SUPERIOR COURT OF JUSTICE - ONTARIO

CITATION: Ducharme v. Iftikhar, 2015 ONSC 1639

COURT FILE NO.: CV-14-21014

DATE: 2015/03/18

RE: Patrick Ducharme (Applicant)

- and -

Hina Iftikhar (Respondent)

BEFORE: Justice A. J. Goodman

COUNSEL: Rodney M. Godard, for the Applicant

Vito S. Scalisi, for the Respondent

HEARD: February 11, 2015

ENDORSEMENT

[1] This is an application brought by Patrick J. Ducharme (“Ducharme”), for a declaration that he has a legal right and a priority to a $35,000.00 cash deposit being held by the Superior Court of Justice in Kitchener (the “funds”), and an order compelling the Clerk of the Court to remit the funds to Ducharme pursuant to a purported assignment dated August 30, 2011.

[2] The respondent, Hina Iftikhar (“Hina”), opposes this application on the basis that she posted the funds to secure the release of her brother, Nabeel Ahmed (“Nabeel”); that she is the rightful owner of the funds and that Ducharme has no interest in the funds, and on June 4, 2013, Glithero J. ordered that the remainder of the funds be returned to her.

[3] The issues in this application are:

(i) Does this Court have jurisdiction to set aside the Order of Glithero J. made at the estreatment hearing with respect to the subject funds?

(ii) Under the Rules of Civil Procedure, does Ducharme have a security or other legal interest in the funds, and if so, does he have priority to them?

Background:

[4] Ducharme, a lawyer practicing criminal defence law represented Hina’s brother, Nabeel with respect to criminal charges against him relating to fraudulent activity in Chatham, Kitchener, and Toronto, Ontario. According to Ducharme, the retainer commenced on January 11, 2010 with respect to numerous charges in Chatham, followed by a January 8, 2011 retainer with regards to fraudulent activity in Toronto.

[5] On August 15, 2011 Nabeel was arrested and charged in Kitchener and Ducharme was retained to represent him on those charges. On August 16, 2011 Nabeel was released on a recognizance of bail with a cash deposit of $45,000.00. These funds were provided by Hina through her personal funds or by securing a line of credit from the bank.

[6] On August 26, 2011, Nabeel and Hina executed a document stating the following:

I, Nabeel Ahmed, born on the 2nd of August, 1982 hereby accept that my sister Hina Iftikhar, born on the 18th of October 1986 has paid a cash bail in the sum of $45,000.00 CAD on my behalf while I was in custody for charges outstanding in the Waterloo-Kitchener region relating to attempted fraud by the use of fabricated ID documents. I acknowledge that I have no legal ownership or authority over these funds deposited in my name for the purposes of bail, as Hina Iftikhar has acquired these funds from her banking institution through a personal Line of Credit, for which she will be paying interest until the finds are deposited back, and I hereby forfeit the right to transfer or assign the sum of these funds to a party other than Hina Iftikhar.

[7] According to Hina, this authorization or assignment document was deposited with the Clerk of the Ontario Court of Justice in Kitchener.

[8] On August 30, 2011, Nabeel executed another authorization or direction to the Clerk of the Court that the $45,000.00 cash deposited as bail be assigned or released to Ducharme. According to Ducharme, these funds were security for his fees to be incurred with respect to the criminal proceedings against Nabeel in Kitchener, Ontario.

[9] Ducharme notified the Clerk of the Ontario Court of Justice in Kitchener of the assignment and perfected his security interest by registering the assignment under the Personal Property Security Act, R.S.O. 1990, c.P.10, as amended (the “PPSA”), and provided the Clerk of the Court with a copy of the registration on January 31, 2012.

[10] On January 26, 2012, Mr. Brian Smart (“Smart”) was appointed as counsel for Nabeel and Ducharme was removed from the record. On February 1, 2012, Ducharme provided Smart with a copy of his assignment.

[11] On June 4, 2013, an estreat hearing was held without any notice to Ducharme. Smart did not advise the Court of the applicant’s assignment.

[12] At the June 4, 2013 estreatment hearing, at the request of Crown counsel, Glithero J. estreated the amount of $10,000.00 to the Crown and ordered that the balance of the $35,000.00 cash bail deposit be returned to Hina.

Positions of the Parties

[13] The Applicant seeks an order setting aside or amending the order of Glithero J. on the grounds that he did not have notice of the estreat court hearing. The applicant submits that had they notice of the estreat court application, he could have appeared before Glithero J. to establish his priority to the $35,000.00 cash bail deposit.

