COURT FILE NO.: 842/15
DATE: 20150710
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HER MAJESTY THE QUEEN
LISA MATHEWS, RUTH McGUIRL and AMBER PASHUK, for the Respondent/Crown
Respondent
- and -
TO-BARGAINS INC.
LUISA RITACCA and CAROLO Di CARLO, for the Applicant
Appellant
HEARD: May 22 and June 20, 2015
REASONS FOR JUDGMENT
DURNO, J.
[1] On September 19, 2014, after a lengthy police investigation, Royal Canadian Mounted Police (RCMP) officers obtained a General Warrant and Assistance Order in relation to an investigation of 13 individuals, including Vito Buffone, the founder and as of that date, the sole director of TO-Bargains Inc. (TO-Bargains). The warrant authorized the search of SLM Logistics Corporation (SLM), operating at a Bramalea warehouse, another company owned and operated by Vito Buffone.
[2] On September 22, 2014, Mr. Buffone and others were arrested on drug offences including importing cocaine, conspiracy to import cocaine, possession of cocaine for the purpose of trafficking, trafficking in cocaine, possession of Canadian currency obtained by crime, and money laundering.
[3] On the same date, the warrant was executed at SLM and officers searched the premises including Mr. Buffone’s office. At roughly 4:00 p.m. the police returned the premises to SLM. When SLM management went to the offices to determine whether they could open for business the next day, a former director went into Mr. Buffone’s office and on a high shelf in a closet located a plastic container that held $144,050 in cash. The money was taken and retained by SLM’s corporate counsel at his law firm.
[4] Roughly seven weeks later, the law firm advised SLM that they no longer wished to retain the funds and SLM filed an application seeking an interpleader order with respect to the funds. The Application Record was served on TO-Bargains and the Public Prosecution Service of Canada (PPSC) with a November 18, 2014 return date.
[5] On November 17, 2014, the RCMP obtained a search warrant, executed it at the law firm and seized the funds. On December 4, 2014, a Report to a Justice was filed indicating the RCMP had seized and would be detaining the funds.
[6] TO-Bargains applies for the return of the funds contending the company is the lawful owner of the money and that the funds will not be required for Mr Buffone’s preliminary inquiry, trial or any other proceeding because the funds are solely related to their business and have nothing to do with drug dealing. In support of their application they rely on the affidavit and testimony of Joe Fiorillo, currently the sole officer and director of TO-Bargains, the documentary evidence on the application as well as the testimony of the investigating officer, Corporal Colleen Piers.
[7] The PPSC opposes the order contending the applicant has no recourse to s. 490 because proceedings have commenced and, in the alternative, that TO-Bargains is not the lawful owner of the money, that the funds are proceeds of crime, will be required for the Buffone’s trial and that the Mr. Fiorillo is a “straw man” simply taking Buffone’s place as head of TO-Bargains.
[8] For the following reasons, the application is dismissed.
The Application
[9] TO-Bargains seeks:
i. a declaration that the $144,050 seized pursuant to the search warrant will not be required for the purposes mentioned in ss. 490(1) to (4) of the Criminal Code,
ii. an order under s. 490(11) of the Criminal Code, returning the seized funds to their lawful owner, TO-Bargains, or
iii. in the alternative, an order under s. 490(9)(c) of the Criminal Code, returning the seized funds to their lawful owner, TO-Bargains
The Legislation
[10] The relevant sections of s. 490 of the Criminal Code provide;
Detention of things seized
- (1) Subject to this or any other Act of Parliament, where, pursuant to paragraph 489.1(1)(b) or subsection 489.1(2), anything that has been seized is brought before a justice or a report in respect of anything seized is made to a justice, the justice shall,
(a) where the lawful owner or person who is lawfully entitled to possession of the thing seized is known, order it to be returned to that owner or person, unless the prosecutor, or the peace officer or other person having custody of the thing seized, satisfies the justice that the detention of the thing seized is required for the purposes of any investigation or a preliminary inquiry, trial or other proceeding; or
(b) where the prosecutor, or the peace officer or other person having custody of the thing seized, satisfies the justice that the thing seized should be detained for a reason set out in paragraph (a), detain the thing seized or order that it be detained, taking reasonable care to ensure that it is preserved until the conclusion of any investigation or until it is required to be produced for the purposes of a preliminary inquiry, trial or other proceeding.
Further detention
(2) Nothing shall be detained under the authority of paragraph (1)(b) for a period of more than three months after the day of the seizure, or any longer period that ends when an application made under paragraph (a) is decided, unless
(a) a justice, on the making of a summary application to him after three clear days’ notice thereof to the person from whom the thing detained was seized, is satisfied that, having regard to the nature of the investigation, its further detention for a specified period is warranted and the justice so orders; or
(b) proceedings are instituted in which the thing detained may be required.
