Director of Civil Forfeiture Plaintiff v. Hells Angels Motorcycle Corporation, Angel Acres Recreation, 2013 BCSC 2575

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: British Columbia (Director of Civil Forfeiture) v. Hells Angels Motorcycle Corporation, 2013 BCSC 2575 Date: 20131212 Docket: 07-4460 Registry: Victoria Civil Forfeiture Action in Rem Against The Land and Structures Situated at 805 Victoria Road, Nanaimo, British Columbia, and having a legal description of PID 004-954-581 Lot 7 Block 5

Section 1 Nanaimo District Plan 2009, PID 006-637-167 Lot 8 Block 5

Section 1 Nanaimo District Plan 2009 (the “NHAMC Clubhouse”) and the contents of the NHAMC Clubhouse, including but not limited to various articles of clothing, bar equipment and supplies, including all alcohol, $10,642.17 in Canadian currency, $278.00 in United States currency, a 2006 Harley Davidson with License Plate #K95059 and a 2003 Harley Davidson with License Plate #K48229 Between: Director of Civil Forfeiture Plaintiff And Hells Angels Motorcycle Corporation, Angel Acres Recreation and Festival Property Ltd., Richard Phillips, Lloyd Stennes, Robert Widdifield, and all others interested in the property Defendants Before: The Honourable Mr.

Justice Davies Oral Ruling re Defence Application to File Counterclaim In Chambers Counsel for the Plaintiff: D.B. Ryneveld, Q.C P.D. Ameerali S. King Counsel for the Defendants: P.C.M. Freeman, Q.C. J.J.M. Arvay, Q.C. J. Adams Counsel for the Attorney General of British Columbia: B.A. Mackey Place and Date of Trial/Hearing: Victoria, B.C. December 11, 2013 Place and Date of Judgment: Victoria, B.C.

December 12, 2013 [ 1 ] THE COURT: The defendants have applied for leave to file a counterclaim which challenges the constitutional validity of the Civil Forfeiture Act , S.B.C. 2005, c. 29. [ 2 ] Leave to file a counterclaim in this proceeding is now required because the time limited for the filing of a counterclaim has expired. [ 3 ] The specific orders sought by the defendants are: 1) an order extending the period of time provided in the Supreme Court Rules for filing a counterclaim; 2) an order that the defendants may file a counterclaim; 3) an order that the counterclaim be heard first, separately from the issues in the notice of civil claim;

4) an order that until the ruling on the counterclaim, the parties' obligation to answer questions on examination for discovery and to listdocuments is restricted to matters that are relevant to the counterclaim; 5) costs; and 6) such further and other orders as this Honourable Court deems just. [4] The plaintiff, Director of Civil Forfeiture, objects to the filing of the counterclaim. [5] His primary position is that the constitutional challenges sought to be advanced by the defendants must be brought as part ofthe defendants' response to the Director's notice of civil claim. [6] The Director does not, however, suggest that the substantive constitutional issues raised by the proposed counterclaim shouldnot be determined in this proceeding. [7] Thus, while the Director's objection is essentially procedural, it does have substantive overtones. [8] The Director submits that an amended response to his notice of civil claim (for which leave is not required, given the latestfurther amendment to the notice of civil claim filed by the defendant on December 3, 2013) coupled with a notice of constitutionalquestion directed to the Attorneys General of British Columbia and Canada, will properly put the issues sought to be raised by thedefendants before the Court. [9] The Director also submits that the proposed counterclaim is not an appropriate method of proceeding, because it does notconstitute an independent cause of action.

In making that submission, the Director relies primarily upon the decision of JusticeMcLachlin, as she then was, in Royal Bank of Canada v. Rizkalla (1984), (BC SC), 59 B.C.L.R. 324 at paras. 9 and 10,in which Her Ladyship stated: [9] A defence is a contention that the plaintiff's claim is not established. It adopts one or more of the following positions: (

i) an objection on grounds of jurisdiction; (ii) a denial of the plaintiff's allegations (traverse); (iii) a submission that if the plaintiff's allegations are true they disclose no cause of action (demurrer); and (iv) a submission that if the plaintiff's allegations are true there are facts which provide a legal justification for the defendant's conduct(confession and avoidance). [10] A counterclaim, on the other hand, is an independent action raised by a defendant, which, because of the identity of the parties,can conveniently be tried with the plaintiff's claim.

