Her Majesty the Queen v. Melnick, 2020 BCPC 232

Citation: Her Majesty the Queen v. Melnick 2020 BCPC 232 Date: 20201130 File No: 105129-6-C Registry: Kamloops IN THE PROVINCIAL COURT OF BRITISH COLUMBIA HER MAJESTY THE QUEEN RESPONDENT v. JONATHAN WAYNE MELNICK and JOSHUA ALAN SUSEE-HOLMES DEFENDANTS AND LEGAL SERVICES SOCIETY APPLICANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE S.D. FRAME Counsel for the Crown: S. Behling Counsel for the Applicant: D. McNamee

Place of Hearing: Kamloops, B.C. Date of Hearing: September 29, 2020 Date of Judgment: November 30, 2020 [ 1 ] At the conclusion of this trial, crown made an application for the forfeiture of items seized pursuant to the investigation. Included in those items seized was the sum of $40,000. Initially, Mr. Susee-Holmes told the police that the money was from the sale of a vehicle. Ultimately, after my ruling on Voir Dire issues, Mr. Susee-Holmes and his co-accused Jonathan Melnick, pleaded guilty to separate offences. Mr. Susee-Holmes pleaded guilty to, in the vernacular, the possession of property or proceeds of property obtained by crime contrary to s. 354(1) (

a) of the Criminal Code . [ 2 ] The Legal Services Society has applied for recovery of a portion of those funds which it says have been assigned by Mr. Susee- Holmes and Mr. Melnick to it. The sums in issue are $6,889.57 for Mr. Susee-Holmes’ defence and $11,617.03 for Mr. Melnick’s defence. [ 3 ] Messrs. Melnick and Susee-Holmes have both filed affidavits in support of Legal Service Society’s application for sufficient funds from the money seized to cover the legal costs incurred in the defence of this case. THE LEGAL AID CONTRACT [ 4 ] Mr. Melnick and Mr.

Susee-Holmes both applied for and obtained legal aid for the defence of these charges. The legal aid contract obligates the defendants to advise Legal Services Society of any changes of financial significance to them. They agree that if such financial or legal situations change, the Society would reassess the case to determine if the defendants were still eligible for legal aid. There is nothing in this

section of the contract that creates an obligation in debt or otherwise to repay the costs of the legal fees incurred on their behalf. [ 5 ] There is also a specific

section in the contract dealing with court costs. One of the terms is that if the court makes the other party pay for some or all of the defendants’ legal costs those costs are to be paid to Legal Services Society. The contract also requires the defendants to assign to Legal Services Society any legal costs collected from the other party in relation to the Legal Services Society’s funded case. This is the only assignment clause in the contract. There is no assignment of goods seized or funds that may otherwise come into the hands of the defendants. [ 6 ] This is also the only

section of the contract that creates a debt obligation of any description for a criminal case; and that is only with respect to an award of costs. None of these terms apply to this case or these proceeds. The crown has not been ordered to pay costs to Messrs. Melnick or Susee-Holmes. In fact, the crown is seeking forfeiture of proceeds of crime. In other words, neither defendant has any entitlement to the money regardless of whether it fits within the definition of costs or a reassessment of eligibility for legal aid coverage. [ 7 ] There is an entirely separate

section of the contract that is not applicable to this case where there are judgments and settlements in family cases and how those judgments or settlements are to be paid to Legal Services Society to cover legal fees. As I have said, that is not applicable to this case. The money is not proceeds of a judgment or of a settlement. THE CRIMINAL CODE PROVISIONS [ 8 ] The Legal Services Society brings the application under s. 462.42 of the Criminal Code or, alternatively, under s. 490 .

The confusion arises because it was unclear to the applicant whether the crown was seeking forfeiture of the money seized as property seized in an investigation under s. 490 or whether the crown was seeking forfeiture of the funds pursuant to s. 462.42 as proceeds of crime. [ 9 ] Mr. McNamee conceded at the commencement of the hearing that the Provincial Court does not have jurisdiction to hear an application under s. 462.42 of the Criminal Code and the crown confirmed that it is bringing the application for forfeiture under s. 490 . [ 10 ]

Section 490 of the Criminal Code pertains to the detention of items seized and the disposition of them when detention is no longer required. The subsection relevant to this hearing is subsection (9) as follows:

(9) Subject to this or any other Act of Parliament, if (

a) a judge referred to in subsection (7), where a judge ordered the detention of anything seized under subsection (3), or (

b) a justice, in any other case, is satisfied that the periods of detention provided for or ordered under subsections (1) to (3) in respect of anything seized have expired and proceedings have not been instituted in which the thing detained may be required or, where those periods have not expired, that the continued detention of the thing seized will not be required for any purpose mentioned in subsection (1) or (4), he shall (

c) if possession of it by the person from whom it was seized is lawful, order it to be returned to that person, or (

d) if possession of it by the person from whom it was seized is unlawful and the lawful owner or person who is lawfully entitled to its possession is known, order it to be returned to the lawful owner or to the person who is lawfully entitled to its possession, and may, if possession of it by the person from whom it was seized is unlawful, or if it was seized when it was not in the possession of any person, and the lawful owner or person who is lawfully entitled to its possession is not known, order it to be forfeited to Her Majesty, to be disposed of as the Attorney General directs, or otherwise dealt with in accordance with the law. [ 11 ] Neither Mr.

Susee-Holmes nor Mr. Melnick maintained that they had lawful possession of these funds. The lawful owner or

people lawfully entitled to possession of the money is or are not known.

In any event, given that the funds are admitted to be proceeds ofcrime, the original owners of the funds would presumably also not be lawfully entitled to possession of them either. [12] That being the case, I have to determine whether the Legal Services Society is lawfully entitled to possession of the funds in thesum of $18,506.60; or to order forfeiture to the crown so that the funds be “otherwise dealt with in accordance with the law”. [13] The other issue is whether in fact the crown ought to have brought this application under s. 462.24 instead of s. 490 given that thefunds are in fact characterized by allegation, admission, and conviction as proceeds of crime. [14]

Section 462.38(1) makes it an option for the Attorney General to make such an application. If such an application is made thenthe judge shall, provided the judge is satisfied that the property is beyond reasonable doubt proceeds of crime, order that the property beforfeited to the crown for disposition. The crown is not required to proceed under that section. Indeed, the crown may seek an order forforfeiture instead under s. 490. That is the course of action which the crown has elected in this case. It is not for the court to interfere inthat election.

THE LAW [15] I was provided a number of cases, most of which relate to an application under s. 462.42. I will not address those cases exceptwhere they in some way may impact the decision under s. 490. [16] Of the remaining cases that counsel say apply, I have reviewed R. v. Thomas, (O.N.C.A.); Wilson v. R., (O.N.C.A.); and British Columbia (Director of Civil Forfeiture) v. Hyland, 2009 BCSC 1906 , 2009 B.C.S.C.1906. [17] In Thomas, the crown applied for an order for forfeiture of $100,000 in cash seized from Mr. Thomas at the time of his arrest.The application was made under s. 462.37(2). Mr.

Thomas assigned any proceeds he would receive as a result of the proceedings to theOntario Legal Aid plan. That is not the case before me either with respect to entitlement to the funds or any assignment of such proceeds.The trial judge relied on s. 462.41(3) to order that some of the seized funds be paid to the Legal Aid plan and to Mr. Thomas’ counsel. [18] In its decision, the Ontario Court of Appeal acknowledged that the trial judge was “entitled, but not required to make a forfeitureorder” with respect to that money.

The Court of Appeal also confirmed that “the trial judge was authorized, but not obliged by s.462.41(3) to order that some or all of the seized funds be paid to the Legal Aid plan …” [19] The Court of Appeal described the forfeiture proceedings as somewhat informal. It observed at para. 6: … It is fair to say that the trial judge appears to have determined the order he would make before he was fully apprised of the relevantfacts, particularly as they related to financial dealings between the Legal Aid Plan and the accused.

He should have made the Legal AidPlan a party to the proceedings from the outset and determined the exact nature of the financial relationship between the Plan and thethree accused before making any order. [20] The crown argued that the trial judge effectively bestowed a financial benefit on the accused in making that order by reducingtheir potential indebtedness to the Legal Aid Plan. In that case, the accused were indebted to the Legal Aid Plan by the terms of theiragreement. As I have said, that is not the case here. [21] There is also nothing in the Legal Services contract between the applicant and Messrs.