Application for order of return
(7) A person from whom anything has been seized may, after the expiration of the periods of detention provided for or ordered under subsections (1) to (3) and on three clear days’ notice to the Attorney General, apply summarily to
(a) a judge of a superior court of criminal jurisdiction or a judge as defined in section 552, where a judge ordered the detention of the thing seized under subsection (3), or
(b) a justice, in any other case,
for an order under paragraph (9) (c) that the thing seized be returned to the applicant.
(8) A judge of a superior court of criminal jurisdiction or a judge as defined in s. 552, where a judge ordered the detention of the thing seized under subsection (3), or a justice, in any other case, may allow an application to be made under subsection (7) prior to the expiration of the periods referred to therein where he is satisfied that hardship will result unless such application is so allowed.
Disposal of things seized
(9) Subject to this or any other Act of Parliament, if
(a) a judge referred to in subsection (7), where a judge ordered the detention of anything seized under subsection (3), or
(b) a justice, in any other case, is satisfied that the periods of detention provided for or ordered under subsections (1) to (3) in respect of anything seized have expired and proceedings have not been instituted in which the thing detained may be required or, where those periods have not expired, that the continued detention of the thing seized will not be required for any purpose mentioned in subsection (1) or (4), he shall
(c) if possession of it by the person from whom it was seized is lawful, order it to be returned to that person, or
(d) if possession of it by the person from whom it was seized is unlawful and the lawful owner or person who is lawfully entitled to its possession is known, order it to be returned to the lawful owner or to the person who is lawfully entitled to its possession, and may, if possession of it by the person from whom it was seized is unlawful, or if it was seized when it was not in the possession of any person, and the lawful owner or person who is lawfully entitled to its possession is not known, order it to be forfeited to Her Majesty, to be disposed of as the Attorney General directs, or otherwise dealt with in accordance with the law.
Application by lawful owner
(10) Subject to this or any other Act of Parliament, a person, other than a person who may make an application under subsection (7), who claims to be the lawful owner or person lawfully entitled to possession of anything seized and brought before or reported to a justice under section 489.1 may, at any time, on three clear days’ notice to the Attorney General and the person from whom the thing was seized, apply summarily to
(a) a judge referred to in subsection (7), where a judge ordered the detention of the thing seized under subsection (3), or
(b) a justice, in any other case,
for an order that the thing detained be returned to the applicant.
Order
(11) Subject to this or any other Act of Parliament, on an application under subsection (10), where a judge or justice is satisfied that
(a) the applicant is the lawful owner or lawfully entitled to possession of the thing seized, and
(b) the periods of detention provided for or ordered under subsections (1) to (3) in respect of the thing seized have expired and proceedings have not been instituted in which the thing detained may be required or, where such periods have not expired, that the continued detention of the thing seized will not be required for any purpose mentioned in subsection (1) or (4),
the judge or justice shall order that
(c) the thing seized be returned to the applicant, or
Copies of documents returned
(13) The Attorney General, the prosecutor or the peace officer or other person having custody of a document seized may, before bringing it before a justice or complying with an order that the document be returned, forfeited or otherwise dealt with under subsection (1), (9) or (11), make or cause to be made, and may retain, a copy of the document.
Probative force
(14) Every copy made under subsection (13) that is certified as a true copy by the Attorney General, the person who made the copy or the person in whose presence the copy was made is admissible in evidence and, in the absence of evidence to the contrary, has the same probative force as the original document would have if it had been proved in the ordinary way.
The Evidence
[11] Vito Buffone was the founder of TO-Bargains. The company started with roughly a $250,000 loan from Trading Post, another of Vito Buffone’s companies. The loan remains outstanding. However, Joe Fiorillo testified that it was not totally a money loan as there was a lot of merchandise that was in the warehouse. Opening the retail end was his idea and they had a lot of “dead inventory” that had been sitting around the warehouse for years and went to TO-Bargains.
[12] Mr. Fiorillo said that there was no loan in the sense of money but also said Mr. Buffone used some of the money to renovate the store, put flooring, move some walls, but it was “never any kind of money to give to TO-Bargains.” It was not that kind of loan that would attract interest. If it was a loan for $257,105.00 it may have been for product.
[13] Mr. Fiorillo was shown the TO-Bargains’ financial statement for the year ending September 30, 2014 that listed under current inter-company liabilities, $257,105 owing to Trading Post. He said it was not a loan, maybe it had to do with product. When shown that the financial statement also showed interest paid on the inter-company loan, Mr. Fiorillo said Mr. Buffone took some interest for the whole year for the goods that were given because he never got paid any money towards them. The entire debt was still owing and interest was being paid on it.
