ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-5424-00
DATE: 2014 06 20
BETWEEN:
ATTORNEY GENERAL OF ONTARIO
Sandra Di Ciano, for the Applicant
Applicant
- and -
$9,475 IN CANADIAN CURRENCY AND $2,300 IN U.S.D. (IN REM)
Jose Magdales, Erlinda Magdales and Rene Magdales, interested parties, in person
Respondents
HEARD: March 17, 2014
REASONS FOR DECISION
EMERY J
[1] On Saturday night, August 18, 2012 the Peel Regional Police Service pulled over a black 2008 Mercedes Benz driven by one Jose Magdales because he had driven through a four-way stop. The investigating officer noted that Mr. Magdales appeared nervous. He also observed particles of a loose, leafy substance resembling marijuana on his clothes. Mr. Magdales was subsequently placed under arrest for possession of a controlled substance.
[2] After another officer arrived, Peel Regional Police searched the Mercedes. In the course of the search, officers located a marijuana cigarette in the centre console and a black pouch on the rear passenger seat containing $9,475 in Canadian currency, and another $2,300 in US funds. This money was confiscated by the Peel Regional Police Service and later held pursuant to a preservation order made by Justice Edwards on January 25, 2013 pending a determination whether those funds should be forfeited to the Crown under the Civil Remedies Act, 2001 (the “Act”).
[3] The Attorney General for Ontario brings this application for a forfeiture order under the Act with respect to the money seized on August 18, 2012. The Attorney General takes the position that both the Canadian dollars and the US dollars found that night were either the proceeds of unlawful activity or an instrument of unlawful activity and therefore subject to forfeiture.
[4] The evidence filed on the application is intended to show that Mr. Magdales was likely engaged in the trafficking of marijuana or cocaine in 2012, and was therefore known to engage in unlawful activity. The affidavit material discloses four incidents of unlawful activity involving these substances:
a) On January 3, 2012, Mr. Magdales was driving a Mercedes Benz when it was pulled over for a violation under the Highway Traffic Act. On that occasion, police observed him throwing a plastic sandwich bag out of the passenger side window while stopping the car. That plastic bag was later analyzed to contain $60 worth of marijuana. Mr. Magdales was arrested for possession. He was subsequently placed on probation and subject to the terms that he keep the peace and to be of good behaviour. He signed the probation order and acknowledged that failure to comply with any term would be a serious criminal offence.
b) On August 18, 2012, Mr. Magdales was pulled over while driving the 2008 Mercedes Benz. This was the occasion when the currency at issue on this application was seized. Mr. Magdales appeared the next day before a Justice of the Peace and was released on a recognizance, a condition of which was that he not possess a controlled substance.
c) On October 24, 2012, Peel Regional Police Service observed Jose Magdales to drive a Honda into a Tim Horton’s parking lot, where an unknown male entered the vehicle on the passenger side for approximately 30 seconds and then left the parking lot on foot. A few minutes later, Peel Regional Police observed the Honda stopping at a parking lot on Earlsbridge Road in Brampton where another individual entered the passenger side. The individual then exited the Honda and drove away in his own vehicle. When that individual was subsequently pulled over that evening, police found a Ziploc bag containing 6 grams of marijuana in his possession. The individual confirmed that he had purchased those drugs from an Asian male named Joe driving a Honda Civic who lives off Botavia Downs Drive in Brampton, and who usually drives a newer black Mercedes. Subsequently, Jose Magdales was charged with one count of trafficking on October 26, 2012 in relation to that transaction.
d) On October 27 2012, Peel Regional Police executed a search warrant at 101 Botavia Downs Drive in Brampton where Jose Magdales resides with his parents, Erlinda and Rene Magdales. In the course of executing that search warrant, the police located:
➢ 460.5 grams of marijuana valued at $9,210
➢ 67.5 grams of cocaine valued at $6,750
➢ a professional digital scale
➢ a clear Ziploc bag with cutting agent
➢ a Blackberry device and an iPhone
➢ $300 in cash
Mr. Magdales was subsequently charged with trafficking, two counts of possession, and two counts of possession of a controlled substance for the purpose of trafficking and breach of recognizance.
