Attorney General (Ontario) v. 855 Darby Road, Welland et al, 2017 ONSC 4953

COURT FILE NO.: CV-09-379723

DATE: 2017-11-06

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Attorney General of Ontario Applicant

– and –

855 Darby Road, Welland and All Contents (In Rem) Respondent

COUNSEL:

Lisa Will for the applicant

Ryan M. Naimark and Michael Warfe for the respondent

HEARD: June 20, 2017

Akbarali J.

Overview

[1] In this application, I am asked to determine whether (i) a property used as a Hells Angels’ clubhouse, and (ii) Hells Angels’ paraphernalia ought to be forfeited under the Civil Remedies Act, S.O. 2001, c. 28.

Background

[2] In March 2001, Timothy Panetta, Randy Beres, Gerald Ward, and Richard Ward purchased a property at 855 Darby Road, Welland, Ontario. Mr. Panetta, Mr. Beres, and Richard Ward each contributed about $20,000.00 to the down payment. Gerald Ward acquired his interest in the property by contributing his labour. Although there is some evidence that the owners purchased the property to develop it, there is no evidence that any steps were ever taken to do so.

[3] The owners heavily fortified the property, including by installing opaque sheeting on parts of the existing fencing, removing the first floor windows and replacing them with cement blocks, and replacing the front door with a cement-filled steel door.

[4] The owners rented the property to the Hells Angels Niagara Prospect Chapter, to which all four owners belonged at the time. At some point, the Hells Angels Niagara Prospect Chapter became a full patch chapter of the Hells Angels Motorcycle Club (“HAMC”). It continued to maintain its clubhouse at 855 Darby Rd. and pay rent. The clubhouse was used for weekly social gatherings and monthly “church meetings” during which club business was discussed.

[5] In about 2002, 1527081 Ontario Inc. o/a Big Red Machine Clothing Company was formed. Its purpose was to produce clothing bearing the Hells Angels insignia. Big Red also operated out of the property and paid rent.

[6] The evidence establishes that the full patch members of the Hells Angels Niagara Chapter, as well as the prospects and hangarounds, paid monthly dues from which bills related to the property, including the mortgage, were paid.

[7] Eventually, Mr. Beres left the Hells Angels. He remains a legal owner of the property but has not visited it since 2003. Richard Ward also left the Hells Angels. His interest in the property was extinguished. Richard Ward died in 2005.

[8] Certain members and associates of the Niagara Chapter of the Hells Angels, including Gerald Ward, were arrested for drug trafficking-related offences in connection with a police operation in 2006. Mr. Ward pleaded guilty to two trafficking-related offences and was convicted of a third - instructing commission of an offence for a criminal organization. In the criminal proceedings relating to Mr. Ward, McMahon J. found that the HAMC is a criminal organization.

[9] In the context of Mr. Ward’s criminal proceedings, the Federal Crown placed restraint orders[^1] on some of Mr. Ward’s property, including over $300,000.00 found in his personal residence, his truck, his motorcycle, his matrimonial home, and 855 Darby Rd. As part of his plea bargain with the Federal Crown, the Crown reduced the sentence it sought for Mr. Ward to sixteen years from eighteen years, and seized only one of his vehicles and the cash.

[10] Two months after the federal Crown lifted the restraint order on 855 Darby Rd., the Attorney General of Ontario commenced these proceedings seeking forfeiture of the property pursuant to the CRA. The Attorney General alleges that the property, on which the clubhouse is situated, is both proceeds of unlawful activity and an instrument of unlawful activity. The Attorney General also seeks forfeiture of Hells Angels’ paraphernalia seized at the clubhouse.

[11] Although this proceeding is in rem, the interested parties, Mr. Panetta, Mr. Beres, and Mr. Ward, are instructing counsel who indicates he is retained by the respondent. However structured, it is clear that the owners of 855 Darby Rd. are resisting the Attorney General’s application.

[12] The owners raise preliminary issues regarding the admissibility of the Attorney General’s evidence. They argue the clubhouse is neither proceeds of nor an instrument of crime. They argue that the legitimate owner and responsible owner exceptions in the legislation apply to prevent forfeiture. They argue that Mr. Ward’s plea bargain with the Crown makes forfeiture clearly not in the interests of justice, or in the alternative, that I should decline to permit forfeiture of the clubhouse under the umbrella of fairness.

Issues

[13] This application raises the following issues:

a. Are the applicant’s experts qualified and is their evidence admissible without a Form 53?

b. Is the evidence of the applicant’s witnesses inadmissible in whole or in part because it is based on information and belief with respect to facts that are contentious, contrary to r. 39.01(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194?

c. Are the agreed statements of facts filed in the criminal prosecutions of Gerald Ward and another Niagara Hells Angels member, Kenneth Wagner, hearsay, and as a result, inadmissible for proof of the truth of their contents?

d. Is 855 Darby Rd. an instrument of unlawful activity?

e. Is the Hells Angels paraphernalia an instrument of unlawful activity?

f. If 855 Darby Rd. or the paraphernalia are instruments of unlawful activity, does the responsible owner exception to forfeiture apply?

g. Is 855 Darby Rd proceeds of unlawful activity?

h. If the property is proceeds of unlawful activity, does the legitimate owner exception to forfeiture apply?

i. Is forfeiture clearly not in the interests of justice? In particular, does the plea bargain between Gerald Ward and the Federal Crown make forfeiture of 855 Darby Rd. clearly not in the interests of justice?

Are the applicant’s experts qualified and is their evidence admissible without a Form 53?

[14] The applicant offers evidence from two proposed experts: Detective Constable Jason Bassi and Detective Sergeant Kenneth Davis. Originally the respondent maintained that neither filed a Form 53 and argued that their evidence is therefore inadmissible. The respondent mounted no other challenge to the experts’ qualifications.

D/C Bassi

[15] D/C Bassi has, in fact, filed a Form 53. The respondent does not contest his qualification as an expert on any other basis.

[16] From January 2004 to November 2011, D/C Bassi was a member of the Organized Crime Section, Biker Enforcement Unit of the Ontario Provincial Police. From January 2005 to November 2011, he was the primary Investigator for the Niagara Chapter of the Hells Angels. His qualifications demonstrate considerable experience in investigating the HAMC and other outlaw motorcycle clubs. He has been involved in surveillance and executions of search warrants relating to outlaw motorcycle clubs in Ontario. He has lectured at training courses on outlaw motorcycle clubs for the Criminal Intelligence Service Ontario and for various Canadian police services. He has assisted in the preparation of the Outlaw Motorcycle Investigators Course.

[17] The first step in determining whether to admit D/C Bassi’s proposed expert evidence is found in R. v. Mohan, 1994 SCC 80, [1994] 2 S.C.R. 9. In Mohan, at p. 20, the Court concluded that the admission of expert evidence depends on the application of four criteria: (i) relevance, (ii) necessity in assisting the trier of fact, (iii) the absence of any exclusionary rule, and (iv) a properly qualified expert. I note that no argument was made that D/C Bassi’s evidence should be excluded based on the Mohan analysis.

[18] In my view, all of the Mohan criteria is made out here. First, D/C Bassi’s evidence is relevant. It is logically relevant to the facts in issue going, as it does, to the HAMC’s structure, membership, rules, colours, criminal activity and clubhouses. It is evidence that is likely to assist me.

[19] D/C Bassi’s evidence is also necessary. The HAMC is a highly controlled, private organization. Its structure, membership, rules, colours, criminal activity and clubhouses are matters which are likely to be outside my experience and knowledge.

[20] No exclusionary rule has been raised under the Mohan analysis.

[21] I have already reviewed D/C Bassi’s qualifications above and I accept him as a properly qualified expert.

[22] There is a second stage to the admission of expert evidence, where I must consider whether the potential benefits of admitting the evidence outweigh the risks of admitting it: White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, [2015] 2 S.C.R. 182, at para. 24.

[23] In my view, the potential probative value of the expert evidence is significant and highly relevant to the issues before me. It is reliable, as it based on relevant and significant experience of the proposed witness who acquired his knowledge in the discharge of his duties. It is also necessary evidence for me to understand the operations of the HAMC. In contrast, I do not think the risks of admitting the evidence are significant. I can receive the evidence without diminishing my fact-finding role. The admission of the evidence will not protract nor complicate the proceedings.

[24] Moreover, I note that no argument has been made in this application that the prejudicial effect of the expert evidence outweighs its probative value or that a cost-benefit analysis weighs in favour of excluding the evidence.

[25] Accordingly, I conclude that D/C Bassi is qualified to give opinion evidence regarding the structure, membership, rules, colours, criminal activity and clubhouses of the HAMC. His evidence is admissible in this application.