[14] When asked if Vito Buffone owned a controlling share of TO-Bargains Joe Fiorillo said Buffone was just another person Fiorillo owed money to but at that time he was not demanding repayment. He agreed that TO-Bargains was in debt to Mr. Buffone for one quarter of a million dollars.
[15] After Buffone was released from custody on bail on October 29, 2014, Joe Fiorillo became the sole owner, officer and director of TO-Bargains. He continued to have a relationship with Mr. Buffone, including being a surety on his judicial interim release order on the drug and proceeds charges.
[16] From November of 2013 he and Mr. Buffone had been fifty-fifty owners of TO-Bargains. At that time they decided to change the nature of TO-Bargains from wholesaling on a much smaller scale than today to the retail operation at 15 Bramalea Rd. From that time Fiorillo was responsible for the management and organization of the revised TO-Bargains in exchange for 50 per cent ownership interest. At the time the search warrant was issued, Mr. Fiorillo described himself as a “warehouse manager” for SLM.
[17] TO-Bargains has two business locations, 15 Bramalea Rd., Brampton, and 5150 Dixie Rd., in the Dixie Flea Market. The Dixie Rd. locations opened in October, 2014, after TO-Bargains renovated the location and built up their inventory. TO-Bargains shares the Bramalea Rd. address with two other corporations, SLM and SEL, both of which Mr. Buffone was formerly the principal. He had one office from which he conducted the business of the three corporations. It was in the closet of that office that the cash was located after the search. The September warrant authorized a search of the business place of SLM, referred to as “the business of Vito Buffone.” TO-Bargains was not mentioned in that warrant.
[18] SLM is a wholesaler selling products to other businesses, including TO-Bargains. SLM bought electronic goods directly from manufactures and had no need for a cash float. Vito Buffone was the sole director and officer of SLM until September, 2014. Now, Joe Fiorillo is the sole officer and director of SLM.
[19] While Vito Buffone is no longer a director, officer or employee of either TO-Bargains or SLM “[o]ccasionally both companies retain him as a consultant” for which he is paid for his services. However, Mr. Fiorillo testified that he had been unable to pay Mr. Buffone for the consulting he had done.
The Float
[20] TO-Bargains is an Ontario corporation engaged in the business of selling refurbished goods. They purchase products on bulk from a variety of sources, including wholesalers and flea markets. The goods are refurbished and sold to the public at a markup. The nature of their business requires a large sum of cash (a float) be readily available as the purchase of goods to be refurbished or on bulk often involved discounts for cash transactions. Having readily available cash facilitates completing or placing a cash down payment for purchases with sellers. In addition, because of the renovations at the Dixie Flea Market location, the float was larger than it would have normally have been according to Mr. Fiorillo’s evidence on this application.
[21] Mr. Fiorillo said that TO-Bargains regularly completed transactions in which vendors offered to sell TO-Bargains thousands of products for a low price, in cash. The amounts would be $15,000 to $25,000. Without the float, TO-Bargains had to change the scale of its operations.
[22] The float came exclusively from their retail sales. It started in November, 2013 when TO-Bargains began to sell retail and slowly built it up through sales. At the end of “every business day or two”, Mr. Fiorillo would take any larger bills (i.e., over $50 and $100 bills) received from significant sales and put them in the float box. As the float grew it enabled TO-Bargains to participate in larger, more profitable purchases from sellers.
[23] Mr. Fiorillo was “generally aware” of the amount in the float that in cross-examination he said was kept in a cardboard box. In his March 9, 2015 affidavit he described the box as plastic. He counted it approximately every two weeks but also kept a running tally of the amount in his head because either he or Mr. Buffone “completed all of the significant sales for TO-Bargains.” He later said that on occasion he would make a note on a piece of paper he had. In cross-examination he was asked whether he wrote down the total in the float and said, “Not, not to keep records of it, no.” He did not include the amount or denominations in his March, 2015 affidavit. They were in his May 7, 2015 affidavit that was produced after the respondent filed an affidavit with a photograph of the plastic container showing some of the denominations. Mr. Fiorillo said he had not seen the photograph until after he swore his second affidavit.
[24] No notes of the amounts in the float were presented in evidence. The cash was kept in Mr. Buffone’s office as Mr. Fiorillo’s office was less secure. Mr. Fiorillo’s was effectively a dispatch office with several individuals coming and going. Mr. Buffone did not share his office. It was locked when he was not in the office. To the best of Mr. Fiorillo’s recollection he never went to Buffone’s office to deposit money that the float was either not there or contained significantly less money than what he would have expected. They were the only individuals who would put money into the float and would advise each other whenever that occurred.
[25] Mr. Fiorillo said that when he learned that the box had been located after the search he immediately said that it was TO-Bargains’ float. When he inquired whether he could get it, he was told by SLM’s counsel, Jay Viera, “You can have it back if you sign for these papers to release it, but you have to be a director of TO-Bargains to get the money back.” At the time the money was seized, Mr. Fiorillo owned 50 per cent of TO-Bargains but was not a director. He became a director of TO-Bargains after Mr. Buffone’s release on October 29, 2014 but never obtained the funds back as Mr. Viera said he could.
