COURT FILE NO.: CR-17-0000-129-00MO DATE: 20180308

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN IN RIGHT OF CANADA Applicant

– and –

msi SPERGAL, INC., in its Capacity as Receiver of BANNERS BROKER INTERNATIONAL LTD. and STELLAR POINT INC. Applicant

– and –

CHRISTOPHER SMITH Respondent

– and –

RAJIV DIXIT Respondent

– and –

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO Respondent

Counsel: E. Carley, for the Applicant Federal Crown J. Martin, for the Applicant, msi Spergal, Inc. A. Patel and H. Fogul, for the Respondent Smith E. Mehrabi, for the Respondent Dixit B. McNeely, for the Respondent Provincial Crown

HEARD: March 5, 2018.

RULING ON VARIOUS APPLICATIONS IN RELATION TO FORFEITURE ORDERS

SCHRECK J.:

[1] On April 27, 2017, a judge of the Ontario Court of Justice made a forfeiture order in relation to a number of documents and electronic devices. The order was made as part of the sentencing of Christopher Smith and Rajiv Dixit (the respondents), who had pleaded guilty to operating an illegal pyramid scheme, contrary to s. 55.1(2) of the Competition Act. The prosecution of that matter had been delegated to the Provincial Crown, so the items were ordered forfeited to Her Majesty the Queen in Right of the Province of Ontario. The order also required that some of the items be destroyed within 30 days (“the destruction order”).

[2] The Canada Revenue Agency (“CRA”) wishes to obtain a search warrant in relation to the forfeited items in furtherance of an investigation it is conducting into the same illegal pyramid scheme that gave rise to the Competition Act charges. As a result, the Federal Crown now seeks to have the forfeiture order varied so that the items are not destroyed. As well, a judge of the Commercial List of this Court has appointed msi Spergel Inc. (“the Receiver”) as Receiver over a number of companies involved in the pyramid scheme. The Receiver also wishes to have access to the forfeited items and has joined in the application. Both parties, as well as the Provincial Crown, take the position that the destruction order should be set aside. The respondents do not oppose this.

[3] Unfortunately, this application is marked by a number of procedural complexities. For the reasons that follow, despite the fact that all parties are in agreement that the destruction order should be set aside, it is my view that it is not open to me to provide that remedy. However, for reasons I will explain, it is open to me to suspend the destruction order.

I. HISTORY OF THE PROCEEDINGS

[4] In January 2013, an investigation was commenced in relation to the respondents and a number of related entities. A number of different government agencies were involved in the investigation, including the Competition Bureau of Canada, the Toronto Police Service (“TPS”), the Ontario Ministry of Government and Consumer Services, the Ontario Ministry of Finance and the Royal Canadian Mounted Police. Later, the CRA became involved in the investigation as well. During the course of the investigation, the TPS executed a search warrant on the respondents’ residences and business premises, resulting in the seizure of a number of items, including those which would eventually become the subject of the forfeiture order.

[5] On December 9, 2015, the TPS laid a number of Criminal Code and Competition Act charges against the respondents. No charges were laid under the Income Tax Act, however, the respondents were apparently notified by the CRA that its investigation was ongoing and that such charges may be laid. There appears to have been some suggestion that an early resolution of the criminal charges could have some bearing on the outcome of any tax prosecution.

[6] On April 27, 2017, the respondents entered guilty pleas to charges laid under s. 55.21(2) of the Competition Act before Lipson J. of the Ontario Court of Justice. This resolution followed a series of discussions, involving several judicial pre-trials with Lipson J. There was a joint submission as to sentence, which was acceded to by Lipson J., and which contemplated conditional sentences of two years less a day for both respondents, fines in lieu of forfeiture amounting to several million dollars, and the forfeiture orders that are the subject of the proceedings before this court.