[14] In the alternative, the applicant seeks an Order pursuant to Rule 59.06 of the Rules of Civil Procedure based on fraud or facts discovered after Glithero J.’s order was made and had the court been aware of the applicant’s assignment of bail, Glithero J. would have ordered the release of the $35,000.00 cash bail deposit to the applicant.

[15] The applicant argues that the assignment of bail signed by Nabeel on August 30, 2011 created a security interest in favour of Ducharme in the $45,000.00 initially deposited with the Court. Any remaining funds left over after forfeiture in accordance with the provisions of the Criminal Code is a civil matter and the Rules of Civil Procedure apply. As the applicant was the first, and the only, creditor to register his security interest with the Ministry of Consumer & Business Services as required by the PPSA, his perfected security interest has priority over the Respondent’s purported unperfected assignment.

[16] The respondent says that this Court does not have the jurisdiction to determine the applicant’s rights to the non-forfeited balance of the cash bail under his assignment of bail dated August 30, 2011. It is submitted that the applicant cannot bring this application after the Court has exercised its discretion after hearing from the proper parties and making an Order pursuant to S. 771 of the Code.

[17] The respondent submits that the applicant has no right to the funds in any application of the civil procedure rules or by any other statutory regime.

Discussion

[18] In an application for estreatment, s. 770 of the Criminal Code sets out the procedure for issuance of a "Certificate of Default". Section 770(1) provides that a court, justice, or provincial court judge who is satisfied that a person bound by a recognizance fails to comply with the recognizance may issue a certificate in Form 33 setting out (a) the nature of the default, (b) the reason for the default, (c) whether "the ends of justice have been defeated or delayed by reason of the default", and (d) the names and addresses of the principals and sureties. Section 770(3) states that the certificate is "evidence of the default to which it relates". Section 770(4) provides that money deposited as security for a defaulted recognizance shall be sent to the clerk of the court to be dealt with in accordance with the law.

[19] Section 771 sets out the procedure for a forfeiture hearing in connection with a default of recognizance. A forfeiture hearing is an opportunity for the person who was bound by the recognizance and the sureties to be relieved from forfeiture. The onus is on these persons to show that they should be relieved from forfeiture. Trotter, The Law of Bail in Canada, 3rd edition, p. 13-15; R. v. Horvarth, 2009 ONCA 732, [2009] O.J. No. 4308 (C.A.) at para. 27.

[20] Section 771(1) provides that upon receipt of a certificate of default under s. 770, the clerk is required to schedule a forfeiture hearing on request of the parties.

[21] Section 771(2) sets out the statutory test to be applied by the presiding judge, namely that "the judge may, after giving the parties an opportunity to be heard, in his discretion grant or refuse the application and may make any order with respect to the forfeiture of the recognizance that he considers proper". Section 771(4) states that where a deposit has been made, the amount of the deposit shall be transferred "to the person who is by law entitled to receive it".

[22] Where the accused defaults on his or her recognizance, that accused and his or her sureties are afforded the opportunity to attend Court and make representations that bail monies not be forfeited. The accused and his or her sureties are entitled to notice of the estreatment hearing. An assignee of bail monies is not entitled to such notice.

[23] No appeal lies from the decision of the court pursuant to an estreatment hearing: R. v. Bal, [2014] MBQB No. 48.

[24] The applicant complains that as a result of Mr. Smart’s failure to inform Glithero J. of his assignment of bail monies, the learned judge would have ordered the release of the $35,000.00 cash bail deposit to the applicant in accordance with the parties’ respective priorities and assignments to the bail deposit. I do not necessarily agree.

[25] In Dodson, at para. 18, the majority of the Ontario Court of Appeal stated:

When there are competing claims, the criminal court is unlikely to have all of the potentially interested parties before it, nor is there a recognized mechanism for bringing those parties to that forum. The rules of practice and procedure in the criminal court are not designed to resolve disputes between competing claimants. There are no provisions for pleadings, discoveries, production of documents, etc. Moreover, criminal courts could become involved in time-consuming inquiries as to the true ownership of the funds used to post bail. Although the present case is said to be unusual because of the order originally sought by the Crown, if this court were to make the order now requested, it may be difficult for criminal courts to decline to consider such orders if requested.

