ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Attorney General for Ontario
Applicant
- and -
626 Strand Avenue, Thunder Bay, Ontario (PIN: 621-86-0132 (LT)); 1745 Hutton Park Drive, Thunder Bay, Ontario (PIN: 62180-0041 (LT)); 117 Algonquin Avenue South, Thunder Bay, Ontario (PIN: 62168-0188 (LT)); 635 Strand Avenue, Thunder Bay, Ontario (PIN:62186-0197 (LT)); 641 Strand Avenue, Thunder Bay, Ontario (PIN: 62186-0135 (LT)); 143 Hill Street North, Thunder Bay, Ontario (PIN: 62155-0065 (LT)); 102 Windemere Avenue North, Thunder Bay, Ontario (PIN: 62161-0216 (LT)); 98 Algonquin Avenue South, Thunder Bay, Ontario (PIN: 62172-0165 (LT)); 1207 John Street Road, Thunder Bay, Ontario (PIN: 62175-0022 (LT)); 625 Faircrest Street, Thunder Bay, Ontario (PIN: 62134-0087 (LT)); 4090 John Street Road, Thunder Bay, Ontario (PIN: 62242-0235 (LT)); 1128 John Street Road, Thunder Bay, Ontario (PIN: 62176-0142 (LT)); and 240 Algoma Street South, Thunder Bay, Ontario (PIN: 62138-0033 (LT)) (in rem)
Joseph Wilkinson, for the Respondent, John Tsekouras
and
Nicola-Antonio Melchiorre, for the Respondents Angelo Marino, Elaine Tsekouras, Julie Tsekouras, and 2314611 Ontario Inc.
Respondent
HEARD: March 6 and 7th, 2013,
at Thunder Bay, Ontario
Mr. Justice F. B. Fitzpatrick
Decision on Motion
1This is a motion by the Attorney General of Ontario (the “AGO”) for a Preservation Order under the Civil Remedies Act, 2001, S.O. 2001, c. 28 (the “Act”). There are thirteen properties at issue, (the “Subject Properties”). The titles to twelve of these properties are held by Elaine Tsekouras (“Elaine”) and Julie Tsekouras (“Julie”). One property is held by 2314611 Ontario Inc.. Julie is an officer of 2314611 Ontario Inc. In the main application, the AGO seeks an order for forfeiture of the Subject Properties on the basis that they are proceeds of unlawful activity. The unlawful activity alleged is drug related.
2In broad terms, the AGO’s case is founded on an allegation that Julie’s husband, and Elaine’s brother, John Tsekouras has laundered drug money through the acquisition of the Subject Properties. An interlocutory preservation order for the Subject Properties was obtained by the AGO on an ex-parte basis on September 13th, 2012. Several court attendances have occurred since, all of which were without prejudice to the position of the Respondents on the hearing of this motion.
3The AGO argues that the voluminous affidavit material filed by both the AGO and the Respondents, together with the cross-examinations on these affidavits, provides an evidentiary record which demonstrates that there are reasonable and probable grounds to believe that the Subject Properties are proceeds of unlawful activity. The Respondents argue the motion should be dismissed for three reasons. Firstly, there are not reasonable and probable grounds to believe that the Subject Properties are proceeds of unlawful activity. Secondly, the AGO failed to make full and frank disclosure when the interlocutory order was obtained in September, 2012 and therefore, the provisions of Rule 39.01(6) of the Rules of Civil Procedure permit the order to be set aside. Thirdly, in any event, the continuation of the order is not in the best interests of justice. Accordingly, the issues to be resolved are as follows:
Issue 1: Are there reasonable and probable grounds to believe the Subject Properties are proceeds of unlawful activity?
Issue 2: Was there material non-disclosure when the order was first obtained and if so, is this a basis to deny continuation of a preservation order? and
Issue 3: If there are reasonable and probable grounds and there was no material non-disclosure, then would it clearly not be in the interests of justice to order interim preservation of the properties?
4At the outset, it is important to set out the general legal framework that governs the resolution of the matters at issue. Recently Justice O’Marra provided a useful summary of the applicable law for a matter where the continuation of a preservation order is at issue. In Ontario (Attorney General) v. $51,000.00 CDN (in rem), 2012 ONSC 4958, Justice O’Marra stated:
- The Civil Remedies Act allows the Attorney General of Ontario to initiate in rem proceedings in the Superior Court to preserve and forfeit proceeds and instruments of unlawful activity. It creates a civil forfeiture scheme and is not part of the criminal process.
Civil Remedies Act, ss. 3, 4, 9 and 15.6.
- The proceedings do not seek to establish fault for a person. An offence may be found to have been committed even if no person has been charged with the offence, or a person was charged with the offence but the charge was withdrawn or stayed or the person was acquitted of the charge.
