Vito et al. v. Her Majesty the Queen in Right of Canada et al. [Indexed as: Vito v. Canada (Public Works and Government Services)]
93 O.R. (3d) 519
Court of Appeal for Ontario,
Weiler, Simmons and Rouleau JJ.A.
October 3, 2008
Criminal law -- Money laundering and terrorist financing -- Applicant giving $5,000 to person who attempted to take $50,000 out of Canada to Kosovo without complying with reporting requirement in Proceeds of Crime (Money Laundering) and Terrorist Financing Act -- Funds seized by customs officials -- Application judge erring in granting applicant's application pursuant to s. 32(1) of Act for declaration that his interest in seized funds was not affected by seizure -- Applicant's failure to make inquiry as to applicable legal restrictions or steps taken by courier to comply with those restrictions meaning that applicant did not take "all reasonable care" as required by s. 33 of Act -- Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17, ss. 32, 33.
The applicant gave M $5,000 to carry with him on a planned trip to Albania. The applicant said that he gave M the funds in order to take advantage of a chance to invest in a small business in Albania. Four other men, all of whom were born and raised either in Kosovo or Albania, as was M, also gave M funds to take on their behalf. M attempted to carry a total of US$50,000 out of Canada without complying with the requirement in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to report the exportation of currency in excess of CDN$10,000. The funds were seized by customs officials pursuant to s. 18 of the Act on the basis that they were proceeds of crime or funds for use in the financing of terrorist activities. The applicant and the other four men who had contributed the funds brought third-party claims pursuant to s. 32(1) of the Act for declarations that their interest in the seized funds was not affected by the seizure. The applications of the other four men were dismissed, and that of the applicant was allowed. The application judge held that the test in s. 33 of the Act for the return of seized funds is conjunctive. The requirement in s. 33(a) was met: the applicant acquired the interest in good faith before the contravention took place. The application judge found that the applicant had failed to establish on a balance of probabilities that he was innocent of any complicity or collusion, as required by s. 33(b). However, he described that finding as being made for "analytical purposes", and went on to find that the applicant had met the requirement in s. 33(c) of the Act in that he had exercised all reasonable care to ensure that M complied with the reporting requirements. The Crown appealed.
Held, the appeal should be allowed.
Section 33 is not limited to applicants who have entrusted another with currency greater than or equal to the prescribed reporting threshold to a courier. Although the applicant gave M less than CDN$10,000, he still had to satisfy each of the requirements of s. 33. The application judge did not explain how his finding that the applicant took "all reasonable care" as required by s. 33(c) was capable of negating collusion under s. 33(b). Moreover, while the application judge correctly found that the phrase "all reasonable care" requires an examination of all the circumstances from the perspective of a reasonable person in the position of the applicant, he erred in applying that test. The applicant's affidavit lacked details about what arrangements or instructions about the currency were given to M, [page520] whether the applicant had received a receipt for the money from M and whether M was being paid to transport the funds. The applicant gave a non-family member thousands of dollars to take to a relatively unstable part of the world. In those circumstances, common sense and prudence dictated that an inquiry be made as to any applicable legal restrictions or steps taken to ensure that M would comply with all regulations relating to the export of currency. Even if the applicant did not know that other people had entrusted M with additional funds, he should have considered that M might be taking his own money and that he should have ensured that M would comply with all regulations regarding the export of currency. The applicant did not take the care that a reasonable person in his circumstances would have taken and, by not doing so, he failed to exercise "all reasonable care" within the meaning of s. 33(c) of the Act.