[26] Mr. Fiorillo referred to examples of lost sales opportunities as a result of the seizure of the float including when Party City offered to sell $175,000 worth of their last year’s inventory for $45,000 cash and opportunities to buy products that were formerly Target’s. In the result, TO-Bargains has been forced to operate on a lower scale than it previously had. Because of lower profits and increased capital costs associated with operating two locations, TO-Bargains has been unable to restore its float. Revenues between December, 2014 and the end of April, 2015 are almost one half of that for the same period one year earlier.
[27] The investigating officer, Corporal Piers, testified that the investigation was ongoing since 2011. During that time TO-Bargains had never been a subject of the investigation and currently was not the subject of an investigation. The Crown had never alleged that TO-Bargains was used by Buffone to import or sell drugs or that any drugs were ever delivered to TO-Bargains’ place of business. While knowing of Buffone’s position with TO-Bargains, the company was not mentioned in the application for the September warrant. There was no evidence TO-Bargains received any funds from Buffone that were related to drug trafficking and no evidence TO-Bargains or Mr. Fiorillo were used as nominees to assist Buffone in laundering money. There was no evidence the seized funds were proceeds of crime, offence related property or part of any money laundering scheme although the officer believes the funds were proceeds of crime.
[28] The Interpleader application filed on behalf of SLM Logistics contained the following under the Grounds for the Application:
On November 6, 2014, Pat Westfall[^1] spoke with Mr. Buffone as well as another representative, one Joe Fiorillo, who are both directing minds and owners of the Respondent, TO-Bargains Inc. Both advised Mr. Westfall that they were aware of the cash in the box in Mr. Buffone’s office and that the money was put away to fund the opening of a second TO-Bargains store, aside from the premises located at 15 Bramalea Road in Brampton. This retail store has now been opened and both Mr. Fiorillo and Mr. Buffone have advised that they require the funds to pay for the construction improvements, inventory and startup costs of the store.
[29] Mr. Westfall’s affidavit states at para. 14:
Both (Vito Buffone and Joe Fiorillo) advised me yesterday that these funds belong to TO-Bargains, that it was cash that was collected from its retail operations over a period of time. Vito Buffone advised me and I do verily believe from what he told me, although I cannot certify same as to the accuracy thereof, that these funds were the property of TO-Bargains and must be used to pay various trades and inventory suppliers for the opening of a second TO-Bargains retail outlet which has opened and both have requested the funds from me.
The Issues
[30] The following issues are raised by this application:
i. can the applicant apply under s. 490 when proceedings have been instituted?
ii. is TO-Bargains the lawful owner of the cash?
iii. are the funds “required for the purposes of any continuing investigation or a preliminary inquiry or trial, or other proceeding?
iv. assuming Mr. Buffone would consent to an admission of fact that the funds were located in his office; does that preclude the PPSC from keeping the funds?
v. has the applicant established hardship if the property is not returned at this time?
The Positions of the Parties
The Applicant’s Position
[31] As regards jurisdiction, the applicant argues the PPSC misapprehends the scope of s. 490 in arguing there is no jurisdiction to apply under that section once proceedings have been instituted.
[32] If the application is under ss. 490 (10) TO-Bargains has to establish it is probably the lawful owner and if under s. 490 (7) and (8) lawful ownership and hardship.
[33] TO-Bargains submits it is a third party to the search and seizure, therefore being entitled to bring the application under s. 490(10) and no prerequisite need be satisfied before the application proceeds. The corporation submits this is the primary basis for the application. In the alternative, if it were determined that the funds were seized from TO-Bargains, the application is based on s. 490(7).
[34] As regards whether TO-Bargains has to wait until the end of Mr. Buffone’s trial and a Crown forfeiture application is heard, s. 490 (10) provides that a third party can apply “at any time.” First, there is no evidence upon which the PPSC could possibly succeed on a forfeiture application. Second, none of the authorities relied upon by the PPSC support their interpretation that no application for the return of the funds can be brought at this time. Indeed one, R. v. Barthorpe [2012] O.J. No. 6094 (S.C.J.) was an application by the assignee of a sales contract for the return of a truck, after the proceeding commenced but before they were completed. R. v. Buller, [2009] O.J. No. 6403 (S.C.J.) also supports the applicant that there is jurisdiction to consider an application under s. 490(7) after the proceedings have commenced.
[35] TO-Bargains is not challenging the issuance of the search warrant. The challenge is not to the basis of the search. Rather, it is to the basis for the continued detention.
