COURT OF APPEAL FOR ONTARIO DATE: 20230719 DOCKET: COA-23-OM-0016 Zarnett J.A. (Motion Judge)
IN THE MATTER OF sections 9.3 and 9.4 of the Mutual Legal Assistance in Criminal Matters Act concerning the restraint and forfeiture of funds in Canadian bank account no. 09971-5038021 at the Royal Bank of Canada
IN THE MATTER OF an application of Loukia Georgiou with respect to said funds
BETWEEN
Attorney General of Canada Respondent (Responding Party)
and
Loukia Georgiou Applicant (Moving Party)
William V. Sasso and Jacqueline Horvat, for the moving party Roy Lee, for the responding party
Heard: June 21, 2023
REASONS FOR DECISION
Overview
[1] The moving party, Loukia Georgiou (“Loukia”), applied for relief from forfeiture under s. 9.4(9) of the Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4th Supp.) (the “Act”). Her application concerned $9.3 million [1], held in Canada, in respect of which a United States court had made a forfeiture order on the basis that the funds belonged to Loukia’s son, George Georgiou (“George”), whom that court had convicted of serious criminal offences. The Act was engaged as Canadian authorities were asked to enforce the U.S. court’s order.
[2] Loukia’s application sought a declaration that she has a 100% interest in the funds and that her interest is not subject to the forfeiture order, as well as an order that the funds be paid to her.
[3] The application judge, Goldstein J., dismissed Loukia’s application for oral reasons he gave at the conclusion of the hearing, and for written reasons reported at 2023 ONSC 64.
[4] By this motion, Loukia seeks leave to appeal the application judge’s order. She also seeks, in the alternative, directions that she may appeal the application judge’s order as of right.
[5] For the reasons that follow, I conclude that Loukia’s proposed appeal requires leave, and that it does not satisfy the Act’s criteria for granting leave to appeal. I therefore dismiss her motion.
The Background
[6] In 2010, George was convicted in the United States of conspiracy, securities fraud, and wire fraud. He was: (i) sentenced to 25 years in prison; (ii) ordered to pay restitution of over $55 million USD; and (iii) ordered to forfeit the amount of $26 million USD, representing the proceeds of his offences.
[7] Under U.S. federal law, a forfeiture order for the proceeds of crime may be extended to include “substitute property” if the property subject to the forfeiture order cannot be located or has been transferred to third parties. Therefore, the U.S. government was entitled to seek forfeiture of any assets belonging to George in satisfaction of his obligation to forfeit proceeds of crime: Canada (Attorney General) v. Georgiou, 2018 ONCA 320, at para. 25, leave to appeal refused, [2018] S.C.C.A. No. 186 (“Georgiou (2018)”).
[8] In July 2012, APP Capital Inc., through its representative, transferred about $9.3 million into an account at the Royal Bank of Canada (“RBC”) in the name Brent David Emanuel, a nominee for George.
[9] In August and September 2012, on application by U.S. prosecutors, the U.S. District Court for the Eastern District of Pennsylvania made orders targeting the $9.3 million sum. On August 24, 2012, that court granted a Preliminary Order of Forfeiture for Substitute Asset. On September 21, 2012, that court issued an order restraining, as a substitute asset, the $9.3 million until further order of that court.
[10] American authorities then requested Canada’s assistance in enforcing the U.S. District Court’s orders, under a treaty providing for mutual legal assistance in criminal matters. The Act authorizes the Minister of Justice to deal with such requests. Section 9.3(1) provides:
When a written request is presented to the Minister by a state or entity, other than the International Criminal Court referred to in section 9.1, for the enforcement of an order for the restraint or seizure of property situated in Canada issued by a court of criminal jurisdiction of the state or entity, the Minister may authorize the Attorney General of Canada or an attorney general of a province to make arrangements for the enforcement of the order.
[11] Pursuant to s. 9.3(2) of the Act, enforcement steps were taken by the responding party. On September 24, 2012, Forestell J. made an order restraining the $9.3 million.