[5] The total value of the drugs seized at the Magdales residence on October 27, 2012 is estimated to be $15,960.
[6] Counsel for the Attorney General filed an application record containing the affidavits of Constable Taylor Halfyard, Constable Damian Savino and Constable Mihai Muresan in support of the application. Affidavits sworn by Jose Magdales, Erlinda Magdales and Rene Magdales were served in an application record of the respondents, along with a subsequent affidavit sworn by Jose Magdales on January 10, 2014. Jose Magdales, Erlinda Magdales and Rene Magdales were each cross-examined on the affidavits. Materials relating to their undertakings and productions were also filed.
[7] Constable Savino interviewed Jose Magdales on October 27, 2012, after he had been arrested and cautioned. Mr. Magdales admitted that he had hidden cocaine in a Ziploc bag in a drawer in his room. He also admitted that he had a cutting agent in the same place as the cocaine and scales. He explained that he used the cutting agent for his own use, because the cocaine was too strong. On this occasion, Mr. Magdales denied that he had the drugs in his possession to sell.
[8] In the interview, Mr. Magdales was confronted with the fact that he had been found with a pound of marijuana in his room, separated and packaged into ounces. When asked why he had so much, he explained that he smokes a lot of marijuana, and stated that he is a drug addict.
[9] On cross-examination, Mr. Magdales testified that the marijuana found in the basement of his home on October 27, 2012 had been given to him by someone and that he would have to pay that someone back for those substances. He admitted that this answer was different than the previous answer given to Constable Savino when he was interviewed on October 27, 2012 after the warrant had been executed on the family home.
[10] He testified that the cocaine been given to him on a separate date and that he owed money for the cocaine as well, but he could not recall how much he owed.
[11] Tellingly, Mr. Magdales testified that he was going to pay for the drugs by selling drugs.
[12] Mr. Magdales and his parents Erlinda Magdales and Rene Magdales have deposed that Mr. Magdales earned the $9,474 Canadian from January 2012 to August 2012. Mr. Magdales was working at the time for $11 an hour and his pay was depositing directly into his bank account. As he had found it difficult to save money in the past and wanted to save up for DJ equipment, he would withdraw around $300 to $400 from his chequing account each week and provide this money in cash to his father, Rene Magdales. Rene Magdales would then store the cash in a Gucci pouch at the family home. Mr. Magdales has produced banking statements for the period January 2012 to August 31, 2012 showing deposits made directly to his chequing account in the range of $300 to $392 each week, followed by withdrawals, in round numbers and sometimes numerous times a week.
[13] Rene Magdales would provide other cash amounts to his son to cover living expenses while holding this cash. Those other expenses included bills for two cell phones and an iTunes account. These expenses were paid for on Erlinda Magdales’ credit card.
[14] At the time of his arrest on August 18, 2012, Jose Magdales claimed that the cash found in the black pouch had been given to him by his parents, as allowance.
[15] Each member of the Magdales family has deposed that the cash found in the black pouch on the back seat of the Mercedes on August 18, 2012 was there for Mr. Magdales to purchase DJ equipment in Toronto.
[16] Each of the Magdales have deposed that Erlinda Magdales loaned Jose Magdales the $2,300 USD in cash for the purposes of purchasing the DJ equipment. This loan was made to Mr. Magdales on August 10, 2012.
[17] During the preservation hearing before Justice Edwards on January 25, 2013, Jose Magdales took the position that the $2,300 USD came from his grandmother.
[18] On cross-examination on his affidavit, Jose Magdales testified that he never took the position earlier in this litigation that the $2,300 USD came from his grandmother.
