Court File and Parties

Court File No.: CV-11-437010 Date: 20200729 Superior Court of Justice – Ontario

Re: ATTORNEY GENERAL OF ONTARIO, Applicant

And:

269 WELDRICK ROAD WEST, RICHMOND HILL (PIN: 03152 – 0007 LT); $220,000.00 IN CANADIAN CURRENCY; $300,000 IN GIFT CARDS; BLACK LEXUS S43 (2007) COUPE; BLACK LEXUS GX7 (2005) SUV; SILVER LEXUS COUPE; FOUR WINNS 238 VISTA BOAT; BOAT TRAILER; AND OTHER PROPERTY (IN REM), Respondents

Before: Sanfilippo J.

Counsel: Sandra Di Ciano and Kateryna Toderishena, for the Applicant George Alatopulos, for the interested party, Halyna Borylo

In Writing: July 29, 2020

Endorsement

Overview

[1] The Applicant, the Attorney General of Ontario (“Ontario”), brought this Application as a civil forfeiture proceeding under the Civil Remedies Act, 2001, S.O. 2001, c. 28. The Application was brought, in rem, against property seized from Ms. Halyna Borylo and Mr. Gleb Tikhomirov and said by Ontario to be either “proceeds of unlawful activity” or “instruments of unlawful activity”, in accordance with sections 2 and 7 of the Civil Remedies Act. Ontario pleaded that the seized property should be forfeited to the Government of Ontario in accordance with sections 3(1) and 8(1) of the Civil Remedies Act.

[2] Ontario served Ms. Borylo and Mr. Tikhomirov with its Application Record and subsequent court Orders, in their capacity as parties interested in the proceeding. Mr. Tikhomirov did not respond, and on January 25, 2012, Archibald J. issued an order dispensing with further service of Application materials on Mr. Tikhomirov. [1] This Order was made on the authority of section 15.6(3) of the Civil Remedies Act. [2]

[3] This Application proceeded with Ms. Borylo receiving notice as the only interested party. Over time, the seized property with value has either been liquidated and paid into court or is in the process of being liquidated and paid into court pursuant to previous court Orders, except for a 2003 Lexus SC430 motor vehicle, and certain gift cards. [3]

[4] Ms. Borylo and Ontario have agreed to settle this Application. They agreed that all the seized property would be forfeited to Ontario except for the 2003 Lexus SC340 motor vehicle, which would remain in Ms. Borylo’s possession, and the sum of $282,244, which would be returned to Ms. Borylo.

[5] On Ms. Borylo’s consent, Ontario brought this Motion in writing for an order approving the settlement of this Application on the basis of section 18.1 of the Civil Remedies Act. For the reasons that follow, I approve the settlement of this civil forfeiture Application on my determination that the proposed settlement satisfies the statutory requirements of the Civil Remedies Act.

A. The Asset Seizure

[6] Ms. Borylo and Mr. Tikhomirov are common law spouses who, in January 2011, resided at 269 Weldrick Road West, Richmond Hill (the “269 Weldrick Road Property”). On February 17, 2011, the RCMP and York Regional Police executed search warrants issued under the Criminal Code for the 269 Weldrick Road Property, a 2007 Lexus S43 SUV, and a 2005 Lexus GX7. The search disclosed instruments used for forgery, instruments and products used to forge and falsify credit cards, gift cards with face value of $300,000, multiple passports bearing Mr. Tikhomirov’s photograph but with different names, $20,000 in Canadian currency, and a money-counting machine. These discoveries resulted in the issuance of a further search warrant in relation to a 2007 travel trailer, and to the search of various safety deposit boxes registered in Ms. Borylo’s name that contained Canadian currency and CD’s containing templates of foreign identification and travel documents.

