





CITATION:
Ontario
          (Attorney General) v. 8477 Darlington Crescent, 2011 ONCA 363



DATE: 20110510



DOCKET: C49874-C49934



COURT OF APPEAL FOR ONTARIO



Doherty, Watt and Epstein JJ.A.

C49874



BETWEEN



Attorney General of Ontario



Applicant (Appellant)



and



8477 Darlington Crescent, Windsor,
10824 Atwater
          Crescent
, Windsor, $29,000 in Canadian Currency (
in rem
), Van-Xinh Do and
Tuoi Le Thi Tran



Respondents (
Respondents in Appeal
)

C49934

BETWEEN

Attorney
          General of Ontario

Applicant (Respondent)

and

1140
          Aubin Road, Windsor and 3142 Halpin Road, Windsor (
in rem
) and
Elwin James McDougall

Respondent (
Appellant
)

AND BETWEEN

Attorney
          General of Ontario

Applicant (Respondent)

and

8477 Darlington
          Crescent
, Windsor, 10824 Atwater Crescent, Windsor, $29,000 in Canadian
          Currency (
in rem
),
Van-Xinh Do
and Tuoi Le Thi Tran

Respondents (
Appellants
)



Robin K. Basu and Leslie Zamojc, for the appellant,
          Attorney General of Ontario

Kenneth W. Golish, for the respondents, McDougall, Do and
          Tran



Heard:  November 16,
        2010

On appeal from the judgments of
          Justice Renee M. Pomerance of the Superior Court of Justice dated December 10,
          2008, reported at [2008] O.J. No. 5209.

Doherty J.A.:





I

Overview

[1]

In November 2005, the Attorney General of
    Ontario (AG) commenced an application under the
Civil Remedies Act, 2001
, S.O. 2001, c. 28 (
CRA
) seeking the forfeiture of two residences in Windsor, Ontario,
    one located at 8477 Darlington Crescent (Darlington property) and the other
    at 10824 Atwater Crescent (Atwater property).  Both residences had been searched in August 2004 and the police had found
    large, sophisticated marijuana growing operations.  Mr. Van-Xinh Do (Do) owned the Darlington
    property at the time of the search.  He also
    rented the Arlington property from his former girlfriend, Ms. Tuoi Le Thi Tran
    (Tran).  Do and Tran were named as
    respondents on the AGs forfeiture application.
[1]


[2]

In October 2006, the AG commenced a second
    application under the
CRA
seeking the
    forfeiture of two more properties in Windsor, Ontario, one located at 1140
    Aubin Road (Aubin property) and the other at 3142 Halpin Road (Halpin
    property).  The police had searched
    those properties in December 2004 and found substantial marijuana growing operations.  At the time of the search, Elwin McDougall
    (McDougall) owned both properties.  He was
    the respondent on this forfeiture application.

[3]

The two applications were eventually heard
    together on March 17, 2008.
[2]
On December 10, 2008, the application judge
    released reasons ordering the Darlington, Aubin and Halpin properties forfeited
    to the Crown in Right of Ontario.  She
    declined to order the forfeiture of the Atwater property.

[4]

The proceedings before the application judge have
    generated four appeals:

·

the AG appeals from the order refusing to
    forfeit the Atwater property to the Crown in Right of Ontario (C49874);

·

Tran, who successfully opposed the application
    for an order forfeiting the Atwater property, appeals the application judges
    refusal to grant her costs on the application (C49874);

·

Do appeals from the order forfeiting the
    Darlington property (C49934); and

·

McDougall appeals the order forfeiting the Aubin
    and Halpin properties (C49934).

[5]

I will address the appeals brought by McDougall and
    Do first.  I would dismiss those appeals
    and affirm the orders directing the forfeiture of the Darlington, Halpin and
    Aubin properties.

[6]

I will next consider the AGs appeal.  I would dismiss that appeal and affirm the
    order refusing forfeiture of the Atwater property.

[7]

Lastly, I will address Trans appeal from the application
    judges refusal to order the AG pay costs on the application.  I would dismiss that appeal.

II

The
Civil Remedies Act

[8]

These forfeiture applications were brought under
    ss. 3 and 8 of the
CRA
.  That
Act
identifies two kinds of property that can be the subject of forfeiture orders.  Under s. 3 the court may order the forfeiture
    of property acquired by unlawful activity and under s. 8 the court may order
    the forfeiture of property used to engage in unlawful activity.  The former, described as the proceeds of
    unlawful activity in the
CRA
, is
    dealt with in Part II of the
Act
(ss.
    2-6).  The latter, referred to as the
    instruments of unlawful activity in the
CRA
,
    is dealt with in Part III (ss. 7-11).  Property
    may fall under either,
both,
or neither
    definition.

[9]

The forfeiture provisions in Parts II and III closely
    parallel each other.  I will review the
    operation of those provisions as necessary to understand the issues
raised
on these appeals.  My review is not an attempt to provide a comprehensive description of the
CRA
.  The relevant provisions are attached as an appendix to these
    reasons.

[10]

The
CRA
creates a civil forfeiture scheme and is not part of the criminal process.  Its purposes are expressly set out in s. 1
    and include the compensation of victims and the deterrence of crime.  Binnie J. in
AG (Ontario) v. Chatterjee
, [2009] 1 S.C.R. 624 said, at para. 4:

Moreover, the
CRA
method of attack on crime is to authorize
in
    rem
forfeiture of its proceeds...
It is true that forfeiture may have
de
    facto
punitive effects in some cases, but its
    dominant purpose is to make crime in general unprofitable, to capture resources
    tainted by crime so as to make them unavailable to fund future crime and to
    help compensate private individuals and public institutions for the costs of
    past crime.

[11]

The nature of the proceedings contemplated by
    the
CRA
was described in
Chatterjee
, at para. 23:

In essence, therefore, the
CRA
creates a property-based authority
    to seize money and other things shown on a balance of probabilities to be
    tainted by crime and thereafter to allocate the proceeds to compensating
    victims of and remedying the societal effects of criminality. The practical
    (and intended) effect is also to take the profit out of crime and to deter its
    present and would-be perpetrators.

[12]

Section 3 of the
CRA
provides for a forfeiture order in respect of property that is proceeds
    of unlawful activity.  That phrase is
    defined in s. 2.  Under that definition,
    and having regard to the definition of property in s. 2, any direct or
    indirect interest in property, real or personal, acquired by unlawful activity will
    constitute the proceeds of unlawful activity.  The definition is clearly a broad one and does not require that the
    person acquiring the property interest be involved in or even aware of the
    unlawful activity tainting that property interest:  see
Chatterjee
at para. 46.

[13]

If the AG demonstrates that the property falls
    within the meaning of the proceeds of unlawful activity, the court must make
    a forfeiture order under s. 3, subject to two exceptions.  The first exception is found in s. 3(3) and
    applies where the party seeking to avoid forfeiture proves that he or she is
    a legitimate owner.  If the party is
    successful, the court must make an order that protects the legitimate owners
    interest in the property, unless the AG demonstrates that such a protection
    order would clearly not be in the interests of justice.

[14]

The phrase legitimate owner is also defined in
    s. 2.  It can refer to a person who was
    the rightful owner of the property before the unlawful activity (subsection
    (a)), or to a person who acquired the property for fair value after the
    unlawful activity occurred (subsection (b)).  In either case there are additional criteria that must be met for a
    person to qualify as a legitimate owner.  The definition of legitimate owner is a narrow one.

[15]

Tran was the rightful owner of the Atwater
    property at the time of the unlawful activity relied on by the AG.  She claimed that she fell within the
    legitimate owner exception on the forfeiture application relating to the
    Atwater property.  I will deal with this
    exception in more detail when I come to the AGs appeal from the refusal to
    order the forfeiture of the Atwater property.

