COURT FILE AND PARTIES

COURT FILE NO.: 3940/07 (Chatham)

DATE: 20121127

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Attorney General of Ontario Applicant – and – 51 Taylor Avenue, Chatham, Ontario (PIN: 00550-1103(R) Respondent

Julia Evans and Dan Phelan, for the Applicant

Craig Bryson, for the Respondent

HEARD: October 10, 2012

REASONS FOR JUDGMENT

thomas J. :

1. The Application

[ 1 ] The applicant, the Attorney General of Ontario (“Attorney General”) brings this application for forfeiture pursuant to the Civil Remedies Act , S.O. 2001, c. 28 (“ CRA ”). The application seeks the forfeiture of a 12-unit residential apartment building located at 51 Taylor Avenue (“51 Taylor”) in the City of Chatham. The building is owned and operated by a Chatham couple, Marlowe Van Dusen (“Marlowe”) and Patricia Van Dusen (“Patricia”). For ease of reference only and consistent with the argument and materials, I have chosen to use first names for Mr. and Mrs. Van Dusen. The nature of their ownership interests will be discussed below.

2. The Legislation

(i) Purpose and Burden of Proof

[ 2 ] The CRA recognizes the substantial costs to the Province occasioned by criminal activities. It allows for an in rem proceeding to preserve and then forfeit property tainted by criminal activity so that it is no longer available for future crime and so the proceeds may serve to compensate victims. ( Chatterjee v. Ontario (Attorney General) , 2009 SCC 19 , [2009] S.C.J. No. 19 (S.C.C.) at paras. 3-4 (“ Chatterjee ”))

[ 3 ] The burden and standard of proof placed upon the Attorney General to prove, in this case, that the property is an instrument of crime, is the civil burden of a balance of probabilities. ( Chatterjee , at para. 23 ; Ontario (Attorney General) v. 1140 Aubin Road, Windsor , 2011 ONCA 363 , [2011] O.J. No. 2122 (C.A.) (“ Aubin Road ”))

[ 4 ] The purpose of the CRA is contained in s. 1 of the Act:

The purpose of this Act is to provide civil remedies that will assist in,

(a) compensating persons who suffer pecuniary or non-pecuniary losses as a result of unlawful activities;

(b) preventing persons who engage in unlawful activities and others from keeping property that was acquired as a result of unlawful activities;

(c) preventing property, including vehicles as defined in Part III.1, from being used to engage in certain unlawful activities; and

(d) preventing injury to the public that may result from conspiracies to engage in unlawful activities.

[ 5 ] The primary purpose engaged in this proceeding is set out in s. 1(c) above, that is, preventing this real property (instrument) from being used to engage in unlawful activities. The in rem nature of this civil procedure is significant. While the potential forfeiture has de facto punitive effects, “…its dominant purpose is to make crime in general unprofitable, to capture resources tainted by crime so as to make them unavailable to fund future crime and to help compensate…”: (see Chatterjee , at para. 4 ).

[ 6 ] The forfeiture does not demand personal fault, but fixes on the property itself. It does not require the laying of criminal charges, and if laid, does not demand a conviction.

(ii) Relevant CRA Provisions

[ 7 ] The following provisions of the CRA are important to the determination of these proceedings:

Definitions

7.(1) “instrument of unlawful activity” means property that is likely to be used to engage in unlawful activity that, in turn, would be likely to or is intended to result in the acquisition of other property or in serious bodily harm to any person, and includes any property that is realized from the sale or other disposition of such property;

“property” means real or personal property, and includes any interest in property;

“responsible owner” means, with respect to property that is an instrument of unlawful activity, a person with an interest in the property who has done all that can reasonably be done to prevent the property from being used to engage in unlawful activity, including,

(a) promptly notifying appropriate law enforcement agencies whenever the person knows or ought to know that the property has been or is likely to be used to engage in unlawful activity; and

(b) refusing or withdrawing any permission that the person has authority to give and that the person knows or ought to know has facilitated or is likely to facilitate the property being used to engage in unlawful activity;

“unlawful activity” means an act or omission that,

(a) is an offence under an Act of Canada, Ontario or another province or territory of Canada, or

(b) is an offence under an Act of a jurisdiction outside Canada, if a similar act or omission would be an offence under an Act of Canada or Ontario if it were committed in Ontario,

whether the act or omission occurred before or after this Part came into force.