While a counterclaim frequently (although not necessarily) arises from the sameevents as the plaintiff's claim, and while it may result in reduction of the plaintiff's claim, it is in principle an independent action. [10] The Director submits that the defendants' constitutional challenge is, at base and in substance, a jurisdictional objection, not theassertion of an independent cause of action, and therefore must be filed as a response, rather than a counterclaim. [11] It is, in my view, significant to note that the practical result of requiring the defendants to proceed by way of response ratherthan counterclaim would be twofold.

Firstly, it would circumscribe the constitutional challenge brought by the defendants by limiting itto the specific claims advanced by the plaintiff against the defendants in the notice of civil claim.

Secondly, it would militate against thedefendants' right to seek costs against the Attorney General of British Columbia as a necessary party to the litigation if the AttorneyGeneral of British Columbia was brought into the litigation only pursuant to a notice of constitutional question, with subsequentparticipation only as an intervenor. [12] I have concluded that the defendants' application for leave to file a counterclaim should be allowed. [13] I reach that conclusion because: 1) I do not accept that the constitutional issues raised by the proposed counterclaim constitute merely an objection to the jurisdiction ofthe court.

The constitutional challenge is to the validity of the statute, and as such is an independent claim brought by the defendants. 2) In R. v. Ferguson, 2008 SCC 6, at paras. 58 to 61, Chief Justice McLachlin stated for the Court: [58] As I noted at the outset, remedies for breaches of the Charter are governed by s. 24(1) of the Charter and s. 52(1) of theConstitution Act, 1982. [59] When a law produces an unconstitutional effect, the usual remedy lies under s. 52(1), which provides that the law is of no forceor effect to the extent that it is inconsistent with the Charter.

A law may be inconsistent with the Charter either because of its purpose orits effect: R. v. Big M Drug Mart Ltd., (SCC), [1985] 1 S.C.R. 295; R. v. Edwards Books and Art Ltd., (SCC), [1986] 2 S.C.R.

Section 52 does not create a personal remedy. A claimant who otherwise has standing can generally seek adeclaration of invalidity under s. 52 on the grounds that a law has unconstitutional effects either in his own case or on third parties: BigM; see also P. Sankoff, “Constitutional Exemptions: Myth or Reality?” (1999-2000), 11 N.J.C.L. 411, at pp. 432-34; M. Rosenberg andS. Perrault, “Ifs and Buts in Charter Adjudication: The Unruly Emergence of Constitutional Exemptions in Canada” (2002), 16 S.C.L.R.(2d) 375, at pp. 380-82.

The jurisprudence affirming s. 52(1) as the appropriate remedy for laws that produce unconstitutional effects isbased on the language chosen by the framers of the Charter: see Sankoff, at p. 438. [60] Section 24(1), by contrast, is generally used as a remedy, not for unconstitutional laws, but for unconstitutional government acts

committed under the authority of legal regimes which are accepted as fully constitutional: see Eldridge v. British Columbia (AttorneyGeneral), (SCC), [1997] 3 S.C.R. 624; Multani v. Commission scolaire Marguerite-Bourgeoys, [2006] 1 S.C.R. 256,2006 SCC 6. The acts of government agents acting under such regimes are not the necessary result or “effect” of the law, but of thegovernment agent’s applying a discretion conferred by the law in an unconstitutional manner. Section 52(1) is thus not applicable.

Theappropriate remedy lies under s. 24(1). [61] It thus becomes apparent that ss. 52(1) and 24(1) serve different remedial purposes. Section 52(1) provides a remedy for lawsthat violate Charter rights either in purpose or in effect. Section 24(1), by contrast, provides a remedy for government acts that violateCharter rights. It provides a personal remedy against unconstitutional government action and so, unlike s. 52(1), can be invoked only bya party alleging a violation of that party’s own constitutional rights: Big M; R. v.

Edwards, (SCC), [1996] 1 S.C.R. 128.Thus this Court has repeatedly affirmed that the validity of laws is determined by s. 52 of the Constitution Act, 1982, while the validityof government action falls to be determined under s. 24 of the Charter [cites given]. We are here concerned with a law that is alleged toviolate a Charter right. This suggests that s. 52(1) provides the proper remedy.