[7] Ms. Borylo and Mr. Tikhomirov were arrested during the search warrant execution, on February 17, 2011. Mr. Tikhomirov was charged with 15 fraud and forgery related offences. [4] On August 2011, Mr. Tikhomirov pled guilty to, and was convicted of eight fraud and forgery-related offences. [5] He was sentenced to six months concurrent pre-sentence custody. After serving his sentence, Mr. Tikhomirov was deported to Russia in December 2011. [6]

[8] Ms. Borylo was charged with fourteen counts, which were later narrowed to five charges. [7] She had no prior criminal record. [8] In October 2012, the charges against Ms. Borylo were withdrawn on the basis that it was not in the public interest to pursue criminal proceedings against her as Mr. Tikhomirov had already pled guilty and been convicted for offences arising from the same matter. [9] By Order issued October 22, 2012, the items seized by the RCMP from Ms. Borylo were returned to her except those that she now claims. [10]

B. The Application

[9] Ontario brought this Application for forfeiture of the assets that were seized, now largely liquidated and paid into court. The Statement of Account of the Accountant of the Superior Court of Justice dated June 1, 2020 established that the sum of $549,489.26 is currently held in court to the benefit of his Application. [11]

[10] In support of its Application, Ontario filed extensive affidavit evidence, [12] including the expert reports of Mr. Brian Lindblom, a Forensic Document Examiner, and Mr. Robert Gervais, a Forensic Technician (the “Forensic Expert Reports”). [13] Messrs. Lindblom and Gervais tendered the following expert opinion evidence:

(a) “We can definitively exclude the possibility that the condition of the numerous documents examined is the result of inadvertent or accidental damage. Rather, there is conclusive evidence to show that documents changed from their original condition are the result of willful alteration on a very substantial scale.” [14]

(b) “Based on our combined review of the documents, graphic files and equipment seized, we are of the opinion that many thousands of hours would be required to create the extensive and varied collection of counterfeit and altered documents. The types of documents are far ranging, and it would take considerable time to construct the working electronic template files and final products. … In addition to the time involved in preparing the graphic files, many, many hours would be needed for the alteration of cards, photo substitution, affixing of holograms and laminas, embossing, as well as diverse methods of printing.” [15]

[11] Ms. Borylo tendered evidence in support of her responding position that she lawfully owned portions of the seized property and it ought to be returned to her. She deposed that the down payment for her 2007 purchase of the 269 Weldrick Road Property was financed through a sale of a property that she previously purchased in 2004, which was assisted by a gift from her father in the amount of $22,900. [16] She deposed that the purchase of 269 Weldrick in 2007 was supported by a loan from her mother in the amount of $35,000 and by the amount of $89,416.67 realized as net proceeds in the simultaneous sale of her previous property, all of which pre-dated the unlawful activity alleged against her. [17] She contended that the equity in the 269 Weldrick Road property ought to be returned to her.

[12] Ms. Borylo also relied on the affidavits of friends and relatives regarding foreign cash loans and the purchase of a motor vehicle, [18] and a letter from a University of Toronto professor explaining cultural differences in approach to banking and financial decisions. [19]

[13] Ms. Borylo also deposed that the 2003 CS430 Lexus was purchased on June 26, 2008 and produced the vehicle purchase agreement and payment receipt. [20] She claimed entitlement to this vehicle.

C. The Settlement

[14] Ontario and Ms. Borylo entered into a settlement of the Application, as set out in the executed Consent, filed, as follows:

(a) Ms. Borylo would receive $282,244 of the funds currently being held by the Accountant of this Court;

(b) Ms. Borylo would retain the 2003 CS430 Lexus currently in her possession;

(c) all remaining property at issue in this Application would be forfeited to Ontario, including:

a. all funds preserved with the Accountant of this Court, including all accumulated interest, minus the $282,244 to be transferred to Ms. Borylo;

b. all gift cards; and

c. all other property seized and itemized in a Schedule annexed to the executed Consent.

(d) Ontario and Ms. Borylo agreed to waive the 30-day appeal period to facilitate the immediate transfer of the funds currently being held in Court;

(e) the parties agreed to bear their own costs of this Application.