[12] George moved to set aside Forestell J.’s order. His motion was unsuccessful, as was his appeal: Georgiou (2018). This court held that a restraint order for the $9.3 million, a substituted asset as contemplated by American law, could properly be considered a restraint order of proceeds of crime for the purpose of the Act.
[13] On June 19, 2018, the U.S. District Court issued a Final Order of Forfeiture for Substitute Asset ordering forfeiture of the $9.3 million amount (the “Forfeiture Order”). The U.S. government then asked the Canadian authorities to enforce the Forfeiture Order.
[14] In April 2021, the Forfeiture Order was filed by the responding party and entered as a judgment of the Superior Court of Justice, pursuant to s. 9.4(3) of the Act.
[15] Section 9.4(8) of the Act provides that a forfeiture order being enforced under the Act shall not be executed before notice in accordance with s. 462.41(2) of the Criminal Code has been given to anyone who, in the opinion of the court, appears to have a valid interest in the property. The responding party moved for directions about the giving of notice.
[16] On May 10, 2021, Davies J. ordered “pursuant to s. 9.4(8) of the Act” that Loukia, Brent David Emanuel, and RBC be given notice of intended execution of the forfeiture order. The order directed any person claiming an interest in the $9.3 million to make an application.
Loukia’s Application
[17] Loukia’s application was expressly brought under ss. 9.4(8) and (9) of the Act. These sections refer to provisions of the Criminal Code that apply to domestic forfeiture orders. As noted above, s. 9.4(8) provides that a forfeiture order shall not be executed before notice to interested parties is given in accordance with s. 462.41(2) of the Criminal Code. Section 9.4(9) states that ss. 462.41(3) and 462.42 of the Criminal Code apply, with any modifications that the circumstances require, to a person who claims an interest in proceeds of crime. Section 462.41(3) authorizes a court, prior to making a forfeiture order, to order that property that would otherwise be forfeited be returned to a particular person if they meet specific criteria. Section 462.42(1) permits any person who claims an interest in property that has been forfeited to make an application for relief, subject to enumerated exceptions. Pursuant to s. 462.42(4), if the judge is satisfied the applicant meets the specified criteria (which are largely the same criteria as those stated in s. 462.41(3)), they may order such relief.
[18] Loukia sought a declaration that she has a 100% interest in the $9.3 million, that the funds are unaffected by the Forfeiture Order, and that the funds be paid to her with accrued interest.
[19] Loukia filed an affidavit that was in large part based on information from George. She deposed that, unconnected to the activity for which he was convicted, George negotiated a transaction whereby Loukia was to have an interest in and be entitled to proceeds from the purchase and planned subsequent resale of the shares of A.P. Plasman Corporation (“Plasman”), an auto parts manufacturer. The shares of Plasman were acquired by APP Capital in about 2008. Loukia deposed that George’s discussions with Thomas Bock (“Bock”), whose family was the other party interested in APP Capital, show that she was to receive the first $9 million from the proceeds of any sale of Plasman shares after repayment of financing, and at least 25% of the balance of the net proceeds.
[20] Loukia further deposed that, when a sale of Plasman shares by APP Capital took place around 2012, no amounts were paid to Loukia. Instead, based again largely on information from George, she understood that Bock insisted that George (through his legal representative) sign a Compensation Agreement, and then paid the $9.3 million to George’s representative, purportedly pursuant to the Compensation Agreement. Loukia deposed that George told her he signed a Power of Attorney (pursuant to which the Compensation Agreement was signed) under duress, and that he never had an entitlement to the $9.3 million payment out of the proceeds of the Plasman sale, as compensation, or otherwise.
[21] George filed an affidavit that supported Loukia’s contentions. Loukia’s son-in-law, Robert Watson, also filed an affidavit.
[22] There were no cross-examinations.
The Application Judge’s Decision
[23] The application judge noted the parties’ agreement that ss. 462.42(1) and (4) of the Criminal Code governed Loukia’s request for relief from forfeiture. As he summarized it, before his discretion to grant relief could be exercised, Loukia had the onus to show that: (a) she was not charged with or convicted of an offence that resulted in the forfeiture; (b) she is innocent of any complicity or collusion with respect to the offences of which George was convicted; (c) she has a valid interest in the disputed funds; and (d) her interest was not transferred to her under circumstances that give rise to a reasonable inference that the transfer was for the purpose of avoiding forfeiture of the disputed funds.