[16]

The second exception to a forfeiture order is
    found in s. 3(1) itself.  That section
    provides that the court may decline to order forfeiture where it would clearly
    not be in the interests of justice.  This language gives the court the discretion
    to refuse forfeiture even where the AG has established that the property is the
    proceeds of unlawful activity and the respondent on the application has failed
    to bring him or herself within the legitimate owner exception.

[17]

The application judge relied on this discretion
    as an alternative ground for refusing to order the forfeiture of the Atwater
    property.  Therefore, the meaning of the
    phrase clearly not in the interests of justice is also an issue on the
    Crowns appeal relating to the Atwater property.

[18]

Section 8 of the
CRA
is the forfeiture provision in Part III of the
Act
that parallels s. 3 in Part II.  Section 8 applies to property that falls
    within the definition of instrument of unlawful activity as defined in s.
    7.  Like s. 3, s. 8 requires that a
    forfeiture order be made if the property falls within the relevant definition,
    unless the party opposing forfeiture can demonstrate that he or she is a
    responsible owner or that it would clearly not be in the interests of
    justice to order forfeiture.  Responsible
    owner is defined in s. 7.

[19]

For reasons I will explain below, these appeals
    can be determined without regard to the provisions in Part III of the
CRA
.  I propose to follow that course and need not describe those provisions
    any further.

III

The Appeal Brought by Do and McDougall

[20]

These appeals involve the Darlington property
    owned by Do, and the Aubin and Halpin properties owned by McDougall.  A brief history of each property is necessary
    before turning to the issues raised by the appeals.

(a)

The Darlington
    property

[21]

Do
purchased
the
    Darlington property in February 2000 for $77,000.  He secured a mortgage from the TD Bank in the
    amount of $57,000.  He made monthly
    payments on that mortgage of $463.66.  Do
    is still the registered owner of the property.

[22]

In August 2004, the police executed a search
    warrant at the Darlington property and discovered a large commercial marijuana
    growing operation.  The marijuana found
    in the residence had a value of slightly under $500,000.  In November 2006,
Do
pled guilty to charges of producing marijuana and possessing marijuana for the
    purpose of trafficking.

[23]

In his affidavit filed on the forfeiture
    application, Do indicated that in 2004 he leased the Darlington property to
    someone he had met at the casino in Windsor.  He knew the person would be using it to grow marijuana, but Do needed
    the rent money to pay large gambling debts.  Do
claimed
to have a job but did not produce
    any documents or provide any information referable to his income or the payments
    made on the mortgage on the Darlington property.  The application judge ultimately concluded at
    para. 60:

Do
asserted
that he has maintained regular employment.  However, records indicate that, since 2002,
Do
has lost approximately $600,000 at Casino Windsor alone.  Given the nature of his expenses and given
    the size of the marijuana cultivation operation, it is more likely than not that
Do
was receiving income from the sale of
    marijuana.  It is also more likely than
    not that he used his income to finance the downpayment and mortgage payments on
    the house.

(b)  The Aubin property

[24]

McDougall purchased the Aubin property in May 1997
    for $143,500.  He placed a mortgage on
    the property in 1999 in the amount of $108,500.  McDougall owned the Aubin property until sometime after these
    proceedings were commenced.  The property
    was sold and did not generate funds beyond those owing to the mortgagee.

[25]

The Aubin property has a long history as a
    marijuana grow-op.  In March 2001, the
    police executed a search warrant and found a large-scale marijuana growing operation
    involving some 382 plants.  McDougall
    subsequently pled guilty to production of a controlled substance.

[26]

In December 2004, the police executed another
    search warrant on the Aubin property.  Once again, they found a significant marijuana growing operation,
    although it was smaller than the previous one.  At the time of the raid, two other people were living in the
    residence.  One paid rent to McDougall.  The drugs seized on this search were valued
    at approximately $90,000.

[27]

McDougall pled guilty to cultivating the
    marijuana found in the 2004 search.  He
    explained that he and the two people living in the residence were involved in
    the cultivation and that one third of the plants belonged to him.  He denied that he was intending to sell any
    of the
product
from his plants.

[28]

McDougall claimed to be self-employed.  He refused to answer questions concerning the
    source of the funds used to purchase the property and pay the mortgage.  He also refused to provide other
    documentation relevant to his income, including his income tax statements.  McDougall agreed that at least one of his
    tenants at the Aubin property, and a co-venturer in the marijuana grow-op, paid
    him rent on a monthly basis.

[29]

The trial judge, at para. 39, made the following
    findings of fact:

I find that the Crown has established, on the
    balance of probabilities, that 1140 Aubin Road is proceeds of unlawful
    activity.  McDougall purchased 1140 Aubin
    Road in 1997 for $143,500.  He stated
    that he was self-employed at the time in the clean-up and disposal business.  However, he refused to disclose the source of
    the downpayment used to purchase the property. McDougall also refused to provide
    any bank statements or income tax statements with respect to his business,
    known as AMD Recycle.  A mortgage was
    registered on title on June 29, 1999 in favour of the National Bank of Canada
    in the amount of $108,500.  There is no
    evidence to indicate that the mortgage has been discharged.

(c)  The Halpin property

[30]

McDougall purchased the Halpin property in January
    2004 for $140,000.  There was a mortgage
    in the amount of $102,500.  In December
    2004, the police executed a search warrant on the Halpin property.  They found a marijuana grow-op.  The street value of the drugs found on site
    was about $37,000.

[31]

McDougall leased the Halpin property to a man
    named Hamilton who was charged in connection with the grow-op.  Hamilton paid rent of $650.00 a month.  McDougall knew there was a marijuana grow-op
    at the Halpin property and he knew that the rent was in all likelihood coming
    from the proceeds of that operation.

[32]

The Halpin property was sold in May 2008.  After payment of the amount owing to the
    mortgagee, a small amount remained.  It
    is being held in trust by a law firm pending the outcome of these proceedings.

[33]

The trial judge made the following findings in
    respect of Halpin Road:

McDougall purchased the 3142 Halpin Road property in
    2004 for $140,000.00.  He took out a
    mortgage for $102,500.00 from the Home Trust Company.  McDougall refused to provide any bank statements,
    income tax filings, or other financial documentation disclosing the source of
    funds used for the downpayment and for the mortgage payments on the property.  Absent evidence to the contrary, it is more
    likely than not that McDougall used rent proceeds from Hamilton to make
    payments on the property.  McDougall was
    aware that Hamilton was growing marijuana, and had to know that the rent money
    was likely derived from this activity.

(d)  Issues raised by Do and
    McDougall

[34]

Do and McDougall challenge the trial judges
    finding that the three properties were the proceeds of unlawful activity and
    the trial judges finding that the properties were also instruments of unlawful
    activity.  On the first finding,
    forfeiture was ordered under s. 3 of the
CRA
,
    and on the second finding, forfeiture was ordered under s. 8.  If either is sustained, the forfeiture orders
    should be upheld, subject to the other arguments advanced on behalf of Do and
    McDougall.

[35]

For reasons I will develop, I would hold that
    the application judge did not err in finding that each of the three properties
    fell within the definition of the proceeds of unlawful activity.  As forfeiture is justified under s. 3, it is
    unnecessary to the determination of this appeal to decide whether the properties
    also fell within the definition of instrument of unlawful activity and could
    be forfeited under s. 8.  It is not only
    unnecessary to decide that question, but also inappropriate to do so.  Unlike the forfeiture power in s. 3 of the
CRA
, the constitutionality of the
    forfeiture power in s. 8 has not been definitively decided.  By agreement, the parties did not litigate
    the constitutionality of s. 8 before the application judge.  To address the merits of the grounds of appeal
    relating to the forfeiture power under s. 8, this court would be required to
    consider the constitutional arguments that were not vetted before the
    application judge.  That would not be a
    prudent course.