APPEAL from the order of Hill J., [2007] O.J. No. 1602, 2007 CanLII 13946 (S.C.J.) allowing an application under s. 32 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Cases referred to Canada (Deputy Minister of National Revenue, Customs and Excise) v. Industrial Acceptance Corp., 1958 CanLII 62 (SCC), [1958] S.C.R. 645, [1958] S.C.J. No. 49, 15 D.L.R. (2d) 369, consd Other cases referred to Canada v. Vito, [2006] O.J. No. 3310, 2006 CanLII 28096 (S.C.J.); Greening v. Canada (Minister of Fisheries and Oceans), 1997 CanLII 14717 (NL CA), [1997] N.J. No. 266, 154 D.L.R. (4th) 596, 157 Nfld. & P.E.I.R. 278, 75 A.C.W.S. (3d) 949, 37 W.C.B. (2d) 402 (C.A.); Van Pham v. Canada (Minister of National Revenue), [1997] O.J. No. 1183, 70 A.C.W.S. (3d) 66, 1997 CanLII 1012 (C.A.), affg, [1993] O.J. No. 154, 38 A.C.W.S. (3d) 286 (Gen. Div.); Villeneuve v. Canada, 1999 CanLII 13333 (QC CA), [1999] J.Q. no 4294, J.E. 99-1889, 140 C.C.C. (3d) 564, 44 W.C.B. (2d) 518 (C.A.) Statutes referred to Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17, ss. 3(a)(ii) [as am.], 12(1) [as am.], 18 [as am.], 25 [as am.], 26 [as am.], 27 [as am.], 28, 29, 30 [as am.], 32(1) [as am.], (5)(a) [as am.], 33 Rules and regulations referred to Cross-border Currency and Monetary Instruments Reporting Regulations, SOR/2002-412, s. 2
Jan Brongers and Elizabeth Kikuchi, for appellant. Frank Addario and Jonathan Dawe as amicus curiae, for respondent.
The judgment of the court was delivered by
WEILER J.A.: -- Overview
[1] The appellant, Her Majesty the Queen in Right of Canada, appeals an order allowing an application by the respondent, [page521] Katch McCain (formerly known as Luan Ceno), and declaring his ownership interest in US$5,000 not to be affected by a currency seizure. McCain entrusted the $5,000 to one Bujar Mehmeti who attempted to carry a total of US$50,000 out of the country without complying with the statutory requirement to report the exportation of currency in excess of CDN$10,000. The effect of the application judge's order is to entitle McCain to the return of the US$5,000.
[2] There is no issue that the application judge correctly articulated the statutory test for the return of seized currency to the respondent. The issue raised on this appeal is whether the application judge erred in applying that test. For the reasons that follow, I would hold that he did. Statutory Framework
[3] The Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (the "Act") received Royal Assent on June 29, 2000. One of its stated objectives, set out in s. 3(a)(ii), is to require "the reporting of suspicious financial transactions and of cross-border movements of currency and monetary instruments".
[4] To fulfill this objective, Part 2 of the Act provides for a currency reporting regime. Under s. 12(1), persons importing or exporting currency or monetary instruments exceeding a prescribed threshold are required to submit a report to customs officials. The prescribed threshold is currently set at CDN$10,000 or the foreign currency equivalent: see Cross-border Currency and Monetary Instruments Reporting Regulations, SOR/ 2002-412, s. 2.
[5] In the event an officer believes on reasonable grounds that s. 12(1) has been contravened, "the officer may seize as forfeit the currency or monetary instruments" under s. 18(1). Under s. 18(2), the seized currency or monetary instruments are to be returned on payment of a prescribed fee unless the officer believes on reasonable grounds that the currency or instruments are the "proceeds of crime . . . or funds for use in the financing of terrorist activities".
[6] The Act sets out two review procedures available to persons affected by a seizure. Under s. 25, a person from whom currency or monetary instruments were seized or the lawful owner may apply to the Minister of Public Safety and Emergency Preparedness for a decision "as to whether subsection 12(1) was contravened". Sections 26 to 30 set out the detailed procedures in respect of such "first party" reviews and appeals. [page522]
[7] The second procedure, and the one pertinent to this appeal, is the "third party claim" procedure. Section 32(1) provides:
32(1) If currency or monetary instruments have been seized as forfeit under this Part, any person or entity, other than the person or entity in whose possession the currency or monetary instruments were when seized, who claims in respect of the currency or monetary instruments an interest as owner . . . may, within 90 days after the seizure, apply by notice in writing to the court for an order under section 33. In Ontario, the term "court" refers to the Superior Court of Justice: see s. 32(5)(a) of the Act.