D/S Davis

[26] D/S Davis has been a police officer since 1975. He is currently in charge of the Thunder Bay satellite office of the Biker Enforcement Unit responsible for Northwest Ontario. Between 1987 and 1998, he was the Project Coordinator for a number of anti-outlaw motorcycle gang operations, including operations against the HAMC. He has been involved in surveillance and the execution of search warrants against outlaw motorcycle gang clubhouses including the HAMC. He has lectured and trained various police services on outlaw motorcycle gangs. He has been qualified and has given evidence in other proceedings, including in Mr. Ward’s criminal proceedings, on subjects including the structure, organization, hierarchy, purposes and activities of the HAMC.

[27] The respondent’s objection to D/S Davis’s qualifications is that he has not filed a Form 53 with his affidavit. The applicant argues that no Form 53 is required because D/S Davis is a participant expert as described in Westerhof v. Gee Estate, 2015 ONCA 206 at para. 60:

… a witness with special skill, knowledge, training, or experience who has not been engaged by or on behalf of a party to the litigation may give opinion evidence for the truth of its contents without complying with rule 53.03 where:

• the opinion to be given is based on the witness’s observation of or participation in the events at issue; and

• the witness formed the opinion to be given as part of the ordinary exercise of his or her skill, knowledge, training and experience while observing or participating in such events.

[28] The respondent argues that D/S Davis has admitted that his evidence was given on behalf of the applicant for the purpose of this litigation and as such, he has been “engaged by or on behalf of a party,” and as a result, he cannot be a participant expert. The respondent relies on Ontario (Attorney General) v. $18,550 in Canadian Currency (In Rem), 2016 ONSC 2237, at para. 52, where the court excluded the proposed opinion evidence of a police expert for failure to file a Form 53. In that case, Bondy J. found that the opinions of the officer, who worked for the Asset Forfeiture Unit, were formed in the process of building a case for the seizure of the property. The officer was not personally involved in the investigation. He had also been the one to request that the Attorney General consider a civil forfeiture proceeding. There was thus a reasonable apprehension that he had a vested interest in the outcome of the litigation. His role was essentially the same as an expert engaged by or on behalf of a party. A Form 53 was therefore required: See Ontario (A.G.) v. $18,550, at paras. 47-48, and 52.

[29] This is a very different case. In my view, the question is not whether D/S Davis’s evidence is offered on behalf of the applicant, but whether D/S Davis’s opinion was formed for the purposes of this litigation. If it was, his role would be akin to expert, and he would be “engaged by or on behalf of the applicant”. However, D/S Davis’s opinion is founded, in significant measure, upon his personal observations made during the course of his investigations into the HAMC. Accordingly, I agree with the applicant that he is a participant expert.

[30] Moreover, for the same reasons I set out above with respect to D/C Bassi, D/S Davis’s evidence satisfies the Mohan criteria, and the potential benefits of admitting it outweigh the potential risks of doing so. No argument was made that the evidence does not meet the Mohan criteria, that its probative value is outweighed by its prejudicial effects, or that a cost-benefit analysis weighs in favour of excluding the evidence.

[31] I therefore accept D/S Davis as a properly qualified expert, qualified to give evidence about the origins, corporate structure, composition, purposes and activities of the HAMC, and admit his evidence in this proceeding.

Is affidavit evidence of contentious facts based on information and belief admissible?

[32] The respondent relies on r. 39.01(5) of the Rules of Civil Procedure, which provides that an affidavit for use on an application “may contain statements of the deponent’s information and belief with respect to facts that are not contentious” if the source of the information and the fact of the belief are specified.

[33] Proceedings under the CRA may be brought by way of action or application: s. 15.6. The respondent argues that the applicant chose to proceed by way of application, and as a result, is limited by r. 39.01(5) with respect to the type of evidence it can file. The respondent argues that the applicant’s evidence is entirely based on information and belief, including the evidence of its experts who depose to learning what they know about the HAMC through, for instance, conversations with former and current HAMC members, and fellow police officers and investigators. It argues that the evidence about the manner in which the HAMC operates is contentious. It argues I cannot rely on this evidence at all.

[34] The applicant was taken by surprise by this argument, which was raised for the first time at the hearing of the application. It was not set out in the respondent’s factum, nor were any objections to the form of the evidence or the nature of the proceeding made at any time in the nine years during which this proceeding was ongoing before the hearing.

[35] The applicant argues that the respondent conducted significant cross-examination, so there is no element of procedural unfairness that prohibits me from relying on its evidence.

[36] In Newmarket (Town) v. Halton Recycling Ltd., (2006), 23 M.P.L.R. (4th) 227 (Ont. S.C.), Fuerst J. considered the application of r. 39.01(5). She noted the importance of distinguishing between contentious facts and contentious issues. An affidavit touching on contentious issues does not attract the operation of r. 39.01(5).

[37] Fuerst J. also noted that the rule is designed to address hearsay. Hearsay statements may be admissible notwithstanding the rule:

Information and belief evidence is often hearsay evidence: Metropolitan Toronto Condominium Corp. No. 781 v. Reyhanian, [2000] O.J. No. 2640 (S.C.J.); King Estate v. King, [1999] O.J. No. 2509 (Gen. Div.). Accordingly, even where the facts are contentious, a statement on information and belief is permissible if it is not hearsay because it is not tendered in proof of the truth of its contents, or if it falls within an exception to the hearsay rule, including the principled approach: King Estate, supra. (Halton Recycling, para. 15).

[38] Compliance with r. 39.01(5) is not a mere technicality. As Leach J. recognized in Aker Biomarine AS v. KGK Synergize Inc., 2013 ONSC 4897, [2013] O.J. No. 5048, where it is clear in law that evidence is inadmissible, leaving it on the record is embarrassing and prejudicial to the fair hearing of the application. A court should not consider such evidence. However, underlying r. 39.01(5) is the prevention of inadmissible hearsay. Rule 39.01(5) is a controlled exception to the hearsay rule. It is not a stand-alone method of challenging and excluding evidence that is clearly not hearsay: Aker paras. 12-13.

[39] The rule is also concerned with preventing witnesses from shielding themselves from cross-examination: Armstrong v. McCall (2006), 213 O.A.C. 29, at para. 33.

[40] Significantly, r. 39.01(5) does not apply to affidavits sworn by expert witnesses. In Bradley v. Eastern Platinum Ltd., 2014 ONSC 4284, [2014] O.J. No. 3487, Brady J. summarized the law on the point:

[31] There is authority for the proposition that Rule 39.01(5) does not apply to expert evidence. In Inco Ltd. v. Ontario (2002), 2002 ONSC 62443, 61 O.R. (3d) 561 (S.C.J.) the court declined to strike an affidavit of an expert witness on the basis it contravened the Rule. The court’s rationale was expressed in this way:

In my opinion, there is nothing objectionable about this. Mr. Murphy [the expert witness] is not attempting to prove contentious facts; rather, he is expressing a professional opinion based on the facts set out in the affidavits of others. Such opinions are almost always based on facts provided by others and the rule is that the opinion is only as good as the proof of the underlying facts. To the extent that Mr. Murphy relies on his years of experience in putting forward evidence as to facts in the industry generally, that is personal knowledge, not hearsay.

[32] Similarly, in Ottawa (City) v. TKS Holdings Inc., 2011 ONSC 7633, the court held that “the admissibility of an expert opinion in an application is not to be determined through an analysis of Rule 39.01(5).” Rather, the admissibility of any expert report is governed by the application of the common law rules on expert evidence to which I will return below.

[33] Finally, the law is quite clear that expert evidence is not inadmissible hearsay because it relies on others’ information in formulating an opinion. In R. v. Abbey, 1982 SCC 25, [1982] 2 S.C.R. 24, the court noted:

An expert witness, like any other witness, may testify as to veracity of the facts of which he has first-hand experience, but this is not the main purpose of his or her testimony. An expert is there to give an opinion. And the opinion more often than not will be based on second-hand evidence.

[41] Unfortunately, the respondent has not identified with any particularity what in the applicant’s affidavits it alleges are contentious facts. Rather, the respondent has objected to the admission of all of the affidavits in their entirety. The applicant has filed seven affidavits on this motion. They are lengthy. Five affidavits range from 93-194 pages long. The other two are over twenty pages long. It is not possible for me to review every allegation in every paragraph in every affidavit in these reasons to explain which portions are admissible and which are not.

[42] As noted, the applicant has filed the affidavits of its experts, D/C Bassi and D/S Davis. For reasons unknown to me, the respondent did not cross-examine these experts. However, the respondent relies on r. 39.01(5) to challenge the admissibility of their evidence. The respondent argues that the expert witness’s affidavits, relying as they do on information from others such as current and former members of the HAMC, improperly shield those people from cross-examination.