[7] According to the formal forfeiture order signed by Lipson J., the order was being made in relation to an application by the Attorney General of Ontario pursuant to s. 490.1(1) of the Criminal Code for the forfeiture of offence-related property. However, the order was made pursuant to both s. 490.1(1) and s. 490(9), which relates to the forfeiture of items seized pursuant to a search warrant. Section 490.1(1) provides that items may be forfeited “and disposed of by the Attorney General … in accordance with the law”. Section 490(9) states that the items may be forfeited and “disposed of as the Attorney General directs, or otherwise dealt with in accordance with the law”. Neither section appears to give the court the power to order that the items be destroyed.

[8] It would seem that Lipson J. did not have jurisdiction to make an order pursuant to s. 490.1 because that section applies only to convictions under the Criminal Code and the Corruption of Foreign Public Officials Act. It does not apply to the Competition Act. I should note that the forfeiture order was part of a joint submission with several components, including a conditional sentence order with a number of conditions and multiple fine orders with terms of imprisonment in default. It appears from the transcript that the forfeiture order was drafted and agreed upon by the parties before being presented to Lipson J. for his signature. In circumstances such as this, a trial judge should be able to rely on counsel to ensure that the order being requested was legally available and properly reflected the intentions of the parties. Unfortunately, that did not occur in this case.

[9] On May 23, 2017, Molloy J. of this Court stayed the forfeiture order pending the completion of these proceedings or a further order of this court.

II. ANALYSIS

A. The Problem of Different Appeal Routes

[10] According to s. 490.1(3), appeals from orders made pursuant to s. 490.1(1) are to the Court of Appeal. According to s. 490(17), the appeal route from orders made pursuant to s. 490(9) depend on which court made the order. Where the order was made by the Ontario Court of Justice, the appeal is to this court. Because the forfeiture order was made pursuant to both s. 490.1(1) and s. 490(9), it would appear that any variation of the order on appeal would require appeals to both this court and the Court of Appeal.

[11] The applicant Federal Crown, joined by the Receiver and the Provincial Crown, suggests that the procedural problem can be solved by having this court review the s. 490.1(1) order on an application for certiorari because this would “eliminate duplicate appeal proceedings” and would be “in the interests of judicial economy”.

B. This Court’s Inherent Jurisdiction to Provide Prerogative Relief

[12] While I am sympathetic to the applicant’s wish to deal with this matter expeditiously, I am not persuaded that it would be appropriate for me to exercise any inherent jurisdiction with respect to the s. 490.1(1) order where there is a statutory right of appeal to not only a different court, but a higher court. It is not for me to undertake a task which Parliament has determined should be undertaken by the Court of Appeal. I draw this conclusion for two reasons.

(i) The Privative Clause

[13] First, I note that the Criminal Code has a privative clause which prevents resort to certiorari where there is a statutory right of appeal. Section 776 provides:

776. No conviction or order shall be removed by certiorari

(b) where the defendant appeared and pleaded and the merits were tried, and an appeal might have been taken, but the defendant did not appeal.

There is authority that suggests that this section does not apply to the Crown: R. v. Conley (1979), 1979 ALTASCAD 129, 17 A.R. 447, 47 C.C.C. (2d) 359 (S.C.A.D.); R. v. Eross, 1970 CanLII 1004 (BC CA), [1970] 5 C.C.C. 169 (B.C.C.A.). While I have considerable doubts as to the correctness of those decisions, for reasons I will explain I need not decide this issue.

(ii) The Availability of Prerogative Relief in Lieu of an Appeal

[14] Apart from s. 776 of the Criminal Code, there is a venerable line of authority stating that a court should not exercise its discretion to provide prerogative relief where the parties could resort to a statutory right of appeal. The two authorities relied on by the Federal Crown support, rather than contradict this line of authority. In R. v. Raponi, 2004 SCC 50, [2004] 3 S.C.R. 35, the Court held that an application for certiorari was the appropriate mechanism for the review of a Provincial Court judge’s order for the return of seized monies. However, it is clear that the Court reached this conclusion because there was no statutory right of appeal (at paras. 40-41):

The question then is whether the Court of Appeal had jurisdiction to set aside the orders. The Code provides no appeal from an order under s. 490(2). It follows that the Court of Appeal had no jurisdiction to set aside the Provincial Court’s erroneous order or the judgment of the Court of Queen’s Bench, which was not properly seized of an appeal.