[8] Section 33 sets out the three-part test that must be satisfied by an applicant who seeks such a declaration. It is worth setting out s. 33 in full:
- If, on the hearing of an application made under subsection 32(1), the court is satisfied (a) that the applicant acquired the interest or right in good faith before the contravention in respect of which the seizure was made, (b) that the applicant is innocent of any complicity in the contravention of subsection 12(1) that resulted in the seizure and of any collusion in relation to that contravention, and (c) that the applicant exercised all reasonable care to ensure that any person permitted to obtain possession of the currency or monetary instruments seized would report them in accordance with subsection 12(1),
the applicant is entitled to an order declaring that their interest or right is not affected by the seizure and declaring the nature and extent of their interest or right at the time of the contravention. Facts
[9] In 2005, five men (Messrs. Vito, Kazazi, Ngjela, Kolleshi and the respondent McCain) entrusted money to a man named Bujar Mehmeti. All five men were born and raised in either Kosovo or Albania before emigrating to Canada. Though their exact relationships to Mehmeti are not entirely clear, they seem to have known him through a common heritage and ties to the Kosovo/Albanian community in Canada.
[10] In addition to the US$5,000 given by McCain to Mehmeti, Mehmeti received between US$10,000 and US$15,000 from each of the other four men for a total of US$50,000.
[11] On August 3, 2005, the funds were seized by customs officials at Pearson International Airport pursuant to s. 18 of the Act. Since the seizing officer was of the opinion that the funds were proceeds of crime or funds for use in the financing [page523] of terrorist activities, no terms of release were offered in accordance with s. 18(2).
[12] The five men brought third-party claims, which were initially stayed pending a first-party review by Mehmeti for the return of the money under s. 25: see Canada v. Vito, [2006] O.J. No. 3310, 2006 CanLII 28096 (S.C.J.). That review was ultimately rejected by the Minister of Safety and Emergency Preparedness and no appeal was taken from it.
[13] The third-party applications of the five men were then heard together. With the exception of the claim by McCain, the application judge dismissed all applications.
[14] In his affidavit filed in support of the return of the US$5,000, McCain swore the following: -- He was born and raised in Kosovo but was now a Canadian citizen. -- He presently worked as a sub-contractor installing flooring and had minimal income but lived frugally. -- By the summer of 2005, he had saved approximately US$3,000. He was advised "of a small business opportunity in Albania" that he thought was a good one and borrowed an additional US$2,000 from friends. He then stated:
I have known Mr. Mehmeti for approximately 10 years. We met because Mr. Mehmeti is also from Kosovo and the Kosovo/ Albanian community in Toronto is a small and tight-knit one. As is commonly the case, when someone from our community is traveling to Albania/Kosovo, I asked Mr. Mehmeti to take the money that I had to Kosovo via Albania. The Decision of the Application Judge
[15] The application judge held that the test for the return of seized funds under s. 33 is conjunctive. That is, an applicant must establish each of the three necessary criteria on a balance of probabilities. (1) Good faith (s. 33(a))
[16] On the first element of the test, the application judge noted, at para. 34, that "[a]lthough the concept of 'good faith' has an intangible, and at times abstract, quality, in the context of [s. 33(a)] the court will look to the existence of a real and lawful interest in the subject currency before the s. 12(1) contravention" (emphasis in original). [page524]
[17] The judge found, at para. 35 of his reasons, that each of the applicants had satisfactorily accounted for the lawful origin and possession of the currency that they had entrusted to Mehmeti "through gainful employment and the like". As this finding was not disputed by the parties on this appeal, the remainder of these reasons focus on the second and third elements of the s. 33 test. (2) Absence of complicity or collusion (s. 33(b))
[18] The application judge set out both common sense and authoritative definitions of the terms "complicity" and "collusion". At para. 36, he held that "[c]omplicity generally connotes acting as a party or accomplice with knowledge of the unlawful objective and an intention to participate in furtherance of attaining the objective". He quoted a passage from Villeneuve v. Canada, 1999 CanLII 13333 (QC CA), [1999] J.Q. no 4294, 140 C.C.C. (3d) 564 (C.A.), at pp. 574-75 C.C.C., defining collusion as an agreement with an aim to mislead one or more persons. Significantly, at para. 38 of his reasons, the application judge held that "[t]he disqualifying complicity or collusion must relate to the s. 12(1) non-reporting contravention".