[36]

I will not address the grounds of appeal
    relating to Part III of the
CRA
, in
    particular, the argument directed at the proper interpretation of s. 7(2) of
    the
CRA
.  Those arguments have no relevance to the
    correctness of the forfeiture orders made under s. 3.

[37]

Counsel for Do and McDougall raise four issues arising
    out of the forfeiture order made under s. 3:


i.

Did the application judge err in holding that
    the AG had established that the properties were the proceeds of unlawful
    activity?


ii.

Did the application judge err in holding that
    the AG was required to establish that the properties were the proceeds of
    unlawful activity on the balance of probabilities, rather than beyond a
    reasonable doubt?


iii.

Did the application judge err in law in placing
    the onus on Do and McDougall to demonstrate that they fell within the legitimate
    owner exception to forfeiture?


iv.

Did the application judge err in failing to hold
    that the AG was estopped from making a forfeiture application under the
CRA
by virtue of the federal Crowns
    failure to seek a forfeiture order in the criminal proceedings?

a)

Did the application judge err in holding that the AG
    had established that the properties were the proceeds of unlawful activity?

[38]

Counsel submits that the application judge
    improperly drew adverse inferences against Do and McDougall from their failure
    to answer questions or produce documentation relevant to their sources of
    income and the sources of the money used to fund the purchases of the
    properties and the payments on the mortgages on the properties.  Counsel contends that without this improper
    inference, the evidence could not reasonably support the finding that the
    properties were the proceeds of unlawful activity.

[39]

Clearly, if money acquired through the sale of
    drugs was used to purchase any of these properties, that property is the
    proceeds of unlawful activity.  Counsel
    also accepts that if drug money is used to pay down a mortgage, the interest
    acquired in the property is the proceeds of unlawful activity under the
    definition in s. 2 of the
CRA
.

[40]

I agree that payments on the mortgage constitute
    the acquisition of an interest in the property.  Under s. 6 of the
Land
    Registration Reform Act
, R.S.O. 1990, c. L.4, a mortgage (charge) does
    not, unlike the common law, operate as a transfer of the legal estate in the
    land.  The charge does, however, give the
    mortgagee equitable rights in the property that remain in place until the obligation
    secured by the charge is discharged.

[41]

Although the mortgagee maintains an equitable
    interest until the obligation is discharged, payments on the mortgage affect
    the respective rights of the mortgagor and mortgagee.  If a mortgagor has made significant payments
    against the mortgage, the defaulting mortgagor may receive relief from
    forfeiture and be allowed to redeem the property.  Payments on the mortgage can be seen as
    enhancing the mortgagors equity and diminishing the mortgagees equitable
    interest:  see
355498 B.C. Ltd. v. Namu Properties Ltd.
(1999), 171 D.L.R. (4
th
)
    513 at para. 17 (B.C.C.A.);
Coast-to-Coast
    Industrial Development Co. v. 1657438 Ontario Inc.
, [2009] O.J. No. 5212 at
    para. 14 (S.C.).  In my view, paying down
    a mortgage constitutes a direct acquisition of an interest in property for the
    purposes of the
CRA
.

[42]

The trial judge concluded, at para. 60, that
Do
used drug money to finance both the downpayment and the
    mortgage payments on the Darlington property.  Do
purchased
the property in February 2000,
    four and a half years before the police discovered the marijuana grow-op in the
    residence.  Even if the evidence supports
    the inference that the grow-op at the Darlington property was in place for
    quite some time before the August 2004 search, that evidence cannot reach back
    to 2000.  There is no evidence connecting
    Do to any drug operation at the Darlington property or anywhere else in 2000
    when he purchased the Darlington property.  There is no evidence from which it could reasonably be inferred that
Do
used the proceeds of the production and sale of drugs to
    fund the purchase of the Darlington property in 2000.

[43]

The evidence does, however, support the
    inference that Do paid his mortgage using money generated from the marijuana
    growing operation.  That operation was large
    and well-established at the time of the search.  There was almost $500,000 in product on site.  It is a fair inference that Do had been
    running the marijuana growing business at the Darlington property for some time
    and that a business of that size had generated considerable income.

[44]

Although Do indicated in his affidavit that he
    had a job, he did not provide any details of the income earned by him from that
    job or any details as to the sources of the funds used to pay down the
    mortgage.  Do did admit that he had very
    large gambling debts.  Those debts no
    doubt put further strain on any source of income that
Do
had.  The only source of income alluded
    to by Do was rent paid to him on the Darlington property by a person who Do knew
    was using the property to grow marijuana.

[45]

I do not think the application judge drew any
    adverse inference against Do from his failure to identify sources of income and
    the source of the funds used to pay down the mortgage.  Do was not cross-examined.  The application judge was entitled to draw
    inferences from the facts established by the AGs material and in doing so she
    was entitled to have regard to the absence of any evidence documenting any
    other sources of income or other sources for the funds used to pay the mortgage
    on the Darlington property.  The
    inferences urged by the AG stood unanswered except for Dos bald assertion that
    he had a job.  It was open to the
    application judge to draw the inferences she did concerning the funding of the mortgage
    payments on the Darlington property.  On
    those findings, the property was properly characterized as being the proceeds
    of unlawful activity.

[46]

The application judges findings that the Aubin
    property and the Halpin property, both owned by McDougall, were the proceeds
    of unlawful activity can be considered together.  The evidence supported the inference that
    McDougall was in the business of producing and selling marijuana and had been
    in that business for several years.  McDougall
    was criminally implicated in three separate grow-ops between 2001 and 2004.  He also had a prior conviction for drug
    trafficking.

[47]

In cross-examination on his affidavit, McDougall
    admitted that Hamilton, his tenant at the Halpin property, produced marijuana on
    the property and that the rent paid to McDougall by Hamilton likely came from
    the sale of marijuana produced on the property.  McDougall acknowledged using that drug money to pay his mortgage on the
    Halpin property.  These admissions provide
    a further basis for finding that the Halpin property constituted the proceeds
    of unlawful activity.

[48]

In his affidavit, McDougall presented himself as
    an entrepreneur who operated two or three different businesses.  McDougall made these assertions presumably to
    demonstrate that he had sources of income other than the income derived from
    his marijuana growing business.

[49]

McDougall refused to provide any details of his
    income or to identify the sources used to pay down the mortgages on his
    properties (other than money received from his drug-producing tenant).  McDougalls counsel, at the cross-examination
    of McDougall and in this court, maintained that McDougall was not required to
    answer questions about the mortgage or his income because the AGs material
    filed on the application did not provide any factual basis for the AGs
    allegations concerning the property.

[50]

An affiant is not entitled to refuse to answer relevant
    questions in cross-examination because the affiant, or his lawyer, thinks the
    opposing partys case is insufficient to warrant a response.  The allegations made in the application, the
    supporting material filed by the applicant, and the responding material,
    including the affiants affidavit, draw the boundaries of relevance for the
    purpose of cross-examination.  The
    acquisition of the properties through unlawful activity was a central allegation
    in the application.  Those allegations
    made the source of the funds used to pay down the mortgages a relevant
    fact.  McDougall was required to answer
    questions concerning the payment of the mortgages and his income sources regardless
    of his view of the sufficiency of the AGs material filed in support of the
    allegations that the properties were the proceeds of unlawful activity.

