The Attorney General of Canada on behalf of the United States of America v. Fafalios et al.

[Indexed as: United States of America v. Fafalios]

110 O.R. (3d) 641

2012 ONCA 365

Court of Appeal for Ontario,

Doherty, Goudge and Epstein JJ.A.

May 31, 2012

Appeals -- Abuse of process -- Crown appeals -- Accused subject of joint Canadian-American fraud investigation -- Evidence gathered in Canada by order to gather pursuant to Mutual Legal Assistance in Criminal Matters Act ("MLACMA") and via Canadian search warrants and production orders -- Accused charged with fraud in Canada -- Evidence obtained in Canada including using MLACMA gathering order informally shared with American authorities without obtaining order to send evidence under MLACMA -- Canadian charges withdrawn to facilitate extradition to United States -- Americans seeking extradition of accused -- Accused asking extradition hearing judge for disclosure of communications between police, federal and provincial Crown counsel regarding evidence gathering and how it was shared with Americans -- Accused seeking evidence to buttress Charter claim that Canadian evidence illegally shared with Americans -- Crown initially objecting to disclosure on basis of no air of reality to Charter claim -- Judge rejecting Crown's argument and ordering disclosure -- Crown opposing disclosure on basis of relevance but explicitly waiving litigation privilege -- Crown later arguing solicitor-client privilege not waived and that disclosure could injure international relations in addition to primary position that evidence sought was irrelevant -- Judge ordering Crown to comply fully with disclosure order -- Crown refusing to do so and asking extradition judge to stay proceedings or grant discharge but not explaining reasons for halting proceedings -- Extradition judge staying extradition proceedings -- Crown appealing -- Crown entitled to appeal correctness of interlocutory order only where it has no reasonable alternative as order excludes essential evidence or as compliance with order raises reasonable prospect of harm to interest that court deems worthy of protection -- Neither exception applying -- Appeal dismissed without determination on merits -- Crown appeal amounting to abuse of process.

American and Canadian authorities were jointly investigating the accused for fraud. Evidence was obtained at the request of American authorities pursuant to a treaty made under the Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 ("MLACMA") and also pursuant to Canadian search warrants and production orders. Canadian fraud charges were laid. Officials at the Federal Department of Justice's International Assistance Group advised the Canadian police that they could share the fruits of the evidence gathered with American authorities informally. This included evidence obtained pursuant to an order to gather issued under the MLACMA but for which the requisite order to send had been obtained. Canadian fraud charges were then stayed in order to facilitate a request by American authorities to extradite the accused. The accused sought disclosure of communications between the Canadian police officers and a number of Crown counsel employed by the Ontario Ministry of the Attorney General and the International Assistance Group regarding the sharing of evidence with [page642] American authorities. They sought this evidence in support of an argument to be made at the extradition hearing that Canadian evidence had been shared with American authorities contrary to their Canadian Charter of Rights and Freedoms rights. The Crown initially argued that there was no air of reality to the Charter argument and that therefore the disclosure request should be denied. After the judge ruled that there was an air of reality to the claim, the Crown explicitly waived "litigation" privilege but argued that the disclosure sought was not relevant to the issues at the extradition hearing. The Crown later additionally argued that it had not waived solicitor-client privilege and that the disclosure of the communications could hamper international relations, although the primary thrust of the Crown's argument was relevance. The judge ordered that the remaining material sought be disclosed. The Crown refused to fully comply with disclosure orders made in extradition proceedings and invited the extradition judge to stay the proceedings or grant a discharge, without providing advance notice of its intention to do so or providing reasons for seeking to halt the proceedings. The extradition judge discharged the respondents. The Crown immediately appealed, having attended court with two notices of appeal prepared, one from a stay of proceedings and the other from the discharge of the accused.

Held, the appeal should be dismissed.

The Crown is entitled to bring proceedings to a halt and appeal the correctness of an interlocutory order only where it can clearly demonstrate that it had no reasonable alternative because (a) the effect of the interlocutory order is to exclude essential evidence or (b) compliance with the interlocutory order raises a reasonable prospect of harm to an interest the court deems worthy of protection. The Crown in this case failed to show that it had no reasonable alternative to bringing the proceedings to a close. Its refusal to continue with the extradition proceeding was for the sole purpose of obtaining an interlocutory appeal on an adverse ruling. As the Crown sought only to attack the correctness of the ruling, it had to comply with the order and then appealed if the accused were discharged based on the disclosure of the material. Had the Crown argued from the outset that privilege would be breached or that harm to international relations would result from compliance with the order, it could have sought to halt the proceedings and appealed the interlocutory order. The Crown chose neither of these avenues. It chose to end the proceedings without warning or explanation. Its conduct amounted to an abuse of process. The appeal should be dismissed for that reason, without considering the merits of the impugned orders.