Since it has not been validly appealed, the Provincial Court judge’s order for the return of the money to Raponi remains in force. The Crown should have instituted an action for certiorari seeking to have the Provincial Court judge’s order set aside for want of jurisdiction.

[15] The applicants also rely on R. v. Dubois, 1986 CanLII 60 (SCC), [1986] 1 S.C.R. 366 for the proposition that certiorari may be appropriate despite the existence of alternative remedies. However, the issue in that case was whether the Crown could apply for certiorari to quash a decision rendered at a preliminary inquiry. The alternative remedies being discussed were not statutory appeals but, rather, the Crown’s power to prefer an indictment or re-charge the accused. While the Court did conclude that the existence of alternative remedies does not preclude resort to certiorari, this conclusion appears to be confined to alternative remedies other than an appeal (at p. 381):

The discretion to decline to grant certiorari is most frequently exercised where the alternative remedy consists of a right to appeal the decision complained of (see Reid and David, Administrative Law and Practice (2nd ed., 1978), at pp. 369‑72, Harelkin v. University of Regina, 1979 CanLII 18 (SCC), [1979] 2 S.C.R. 561). Other alternative remedies have also been considered to justify a refusal of certiorari (i.e., where the statute sets out specific alternatives other than an appeal, or where there may be a right of action for damages or for a declaration). However, “[t]he court ought not to refuse certiorari because of alternative remedies other than appeal unless it is clearly satisfied that those other remedies are more appropriate" (De Smith’s Judicial Review of Administrative Action (4th ed., 1980), at p. 426). [Emphasis added].

A long line of subsequent authority makes it clear that prerogative relief should only be granted where alternative remedies are “inadequate”: Strickland v. Canada (Attorney General), 2015 SCC 37, [2015] 2 S.C.R. 752, at para. 70; R. v. Larche, 2006 SCC 56, [2006] 2 S.C.R. 762, at para. 70; Matsqui Indian Band v. Canadian Pacific Ltd., 1995 CanLII 145 (SCC), [1995] 1 S.C.R. 3, at paras. 30-37; Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541, 111 O.R. (3d) 567, at paras. 62-63; Toth Equity Ltd. v. Ottawa (City), 2011 ONCA 372, 283 O.A.C. 33, at paras. 33-34; R. v. 1353837 Ontario Inc. (2005), 2005 CanLII 4189 (ON CA), 74 O.R. (3d) 401 (C.A.), at para. 20; Danlyluk v. Ainsworth Technologies Inc. (1998), 1998 CanLII 5431 (ON CA), 42 O.R. (3d) 235 (C.A.), at paras. 54-56.

[16] While an appeal to the Ontario Court of Appeal may be less convenient and expeditious, I am unable to conclude that it would be inadequate. As a matter of principle, in my view only in very rare cases would mere convenience or expediency be a sufficient reason for this court to grant prerogative relief in a situation where Parliament has created a right of appeal, particularly where that appeal is to a higher court.

(iii) The Federal Crown’s Right of Appeal

[17] Counsel for the respondent Provincial Crown also submits that I should exercise my inherent jurisdiction, but on a different basis. He points out that s. 490.1(3) only gives a right of appeal to the person who has been convicted or to the Attorney General. Because this matter was prosecuted by the Provincial Crown, he submits that the definition of “Attorney General” in s. 2 of the Criminal Code would mean only the Provincial Attorney General. Since the Federal Crown has no statutory right of appeal, it would be appropriate for it to seek relief by way of an application for certiorari.

