ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-11463
DATE: 20121031

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN
Respondent

– and –

JEFFREY LEE GRANGER
Applicant

Brian McNeely, for the Respondent

Sam Scratch, for the Applicant
Eric Freedman, for Heather Granger
Michael De Rubeis, for Antonio Lima

HEARD: October 1, 2012

reasons for decision

FUERST J.:

Introduction

[1] Jeffrey Granger was charged in November 2010 with taking secret commissions, fraud, and related offences.

[2] Several months before his arrest, the Crown obtained an order restraining the house Mr. Granger owned with his wife, Heather Granger. The property subsequently was sold with the consent of the Ministry of the Attorney General. Net proceeds of the sale in the amount of $33,830.05 remain subject to restraint.

[3] The charges against Mr. Granger have yet to come to preliminary hearing or trial.

[4] Mr. Granger applied under ss. 462.34(4) and 462.341 of the Criminal Code for release of the restrained funds for the purpose of paying his reasonable legal expenses and also his reasonable living expenses. The factum filed on his behalf, however, sought an order releasing the funds only “to pay for the Applicant’s reasonable legal expenses”. Little was said in oral argument about the payment of reasonable living expenses.

[5] Accordingly, I treat the application as one focused on obtaining the release of the funds to pay legal expenses, although the analysis that follows also applies to the nominal request to release the funds to pay living expenses.

[6] The application proceeded on the basis of the affidavit of Mr. Granger, the affidavits of police officers involved in the investigation including the affidavit used to obtain the restraint order, and some additional documents. There was no cross-examination on the affidavits.

[7] Mr. Granger’s wife formally asserted her entitlement to one half of the restrained funds, because they derive from the sale of the matrimonial home. Mr. Granger and Crown counsel acknowledge her interest, and agree that the maximum amount that could be released to Mr. Granger is $16,915. Any reference that I make to “the restrained funds” means this amount.

The Alleged Offences

[8] Mr. Granger is charged with breach of trust, taking secret commissions, two counts of fraud over, public mischief, uttering a forged document, and possession of the proceeds of crime over $5000. The charges concern activities he engaged in while employed as a manager in the Audit Division of the Canada Revenue Agency (“CRA”), without its knowledge or authorization. In essence, it is alleged that over a period of years he abused his position with the CRA for unauthorized personal gain. There is evidence that he used false names to carry out his activities.

[9] It is alleged that Mr. Granger held himself out for hire as a “consultant” who could assist companies or individuals with tax issues. He purported to do work for two individuals and their companies, Antonio Lima of Limen Group, and Vic Nonis of Lido Wall Systems. Although it is alleged that he in fact performed no work for either Mr. Lima or Mr. Nonis or their companies, he charged them for services rendered. From August 2006 to April 2008, a numbered company he controlled received just over $400,000 from Limen Group. That money was deposited to a TD bank account held by the numbered company. In August 2008, the numbered company received just over $26,000 from Lido Wall Systems. That money also was deposited to the TD bank account.

[10] Mr. Granger did not disclose either his dealings with Mr. Lima and Mr. Nonis or his receipt of money from them or their companies to his employer, the CRA.

[11] It also is alleged that Mr. Granger used his position with the CRA to create an unauthorized and false audit report concerning a municipal politician. That individual was at odds with the owner of a land development corporation for whom Mr. Granger ostensibly did tax “consulting” work. The audit report purported to show tax improprieties suggestive of corruption on the part of the politician.

[12] Mr. Granger ultimately provided the audit report to the police, knowing that the police intended to act on it. The police did launch an investigation of the politician, and discovered through their investigation that the audit report was entirely false.

[13] From February 2006 to June 2009, the land development corporation paid just over $540,000 to a second company Mr. Granger controlled. About half of that amount was paid in March 2008. The money was deposited to a TD bank account held in the name of Mr. Granger’s company.

[14] In total, from February 2006 to August 2008 the two companies controlled by Mr. Granger received over $850,000. [1] The money was not reported for tax purposes.