[19] The application judge found that none of the applicants had directly deposed to an absence of complicity or collusion in their affidavit evidence. However, at para. 44 of his reasons, he held that the evidence of three of the applicants "may be fairly taken to have addressed the lack of any complicity or collusion".
[20] By contrast, the application judge found, at para. 43, that neither Kolleshi nor the respondent McCain had made "any statement touching on the matter of reporting". At para. 45 of his reasons, he stated:
Both Kolleshi and McCain have failed to establish, on a balance of probabilities, innocence of any complicity or collusion in the s. 12(1) contravention. However, later in his reasons, he described this finding as being made for "analytical purposes" in respect of McCain. (3) All reasonable care (s. 33(c))
[21] The application judge began by emphasizing that a person involved in the export of currency is not simply required to exhibit due care or reasonable caution. Rather, "all reasonable care" must be taken. He noted that while there is a paucity of jurisprudence on s. 33, interpretive guidance can be gleaned from decisions considering analogous provisions found in the Customs and Excise Act. He then reviewed the classic definition of the [page525] term "all reasonable care" by Fauteaux J. in Canada (Deputy Minister of National Revenue, Customs and Excise) v. Industrial Acceptance Corp., 1958 CanLII 62 (SCC), [1958] S.C.R. 645, [1958] S.C.J. No. 49, at pp. 647-48 S.C.R.:
Under subs. (5) of s. 166 of the Act, the claimant becomes entitled to an order that his interest is not affected by the seizure, once he has shown, to the satisfaction of the Judge, that he did, at the relevant time, exercise all reasonable care to satisfy himself that the vehicle was not likely to be used contrary to the provisions of the Act. The condition precedent to the right to obtain the relief is precisely that a positive and specific inquiry as to whether there are reasons to suspect such a likelihood, was made and negatived any reason for such suspicions. The fact that such an inquiry might offend the person who is the subject thereof cannot minimize the obligation to make it. . . . . .
What, in each of the cases, the inquiry should be to satisfy the standard of care set forth in subs. (5) of s. 166, is for the Judge before whom relief is claimed to appreciate in the light of the particular circumstances of the case under consideration. It is obvious that the nature and extent of such inquiries will differ widely in various cases and that no general rule can be laid down as to what they must consist of. . . .
It may very well be that in certain areas and under certain circumstances, the specific and positive inquiries to which I have referred should include an inquiry of the police or some other public authority; but such procedure cannot be held to be necessary in all of the cases to satisfy the standard of care described in the enactment.
[22] The application judge also quoted a passage from the concurring judgment of Cartwright J. in Industrial Acceptance, found at p. 651 S.C.R.:
The standard of conduct required by the statute is, I think, the same as that required by the common law of a person under a duty to take care, i.e., that of the reasonable man.
The question in the case at bar appears to me to be whether we can say that the courts below have erred in holding that the respondent used all the care which a reasonable man, mindful of his duty under the Act, would have used in the particular circumstances.