Civil Remedies Act., s. 17(2).
- Proof that a person was convicted, found guilty or found not criminally responsible on account of mental disorder in respect of an offence is proof that the person committed the offence.
Civil Remedies Act, 17(1).
- Proceeds of unlawful activity is defined as property acquired, directly or indirectly, in whole or in part, as a result of unlawful activity.
Civil Remedies Act, s. 2.
The two part test for granting a preservation order is as follows:
Reasonable grounds to believe the property is a proceed or instrument of unlawful activity; and
where such grounds exist the court shall make the order unless it is "clearly not in the interest of justice to make the order".
Civil Remedies Act, ss. 4(2) and 9(2)
5The Respondents agree the test on this motion is one of reasonable and probable grounds. However, they argue that the reasonable grounds standard should be adjusted to reflect the fact that a situation on an interim motion for a preservation order is more akin to that of the police obtaining a search warrant and the assessment of reasonable grounds in those cases. The Respondent urges that an affiant (in this case the AGO) and the court must conduct inquiries which the circumstances reasonably permit, and should only disregard information which there is good reason to believe is unreliable. In this regard, the Respondents rely on the judgment of Justice B.G.A. MacDougall in Ontario (Attorney General) v. $61,686.12 in Canadian Currency (In Rem), [2009] O.J. No. 3874 (S.C.J.).
6My review of that case does not lead to the conclusion urged by the Respondents. In $61,686.12, Justice MacDougall was dealing with a submission by a respondent that the test on a motion of this nature should be decided on the balance of probabilities rather than on a reasonable grounds test. Justice MacDougall referred to the decision of the Supreme Court of Canada in R. v. Storrey, 1990 CanLII 125 (SCC), [1990] 1 S.C.R. 241, a case involving the issue of arrest without warrant, which I view as having a different quality than a situation involving a request for a search warrant, which is more analogous to the ex-parte manner in which the AGO obtained the Preservation Order at first instance. Justice MacDougall stated:
The responding party submits that the test for the forfeiture order, that being on a balance of probabilities, is the same test with respect to the preservation order, on a balance of probabilities.
I disagree with the respondent's submissions. The test for a preservation order in s. 4.2 is not on a balance of probabilities, but is based on whether the court is satisfied that there are reasonable grounds to believe.
This wording is similar to the wording in s. 495 of the Canadian Criminal Code in dealing with arrest without warrant by a peace officer.; In R. v. Storrey, 1990 CanLII 125 (SCC), [1990] 1 S.C.R. 241, dealing with the meaning of "reasonable grounds", the Supreme Court stated that:
It is not sufficient for the police officer to subjectively believe that he has reasonable and probable grounds to make an arrest. Rather it must also be shown that a reasonable person, standing in the shoes of the officer, would have believed that reasonable and probable grounds existed to make the arrest. The police need not go further and establish a prima facie case.
7While I do not agree that $61,868.12 stands expressly for the precise proposition urged by the Respondents, I agree that in dealing with a matter such as this, all the evidence must be considered in coming to a determination of whether reasonable and probable grounds exist.
Issue 1: Are there reasonable and probable grounds to believe the Subject Properties are proceeds of unlawful activity?
8In my view, the AGO has established there are reasonable grounds to believe that John Tsekouras is or has recently been engaged in, criminal activity. The evidence put before the Court that establishes this fact is, first and foremost, his conduct upon his arrest in June, 2011. As he was being confronted by police, he removed the battery from his Blackberry and attempted to smash the unit before the police were physically able to arrest him. Blackberries are valuable and expensive electronic devices. Persons do not routinely attempt to destroy these devices. I take judicial notice of the fact that these devices are now an important part of many businesses in Canada.
9Subsequent review of the nature of the encryption used on Mr. Tsekouras’ Blackberry reveals it was a “PGP” device which means “Pretty Good Privacy”. The device was serviced by a company based outside of Canada which does not give information to law enforcement. It had encryption that could be described as “military grade level”. Again, this is something out of the ordinary. It would suggest to a reasonable person that a Blackberry encrypted to this level was designed to be used in some kind of covert activity. Despite not filing any affidavit material in this matter, Mr. Tsekouras was described in argument as being a property developer and contractor. No evidence was put forward as to why a property developer and contractor in Thunder Bay requires military grade encryption in his personal electronic devices. This is something out of the ordinary in my view. It suggests a desire to be covert, something a reasonable person could equate with criminal behaviour.