So, too, in this case. 3) The counterclaim sought to be filed by the defendants in this case challenges the constitutional validity of the Civil Forfeiture Act,not merely the application of it against these defendants on the bases alleged in the Director's notice of civil claim.

As such, it invokesbroader constitutional concerns as addressed in s. 52(1) in the foregoing analysis in Ferguson, including the potential effects of the CivilForfeiture Act on other citizens who may be subject to its operation. 4) To the extent that the proposed counterclaim raises an independent action and requires the addition of the Attorney General ofBritish Columbia as a necessary party, because of the nature of the challenge to the statute and the potential consequences of that joinder,the counterclaim is properly advanced as a counterclaim rather than as a response to the notice of civil claim as asserted by the Director. [14] Since the Director does not object to the substance of the constitutional challenge being tried in this proceeding because of delayor other procedural reasons, I am satisfied that leave to file a constitutional challenge to the Civil Forfeiture Act by way of counterclaimrather than by way of response to notice of civil claim should be granted and that the time for filing of that counterclaim be extended todo so.

I will grant an extension of a further one month for that purpose. [15] That ruling does not, however, mean that I have determined that the proposed counterclaim, as drafted, may not be defective inrelation to the joinder of parties who may not have standing in relation to the bringing of that counterclaim, because they are no longerparties to this proceeding. [16] I am also not pronouncing on other aspects of the pleading generally, which may include, without limitation and withoutdetermination, issues concerning the sufficiency of pleadings and particulars. [17] Those are, however, matters that should be addressed by way of specific application if necessary once the counterclaim is filed,rather than by the general assertion at this time that the counterclaim, as proposed, is not the appropriate method of bringing the issuesraised by the defendants' constitutional challenge before the court in this proceeding. [18] I turn next to the second aspect of the defendants' application, which in effect seeks, by way of severance or adjournment ofprocedures available under the Director's notice of civil claim, a stay of the Director's notice of civil claim pending the hearing of thedefendants' proposed counterclaim. [19] The defendants submit that such an order should be granted, so that the defendants will not be subjected to allegedly illegalprocesses under the Civil Forfeiture Act while the constitutional validity of that process is under determination.

They also submit that itwill be a more efficient use of resources to have the constitutional questions decided before other substantive issues required to beconsidered in the case, because the constitutional issues and decision in relation thereto will be less complex if the counterclaim proceedsthat way, rather than in conjunction with the entirety of the claims which are at issue in the Director’s notice of civil claim. [20] The defendants make that submission due to the length of time that has elapsed in this matter since it has been before the court,the numerous interlocutory proceedings which have occurred to date, including still outstanding appeals, and submit that a finaldetermination of the constitutional issues will truncate these proceedings by conclusion of an important aspect of them.

The defendantsalso submit that the whole of the "instruments of unlawful activity" allegations in the notice of civil claim should be resolved, which willpotentially bring this litigation to an end. [21] I do not agree with the defendants’ submissions and accordingly will not order what amounts to a stay by way of severance oradjournment of the Director's claims against the defendants in his notice of the civil claim pending the hearing of the issues now raisedby the counterclaim. [22] I reach that conclusion because: 1) Although the constitutional validity of the instruments of unlawful activity parts of the Civil Forfeiture Act are now challenged bythe defendants, there is no such challenge to the “proceeds of unlawful activity” provisions of the Civil Forfeiture Act which are alsoengaged by the Director’s notice of civil claim in these proceedings. 2) The constitutional validity of the Civil Forfeiture Act and similar Acts has been previously addressed by not only the Supreme Courtof Canada but also by the British Columbia Court of Appeal and by this Court. 3) In that regard, the decisions of the Supreme Court of Canada in Chatterjee v.

Ontario (Attorney General), 2009 SCC 19, and by theBritish Columbia Court of Appeal in British Columbia (Director of Civil Forfeiture) v. Onn, 2009 BCCA 402, and British Columbia(Director of Civil Forfeiture) v. Wolff, 2012 BCCA 473, as well as the decision of this Court in British Columbia (Director of CivilForfeiture) v. Nguyen, 2013 BCSC 1610, have all considered the constitutional validity of the Civil Forfeiture Act or similar statutes, and

have not found those statutes to be constitutionally invalid. 4) Accordingly, the defendants' assertions of constitutional invalidity must be considered in light of presumptively valid legislation.

