



COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Trac, 2013 ONCA 246

DATE: 20130419

DOCKET: C51564 and C51567

Doherty, Feldman and LaForme JJ.A.

BETWEEN

Her
    Majesty the Queen

Appellant/Respondent

and

Phu Nhi (John) Trac

Respondent/Appellant

David Littlefield, Lisa Mathews and Brendan Gluckman, for the appellant

Peter Lindsay, for the respondent

Heard: June 6, 2012 and November 23, 2012.

Appeals and applications for leave to appeal from the orders
    of Regional Senior Justice Michael Brown of the Superior Court of Justice,
    sitting in Newmarket, on December 22, 2009.

Doherty J.A.:


I



OVERVIEW

[1]

There are three appeals before the court.  First, the Crown seeks leave
    to appeal and, if leave is granted, appeals pursuant to s. 676(1)(d) of the
Criminal
    Code
from the sentence imposed by the trial judge.  That appeal, as
    originally framed, sought an increase in the term of imprisonment imposed on
    the respondent and a restitution order.  As matters developed, the Crown
    abandoned its request for a longer jail sentence.

[2]

Second, the Crown appeals, pursuant to s. 462.44, from the order of the
    trial judge revoking a restraining order in respect of certain assets and
    ordering the return of those assets to the owners, including the respondent. 
    The trial judge made that order after he refused to order those assets
    forfeited to the Crown.  The Crown seeks a new forfeiture hearing.

[3]

Third, the respondent seeks leave and, if leave is granted, appeals
    pursuant to s. 675(1)(b) from the trial judges imposition of a fine in lieu of
    forfeiture.  He contends that while the trial judge properly declined to make a
    forfeiture order, he erred in imposing a fine in lieu of forfeiture.

[4]

I would allow the Crowns sentence appeal in part.  I would not vary the
    terms of imprisonment imposed by the trial judge but I would make the
    restitution order sought at trial.  I would also allow the appeal from the
    order revoking the restraining order and directing the return of the assets,
    and would direct that a new forfeiture hearing be held.

[5]

As I would order a new forfeiture hearing, it follows that the respondents
    appeal should be allowed and the order requiring payment of the fine in lieu of
    forfeiture should be set aside.  The judge hearing the new forfeiture
    application may decide what order, if any, should be made in lieu of
    forfeiture.


II



HISTORY OF THE MATTER

[6]

This prosecution has a protracted ten year history.

[7]

The respondent was a central participant in a multi-million dollar
    marihuana growing scheme that operated between September 2000 and December 2002
    out of dozens of residences in the Toronto area.  The residences had been
    rented under false pretences and used to house large scale marihuana growing
    operations (grow ops).  The respondent was arrested in December 2002 and a
    restraining order was made under s. 462.33 freezing various assets allegedly
    connected to the respondent.

[8]

On December 6, 2006, the respondent re-elected trial by judge alone and
    entered guilty pleas on eight counts:

·

producing marihuana (count 1)

·

possession of marihuana for the purpose of trafficking (count 2)

·

fraudulent consumption of electricity (count 3)

·

money laundering (count 5)

·

income tax evasion (counts 11, 12 and 13)

·

failure to pay GST (count 16)

[9]

The Crown tendered an agreed statement of facts on the guilty plea and
    the respondent was found guilty on the charges to which he had pled guilty. 
    Sentencing was adjourned approximately 11 times in 2007.  On December 20, 2007,
    the proceeding was adjourned yet again.  However, on this occasion, it was
    adjourned to allow the respondent to bring a motion to strike the guilty pleas
    he had entered a year earlier.

[10]

The
    motion to strike was heard over several days early in 2008.  The trial judge
    dismissed that motion on April 30, 2008.

[11]

The
    proceeding was adjourned on several occasions in 2008.  In May 2009, the trial
    judge conducted a combined sentencing and forfeiture application hearing.

[12]

In
    December 2009, three years after the guilty pleas were entered and seven years
    after the respondent was arrested, the trial judge imposed jail sentences
    totalling five years.  He also imposed fines on the tax evasion counts (counts
    11, 12, 13 and 16).  The trial judge declined to make the restitution orders
    sought by the Crown.

[13]

On
    the forfeiture application, the Crown sought forfeiture of cash, three real
    properties, and numerous bank accounts.  The trial judge declined to make the
    forfeiture order requested by the Crown.  He did, however, invoke s. 462.37(3)
    of the
Criminal Code
and ordered the respondent to pay a fine of
    $760,000 in lieu of forfeiture.

[14]

Having
    declined to make the forfeiture order sought, the trial judge proceeded to
    revoke the outstanding restraining order and ordered the various assets
    returned to their owners.  The respondent is an owner of some of the assets.

[15]

The
    Crown launched its appeal in January 2010, but did not perfect its appeal until
    two years later in February 2012.  The respondent also appealed the imposition
    of a fine in lieu of forfeiture.  The appeals were listed for argument on June
    6, 2012.  The assets that had been the subject of the forfeiture application
    were held under an order of this court pending the outcome of the appeal.

[16]

In
    the notice of appeal, the Crown sought, among other relief, a restitution order
    in an amount equal to the damages caused to 11 properties used for marihuana
    grow ops.  However, the Crown took a different position in its factum, seeking
    a new hearing on the restitution claim rather than an order for restitution.

[17]

At
    the outset of oral argument, the court requested submissions on its power, if
    any, to order a new restitution hearing as sought by the Crown in its factum.  After
    hearing argument, the court concluded that since the appeal from a refusal to
    make a restitution order was a sentence appeal for the purposes of Part XXI of
    the
Criminal Code
, the court could only dismiss the appeal or make the
    restitution order that should have been made.  The court could not order a new
    restitution hearing: see
Criminal Code
,

ss. 673 and 687(1);
R.
    v. Kakekagamick
(2006), 81 O.R. (3d) 664 (C.A.), at para. 60.

[18]

After
    the court indicated it had no authority to make the order sought by the Crown,
    Crown counsel requested an opportunity to file additional written argument to
    persuade the court that it should make the restitution orders that had been
    refused at trial.  The court agreed to accept further submissions and both
    parties filed those submissions by early August 2012.  Counsel also requested
    the opportunity to make further oral submissions.  Those submissions were heard
    on November 23, 2012.


III



THE FACTS

[19]

The
    parties filed an agreed statement of facts on the guilty pleas.  The relevant
    parts of that agreement are set out below.

A.

OVERVIEW

1.      Phu
    Nhi (John) TRAC, in association with others, produced marihuana at more than
    fifty residences across the Greater Toronto Area, stole hydro-electricity in
    order to facilitate this production, and ultimately possessed this marihuana
    for the purpose of trafficking.  TRAC also possessed and laundered the proceeds
    of such crime.  Finally, TRAC evaded paying income tax on income from all
    sources (including both legitimate realty commissions as well as the proceeds
    of crime) and failed to remit GST collected and owing from his legitimate
    realty employment.

B.

THE MARIHUANA AND THEFT OFFENCES

2.      John TRAC is charged along with others with one global count
    each of production of marihuana, possession of marihuana for the purpose of
    trafficking and theft of hydro-electricity, between September of 2000 and
    December of 2002.

3.      TRAC,
    along with others, was responsible for farming marihuana at fifty-four
    residences across the Province, including homes in Aurora, Brampton, Brooklin,
    Markham, Mississauga, Oakville, Richmond Hill, Toronto and Vaughan.  In order
    to secure those premises, TRAC principally, with and through Jennifer WU,
    arranged for real and illusory tenancies to be established in connection with
    those homes, using as tenants phoney names and identities, or identities
    stolen from unwitting third parties.

4.      From
    these grow houses, police seized more than
27,550
marihuana plants, weighing well in
    excess of three kilograms.  The possession of this amount of marihuana was for
    the purpose of trafficking.

