COURT FILE NO.: 2144/07

DATE: 20120615

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

HER MAJESTY THE QUEEN

Aimee Gauthier, for the Applicant/Crown

Applicant

• and -

DEREK SANKAR

On his own behalf

Respondent

• and -

SNC-LAVALIN PROFAC INC.

KATHRYN J. MANNING AND ERIN HOULT, on behalf of SNC-Lavalin Profac Inc.

A person claiming

an interest in property

• and -

PICARD FOODS LTD.

MERVIN L. RIDDELL, on behalf of Picard Foods Ltd.

A person claiming

an interest in property

RULINGS ON

APPORTIONMENT OF FUNDS AND COSTS APPLICATION

Durno J.

[1] This is the final ruling in the Crown’s forfeiture application pursuant to Criminal Code s. 462.37 following Derek Sankar’s guilty pleas to fraud and money laundering. In the last ruling now reported at 2012 ONSC 1498, I found that Picard Foods Ltd. (Picard) was entitled to the costs of municipal services attributable to 457 Dundas St. E. (457) to a maximum of $110,000. Those costs were to be determined on the basis of the proportion of the total frontage of the properties in a similar manner to that used by SNC-Lavalin Profac’s (ProFac) expert, Angelo Cameracci, in his calculations. Counsel were urged to reach an agreement as to the amounts. Despite their best efforts, ProFac and Picard were unable to do so although the issues in dispute have been limited to three: first, the assignment of costs of sodding and sidewalks, second, whether it is appropriate for Picard to have included “carrying costs” in its calculation and third, the relevant period for the calculation of interest on those funds. Picard and ProFac have both filed expert’s reports in relation to the apportionment of the costs of the municipal services.

[2] In addition, Picard applies for costs, including fees, disbursements and H.S.T. of $116,202.89, submitting the costs should be fixed at at least $85,597.00, plus disbursements and H.S.T. The costs claim on a substantial indemnity basis is against the Crown, or alternatively, against ProFac or against both jointly and severally. The Crown and ProFac oppose any costs order.

[3] For the following reasons, the outstanding issues are resolved as follows:

(1) The principal amount owing to Picard is $72,690.29;

(2) The pre-judgment and post-judgment interest on that amount at 10% is to be calculated from June 21, 2008, and

(3) I decline to make a costs order.

The Amount Owing to Picard

[4] In their reports, Mr. Cameracci, on behalf of ProFac, concludes the amount should be $65,951.55 while Mr. Towle, on behalf of Picard, concludes the amount should be $76,277.23. There are two differences in their approaches: first, ProFac submits that 100% of the sidewalk and sodding costs should be attributable to Picard, and none to 457. Second, Picard has included in its calculations “carrying charges” that ProFac says should not be included.

[5] As I read the submissions, ProFac advances three positions. First, there is an error in Mr. Towle's report where he has overstated the length of sidewalk installed and the total costs for sidewalks. Second, ProFac argues it is appropriate to attribute the entire costs of both items to Picard because Picard led no evidence on the forfeiture application that either item benefited 457. Finally, in relation to Picard’s inclusion of “carry costs” in its calculations, ProFac submits that to permit carrying costs/interest on the funds expended and an additional interest on the principal awarded would result in “duplicative compensation to Picard for any interest incurred.”

[6] Picard argues the ProFac report is premised on the assumption that only 90 metres of sidewalk were completed when roughly 136.6 metres were installed, that in the circumstances there was no need to call evidence to establish a benefit to 457 and that including the “carrying costs” was appropriate given the direction to use $248,699.00, a figure that was not the total of the three Payment Certificates.

Analysis

[7] When Mr. Cameracci testified, he marked in red on exhibit #16 (the large survey) where he believed the sidewalks had been completed. He said the document prepared by Mr. Towle to which he was referring noted the sidewalks in front of 457 were not installed and would be done in the future. Accordingly, all of the sidewalks that he felt were installed were for the benefit of Picard because they were only in front of Picard’s property.

[8] The material filed by Picard on these issues establish that Mr. Towle was using the work done to date instead of the completed work that shows roughly 136 metres of sidewalk installed and would include the frontage of 457. That amount of sidewalk coincides with the cost of $15,026.00, included in Mr. Towle’s calculations. In those circumstances, there is no need for Picard to have led evidence regarding the benefit to 457. The costs are apportioned in relation to the frontage and Mr. Towle’s calculations are correct in terms of the total sidewalk installed.

