COURT FILE NO.: 19-15003014

DATE: 20190206

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN

Applicant

– and –

NORMA WALTON and RONAULD WALTON

Respondents

– and –

PETER GRIFFIN and SHARA ROY

Applicants (Subpoenaed Parties)

Sean Doyle, counsel for the Crown

Howard Cohen, Jessica Parise, and Michael Kohl, counsel for Norma and Ronauld Walton

Frank Addario and James Foy, counsel for Peter Griffin and Shara Roy

HEARD: January 7 and 8, 2019

M.A. CODE J.

REASONS FOR JUDGMENT

A. OVERVIEW

[1] The accused Norma Walton and Ronauld Walton (hereinafter, the Waltons) are jointly charged in a four count Indictment alleging theft and fraud over five thousand dollars. The matter is scheduled for a two month trial in this Court in April 2019.

[2] On November 23, 2018, the Waltons brought an Application seeking to stay the Indictment as an abuse of process. In support of their Application, they issued subpoenas to a number of witnesses including two civil litigation lawyers, Peter Griffin and Shara Roy (hereinafter, Griffin and Roy), and two Crown counsel, Renna Weinberg and Susan Orlando (hereinafter, Weinberg and Orlando). On December 19, 2018 the Crown brought an Application seeking to quash the subpoenas issued to the two Crown counsel. On December 21, 2018, counsel for Griffin and Roy brought an Application seeking to quash the subpoenas issued to the two civil litigators.

[3] On December 13, 2018, prior to the above Applications to quash four of the subpoenas, the Crown brought a Motion seeking to summarily dismiss the entire abuse of process Application on the basis that it had “no reasonable prospect of success”. See: R. v. Cody (2017), 2017 SCC 31, 349 C.C.C. (3d) 488 at para. 38 (S.C.C.).

[4] Morawetz R.S.J. made an Order on December 17, 2018 appointing me as the case management judge, pursuant to s.551.7 of the Criminal Code. McMahon J. then scheduled a hearing for the abuse of process Application, commencing on January 14, 2019. He set aside a full week for the Application because the Waltons wished to call six witnesses to give viva voce testimony, in addition to a large five volume Record of documents and affidavits they had filed which was followed by a three volume Supplementary Record of further documents and affidavits.

[5] McMahon J. also scheduled an earlier two day hearing, commencing on January 7, 2019, for the Crown’s Motion to summarily dismiss the abuse of process Application and for the two Applications seeking to quash subpoenas issued to the four lawyers. I heard these three preliminary matters on January 7 and 8, 2019. At the end of oral argument, I issued a short decision with reasons to follow, allowing the Crown’s Motion to summarily dismiss the abuse of process Application and allowing the two Applications to quash subpoenas to the four lawyers. In the result, the abuse of process Application was dismissed on the basis that it had no “reasonable prospect of success”. These are my written Reasons for the above decisions.

B. FACTS

(i) Introduction

[6] There are a number of different aspects to the Walton’s allegation of abuse of process. They are summarized below at para. 36. In my brief oral reasons on January 8, 2019, summarily dismissing the abuse of process Application, I held that some of these grounds or bases for abuse of process were “legally and factually misconceived” and others were “grounded in speculation and are minor and weak”. Because there are a number of different aspects to the alleged abuse of process, the relevant factual record is lengthy and complex. I will summarize as much of it as seems necessary to a proper understanding of the matter.

[7] The Waltons are both Toronto lawyers and real estate developers. Dr. Bernstein is the founder of a number of diet and health clinics. He became an investor, together with the Waltons, in a portfolio of 31 Toronto properties. Each individual real estate development project or property was held by a separate corporation. The corporations were jointly owned by Dr. Bernstein and the Waltons. The total amount eventually invested by Dr. Bernstein (through his investment corporations) in these real estate development companies was about $110 million. Dr. Bernstein was not actively involved in the real estate projects. The Waltons were the active partners, responsible through their company Rose and Thistle Group Ltd. (hereinafter, Rose and Thistle) for the day to day operation of the real estate developments. Disputes between Dr. Bernstein and the Waltons led to civil litigation. That civil litigation eventually led to the present criminal proceedings, which the Waltons now seek to stay as an abuse of process.

(ii) The early stages of the civil litigation, including the appointment of a Receiver Manager, during late 2013 and early 2014

[8] The civil litigation began with an Application brought in the Commercial List by Dr. Bernstein’s investment corporations. The Application sought “oppression” remedies pursuant to s. 161 of the Ontario Business Corporation Act. After hearing preliminary motions in the matter on October 4, 2013, Newbould J. made a finding of “oppression” and held that Dr. Bernstein was “entitled to an investigation of the affairs of the owner corporations”. He made an order appointing Schonfeld Inc. “as an inspector of those [owner] corporations to investigate and report to the Court” and he made a further order “restraining” the Waltons in various ways. See: DBDC Spadina Ltd. et al v. Norma Walton et al, 2013 ONSC 6251.

[9] The court-appointed Inspector, Mr. Schonfeld (hereinafter, Schonfeld), quickly filed two interim reports during October 2013. On November 5, 2013, Newbould J. granted a further motion brought by Dr. Bernstein seeking to appoint Schonfeld Inc. as the Receiver Manager of the 31 real estate development companies owned jointly by Dr. Bernstein and the Waltons, pursuant to s.101 of the Courts of Justice Act and s.248 of the Ontario Business Corporations Act. Newbould J. made a number of important findings based on the Inspector’s initial reports and the affidavit evidence filed on the motion. In particular, he analyzed three transactions where monies belonging to three of the real estate development companies (1450 Don Mills Rd., 1500 Don Mills Rd., and Tisdale Mews) had been transferred out and had been used for purposes unrelated to the development of the three properties, including payment of the Waltons’ personal expenses. Newbould J. made the following findings about these transactions:

The Inspector has sought unsuccessfully so far to obtain documentation underlying Rose and Thistle’s invoices of some $34.6 million to the companies, including construction budgets for the various projects… Ms. Walton said that Rose and Thistle did not have third party invoices for many of the invoiced expenses because Rose and Thistle performed much of the work itself (it has a construction company) and that some of the expenses had not yet been incurred. In response, the Inspector requested documents such as material invoices and payroll records to validate the cost of work done by Rose and Thistle… None were provided… In the month since the Inspector was appointed, Ms. Walton has caused back-dated invoices to be prepared for past work said to have been done. What they have been prepared from is not at all clear. With some of the troubling things about changing records that have become apparent as a result of digging by Mr. Reitan [Dr. Bernstein’s accountant] and the Inspector, discussed above, and the diversion of money that has taken place, there is reason to be concerned exactly what Ms. Walton is doing to shore up her position. The Inspector is not in a position to know what is being prepared on an ex post facto basis or from what, and Dr. Berstein should not have to rely on a hope that something untoward will no longer be done. [Emphasis added]

See: DBDC Spadina Ltd. et al v. Norma Walton et al, 2013 ONSC 6833 at paras. 12 and 17.

[10] Newbould J. also made findings about the conduct of the Waltons in the month since the Court had appointed an Inspector, including the following:

The Inspector has sought unsuccessfully so far to obtain documentation underlying Rose and Thistle’s invoices of some $34.6 million to the companies, including construction budgets for the various projects… Ms. Walton said that Rose and Thistle did not have third party invoices for many of the invoiced expenses because Rose and Thistle performed much of the work itself (it has a construction company) and that some of the expenses had not yet been incurred. In response, the Inspector requested documents such as material invoices and payroll records to validate the cost of work done by Rose and Thistle… None were provided… In the month since the Inspector was appointed, Ms. Walton has caused back-dated invoices to be prepared for past work said to have been done. What they have been prepared from is not at all clear. With some of the troubling things about changing records that have become apparent as a result of digging by Mr. Reitan [Dr. Bernstein’s accountant] and the Inspector, discussed above, and the diversion of money that has taken place, there is reason to be concerned exactly what Ms. Walton is doing to shore up her position. The Inspector is not in a position to know what is being prepared on an ex post facto basis or from what, and Dr. Berstein should not have to rely on a hope that something untoward will no longer be done. [Emphasis added]

See: DBDC Spadina Ltd. et al v. Norma Walton et al, supra at paras. 28, 31 and 52.

[11] Utilising the powers of a Receiver Manager over the next nine months, Schonfeld proceeded to prepare and file a large number of reports concerning the affairs of the 31 real estate development companies. On May 26, 2014, while this work was ongoing, the Court of Appeal dismissed an appeal brought by the Waltons from Newbould J.’s decision appointing a Receiver Manager. The Court (Doherty, Simmons and Tulloch JJ.A.) stated the following:

… [Ms. Walton] says that the application judge mischaracterized her conduct in relation to two of the properties as “theft” or “having the appearance of theft”. Ms. Walton submits that this characterization led the application judge to the “overkill” remedy of a Receiver Manager. …We see no misapprehension of the relevant evidence. Indeed the evidence relating to the conduct of the inspectorship was unchallenged. Nor can we characterize the application judge’s assessment of that evidence as unreasonable… We also do not accept that the application judge’s use of the word “theft” is necessarily a mischaracterization of some of the conduct of Ms. Walton. However, even if the word “theft” is considered inappropriate given its criminal connotation, Ms. Waltons’ own affidavit acknowledges a knowing misappropriation of funds in respect of at least one property. Whatever one might choose to call that conduct, it provided powerful evidence that Dr. Bernstein’s interests in the property were being unfairly prejudiced by the conduct of the Waltons. The application judge’s use of the word “theft” does not, in our view, taint his factual findings or the manner in which he exercised his discretion. [Emphasis added]

(iii) The further civil proceedings before Brown J. in the summer of 2014

[12] Shortly after the Court of Appeal’s decision, Brown J. (as he then was) heard a number of motions, together with the original Application brought by Dr. Bernstein in the Commercial List. Various rulings and remedies were sought by Dr. Bernstein and the Waltons. In particular, Dr. Bernstein sought findings against the Waltons of unjust enrichment and breach of fiduciary duty. Dr. Bernstein submitted that the Waltons had both unjustly enriched themselves and breached their fiduciary duties to the real estate companies by improperly diverting funds invested by Dr. Bernstein in the real estate companies. Dr. Bernstein sought various remedies including a constructive trust over certain properties owned by the Waltons on the basis that the diverted funds could be traced into those properties.

[13] By the time Brown J. heard the above arguments in July 2014, there was a great deal more evidence before him than had been before Newbould J. in October and November 2013 when the Inspector and then Receiver Manager Schonfeld had been appointed. The Inspector Receiver Manager had used the intervening nine months to try and trace the invested monies that had been diverted from the real estate companies. In addition, the Waltons had used the nine months to try to explain and justify any such transfers of money out of the real estate companies. Based on this more substantial evidentiary record, Brown J. made a number of findings in lengthy written reasons released on August 12, 2014. See: DBDC Spadina Ltd. et al v. Norma Walton et al, 2014 ONSC 4644. In summary, the more important findings were the following:

• first, Brown J.’s broad conclusion was that “the Waltons misused and misappropriated most of the funds advanced to them, diverting some of the funds to their own personal benefit and the benefit of their… companies” (at para. 15 supra);

• second, and more specifically, Brown J. found that a “net transfer” of $23.6 million had occurred, from the real estate companies that Dr. Bernstein had invested in to the Waltons’ Rose and Thistle company, and that the transfer of “some or all of the amounts” occurred “in almost all cases… almost immediately”. Further net transfers of $25.4 million then occurred from Rose and Thistle to other companies owned by the Waltons in which Dr. Bernstein had no interest. These transfers, according to Brown J., “constituted breaches of the agreements” between the Waltons and Dr. Bernstein “which [agreements] required that… the funds advanced [to the real estate companies]… be used only to purchase, renovate and refinance the specific property owned by” the particular real estate company (at para. 39 supra);

• third, Brown J. addressed the Waltons’ submission that “a significant part of the funds advanced” by the real estate companies to Rose and Thistle “were used to pay invoices… for legitimate construction costs” (at para. 41, supra). The most recent report by the Inspector Receiver Manager, dated July 1, 2014, stated the following in relation to this issue: “The Inspector’s analysis is impaired by the fact that [the Waltons] have not provided back-up documentation, including third party invoices, proof of payment and progress draws relating to the majority of the alleged construction expenses. Accordingly, the Inspector cannot perform a detailed reconciliation of the alleged construction expenses to the cash transfers to determine whether these transfers related to construction work that had been performed… There was no apparent correlation between the amount of construction work performed on a [particular] property and the volume of funds transferred from that property… The Inspector observed a pattern whereby the amounts invoiced by Rose and Thistle… appeared to match the amount of cash previously transferred from the [real estate companies] to Rose and Thistle”. After a lengthy and detailed analysis of all the evidence relating to this issue, Brown J. concluded as follows: “Rose and Thistle no doubt provided some construction and maintenance work for the [real estate companies] but the Waltons bore the burden of establishing the validity and accuracy of the invoices which Rose and Thistle rendered for those services. Not only have they failed to do so, but one can only conclude from the refusal of the Waltons over the past nine months to provide back-up for the Rose and Thistle invoices – both to the Inspector and to their own cost consultants – that back-up for the full amount of those invoices simply does not exist” (at para. 87 supra) [emphasis added];

• fourth, Brown J. analyzed the now expanded evidentiary record relating to two specific transactions that Newbould J. had characterized as “theft” and that the Court of Appeal had characterized as “knowing misappropriation of funds”. Ms. Walton filed an affidavit before Brown J. asserting that “I never knew” about these transfers relating to “the two Don Mills Rd. mortgages” (at para. 93 supra). Brown J. rejected Ms. Walton’s denial of knowledge, referring to her “continued willingness to distort the truth” (at paras. 94-103 supra). He concluded as follows: “In sum, I do not accept Ms. Walton’s continued protestations that she had a complete lack of knowledge that funds… had been misappropriated to the use of Walton and her companies. The voluminous evidence placed before me on this motion leads me to have absolutely no doubt that Norma Walton not only knew, in detail, what was taking place with the transfer of funds… but that those transfers took place at the direction of… Norma Walton… and she knowingly misappropriated some of the proceeds… to her own personal use and the use of companies which she owned, but in which Dr. Bernstein had no ownership interest” (at para. 104 supra) [emphasis added];

• fifth, Brown J. analysed another somewhat similar transaction involving monies transferred from one of the real estate companies (Red Door Developments) and apparently used to help purchase the Waltons’ personal residence located in “the Bridle Path area of Toronto” (at paras. 130-144 supra). Brown J. concluded that the Waltons “intended to use the funds advanced by Dr. Bernstein to fund, in part, their own acquisition that day of their 44 Park Lane Circle personal residence… By signing the [investment] agreement with Dr. Bernstein on June 25, 2012, and then proceeding immediately to appropriate the funds he advanced to their own use later that day to acquire their mansion at 44 Park Lane Circle, Norma and Ron Walton deceived Dr. Bernstein and unlawfully misappropriated Dr. Bernstein’s funds to their own personal use. In short, the Waltons defrauded Dr. Bernstein” (at paras. 145 and 204 supra) [emphasis added];

• sixth, Brown J. analysed the evidence relating to the transaction that Newbould J. had described as having “all the appearances of another case of theft”. Brown J. concluded that “the Waltons deceived and defrauded Dr. Bernstein” in this transaction relating to the Tisdale Mews project (at paras. 205-7 supra) [emphasis added].