5.      The
    hydro-electricity meter was being by-passed at most of these residences and
    electricity of a value in excess of $100,000.00 was being stolen from service
    providers Aurora Hydro (Powerstream), Hydro One Brampton, Markham Hydro
    Distribution Inc. (Powerstream), Oakville Hydro Corporation, Enersource Hydro
    Mississauga, Richmond Hill Hydro Inc. (Powerstream), Toronto Hydro Corporation
    and Vaughan Hydro Distribution Inc. (Powerstream).

C.      THE
    PROCEEDS OF CRIME AND MONEY LAUNDERING OFFENCES

6.      John TRAC is also charged with his spouse Man Nghi (Yvonne) LE
    with possession of proceeds of crime in excess of $5,000 and with laundering
    that money.

7.      TRAC
    controlled numerous bank accounts personally, jointly with his wife, through
    his wife and third party nominees, and through two numbered companies operated
    by him.  There were significant cash deposits into these accounts totalling
    approximately
$760,000
. 
    On a conservative estimate, this figure represents the minimum
actual
proceeds of drug trafficking received by John
    TRAC.

8.      TRAC
    then laundered these proceeds of crime through these various accounts, with
    which he also purchased hard assets and investment instruments, all for the
    purpose of concealing the illicit source of those proceeds.

D.      THE INCOME TAX AND GST EVASION
    OFFENCES

9.      John
    TRAC is also charged with evading the payment of income tax and GST, and with
    making fraudulent statements on his income tax and GST returns.

10.     TRAC
    grossly under-reported his income in the years 1999, 2000, and 2001 and did not
    report income at all in 2002.  TRAC did so with the intention that the
    under-reported and unreported income would be relied upon by the CCRA to
    determine his taxable income.  TRAC thereby wilfully evaded paying federal
    income taxes as follows:



TAXATION YEAR

1999

2000

2001

2002

TOTAL



Understated Taxable Income

$276,453.27

$273,056.08

$313,066.31

$434,020.59

$1,296,596.20



Federal Income Tax
          Owing

$83,802.19

$79,784.22

$87,418.52

$117,119.36

$368,124.29



11.     Further,
    TRAC did not report taxable supplies (i.e. realty commission income) in his
    Goods and Services Tax (GST) Return for the period between January 1, 1999
    and March 31, 1999, nor did TRAC remit the GST he collected from his real
    estate business for the years 1999, 2000, 2001 and 2002.  In so doing, TRAC
    evaded paying
$54,829.47
in GST.

[20]

At
    the sentencing/forfeiture hearing, counsel for the respondent made it clear
    that while his client accepted the facts in the agreed statement of facts, he
    did not admit any fact that was not expressly set out in that document. 
    Specifically, the respondent did not admit that any of the assets referred to
    in the voluminous Crown evidence filed on sentencing were the assets referred
    to in more general terms in the agreed statement of facts.


IV



THE APPEAL FROM THE TERM of imprisonment

[21]

At
    trial, the Crown sought sentences totalling 14 years.  The trial judge imposed
    terms totalling five years.  He sentenced the respondent to three years
    concurrent on each of the charges of producing marihuana (count 1), possession
    of marihuana for the purpose of trafficking (count 2) and fraudulent
    consumption of electricity (count 3).  The trial judge also imposed a two year
    consecutive term on the money laundering charge (count 5) and one year concurrent
    sentences on each of the three income tax evasion charges (counts 11, 12 and
    13).  He imposed a fine on the count of failing to pay GST (count 16).

[22]

In
    its notice of appeal, the Crown alleged that the jail terms imposed were
    manifestly inadequate.  The Crown also alleged that the sentences on the tax
    evasion charges should have been consecutive to the other jail terms.

[23]

In
    its factum, the Crown sought to challenge only the three-year concurrent sentences
    imposed on the charges of producing marihuana, trafficking in marihuana, and
    fraudulent consumption of electricity.  The Crown argued that a sentence
    totalling ten years should have been imposed on those counts.

[24]

The
    Crown further took the position that as the respondent had been released on
    parole in October 2010, long before the Crown perfected its appeal, he should
    not be re-incarcerated, even though, on the Crowns submission, a fit sentence would
    have been some seven years longer than the sentence imposed.  The Crown asked
    this court to both dismiss the appeal as it related to the jail term and to send
    a clear message that a sentence of ten years on the marihuana growing charges
    should have been imposed.

[25]

The
    two prongs of the Crowns position are entirely inconsistent with each other.  I
    would dismiss this part of the appeal solely on the basis that the Crown, by
    choosing not to seek the respondents re-incarceration, has effectively abandoned
    this part of the appeal.  I make no comment on the appropriateness of the
    prison terms imposed by the trial judge.
[1]



V



THE REFUSAL TO MAKE THE RESTITUTION ORDERS

[26]

The Crown led evidence of substantial damage done to 11 residences that
    had been used for the growing of marihuana.  The Crown sought a restitution
    order under s. 738(1)(a) totalling $257,627.26.  The Crown also particularized
    the damage done to each property.  Those particulars are as follows:



Homeowner

Grow House

Quantum



David Wa

1381 Ballantrae Dr.

$40,322.00



Donald Huen

3147 Barwell Rd.

$37,896.63



Wafaa Youssef

67 Black Walnut Cr.

$6,525.80



Silvano DeLuca

1475 Bryce Rd.

$13,115.36



Joan & John Perquin

14 Dingwall Ct.

$7,700.00



Thomas Kim

2731 Duncairn Dr.

$27,200.00



Wallace Yuen

16 Hillholm Blvd.

$9,354.80



Helen Kilitzoglou

180 Ivy Cr.

$35,569.00



Parves Jahed

4151 Loyalist Dr.

$8,854.50



Maria da Graca Almeida

3283 Pilcom Cr.

$29,545.48



Maura (Mary) Walsh

255 St. Johns SR

$41,543.69



[27]

The
    defence at trial accepted that the 11 residences had been damaged as a result
    of their use as marihuana grow ops.  The defence also did not challenge the quantification
    of the claims either in total or as particularized for each property.

[28]

The
    defence did contend, however, that the Crown could not link the respondent to
    the grow ops at the 11 residences.  The defence maintained that the Crown had
    not shown that any of the 11 residences referred to in the restitution claim
    were among the 54 grow ops that the respondent had admitted in the agreed
    statement of facts he had operated between 1990 and 1992.

[29]

The
    Crown submitted that the evidence established the necessary link between the
    respondent and each of the 11 properties either by directly connecting the
    respondent to the fraudulent rental of the properties, or by linking the rental
    of the properties to Jennifer Wu, who by the respondents own admission was his
    partner in a large scale joint venture to grow marihuana in numerous residences
    around the Toronto area during the relevant time.

[30]

The
    trial judge did not refer to any of the evidence in his brief reasons for refusing
    the restitution order.  He said:

As a general rule, a restitution order should not be made in
    circumstances where there is any serious contest on legal or factual issues. 
    See the Ontario Court of Appeal,
R. v. Devgan
(1999), 44 O.R. (3d) 161
    (Ont. Court of Appeal) at para. 26.  In this case, I do not think it would be
    appropriate to order restitution given the serious factual and legal contests
    that exist between the parties.  This is not to suggest in any way that the
    aggrieved parties in question are not without remedies, or may not be
    compensated in some other court at some other time.  In my view though, the
    factual and legal issues of whether Mr. Trac was responsible for farming
    marihuana at the specific 11 homes in question are contentious issues between
    the Crown and Mr. Trac.  In all the circumstances, I decline to exercise my
    discretion under s. 738 of the
Criminal Code
, to order restitution

[31]

Section
    738 provides for restitution orders.  The relevant parts of the section read:

(1) Where an offender is convicted ... the court imposing
    sentence ... may ... in addition to any other measure imposed on the offender,
    order that the offender make restitution to another person as follows:

(a)     in
    the case of damage to ... the property of any person as a result of the
    commission of the offence ... by paying to the person an amount not exceeding
    the replacement value of the property as of the date the order is imposed, less
    the value of any part of the property that is returned to that person as of the
    date it is returned, where the amount is readily ascertainable;

[32]

An
    order under s. 738 is discretionary.  The deference due discretionary decisions
    made by trial judges in the course of sentencing proceedings applies to
    decisions made to grant or refuse restitution applications:
R. v. Devgan
(1999), 44 O.R. (3d) 161 (C.A.), at para. 28.