[26] I adopt the principles as enunciated in R v. Webster, 1994 ABQB 9166, [1994] A.J. No. 898 (Q.B.) where the court reviewed an assignment of the accused's entitlement to bail monies. The court considered that by the terms of his recognizance of bail, the accused has agreed that he owed Her Majesty the Queen the cash bail deposit "if he fails in any of the conditions" of bail. The court opined that cash bail deposits amount to secured funds payable to the Crown on default cannot at the same time and by virtue of the discretion available to the Court under section 771(2), also amount to security for legal fees owed to defence counsel. However, the Court did not specifically address the portion of any funds not forfeited to the Crown.

[27] Much of the prevailing jurisprudence focusses on the treatment of orders for forfeiture of bail monies. There is limited discussion about the rights of the various parties including non-sureties and assignees who are granted standing, to the non-forfeited amounts. To this point, in Webster, Veit J. stated at para. 4:

Bail is intended by Parliament as a guarantee that the person who puts up the bail appear in court when required to do so and will not commit any offences between release and the trial of the charge on which the bail was required. When lawyers become assignees of bail, they are entitled to step into the shoes of the accused. They are not, however, entitled to a more favourable position than that of the accused; they are not entitled to the treatment of a surety.

[28] Indeed, s. 771(2) restricts the jurisdiction of the judge on an estreatment hearing to make any order with respect to the forfeiture of the recognizance. Generally, any remaining funds are returned to the accused or his surety, albeit there are exceptions for valid signed directions or assignments. Once Glithero J. made an order forfeiting $10,000.00 of the $45,000.00 recognizance, his criminal jurisdiction was spent.

[29] The applicant says that it is instructive to look at the recognizance of bail that sets out the obligations of the parties. In this case, the recognizance denotes the persons named came before the court and acknowledged themselves to owe the several amounts set opposite their respective names. Nabeel posted $45,000.00 cash. The respondent acknowledged a surety of $6,000.00 without deposit. It is submitted that the respondent was not a surety with respect to the $45,000.00 cash deposit by Nabeel.

[30] Based on Hina’s unchallenged affidavit evidence, I do not interpret the recognizance as limiting or specifically delineating the various amounts to specific individuals as described in the document. Section 515(2) of the Code should not be so narrowly interpreted.

[31] In this case, it would seem entirely appropriate to return the forfeited amounts to the accused or the named surety who deposited the funds as distinct from non-surety stakeholders who deposit cash: R. v. Olsen, [2014] O.J. No. 5845 (S.C.). Some of the factors considered by the court included whether the surety acted properly and in accordance with her obligation as well as the circumstances under which the surety entered into the recognizance and secured funds: Olsen at para. 46. While the case is instructive, in Olsen, Durno J. dealt with the rights of a non-surety claimant and can be distinguished on that basis. At the very least, in the case before me, I am satisfied on the evidence that the funds were deposited jointly by the accused and the surety. This circumstance distinguishes this case from R. v. Dodson, 2000 ONCA 5623, [2000] O.J. No. 35, (Ont. C.A.).

[32] I note that Flynn J.’s June 9, 2014 endorsement stipulated that he had no jurisdiction to hear the application. Similarly, I agree with the ruling. While framed in a civil context, in my view, this application is a collateral attack or an appeal with respect to an order of a court in a criminal proceeding.

[33] In any event, the authorities provide that Ducharme was not entitled to notice of the hearing as of right, and Glithero J. made no error in exercising his discretion based on what was presented to him during the course of the estreat hearing. Whether Ducharme has a valid grievance against Smart for non-disclosure of the purported assignment or direction of bail funds or other alleged misconduct is another matter for a different forum.

[34] This application must be dismissed as I have no jurisdiction pursuant to the provisions of the Criminal Code to review, vary or even re-consider this matter.

[35] Nonetheless, the applicant submits that this application is neither a review nor an appeal under the Criminal Code. Justice Glithero’s Order that the balance of $35,000.00 be returned to the respondent as “surety” was the exercise of a civil jurisdiction based on a purported consent of what the judge understood to be all interested parties with a claim to the bail funds. The applicant stresses that this court exercise its inherent civil jurisdiction with respect to the remaining funds being held.

[36] In argument the applicant attempts to differentiate between the forfeited amount of $10,000.00 as falling under the provisions of s. 771 of the Code, and the remainder of the funds left over as a result of the forfeiture order provided at the estreat hearing as having a unique or purposeful civil component to it; claiming that the provisions of s. 771 of the Code are silent in that regard.