[43] I reject this argument. The body of general knowledge the expert affiants have acquired through their years investigating the HAMC and other outlaw motorcycle clubs, including by speaking to former and current members of the HAMC, lies at the heart of their expertise and as such is better understood as their personal knowledge gained through years of experience and study. It is what is described in the excerpt from Bradley quoted above as “facts in the industry generally,” understanding that in this context, D/C Bassi’s and D/S Davis’s “industry” is outlaw motorcycle clubs, including the HAMC. Rule 39.01(5) does not apply.

[44] Accordingly, D/C Bassi’s and D/S Davis’s opinion evidence is admissible. To the extent their evidence contains facts outside of their expertise or personal knowledge, those facts must be properly proven and are subject to the analysis that follows with respect to the applicant’s fact witnesses.

[45] The application of r. 39.01(5) is more nuanced in the case of the applicant’s fact witnesses. While the respondent argues that their affidavits should be excluded in their entirety, it is clear that there is evidence in the affidavits that is not evidence of contentious facts given on information and belief.

[46] For example, the applicant offers Detective Constable Vincent St. Pierre as a fact witness. D/C St. Pierre gives evidence about how title to 855 Darby Rd. is held and sets out relevant events documented on the parcel register for the property. These are not contentious facts and are based on his first-hand review of the parcel register. This evidence is admissible.

[47] D/C St. Pierre also gives evidence on information and belief, including, for example, evidence about the security measures taken at the property.[^2] These facts are not contentious. For example, it is not disputed that the front door of the property has been replaced with a steel door filled with cement. The dispute is about why that was done, and the inference I should draw from the fact that it was done. The applicant argues that the enhanced security measures are designed to allow the HAMC to conduct unlawful activity in private. The respondent argues they are necessary security measures for a rural property. The issue is contentious; the facts are not.

[48] On the other hand, D/C St. Pierre’s affidavit includes evidence that has not been admitted by the respondent and is based on information and belief, including, for example, his evidence based on a police report from Detective Constable Mike Tripp about a visit to Niagara by 15 members of the Trois-Rivières chapter of the Hells Angels. D/C Tripp has not filed an affidavit in these proceedings. This evidence is only admissible if a principled exception to the hearsay rule applies. None was argued, so I will not consider this evidence.

[49] To ascertain the admissibility of the applicant’s evidence, I am guided by the legal principles set out above. I will consider the applicant’s affiants’ evidence to the extent that it is (i) opinion evidence (although facts on which the opinion is based, if not in the personal knowledge of the experts, must still be proven); (ii) evidence of which the affiant has first-hand knowledge; or (iii) evidence of non-contentious facts, even if those facts speak to contentious issues. The evidence would also be admissible if an exception to the hearsay rule applies, but as I have noted, no such argument has been made so I do not consider it.

Are the agreed statements of facts filed in Gerald Ward’s and Kenneth Wagner’s criminal proceedings admissible?

[50] The respondent argues that the agreed statements of facts filed in the criminal proceedings are hearsay, and not admissible for the truth of their contents. The respondent relies on R. v. Caesar, 2016 ONCA 599, 339 C.C.C. (3d) 354 and R. v. Youvarajah, 2013 SCC 41, [2013] 2 S.C.R. 720, to argue that an agreed statement of facts in one proceeding is inadmissible hearsay in another. It argues Mr. Ward neither read nor agreed with the agreed statement of facts filed in his criminal proceedings, but he took a “package deal,” part of which included the agreed statement of facts. There is no question that Mr. Ward adopted the agreed statement of facts when he pleaded guilty to two offences in his criminal proceedings – trafficking in cocaine and possession of the proceeds of crime. McMahon J. relied on the agreed statement of facts when he convicted Mr. Ward of the third offence – instructing commission of an offence for a criminal organization.

[51] The applicant argues that the agreed statements of facts were made voluntarily and with legal advice. It argues that the case law the respondent relies on does not apply.

[52] Each agreed statement of facts must be considered individually.

[53] The agreed statement of facts in Mr. Ward’s criminal proceeding is, in effect, sought to be used against its declarant. It was put to Mr. Ward on cross-examination.

[54] In R. v. Baksh (2005), 2005 ONSC 24918, 199 C.C.C. (3d) 201 (Ont. S.C.), at para. 82, aff’d 2008 ONCA 116, [2008] O.J. No. 538, the Superior Court of Justice held that a statement of facts signed by an accused and provided to the prosecution constitutes an admission by the accused. If the statement is not subject to an express or implied limitation as to its use, the admission is properly receivable as evidence against the declarant in a subsequent legal proceeding. The court considered it important that the statement was made voluntarily and with the benefit of legal advice, as Mr. Ward’s statement was.

[55] However, the court found that a statement used in a prior proceeding was not conclusive in a subsequent proceeding and may be explained, attacked or otherwise countered by the defence.[^3]

[56] The Court of Appeal upheld the lower court’s decision and noted that a voluntary admission is not the same as testifying at trial, such that using the agreed statement of facts in a subsequent proceeding does not violate the declarant’s s. 13 Charter rights.

[57] Baksh is consistent with the Court of Appeal’s decision in R. v. C.(W.B.) (2000), 2000 ONCA 5659, 130 O.A.C. 1, at para. 60, where the court noted that “although an admission can be admitted in evidence against a party in a subsequent criminal or civil case, it is always open to the party who has made the admission to testify that he or she never made the admission, or to qualify it in some other way”.

[58] I thus conclude that the agreed statement of facts filed in Mr. Ward’s criminal proceeding is admissible, although when I consider its weight I must also consider his evidence that seeks to explain or qualify it. In the circumstances, given that it was an admission against Mr. Ward’s interests in a criminal proceeding and made with the benefit of legal advice, I find it to be reliable. I do not accept Mr. Ward’s explanation that he did not read it or agree with it, but was simply taking a “package deal” on his plea bargain.

[59] The issue with respect to the agreed statement of facts filed in Mr. Wagner’s criminal proceeding is different. Mr. Wagner is not involved in this application and he has not been cross-examined. No person on behalf of the respondent has adopted the statements made in Mr. Wagner’s agreed statement of facts.

[60] The statement is hearsay. To be admitted for the truth of its contents, it must fall within the principled exception to the hearsay rule. To be admissible, the evidence must be both necessary and reliable: Youvarajah, at para. 21.

[61] In Youvarajah, at paras. 59-62, the Supreme Court of Canada considered the admissibility in the accused’s criminal trial of a co-accused’s agreed statement of facts admitted in the co-accused’s youth court proceeding. It held that “to the extent that the ASF incriminated [the declarant], was against his interests, and admitted his own culpability in court, these circumstances provide a compelling inference that those statements were in fact reliable.” However, the Court found that “the rationale for the admissibility of admission as against the party making them falls away when they are sought to be used against a third party,” noting that “criminal law is generally and rightfully suspicious of allegations made by a person against an accomplice.”

[62] The Wagner agreed statement of facts implicates Mr. Ward in illegal activity. To the extent it does so, the statement’s reliability is questionable. It is difficult to identify whether any portions of the agreed statement of facts are only as against the interests of Mr. Wagner. Much of the evidence in the Wagner statement is before me from other sources in any event. Given that Mr. Wagner has not been cross-examined on the statement, I agree with the respondent that the statement should be excluded in its entirety.

Is 855 Darby Rd. an instrument of unlawful activity?

[63] Under s. 8(1) of the CRA, unless it is clearly not in the interests of justice, a court shall make an order forfeiting property in Ontario to the Crown in right of Ontario if the court finds that the property is an instrument of unlawful activity.

[64] “Unlawful activity” is defined in s. 2 of the CRA and includes an act or omission that “is an offence under an Act of Canada, Ontario, or another province or territory of Canada.”

[65] Section 7(1) of the CRA defines “instrument of unlawful activity” as:

property that is likely to be used to engage in unlawful activity that, in turn, would be likely to or is intended to result in the acquisition of other property or in serious bodily harm to any person, and includes any property that is realized from the sale or other disposition of such property.

[66] Section 7(2) of the CRA creates a presumption that property used to engage in unlawful activity in the past is likely to be so used again. It provides:

For the purpose of the definition of “instrument of unlawful activity” in subsection (1), proof that property was used to engage in unlawful activity that, in turn, resulted in the acquisition of other property or in serious bodily harm to any person is proof, in the absence of evidence to the contrary, that the property is likely to be used to engage in unlawful activity that, in turn, would be likely to result in the acquisition of other property or in serious bodily harm to any person.

[67] To establish that 855 Darby Rd. is an instrument of unlawful activity, the applicant relies on:

a. evidence that the clubhouse operated as an illegal bar, or “booze can”, contrary to the Liquor Licence Act, R.S.O. 1990, c. L.19.

b. evidence of drug deals that took place, at least in part, in the clubhouse contrary to the Criminal Code, R.S.C. 1985, c. C-46, and Controlled Drugs and Substances Act, S.C. 1996, c.19. These drug deals were instigated by the police agent Stephen Gault. There is some evidence they were instigated at the urging of police; and

c. evidence of church meetings, at which the applicant states the HAMC members planned their criminal activities, contrary to the Criminal Code and the Controlled Drugs and Substances Act.

