Court File and Parties

Court File No.: 11-04549 and 11-04550 Central East Region – Newmarket

Date: 2013-11-20

Ontario Court of Justice

In the Matter of an application by Fercan Developments Inc. pursuant to Section 14(9) of the Controlled Drugs and Substances Act for a revocation of Restraint Orders and an Order pursuant to section 19(3) of the Controlled Drugs and Substances Act for the return of property restrained as offence-related property.

Between:

Her Majesty the Queen

— and —

Fercan Developments Inc. (Applicant on Revocation)

— and —

Her Majesty the Queen (Respondent on Revocation)

— and —

GRVN Group Inc. (Applicant on Revocation)

Before: Justice Peter C. West

Application heard: November 19, 2013

Ruling Delivered Orally: November 20, 2013

Counsel:

• Mr. J. Selvaratnam – Crown Public Prosecution Service of Canada
• Mr. James McKeachie – Senior Counsel for Civil Remedies for Illicit Activities Office (Attorney General of Ontario)
• Ms. Naomi Lutes – Applicant, Fercan Developments Inc.
• Mr. William Friedman, Mr. Patrick Bakos – Applicant, GRVN Group Inc.

WEST J.:

Background and Procedural History

[1] This application is brought by the Applicant pursuant to sections 14(9) and 19(3) of the Controlled Drugs and Substances Act, R.S.C. 1996, c. 19 (the "CDSA"), seeking an order for the revocation of a Restraint Order, dated September 21, 2010 in relation to the property at 1 Big Bay Point Road, Barrie, Ontario and an order for the revocation of a Restraint Order, dated April 11, 2011 in relation to the property at 1408 Rainbow Valley Road, Phelpston, Ontario.

[2] Fercan Developments Inc. was the registered owner of lands upon which the former Molson Brewery Plant was situated on 1 Big Bay Point Road, Barrie, Ontario. GRVN Group Inc. was the registered owner of a residential dwelling located at 1408 Rainbow Valley Road West, Phelpston, Ontario.

[3] Both the Fercan Property and the GRVN Property were the subject of applications for forfeiture commenced by separate Notices of Application. Both Notices of Application were issued on May 20, 2011, and were brought by the Respondent pursuant to section 16 of the Controlled Drugs and Substances Act (CDSA).

[4] On September 11, 2013 I dismissed the Crown's Application for forfeiture after in excess of 35 days of court hearings and ordered the return of the properties or if they had been sold, the return of any monies being held in trust by the Seized Property Management Directorate Branch of the federal Department of Public Works and Government Services.

[5] I was advised during the submissions during the forfeiture hearing that the property located at 1408 Rainbow Valley Road, Phelpston had been sold prior to the restraint order and only $20,136.39 was being held in trust by Seized Property Management Directorate Branch.

[6] I was advised on November 19, 2013 that the property located at 1 Big Bay Point Road, Barrie was sold on September 17, 2013 and that First Ontario Credit Union had already been repaid the principal and interest owing on a mortgage they held on 1 Big Bay Point Road, Barrie. First Ontario was paid out the amount of $2,628,016.42 by Seized Property Management Directorate Branch. The amount of $4,067,685.10 is still being held by Seized Property Management Directorate Branch in relation to the proceeds of the sale of 1 Big Bay Point Road, Barrie.

[7] On October 17, 2013 the Federal Crown brought an application in the Superior Court of Ontario in Barrie for the revocation of the two Restraint Orders referred to above and for an Order pursuant to section 490(5) of the Criminal Code for the return of property restrained as offence-related property. The Federal Crown also applied for directions as to disbursement of the monies held in trust by Seized Property Management Directorate Branch. This application has not been heard by the Superior Court.

[8] In the Public Prosecution Service of Canada's application the Crown advised that a decision had been made not to appeal my ruling dated September 11, 2013 and consequently, the properties (or proceeds held by the Seized Property Management Directorate Branch) were "no longer required to be restrained for any further forfeiture hearings."

[9] On November 12, 2013, counsel on behalf of Fercan and GRVN brought this application before me returnable on November 19, 2013 seeking revocation of the two Restraint Orders pursuant to section 14(9) of the CDSA and return of the monies still held by the Seized Property Management Directorate Branch pursuant to section 19(3) of the CDSA.

[10] Although First Ontario has received from the Seized Property Management Directorate Branch the return of the outstanding principal and interest relating to their mortgage, they have claimed an interest in a portion of the remaining proceeds of the sale of the Fercan Property held by the Seized Property Management Directorate Branch.

