ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO: CV-12-456196

DATE: 20140930

BETWEEN:

ATTORNEY GENERAL OF ONTARIO

Miriam Young, for the Applicant

Applicant

• and -

104,877 IN U.S. CURRENCY (IN REM)

Respondent

Nathan M. Ross, for the Respondent Alexander Bourgeois

HEARD: September 19, 2014

AMENDED REASONS FOR decision

CHAPNIK J.:

Background

[1] At 6:20 a.m. on Friday November 11, 2011, Alexander Bourgeois was stopped by airport security at Toronto Pearson International Airport when an x-ray machine operator detected something suspicious in his backpack. Mr. Bourgeois was on his way to Panama City and his backpack was filled with socks – the socks were filled with money.

[2] There was $100,000 USD in Mr. Bourgeois’ backpack. The money had been divided across twenty-two socks. Each tightly-wound bundle had been wrapped in wax-coated graph paper and covered with clear tape. Eighteen of the bundles contained exactly $5,000 USD and four of the bundles exactly $2,500 USD. Mr. Bourgeois’ backpack also contained a pair of jeans, a t-shirt and a pair of briefs. Upon arrest, police officers found two more bundles totaling $4,877 USD in Mr. Bourgeois’ pockets, and a small baggy of cocaine in his wallet.

[3] The Attorney General for Ontario commenced an application under ss. 3 and 8 of the Civil Remedies Act, 2001, S.O. 2001, c. 28 [the CRA] for forfeiture of the funds seized from Mr. Bourgeois. The Attorney General submits that the monies, which total $104,877 USD, are either the proceeds of unlawful activity or an instrument thereof. The Attorney General also submits that Mr. Bourgeois has failed to establish himself as the legitimate or responsible owner of the monies and has failed to show that it would not be in the interests of justice to order forfeiture.

[4] Mr. Bourgeois submits that the monies are neither the proceeds of unlawful activity nor an instrument thereof, that he is a legitimate owner, and that it is not in the interests of justice to order forfeiture of the funds. Mr. Bourgeois also brings a motion under s. 5(1) of the CRA for an order directing that the cost of an expert report used to challenge the Attorney General’s application be paid from the seized funds. The Attorney General contests this motion on a number of grounds.

[5] For the reasons that follow, Mr. Bourgeois’ s. 5(1) motion is allowed in part, and the Attorney General’s application for forfeiture is granted.

Part One - Mr. Bourgeois’ Motion for Legal Expenses

Overview

[6] Section 5(1) of the CRA permits a person who claims interest in seized property to make a motion to the Superior Court of Justice for an order directing that reasonable legal expenses incurred by the person be paid out of the property. Mr. Bourgeois hired accountants to prepare a report that would assist his defense against the Attorney General’s forfeiture application. Mr. Bourgeois seeks the payment of $9,791.50 for the accountants’ report. He also seeks an additional $13,646.63 in legal fees.

[7] This is Mr. Bourgeois’ second such motion. On May 21, 2013, Perell J. allowed a motion brought by Mr. Bourgeois directing that his reasonable legal fees be paid from the monies seized: Ontario (Attorney General) v. $104877 in U.S. Currency, 2013 ONSC 2955, [2013] O.J. No. 2348. Justice Perell ordered that $6,000 be paid to Mr. Bourgeois to cover the cost of reasonable legal fees that had been incurred up to that time.

[8] The Attorney General opposes Mr. Bourgeois’ motion for the payment of legal fees out of the preserved funds. First, the Attorney General argues that Mr. Bourgeois is estopped by the decision of Perell J. Second, the Attorney General submits that amount requested is unreasonable. Third, the Attorney General argues that the amount requested exceeds the maximum allowed under s. 3(1) of O. Reg. 91/02 made under the CRA. The first two arguments fail for the following reasons.

Analysis

(1) Res Judicata

[9] The Attorney General submits that this matter is res judicata, arguing in written submissions that Mr. Bourgeois’ motion is barred by both issue estoppel and cause of action estoppel. (The Attorney General did not raise res judicata during oral submissions.) The Attorney General points out that these are the same parties, that this is the same issue, and that Perell J. stated that $6,000 was “the maximum” allowed under s. 3(1) of O. Reg. 91/02.

[10] I disagree. In Angle v. Minister of National Revenue, 1974 168 (SCC), [1975] 2 S.C.R. 248 at p. 551, the Supreme Court of Canada outlined three requirements to establish issue estoppel:

1. That the same question has been decided;

2. That the judicial decision which is said to create the estoppel was final; and

3. That the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in the estoppel raised or their privies.

[11] The first requirement has not been meet in this case. Mr. Bourgeois’ motion does not involve relitigation of an identical substantive issue of law or fact.