[19] On their cross-examinations, the affiants were unable to provide a cogent explanation why Jose Magdales was driving around in Brampton on a Saturday night with approximately $12,000 in cash in the car at a time when the DJ store in Toronto was closed.
[20] On cross-examination, Jose Magdales testified that he had that cash in the car with him on that Saturday night because he might have driven to Toronto that night to purchase the equipment, or he might have done so the next day.
[21] Rene Magdales could not offer an explanation for why his son Jose Magdales was driving around in Brampton on a Saturday night with all of his savings in the car when the Play De Record store was located in Toronto and not open for business. He stated “I’m really surprised” that he was “driving with that sum of money”.
[22] Two days after the currency was seized by police, Erlinda Magdales authorized Jose Magdales to use her credit card to purchase the DJ equipment. A receipt from Play De Record at 357A Yonge Street in Toronto is attached to the affidavit of Jose Magdales showing certain electronic equipment was sold to “Joe Magdales” for $7,851.64. This exhibit appears to show the equipment was paid for by two credit card charges of $3,950 and $3,901.64 that day.
[23] This purchase was made after Erlinda Magdales had posted $1,000 bail for the release of her son from custody.
[24] Further withdrawals from Mr. Magdales’ bank account in the amount of $200 were made on August 27, 2012 and August 30, 2012 after Jose Magdales had purchased the DJ equipment from the store in Toronto with his mother’s credit card. When asked why the withdrawals continued after he purchased that equipment, Jose Magdales stated on cross-examination that the later withdrawals were made to pay his mother back for the bail.
[25] Erlinda Magdales has deposed in her affidavit that no payments had been made to repay her for the bail payment.
[26] Banking statements for the account of Jose Magdales from before and after the purchase of the DJ equipment show a similar, if not identical pattern to the cash withdrawals from his account during the period of time each of the affiants claim Mr. Magdales was saving funds to purchase DJ equipment.
[27] The applicant’s factum contains a summary of observations from Constable Savino given in his affidavit as an experienced officer assigned to the Street Crime Game Unit:
- Constable Savino, an experienced officer assigned to the Street And Game Unit, as attested that based on his training and experience, he is aware that drug traffickers often carry large sums of cash on their persons, or have large sums of money hidden in their vehicles or residences. In his experience, traffickers require access to cash on hand in order to purchase drugs to supply their operations and will avoid using banks for illegally obtained funds, as bank accounts produce records of income that investigators are able to trace. He has also attested that in his experience, the presence of cutting agents and digital scales is indicative of drug dealing, with cutting agent being used to dilute cocaine to increase profits and scales used to weigh and dispense product. Further, storing large quantities of drugs, separated and packaged into ounces is indicative of drug dealing.
Savino Affidavit, Application Record, Tab 3, paras 29 and 30
Analysis
[28] The Civil Remedies Act, 2001 was enacted in Ontario to enable the Attorney General to bring a civil proceeding for an order that property to be forfeited to the Crown in Right of Ontario if the court finds that the property is proceeds of unlawful activity, or is an instrument of unlawful activity, except where making that order would clearly not be in the interests of justice. The Act also exempts such property from forfeiture where an interested party can prove that he or she is the legitimate or responsible owner of the property in which case the court is empowered to make an order it considers necessary to protect the responsible owner’s interest in the property.
[29] The funds found in the black pouch on the rear passenger seat of the black Mercedes Benz driven by Jose Magdales on Saturday night, August 18, 2012 will be forfeited to the Crown if they are found to be the proceeds of an unlawful activity under section 3, or the instrument of unlawful under section 8 of the Civil Remedies Act, 2001, unless it is clearly not in the interest of justice or if another person is found to be the legitimate or responsible owner of those funds. The issues to be determined on this application can be organized as follows:
On a balance of probabilities, was the currency an instrument and/or proceeds of unlawful activity?
Does any member of the Magdales family fall within the legitimate or responsible owner exceptions under the Civil Remedies Act, 2001?