[14] Given the above findings, Brown J. held that the Waltons “breached their contractual obligations to Dr. Bernstein and their fiduciary duties to the [real estate development] companies”. Based on the tracing analysis of the Inspector Receiver Manager, Brown J. found that the Waltons had used funds transferred out of the real estate companies in order “to purchase or discharge encumbrances” on eight separate properties owned by the Waltons, which “resulted in the unjust enrichment of the Waltons”. He held that, in some cases, this “amounted to fraud”. In the result, Brown J. granted the remedy of a constructive trust in favour of Dr. Bernstein in the amount of $8.128 million over these eight properties owned by the Waltons (at paras. 264-7 supra) [emphasis added].

[15] Brown J. granted various other remedies sought by Dr. Bernstein, including appointing Schonfeld Inc. “as receiver of all the property of the Waltons, of whatever kind, as well as their books and records” in order “to ensure that the Waltons cannot dispose of their [properties]” pending resolution of Dr. Bernstein’s remaining claims. The one major claim that Brown J. was not yet prepared to decide, was an order that Dr. Bernstein sought “for restitution and repayment… in the amount of $78.420 million for breach of contract, unlawful misappropriation and unjust enrichment… for all funds diverted from the [real estate] companies and that they pay… the balance of those funds not otherwise recovered… from the sale of the [real estate companies’] properties”. Brown J. required further argument on this issue, especially concerning the “measures of damages”, and he therefore deferred “to a later date consideration of this part of [Dr. Bernstein’s] claim” (at paras. 226-233 supra).

(iv) Developments during 2014 and 2015 leading to Dr. Bernstein’s criminal complaint

[16] The documentary record filed by the Waltons in support of their abuse of process Application indicates that a number of developments occurred around the time of the above civil proceeding before Brown J. in July 2014. These developments eventually led to Dr. Bernstein making a criminal complaint to the Toronto police in May 2015, with the assistance of his civil lawyers. I will summarize these further developments.

[17] Peter Griffin, a senior partner at the Lenczner Slaght law firm, was the lead counsel who acted for Dr. Bernstein in the various civil proceedings summarized above. During Dr. Bernstein’s cross-examination on his affidavit on July 10^th, 2014, a week prior to the above proceedings before Brown J., Dr. Bernstein and Griffin confirmed that they were in the process of retaining a private investigator. Griffin also advised that “there has been no report to the police”. These disclosures in early July 2014 were made in response to questions from Ms. Walton as to whether Dr. Bernstein had “hired a private investigator in this litigation” and whether his accountants had “been in contact with the police”. At some point around this time, Thomas Hartford was retained by the Lenczner Slaght law firm. Hartford is a private investigator and a former Toronto commercial crimes police officer. He prepared a report to his client Dr. Bernstein concerning the Waltons at some point. In addition, Hartford met with the Toronto police on October 28^th and December 1^st, 2014, presumably at the direction of his client Dr. Bernstein and after advice of some kind from Griffin. It should be noted that these two meetings between Hartford and Det. Wilson of the Toronto police are the first known contacts between Dr. Bernstein’s representatives and the police. They occurred over two months after Brown J. had delivered his Reasons for Judgement summarized above, over five months after the Court of Appeal had delivered its Reasons summarized above, and about a year after Newbould J. had delivered his Reasons summarized above.

[18] The handwritten police notes of these early meetings between Det. Wilson and Hartford in late October and early December, 2014, as I read them, indicate the following: “Meeting with… Tom Hartford; discuss items received for intake of criminal complaint; complainant is Dr. Bernstein concerning investments in 31 different properties; receive information from Tom Hartford; Bernstein intake to be delayed” [emphasis added]. It appears from these notes that the criminal complaint intake process began on October 28, 2014.

[19] The Waltons had appealed Brown J.’s August 2014 decision and the appeal was not heard until September 2015. In addition, Brown J. had been appointed to the Court of Appeal in late 2014 and the resumption of the Commercial List proceedings before him had to be re-scheduled before Newbould J., who eventually heard various final motions in the matter in June 2016. As a result, the DBDC Spadina Ltd. civil litigation was ongoing in both the Commercial List and the Court of Appeal during 2015 and 2016. At the same time, Hartford continued to meet with the Toronto police officer, Det. Wilson, on March 19 and in early May of 2015. Det. Wilson’s handwritten notes for these dates, as I read them, indicate the following: “return from [meeting] Tom Hartford concerning Bernstein file; advised they are prepared to report but are not available until after April 13… I will contact next week to set up appointment for intake meeting; return from [meeting] Tom Hartford concerning intake meeting for Bernstein… suggested May 22, 26; awaiting reply” [emphasis added]. It appears from these notes that Hartford’s report was completed by March 19, 2015. That report was provided to the police at some point and forms part of the record on the abuse of process Application.

[20] A formal criminal complaint was made on behalf of Dr. Bernstein at the “intake meeting”, as the police call it, on May 22, 2015. Shara Roy of Lenczner Slaght attended on behalf of Dr. Bernstein, together with the private investigator Hartford. Detectives Wilson and Streng attended on behalf of the Toronto police. Ms. Roy had been junior counsel to Griffin in the earlier and ongoing civil proceedings. Det. Wilson prepared two pages of notes and Det. Streng prepared a typed report concerning this initial “intake meeting”. The police notes and report both describe the background investment relationship between Dr. Bernstein and the Waltons, to the effect that about $110 million was invested in 31 real estate projects upon certain contractual terms. Det. Wilson’s notes then state: “forensic accounting was done and approximately $23 million diverted away from the projects; quantity of supporting documents provided for Tisdale Mews, 1450 and 1500 Don Mills Rd., Galloway Rd. townhouses, and Red Door Shelter; documents to be further reviewed.” Det. Streng’s report goes into more detail about the above five specific projects that were the focus of the complaint to the police, as follows:

The complainant indicated that although there were 31 project agreement between Dr. Bernstein and the Waltons the focus of what they were reporting to the police were five separate projects:

Tisdale Mews - Cheques and invoices totalling $268,104.57 from this projects account were for work done at 44 Park Lane Circle, the personal residence of the Walton's (located in the Bridle Path area of Toronto.)

Global Mills and Donalda Developments - Bernstein and the Waltons agreed to invest equal amounts to this project, $6,510,313. The Waltons did not invest their portion. Additional mortgages were being taken out on these properties without Bernstein required knowledge.

232 Galloway Road - A purchase and development project wherein town home properties were purchased and renovated then re-sold. Bernstein provided mortgage proceeds of $4,050,000.00. This mortgage was to be discharged in the amount of $253,125.00 per town home by 3:00pm on the day of each sale. Ms. Walton represented that on May 3rd, 2012 nine town homes had been sold and that the principal amount on the outstanding mortgage was $1,771,875. A review of title searches revealed the mortgage of the entire project was discharged as of August 2nd, 2012 despite the fact not all the town homes had been sold.

The Red Door - On June 12th, 2012 Bernstein and Walton agreed to make equity contributions to Red Door Developments Inc and to Red Door Lands Ltd. in the amount of $2,320,963. 00. According to the agreement dated June 25th, 2012, the deal was to close on June 20, 2012. On June 15, 2012, Dr. Bernstein's contribution was deposited to the bank account for this project. Prior to this deposit being made the account showed a balance of $100.19. Between the dates of June 15th and June 25th, 2012, Ms. Walton effected a series of transfers from this account to the account of Rose and Thistle, leaving the Red Door account at $117.19. Additionally, on June 25th, 2012 a transfer of $1,662,850.00 to the Rose and Thistle account occured, the same day as the Waltons purchased their personal residence at 44 Park Lane Circle. Ms. Walton explained this to the complainants as her taking equity out of the properties which had accumulated. (the equity was based on a period of time during which she, nor the partnership, owned the properties).

The complainant advised that the information being reported to police was currently before the civil court of Ontario. At the time of the report, the court had not yet heard the entire case and no findings had been made. The complainant explained that she and the party she represented had been informed that Ms. Walton was once again seeking out investors with respect to additional real estate projects. They were fearful with respect to additional individuals being victimized and as such felt it best to come to police in an effort to have this investigated and subsequently have Ms. Walton stopped.

[21] Four of the five specific real estate development projects that were the focus of the above criminal complaint are the same ones that Newbould J. and Brown J. had described as “theft”, “the appearance of theft”, “knowing misappropriation” or “fraud”, and that the Court of Appeal had described as “knowing misappropriation” (namely, Tisdale Mews, 1450 Don Mills Rd., 1500 Don Mills Rd., and Red Door Developments). The report prepared by the private investigator Hartford also focused on these same projects. There are similarities between Hartford’s report and Det. Streng’s “intake” report, although Hartford’s report is longer and more detailed. In addition, Harford’s report copies verbatim some of the facts set out in the Reasons of Newbould J. and Brown J. It can be inferred that the criminal complaint made to the police by Dr. Bernstein’s representatives (Hartford and Roy) on May 22, 2015, largely mirrored the report that Hartford had prepared and provided to the police. It can also be inferred from the facts summarized above that Hartford’s report drew heavily on the analysis and findings of Newbould J. and Brown J.

(v) Detective Moran’s police investigation during 2015 and early 2016, leading to the criminal charges against the Waltons in April 2016

[22] On June 18, 2015, a month after the “intake meeting”, Det. Moran was assigned as lead investigator on the Bernstein criminal complaint. Det. Moran’s lengthy notes were filed on the abuse of process Application. They set out the steps that she took during the 10 month pre-charge phase of the investigation, up until the present criminal charges were laid on April 25 and 26, 2016. In particular, Det. Moran did the following prior to laying charges: she reviewed the apparently substantial file material that had been provided by Dr. Bernstein’s representatives; she spoke to the Lenczner Slaght lawyers involved in the civil litigation, attended at their offices, made inquiries clarifying many detailed factual issues, and reviewed additional documents from their file; she contacted Teraview and Teranet and the Land Registry Office on a number of occasions seeking further information about the relevant properties; she conferred a number of times with Dr. Bernstein’s accountant Reitan and with the Inspector Receiver Manager Schonfeld (or with James Merryweather from Schonfeld’s office) about their investigations and their forensic accounting work, asking detailed questions about various transactions set out in the documents; she contacted a particular financial institution used by the Waltons and prepared a Production Order seeking documents relating to numerous accounts at that institution; she conferred with Crown counsel in January 2016 about the charges; she obtained transcripts from the civil proceedings with Crown counsel’s assistance; she prepared a Production Order for Teraview and Teranet documents; she requested and received copies of Reitan’s and Dr. Bernstein’s affidavits from counsel in the civil proceedings, together with their voluminous documentary attachments; she conferred again with Crown counsel in February 2016, in particular seeking advice about a legal issue concerning the banking documents received from one of the Production Orders; she followed up on this advice and took steps to carry it out in March 2016, taking certain precautions with the banking documents; she investigated Ms. Walton’s current businesses in March and April 2016, preparing for the arrest and bail hearing; and she phoned Ms. Walton and her counsel, Mr. Cohen, to advise of the pending criminal charges, to arrange surrender, to agree on terms of release, and to discuss disclosure (she told Mr. Cohen that she was “relying mainly on civil documents”).

[23] Det. Moran prepared a five page synopsis of the four criminal charges. Count One dealt with the Galloway townhouse project, Count Three dealt with the 1450 Don Mills Road project, and Count Four dealt with the 1500 Don Mills Road project. These were three of the five initial criminal complaints that Dr. Bernstein’s representatives had focused on at the initial “intake meeting” with the police in May 2015, as summarized above. Count Two was not focused narrowly on any one of the 31 real estate development projects. Rather it charged a much broader fraud that covered many of the projects, alleging that the Waltons “directed the transfer of approximately $23.68 million (net) of Bernstein’s contributions from the jointly owned company accounts to the Rose and Thistle account, from which the funds were used for their own personal benefit and the benefit of their other businesses and ventures in which Bernstein had no interest”. As I read Det. Moran’s synopsis, this broad Count Two allegation of fraud is based on similar reasoning to that found in Brown J.’s August 12, 2014 Reasons for Judgement. It includes the Red Door Development complaint from the initial “intake meeting” as part of the broader alleged fraud.

(vi) The conclusion of the DBDC civil proceedings before Newbould J. in June 2016 and their overlap with the initial stages of the criminal process

[24] The Waltons were released on bail on consent on the same day that they surrendered, namely, April 25 and 26, 2016. At this time, certain steps were being taken to conclude the civil proceedings before Newbould J. About seven months earlier, on September 17, 2015, the Court of Appeal had dismissed the Waltons’ appeal from Brown J.’s August 2014 decision. The Court (Gillese, Lauwers and Benotto JJ.A.) stated the following in a brief endorsement:

The motions judge correctly articulated the applicable legal principles in respect of constructive trusts. He imposed them based on the conduct of the Waltons and their companies, namely, their fraud, deceit and misappropriation of the Bernstein applicants’ funds for their own personal use and in contravention of their agreements. [Emphasis added].

See: DBDC Spadina Ltd. v. Walton, 2015 ONSCA 624.

[25] In relation to the main outstanding issue in the civil proceedings, concerning the quantum and measure of damages which Brown J. had not decided in his August 2014 Reasons for Judgement, I am advised that Dr. Bernstein amended the originating Application in order to allege fraud for the first time on November 22, 2015. This was about two months after the Court of Appeal had released the above Reasons. That issue concerning fraud and the issue concerning damages and final judgement, together with a number of other motions, were all scheduled to be heard by Newbould J. in the Commercial List on June 3, 2016. This hearing date was about six weeks after the late April date when the criminal charges were laid by Det. Moran. Because Det. Moran had called Ms. Walton and Mr. Cohen well in advance of laying the criminal charges, in order to discuss surrender and bail, Mr. Cohen was able to advise Newbould J. at a meeting in chambers on April 14, 2016 that criminal proceedings were about to commence. Mr. Cohen made various attempts to obtain disclosure of Det. Moran’s notes, both before and after charges were laid, in order to consider any use they might have in the upcoming hearing of the civil matter. I will discuss the facts relating to “delayed disclosure” of the police notes in more detail below, when analysing this alleged basis for abuse of process. In the result, Mr. Cohen did not obtain Det. Moran’s notes until after the June 3, 2016 hearing before Newbould J.

[26] Mr. Cohen did not need early disclosure of Det. Moran’s notes in order to prepare for the consent bail hearing in the criminal proceedings on April 25, 2016. Indeed, police notes are rarely available at the time of a bail hearing. Rather, he was considering two possible remedies in the civil proceedings scheduled to proceed on June 3, 2016, as follows: first, a stay of the civil proceedings, pending conclusion of the criminal proceedings; and second, an abuse of process Application in the civil proceedings based on an allegation that Dr. Bersntein and his counsel had initiated the criminal complaint in order to further the civil case. Mr. Cohen filed a Wagg motion in the civil proceedings, seeking an order disclosing police notes from the criminal proceedings, in order to consider using this disclosure in the civil proceedings. See: D.P. v. Wagg (2004), 184 C.C.C. (3d) 32 (Ont. C.A.). In his Factum in support of the Wagg motion, Mr. Cohen made some of the same allegations now advanced on the present abuse of process Application, for example: “At this point in time, it appears that the police investigation lacks any independent and separate allegations of fraud. It indeed appears that the criminal charges and allegations utilize the work product generated by the civil matter without much more. Large volumes of materials were provided to the police by Shara Roy including document packages that may violate the deemed undertaking rule… There is a potential abuse of process where civil counsel motivate the police to bolster their position in the civil litigation… In the instant case, the complaint to police was tactfully delayed, following the Waltons’ compulsion to submit to oral discovery and disclosure obligations. There is no principle against self-incrimination in a civil proceedings”.

