Alberta (Justice and Attorney General) v. Chau, 2010 ABQB 758

Court of Queen ’ s Bench of Alberta Citation: Alberta (Justice and Attorney General) v. Chau, 2010 ABQB 758 Date: 20101201 Docket: 0901 11043 Registry: Calgary Between: Minister of Justice and Attorney General for Alberta Applicant - and - Thuy Bich Chau and Trung Kinh Lieu and Hoang Minh To and Bank of Montreal Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D.

Macleod _______________________________________________________ [ 1 ] The enactment of provincial legislation allowing for the forfeiture of property associated with criminal activity is a recent development in many provinces: Civil Forfeiture Act , S.B.C. 2005, c. 29,-6.011, Criminal Property Forfeiture Act , 2004, C.C.S.M. c. C306 , Civil Remedies Act , 2001, S.O. 2001, c. 28,

An Act respecting the forfeiture, administration and appropriation of proceeds and instruments of unlawful activity , 2007, R.S.Q. c. C-52.2 , Civil Forfeiture Act , S.N.B. 2010, c. C-4.5, Civil Forfeiture Act , S.N.S. 2007, c. 27 (not yet in force). The purpose of these Acts is to deter crime by compelling the forfeiture of property tainted by crime, and use the proceeds of forfeitures to compensate the victims of crime.

[ 2 ] This goal is laudable; crime should not pay and victims deserve support from the community. On the other hand, it is equally important to ensure that the Act not be a instrument for expropriating property from owners not implicated in the alleged crime. This case is about resolving those conflicting goals. [ 3 ] Pursuant to Alberta’s Victims Restitution and Compensation Act , S.A. 2001, c.

V-3.5 (the Act), the Applicant, the Minister of Justice and Attorney General for Alberta (the Minister), requests an Order granting the disposal of restrained property located at 3 Edgehill Bay N.W., Calgary, Alberta (the property), and that the proceeds be used to fund victims programs relating to substance abuse pursuant to s.19.94 and s.44(1) of the Act. [ 4 ] The Act expressly does not require that the owner of the interest to be forfeited be charged or convicted, and the Crown has not pursued criminal charges against Ms. Chau.

Had they done so, I would have likely stayed this application pending the completion of any criminal proceedings against her, on the basis that she should not have to choose between potentially incriminating herself in an effort to defend her property or forfeit her property by failing to come forward as a witness and submit to cross-examination in an effort to avoid self-incrimination (see Alberta (Justice and Attorney General) v. To , 2010 ABQB 648 ).

Moreover, I agree with Burrows J. comments in Clarke , referenced in para. 30. [ 5 ] Under s.19.93(1), the Act requires the Minister to demonstrate, on a balance of probabilities, that the restrained property was used as an instrument of an illegal activity. Once satisfied, the onus shifts to the Respondents to demonstrate their interest in the property, and that they were not involved in an illegal act, did not know, or would not be reasonably expected to know that the property was being used to carry out an illegal act. [ 6 ] It is clear that the property was being used as an instrument of an illegal activity.

On April 27, 2009, the Calgary Police Service executed a search warrant for the property and discovered a sophisticated stage 3 marijuana grow operation. A total of 290 marijuana plants were seized, comprising an estimated street value of $362,500. Therefore, the onus now shifts to the Respondents. [ 7 ] Among the Respondents, only the owner Thuy Bich Chau’s interest is at issue.

Trung Kinh Lieu and Tommy Tran (the tenants) have forfeited their leasehold interests under s.19.92 of the Act , and the Minister has consented to the preservation of the Bank of Montreal’s interest as mortgagee. [ 8 ] As required by s.19.91(2) of the Act , Ms. Chau filed an Affidavit swearing to a number of facts that she claims satisfies her onus under the Act, specifically demonstrating that she is both the owner of the property, and that she reasonably did not know the property was being used as an instrument of crime. The Minister then exercised its right to cross-examine Ms. Chau on her Affidavit.