[33]

The
    trial judge refused to order restitution because of what he described as the
    general rule that restitution should not be made in circumstances where there
    is any serious contest on legal or factual issues.
Devgan
, the
    authority relied on by the trial judge, does not lay down the general rule
    described by the trial judge.
Devgan
recognizes that various factors,
    including any serious contest on a legal or factual issue, are relevant to the
    exercise of the judges discretion on an application for restitution.  Labrosse
    J.A., at p. 169, made it clear that no single factor was determinative:

It is in light of these considerations that an exercise of
    discretion under s. 725(10 [now s. 738] must be assessed.
None of these considerations by themselves are
    determinative of whether a compensation order should be granted.  The weight to
    be given to individual considerations will depend on the circumstances of each
    case.

Nor is
    the preceding list intended to be exhaustive.  Indeed, other relevant
    considerations may arise in future cases.  [Emphasis added.]

[34]

This
    court has repeatedly applied the above passage from
Devgan
: see e.g.
R.
    v. Perciballi
(2001), 54 O.R. (3d) 346 (C.A.), at para. 34. The trial
    judge erred in law in his interpretation of the controlling jurisprudence.

[35]

The
    trial judges error in law requires this court to determine whether, on a
    proper consideration of all of the relevant factors, the restitution order
    should be made.  The inquiry begins with the purpose of restitution orders in
    the sentencing process.  Restitution orders advance the goal of rehabilitation by
    promoting direct accountability by the wrongdoer to the victim.  Restitution
    orders also promote public acceptance of and support for the criminal justice
    system by recognizing the specific harm done to victims and by providing a convenient
    and inexpensive route by which victims may gain at least some redress for that
    harm: see
R. v. Fitzgibbon
,
[1990] 1 S.C.R. 1005, at pp. 1012-13;
R. v. Popert
, 2010 ONCA 89, 251
    C.C.C. (3d) 30, at para. 38.

[36]

However,
    judges must be cautious in making restitution orders.  Those orders are not a
    substitute for private law remedies.  That said, the realities of this specific
    case cannot be ignored.  The victims seeking restitution have all suffered
    substantial damage to their residential properties as a result of premeditated
    criminal activity carried out for financial gain.  In addition to the physical
    damage done to the victims properties, those properties, no doubt, suffer the
    stigma associated with residences that have been used in the growing of
    marihuana.  It is accepted that the amounts claimed by the victims accurately
    reflect the replacement value of the property.  The victims waited seven years
    for an opportunity to advance their restitution claim at the trial level.  They
    have waited another three for the determination of the appeal.  If patience is
    not to be exclusively its own reward, these claims deserve serious and
    sympathetic consideration.

[37]

In
    the brief reasons quoted above, the trial judge referred to contentious factual
    and legal issues.  There are no contentious legal issues relating to the
    restitution claim and only one serious disputed factual issue  was the
    respondent sufficiently linked to the grow ops in the 11 homes to justify a
    restitution order against him?

[38]

I
    see no impediment to the resolution of this single disputed factual issue.  The
    evidence relevant to the issue came entirely from documents produced by the
    Crown and witnesses called by the Crown.  That evidence was largely
    unchallenged, although counsel for the respondent certainly challenged the
    inferences that should be drawn from the evidence.  Counsel also cross-examined
    Crown witnesses in an effort to show that the evidence supported inferences
    other than those linking the respondent to the properties.

[39]

The
    divide between the Crown and the respondent on the single factual issue was a
    straightforward one.  The Crown took the position that the evidence established
    beyond a reasonable doubt that the respondent, acting in concert with Ms. Wu,
    rented the 11 residences and used them as grow ops.  The defence took the
    position that the evidence connected Ms. Wu to the 11 properties but did not
    connect the respondent to those properties.  The defence argued that the
    evidence was at least as consistent with Ms. Wu acting on her own as it was
    with Ms. Wu acting in concert with the respondent and could not demonstrate
    beyond a reasonable doubt that the respondent was involved with the grow ops in
    the 11 residences.

[40]

A
    review of the relevant evidence begins with the admissions made in the agreed
    statement of facts.  The respondent acknowledged that between 2000 and 2002,
    he, Ms. Wu and others operated a large scale marihuana growing operation using
    54 residences principally in the Toronto area.  The respondent agreed that
    residences were rented for the purpose of using them as grow ops.  In
    describing his role in the renting of the properties, the respondent admitted
    the following:

In order to secure those premises, Trac principally, with and
    through Jennifer Wu arranged for real and illusory tenancies to be established
    in connection with those homes, using as tenants phony names and identities,
    or identities stolen from unwitting third parties.

[41]

Although
    the respondents admissions do not link the 11 properties that were the subject
    of the restitution claim to the 54 properties referred to in the agreed
    statement of facts, those admissions do establish that during the relevant time
    period, the respondent and Wu were involved in a scheme to grow marihuana in various
    residences in the Toronto area and that the scheme involved the renting of numerous
    residences using various fraudulent means.  While by no means conclusive
    evidence of the respondents involvement in the grow ops at the 11 properties,
    it is certainly probative of his involvement in the operations of the 11
    properties that he was, by his own admission, engaged in exactly that kind of
    conduct on a large scale during the same time frame, in the same geographic
    area and with the same person (Ms. Wu).

[42]

The
    Crown directly linked Ms. Wu to the 11 properties that were the subject of the
    restitution application.  She was the real estate agent involved in securing
    the relevant leases for each of the properties.  In arranging those leases, Ms.
    Wu used the same kind of fraudulent techniques that the respondent admitted he
    and Ms. Wu had used in relation to the 54 unspecified properties that the
    respondent agreed he had originally rented to use for the purpose of growing
    marihuana.

[43]

The
    Crown led evidence that the respondent and Ms. Wu had a close personal
    relationship at the relevant time.  There was also evidence that Ms. Wu took instructions
    from the respondent in relation to their joint marihuana growing scheme.  The
    Crown relied on two intercepted conversations during which the respondent is
    heard instructing Ms. Wu to retreat from two properties where grow ops had
    been uncovered.  In the same conversations, the respondent gave Ms. Wu instructions
    to empty and close certain bank accounts relating to those properties.  One of
    the two properties was referred to during the conversation as loyalist.  One
    of the 11 properties subject to the restitution claim is located on Loyalist
    Drive in Mississauga.

[44]

There
    is a third intercepted conversation in which the respondent instructs Ms. Wu to
    lock everything in the safety deposit box.  A subsequent search of Ms. Wus safety
    deposit box revealed a chart listing many grow house operations with
    corresponding fictitious tenants names, fictitious employer references, and
    the name of the person designated to pay the hydro.

[45]

The
    intercepted communications summarized above are consistent with the
    respondents admission that he and Ms. Wu were in the business of growing
    marihuana at various properties they had rented through fraudulent means.  I
    also agree with the Crowns submission that the conversations strongly suggest
    that the respondent was in charge of the scheme and Ms. Wu took direction from him.

[46]

In
    addition to the evidence of the relationship between the respondent and Wu, and
    the nature of their ongoing criminal enterprise, there was evidence connecting
    the respondent to each of the 11 properties that were the subject of the
    restitution claim.  That evidence can be summarized as follows:

·

The fictitious tenants renting three of the properties used
    aliases known to be used by the respondent (14 Dingwall Ct., 4151 Loyalist Dr.,
    16 Hillholm Blvd.)

·

On four of the properties, the name John Trac, or aliases known
    to be used by the respondent, was identified as the present landlord of the
    fictitious tenant (2731 Duncairn Dr., 180 Ivy Cres., 3283 Pilcom Cres., 255 St.
    Johns SR).

·

The name John Trac, or aliases known to be used by the
    respondent, was listed as a reference for the fictitious tenants on three of
    the properties (3147 Barwell Rd., 1475 Bryce Rd., 180 Ivy Cres.).