[37] The nub of the applicant’s argument is that civil remedies lie with respect to the remainder of the non-forfeited cash bail finds. While this argument has some ingenuity and is novel, I do not find any authority from the jurisprudence supporting the applicant’s argument. In my view, Dodson does not stand for the proposition that Glithero J.’s order pertaining to the non-forfeited balance of $35,000.00 was the exercise of a civil jurisdiction, which should only have been done after there was a notice to creditors who claimed an interest in the funds. I am disinclined to characterize the non-forfeited funds at an estreatment hearing as being parcelled out from the entire amount deposited or from any amount forfeited, and thus subject to the civil regime. While forfeiture proceedings have some similarity to civil proceedings, these hearings are part of the criminal justice system: Horvath at para. 49. Despite the able submissions of counsel, I am not persuaded that this is the proper approach to be adopted.

[38] Indeed, even if I am in error on the jurisdictional question, in this case I am persuaded that the applicant also fails through any application of the Rules of Civil Procedure or the Personal Property Security Act, R.S.O. 1990, c. P.10, as amended (the “PPSA”).

[39] I do not agree that it is a denial of natural justice to creditors, which entitles them to relief under Rules 38.11 or 59.06. It is true that pursuant to Rule 38.11 of the Rules of Civil Procedure, a party or other person who is affected by an order on an application or who fails to appear at the hearing of an application through accident, mistake or insufficient notice may move before any other judge to set aside or vary the order forthwith after that order comes to the person’s attention. However, such does not create an independent right were one does not exist in law or where the nature or gist of the application is one of an appeal.

[40] Even if the Rules of Civil Procedure apply, the applicant submits that not only does he have a security interest in the non-forfeited bail, he has priority over any interest the respondent may have to that collateral by virtue of s. 20(1)(a) of the PPSA.

[41] In any event, three events are necessary for attachment to occur:

(i) the giving of value;

(ii) the acquisition of rights in the collateral by the debtor; and

(iii) the debtor signs security agreement containing a description of the collateral sufficient to identify it.

[42] Ducharme argues that this application is about a priority issue. With respect, I must disagree. At this juncture, the issue is simply whether or not there has been attachment pursuant to the PPSA.

[43] In order for Ducharme to have an interest in the funds, he must establish that he is a creditor of Nabeel and that at the requisite time, the funds belonged to Nabeel. There must be an acquisition of rights in the collateral. The debtor must have something more than mere possession or entitlement to possession, but less than full legal ownership, to satisfy the requirement of having rights in the collateral.

[44] Ducharme states that he gave value as he agreed to represent Nabeel on the strength of Nabeel’s assignment to Ducharme of his cash bail and complied with all of the requirements. I agree that in certain circumstances a valid assignment of bail monies is entirely appropriate and can be considered by an estreat court. Ducharme argues that Nabeel had the right to a return of any non-forfeited portion of that cash bail when he provided the assignment to the applicant. However, I note that Nabeel signed the direction to Ducharme that identified the collateral as “the cash deposited by me as bail on or about the 16th day of August in the amount of $45,000.00”. On August 30, 2011, Nabeel executed an authorization and direction to the Clerk that the cash deposited as bail be released to Ducharme. The document is entitled “Assignment of Bail Cash Bail (sic)”.

[45] In my view, the language of this document does not support that it is an assignment of funds. The document provides that at best, it is simply a direction.

[46] Aside from Ducharme’s affidavit, there is little confirmatory evidence about the retainer or agreement for services, and in fact, there appears to be some conflicting information. I query how a retainer commencing in 2010, was based on the strength of a purported direction and assignment only provided some 18 months later. The affidavit leaves me pondering about the scope of the retainer throughout the entire period of representation with the various charges laid in several jurisdictions throughout Ontario.

[47] The evidentiary record before me fully supports Hina’s position that the funds belong to her subject to the Crown’s right to forfeiture. In her unchallenged affidavit filed in the application, Hina deposed:

On August 16, 2011, I signed as a surety for my brother in the amount of $6,000.00 without deposit with respect to certain charges laid against my brother in Kitchener, Ontario…

I also posted a $45,000.00 cash deposit to secure my brother’s release…

The funds paid to the Minister of Finance came from my chequing account with the Royal Bank. My family did not have the means to pay the $45,000 bail required. As such, I obtained a line of credit with the Royal Bank to ensure I could come up with the requisite funds.

I had my brother execute an Assignment of Cash Bail (“Assignment”) to ensure that the bail would be returned to me so that I could pay off the monies borrowed from the credit line.