APPEAL from the order of Backhouse J. of the Superior Court of Justice dated November 26, 2010 discharging the respondents at an extradition hearing.

Cases referred to R. v. Cassidy (2004), 2004 CanLII 14383 (ON CA), 69 O.R. (3d) 585, [2004] O.J. No. 39, 180 O.A.C. 355, 182 C.C.C. (3d) 294, 114 C.R.R. (2d) 157, 60 W.C.B. (2d) 125 (C.A.); R. v. Creswell, [2000] B.C.J. No. 2171, 2000 BCCA 583, 146 B.C.A.C. 7, 149 C.C.C. (3d) 286, 38 C.R. (5th) 358, 48 W.C.B. (2d) 56; R. v. Fitch, [2006] S.J. No. 420, 2006 SKCA 80, [2006] 10 W.W.R. 1, 210 C.C.C. (3d) 205, 39 C.R. (6th) 172, 143 C.R.R. (2d) 321, 69 W.C.B. (2d) 825, 279 Sask. R. 310; United States of America v. Chan, [2003] O.J. No. 4158, 59 W.C.B. (2d) 568 (C.A.), revg United States of America v. Tang, [2002] O.J. No. 5737, 66 W.C.B. (2d) 30 (S.C.J.), consd Other cases referred to R. v. Bailey, 1983 CanLII 3569 (ON CA), [1983] O.J. No. 14, 4 C.C.C. (3d) 21, 32 C.R. (3d) 337, 9 W.C.B. 143 (C.A.); R. v. Banas (1982), 1982 CanLII 2107 (ON CA), 36 O.R. (2d) 164, [1982] O.J. No. 3202, 65 C.C.C. (2d) 224 (C.A.); R. v. Brown, [1987] O.J. No. 65 (C.A.); R. v. Chiarantano, 1991 CanLII 101 (SCC), [1991] 1 S.C.R. 906, [1991] S.C.J. No. 35, affg [1990] O.J. No. 2603 (C.A.), revg [1989] O.J. No. 2950 (Dist. Ct.); R. v. Johnson (1991), 1991 CanLII 7174 (ON CA), 3 O.R. (3d) 49, [1991] O.J. No. 481, 44 O.A.C. 249, 64 C.C.C. (3d) 20, 4 C.R. (4th) 378, 6 C.R.R. (2d) 180, 12 W.C.B. (2d) 707 (C.A.); [page643] R. v. Power, 1994 CanLII 126 (SCC), [1994] 1 S.C.R. 601, [1994] S.C.J. No. 29, 165 N.R. 241, J.E. 94-649, 117 Nfld. & P.E.I.R. 269, 89 C.C.C. (3d) 1, 29 C.R. (4th) 1, 2 M.V.R. (3d) 161, 23 W.C.B. (2d) 194; R. v. Whittle, 1992 CanLII 12777 (ON CA), [1992] O.J. No. 2752, 59 O.A.C. 218, 78 C.C.C. (3d) 49, 18 W.C.B. (2d) 168 (C.A.); R. v. Wilcox, [2001] N.S.J. No. 85, 2001 NSCA 45, 192 N.S.R. (2d) 159, 152 C.C.C. (3d) 157, 49 W.C.B. (2d) 198; United States of America v. Dynar (1997), 1997 CanLII 359 (SCC), 33 O.R. (3d) 478, [1997] 2 S.C.R. 462, [1997] S.C.J. No. 64, 147 D.L.R. (4th) 399, 213 N.R. 321, J.E. 97-1400, 101 O.A.C. 321, 115 C.C.C. (3d) 481, 8 C.R. (5th) 79, 44 C.R.R. (2d) 189 Statutes referred to Canadian Charter of Rights and Freedoms Extradition Act, S.C. 1999, c. 18, s. 15 Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4th Supp.) [as am.] Treaties and conventions referred to Treaty between the Government of Canada and the Government of the United States of America on Mutual Legal Assistance in Criminal Matters, March 18, 1985, Can. T.S. 1990 No. 19

Moiz Rahman and Monika K. Rahman, for appellant. Richard H. Shekter, for respondent George Fafalios.

The judgment of the court was delivered by

EPSTEIN J.A.: --

A. Introduction

[1] This case raises the issue of the options available to the Crown when confronted with an adverse interlocutory ruling in a criminal or quasi-criminal prosecution.