·

Win Trading, an apparent shell company incorporated using the
    respondents residence was listed as the fictitious tenants employer on five
    of the properties (1381 Ballantrae Dr., 3147 Barwell Rd., 67 Black Walnut
    Cres., 1475 Bryce Rd., 16 Hillholm Blvd.).

·

Two of the respondents former actual tenants were listed as the fictitious
    tenants renting six of the properties.  One of those individuals had returned
    to Hong Kong after terminating his tenancy with the respondent (67 Black Walnut
    Cres., 1475 Bryce Rd., 2731 Duncairn Dr., 180 Ivy Cres., 3283 Pilcom Cres., 255
    St. Johns SR).

·

The fictitious tenants were shown as employed by ACI Worldwide on
    two of the properties.  ACI Worldwide is a legitimate company.  The company had
    no knowledge of the fictitious tenants or the respondent.  John Chen, an alias
    used by the respondent, was shown as ACIs contact person on the tenancy
    applications.  Ms. Wus telephone number was listed as ACI Worldwides contact
    number (180 Ivy Cres., 2731 Duncairn Dr.).

·

Aliases used by the respondents brother appeared as references for
    the fictitious tenants on two of the properties.  The police wiretaps intercepted
    a conversation during which the respondent was heard instructing his brother to
    represent himself as the former landlord of fictitious tenants and to use
    aliases when doing so (1475 Bryce Rd., 14 Dingwall Ct.).

[47]

I
    cannot say that it is impossible in the face of the evidence summarized above
    that Ms. Wu acted on her own in establishing the grow ops at the 11
    residences.  The Crown is not, however, required to prove that Ms. Wu could not
    possibly have acted on her own.  On the totality of the evidence, the Crown has
    proved that the only reasonable conclusion is that Ms. Wu and the respondent
    acted in concert establishing the grow ops at the 11 properties in issue in
    exactly the same way the respondent admitted they had acted in concert in
    connection with 54 unspecified residences.

[48]

I
    would make the order under s. 738(1)(a) requiring the respondent to make restitution
    to the homeowners described in paragraph 26 in the amounts specified in that
    paragraph.  The parties did not make any submissions as to any further terms of
    the restitution order and I would make none.
[2]



VI



THE FORFEITURE APPEAL

(a)

The Statutory Authority
    for the Appeal

[49]

The
    trial judge made two orders at the end of the forfeiture application.  First,
    he refused to order any of the assets forfeited to the Crown either as the proceeds
    of crime (s. 462.37) or offence-related property (s. 490.1).  Second, and
    this order flowed from the first, the trial judge revoked the existing
    restraining order made in respect of those assets and directed the return of
    the assets to their owners, including the respondent (s. 462.43(1)).

[50]

The
Criminal Code
provides for appeals from the refusal to make forfeiture
    orders under s. 462.37 (proceeds of crime) or s. 490.1 (offence-related
    property).  Those appeals are treated as sentence appeals meaning that this
    court can either dismiss the appeal or make the appropriate forfeiture order. 
    The court cannot order a new forfeiture hearing: see ss. 490.1(3), 673, and 687.

[51]

The
Criminal Code
also creates a right of appeal from an order made under s.
    462.43 revoking a restraining order.  Unlike appeals from the refusal to make
    forfeiture orders, an appeal from the revocation order is appealable as if an appeal
    from acquittal: s. 462.44.  Thus, if the Crown demonstrates an error in law,
    the courts remedial options include the power to set aside the revocation
    order and direct a new forfeiture hearing.

[52]

On
    the forfeiture appeal, the Crown argues that the trial judge erred in law in
    his interpretation of the forfeiture provisions in the
Criminal Code
,
    misapprehended relevant evidence and failed to consider relevant evidence.  The
    Crown contends that the trial judge refused to make a forfeiture order because
    the Crowns forensic accountant could not say that any specific asset the Crown
    wanted forfeited was traceable in its entirety to cash generated by the
    respondents drug trafficking.  The Crown submits that this approach reads too narrowly
    the forfeiture powers in the
Criminal Code
,
ignores the money laundering conviction, and fails to
    consider the entirety of the evidence.  The Crown submits that a new forfeiture
    hearing is necessary so that all of the relevant evidence can be considered in
    the context of a proper interpretation of the forfeiture provisions and a
    consideration of all of the convictions entered against the respondent.  Because
    the Crown submits that a new forfeiture hearing is the only appropriate remedy,
    it cannot rely on its right to appeal directly from the trial judges refusal
    to make the forfeiture order, but must appeal from the revoking of the
    restraining order.

[53]

Although
    it appears somewhat artificial to treat this as an appeal from the revocation
    of the restraining order, the Crown does not gain any unfair advantage by
    framing the appeal in that way.  Instead, the Crown gains potential access to a
    new hearing, which, as I understand it, counsel for the respondent accepts is
    the only appropriate remedy if the Crown can establish a reversible error in
    law.

[54]

Nothing
    in the language of s. 462.44 precludes the Crown, on an appeal from an order
    revoking a restraining order, from raising arguments going to the merits of the
    Crowns forfeiture application.  The denial of that application is a necessary
    precondition to the revocation of the restraining order.  I also agree with the
    parties contention that, on this record, if any of the Crowns arguments succeed,
    a new forfeiture hearing would be the proper order.

(b)

The Forfeiture Hearing
    at Trial

(i)

The
    positions of the parties

[55]

The
    Crown sought forfeiture of cash seized from the respondents residence ($10,532.37),
    three real estate properties owned by the respondent and credits in 23 accounts
    allegedly controlled by the respondent.
[3]
The assets the Crown sought forfeited were valued at about $2 million.

[56]

The
    Crown did not lead any evidence that specifically addressed the source of the
    cash seized from the respondents residence.  The Crowns forensic accountant testified
    that he could not identify the source of the cash.    The Crown argued,
    however, that the respondents marihuana production and trafficking operation
    must have generated a great deal of cash and it could, therefore, be inferred
    that the large amount of cash found in the respondents home came from that operation. 
    The defence countered with the argument that as the respondent had other
    legitimate sources from which he obtained cash, no inference should be drawn as
    to the source of the cash found in his residence.

[57]

The
    three properties consisted of the respondents home (69 Upper Canada Dr.) and two
    condominium units that the respondent used as rental properties (456 College
    St., Unit 203; 2 Cox Blvd., Unit 12).  The properties were purchased before the
    timeframe covered in the indictment and the Crown did not allege that any of
    the properties were purchased with money that was the proceeds of crime or offence-related
    property.  The Crown did allege, however, that some of the mortgage payments
    on each of the properties were made with monies obtained from accounts that
    were funded, at least in part, by cash deposits that came from the respondents
    drug operation.  For example, the Crown pointed to a mortgage payment on the
    Cox Boulevard property made on January 30, 2002.  That mortgage payment came from
    an account in which a cash deposit from an unknown source had been made on the
    same day.  The Crown argued that it could be inferred that the cash deposit was
    drug money, and was used to make the mortgage payment on the Cox Boulevard
    property, thereby making that property, or at least the equity represented by
    the mortgage payment, the proceeds of crime and/or offence-related
    property.

[58]

The
    bank accounts were in the name of the respondent, his wife, corporate entities,
    and other alleged nominees.  The Crown alleged that all of the accounts were
    controlled by the respondent.  The forensic accountant who testified as an
    expert for the Crown examined some 90 accounts, including the 23 the Crown
    sought forfeited.  In his opinion, those accounts bore several
indicia
associated with money laundering.  I need not detail that evidence.

[59]

The
    Crowns
forensic accountant determined that
$765,563.97 in cash from unknown sources had been deposited into the
    accounts the Crown sought forfeited.  Some of those cash deposits were then converted
    by transfer to credits in other accounts controlled by the respondent, or were
    used to fund the purchase of other assets or investments.  When the expert
    testified that $765,563.97 in cash from unknown sources had been deposited into
    the accounts, he did not know that the respondent had admitted laundering through
    his accounts at least $760,000 in cash from his drug operation.