[51]

In refusing to answer questions, McDougall
    risked, at a minimum, that the inferences available from the AGs evidence
    would remain unchallenged and, therefore, more likely to be drawn.  I think he also risked an adverse
    inference.  The application judge was not
    obliged to draw that inference, but it was within her discretion to do so.  She did not misuse McDougalls refusals to
    answer relevant questions concerning the property.  I would affirm her findings that both
    properties were the proceeds of unlawful activity.

(ii)  Did the
    application judge err in holding that the AG was required to prove that the
    properties were the proceeds of unlawful activity on the balance of
    probabilities, rather than beyond a reasonable doubt?

[52]

Section 16 of the
CRA
specifically provides that findings of fact in proceedings
    under that
Act
shall be made on the
    balance of probabilities.  That standard
    of proof reflects and is consistent with the civil nature of the forfeiture
    proceedings.

[53]

As I understand counsels submission, he argues
    that a forfeiture order made under the
CRA
on a balance of probabilities standard violates s. 7 of the
Charter
in that it infringes an
    individuals liberty interest in a manner that is inconsistent with the
    principles of fundamental justice.  Counsel identifies the liberty interest as a right to property.  I take him to identify the principle of fundamental
    justice at play as a requirement that the state meet the reasonable doubt
    standard when seeking an order that interferes with an interest protected by s.
    7.

[54]

Section 7 of the
Charter
does not protect economic interests.  I am far from satisfied that the liberty
    right includes a right to property.  I
    am, however, firmly convinced that the application of the balance of
    probabilities standard in a civil proceeding, even where s. 7 rights are
    implicated, is not inconsistent with the principles of fundamental
    justice.  To the contrary, the balance of
    probabilities standard is a basic tenet of our civil justice system:  see
F.H.
    v. McDougall
, [2008] 3 S.C.R. 41.

[55]

Many civil proceedings in which the government
    and an individual are the protagonists involve the individuals s. 7
    rights.  I am not aware of any case in
    which the court has held that if a litigants constitutional rights are engaged
    in a civil proceeding, s. 7 demands the abandonment of the balance of
    probabilities standard in favour of a reasonable doubt requirement.  In my view, the balance of probabilities
    standard is consistent with the principles of fundamental justice as they apply
    in civil proceedings.

(iii) Did the application judge err in law in placing the onus on Do
    and McDougall to demonstrate that they fell within the legitimate owner exception
    to forfeiture?

[56]

In his factum, counsel argued that the
    application judge wrongly put the onus on Do and McDougall to prove they were legitimate
    owners.  Counsel ties this submission to
    s. 15.5 of the
CRA
.  That section directs that notice of
    forfeiture proceedings must be given to certain entities, including those who
    appear through the parcel register of the property to have an interest in the
    property.

[57]

I cannot see any connection between s. 15.5,
    essentially a procedural notice provision, and the operation of the legitimate
    owner exception to forfeiture orders.  Section 3(3) of the
CRA
requires the party claiming to be a legitimate owner to prove that he or
    she meets the criteria in that definition.  Section 16 of the
CRA
requires
    the party who carries the onus on a particular fact to meet that onus on the balance
    of probabilities.

[58]

The statute is crystal clear.  The party relying on the legitimate owner
    exception bears the burden of proving that the exception applies.

(iv) Did
the application judge err in holding that the AG was not estopped from pursuing
    a forfeiture application?

[59]

Do and McDougall were prosecuted for drug
    offences by the federal Crown.  The
    federal Crown did not seek forfeiture orders as part of the sentencing process,
    though it could have done so under the relevant legislation:
Controlled Drugs and Substances Act
,
    S.C. 1996,
c
. 19.  There is no suggestion that the federal prosecutor made any
    representations to Do or McDougall one way or the other in relation to
    forfeiture.  It would appear that
    forfeiture was never an issue in the criminal proceedings.

[60]

The AG in right of the provincial Crown brings
    this application.  This is a civil
in rem
proceeding and is not connected
    to or dependent upon the prior criminal proceedings, although the outcome of
    those proceedings can have evidentiary value in this proceeding:
CRA
s. 17.

[61]

Counsel submits that the federal Crown in the
    criminal prosecution and the provincial AG in these proceedings are
    indivisible and that the decision made by the federal prosecutors not to
    pursue a forfeiture order in the criminal proceedings is binding on the
    provincial AG in this proceeding.  Counsel cites no authority for this proposition.

[62]

The submission cannot survive the analysis in
Chatterjee
.  In the course of discussing the potential
    intersection of proceedings under the
CRA
and forfeiture applications in the course of sentencing proceedings, Binnie J.,
    after recognizing the possibility of abusive re-litigation of factual issues,
    said, at para. 49:

...
but
where no forfeiture
    is sought in the sentencing process, I see no reason why the Attorney General
    cannot make an application under the
CRA
.  Where forfeiture is sought and refused in the
    criminal process, a different issue arises.

[63]

I would dismiss the appeals brought by Do and
    McDougall.

IV

The AGs Appeal

(a)

The Atwater property

[64]

The AG appeals the application judges refusal
    to order the forfeiture of the Atwater property.  Tran purchased the property in June 2001 for
    $166,000 with a downpayment of $41,500.  The Royal Bank took a mortgage in the amount of $124,500. Tran paid $833
    a month on the mortgage.

[65]

Tran lived in the Atwater property with her
    children.  In February or March 2004, she
    rented the property to her then-boyfriend, Do.  Tran continued to live in the property until June or perhaps July 2004
    when she learned that Do was married.  Tran,
    who was angry with Do, moved out of the Atwater property and went to Toronto to
    live with her children.  Do
continued
to live in the Atwater property and pay rent.  Tran returned to Windsor from time to time in
    the summer of 2004 to, among other things, check on the property.  According to her, she did not enter the house.

[66]

The police executed a search warrant at the
    Atwater property on August 13, 2004.  They found 854 marijuana plants with a street value of over
    $1,000,000.  They also found equipment,
    including a hydro bypass, indicating that the property housed a large-scale
    active marijuana grow-op.  The evidence
    found at the property was consistent with the grow-op having been in operation
    through at least one grow cycle, a period of three months.

[67]

Do and Tran were charged with cultivating
    marijuana and with trafficking in marijuana.  Do
pled
guilty to both charges.  The charges were withdrawn against Tran.  In his affidavit filed on the application,
Do
insisted that Tran had nothing to do with the marijuana
    grow-op.  Tran filed an affidavit denying
    any knowledge of the grow-op at the Atwater property.  She was cross-examined on her affidavit.  Tran testified that she was also unaware of
    Dos marijuana grow-op at the Darlington property, even though she visited him
    there a number of times in the summer of 2004.

[68]

Tran indicated that
Do
paid her $1,200 a month in rent between February and August 2004.  He paid in cash and she applied the cash to
    the payment of the mortgage.  The Atwater
    property was sold under power of sale sometime after the application was
    heard.  The proceeds of the sale were
    less than the outstanding amount owed on the mortgage.

(b)

The application judges findings

[69]

The application judge found, at para. 75, that
    the Atwater property was the proceeds of unlawful activity by virtue of Trans
    admitted use of the rent payments from Do to make her mortgage payments.  The application judge concluded that Dos
    income came from the cultivation and sale of marijuana at the Darlington and
    Atwater properties.

[70]

The application judge declined to make a
    forfeiture order in respect of the Atwater property for two reasons.  First, she concluded that Trans conduct was
    consistent with that of a legitimate owner (para. 79).  Second, she held that a forfeiture order on
    the Atwater property would clearly not be in the interests of justice (para.
    82).  The AG challenges both findings.