[27] The Wagg motion was filed in the Commercial List in a sealed envelope but it never proceeded before Newbould J. on June 3, 2016. In his Factum on the present abuse of process Application, Mr. Cohen asserts that the reason the motion did not proceed was “because defence counsel was unable to articulate the extent that the deemed undertaking rule had been violated, if at all, in the civil matter, due to not being in possession of the police notes disclosure despite the fact that they were requested from the Crown…”.

[28] The DBDC Spadina Ltd. civil litigation came to a conclusion at the June 3, 2016 hearing before Newoubld J. The Bernstein corporate Applicants sought judgement in the amounts of $66.9 million and $22.6 million against the Waltons and their companies and sought a finding of fraud against the Waltons that would survive bankruptcy. The Walton Respondents brought a counter-application seeking various remedies against Dr. Bernstein and the real estate companies and, in particular, seeking a trial of the fraud issue. After reserving judgement for about three months, Newbould J. released Reasons on September 23, 2016. See: DBDC Spadina Ltd. et al v. Norma Walton et al, 2016 ONSC 6018. In relation to the Waltons’ request for a trial of the fraud issue, Newbould J. reasoned as follows (at paras. 5 and 6 supra):

The request by the Waltons for a trial on the fraud issue appears rooted in the fact that they have now been charged criminally with fraud… They contend that a finding of that nature could cause serious prejudice and unfairness in the criminal matter, especially having regard to the potential to prejudice a potential jury… There is no motion to stay the civil proceedings. The issue is whether, as asserted by the [Bernstein] applicants, there is enough evidence on the record or previous findings made in these proceedings justifying a declaration of fraud that would survive any bankruptcy of the Waltons. If there is not, a trial will be required.

[29] Newbould J. proceeded to analyse the various issues that the Waltons wished to contest at a trial in relation to the issue of fraud. He concluded that they were all res judicata, having been determined by Brown J. in his August 12, 2014 Reasons. For example, Newbould J. stated the following (at paras. 8, 9 and 18 supra):

Ms. Walton has now filed further affidavit evidence in support of her claim that she is entitled to a trial to determine whether she and her husband are liable for fraud. These new affidavits and the arguments made on her behalf ignore the findings made in this proceeding by Brown J. However, it is not open to them to challenge the findings of fact made by Brown J.

In his reasons for decision, Brown J. held that the Waltons deceived and defrauded Dr. Bernstein of funds that were invested in properties at 875/887 Queen St. East [the Red Door Developments project] and 78 Tisdale Ave [the Tisdale Mews project]. It is now argued on behalf of the Waltons that Ms. Walton is confident that once she is given an opportunity at a trial to explain these transactions that any notion of fraud will be eliminated. However, the issue of fraud with respect to these properties is now res judicata. The findings were not some interlocutory finding that does not continue at a trial. Each side moved for relief on a final basis and the findings stand. Ms. Walton tried to establish before Brown J. that there was no fraud in connection with these properties but failed. Her appeal to the Court of Appeal was dismissed.

As will be seen, I am satisfied that there are sufficient findings of fact already made and other evidence to make findings and that a trial of issues regarding the fraud allegations is not needed. [Emphasis added].

[30] Newbould J. set out the elements of the tort of civil fraud and false representation, applied the findings made by Brown J. to those elements, and concluded (at paras. 32 and 35 supra):

The evidence establishes clearly that the Waltons committed the tort of civil fraud and false representation that caused Dr. Bernstein to invest his funds into the [real estate development] companies. His damage claim is the unrecovered amount of $66.95 million. The [Bernstein] applicants are entitled to judgement against the Waltons… in that amount plus interest… As the liability of the Waltons arose from their fraud while acting in a fiduciary duty to Dr. Bernstein, it is appropriate and is declared that their liability to the applicants for $66.95 million plus interest will survive any bankruptcy of the Waltons… [Emphasis added].

[31] While the DBDC Spadina Ltd. civil litigation was proceeding to a conclusion during the summer of 2016, the criminal proceedings moved through their initial stages. The first three waves of disclosure were received by the defence on May 24, June 14, and September 26 of 2016. Dr. Bernstein gave a KGB statement to the police on September 28, 2016. This was five months after the charges were laid and five days after Newbould J. gave his above Reasons finding civil fraud. Ms. Roy, junior civil counsel from Lenczner Slaght, attended with Dr. Bernstein for the KGB statement.

[32] The Crown counsel who had provided pre-charge assistance to the police, Renna Weinberg, continued to perform some post-charge duties. For example, she conducted the bail hearing, made the initial waves of disclosure, and attended at the first JPT in the Ontario Court of Justice before Lipson J. on October 31, 2016. At this JPT, Weinberg advised that a direct Indictment was under consideration and the fourth wave of disclosure was made.

(vii) The preferring of a direct Indictment by the Deputy Attorney General in early 2018 and the most recent developments

[33] By the time of the second JPT before Lipson J. on December 6, 2016, Weinberg had been replaced as Crown counsel on the case. The new Crown prosecutor, Susan Orlando, appears to have had no involvement at the pre-charge stage. She proceeded to provide three further waves of disclosure to the defence, on January 10 and July 27 of 2017 and on February 5, 2018. She also corresponded with the defence on a number of occasions about the direct Indictment that was under consideration and about the Crown’s charge screening assessments. In particular, in letters dated July 11 and July 27, 2017, she advised Mr. Cohen as follows:

In every criminal prosecution, the Crown has an ongoing obligation to assess reasonable prospect of conviction at all stages of the prosecution. The Crown is in the process of reviewing all of the evidence in this case and/or the public interest in proceeding with a criminal prosecution. During our review of the matter, we would be happy to consider any information you may wish to provide us which bears on whether there exists a reasonable prospect of conviction and whether continuing the prosecution is in the public interest, either in writing or during an in person meeting.

With respect to your inquiry about whether the Crown intends to seek a direct Indictment in this matter, that determination will be made once we complete our reasonable prospect of conviction and public interest assessment.

[34] On August 29, 2017, Mr. Cohen sent a 24 page written submission to Orlando, opposing a direct Indictment. As noted above, the seventh wave of disclosure was provided to the defence on February 5, 2018. Some two weeks later, on February 18, 2018, the Deputy Attorney General preferred a direct Indictment charging the Waltons with essentially the same four counts of fraud and theft that Det. Moran had alleged in the original Information filed on April 25, 2016.

[35] There have been further developments since the preferring of the direct Indictment almost twelve months ago in February 2018. For example, there have been ongoing requests from Mr. Cohen for further disclosure, some further disclosure has been provided, a third Crown counsel has been assigned to conduct the trial scheduled for April 2019 (apparently because Orlando was appointed to a new management level position), and there has been further civil litigation (a commercial mortgage lender, Trez Capital, sued both the Waltons and Dr. Bernstein in relation to loans on three of the real estate projects). One judgement of Newbould J. on a motion relating to a limitation period in the Trez Capital litigation, released May 24, 2017, was unfavourable to Dr. Bernstein, although it was subsequently clarified and corrected in a July 4, 2017 endorsement. Mr. Cohen provided Newbould J.’s initial May 24, 2017 judgement to the Crown and Orlando appears to have considered it when making the Crown’s charge screening assessment. Subsequent endorsements in the Trez Capital litigation of Hainey J., Pattillo J., and McEwen J., released on April 9, April 19, and November 27 of 2018, have all been unfavourable to the Waltons. In my view, it is not necessary to summarize any of these further developments in any detail, for purposes of the present motions before me in the criminal proceedings. They can be referred to below, if necessary, when discussing any of the alleged bases for abuse of process to which they relate.

C. ANALYSIS

(i) Introduction

[36] The Waltons allegations of abuse of process have evolved and expanded somewhat over time. In their original abuse of process Application, filed together with a 70 page Factum dated November 26, 2018, the following six bases were advanced (set out here in the same general order in which they appeared in the Factum, although some of the grounds are related and so I have combined them):

• the first ground was titled “compelled self-incrimination” and it referred to alleged violations of the protections provided in ss.7, 11(c), and 13 of the Charter of Rights for “testimony given in civil proceedings”. This ground was inter-twined to some extent with two related issues: first, concerns were expressed that the spirit if not the letter of the “deemed or implied undertaking” rule relating to compelled civil discoveries may have been violated, as explained in the Wagg motion filed before Newbould J. on June 3, 2016; and second, an analysis was set out of powers of compulsion under various Business Corporations Acts and there was some discussion about the admissibility of Inspectors’ reports;

• the second ground was initially framed as “coordination of civil and criminal proceedings”, that is, an argument that the Crown, the police, and Dr. Bernstein’s civil counsel had “coordinated the civil and criminal proceedings in a way that used the criminal proceedings to increase Dr. Bernstein’s chances of getting a judgement in the civil matter”. This ground was also framed as “using the criminal court to collect a civil debt”, relying on Dr. Bernstein’s refusal to reach a civil settlement with the Waltons and on the timing of the criminal complaint. This broad argument was inter-twined with narrower allegations to the effect that the Crown had “delayed disclosure” and that the police had not carried out an “independent investigation”, as illustrations or manifestations of the improper coordination between the civil and criminal proceedings and the improper use of the criminal process in order to collect a civil debt;

• the third ground was a lengthy attack on Dr. Bernstein’s character, asserting that he was a man with criminal antecedents and that “a sizeable portion of the investment monies [paid by Dr. Bernstein to the 31 real estate companies] may very well be illegitimate”. This ground appeared to be related to two other arguments: first, that the police had failed to carry out an “independent investigation” (because they had failed to investigate Dr. Bernstein’s antecedents); and second, an “assertion that the criminal justice system should not be conscripted by Dr. Bernstein in the hope of attaining a restitution order for monies potentially obtained in violation of law”;

• the fourth ground was a lengthy attack on the independence and impartiality of Schonfeld, the court-appointed Inspector Receiver Manager. It was framed as an argument concerning Schonfeld’s “qualification as [an] expert witness”, relying on well-known evidence law cases about the opinion rule, to the effect that “impartiality and independence are essential elements of what it means to be a ‘properly qualified’ expert entitled to give expert opinion evidence”. However, this ground also involved a broad critique of the civil proceedings overseen by judges of the Commercial List Court, including the following two arguments: that “the civil findings may well have been adjudicated differently” if the Receiver Manager had found “fifty additional invoices” recently discovered by defence counsel; and that the Waltons’ real estate “portfolio was profitable” and Dr. Bernstein’s “investment losses were caused directly by the operation of the receivership and the process of court-ordered sales of properties”;

• the fifth ground alleged improper “involvement at the investigatory stage” by Crown counsel Weinberg;

• the sixth ground alleged impropriety in preferring the direct Indictment. This argument relied on delay in making the decision to prefer, on the denial of access to “the application material submitted to the AG by the Crown”, and on the suggestion that “the Crown used the [direct Indictment] procedure to prevent Dr. Bernstein from being cross-examined at a preliminary inquiry”.

[37] In response to the November 26, 2018 abuse of process Factum and Application and the related subpoenas, the Crown and Mr. Addario filed a number of responding Facta together with various preliminary Motions of their own (as summarized above at paras. 2 and 3). This responding material was all served and filed during December 2018. Finally, on January 4, 2019, the Waltons filed a 50 page Respondents’ Factum. It stated (at paras. 2 and 81) that there were six “general categories” of alleged “prosecutorial misconduct” on which the Waltons based their claim of abuse of process and their right to an evidentiary hearing, namely (again, the grounds are set out here in the same general order in which they appeared in the Respondents’ Factum):

• first, “using the criminal court to collect a civil debt” (the second ground already set out above at para. 36);

• second, “Ms. Weinberg’s involvement as both pre-charge and prosecuting Crown” (the fifth ground already set out above at para. 36);

• third, the “lack of independent investigation by the police” and “the investigator’s reliance on civil players” (which is related to the ground concerning “using the criminal court to collect a civil debt”, and which I have treated as part of the second ground already set out above at para. 36);

• fourth, “tactically delaying the disclosure of police notes”, both “before the civil motion was heard [on June 3, 2016] and before the Indictment was preferred [on February 18, 2018]” (which I have also treated as part of the broad second ground already set out above at para. 36 concerning improper coordination of the civil and criminal processes);

• fifth, “delaying Dr. Bernstein’s KGB statement” (this was mentioned briefly, in sub-para 73(c) of the Waltons’ original Factum, as part of the argument concerning “lack of independent investigation by the police,” and I have treated it as part of the broad second ground already set out above at para. 36 concerning improper coordination of the civil and criminal processes);

• sixth, “Ms. Orlando’s conflict in the direct Indictment process” and the “15 month delay” in preferring the Indictment (the sixth ground already set out above at para. 36, but now with an additional argument concerning an alleged conflict of interest involving Orlando).

[38] Upon reading this Respondents’s Factum, prior to the hearing, I took it to mean that only three of the original six grounds were now being advanced, after Mr. Cohen had the benefit of further time to reflect and consider the materials filed by the Crown and Mr. Addario. Only three of the original six grounds were listed at paras. 2 and 81 of the Respondent’s Factum: the broad second ground concerning improper coordination, as between the civil and criminal proceedings, which was now fleshed out and expanded with separate emphasis on two incidents of delayed disclosure, the delayed KGB statement, and the lack of any independent investigation by the police; the fifth ground concerning Ms. Weinberg’s involvement at the investigative stage; and the sixth ground concerning the direct Indictment. Almost no mention was made anywhere in the 50 page Respondents’ Factum of the other three original grounds: the Charter of Rights concerns about self-incrimination and the deemed undertaking rule (the first ground in the original Factum); the attack on Dr. Bernstein’s character and whether he was seeking to recover proceeds of crime (the third ground in the original Factum); and the attack on the Receiver Manager Schonfeld and whether he was a qualified expert and whether the outcome of the civil proceedings might have been different (the fourth ground in the original Factum). Indeed, the only mention of these three original grounds appeared to be a concession (at paras. 91 and 93 of the Respondents’ Factum) that there had been no violation of the deemed undertaking rule and that there was no Charter of Rights self-incrimination protection relating to the Waltons’ evidence because it had been “filed with the Commercial List Court” in the civil proceedings.

[39] I asked Mr. Cohen, at the commencement of the hearing, whether I had read his Respondents’ Factum correctly and whether three of the original six grounds were now being abandoned. Mr. Cohen advised that I had misread his materials and that he was still relying on all of the grounds set out in the original Factum. Accordingly, I will address all six original grounds, as summarized above at paras 36 and 37. However, the emphasis in both oral argument and in the final 50 page Respondents’ Factum was on only three of those grounds. The other three grounds are the ones that are most obviously misconceived, and so I will address them first.

(ii) Abuse of process and the scope of a Motion to summarily dismiss

[40] Before turning to the six specific bases or grounds alleged as abuse of process, there is a preliminary point of law that needs to be addressed. The Crown’s responding Motion seeks to summarily dismiss the Waltons’ abuse of process Application, without a full evidentiary hearing, on the basis that it has no “reasonable prospect of success”. I ruled in favour of this Motion at the end of two days of oral argument, on January 8, 2019. Accordingly, the scope in law of such a Motion should be set out. It requires some analysis of the abuse of process doctrine, as well as some analysis of motions to summarily dismiss.