[60]

The
    Crown also relied on admissions made by the respondent in the agreed statement
    of facts.  The respondent admitted that he controlled various bank accounts
    into which cash deposits of $760,000 had been made.  The respondent further
    admitted: on a conservative estimate this figure [$760,000] represents the
    minimum
actual
proceeds of drug trafficking
    received by John Trac.  Finally, the respondent admitted that he laundered
    $760,000 in proceeds from his drug business through these various accounts,
    using the proceeds to purchase hard assets and investment instruments, all for
    the purpose of concealing the illicit source of these proceeds.

[61]

The
    Crown submitted that if a credit standing in any account was the product, at
    least in part, of the deposit of cash obtained through drug trafficking, the
    entire credit was properly forfeited as either the proceeds of crime or offence-related
    property.  The Crown argued that even if forfeiture under the proceeds of
    crime provisions was limited to that part of the credit in the account that
    could be traced directly to drug money, the Crown was entitled to a
pro
    rata
forfeiture in the amount of about $320,000.

[62]

The
    Crown further contended that the respondents conviction on the money
    laundering charge provided an alternative basis upon which the accounts and the
    real estate could be ordered forfeited.  The Crown submitted that any account
    or other asset used in any manner in connection with the money laundering
    scheme fell within the definition of offence-related property and was
    potentially forfeitable under s. 490.1.

[63]

The
    defence made three arguments against forfeiture.  First, the defence argued
    that the admissions made by the respondent were not connected to any specific
    assets or bank accounts and it could not be assumed that those admissions related
    to any of the assets or accounts examined in the Crowns forensic audit of the
    respondents financial affairs.

[64]

Second,
    the defence submitted that it could not be safely inferred that all of the cash
    deposits into the respondents various accounts that could not be traced to a
    specific source were from his drug business.  On the evidence, the respondent
    had several legitimate cash sources that could have accounted for some unknown
    part of the cash deposits identified by the Crowns forensic accountant.  That accountant
    acknowledged that he could not say whether any particular cash deposit came
    from the respondents marihuana trafficking operation.  The defence made the
    same argument in respect of the cash seized from the respondent.

[65]

Third,
    the defence argued that on the uncontested evidence, funds from various legitimate
    sources, including the respondents profitable real estate business, were
    deposited into the accounts targeted by the Crowns forfeiture application.  In
    some of those accounts, the Crowns expert conceded the deposits from legitimate
    funds far exceeded the amount of the deposits that the Crown claimed came from cash
    earned in the marihuana trafficking business.  The defence maintained that the
    Crown was not entitled to seize accounts where the closing balance reflected
    the deposit of legitimate funds, particularly when, as was the case for some of
    the accounts, the deposits from legitimate sources far exceeded the cash
    deposits said to be the proceeds of crime.

(ii)

The
    trial judges reasons

[66]

The
    trial judge did not review in any detail the evidence relied on by the Crown on
    the forfeiture application.  He also treated the assets the Crown sought
    forfeited as a single entity and did not consider the potential forfeitability
    of the assets on an individual basis.  For example, the trial judge made no specific
    finding as to the provenance of the cash the Crown sought forfeited.

[67]

The
    trial judge also drew no distinction between the forfeiture regime in s. 462.37
    (proceeds of crime) and s. 490.1 (offence-related property).  Further, he referred
    only to the convictions on the marihuana growing and trafficking charges
    (counts 1 and 2) when determining whether the respondent had been convicted of
    a designated offence, a prerequisite to forfeiture under s. 462.37, or an indictable
    offence, a prerequisite to forfeiture under s. 490.1.  Specifically, the trial
    judge did not consider the application of the forfeiture regime from the perspective
    of the respondents conviction on the money laundering charge (count 5).  Money
    laundering is a designated offence and an indictable offence and,
    therefore, capable of triggering forfeiture under s. 462.37 and/or s. 490.1.

[68]

The
    trial judges central factual finding underlying his refusal to order forfeiture
    is somewhat ambiguous.  He said:

The admissions in the Agreed Statement of Facts are not linked
    to any particular assets.

[69]

This
    observation could mean that the trial judge was not satisfied that the 90
    accounts examined by the Crowns expert included the accounts referred to in
    the Agreed Statement of Facts; or it could mean that the Crown expert could not
    identify any particular asset the Crown sought forfeited as derived entirely
    from the proceeds of the respondents marihuana operation.  The latter interpretation
    seems more likely given the exhaustive nature of the Crowns forensic review
    and the absence of any indication in the evidence that the respondent
    controlled accounts other than those identified in the Crowns audit.

[70]

The
    latter interpretation also seems more likely given the trial judges conclusion
    that a fine in lieu of forfeiture was appropriate.  In so ordering, he said:

It is clear that in this case, Mr. Trac has admitted receiving
    $760,000 of actual proceeds of crime which he admits he laundered through
    various accounts.
As demonstrated by the evidence of Mr.
    Coort [the Crown forensic accountant] those proceeds of crime are no longer
    traceable.
It seems to me that this is precisely the type of case that
    Parliament envisioned when it enacted s. 462.437(3).  [Emphasis added.]

[71]

The
    trial judges observation indicates that he accepted that the Crowns expert had
    examined the accounts used by the respondent to launder the proceeds of his
    criminal activity, but that he could not adequately trace the cash deposits
    through to the assets the Crown wanted forfeited.

(c)

Analysis

(i)

The failure to consider forfeiture under s. 490.1 in the context of the
    money laundering conviction

[72]

In
    Part B of its Notice of Application for Forfeiture, the Crown alleged that the
    respondent had been convicted of the indictable offence of money laundering and
    that the assets sought forfeited to the Crown are offence-related property in
    relation to the money laundering conviction.  I agree with Crown counsels submission
    that the trial judge erred in law in failing to consider this aspect of the
    Crowns forfeiture claim.  To the extent that the trial judge referred to s.
    490.1, he did not distinguish it from the forfeiture claim under s. 462.37
    (proceeds of crime).  The trial judge also did not consider forfeiture on the
    basis of the relationship between the assets the Crown sought forfeited and the
    respondents conviction on the money laundering charge.  This failure was significant,
    as on the offence-related property approach to forfeiture set out in s. 490.1, the
    Crown could obtain forfeiture of assets without tracing the property sought
    forfeited back to the cash realized by the respondent through his drug activities.

[73]

I
    have set out the relevant provisions in the
Criminal Code
applicable
    to the forfeiture of offence-related property in an appendix to these reasons. 
    Those provisions are not easy to read or understand.  I will attempt to summarize
    them.

[74]

Section
    490.1(1) provides for mandatory forfeiture, subject to the powers to relieve
    from forfeiture set out in ss. 490.3 to 490.41, in the following circumstances:

·

the accused must be convicted of an indictable offence;

·

the Crown must prove on the balance of probabilities that the
    property sought forfeited is offence-related property; and

·

the Crown must prove on the balance of probabilities that the
    indictable offence was committed in relation to that property.

[75]

Section
    490.1(2) creates a discretionary forfeiture power that applies where:

·

the accused is convicted of an indictable offence; and

·

the Crown proves beyond a reasonable doubt that the property sought
    forfeited is offence-related property.

[76]

Offence-related
    property is a defined term.  The definition is broad and includes:

·

any property by means or in respect of which an indictable
    offence is committed; and

·

any property that is used in any manner in connection with the
    commission of an indictable offence.

[77]

The
    phrase offence-related property takes one to the definition of property. 
    That definition is also wide and includes:

·

real and personal property of every description; and

·

property originally in the possession or under the control of any
    person and any property into or for which it has been converted or exchanged
    and anything acquired at any time by the conversion or exchange.

[78]

Real
    property and cash are undoubtedly property as defined in the
Criminal Code
. 
    A credit in a bank account represents a debt owed to the account holder by the
    deposit-taking institution.  Subject to the terms of any agreement between that
    institution and the account holder, the account holder has the right to payment
    on demand of the debt represented by the credit in the account:  see
B.M.P.
    Global Distribution Inc. v. Bank of Nova Scotia
,
2009 SCC 15, [2009] 1 S.C.R. 504, at para. 63;
Royal
    Bank of Canada v. Rastiogi
, 2011 ONCA 47, 330 D.L.R. (4th) 98, at para. 17. 
    The debt owed to the account holder is personal property within the definition
    of property in the
Criminal Code
.