[68] The respondent argues that there was no booze can operating. Rather, everybody who drank alcohol at the property contributed to cover costs in a manner that is no different than a guest bringing a bottle of wine to a dinner party.

[69] The respondent also argues that the evidence does not support any unlawful activity taking place at 855 Darby Rd. Rather, it says the evidence establishes that drugs and weapons were strictly prohibited at the clubhouse.

[70] The respondent also argues that church meetings dealt only with administrative issues affecting the club, like responsibility for maintenance.

[71] I will address each of these grounds in turn.

Was 855 Darby Rd. being used as an illegal booze can?

[72] The applicant states that there was a bar inside the clubhouse on which a can labelled “donations” was used to collect payment for drinks. A police agent identified “donations” as the term used to describe the payment for alcohol at the clubhouse, but there is no evidence that a particular amount had to be paid or that all drinks were paid for. The agent deposed that he, himself, usually drank for free.

[73] There is evidence that a sheet of rules for prospects of the HAMC found inside the clubhouse made reference to “bar shifts.” During searches of other clubhouses, price lists for drinks were located, but the applicant did not identify any evidence of price lists located at 855 Darby Rd.

[74] The clubhouse was heavily fortified. It was not open to the public. The evidence demonstrates the Hells Angels members closely monitored who was allowed to attend at the property.

[75] In my view, a document referencing bar shifts and a can labelled “donations” is not sufficient to establish, on a balance of probabilities, that the clubhouse was being operated as an illegal booze can or is likely to be operated as a booze can in the future.

Was 855 Darby Rd. used as a location to conduct illegal drug transactions?

[76] I have already noted above that there is some evidence that the police agent Mr. Gault was involved in two drug transactions on the property. Both times, the transactions were moved off site. There is evidence that Mr. Gault was encouraged by police to initiate these transactions to create a basis to seize the clubhouse.

[77] In the first instance, Mr. Gault testified that the police asked him to try to buy a kilogram of cocaine from Mr. Ward. He followed their instructions and had a conversation with Mr. Ward at the clubhouse. The conversation was wiretapped. Mr. Gault testified that he would have used hand signals to signify that he wanted a kilogram of cocaine (like touching his nose or motioning as if he was turning a key to signify a key of cocaine). The discussion at the clubhouse ended, and Mr. Gault and Mr. Ward returned to Mr. Ward’s residence to complete the transaction.

[78] The second instance relates to Mr. Gault’s efforts to sell his motorcycle. Mr. Wagner offered to buy it for $10,000.00. Mr. Gault testified that the police told him he could not sell it for money because the money could be proceeds of crime. The police told him to get 10 ounces of cocaine from Mr. Wagner instead, and the police would take the cocaine and give him $10,000.00. Mr. Gault testified that he dropped the motorcycle off at 855 Darby Rd., and then asked Mr. Wagner for 10 ounces of cocaine instead of $10,000.00. Three days later, Mr. Wagner delivered the cocaine to Mr. Gault at another location.

[79] Mr. Gault also testified that, on one occasion, he tried to buy hashish from Mr. Panetta at the clubhouse, but Mr. Panetta avoided him.

[80] Mr. Gault testified that it would be very difficult to conduct an illegal transaction at the clubhouse. He knew when he attempted to discuss drug transactions at the clubhouse that some members would not have been happy had they known. He knew he was breaking the clubhouse rules when he initiated those discussions.

[81] There is a wiretapped conversation between Mr. Gault and Mr. Ward in which they discuss the downfall of the Hells Angels Simcoe chapter because the members were all “on blow.” They discussed how the Niagara chapter did not want to be like the Simcoe chapter.

[82] Mr. Gault also testified that he never saw any drug transactions or weapons transactions or any illegal transactions taking place at the clubhouse.

[83] There is evidence that there were signs prohibiting drugs at the clubhouse.

[84] However, Mr. Gault also testified that he saw people smoking marijuana and hashish at clubhouse parties.

[85] The respondent relies on Ontario (Attorney General) v. Kittiwake Sailboat, 2015 ONSC 6106. In Kittiwake Sailboat the Crown sought forfeiture of a sailboat that had been operated by its owner while impaired. It argued that the sailboat was an instrument of unlawful activity and was likely to be used to engage in unlawful activity that would be likely to result in serious bodily harm to any person.

[86] The application was dismissed. The court noted that the onus was on the Crown to show that it was likely that the boat would be used for unlawful activity in future. The evidence established that the boat had been operated once while its operator was impaired. Although the court allowed that “there may even be a good chance” that the owner would again operate it while impaired, his ownership of the boat was lawful. The boat was not property “like a weapon, lights for growing drugs or premises used exclusively for growing drugs, where the ownership and use of the property is inherently illegitimate.” The court found there was nothing about the boat, or its customary or ordinary use, that would lead to an inference that it would likely be used for an unlawful purpose in the future: paras. 19 and 21.

[87] In my view, the applicant has not established on a balance of probabilities that the clubhouse is likely to be used for the unlawful purpose of buying or selling drugs in the future. Rather, there is contrary evidence that establishes that the HAMC members do not want the property to be used for that purpose and take steps to guard against its use for drug transactions.

[88] With respect to Mr. Gault’s evidence that he observed people smoking marijuana and hashish at parties at the clubhouse, it is not clear how many times he observed this behaviour. There is no evidence that the clubhouse was regularly, customarily or ordinarily used as a facility for drug consumption. Rather, there is evidence to the contrary, which I describe above.

[89] In my view, the allegation that 855 Darby Rd. is an instrument of unlawful activity because it is a place at which drugs are consumed or bought and sold has not been proven on a balance of probabilities.

Was 855 Darby Rd. used as a safe space to plan unlawful activity?

[90] The applicant alleges that HAMC members used their regular church meetings to plan unlawful activity. Mr. Panetta, Mr. Beres, and Mr. Ward all deny that church meetings were used for any unlawful purpose. Mr. Gault gave no testimony about the content of church meetings.

[91] D/S Davis testified that the HAMC is an organization that is linked locally, regionally, nationally and internationally. Minutes from meetings disclose that each chapter discusses matters of interest locally, regionally, nationally and internationally.

[92] Each clubhouse, including 855 Darby Rd., has a whiteboard. D/S Davis deposed that a white board is used to allow members to communicate about unlawful activity non-verbally to frustrate police efforts to intercept their communications. This is consistent with Mr. Gault’s evidence that drugs would be discussed using hand signals to avoid communications being intercepted by police.

[93] In a search of the clubhouse, police located an email that included a portion of the Criminal Code, ss. 467.11(1) and (2), relating to “participation in activities of a criminal organization”. The email suggested that it be passed on to all HAMC charters and “read at a meeting”.

[94] The search also located police intelligence documents, suggesting the organization has a sophisticated intelligence gathering capability and is interested in police efforts to surveil the HAMC.

[95] In addition, it is not controverted that 855 Darby Rd. was heavily fortified. It has sophisticated security including video surveillance. D/S Davis’s evidence, which I accept, is that the fortifications and security were designed to create a place where the members could meet to form criminal connections and to aid in their criminal activities, especially involving the drug trade.

[96] Based on this evidence, I conclude that the clubhouse is used as a safe haven to plan illegal activities, including in the drug trade, and to guard against police interference with those activities. I am satisfied that church meetings were not simply opportunities to discuss clubhouse maintenance but that the clubhouse was used to hold these meetings in order to facilitate and plan unlawful activity, including trafficking drugs, from which property (money) was acquired. The presumption in s. 7(2) of the CRA applies. The applicant has proven on a balance of probabilities that the clubhouse is an instrument of unlawful activity.

Is the Hell’s Angels paraphernalia an instrument of unlawful activity?

[97] The applicant argues that items seized from the clubhouse at 855 Darby Rd. are Hells Angels paraphernalia that are instruments of unlawful activity.[^4] These include items bearing the death head logo; items bearing the Hells Angels name; items bearing the HAMC official emblem, commonly called "colours" or "patches" [^5]; items bearing HAMC-related slogans; items bearing the names of other outlaw motorcycle clubs; pictures of HAMC members or affiliates; and plaques commemorating HAMC events, anniversaries or individual members or affiliates.

[98] To support its argument, the applicant relies on the decision of Pardu J. (as she then was) in R. v. Hells Angels Motorcycle Corporation, 2009 ONSC 53152, [2009] O.J. No. 3503 (S.C.) at paras. 23-24, which dealt with a forfeiture application under the Criminal Code and the Controlled Drugs and Substances Act. In that case, Pardu J. found that items of clothing and jewellery bearing the death head logo was “offence-related property,” concluding that the use of the items was intended to intimidate and extort, and to serve as a badge of trustworthiness in the conduct of drug deals.