10This is a finding that does not require reference to what was found on the Blackberry when it was subsequently searched. There is a very serious issue as to whether that search was done constitutionally. Counsel for Mr. Tsekouras eloquently and repeatedly made that argument to the Court in this matter. I understand the gravity and possible consequences for the criminal case against Mr. Tsekouras if that argument is made successfully in another context. However, for this case, it does not take away from the fact that Mr. Tsekouras was observed attempting to destroy an expensive device when confronted with imminent arrest that cannot be explained other than he sought to keep the device and what it might reveal from the police.
11Mr. Tsekouras has been convicted of drug trafficking in the past, but it was certainly not the recent past. The AGO evidence asserts Mr. Tsekouras associates with and employs known members of motorcycle gangs. Material filed suggests Mr. Tsekkouras is associated with a person, Frank Muzzi, from whom the police made significant undercover drug buys. The affiant for the AGO attests to his belief that, based on the review of extensive police records, Mr. Tsekouras has been involved with illicit drug activity from the completion of his sentence in 2004, until the time of his arrest in 2012. I conclude that there are reasonable and probable grounds that Mr. Tsekouras was engaged in criminal activity prior to his interaction with police in June 2011. This finding, however, does not end the inquiry for me however.
12What is at issue is whether the evidence shows that there are reasonable and probable grounds to conclude that the Subject Properties are proceeds of unlawful activity. There is no dispute that the two owners of the lands at issue, Elaine and Julie, do not have criminal records. They have not been charged with any criminal activity. I recognize this is not necessary for real property to be found to be proceeds of unlawful activity. However, there is no evidence that criminal or unlawful activity has been carried on, at the lands at issue.
13The essence of the AGO’s case against these properties is that because Elaine and Julie work in relatively modest jobs, they could not afford to buy property worth more than 3 million dollars. The AGO submits the money to acquire the properties originated from the criminal activity of the women’s husband and brother (respectively) John Tsekouras.
14The case law provides that a proceeding does not have to establish fault, nor does a criminal charge have to be laid. However, I am of the view that there must be some connection tying the subject of a proceeding to some criminal or unlawful activity, for a court to be satisfied that reasonable and probable grounds have been made out.
15It is important, in my view, that there was no evidence suggesting there was any unlawful activity noted as having occurred at the Subject Properties. In the two cases cited by the AGO that involved seizures of property (other than cash), Chatterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] 1 S.C.R. 624 and Ontario (Attorney General) v. 8477 Darlington Crescent et al, [2008] O.J. No. 5209 (S.C.J.), the property at issue had some tangible connection to illegal activity. In Chatterjee, the equipment seized smelled like marijuana, and in 8477 Darlington, marijuana grow operations were found in the four properties at issue in this case. No such evidence was led in this matter regarding the Subject Properties.
16In essence, the AGO argues that if there are reasonable and probable grounds to believe Mr. Tsekouras is involved in the unlawful drug trade, then one must also believe that the only way persons related to him could acquire any significant portfolio of assets is because he provided them proceeds of crimes. In making this argument, I believe it incumbent for the evidence to show some connection how the criminal activity led to, or facilitated, the acquisition of the property at issue, other than simply alleging “guilt by association”.
17Both Julie and Elaine put forward evidence concerning their financial situations in an attempt to demonstrate how it was they came to acquire the properties at issue. This evidence was very important in determining the matters at issue on this motion.
Elaine’s Properties
18I will first address the two properties owned by Elaine at issue in this matter, 625 Faircrest and 635 Strand. In her affidavit, Elaine admits she holds 635 Strand in trust for Julie. This was done for Planning Act purposes. This property will be dealt with below.
19The other property, 625 Faircrest, is Elaine’s home. Elaine has provided detailed evidence setting out how she came to acquire 625 Faircrest. The evidence referenced two other properties which Elaine bought, improved, and sold between 2006 and 2010. The properties were 139 Empress and 1339 Regina, both in Thunder Bay. She also explained that she had windfalls from casino winnings and gifts which were available to assist her in buying properties. In cross-examination, she denied she received any monies to purchase the properties from John Tsekouras or Julie. She did admit that John Tsekouras, along with other relatives, provided free labour to build 625 Faircrest. The increase in value of the properties did not seem unusual for residential properties in Thunder Bay as the real estate market has been positive over the past decade.
20In my view, Elaine’s evidence of her economic circumstances is satisfactory to rebut any evidence led by the AGO to suggest reasonable and probable grounds that 625 Faircrest represents proceeds of crime. While the affiant for the AGO testified about the propensity for persons involved in the drug to launder proceeds by using family members as nominee owners of property, the financial evidence regarding 625 Faircrest added up; that is to say, the values could all be traced back to what appeared to be legitimate sources. There was no other evidence that showed how proceeds of crime were connected in any specific way with the purchase and development of 625 Faircrest, or the other properties that Elaine has acquired and whose proceeds in some way flowed in to 625 Faircrest.