[79]

Offence-related
    property has a different and potentially broader meaning than does proceeds
    of crime.  Proceeds of crime as defined in s. 462.3(1) refers to property
    obtained or derived directly or indirectly from the commission of an
    indictable offence.  Property is only the proceeds of crime if it is at least
    indirectly the product of crime.  The definition of proceeds of crime brings
    to mind the concept of ill-gotten gains: see
R. v. Lavigne
, 2006 SCC
    10, [2006] 1 S.C.R. 392, at paras. 9-10.

[80]

Offence-related
    property reaches property used in any manner in connection with the commission
    of an indictable offence.  The section is aimed at the means, devices or
    instrumentalities used to commit offences.  Thus, the house used to grow
    marihuana or the truck used to carry the marihuana to the point of sale are
    offence-related property.  They are clearly not proceeds of crime unless
    perhaps the drug operation funded the purchase of the house and/or vehicle: 
    see
R. v. Craig
, 2009 SCC 23, [2009] 1 S.C.R. 762, at para. 81;
R.
    v. Paziuk
, 2007 SKCA 63, 221 C.C.C. (3d) 518, at para. 10;
R. v.
    Manning
,
2011 QCCA 900,
    2011 CarswellQue 15720.

[81]

When
    the Crown seeks forfeiture of offence-related property and relies on a
    conviction for money laundering as the triggering indictable offence, the forfeiture
    inquiry does not involve tracing the genesis of the claimed assets back to money
    generated by criminal activity.  Instead, the focus is on the connection of the
    property sought forfeited to the commission of the indictable offence of money
    laundering.  This distinction becomes crucial in the context of a Crown
    application for the forfeiture of assets said to be connected to a
    sophisticated, multi-layered money laundering operation like that the
    respondent acknowledged in the agreed statement of facts.

[82]

The
    offence of money laundering is defined in s. 462.31:

462.31  (1)  Every one commits an offence who uses, transfers
    the possession of, sends or delivers to any person or place, transports,
    transmits, alters, disposes of or otherwise deals with,
[4]
in any manner and by any means, any property or any proceeds of any property
    with intent to conceal or convert that property or those proceeds knowing or
    believing that all or a part of that property or of those proceeds was obtained
    or derived directly or indirectly as a result of

(a) the commission in Canada of a designated offence; or

(b) an act or omission anywhere that, if it had occurred in
    Canada, would have constituted a designated offence.

[83]

The
actus reus
or conduct component of the offence created by s. 462.31
    captures a broad array of activities involving property or the proceeds of
    property.  Almost anything done with property will satisfy the conduct
    component of the offence.  The
mens rea
or fault component of the
    offence has two dimensions  specific intent and knowledge or belief.  The
    accused must do something with the property with intent to conceal or convert
    that property or those proceeds, and the accused must know or believe that all
    or part of the property was obtained or derived directly or indirectly from the
    commission of an indictable offence.

[84]

Money
    laundering is achieved by the injection of cash generated through criminal
    activity into the legitimate, commercial mainstream through the deposit of that
    cash with a reputable deposit-taking institution.  By depositing the cash, the illicit
    funds are immediately converted from a tangible physical asset easily traced directly
    to the crime, to an intangible asset, a credit in the account, of no obvious origin. 
    The mere depositing of the funds can achieve both the conversion and concealment
    so coveted by the money launderer.  The laundering of the illicit proceeds of
    crime through bank accounts where those proceeds are mixed with untainted funds
    and then transferred from the account to acquire other assets is an effective
    and well-recognized form of money laundering:
see
    e.g.

U.S. v. Tencer
,
107 F.3d 1120 (5th Cir. 1997);
U.S. v. Puche
, 350 F.3d 1137 (11th
    Cir. 2003).

[85]

Not
    only does the conversion of the asset from cash to a credit assist in concealing
    the source of the funds, the placement of the credit within the stream of
    legitimate day-to-day commerce also achieves the desired anonymity.  That
    concealment is enhanced when funds from criminal and legitimate sources are
    mixed into the same account.  The legitimate funds become a kind of camouflage
    hiding the existence and movement of the illicit funds.

[86]

The
    placement of the illicit funds into an account with a legitimate financial
    institution also enhances the money launderers ability to further convert and
    conceal the source of the funds.  Credits in a bank account can be easily
    transferred to other accounts or used to purchase other assets in what appears
    to be the normal course of commercial activity.


[87]

On
    the admitted facts, the respondents money laundering scheme involved several steps
    beginning with the deposit of drug monies (approximately $760,000) into various
    accounts controlled by him, followed by the transfer of some or all of the
    credits generated by those deposits into other accounts, and/or the use of those
    credits to purchase other assets, including investments.  As admitted by the
    respondent, all of this activity was done for the purpose of concealing the
    illicit source of those proceeds.

[88]

The
    Crown led substantial evidence of the kind of activity associated with the use
    of bank accounts for money laundering.  The Crown expert gave detailed evidence
    that many of the respondents accounts displayed several of those
indicia
. 
    That evidence, combined with the respondents admission as to the nature of his
    money laundering operation, had to be considered in determining whether any
    particular asset the Crown sought forfeited was either the means by which the
    money laundering offence was committed, or was used in any manner in
    connection with the money laundering.  If the asset fell within either
    definition, it was offence-related property and subject to forfeiture under
    s. 490.1, regardless of whether the credit in the account when it was ordered
    frozen could be traced to cash generated by the respondents drug business.

[89]

The
    proper application of the definition of offence-related property to the bank
    accounts in the context of the money laundering offence does away with the need
    to attempt to segregate legitimate funds in an account from drug money. 
    Instead, forfeiture depends on whether the evidence shows that the accounts
    were used to further the money laundering scheme.  If an account was used in
    any way to further the respondents money laundering scheme, that account, and
    more precisely the property in the account at the time of seizure (the credit
    owed to the account holder by the bank), is offence-related property regardless
    of the origins of the deposits reflected in the credit in the account.

[90]

Although
    the bank accounts were certainly the focus of the forfeiture argument in this
    court, the real estate sought forfeited might also qualify as offence-related
    property.
[5]
As with the bank accounts, this determination would depend upon a connection
    between that property and the money laundering scheme perpetrated by the
    respondent.  For example, the Crown pointed to the deposit of almost $50,000 in
    cash into an account controlled by the respondent (TD account #31423381).  The
    Crown also pointed to mortgage payments made on each of the properties from
    that account after the cash was deposited.  If a trial judge was satisfied that
    the deposits into the account and the subsequent use of some of the funds to
    pay down mortgages were part of the money laundering scheme, then the real
    estate would be property used in any manner in connection with the money
    laundering.

[91]

A
    finding that any of the assets the Crown sought forfeited was offence-related
    property is a prerequisite to a forfeiture order under s. 490.1, but is not
    determinative of whether that order should be made.  As described above, s.
    490.1(1) provides for forfeiture where the Crown proves on a balance of
    probabilities that:

·

the property is offence-related
    property; and

·

the offence (here, money laundering) was committed in relation to
    that property.

[92]

The
    phrase in relation to commonly appears in statutes and other legal writing. 
    It describes in broad terms a connection between two things:
Nowegijick v.
    The Queen
, [1983] 1 S.C.R. 29, at p. 39.  In s. 490.1(1), it describes a
    connection between the property sought forfeited and the offence.

[93]

The
    parties did not make submissions as to the meaning of the phrase in relation
    to that property in s. 490.1(1).  I will not attempt an exhaustive
    definition.  I think it is fair to say, however, that the requirement that the
    offence be committed in relation to that property demands a more direct
    connection between the property and the offence than would be necessary to find
    that property was used in any manner in connection with the commission of the
    offence.  For example, although property, such as a bank account used to conceal
    or disguise money laundering, would be considered offence-related property, it
    is arguable that the crime of money laundering could not be said to have been committed
    in relation to that property.