[24] The application judge found that Loukia satisfied the first two criteria. However, he was ultimately not satisfied that Loukia met the last two requirements.
[25] He first rejected Loukia’s argument that he was required, because of the absence of cross-examinations and the rule in Browne v. Dunn (1893), 6 R. 67 (H.L.), to accept the evidence of George and Loukia.
[26] He then analyzed the contention that Loukia was the owner of the $9.3 million because they were held in trust for her. He rejected that argument:
George has stated in his affidavit that he intended to create a trust. There is a 2008 document where he states an intention to hold the shares of APP Capital in trust for Loukia (and Robert Watson). There is no evidence (other than in his affidavit) that he still intended to create a trust in 2012, when the disputed funds were paid to him. A better example of George’s intentions comes from what he actually did: in 2008 he transferred the shares in APP Capital to Thomas Bock. Through his legal representative, in 2012 he signed a compensation agreement with the Bocks. APP Capital was the source of the disputed funds. There is no evidence that the Bocks generally intended to settle a trust in favour of Loukia. They strongly deny it in their statement of defence [in civil proceedings with George, Loukia, and Robert Watson]. Moreover, there is no evidence that Brent David Emanuel was to hold the disputed funds in trust for Loukia. The funds were directed into the account of Brent David Emanuel at RBC, where they were ultimately frozen. There are no documents at all creating a trust with George (or the Bocks) as settlor, Brent David Emanuel as a trustee, and Loukia as beneficiary. Brent David Emanuel has both claimed and withdrawn a claim that he was the beneficial owner of the money. He has made other claims. One thing he has never claimed is that he held the money in trust for Loukia – other than in the suspicious documents.
[27] The application judge also rejected the contention that the funds were Loukia’s because of a commercial contract relating to the Plasman deal. He noted that Loukia’s claim of a contract was based entirely on George’s evidence, including of the arrangements he made with Bock and his claim that those arrangements were varied under duress after the sale of the Plasman shares. He rejected George’s evidence and therefore Loukia’s derivative understanding:
The only evidence for these agreements comes from George. As I have noted, George is a convicted fraudster. According to the U.S. courts, he has allegedly committed perjury and suborned perjury by others. In the absence of corroborating documents, I find that George’s evidence is not to be relied upon in the face of strong denials from the other party, as well as in the face of documents to the contrary. Since Loukia’s evidence on this point is dependent upon George, I do not accept it either.
[28] Based on his findings, including that the documents supporting Loukia’s claims were suspicious, the application judge concluded that her claim “smacks of deliberate fabrication”. Accordingly, he inferred that any alleged “‘interest’ in the disputed funds arises only for the purpose of avoiding forfeiture”.
Analysis
(1) Is Leave to Appeal Required?
[29] Although Loukia’s notice of motion asks for leave to appeal under s. 35 of the Act, in her factum for this motion and in oral argument she advanced the alternate position that she has an appeal as of right.
[30] The question of whether an appeal is within the jurisdiction of the court is a question for a panel, not for a single judge on a motion for directions. Only a panel may quash an appeal over which the court has no jurisdiction: see e.g., Ontario (Provincial Police) v. Assessment Direct Inc., 2017 ONCA 986, at paras. 4-5, where the question was whether the appeal was properly brought in this court or could only be brought to the Supreme Court of Canada, and Dal Bianco v. Deem Management Services Limited, 2020 ONCA 488, at para. 4, where the question was whether the appeal route was to the Divisional Court or this court.
[31] However, where a motion for leave to appeal is brought before a single judge as required by some statutes, such as the Act, it implicitly raises the question of whether the provision permitting an appeal with leave applies to the appeal that the party seeks to bring. A judge should not consider whether leave should be granted if the provision providing for an appeal with leave does not apply to the proposed appeal: R. v. Viscomi, 2014 ONCA 765, at paras. 11-13. To determine whether the provision applies, the motion judge must interpret the provision, which, in this case, is s. 35 of the Act, and be satisfied that the appeal falls within it. On that limited basis, therefore, I turn to the question of whether Loukia’s proposed appeal falls within s. 35 of the Act.