[12] In the motion before Perell J., the issue was whether Mr. Bourgeois was entitled to payment out of the seized funds for legal expenses incurred by him as of January 25, 2013.

[13] In this motion, the issue is whether Mr. Bourgeois is entitled to payment for expenses incurred as of August 8, 2014, and which arose after the decision of Perell J. While the need for an accountant was known at the time of the first hearing, the full cost of the expert report was not. The accountants were not engaged by Mr. Bourgeois until August 7, 2013. Whether Mr. Bourgeois is entitled to payment of this disbursement was not, and could not have been, decided in the first proceeding before Perell J.

[14] Likewise, cause of action estoppel does not apply in this case. The facts giving rise to Mr. Bourgeois’ right to judicial relief in this motion are not, in substance, identical to the facts before Perell J. Although this motion and the previous motion have one or more material facts in common, this does not make them the same cause of action: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460 at para. 54.

(2) Reasonableness of the Report

[15] The Attorney General submits that Mr. Bourgeois’ request for additional legal expenses, and in particular, the expenses relating to the expert report, do not represent reasonable legal expenses. On this basis, the Attorney General submits, Mr. Bourgeois has failed to satisfy the requirements under s. 5 of the CRA.

[16] I disagree. Having regard to all the circumstances, the cost of the expert report was reasonable. The average hourly rate charged by the accountants who prepared the report was $158.51, and it appears that wherever possible, work was delegated to associates and staff with lower hourly rates. The scope of review of the report was large, covering nine years of income tax returns and dealing with a range of different financial issues. As the cross-examination of Mr. Bourgeois clearly indicated, his financial affairs were not in order and a professional assessment was necessary. It is highly unlikely that Mr. Bourgeois would have been unable to mount a case in support of his entitlement to the funds without professional assistance.

[17] I note further that the impetus for the expert report arose from the numerous requests by the Attorney General for further financial disclosure. These wide-ranging requests for such information during Mr. Bourgeois’ cross-examination contribute to the reasonableness of the expenses he incurred obtain it.

(3) Monetary Limit

[18] Finally, the Attorney General argues that the amount of legal expenses requested by Mr. Bourgeois exceeds the monetary limit under s. 5 of the CRA. I agree with the Attorney General to the extent that the total amount that can be ordered paid in this case is 15 per cent of the value of the seized property or $15,731.55 USD. Taking account of the $6,000 USD already released, the most that this court can order paid is, as the Attorney General submits, $9,731.55 USD.

[19] Section 3 of O. Reg. 91/02 of the CRA limits on the amount that can be paid to an interested person under s. 5 of the CRA. Payments ordered pursuant to s. 5 of the CRA are limited to the lesser of (a) 15 per cent of the value of the property and (b) the amount which would be paid for legal services under a legal aid certificate in connection with a civil matter:

3. (1) The monetary limit for payments under orders made under section 5 or 10 of the Act in respect of property that is the subject of a proceeding is the lesser of,

(a) 15 per cent of the value of the property; and

(b) the amount which would be paid for legal services under a legal aid certificate in connection with a civil matter, as calculated under subsection (3). O. Reg. 478/09, s. 1.

(2) For the purposes of clause (1) (a), the value of non-monetary property is the realizable value less the costs of conversion, the payment of all liens or other encumbrances that attach to the property, and any costs to the Director of Asset Management — Civil incurred under an interlocutory order for the preservation, management and disposition of the property up to conversion. O. Reg. 478/09, s. 1.

(3) For the purposes of clause (1) (b), the amount which would be paid under a legal aid certificate in connection with a civil matter shall be calculated with reference to Ontario Regulation 107/99 (General) made under the Legal Aid Services Act, 1998 as follows, with necessary modifications:

1. Lawyers’ fees shall be calculated at the hourly rate set out in Part I of Schedule 2 to that regulation, up to the maximum hours set out in Part II of Schedule 2 to that regulation.

2. Costs for travel time shall be calculated in accordance with item 23 of Part IV of Schedule 2 to that regulation.

3. Fees for services of law clerks, articled students and investigators shall be calculated based on Schedule 3 to that regulation.

4. Disbursements shall be calculated in accordance with Schedule 6 to that regulation. O. Reg. 478/09, s. 1.

(4) The monetary limit under subsection (1) is the maximum that is available for all claimants in respect of the same property. O. Reg. 478/09, s. 1.