[18] While I found this submission to be an initially attractive solution to the procedural quagmire in this case, it unfortunately does not withstand scrutiny. Section 2 of the Criminal Code defines “Attorney General” as follows:

Attorney General

(a) subject to paragraphs (b.1) to (g), with respect to proceedings to which this Act applies, means the Attorney General or Solicitor General of the province in which those proceedings are taken and includes his or her lawful deputy,

(b) with respect to Yukon, the Northwest Territories and Nunavut, or with respect to proceedings commenced at the instance of the Government of Canada and conducted by or on behalf of that Government in respect of a contravention of, a conspiracy or attempt to contravene, or counselling the contravention of, any Act of Parliament other than this Actor any regulation made under such an Act, means the Attorney General of Canada and includes his or her lawful deputy …. [Emphasis added].

[19] The forfeiture order at issue in this case was made in relation to a conviction under the Competition Act, a federal statute. The Provincial Crown prosecuted this case because the Federal Crown had delegated its authority to do so, presumably because the respondents had initially been charged with Criminal Code charges and it made sense to have one prosecutor deal with all of the charges. However, the proceedings were nonetheless “commenced at the instance of the Government of Canada” and were in relation to a federal statute. The fact that the Federal Crown delegated its authority to the Provincial Crown does not mean that the Federal Crown has forever lost its authority over the case. To the contrary, despite the delegation, the Federal Crown always retained ultimate control over the prosecution: R. v. DiGiuseppe, [2003] O.J. No. 5630 (C.J.), at paras. 18-20; R. v. Luz (1991), 1988 CanLII 4529 (ON SC), 5 O.R. (3d) 52 (H.C.).

C. The Rights of the Receiver

[20] Initially, the Receiver claimed standing in this proceeding on the basis that it is a “person aggrieved” by the forfeiture order, as that term is used in s. 490(17). If the Receiver is a “person aggrieved”, then it has its own independent right of appeal to this court pursuant to s. 490(17) in relation to the order made pursuant to s. 490(9). With respect to the s. 490.1(1) order, the Receiver adopted the Federal Crown’s submission that I should exercise my inherent jurisdiction to review the order. For the reasons I have explained, I do not believe that it would be appropriate for me to do so.

[21] It is unclear why the Receiver relied on my inherent jurisdiction because unlike the Federal Crown, it does have a route to this court to have its interests protected. Section 490.5 of the Code provides that where property has been ordered forfeited pursuant to s. 490.1(1), “any person who claims an interest in the property” may, with certain exceptions that do not apply in this case, “apply by notice in writing to a judge” for an order declaring that the applicant’s interest in the property is not affected by the forfeiture order. Once such an order is made, the applicant can apply to the Attorney General for the return of the property.

[22] Section 490.5 provides that an interested third party can make an application to a “judge”. The term “judge” is not defined. In some sections of the Criminal Code (ss. 164, 320, 490.2, 493, 552), “judge” is defined for the purposes of those sections as being a judge of the Superior Court. However, in s. 83.28, “judge” is defined as being a judge of either the Superior Court or the Ontario Court of Justice. Either way, a judge of this court meets the definition.

[23] Section 490.5 requires that the application be brought within 30 days after the forfeiture order is made. After I raised the possibility of a s. 490.5 application, the Receiver applied for an extension of time, which was opposed by the respondent Smith. Because the Receiver did bring an application before the Commercial List of this court to stay Lipson J.’s order within 30 days and then joined the Federal Crown’s application soon after, it clearly demonstrated an intention to seek a remedy within the allotted time. In my view, no party would be prejudiced if the Receiver was granted an extension of time. As a result, I granted the extension and the Receiver brought an application pursuant to s. 490.5.

[24] As there does not appear to be any dispute as to the nature of the Receiver’s interest in the property and the other requirements of s. 490.5 have been met, I made an order pursuant to s. 490.5(4) declaring that the Receiver’s interest is not affected by the forfeiture and that the nature of that interest is as described in the receivership orders of Matheson J., dated August 22, 2014, Newbould J., dated October 15, 2014 and August 7, 2015, and Hainey J., dated April 8, 2016.