There was also a half-day hearing wherein Ms. Chau took the stand to give viva voce evidence. She was then cross-examined by the Minister. Issues [ 9 ] The issue is whether or not Ms. Chau has discharged her onus under s.19.93(1)(b)(ii)(

B) in demonstrating, on a balance of probabilities, that she “did not know and would not reasonably be expected to know that the restrained property was or was likely to be used in carrying out an illegal act”. If Ms. Chau fails to discharge this onus, her interest in the property will be forfeited to the Minister. Ms. Chau claims that she reasonably did not know of the grow operation, and the Minister asserts that she did know or ought to have known about the operation. Facts [ 10 ] Ms. Chau purchased the property in July 2004, with a down payment of $70,000.

She immediately rented it to Hoang Ming To for $1,700 a month. This arrangement continued until Hoang Ming To moved out in March 2007. After which, Ms. Chau remortgaged the property, using a portion of the liquidated equity to renovate it in an effort to attract prospective tenants. [ 11 ] In the summer of 2007, Ms. Chau learned that her second cousin Trung Kinh Lieu was looking for a house to rent with his roommate Tommy Tran. Ms.

Chau claims to have offered the property to Trung Kinh Lieu on the basis that he was her cousin, they had a shared cultural heritage, and that he was a “polite and clean cut individual”: para. 14 of Sept 14, 2009 Affidavit of Thuy Bich Chau.

[ 12 ] On October 30, 2007, Ms. Chau entered into a rental agreement with Tommy Tran. During cross-examination, Ms. Chau claimed that she did not require Trung Kinh Lieu to sign the rental agreement because he did not have a job at the time. The terms of the lease were, inter alia , that Tommy Tran was to rent the property from November 1, 2007 to December 31, 2010 at a rate of $2,000 per month. [ 13 ] Ms. Chau states that she rarely attended the property after the tenants took possession. Rent was paid in cash that was regularly delivered directly to her residence.

She admits that she did attend the property infrequently to obtain overdue rent when it was not delivered to her. During these visits, she claims that she only entered into the foyer of the property and noticed that the tenants burnt incense at a Buddhist shrine and that there was furniture in the living room. From this vantage point in the foyer, she did not notice any signs of misuse or criminal activity. [ 14 ] Ms. Chau states that, beyond the relationship of landlord and tenant, she did not have a personal or business relationship with either Tommy Tran or Trung Kinh Lieu.

Rather, she informs that she only occasionally chanced to meet Trung Kinh Lieu at bars, family weddings, or while shopping for groceries. [ 15 ] Consequently, Ms. Chau maintains that she only became aware of the state of the property in May 2009 when she attended for the purposes of obtaining overdue rent. At that time the windows were boarded up and notices were posted on the doors that the property was unsafe for habitation. Alberta Health Services left a notice, requiring that the property undergo various repairs before it could be inhabited. In response, in May 2009 Ms.

Chau hired contractors to clean, repair, and otherwise ensure the habitability of the property, at a cost of $30,000. The Minister ’s position [ 16 ] It is the Minister’s position that Ms. Chau has failed to satisfy her onus under the Act , pointing to the constellation of facts about Ms. Chau’s financial history and conduct as a landlord to refute Ms. Chau’s submission that she reasonably did not know of the grow operation. [ 17 ]

Section 19.92 of the Act allows the Minister to require a Respondent wishing to protect her property to submit to cross- examination on her affidavit. During the cross-examination, the Respondent must answer all questions put to her and provide any information or documentation by way of undertaking, or failing that by Court Order.

If a Respondent unreasonably fails in any of these requirements she forfeits her rights to the restrained property. [ 18 ] The practical operation of the disposal process allows the Minister to begin their investigation and build their case against the Respondent through the information provided by the Respondent through undertakings, since the Respondent, as detailed above, cannot refuse to provide undertakings. For instance, during cross-examination on her Affidavit, Ms. Chau was asked to provide a wide range of undertakings including documentation regarding her purchase of the property, copies of Ms.