[20] In this case, 15 per cent of the seized property is $15,731.55 USD.

[21] The amount which would be paid for legal services under a legal aid certification cannot be confidently ascertained as expert disbursements under Schedule 6 to O. Reg. 478/09 of the Legal Aid Services Act are calculated on a case-by-case basis. Neither party has provided the court with a confident estimate of what would be paid under a legal aid certificate. The Legal Aid Disbursements Handbook echoes O. Reg. 478/09, stating that the amount paid for “Other Experts” is determined on a case-by-case basis. As a rough guide, the Handbook states that the cost of Medical/Legal reports must be 10% of the estimated recovery set out in the opinion letter. While not binding, 10% of the estimated recovery in this case would be $10,487.70 USD.

[22] As any calculation of the legal aid rates for expert reports will be uncertain, 15 per cent of the property seized should set the maximum amount allowed for legal expenses in this case.

[23] For these reasons, Mr. Bourgeois’ motion is allowed in part. $9,731.55 USD shall be paid toward the expenses incurred to retain the expert accountants. As such, Mr. Bourgeois’ request for $13,646.63 in legal fees is denied. During oral arguments, counsel for Mr. Bourgeois stated that their primary concern was securing payment for the accountants and suggested that this took precedent over other legal expenses.

Part Two – The Attorney General’s Application for Forfeiture

Additional Factual Background

[24] After Mr. Bourgeois was arrested and the monies seized, the police charged Mr. Bourgeois with (a) possession of proceeds of crime contrary to s. 354(1) of the Criminal Code, (b) money laundering contrary to s. 462.31 of the Criminal Code, and (c) violating s. 4(1) of the Controlled Drugs and Substance Act.

[25] On May 23, 2012, the criminal charges against Mr. Bourgeois were withdrawn by the Crown. In June 2012, the Attorney General commenced a forfeiture application under the CRA.

[26] On June 19, 2012, Low J. granted a 30-day preservation order on a motion made without notice. On July 18, 2012, on a motion made with notice to Mr. Bourgeois, Pollack J. granted an order for the continued preservation of the currency pending disposition of a forfeiture application.

The Civil Remedies Act, 2001

[27] The CRA “enacts civil remedies in relation to property tainted by crime”: Chatterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] 1 S.C.R. 624 at para. 17. Specifically, the CRA allows the Attorney General of Ontario to initiate in rem proceedings in the Superior Court of Justice to preserve and forfeit both proceeds and instruments of unlawful activity.

[28] The relevant provisions of the CRA are as follows:

Forfeiture order

3. (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.

Legitimate owners

3. (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.

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

8. (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.

[Emphasis Added]

The Test

[29] The test for forfeiture proceedings under the CRA has two steps. First, the Attorney General must satisfy the court that the property is either the proceeds of unlawful activity or the instrument of unlawful activity.

[30] Second, if the Attorney General succeeds, the respondent may seek protection from forfeiture under s. 3(3) or s. 8(3) as either a “legitimate owner” or a “responsible owner.” At this stage, the burden of proof shifts to the respondent.

[31] If the Attorney General succeeds at the first step and the respondent fails to prove that she is a legitimate or reasonable owner, the court shall forfeit the property in question unless it is “clearly not in the interests of justice.”

[32] “Legitimate Owner” is defined in section 2 of the CRA as follows:

“legitimate owner” means, with respect to property that is proceeds of unlawful activity, a person who did not, directly or indirectly, acquire the property as a result of unlawful activity committed by the person, and who,

(a) was the rightful owner of the property before the unlawful activity occurred and was deprived of possession or control of the property by means of the unlawful activity,

(b) acquired the property for fair value after the unlawful activity occurred and did not know and could not reasonably have known at the time of the acquisition that the property was proceeds of unlawful activity, or

(c) acquired the property from a person mentioned in clause (a) or (b); (“propriétaire légitime”)

[33] “Responsible Owner” is defined in the CRA as follows:

“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; (“propriétaire responsable”)

The Legal Framework

[34] The forfeiture regime in Ontario has a number of features worth noting.