(c)

Was Tran a legitimate owner within the meaning of
    s. 2 of the CRA?

[71]

Counsel for the AG submits that the application
    judge erred in holding that the legitimate owner exception to a forfeiture
    order was available to Tran.  Counsel
    contends that this error flowed from a misapprehension of evidence, an improper
    placing of the burden on the AG to disprove that Tran was a legitimate owner,
    and a failure to draw adverse inferences from Trans refusal to answer
    questions concerning her income and the funding of her purchase of the
    property.

[72]

As explained earlier, the legitimate owner
    exception comes into play only if the court is satisfied that the AG has
    established that the property is the proceeds of unlawful activity.  The exception provides potential protection
    for the property interests of those who can prove on the balance of
    probabilities that they meet the qualifications of a legitimate owner, even
    though the property is the proceeds of unlawful activity.  Contrary to the submissions of counsel for
    Tran, I do not think that the phrase legitimate owner in s. 3 has anything to
    do with the question of standing under the
Act
.

[73]

I find it unnecessary to deal with the specific
    arguments made by the AG in support of the contention that the application
    judge misapplied the legitimate owner exception.  On a plain reading of the statutory language,
    there is no evidence capable of bringing Tran within the definition of
    legitimate owner.

[74]

Tran was the rightful owner of the Atwater
    property before the unlawful activity occurred.  The relevant definition of legitimate owner is therefore found in subsection
    (a):


legitimate
owner means,
    with respect to property that is proceeds of unlawful activity, a person who
    did not, directly or indirectly, acquire the property as a result of unlawful
    activity committed by the person, and who,

(a)

was
the rightful owner of the property before the unlawful
    activity occurred
and was deprived of possession or control of the property
    by means of the unlawful activity
[Emphasis added.]

[75]

To fall within the definition of legitimate
    owner set out above, three requirements must be met:

·

the person did not acquire the property as a
    result of unlawful activity;

·

the person was the rightful owner of the
    property before the unlawful activity occurred; and

·

the
person was deprived
    of possession or control of the property by means of the unlawful activity.

[76]

On the evidence, Tran meets the first and second
    requirements.  The application judge did
    not turn her mind to the third requirement.  There was no evidence that Tran was ever deprived of possession or
    control of the Atwater property by means of Dos unlawful cultivation of
    marijuana at that property.  To the
    contrary, on the evidence, the only possession or control Do had
was
that given to him under the lease.  Had the application judge turned her mind to
    the third requirement in the definition of legitimate owner, she would have
    found that Tran did not prove that she was a legitimate owner of the Atwater
    property.

(d)

Did the application judge err in the interpretation
    of the clearly not in the interests of justice exception to forfeiture?

(i)

The reasons

[77]

The application judge interpreted the interests
    of justice exception in s. 3(1) as having application only where the AG had
    established that the property was forfeitable under s. 3.  She put it this way, at paras. 26 and 30:

... First, the
interests of
    justice test is
only triggered when the standard of proof has been met.
    If the Crown has failed to discharge its burden, there is no need to weigh the
    interests of justice; the case for forfeiture has not been made out. The
    enactment discloses
a recognition
by the Legislature
    there will be cases in which forfeiture should not be ordered, notwithstanding
    that it has been proved that the property is proceeds or an instrument of unlawful
    activity. The court retains a residual discretion to weigh competing interests
    and determine whether, independent of the statutory criteria, it is fair and
    just to issue the order.

...

... Viewed in this light, it makes sense that the
    court is empowered to consider overarching issues of fairness and
    proportionality before ordering forfeiture, even where the standard of proof
    has been met.

[78]

The application judge exercised her discretion
    against forfeiture of the Atwater property for three reasons.  First, she found that Tran was not connected
    to the unlawful activity at the Atwater property either by actual criminal
    participation, or by knowledge of the criminal activities that were going on at
    the property (para. 84).  Second, the
    application judge observed that Tran had owned the property since 2001, over
    three years before the unlawful activity occurred in 2004 (para. 88).  Third, she concluded that a forfeiture
    application following the withdrawal of criminal charges against Tran created
    an appearance of unfairness (para. 87).

(ii) The AGs arguments

[79]

Counsel for the AG submits that the application
    judge gave an unwarranted and overly broad reading to the phrase interests of
    justice.  Counsel argues that the
    application judges interpretation ignored the purposes of the
CRA
and the requirement that the party
    resisting forfeiture show that forfeiture is clearly not in the interests of
    justice.

[80]

Counsel for the AG further
contends
that proportionality in the sense of the relationship between the role played
    by the property owner in the unlawful activity and the harm suffered by the property
    owner should a forfeiture order be made plays no role in deciding whether
    forfeiture would be clearly not in the interests of justice.  Counsel maintains that proportionality is a
    criminal law concept and has no place in the civil regime created under the
CRA
.

[81]

Counsel for the AG next submits that the
    strength of the nexus between the property and the unlawful activity is the
    primary, if not the sole, consideration in determining whether forfeiture would
    clearly not be in the interests of justice.  On this submission, a weak nexus between the property and the unlawful
    activity could result in a finding that forfeiture was clearly not in the
    interests of justice.  Counsel argues
    that the Atwater property was being used as a grow-op, making the connection
    between the property and the unlawful activity a strong one.

[82]

Finally, counsel challenges the findings of fact
    made by the application judge.  While
    counsel urges this court to find that the nature of Trans involvement in the criminal
    activity at the Atwater property had little, if any, relevance to whether the
    forfeiture order should be made, counsel also argues that the application judge
    misapprehended the relevant evidence.  Counsel submits that on a reasonable reading of the evidence, Tran must
    have at least known that Do was operating the marijuana grow-op at the Atwater
    property in the summer of 2004.

(iii) Analysis

[83]

The relevant part of s. 3(1) reads:

... the Superior Court of Justice shall, subject to
    subsection (3) [the legitimate owner exception] and except where it would
    clearly not be in the interests of justice, make an order forfeiting property
    that is in Ontario to the Crown in Right of Ontario if the court finds that the
    property is proceeds of unlawful activity.

[84]

I agree with the application judge that the
    interests of justice exception to forfeiture operates where the Crown has
    otherwise shown that the property is subject to forfeiture and the respondent
    has not brought herself within the legitimate owner exception.  The interests of justice exception to
    forfeiture recognizes that, given the very broad definition of proceeds of
    unlawful activity and the narrow exception to forfeiture carved out by the
    definition of legitimate owner, there will be cases that fall within the
    scope of the forfeiture power where, on any reasonable view, forfeiture would
    be a draconian and unjust result.  The Legislature,
    rather than attempting to identify with specificity factors that would justify
    granting relief from forfeiture, used the broad phrase interests of justice and
    left it to the court on a case-by-case basis to determine when forfeiture was
    clearly not in the interests of justice.
[3]


[85]

I do accept counsel for the AGs contention that
    s. 3(1) does not contemplate that the question of forfeiture will be decided
    based on a mere balancing of the pros and cons of making a forfeiture order.  The word clearly modifies the phrase
    interests of justice and must be given some meaning.  I think the word clearly speaks to the cogency
    of the claim advanced for relief from forfeiture.  The party seeking relief must demonstrate
    that, in the circumstances, the forfeiture order would be a manifestly harsh
    and inequitable result.