Instruments of unlawful activity

(2) For the purpose of the definition of “instrument of unlawful activity” in subsection (1), proof that property was used to engage in unlawful activity that, in turn, resulted in the acquisition of other property or in serious bodily harm to any person is proof, in the absence of evidence to the contrary, that the property is likely to be used to engage in unlawful activity that, in turn, would be likely to result in the acquisition of other property or in serious bodily harm to any person.

Forfeiture order

8.(1) In a proceeding commenced by the Attorney General, the Superior Court of Justice shall, subject to subsection (3) and except where it would clearly not be in the interests of justice, make an order forfeiting property that is in Ontario to the Crown in right of Ontario if the court finds that the property is an instrument of unlawful activity.

Responsible owners

(3) If the court finds that property is an instrument of unlawful activity and a party to the proceeding proves that he, she or it is a responsible owner of the property, the court, except where it would clearly not be in the interests of justice, shall make such order as it considers necessary to protect the responsible owner’s interest in the property.

[ 8 ] While the majority of applications of this nature proceed on the basis that the property is proceeds of unlawful activity ( s. 3(1) of the CRA ) such is not the case here. Here the Attorney General asks the court to find 51 Taylor to be an “instrument of unlawful activity” pursuant to s. 8(1) and as defined in s. 7, all set about above.

[ 9 ] Section 8(1) calls for a mandatory forfeiture upon proof that the property is an “instrument”, but the CRA allows for two exceptions. The first is where the owner, proof of which rests with him or her, establishes that he is a “responsible owner” as defined in s. 8(3) above. Here, the court is required to protect his interest in the property. The second, where forfeiture would “clearly not be in the interests of justice”: (see Ontario (Attorney General) v. 1140 Aubin Road, Windsor and 3142 Halpin Road, Windsor (In Rem) , [2008] O.J. No. 5209 (S.C.J.), at paras. 19-21 ).

(iii) Interests of Justice

[ 10 ] The interests of justice exception was discussed in detail by Doherty J. in Aubin Road . He recognized the significance of the fact that the forfeiture clearly must not be in the interests of justice and at para. 85 said, “The party seeking relief must demonstrate that, in the circumstances, the forfeiture order would be a manifestly harsh and inequitable result.”

[ 11 ] Justice Doherty suggested that the community needs to see the orders of forfeiture as “fair”. At para. 97, he considered a number of factors that are relevant in assessing the interests of justice.

A court asked to grant relief from forfeiture under s. 3 must consider all factors that are relevant to the “interests of justice”. It is not possible to catalogue all of the factors that could properly be taken into account in evaluating the interests of justice in any given case. Those factors certainly include the closeness of the connection between the property and the illegal activity: see, for example, Ontario (Attorney General) v. 170 Glenville Road, King (In Rem) , [2010] O.J. No. 2865 at para. 72 (S.C.) .

[ 12 ] Justice Doherty went on, at para. 98, to specifically consider three factors important to the case at bar.

I will focus on three factors that are significant to the decision not to order the Atwater property forfeited. Two of those factors, the conduct of the party whose property is the subject of the forfeiture application, and the value of that party’s interest in the property compared to the value of the property that is tainted by the unlawful activity, are analogous to two of the considerations that figure prominently in the relief from forfeiture jurisprudence. The third factor examines the interplay between the purposes of the CRA and the exercise of the “interests of justice” discretion in s. 3.

