HER MAJESTY THE QUEEN ET AL. v. MIRIAN, 2015 ONSC 2848
COURT FILE NO.: CR-12-4751
DATE: 20150430
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN and
KENNETH JAMES
Respondents
– and –
FARIBOURZ MIRIAN
Applicant
K. Wilson, for the Respondent, Public Prosecution Service of Canada
S. Bergman, for the Respondent, Kenneth James
J. Lockyer and L. Beechener, for the Applicant
HEARD: January 29, 2015
REASONS FOR DECISION
FUERST J.
[1] Kenneth James is a lawyer, who operated a private law practice in the Greater Toronto Area.
[2] Mr. James was arrested in 2012 and charged with a variety of offences, including money laundering and possession of property obtained by crime.
[3] The charges against Mr. James are outstanding in the Ontario Court of Justice.
[4] In the course of a lengthy and complex investigation into Mr. James’ alleged illegal activities, the police obtained orders restraining a number of bank and securities accounts held by or associated to him.
[5] Faribourz Mirian applies to this Court for the return of $1.3 million that he asserts he gave Mr. James in 2010 for investment purposes. Mr. James deposited the funds to one of the bank accounts that became subject to restraint.
Background
[6] On December 6, 2011, a Superior Court judge authorized a restraint order under s. 490.8(3) of the Criminal Code (“the Code”). It restrained five Toronto-Dominion Bank (“TD Bank”) accounts related to Mr. James. One of those accounts was TD Bank account 320 6241142.
[7] The basis for the order was that the accounts were offence-related property used as a means of committing the offences of possession of property obtained by crime and laundering the proceeds of crime, and used in connection with those offences and certain drug offences.
[8] On October 22, 2012, the same Superior Court judge authorized a restraint order under s. 462.33(3) of the Code. It restrained various HSBC Bank Canada accounts, and also TD Bank account 320 6241142, on the basis that there were reasonable grounds to believe that the accounts could be ordered forfeited as proceeds of crime.
[9] On a previous application, Mr. James sought to vary or vacate the two restraint orders that are the subject of this application by Mr. Mirian, as well as a third restraint order against other accounts.
[10] On that previous application, counsel for Mr. James conceded that there were reasonable grounds to believe that at the time the first restraint order was made, of the approximately $3.8 million in the TD Bank accounts, as much as $1.8 million had been obtained from Afshin Dastani. Mr. Dastani was involved in the illegal exportation of ephedrine. Mr. James sought the return of the balance in those accounts, of approximately $2 million.
[11] I dismissed Mr. James’ application.[^1] I ruled with respect to the first restraint order that for the purpose of Mr. James’ application, it was immaterial whether only some of the property in the accounts at the time the restraint order was made derived from illegal activity, and that the Crown was not required to demonstrate that all the property in the accounts when the restraint order issued could be traced to illegal activity. I also rejected the argument that the subsequent restraint orders should not have been granted.
The Applicant’s Claim
[12] Mr. Mirian provided evidence on this application, by affidavit and related material, of his financial dealings with Mr. James. That evidence stands uncontradicted by the Crown.
[13] The evidence is that Mr. Mirian knew Mr. James as a lawyer who had acted for him and his brother on a business transaction in the past. On October 12, 2010, Mr. Mirian provided Mr. James with a bank draft bearing that date, made payable to “Ken James in Trust”. The bank draft was in the amount of $1,345,500.
[14] Mr. Mirian intended to invest the money in a film to be made by Damian Lee, who is a film producer, writer and director. Mr. James was to hold the funds in a trust account, and disburse them to Mr. Lee’s company as and when instructed by Mr. Mirian.[^2]
[15] On October 14, 2010, Mr. James deposited the bank draft to TD Bank account 320-6241142. This was not a trust account of any kind.
[16] On December 3, 2010, Mr. Mirian authorized Mr. James to pay Mr. Lee $45,500 from the funds received in October.
[17] Subsequently, a disagreement developed between Mr. Mirian and Mr. Lee about the nature of Mr. Mirian’s investment. As a result, their investment agreement was nullified, and no further funds were to be paid to Mr. Lee.
[18] Mr. Mirian instructed Mr. James to continue to hold his remaining $1,300,000. Mr. Mirian intended to invest the money in the future.
[19] Unknown to Mr. Mirian, on December 6, 2011, TD Bank account 320 6241142 was ordered restrained pursuant to s. 490.8 of the Code as offence-related property.
[20] It was only after Mr. James’ arrest in June 2012, that Mr. Mirian learned the bank account into which the bank draft was deposited was restrained.
[21] Mr. Mirian retained a lawyer, but did not apply for the return of the money held by Mr. James. Mr. Mirian hoped that Mr. James’ application for return of some of the funds subject to restraint would succeed, or that the proceedings against Mr. James would resolve and his money would be returned to him.
[22] When that did not occur, Mr. Mirian brought this application.