21The AGO argues that Elaine has been a nominee owner and submits that the evidence does not explain how she was able to sell properties for more than she purchased them. The AGO points to some evidence to suggest that John Tsekouras uses nominees to hold assets: for example the car he drives is actually owned by his father. However the evidence was not sufficient to convince me that Elaine was a nominee owner of 625 Faircrest. I find that Elaine explained how she acquired this land with funds from legal sources. In all, 4 properties were involved in the “chain” leading to 625 Faircrest. The period at issue spanned 6 years, 2006 to 2012. I take judicial notice of the fact that, generally speaking, residential property values in Thunder Bay have improved over these years. The fact that Elaine was able to sell properties for more than she paid for them over this time frame does not seem out of the ordinary.
22While Elaine did say that John Tsekouras did provide free labour to assist in the improvement or development of all the properties she mentioned, this is not something I found unusual as between siblings. It strikes me as draconian and beyond anything I can reasonably ascertain from a reading of the Act to believe that the Legislature intended that once a person was found to be reasonably and probably involved in criminal activity, that any subsequent gratuitous act for the rest of their lives would then taint every beneficiary of that activity with the possibility of forfeiture of the fruits of that action under the Act. In this case, I find that there is no reasonable and probable grounds to find that 625 Faircrest is a proceed of an unlawful activity. In respect of that property, there is no need to deal with the other two issues raised on this application.
Julie’s Properties
23The properties owned by Julie are another matter. There are twelve properties involved, if one includes 635 Strand which Elaine admits she holds in trust for Julie. All of these twelve are located in the City of Thunder Bay. The addresses are:
626 Strand Avenue
635 Strand Avenue
641 Strand Avenue
1745 Hutton Park
117 Algonquin
98 Algonquin
4090 John Street Road
102 Windemere
1207 John Street Road
1128 John Street Road
240 Algoma Street South
143 Hill Street North
24The number and values of the properties involved place the matter in a different category than was involved with respect to the one property, 625 Faircrest, owned by Elaine.
25Both Julie and Elaine work in education. They have similar incomes. Julie’s husband John has declared minimal amounts of income since being released from prison on full parole in January 2001. Like Elaine, Julie did lead evidence as to how she was able to acquire 12 properties worth over 3 million dollars over an approximate 13 year period. The properties are financed for approximately 1.2 million dollars. Julie explained that she and her family have lived frugally. She claims the couple lived with family, paying no rent for 8 of the 9 years of 2003 to 2011, inclusive. This claim of frugal living is contrasted to the expensive sun destination trips in 2008 through 2013 that the affiant for the AGO attributes to Julie and John Tsekouras and their children and extended families.
626 Strand
26Counsel for Julie provided a useful summary of the evidence regarding property acquisitions by way of a spread sheet. Julie’s current portfolio had a relatively humble beginning. One property, 626 Strand Avenue was purchased in early 1999 for $75,000.00. It was acquired as a gift from Julie’s parents. Next, Julie and John purchased vacant land at 1345 Central Avenue for $40,000.00 in 2002. The source of funds for this purchase was John Tsekouras’ CIBC account. The property was transferred to Julie alone in 2005, and sold in July 2006 for $389,900.00. The couple spent $200,000.00 developing the property. Julie claims $147,000.00 of these funds came from the couple’s wedding in 2003.
1745 Hutton Park and 117 Algonquin
27In regard to 1345 Central, by doing a calculation based on the evidence provided, namely the sale price less the development and acquisition costs, ($389,000 - $200,000.00 - $40,000 =$149,000.00) Julie made about $150,000.00 on the sale of 1345 Central. As the development of the property had been funded largely from wedding gift monies, Julie claims she had approximately $232,000.00 to then use to purchase other properties. She was able to claim the sale proceeds as tax exempt under the principal residence deduction as the family had been living at 1345 Central from July 2005 until July 2006. In any event, these proceeds were then used to acquire vacant land at 1745 Hutton Park for $99,900.00 and another vacant parcel at 117 Algonquin for $39,000.00. Again, by doing a calculation based on the evidence, taking the proceeds of the 1345 Central sale and deducting the 1745 Hutton Park and 117 Algonquin acquisitions ($232,000.00 -$138,900.00 =$93,100.00), Julie had about $93,000.00 available for use for future development or investment. Also, she claims John sold a restaurant in December 2005 which provided “additional capital” of $30,000.00, for a total of roughly $123,000.00 for future development.