[99] In reaching her conclusions, Pardu J. relied heavily on the findings of fact made by McMahon J. in Mr. Ward’s criminal trial. Pardu J. noted that typically, an application for forfeiture following conviction relies upon the factual findings of the trial judge. In R. v. Hells Angels Motorcycle Corporation, for reasons that are not relevant here, McMahon J. recused himself from hearing the forfeiture application. However, Pardu J. found that the Crown could rely upon his findings and conclusions in support of its application for forfeiture.

[100] McMahon J.’s findings in the criminal trial included reviewing in detail expert evidence from D/S Davis about eight characteristics upon which D/S Davis concluded that the HAMC is a criminal organization dedicated to the facilitation and commission of serious criminal offences that materially benefit the members of the HAMC. These characteristics include its corporate structure, its membership, its rules, its clubhouse and its colours.

[101] McMahon J. found that the colours demand respect from criminal elements and allow the member to intimidate and extort. He found that the colours are used to facilitate the commission of criminal offences by HAMC members for the benefit of the club and the individual member. McMahon J. noted that D/S Davis’s evidence was corroborated by Mr. Gault, the police informant. Both D/S Davis and Mr. Gault gave evidence in the application before me[^6].

[102] The respondent argues that there is no evidence linking the paraphernalia to specific unlawful activity. However, this is not an application for criminal forfeiture; here, I am to decide whether the evidence establishes, on a balance of probabilities, that the paraphernalia is an instrument of unlawful activity. The CRA does not require an allegation or proof that a particular person committed a particular crime: Chatterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] 1 S.C.R. 624, at paras. 46-67.

[103] D/S Davis deposes that the HAMC colours are one of the eight characteristics of a criminal organization. D/S Davis notes that the HAMC have registered their name and death head logo under the Copyright Act, R.S.C. 1985, c. C-42. Minutes from the organization’s World and European Officers Meetings indicate that the HAMC looked to large corporations such as Coca-Cola and Nike to see how they deal with trademark infringements.

[104] Members must sign property agreements with the Hells Angels Motorcycle Corporation that govern their use of items bearing the HAMC colours. The agreements provide that the corporation has exclusive ownership of any and all articles bearing the Hells Angels name or the death head logo. There is evidence that the HAMC instructed its lawyers that it would not accept Hells Angels colours being subject to plea bargaining. I take this to mean that the HAMC would not accept an accused, as part of a plea bargain, turning over his colours to authorities.

[105] The colours are accepted at any Hells Angels chapter and indicate to the criminal community that one can do business with the member, like drug transactions, without fear of being ripped off or reported to police. The criminal community also knows that ripping off an HAMC member will be treated as ripping off the whole club. The colours are used to intimidate other outlaw motorcycle clubs and the public.

[106] The colours are used to mark the territory of the HAMC. D/S Davis deposes that members of the HAMC will announce their presence to rival gangs and other members of the criminal community by donning their colours and riding their motorcycles from place to place. The places they ride to are generally liquor licensed and known for criminal activity such as drug trafficking. The purpose of going to these places on motorcycles while wearing colours is to announce to everyone present that the HAMC is in the community and either has taken or will be taking control over criminal activity, including drug transactions, at that location. The wearing of colours is thus used as an intimidation tactic to facilitate the commission of criminal offences.

[107] Mr. Beres testified that, on leaving the HAMC, a member must give back his colours. There is evidence that the HAMC objected to others using their colours and would take money from those who wore the colours without permission.

[108] In contrast, Hells Angels support wear does not identify its wearer as having official club status. These clothes are sold by HAMC owned and operated businesses to the general public. Support wear does not contain the words “Hells Angels” or the death head logo but often has images and words that are intimidating in nature.

[109] In my view, items that identify their wearer as having official status within the HAMC are instruments of unlawful activity because they are used to intimidate rival gangs and the public, and to signal the wearer’s trustworthiness to the criminal community. By doing so, these items are used to engage in unlawful activity that is likely to result in the acquisition of other property, including money from drug transactions. For the purposes of this application, these items are those bearing the death head logo, items bearing the Hells Angels name, and items bearing the HAMC colours.

[110] However, items bearing Hells Angels-related slogans and items bearing the names of other outlaw motorcycle clubs do not identify the wearer or holder of these items as having official status with the HAMC. Since these items are available to the general public, the applicant has not proven that possessing them facilitates unlawful activity, intimidates others for the purposes of unlawful activity, or is used to mark the territory of the HAMC.

[111] The applicant also seeks forfeiture of pictures of HAMC members or affiliates, and plaques commemorating HAMC events, anniversaries or individual members or affiliates. The applicant has identified no evidence to allow me to conclude that these items are instruments of unlawful activity.

[112] Accordingly, of the personal property of which the applicant seeks forfeiture, only items bearing the death head logo, items bearing the Hells Angels name, and items bearing the HAMC colours are instruments of unlawful activity. The respondent is entitled to the return of the other items.

If 855 Darby Rd. or the Hell’s Angels paraphernalia are instruments of unlawful activity, does the responsible owner exception apply?

[113] When property has been found to be an instrument of unlawful activity, and a party to the proceeding proves that he 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”: s. 8(3) CRA.

[114] Section 7(1) of the CRA provides that a responsible owner is:

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.

[115] The parties agree that Mr. Panetta, Mr. Beres, and Mr. Ward bear the burden to establish that they are responsible owners, on a balance of probabilities: Ontario (Attorney General) v. Chow, [2003] O.J. No. 5387 (S.C.), at para. 33.

[116] In my view, none of the owners have been able to establish that they are responsible owners of 855 Darby Rd.

[117] As full patch members, each of the owners was required to attend church meetings, at which I have found criminal activity and efforts to avoid police detection were planned and discussed. There is no evidence that any of Mr. Panetta, Mr. Beres, or Mr. Ward notified law enforcement that 855 Darby Rd. was being used for this purpose or that they refused or withdrew permission to allow the planning of criminal activity to take place on the property.

[118] In addition, Mr. Beres for all intents and purposes abandoned the property when he left the HAMC in 2003. He has been an absentee owner. There is no evidence of any steps he took to ensure that the property would not be used as an instrument of unlawful activity.

[119] Mr. Ward also participated in discussions with Mr. Gault about a drug transaction on at least one occasion at the property. While the transaction was completed at his home, by engaging in the discussion, Mr. Ward did not act as a responsible owner.

[120] I also find that Mr. Panetta, Mr. Beres, and Mr. Ward have failed to establish that they are responsible owners of the paraphernalia that I have concluded are instruments of unlawful activity – these being items bearing the death head logo, items bearing the Hells Angels name, and items bearing the HAMC colours. These items are systematically used by HAMC members to intimidate others, mark their territory, and signal to the criminal community that they are trustworthy business partners. I infer that, as full patch members of the HAMC, Mr. Panetta, Mr. Beres, and Mr. Ward knew that these items were used as instruments of unlawful activity. There is no evidence that they notified law enforcement that the items had been or were likely to be used to engage in unlawful activity.

Is 855 Darby Rd. proceeds of unlawful activity?

[121] Under s. 3(1) of the CRA, and subject to certain limitations, a court shall order forfeiture of property where it finds on a balance of probabilities that the property is proceeds of unlawful activity.

[122] “Proceeds of unlawful activity” is defined under s. 2 of the Act as property acquired, directly or indirectly, in whole or in part, as a result of unlawful activity.

[123] The evidence of the source of funds used to purchase 855 Darby Rd. is unclear. The applicant argues that Gerald Ward had a lengthy criminal record prior to purchase. He did, but it was dated by the time of the purchase and it does not include for-profit offences. Moreover, the applicant has not proven that Mr. Ward contributed funds to acquire the property. The evidence suggests that Mr. Ward acquired his interest in the property by contributing his labour.

[124] Mr. Beres was a lottery winner and also a mechanic and transport truck operator. Mr. Panetta has been operating a dump truck business since 1999. There is no evidence as to the source of funds that Richard Ward contributed to the purchase of the property. The evidence does not allow me to conclude that, at the time of its purchase, 855 Darby Rd. was proceeds of unlawful activity.

[125] The respondent argues that, when determining whether a property was acquired from the proceeds of unlawful activity for purposes of the CRA, only the purchase of the property is relevant; any subsequent increase in equity resulting from mortgage payments and any ongoing payments to maintain the property, such as utilities, are not relevant. The respondent relies on Ontario (Attorney General) v. 108 Fred Young Drive, Toronto (In Rem), 2016 ONSC 2033, [2016] O.J. No. 2608, at paras. 43-45.