[2] On September 19, 2007, the respondents, George and Marc Fafalios, were arrested and charged in Canada with fraud over $5,000 in connection with an alleged scheme to defraud several large American corporations.

[3] In connection with the arrests, Canadian police executed search warrants and seized evidence from the respondents. The police subsequently sent some of the seized evidence to American authorities.

[4] On May 2, 2008, the fraud charges in Canada were withdrawn. On May 27, 2009, the U.S. sought the respondents' extradition. As a result, Canadian authorities arrested them on January 5, 2010. [page644]

[5] At the commencement of the extradition hearing, the respondents brought an application for disclosure of information relating to the conduct of the Canadian authorities in sending evidence to the U.S. authorities. The application was based on the respondents' allegation that this sharing of information breached their Canadian Charter of Rights and Freedoms rights. In defence, the Crown argued that there was no air of reality to the Charter breach argument.

[6] On April 1, 2010, the extradition judge granted the request for disclosure, holding that the respondents had established "more than an air of reality to the Charter issues raised".

[7] After the Crown partially complied with the April disclosure order, the respondents brought another application for production seeking full compliance with the first order and further disclosure. On November 23, 2010, the extradition judge made a second disclosure order that not only mandated full compliance with the April order but also granted the relief sought in the second application -- relief that included obtaining evidence from a number of lawyers associated with the gathering and transmission of evidence to U.S. authorities.

[8] On November 26, 2010, the Crown advised the extradition judge that it was not prepared to supply any more disclosure and invited the court to stay the proceedings or grant a discharge. The extradition judge chose to discharge the respondents.

[9] In this Crown appeal from the discharge order, both parties have addressed the correctness of the two disclosure orders. However, the argument upon which the respondents primarily rely is that the Crown's conduct in refusing to comply with the orders, terminating the proceeding and then appealing the validity of the orders on the basis of arguments not raised before the extradition judge, constitutes an abuse of process. The respondents further contend that this appeal, if heard on the merits, would amount to a continuation of that abuse.

[10] For the reasons that follow, I agree. I am therefore of the view that this court should exercise its inherent jurisdiction to protect its process and dismiss the appeal without considering the merits of the impugned orders.

B. Factual Background

(1) Preceding the commencement of the extradition proceedings -- evidence is gathered and sent to the U.S.

[11] In early 2007, Canadian and American police conducted a joint investigation seeking to identify the perpetrators of a scheme to defraud American companies. It was alleged that the [page645] offenders created e-mail accounts in the names of actual executives at supplier companies. These false identities and accounts were used to redirect, for the benefit of the perpetrators, payments meant for the suppliers.

[12] On May 31, 2007, the United States government sent a request to the central authority in Canada under the mutual legal assistance treaty between Canada and the United States [See Note 1 below] requesting assistance in obtaining telephone and Internet records to help identify those involved in the fraudulent conduct. On July 4, 2007, Rivard J. granted an order to gather evidence pursuant to the Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4th Supp.) ("MLACMA").

[13] The perpetrators were identified as the respondents.

[14] On September 19, 2007, the respondents were arrested and charged in Canada with fraud over $5,000, possession of property obtained by crime and theft of telecommunications services. In conjunction with the arrests, Canadian police executed search warrants and seized evidence from the respondents. Detective Carmine Palermo of the Toronto Police Service Fraud Squad headed the investigation.

[15] The seized evidence included a laptop and a hard drive that contained evidence of an electronic trail connecting the respondents to the e-mail addresses used for the purposes of the fraud. Canadian police also gathered Internet records from Rogers Cable, which connected specific Canadian locations to IP addresses used to log on to the same e-mail accounts. These Internet records were gathered pursuant to the July 4 evidence- gathering order.

[16] On September 28, 2007, the U.S. authorities sent a supplementary treaty request to the Canadian authorities seeking additional information to assist in the investigation. In response, the International Assistance Group of the Department of Justice authorized the police to share copies of some of the requested material with the U.S. authorities.

[17] In November and December 2007, Palermo shared forensic copies of the laptop and hard drive with U.S. authorities pursuant to an informal information-sharing agreement. He also mistakenly shared the telephone and Internet records gathered pursuant to the July 4 order, and sent them without a [page646] proper order to send under the MLACMA. These records were returned by U.S. authorities on February 11, 2008, and properly re-sent pursuant to a sending order issued on March 27, 2008.

[18] On May 2, 2008, the Canadian charges were withdrawn. In exchange for having the charges withdrawn, the respondents consented to their computers and other electronic equipment being sent to the United States.