Interested Parties and Consent Order

[11] I was provided a consent executed by all parties claiming an interest in the remaining proceeds from the sale of 1 Big Bay Point. I was advised that two liens reflected on an abstract of title filed during the forfeiture hearing were removed prior to the sale of the property. The Public Prosecution Service of Canada's Notice of Application and a letter, dated October 17, 2013, sent by Ms. Healey to Mr. Greenspan reflects that the only interested parties in the remaining monies held by the Seized Property Management Directorate Branch were First Ontario and Fercan/Vincent DeRosa and GRVN.

[12] The Consent Order reflects that $450,000 would be distributed to a joint trust account in the name of Friedman & Associates, Fercan's solicitors and Agro Zaffiro LLP, First Ontario's solicitors and the remaining $3,617,685.10 plus any accrued interest, would be distributed to Vincent DeRosa as a result of the $5 million mortgage he held on the property at the time of its sale.

[13] Ms. Healey in her letter advises that the Public Prosecution Service of Canada takes no part in how the remaining proceeds held by the Seized Property Management Directorate Branch are distributed.

[14] I have heard submissions concerning the return of the property, which I ordered in my ruling dated September 11, 2013. Both First Ontario and Fercan are requesting that the funds be distributed as per the Consent Order provided. GRVN is requesting that the funds held by the Seized Property Management Directorate Branch regarding 1408 Rainbow Valley Road also be distributed as per the Consent Order provided.

Application of Section 490(12) of the Criminal Code

[15] Mr. Selvaratnam has drawn my attention to section 15 of the CDSA and section 490(12) of the Criminal Code and he argues that should I order the return of the funds held by the Seized Property Management Directorate Branch the return of these funds should not occur prior to the expiration of 30 days. Mr. McKeachie, on behalf of the Civil Remedies for Illicit Activities Office, Legal Service Division (Attorney General of Ontario) supports Mr. Selvaratnam's interpretation of the interplay of these two sections.

[16] I should also indicate that Mr. McKeachie has also made application for an adjournment of the application brought by Fercan and GRVN for distribution of the proceeds held by the Seized Property Management Directorate Branch as a result of a referral to his office by the Ontario Provincial Police respecting these monies being proceeds of illegal activities. Mr. McKeachie is asking for an adjournment of 90 days to permit him an opportunity to examine the numerous boxes of materials that were collected during the OPP investigation that spanned 2004 and 2012 to determine whether proceedings pursuant to the Civil Remedies Act, 2001 should be commenced. In the alternative, he suggests if I refuse the adjournment request I should delay distribution of the monies for 90 days to allow for the same review to take place. Finally, during argument, Mr. McKeachie argued that at the very least if I order the return of monies held by the Seized Property Management Directorate Branch I should comply with section 490(12) of the Criminal Code. I will deal with his request for an adjournment later in these reasons.

[17] With respect to the applicability of section 490(12) to an Order for return of property pursuant to section 19(3) of the CDSA, I do not agree with Mr. Selvaratnam's interpretation of section 15 of the CDSA. He was not able to provide me with any authority for his interpretation.

[18] Section 15(1) of the CDSA provides:

Subject to sections 16 to 22, sections 489.1 and 490 of the Criminal Code apply with such modifications as the circumstances require, to any offence-related property that is the subject-matter of a restraint order made under section 14.

[19] Section 19(3) of the CDSA provides:

Where a court is satisfied that any person, other than

(a) a person who was charged with a designated substance offence, or

(b) a person who acquired title to or a right of possession of the property from a person referred to in paragraph (a) under circumstances that give rise to a reasonable inference that the title or right was transferred for the purpose of avoiding the forfeiture of the property,

is the lawful owner or is lawfully entitled to possession of any property or any part of any property that would otherwise be forfeited pursuant to an order made under subsection 16(1) or 17(2) and that the person appears innocent of any complicity in an offence referred to in paragraph (a) or of any collusion in relation to such an offence, the court may order that the property or part be returned to that person.