Chau’s bank statements from January 2004 to present, documents from the Bank of Montreal regarding Ms. Chau’s refinancing of the property, a signed copy of the residential tenancy agreement signed by Mr. Tran, copies of any documentation with respect to the repairs to the property conducted by contractors, and her income tax returns from 2004 to present. [ 19 ] Since the burden of proof is on Ms. Chau, the Minister’s position is to raise suspicions against her by attacking the veracity and plausibility of her evidence. In particular, the Minister questions Ms.

Chau’s ability to purchase the property, her financial history, her conduct as a landlord, and her connection to Hoang Ming To. [ 20 ] Firstly, the Minister argues that it is suspicious that Ms. Chau was able to purchase the property at such a young age with low income. Ultimately, the Minister is suggesting that Ms. Chau used illegally acquired funds in the purchase of the property. [ 21 ] Secondly, the Minister claims that Ms. Chau has a long history of making large unidentified cash deposits into her bank account. It is alleged that since January 2004 Ms.

Chau has deposited $196,437.21 from unknown sources into her bank account:

2004 - $86,206.14 2005 - $32, 068.01 2006 - $31, 723.93 2007 - $41,020.25 2008 - $32,246.92 2009 - $36,963.90. The suggestion is that these deposits must have been proceeds from the grow operation since Ms. Chau, by comparison, has reported earning much less income on her taxes. [ 22 ] Thirdly, the Minister claims that Ms. Chau has been an irresponsible landlord who ought to have known about the grow operation had she taken reasonable steps to protect the property. There is evidence that Ms Chau did not keep many records.

She was unable to provide copies of walk-through inspection reports of the property she claims to have conducted prior to renting to the tenants. Furthermore, the Minister argues that it was irresponsible to rent the property to the tenants without first requiring both tenants to sign the rental agreement and provide proof of employment. Likewise, the Minister asserts that Ms. Chau’s failure to report rental income on her taxes is another example of irresponsibility. Finally, the Minister asserts that it is suspicious that Ms.

Chau has not sought compensation from the tenants for the $30,000 cost of repairing the property after the police seizure. Consequently, it is the Minister’s submission that these incidents, in the aggregate, evidence a pattern of behaviour not consistent with what would be expected from a reasonable landlord who takes steps to protect her investment in the property, and as such Ms.

Chau ought to have known that the property was being used in an illegal activity. [ 23 ] Finally, the Minister suggests that it is suspicious that Hoang Ming To was charged with possession for the purposes of trafficking in Lundar, Manitoba in November 2008. Though this event took place in another province, after Hoang Ming To was no longer a tenant, the Minister suggests that it adds to the suspicions against Ms. Chau. The Respondent ’s position [ 24 ] Ms. Chau stresses that she has sworn that she did not know about the grow operation.

She believes that there is no evidence showing that she has not been truthful and that this alone should be enough to satisfy her burden. [ 25 ] Ms. Chau claims that the Minister’s submissions represent an argument by innuendo, using an accumulation of irrelevant evidence “in the hopes that [the] sheer number of ‘suspicious facts’ will make their argument plausible”, rather than present evidence proving she knew about the grow operation: para. 12 of Respondent’s brief.

As a result, despite swearing she did not know of the grow operation, she feels she must respond to the specific allegations against her to protect her interest in the property. [ 26 ] Firstly, Ms. Chau claims that she is a victim in the tenants’ crime because her property was damaged, requiring her to spend significant amounts to repair it. She also argues that spending $15,000 in renovations immediately prior to renting the property to the tenants is behaviour that would not be expected from a landlord that was aware of, or was planning to operate, a grow operation. [ 27 ] Secondly, Ms.

Chau indicates that despite her young age and low income she was able to purchase the home by assuming an already existing mortgage. She claims that she was able to raise the $70,000 down payment by borrowing $45,000 from her parents, $10,000 from her friend Trang Troung, and by providing the remaining $15,000 from her own savings. [ 28 ] Finally, Ms. Chau claims that the Minister has exaggerated the amount of unidentified deposits into her account.