[94]

If
    the Crown demonstrates that the property is offence-related property, but
    does not show that the offence was committed in relation to that property, the
    property may be forfeited under s. 490.1(2).  Under that section, however,
    forfeiture is not mandatory, but is at the discretion of the judge.  The Crown must
    also meet the higher burden of proving beyond a reasonable doubt that the
    property was offence-related property.

[95]

Where
    the Crown establishes a right of forfeiture under s. 490.1(1) or a judge
    chooses to exercise his discretion in favour of forfeiture under s. 490.1(2), the
    judge may still grant relief from forfeiture under ss. 490.3 to 490.41.  These
    provisions deal with various persons and types of property, including innocent
    third party owners and dwelling homes.  I need only refer specifically to s.
    490.41(3), which creates a broad power to relieve in whole or in part from a forfeiture
    order made under either s. 490.1(1) or s. 490.1(2).  The section reads in part:

[I]f a court is satisfied that the impact of an order of
    forfeiture  would be disproportionate to the nature and gravity of the
    offence, the circumstances surrounding the commission of the offence and the
    criminal record, if any, of the person charged with or convicted of the
    offence, as the case may be, it may decide not to order the forfeiture of the
    property or part of the property

[96]

The
    provision giving the judge a broad power to relieve from forfeiture in respect
    of offence-related property has no comparable provision in the forfeiture
    scheme applicable to the proceeds of crime.  In my view, the discretion to
    relieve from forfeiture, in whole or in part, found in s. 490.41(3) is a
    reflection of the very wide definition of offence-related property and the
    consequentially broad forfeiture powers in s. 490.1.  Parliament recognized
    that there would inevitably be cases where the forfeiture of offence-related
    property would be unjust in the circumstances.  Rather than attempting a
    narrower definition of offence-related property and potentially missing
    property that should be forfeited to effectively deter criminal conduct,
    Parliament chose instead to protect against the injustice of excessive
    forfeiture by giving trial judges the discretion to relieve from forfeiture:  see
Craig
,
paras. 22-23
    and 50-51.
[6]


[97]

The
    power to relieve from forfeiture in s. 490.41(3) could have application in a
    case like this one.  On the new forfeiture application, the trial judge will
    have to consider forfeiture under s. 490.1 on an asset-by-asset basis.  He or
    she will, of course, do so in the context of the broad criminal scheme
    acknowledged by the respondent in the agreed statement of facts.  Having regard
    to both the broad scheme and the particular circumstances relating to any
    particular asset, the judge may grant some relief from forfeiture in respect of
    assets which he determines are otherwise forfeitable under s. 490.1.

[98]

To
    summarize, the judge hearing the new forfeiture application, when considering
    forfeiture under s. 490.1, must determine, in the context of the money
    laundering conviction, the following questions:

·

is the specific asset
    offence-related property?

·

if the asset is offence-related property, is it subject to
    forfeiture under s. 490.1(1)?

·

if the asset is subject to forfeiture under s. 490.1(1), are any
    of the provisions that provide relief from forfeiture applicable to all or part
    of the property?

·

if the offence-related property is not subject to forfeiture
    under s. 490.1(1), is it subject to forfeiture under s. 490.1(2)?

·

if the property is subject to forfeiture under s. 490.1(2),
    should the judge exercise his or her discretion in favour of ordering forfeiture?

·

if the judge chooses to order forfeiture, is the asset subject to
    any of the relieving provisions and, if so, to what extent do those provisions
    relieve from forfeiture?

[99]

The
    judge hearing the forfeiture application will also have to ensure that all appropriate
    notices are given so that those with a legitimate interest in any of the
    property sought forfeited have an opportunity to take part in the forfeiture
    proceeding.

(ii)

Forfeiture
    of the proceeds of crime

[100]

As there must be
    a new forfeiture hearing for the reasons set out above, I need not examine the proceeds
    of crime forfeiture claim in any detail.  I also will not attempt, on the
    submissions made in this court, a definitive description of the operation of
    those provisions.

[101]

I agree with
    Crown counsel that the trial judges finding that none of the assets were the proceeds
    of crime turned entirely on the experts inability to say that any given asset
    was the proceeds of crime.  I think it was unreasonable to expect that kind
    of evidence from the expert.  The expert could identify
indicia
associated with the proceeds of crime and could speak to probabilities with
    respect to particular assets.  It was for the trial judge, on the basis of the
    expert evidence and the rest of the evidence, especially the admissions, to
    decide whether the Crown had proved that any particular asset was the proceeds
    of crime.

[102]

The trial judge also
    erred in failing to examine each of the assets individually.  The Crown did not
    put forward an all or nothing case on forfeiture.  There was different evidence
    pertaining to each asset.  The trial judge was required to assess the evidence
    as it applied to each asset in deciding whether that asset fell within the meaning
    of proceeds of crime.  For example, the evidence connecting credits in an
    account to the respondents drug business was much stronger in respect of some
    accounts than others.

[103]

Lastly, the
    trial judge seems to have proceeded on the basis that he could either order
    forfeiture of the entire asset, or refuse forfeiture entirely in respect of an
    asset.  There is, however, authority for the proposition that property can be
    forfeitable to the extent that the property falls within the meaning of the proceeds
    of crime.  On this approach, a
pro rata
forfeiture of credits in a
    bank account, or a
pro rata
forfeiture of the equity in real property
    attributable to the proceeds of crime would be possible:  see
R. v.
    Marriott
,
2001 NSCA 84,
    194 N.S.R. (2d) 64, at para. 28;
R. v. 1431633 Ontario Inc.
,
2010 ONSC 266, 250 C.C.C. (3d) 354;
R.
    v. Kelly
,
2011 QCCQ 4080, 2011
    CarswellQue 5045;
contra R. v. Vincent
, [2003] J.Q. No. 12819 (C.A.),
    at para. 31.

[104]

At the new
    forfeiture hearing, it is open to the Crown to pursue forfeiture under the proceeds
    of crime provisions.  Neither the trial judges factual findings, nor his
    interpretation of the relevant provisions, will be binding on the judge
    conducting the new forfeiture hearing.


VII



conclusion

[105]

The Crowns
    sentence appeal is allowed in part.  The sentence imposed at trial is set aside
    and varied by the imposition of a restitution order in the amount and with the
    particulars set out in para. 26 of these reasons.

[106]

The Crown appeal
    from the order revoking the restraining order and ordering the return of assets
    is set aside and a new forfeiture hearing is ordered.  It follows from that
    order that the trial judges order requiring the respondent to pay a fine in
    lieu of forfeiture is also set aside.

[107]

The
    assets subject to the forfeiture application remain under the order of this
    court pending any further order by this court or the trial court.

RELEASED: Apr 19, 2013                                      Doherty
    J.A.

DD                                                            I
    agree K. Feldman J.A.

I
    agree H.S. LaForme J.A.




APPENDIX

Criminal Code
, R.S.C. 1985, c. C-46, ss. 490.1, 490.3-490.5:

Forfeiture of Offence-related Property

Order of forfeiture of property on conviction

490.1 (1) Subject to sections 490.3 to 490.41, if a person
    is convicted of an indictable offence under this Act or the Corruption of
    Foreign Public Officials Act and, on application of the Attorney General, the
    court is satisfied, on a balance of probabilities, that any property is
    offence-related property and that the offence was committed in relation to that
    property, the court shall

(a) where the prosecution of the offence was commenced at
    the instance of the government of a province and conducted by or on behalf of
    that government, order that the property be forfeited to Her Majesty in right
    of that province and disposed of by the Attorney General or Solicitor General
    of that province in accordance with the law; and

(b) in any other case, order that the property be forfeited
    to Her Majesty in right of Canada and disposed of by the member of the Queen's
    Privy Council for Canada that may be designated for the purpose of this
    paragraph in accordance with the law.