[41] Abuse of process was a common law principle used mainly to prevent oppressive or vexatious civil proceedings brought by private litigants. For many years there was doubt, both in Canada and Great Britain, as to whether abuse of process had any application to criminal proceedings. The great majority of criminal proceedings are brought in the name of the Crown by agents of the Attorney General. The idea that the courts could determine whether the Attorney General was an oppressive or vexatious litigant did not fit well with the generally broad immunity that the Attorney General enjoyed from judicial review. It also raised concerns relating to the separation of judicial and prosecutorial functions. As a result, it was unclear for many years whether abuse of process had any application to criminal proceedings. See: Gouriet v. Union of Post Office Workers [1977] 3 A11 E.R. 70 (H.L.); Re Saikaly and the Queen (1979), 48 C.C.C. (2d) 192 (Ont. C.A.); Re Balderstone and the Queen (1983), 8 C.C.C. (3d) 532 (Man. C.A.); Smythe v. the Queen (1971), 3 C.C.C. (2d) 366 (S.C.C.); Rourke v. the Queen (1977), 35 C.C.C. (2d) 129 (S.C.C.); D.P.P. v. Humphrys [1976] 2 A11 E.R. 497 (H.L.); R. v. Osborn (1970), 1 C.C.C.(2d) 482 (S.C.C.).

[42] This early doctrinal reluctance to recognize that abuse of process applied in the criminal courts was finally swept aside in 1985 when the Supreme Court of Canada decided the pre-Charter case of R. v. Jewitt (1985), 21 C.C.C. (3d) 7 (S.C.C.). The Court’s unanimous judgement, written by Dickson C.J.C., held that the common law abuse of process doctrine did apply to criminal proceedings but “only in the clearest of cases” and only where the particular prosecutorial conduct was held to “violate those fundamental principles of justice which underlie the community’s sense of fair play and decency” (adopting the way in which Dubin J.A., as he then was, had formulated the common law principle in R. v. Young (1984), 13 C.C.C. (3d) (Ont. C.A.)).

[43] Some ten years after Jewitt was decided, the Supreme Court released two important judgements that fleshed out and clarified the stringent test for abuse of process in the criminal law context. In R. v. Power (1994), 89 C.C.C. (3d) 1 (S.C.C.), L’Heureux-Dubé J. for the majority held that abuse of process requires “conspicuous evidence of improper motives or of bad faith or of an act so wrong that it violates the conscience of the community, such that it would genuinely be unfair and indecent to proceed”. Not surprisingly, the majority in Power also stated that “cases of this nature will be extremely rare”. It was then in Canada (Minister of Citizenship and Immigration) v. Tobiass et al (1997), 118 C.C.C. (3d) 443 at paras 90 and 92 (S.C.C.) that the Court went on to unanimously formulate the modern three part test for abuse of process, as follows:

If it appears that the state has conducted a prosecution in a way that renders the proceedings unfair or is otherwise damaging to the integrity of the judicial system, two criteria must be satisfied before a stay will be appropriate. They are that:

(1) the prejudice caused by the abuse in question will be manifested, perpetuated or aggravated through the conduct of the trial, or by its outcome; and

(2) no other remedy is reasonably capable of removing that prejudice…

After considering these two requirements, the court may still find it necessary to consider a third factor. As L’Heureux-Dubé J. has written, “where the affront to fair play and decency is disproportionate to the societal interest in the effective prosecution of criminal cases, then the administration of justice is best served by staying the proceedings”. …We take this statement to mean that there may be instances in which it will be appropriate to balance the interests that would be served by the granting of a stay of proceedings against the interest that society has in having a final decision on the merits.

Also see: R. v. Regan (2002), 2002 SCC 12, 161 C.C.C. (3d) 97 at paras. 53-7 (S.C.C.).

[44] Most recently, in R. v. Babos (2014), 2014 SCC 16, 308 C.C.C. (3d) 445 at paras. 30-32 (S.C.C.), the majority summarized the modern law of abuse of process, in the criminal law context, as follows (per Moldaver J.):

A stay of proceedings is the most drastic remedy a criminal court can order (R. v. Regan supra at para. 53). It permanently halts the prosecution of an accused. In doing so, the truth-seeking function of the trial is frustrated and the public is deprived of the opportunity to see justice done on the merits. In many cases, alleged victims of crime are deprived of their day in court.

Nonetheless, this Court has recognized that there are rare occasions -"the clearest of cases"- when a stay of proceedings for an abuse of process will be warranted (R. v. O'Connor, [1995] 4 S.C.R. 411 (S.C.C.), at para. 68). These cases generally fall into two categories: 1) where state conduct compromises the fairness of an accused's trial (the "main" category); and 2) where state conduct creates no threat to trial fairness but risks undermining the integrity of the judicial process (the "residual" category) (O' Connor, at para. 73). The impugned conduct in this case does not implicate the main category. Rather, it falls squarely within the latter category.

The test used to determine whether a stay of proceedings is warranted is the same for both categories and consists of three requirements:

1. There must be prejudice to the accused's right to a fair trial or the integrity of the justice system that "will be manifested , perpetuated or aggravated through the conduct of the trial, or by its outcome'' (Regan, at para. 54);

2. There must be no alternative remedy capable of redressing the prejudice; and

3. Where there is still uncertainty over whether a stay is warranted after steps 1) and 2), the court is required to balance the interests in favour of granting a stay, such as denouncing misconduct and preserving the integrity of the justice system, against "the interest that society has in having a final decision on the merits" (ibid., at para. 57).

[45] It is the above test for abuse of process that must be applied in relation to the Crown’s Motion to summarily dismiss. The standard to be met on such a Motion was recently described by the Supreme Court in its unanimous decision in R. v. Cody, supra at para. 38:

In addition, trial judges should use their case management powers to minimize delay. For example, before permitting an application to proceed, a trial judge should consider whether it has a reasonable prospect of success. This may entail asking defence counsel to summarize the evidence it anticipates eliciting in the voir dire and, where that summary reveals no basis upon which the application could succeed, dismissing the application summarily (R. v. Kutynec (1992), 7 O.R. (3d) 277 (Ont. C.A.), at pp. 287-89; R. v. Vukelich (1996), 108 C.C.C. (3d) 193 (B.C. C.A.)). And, even where an application is permitted to proceed , a trial judge's screening function subsists: trial judges should not hesitate to summarily dismiss "applications and requests the moment it becomes apparent they are frivolous" (Jordan, at para. 63). This screening function applies equally to Crown applications and requests. As a best practice, all counsel - Crown and defence -should take appropriate opportunities to ask trial judges to exercise such discretion. [Emphasis added].

[46] In other words, the issue before me is whether the six bases or grounds advanced by the Waltons, as summarized above, have a “reasonable prospect” of meeting the Babos test for abuse of process, or whether they disclose “no basis” for satisfying that test and should therefore be summarily dismissed without a full evidentiary hearing. In this regard, Mr. Cohen acknowledged that the six bases alleged do not relate to the “main” trial fairness branch of the Babos test. Rather, they relate solely to the “residual” branch concerning “the integrity of the judicial process”.

[47] The Cody test – “reasonable prospect of success” and “no basis upon which the application could succeed” – emerges from earlier case law and it has now been applied in some subsequent cases. The two original cases referred to in Cody, namely, Kutynec and Vukelich, described the “no basis” test in similar terms. In R. v. Kutynec (1992), 70 C.C.C. (3d) 289 at 301 (Ont. C.A.), Finlayson J.A. (Brooke and Doherty JJ.A. concurring) referred to the need to consider anticipated “evidence” and “facts” when applying the “no basis” standard:

If the defence is able to summarize the anticipated evidentiary basis for its claim, and if that evidence reveals no basis upon which the evidence could be excluded, then the trial judge need not enter into an evidentiary inquiry. In other words, if the facts as alleged by the defence in its summary provide no basis for a finding of a Charter infringement… then the trial judge should dismiss the motion without hearing evidence. [Emphasis added].

In R. v. Vukelich (1996) 108 C.C.C. (3d) 193 at 200 (B.C.C.A.) McEachern C.J.B.C. (Southin and Cumming JJ.A. concurring) similarly referred to anticipated “facts”, agreeing with Kutynec and stating that “in establishing the necessity for a voir dire… defence counsel should, in the first instance, summarize the facts upon which it relies in support of its submission that there has been a Charter breach”. [Emphasis added].

[48] In two decisions released shortly after Kutynec, the Ontario Court of Appeal fleshed out what was meant by terms such as “no basis”, “evidentiary basis”, “the facts as alleged”, and “offer of proof”. In R. v. Durette et al (1992), 72 C.C.C. (3d) 421 at 436-440 (Ont. C.A.), the same panel that decided Kutynec stated the following, in upholding a trial judge’s ruling denying an evidentiary hearing on a Charter motion:

… to allow an evidentiary hearing for that purpose, there must be some basis for suspecting the Crown's choice of conduct. In order to ask the court to delve into the circumstances surrounding the exercise of the Crown's discretion, or to inquire into the motivation of the Crown officers responsible for advising the Attorney- General, the accused bears the burden of making a tenable allegation of mala fides on the part of the Crown. Such an allegation must be supportable by the record before the court, or if the record is lacking or insufficient, by an offer of proof. Without such an allegation, the court is entitled to assume what is inherent in the process, that the Crown exercised its discretion properly and not for improper or arbitrary motives

It must follow from La Forest J.'s statement [in Beare] that the allegation of improper or arbitrary motives cannot be an irresponsible allegation made solely for the purpose of initiating a "fishing expedition" in the hope that something of value will accrue to the defence.

The mere fact that the Crown made a decision does not, without more, form a basis for an allegation of bad faith. Nor does it require a trial judge to allow an evidentiary hearing to inquire into why the discretion was not exercised differently. [Emphasis added].

[49] The distinction in Durette between “a tenable allegation” and “an irresponsible allegation” was applied by Dambrot J. in Perks v. A-G Ontario [1998] O.J. No. 421 at para. 9 (S.C.J.), in denying an evidentiary hearing in relation to an allegation of abuse of process. He reasoned as follows:

In this case, the Crown articulated a perfectly reasonable explanation for his decision to intervene, and to withdraw the information. Thus the record disclosed no basis to embark on an evidentiary hearing. [Counsel’s] allegation that the Ministry of the Environment and big business are in “an unholy alliance ... whose object is to rape the environment”, however colourful, is nothing more than an allegation. It neither changes the state of the record nor amounts to an offer of proof. [Emphasis added].

On further appeal, the Court of Appeal expressly agreed with the above reasoning and dismissed the appeal. See: Perks v. A.-G. Ontario, [1998] O.J. No. 5266 (C.A.). Also see R. v. Larosa (2002), 166 C.C.C. (3d) 449 at paras. 76-82 and 85 (Ont. C.A.).

[50] The Kutynec issue, concerning “the accused’s right to an evidentiary hearing” in support of a Charter motion or abuse of process application, finally reached the Supreme Court in three important cases decided between 2005 and 2014. In the first case, R. v. Pires and Lising (2005), 2005 SCC 66, 201 C.C.C. (3d) 449 at paras. 24 and 34-5 (S.C.C.), Charron J. gave the unanimous judgement of the Court and upheld the trial judge’s denial of an evidentiary hearing on a s.8 Charter motion. After quoting from the Ontario Court of Appeal’s decision in Durette, she stated:

…the accused's right to an evidentiary hearing must be considered in context. It must also be balanced against countervailing interests, including the need to ensure that the criminal trial process is not plagued by lengthy proceedings that do not assist in the determination of the relevant issues

…judges must have some ability to control the course of proceedings before them. One such mechanism is the power to decline to embark upon an evidentiary hearing at the request of one of the parties when that party is unable to show a reasonable likelihood that the hearing can assist in determining the issues before the court. [Emphasis added]

In the second case, R. v. Nixon (2011), 2011 SCC 34, 271 C.C.C. (3d) 36 at paras. 60-2 (S.C.C.), Charron J. again gave the unanimous judgement of the Court. She applied the reasoning in Pires to an abuse of process Application and held that there must be a “proper evidentiary foundation” before embarking on “an inquiry into the reasons behind an act of prosecutorial discretion”:

... mandating a preliminary determination on the utility of a Charter-based inquiry is not new. R. v. Pires, 2005 SCC 66, [2005] 3 S.C.R. 343. Similar thresholds are also imposed in other areas of the criminal law, they are not an anomaly. Threshold requirements may be imposed for pragmatic reasons alone. As this Court observed in Pires at (para. 35):

For our justice system to operate, trial judges must have some ability to control the course of proceedings before them. One such mechanism is the power to decline to embark upon an evidentiary hearing at the request of one of the parties when that party is unable to show a reasonable likelihood that the hearing can assist in determining the ·issues before the court.

Quite apart from any such pragmatic considerations, there is a good reason to impose a threshold burden on the applicant who alleges that an act of prosecutorial discretion constitutes an abuse of process. Given that such decisions are generally beyond the reach of the court, it is not sufficient to launch an inquiry for an applicant to make a bare allegation of abuse of process. [Emphasis added]

Finally, in R. v. Anderson (2014), 2014 SCC 41, 311 C.C.C. (3d) 1 at para. 52-5 (S.C.C.), the Court quoted the above passage from Nixon and stated the following (per Moldaver J. on behalf of a unanimous Court):

Requiring the claimant to establish a proper evidentiary foundation before embarking on an inquiry into the reasons behind the exercise of prosecutorial discretion respects the presumption that prosecutorial discretion is exercised in good faith. Application under s. 83.28 of the Criminal Code (Re), 2004 SCC 42, [2004], 2 S.C.R. 248 at para. 95. It also accords with this Court's statement in Sriskandarajah, at para. 27, that "prosecutorial authorities are not bound to provide reasons for their decisions, absent evidence of bad faith or improper motives". [Emphasis of Moldaver J. in the original.]

[51] The most useful post-Cody decision, in my view, is R. v. Papasotiriou-Lanteigne, 2017 ONSC 5337. In that case, the accused brought a motion seeking to remove Crown counsel on the basis of numerous allegations of serious Crown and police misconduct, all set out in lengthy affidavits sworn by the accused. The Crown brought a responding motion seeking to summarily dismiss the defence motion without an evidentiary hearing. Nordheimer J., as he then was, granted the Crown’s motion. After quoting the passages from Cody and Kutynec, already set out above, he reasoned as follows (at paras. 10, 17, 22, 25 and 26):

… as will be apparent from a review of Mr. Ivezic’s affidavit, it is replete with suspicion, conjecture, and speculation. Mr. Ivezic [one of the two accused] is, of course, entitled to be suspicious of the actions of the police who investigated him. However, his suspicion cannot be a substitute for evidence and facts. …Mr. Ivezic’s complaints about the conduct of Crown counsel (and of the police) are drawn from his opinions and beliefs that are, in turn, based almost entirely on conjecture and speculation. None of that amounts to evidence.

Rather, what is envisaged [pursuant to Cody and Kutynec] is that counsel will advise the court of their “best case”, assuming that there is a reasonable prospect that they could obtain all of the facts that they hope to through an evidentiary hearing, and the court will then determine if that best case could reasonably achieve the result that the party seeks.

Under the process I have described, I am entitled to look at what counsel for the applicant says the evidence currently reveals, and at what counsel for the respondents asserts the evidence might become, and determine whether it would warrant this court granting an order removing Crown counsel from this prosecution… Having set out the test, I will say that the bare allegations made by the respondents regarding the conduct of Crown counsel… might suggest that a removal order could be obtained.