[35] First, the standard of proof under the CRA is proof on a balance of probabilities: CRA at s. 16; Chatterjee (2009), at para 47. Second, there are situations, such as in this case, where property may be both the proceeds of unlawful activity and an instrument of unlawful activity: Ontario (Attorney General) v. Chow [2003] OJ No. 5387 at para. 23. Third, and most importantly, the CRA does not require the Attorney General to prove that a specific criminal offence was committed by a specific person. As the Court of Appeal held in Ontario (Attorney General v. Chatterjee, 2007 ONCA 406, 225 O.A.C. 40, “Forfeiture proceedings do not require or result in a conviction or finding of guilt or wrongdoing by a named party. The CRA is aimed squarely at the question of the forfeiture of property obtained through unlawful activity and its eventual distribution to the victims of crime and others specified in the regulations, not the punishment of offenders”: at para. 21 affm’d in Chatterjee (2009). Fourth, as stated above, the onus is on the interested party to establish that he or she is a responsible or legitimate owner: Chow at para 33. Fifth, the respondent’s failure to provide a credible explanation for a legitimate source of the property may be considered by the court at both stages of the forfeiture analysis. Suspicious circumstances, such as the possession of large amounts of currency, call for a “credible and reasonable answer”: Ontario (Attorney General) v. $10,000.000 in Canadian Currency (In Rem), 2014 ONSC 944, [2014] O.J. No. 653 at paras. 21 and 32.

Analysis

Step One – Proceeds or Instrument of Unlawful Activity

[36] Mr. Bourgeois submits that the $104,877 USD seized was his life savings. In support of this position, Mr. Bourgeois argues that no one else has come forward for the money, that the only evidence that he obtained the funds through unlawful means is circumstantial evidence, and that the accountants’ report shows Mr. Bourgeois could have accumulated such a sum lawfully.

[37] From 2002 to 2003, Mr. Bourgeois worked 40 hrs/week at Casino Rama, and between 2003 and 2004, at Seneca Niagara Casino for 40 hrs/week. Between 2004 and 2009, Bourgeois held positions as a cook at Seneca and other organizations in the area. Mr. Bourgeois has been receiving social assistance since 2010. Mr. Bourgeois submits that these revenue sources, in addition to a $25,000 settlement he received several years ago, are the source of the monies seized from him.

[38] Mr. Bourgeois also submits that the fact that his family doctor “suspected” he has a psychological disability can explain why he would have answered questions put to him by the police and under cross-examination in an inconsistent manner. Mr. Bourgeois also submits that his lack of criminal record supports his general position.

[39] The Attorney General, however, has provided a veritable laundry-list of evidence in support of its submission that the $104,877 USD seized from Mr. Bourgeois is, on a balance of probabilities, either the proceeds or an instrument of unlawful activity within the meanings of ss. 3(1) and 8(1).

[40] Although circumstantial, this evidence is compelling as a whole. As such, I find that on a balance of probabilities, Mr. Bourgeois was acting as a cash courier—either for drug trafficking or other profit-motivated unlawful activity.

[41] The following facts are particularly salient:

a. Mr. Bourgeois was travelling with a large about of undeclared currency concealed in tightly-wound and sophisticated bundles.

b. The amount, packaging, and concealment of currency is consistent with the delivery of money used for drug trafficking.

c. Although the backpack containing the money appeared new and unused, Mr. Bourgeois could not recall when it was purchased.

d. Mr. Bourgeois has offered inconsistent explanations for the monies, ranging from carrying the money for an unknown man to simply being in the habit of bundling his own money in “circles.”

e. Mr. Bourgeois could not recall the name of the person who picked him up and drove him to the airport.

f. Just over a month before, Mr. Bourgeois flew to Argentina for one day and then flew back Canada.

g. Mr. Bourgeois could not reconcile his otherwise very modest standard of living with the extremely large amount of currency in his backpack.

[42] I find that taken as a whole, the totality of the evidence supports the applicant’s submission. Moreover, Mr. Bourgeois has failed to present any evidence capable of dislodging the Attorney General’s case. Even on the most generous reading of Mr. Bourgeois’ evidence, the most that can be said is that Mr. Bourgeois might have been able to earn the $104,877 lawfully. The accountants retained by Mr. Bourgeois confirm this. Their confirmation, however, comes with a significant caveat: because Mr. Bourgeois was unable to provide any documentation to support the amount he earned in tips, the accountants estimated his income from tips based on the information he provided during cross-examination. As one of the accountants, Mr. Deacon, acknowledged on cross-examination, this tip income was the largest amount of money Mr. Bourgeois indicated he received during the period in question.

[43] Even without this limitation in the expert report, the fact that Mr. Bourgeois could have earned these monies is not a credible or reasonable answer to the suspicious circumstances in which Mr. Bourgeois was found in possession of the funds.

[44] Likewise, Mr. Bourgeois’ other submissions fail to explain why he had such a large amount of cash in the circumstances. Neither the fact that Mr. Bourgeois lacks a criminal record nor the fact that his family doctor “suspects” that he might have a psychological disability help explain why Mr. Bourgeois had so much currency on his person at the time of his arrest.