[25] Because the destruction order made by Lipson J. would have the effect of destroying the Receiver’s possessory interest in the forfeited items, in my view the order I have made pursuant to s. 490.5(4) supersedes that aspect of Lipson J.’s order. As a result, until this or another court orders otherwise, the destruction order made by Lipson J. pursuant to s. 490.1(1) is suspended to the extent necessary to give effect to the order I have made pursuant to s. 490.5(4). Pursuant to s. 490.5(6) of the Code, the Receiver may apply to the Attorney General to obtain copies of the property.

D. The Appeal Pursuant to [s. 490(17)](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html) of the [Criminal Code](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html)

[26] There is no issue that pursuant to s. 490(17), I have the jurisdiction to entertain an appeal from the s. 490(9) order. The parties are all agreed that the destruction order made pursuant to s. 490(9) order should be set aside. Accordingly, the Federal Crown’s appeal is allowed to that extent. As a result, it is unnecessary to determine the issue of whether the Receiver is an “aggrieved person” for the purposes of s. 490(17).

E. Other Issues

[27] The respondents have raised a concern that some of the items covered by the forfeiture order may contain solicitor-client privileged communications. It is premature for this court to take any steps to preserve such privilege. The applicants have been put on notice as to the possibility that some of the material is privileged. I am sure that their counsel, as officers of the court, will take steps to ensure that any privilege that may exist is protected and that any privilege claims are judicially determined before the material is provided to anybody: Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209, at para. 49.

[28] The parties have agreed that they will attempt to come to an agreement as to how to determine which portions of the forfeited material come within the scope of the receivership orders. If they are unable to do so, they may seek direction from a judge of the Commercial List, who would be better suited than I am to determine whether or not material falls within the scope of the receivership orders.

[29] The respondents also take the position that their guilty pleas before Lipson J. were intended to a be a global resolution of all charges arising from the pyramid scheme and that any additional tax charges laid by the CRA would be contrary to the agreement they had reached with the prosecution. Again, this issue is premature. If the respondents are charged with any new offences, it would be open to them to bring an abuse of process application at that time.

[30] Counsel for the Federal Crown inquired whether it would be open to the CRA to seek a search warrant with respect to the material that is the subject of the destruction order, given that the destruction order has been suspended as a result of the Receiver’s s. 490.5 application. In my view, these are matters that must be determined by the judicial officer considering the CRA’s search warrant application and, if necessary, the trial judge hearing any s. 8 Charter application that may be brought at the respondents’ trial on tax charges, should such charges be laid. It of course remains open to the Crown to appeal the s. 490.1 order to the Court of Appeal. I note that Rule 24 of the Criminal Appeal Rules allows for appeals to be made in writing. As it appears that all parties are in agreement that the order should be set aside, it may be that the matter can be dealt with expeditiously in this way.

III. DISPOSITION

[31] For the foregoing reasons, it is not open to me to set aside the order made pursuant to s. 490.1(1). However, the appeal against the s. 490(9) order is granted and the destruction aspect of the order is set aside.

[32] The Receiver’s application pursuant to s. 490.5 is granted and this court makes a declaration pursuant to s. 490.5(4) that the Receiver has an interest in the forfeited material to the extent that that material falls within the scope of the receivership orders described above. The destruction order made pursuant to s. 490.1 is suspended as necessary to give effect to the order I have made pursuant to s. 490.5(4), until such time as this or another court orders otherwise. It remains open to the Crown to appeal the s. 490.1 order to the Court of Appeal.

Order accordingly

Justice P.A. Schreck

Released: March 8, 2018.

R. v. Smith, 2018 ONSC 1614

ONTARIO SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN IN RIGHT OF CANADA et al.

– and –

CHRISTOPHER SMITH et al.

RULING

P.A. Schreck J.

Released: March 8, 2018