However, the allegations are just that – allegations. The evidence in support of those allegations is difficult to find. It is clear that the respondents do not trust Crown counsel, to put it mildly. They have their reasons for their attitudes in this respect and they are entitled to hold those attitudes. However, attitudes, opinions, and beliefs are not evidence. It would not be surprising that an accused person would not necessarily trust prosecuting counsel. The question is whether there is an evidentiary foundation from which the court could draw the conclusion that the conduct of Crown counsel has crossed over the line such that their removal could be justified. [Emphasis added].

Also see: R. v. Frederickson, 2018 BCCA 2 at paras. 24-6; R. v. Blanchard, 2018 ABQB 43 at paras. 12-17.

[52] The propositions that I draw from the above review of the Kutynec and Cody line of authority are as follows:

• the “anticipated evidentiary basis” for a Charter or abuse of process Application refers to “the facts as alleged by the defence” or “the facts upon which it relies” (Kutynec and Vukelich);

• an “irresponsible allegation made solely for the purpose of initiating a fishing expedition” or “a bare allegation of abuse of process” does not displace “the presumption that prosecutorial discretion is exercised in good faith” (Durette, Nixon, and Anderson);

• a “colourful… allegation” made by counsel in argument or “conjecture and speculation” in an affidavit do not amount to “an offer of proof” or “evidence” or “an evidentiary foundation” (Perks and Papasotiriou-Lanteigne);

• a “reasonable likelihood that the [evidentiary] hearing can assist” and a “reasonable prospect of success” appear to be analogous standards that have both been applied by the Supreme Court (Pires, Nixon, Anderson, and Cody).

[53] Applying the above principles concerning the Babos test for an abuse of process Application and the Cody test for summarily dismissing such an Application, the next sections of these Reasons will analyse each one of the six bases or grounds relied on by the Waltons, beginning with the three grounds that were not emphasized either in oral argument or in the final Respondents’ Factum.

(iii) Compelled self-incrimination, the testimony given in the civil proceedings, and the deemed undertaking rule

[54] The Waltons’ concern about self-incrimination, due to the prior civil proceedings, was the first ground set out in the original Factum in support of the abuse of process Application. It has been summarized above at para. 36. This ground suffers from a number of significant deficiencies. First, it was never addressed in oral argument. Second, the record and Factum filed on the abuse of process Application never set out or described the particular evidence to be tendered by the Crown at trial that allegedly violates the ss.7, 11(c), or 13 Charter of Rights protections against self-incrimination. Third, there are well-known evidence law protections available to the defence at trial, should the Crown attempt to tender any such self-incriminating evidence. In other words, effective lesser remedies exist without having to resort to a stay based on abuse of process. Fourth, when I inquired during oral argument as to whether the Crown intended to tender any of the Waltons’ testimony or affidavits from the prior civil proceedings at the upcoming criminal trial, Mr. Doyle advised that the Crown’s present intention was not to use the Waltons’ prior evidence during the Crown’s case in chief. Depending on whether the Waltons testify at trial, and depending on how they testify, the Crown may seek to use their prior evidence in order to impeach, that is, during cross-examination. In this regard, the Supreme Court’s most recent decision concerning Charter protections against self-incrimination, R. v. Nedelcu (2012), 2012 SCC 59, 290 C.C.C. (3d) 153 at paras. 9-11, 16, 23 and 25 (S.C.C.), held that “incriminating evidence” does “not include evidence from the prior proceeding that the Crown wished to use for the sole purpose of impeaching the witness’ testimony at the subsequent proceeding”. Nedelcu also confirmed the longstanding principle, first stated in R. v. Dubois (1985), 22 C.C.C. (3d) 513 (S.C.C.), that “the time for determining whether the evidence given at the prior proceeding may properly be characterized as ‘incriminating evidence’ is the time when the Crown seeks to use it at the subsequent hearing”. In other words, this entire issue is premature at best.

[55] An additional concern about this first ground is that the Waltons’ Respondents’ Factum stated (at para. 93) that “their compelled evidence” at the prior civil proceedings is “precluded from any protection… on account of such evidence being filed with the Commercial List Court”. This statement is unclear but it appears to refer to an issue concerning whether the Waltons’ testimony in the civil proceedings was “volunteered”, and not “compelled”, because it was “filed” in response to an originating Application brought by Dr. Bernstein. In R. v. Nedelcu, supra at paras. 1 and 101-9, the accused’s prior testimony was given on discoveries in a civil action. It was held to be “compelled” because the Rules of Civil Procedure “compel a defendant in a civil action to be examined for discovery”. There are no compelled discoveries on an originating Application such as the DBDC civil proceedings in the present case. As a result, there is a live issue as to whether the Waltons’ prior evidence in the civil proceedings is subject to the principle that emerged from R. v. Henry (2005), 2005 SCC 76, 202 C.C.C. (3d) 449 at paras. 43, 47, and 60 (S.C.C.). In that case, the unanimous court held (per Binnie J.) that “s.13 is not available to an accused who chooses to testify”, that s.13 does not apply to “prior volunteered testimony”, and that accused persons “who testify at their first trial and then volunteer inconsistent testimony at the retrial” are not protected by s.13 [emphasis added]. The present record does not disclose whether the Waltons were “compelled” in the prior civil proceedings, for example, by way of a summons, or whether their evidence was “volunteered”. The point was not addressed in oral argument. In any event, as the court stated in Dubois, the time to determine this issue is at trial, if and when the Crown tenders the prior testimony. As a result, I express no view about this particularly difficult issue. I note that in Ontario Psychological Association v. Mardonet et al, 2015 ONSC 1286, Perrell J. effectively held that any witness or party who could be compelled by summons is protected by s.13 of the Charter.

[56] For all these reasons, the first ground or basis on which the Waltons allege abuse of process, namely, because of compelled self-incrimination, is without merit. Similarly, the faint suggestion that there may have been some violation in spirit of the deemed or implied undertaking rule is also without merit. The Respondents’ Factum (at para. 91) states that the Waltons “have already conceded” that the DBDC civil litigation “is not technically encompassed” by Rule 30.1 of the Rules of Civil Procedure [emphasis added]. In fact, it is clear that the common law implied undertaking rule relating to civil discoveries, now codified in Rule 30.1, was not violated in this case. That Rule applies to evidence and documents obtained by discovery (unlike this case where there were no discoveries) and, in any event, Rule 30.1 expressly exempts evidence “filed with the court” and evidence used “to impeach the testimony of a witness in another proceeding”. For all three of these reasons, there can be no suggestion of any violation of the deemed or implied undertaking rule. See: Juman v. Doucette, 2008 SCC 8, [2008] 1 S.C.R. 157; S.C. v. N.S. (2017), 2017 ONSC 5566, 141 O.R. (3d) 145 (Div. Ct.); R. v. Thornton, 2016 ONCA 562; R. v. Prosa, [2015] O.J. No. 7134 (S.C.J.).

[57] In the result, no anticipated evidentiary basis or facts have been alleged on which this first ground could possibly amount to an abuse of process.

(iv) Dr. Bernstein’s alleged criminal antecedents and the potential for restitution of unlawful proceeds

[58] The third basis or ground relied on by the Waltons, summarized above at para. 36, concerns allegations about Dr. Bernstein’s character and whether he might have used illegal proceeds of crime to invest in the Waltons’ real estate projects, and whether he might seek restitution of those alleged proceeds through the criminal trial process. Mr. Cohen had a great deal of difficulty articulating how this ground amounted to an abuse of process. In the Waltons’ original Factum, the argument was explicitly framed (at para. 76) as an “assertion that the criminal justice system should not be conscripted by Dr. Bernstein, in the hope of attaining a restitution order for monies potentially obtained in violation of law.” A great deal of authority was cited concerning the maxim ex turpi causa, that is, “a criminal cannot profit from his crime.” However, when pressed in oral argument on this point, Ms. Cohen appeared to concede that persons of bad character are often victims of crime. He also appeared to submit that this ground or basis for abuse of process was not focused on the future possibility of a sentence that may or may not include restitution.

[59] In my view, the way in which this ground or basis for abuse of process was originally framed in the Waltons’ Factum is misconceived for two main reasons. First, there is no authority for the proposition that it is an abuse of process where the Crown prosecutes an alleged crime and the victim is a person of bad character. Anyone who works in the criminal courts knows that victims of crime are often persons of bad character who are themselves involved in crime. Indeed, that is sometimes the explanation for how the victim and the accused came to know eachother. We routinely instruct juries, when this kind of evidence emerges at trial, that bad people are nevertheless entitled to the protection of the rule of law. In addition, the rules of evidence protect against certain kinds of undue prejudice that may arise from evidence of the victim’s bad character. See, e.g. R. v. Watson (1996), 108 C.C.C. (3d) 310 at 328 (Ont. C.A.); R. v. Varga (2001), 159 C.C.C. (3d) 502 at para. 71 (Ont. C.A.); R. v. Scopelliti (1981), 63 C.C.C. (2d) 481 at 496 (Ont. C.A.). Second, this ground as originally framed relies heavily on the future possibility of a restitution order. At this stage of the proceedings, there has been no conviction, no sentencing hearing, and no application for restitution. If these later stages of the criminal process are eventually reached, the Waltons can raise their argument about ex turpi causa at that time, assuming a proper evidentiary foundation exists.

[60] In light of the above significant difficulties with this ground, Mr. Cohen appeared to retreat to a more limited position during oral argument. As I understood him, he submitted that Dr. Bernstein’s allegedly bad character was not a free-standing basis for abuse of process but was relevant to the other grounds, namely, the alleged failure of the police to independently investigate the case and the alleged efforts by the civil lawyers and the Crown and the police to coordinate and to shield Dr. Bernstein from scrutiny. I will address these grounds below.

[61] Before leaving this ground, I should note that the Waltons offered little or no evidence of Dr. Bernstein’s alleged antecedents or character. It was conceded in their original Factum (at paras. 101 and 102) that proof of the facts asserted about Dr. Bernstein’s character would depend on the results of a potential third party records Application. I have proceeded on the assumption that the Waltons could prove the facts asserted, for purposes of considering this Kutynec and Cody motion to summarily dismiss the abuse of process Application.

[62] For all the above reasons, the third ground or basis relied on by the Waltons has no reasonable prospect of amounting to an abuse of process.

(v) The alleged lack of impartiality of the court-appointed Inspector Schonfeld

[63] The fourth ground or basis relied on by the Waltons is a lengthy attack on the impartiality and independence of the Inspector Receiver Manager Schonfeld. It is summarized above at para. 36. This ground was advanced only in the original Factum. It was not mentioned in the final Respondents’ Factum or in oral argument.

[64] The Waltons framed their argument about the Inspector Schonfeld in two separate ways in the original Factum. In my view, both arguments are misconceived. The first argument was that Schonfeld’s alleged lack of independence and impartiality disqualified him from testifying as an expert witness. In this regard, the Factum relied on leading authorities concerning the opinion evidence rule, such as White Burgess Langille Inman v. Abbott and Haliburton Co. 2015 SCC 23, [2015] 2 S.C.R. 182. The record filed by the Waltons assumes that the Crown will be calling Schonfeld as an expert at trial, in order to give opinion evidence. It then proceeds to challenge his impartiality. I inquired of the Crown during oral argument as to whether Schonfeld would be called at trial to give expert opinion evidence. It seemed to me that the main utility of Schonfeld’s evidence, derived from his work in the civil proceedings, was more in the nature of an accounting summary, organizing and simplifying the mass of under-lying facts set out in banking and real estate documents in order to show where the investment monies went, without necessarily giving any opinion evidence. See, e.g. R. v. Scheel (1978), 42 C.C.C. (2d) 31 (Ont. C.A.); J.D. Ewart et al., Documentary Evidence in Canada, 1984 Carswell, at pp.37-8; J. D. Watt, Manual of Criminal Evidence, 2018 Thomson Reuters, at p. 463. In addition, Schonfeld may have factual evidence to give about the Waltons’ conduct after the appointment of the Inspector when they were asked to produce invoices and back-up documents, as summarized above at paras. 10 and 13. None of this would seem to engage the opinion rule. In response to my inquiry, Mr. Doyle advised that the Crown does not presently intend to call Schonfeld in order to give expert opinion evidence. At most, the Crown may seek to call Schonfeld in order to provide Scheel accounting summaries, that is, to give secondary evidence of facts set out in the original documentary evidence. In any event, even if the Crown seeks to qualify Schonfeld as an expert, in order to give opinion evidence in some particular area, there are well-known evidence law remedies available to the Waltons (as set out in White Burgess, supra and subsequent cases concerning the opinion rule). If the Waltons seek to pursue their attack on Schonfeld’s independence and impartiality, and if the Crown seeks to qualify him as an expert, these issues can be raised in the ordinary way before the trial judge. In other words, lesser remedies are available and there is no need to resort to a stay of proceedings and abuse of process.

[65] The second way in which this argument was framed in the original Factum was as an attack on the civil proceedings themselves. The Receiver Manager was said to have failed to discover certain exculpatory documents (“fifty additional invoices” that defence counsel recently recovered from a Rose and Thistle server). Furthermore, the court-ordered process of selling the various properties was said to have caused the “investment losses” in what was otherwise a real estate “portfolio [that] was profitable.” In conclusion, it was submitted that “the civil findings may well have been adjudicated differently” but for the failings of “the receivership and the court-ordered sales of properties, thus precipitating losses which would not have otherwise occurred.” This remarkable submission (at paras. 103-117 of the original Factum) effectively asks this Court to re-litigate the receivership under the guise of an abuse of process hearing. It is entirely improper because it is a collateral attack on the orders and judgements rendered in the civil proceedings. The rule against collateral attack holds that, generally “the validity of a court order can only be challenged in the proceedings in which it is made or on an appeal or judicial review from that proceeding.” See: R. v. Wilson (1983), 9 C.C.C. (3d) 97 at pp.104 and 117-121 (S.C.C.); R. v. Garofoli (1990), 60 C.C.C. (3d) 161 at 182-6 (S.C.C.); R. v. Litchfield (1993), 86 C.C.C. (3d) 97 at 109-111 (S.C.C.); R. v. Domm (1996), 111 C.C.C. (3d) 449 (Ont. C.A.); R. v. Fercan Developments Inc. (2016), 2016 ONCA 269, 335 C.C.C. (3d) 519 (Ont. C.A.); R. v. Oliveira (2009), 2009 ONCA 219, 243 C.C.C. (3d) 217 (Ont. C.A.); Toronto (City) v. C.U.P.E, Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77 at paras. 33-4. Even if the Waltons’ attack on the trial and appellate decisions in the civil proceedings was characterized more benignly, relying on Toronto v. C.U.P.E., as an “attack on the correctness of the factual basis of the [civil] decisions”, it is hard to see how the Crown’s conduct in prosecuting such a case could amount to an abuse of process. The Crown presumably agrees with the judicial findings in the civil proceedings and is entitled to prosecute on that basis.

[66] It should be noted that the Waltons made the same argument before Newbould J. in June 2016, on the motion for final judgement in the DBDC civil litigation. Newbould J. summarily dismissed the argument on the basis that the matter was res judicata:

The Waltons argue that Dr. Bernstein caused his losses by litigating and recklessly pursuing a receivership in the face of evidence that a receivership would decimate the value of the properties. It is not open to the Waltons to argue this point. It was argued before Brown J. and rejected. It is a matter of res judicata. Brown J. stated:

On several occasions during this proceeding Ms. Walton has contended that it was the Applicants' decision to seek the appointment of receiver which caused them financial harm. She argued that had the Applicants allowed the Waltons to deal with the portfolio, everyone would have been financially happy. In her June 21, 2014 affidavit, Ms. Walton again stated that a valuation of the portfolio of Schedule B Properties the Respondents had commissioned from Colliers right after the receivership order was made showed an appraised value of the portfolio of $328.34 million. That appraisal was not placed before me in evidence; I am unable to comment upon it.