[36] The applicant summarizes the issues as follows:
Are the funds that were seized from TO-Bargains on November, 17, 2014, required for either the trial of Vito Buffone or any forfeiture hearing that may result from the possible conviction of Mr. Buffone? If the answer is ‘yes,’ the funds should continue to be detained. If, however, TO-Bargains can convince this court that the answer is ‘no,’ and that it is the lawful owner of the seized funds, then these funds should be returned to it.
[37] With respect to TO-Bargains being the lawful owner of the money, the applicant submits the funds are unrelated to Buffone’s pending trial, to his alleged criminal conduct, and to SLM, the only corporation named in the September warrant. TO-Bargains submits, “Mr. Buffone, as a former principal of the TO-Bargains, kept that money in his office but the money is unconnected to him personally.” The funds are solely related to TO-Bargains and represent the money received by TO-Bargains for the products it sold. There is no reason why the Crown needs to money.
[38] TO-Bargains has provided financial documents to support its position that the funds are those of TO-Bargains and TO-Bargains alone, including a financial statement that its assets include $163,910 in cash, “a number substantially similar to the amount that was taken from Mr. Buffone’s office.” TO-Bargains submits that numerous invoices produced support their contention that all the funds belong to TO-Bargains alone. The hand-written receipts, from which the float funds originated, are in an amount “similar” to the seized funds.
[39] In contrast to the investigating officer’s testimony that there is no direct link between Buffone’s criminal conduct and TO-Bargains, the applicant submits that the prosecution has evidence of cheques from SLM to Mr. Buffone’s co-conspirators, intercepted communications and surveillance to demonstrate Mr. Buffone used SLM for money laundering and to import drugs.
[40] The applicant contends the funds are not required for Mr. Buffone’s preliminary inquiry or trial or any other proceeding. In the alternative, if it is, Mr. Buffone will agree as a fact that the funds were found in his SLM office.
[41] As regards hardship, the applicant submits that if the funds are not returned, TO-Bargains will suffer negative financial repercussions as it will be unable to take advantage of discounted prices for merchandise and lack the flexibility it requires to succeed in its business. TO-Bargains has suffered hardship and will continue to do so if the funds are not returned.
The PPSC’s Position
[42] The PPSC submits that once charges are laid, s. 490 has no application and TO-Bargains cannot seek the return of the funds at this time. In addition, the application amounts to a collateral attack on the search warrant.
[43] Ms. Matthews submits that Mr. Fiorillo is a straw man for Mr. Buffone, that what the applicant is engaged in is a shell game. TO-Bargains is not the lawful owner of the funds.
[44] The PPSC submits that the funds are required for Mr. Buffone’s trial as circumstantial evidence he was engaged in importing cocaine and trafficking in it once in Canada. It is for the prosecution to determine the facts upon which admissions are sought, not the accused person.
[45] While not strenuously submitting the applicant has failed to establish hardship, the PPSC attacks Mr. Fiorillo’s credibility and reliability as a witness.
[46] The PPSC contends Corporal Pier’s evidence is a red herring and a distraction. That there is no direct evidence the funds are offence related property or proceeds of crime does not end the inquiry. Rather, the money is circumstantial evidence of Buffone’s criminal conduct.
Analysis
Is the applicant precluded from applying under s. 490 because proceedings have been instituted?
[47] While the PPSC argued that the applicant had no access to s. 490 because proceedings had been instituted, I am not persuaded the swearing of an information precludes an applicant from seeking the return of property. Were it as the PPSC contends, if a search warrant were executed at a car dealership, all cars were seized, and charges laid contending all of the cars were stolen, a customer who bought her car elsewhere and had it at the dealership for service would have to wait until the end of the trial to attempt to get her car returned. The scope of s. 490 as contended by the PPSC cannot be correct.
[48] The authorities cited in support of the PPSC’s position do not advance the argument that the applicant is without recourse to attempt to have its property returned until the trial and any forfeiture application is heard. First, in R. v. Tennina (2007), 2007 CanLII 51706 (ON SCDC), 88 O.R. (3d) 27 (S.C.J.) at para. 10 Corbett J. referred to seized property becoming evidence in a prosecution and the trial court having jurisdiction over the disposition of the property. His Honour was not referring to seized property before it became evidence in a trial. The reference to trial court restricts the comment to trial evidence.
[49] Second, in R. v. Raponi 2004 SCC 50, [2004] 3 S.C.R. 35 the Court held that the scope of the powers of a provincial court under s. 490(9) were best left for another day. Accordingly, the comments in para. 30 do not assist the PPSC.
[50] Third, R. v. Barthorpe [2012] O.J. No. 6094 (S.C.J.) was an appeal by the accused person from an order of an Ontario Court Judge on a successful application by the assignee of a sales contract for the return of its truck. The appeal was brought by the person from whom the truck was seized after he was arrested for drug offences, after charges were laid and before the trial was completed. Three members of the PPSC appeared on the application and no one raised the jurisdictional issue now advanced.