[15] Ontario and Ms. Borylo jointly ask that I approve of this settlement in accordance with sections 18.1, 3(1) and 8(1) of the Civil Remedies Act.

D. Analysis

[16] Section 18.1 of the Civil Remedies Act provides as follows:

18.1 (1) Despite anything to the contrary in this Act, the court may approve a settlement in relation to a proceeding under this Act, on the motion or application of the Attorney General or of any other party to the proceeding with the Attorney General’s consent.

(2) For greater certainty, the power to approve a settlement under subsection (1) includes a power to approve a settlement that provides for the full or partial forfeiture of the property that is the subject of the proceeding.

(3) For greater certainty, the power to approve a settlement under subsection (1) includes a power to approve a settlement that provides for payment of a monetary amount instead of the full or partial forfeiture of the property that is the subject of the proceeding.

[17] Ontario submitted that section 18.1 of the Civil Remedies Act provides the Court with broad authority to approve a proposed settlement. Ontario contended that the broad authority thereby permits civil forfeiture cases to be settled for any reason, including consideration of proportionality, cost/benefit analysis, litigation risk and costs of litigation, even without analysis of whether Ontario has established a basis for property forfeiture under the Civil Remedies Act. Ontario submitted that in a case such as the present – where the forfeiture is consented to by an interested party and not contested to by another interested party – “the Court need not inquire into the merits of a case in approving a settlement.” [21] I do not accept this submission.

[18] I agree that the Court has broad discretion in considering settlements of proceedings initiated under the Civil Remedies Act. In my view, this is clear from the opening words of s. 18.1(1) which state: “Despite anything to the contrary in this Act, the court may approve a settlement…” [Emphasis added]. But I cannot accept that these words mean that the Court can disregard the substantive requirements of the Civil Remedies Act and simply convert any proposed settlement into a judgment. Rather, the approval process requires analysis of whether Ontario has shown that proposed settlement satisfies the requirements of the Civil Remedies Act.

[19] I am guided by the findings by the Ontario Divisional Court in Ontario (Attorney General) v. $29,900 in Canadian Currency (in rem). [22] There, the Divisional Court rejected Ontario’s submission that the parties “were entitled to come to a settlement of the dispute over these monies, and that the court should generally honor settlements that are arrived at by the ‘parties’”. [23] The Divisional Court held that the consent of Ontario and an interested party was insufficient for the Court to issue Judgment without first ensuring that the statutory requirements of the Civil Remedies Act were strictly complied with. [24]

[20] The Divisional Court explained the basis for these determinations. The Court has an overriding discretion to enforce a settlement. [25] Further, the Civil Remedies Act is not a normal proceeding, but rather is a special statutorily created proceeding which affords the “extraordinary remedy” by which property can be forfeited from its lawful owner to the Government of Ontario. [26]

[21] Ontario relied on the principle that the Court encourages settlement because, as explained by the Supreme Court in Sable Offshore Energy Inc. v. Ameron International Corp., promoting settlement is “sound judicial policy” that “contributes to the effective administration of justice.” [27] This principle is well-entrenched in civil litigation. Settlements are an essential element of an efficient and expeditious civil justice system and are encouraged. However, there are instances where court approval is required necessitating analysis of the merits of the case. For example, settlements involving parties under disability under Rule 7.08 and class action settlements. [28] And, as the Divisional Court found, settlements in proceedings under the Civil Remedies Act.

[22] There are reasons for this. A proceeding under the Civil Remedies Act cannot readily be equated to routine civil litigation where all parties of interest in the dispute are before the Court and all have decided to compromise in settlement. As the Divisional Court explained, “property is being taken by the Government of Ontario for redistribution to others, as a consequence of its use in criminal activities.” [29] It is an in rem proceeding: not an in personam action. [30] The parties of interest in the dispute are, like here, not even named as party respondents. These proceedings do not establish fault or punishment or lead to imprisonment but determine whether property should be forfeited because the property itself (in rem) is “proceeds of crime” or “an instrument of unlawful activity”. [31] The determination is binding on all.