Moreover, Ms. Walton's submission on this point ignored the simple fact that it was the conduct of the Respondents in breaching the agreements by co-mingling funds and applying some of the Applicants' funds for unintended purposes, including self-dealing in favour of the Respondents' personal interests, that lies at the root of the current situation. The receivership order was designed to mitigate the harm caused by the Respondents' wrongful conduct.

See: DBDC Spadina Ltd. v. Norma Walton, supra at para.30.

[67] In terms of their impact on the criminal proceedings, I inquired as to whether the allegedly exculpatory invoices recently discovered by counsel had been provided to the Crown (although it appears they were not provided to the Inspector Schonfeld). Mr. Cohen advised that these “50 invoices” had only been discovered by Ms. Parise in the spring and summer of 2018, after she obtained a particular Rose and Thistle server, and that the invoices were provided to the Crown. It was acknowledged that the defence has excellent relations with present Crown counsel, Mr. Doyle and Mr. Power, and that the Crown was asked to re-assess the charge-screening standard (“reasonable prospect of conviction”) in light of this newly discovered reciprocal disclosure. Mr. Doyle advised that the Crown is continually re-assessing this issue as the Crown prepares for trial. In other words, the criminal process appears to be working as it should.

[68] In conclusion on this ground, there is no basis on which it could result in a finding of abuse of process.

(vi) The allegedly improper involvement of the Crown at the pre-charge investigative stages of the case

[69] The Waltons make two separate allegations of Crown misconduct. First, they allege misconduct at the pre-charge stage relating to Weinberg’s involvement with the police investigation. Second, they allege Crown and police misconduct throughout, both pre-charge and post-charge, by improperly coordinating with civil counsel and by using the criminal process to further the civil proceedings. I will address both of these allegations of Crown misconduct. However, they raise separate and distinct factual issues and they are based on separate and distinct case law concerning abuse of process. Accordingly, I intend to address them separately, beginning with the allegation of improper pre-charge involvement in the police investigation. This is an established basis for abuse of process, arising from the Supreme Court of Canada’s decision in R. v. Regan, supra.

[70] In my view, the allegation of improper involvement by Crown counsel in the police investigation is frivolous. The factual record on the abuse of process Application relating to this issue indicates the following (as summarized above at para. 22): the Crown advised Det. Moran in January 2016 about the charges being contemplated; the Crown assisted Det. Moran by attending at the Commercial List and obtaining transcripts of certain examinations and cross-examinations from the civil proceedings; and the Crown advised Det. Moran about a legal issue concerning banking records obtained through a Production Order in February 2016. All of these acts of advice and assistance by Crown counsel at the investigative stage were entirely proper. They do not begin to suggest any violation of the principle of police independence from Crown counsel, as explained in R. v. Regan, supra and in LeSage and Code, Report of the Review of Large and Complex Criminal Case Procedures, Queen’s Printer for Ontario 2008, at pp. 25-28. No tenable allegation or offer of proof was made to suggest that Weinberg did anything more, at the investigative stage of the case, that might compromise police independence.

[71] In the final Respondent’s Factum, it was pointed out that Weinberg carried on as Crown counsel for a period of time at the post-charge stage. As summarized above at para. 32, she conducted the bail hearing, made initial disclosure, attended at the first JPT, and advised that a direct Indictment was under consideration. None of these activities were improper in any way, let alone an abuse of process. What matters in a case where Crown counsel has “collaborated closely and significantly with the police at the investigative stages”, is that “fresh and independent counsel” ought to be brought in to carry out the Crown’s charge screening assessments at the post-charge stage. I doubt that Weinberg could be said to have “collaborated closely and significantly with the police at the investigative stages” but, in any event, Orlando was brought in as “fresh and independent” Crown counsel to carry out the Crown’s charge screening duties, prior to the Deputy Attorney General’s decision to prefer a direct Indictment (as summarized above at paras. 33-5). See: Report of the Review of Large and Complex Criminal Case Procedures, supra at pp. 28-31; Crown Prosecution Manual, Ontario Ministry of the Attorney General, at D. 29.

[72] Before leaving this ground or basis for alleging abuse of process, I should mention one additional aspect of Weinberg’s pre-charge conduct that was relied on by the Waltons. In the Application Record, there is an online article titled “Coordinating Criminal and Civil Justice as a Means of Recovery for Fraud Victims”. Counsel advised the Court that it was posted on the website of the Association of Certified Forensic Investigators of Canada (ACFI). As initially posted, the authors of the article were named as Norman Groot and Renna Weinberg and it is stated that they presented the article at a May 5, 2015 meeting of the ACFI in Toronto. This would have been about a year before the criminal charges were laid in the present case. Apparently the article was removed from the website at some point and was later re-posted without Weinberg’s name as co-author. Mr. Groot, the other apparent co-author, is said to be a lawyer in private practice.

[73] Assuming for purposes of the present Cody and Kutynec Motion, that Weinberg and Groot co-authored the article and presented it at an ACFI meeting in May 2015 in Toronto, I agree that the article contains some improper language which the authors likely regret. They were trying to describe the practical “reality” in fraud cases, that making restitution can be an important mitigating consideration at the time of sentencing. See, e.g.: R. v. Castro (2010), 2010 ONCA 718, 261 C.C.C. (3d) 304 (Ont. C.A.); R. v. Bogart (2002), 167 C.C.C. (3d) 390 at para. 39 (Ont. C.A.); R. v. Wilson (2003), 174 C.C.C. (3d) 255 at para. 8 (Ont. C.A.). The authors unfortunately used the phrase “trading liberty for money” when describing this “reality”, and they also used a completely inappropriate heading, “Criminal Charges as Leverage for Restitution”. The entire context for this improperly worded part of the article was as follows:

Criminal Charges as Leverage for Restitution

Although fraud victims are not permitted to threaten criminal charges as a means to recover their money due to concerns that they themselves are in breach of the criminal extortion provisions, another reality of our criminal justice system is that Crown attorneys in fraud cases will often trade prison sentences in exchange for conditional sentences (house arrest) if the fraudster makes a full payment of the loss, or reduce the prison otherwise sought in exchange for partial payment of the loss. Thus while threats of criminal charges for recover of money is prohibited by fraud victims, trading liberty for money by Crown attorneys is lawful – and a mechanism that fraud victims should consider when coordinating their civil prosecutions with their criminal complaints.

[74] The legitimate point that the authors were trying to make, about the importance of restitution at the sentencing stage of fraud cases, could and should have been made in a much more professional and much less offensive way. However, the fact that lawyers sometimes write things in articles or say things at conferences, that are unprofessional and offensive, does not begin to rise to the level of an abuse of process. Assuming for purposes of this Motion, that Weinberg and not Groot was responsible for the offending language chosen in the above paragraph, her removal from the prosecution over two years ago in late 2016 is a complete remedy for what is at most an isolated failure of judgement and professionalism. See R. v. Babos, supra at paras. 58-72, where the Court addressed highly improper threats made to the accused “more than a year before trial by a Crown no longer on the case.” The majority held that “the Crown’s threatening conduct, while reprehensible, did not approximate the type of shocking conduct needed to justify a stay”.

[75] For all the above reasons, the allegation of Crown misconduct at the pre-charge investigative stage of the case could not possibly amount to an abuse of process and justify a stay of proceedings.

(vii) The alleged improprieties relating to the preferred Indictment

[76] There are a number of different aspects to the Waltons’ allegation of impropriety in relation to the direct Indictment. In their initial Factum, three concerns or complaints were stated, as follows: first, the 15 month delay between October 31, 2016 (when counsel was advised at the first JPT about a potential direct Indictment) until February 18, 2018 (when the Indictment was preferred) was said to be improper; second, the refusal to disclose the materials submitted by the Crown to the Deputy Attorney General was challenged; and third, the asserted motive for the direct Indictment was allegedly improper, namely, “to prevent Dr. Bernstein from being cross-examined at a preliminary hearing, due to credibility concerns following the adverse credibility findings made by Newbould J.”

[77] In the final Respondents’ Factum, two additional concerns or complaints were stated, as follows: first, disclosure of certain notes of Det. Moran was requested but was not provided until after the direct Indictment had been preferred; and second, Orlando’s position as both Crown prosecutor in the present case and Deputy Director in the Assistant Deputy Attorney General’s (ADAG) office allegedly put her in a “conflict” because it “enabled her to make decisions on preferring Indictments”.

[78] In my view, all five of these alleged improprieties relating to the direct Indictment are without merit. I will address them in turn, beginning with the four substantive complaints. The first concern about 15 months delay is misconceived. If there has been improper delay in the present case, then the appropriate remedy is a s.11(b) Charter of Rights Motion and not an abuse of process Application. In any event, and as explained in R. v. Millard and Smich, 2017 ONSC 4030 at paras. 56-61 and 85-7, there are “sound policy reasons” for taking some time before seeking or granting a direct Indictment. In particular, disclosure should be “substantially complete” before considering a direct Indictment so that the Crown’s charge screening responsibilities and any submissions from defence counsel can be undertaken on the basis of reasonably complete disclosure. As summarized above at paras. 33-35, this is what appeared to happen in the present case. See: Crown Prosecution Manual, Direct Indictments, Ministry of the Attorney General, at D. 9.

[79] The suggestion that the Crown’s motive for preferring a direct Indictment was to shield Dr. Bernstein from cross-examination at a preliminary inquiry is entirely speculative. There is no evidence, no facts, and no offer of proof concerning this allegation. It is reminiscent of Dambrot J.’s reference in Perks, supra to a “ colourful… allegation” made by counsel, and Nordheimer J.’s reference in Papasotiriou, supra to “bare allegations” based on “conjecture and speculation”, without any facts, evidence or offers of proof. Indeed, the evidence in the record tends to contradict the suggested motive. Dr. Bernstein had filed affidavits and had been cross-examined by the Waltons in the civil litigation. As a result, defence counsel was already armed with substantial material concerning Dr. Bernstein. In other words, he had not been shielded from cross-examination. Furthermore, the one adverse finding concerning Dr. Bernstein’s credibility was made by Newbould J. in relation to a dispute with Trez Capital about a limitation period. That limitation period issue did not affect the Waltons. See: Trez Capital Limited Partnership et al v. Dr. Stanley Bernstein et al, 2017 ONSC 3111. The limitation period dispute with Trez Capital revolved around a particular phone call, which was not an issue that would have arisen in the criminal case (aside from its possible impact on Dr. Bernstein’s general credibility, assuming it does not run afoul of the collateral facts rule). It would certainly not have arisen at a preliminary inquiry where credibility findings cannot be made and where counsel rarely engage in a “frontal attack on credibility”. See Re Regina and Arviv (1985), 19 C.C.C. (3d) 395 (Ont. C.A.), where Martin J.A. gave the judgement of the Court and stated: “Cross-examination at a preliminary hearing rarely involves a frontal attack on the credibility of a witness, since the provincial court judge conducting a preliminary hearing is not entitled to determine the credibility of witnesses”.

[80] The alleged late disclosure of some of Det. Moran’s notes caused no prejudice in my view. Counsel has had all of Det. Moran’s notes for some time now and there was no showing made as to how the few pages of late-disclosed notes would or could have affected the decision to prefer a direct Indictment. Seven waves of disclosure had been provided to the defence before the direct Indictment was preferred. In addition, the Crown had sent a detailed letter to Mr. Cohen on July 27, 2017, summarizing much of the information requested by the defence about Det. Moran’s contacts with Dr. Bernstein’s civil lawyers. Mr. Cohen then made lengthy written submissions to the Crown on August 29, 2017, opposing a direct Indictment. There was no suggestion in Mr. Cohen’s written submissions that he lacked sufficient disclosure to be able to make the submissions effectively. When I pressed Ms. Parise during oral argument, to point to anything in the delayed disclosure that would have made Mr. Cohen’s written submissions concerning the direct Indictment more effective, she conceded that there were no “specific emails or notes” that she could point to. The delayed disclosure was simply more material about the ongoing cooperation between Det. Moran and the civil lawyers at the post-charge stage. As will be explained below, there was nothing improper about this ongoing cooperation by counsel acting on behalf of the complainant. I am satisfied that the minimal amount of delayed disclosure of parts of Det. Moran’s notes caused no prejudice and had no impact on the direct Indictment process.

[81] The new allegation about Orlando’s alleged “conflict” is misconceived. She held the position of Deputy Director in the ADAG’s office from 2015 to 2017, that is, during the period when she first took over the present prosecution in late 2016. In 2017 she was appointed to the position of Provincial Coordinator of human trafficking prosecutions. She held this new position at the time when the direct Indictment was preferred in February 2018. The suggestion in the final Respondents’ Factum, that Orlando was somehow in a “conflict”, was not addressed or clarified in any way during oral argument. The assertion in that final Factum, that her position in the ADAG’s office “enabled her to make decisions on preferring Indictments”, is both factually and legally wrong. A Deputy Director in the ADAG’s office has no such power and there was no offer of proof to suggest otherwise.

[82] The one procedural or evidentiary complaint concerning the direct Indictment relates to the Waltons’ request for access to the materials submitted to the Deputy Attorney General in support of the Crown’s request for a direct Indictment. The law is settled that these materials are presumptively privileged and need not be produced to the Court for review, absent a threshold showing that the abuse of process Application, to which the materials are said to relate, has a “reasonable prospect of success”. See: R. v. Ahmad (2008), 59 C.R. (6th) 308 (Ont. S.C.J.); R. v. Codina (2018), 2018 ONSC 1096, 146 W.C.B. (2d) 551 (Ont. S.C.J.); R. v. T.G., 2017 ONSC 1314. Given that I have dismissed all four of the substantive bases for alleging that the direct Indictment amounted to an abuse of process, for the reasons set out above, there is no basis on which to order production of the materials submitted to the Deputy Attorney General.

[83] I am satisfied that there is no merit to any of the Waltons complaints about the direct Indictment in this case, let alone any possibility that it caused an abuse of process.

(viii) The allegedly improper coordination between the civil and criminal proceedings and the use of the criminal process to collect a civil debt

[84] The allegation that the Crown and the police and Dr. Bernstein’s civil counsel improperly coordinated their efforts and used the criminal process to further the civil litigation is the real core of the abuse of process Application. It occupied the great majority of oral argument and it was the main focus of the final Respondents’ factum. This argument has a number of different but related aspects as follows: it begins with the assertion set out in Ms. Walton’s affidavit in support of the abuse of process Application, that she made efforts to reach a civil settlement with Dr. Bernstein between October and December of 2013, after the DBDC litigation began, but that Dr. Bernstein declined a generous settlement offer and told her in a January 2014 telephone call that he wanted to see her “bankrupt and in jail”; it is then alleged that Dr. Bernstein and the Lenczner Slaght lawyers retained the private investigator Hartford who began liaising with the Toronto police in late 2014; it is further alleged that the police did no independent investigation but simply adopted Hartford’s report and the materials provided by the Inspector Schonfeld and the civil lawyers; finally, and most importantly, various acts of improper coordination between the Crown, the police and civil counsel are alleged, in particular, it is asserted that the Crown’s failure to disclose Det. Moran’s notes prior to the June 2016 hearing before Newbould J. and the further delay in taking a KGB statement from Dr. Bernstein until after Newbould J. had delivered his Reasons granting final judgement to Dr. Bernstein in September 2016, were coordinated steps taken for the improper purpose of manipulating the criminal process, furthering the civil litigation, and assisting in the ultimate goal of collecting a civil debt.