281745 Hutton Park remains vacant land to date.
635 Strand, 641 Strand and 143 Hill Street North
29John and Julie built a duplex on 117 Algonquin. It was completed by early 2008. In cross-examination Julie said the cost to build the duplex “including the land is $171,138.30”. I infer that the land value of $39,000.00 was included in this amount so the couple spent approximately $132,000.00 building the duplex. The cost of this building would largely “eat up” the proceeds of 1345 Central and John’s restaurant sale. In June 2008, Julie placed a $240,000.00 mortgage against 117 Algonquin. According to Julie, these funds were used to build a fourplex on each of 635 and 641 Strand. In addition, these funds were used to purchase the land and construct a duplex at 143 Hill Street North. According to MPAC records filed by the AGO, construction of the two fourplexes was completed in 2009 and the duplex construction was completed in 2007.
30According to Julie, the costs put forward to build the two fourplexes ($364,314.81) and the duplex ($172,229.60) totalled over $536,000.00. For the Strand fourplexes, Julie said these were financed with savings, proceeds from 1345 Central and the mortgage from 117 Algonquin. For 143 Hill Street North, it was financed from savings and the 117 Algonquin mortgage. From my review of the evidence this means that the “savings” contribution to these acquisitions would have been in the order of $250,000.00. This seems to be a very large requirement for a couple who at the time, 2006, had two children and had a combined annual declared income of $67,594.25. For 2007, their combined total pre-tax income was $65,306.12. In 2008, the couple had a combined annual income of $102,075.30. For 2006 through 2008, even adding the couple’s pre-tax incomes together, the income does not total the amount of the “savings” necessary to explain the acquisition and development of the five properties they acquired from July 2006 until June 2007. I appreciate that 143 Hill Street was mortgaged in 2009 for $280,000.00, two years after the property was acquired and the duplex built. However, the evidence of the mortgage financing does not explain how 143 Hill Street was improved. The financing is only evidence that once the property was improved it was capable of being mortgaged to fund further projects.
31I find there is a significant gap in the economic evidence explaining how these properties were acquired in 2006 and 2007. The evidence does not satisfactorily explain how these properties could have been acquired by Julie given the extent of the legitimate funds she explained she had available. The explanation that the couple contributed $250,000.00 from their savings is difficult to accept given their declared incomes. As previously stated, there are reasonable and probable grounds to believe John Tsekouras is involved in illegal activity. There are reasonable and probable grounds to believe that the illegal activity was drug related. Drug related activity generates a great deal of cash. This cash can be used to purchase assets like real estate. In my view, this creates reasonable and probable grounds to believe some or all of the $250,000.00 came from funds acquired from John’s illegal activity. This funding gap leads to the conclusion that there are reasonable and probable grounds to believe 635 Strand, 641 Strand and 143 Hill Street were acquired with proceeds of crime.
98 Algonquin and 4090 John Street
32Julie deposes that 98 Algonquin and 4090 John Street were acquired by way of vendor take-back mortgages. However, substantial improvements were made to the properties in the amount of approximately $500,000.00. On cross-examination, Julie indicated the funds used to make these improvements came from mortgages placed against the Strand Avenue properties. The Strand Avenue properties were mortgaged in September 2010 and 98 Algonquin was acquired in 2008. As I have found, there are reasonable and probable grounds to believe the Strand Avenue properties are proceeds of unlawful activity; to the extent they were used to finance 98 Algonquin and 4090 John Street, there are reasonable and probable grounds to find that these properties as well represent proceeds of unlawful activity.
102 Windemere
33Julie’s evidence indicates she borrowed the monies necessary to purchase 102 Windemere from her uncle, Luigi Galle. There was no evidence led to suggest Mr. Galle is involved in criminal activity. No further development monies were spent on this property. The economic evidence regarding this property is sufficient to rebut any evidence the AGO has led to connect this property to proceeds of unlawful activity. Accordingly, there are no reasonable and probable grounds to find that 102 Windemere is proceeds of unlawful activity. In respect of that property, there is no need to deal with the other two issues raised on this application.
1207 John Street
34In her affidavit, Julie deposed that the $95,000.00 needed to buy 1207 John Street in May 2008 came from an RBC account. In cross-examination, Julie testified that the source of the funds for the RBC account was “the fourplexes”. I took from that evidence that she meant the mortgage placed against the Strand Avenue properties in September, 2010. This two year difference was not explained. I find there are reasonable and probable grounds to believe that 1207 John Street is proceeds of unlawful activity. I come to this conclusion as I have found the Strand Avenue properties are proceeds of unlawful activity. As these properties are proceeds, 1207 John Street is similarly tainted as, according to Julie, it was acquired with mortgage monies from these lands.