[15] In contrast, Mr. Granger’s income from his employment at CRA during this period did not exceed $35,000 annually.

The Restraint Order

[16] On July 25, 2008, Mr. Granger and his wife purchased a house in Stouffville. The purchase price was $1,050,000. A mortgage of $787,500 was registered against the property.

[17] Mr. Granger and his wife previously owned a home in Newmarket, which they purchased in 2005. On April 1, 2008, title was transferred to Ms. Granger alone, although the house remained the matrimonial home. The property was sold in September 2008 for $479,000.

[18] On October 30, 2009, the Grangers’ mortgage on the Stouffville property was replaced and increased to $959,176.

[19] On May 31, 2010, the Crown obtained an ex parte order restraining the Stouffville property. The order was served on Mr. Granger on June 7, 2010. At that time, the property already was listed for sale.

[20] Mr. Granger obtained permission from the Ministry of the Attorney General to sell the restrained property. However, he did not disclose that he was acting as a realtor on the sale and intended to receive part of the commission from the sale. He agreed that he would not do so only after the Ministry learned of his intention and threatened to withdraw consent to the sale.

[21] The sale of the Stouffville property closed in December 2010. The sale price was $1,040,000. The Ministry of the Attorney General received net proceeds of $33,830.05.

[22] Mr. Granger was arrested on November 17, 2010. He was released from custody.

The Status of the Criminal Charges

[23] Mr. Granger has yet to have a preliminary hearing. He currently is self-represented. He asserts that he wishes to retain Mr. Scratch, the lawyer who acted for him on this application, but has been unable to do so because he lacks funds. He was denied legal aid, initially in 2011 and again on appeal in May of this year. The basis of the refusal was that he used funds he obtained in 2010 from a combination of work as a real estate agent and his parents, to pay child support and other personal expenses, rather than for legal fees. Legal Aid Ontario also noted that it was open to Mr. Granger to bring this application for release of the restrained funds, and indicated that if the application was unsuccessful it could reassess him.

The Legal Parameters of the Application

[24] Read together, ss. 462.34(4) and 462.341 provide that I “may” order the release to Mr. Granger of the funds subject to the restraint order, if he satisfies me on a balance of probabilities that:

(a) He has an interest in the funds (s. 462.34(1));

(b) He has no other assets or means available for the purpose of meeting his reasonable legal expenses ( s. 462.34(4) (c)); and

(c) No other person appears to be the lawful owner of or lawfully entitled to possession of the funds ( s. 462.34(4) (c)).

See R. v. Malik, [2008] O.J. No. 1470 (S.C.J.) ; R. v. Kalenuik (2004), 2004 19299 (ON SC) , 186 C.C.C. (3d) 408 (Ont. S.C.J.).

[25] As expressed by Doherty J.A. in Wilson v. R. (1993), 1993 8665 (ON CA) , 15 O.R. (3d) 645 (C.A.), at para. 42 , “The provision recognizes that the state should not be allowed to beggar a person who will often need to retain the assistance of counsel in order to defend himself or herself against state action directed at depriving that person of their property and liberty”. That need “has a constitutional underpinning, and must be given due weight”: see para. 45.

[26] At this point, there has not been a finding that Mr. Granger committed any crime, or that the restrained funds are in fact the proceeds of crime. There has been a finding only that there are reasonable grounds to believe that the Stouffville property, and accordingly the funds resulting from its sale, are the proceeds of crime: see Wilson , at para. 45 .

[27] Under s. 462.34, an applicant’s need for legal assistance must be balanced against the possibility that the funds will be proven to be the proceeds of a crime or crimes committed by him: see Wilson , at para. 47 .

The Positions of the Parties

[28] For the purpose of this application, it is not disputed by Mr. McNeely on behalf of the Crown that Mr. Granger has an interest in the restrained funds.