[9] The second issue is the inclusion of “carrying costs” by Picard. Picard explains the inclusion of the “carrying costs” of $11,035.00 as follows:

In effect this is a “plug” figure to bring the total to $248,699.00. The reason for this is somewhat complicated. The $248,699.00 figure directed to be used is based on an incorrect amount for the total of the three Payment Certificates. It is based on a total of $194,387.77 (pre G.S.T.) whereas it should be $204,681.06. This latter figure is what was used by both Towle and Cameracci in doing the calculations for the Picard/Massdan[^1] split since they needed to use the correct itemized costs, which total $204,681, to do these calculations. As a result, they couldn’t include the carrying cost of $21,239.00 which would have taken the total to over $260,000.00. The amount used, $11,035.00, is about 4.6% of costs.

[10] In arriving at his $76,277.23 calculation Mr. Towle included $3,383.87 as Massdan’s share of the “carrying costs” and G.S.T. of $203.03 with the balance attributed to Picard’s share. I agree with ProFac that it is inappropriate to include the “carrying costs” and the G.S.T. on those costs. Both amounts will be excluded leaving a total principal of $72,690.29.

The Period for which Picard is entitled to 10% Interest on the Principal

[11] Picard submits the interest should be payable from either May 1, 2006, the date of the Picard-Massdan contract, or June 21, 2007, the date Picard advised Massdan the municipal services had been installed.

[12] ProFac submits the interest should be from the date Picard indicated their intention to participate in the forfeiture hearing, August 19, 2010, because Picard delayed pursuing its claim to the proceeds of the sale of 457. Those funds were paid into Court on November 19, 2008. Picard’s right to a portion of the funds could have been litigated in the civil proceeding any date thereafter because, unlike ProFac to this date, Picard had a civil judgment against Massdan Group Inc. (the Sankars).

[13] Picard first applied to have its claim to the funds litigated in August, 2009 but abandoned the application upon being advised by ProFac that the appropriate procedure would be to seek a Stop Order and bring a motion in ProFac’s civil action against the Sankars, the proceeding in which the monies were held. Despite advising in September, 2009, that Picard would follow that procedure, no motion was ever brought. It was not until Derek Sankar’s guilty plea was imminent that Picard expressed a desire to have its claim determined in the criminal proceeding. ProFac says Picard should not get the benefit of interest during the period Picard “sat on its rights.”

[14] The pre-judgment interest would be payable from August 19, 2010 to March 13, 2012, the judgment date. ProFac submits the case law and statutory provisions relating to pre-judgment interest in civil proceedings, while not binding in the context of this criminal proceeding, may be of assistance.

[15] ProFac also argues that other factors weigh in favour of limiting the interest period. First, ProFac successfully resisted Picard’s attempt to recover all the money spent on the municipal services. Second, the Court adopted the approach of ProFac’s expert. Third, “the voluminous materials put forward by Picard tended to unnecessarily complicate, rather than simplify the proceedings.” Fourth, ProFac has not had the use of the money up to the judgment date because the funds were paid into Court. Indeed, ProFac was precluded from paying those funds to Picard because of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 184, and the Criminal Code, provisions. In the civil context, a defendant can stop pre-judgment interest from running by paying the disputed amount into Court pending the determination of the proceeding.

[16] In the alternative, ProFac rejects Picard’s submission that the interest should run from the date of the contract between Picard and Massdan because the contract stipulated interest was only payable by Massdan one year from the completion date of the work. The work undertaken, in ProFac’s submission, ended March 15, 2007. Accordingly, the earliest possible date for the interest is March 15, 2008.

[17] Picard replied that they did obtain a Stop Order on October 20, 2009. To have brought a motion in the civil proceeding would have involved a large number of defendants and the “complexities of the civil litigation.” Picard suggests ProFac abandoned the civil process to pursue the forfeiture process with the Crown’s lead. ProFac replies that the civil case will be proceeding to trial in February, 2013.

Analysis

[18] The agreement between Picard and Massdan included the following clauses:

Massdan will pay Picard the total actual final cost of the works as described in Schedule “A” on the earlier of one year from the final installation of the works by Picard as solely determined by Picard acting reasonably, or a building permit being issued on the Massdan Lands (the “Event”)

Massdan will pay Picard interest at the rate of 10% per annum on the cost of the works from the Event until paid in full.

[19] As no building permit was ever issued for 457, the Event was one year from the completion date of the installation of the municipal services as solely determined by Picard. While ProFac and Picard have provided different dates for the completion, since that issue was to be determined solely by Picard, I will use Picard’s date, June 21, 2007, the date Picard notified Massdan that the work was completed and the funds were to be paid by August 1, 2007. Accordingly, the first date upon which Picard would have been able to apply the 10% interest was June 21, 2008.

