Court Information
Ontario Court of Justice
Between: Her Majesty the Queen — and — Kenneth James
Before: Justice D.S. Rose
Reasons for Judgment released on: July 7, 2016
Counsel
B. Gluckman — Counsel for the Public Prosecution Service of Canada
S. Bergman and W. Cunningham — Counsel for the Respondent Kenneth James
Judgment
1. Background and Application
This is an Application by the Crown under s. 490(9)(d) of the Criminal Code for forfeiture of $32,279.78 US and $3,060.50 Cdn. ("the moneys"). On January 7 of this year Mr. James was acquitted of all charges against him, which included money laundering. The reasons for judgment are reported at R. v. James 2016 ONCJ 10. Thereafter Mr. James commenced proceedings to restore various items, including bank accounts seized after his arrest. Mr. Bergman and Mr. Gluckman have managed to resolve on consent all but one lingering item.
2. Agreement on Proceeds of Crime
What remains is the moneys mentioned above. Both Mr. James and the Crown agree that both sums are proceeds of crime, because they were amounts received by Mr. James from Mr. Dastani while Mr. Dastani was operating his illegal ephedrine exportation scheme. Both Crown and Defence also agree that the Crown is relieved of the burden of tracing the proceeds of crime and that the proceeds can be recovered from any or all accounts. If it were left there this would be fairly straightforward, but it is in fact complicated because of previous actions taken by the account holder of the moneys, TD Bank.
3. The Restraint and Management Orders
On December 6, 2011 Mr. Justice Edwards of the Superior Court issued a Restraint Order under s. 490.8 and a Management Order under s. 490.81 of the Criminal Code, which named TD Bank and the account held there 0320-751292, which was titled "Ken James IT Eveline Holdings" as subject to the Order. I take this to be a trust account for Eveline operated by Mr. James. Eveline Holdings was an accused at Mr. James' trial but it did not appear, and was never served with initiating process. Edwards J's Order was crystal clear that "TD Bank Financial Group shall continue to maintain the property per its obligations as a chartered financial institution. TD Bank Financial Group shall not withdraw or allow any other person…to withdraw any funds from the property". There is no suggestion that TD Bank was not served with the Order.
4. TD Bank's Breach of the Order
On March 15, 2012 Citi Bank wrote to TD requesting the return of $35,000. Citi provided some affidavit material which suggested that such an amount had been fraudulently deposited to 292 on November 8, 2011. On October 5, 2012 TD withdrew $35,000 from account 292 and sent a bank draft in that amount to Citi. This came to light fairly quickly, and on November 12, 2012 Counsel for Mr. James sent a letter to in house counsel at TD asking for an explanation. Mr. Bergman also raised the issue promptly with Counsel for PPSC, who wrote back on November 28, 2012 that "We will consider the implications of the information that you have provided, and we will take whatever steps we think are appropriate". On January 15, 2013 private counsel for TD at McCarthy Tetrault replied to Mr. Bergman. McCarthy Tetrault claimed that the delivery of funds to Citi was "…an innocent error". That said, it was counsel for TD's position that Mr. James was not prejudiced by the withdrawal and that the onus was on him to explain why the funds were legitimate and, presumably, should be returned. In the result, McCarthy Tetrault took the position that "…there is no issue to be addressed…".
5. Inaction by the Crown
Nothing further was ever done by PPSC to pursue the matter.
6. Defence Argument on Discretion
Mr. Bergman argues that I should exercise my discretion to deny the Application because the amounts sought in the Application are more or less what TD sent to Citi Bank under the nose of the PPSC. Section 490(9) of the Criminal Code permits discretion to order things seized previously from a person forfeited to Her Majesty if the things are unlawfully in the possession of the person. That discretion, he argues should weigh against making the forfeiture order sought. Given the conduct of TD Bank and the relative lack of interest by the PPSC in addressing a breach of a Superior Court Order, his argument has some merit.
7. Objectives of Forfeiture
A judicial discretion in this case should be exercised bearing in mind the objective and context of the forfeiture proceedings of the Criminal Code. In R. v. Lavigne 2006 SCC 10, the Court commented that:
"…the objective of forfeiture is …to deprive the offender and the criminal organization of the proceeds of crime and to deter them from committing crimes in the future. The severity of broad scope of the provisions suggest that Parliament is seeking to avert crime by showing that the proceeds of crime themselves, or the equivalent thereof, may be forfeited".
That comment was made about provisions in Part XII.2 in the Criminal Code and this Application is made under Part XV, but I read the Criminal Code as a coherent whole and therefore interpret s. 490(9) as part of the forfeiture provisions. I pause to comment that Mr. James is not an offender and there is no finding of a criminal organization. That said, it is agreed by all before me that the moneys are nonetheless proceeds of crime.
8. Assessment of TD Bank's Conduct
I find that TD's violation of Edwards J's Order was inexcusable. It is axiomatic that TD is among the largest and most sophisticated financial institutions in the country. Counsel for TD's statement that the mistake was innocent but that the matter was closed is baffling. I would have expected TD to promptly return the account to its state before the funds were sent to Citi bank. I am also surprised that counsel for PPSC did so little to enforce the Order once it was notified of the breach. This falls short of the standard expected of PPSC.
9. Decision and Reasons
This is a very close case. However, despite the initial appeal of Mr. Bergman's argument, I would grant the Crown's Application for forfeiture for three principal reasons:
i. Nature of the Proceeds
The moneys sought are proceeds of crime. They may be roughly the same amount as the money TD Bank sent to Citi, but the nature of the money sought remains ill-gotten gains. It is consistent with Parliament's intention that proceeds of crime be remitted to the Crown, and not individuals or private entities such as Eveline.
ii. Account Holder vs. Beneficial Owner
The violation of Edwards J. Order was in connection with an account for which Mr. James was the account holder, but not beneficial owner which was Eveline Holdings. Eveline has not appeared before me on this Application.
iii. Limited Remedial Efforts
Mr. James was a lawyer, and so not an unsophisticated party to the Order. Once he became aware of TD's delivery of the Moneys, his actions were to seek an explanation for the Breach from TD, but nothing more. There is no evidence that Eveline Holdings did anything, and it was Eveline that was otherwise entitled to the money. I appreciate that Mr. James was at the time embroiled in considerably complex criminal proceedings, but the fact remains that his efforts to recover the moneys were limited to writing to TD. No lawsuit was ever launched. This factor might have weighed in favour of the Respondent if the Respondent were an unsophisticated individual without the benefit of legal advice.
10. Order
I will sign the appropriate Order which can be submitted through the trial coordinator.
July 7, 2016
David S. Rose
Of the Ontario Court of Justice