[20] I found in my September 11, 2013 ruling that there was no evidence of complicity or collusion on the part of Fercan or Vincent DeRosa regardless of who bore the onus of proof. I handed out my 80 page, single-spaced judgment and advised all counsel that it was my view that I had jurisdiction to order revocation of the two Restraint Orders and to order the return of the properties to their lawful owners. Further, I indicated to counsel I was ordering the return of the properties and if they wished to provide me with an order I would sign it. The Crown advised they needed an opportunity to review my reasons for judgment. I assumed it was to determine whether my ruling would be appealed. That decision was made as reflected in the Notice of Motion filed in the Superior Court of Ontario, in Barrie, as well as Ms. Healey's letter.

[21] Section 15 provides that subject to sections 16 to 22 the sections in the Criminal Code respecting the return of items seized by police are applicable. The Restraint Orders, as set out above, in my view remain in effect only until an order is made under section 19(3), as per section 14(9). I made such an order under section 19(3) on September 11, 2013. If section 490(12) of the Criminal Code has any application after an order is made under section 19(3), which I do not believe it does, the 30 days expired on October 11, 2013. The Crown advised the parties on October 17, 2013 that a decision had been made not to appeal my ruling and the properties (or proceeds held by the Seized Property Management Directorate Branch) were "no longer required to be restrained for any further forfeiture hearings."

[22] In fact, a significant portion of the proceeds held by the Seized Property Management Directorate Branch as a result of the sale of the property on September 17, 2013, were returned to First Ontario Credit Union. I recognize that these funds were provided to First Ontario in a timely fashion because of the decision by the Public Prosecution Service of Ontario to discontinue the forfeiture proceedings in respect of First Ontario because they were satisfied that there was no evidence of complicity or collusion of First Ontario's part. This was after 28 days of evidence.

Rejection of Adjournment Request

[23] I am not prepared to accede to Mr. McKeachie's request for an adjournment of Fercan and GRVN's application. First, I am mindful of the comments made by Justice Binnie in Chaterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] 1 S.C.R. 624 at paragraphs 49-52. Justice Binnie observed there is a "concern [which] has been that the federal forfeiture provisions will be displaced by the CRA with its lower threshold of proof,… This may be true, but where no forfeiture is sought in the sentencing process, I see no reason why the Attorney General cannot make an application under the CRA. Where forfeiture is sought and refused in the criminal process, a different issue arises" (para. 49).

[24] He further comments at para. 51:

I believe the various doctrines of res judicata, issue estoppel and abuse of process are adequate to prevent the prosecution from re-litigating the sentencing issue. Detailed consideration must await a case where the clash of remedies is truly in issue. Reference may be made, however, to Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77. (para. 37) In that case, in the context of civil proceedings launched in the wake of a criminal conviction, the Court said that it is an abuse of process "where the litigation before the court is found to be in essence an attempt to relitigate a claim which the [criminal] court has already determined"

[25] Second, I expressed to Mr. McKeachie my concerns about the decision of the OPP, so late in the day to refer the matter to the Civil Remedies Office. The grow-ops were discovered in 2004 with 6 persons charged, Project Plants: (Neither Vincent DeRosa or Fercan were charged and no referral made to Civil Remedies); there was further investigation, which lasted for a number of years after 2004, respecting Fercan and Vincent DeRosa in Project 3D attempting to establish any connection to the grow-ops discovered in 2004: (no charges were laid and no referral to Civil Remedies); and finally, in 2010 there was a further investigation, Project Birmingham, involving an undercover agent and undercover police officer, which resulted in charges being laid against 7 other individuals (no charges were laid against Fercan or Vincent DeRosa and no referral to Civil Remedies).

[26] What did occur was a decision by the Public Prosecution Service of Canada to restrain the properties pursuant to section 14 of the CDSA and to commence forfeiture proceedings under section 16 of the CDSA. The referral by the OPP was not made until, I am told November 6, 2013 as I was not provided with the correspondence referring the matter by the OPP. That document may have shed some light as to why the OPP referred these proceeds to the Civil Remedies Office of the Ontario Attorney General. Mr. McKeachie advised me that the referring document was 189 pages in length, which coincidentally was the same length of the Crown's written submissions in the forfeiture hearing.

[27] In my view, the referral by the OPP at this late stage is in direct response to my ruling of September 11, 2013 dismissing the Crown's forfeiture application. Further, it is my opinion that the referral to the Civil Remedies Office is an attempt to re-litigate the issues dealt with in the forfeiture hearing that lasted in excess of 35 court days. In my view there is a reasonable inference that the referral to the Civil Remedies Office is an attempt to circumvent my ruling. As Justice Binnie observed, "Where forfeiture is sought and refused in the criminal process, a different issue arises." I am also mindful of the dicta in Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77. (para. 37). The referral also was made two days after the matter returned before me on November 4, 2013 to affix dates for a Costs Application being brought by Fercan and First Ontario. During that attendance there was discussion about bringing an application for disbursement of the proceeds held by the Crown before me. I find that the referral by the OPP is an attempt to relitigate issues that have been already determined.