She claims that all of the deposits came from legal sources, indicating that a large portion represents rental income paid to her by the tenants, though she admits she never disclosed this income for tax purposes. She claims that other portions represent employment income earned as a babysitter, regular gifts from her mother, and gifts from distant family members given in celebration of the birth of her child, pursuant to cultural tradition. She also claims that her child’s father has been providing her with varying unofficial child support amounts on a

monthly basis. Law [ 29 ] Given the connection of civil forfeitures to the criminal law, a constitutional challenge on the basis of jurisdiction was not unexpected. The Ontario Act withstood this challenge in Chatterjee v. Ontario (Attorney General) , 2009 SCC 19 , [2009] 1 S.C.R. 624 where the Supreme Court of Canada upheld that Act as primarily pursuing the valid provincial objectives of promoting health, safety, and community welfare. Though the Court admitted that the Ontario Act had punitive effects, these were deemed to be sufficiently ancillary so as to avoid it operating ultra vires the province.

Ultimately, the Court was of the view that “it would be out of step with modern realities to conclude that a province must shoulder the costs to the community of criminal behaviour but cannot use deterrence to suppress it” (at para. 3). I fully agree. [ 30 ] Nevertheless, these Acts walk a delicate balance between civil and criminal law, and this Court has expressed numerous concerns regarding the Alberta Act’s operation. In Alberta (Justice and Attorney General) v. Vuong , 2010 ABQB 85 , 22 Alta.

L.R. (5th) 141 Tilleman J. expressed serious concerns about, inter alia , how Respondents and victims are identified and given notice of the Minister’s intention to seek a Restraint Order. I have expressed concerns that the Minister can, on an ex parte basis, seriously intrude on a Respondent’s privacy rights and their right to the use and enjoyment of their property: Alberta (Justice and Attorney General) v. Yousif , 2010 ABQB 81 , 22 Alta. L.R. (5th) 133.

I have also expressed concern regarding an accused’s right to silence when faced with the requirement of submitting to cross-examination on affidavit when questions are likely to touch on the issues which form the basis of corresponding criminal charges against the Respondent: Alberta (Justice and Attorney General) v. To , 2010 ABQB 648 . On that issue, Burrows J. felt that it would be inappropriate “to make any determination if the criminal proceedings were still outstanding and the accused’s liberty was still at stake”: Alberta (Minister of Justice and Attorney General) v.

Clarke, 2009 ABQB 518 , [2010] A.W.L.D. 352 at para. 6 . Because the Act balances the civil and criminal law, the Court should ensure that innocent Respondents are not subjected to unnecessary hardship when faced with the prospect coming to court to prove why they should keep their property. [ 31 ] A specific problem raised on the facts of this case involves the operation of the negative reverse onus in s.19.93(1)(b)(ii)(B). The Alberta Act is the only one in Canada mandating a negative reverse onus in respect to property being used as an instrument of an illegal activity.

That is, as set out above, the Respondent must establish on balance that she did not know or could not be reasonably expected to know that the property was being used as an instrument of crime. [ 32 ] By comparison, though Ontario’s Civil Remedies Act , 2001, S.O. 2001, c. 28 is silent as to onus, in Ontario (Attorney General) v. McDougall , 2008 CanLII 67887 at para. 5 (ON S.C.) Pomerance J. detailed that the onus in the Ontario Act is considered to be on the Minister: The Act does not address the onus of proof, though it has been held that the onus falls upon “he who asserts.” See Ontario (Attorney General) v.

Chow , [2003] O.J. No. 5387 at para. 33 (S.C.J.) . Therefore, where the Attorney General asserts that property is proceeds or an instrument of crime, the Attorney General must establish that fact on the balance of probabilities. See Ontario (Attorney General) v. Lok , [2007] O.J. No. 3015 (S.C.J.) , aff’d [2008] O.J. No. 3550 at para. 22 (C.A.) . It is not clear whether the onus then shifts to a responding party to prove an exemption from forfeiture on the balance of probabilities. See Ontario (Attorney General) v. Chatterjee , [2006] O.J. No. 2236 (S.C.J.) .