1128 John Street
35Julie deposed in her affidavit that the $54,000.00 needed to buy 1128 John Street in June 2011 came from an RBC account. In cross-examination, Julie testified that the source of the funds for this RBC account was a mortgage against 98 Algonquin. Title documents filed as part of the AGO’s record indicate a $500,000.00 mortgage was placed against 98 Algonquin on May 17, 2012. It was not explained how the purchase in 2011 could be funded by a mortgage secured in 2012. I have found that 98 Algonquin is proceeds of unlawful activity. Accordingly, as Julie testified that 1128 John Street was acquired with mortgage monies from a property for which I find there are reasonable and probable grounds to believe are proceeds of unlawful activity, I find that 1128 John Street suffers from the same taint. I find there are reasonable and probable grounds to believe 1128 John Street is proceeds of unlawful activity.
240 Algoma
36240 Algoma is owned by 2314611 Ontario Inc.. Julie and John Tsekouras are noted in the material as officers of the company. Julie deposes that the $285,000.00 needed to buy this property in April 2012 came from bank financing of $185,000.00 and a loan from Elaine of $100,000.00. Julie’s also deposes she used the proceeds from the 98 Algonquin mortgage to pay off the bank. Again, to the extent that I have found reasonable and probable grounds to believe that 98 Algonquin is proceeds of unlawful activity, the fact that this source has been used to fund 240 Algoma is sufficient to permit a finding that there are reasonable and probable grounds to believe this property is proceeds of unlawful activity.
37Therefore, to summarize, in answer to issue number one on this interim motion, I find that there are no reasonable and probable grounds to believe that 625 Faircrest, 626 Strand Avenue, 1745 Hutton Park Drive, 117 Algonquin Avenue, and 102 Windermere Avenue North are proceeds of unlawful activity. An order shall issue discharging the interim preservation order against these five properties.
38Also, in answer to issue number one, I find there are reasonable and probable grounds to believe that 635 Strand Avenue, 641 Strand Avenue, 143 Hill Street North, 98 Algonquin Avenue South, 1207 John Street Road, 4090 John Street, 1128 John Street and 240 Algoma Street South are proceeds of unlawful activity. In respect of these 8 properties, I will now address issue number two.
Issue 2: Was there material non-disclosure when the order was first obtained and if so, is this a basis to deny continuation of a preservation order?
39Rule 39.01 (6) states:
Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient grounds for setting aside any order obtained on the motion or application.
40In this particular case, the manner in which it came before me has a bearing on the applicability of the jurisprudence interpreting Rule 39.01(6). At first instance, the preservation orders were obtained on an ex parte basis; however once the Respondents learned of the orders, the litigation proceeded down a path that was somewhat different than the course of action generally taken when parties are confronted by ex parte orders involving property. The Respondents did not move to set aside the orders. Instead, they cooperated with counsel for the AGO to put together a time table for the AGO to file fresh and better materials and for the Respondents to reply. I appreciate this was all done without prejudice to the parties’ position on this motion. The record now before the Court consists of much more precise affidavit material on behalf of the AGO, and a complete and detailed reply by the Respondents. As such, I find that the analysis utilized in the Rule 39.01(6) cases is not as applicable or helpful as if this motion had proceeded with the Respondents moving to set aside the orders strictly on the baisi of the material filed at first instance.
41In 2010, Justice D. M. Brown had occasion to comment on the need for full and fair disclosure on ex parte motions brought under the Act in the case Attorney General of Ontario v. CDN $46,078.46, 2010 ONSC 3819. Justice Brown said at paragraph 34:
On such a motion the AGO, like any other litigant, must make full and fair disclosure to the court of all material facts and law relating to the subject-matter of the motion and the relief sought. Like any party moving ex parte the AGO must not only disclose the facts and law supporting his motion, but also identify and explain any weaknesses in the case – i.e. in effect put before the court arguments that the responding party might advance if he had been given notice of the motion. Such a requirement is standard fare on ex parte motions, such as those for certificates of pending litigation. The AGO should not operate under any lesser obligation on ex parte motions under sections 4 and 9 of the CRA.
42While I agree with the comments of Justice Brown for matters which are strictly being done ex parte, the nature of what is being alleged by the AGO, that the Respondents are engaged in a sophisticated scheme to launder drug money, has to be kept in mind when attempting to apply a test of materiality to the evidence put before the Court on this motion. There may be issues about which the AGO is not aware, and for which investigations are ongoing and it may be difficult if not impossible to anticipate every defence or argument that a respondent may make given the covert nature of the activity alleged at first instance.
43In this case, counsel for Mr. Tsekouras places great emphasis on the fact that the very serious Charter issue of the search of Mr. Tsekouras’s Blackberry was not disclosed in the AGO’s material at first instance. Subsequently, the AGO’s affiant, Corporal Smith, testified in cross-examination that he was not aware there was a Charter issue when he first swore the affidavit used on the ex parte motion. It is usually difficult to make findings of credibility on motions without the benefit of seeing and hearing the witness testify. I am not prepared on this record to make an adverse finding regarding the credibility of Corporal Smith.