[85] There are four significant defects or flaws in this argument. Some of these flaws are factual and some are legal. I will summarize all four points below and then analyse each one in greater detail. In my view, the four main failings in this central argument concerning abuse of process can be summarized as follows:

• first, there is no evidence that Dr. Bernstein ever threatened to involve the police and the criminal courts unless Ms. Walton settled the civil litigation on his terms. Indeed, it was Ms. Walton who initiated and pursued the settlement discussions, according to her own affidavit. At its highest, Dr. Bernstein’s oral utterance over the telephone, about wanting to see Ms. Walton “bankrupt and in jail”, indicates anger and vindictiveness. These are not unusual sentiments amongst those who see themselves as victims of crime. There is nothing in the facts of this case that would bring it within the old line of authority holding that it is an abuse of process “if criminal proceedings are commenced solely for the purpose of collecting a civil debt,” as will be explained below. See: R. v. Leroux (1928), 50 C.C.C. 52 (Ont. C.A.); R. v. Leclair (1956), 115 C.C.C. 297 (Ont. C.A.); R. v. Laird (1983), 4 C.C.C. (3d) 92 (Ont. H.C.J.); R. v. Waugh (1985), 21 C.C.C. (3d) 80 (N.S.C.A.);

• second, the modern authorities concerning this form of abuse of process hold that even when the complainant is improperly motivated and threatens resort to the criminal courts in order to collect a civil debt, this will not amount to an abuse of process if the police and Crown are not implicated in the misconduct and if “charges were laid after an independent investigation and decision by the authorities.” See: R. v. Finn (1996), 106 C.C.C. (3d) 43 (Nfdl. C.A.), aff’d (1997), 112 C.C.C. (3d) 288 (S.C.C.); R. v. Neal (2002), 2002 SCC 70, 168 C.C.C. (3d) 321 (S.C.C.); R. v. Meyer, [1998] O.J. No. 2331 (C.A.); R. v. McCague (2006), 2006 ONCJ 208, 209 C.C.C. (3d) 557 (Ont. C.J.). I have reviewed Det. Moran’s lengthy notes and I have compared her synopsis in support of the four criminal charges that she laid with the earlier report from Dr. Bernstein’s private investigator. In my view, it is apparent that Det. Moran carried out a thorough and independent police investigation during the 10 month period from June 2015 to April 2016 (summarized above at paras. 22 and 23). Furthermore, Orlando then carried out a thorough and independent charge screening assessment during 2017, including consideration of new materials submitted by the defence (summarized above at paras. 33-35). Finally, the Deputy Attorney General made an independent assessment of the case before preferring a direct Indictment (summarized above at para. 34). In all these circumstances, there is no basis in fact or in law to allege this particular form of abuse of process;

• third, the timing of the formal criminal complaint (and various related steps), about a year and a half after the civil litigation began, is relied on by the Waltons to suggest improper coordination and improper motivation amongst the civil and criminal players. In my view, the timing of the complaint and its various related steps was logical and understandable. The fact that the Lenczner Slaght law firm retained the private investigator Hartford in and around July 2014, the fact that Hartford began meeting with the Toronto police in October and December 2014, and the fact that the Toronto police began receiving materials from Hartford for the purpose of “intake of criminal complaint” at the time of these initial meetings does not suggest any impropriety, let alone the kind of sinister and speculative impropriety suggested by the Waltons. Given the known facts in the record, the timing of the steps taken by Dr. Bernstein’s representatives, presumably after legal advice and some oversight from Griffin, were entirely logical. What is most significant about the timing of the above developments in the case during 2014 is that damaging findings about the Waltons’ conduct had already been made by various branches and members of the judiciary. As summarized above (at para. 7), Dr. Bernstein was the silent or inactive partner in the 31 real estate development projects with the Waltons. It was only through the civil litigation, with its appointment of an Inspector, that facts began to emerge suggesting “theft”, the “appearance … of theft,” “knowing misappropriation”, and “fraud.” I have set out these findings made by the judiciary in November 2013, May 2014, and August 2014 (at paras. 9, 11, 13 and 14). It is hardly surprising that Dr. Bernstein and his civil lawyers, upon receiving the above findings and judgements, would retain Hartford and then approach the police. There is certainly nothing improper about taking these steps, reporting an alleged crime to the appropriate authorities on instructions from a client complainant. As will be explained below, Mr. Cohen’s argument concerning the above steps involves a great deal of speculation about improper contacts, collaboration, and motivation. He does not address or acknowledge the known facts. Those facts are what Dr. Bernstein and Griffin had to go on at this stage, namely, the findings made by Newbould J., the Court of Appeal, and Brown J. based on evidence filed in the civil proceedings. I can understand why the Waltons do not wish to acknowledge these facts, because they want to challenge them by way of an improper “collateral attack” (as explained above at para. 65). This determination by the Waltons and their counsel, to ignore the facts and instead rely on speculation, is not helpful when alleging abuse of process and seeking an evidentiary hearing;

• fourth, the specific instances of allegedly improper coordination between the police, the Crown, and the civil lawyers are factually misconceived. They too depend heavily on speculation. I have already rejected the allegations to the effect that the police investigation was somehow negligent, or was a deliberate attempt to protect Dr. Bernstein, for example, by failing to find “50 third party invoices” in an “external copy” of the Rose and Thistle server, and by failing to look into Dr. Bernstein’s alleged bad character. The Waltons presumably had control of the Rose and Thistle server, and any “external copy” that contained these invoices. It appears that the clients provided this “external copy” to their counsel in the spring of 2018, based on what Ms. Parise stated during oral argument. There is no evidence these invoices were ever provided to Schonfeld, in spite of repeated requests and court orders to produce all relevant records, and there is no evidence that these “50 third party invoices” could explain the four most suspicious transactions that the judiciary had characterized as “theft”, “knowing misappropriation”, and “fraud.” Similarly, the suggestion that Dr. Bernstein may be a bad person is simply no defence to “theft” and “fraud.” As explained above, and without making any findings about Dr. Bernstein’s character, it is normal for the police to investigate crimes where the victim may be a person of bad character. Finally, the allegedly “delayed disclosure” of Det. Moran’s notes in May and June 2016, in the period immediately after the criminal charges were laid, was entirely appropriate (as will be explained below). Similarly, the timing of Dr. Bernstein’s KGB statement was also appropriate (as will be explained below). In short, the sinister and unprofessional motives attributed to the Crown, the police, and the Lenczner Slaght lawyers in relation to the above steps in the criminal process are based on speculation and are not based on “facts”, “evidence”, or an “offer of proof”. Indeed, the known facts contradict any sinister or unprofessional motive.

[86] Turning to a more detailed analysis of the above four points, the first issue concerns the old law to the effect that commencing criminal proceedings “solely for the purpose of collecting a civil debt” is per se abuse of process. These cases – Leroux, Leclair, Laird, and Waugh are typical of this early line of authority – all pre-date the modern approach to abuse of process articulated in Jewitt, Power, Tobiass, and Babos. As a result, they should be approached with some caution. Nevertheless, as Callaghan J., as he then was, pointed out in Laird, supra at p.96:

Civil proceedings and criminal proceedings often go hand in hand when a charge of fraud is in issue. Such concurrence of proceedings, however, is not essential to the integrity of the criminal proceedings. In order to conclude that the criminal process is being used for the proscribed purpose, evidence of either an implied or express threat is usually present. In this case there is no evidence from which one could infer that the resort to the criminal jurisdiction was for the purpose of collecting a civil debt. In these circumstances I am of the view that the provincial court judge erred in law when he invoked, or purported to invoke, the doctrine of abuse of process and quashed the proceedings. [Emphasis added]

[87] There is no evidence and no offer of proof in the present case, that Dr. Bernstein ever expressly or implicitly threatened the Waltons with criminal prosecution unless they paid him a sum of money that he required in order to settle the civil proceedings. Assuming for purposes of the Kutynec and Cody Motion, that Ms. Walton’s account of the January 2014 phone call is accepted, Dr. Bernstein simply rejected Ms. Walton’s best offer to settle and made an angry statement about wanting to see her “bankrupt and in jail.” By this point, Newbould J. had already released his November 2013 Reasons for Judgement in which he analysed three particularly suspicious transactions and described them as “theft”, or having “the appearance… of theft” (given that the Waltons had apparently transferred Dr. Bernstein’s investment monies into their own entities or accounts where the money was apparently used for payment of their personal expenses, as summarized above at para. 9). Newbould J. had also referred to some of the Waltons’ suspicious conduct after the appointment of the Inspector (summarized above at para. 10). Another few months went by, after the January 2014 phone call, while the Waltons appealed Newbould J.’s decision. The Court of Appeal released its judgement in late May 2014, holding that there had been “knowing misappropriation of funds in respect of at least one property.” Another month and a half went by until early July 2014 when Griffin advised Ms. Walton, in response to her inquiry, that he was in the process of retaining a private investigator but that Dr. Bernstein had not yet gone to the police. After one more month, Brown J. released his damning findings in August 2014 to the effect that there had been “fraud” by the Waltons in relation to a number of the transactions (as summarized above at paras. 13 and 14). Finally, after a few more months had passed, the private investigator Hartford met with the Toronto police on October 28, 2014 and they discussed “items received for intake of criminal complaint” (summarized above at para. 18).

[88] There is no evidence of any ongoing settlement discussions, after the January 2014 phone call and while the above developments were taking place. Furthermore, there is no evidence that Dr. Bernstein or his civil counsel ever made a demand for some kind of civil settlement, before going to the police in late October 2014. Finally, there is no evidence of any threat to go to the police, absent a suitable civil settlement. On this record, there is simply no evidence and no offer of proof, that the complaint made to the police by Dr. Bernstein’s representatives was “solely for the purpose of collecting a civil debt.” On the contrary, the natural inference is that the complaint to the police was driven by the judicial findings and the facts that emerged from the civil litigation.

[89] Turning to the second issue summarized above, even if there was evidence that Dr. Bernstein was improperly motivated (contrary to my above findings in relation to the first issue), the modern post-Jewitt law is to the effect that there is no abuse of process if the police and Crown are not implicated in the complainant’s improper demands and, instead, proceed with their own independent investigation and assessment of the appropriateness of criminal charges. Trotter J., as he then was, analysed the modern authorities on this point in R. v. McCague, supra and I adopt his analysis of the case law without repeating it. These modern authorities – Finn, Neal and Meyer – are unambiguous and they are binding. Provided that “charges were laid after an independent investigation and decision by the authorities,” any antecedent improper motivation by the complainant is effectively cleansed or, at least, is not determinative of an abuse of process. In other words, the modern authorities focus on state misconduct, consistent with the principles set out in Jewitt and its progeny. Given the clarity of the modern law on this point, the issue in the present case becomes purely factual. In this regard, the facts of the present case are much weaker than in McCague, supra at paras. 19 and 35-6, where there had been an explicit threat to “give us our money in a certified cheque and everything will be forgotten.” In spite of this improper threat by the complainants in that case, Trotter J. followed the modern Finn, Neal, and Meyer line of authority and concluded:

On all the evidence, I find that it was not improper for [the complainants] to turn to the police and the criminal courts in these circumstances… I find that they had a bona fide belief that they had been the victim of theft or fraud… I find there was no intent to leverage the accused in a manner that amounted to conduct that should attract the abuse of process doctrine.

In conclusion, this case does not come close to being one of the "clearest of cases" warranting judicial termination of the proceedings for an abuse of process or an infringement of the Charter. Far from undermining integrity in the administration of justice by letting this case proceed in the normal course, a stay of proceedings would undermine confidence in the system. To borrow and slightly alter the words of the Court of Appeal in R. v. Meyer reproduced above, "the evidence establishes nothing more than that [the complainants] having been unable to collect a debt clearly owing, even with the threat of criminal prosecution, turned the matter over to the police for them to decide.” [Emphasis added]

[90] Turning to the facts of the present case, the police investigation inevitably relied to a significant extent on the work product that had emerged from the civil litigation. This is how Dr. Bernstein had discovered the alleged “theft” and “fraud” and it is simply common sense that he and his representatives would rely on this material as evidence of the alleged crime which they were reporting to the police. Ms. Parise sensibly conceded this point in her concluding oral argument on behalf of the Waltons. In spite of relying on much of the materials and findings from the civil litigation, it is apparent from all the steps taken by Det. Moran (summarized above at para. 22) that she also carried out her own independent investigation. What matters most for purposes of the abuse of process doctrine, as I read the modern Finn, Neal, Meyer, and McCague line of authority, is that there is no police or Crown “involvement” in the complainant’s misuse of the criminal process and that the police and Crown make an “independent… decision” concerning the merits of a prosecution [emphasis added]. In this regard, there is no suggestion that the police or Crown had any “involvement” in the matter prior to Hartford’s October 28, 2014 meeting with Det. Wilson. Assuming that Dr. Bernstein’s representatives came to the police in late 2014 on the basis of some improper motivation or implied threat (contrary to my above findings in relation to the first issue), there is no suggestion of police/Crown complicity in any such motivation or implied threat. Indeed, Det. Moran did not even appear on the case until June 2015 and Weinberg did not appear on the case until January 2016. It is Moran and Weinberg who were the relevant state actors in the criminal case.

[91] As to whether Det. Moran made an “independent decision” to lay criminal charges in May 2016, her lengthy and thorough notes for the 10 month pre-charge investigative phase of the case (summarized above at para. 22) indicate that she was diligent, thorough, and cautious. She took steps to secure relevant documents through proper legal processes, she took legal advice from the Crown when appropriate, and she took the necessary time to review the voluminous existing record and to ask detailed follow-up questions. I am satisfied that there was an independent police investigation. In terms of her charging decision, it is apparent that she did not simply adopt and copy Hartford’s initial report and complaint on behalf of Dr. Bernstein, contrary to the submission repeatedly made by Mr. Cohen. As summarized above at paras. 20 and 21, Hartford’s report and the complaint made at the May 2016 “intake meeting” with the police, focused on five of the 31 projects: Tisdale Mews, 1450 Don Mills Rd., 1500 Don Mills Rd., the Galloway Road townhouses, and Red Door Developments. Four of these five projects had been the subject of Newbould J. and Brown J.’s findings of “theft”, the “appearance… of theft”, “knowing misappropriation”, and “fraud”, and so it is hardly surprising that this was the focus of Hartford and Roy’s complaint to the police, on behalf of their client Dr. Bernstein.

[92] Det. Moran’s synopsis of the four charges that she laid in May 2016, summarized above at para. 23, shows that she agreed with three of the five specific complaints set out in Hartford’s report. Counts One, Three, and Four of Det. Moran’s criminal Information were focused on the Galloway Road townhouse project and the two Don Mills Road projects. However, she did not lay charges specifically focused on the other two projects in Hartford’s report. Instead, Det. Moran’s Count Two alleges a broad “$23.68 million (net)” fraud that covers a large number of the projects and alleges a pattern of transferring, commingling, and misusing of Dr. Bernstein’s investment monies. As noted previously, this Count Two allegation appears to follow much of Brown J.’s reasoning in his August 2014 decision. I am satisfied that Det. Moran made her own “independent decision” concerning the appropriate charges and she did not simply copy and adopt the complaint made on behalf of Dr. Bernstein.