If the answer is no to questions 1 and 2, is it clearly not in the interest of justice to order forfeiture of the currency found?
[30] An application under the Civil Remedies Act is a proceeding in rem, being a claim against the thing rather than against a person. The statute does not define or create a criminal offence. The purpose of the Act has nothing to do with the identification, charge or prosecution, conviction or punishment of an offender. It does not seek to impose a fine, penalty or other punishment and does not provide for imprisonment: Ontario (Attorney General) v. Chatterjee, [2007] O.J. No. 2012 (Ont. C.A.), affirmed at 2009 SCC 19 (SCC).
[31] The Act provides the court with the authority to make a forfeiture order with respect to property suspected of being the proceeds of unlawful activity as follows:
s. 3 - Forfeiture order
Forfeiture order
(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 proceeds of unlawful activity. 2001, c. 28, s. 3 (1).
Legitimate owners
(3) If the court finds that property is proceeds of unlawful activity and a party to the proceeding proves that he, she or it is a legitimate 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 legitimate owner's interest in the property. 2001, c. 28, s. 3 (3).
[32] The term “proceeds of unlawful activity” is defined in section 2 of the Act to mean “property acquired, directly or indirectly, in whole or in part, as a result of unlawful activity, where the property was acquired before or after this act came into force…” The term “unlawful activity” is defined under section 2 to mean “an act or omission that is an offence under an act of Canada, Ontario or another province or territory of Canada … whether the act or omission occurred before or after this part came into force.”
[33] The Act gives the court the power to make an order forfeiting property if the court finds that the property is an instrument of unlawful activity on the following terms:
s. 8 - Forfeiture order
Forfeiture order
(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. 2001, c. 28, s. 8 (1).
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. 2001, c. 28, s. 8 (3).
[34] The Act further defines the term “instrument of unlawful activity” in paragraph 7(1) to mean “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…” and includes any property that is realized from the sale or other disposition of such property. The term “unlawful activity” is defined in the same way as that term is defined with respect to the requirements for a forfeiture order for proceeds of unlawful activity under section 3 of the Act.
[35] It is an offence to traffic in a substance or to possess a substance for the purpose of trafficking under section 5(1) and (2) of the Controlled Drugs and Substances Act. Any activities contrary to these sections would properly be considered unlawful activities.
[36] Although the issue in Chatterjee was whether the Act was ultra vires the Province of Ontario to enact, the Supreme Court took the opportunity when it upheld the constitutionality of the Act as a legitimate exercise of provincial jurisdiction to interpret the nature of the Act and its purpose. The court explained that proceedings under the Act are taken in rem against the confiscated property without joining any of the persons who may be owners or possessors as parties, although they may be added as parties later. Justice Binnie summarized the objective of the Act this way at paragraph 23:
In essence, therefore, the CRA creates a property-based authority to seize money and other things shown on a balance of probabilities to be tainted by crime and thereafter to allocate the proceeds to compensating victims of and remedying the societal effects of criminality. The practical (and intended) effect is also to take the profit out of crime and to deter its present and would-be perpetrators.
[37] The standard of proof to determine whether money found in a compromising situation is either the proceeds of an unlawful activity or an instrument of unlawful activity is on the balance of probabilities, like in all civil cases. As in all civil cases, the application judge is required to scrutinize the relevant evidence to determine whether it is more likely than not that an alleged event or set of circumstances has occurred. It has been held that similar fact and propensity evidence is admissible in civil proceedings under the Act: F.H. v. McDougall, [2008] SCC 53 and A.G. v. $5,545 in Canadian currency (In Rem), [2011] O.J. No. 2190.