[126] It appears that the court in 108 Fred Young Drive was not directed to the decision of the Court of Appeal in Ontario (Attorney General) v. 1140 Aubin Road, Windsor and 3142 Halpin Road, Windsor (In Rem), 2011 ONCA 363, 269 C.C.C. (3d) 159. In that case, at paras. 39-41, the court held that paying down a mortgage constitutes a direct acquisition of an interest in property for the purposes of the CRA.

[127] Here, the evidence establishes that the mortgage on 855 Darby Rd. was paid down by monthly dues paid by the members, prospects and hangarounds of the Hells Angels Niagara chapter.

[128] There was some evidence that the dues paid were “shareholder loans” of Big Red Machine Co., which in turn paid rent. In my view, it does not matter how the contributions were structured. Money paid in dues paid the mortgage. Mr. Beres said so in his cross-examination.

[129] On the respondent’s own evidence, dues were paid by, among others, Gerald Ward, Kenneth Wagner and Richard Beaulieu. Each of these men were convicted of for-profit offences, including trafficking, that occurred during the time that they were paying dues at the clubhouse. On the applicant’s evidence, other dues-paying members have been convicted of for-profit offences, including drug offences, that occurred in the relevant time period.

[130] D/S Davis deposes that, as of 2008, 75% of HAMC membership had been convicted of criminal offences. Members of the HAMC also pay dues to the “BHC,” or the “Big House Crew.” These payments support HAMC members who have been convicted of criminal offences and are incarcerated. This demonstrates the widespread criminal activity within the HAMC and the support for that activity by its membership.

[131] In view of these facts, it is reasonable to infer that at least some of the dues were paid from money from drug sales. Therefore, at least some of the mortgage was paid down with money from drug sales.

[132] I thus conclude that the mortgage was paid down, at least in part, through funds acquired through unlawful activity. 855 Darby Rd. is thus proceeds of unlawful activity.

If 855 Darby Rd. is proceeds of unlawful activity, does the legitimate owner exception apply?

[133] The legitimate owner exception provides that where property is proceeds of unlawful activity, and a party to the proceeding proves that he 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.

[134] A legitimate owner is defined in s. 7(1) of the CRA as:

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).

[135] The parties agree that Mr. Panetta, Mr. Beres, and Mr. Ward bear the onus to prove, on a balance of probabilities, that they are legitimate owners: Chow, at para. 33.

[136] The respondent argues that there is no evidence that any of the property owners acquired the property as a result of unlawful activity; rather the evidence shows that the lawful owners were deprived of the property by the actions of the police informant, Mr. Gault. However, the respondent does not identify how Mr. Panetta, Mr. Beres, or Mr. Ward fit into the legitimate owner exemption.

[137] In my view, none of Mr. Panetta, Mr. Beres nor Mr. Ward has established that he is a legitimate owner.

[138] Mr. Ward was involved in drug trafficking and was a dues-paying member of the HAMC. His dues, along with the dues of others, went to pay down the mortgage on 855 Darby Rd. Since paying down a mortgage constitutes acquiring a property, he is not a legitimate owner.

[139] With respect to Mr. Panetta and Mr. Beres, I have found that they were participants in the church meetings at which the HAMC’s criminal ventures, including its involvement in the drug trade, were planned and discussed. As a result, I infer that, at the very least, they facilitated other members’ for-profit criminal activity. By collecting dues from those members to pay down the mortgage, they acquired the property using the proceeds of unlawful activity. They are not legitimate owners.

[140] Moreover, all the owners rented the property to the HAMC with knowledge that at least some members, prospects and hangarounds were involved in unlawful, for-profit, activity. The evidence establishes that there were warnings in the clubhouse that telephone conversations from the clubhouse were “conversations with police”, meaning that conversations were likely monitored. In addition, signs were up in the clubhouse prohibiting drugs and weapons. The respondents led evidence that there were strong rules against drug transactions and consumption in the clubhouse, which I accept. This suggests that they knew that members, prospects and hangarounds participated in drug transactions and consumption, and had access to weapons. Since they knew that at least some of those who paid dues at the clubhouse were involved in unlawful, for-profit activity, it is reasonable to infer that they knew that the property’s mortgage was being funded, at least in part, by proceeds of that unlawful activity.

[141] In my view, even if the owners, or any of them, were not personally involved in unlawful activity, one cannot facilitate the unlawful activity of others, knowingly use the proceeds of that activity to acquire property, and hide behind the legitimate owner exception on the basis that the unlawful activity was committed by others. For this reason, even if Mr. Panetta, Mr. Beres and Mr. Ward were legitimate owners, it would clearly not be in the interests of justice to make an order to protect their interest in 855 Darby Rd.

Is forfeiture clearly not in the interests of justice?

[142] Forfeiture under ss. 3(1) or 8(1) of the CRA shall be ordered when it is proven that the property is either proceeds of unlawful activity or an instrument of unlawful activity “except where it would clearly not be in the interests of justice”.

[143] To make out the clearly not in the interests of justice exception, the party seeking relief must demonstrate that, in the circumstances, the forfeiture order would be manifestly harsh and inequitable: Aubin Road, at para. 85.

[144] In Aubin Road, the Court of Appeal described three non-exhaustive factors that are relevant to determining whether forfeiture is clearly not in the interests of justice.

[145] First, the court should consider the role of the party seeking relief in the unlawful activity. This includes considering the party’s knowledge of criminal activity, the failure to take reasonable steps to prevent the criminal activity, and any profit derived from the criminal activity: para. 99.

[146] Second, the court should consider any disparity between the property acquired by unlawful activity and the amount sought to be forfeited: para. 104.

[147] Third, the court should consider the interplay between the purposes of the CRA and the exercise of the discretion to relieve from forfeiture. The purposes of the CRA are identified in s. 1. They are compensation of victims, crime prevention and deterrence. In most circumstances, those purposes are furthered by a forfeiture order: para. 107.

[148] A consideration of these factors does not support a conclusion that forfeiture of 855 Darby Rd. is clearly not in the interests of justice. I am unable to identify how much of the mortgage payments came from proceeds of unlawful activity, and as a result, I consider the disparity between the property acquired by unlawful activity and the amount sought to be forfeited to be a neutral factor. However, the first and the third factors support forfeiture. I have found that the owners facilitated unlawful activity on the property and knowingly took proceeds of unlawful activity to pay down its mortgage. Moreover, forfeiture of the property would serve the objectives of the CRA, and particularly the objective of crime prevention, by denying the HAMC the ability to use 855 Darby Rd. as a place to plan illegal activity.

[149] Similarly, a consideration of the factors identified in Aubin Road does not support a conclusion that forfeiture of the Hells Angels paraphernalia is clearly not in the interests of justice. The disparity between the property acquired and the amount sought to be forfeited is not a relevant consideration here, where the paraphernalia has only been established to be an instrument of unlawful activity, not proceeds of unlawful activity. As for the other two factors, Mr. Panetta, Mr. Beres, and Mr. Ward either used or were aware of the use of the HAMC paraphernalia as instruments to intimidate and further unlawful activity. Forfeiture of the paraphernalia furthers the purposes of the CRA because without it, individuals will lose the power, authority and intimidation associated with the HAMC, and HAMC’s unlawful activities will be hampered or frustrated.

[150] On this analysis, it is not clearly not in the interests of justice to order forfeiture of 855 Darby Rd. and the paraphernalia. However, the respondent also raises an argument with respect to Mr. Ward’s plea bargain which I consider below.

Does the plea bargain between Gerald Ward and the Federal Crown make forfeiture clearly not in the interests of justice?

[151] The respondent argues that Mr. Ward’s plea bargain requires that forfeiture not be ordered, either because forfeiture is clearly not in the interests of justice or under the umbrella of fairness. I understand this argument to relate only to 855 Darby Rd. While it appears some paraphernalia may have been seized, and some may have been returned, in the course of Mr. Ward’s criminal proceedings, there is no evidence before me, and no argument made, that any of the paraphernalia at issue in this proceeding is the same paraphernalia that was at issue in Mr. Ward’s criminal proceeding.

[152] At the time of Mr. Ward’s criminal proceedings, the federal Crown placed a restraint order over Mr. Ward’s Escalade, his motorcycle, over $300,000.00 in cash, his matrimonial home, and 855 Darby Rd. As part of Mr. Ward’s plea bargain, the federal Crown seized the cash and one vehicle. The rest of the property was returned.

[153] In 2011, when Mr. Ward swore his affidavit, he offered no evidence about his plea bargain or the discussions or circumstances that led to the return of some of his property. He gave no evidence of any representations that were made to him or about his understanding of the effect of plea bargain as it related to 855 Darby Rd.