[19] In response to a request by the U.S. for extradition of the respondents, the Minister of Justice issued an authority to proceed on June 1, 2009, pursuant to s. 15 of the Extradition Act, S.C. 1999, c. 18, authorizing the Attorney General of Canada to seek an order for the committal of the respondents for the equivalent Canadian offences of attempted fraud and personation.

[20] The record of the case for prosecution submitted by the United States Department of Justice includes evidence gathered in Canada in support of the extradition request.

(2) The extradition proceedings

[21] From the outset of the extradition proceedings, the respondents alleged that their Charter rights had been breached by the manner in which the Canadian authorities sent the Canadian-gathered information to the U.S. authorities. In contemplation of a Charter application to exclude this evidence from the extradition proceedings, the respondents brought an application on March 17, 2010 for disclosure of all materials relevant to the gathering and transmitting of evidence to the U.S.

[22] On March 17, 2010, the first application for disclosure was argued before the extradition judge. The respondents asked for extensive disclosure, including an order that they be entitled to cross-examine Palermo before the extradition judge. Appended to the respondents' factum was a detailed list of 41 categories of items requested along with an outline of the evidence the respondents wished to obtain from Palermo. Rather than address the individual items on the list, the Crown defended the application solely on the basis that there was no air of reality to the allegations of a Charter breach. The Crown did not raise any issue of privilege or any other specific objection.

[23] When the parties returned before the extradition judge on April 1, 2010, the extradition judge granted all of the relief requested, holding that the respondents had established "more than an air of reality to the Charter issues raised". The Crown's response to being advised of the ruling was to broach additional arguments in defence of the application, arguments pertaining to privilege and third party records. The extradition judge expressed concern that those points should have been raised [page647] when the matter was argued in March but agreed to hear them at the next attendance.

[24] In the meantime, the Crown provided some of the disclosure that was subject to the April 1 order under cover of a letter dated June 14. Significantly, in that letter the Crown advised that it was waiving litigation privilege in respect to the disclosure provided:

A significant portion of the attached disclosure includes material that is protected by litigation privilege. However, in the unusual circumstances of the case, and in order to move this matter forward as expeditiously as possible, both the Attorney General of Canada and the Attorney General of Ontario are prepared to waive the privilege in respect of the attached material. . . . The only outstanding piece of disclosure that remains to be disclosed is Detective Palermo's notes.

[25] This position was confirmed by Crown counsel in open court on June 21, when he advised the extradition judge:

In keeping with the spirit of Your Honour's order and to move this forward, the Attorney General of Canada and the Attorney General of Ontario, included documents that are otherwise protected by litigation privilege and have included what you had read in the package. So, the package that has been provided is the fulsome package. . . . [Subject to Palermo's notes and some photocopying errors] we have now provided all documents responsive to that order.

[26] At the next attendance before the extradition judge on August 17, counsel for the respondents expressed dissatisfaction with the Crown's compliance with the disclosure order. Crown counsel responded by arguing that, while litigation privilege had been waived, "solicitor-client" privilege had not. The thrust of his argument was that the Crown had, in fact, produced information in accordance with the spirit of the April 1 order. He added, however, that if the court intended everything on the list to be produced "that's a different matter".

[27] The extradition judge instructed the Crown to produce everything on the initial list that had not yet been produced. The Crown undertook to do so.

[28] By letter dated September 13, 2010, the Crown made further disclosure, including communications between Palermo and the Crown Law Office-Criminal. Crown counsel described these communications as privileged but advised that they were being produced, again citing the "unique and particular circumstances of this case".

[29] At the next court appearance, on September 30, 2010, Crown counsel took the position that the April 1 order had been fully complied with. Counsel for the respondents disagreed but [page648] advised that he would deal with the deficiencies in the course of a second disclosure application.

[30] The respondents brought their second disclosure application on November 19. They submitted that nine of the 41 categories of items that were ordered produced in the first order remained outstanding and sought reinforcement of the Crown's obligations under that order. The respondents also requested affidavit evidence from six lawyers from the Toronto Police Service, the Ontario Ministry of the Attorney General, and the Department of Justice who had been involved in the extradition process and the opportunity to cross-examine the lawyers on their affidavits. Once again, the Crown resisted the application only on a general basis -- arguing that the respondents' Charter application was without merit and that the disclosure requests were nothing more than fishing expeditions.

[31] The issue of privilege was addressed in the Crown's factum only to this extent:

The [respondents] raise the question of whether privilege has been waived. With respect, that is not the issue. The relevant inquiry is whether the [respondents'] abuse of process allegation has any basis whatsoever that could possibly support such a request. It does not. In other words, the Crown mentioned privilege only to dismiss it as irrelevant.