Whether or not there is a shifting onus, the Court must be satisfied, on the totality of the evidence, that an order of forfeiture should properly issue. [emphasis added] [ 33 ] In like manner, though British Columbia’s Civil Forfeiture Act , S.B.C. 2005, c. 29, places a reverse onus on property thought to be the proceeds of crime, it does not place an onus on the Respondent in respect to instruments of illegal activity.

To illustrate, under s.6(1) of the BC Act the Court may refuse, limit, or put conditions on a forfeiture order if it is in the interests of justice, and s.6(1) only applies to property used as an instrument of illegal activity, not property that is proceeds of unlawful activity. In contrast, in s.6(2) of the BC Act there is a reverse onus on the Respondent in respect to proceeds of unlawful activity.

The specification of a reverse onus only for the proceeds of illegal activity demonstrates the legislature’s intention not to have one apply where the restrained property was merely used as an instrument of crime. [ 34 ] A negative reverse onus is rare. In an ordinary action, the Plaintiff is required to prove their case and then upon doing so the Defendant must respond to overcome that proof. Indeed, courtroom procedure is adapted to follow this standard operation. Requiring instead that the Respondent prove a reasonable absence of knowledge is importantly different and problematic.

[ 35 ] Assuming the Respondent is credible, is it enough for her to merely say, under oath, that she did not know the property was being used in crime? If that were the case then the onus on the Respondent would be met by the bald assertion that she had no knowledge. Normally, the party with the onus is expected to raise convincing evidence to satisfy the balance of probabilities test. This requirement was recently stated in F.H. v. McDougall , 2008 SCC 53 , [2008] 3 S.C.R. 41 at para. 46 : ...evidence must always be sufficiently clear, convincing and cogent to satisfy the balance of probabilities test.

But again, there is no objective standard to measure sufficiency...As difficult as the task may be, the judge must make a decision. If a responsible judge finds for the plaintiff, it must be accepted that the evidence was sufficiently clear, convincing and cogent to that judge that the plaintiff satisfied the balance of probabilities test. However, I see no reason why a reasonable assertion of an absence of knowledge, made under oath, should not be sufficient in circumstances where the Minister subsequently fails to raise convincing evidence against the Respondent.

Otherwise, the Act would permit the forfeiture of property merely on a lack of evidence, an outcome not in the interests of justice. [ 36 ] In my view, the Minister must raise convincing evidence to rebut the Respondent’s reasonable assertion of an absence of knowledge. The practical result is that there is a de facto shifting onus on the Minister to raise evidence against a credible Respondent who swears to a reasonable absence of knowledge. To illustrate, the Respondent begins by swearing a reasonable absence of knowledge that the property was used in the crime.

This establishes that the Respondent has prima facie satisfied her onus. The onus then de facto shifts to the Minister to raise convincing evidence that the Respondent knew or must have known that the property was used in crime. I stress that the Minister must raise convincing evidence; baseless assertions and allegations are not sufficient for the reasons detailed in the preceding paragraph.

Once the Minister raises this evidence, it is on the Respondent to demonstrate that, on the totality of the evidence, she reasonably did not know the property was used in crime. [ 37 ] The use of a de facto shifting onus to deal with a negative onus is not a novel idea. A similar approach was taken in the law of unjust enrichment to deal with proving a negative in the third stage of the test: Garland v. Consumers' Gas Co. , 2004 SCC 25 , [2004] 1 S.C.R. 629; see also Peter v. Beblow , 1993 CanLII 126 (SCC) , [1993] 1 S.C.R. 980, 101 D.L.R. (4th) 621.

A plaintiff bringing an action for unjust enrichment is tasked, at the third stage of the inquiry, with demonstrating that there is no juristic reason to deny recovery.