[20] Given the clear wording of the agreement, what Picard now seeks is interest from an earlier date than it would have been entitled to under the agreement. I am not prepared to make that order.

[21] The next question is whether Picard’s conduct as outlined above from ProFac’s submissions should result in the interest being payable from a later date. Picard obtained their default judgment on July 23, 2008 and knew the funds from the sale of 457 were held in Court from November, 2008. On this record, they took no steps to assert their claim in civil courts until August, 2009 but subsequently abandoned that claim, stating their intention to seek a Stop Order and bring a motion in ProFac’s civil action against the Sankars. The Stop Order was obtained on October 20, 2009 pursuant to Rule 72.05 of the Rules of Civil Procedure, which states in subsection (c), “a person who has obtained an order under subrule (1), may make a motion on notice to all interested parties for an order for payment out.” No further applications were ever made. Ten months later, on August 19, 2010, Picard expressed an interest in participating in the forfeiture proceeding.

[22] I have also taken into consideration that the funds paid into Court earn a significantly lower interest rate than the 10% rate applicable to Picard’s funds.

[23] In these particular circumstances, while a case could be made out for another effective date, I accept Picard’s submission regarding the complexities of the civil proceeding and that the number of defendants may have been a disincentive to apply in the civil proceeding. I also consider that it was not as if Picard did nothing to pursue its claim because civil proceedings were started in 2009 albeit abandoned at a later date. Interest at 10% will be payable from June 21, 2008.

Picard’s Cost Application

[24] Picard submits costs should be awarded against the Crown alone, ProFac alone or both jointly and severally in the exercise of the Court’s inherent jurisdiction. In relation to the Crown, Picard contends there are numerous reasons why costs should be ordered including the Crown’s “narrow focus” in favour of ProFac during the forfeiture hearing that takes the Crown out of the general rule that no costs should be awarded against the Crown because the Crown acts in the public interest. Further, where the proceeding is for the benefit of a private individual (ProFac) and not the general public interest, costs should be awarded.

[25] Picard submits the Crown has a responsibility to represent the community as a whole, including Picard. Instead, the prosecution engaged in improper conduct by supporting the victim of the fraud ProFac and opposing Picard, an innocent third party and a corollary victim. Picard submits the Crown’s “hardball” tactics during the forfeiture hearing, supporting ProFac and opposing Picard. While the tactics may not amount to misconduct, they do warrant an award of costs against the Crown. Ms. Gauthier’s tactics reflect either “fault or conduct requiring censure” and were a departure from the reasonable standard expected of prosecutors.

[26] Picard further submits costs should be awarded against the Crown because of Ms. Gauthier’s failure to fulfill her disclosure obligations in relation to Picard. The situation is similar to one in which the Crown has failed in its disclosure obligations to accused persons. In addition, Picard contends the Crown failed in its obligations by failing to tell Mr. Sankar that he had to attend the first day for the forfeiture application, resulting in a lost court day when Mr. Riddell and Mr. Picard had attended ready to proceed.

[27] Further, in determining the costs issues, Picard argues that it is inappropriate to examine civil law costs cases when dealing with a criminal proceeding. Mr. Riddell also objects to ProFac referring to its offer to settle that he submits was covered by resolution privilege.

[28] As regards the costs claimed from ProFac, Picard notes that it was ProFac’s handling of the Certificate of Pending Litigation that caused the dispute to arise. Mr. Riddell argues ProFac’s “brief of issues and law” was produced and filed only at the commencement of the forfeiture hearing and ProFac’s argument based on s. 93(2) of the Land Titles Act, R.S.O. 1990. c.L.5, was first raised in ProFac’s closing submissions. By analogy, in a civil case the participants must plead the statute but also the section relied upon.

[29] The Crown accepts that the Superior Court has inherent jurisdiction to award costs against the Crown in criminal and quasi-criminal cases. However, Ms. Gauthier disputes the contention that the Crown’s conduct in this case provides any legal basis upon which to exercise that jurisdiction. Some level of “bad action” is required of the Crown before an order can be made. That Picard is a bystander in the criminal proceeding, in itself, does not justify a costs award. She submits the Crown’s conduct was reasonable and responsible throughout the proceeding.

[30] To the extent that Picard basis its costs claim on the Crown’s support of ProFac’s position over Picard’s, the Crown argues their conduct was reasonable and fair towards Picard. In addition, Picard’s argument reflects a lack of understanding of the forfeiture process, the Crown’s position and the previous rulings for the following reasons. First, the Crown never refused or failed to compensate Picard for “any portion” of its costs for the municipal services when Picard always took the position it should receive the full amount of their judgment. For the Crown to have agreed to Picard’s position would have been unreasonable when Picard called no evidence to support its claim that ProFac would receive a windfall from the sale of 457.