[86]

The application judge analogized the discretion
    to refuse forfeiture to the discretion to refuse to issue a search warrant even
    though the statutory preconditions for the issuing of a warrant were met.  I think a better analogy is the civil remedy
    of relief from forfeiture.  Courts of
    equity have always had the power to relieve against the forfeiture of property
    consequent upon a breach of contract:  see
McBride v. Comfort Living
    Housing Co-Op
(1992), 7 O.R. (3d) 394 at 402 (C.A.).  That power is now expressed in various statutes
    dealing with specific kinds of contracts (
e.g.
contracts of insurance, leases) and has been given more general expression in
    s. 98 of the
Courts of Justice Act
,
    R.S.O. 1990, c. C. 43:

A court may grant relief against penalties and
    forfeitures, on such terms as to compensation or otherwise as are considered
    just.

[87]

The power to relieve from forfeiture is
    discretionary and fact-specific:
Saskatchewan River Bungalows Ltd. v.
    Maritime Life Assurance Co.
, [1994] 2 S.C.R. 490 at p. 504.  The power is predicated on the existence of circumstances
    in which enforcing a contractual right of forfeiture, although consistent with the
    terms of the contract, visits an inequitable consequence on the party that
    breached the contract.  Relief from
    forfeiture is particularly appropriate where the interests of the party seeking
    enforcement by forfeiture can be fully vindicated without resort to
    forfeiture.  Relief from forfeiture is
    granted sparingly and the party seeking that relief bears the onus of making the
    case for it:
1497777 Ontario Inc. v. Leons Furniture Ltd.
(2003), 67 O.R. (3d)
    206 at paras. 67-69, 92 (C.A.).

[88]

In
Saskatchewan
    River Bungalows
, at p. 504, Major J. identified the factors relevant to the
    exercise of the power to grant relief against forfeiture:

... The factors to be considered by the court in the
    exercise of its discretion are the conduct of the applicant, the gravity of the
    breaches, and the disparity between the value of the property forfeited and the
    damage caused by the breach.

[89]

The first factor, the conduct of the breaching
    party, requires an examination of the reasonableness of the breaching partys
    conduct as it relates to all facets of the contractual relationship, including the
    breach in issue and the aftermath of the breach.  Osborne J.A. explained the nature of this
    inquiry in
Williams Estate v. Paul Revere
    Life Insurance Co.
(1997), 34 O.R. (3d) 161 at p. 175 (C.A.):

The reasonableness test
    requires consideration of the nature of the breach, what caused it and what, if
    anything, the insured attempted to do about it.
All of the circumstances,
    including those that go to explain the act or omission that caused the lapse
    (forfeiture) of the policy, should be taken into account. It is only by
    considering the relevant background that the reasonableness of the insured's
    conduct can be realistically considered.  [Emphasis added.]

[90]

The examination of the reasonableness of the
    breaching partys conduct lies at the heart of the relief from forfeiture analysis.  A party whose conduct is not seen as
    reasonable cannot hope to obtain relief from forfeiture: see
Paul Revere
at p. 175;
Saskatchewan River Bungalows
at pp. 504-05.

[91]

The second factor identified in
Saskatchewan River Bungalows
,

the gravity of the breach, looks both
    at the nature of the breach itself and the impact of that breach on the
    contractual rights of the other party:  see
Leons Furniture
at paras.
    75-78
.  If
, for
    example, the forfeiture provision operated as a means of securing payment of
    the rent required under a lease, the fact that the breaching party had paid all
    amounts owing could obviate the need to resort to forfeiture and support a
    claim for relief from forfeiture.

[92]

The third factor identified in
Saskatchewan River Bungalows
engages a
    kind of proportionality analysis.  If
    there is a large difference between the value of the property to be forfeited
    and the amount owing as a result of the breach, equity will favour relief from
    forfeiture.  For example, in
Liscumb v. Provenzano
(1985), 51 O.R.
    (2d) 129 (H.C.), affd (1986), 55 O.R. (2d) 404 (C.A.), the trial judge, in
    granting relief from forfeiture, observed that the property to be forfeited was
    worth between three and four times the amount owing on the debt giving rise to
    the breach.  The trial judge relied on
    this disproportionality between the debt owing and the consequences of the
    forfeiture as one factor in favour of granting relief from forfeiture.

[93]

There are several similarities between a relief
    from forfeiture provision like s. 98 of the
Courts
    of Justice Act
and the clearly not in the interests of justice exception
    in s. 3(1) of the
CRA
.  Both accept that the unqualified enforcement
    of one partys legal right to take the property of another, whether under
    contract or statute, is not always in the best interests of justice and that
    exceptions should be made based on specific circumstances.  The discretion in s. 3(1), like the
    discretion in s. 98, is framed in broad terms that invite a case-by-case
    consideration of the specific circumstances.  Finally, the power to relieve from forfeiture under s. 3(1), again like the
    power in s. 98, will not be routinely exercised to allow a party to avoid
    prescribed statutory or contractual consequences.  Relief from forfeiture is very much the
    exception and will be granted only where the party seeking that remedy clearly makes
    the case that forfeiture would be an inequitable and unjust order in all of the
    circumstances.

[94]

While I regard the interests of justice
    exception in s. 3(1) as a relief from forfeiture provision that has much in
    common with the more generic form of that remedy, I acknowledge that s. 3(1)
    does not operate in exactly the same way as
does
relief
    from forfeiture in the realm of private law.  Relief from forfeiture in the contractual context pits competing private
    rights against each other.  Those rights
    are generally quantifiable in economic terms.  A forfeiture claim under the
CRA
engages important public concerns.  The
    interests of justice in s. 3(1) encompass both public and private
    interests.

[95]

I agree with counsel for the AG that forfeiture
    orders under the
CRA
are intended to
    further the purposes of the
Act
as
    set out in s. 1.  It follows that in
    deciding whether to grant relief from forfeiture under s. 3(1), the court must
    consider the effect of granting relief on the achievement of those purposes.  The power to relieve from forfeiture cannot
    be allowed to subvert the purposes of the
CRA
.

[96]

I do not, however, agree that the interests of
    justice in s. 3(1) are limited to the purposes of the
CRA
identified in s. 1.  Those purposes are part of, but cannot be equated with, the interests
    of justice.  That phrase is a broad one
    and includes maintaining public confidence in the civil justice process.  That confidence is promoted by orders that
    are, broadly speaking, in accord with the communitys sense of fairness.  A forfeiture order made in circumstances
    where any reasonable person would regard the order as excessive, while perhaps
    serving the purposes of the
CRA
in
    the narrow sense, would do a real disservice to the administration of justice
    and thereby undermine rather than promote the interests of justice.

[97]

A court asked to grant relief from forfeiture
    under s. 3 must consider all factors that are relevant to the interests of
    justice.  It is not possible to
    catalogue all of the factors that could properly be taken into account in
    evaluating the interests of justice in any given case.  Those factors certainly include the closeness
    of the connection between the property and the illegal activity:  see, for example,
Ontario (Attorney General) v. 170 Glenville Road, King (In Rem)
,
[
2010] O.J. No. 2865 at para. 72 (S.C.).

[98]

I will focus on three factors that are
    significant to the decision not to order the Atwater property forfeited.  Two of those factors, the conduct of the
    party whose property is the subject of the forfeiture application, and the
    value of that partys interest in the property compared to the value of the
    property that is tainted by the unlawful activity, are analogous to two of the considerations
    that figure prominently in the relief from forfeiture jurisprudence.  The third factor examines the interplay
    between the purposes of the
CRA
and
    the exercise of the interests of justice discretion in s. 3.

[99]

As explained above, the reasonableness of the
    conduct of the breaching party is a crucial consideration when that party seeks
    relief from forfeiture in private law matters.  In the context of a forfeiture application under s. 3 of the
CRA
, it is the conduct of the party
    whose property is the target of the forfeiture application as it relates to the
    unlawful activity that is important.  That
    conduct is not limited to any involvement in the criminal activity.  It extends to any knowledge of the criminal
    activity, the failure to take reasonable steps to prevent the criminal
    activity, any profit derived knowingly or unknowingly from the criminal
    activity, and any steps taken after the property owner became aware of the
    criminal activity.