44I agree that the Charter issue concerning the search looms large in the criminal proceedings against Mr. Tsekouras. However, counsel for the AGO points out that no motion to exclude the evidence was brought in these proceedings. I agree this has to be considered in assessing the merit of the argument that the failure to raise the possibility of a Charter argument on the ex parte motion represents a material non-disclosure or a material misrepresentation. I suspect there are tactical considerations that both sides are assessing in all these matters, given what is at stake in the criminal proceedings. However, I am left to deal with the relatively narrow question of whether it is appropriate to dismiss this motion simply because of the allegations of non-disclosure and material misrepresentation when the original ex parte order was granted. I find it was difficult to fully assess the merits of the Charter argument without a full record focused on that particular issue.
45I accept that Constable Smith may not have been aware of the issues concerning the search at the time he made his original affidavit on the ex parte motion in early September, 2012. He did not actually conduct the arrest and was not the officer primarily in charge of doing the search on the device. I do not find this to be a material non-disclosure for the purposes of this motion. The original ex parte motion material for the motion returnable on September 13, 2012, was contained in three volumes, with an 85 page affidavit and approximately 800 pages of exhibits. This means there was a substantial volume of material placed before the ex parte motion judge by which a preservation order could be made, despite the allegations subsequently made by the Respondents of deficiencies and misrepresentations in the material.
46In my view, the litany of complaints brought by the Respondents concerning non-disclosure are without merit, at least in so far as they materially bear on the essential issue for this motion, that is whether or not there are reasonable and probable grounds to believe that the Subject Properties are proceeds of unlawful activity and if so, would it be not in the interests of justice to continue an interim preservation order.
47What is most persuasive on this motion is the connection between the acquisition of a sizeable real estate portfolio by persons of modest means and their connection with a person who may be involved in money laundering. The arguments made by the Respondents certainly touch on the larger question of Mr. Tsekouras’s defence in the criminal matter. In addition to the Charter search issue, the Respondents allege that the AGO’s affiant made material misrepresentations because he did not mention the fact that there may be an issue in the criminal proceeding involving seizures of documents or of Mr. Tsekouras’ Blackberry that were contrary to procedures required in the Criminal Code. In my view, considering the totality of the evidence on the ex parte motion, and now having the benefit of reviewing all the material and the cross-examinations of the various affiants in this motion, I find that these alleged omissions and alleged misrepresentations were not sufficiently persuasive in this civil proceeding to convince me to dismiss the motion or to refuse to continue the preservation order in respect to some of the Subject Properties.
Issue 3: If there are reasonable and probable grounds and there was not material non-disclosure, then would it clearly not be in the interests of justice to order preservation of the properties?
48As noted above, I find that there are reasonable and probable grounds to find that 635 Strand Avenue, 641 Strand Avenue, 143 Hill Street North, 98 Algonquin Avenue South, 1207 John Street Road, 4090 John Street Road, 1128 John Street Road, and 240 Algoma Street South are proceeds of crime. I have also found that there was not material non-disclosure or material misrepresentation on the original ex parte motion such that I find it appropriate to dismiss the motion pursuant to the provisions of Rule 39.01(6). Finally, I must determine whether it would clearly not be in the interest of justice to order continued interim preservation for the eight properties noted above.
49The Ontario Court of Appeal, in considering a forfeiture application in Ontario (Attorney General) v. 1140 Aubin Road Windsor and 3142 Halpin Road, Windsor (In Rem), 2011 ONCA 363, had occasion to discuss meaning of s. 3(1) of the Act, the “interests of justice” exception. Justice Doherty wrote:
84 I agree with the application judge that the “interests of justice” exception to forfeiture operates where the Crown has otherwise shown that the property is subject to forfeiture and the respondent has not brought herself within the “legitimate owner” exception. The “interest of justice” exception to forfeiture recognizes that, given the very broad definition of “proceeds of unlawful activity” and the narrow exception to forfeiture carved out by the definition of “legitimate owner”, there will be cases that fall within the scope of the forfeiture power where, on any reasonable view, forfeiture would be a draconian and unjust result. The Legislature, rather than attempting to identify with specificity factors that would justify granting relief from forfeiture, used the broad phrase “interests of justice” and left it to the court on a case-by-case basis to determine when forfeiture was “clearly not in the interests of justice”.
85 I do accept counsel for the AG’s contention that s. 3(1) does not contemplate that the question of forfeiture will be decided based on a mere balancing of the pros and cons of making a forfeiture order. The word “clearly” modifies the phrase “interests of justice” and must be given some meaning. I think the word “clearly” speaks to the cogency of the claim advanced for relief from forfeiture. The party seeking relief must demonstrate that, in the circumstances, the forfeiture order would be a manifestly harsh and inequitable result.