[31] Second, it was ProFac’s expert’s evidence that provided the only alternative evidence upon which to grant Picard relief from total forfeiture to ProFac.

[32] Third, Picard presented a “legalistic” basis upon which the Court could order all of the funds paid for the municipal services. That was not the basis upon which the order was made. Rather, it was pursuant to the exercise of a discretion after examining the equities. Accordingly, the Crown cannot be faulted for arguing Picard’s status as a first mortgagor in itself did not entitle it to the full amount sought.

[33] Fourth, the findings of fact belie Picard’s position that Picard did not contribute to the situation it found itself in and fault assertions against the Crown and ProFac. The findings included that Picard placed reckless reliance on the words of someone about whom Picard knew very little, Audrey Holder-Sankar. Picard’s reaction to the Certificate of Pending Litigation was careless. In the result, Picard did not obtain what it sought, an order for the full amount of all the municipal services. Accordingly, Picard cannot be regarded as a successful litigant. That the Crown argued with partial success against full recovery by Picard should not be viewed as unreasonable.

[34] Fifth, the Crown argues the issue of whether Picard would recover some or all of the funds it sought was inevitably going to have to be determined in a court, with ensuing legal fees.

[35] Sixth, the Crown submits there is no obligation on the Crown to provide disclosure to bystanders in criminal proceedings.

[36] Seventh, the Crown contends that there was no advertent failure by Ms. Gauthier to have Mr. Sankar at Court for the first day of the forfeiture hearing.

[37] ProFac adopts the Crown’s submissions and submits there is no factual basis upon which a costs order could be made against ProFac. ProFac notes that even if the funds held in Court were all returned to ProFac, it would not cover their loss from the fraud. ProFac paid for the expert evidence upon which the Court relied in the ruling, for the additional report on the apportioning of the costs dealt with earlier in this ruling and the additional expenses in freezing the Sankars’ assets.

[38] ProFac submits that applying the case law dealing with criminal or civil costs Picard is not entitled to any costs. Citing Rule 57.01(1) of the Rules of Civil Procedure, ProFac notes Picard sought $269,986.87 plus interest and costs. The previous ruling limited the principal amount to $110,000.00. This ruling found the amount was $72,690.29.

[39] ProFac further argues that Picard’s choice to pursue the funds in the criminal instead of a civil proceeding lengthened the sentencing procedure. By doing so, Picard caused additional issues to be addressed that would not have been part of a civil proceeding such as the onus and procedure rulings. Picard’s choice resulted in oral testimony in Court as opposed to affidavit evidence and out-of-court examinations being utilized, eliminated the potential for written arguments with a one day hearing to determine the issue and repeated appearances were required in the criminal court because of the need to maintain jurisdiction over the offender. It is ProFac’s position that the costs incurred in the criminal proceeding were significantly greater than would have occurred had Picard taken ProFac’s advice in 2009 and pursued its claim in the civil proceeding. Indeed, it is ProFac’s submission that had the issues been determined in the civil proceeding with the same result as here, costs could have awarded against Picard.

[40] Finally, ProFac notes its offer in March, 2011 to resolve the issue on the basis this Court found appropriate.

Analysis

[41] Picard’s claim for costs against ProFac can be quickly dealt with. Picard provides no authority to support this application. There is no basis in law or fact upon which to order costs against the victim of a multi-million dollar fraud who seeks the return of funds found to be proceeds of crime. Nor is there any authority that one bystander should pay the costs of a second bystander. The forfeiture application was brought by the Crown, not ProFac. That ProFac participated in the hearing and was going to receive the funds does not change that fact.

[42] With regards to Picard’s allegations of unfairness in the proceedings because ProFac provided their brief of issues and law at the outset of the proceeding and raised their s. 93(2) of the Land Titles Act issue in submissions, Picard had ample opportunity to address any issues raised by the Crown or ProFac. The analogy to what would have been required in a civil proceeding where civil rules and authorities apply is not of assistance. This was a forfeiture application that was part of a sentencing hearing in a criminal case. There are no similar rules and no request was made to limit the issues that could be raised to pleadings.

[43] I decline to make a costs order against ProFac.

[44] The application for costs against the Crown, despite resulting in the same conclusion, requires more analysis. Cost orders against the Crown in criminal proceedings are rare. R. v. Ciarniello (2006), 2006 CanLII 29633 (ON CA), 211 C.C.C. (3d) 540 (Ont. C.A.) at para. 35. Where the application is brought by an accused person there must be a finding a serious Crown misconduct. However, the traditional rationale for so limiting costs awards does not apply with the same force to bystanders to criminal litigation. Ciarniello, at para. 24.