[29] On behalf of Mr. Granger, Mr. Scratch (who is not retained as defence counsel) submits that Mr. Granger cannot afford to pay legal expenses on the meagre income he receives from Employment Canada, and has no assets he could use to retain counsel other than the restrained funds. He applied for and was denied legal aid. Mr. Scratch contends that Mr. Granger needs the assistance of counsel, because the disclosure is voluminous and he faces a lengthy jail sentence if convicted at trial. A s. 462.34 order can be made at any stage of the proceedings and is not restricted to trial. Mr. Scratch argues that no-one else appears to be lawfully entitled to possession of the restrained funds. He submits that Mr. Lima (and any other alleged victim) is not someone who appears to be lawfully entitled to possession of the seized funds, because the claim is too tenuous. There is no outstanding civil action, any entitlement to the restrained funds depends upon a conviction for fraud and identification of the funds as proceeds of that offence, and the Crown’s case is not strong.

[30] On behalf of the Crown, Mr. McNeely opposes the release of the restrained funds to Mr. Granger. He submits that I cannot be satisfied on a balance of probabilities that Mr. Granger has no other assets or means available to meet his legal expenses. The assertions to this effect in Mr. Granger’s affidavit are barebones. Their credibility is in doubt given the other evidence that he fairly recently had access to assets and a considerable amount of money that he has not accounted for on this application. As a tax auditor, Mr. Granger is knowledgeable about the secretion of assets and misrepresentation of financial means. Mr. McNeely contends that while there may be a need for legal representation at trial, Mr. Granger has no such need at a preliminary hearing, and in any event if this application is dismissed, it will be open to Mr. Granger to reapply for legal aid on the ground of changed circumstances. On the issue of entitlement, Mr. McNeely argues that the named alleged victims of fraud by Mr. Granger have a sufficiently cogent claim to the restrained funds, without need for filing a Statement of Claim. It cannot be said that no other person appears to be lawfully entitled to possession of the funds.

[31] On behalf of Mr. Lima, Mr. De Rubeis submits that his client is a person who appears to be lawfully entitled to possession of the restrained funds. That entitlement does not depend on the filing of a Statement of Claim. The evidence on the application shows that Mr. Lima was a victim of a large and sophisticated fraud, and raises the possibility of secretion of assets by Mr. Granger. Mr. Granger should be denied access to the restrained funds.

The Issues on this Application

[32] The issues are whether Mr. Granger has established on a balance of probabilities that he has no other assets or means available for the purpose of meeting his reasonable legal expenses and that no other person appears to be lawfully entitled to possession of the restrained funds.

Analysis

Issue #1: Whether Mr. Granger Has No Other Assets or Means Available for the Purpose of Meeting His Reasonable Legal Expenses

[33] The charges against Mr. Granger have yet to come to preliminary hearing or trial.

[34] Mr. Granger states in his affidavit that he has no funds available to retain counsel. He lost his job at the CRA as a result of the criminal charges. He has been unemployed for about six months. He has received Employment Insurance benefits of $295 per week after taxes for the past three months, but expects that will end this month. He states that work as a real estate agent is “foreclosed” to him because of the criminal charges. He has no savings. He does not own any real estate.

[35] Mr. Granger states that he moved to Ottawa to live with his parents, but currently rents a room from a friend for which he pays $450 per month. He refers to the “dissolution” of his marriage, and states that he settled financially with his “ex-wife”. He is responsible for child support of about $460 per month.

[36] There is, however, other evidence that bears on the credibility of Mr. Granger’s rather spartan account of his financial circumstances.

[37] The affidavit of one of the investigating officers reveals that when the restraint order was served on Mr. Granger, the police also attempted to execute a special search warrant. That warrant authorized the seizure, as proceeds of crime, of a BMW and an all terrain vehicle. Both vehicles were registered to Mr. Granger as owner. The officer was unable to carry out the seizure, because the vehicles were not at the Stouffville property. Mr. Granger told the officer that the all terrain vehicle was “sold” to his father, and the BMW was “sold” for $10,000 with the money used as a down payment on a Honda truck.

[38] Other information gathered by the police contradicts these assertions. Mr. Granger’s father turned the all terrain vehicle over to the police, describing it as a “gift” from his son. A representative of Honda told the police that the Honda truck was leased by Mr. Granger without any down payment.