[32] Section 35 of the Act provides:
An appeal lies, with leave, on a question of law alone, to the court of appeal, within the meaning of s. 2 of the Criminal Code, from any order or decision of a judge or a court in Canada made under this Act, if the application for leave to appeal is made to a judge of the court of appeal within fifteen days after the order or decision. [Emphasis added.]
[33] As Strathy C.J.O. stated in Viscomi, at para. 11, the key question for determining the applicability of this provision is whether the order of the application judge was made “under” the Act.
[34] On its face, s. 35 is directly applicable to Loukia’s proposed appeal. The relief sought by Loukia from the application judge was expressly sought under the Act, and his decision denying that relief would therefore be an order or decision under the Act.
[35] Loukia argues, however, that the application judge’s order was made under s. 462.42(4) of the Criminal Code, entitling her to an appeal as of right. She relies on the parties’ agreement before the application judge that ss. 462.42(1) and (4) governed the application. Section 462.42(5) of the Criminal Code provides that an applicant or the Attorney General may appeal to the Court of Appeal from an order made under s. 462.42(4). In Loukia’s submission, the Act incorporates this appeal route pursuant to s. 9.4(9). For ease of reference, I set out the relevant text of that provision here:
Subsection 462.41(3) and section 462.42 of the Criminal Code apply, with any modifications that the circumstances require, to a person who claims an interest in proceeds of crime…. [Emphasis added.]
[36] I do not accept Loukia’s submission because, in my view, the application judge’s order was made “under” the Act within the meaning of s. 35, not under the Criminal Code.
[37] The parties’ agreement before the application judge, that certain Criminal Code provisions governed, was relevant to ascertaining the criteria that Loukia had to satisfy to obtain relief under the Act. It did not mean that her application, or any resulting order, was made other than under the Act. It could not alter the appeal route from a decision on her application.
[38] Nor do the references to the Criminal Code provisions in s. 9.4(9) of the Act assist Loukia’s argument, when s. 9.4(9) is properly interpreted. Read in context with the rest of s. 9.4, the purpose of s. 9.4(9)’s reference to Criminal Code provisions is to provide individuals who have valid interests in property subject to foreign forfeiture orders with similar, but not identical, relief proceedings as those found in the Criminal Code for individuals who have valid interests in property subject to domestic forfeiture orders. Recognizing that the procedure for enforcing foreign forfeiture orders does not mirror domestic proceedings, and that different interests exist in each context, the text of s. 9.4(9) expressly provides that the Criminal Code provisions apply, subject to “any modifications that the circumstances require”. This qualification clearly suggests that not every component of these Criminal Code provisions may be applicable.
[39] Section 9.4(9) must be interpreted by examining the statutory text in its entire context and in its grammatical and ordinary sense, in harmony with the statute’s schemes and objects: Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21. And given that the Act is domestic legislation enacted for the purpose of implementing Canada’s international obligations, the provision should be interpreted purposively with a view to fulfill these obligations: National Corn Growers Assn v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, at p. 1371. As this court stated in United Kingdom v. Ramsden (1996), 108 C.C.C. (3d) 289 (Ont. C.A.), at p. 304, leave to appeal refused, [1996] S.C.C.A. No. 443, one of the purposes of the Act is to “provide the widest measure of mutual legal assistance in criminal matters in a prompt and efficient manner”.
[40] Providing limited appeal routes is one manner in which this purpose is achieved. Reading the language of s. 9.4(9) as not incorporating the Criminal Code appeal provisions is consistent with the objects of the Act, and with the Act as a whole, given the unambiguous language of s. 35 that requires leave to appeal for any order or decision made under the Act.
[41] Accordingly, I conclude that Loukia’s proposed appeal falls within s.35 of the Act and that she may appeal only if she satisfies the test for leave in s. 35.
