Court File and Parties

Court File No.: CR-18-00000142-00MO Date: 2020-07-06 Ontario Superior Court of Justice

Between: Her Majesty The Queen, Applicant – and – Fortress Real Capital Inc., Fortress Real Developments Inc., Building and Development Mortgages Canada Inc., FMP Mortgage Investments Inc., FDS Broker Services Inc., FFM Capital Inc., and Charene Bunnett, Respondents

Counsel: Robert Hubbard and Mabel Lai, for the Crown Mr. Scott Fenton, Mr. Ian Smith and Mr. Andrew Guaglio, counsel for Fortress Real Capital Inc., Fortress Real Developments Inc., Mr. Jawad Rathore And Mr. Vincenzo Petrozza Mr. Jay Naster (Ms. Galati is now deceased), counsel for Ms. Ildina Galati (of Building and Development Mortgages Canada Inc.) Mr. Jeremy Dacks and Mr. Michael De Lellis, counsel for FAAN Advisors Group Inc., court-appointed trustee for Building and Development Mortgages Canada Inc. Mr. Naveed Manzoor, for FAAN Advisors Group Inc. Mr. Scott Bergman, counsel for FMP Mortgage Investments Inc. And Mr. Tonino Amendola Mr. Glen Jennings, Counsel for FDS BROKERS Services Inc. and Mr. Zafar Khawaja Mr. Seth Weinstein, counsel for FFM Capital Inc. and Mr. Tonino Mazzoli

Heard: In writing

Before: R.F. Goldstein J.

Reasons for Judgment on Application to Retain Seized Material

[1] On April 10, 2018, Justice Band of the Ontario Court of Justice issued six search warrants. The warrants were executed on April 13, 2018. Constable Williamson of the RCMP swore the Information to Obtain. The RCMP seized a very large volume of material. The police have not laid charges.

[2] The police, represented by the Crown, say that they require the documents for another year. The police say that due to the complexity of the investigation they have not been able to determine whether they ought to lay charges. Several parties have standing to oppose the request. Only Fortress Real Capital Inc., Fortress Real Developments Inc., Jawad Rathore, and Vince Petrozza do so.

[3] In my view, having regard to the complex nature of the investigation, further detention is justified. For the reasons that follow, the application is granted. The items may be retained until June 22, 2021.

Background

[4] I briefly described the investigation and allegations in an earlier related decision. I will simply repeat that here (R. v. Canadian Broadcasting Corporation, 2018 ONSC 5167 at para. 4):

The RCMP commenced an investigation into Fortress and its principals based on complaints from investors. The RCMP alleged in the ITO that Fortress defrauded investors by knowingly misrepresenting the appraised value of various development properties. The RCMP further alleged in the ITO that the loan ratios were in excess of 100%, which meant that the investments were not RRSP eligible — something that was also misrepresented to investors. The RCMP also alleged in the ITO that the investment funds were not used for the purposes that were disclosed to the investors.

[5] The warrants were executed at these six office locations:

• Fortress Real Capital Inc and Fortress Real Developments Inc. in Richmond Hill;
• Fortress Satellite Office on Bloor Street West in Toronto;
• Building and Development Mortgages Canada Inc. in Richmond Hill;
• FMP Mortgage Investments Inc. in Etobicoke;
• FDS Broker Services Inc. in Mississauga; and,
• FFM Capital Inc. in Woodbridge.

[6] On May 1, 2018 Constable Prahar presented a Report to Justice to Justice of the Peace Edwards. Justice of the Peace Edwards authorized retention of the seized items until July 11, 2018. Justice Brownstone of the Ontario Court of Justice authorized a further detention until April 12, 2019. Justice McMahon of this Court authorized a further detention until April 12, 2020. Since that time, the parties have either consented or not opposed a further detention.

[7] The RCMP seized a significant amount of material. The police seized over 100 banker’s boxes of material. The police also seized a significant amount of data on computer hard drives and servers. As I will describe below, counsel for the various parties asserted privilege over much of the material.