[39] Mr. Granger’s affidavit is silent about the vehicles or any money received in respect of them.

[40] Mr. Granger provided no details in his affidavit about the matrimonial “settlement”, other than his child support obligation. His wife’s counsel, however, filed a copy of a separation agreement signed by the couple in June 2011. The agreement recites that Mr. and Ms. Granger purchased a condominium unit in Barrie around 2007, which eventually closed around June 2010. They sold the unit in November 2010, by which point, I note, the restraint order against the Stouffville property had been in place for months and Mr. Granger was well aware of the police investigation concerning him and his assets. According to the separation agreement, the Grangers “directed their solicitor to direct $48,778.02 from the sale proceeds to Heather [Ms. Granger], and $13,000 from the sale proceeds to Jeffrey [Mr. Granger]”.

[41] Mr. Granger did not reveal on this application that he had owned the condominium unit, or that some $60,000 flowed from its sale. He did not account for the portion of the sale proceeds he received, or explain why the total proceeds were distributed in favour of his wife.

[42] The affidavits filed by the Crown indicate that Mr. Granger had access to large amounts of money in the relatively recent past. Specifically,

(i) As set out above, companies controlled by Mr. Granger received more than $850,000 from the individuals and/or companies named in the criminal charges;

(ii) The Grangers’ previous matrimonial home was sold for $479,000 in September 2008;

(iii) By increasing the mortgage on the Stouffville property, Mr. Granger and his wife obtained $170,000 in October 2009.

[43] Notwithstanding Mr. Granger’s knowledge and experience as a tax auditor, his affidavit provides no accounting of this money.

[44] Mr. Granger’s claim of present impecuniosity is suspect given the financial information not included in his affidavit. It is his onus to satisfy me of the statutory preconditions to release of the restrained funds. I am not persuaded on a balance of probabilities that he has no other assets or means available for the purpose of meeting his reasonable legal expenses.

Issue #2: Whether No Other Person Appears to be Lawfully Entitled to Possession of the Restrained Funds

[45] The onus is on Mr. Granger to satisfy me on a balance of probabilities that there is no other person who appears to be lawfully entitled to possession of the restrained funds.

[46] Mr. Lima, through his counsel, asserts that he is a person who is lawfully entitled to possession of the restrained funds, as a victim of fraud at the hands of Mr. Granger.

[47] I am alive to the concern expressed by Mr. Scratch, that an individual whose interest is contrary to the accused’s could frustrate the accused’s access to restrained property simply by claiming to be a victim of the alleged crime. In this case, however, the evidence does not suggest that Mr. Lima’s assertion of legal entitlement is a tenuous claim made simply to stymie Mr. Granger’s access to the restrained funds. Mr. Lima’s claim is supported by the affidavit material filed by the Crown, which includes copies of cheques issued by Limen Group to the numbered company controlled by Mr. Granger. Further, Mr. Granger’s dealings with Mr. Lima and the flow of money from Limen Group form part of the evidentiary foundation on which the restraint order was made.

[48] Mr. Granger has failed to satisfy me on a balance of probabilities that there is no other person who appears to be lawfully entitled to possession of the restrained funds. Rather, the evidence on this application that Mr. Lima and/or his company were defrauded by Mr. Granger of a very large amount of money is sufficiently strong that I am satisfied on a balance of probabilities that Mr. Lima is a person who appears to be lawfully entitled to the restrained funds.

[49] I make no finding with respect to Mr. Nonis or Mr. Marotta, who did not make submissions on the application.

Conclusion

[50] As two of the three statutory prerequisites are not met, my discretion to order the release of the restrained funds is not triggered. It is not necessary for me to hold an in camera hearing about or determine the reasonableness of Mr. Granger’s legal expenses.

[51] The application is dismissed.

Justice M.K. Fuerst

Released: October 31, 2012

[1] The figures are taken from the affidavit material filed on behalf of the Crown.