[45] In Ciarniello, the Court of Appeal examined the different considerations for bystanders starting at para. 39. They include that the bystander is a member of the public the Crown is duty bound to protect, that the compensatory principle underlying costs holds greater sway from an access to justice perspective for a bystander to a criminal prosecution, and the rules of criminal procedure afford the accused procedural protections not available to bystanders. In the result, a lower standard of Crown conduct than a finding of serious Crown misconduct can result in the award of costs.

[46] The bystander may be awarded costs as a Charter remedy or pursuant to the Superior Court’s inherent jurisdiction. While the Charter expanded the availability of accused persons to be awarded costs, absent Crown misconduct, costs would not be an “appropriate and just” Charter remedy. Ciarniello, at para. 87. Here, Picard, while referencing Charter issues, relies upon the Court’s inherent jurisdiction to award costs.

[47] A brief examination of some of the cases where costs were sought will define the lower standard, how it has been applied and the type of Crown conduct that has resulted in cost awards.

[48] In Ciarniello, costs were awarded pursuant to s. 24(1) of the Charter. The Ontario Provincial Police obtained a warrant in Ontario to seize Ciarniello’s computer and computer records that were in the possession of police in British Columbia. Officers there had seized the items pursuant to a British Columbia warrant. However, before the Ontario warrant was obtained a British Columbia Court had quashed the warrant and ordered the return of some of the items to Ciarniello. He was neither the target of either investigation nor ever charged with an offence.

[49] Pending the resolution of the British Columbia litigation, there was an agreement that the police could examine the material to which no solicitor-client privilege claim was made but the officers could not disseminate any information they obtained from that inspection. The British Columbia judge found that for most of the categories of items seized there were no reasonable and probable grounds and ordered those items returned. While the parties sought clarification of the order, the Brampton O.P.P. were given the details of the information stored in the computer by a British Columbia officer.

[50] The Ontario warrant authorized the seizure of all items seized in British Columbia. The Information to Obtain that warrant disclosed neither the non-dissemination agreement nor the existence of Ciarniello’s solicitor-client privilege claims. The affiant swore the British Columbia judge had upheld the validity of the search warrant as it related to the items sought when the order was to the opposite effect. When the Ontario search warrant was brought to the attention of the British Columbia judge he ordered the Crown to write to the Ontario Crown to advise that the British Columbia search warrant was issued on “fundamentally flawed” information. The Crown’s letter sought the voluntary return of the items. Not only were the items not returned to British Columbia but the Crown, armed with the knowledge of this history, persisted in opposing Ciarniello’s application.

[51] Ciarniello successfully applied to quash the warrant and sought costs against the Crown. The application judge found that recklessly misleading evidence had been used to obtain the Ontario warrant and that further investigation should have led to the Crown to conclude the warrant probably would be quashed. However, His Honour dismissed the costs application finding it did not meet the traditional criminal law standard related to accused persons who sought costs against the Crown – serious Crown misconduct.

[52] The Court of Appeal ordered costs against the Crown, holding that with Ciarniello establishing a serious Charter breach, he was entitled to costs as remedy pursuant to s. 24(1) of the Charter. Sharpe J.A. wrote that Charter rights have a higher claim to judicial protection than non-Charter rights with s. 24(1) entitling the victim of a Charter breach to an appropriate remedy. The clear effect of s. 24(1) is to enlarge the grounds upon which the Superior Court’s inherent jurisdiction to award costs against the Crown may be exercised, including Charter violations and Crown misconduct. R. v. Pawlowski (1993), 1993 CanLII 3378 (ON CA), 79 C.C.C. (3d) 353 (Ont. C.A.) at p. 357.

[53] However, this expansion does not mean that costs will routinely be awarded against the Crown because costs will not be a “just and appropriate remedy” as a general rule. Ciarniello, at para. 36. Where there has been no Crown misconduct costs will not be awarded absent something rare or unique, resulting in something akin to an extreme hardship on the defendant. R. v. Hallstone Products Ltd., [2000] O.J. No. 1051 (S.C.J.) at para. 33.

[54] In Mark George Balemba v. The Queen 2009 CanLII 28396 (ONSC), Balemba was convicted of drug offences. Drug paraphernalia was found at his Brick Road property and the Crown obtained a Restraint and Management Order in relation to the property on an ex parte application. Balemba owned a second property, referred to as the Lisburn property that was not subject to the order. The Brick Road property had a private second mortgage registered against the Lisburn property for $53,600. It was collaterally secured as a second mortgage against the Brick property.