Step Two – Responsible or Legitimate Owner

[45] At this stage, the burden falls upon Mr. Bourgeois to demonstrate on a balance of probabilities that he is either a legitimate owner or a reasonable owner. Mr. Bourgeois points to the fact that no one else has come forward to claim the monies and argues that the Attorney General relies entirely on circumstantial evidence. Again, Mr. Bourgeois argues that it was possible, given his income from tips, to have earned this much money lawfully.

[46] As stated above, whether it was possible for Mr. Bourgeois to earn the money lawfully is not enough to dislodge the Attorney General’s case. Neither the Attorney General’s reliance on circumstantial evidence to make its case nor the absence of other people claiming ownership to the funds helps Mr. Bourgeois’ argument that he was a legitimate or responsible owner.

Interests of Justice Exception

[47] Would it clearly not be in the interests of justice to order the forfeiture?

[48] On this point, Mr. Bourgeois submits that “even if the Attorney General has proven that on a balance of probabilities that the monies seized were from unlawful activity that in no way means that they are in fact derived from an unlawful activity.”

[49] This tautology does little for Mr. Bourgeois’ case. The “interests of justice” exception is a narrow one, and is intended to remedy situations where the result would be draconian and unfair: Ontario v. McDougall, 2011 ONCA 363, [2011] O.J. No. 2122 at 84. Mr. Bourgeois has failed to show that the forfeiture order would be manifestly harsh and inequitable.

[50] In McDougall, Dougherty J.A. held that “A court asked to grant relief from forfeiture under s. 3 must consider all factors that are relevant to the ‘interests of justice’.” Justice Dougherty identified three non-exhaustive factors: the respondent’s conduct as it relates to the unlawful activity, the value of the respondent’s total interest in the property and the value acquired directly or indirectly through unlawful means, and the interplay between the purposes of the CRA and the exercise of the discretion to relieve from forfeiture.

[51] First, on the evidence, Mr. Bourgeois was a likely participant in unlawful activity. Second, the property is indistinguishable, its entirety appearing to be either the proceeds from or instrument of unlawful activity. Third, the need for crime prevention and deterrence must be weighed against the need to relieve innocent owners from forfeiture. On the evidence available, Mr. Bourgeois is not an innocent owner. Forfeiture in this case does not fall indiscriminately on the innocent.

Application Allowed

For the above reasons, I grant the Attorney General’s application for forfeiture and order that $89,145.45 USD – i.e. what remains of the funds – be forfeited to the Crown forthwith.

Costs

[52] The fixing of costs is a discretionary decision under s. 131 of the Courts of Justice Act, R.S.O. 1990, c C-43. That discretion is generally to be exercised in accordance with the factors listed in rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). The court must also consider the application of the principle of proportionality (1.04(1)).

[53] The Court is required to consider what is “fair and reasonable” with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v. Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, at paras 26, 37.

[54] The Attorney General has submitted a bill of costs claiming $12,854.65 on a partial indemnity scale and $15,367.15 on a part partial/part substantial indemnity scale, inclusive of HST. Mr. Bourgeois has submitted a bill of costs claiming $36,736.34 inclusive of HST.

[55] Given its success in the forfeiture application and its offer to settle made pursuant to rule 49 on June 27, 2013, the Attorney General is entitled to partial indemnity costs to the date of the offer and substantial indemnity costs thereafter. Under the circumstances and bearing in mind the principles of Boucher, it is my view that $15,367.15 is fair, reasonable, and within the reasonable expectations of the parties.

[56] With regard to the Mr. Bourgeois’ motion for increased legal costs in which he had some success, I assess those costs at $1,000 to be off set against the $15,367.15 payable to the Attorney General. Therefore, order to go that Mr. Bourgeois pay the all-inclusive sum of $14,367.15 to the Attorney General of Ontario.

CHAPNIK, J.

Released: September 30, 2014

CORRECTION NOTICE

Corrected decision: the neutral citation of the original judgment was corrected on October 10, 2014, and the description of the correction is appended:

The neutral citation year was missing - “2014” was added to first and back pages

COURT FILE NO: CV-12-456196

DATE: 20140930

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ATTORNEY GENERAL OF ONTARIO

Applicant

• and –

104,877 IN U.S. CURRENCY (IN REM)

Respondent

AMENDED REASONS FOR DECISION

CHAPNIK J.

RELEASED: September 30, 2014