That fact alone, in my view, is sufficient to preclude the granting of a stay or severance of further proceedings under the Director’s notice of civil claim pending determination of constitutional validity on the basis now claimed by these defendants. 5) The defendants' challenge to the constitutional validity of the Civil Forfeiture Act does not raise issues which should be decided without a full evidentiary record in the context of all of the allegations brought against these defendants in the Director’s notice of civil claim. 6) Although the defendants now seek to narrow the evidentiary record necessary to address the constitutional questions raised by their counterclaim to an extent that they say will create efficiencies, I am not satisfied that the full factual underpinnings of the action that are necessary for determination of the counterclaim should be considered only in that limited context. 7) It is settled law that constitutional litigation should not be conducted in a "factual vacuum” even in division of powers cases.

Rights must be asserted and their factual underpinnings demonstrated: see Kitkatla Band v. British Columbia , 2002 SCC 31 . 8) I substantially agree with the submissions of counsel for the Director in his written argument in this matter, at paras. 71 through 75, in which he submitted that: 71. In this case, there is considerable factual overlap amongst the division of powers, Charter and substantive issues.

For example, evidence relating to the existence and practices of criminal organizations, including . . . that the HAMC is a prominent example of such in Canada, will be relevant to the determination of each issue. 72. Even if the constitutional questions were isolated, the plaintiff would likely rely on expert evidence relating to groups like HAMC as a reason and justification for the CFA , and proof of its importance and efficacy.

If the issue is to be properly tried by this court, let alone be put to an appellate court, it should be done on the basis of the most concrete and complete factual record available. 73. A complete record specific to this case is critical because of the . . . alleged constitutional defects. The defendants strongly rely on the impact or effect of the CFA on criminal proceedings. . . . in looking at the effect of the legislation, the Court may consider both its legal effect and its practical effect.

In other words, the Court looks to see, first, what effect flows directly from the provisions of the statute itself then second, what "side" effects flow from the application of the statute which are not direct effects of the provisions of the statute itself . . . [referring to Kitkatla at para. 54] 74. Even allowing for the possibility that there could be an operational conflict between the CFA and criminal law, it could arise in certain circumstances but not in others. The "potential" for operational conflict is best examined through examples where it is said to arise. 75.

The complete facts of this case are required in order for the court to comprehensively examine whether the alleged effects actually exist. It is conceivable that there could be cases where such an effect does exist; proof of that on a reasonable hypothetical would not automatically demonstrate that the CFA should not apply to these defendants in these circumstances.

If that theory of ownership or application of the definition of "instruments" is not raised on the facts of this case, it should not be decided in this case. 9) The defendants have also alleged, in their defence to the Director's notice of claim, separate constitutional defences, including allegations of breach of s. 8 of the Charter , s. 2(

b) and s. 2(d), as well as issues with respect to the operation of s. 1 of the Charter .

All are live issues which require a full evidentiary record in order to be appropriately addressed, both at the trial level and upon any appellate review, which seems inevitable in this case. [ 23 ] In addition to the need for a full factual matrix and evidentiary record to determine the constitutional issues that I have addressed, I am not satisfied that a stay or severance of the notice of civil claim would promote legal or judicial efficacy. [ 24 ] These proceedings are destined for a complex trial, both factually and now constitutionally.

Appeals of interlocutory rulings have been and likely will continue to delay final resolution.

Severance or a stay of the underlying action will not only invite further appeals because of bifurcation, but also preclude full adjudication of the merits of not only the Director’s claims but also the defendants’ counterclaim. [ 25 ] Issues concerning the manner in which this case should proceed are factors which, in my view, should be addressed by way of continued case management to attempt to attain the most efficient manner of proceeding, rather than at this stage of the proceedings where the pleadings are still not complete and appeals of interlocutory rulings remain outstanding. [ 26 ] While circumstances may in future arise that warrant some bifurcation or even trifurcation of some discrete issues raised by the pleadings when finalized, the defendants have not satisfied me at this stage that the orders sought in paragraphs 3 and 4 of their notice of application should be granted. [ 27 ] Costs will be in the cause. “Davies J.”