Because requiring a party to prove a negative is problematic, the Supreme Court of Canada developed a de facto shifting onus such that, once a plaintiff proves that no previously established juristic reason to deny recovery applies, the onus de facto shifts to the defendant to prove that a new one does, though the ultimate burden of proof remains with the plaintiff. [ 38 ] In the final analysis, therefore, I do not think the Alberta Act relieves the necessity that the Court must be satisfied on the totality of the evidence that an order of forfeiture should properly issue. Analysis [ 39 ] Ms.

Chau’s evidence is that she did not know her property was being used as a grow-op. She was a credible witness. Accordingly, in my view, if the Minister fails to raise convincing evidence to suggest otherwise, Ms. Chau has successfully satisfied her onus under the Act . [ 40 ] I do not find the Minister’s submission regarding Ms. Chau’s purchase of the property convincing. While it may be uncommon for a young adult with low income to own rental property, it cannot simply be assumed that the property was purchased with the proceeds of crime. Ms.

Chau has indicated that she borrowed the money required to assume an existing mortgage on the property and the Minister has not raised any evidence to demonstrate otherwise. [ 41 ] Furthermore, after careful analysis of Ms. Chau’s banking history, the Minister’s claim that she deposited $196,437.21 since 2004 from unknown sources is grossly exaggerated. Firstly, the Minister relies in part on deposits made prior to Ms. Chau’s purchase of the property. It is beyond this Court to understand how deposits made before the property was even purchased can demonstrate that Ms.

Chau knew or ought to have known the property was being used in crime. Similarly irrelevant are deposits made after the seizure of the grow operation. Secondly, the Minister claims that Ms. Chau deposited $86,206.14 from unknown sources in 2004. This alleged total includes large deposits made in June and July of 2004 which Ms. Chau has stated were borrowed funds for the purpose of purchasing the property. Therefore, the Minister should not be characterizing these deposits as coming from unknown sources. Thirdly, much of the

unexplained deposits can be attributed to rental income earned from the property, gifts given to Ms. Chau from relatives in celebration of the birth of her child, $6,000 from the sale of a car in 2007, and unofficial child support paid to her from her child’s father. After factoring in all of these explanations, with the exception of child support since the Court does not have exact numbers of what was paid, Ms.

Chau has deposited a total of $62,144.34 from unknown sources since the purchase of the property on July 2, 2004, until it was raided by police on April 27, 2009, a period of approximately 4 years and 10 months. To put it in perspective, the deposits from unknown sources averaged approximately $1,071.45 per month during the relevant time period. [ 42 ] In addition, the Minister’s submission that Hoang Ming To’s arrest in November 2008 in Lundar, Manitoba for possession for the purposes of trafficking lends support to the claim that Ms. Chau knew of the grow operation on her property in Calgary is unreasonable.

All that is known is that Hoang Ming To is a past tenant of Ms. Chau and that he has since been arrested for trafficking drugs. These two facts on there own do not lend any support to the Minister’s position. [ 43 ] The Minister asserts that Ms. Chau is an irresponsible landlord who failed to take reasonable steps to protect her property from the tenants. While it is true that she did not keep many records, that is not completely unexpected given her age and that she trusted her cousin Trung Kinh Lieu. Additionally, it is Ms. Chau’s choice whether to seek compensation from the tenants for damaging her property.

Her failure to do so should not be considered a factor indicating she is an irresponsible landlord. There are many legitimate reasons for not pursuing litigation, including the prospect of suing family, high legal costs, and the likelihood of actually recovering funds. Finally, while Ms. Chau’s failure to disclose rental income on her taxes may have serious consequences for her, it is irrelevant for our purposes. Conclusion [ 44 ] For the reasons stated above, the Disposal Application is dismissed.

I also direct that the Restraint Order against the property be vacated. [ 45 ] The Respondent shall have her costs which may be spoken to. Heard on the 16 th day of September, 2010. Dated at the City of Calgary, Alberta this 1 st day of December, 2010. A.D. Macleod J.C.Q.B.A. Appearances: Christine Nugent for the Applicant

Jeffrey B. Woodruff / Michael H. Lee for the Respondent