[154] Mr. Ward’s criminal counsel, Mr. Evans, gave affidavit evidence in 2011, which was, for the most part, repeated and supplemented in a supplementary affidavit sworn in 2015. Mr. Evans deposes that Mr. Ward’s criminal trial was largely resolved at a pre-trial conference before McMahon J. on the following terms:

a. Mr. Ward would plead guilty to trafficking and possession of proceeds;

b. Mr. Ward would plead not guilty to the criminal organization offence. The evidence on that charge would be filed by way of an agreed statement of facts;

c. The Crown would seek a global sentence of 16 years. The defence could seek whatever it wished in the way of enhanced credit for pre-sentence custody;

d. Mr. Ward would agree to forfeiture of the cash, his motorcycle,[^7] and some HAMC paraphernalia;

e. The Crown would return Mr. Ward’s Escalade and not seek forfeiture of his matrimonial home or 855 Darby Rd.;

f. Once sentencing was completed, within 45 days, the Crown would lift the restraint orders on 855 Darby Rd. and the matrimonial home.

[155] Mr. Evans also deposes that this deal saw the Crown modifying its sentencing position only moderately, from the 18 years it originally sought to 16 years. Mr. Evans stated that the property issues were significant because “they allowed Mr. Ward to have peace of mind that his wife would not have to battle to stay in the residence and to preserve his interest in the Darby Rd. property”. Mr. Ward does not give this evidence.

[156] Mr. Evans also deposes that there was no evidence connecting 855 Darby Rd. with any of the offences with which Mr. Ward had been charged. Such a connection is relevant to criminal forfeiture, but not relevant to forfeiture under the CRA.

[157] Mr. Evans’ affidavit explains that Mr. Ward was sentenced, and the money and motorcycle were forfeited on consent. As expected, the Crown lifted the restraint orders on 855 Darby Rd. and the matrimonial home.

[158] Mr. Evans deposes that the agreement with respect to the properties was not put on the record because, as is common, it was a verbal agreement between the defence and Crown that did not require McMahon J. to do anything. The court proceedings are silent with respect to 855 Darby Rd. and the matrimonial home.

[159] On cross-examination, Mr. Evans agreed that the federal Crown never said that nobody else would seize the property, and he admitted the federal Crown did not mislead them in any way. However he said that it would have rendered the whole agreement “meaningless if the Crown was going to give with one hand and take with the other.” He stated that he assumed he was aware of the CRA and that he advised Mr. Ward on the plea bargain. He said that the return of the property was an integral part of the plea agreement and without it, he doubted that the agreement as a whole would have gone forward. He noted that Mr. Ward’s plea bargain also benefitted the provincial Crown. Mr. Ward’s trial would have been lengthy and would have required a great deal of security. The plea bargain thus represented a significant economic savings to the provincial Crown.

[160] On his cross-examination, Mr. Ward gave very brief evidence about his plea bargain. He stated that there was an agreement that he would get the clubhouse back. When asked whether the federal Crown ever promised that no one else would come after the clubhouse, Mr. Ward said “I don’t know. It was brought up in court.” (By “brought up in court”, I assume he meant the pre-trial conference where Mr. Evans deposes the agreement with respect to the return of the properties was reached, since it is apparent the properties were not discussed on the record in the criminal proceedings.)

[161] Mr. Ward confirmed that the clubhouse was to be “unseized”. He stated that “they” didn’t come through on their promise. It appears from the transcript that he may not have understood that the federal restraint order was lifted but a provincial preservation order was obtained.

[162] Notably, no witness speaks to any statement or promise of the federal Crown purporting to bind the provincial Crown, or even any assurance that 855 Darby Rd. was safe from forfeiture. Rather, the discussions as they are described in evidence refer to the properties that had been restrained by the federal Crown being returned to Mr. Ward.

[163] The respondent argues that Mr. Ward was lulled into a false sense of security by the federal Crown. It relies on the decision of the Court of Appeal in Ontario (Attorney General) v. 714 Railton Avenue, 2014 ONCA 397, 310 C.C.C. (3d) 448, to argue that in such circumstances, forfeiture should not be ordered.

[164] In Railton, the accused was charged with production of marijuana and possession of marijuana for the purposes of trafficking. He pleaded guilty to the production offence and received a fine. Subsequently, the Attorney General for Ontario applied for a forfeiture order under the CRA. The application judge found that the property was an instrument of unlawful activity and that the accused was not a responsible owner.

[165] At issue was the “clearly not in the interests of justice” exception. The application judge was troubled by the fact that, in the criminal proceeding, the federal prosecutor made statements about the accused’s residence being restrained based on, among other things, income information available at the time. However, the accused provided documents explaining previously unexplained sources of wealth. In reliance on these documents, the federal prosecutor sought an order vacating the restraint order and stated that there would be no forfeiture proceedings.

[166] Based on this evidence, the application judge concluded that the accused was misled, or lulled into a false sense of security, that his home would not be the subject of forfeiture. She was also concerned that the “plea deal process so vital to the orderly and expeditious administration of justice might be impaired if an accused will not entertain a plea arrangement because of concern for future jeopardy”: Ontario (Attorney General) v. 714 Railton Ave, 2013 ONSC 1291, [2013] O.J. No. 1707, at para. 70, cited in Railton (ONCA), at para. 21.

[167] The Court of Appeal concluded that the trial judge’s concern about the integrity of the plea bargaining process was misplaced. It noted that uncertainty as to the civil consequences of a guilty plea has always existed. However, it found that the application judge’s factual analysis, under the umbrella of fairness, was entirely supportable and not in conflict with prevailing jurisprudence. The federal prosecutor formally agreed to an order lifting the restraint order in “language that a reasonable person could assume meant that although he would have to pay a $10,000 fine and forfeit chattel property worth about $8,000, at least his house was safe”: para. 20.

[168] The respondent argues that this case presents a similar situation to Railton. Mr. Ward entered into his guilty plea believing that 855 Darby Rd. would be safe from seizure. Accordingly, it argues, it would be unfair to grant an order of forfeiture. The respondent states that all the federal Crown has to do is make clear that its plea agreements do not bind the provincial Crown in order to relieve of any unfairness, but the federal Crown did not do so.

[169] Railton must be read together with the body of law that holds that where forfeiture of property is not addressed by the criminal court, there is no reason it cannot be sought under the CRA. The federal Crown and provincial Crown are divisible for this purpose: Chatterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] S.C.J. No. 19, at para. 49; Aubin Road, at paras. 59-62; Ontario (Attorney General) v. $69,360 in Canadian Currency and $2295 in US Currency (In Rem), [2015] O.J. No. 3534 (S.C.), at para. 10.

[170] What of circumstances where there is a plea bargain involving property? In Saskatchewan (Seizure of Criminal Property Act 2009, Director) v. Nagy, 2016 SKQB 332, [2016] S.J. No. 557, an accused entered a guilty plea, and was convicted and sentenced for possession of a controlled substance and possession of proceeds of crime. A consent order was issued, one of the terms of which was to return funds that were at issue in the proceeding to the accused pursuant to s. 490(9)(c) of the Criminal Code. Subsequently, the province began a forfeiture application. The court considered the accused’s plea bargain in the context of the provincial forfeiture application.

[171] The court noted that the consent order was within the realm of a s. 490 administrative determination returning assets. With respect to the plea agreement, the court recognized that the federal prosecutor was not authorized to bargain away the civil forfeiture just as the director could not bargain with respect to the prosecution: paras. 80-81.

[172] The court considered whether forfeiture would have a chilling effect on plea bargains and, consistent with the decision in Railton, found that there was a complete lack of evidence of any such chilling effect. Moreover, the court held that even if there had been evidence to establish that some plea bargains may be jeopardized, there was no authority to demonstrate that such an eventuality could have the effect of authorizing the overriding of legislative provisions enabling forfeiture: paras. 87-88. The plea bargain did not make the forfeiture of the property at issue clearly not in the interests of justice: para. 92.

[173] It is apparent from the transcript of the criminal proceedings that forfeiture of 855 Darby Rd. was not addressed by the criminal court on the record. Lifting the restraint order was an administrative step taken by the federal Crown, and not ordered by McMahon J. But lifting the restraint order was part of the plea bargain Mr. Ward had reached with the federal Crown. The respondent does not argue that the Crown is not divisible; it argues that with respect to the plea agreement, the federal Crown binds the provincial Crown, or that it is unfair to allow the provincial Crown to seize the property when the federal Crown agreed to return it.

[174] In effect, the respondent’s claim is not that the federal Crown represented that 855 Darby Rd. would be safe from seizure by the provincial Attorney General; rather it is that the federal Crown did not make it explicit that the provincial Attorney General might yet bring an application for forfeiture. The question is whether the holding in Railton extends this far.