Susee-Holmes and Melnick whichobligates the defendants to pay for the legal fees incurred on their behalf should they become financially able to do so. All that I candraw from this decision is that where there is an assignment to a Legal Aid provider, that legal aid society may be someone who is“lawfully entitled to possession of any property or any part thereof …” that would otherwise be forfeited pursuant to s. 462.37(1). [22]

Section 490 has similar wording but is much more restrictive with respect to what a judge may do on such an application. If theLegal Services Society is a person lawfully entitled to possession of the money under s. 490(9)(d), then I am required to order that it be“returned … to the person who is lawfully entitled to its possession …”. There is nothing in the contract that makes the Legal ServicesSociety lawfully entitled to possession. [23] The Wilson decision was also an application under s. 462.42.

In that decision, it was a lawyer acting on behalf of the accusedwho took an assignment of his client’s interest in cash seized by the police. The crown applied under s. 462.37 for an order forfeiting thecash seized at the time of the arrest. In that decision, though, the Ontario Court of Appeal addressed the purpose of the proceeds of crimelegislation: The purpose of

Part XII.2 is clear. It is intended to give effect to the age old adage that crime does not pay. It is now recognized thatsome crime is big business, and that massive profits, both direct and indirect, can be made from criminal activity.

Part XII.2 is a responseto that realization and provides a comprehensive scheme whereby those direct and indirect profits may be located, seized and eventuallyforfeited to the Crown: R. v. Clymore (1992), (BC SC), 74 C.C.C. (3d) 217 (B.C.S.C.) at p. 231; R.G.

Mosley,"Seizing the Proceeds of Crime: The Origins and Main Features of Canada's Criminal Forfeiture Legislation" (Address to theCanada/United States Proceeds of Crime Conference, Ottawa, March 1989). [24] The bulk of the decision is largely irrelevant to the application before me dealing as it dealt with the transfer of property and anassignment to legal counsel of proceeds. It cannot even be said that s. 490 serves the same purpose as s. 462 in that s. 490 does notaddress the social policy of “crime does not pay”. The

section only deals with the disposition of items seized pursuant to an investigationin specific circumstances. The assignments referred to a proprietary interest that the accused may have had in the seized funds. In otherwords, the interest of the applicants was no greater than the interest of the accused who made the assignment to them. There is noassignment at all in the case before me. [25] The Court of Appeal concluded that even if there had been an interest retained by the lawyers in that case, the judge would still

not allow the appeal. That conclusion was reached because the lawyers knew that their clients had chosen to pay them by an assignment of proceeds that could well be determined to be proceeds of crime, rather than from other available sources. [ 26 ] In Hyland, the forfeiture application was made under s. 490 first. The trial judge dismissed the application for forfeiture because she was not satisfied that the possession of the property in question was unlawful. The Director of Civil Forfeiture brought an action under the Civil Forfeiture Act .

The court said this at para. 20: [20] In Cole-Watson the Court concluded that where an order to return property to an applicant under s. 490(11) of the Criminal Code is made, the question of entitlement to the money has been decided. In reaching this conclusion, the Court held that the Director and the Crown are one for the purposes of an issue estoppel analysis.

It also rejected the Crown's argument that the higher burden of proof applicable in respect of the Crown's forfeiture application under s. 490(9) permits it to relitigate the issue on the lower standard of proof applicable under civil forfeiture legislation, where the criminal Court has determined that the property should be returned to a third party. [ 27 ] Justice Dickson applied Cole-Watson and found similarly that the crown and the Director were indivisible. This decision is only relevant to the argument Ms. Behling makes that a s. 462.37 application might still be made by the applicant to the Supreme Court.

I leave that to the parties to resolve another day in another level of court. [ 28 ] Mr. Susee-Holmes has pleaded guilty to possession of the proceeds of crime. He is not in lawful possession of those funds and nor was Mr. Melnick. The applicant may only acquire a lawful interest on an assignment that they could acquire from Mr. Susee- Holmes. For the Legal Services Society to be lawfully entitled to return of the money seized, the assignment would have to speak directly to money in criminal or all proceedings other than an award for costs.

Even so, I do not think the Legal Services Society could have acquired lawful possession of that money from Mr. Susee-Holmes. I leave that question to the Supreme Court on a s. 462.37 application; or to another case another day should Legal Services Society amend their contracts. _______________________ S.D. Frame Provincial Court Judge