[23] The application judge observed that the Industrial Acceptance decision has been consistently applied in forfeiture cases. At para. 49 of his reasons, he provided a helpful summary of jurisprudential guidelines which I reproduce below: (1) the standard is that of a reasonable person in similar circumstances to the applicant. (2) as a general rule, the applicant has the burden of demonstrating that he, she or it made the relevant inquiry or took positive action to ensure the individual entrusted with possession of the relevant item complied with the applicable statute. [page526] (3) confidence in the ultimate possessor and lack of awareness of his or her intentions does not amount to discharge of the obligation to take all reasonable care. [See Note 1 below] (Citations omitted)
[24] The application judge then applied these principles to the evidence on the applications before him. The core of his reasons are reproduced below [at paras. 50-57]:
Although for analytical purposes I noted that McCain's affidavit failed the [s. 33(b)] requirement, I am satisfied that he has discharged the burden of showing that the $5,000. USD given to Mehmeti is not only less than the $10,000.CAD limit but also that he was not reasonably under any legal obligation to take steps to ensure that if Mehmeti left Canada with his money pooled with the funds of others that the mandatory reporting regime would be complied with. The seized funds of $5,000. USD shall be returned to McCain.
The court must consider all the circumstances including such factors as the character of the assigned possession, the nature of the relationship between the applicant and the possessor from whom the seizure was made, the relative ease or difficulty for the applicant to make inquiries or to take steps to ensure the law was complied with, any motive for the applicant not to take positive action, and the existence of any facts known to the applicant suggesting a breach of the law was likely.
In the circumstances here, a legal standard governed the export of funds exceeding a value of $10,000.CAD. Ignorance of the law and in turn failure to take steps to ensure compliance is antithetical to the discharge of all reasonable care.
The applicants indicate that they became aware that Mehmeti was travelling to Albania in August of 2005. There is a significant element of vagueness here. There is no detail as to how these applicants came to have this knowledge.
Although Mehmeti was known to Ngjela, Kazazi and Kolleshi, their affidavits provide almost no detail as to arrangements or instructions regarding the currency they were entrusting to Mehmeti. There is no evidence that Mehmeti was a friend or acquaintance of Vito. Where and when were funds provided to Mehmeti? Was a receipt given? Was the courier provided a service fee?
Giving a non-family member thousands of dollars in currency, to physically take to a part of the world at times experiencing political instability, is not without risk. Even leaving the deemed knowledge of the s. 12(1) reporting requirement to the side, in circumstances of rejection of a bank transfer option, common sense and prudence would dictate that the person entrusting possession to the courier would himself inquire as to any applicable legal restrictions or take steps to ensure that the courier was instructed to comply, and would comply, with any and all regulations relating to export of currency. [page527]
International efforts to combat illicit drug profiteering as well as global fund-raising for terrorism demand that legislative steps by various countries, such as the Act, be firmly administered. Forgiveness for non-compliance, in the absence of any positive action by third party claimants toward ensuring compliance, altogether too easily permits defeat of the interdiction scheme.
The exercise of all reasonable care would not have been onerous for the applicants. On the evidence, none of the applicants took any measures at all to ensure that Mehmeti complied with any Canadian laws which might govern the export of thousands of dollars of U.S. currency by a non-commercial courier. The applicants have not met the burden of demonstrating that "all reasonable care" was taken within the meaning of [s. 33(c)] of the Act. Analysis
[25] The appellant submits that the application judge erred by not giving effect to his finding that the respondent's affidavit was silent on the issue of collusion and conspiracy. The appellant contends that since each element of the s. 33 test must be proven on a balance of probabilities, the application judge ought to have dismissed McCain's application at that point.