[51] Fourth, I agree with the comments in R. v. Dawson, (2013), 2013 ONSC 4706, 48 M.V.R. (6th) 106 (S.C.J.) at para. 6 and R. v. Buller [2009] O.J. No. 6403 (C.J.) at para. 8 that recourse to s. 490 is not precluded by charges being laid.
[52] In summary, I agree with the applicant that s. 490 (7) permits a person from whom anything has been seized to apply for an order that the thing be returned where the period of detention provided for or ordered under s. 490 (1-3) has expired as it has here as the proceedings have been instituted and there is no limit on the time the item may be detained. Where proceedings have been instituted, s. 490(8) provides a mechanism whereby leave to bring an application under s. 490 (7) can be brought. Where an application is brought pursuant to s. 490(7) the applicant must show that hardship will result unless the application is allowed. This low threshold involves some evidence of negative financial repercussions. R. v. Niktscuk 2009 CanLII 29911 (ON SC), [2009] O.J. No. 2438 (S.C.J.)
[53] Under s. 490 (10) a separate procedure exists whereby a person, other than a person who may apply under s. 490 (7), can apply “at any time” for the return of seized property that lawfully belongs to them. As the applicant submits, this procedure is available to third parties to the search which resulted in the seizure.
[54] The onus is on the applicant to establish its lawful possession of the cash and that the funds will not be required for the preliminary inquiry, trial or other proceedings. R. v. Dawson, [2013] O.J. No. 3354 (S.C.J.); R. v. Alchin, [2007] O.J. No. 4930 (C.J.)
[55] I am persuaded the onus is on a balance of probabilities. While the PPSC suggested that R. v. West (2005), 2005 CanLII 30052 (ON CA), 77 O.R. (3d) 185 where the Court of Appeal held that the onus was on the Crown to establish the forfeiture should be ordered beyond a reasonable doubt on a s. 490 (9) application as it was a final order, I am not persuaded that judgments supports the PPSC position. Weiler J.A. found that because it was a forfeiture application only, and not one involving a cross-application by the party from whom the funds were seized, that the onus was on the Crown beyond a reasonable doubt. I do not read West as holding that every application in relation to seized property involves an onus on the applicant beyond a reasonable doubt.
Has the applicant established that TO-Bargains is probably the lawful owner of the funds?
[56] While TO-Bargains might be the lawful owner of the cash seized from the law office, I am not persuaded the applicant is probably the lawful owner for the following reasons:
[57] First, there is no direct evidence from Vito Buffone. Given that he is facing serious charges, that is not surprising. However, taking the applicant’s evidence at its highest, he is one of two people who had access to the plastic container of money. It was kept in his office closet. There are reasonable and probable grounds to believe that he was a major participant in the importation of large amounts of cocaine into Canada. He is alleged to be a co-kingpin in the operation that involved importing cocaine concealed in boulders. He is charged with having proceeds of crime in relation to the funds.
[58] Mr. Fiorillo’s evidence did not and could not include from his own observations what Buffone put into or took out of the box or the source of the funds he put into the box. Mr. Fiorillo believed only he and Buffone had access to the box and that to the best of his recollection he never went to Buffone’s office when the box was either not there or contained significantly less money than what he would have expected. He does not address whether he ever went and there was significantly more money. That Mr. Fiorillo believes Mr. Buffone only put TO-Bargains money in or took it out of the plastic container is not persuasive.
[59] Second, and related to the first, Mr. Buffone is charged with money laundering, a method of converting illegally obtained funds into an intangible asset of no obvious origin. While in the context of money being put into bank accounts, the Court of Appeal’s comments regarding the nature of money laundering in R. v. Trac 2013 ONCA 246 at para. 84-5 are instructive regarding large amounts of cash:
- Money laundering is achieved by the injection of cash generated through criminal activity into the legitimate, commercial mainstream through the deposit of that cash with a reputable deposit-taking institution. By depositing the cash, the illicit funds are immediately converted from a tangible physical asset easily traced directly to the crime, to an intangible asset, a credit in the account, of no obvious origin. The mere depositing of the funds can achieve both the conversion and concealment so coveted by the money launderer. The laundering of the illicit proceeds of crime through bank accounts where those proceeds are mixed with untainted funds and then transferred from the account to acquire other assets is an effective and well-recognized form of money laundering: see e.g. U.S. v. Tencer, 107 F.3d 1120 (5th Cir. 1997); U.S. v. Puche, 350 F.3d 1137 (11th Cir. 2003).