[100]

In
    holding that the property owners conduct as it relates to the unlawful
    activity is an important consideration in determining whether to grant relief
    from forfeiture, I do not suggest that actual involvement in the criminal
    activity is in any way a prerequisite to a forfeiture order under the
CRA
.  It is not.  However, nothing in
    the
CRA
precludes the common sense
    recognition that the conduct of the property owner will be important when
    deciding whether it is clearly not in the interests of justice to order
    forfeiture.  Surely, a property owner who
    had no involvement in the criminal activity, was unaware of that activity, had
    acted reasonably throughout and did not profit from the activity, should, as a
    matter of elementary justice, be treated differently on a forfeiture
    application than the property owner who was involved in and directly profited
    from the unlawful activity.  If
170 Glenville Road, King
, at para. 78,
    stands for the proposition that a consideration of the property owners involvement
    in the criminal activity in issue is irrelevant to the interests of justice,
    I must, with respect, disagree.

[101]

It
    is suggested that by considering the property owners conduct in respect of the
    unlawful activity, one confuses the civil process of forfeiture with concepts
    of criminal liability and sentencing.  I
    see no confusion.  There are obvious and
    important differences between civil and criminal proceedings.  Those labels cannot, however, obscure the
    reality underlying any particular proceeding.  Regardless of whether a forfeiture proceeding is labelled as civil,
    criminal,
in personam
or
in rem
, taking a persons property away
    from that person has a punitive component: see
Chatterjee
at para. 4.  The
    interests of justice require that punitive orders made by the courts be
    reasonably perceived by the community as being deserved by those against whom
    they are made.

[102]

The
    application judge found that Tran did not participate in, and had no knowledge of
    Dos unlawful activity at the Atwater property before the police raid in August
    2004.  She also found that Tran was
    unaware that Do was paying the rent with drug money.  In making these findings, the trial judge
    relied on Trans evidence.  There was
    considerable evidence to the contrary, indicating that at a minimum Tran was
    aware of the drug activity.

[103]

It
    was for the application judge to assess the evidence.  I cannot describe her findings as
    unreasonable on the totality of the evidence.  Those findings stand and are entitled to significant weight in assessing
    Trans claim for relief from forfeiture.

[104]

The
    second factor I will address is the difference in the value of Trans total
    interest in the Atwater property and the value of the part of the Atwater
    property acquired directly or indirectly through Dos drug activities.  On the application judges findings, Tran purchased
    the property in June 2001 with a downpayment of $41,500.  There is no evidence connecting that downpayment
    to any unlawful activity.  Tran presumably
    paid the mortgage for the next three years.  There is no evidence connecting any of those payments to unlawful
    activity.  Do
began
paying rent in February 2004.  The rent
    was used to pay the mortgage.  On the application
    judges findings, the criminal activity began in about June 2004.  Tran received three months rent totalling
    $2,499 between June 2004 and August 2004.  That money, unbeknownst to Tran, came from Dos drug activity.  The property interest acquired by Tran as a
    result of Dos unlawful activity was limited to three mortgage payments
    totalling $2,499.  That amount is small
    compared to the value of Trans entire interest in the property, which included
    the $41,500 downpayment and some three years of mortgage payments.

[105]

The
    application judge did not specifically refer to the disparity in the value of
    Trans total interest in the property, and the value of the interest acquired
    as a result of unlawful activity.  She
    may have been indirectly referring to that disparity when she observed that
    Tran had purchased the property in June 2001 with a sizeable downpayment, and
    that the rent payments from the drug proceeds did not begin until three years
    later and continued for only three months.

[106]

The
    significant disparity described above was a relevant consideration in
    determining whether forfeiture would clearly not be in the interests of
    justice.  It is particularly significant
    where the property owner is not implicated in or aware of the criminal
    activity.  An order requiring forfeiture
    of an entire interest in property based on the fact that a small part of that
    interest was unknowingly acquired through unlawful activity could well be seen
    as an unwarranted and unjust use of the forfeiture power.

[107]

I
    turn now to the third factor, the interplay between the purposes of the
CRA
and the exercise of the discretion
    to relieve from forfeiture.  Section 1 of
    the
CRA
identifies compensation of
    victims, crime prevention and deterrence as the purposes motivating the
    remedies provided by the
CRA
.  It is fair to say that in most circumstances those
    purposes are furthered by a forfeiture order.  As explained earlier, the purposes of the
CRA
are part of, but not synonymous with, the public interest
    concerns in s. 3.

[108]

The
    purposes identified in s. 1 of the
CRA
do, however, mandate the drawing of a distinction, for the purposes of
    determining whether to relieve from forfeiture, between innocent property
    owners and those who are involved in or at least have knowledge of the relevant
    criminal activity.  Directing forfeiture
    of the property of a person who had no involvement in, knowledge of, or
    responsibility for the relevant criminal activity would hardly seem to further
    the deterrence objective of the
CRA
.  There is no need to deter the innocent and
    responsible property owner by seizing his or her property.  Indeed, it could be argued that disregarding
    the property owners lack of involvement in or knowledge of the criminal
    activity when deciding the question of forfeiture could well undermine the deterrence
    goals of the
CRA
.  If forfeiture falls indiscriminately on the
    innocent and the complicit, there may seem to be little value in avoiding
    involvement in criminal activity.  Given
    the application judges findings of fact, an order requiring Tran to forfeit
    her interest in the Atwater property would not promote the deterrence goals underlying
    the
CRA
.

[109]

The
    three factors discussed above, considered in combination,
justified
the application judges decision not to order forfeiture of Trans interest in the
    Atwater property.  I would not interfere
    with the exercise of that discretion.  I will,
    however, address one additional consideration relied on by the application
    judge that, in my view, has no relevance to the exercise of her
    discretion.

[110]

The
    application judge found the forfeiture application created the appearance of unfairness
    because it followed the withdrawal of criminal charges against Tran by the
    federal prosecutor.  In her view, the
    forfeiture application could be seen as an attempt to gain forfeiture while
    avoiding the more rigorous criminal standard of proof in favour of the civil
    balance of probabilities requirement.

[111]

I
    see no unfairness in the bringing of the application.  The federal Crown, responsible for the drug
    prosecution, chose not to prosecute Ms. Tran.  The provincial AG, responsible for the operation of the
CRA
, chose to pursue a forfeiture
    order.  The AGs claims did not depend
    upon demonstrating, to any standard of proof, that Tran was complicit in any
    criminal activity.  The AGs decision to
    pursue a forfeiture claim can hardly be described as arbitrary or unfair when,
    under the terms of the legislation, the AG established a
prima facie
entitlement to the forfeiture order, subject to the interests
    of justice exception in s. 3.  That
    exception saved Trans interest in the Atwater property.

[112]

In
    summary, even though I reject the application judges finding of an appearance
    of unfairness in the proceedings, I would affirm her decision that forfeiture
    of the Atwater property was clearly not in the interests of justice.  On the application judges findings, Tran was
    innocent of any involvement in the unlawful activity, and only a small fraction
    of her interest was acquired as a result of unlawful activity.  To order forfeiture in those circumstances
    would constitute a punitive and excessive exercise of the forfeiture order that
    would not further the purposes of the
CRA
.

V

Trans Appeal from the Costs Order

[113]

The
    application judge made no order as to costs in respect of either application.  Counsel for Tran seeks leave to appeal from
    that order, asks the court to grant leave, and order costs in favour of
    Tran.  Counsel submits that the application
    judge erred in not giving the parties an opportunity to make submissions on costs
    and that there is no reason to depart from the normal rule that the successful party,
    in this case Tran, should get her costs.