(2) Should Leave be Granted?
[42] An applicant for leave under s. 35 of the Act must (a) identify a true question of law, and (b) show that leave ought to be granted to address it. On the latter requirement, relevant considerations are whether the question raised is: (i) settled by authority, (ii) of importance generally or great importance to the parties specifically, and (iii) is meritorious or frivolous. As well, this court will consider whether an appeal will cause prejudice, including to the requesting state: R. v. Kachkar, 2014 ONCA 560, 121 O.R. (3d) 197, at para. 32.
[43] Loukia raises two issues:
- Did the application judge err as a matter of procedural fairness in relying upon pleadings in a separate civil proceeding in support of his foundational finding that there was no oral agreement and/or trust concerning the sharing of Plasman profits with Loukia as a beneficiary?
- Did the application judge err in failing to comprehend the evidence of a written 2008 trust arrangement signed by Thomas Bock as trustee for the benefit of Loukia, among others, in sharing Plasman profits?
[44] In my view, neither ground raises a question of law alone justifying leave to appeal.
[45] The crux of Loukia’s complaint regarding the first issue stems from the application judge’s references to a statement of defence filed by the Bocks and other defendants in a civil proceeding commenced by George, Loukia, and Robert Watson, in which they claim that the Bocks did not pay Loukia what she was entitled to from the proceeds of the Plasman sale.
[46] The Bocks did not give evidence on the application. Yet, according to Loukia, the application judge relied on the Bocks’ statement of defence in various ways as though it was evidence. After summarizing the evidence of Loukia and George, he devoted multiple paragraphs of his reasons, under the heading “The Bocks Tell a Different Story”, to describe a competing version of events drawn from the statement of defence. Later in his reasons, the application judge referred to the denial by the Bocks of a trust or agreement in favour of Loukia pertaining to the $9.3 million payment in 2012 in rejecting the evidence proffered by George and Loukia. For example, he stated that: “There is no evidence that the Bocks generally intended to settle a trust in favour of Loukia. They strongly deny it in their statement of defence” (emphasis added). And, he wrote: “In the absence of corroborating documents, I find that George’s evidence is not to be relied upon in the face of strong denials from the other party, as well as in the face of documents to the contrary” (emphasis added).
[47] Loukia characterizes this as an error of law involving a breach of the rule in Browne v. Dunn, as it allowed the responding party to proffer competing evidence to impeach the credibility of Loukia and George without giving them the opportunity to respond to it in cross-examination.
[48] In my view, Loukia’s framing of the first question is based on a misunderstanding of how the application judge used the Bocks’ pleading. Loukia’s argument depends on the application judge having given evidentiary treatment to the assertions in the Bocks’ pleading, using them as evidence in preference to, or to diminish the credibility of, George and Loukia’s sworn evidence. But as Loukia acknowledges, the application judge specifically reminded himself that the Bocks’ pleading was not evidence, stating:
Obviously the Bocks’ statement of defence is hearsay, and not evidence. It represents the position of the Bocks in relation to their dispute with Loukia, George, and Robert Watson. It is relevant, however, to show that they dispute three things: first, that Loukia is owed anything arising from the AP Plasman transaction; second, that George signed the compensation agreement under duress; and third, that there were any oral agreements as George and Loukia claim.
[49] Read as a whole, the application judge’s reasons reveal that his use of the Bocks’ pleading was limited to pointing to the absence of corroboration for Loukia and George’s assertions. The application judge was gravely concerned about the credibility and reliability of George’s evidence, given George’s criminal background and the general implausibility of his version of events. He was not prepared to accept it without corroboration, and he found none. His references to the denials in the Bocks’ pleading were a forceful way of underscoring that there was no corroboration from the Bocks on the key planks of George’s evidence. And because he did not accept George’s uncorroborated evidence, he did not accept Loukia’s which was based on George’s.
[50] The application judge’s conclusion that Loukia had not met her onus of proving the $9.3 million belonged to her turned on his factual determinations. Loukia cannot appeal, under s. 35 of the Act, on anything other than a question of law. When the application judge’s use of the Bocks’ pleading is properly characterized, it becomes clear that Loukia’s first issue does not raise “a question of law alone” that would warrant leave to appeal.