85 Not only does the conversion of the asset from cash to a credit assist in concealing the source of the funds, the placement of the credit within the stream of legitimate day-to-day commerce also achieves the desired anonymity. That concealment is enhanced when funds from criminal and legitimate sources are mixed into the same account. The legitimate funds become a kind of camouflage hiding the existence and movement of the illicit funds.
[60] Third, while the investigating officer was unable to say there was any evidence that the funds were from Buffone’s drug dealing that is not the complete answer. As the Court of Appeal held in Trac at para. 101 where a forensic accounting expert could not say bank account funds were from that offender’s drug activities:
I agree with Crown counsel that the trial judge's finding that none of the assets were the "proceeds of crime" turned entirely on the expert's inability to say that any given asset was the "proceeds of crime". I think it was unreasonable to expect that kind of evidence from the expert. The expert could identify indicia associated with the "proceeds of crime" and could speak to probabilities with respect to particular assets. It was for the trial judge, on the basis of the expert evidence and the rest of the evidence, especially the admissions, to decide whether the Crown had proved that any particular asset was the "proceeds of crime".
[61] If Mr. Buffone is convicted it will be for the trial judge to determine whether the funds should be forfeited, returned to TO-Bargains of to make some other order having regard to all of the evidence.
[62] Fourth, while the applicant notes that the hand-written receipts total $159,719 and the Financial Statement cash line shows $163,910 and submits they are similar to the float amount, $144,050. In relation to the handwritten receipts, while Mr. Fiorillo said they got the figure $163,910 from the sales of the P.O.S. system and the handwritten cash sales they did, he also said that every business day or two he would take any larger bills (i.e. $50 and $100 bills) received from significant sales and place them in the box containing the float. He would count the money every two weeks. As I understand his evidence, it was not the proceeds of every sale that went into the float.
[63] With respect to the cash receipts filed in the Supplementary Application Record there are 76 receipts. Only one is in the $15,000 to $25,000 range for which Mr. Fiorillo said they often made purchases. There are fourteen for $5000 or larger amounts. The receipts are from November, 2013 and sequentially numbered with some missing from 178401 to 178581. The last date is on receipt 178565 for September 5, 2014. There are no dates on the balance of the receipts.
[64] The financial statement to September 30, 2014 was prepared on February 1, 2015 when the exact amount of the cash was known as it had been counted at the law firm in early October. If the cash funds noted in the financial statement are the float as Mr. Fiorillo believed, between September 22, 2014, the date of the search warrant and September 30, 2014, the date of the financial statement. TO-Bargains accumulated $15,669 in a new float (deducting the amount removed on September 22, 2014 from the amount listed in the financial statement) in eight days.
[65] Fifth, since on his own evidence, Mr. Fiorillo was not a money person, his knowledge of the financial situation of TO-Bargains is not persuasive. That there was never a note made of the contents of the plastic container is a most curious way of doing business.
[66] Finally, I have considered Pat Westfall’s statement in the Application Record for the Interpleader application as to what Mr. Buffone told him. While it is hearsay I will proceed on the basis that I can act upon it for the purposes of this application. The statement is not totally consistent with Mr. Fiorillo’s evidence on this application. On the most charitable view, it is incomplete as to the reason there was a float. On this application, Mr. Fiorillo said that it was to facilitate cash purchases of product and testified about the negative impact on sales that occurred in the absence of the float. The float was larger than normal because of the costs of expanding to the Dixie Flea Market location. Arguably, the Interpleader from Mr. Buffone and Mr. Fiorillo is inconsistent from Mr. Fiorillo’s evidence on this application or at very least is not as fulsome as Mr. Fiorillo’s evidence as to why the float was required and continues to be needed. Both told Westfall that the float was in relation to the new store with no mention of the cash sales rationale now advanced.
[67] In reaching this conclusion with respect to lawful ownership, I draw no adverse inference from the delay in bringing this application nor from Mr. Fiorillo’s misstatement that the float was kept in a cardboard box. In his first affidavit, he referred to the container as plastic. I am proceeding on the basis that there was only one box.
[68] While the PPSC strongly urged that Mr. Fiorillo was not credible, in reaching my conclusions I find that there were greater concerns for his reliability, the extent of his knowledge about the finances of TO-Bargains, and his inability to know from his observations what Mr. Buffone did with the cash. No doubt Mr. Fiorillo honestly believed that the cash was only for the purposes that he believed. How far he can advance the applicant’s argument on that issue is the unsurmountable challenge TO-Bargains face.
Are the funds required for Buffone’s preliminary inquiry or trial?
[69] On this record, the applicant has failed to persuade me that the funds are not required for the preliminary inquiry in which Mr. Buffone is charged in relation to the cash with possessing proceeds of crime and money laundering for a trial if there is a committal on those counts or for a forfeiture hearing at the end of the trial which is another proceeding within the meaning of the section. R. v. Dawson (2013), 2013 ONSC 4706, 48 M.V.R. (6th) 106 (S.C.J.) at para. 8.