[93] In addition, Orlando was brought in as a fresh and independent Crown counsel in December 2016. She had no involvement in the pre-charge investigative stage of the case. She made the “charge screening” decision, concluding that there was a reasonable prospect of conviction in relation to the four counts and that it was in the public interest to prosecute. Finally, the Deputy Attorney General made a further independent charging decision in February 2018, preferring a direct Indictment in relation to the four counts.

[94] In all the above circumstances, there is no basis to allege an abuse of process pursuant to the modern Finn, Neal, Meyer, and McCague line of authority. The police and the Crown were not involved in any attempts to use the criminal process to further the civil litigation. They carried out an independent investigation and made independent decisions concerning the appropriateness of a criminal prosecution. There are no “facts”, no “evidence”, and no “offer of proof” to suggest the contrary.

[95] The third point summarized above concerns the timing of the criminal complaint, about a year and a half after the civil litigation began, and the speculative arguments relied on by the Waltons concerning this timing. Mr. Cohen stresses the timing of the criminal complaint and its related steps in various ways, as follows: first, he submits that “Dr. Bernstein’s counsel were evidently waiting to see whether the Walton’s personal receiver, Ira Smith, had located any other bank accounts belonging to the Waltons, prior to Hartford’s attendance at the Commercial Crimes Unit” (at para. 168 of the original Factum); second, he notes that Hartford’s first steps towards a criminal complaint in October and December 2014 did not proceed further until the formal “intake meeting” in May 2015, and submits that “from the timing of Mr. Hartford’s involvement it appears that a criminal complaint was delayed to avoid a potential stay application from being advanced in the civil matter” (at para. 30 of the final Respondent’s Factum); and third, he submits that Det. Moran’s decision to lay criminal charges in April 2016, at a point when the motion for final judgement before Newbould J. was already scheduled to be heard on June 3, 2016, indicates “that the coordination of the criminal investigation was geared towards facilitating the laying of criminal charges, prior to the return of the [June 3, 2016] application. The effect of those charges upon the return of the application was palpable” (at para. 35 of the final Respondents’ Factum).

[96] These kind of assertions by counsel, either in a Factum or in oral argument, are examples of what Dambrot J. in Perks, supra and Nordheimer J. in Papasotiriou, supra referred to as a “colourful… allegation” by counsel and “conjecture and speculation”, unsupported by any “facts”, “evidence”, or an “offer of proof”, contrary to what is required by the Kutynec and Cody line of authority. They are also examples of what Finlayson J.A. in Durette, supra and Charron J. in Nixon, supra referred to as an “irresponsible allegation” or a “bare allegation”. In oral argument, Mr. Cohen went even further and alleged that the civil lawyers “controlled the police”, without any facts or evidence or offer of proof to support this serious allegation.

[97] As noted, the Waltons’ above allegations concerning the reasons or motivation for the timing of the steps taken in the case are unsupported by any facts, evidence, or offer of proof. They are unadorned speculation. Furthermore, there is evidence in the record that suggests other explanations for the timing of the various steps. As summarized above, the Lenczner Slaght law firm did not retain a private investigator until after Newbould J.’s preliminary finding of “theft”, when first appointing a Receiver Manager, had been upheld by the Court of Appeal in late May 2014 and had been characterized by the Court of Appeal as “knowing misappropriation of funds”. The private investigator presumably began his work but did not take initial steps to meet with the police until after Brown J. had made findings of “fraud” on a much more complete evidentiary record than what was before Newbould J. and the Court of Appeal. This was a responsible and cautious way to proceed.

[98] Turning to the Waltons’ speculative allegations about timing (set out above at para. 95), the assertion in the original Factum is that Dr. Bernstein’s civil “counsel were evidently waiting to see whether the Waltons’ personal receiver, Ira Smith, had located any other bank accounts belonging to the Waltons, prior to Hartford’s attendance at the Commercial Crimes Unit”. The evidentiary record squarely contradicts this assertion, indicating that Hartford first met with the police and initiated the complaint process on October 28, 2014, over a month before the Waltons’ personal receiver Ira Smith rendered his first report on December 1st, 2014 stating that “no funds or other property [belonging to the Waltons] was located”. In terms of the delay between Hartford’s initial meetings with the police in October and December 2014 and the formal “intake meeting” in May 2015, it is apparent from the police notes of the early meetings (set out above at para. 18) that Hartford provided materials to the police “for intake of criminal complaint” at the initial October 28, 2014 meeting. It therefore appears that the complaint process was underway at that point. In addition, Mr. Cohen conceded in oral argument that Brown J. had asked for further submissions on certain issues, in particular, the “measure of damages”, before the civil proceedings could be concluded. Mr. Cohen agreed that there would normally be nothing wrong with delaying the formal criminal complaint until after completion of these proceedings before Brown J. An important intervening event that counsel did not mention, was that Brown J. was appointed to the Court of Appeal on December 11, 2014. As a result, he was unable to complete the DBDC civil proceedings and they had to be re-scheduled. The formal criminal complaint “intake meeting” proceeded in May 2015, once Hartford advised Det. Wilson in March 2015 that he was ready “to report”. The suggestion that the reason for delaying the formal criminal complaint from October 2014 until May 2015 was in order “to avoid a potential stay” of the civil proceedings (as asserted in the Respondents’ final Factum) is not only speculative. It is belied by the fact that no stay of the civil proceedings was ever sought by the Waltons, even after the complaint had led to criminal charges in April 2016. See paras. 5 and 6 of Newbould J.’s final reasons in the DBDC litigation, released on September 23, 2016 (summarized above at paras. 28-30). Finally, the delay from the formal criminal complaint in May 2015 to the laying of charges in April 2016 is fully explained by Det. Moran’s thorough investigation of the matter, as summarized above.

[99] To make speculative and unsupported allegations of serious misconduct by counsel, especially in the face of a factual record that strongly suggests no such misconduct, is irresponsible. As Kelly J.A. (Lacourciere and Zuber JJ.A. concurring) put it many years ago, speaking for the Court in R. v. Elliott (1975), 28 C.C.C. (2d) 546 at 549 (Ont. C.A.):

I consider it most unfortunate that any counsel, carried away by his enthusiastic support of his client’s cause, should permit himself, by reason of his client’s instructions, to make allegations inferring unjust conduct on the part of the Court, or unprofessional conduct on the part of brother solicitors without first satisfying himself by personal investigations or inquiries that some foundation, apart from his client’s instructions, existed for making such allegations. His duty to his client does not absolve a solicitor from heeding his duty to the Court and to his fellow solicitors.

More recently, Rosenberg J.A. (Carthy and Doherty JJ.A. concurring) made much the same point in R. v. Felderhof (2003), 180 C.C.C. (3d) 498 at 537 (Ont. C.A.):

The defence has the right to make allegations of abuse of process and prosecutorial misconduct, but only where those allegations have some foundation in the record, only where there is some possibility that the allegations will lead to a remedy and only at the appropriate time in the proceedings. See R. v. Kutynec (1992), 70 C.C.C. (3d) 289 (C.A.).

See also: Rondel v. Worsley, [1967] 3 A11 E.R. 993 at 998 per Lord Reid (H.L.); R. v. Samra (1998), 129 C.C.C. (3d) 144 at 158-9 and 168 per Rosenberg J.A. (Ont. C.A.).

[100] I am satisfied that the timing of the various steps in the present case, beginning with civil proceedings that eventually led to criminal charges, was logical and appropriate and provides no basis for an allegation of abuse of process. For the reasons summarized above, the evidentiary record indicates that the alleged “theft” and “fraud” came to light through the civil litigation process, it was identified as such by the judiciary, and the civil lawyers then took steps on behalf of their client to make a criminal complaint. After a thorough investigation, the police laid criminal charges, the Crown then reviewed the evidence and decided to prosecute. In my view, there is nothing untoward in the above sequence of events. Indeed, it would have been inappropriate if Dr. Bernstein had rushed into making precipitous criminal allegations and had reported them to the police before he had the facts. All of the evidence in the record satisfies me that Dr. Bernstein and his civil counsel were cautious in waiting until they had a proper factual record on which to base a criminal complaint. There is nothing about the timing of the various steps in this case that could possibly suggest abuse of process. The speculative allegations made on behalf of the Waltons simply ignore the known facts.

[101] The fourth and last point summarized above concerns the two main acts or incidents that are alleged to exhibit improper coordination and improper motivation, as between the civil and criminal players. These two specific allegations are as follows: first, the allegedly “delayed disclosure” of Det. Moran’s notes by Crown counsel during May and June 2016 and its relationship to the Motion for final judgement in the civil proceedings that was pending before Newbould J.; and the alleged delay by Det. Moran in failing to take a KGB statement from Dr. Bernstein until September 2016, and its relationship to Newbould J.’s release of his Reasons granting final judgement in the civil litigation. These two incidents were the focus of a great deal of argument, both written and oral. They are also the subject of some of the most extravagant and irresponsible speculation. In the First Supplementary Affidavit sworn by Mr. Cohen’s articling student, she sets out her information and belief concerning these two incidents as follows (at paras. 31 and 36):

I am advised by Mr. Cohen, and I verily believe, that, based on the transpiration of events at this juncture in the matter, it is his belief [that is, Mr. Cohen’s belief] that Shara Roy called Renna Weinberg to discuss the timing of the release of Detective Moran’s notes, and the impact which those notes might have on the return of the [June 3, 2016 civil] application. Mr. Cohen also postulates that these concerns led Shara Roy to ask Justice Newbould to move the June 3^rd return date of the application forward. Ultimately, the notes were not provided after the arrest, but two months later, and approximately 10 days after the return of the June 3^rd motion.

It is clear to the Applicants here, that there was a conscious determination to control the timing of Dr. Bernstein’s KGB statement, in order to prevent the Waltons from obtaining access to it, in order to ensure that it could not be used on the June 3^rd Application, to support the Waltons prayer for the trial of the issue of fraud. [Emphasis added]

[102] The above speculation in the Affidavit is developed further in the Respondents’ final Factum as follows (at paras. 74 and 75):

The timing of the KGB statement of Dr. Stanley K. Bernstein suggests that the criminal investigation was compromised in order to ensure the result obtained in the civil application.

… it seems clear that withholding the disclosure of the KGB statement until after the appeal period had passed was a tactical decision made by the Crown to prevent the Waltons from accomplishing the avowed purpose of determining whether the notes of the investigator and the KGB statement of Dr. Bernstein would have an impact on the application. [Emphasis added]

[103] I repeat what has already been stated previously about the impropriety of this kind of irresponsible speculation, without any facts, evidence, or offer of proof. There is simply nothing in the record to suggest that Dr. Bernstein’s civil lawyers and Ms. Weinberg and Det. Moran even communicated at this stage, let alone conspired to delay disclosure of Det. Moran’s notes and to delay the taking of a KGB statement from Dr. Bernstein until after Newbould J.’s final judgement had been secured in the civil litigation. Once again, the known facts in the record strongly suggest entirely appropriate explanations for these two events.

[104] In terms of the allegedly delayed disclosure of Det. Moran’s notes, Mr. Cohen initially asked the police for the notes at the pre-charge stage of the case, when Det. Moran called him and advised that she intended to lay criminal charges. They discussed surrender and bail and Mr. Cohen took the opportunity to ask for disclosure of her notes. It is unusual to seek disclosure at the pre-charge stage and it is wrong to seek disclosure directly from the police. The modern law of disclosure, emerging from R. v. Stinchcombe (1991) 68 C.C.C. (3d) 1 at pp. 10-14 (S.C.C.), is clear that disclosure is a right that arises after charges are laid, that it is the Crown who is responsible for making disclosure, and that disclosure should be made after editing out any irrelevant or privileged material and after delaying disclosure of anything that would prejudice the safety of witnesses or ongoing investigations. Det. Moran had almost 200 pages of notes and it was entirely appropriate for the Crown to take the necessary time to review them, edit them, and determine whether it was necessary to delay any part of them, in accordance with Stinchcombe. These steps could only be taken once Mr. Cohen had made a proper request for the notes from the Crown after the charges had been laid. The notes were not required for the bail hearing and would almost never be disclosed, in practice, prior to a bail hearing. There was nothing improper in the short delay in disclosing the notes. Indeed, the delay in this case was mundane and normal. Mr. Cohen could have proceeded with his Wagg Motion before Newbould J., if he genuinely required the police notes for the civil proceedings. Finally on this point, now that Det. Moran’s notes have been fully disclosed and are filed in the record, counsel has not pointed to anything in the notes that realistically could have assisted in the civil proceedings before Newbould J. The allegations that Mr. Cohen was exploring, as set out in the Wagg Motion and summarized above at paras. 25 and 26, are not substantiated by anything in Det. Moran’s notes. This entire argument is frivolous, in my view, and has been the subject of a great deal of wasted time and effort.

[105] In terms of the alleged delay in taking a KGB statement from Dr. Bernstein, the premise for Mr. Cohen’s argument on this point is that taking such a statement from the complainant in this case should have been an immediate priority, at the time charges were laid. He then proceeds to advance the above sinister explanations for the five months delay from April to September 2016 in taking the statement. Mr. Cohen’s initial premise is faulty. Taking a KGB statement is an important investigative step where the particular witness is one who may recant, flee the jurisdiction, or become uncooperative. None of this applied to Dr. Bernstein. He was clearly a cooperative complainant who had received legal advice and who had voluntarily initiated the criminal process. Furthermore, the police already had Dr. Bernstein’s affidavits and cross-examinations from the civil proceedings, which are akin to KGB statements. Finally, Det. Moran had other important priorities at this early stage of the criminal process, in particular, preparing for the arrests and bail hearings on April 25 and 26, 2016, preparing the first three waves of disclosure on May 24, June 14, and September 26, 2016, and then preparing for taking the KGB statement on September 28, 2016. This latter point is important. In a large sprawling fraud case, like the present one, where the complainant has already provided sworn affidavits and has been cross-examined, and where a large record of contemporaneous documents is available, a useful KGB statement requires careful preparation. A good investigator will focus the interview on any gaps or weaknesses in the existing record, will clarify any ambiguities while confirming, qualifying or elaborating on the prior statements, and will refer the witness to any documents that could assist in refreshing memory. Proper preparation for such an interview takes a considerable amount of time. It would have been a mistake to rush into a KGB statement with Dr. Bernstein in a case like the present one. In my view, the alleged impropriety in “delaying” the KGB statement is entirely speculative and ignores the known facts.

[106] In conclusion on the fourth point summarized above, neither the delayed disclosure of Det. Moran’s notes nor the delay in taking the KGB statement provide any basis for alleging abuse of process.

[107] In light of the above analysis of the four major frailties in the Waltons’ argument concerning improper coordination and improper use of the criminal process to further the civil litigation, I am satisfied that this final ground or basis for alleging abuse of process has no reasonable prospect of success.

D. CONCLUSION

[108] For the reasons set out above, the six grounds or bases for alleging abuse of process are completely without merit. The abuse of process Application is summarily dismissed, without the need for a hearing, as it has no reasonable prospect of success. As a result, the subpoenas issued to the six witnesses who the Waltons sought to examine at an evidentiary hearing are also quashed.

[109] These are my reasons for allowing the three preliminary Motions brought by the Crown and Mr. Addario and for summarily dismissing the abuse of process Application brought by the Waltons.

M.A. Code J.

Released: February 6, 2019