[55] Before the Crown application for forfeiture on the Brick property, the first and second mortgages on both the Lisburn property and the Brick Rd. property went into default. The Brick property was sold. The mortgage holder discharged their second mortgage on the Brick property to allow the sale on a without prejudice basis. After the sale of the Brick property, funds remained with the Crown who refused to pay out the second mortgage on the Brick property contending the mortgage holder had to enforce against the defaulted second mortgage on the Lisburn property first. The application judge found the mortgage holder could enforce its security in any order as a bona fide innocent and arm’s length creditor. The funds had been held in a non-interest bearing account by the Crown pending the resolution of the issue thereby causing the mortgage holder to lose interest for over nine months.

[56] The offender’s application for costs was dismissed because the Crown’s conduct did not amount to the type of misconduct that would warrant costs under the traditional criminal law. The mortgage holder sought full indemnity costs plus disbursements and GST totalling $43,389.83. Costs were ordered in the amount of $20,000.00 because of unexplained delay on the part of the Crown that was known to be detrimental to the mortgage holder, the Crown knew the mortgage holder was a bona fide secured and arm’s length creditor (without a CPL as in this case), the Crown’s refusal to pay out even the principal to reduce running interest and costs. The application judge found there was no reason those funds were not paid out. In addition, Her Honour relied on the fact the funds had been held in a non-interest bearing account.

[57] The Crown had argued that the mortgage holder had delayed in bringing its own application for restoration. However, the mortgage holder had provided an explanation that was accepted by the judge. The mortgage holder initially thought the funds would be paid out of the sale of the Brick property and then was repeatedly assured by the Crown that it would bring the forfeiture application. The judge found the Crown was indifferent to the mortgage holder’s rights. In reaching her decision, Gilmore J. found that it did not matter whether the application was Charter-based or inherent jurisdiction-based, the test was a lower standard than serious Crown misconduct noting bystanders received costs in Ciarniello, supra, based on the Charter while in R. v. Connolly, 207 NLCA 5, the award was not Charter based but rather was founded on the Court’s inherent jurisdiction.

[58] In Connolly, supra, a husband and wife were charged with drug offences. The wife was acquitted and to the knowledge of the Crown had commenced proceedings in relation to the matrimonial home. Without the mandatory notice to the wife, the Crown sought and obtained a forfeiture order in relation to the home and in violation of the Criminal Code provisions sold the home where the wife and three children were living. Costs were awarded against the Crown because the conduct was a marked and unreasonable departure from the reasonable standard expected of the Crown.

[59] Crown conduct that will result in a costs award has been characterized as conduct “beyond inadvertence or carelessness and [amounting] to oppressive or otherwise improper conduct.” The Crown’s conduct may be viewed as a “marked and unacceptable departure from the reasonable standards expected of the prosecution, or if not involving prosecutorial misconduct, conduct by the police or systemic failures so extraordinary as to be virtually unique in character. R. v. Taylor, 2008 NSCA 5.

[60] Costs have also been ordered where there has been Crown misconduct and in other exceptional circumstances where fairness requires that the individual litigant not carry the financial burden flowing from his or her involvement in litigation. R. v. Garcia (2005), 2005 CanLII 4831 (ON CA), 194 C.C.C. (3d) 361 (Ont. C.A.) at para. 13.

[61] Against that background and applying the authorities referenced, I find there is no basis upon which to award costs against the Crown applying my inherent jurisdiction.[^2] It is not essential for a successful costs application that the Crown conduct mirror that found in the authorities referenced. However, the principles are clear and the type of conduct well-defined.

[62] On those bases, I find there was no departure from the acceptable standard of Crown conduct, there is neither fault nor conduct requiring censor. The Crown throughout acted fairly and presented credible and reliable evidence. The Crown’s conduct was neither careless, oppressive nor otherwise improper. There is no basis upon which I could find a marked and unacceptable departure from the reasonable standard expected of the Crown or that punitive measures were warranted against the Crown. Finally, I am unable to find that fairness dictates a costs award against the Crown. This is not a rare or unique case resulting in something akin to extreme hardship to Picard so as to require costs against the Crown. I reach these conclusions for the following reasons. In doing so, I agree with Gilmore J.’s conclusion in Balemba, supra at para. 31, that the cases dealing with costs against the Crown in favour of innocent third parties are instructive. They reveal that while they have their origin in criminal law there are some civil and/or third party aspects. Reference to the Rules of Civil Procedure is not necessary.

Was the Crown’s conduct of the forfeiture application unfair to Picard as a member of the public and corollary victim, too narrowly focussed or reflective of “hardball tactics?”