[23] Accordingly, I have analysed the requirements of the Civil Remedies Act to determine whether they are satisfied by the distribution of seized assets agreed upon by the Applicant and this interested party. I have done so by applying the two-step process mandated by the Civil Remedies Act, as set out by the Ontario Court of Appeal in Ontario (Attorney General) v. $104,877 in U.S. Currency (In Rem): [32]

(a) Ontario must establish, on a balance of probabilities, [33] that the seized property is either the “proceeds of unlawful activity” or the “instrument of unlawful activity”; and

(b) an interested party may seek protection from forfeiture as either a “legitimate owner” or a “responsible owner” of all or part of the seized property.

[24] Where the first part of the test is established, the Court nonetheless retains a discretion not to make the order for forfeiture where it is “clearly not in the interests of justice” to do so.

[25] Section 2 of the Civil Remedies Act defines “proceeds of unlawful activity” as “property acquired, directly or indirectly, in whole or in part, as a result of unlawful activity”. Section 7(1) of the Civil Remedies Act defines “instrument of unlawful activity” as “property that is likely to be used to engage in unlawful activity that, in turn, would be likely to or is intended to result in the acquisition of other property or in serious bodily harm to any person, and includes any property that is realized from the sale or other disposition of such property”.

[26] Sections 3(1) and (3) of the Civil Remedies Act provide that the Court shall make an order forfeiting property that is in Ontario to the Government of Ontario where the Court finds that the property is “proceeds of unlawful activity”, except where the Court determines that it is not in the interest of justice to do so, or where it is necessary to protect a legitimate owner’s interest in the property. Property that is “the instrument of unlawful activity” may be forfeited in a similar manner in accordance with section 8(1) of the Civil Remedies Act.

[27] I am satisfied that the affidavit evidence filed by Ontario established that the property seized was either “proceeds of unlawful activity” or “instruments of unlawful activity” in Mr. Tikhomirov’s fraud and forgery-related offences. The expert report of Messrs. Lindblom and Gervais established that the sophisticated forgery equipment, blank credit cards and blank gift cards, blank passports, printers, films, laminators, scanners, copiers, computers, and external hard drives were all “instruments of unlawful activity”.

[28] I find that the affidavit evidence of Sergeant Tarachandra established that the funds seized were proceeds of Mr. Tikhomirov’s fraud, except the property claimed by Ms. Borylo and conceded by Ontario. With the exception of this property, I find that the seized assets are the proceeds of Mr. Tikhomirov’s involvement in identity-related crimes, including identity theft and identity trafficking, for which he was convicted.

[29] Ms. Borylo has filed affidavit evidence to establish that she is an uninvolved interest holder in certain of the property and on that basis should be allowed to retain her equity in the 269 Weldrick Road West Property and in the car that has remained in her possession, the 2003 Lexus SC430. I have considered her evidence to determine whether it meets the requirements of s. 3(3) of the Civil Remedies Act. I am satisfied that it does, in that she is a legitimate owner of the assets that she seeks to recover through the proposed settlement. I will explain why.

[30] I accept Ms. Borylo’s evidence that her acquisition of her first property was assisted by a loan from her father in the amount of $22,900, and that her acquisition of the 269 Weldrick Road West property was assisted by the loan from her mother in the amount of $35,000 and that from the equity that she monetized in the amount of $89,416.67 on the simultaneous sale of her first property. The father’s gift, mother’s loan, and capital appreciation to her first real estate investment do not derive from unlawful activity. I thereby find that Ms. Borylo has led sufficient evidence, that I have accepted, to support a legitimate source of funds for her equity interest in the 269 Weldrick Road Property. I also accept that the amount of $282,244 represents a reasonable negotiated value of this entitlement, particularly where, like here, the cost of continued litigation and expert valuation evidence necessary to quantify the monetary value of this claim with absolute analytical precision is disproportionate to the amount in issue.