[32] On November 23, 2010, the extradition judge granted the relief sought in the second disclosure application.

[33] What followed was a brief appearance on November 26, 2010, during which Crown counsel simply advised the extradition judge that he was not prepared to provide any additional disclosure. Crown counsel then invited the extradition judge to order that the respondents be discharged or to enter a stay of the proceedings. He provided no notice of his intention to take this step. He provided no explanation for refusing to provide further disclosure and requesting that the proceedings be terminated.

[34] The extradition judge discharged the respondents. She also indicated that she was prepared to make an order staying the proceedings as an abuse of process.

[35] It is not disputed that at the conclusion of the hearing on November 26, 2010, the Crown had in hand two notices of appeal -- one in the event that a stay was imposed and the other available if the court granted a discharge. The latter notice of appeal, dated November 26, 2010, was served and filed with this court that day. [page649]

C. The Issues

[36] As I have indicated, the Crown's steadfast and only position throughout the dispute over the respondents' requests for disclosure was lack of relevance -- that the respondents' application for exclusion of evidence, based on a breach of their Charter rights arising out of the way in which Canadian police shared information with U.S. authorities, was doomed to fail.

[37] According to the Crown, the extradition judge's error stemmed from an incorrect approach to the Charter analysis in two respects. First, she incorrectly placed an onus on the Crown to prove that the evidence in issue was dealt with by Canadian authorities in a Charter-compliant fashion rather than requiring the respondents to demonstrate a Charter breach. Second, the legal assertion underlying the Charter claim, that prior judicial authorization was necessary to share information, was incorrect.

[38] Before this court, the Crown argues that the orders were wrong in law for the same reason as the one consistently advanced before the extradition judge -- the information and documentation requested was not relevant to the extradition proceeding as there is no air of reality to the Charter argument. Crown counsel also raises two additional arguments against disclosure not advanced below -- that compliance with the orders would violate privilege and harm international relations.

[39] For reasons that I will explain, the focus of this appeal is not the correctness of the interlocutory orders, but rather whether the conduct of the Crown in response to the orders amounts to an abuse of process. In my view, it does.

(1) The applicable legal principles

[40] The foundation of the respondents' abuse of process argument is that parties to an extradition proceeding have a right of appeal only from a final order that brings the matter to an end. Orders made during the proceeding, like interlocutory orders in criminal matters generally, are not the subject of an immediate right of appeal. Those orders can be challenged on appeal only after the proceedings are complete and a final order is made.

[41] The policy reasons underlying the bar against interlocutory appeals include the promotion of efficiency and protecting the system and those involved in it from the disadvantages associated with fragmentation: R. v. Johnson (1991), 1991 CanLII 7174 (ON CA), 3 O.R. (3d) 49, [1991] O.J. No. 481 (C.A.). In my view, these concerns are especially relevant in the extradition process, which is, by design, an expedited process that is less complex and extensive [page650] than a criminal trial: United States of America v. Dynar (1997), 1997 CanLII 359 (SCC), 33 O.R. (3d) 478, [1997] 2 S.C.R. 462, [1997] S.C.J. No. 64, at paras. 122, 131.

[42] While the prosecution has no immediate right of appeal when faced with an interlocutory ruling to which it takes serious objection, the Crown is not without a remedy. It has two options. It can continue with the proceeding and, depending on the result and the effect of the ruling on that result, launch an appeal in which the adverse ruling is challenged. Or it can do what the Crown did here; it can bring the proceedings to a halt and launch an appeal challenging the correctness of the interlocutory order.

[43] However, this second option is strictly limited to cases where the Crown can clearly demonstrate that it had no reasonable alternative. If the record does not support such a finding, allowing the Crown to argue its appeal from the interlocutory order would amount to an abuse of process.

[44] A review of the authorities reveals that two types of circumstances have been recognized as putting the Crown in the position where there is no reasonable alternative other than to pursue what may be called a functional appeal of an interlocutory order. These two circumstances broadly can be identified as where the record demonstrates: (a) that the effect of the interlocutory ruling is to exclude evidence sufficiently important to the prosecution that the Crown is unable to continue or (b) that compliance with the interlocutory order raises a reasonable prospect of harm to an interest the court deems worthy of protection.

[45] It follows that, except where the Crown can demonstrate that it really had no other reasonable option, it will generally be considered an abuse for the Crown to appeal from an order that it agreed to, much less one that it invited the court to make.