[63] The Crown conduct in this case bears no resemblance to any of the conduct that resulted in costs awards in the authorities referenced. In Ciarniello there had been a judicial determination in British Columbia regarding the serious problems with the warrant. Notwithstanding the Ontario officer’s knowledge of those concerns they were not addressed in the Ontario Information to Obtain. Notwithstanding the Ontario Crown’s knowledge that the warrant would probably be quashed, the Crown persisted with the Ontario proceedings. There was a “clear and serious warning” that there were serious problems with the information provided by the British Columbia officer. In those circumstances the Court of Appeal found the Crown displayed a “hardball” attitude towards Ciarniello and his Charter rights.

[64] I do not regard the Crown’s opposition to Picard’s claim for total recovery as reflective of a “hard ball” attitude. The Crown and ProFac had arguable and well argued grounds for submitting that Picard had actual notice. That I rejected that position does not mean the Crown engaged in “hardball” tactics. The award was only a portion of that claimed by Picard and was awarded on the equities, as opposed to the legal entitlement claimed by Picard. In the criminal proceeding, ProFac was the victim. A victim who almost certainly will never recover all the funds it lost and a victim that has itself incurred substantial costs as noted in the previous ruling. While Picard is a corollary victim it was in relation to Audrey Holder-Sankar’s deception.

[65] Had the Crown remained neutral ignoring ProFac’s position as the victim of the offence for which sentencing was occurring, the same issues and arguments regarding Picard’s claim would have occurred. ProFac sought to pursue its claim to the funds on the basis of actual notice and in the alternative, how the Court’s discretion should be exercised considering the equities. That the Crown took a similar position did not alter the issues that would have been addressed at the forfeiture hearing. Given the basis upon which the Crown argued its position, I cannot conclude the prosecution’s decision to support ProFac’s position was arbitrary. It was a reasoned and reasonable approach.

[66] While Picard was a bystander in relation to the criminal investigation and proceedings, unlike Ciarniello, Picard had another option. Mr. Ciarniello had to institute the proceedings challenging the search warrant. There was no other proceeding or option available to him. As referenced earlier, the civil rules provided Picard with the option of determining the matter in the civil proceeding. Picard chose not to pursue that route. While Picard has provided their reasons for not doing so, it cannot be said that he was forced into the forfeiture hearing when he had decided well before that hearing that he would not take advantage of Rule 72.05(3). No doubt once the forfeiture application was brought, Picard had to become involved but Picard could have had the issue resolved many months earlier.

[67] Mr. Ciarniello was never the target of the initial police investigation as was the case with Picard. Neither the application judge nor the Court of Appeal found fault with anything Ciarniello did. The application judge in Balemba, supra found no fault with the conduct of the mortgage holder. The same cannot be said for Picard. I found Picard was reckless and naïve in its reliance on the word of Audrey Holder-Sankar. Picard refers to its decision not to investigate the Certificate of Pending Litigation further as one made under stress. While I accept that there was stress and frustration at the time, Picard or its counsel had between May 18 and May 23, as I found at para. 120 of the last ruling, in which to make one phone call to make inquiries about the CPL to clarify Mr. Picard’s erroneous understanding of the issues in dispute. Apparently on the instructions of Mr. Picard that phone call was never made.

[68] Picard, referencing Ciarniello, noted that when the Crown decides to take a hardball attitude in the face of questionable legal status or clear warnings there could be problems with the case the availability of costs was expanded and there was no need for serious Crown misconduct. The Crown here did not have a ruling against its position on the same or a similar issue to be litigated nor did the Crown have any knowledge prior to embarking on the forfeiture application how the equities would be determined. There was no “clear warning” against the position the Crown advanced.

[69] Picard argues there was a financial imbalance between Picard and ProFac and Picard and the Crown, implying, at least inferentially, that “they can afford it.” I am not persuaded any imbalance would be a basis upon which to order costs against the Crown or ProFac. Costs awards against the Crown or the party with the greatest assets would be a common occurrence if the issue was determined on that basis. In addition, given the voluminous material filed by Picard throughout the forfeiture proceeding and the thorough submission by Mr. Riddell throughout, any imbalance did not impede Picard from forcefully and tirelessly pursuing its positions.

[70] To the extent that Picard suggested the Crown failed in its obligation to produce credible and reliable evidence, the allegation is unfounded on this record. As regards the forfeiture hearing, the proceeding for which the costs are sought, the Crown led no evidence except the Agreed Statement of Fact that was the basis of the guilty plea. If the allegation refers to the Agreed Statement of Fact, in an earlier ruling reported at 2010 ONSC 6967, I found that those claiming an interest could not re-litigate factual issues determined at trial.