[ 13 ] As to the forfeiture, at para. 99:

As explained above, the reasonableness of the conduct of the breaching party is a crucial consideration when that party seeks relief from forfeiture in private law matters. In the context of a forfeiture application under s. 3 of the CRA , it is the conduct of the party whose property is the target of the forfeiture application as it relates to the unlawful activity that is important. That conduct is not limited to any involvement in the criminal activity. It extends to any knowledge of the criminal activity, the failure to take reasonable steps to prevent the criminal activity, and profit derived knowingly or unknowingly from the criminal activity, and any steps taken after the property owner became aware of the criminal activity.

In holding that the property owner’s conduct as it relates to the unlawful activity is an important consideration in determining whether to grant relief from forfeiture, I do not suggest that actual involvement in the criminal activity is in any way a prerequisite to a forfeiture order under the CRA . It is not. However, nothing in the CRA precludes the common sense recognition that the conduct of the property owner will be important when deciding whether it is clearly not in the interests of justice to order forfeiture. Surely, a property owner who had no involvement in the criminal activity, was unaware of that activity, had acted reasonably throughout and did not profit from the activity, should, as a matter of elementary justice, be treated differently on a forfeiture application than the property owner who was involved in and directly profited from the unlawful activity.

Regardless of whether a forfeiture proceeding is labelled as civil, criminal, in personam or in rem , taking a person’s property away from that person has a punitive component: see Chatterjee at para. 4 . The interests of justice require that punitive orders made by the courts be reasonably perceived by the community as being deserved by those against whom they are made.

[ 14 ] As to factor two, the total value of the property compared to the value of the tainted portion, Justice Doherty stated:

The significant disparity described above was a relevant consideration in determining whether forfeiture would “clearly not be in the interests of justice”. It is particularly significant where the property owner is not implicated in or aware of the criminal activity. As order requiring forfeiture of an entire interest in property based on the fact that a small part of that interest was unknowingly acquired through unlawful activity could well be seen as an unwarranted and unjust use of the forfeiture power.

[ 15 ] Finally, at para. 108, forfeiture, the interplay between the purposes of the CRA and the exercise of discretion to relieve from forfeiture:

The purposes identified in s. 1 of the CRA do, however, mandate the drawing of a distinction, for the purposes of determining whether to relieve from forfeiture, between innocent property owners and those who are involved in or at least have knowledge of the relevant criminal activity. Directing forfeiture of the property of a person who had no involvement in, knowledge of, or responsibility for the relevant criminal activity would hardly seem to further the deterrence objective of the CRA . There is no need to deter the innocent and responsible property owner by seizing his or her property. Indeed, it could be argued that disregarding the property owner’s lack of involvement in or knowledge of the criminal activity when deciding the question of forfeiture could well undermine the deterrence goals of the CRA . . . .

[ 16 ] It is easy to understand the emphasis placed by Doherty J. on the knowledge and/or participation of the owner in the criminal activity. It impacts directly the sense of fairness demanded by the community. As an observation, when dealing with the potential forfeiture of an “instrument”, it is hard to imagine that a party could fail the responsible owner test and yet benefit from the narrow “interests of justice” exception.

5. Conclusion

[ 98 ] The property, 51 Taylor Avenue, Chatham, Ontario, is an instrument of unlawful activity and will be forfeited to the Crown in right of Ontario pursuant to s. 8(1) of the CRA .

[ 99 ] Having made that order, it is clear I have found there is no “responsible owner” and no exemption from seizure in the “interests of justice”.

[ 100 ] There is a claim for costs. I will receive written cost submissions from the parties within 30 days of the release of these reasons. The written submissions will be no more than five typed pages each. If I have no written submissions within 30 days there will be no order as to costs.

Original signed “Justice Thomas”

Bruce Thomas

Justice

Released: November 27, 2012

COURT FILE NO.: 3940/07 (Chatham)

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Attorney General of Ontario Applicant – and – 51 Taylor Avenue, Chatham, Ontario (PIN: 00550-1103(R) Respondent REASONS FOR JUDGMENT Thomas J.

Released: November 27, 2012