[38] The courts have held that evidence of how property has been used in suspicious or unlawful circumstances in the past is relevant to determine whether that property is an instrument of unlawful activity. Where property such as money has been used for unlawful activity in the past, such as to purchase drugs, and the evidence supports the likelihood that money found in similar circumstances will likely be used for the acquisition of more drugs, the Attorney General has met the test of establishing that the property is an instrument of unlawful activity: Ontario (Attorney General) v. Jinarern, [2005] O.J. No. 6008 (SCJ), and Ontario (Attorney General) v. 170 Glenville Road, King (in rem), [2010] O.J. No. 2865 (SCJ).
[39] The Attorney General submits that the evidence of Mr. Magdales’ past drug activities is relevant when assessing whether the currency seized from the black Mercedes on August 18, 2012 were the proceeds, or alternatively an instrument, of unlawful activity.
[40] In several cases cited by Ontario Courts, the self-evident fact that selling drugs is a cash business has consistently been recognized. In Ontario (Attorney General) v. $1,650 Canadian currency (In Rem), [2008] O.J. No. 2076, Power J. held that:
It is a well-known fact that persons involved in illegal drug activity frequently are found carrying large sums of cash for the purpose of purchasing drugs or as proceeds for the sale of drugs. The suspicion that arises, therefore, calls for a credible and reasonable answer.
[41] In Attorney General v. $42,885 In Canadian currency (In Rem), [2012] O.J. No. 4080, Shaw J. concluded that the money in question be forfeited for various reasons that included the fact that the individual found in possession of that amount of cash was found to have a bank card, indicating that he had a bank account. The court found it reasonable to conclude that had the money been obtained by legitimate means, that individual would have placed that large an amount into a bank account rather than storing it in a duffle bag found in his vehicle.
[42] The facts on the case before the court are not that much different. Mr. Magdales had a bank account and yet was travelling around on a Saturday night with a great deal of cash. The record before the court suggests that it is more likely than not that the money in the black pouch that night was either the proceeds of drug transactions paid by his customers, the currency of choice or convenience, or an instrument of unlawful activity, being funds to purchase drugs. On two prior occasions Mr. Magdales had been stopped by police while in the possession of controlled substances or in the course of dealing drugs. Subsequent to the confiscation of those funds on August 18, 2012, police found controlled substances and drug dealing paraphernalia at his home when the warrant was executed on October 27, 2012.
[43] I find that the explanations offered by Mr. Magdales for having the amount of Canadian Dollars and U.S. funds in the car he was driving on August 18, 2012 are not credible. On three occasions when he was questioned about their source and purpose, and on each occasion Mr. Magdales has changed his story from those funds being an allowance from his parents, to a story that they were his savings that his father had given to him in order to purchase DJ equipment, and last that he required those funds from the police as they were his tuition funds to enrol in a disc jockey school.
[44] While I cannot conclude on the balance of probabilities that the funds were generated from the previous sale of drugs, I have no difficulty in concluding on the record before me that in all likelihood Mr. Magdales was carrying the quantity of cash found in the black Mercedes he was driving on August 18, 2012 for the purpose of paying for drugs he would then re-sell, contrary to The Controlled Drugs and Substances Act. It is therefore my finding that the funds confiscated by the Peel Regional Police Service on August 18, 2012 are an instrument of unlawful activity. They will therefore be subject to forfeiture, unless an interested party can show the court that it would not be in the interests of justice to do so, or if Erlinda or Rene Magdales can show that one of them is the legitimate or responsible owner of those funds.
[45] The onus to establish that he or she is the responsible owner of cash that would otherwise be forfeited as an instrument of unlawful activity is on the interested party. I find that neither Mr. Magdales nor his parents Erlinda Magdales or Rene Magdales have met the burden of proving that any of them are the responsible owner of either the Canadian dollars or the U.S. funds found in the possession of Mr. Magdales on August 18, 2012 to invoke that exception to an order forfeiting those funds. On Rene Magdales own evidence, the funds belong to his son. On the evidence of Erlinda Magdales, any money she loaned to Jose Magdales that formed part of the funds seized on August 18, 2012 are unsecured and simply a debt owing by her son to her.