Was the Crown at fault for failing to ensure Derek Sankar attended the first date of the forfeiture application?

[71] Picard’s allegation the Crown was to blame for Derek Sankar’s non-attendance on the first date of the forfeiture application is also unfounded on this record. A review of the Digital Audio Recording for November 14, 2011, the first date scheduled for the forfeiture application revealed Ms. Gauthier indicating at the outset that she was not aware why he was not at Court and sent the officer to call him. From that call it was learned that Mr. Sankar was on a job site and did not understand that he was required to attend for the application in which he was not participating. I ruled that he was required because the forfeiture hearing was part of his sentencing. The next day he attended and apologized. Accordingly, the Crown had nothing to do with his non-attendance. There is no factual basis for Picard’s assertion of Crown fault. In any event, I am unaware of any obligation on the Crown to insure the attendance of out of custody accused persons or offenders.

Did the Crown fail in its disclosure obligations?

[72] While the Crown interpreted this allegation that Picard wanted disclosure of the “Crown brief” to re-litigate the facts behind the guilty plea, Picard has clarified that the complaint is in relation to the forfeiture application disclosure. The only two examples referenced by Picard are the Crown’s production of Picard’s agreement of purchase and sale for its land on Dundas St. E. and the Crown’s production of a chronology late in the hearing that included inaccuracies and was not corrected when Picard brought the errors to the Crown’s attention. There is no suggestion in Picard’s lengthy written submissions what prejudice flowed to Picard from either event nor am I able to ascertain how either could be detrimental to Picard.

[73] In relation to the agreement, Picard suggests that it must have been obtained from sealed documents in the civil case. I do not recall any issue being raised at the time it was introduced or any suggestion before the costs submissions that Picard had no opportunity to consider its impact, if any, and attempt to address any concerns. I note as well that it was a document Picard presumably had access to if Picard wanted to see or use it.

[74] In relation to the chronology, there is no evidence or submissions when it was prepared. There is no difficulty with a party providing the court with summaries or charts to assist the Court at any stage of the proceedings provided all parties have been given copies and are permitted to make representations on relevance and accuracy. It is difficult to see how the chronology was subject to disclosure before the hearing or earlier in the hearing when there is no evidence it existed much before it was introduced. As for the errors, throughout these proceedings Mr. Riddell has taken advantage of every opportunity afforded him to set the record and issues straight. There was no prejudice from the introduction of the chronology and no basis upon which to order costs.

Was Picard successful?

[75] There could be no dispute that Ciarniello and the mortgage holder in Balemba were totally successful in the proceedings. The same cannot be said in relation to Picard. Throughout Picard’s written submissions there are references to awarding costs to the “successful” party. Picard submits costs should be awarded because they successfully opposed the Crown and ProFac’s position that Picard should receive no funds. The Crown and ProFac submits that Picard sought a substantial amount more than it received and accordingly, cannot be viewed as successful in the forfeiture application.

[76] I agree with ProFac that at best, success was split, Picard cannot be regarded as the successful participant in the forfeiture application, an important consideration in assessing whether costs should be awarded.

[77] On the basis of the foregoing, I decline to order costs against the Crown relying on my inherent jurisdiction and applying a lower standard than the traditional criminal law one. In doing so, I have not relied on the submissions regarding offers to settle.

The Offers to Settle

[78] Given my conclusion in para. 77, it is not essential to the costs issue to rely upon the offers to settle submissions. However, to complete the record, I agree with ProFac that it would be appropriate to consider the offers referenced in the submissions. I reach this conclusion for the reasons set out in ProFac’s responding letter of June 4, 2012. First, Picard raised civil costs principles in submissions and offers to settle are a relevant consideration. Second, one of Picard’s main submissions was that ProFac steadfastly refused to consider that Picard was entitled to any money and further that ProFac made no offer to settle. ProFac’s offer to settle on the basis upon which I based my judgment was relevant given the submissions of Picard. Third, Picard has included its offer to settle for $300,000.

[79] If I had relied upon the submissions regarding the offers, it would not have assisted Picard. Indeed, it would have given further support for the conclusion I reached.

Conclusion

[80] For the foregoing reasons,

1. The principal amount owing to Picard is $72,690.29;

2. The pre-judgment and post-judgment interest on that amount at 10% is to be calculated from June 21, 2008, and

3. I decline to make a costs order.

Durno J.

Released: June 15, 2012

[^1]: Massdan Group was incorporated with Audrey Holder-Sankar as president, secretary and treasurer. Derek and Audrey Holder-Sankar were the only directors.

[^2]: While Picard did not argue there were Charter violations, to complete the record I find there were no violations of Picard’s Charter rights.