[114]

I
    would agree with Trans counsel that the application judge should have
    entertained submissions on costs.  That
    said, we have now done so and can, therefore, address the merits of the
    submission.  As our analysis reveals, the
    application brought by the AG had considerable merit in that the preconditions
    to a forfeiture order were all established by the AG.  Tran escaped forfeiture only by virtue of the
    relief from forfeiture provision in s. 3.  A no costs order aptly reflects the outcome of this application.  I would grant leave to appeal the costs
    order, but would dismiss that appeal.

VI

Conclusion

[115]

I
    would dismiss all of the appeals.  On the
    appeals brought by McDougall and Do, I would order costs in favour of the AG as
    against Do in the amount of $4,500 and as against McDougall in the amount of
    $4,500, inclusive of disbursements and HST.

[116]

In
    respect of the litigation between the AG and Tran, that is, the Crowns appeal
    and Trans costs appeal, I would consider the two together and order costs in
    favour of Tran in the amount of $7,000, inclusive of disbursements and HST.

RELEASED:
DD  MAY 10 2011

Doherty J.A.

I agree David Watt J.A.

I agree Gloria Epstein
    J.A.


APPENDIX A

Civil Remedies Act, 2001

S.O. 2001, CHAPTER 28

Part I  Purpose

Purpose

1.
The purpose of this Act is to provide civil remedies that
    will assist in,

(a)
compensating
persons who suffer pecuniary or non-pecuniary
    losses as a result of unlawful activities;

(b)
preventing
persons who engage in unlawful activities and
    others from keeping property that was acquired as a result of unlawful
    activities;

(c)
    preventing property, including vehicles as defined in Part III.1, from being
    used to engage in certain unlawful activities; and

(d)
preventing
injury to the public that may result from
    conspiracies to engage in unlawful activities.
2001,
    c. 28, s. 1; 2007, c. 13, s. 26.

Part II  Proceeds of Unlawful Activity

Definitions

2.

In
this Part,

...


legitimate
owner means,
    with respect to property that is proceeds of unlawful activity, a person who
    did not, directly or indirectly, acquire the property as a result of unlawful
    activity committed by the person, and who,

(a)
was
the rightful owner of the property before the unlawful
    activity occurred and was deprived of possession or control of the property by
    means of the unlawful activity,

(b) acquired
    the property for fair value after the unlawful activity occurred and did not
    know and could not reasonably have known at the time of the acquisition that
    the property was proceeds of unlawful activity, or

(
c
) acquired the property from a person mentioned in clause
    (a) or (b); (propriétaire légitime)

proceeds of unlawful activity means property
    acquired, directly or indirectly, in whole or in part, as a result of unlawful
    activity, whether the property was acquired before or after this Act came into
    force, but does not include proceeds of a contract for recounting crime within
    the meaning of the
Prohibiting Profiting from Recounting Crimes Act, 2002
;
    (produit dactivité illégale)


property
 means real or
    personal property, and includes any interest in property; (bien)

...

Forfeiture order

3.
(1)
In a proceeding
    commenced by the Attorney General, the Superior Court of Justice shall, subject
    to subsection (3) and except where it would clearly not be in the interests of
    justice, make an order forfeiting property that is in Ontario to the Crown in
    right of Ontario if the court finds that the property is proceeds of unlawful
    activity.
2001, c. 28, s. 3 (1).

Action or application

(2)  The
    proceeding may be by action or application.
2001, c. 28,
    s. 3 (2).

Legitimate owners

(3)  If
    the court finds that property is proceeds of unlawful activity and a party to
    the proceeding proves that he, she or it is a legitimate owner of the property,
    the court, except where it would clearly not be in the interests of justice,
    shall make such order as it considers necessary to protect the legitimate
    owners interest in the property.
2001, c. 28,
    s. 3 (3).

...

Part III  Instruments of Unlawful Activity

Definitions

7.
(1)
In this Part,

...

instrument of unlawful activity means 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; (instrument dactivité
    illégale)


property
 means real or
    personal property, and includes any interest in property; (bien)

responsible owner means, with respect to property
    that is an instrument of unlawful activity, a person with an interest in the
    property who has done all that can reasonably be done to prevent the property
    from being used to engage in unlawful activity, including,

(a) promptly
    notifying appropriate law enforcement agencies whenever the person knows or
    ought to know that the property has been or is likely to be used to engage in
    unlawful activity, and

(b)
refusing
or withdrawing any permission that the person has
    authority to give and that the person knows or ought to know has facilitated or
    is likely to facilitate

the property being used to engage in unlawful
    activity; (propriétaire responsable)

...

Instruments of unlawful activity

(2)  For
    the purpose of the definition of instrument of unlawful activity in
    subsection (1), proof that property was used to engage in unlawful activity
    that, in turn, resulted in the acquisition of other property or in serious
    bodily harm to any person is proof, in the absence of evidence to the contrary,
    that the property is likely to be used to engage in unlawful activity that, in
    turn, would be likely to result in the acquisition of other property or in
    serious bodily harm to any person.
2001, c. 28,
    s. 7 (2).

...

Forfeiture order

8.
(1)
In a proceeding
    commenced by the Attorney General, the Superior Court of Justice shall, subject
    to subsection (3) and except where it would clearly not be in the interests of
    justice, make an order forfeiting property that is in Ontario to the Crown in
    right of Ontario if the court finds that the property is an instrument of
    unlawful activity.
2001, c. 28, s. 8 (1).

Action or application

(2)  The
    proceeding may be by action or application.
2001, c. 28,
    s. 8 (2).

Responsible owners

(3)  If
    the court finds that property is an instrument of unlawful activity and a party
    to the proceeding proves that he, she or it is a responsible owner of the
    property, the court, except where it would clearly not be in the interests of
    justice, shall make such order as it considers necessary to protect the
    responsible owners interest in the property.
2001,
    c. 28, s. 8 (3).

Part V - General

...

Actions
in rem

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
.
2007,
    c. 13, s. 37.

...

Standard of proof

16.
Except as otherwise provided in this Act, findings of fact
    in proceedings under this Act shall be made on the balance of probabilities.
2001, c. 28, s. 16.

Proof of offences

17.
(1)
In proceedings under
    this Act, proof that a person was convicted, found guilty or found not
    criminally responsible on account of mental disorder in respect of an offence
    is proof that the person committed the offence.
2001,
    c. 28, s. 17 (1).

(2)  In
    proceedings under this Act, an offence may be found to have been committed even
    if,

(a)
no
person has been charged with the offence; or

(b)
a
person was charged with the offence but the charge was
    withdrawn or stayed or the person was acquitted of the charge.
2001, c. 28, s. 17 (2).

...





[1]
The AG also sought the forfeiture of $29,000 found on the Atwater
    premises.  That request was refused and
    is not challenged on appeal.



[2]
A forfeiture application under s. 3 or s. 8 may be commenced by action or
    application:  s. 3(2), s. 8(2).  These proceedings were both commenced by way
    of application.  While the
    appropriateness of proceeding by way of application is not in issue, with the
    benefit of hindsight, given the factual disputes and the refusals of Tran,
    McDougall and Do to produce certain relevant documents and answer relevant
    questions, it would have been better had the matters proceeded by action.



[3]
For example, the forfeiture provisions in the
Controlled Drugs and Substances Act
, S.C. 1996, c.19 provide for
    exemptions from forfeiture using much more specific language in ss. 19(3),
    19.1(3)(4).