The Account Transactions
[23] In an affidavit filed on behalf of the Crown, Constable Michael Robertson, a police officer who is involved in the investigation of Mr. James, provided information about the status of TD Bank account 320 6241142. That information was not challenged by Mr. Mirian.
[24] Constable Robertson asserts that minutes before Mr. Mirian’s bank draft was deposited, two bank drafts totalling over $3 million were purchased from the TD Bank account. At the end of the day on October 14, 2010, the account balance was just over $5,900,000. From that date to the date the first restraint order issued, 156 aggregated deposits from dozens of different sources totalling over $15,900,000 were made to the account. In the same time period, just over $21,600,000 was withdrawn, with almost $19,000,000 being moved to other accounts controlled by Mr. James, just over $2.5 million going to third parties, and the balance attributed to various fees.
[25] The evidence on this application does not indicate the account balance when the first restraint order issued in December 2011. Constable Robertson indicated that as of February 28, 2013, the balance was $2,046,404.67.
The Positions of the Parties
[26] On behalf of the applicant, Mr. Lockyer submits that neither the Crown nor Mr. James have challenged the legitimacy of Mr. Mirian’s claim to $1.3 million. Mr. Mirian clearly intended that his money be held in trust for him by Mr. James, regardless of the fact that it was comingled with other funds that went in and out of the account. The account balance was well in excess of $1.3 million when the account was restrained as offence-related property. Section 490, and in particular s. 490(11), permits Mr. Mirian to seek the return of that part of the funds in the restrained account, before any forfeiture hearing is held. No-one else has come forward to claim any part of the monies in the account. While the decision in R. v. Trac[^3] may prevent Mr. James from accessing the balance in the account, it does not bar an innocent third party with a lawful claim from doing so.
[27] Mr. Lockyer learned of the additional restraint order under s. 462.33(3) only in the course of argument of this application. He submits that the Code provisions give an innocent third party the right to advance a legitimate claim to release of funds restrained as proceeds of crime, prior to a forfeiture hearing.
[28] Mr. Lockyer argues that if there is concern about the existence of other lawful claimants, the Crown could be given a brief period of time to ascertain whether any such claimants exist.
[29] On behalf of the Crown, Mr. Wilson submits that the application is premature and in the wrong court. Given that millions of dollars flowed in and out of the account from dozens of different sources, there are other potential claimants who have not yet been identified and who have not received notice of this application. Mr. Mirian cannot prioritize his claim and exclude other potential claimants. His intention that the money he paid over be held in trust did not operate as a guarantee that the funds he provided stayed in the account. Mr. Wilson submits that the correct process for this application is under s. 19 of the Controlled Drugs and Substances Act (“CDSA”). It provides that where the Crown applies for forfeiture of offence-related property following a conviction for a designated substance offence, an innocent third party who is lawfully entitled to any of the property may assert a claim to it. Before the court grants a forfeiture application, it must require that notice be given to any person with a valid interest in the property.
[30] Mr. Wilson argues that a precondition to an application under s. 490(11) is that the property is not required in the proceedings. This precondition is not met where there is a potential forfeiture application.
[31] On behalf of Mr. James, Mr. Bergman takes no issue with the evidence presented on behalf of Mr. Mirian. He advises that Mr. James would like Mr. Mirian to get his money back.
Analysis
[32] Crown counsel relied on the decisions in R. v. Fercan Developments Inc., 2012 ONSC 2365 and R. v. FirstOntario Credit Union Ltd., 2012 ONSC 4808, which concerned a restraint order against land, made under the CDSA. Applications to vary the restraint order to permit the sale of the land and the pay-out of a mortgagee were dismissed. The applications failed because the Crown made out a prima facie case that the mortgagee was not an innocent third party.
[33] Those cases are distinct from this application. There is no issue that Mr. Mirian is an innocent third party. I also agree with Mr. Lockyer that the decision in Trac does not bar Mr. Mirian, as an innocent third party, from obtaining the release of money that is lawfully his.
[34] Further, whether or not the forfeiture provisions in the CDSA might be applicable in the event Mr. James is convicted of particular offences, the restraint orders in this case were not made under that statute. The statutory provisions that apply to Mr. Mirian, as an innocent third party seeking the return of restrained property before any conviction that could trigger a forfeiture application, are those in the Code.
[35] The initial restraint order was granted under s. 490.8(3) of the Code, which applies to property believed to be offence-related property. The basis for the order was that the bank accounts were offence-related property used as a means of committing the offences of possession of property obtained by crime and laundering the proceeds of crime, and used in connection with those offences and certain drug offences. The restraint order refers to the various bank accounts as “the property”.
[36] Section 490.9(1) makes applicable to a s. 490.8 order the provisions of s. 490, with necessary modifications. Section 490 deals with detention of things seized.
[37] By virtue of ss. 490(10) and (11) in particular, a lawful owner or person lawfully entitled to possession of anything seized may seek its return “at any time”, and may do so in the Superior Court of Justice if that is the court that ordered detention of the thing seized. The judge must be satisfied that the thing is not required “for the purposes of any investigation or a preliminary inquiry, trial or other proceeding”.