[175] In my view, it does not. Railton was an unusual case, where assurances had been given to the accused on the record that a reasonable person would think meant that his house was safe from forfeiture. It raised a significant fairness issue. This case is more like Nagy, where a plea bargain was made but did not bind the provincial Crown. This conclusion is consistent with the law that holds that the provincial and federal Crown are divisible in this context, and with the conclusion in Railton that there has always been uncertainty of the civil consequences of a guilty plea.

[176] Unlike Railton, in this case no explicit promises were made to Mr. Ward. The unfairness his counsel alludes to – that a key element of the bargain disappeared for Mr. Ward when the province began its forfeiture proceeding – is a civil consequence about which his counsel could have advised him.[^8]

[177] The respondent argues that I should draw an adverse inference about the content of the discussions between Mr. Ward and the federal Crown because the applicant has failed to adduce evidence from the federal prosecutor. I decline to draw an adverse inference on this basis. The respondent’s own evidence falls short of establishing an agreement between Mr. Ward and the federal Crown that would have led a reasonable person to believe his property would be safe from provincial forfeiture. I will not draw an adverse inference to assume that the federal prosecutor’s evidence would have been stronger or clearer than that offered by the respondent to establish the kind of agreement that created unfairness on the facts in Railton.

[178] As a result, I find that it is not clearly not in the interests of justice to order forfeiture.

[179] The respondent also argues that forfeiture can be denied under the “umbrella of fairness”, relying on Railton, at para. 20, where the Court of Appeal found that the application judge’s factual analysis of the circumstances there was entirely supportable “under the umbrella of fairness”.

[180] In my view, in so writing, the Court of Appeal was not setting out a second exception to forfeiture beyond the “clearly not in the interests of justice” exception in the CRA. Rather, the Court of Appeal’s decision makes clear that the application judge’s analysis was undertaken pursuant to the “clearly not in the interests of justice” exception. The application judge considered various factors that she concluded favoured forfeiture, but she was troubled by a different factor - the submissions made by the federal prosecutor to the court when he indicated there would be no forfeiture application and explained that decision with reference to the financial documentation that the accused had provided.

[181] I conclude that there is only one exception. If forfeiture should be denied under the umbrella of fairness, it will be because forfeiture is unfair to such an extent as to make forfeiture clearly not in the interests of justice. I have already found that it is not clearly not in the interests of justice to order forfeiture of 855 Darby Rd.

Costs

[182] The applicant seeks its costs of this proceeding. The respondent argues it is not entitled to costs because, although the notice of application indicates the applicant is seeking costs, it does not say against whom. The respondent argues that the property cannot pay costs, and the individual owners were never put on notice that costs would be sought against them.

[183] Section 15.6(1) of the CRA provides that all proceedings under Parts II, III and III.1 are in rem and not in personam. Section 15.6(3) of the CRA provides that “the rules of court apply with necessary modification to the court’s jurisdiction to make an order in respect of any party or other person in any proceeding as if the proceeding were in personam and such person were a named defendant or respondent in the proceeding”.

[184] The operation of s. 15.6(3) thus provides the jurisdiction for the court to make a costs order against the individual owners.

[185] The parties generally agree on the legal principles that govern costs awards. Costs generally follow the event. Fixing costs is a discretionary decision under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The discretion must be exercised in accordance with the factors set out in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the principle of indemnity, the reasonable expectations of the unsuccessful party and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants Council (Ontario), 2004 ONCA 14579, 71 O.R. (3d) 291, at paras. 26 and 37.

[186] The parties also generally agree about the application of many of the factors set out in r. 57.01(1). In particular, the application involved complex questions of law and fact, both parties’ conduct was appropriate, and the application proceeded in an orderly manner, without unnecessary or improper steps. No party refused to admit anything that should have been admitted.

[187] If it had been successful, the respondent would have sought $40,431.75 in partial indemnity costs, including H.S.T. and disbursements, and argues that this amount is fair and reasonable for its costs. The applicant seeks $49,881.71 in costs, including $11,456.71 in disbursements. The applicant’s partial indemnity costs are $5,883.70 more than the respondent’s partial indemnity costs, excluding disbursements and HST on the respondent’s fees (the applicant does not claim HST).

[188] The respondent argues that the applicant’s costs are too high, and points to the voluminous material filed by the applicant, much of which it says was unnecessary, irrelevant or duplicative. I accept this submission.

[189] The applicant filed seven affidavits. Many of them were very lengthy. Some of those involved recitations of facts, including results of surveillance involving individual members of other chapters of the HAMC. Much of this evidence was not referred to by the applicant in its written or oral argument on the motion, and I did not rely on it. Much of it was simply not necessary to decide this application.

[190] I note that the applicant’s disbursements for printing are extremely high and unexplained. Of the $11,456.71 in disbursements, $6,943.12 are printing costs. This includes twelve regular copies, plus one colour copy, of the motion record. I assume this is the motion record for the preservation order. I do not have the motion record before me, but I note that the notice of application was served on only six respondents (and the application record only on counsel for the respondents). I cannot understand why thirteen copies of the motion record were necessary or why the owners of the respondent should have to pay for that many copies. Moreover, the elevated printing costs also reflect the unnecessary evidence that the applicant placed before me.

[191] Accordingly, I reduce the applicant’s recoverable disbursements to $4,000.00 and the applicant’s partial indemnity fees by $10,000.00 to $28,425.00. The applicant is thus entitled to its partial indemnity costs from Mr. Panetta, Mr. Beres, and Mr. Ward jointly and severally in the amount of $32,425.00. I recognize that this amount is less than the amount the respondent would have sought in costs if successful, and may thus be said to be less than the reasonable expectations of Mr. Panetta, Mr. Beres, and Mr. Ward. That may be so, but costs must still be fair and reasonable. In my view, given the unnecessary material included in the applicant’s application record, $32,425.00 in costs and disbursements is fair and reasonable.

Conclusion

[192] The applicant has established that 855 Darby Rd. is an instrument of unlawful activity. The responsible owner exception does not apply.

[193] The applicant has established that the HAMC paraphernalia bearing the death head logo, the paraphernalia bearing the Hell Angels name and the paraphernalia bearing the HAMC colours are instruments of unlawful activity. The other identified items of paraphernalia, including items bearing HAMC-related slogans or slogans of other outlaw motorcycle clubs, pictures of HAMC members or affiliates and plaques commemorating HAMC events, anniversaries, or individual members or affiliates are not instruments of unlawful activity and must be returned. The responsible owner exception does not apply to the paraphernalia that I have found to be instruments of unlawful activity.

[194] The applicant has established that 855 Darby Rd. is proceeds of unlawful activity. The legitimate owner exception does not apply.

[195] Given the facilitation or participation of the owners in the unlawful activity, and that forfeiture will further the CRA’s goals including crime prevention, it is not clearly not in the interests of justice to order forfeiture. Moreover, the plea bargain between Mr. Ward and the Federal Crown does not lead to the conclusion that forfeiting the property is clearly not in the interest of justice. Neither does it require that forfeiture be denied under the umbrella of fairness.

[196] Mr. Panetta, Mr. Beres, and Mr. Ward are jointly and severally liable for the applicant’s costs in the amount of $32,425.00 all inclusive.

Madam Justice J.T. Akbarali

Released: November 06, 2017

CITATION: Attorney General (Ontario) v. 855 Darby Road, Welland et al, 2017 ONSC 4953

COURT FILE NO.: CV-09-379723

DATE: 20171106

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Attorney General of Ontario Applicant

– and –

855 Darby Road, Welland and All Contents (In Rem) Respondent

REASONS FOR JUDGMENT

Akbarali J.

Released: November 06, 2017

[^1]: The parties refer to the orders restraining the property as both, restraint orders and management orders. The distinction is not relevant for purposes of these reasons. I use the term “restraint orders” herein. [^2]: These facts are also in evidence from sources with personal knowledge, including the owners of the property and D/S Davis. [^3]: The court also set out circumstances where it might be unfair to allow the admissions into evidence in the subsequent proceeding, none of which apply here. [^4]: It does not argue that the paraphernalia are proceeds of unlawful activity. [^5]: The colours are normally worn on a sleeveless denim or leather vest. They consist of a club emblem, which is a winged death head skull that is sewn in the centre along with a patch indicating “MC” for motorcycle club. Above these is a top rocker indicating the name of the club and below these is a bottom rocker indicating the province or state in which the wearer’s chapter is located. Thus, while the colours include the death head logo, they are different than the logo. [^6]: D/S Davis’s evidence included evidence about the eight characteristics of criminal organizations. [^7]: Mr. Ward’s evidence was that he got to choose whether to forfeit the Escalade or his motorcycle. In his cross-examination he states that he forfeited the Escalade. The record of proceedings indicates he forfeited his motorcycle. Nothing turns on this discrepancy. [^8]: I have no evidence before me as to the legal advice Mr. Ward received, if any, with respect to the potential that the province might bring forfeiture proceedings.