other persons as he or she considers advisable."

Accordingly, it is my opinion that section 10 of Schedule 25 to the by-law and section 15 of the Pawnbrokers Act provide to police officers a broad authority to inspect items at these businesses.

Regarding the need for detailed and exact reporting by owners of these businesses identified by the Chief of Police in his report, members of my staff have been advised by the S.I.S. that while the current provisions of both the Pawnbrokers Act and Schedule 25 to the by-law require such reporting, the methods used are outdated and inefficient.

Under clause 9(1)(c) of the Pawnbrokers Act, pawnbrokers are required to keep a record of "a description of the pledge reasonably sufficient to identify it." Similarly, under section 11 of Schedule 25 to the by-law, owners of second-hand goods shops are required to keep a transaction register of a full description of the goods, including the serial number and make and model of the item. Both pawnbrokers and owners of second-hand shops are required to provide these registers to the Chief of Police on a daily basis.

Under the current system, this record-keeping is paper based and does not utilize current computer technology. I understand from the S.I.S. that other jurisdictions are currently developing methods for electronic recording and transmission of these registers. In addition, I understand from the S.I.S. that other jurisdictions, such as the City of Minneapolis, require these businesses to attach a label to all goods received, showing the details of the transaction as recorded in the transaction register.

Accordingly, it is recommended that staff of the Toronto Licensing Commission and the Toronto Police provide a report on the technology or other means available for the recording and transmission of transaction registers, along with an assessment of the feasibility and costs of implementing the use of such methods in the City of Toronto.

Standards for Search and Seizure under the Criminal Code

The standard to be met in obtaining a search warrant under section 487 of the Criminal Code is that of "reasonable grounds". To obtain a search warrant to seize goods from pawnbrokers or owners of second-hand goods shops believed to be stolen, a police officer must satisfy a justice that there are reasonable grounds to believe that an offence under the Criminal Code has been committed in respect of such goods or that such goods will afford evidence of the commission of an offence. In effect, a police officer must satisfy a justice that there are reasonable grounds to believe that the goods are stolen goods.

As described by the Chief of Police in his report, a police officer may not obtain a search warrant upon "mere suspicion". Instead, the officer is required to have "reasonable grounds".

In my opinion, this standard of reasonable grounds contained in the Criminal Code is consistent with other statutes authorizing search and seizure. It is my opinion that a standard of "mere suspicion" in the context of seizure of stolen goods would be inconsistent with the requirements of section 8 of the Canadian Charter of Rights and Freedoms (the "Charter") which provides that "everyone has the right to be secure against unreasonable search or seizure".

One of the leading cases on search and seizure and section 8 of the Charter is the Supreme Court of Canada's decision in Hunter, et al v. Southam Inc. With respect to the standard to be met in establishing the criterion upon which a search and seizure may be effected in the criminal law context, the Court stated as follows:

The purpose of an objective criterion for granting prior authorization to conduct a search or seizure is to provide a consistent standard for identifying the point at which the interests of the State in such intrusions came to prevail over the interests of the individual in resisting them. To associate it with an applicant's reasonable believe that relevant evidence may be uncovered by the search, would be to define the proper standard as the possibility of finding evidence. This is a very low standard which would validate intrusion on the basis of suspicion, and authorize fishing expeditions of considerable latitude...I do not believe that this is a proper standard for securing the right to be free from unreasonable search and seizure. (emphasis in the original)

The criteria for a reasonable search and seizure described by the Supreme Court of Canada in Hunter, et al v. Southam were subsequently summarized by that Court as including the following:

a)a system of prior authorization, by an entirely neutral and impartial arbiter who is capable of acting judicially in balancing the interests of the State against those of the individual; and

b)a requirement that the impartial arbiter must satisfy himself that the person seeking the authorization has reasonable grounds, established under oath, to believe than an offence has been committed or that something which will afford evidence of the particular offence under investigation will be recovered.

Search and Seizure in administrative and regulatory schemes

Administrative and regulatory schemes such as the scheme of business regulation contained in By-law No. 20-85 often provide to those administering and enforcing such regulations with the authority to inspect business records and items used in the carrying on of the business. Courts have considered these powers of inspection on various occasions in the context of search and seizure standards as well as in the context of section 8 of the Charter.