[26] I would agree that each element of the test in s. 33 must be proven on a balance of probabilities and the application judge was alive to this. He found that Ceno's affidavit did not address s. 33(b) and therefore he failed to satisfy the onus of showing that he did not collude with respect to the export of funds. He chose to continue his analysis, however, because he appears to have been of the opinion that his conclusion respecting the "all reasonable care" component of s. 33(c) could be a factor that would negate collusion under s. 33(b). He held [at para. 50], "the $5,000. USD given to Mehmeti is not only less than the $10,000.CAD limit but also that [McCain] was not reasonably under any legal obligation to take steps" to ensure Mehmeti complied with the reporting requirement.
[27] While I agree with the application judge that the phrase "all reasonable care" in s. 33(c) requires an examination of all the circumstances from the perspective of a reasonable person in the position of the third-party applicant, I am of the opinion that the application judge erred in applying this analysis. (It follows from my conclusion that I would reject the appellant's submission that the decision in Industrial Acceptance always requires that the third-party applicant must have taken positive steps, by inquiry or admonition, to ensure compliance with the regulation in issue. That submission ignores the decision of this court respecting the same phrase in Van Pham: see, also, Greening v. Canada (Minister of Fisheries and Oceans), 1997 CanLII 14717 (NL CA), [1997] N.J. No. 266, 154 D.L.R. (4th) 596 (C.A.).)
[28] Applying an analysis that takes into account all the circumstances, the criticisms and comments made by the application [page528] judge with respect to the shortcomings of the other applicants' affidavits apply with equal force to that of the respondent. There is no detail as to how McCain learned that Mehmeti was travelling to Kosovo. His affidavit provides almost no detail as to arrangements or instructions regarding the currency he was entrusting to Mehmeti. Details as to where and when funds were provided to Mehmeti, whether a receipt for the money was given and whether Mehmeti was provided a service fee are all lacking.
[29] Further, McCain's affidavit states: "As is commonly the case, when someone from our community is traveling to Albania/ Kosovo, I asked Mr. Mehmeti to take the money that I had to Kosovo via Albania" (emphasis added). If it was common for members of the community to give a person going to Albania and Kosovo money to carry for others, an inference may be drawn that McCain was aware that other persons may also give Mehmeti money to carry for them. Even if McCain had no reason to think that Mehmeti would be carrying currency for other people, surely he would have turned his mind to the possibility that Mehmeti would take money of his own.
[30] McCain gave a non-family member thousands of dollars to take to a relatively unstable part of the world. As the application judge observed in relation to the other applicants, common sense and prudence dictated that an inquiry be made as to any applicable legal restrictions or steps taken to ensure that the courier would comply with all regulations relating to the export of currency.
[31] Section 33 is not limited to applicants who have entrusted currency greater than or equal to the prescribed reporting threshold to a courier for export across the Canadian border. Although McCain gave Mehmeti less than CDN$10,000, he must still satisfy each of the requirements of s. 33. The applications judge erred in reaching the conclusion he did in this case because he did not give sufficient weight to the factors he applied to the other accused. McCain did not take the care that a reasonable person in his circumstances would have taken and, by not doing so, he failed to exercise "all reasonable care" within the meaning of s. 33(c) of the Act. Finally, even if a finding that all reasonable care has been taken pursuant to s. 33(c) was made and that it is a relevant factor in determining whether there was collusion under s. 33(b), the application judge failed to explain how his finding respecting s. 33(c) was capable of negativing the requirement in s. 33(b) in this case. Conclusion
[32] For these reasons, I would allow the appeal. I would set aside the following paragraphs of the application judge's order: [page529] para. (b) allowing the respondent's application; para. (c) declaring that the applicant's ownership interest is not affected by the seizure. In their place, I would order that the respondent's application be dismissed.
Appeal allowed.
Notes
Note 1: I note, however, that in Van Pham v. Canada (Minister of National Revenue), [1997] O.J. No. 1183, 1997 CanLII 1012 (C.A.), affg [1993] O.J. No. 154, 38 A.C.W.S. (3d) 286 (Gen. Div.), this court held that in the circumstances of the particular case, sufficient inquiry was made in applying one's own knowledge of the individual's past activities.