The originally executed Assignment was provided to my brother’s lawyer, Brennan Smart, who had the document deposited with the Clerk of the Ontario Court of Justice in Kitchener. At no time did my brother have any interest or title in those funds. It was at all material times my understanding that the funds could be forfeited to the Crown if my brother did not meet his obligations, otherwise the funds would be returned to me to pay me back and the line of credit.

[48] There is no evidence, other than Ducharme’s bald assertion in para. 18 of his Affidavit sworn July 9, 2014 that he has not been paid his fees and disbursements relating to the Toronto and Kitchener charges. In his affidavit, it is specifically suggested that the funds relate to the Kitchener charges. Ducharme has not produced a single account to substantiate his accounts. While not determinative of the issue, I have no information about the actual quantum of fees claimed or owing in support of the relief sought.

[49] When there are true competing claims to the non-forfeited bail money, the Court of Appeal for Ontario directs that the criminal court is not the appropriate forum for making orders directing to whom the bail money should be paid. Justice Glithero was advised that the surety had posted bail. The Court was also advised that Hina had taken out a loan to fund the deposit to the Court. Based on these facts, and the assignment of August 26, 2011, Nabeel had no further interest in the funds deposited for his bail. It is clear that Ducharme can have no better position than Nabeel. I am satisfied that the cash was secured and deposited on behalf of Nabeel by Hina.

[50] In the civil context, the applicant also submits that as a result of Smart’s failure to advise the court of the applicant’s assignment of bail, the judge did not determine the parties’ priority to the cash bail deposit based upon their respective assignments. It is alleged that Smart either intentionally or negligently failed to advise the Court of the applicant’s assignment of bail. While this may or may not be the case, again, in my view, the applicant may have to seek other potential remedies for this grievance.

[51] It is true that Ducharme was the first, and the only creditor to register his security interest under the PPSA. However, I am not convinced that fact is determinative of the issue. I accept that Hina filed her assignment of bail with the Ontario Court in a timely manner, and that is all that is required.

[52] In my view, Ducharme does not have a priority over Hina’s assignment as there was no attachment at the time Nabeel signed the document in favour of Ducharme. In other words, Nabeel could not assign or cause a direction to funds that he had no right, interest or control over at the time of the signing of that direction. He had relinquished all claims to the funds by his assignment to Hina days earlier. The common law principle of nemo dat quod non habet applies.

[53] As a policy matter, absent a clear, valid direction or assignment, funds secured and held on deposit for bail would lose their persuasive ability in inducing an accused to appear in court or comply with the terms of the conditions of the recognizance if these cash deposits were applied to the accused’s debts; which in certain circumstances could include legal fees. Leaving aside the provisions of the Criminal Code, in my view, Glithero J. did not mistakenly order that the balance of $35,000.00 cash bail deposit be returned to Hina based on an August 26, 2011 assignment of cash bail in her favour. In the circumstances of this case, even had the judge been advised about Nabeel’s August 30th direction to Ducharme, I am not persuaded that his decision would have been altered by any operation or application of the requisite Rules of Civil Procedure or the PPSA.

Conclusion

[54] I conclude that I do not have the jurisdiction to entertain this application. There is no review or appeal from Glithero J.’s Order of June 4, 2013.

[55] If I am found to be in error on the jurisdictional question, I am not persuaded that as a legal principle, the remaining non-forfeited funds after a s. 771 Criminal Code estreat hearing can be parcelled out and fall under the domain of the Rules of Civil Procedure. Even if I were inclined to consider this application under the Rules of Civil Procedure, the applicant has failed to satisfy his onus that he is entitled to the funds as the document provided to the applicant by Nabeel on August 30, 2011 was a direction to non-existent ownership or control of funds. As such, there was no attachment to the aforementioned funds and Ducharme has no security interest in funds that were not properly directed or assigned to him. I find that from a legal and equitable perspective, the impugned funds rightly belong to Hina.

[56] The application is, therefore, dismissed. The funds held by the Clerk of the Superior Court are to be immediately released to Hina in accordance with Glithero J.’s order of June 4, 2013.

[57] If the parties cannot agree on the issue of costs, I will consider brief written submissions. These cost memoranda shall not exceed three pages in length, (not including any bill of costs or offers to settle). The respondent shall file her costs submissions within 15 days of the date of this endorsement. The applicant may file his costs submissions within 15 days of the receipt of the respondent’s materials. The respondent may file a reply within five days thereafter.

“Justice A. J. Goodman”

A.J. Goodman J.

Released: March 18, 2015