It is well settled law that the standards to be applied to the reasonableness of a search or seizure within an administrative and regulatory context are not the same as those to be applied with respect to criminal investigations. The reason for this is a recognition by the courts of a lower expectation of privacy where one is involved in a regulated industry and a need for flexibility and openness in the administration of regulatory statutes enacted in the public interest.

However, courts have consistently held that the lower standards of reasonableness for search and seizure in administrative and regulatory contexts only apply where the search and seizure is for purposes of ensuring and securing compliance with regulatory provisions enacted for the purposes of protecting the public interest. Where the search and seizure is for criminal or quasi-criminal purposes or for detecting criminal activity, courts have held that the higher standards for search and seizure apply.

It is my opinion that seizure of stolen goods found at pawnbrokers shops is for criminal purposes and for detecting criminal activity. Accordingly, it is my opinion that the high standards of reasonableness applicable in the criminal context is required for seizures of stolen goods found in the possession of licensed businesses.

Authority of City Council to enact a by-law giving police officers authority to search for and seize and dispose of stolen property found at these businesses

Under section 257.2 of the Municipal Act, City Council may enact by-laws for the licensing, regulating and governing of businesses. Included in this delegated authority is the authority to impose conditions as a requirement of obtaining or holding a licence. This authority to impose conditions includes the authority to impose conditions "requiring persons carrying on or engaged in the business to allow the municipality at any reasonable time to inspect places or premises used in the carrying on of the business and the equipment, vehicles, and other personal property used or keep for hire in connection with the carrying on of the business."

It is my opinion that the authority of City Council to impose conditions relating to inspections conducted at business premises does not include the authority to enact a by-law authorizing police officers to seize stolen items found at these premises. The seizure of stolen goods is governed by the search and seizure provisions of the Criminal Code described above. It is well settled law that the authority to legislate in the criminal law field is within the exclusive jurisdiction of the federal parliament. Where a by-law of a municipality infringes upon a matter of exclusive federal criminal law jurisdiction, such by-law is extremely vulnerable to successful legal challenge.

In any event, even if City Council did have the statutory authority to enact by-laws to provide to police officers the authority to seize and dispose of stolen property found at these businesses, it is my opinion that any such by-law must incorporate the high standards of reasonableness for such searches and seizures. These standards, described more fully above, would include a system comparable to that for the obtaining of search warrants under the Criminal Code, including a requirement of prior authorization by an impartial and neutral arbiter and a requirement that police officers have reasonable grounds to believe that the item in question is stolen. As this would, in effect, merely duplicate the existing provisions of the Criminal Code pertaining to search warrants, such a by-law would not be of assistance to police officers in seizing stolen goods from these businesses.

Accordingly, I recommend that By-law No. 20-85 of the former Metropolitan Council not be amended to provide police officers search and seizure powers in respect of stolen property found at second-hand goods shops and pawnbrokers shops.

Conclusions:

While many of the general issues raised in the recommendations adopted by the Emergency and Protective Services Committee at its meeting of April 21, 1998 are addressed in the existing regulations governing pawnbrokers shops and second-hand goods shops, I understand from the S.I.S. that certain of these regulations are outdated, inefficient and do not utilize existing technologies for record keeping.

Accordingly, it is recommended that staff of the Toronto Licensing Commission and the Toronto Police report further on the technology or other means available for the recording and transmission of transaction registers, along with an assessment of the feasibility and costs of implementing the use of such methods in the City of Toronto.

Regarding the identification of customers of these businesses, if City Council wishes to enact a by-law requiring owners of second-hand goods shops to obtain photographic identification from customers, or if City Council wishes to request that the provincial legislature amend the Pawnbrokers Act to require pawnbrokers shops to obtain such identification, it is recommended that City Council defer consideration of this issue until staff of the Toronto Licensing Commission and the Toronto Police report further on the forms of identification which would meet the needs of law enforcement personnel, having regard to those customers who, for whatever reason, may not be in possession of those forms of identification.

Regarding the seizure of stolen goods found at these premises, it is my opinion that City Council lacks the authority to enact a by-law authorizing police officers to seize and dispose of stolen property. Accordingly, I recommend that By-law No. 20-85 not be amended to provide police officers search and seizure powers in respect of stolen property found at second-hand goods shops and pawnbrokers shops.

Contact Name:Ansuya Pachai

392-9074

H.W.O. Doyle

City Solicitor

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