[38] I have not been referred to any jurisprudence that holds that the prospect that a forfeiture application will be made at the end of a trial means that restrained property is “required for the purposes…of…a trial or other proceeding”, and so cannot be earlier returned to an innocent third party who is the lawful owner of some or all of it. This would seem to make little sense, because it would mean that in any case where a restraint order is granted under s. 490.8, an innocent third party with a lawful interest in some of all of the restrained property would have no ability to seek its return before the conclusion of the trial against the person charged.
[39] The subsequent October 22, 2012, restraint order was granted on the basis that there were reasonable grounds to believe that the various bank accounts could be ordered forfeited as proceeds of crime. The restraint order refers to the various bank accounts as “the property”.
[40] Section 462.34(1) provides that any person who has an interest in property in respect of which a restraint order was made under s. 462.33(3) may apply, “at any time”, to have the order revoked or varied to exclude the property or any interest in the property or part thereof from the application of the order. In Ontario, just as the application for a restraint order is heard by a judge of the Superior Court of Justice, so too is the application to revoke or vary it. The judge must be satisfied under subsection (6) that the applicant is lawfully entitled to possession of the property and appears innocent of any complicity in the designated offence or collusion in relation to it, that no other person appears to be the lawful owner of or lawfully entitled to possession of the property, and that the property is no longer required for investigative or evidentiary purposes. Under subsection (2), the judge may require that notice of the application be given to any person who appears to have a valid interest in the property.
[41] The fact that s. 462.41 permits an innocent third party who has an interest in property that is the subject of a forfeiture application to seek the return of the property or part thereof at that stage of the proceedings against another person, does not mean that an earlier application under s. 462.34(1) cannot be brought. To the contrary, the clear wording of s. 462.34(1) permits the application to be brought “at any time”.
[42] I am satisfied that the Criminal Code permits this application to be brought by Mr. Mirian as an innocent third party asserting lawful ownership, in this Court and at this stage of the proceedings against Mr. James, in respect of both restraint orders.
[43] I am satisfied that the funds sought by Mr. Mirian are not required for any investigative or evidentiary purposes, including Mr. James’ trial.
[44] I next consider whether I am satisfied that no person other than Mr. Mirian appears to be lawfully entitled to possession of the money he seeks.
[45] I accept that Mr. Mirian intended that the funds he provided would be held in trust. However, on the undisputed evidence of Constable Robertson, the funds provided by Mr. Mirian were comingled with monies from other sources in an account through which a great deal of money flowed. The uncontradicted evidence of Constable Robertson was that many deposits and withdrawals were made to and from the account in the months that followed the deposit of Mr. Mirian’s bank draft. The officer described those transactions in his affidavit, in summary fashion only.
[46] In these circumstances, I cannot be satisfied, simply from the passage of time since Mr. James’ arrest, that no other person appears to be lawfully entitled to the funds currently frozen in the account. No notice of Mr. Mirian’s application has been given to any person other than Mr. James.
[47] I appreciate that Mr. Mirian is a third party to the proceedings against Mr. James, and likely is not in possession of information about the particulars of the account transactions or the identity of other potential claimants. But this is his application. It is his onus to satisfy me that no other person appears to have an entitlement. The evidence that might do so is not beyond his reach.
[48] I have concluded that fairness requires that this application be adjourned sine die, so that Mr. Mirian will have an opportunity to give notice of it to others who may have a valid interest in the funds, and to take steps to present more particularized evidence about the account transactions in the period after deposit of his bank draft, until the first restraint order was made.
[49] Notice to others who may have a valid interest in the funds is to be given by Mr. Mirian by way of advertisement placed once in a newspaper having a national circulation, and once in the Ontario Reports. The cost of the advertisements shall be borne by Mr. Mirian. The advertisements shall be published a minimum of 60 days before any return date of the application.
Conclusion
[50] I order the application adjourned sine die, to be brought back before me on a date agreed upon by counsel for Mr. Mirian and counsel for the Crown, and arranged with the trial coordinator in Newmarket.
[51] In the event that counsel need to seek further direction from me, they may arrange to appear before me by contacting the trial coordinator in Newmarket.
Fuerst J.
Released: April 30, 2015
COURT FILE NO.: CR-12-4751
DATE: 20150430
ONTARIO
SUPERIOR COURT OF JUSTICE
HER MAJESTY THE QUEEN and
KENNETH JAMES
– and –
FARIBOURZ MIRIAN
REASONS FOR JUDGMENT
Fuerst J.
Released: April 30, 2015
[^1]: R .v. James, 2013 ONSC 5085
[^2]: Mr. Lockyer clarified in oral argument that Mr. Mirian did not intend the funds to be held in a lawyer’s trust account, because the transaction did not involve a solicitor-client relationship.
[^3]: 2013 ONCA 246