Property related to other offences

(2) Subject to sections 490.3 to 490.41, if the evidence
    does not establish to the satisfaction of the court that the indictable offence
    under this Act or the Corruption of Foreign Public Officials Act of which a
    person has been convicted was committed in relation to property in respect of
    which an order of forfeiture would otherwise be made under subsection (1) but
    the court is satisfied, beyond a reasonable doubt, that the property is
    offence-related property, the court may make an order of forfeiture under
    subsection (1) in relation to that property.



Voidable transfers

490.3 A court may, before ordering that offence-related
    property be forfeited under subsection 490.1(1) or 490.2(2), set aside any
    conveyance or transfer of the property that occurred after the seizure of the
    property, or the making of a restraint order in respect of the property, unless
    the conveyance or transfer was for valuable consideration to a person acting in
    good faith.

Notice

490.4 (1) Before making an order under subsection 490.1(1)
    or 490.2(2) in relation to any property, a court shall require notice in
    accordance with subsection (2) to be given to, and may hear, any person who, in
    the opinion of the court, appears to have a valid interest in the property.

Manner of giving notice

(2) A notice given under subsection (1) shall

(a) be given or served in the manner that the court directs
    or that may be specified in the rules of the court;

(b) be of any duration that the court considers reasonable
    or that may be specified in the rules of the court; and

(c) set out the offence charged and a description of the
    property.

Order of restoration of property


(3) A court may order that all or part of the property that
  would otherwise be forfeited under subsection 490.1(1) or 490.2(2) be returned
  to a person - other than a person who was charged with an indictable offence
  under this Act or the Corruption of Foreign Public Officials Act or a person
  who acquired title to or a right of possession of the property from such a
  person under circumstances that give rise to a reasonable inference that the
  title or right was transferred for the purpose of avoiding the forfeiture of
  the property - if the court is satisfied that the person is the lawful owner or
  is lawfully entitled to possession of all or part of that property, and that
  the person appears innocent of any complicity in, or collusion in relation to,
  the offence.

Notice
490.41 (1) If all or part of offence-related property that
    would otherwise be forfeited under subsection 490.1(1) or 490.2(2) is a
    dwelling-house, before making an order of forfeiture, a court shall require
    that notice in accordance with subsection (2) be given to, and may hear, any
    person who resides in the dwelling-house and is a member of the immediate
    family of the person charged with or convicted of the indictable offence under
    this Act or the Corruption of Foreign Public Officials Act in relation to which
    the property would be forfeited.
Manner of giving notice
(2) A notice shall
(a) be given or served in the manner that the court directs
    or that may be specified in the rules of the court;
(b) be of any duration that the court considers reasonable
    or that may be specified in the rules of the court; and
(c) set out the offence charged and a description of the
    property.
Non-forfeiture of property
(3) Subject to an order made under subsection 490.4(3), if
    a court is satisfied that the impact of an order of forfeiture made under
    subsection 490.1(1) or 490.2(2) would be disproportionate to the nature and
    gravity of the offence, the circumstances surrounding the commission of the
    offence and the criminal record, if any, of the person charged with or
    convicted of the offence, as the case may be, it may decide not to order the
    forfeiture of the property or part of the property and may revoke any restraint
    order made in respect of that property or part.
Factors in relation to dwelling-house
(4) Where all or part of the property that would otherwise
    be forfeited under subsection 490.1(1) or 490.2(2) is a dwelling-house, when
    making a decision under subsection (3), the court shall also consider
(a) the impact of an order of forfeiture on any member of
    the immediate family of the person charged with or convicted of the offence, if
    the dwelling-house was the member's principal residence at the time the charge
    was laid and continues to be the member's principal residence; and
(b) whether the member referred to in paragraph (a) appears
    innocent of any complicity in the offence or of any collusion in relation to
    the offence.
Application
490.5
    (1) Where any offence-related property is forfeited to Her Majesty pursuant to
    an order made under subsection 490.1(1) or 490.2(2), any person who claims an
    interest in the property, other than
(a) in
    the case of property forfeited pursuant to an order made under subsection
    490.1(1), a person who was convicted of the indictable offence in relation to
    which the property was forfeited,
(b) in
    the case of property forfeited pursuant to an order made under subsection
    490.2(2), a person who was charged with the indictable offence in relation to
    which the property was forfeited, or
(c) a
    person who acquired title to or a right of possession of the property from a
    person referred to in paragraph (a) or (b) under circumstances that give rise
    to a reasonable inference that the title or right was transferred from that
    person for the purpose of avoiding the forfeiture of the property,
may,
    within thirty days after the forfeiture, apply by notice in writing to a judge
    for an order under subsection (4).
Fixing
    day for hearing
(2) The
    judge to whom an application is made under subsection (1) shall fix a day not
    less than thirty days after the date of the filing of the application for the
    hearing of the application.
Notice
(3) An
    applicant shall serve a notice of the application made under subsection (1) and
    of the hearing of it on the Attorney General at least fifteen days before the
    day fixed for the hearing.
Order
    declaring interest not affected by forfeiture
(4)
    Where, on the hearing of an application made under subsection (1), the judge is
    satisfied that the applicant
(a) is
    not a person referred to in paragraph (1)(a), (b) or (c) and appears innocent
    of any complicity in any indictable offence that resulted in the forfeiture of
    the property or of any collusion in relation to such an offence, and
(b)
    exercised all reasonable care to be satisfied that the property was not likely
    to have been used in connection with the commission of an unlawful act by the
    person who was permitted by the applicant to obtain possession of the property
    or from whom the applicant obtained possession or, where the applicant is a
    mortgagee or lienholder, by the mortgagor or lien-giver,
the
    judge may make an order declaring that the interest of the applicant is not
    affected by the forfeiture and declaring the nature and the extent or value of
    the interest.
Appeal
    from order made under subsection (4)
(5) An
    applicant or the Attorney General may appeal to the court of appeal from an
    order made under subsection (4), and the provisions of Part XXI with respect to
    procedure on appeals apply, with any modifications that the circumstances
    require, in respect of appeals under this subsection.
Return
    of property
(6) The
    Attorney General shall, on application made to the Attorney General by any
    person in respect of whom a judge has made an order under subsection (4), and
    where the periods with respect to the taking of appeals from that order have
    expired and any appeal from that order taken under subsection (5) has been
    determined, direct that
(a) the
    property, or the part of it to which the interest of the applicant relates, be
    returned to the applicant; or
(b) an
    amount equal to the value of the interest of the applicant, as declared in the
    order, be paid to the applicant.

[1]
At the oral argument in June, 2012, the court indicated in a brief oral
    endorsement that in light of the Crowns position, it would not address the
    merits of the appeal as it related to the terms of imprisonment imposed.  It
    does not appear that that endorsement was released.  These reasons reflect the
    contents of that endorsement.


[2]
The parties made no submissions as to the availability of pre-judgment interest
    on the amounts ordered paid to the victims.  It would appear that if any of the
    victims file the order in the Superior Court and take out a judgment that the
    judgment will attract post-judgment interest:
Criminal Code
s. 741(1);
Brydon v. Berrigan
,
2003 Carswell Ont. 651 (S.C.), at para. 10.  The Crown also did not suggest
    that cash seized from the respondents home should be applied to the
    restitution order pursuant to s. 741(2).


[3]
The Crown subsequently abandoned its claim in respect of two of the accounts
    (items 7 and 9 in Appendix A to the Crowns revised Notice of Application).


[4]
The phrase otherwise deals with does not appear in the French version of s.
    462.31 and has been read out of the English version:  see
R. v. Daoust
,
    2004 SCC 6, [2004] 1 S.C.R. 217.
Daoust
, at paras. 62-65, however,
    acknowledges that even with the modification demanded by the French version,
    the reach of the offence remains long:  see also
R. v. Tejani
(1999),
    138 C.C.C. (3d) 366 (Ont. C.A.), at para. 27.


[5]
There is no suggestion that the cash seized from the respondents residence
    could be offence-related property.


[6]

Craig
was concerned with s. 19.1(3) of the
Controlled Drugs and
    Substances Act
, S.C. 1996, c. 19.  That section is very similar to s.
    490.41(3), except that it applies only to real property.