[28] Third, Mr. McKeachie, on behalf of the Civil Remedies for Illicit Activities Office, really has no standing on the application brought by Fercan and GRVN. His office is not a party to the forfeiture proceedings initiated by the Public Prosecution Service of Canada. The Crowns in this case have taken the position that the proceeds held by Seized Property Management Directorate Branch are "no longer required to be restrained for any further forfeiture hearings." Mr. McKeachie has advised me that he has not made a determination whether he will or will not recommend proceeding under the Civil Remedies Act, 2001 as he has not had sufficient time to obtain and review the materials generated by the three police investigations.

[29] I was provided two decisions by Mr. McKeachie, Lin v Ontario (Attorney General), [2008] O.J. No. 5364 (Ont S.C.) a decision of Justice Baltman and Dhingra v. Dhingra Estate, [2012] O.J. No. 1757 (Ont C.A.). In my view both cases are not of any assistance in determining whether to grant Mr. McKeachie's request for an adjournment. The Dhingra decision was a civil proceeding between an accused that was found to be not criminally responsible on a charge of 2nd Degree murder in respect of his wife and an application by the deceased's son on behalf of his mother's estate for an order preventing Mr. Dhingra from benefiting from the death of his wife, which he caused. The lower court refused to allow Mr. Dhingra to receive insurance proceeds from the death of his wife. The Court of Appeal overturned the lower court decision as there was nothing in the insurance policy to bar the accused from receiving the insurance monies. The court did delay the payment of the money to the accused for 30 days to allow Civil Remedies Office to determine if they would intervene on behalf of the deceased's estate. This was done on the request by the Dhingra Estate. In my view this is a completely different situation from the case at bar.

[30] In Lin, the issue related to approximately $80,000 being seized from Mr. Lin where no charges were laid. Mr. Lin was applying to the court pursuant to s. 490 of the Criminal Code for the return of the money seized upon his arrest. The Civil Remedies Office was bringing an application respecting those monies being the proceeds of illegal activities. Apparently a sniffer drug dog went to a container which contained the money in a blind test, which indicated the monies had been in contact with illicit drugs. Again, this case is not applicable to the facts of the case at bar.

[31] In the case at bar the Federal Crown had decided to proceed with a forfeiture application in respect of the offence-related property as I have already set out above. No decision had been made by the Civil Remedies Office to institute proceedings because of the lateness of the referral. The OPP at no time prior to November 6, 2013 referred these properties to the Civil Remedies Office. I have already expressed my concerns which are reflected in Justice Binnie's comments in Chaterjee and I do not need to repeat them.

[32] Therefore, for the reasons outlined above, I am not prepared to adjourn the application brought by Fercan and GRVN. Sixty-nine days have elapsed since my ruling on September 11, 2013.

Order

[33] Consequently, I am prepared to sign the Consent Order provided by First Ontario, Fercan, GRVN and Vincent DeRosa and order that all proceeds still held by the Seized Property Management Directorate Branch be distributed pursuant to the Consent Order provisions.

[34] The only remaining issue is whether I will delay disbursement of the funds for 90 days as requested by Mr. McKeachie. I will not. I have ruled that there was no evidence of complicity or collusion on the part of Fercan or Vincent DeRosa. No charges were ever laid by the OPP in respect of those persons. Pursuant to section 14(9) of the CDSA the Restraint Orders previously ordered are no longer in effect. A decision was made in 2010/2011 to bring a forfeiture hearing respecting the property at 1 Big Bay Point Road, Barrie. I dismissed that application on September 11, 2013 after over 35 days of court hearings. On October 17, 2013 the Federal Crown took the position that the proceeds held by the Seized Property Management Directorate Branch are "no longer required to be restrained for any further forfeiture hearings."

[35] The proceeds therefore will be disbursed pursuant to provisions of the Consent Order that I have signed.

Released: November 20, 2013

Signed: "Justice Peter C. West"

[i] See paragraph 5 of the Public Prosecution Service of Canada's Notice of Application signed by Kathleen Healey on October 17, 2013.