[31] Similarly, regarding the 2003 Lexus SC430, Ms. Borylo explained that that she purchased this vehicle on June 26, 2008, well-before the activities giving rise to the criminal charges. She has produced the vehicle purchase agreement with the supporting bank payment. I am satisfied that Ms. Borylo has established that the purchase of the 2003 Lexus SC430 was completed with her own resources and without use of the proceeds of unlawful activity.

[32] On the basis of these reasons, I have concluded that the proposed settlement, wherein all of the seized assets will be forfeited to the Government of Ontario except for the 2003 Lexus SC340 motor vehicle and the sum of $282,244, which would be returned to Ms. Borylo, meets the requirements of the Civil Remedies Act and is thereby approved. I will issue an Order on these terms.

[33] Last, I will address the request made jointly by Ontario and Ms. Borylo that I order that the 30-day appeal period is waived “by all parties”. I see no basis for granting such a term. No evidence was presented to justify this order, and Ontario did not make any written submissions in its factum for this relief. This Application is almost nine years old, and Ontario has not shown any urgency in the distribution of the seized assets. Further, the waiver of the appeal period is said to apply to “all parties” when the only named parties to this in rem Application are Ontario and the listed physical property. I decline to grant an order waiving a right of appeal in these circumstances.

E. Disposition

[34] On the reasons set out herein, I order as follows:

(a) Upon receipt of this Order and the expiry of the 30-day appeal period, as established by an affidavit filed under Rule 72.03(2)(c)(ii), the Accountant of the Superior Court of Justice shall pay the sum of $282,244 in Canadian currency to George Alatopulos, counsel for Ms. Borylo, in trust for Ms. Borylo.

(b) The 2003 Lexus SC430 motor vehicle (Vehicle Identification Number ending in 044260), currently in Ms. Borylo’s possession, shall not be forfeited.

(c) Pursuant to sections 3 and 8 of the Civil Remedies Act, all the remaining property at issue in this proceeding is forfeited to the Crown in right of Ontario, including:

a. all funds preserved with the Accountant of the Superior Court of Justice, including all accumulated interest, minus the $282,244 in Canadian currency referenced above (herein the “Forfeited Funds”);

b. all gift cards; and

c. all other property referenced in Schedule “A” to the Consent, filed.

(d) The Accountant of the Superior Court shall pay the Forfeited Funds to the Minister of Finance for Ontario upon receipt of this Order and the expiry of the 30-day appeal period as established by an affidavit filed under Rule 72.03(2)(c)(ii).

(e) In the circumstances of the COVID-19 state of emergency and the resultant restrictions on Court operations, notwithstanding Rule 59.05, this Order is effective from the date that it is made and is enforceable without the need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal order need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party may nonetheless submit a formal order for original signing, entry and filing when the court returns to regular operations should the party wish to do so.

(f) The Accountant of the Superior Court shall treat this digitally-signed Order as an “original order” for the purposes of Rule 72.03(2)(b) upon receiving Applicant counsel’s written confirmation that the Order that they submit is a true copy of this Order.

(g) There shall be no order as to costs of this Application.

[35] The counsel for the moving party Applicant may file a form of Order that is compliant with this endorsement, for my consideration. This Order may be delivered to the Court electronically, in pdf, in the same manner as the current motion materials were filed, with a copy to my judicial assistant by email.

Sanfilippo J.