[51] Loukia’s second issue also cannot properly be characterized as a question of law alone. On this issue, Loukia points to the presence, in the record, of a document dated November 1, 2008, entitled “The Sedona Capital Trust”, under which the settlor is Robert Watson, Thomas Bock is trustee, and Loukia is one of 11 beneficiaries. Loukia says that the application judge ignored this document in coming to his conclusion that there was no evidence that “the Bocks generally intended to settle a trust in favour of Loukia”.
[52] The fact that the application judge did not mention this document does not mean that it was ignored. A judge is not required to refer to each item of evidence, and “[t]he failure to mention a piece of evidence does not in and of itself constitute a question of law”: see R. v. M.S. (2002), 160 O.A.C. 184 (C.A.), at para. 12, aff’d 2003 SCC 11, [2003] 1 S.C.R. 125.
[53] The Sedona Trust document is not, on its face, inconsistent with the application judge’s finding that there was no evidence that the Bocks intended to settle a trust in favour of Loukia. The document does not refer to the Bocks as settlors. Moreover, the document does not, on its face, give Loukia, as a beneficiary of the Sedona Trust, an interest in the $9.3 million paid out in 2012. The Sedona Trust document does not identify the trust property beyond a sum of $100. And, it gives the trustee absolute discretion over distributions to beneficiaries, rather than fixing an entitlement of one of them, Loukia, to a specific payment.
[54] Loukia’s attempt to connect the 2008 Sedona Trust document to the $9.3 million that was paid in 2012 depends on the evidence of George. But the application judge did not accept his evidence. The effect to be given to the Sedona Trust document on the issue of whether Loukia had a 100% interest in funds paid in 2012 by APP Capital, ostensibly under a Compensation Agreement with George, is not, nor does it involve, a question of law alone. [2] The application judge made extensive findings of fact to conclude that Loukia did not establish that interest.
(3) Fresh Evidence
[55] Loukia seeks to introduce fresh evidence. She points to Amonite v. A.P. Plasman Corp., 2014 ONSC 1705, where APP Capital and Plasman were sued for breach of an employment contract made in 2008, and specifically, to the following statement that appears at para. 17: “On October 17, 2008, [George’s] common shares in APP [Capital] were transferred to Bock [and his siblings]. The share transfer was done for nominal consideration and Bock advised that he agreed to operate the business on a 50/50 partnership with [George]”. Loukia asserts this statement was derived from evidence given in that proceeding by Bock.
[56] Looking past the issues of how this information would have been admitted into evidence if presented to the application judge, and the appropriateness of considering fresh evidence on a motion for leave to appeal under the Act, I am not satisfied the fresh evidence should be considered. There is no evidence that this information was not available to Loukia through the exercise of due diligence before the hearing of her application. Loukia could have called Bock as a witness on the application if she believed he had evidence that would assist her case. Moreover, the information pertains to arrangements in 2008, and does not directly address whether the 2012 payment to George’s nominee was to be held in trust for Loukia. But most fundamentally, the information could at most bear on factual issues and would not make either of the issues Loukia seeks to raise questions of law alone for which leave to appeal should be granted. The test for the introduction of fresh evidence is not met: Palmer v. The Queen, [1980] 1 S.C.R. 759.
Conclusion
[57] Leave to appeal is not available on the questions Loukia raises.
[58] The motion is therefore dismissed.
“B. Zarnett J.A.”
[1] The exact sum claimed is $9,372,737.23 and accrued interest.
[2] Loukia also argues that the application judge erred in not considering whether the Compensation Agreement was invalid because it altered a pre-existing bargain without consideration. The difficulty with this submission is two-fold. First, the application judge found Loukia did not prove the existence of the pre-existing bargain where she was entitled to the first $9 million from the Plasman sale after repayment of financing, together with a percentage of further amounts. Second, the application judge expressly disbelieved George’s assertion that he signed the Compensation Agreement under duress, which was the ground of invalidity asserted.