[70] The funds were seized pursuant to a warrant issued under s. 487. While the Information to Obtain is not part of this Application Record, the only basis upon which the warrant could issue was that there were reasonable grounds to believe that the contents were “anything on or in respect of which any offence has been or is suspected of being committed,” “anything that there are reasonable grounds to believe will afford evidence with respect to the commission of an offence, or any offence-related property. s. 490(1). What is required is that there be a reasonable inference in relation to the property. R. v. Jacobson 2006 CanLII 12292 (ON CA), [2006] O.J. No. 1527 (C.A.)
[71] While decided under different legislation and on a different evidentiary record, I find the Saskatchewan Court of Appeal’s comments in Canada (Attorney General) v. Matkowski (2005), 2005 SKCA 132, 275 Sask. R. 64 at para. 13 applicable. It is premature to determine whether the funds could be subject to forfeiture. To make that determination would require the PPSC to adduce at this time essentially all of their evidence in relation to Mr. Buffone. I appreciate that detention is not automatic on the prosecution’s assertion that there were grounds to seize the property and it may turn out to be proceeds of crime. Rather, this finding is on this record with the concerns noted above for the reliability of the applicant’s evidence and nothing directly from Mr. Buffone.
[72] I also rely on the findings noted earlier in relation to the investigating officer’s evidence and Trac. The judge or jury will assess what, if any inferences are to be drawn from the $155,050 in the closet. It will be for the trial judge to determine whether the funds are the proceeds of crime or offence-related property if Mr. Buffone is convicted.
Does Buffone’s consent to the admission of the evidence concerning the float as an Agreed Statement of Fact result in the funds not being required for the purpose of the preliminary inquiry or trial?
[73] It does not for the following reasons.
[74] Section 655 of the Criminal Code states:
Where an accused is on trial for an indictable offence, he or his counsel may admit any fact alleged against him for the purpose of dispensing with proof thereof.
[75] The applicant has filed a letter from Mr. Buffone’s trial counsel, Paul Stern, with respect to whether the seized funds will be required as evidence in Mr. Buffone’s trial. While he had not been asked about the seized funds, he has instructions from his client who agrees that the funds were in “a closet in his office at SLM Logistics before the funds ended up” at the law office from which they were seized.” As was the case with documents seized, Mr. Buffone agreed that “true copies may be relied upon by the Crown as evidence without the need to produce the originals.”
[76] I proceed on the basis that at his preliminary inquiry and trial Mr. Buffone would admit as a fact pursuant to s. 655 of the Criminal Code that the cash was found in his closet and the amounts that the prosecution contends.
[77] However, that is not the end of s. 655 and does not result in a finding that the funds will not be required for the preliminary inquiry or trial. In R. v. R.P. (2013), 2013 ONCA 53, 295 C.C.C. (3d) 28 (Ont. C.A.) at para. 42, Watt J.A. wrote:
Among the methods of proof available to the Crown are admissions of fact governed by s. 655 of the Criminal Code. Under that provision, it is for the Crown, not the defence, to state the fact or facts that it alleges against the accused and of which it seeks admission. The accused may choose to admit the facts, or decline to do so. Admissions require action by two parties, one who makes the allegation and the other who admits it. Once the admission is made, no other proof of the facts admitted need be offered: Castellani v. The Queen, 1969 CanLII 57 (SCC), [1970] S.C.R. 310, at pp. 315-317.
[78] Ms. Matthews, the prosecutor of the drug and proceeds charges, indicates that she will not agree to the evidence of the funds being introduced as an agreed statement of fact under s. 655.
[79] In those circumstances, the fact Mr. Buffone would be prepared to admit that the funds were found in a closet in his SLM office does not remove the need for the funds to be evidence at the preliminary inquiry or trial.
[80] I note as well that there is no evidence before me regarding the state of the funds when taken from the closet. It is noted that several days later the funds were counted at the law office. There is no evidence whether the photograph of the funds that is an exhibit on this application accurately depict how the bills were bundled and found in the closet.
Has the applicant established that it will suffer hardship if the funds are not returned at this time?
[81] While the findings to this point preclude the application succeeding, I will address the final issue, hardship. Given the standard is balance of probabilities; I am persuaded that there probably would be hardship notwithstanding the problems noted earlier and conflicting accounts.
Conclusion
[82] The application is dismissed.
DURNO J.
Released: July 10, 2015
COURT FILE NO.: 842/15
DATE: 20150710
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HER MAJESTY THE QUEEN
Respondent
- and –
TO-BARGAINS INC.
Appellant
REASONS FOR JUDGMENT
Durno J.
Released: July 10, 2015
[^1]: At that time Mr. Westfall was the Chief Financial Officer, Director and Interim President and CEO of SLM.