50According to Justice O’Marra in $51,000 noted above, the test at the preservation stage is to be even more narrowly applied as he stated:
38 At the preservation stage the court is only being asked to protect the property pending a determination of the case on the merits. It follows that the “clearly not in the interests of justice” exception should be even more narrowly applied.
51I agree with the submissions of counsel for the AGO that continuation of the interim preservation order with respect to eight of the thirteen properties at issue cannot be said to create a “manifestly harsh” or “draconian” result. Julie Tsekouras remains the owner of the properties. Rents continue to be collected. There is nothing in the order preventing improvements or up keep to be made on the lands. In my view, the Respondents have not convinced me that it would clearly not be in the interests of justice to order continued interim preservation for the eight properties.
Conclusion
52Accordingly, the preservation order shall continue as against the following properties:
635 Strand Avenue, Thunder Bay, Ontario (PIN:62186-0197 (LT));
641 Strand Avenue, Thunder Bay, Ontario (PIN: 62186-0135 (LT));
143 Hill Street North, Thunder Bay, Ontario (PIN: 62155-0065 (LT));
98 Algonquin Avenue South, Thunder Bay, Ontario (PIN: 62172-0165 (LT));
1207 John Street Road, Thunder Bay, Ontario (PIN: 62175-0022 (LT));
4090 John Street Road, Thunder Bay, Ontario (PIN: 62242-0235 (LT));
1128 John Street Road, Thunder Bay, Ontario (PIN: 62176-0142 (LT)); and
240 Algoma Street South, Thunder Bay, Ontario (PIN: 62138-0033 (LT))
53For reasons set out above the preservation order shall be discharged against the following properties:
626 Strand Avenue, Thunder Bay, Ontario (PIN: 621-86-0132 (LT));
1745 Hutton Park Drive, Thunder Bay, Ontario (PIN: 62180-0041 (LT));
117 Algonquin Avenue South, Thunder Bay, Ontario (PIN: 62168-0188 (LT));
102 Windemere Avenue North, Thunder Bay, Ontario (PIN: 62161-0216 (LT));
625 Faircrest Street, Thunder Bay, Ontario (PIN: 62134-0087 (LT));
54With respect to costs, in my view success on this motion was divided and a “no costs” order would be considered appropriate. In the event there were offers to settle exchanged that a party believes would persuade me to make some other costs award in favour of a party, the parties can arrange to make an appointment to argue costs, either in person, or by teleconference to be scheduled within 30 days of release of these reasons. In such event, the parties shall limit their costs submissions to two double spaced pages exclusive of any correspondence relating to the offers to settle which they wish to draw to my attention. In the event no appointment is made within 30 days, the issue of costs will be considered to have been settled on a “no costs basis”.
______”original signed by”
The Hon. Mr. Justice F.B. Fitzpatrick
Released: May 28, 2013
CITATION: Ontario (Attorney General) v. 626 Strand Avenue, 2013 ONSC 3094
COURT FILE NO.: CV-12-368
DATE: 2013-05-28
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Ontario (Attorney General)
Applicant
- and –
626 Strand Avenue, Thunder Bay, Ontario (PIN: 621-86-0132 (LT)); 1745 Hutton Park Drive, Thunder Bay, Ontario (PIN: 62180-0041 (LT)); 117 Algonquin Avenue South, Thunder Bay, Ontario (PIN: 62168-0188 (LT)); 635 Strand Avenue, Thunder Bay, Ontario (PIN:62186-0197 (LT)); 641 Strand Avenue, Thunder Bay, Ontario (PIN: 62186-0135 (LT)); 143 Hill Street North, Thunder Bay, Ontario (PIN: 62155-0065 (LT)); 102 Windemere Avenue North, Thunder Bay, Ontario (PIN: 62161-0216 (LT)); 98 Algonquin Avenue South, Thunder Bay, Ontario (PIN: 62172-0165 (LT)); 1207 John Street Road, Thunder Bay, Ontario (PIN: 62175-0022 (LT)); 625 Faircrest Street, Thunder Bay, Ontario (PIN: 62134-0087 (LT)); 4090 John Street Road, Thunder Bay, Ontario (PIN: 62242-0235 (LT)); 1128 John Street Road, Thunder Bay, Ontario (PIN: 62176-0142 (LT)); and 240 Algoma Street South, Thunder Bay, Ontario (PIN: 62138-0033 (LT)) (in rem)
Respondent
DECISION ON MOTION
Fitzpatrick J.
Released: May 28 , 2013
/mrm