(a) When the trial judge has excluded evidence upon which the prosecution depends

[46] The most common situation in which the prosecution is allowed effectively to bring an appeal from an interlocutory order occurs where a judge has made a ruling during the proceedings that, for all practical purposes, decides the case against the Crown. An example is where the judge makes an interlocutory order the effect of which is to exclude evidence critical to the prosecution, such as in R. v. Banas (1982), 1982 CanLII 2107 (ON CA), 36 O.R. (2d) 164, [1982] O.J. No. 3202 (C.A.), where the trial judge excluded intercepted private communications upon which the Crown's case depended. The Crown declined to call any further evidence and [page651] agreed that a directed verdict of acquittal was appropriate. Martin J.A. held, at p. 169 O.R., that the Crown could appeal, as continuing with the trial in the light of the order would have been "fruitless". See, also, R. v. Whittle, 1992 CanLII 12777 (ON CA), [1992] O.J. No. 2752, 59 O.A.C. 218 (C.A.); R. v. Wilcox, [2001] N.S.J. No. 85, 2001 NSCA 45, 192 N.S.R. (2d) 159; R. v. Bailey, 1983 CanLII 3569 (ON CA), [1983] O.J. No. 14, 4 C.C.C. (3d) 21 (C.A); R. v. Brown, [1987] O.J. No. 65 (C.A.).

[47] R. v. Power, 1994 CanLII 126 (SCC), [1994] 1 S.C.R. 601, [1994] S.C.J. No. 29 was a case of this type. There, the accused was charged with impaired driving causing death and two counts of impaired driving causing bodily harm. The Crown elected not to continue with the prosecution following the trial judge's ruling excluding breathalyzer evidence. The court held that there was no abuse of process as "[t]here is not one iota of evidence that the Crown prosecutor's conduct was prompted by bad faith or an improper motive . . . nor did the prosecution intend to frustrate the administration of justice or even to circumvent the rules of criminal law regarding interlocutory appeals" (at p. 616 S.C.R.). This holding was informed by the fact that the excluded evidence was, in fact, crucial to the Crown's case (at p. 631 S.C.R.).

[48] In such a situation, the prosecution will not be obliged to waste time and resources completing a proceeding where the result is inevitable. Instead, the more prudent course of action is for the Crown to explain to the court how the ruling has had the effect of determining the matter and invite the court to enter a final order so that the prosecution can challenge the exclusion of evidence on appeal.

(b) When compliance would potentially cause harm

[49] The common thread in this second category of cases is evidence demonstrating that compliance with an interlocutory order raises a reasonable prospect of harm to a legally recognized interest worthy of protection. Such interests include disclosure of the identity of a confidential informant or violation of privilege.

[50] This category may also involve situations in which the Crown can demonstrate that compliance with the interlocutory order would cause irreparable harm to the administration of justice, such as situations where the prosecution can make the case that compliance with the interlocutory order would require an inordinate expenditure of prosecutorial and judicial resources.

[51] In R. v. Chiarantano, [1989] O.J. No. 2950 (Dist. Ct.), the trial judge ordered the Crown to disclose the identity of a police informant. The Crown refused to do so and the trial judge entered a stay. This court considered the merits of the disclosure order [page652] and allowed the appeal, ordering a new trial: [1990] O.J. No. 2603 (C.A.). A further appeal to the Supreme Court was dismissed: 1991 CanLII 101 (SCC), [1991] 1 S.C.R. 906, [1991] S.C.J. No. 35.

[52] In R. v. Creswell, [2000] B.C.J. No. 2171, 2000 BCCA 583, 149 C.C.C. (3d) 286, the British Columbia Court of Appeal considered an appeal on its merits from the Crown's refusal to comply with a disclosure order. In that case, the trial judge ordered the production of legal opinions relied on by the police in the course of an undercover operation. The Crown raised privilege, but the trial judge held that it had been waived. The Crown refused to disclose the legal opinions and invited a stay. The Court of Appeal agreed to review the legitimacy of the order, at paras. 11-12:

Once the trial judge made her ruling that the legal opinions had to be disclosed, the Crown had a choice. It could either release the opinions or discontinue its case against the respondent . . .

In my view, the actions of the Crown do not demonstrate contempt for the court but a practical resolution of the problem which arose. If the issue of privilege was to be tested in this Court there was no other way for the Crown to proceed.

[53] The court in Creswell identified Chiarantano as a case where necessity dictated the Crown's course of action and, as such, did not amount to an abuse of process.