[8] On October 4, 2018 Justice Band issued a general warrant related to this case. He authorized the police to seize a hard drive from Charene Bunnett. Although the hard drive was not seized pursuant to the warrant, Ms. Bunnett voluntarily surrendered it to the RCMP. She claimed privilege over it. Mr. Addario, Ms. Bunnett’s counsel, has from time to time consented to an extension of the retention order. He does not take a position on this application. Nonetheless the Crown includes the hard drive in the application.

[9] Crown counsel, on behalf of the police, brought this application to deal with all of the seized material. On the agreement of both parties, the application proceeded in writing.

Issue and Analysis

[10] The only issue before the court is whether, having regard to the complex nature of the investigation, further detention is warranted.

[11] In my view, it is. There is no question that this is a complex investigation. The assertion of privilege has slowed down the process. As well, the current Covid-19 pandemic has had an impact.

[12] The Criminal Code sets out a scheme for the retention of seized items. Where a warrant is executed, the police may return the items to the lawful owner if there is no dispute about who owns them and the items are not required for an investigation or prosecution: Criminal Code, s. 489.1(1)(a). The police must report to a justice. Where the items are required for an investigation or prosecution, or the police are not clear about lawful ownership, the police must either bring the items before a justice or report to a justice: Code, s. 489.1(1)(b). Usually, the police just report.

[13] Where an investigator who is not a police officer (such as a Canada Revenue Investigator) seizes items pursuant to a warrant then s. 489(2) applies. That section is not at issue in this application.

[14] After the initial seizure a justice may order the items returned unless they are required for an investigation. A justice may then order detention for up to three months: Criminal Code, s. 490(1)(b), s. 490(2)(a). The Crown may make further applications to a justice for further detention for up to one year following the execution of the warrant.

[15] If charges are laid, then no further applications for detention are required: Criminal Code, s. 490(2)(b); s. 490(3)(b).

[16] If no charges are laid, and the police wish to continue the investigation, they must make an application to a judge of the Superior Court: Criminal Code, s. 490(3)(a). It is at that point that the Crown must justify further detention of the seized material based on the complex nature of the investigation: Criminal Code, s. 490(3)(a). The application is on notice. The Crown bears the onus of justifying further detention: R. v. Black, 2001 ABQB 216 at para. 22.

[17] The leading case in this area is Durno J.’s decision in Canada Revenue Agency v. Okoroafor, 2010 ONSC 2477, 2010 CarswellOnt 2714, [2010] O.J. No. 1811, 259 C.C.C. (3d) 87. I agree my colleague Harris J. in R v. Neff Kitchen Manufacturers Ltd et al., 2020 ONSC 3412 in that regard.

[18] At para. 20 of Okoroafor, Durno J. described a complex investigation as “one that has many varied interrelated parts, patterns, or elements and consequently is hard to understand fully. It is an investigation that involves many parts, aspects, details, and notions necessitating earnest study or examination to understand or cope with…”

[19] Durno J. conducted an extensive analysis of some of the key factors courts have examined when evaluating complexity. He then set several of them out at para. 21 (I have not included the citations):

• the number of police services and/or government departments involved;
• the involvement of foreign government;
• that the investigation requires the assistance of lawyers, accountants, computer technicians and/or other professionals to decipher the documents or for other purposes;
• that the investigation requires the cooperation of police services other than the applicant and if so, whether those services are in Canada or elsewhere;
• that the investigation requires witnesses to be interviewed outside Canada;
• that the investigation covers an extensive timeframe and/or wide geographical area;
• that there is a confusing paper trail;
• that the offences were committed in more than one jurisdiction, by more than one person or with nominees;
• that complicated and time-consuming net worth calculations are required;
• that it is a paper case, or one where the "tentacles of evidence are wide ranging";
• that the investigative agency has no control over the timely responses of third parties;
• that documents or communications must be translated; and
• that transcripts of intercepted private communications must be prepared.

[20] Durno J. also set out some factors that have not been held to be a valid basis for granting a further detention of documents:

• damages to one's reputation, financial or emotional hardship;
• that insufficient resources have been assigned to the investigation;
• that there is substantial "grunt work" required to complete the investigation;
• that voluminous material must be reviewed and/or that the investigators did not have enough time to fully review the documents seized;
• that there have been difficulties in obtaining information from third parties if procedures that could have required the third party to cooperate more fully, speedily and readily were not employed.