[46] The Attorney General submits that there are no “interests of justice” considerations for the court to consider against issuing an order forfeiting the currency. In Ontario (Attorney General) v. 8477 Darlington Crescent et al (Darlington Crescent), the Court of Appeal held that the word “clearly” in section 3(1) of the Act dealing with the proceeds of unlawful activity modified the phrase “interests of justice” to mean that the scope of the forfeiture power given to the court by the Act should be subject to narrow circumstances where, on a reasonable view, forfeiture would be a draconian and unjust result. In this way, the legislature left it to the court to determine on a case by case basis when forfeiture would “clearly not be in the interests of justice”.
[47] The Darlington Crescent case concerned a situation involving the proceeds of unlawful activity. The Court defined three non-exhaustive factors to consider when exercising the discretion to apply the exception where forfeiture would clearly not be in the interests of justice:
(a) The conduct of the party whose property is the subject of the forfeiture application;
(b) The disparity between the value of the property that is proceeds of unlawful activity and the value of the property sought to be forfeited;
(c) The interplay between the purposes of the Act and the exercise of the discretion to relieve from forfeiture.
[48] The court in Darlington Crescent stated that in such circumstances, relief from forfeiture would very much be the exception and should be granted only where the party seeking that remedy clearly makes the case that forfeiture would lead to an unequitable and unjust result. The court also stated that “a party whose conduct is not seen as reasonable cannot hope to obtain relief from forfeiture”.
[49] I find by virtue of the identical wording in section 8(1) relating to the instrument of unlawful activity provisions that the same factors apply. When I consider the evidence on the record I see no clear reason to find that the interests of justice would be served to relieve Mr. Magdales or his parents from forfeiture of the currency at issue.
[50] The totality of their evidence is inconsistent and lacks the ring of truth. The credibility of the explanations offered by Mr. Magdales changed with the circumstance where he was called upon to give them. The objective evidence of the bank accounts did not align with the reasons for the behavior of Mr. Magdales in the affidavits opposing the application, thereby compromising their credibility as affiants. Where several versions of the source of funds was given by persons seeking the return of those funds, there is little a court can do to divine whether any one of those versions is truthful. Where the evidence from parties with interests in common is inconsistent or contradictory, it is logical to suspect that none is true at all.
[51] For these reasons I have concluded that those funds were possibly the proceeds from recent drug sales, or likely the cash float to make a drug purchase. This makes the confiscated currency proceeds or an instrument of unlawful activity, and thus subject to forfeiture.
[52] I also find that the amount of cash in Canadian and US currency seized from the Mercedes driven by Jose Magdales on August 18 2012 was approximately the same as the estimated value of the drugs found in the Magdales home on October 27, 2012. Forfeiture of the confiscated funds will deprive Mr. Magdales from using those funds to repay suppliers of illegal substances, or to purchase new product to replenish his inventory.
[53] I therefore grant the application of the Attorney General of Ontario and order that the $9,475 in Canadian currency and the $2,300 in U.S. funds be forfeited to the Crown.
[54] If the Attorney General seeks costs of this application, counsel should send written submissions consisting of no more than five pages to Judge’s Chambers at 905-456-4834 to the attention of my assistant, Sherry McHady, by June 30, 2014 and to Mr. Magdales and the other interested parties by email or personal delivery. Mr. Magdales and his parents would then have until July 10, 2014 to provide any written submissions on those costs to counsel for the Attorney General and to judge’s chambers. If no submissions on costs are received by July 10, 2014, I shall consider that the question of costs has either been settled or abandoned.
EMERY J
Released: June 20, 2014
COURT FILE NO.: CV-12-5424-00
DATE: 2014 06 20
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ATTORNEY GENERAL OF ONTARIO
Applicant
- and -
$9,475 IN CANADIAN CURRENCY AND $2,300 IN U.S.D. (IN REM)
Respondents
REASONS FOR DECISION
EMERY J
Released: June 20, 2014