[54] R. v. Cassidy (2004), 2004 CanLII 14383 (ON CA), 69 O.R. (3d) 585, [2004] O.J. No. 39 (C.A.) was a case in which the Crown failed to demonstrate harm to a protected interest. The trial judge ordered the Crown to provide two software programs used to extract child pornography from computers and the hard drives they were found on and, if required, pay the costs of training someone to operate the program. The Crown refused to comply and consented to a stay. On appeal, the Crown submitted that its position as argued at trial was wrong, but on other grounds maintained that the disclosure order went too far. This court drew an analogy between the Banas and the Power type of cases and the circumstances in Cassidy. The court concluded that Cassidy was a case in which the Crown proceeded directly to appeal when it had a reasonable alternative, namely, an order pertaining to the computer equipment and search program that the Crown, on appeal, ultimately agreed would have been appropriate. As a result, this court held that Mr. Cassidy was exposed to a potentially unnecessary appeal, and "it would be an unfair and abusive exercise of prosecutorial discretion to allow the Crown to force [him] to a new trial" (at paras. 22-23). [page653]

(c) Conclusion regarding when the Crown can effectively appeal an interlocutory order

[55] When the Crown requests a premature termination of a proceeding after an adverse interlocutory ruling, it must establish the existence of circumstances where a direct appeal of the ruling is absolutely necessary -- where there is no reasonable alternative. The onus on the Crown is formidable due to the exceptional nature of a procedure that essentially circumvents the rule against a direct appeal from an interlocutory order.

[56] Before applying these principles to this case, I will comment briefly on the Crown's argument that the principle I have just set out is not inviolate and that this court should review the merits of the two orders that it submits are wrong in law.

[57] In trying to make this argument, the Crown relies on the decisions in Creswell; Cassidy; United States of America v. Tang, [2002] O.J. No. 5737, 66 W.C.B. (2d) 30 (S.C.J.), revd United States of America v. Chan, [2003] O.J. No. 4158, 59 W.C.B. (2d) 568 (C.A.); and R. v. Fitch, [2006] S.J. No. 420, 2006 SKCA 80, [2006] 10 W.W.R. 1.

[58] In my view, these cases do not assist the Crown.

[59] As discussed above, in Creswell, the Crown clearly had no reasonable alternative as the disclosure of potentially privileged information was at stake. In Cassidy, this court did comment on the merits of the disclosure order below but, relying on abuse of process, upheld the stay.

[60] Tang is a different case than the one at bar. There, the extradition judge ordered the U.S. to produce further information elaborating on the record submitted in the extradition hearing. The U.S. refused and the extradition judge granted a stay. The Court of Appeal allowed the appeal holding that if the extradition judge was of the opinion that there was insufficient evidence to satisfy the test for committal, the proper remedy was a discharge rather than a disclosure order. The merits of the appeal were considered only because the extradition judge had no basis to make the order in the first place. Here, the jurisdiction to make a disclosure order is unquestioned. It is the correctness of the order that is attacked.

[61] This takes me to the decision of the Saskatchewan Court of Appeal in Fitch, where, in aid of the accused's Charter application, the trial judge ordered the disclosure of a police officer's history of stopping and searching vehicles. The Crown refused to comply but indicated that it was prepared to continue with the trial. It also invited the court to stay the charges if the trial judge concluded that the information in issue was necessary for [page654] a fair trial. The accused then applied for and was granted a stay of proceedings. The Crown appealed the stay by arguing the disclosure order was in error. The Court of Appeal fully considered the merits of the underlying order and, concluding that it was in error, allowed the appeal and set aside the stay.

[62] To the extent that Fitch appears to permit a review of interlocutory orders in circumstances such as this, I am respectfully of the view that its reasoning is inconsistent with the preponderance of authority, including from the Supreme Court.

[63] It follows, therefore, that the legal merits the Crown raised in its factum have no relevance unless the case can be made that the proposed appeal falls within that narrow band of cases in which what are in effect appeals from interlocutory orders are properly taken by the prosecution.

[64] It is this issue to which I now turn.

D. Principles Applied to this Case

[65] Crown counsel attempted to tease out an argument that it must be able to advance in order to persuade this court to review the merits of the impugned interlocutory orders -- that compliance with the orders would have put it in an impossible position. The Crown now takes the position that compliance would have harmed two important interests: the protection of privileged communications and the protection of international relations.

[66] On this record, I am of the view that the "no reasonable alternative" argument is not available to the Crown.

[67] First, as previously noted, neither breach of privilege nor concern about harm to international relations was relied upon by the Crown in its attempts to resist the respondents' requests for the two disclosure orders.

[68] Notwithstanding that the extradition judge allowed the Crown to raise the issue even after the first order was made, the record demonstrates that the Crown's position concerning privilege was neither clear nor pressed on a consistent basis.