[21] Paper cases are obviously a category that present their own set of problems: R. v. Superior Pharmacy at paras. 13-14.

[22] Obviously the factors set out by Durno J. are not to be applied mechanically.

[23] It is clear that some of the factors associated with complexity are present in this case. There is no doubt that the case requires the assistance of professionals such as computer people and accountants. This is a confusing paper case, with a significant paper trail. While significant volume is not in and of itself a badge of complexity, it can be. Here, there are vast amounts of electronic material that the police have only been able to scratch the surface of.

[24] A further factor associated with complexity is the claim of solicitor-client privilege that was made over many of the seized documents. At the time of the execution of the warrant, lawyers for many of the parties attended the search locations. They claimed privilege over a wide range of documents. Crown counsel and counsel for some of the searched parties negotiated two protocols for dealing with privilege claims. The negotiation of those protocols took time. The protocols were approved by this court in September and November 2018. I was the judge who approved the protocols. The protocols appointed counsel as referees to determine privilege claims. That process is not complete. For reasons unrelated to the investigation one of the referees was required to remove himself from the case.

[25] The items reviewed (or to be reviewed) by the referees included both hard copy and electronic documents. The review of six banker’s boxes of hard copies was completed in December 2019. Two boxes were released to the investigators. It was at that point that the referees commenced their review of the electronic material. That review is ongoing.

[26] A large number of seized documents have been reviewed for privilege at the offices of the RCMP. Counsel for the searched parties have attended the RCMP office to review documents. There is nothing wrong with counsel asserting the rights of their clients and taking the time to carefully review documents (a painstaking process) but it significantly delayed the ability of the RCMP investigators to commence their own document review.

[27] In my view, it is the implementation of the protocols when combined with the large volume of electronic and hard copy material that makes this investigation complex.

[28] It needs to be said that the assertion of privilege by at least some parties opposing a further detention was one of those things that made this investigation complex. When I say that I am not being critical – it is the right of a party to assert privilege and counsel’s duty to take steps to vindicate that privilege. It is the duty of the investigators and the court to respect that assertion of privilege. The assertion of privilege was, of course, legitimate. That said, it is one of the things (although not the only thing) that caused the complexity – and drove the delay.

[29] It is important to understand that the scheme created by Parliament does not give the court authority over an investigation. In our system of criminal law the independence of each of the key players from each other – the police, the Crown, the defence, and the courts – is critical. Instead, the Criminal Code’s procedures for the retention of seized items should be seen as holding investigators accountable when they use the court’s process. It is not the court’s job to make sure the police are following certain leads or investigating certain aspects of the case. That would trench on the independence of the police. It would also run the risk of making the police the agent of the courts. The court’s job is to say “yes” or “no” to the retention of seized material based on the complexity of the investigation. When items are seized pursuant to a warrant and the investigation remains unresolved, it is the court’s job to determine whether a reasonable investigation could have been completed any earlier. It is not the court’s job to determine whether the police have allocated sufficient resources. That said, if it becomes clear that an investigation is dragging because of insufficient resources – and not because of complexity – than the court does have a legitimate basis to refuse a further extension.

[30] In my view, it would be unreasonable to expect that the investigation could have proceeded faster than it already has under the circumstances.

Disposition

[31] The application is granted. The RCMP has permission to retain the seized material until June 22, 2021.

Dated: July 6, 2020 Before: R.F. Goldstein J.

COURT FILE NO.: CR-18-00000142-00MO DATE: 20200706 ONTARIO SUPERIOR COURT OF JUSTICE HER MAJESTY THE QUEEN Applicant – and – FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., BUILDING AND DEVELOPMENT MORTGAGES CANADA INC., FMP MORTGAGE INVESTMENTS INC., FDS BROKER SERVICES INC., FFM CAPITAL INC., AND CHARENE BUNNETT Respondents

REASONS FOR JUDGMENT ON APPLICATION TO RETAIN SEIZED MATERIAL

R.F. Goldstein J.