Date: July 29, 2020

[1] Order of Archibald J. dated January 25, 2012, at para. 1, Motion Record, Tab 10. [2] The Act, s. 15.6(3): “The rules of court apply with necessary modifications to the court’s jurisdiction to make an order in respect of any party or other person in any proceeding as if the proceeding were in personam and such person were a named defendant or respondent in the proceeding.” [3] Order of Low J. dated June 22, 2012, Motion Record, Tab 11; Order of Dow J., dated May 19, 2020, Motion Record Tab 12. Further preservation Orders were issued by Conway J. on October 17, 2011 and by Lederer J. on November 14, 2011. [4] Affidavit of Satish Tarachandra, RCMP Corporal in the Commercial Crime Unit, during the time of the search, arrest and initial investigation, and Sergeant of the RCMP, Anti-Corruption Unit since May 2016, sworn October 12, 2018 (“Tarachandra Affidavit”), at para. 86. [5] Criminal Code sections 405; 57(1)(a); 57(1)(b)(i); 342.01; 342(3); 56.1(1); 380(1); and, 292(1). Tarachandra Affidavit, at para. 87. [6] Tarachandra Affidavit, at para. 88. [7] Criminal Code sections 342(3); 354(1); 368(1); and, 380(1). Tarachandra Affidavit, at para. 90. [8] Tarachandra Affidavit, at para. 89. [9] Tarachandra Affidavit, at para. 91. [10] Tarachandra Affidavit, at para. 91, and exhibit 122. [11] Statement of the Accountant of the Superior Court of Justice, Motion Record, Tab 14. [12] Affidavits of Corporal, then Sergeant Tarachandra sworn October 12, 2011 and November 16, 2016; Affidavit of Constable Francois Picard-Blais sworn November 2, 2016; Affidavit of Detective Constable Jennifer Klip sworn October 24, 2016; Affidavit of Detective Constable Mike Hopkins sworn October 11, 2016; Affidavit of Constable Jennifer George sworn September 28, 2016; Affidavit of Sergeant Vance Morgan sworn October 4, 2016; Affidavit of Detective Constable Adam VanLoenen dated September 28, 2016; Affidavit of Constable Richard Amoatey sworn July 29, 2016; Affidavit of Sergeant Nin Leung sworn July 15, 2016; Affidavit of Detective Andrew Quibell sworn July 28, 2016; Affidavit of Detective Gurdip Panaich sworn July 12, 2016. [13] Reports dated March 17, 2014, March 25, 2014 and April 30, 2018. [14] Report of Brian Lindblom and Robert Gervais dated April 30, 2018 (“April 2018 Expert Report”), pp. 3 and 4-5. Motion Record, Tab 3. [15] April 2018 Expert Report, p. 9. [16] Affidavit of Halyna Borylo, sworn April 6, 2018 (“Borylo Affidavit”), paras. 38-39. Motion Record Tab 4. [17] Borylo Affidavit, at paras. 40-44. [18] Affidavit of Alona Kulagina sworn July 11, 2018, Motion Record, Tab 5; Affidavit of Artem Tikhomirov, sworn June 28, 2018, Motion Record, Tab 6; Affidavit of Vergazova Dmitrievna sworn June 29, 2018, Motion Record, Tab 8. [19] Expert report of Professor Waldemar Skrobacki dated April 30, 2014, Motion Record, Tab 9. [20] Borylo Affidavit, para. 60, exhibits “JJ” and “KK”. [21] Factum of the Attorney General of Ontario, at para. 42. [22] 2017 ONSC 2003, 137 O.R. (3d) 221 (Div. Ct.). [23] $29, 000, at. para. 20. [24] $29, 000, at. para. 27. [25] $29, 000, at paras. 21-24. [26] $29, 000, at paras. 25-26. [27] 2013 SCC 37, 2 S.C.R. 623, at para. 11. [28] Class Proceedings Act, 1992, S.O. 1992, c. 6, as amended. [29] $29, 000, at para. 26. [30] Civil Remedies Act, s. 15.6 (1): “All proceedings, including proceedings for an interlocutory order, under Parts II, III and III.1, whether by action or application, are in rem and not in personam.” [31] Ontario (Attorney General) v. Chatterjee, 2007 ONCA 406, at para. 23, affirmed 2009 SCC 19, 1 S.C.R. 624, at para. 46. Civil Remedies Act, ss. 2, 3(1), 3(3), 7, 8(1) and 8(3). [32] 2016 ONCA 71, 129 O.R. (3d) 312, at para. 5. [33] Civil Remedies Act, s. 16.