[69] The Crown specifically waived litigation privilege over the disclosure it provided on June 14, 2010. Then, in court on June 21, 2010, the Crown did not mention privilege. It took the position that it had fully complied with the first disclosure order, with the exception of Palermo's notes and a few photocopying errors.

[70] The Crown raised solicitor-client privilege for the first time on August 17, 2010, when it advised the court that it had waived litigation privilege over certain documents, but had not waived solicitor-client privilege generally. On September 13, 2010, the Crown provided further disclosure, including [page655] correspondence between Palermo and legal counsel, indicating that it was prepared to produce the documents "in the unique and particular circumstances of this case". Again, there was no further mention of privilege. As noted above, the Crown's factum on the second disclosure motion mentioned privilege only to the extent of dismissing it as a relevant issue.

[71] The concern that compliance would harm international relations is made for the first time before this court.

[72] Not surprisingly, given the fact that the two issues the Crown now raises in support of its argument that it had no reasonable alternative but to "fold its tent" and appeal were not argued in the court below, the Crown faces another insurmountable problem -- there is nothing in the record to support either concern.

[73] I have reviewed in detail the privilege issue. The claim about possible harm to international relations is a bald assertion that the Crown now makes. Nothing more.

[74] Finally, it is of significance, in my view, that the Crown made no attempt before the extradition judge to explain either decision -- to provide no further disclosure and to invite the termination of the proceedings.

[75] Crown counsel also submits that compliance with the disclosure orders would "let the genie out of the bottle" in the sense that the information would be irretrievably disclosed. Put another way, any appeal would have been rendered moot. I find no merit in this argument. If the Crown made the disclosure as ordered, the Charter application was successful and the respondents were discharged for reasons relating to the Crown's inability to rely on the excluded evidence, the Crown would have every right to appeal and argue that the disclosure orders were improper. Furthermore, this argument could be said to apply to virtually all disclosure orders. If accepted, it would essentially create a right of appeal from an interlocutory order where the rules do not allow one.

[76] All of this together with the fact that Crown counsel came before the extradition judge on the last day of the proceedings with two notices of appeal in hand -- one drafted if a stay had been ordered and one drafted in the event of a discharge -- seems somewhat high-handed and disrespectful. In my view, it attracts a finding that the Crown's refusal to continue with the extradition proceeding was "for the sole purpose of obtaining an interlocutory appeal on an adverse ruling", as described in Power, at p. 619 S.C.R., and therefore constitutes an unfair and abusive exercise of the prosecutorial discretion. [page656]

E. Conclusion

[77] A fair summary of the Crown's conduct is as follows. It refused to comply with the interlocutory disclosure orders and, without notice or explanation, the Crown folded its tent and in vited the extradition judge to terminate the proceeding either through a stay or discharge. The Crown made no effort before the extradition judge to bring this situation within the exceptions, namely, that compliance would cause harm to an interest deserving of court protection. The Crown's efforts now to justify its actions are not persuasive.

[78] Given the narrow issues raised in the extradition context, the Crown may have had good reason to be concerned about the nature, extent and even the legality of the first disclosure order, concerns that may well have been exacerbated by the second order, particularly given that it required testimony by Crown lawyers. However, these concerns did not justify the route it chose to take. It had alternatives. Since the Crown only objected to the correctness of the disclosure orders, it was required to comply with them. If the respondents were later discharged for reasons relating to the orders, the Crown could have challenged their correctness on appeal. If, however, the Crown had objected to the orders on the basis of privilege or harm to international relations, and had supported this objection with evidence, it could have refused to comply and appealed to this court. It did neither. Instead, without explanation, the Crown invited the extradition judge to end the proceedings.

[79] This constitutes an unfair exercise of prosecutorial discretion and amounts to an abuse of process -- an abuse that this court should not countenance by examining the merits of the impugned order.

[80] The unsatisfactory nature of this disposition is palpable. The charges are serious. The Crown withdrew fraud charges in Canada to facilitate the extradition of the respondents to the United States. However, the responsibility for the fact that there will now be no determination of the extradition request on its merits lies with the Crown. It chose to bring the proceedings to an end without explanation. It then found itself in this court with a record that was devoid of evidence to justify the extraordinary procedure it chose to follow.

F. Disposition

[81] It is on this basis that I would dismiss the appeal.

Appeal dismissed.

@7 Notes

Note 1: Treaty between the Government of Canada and the Government of the United States of America on Mutual Legal Assistance in Criminal Matters, March 18, 1985, Can. T.S. 1990 No. 19 (entered into force January 24, 1990).