Director of Civil Forfeiture Plaintiff v. The Owners and all Others interested in the Property and/or the Money in particular Barry Patrick Crowley, 2014 BCSC 1481

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: British Columbia (Director of Civil Forfeiture) v.

Crowley, 2014 BCSC 1481 Date: 20140807 Docket: 34991 Registry: Penticton Civil Forfeiture Action in Rem against Lands and Structures situated at 8308 - 70 th Avenue, Osoyoos, B.C. with Legal Description of Parcel Identifier 010-523-405 Lot 11, Block 778, District Lot 2540S Similkameen Division Yale District Plan 3085 and the Fruits or Proceeds therefrom (the “Property”) and $56,089.25 in Canadian Currency and $908.00 in United States Currency and the Fruits or the Proceeds therefrom (the “Money”) Between: Director of Civil Forfeiture Plaintiff And The Owners and all Others interested in the Property and/or the Money in particular Barry Patrick Crowley Defendants Before: The Honourable Mr.

Justice G.P. Weatherill Reasons for Judgment Counsel for Plaintiff: J. Poole Counsel for Defendant: J.G. Hardwick Place and Date of Trial/Hearing: Kelowna, B.C. July 22, 2014 Place and Date of Judgment: Penticton, B.C. August 7, 2014 Introduction [ 1 ] The plaintiff (“Director”) seeks orders under the Civil Forfeiture Act , S.B.C. 2005, c. 29 [ CFA ] that the defendant’s home in Osoyoos, BC (“Property”) and money that the RCMP seized during a March 15, 2008 search of the Property and now held in court (“Money”) be forfeited.

The Director suggests that the Property and Money are related to illegal drug trafficking operations. [ 2 ] The defendant is age 77 and has been residing on the Property since 1988. On the facts deemed to be admitted, the defendant does not strenuously argue that the Money should not be forfeited, but the defendant strongly argues the Court should grant him relief from forfeiting the Property under s . 6(1) of the CFA . [ 3 ] In sum, I am exercising my discretion under s. 6(1) (b). The defendant will only forfeit half of his right, title and interest in the Property.

The Money, however, must fully be forfeited to the Director under s. 5(1). Issue [ 4 ] The only issue for determination is: 1. Notwithstanding the mandatory order of forfeiture that must be made under s. 5(1) (2) of the CFA for the Money and Property , should this Court exercise its discretion under s. 6(1) of the CFA to grant relief from forfeiture? Background Facts History of Proceedings

[ 5 ] This proceeding is a rehearing of the Director’s application for default judgment against the defendant as ordered by the Court of Appeal on February 27, 2013 in British Columbia (Director of Civil Forfeiture) v. Crowley , 2013 BCCA 89 [ Crowley ]. [ 6 ] The background was thoroughly summarized by Chiasson J.A. in those reasons.

Nonetheless, for ease of analysis, I will briefly lay out some of those facts. [ 7 ] On May 15, 2008, the RCMP searched the Property and seized $92,468 in Canadian currency, $908 in US currency, a loaded handgun, a loaded shotgun and other firearms. [ 8 ] The RCMP alleged the defendant was using the Property for storing and illegal drug trafficking, and the Money was the proceeds of that unlawful activity. [ 9 ] On December 1, 2010, the Director brought an action for forfeiture against the Property and the Money under the CFA . [ 10 ] Although the defendant filed a Response, he did not cooperate in the litigation.

Indeed, he did not produce documents the Director requested or attend his examination for discovery. [ 11 ] On January 25, 2011, Ballance, J. made a preservation order under s. 8 of the CFA and that order was registered against the Property’s title at the Land Title Office. [ 12 ] So on December 5, 2011, Grauer J. ordered that the defendant’s Response be struck and the action proceed as if no response had been filed. [ 13 ] On January 10, 2012, the Director applied for what was essentially a default judgment seeking forfeiture of the Property and Money. [ 14 ] And on January 30, 2012, Rogers J. heard that matter.

The defendant attended and attempted to participate in the hearing, but because his response was struck, Rogers J. ordered forfeiture of the Property and Money to the Director. [ 15 ] The defendant then appealed the Grauer J. and Rogers J. orders. [ 16 ] The Court of Appeal dismissed the defendant’s application to extend time to appeal the Grauer J. order, but it allowed the appeal of the Rogers J. order and remitted the matter to the Supreme Court for a rehearing on the Director’s application for default judgment. [ 17 ] This proceeding is that rehearing.

And this rehearing’s scope is narrow: it relates strictly to a determination under s. 6(1) of the Civil Forfeiture Act - i.e., whether forfeiture of the Property and Money is “clearly not in the interests of justice”. [ 18 ] In remitting the matter to the Supreme Court for a rehearing, the Court of Appeal said: [69] The appellant could not controvert the facts alleged in the notice of civil claim – they were deemed to be admitted – but, in this case, those facts did not address the interests of justice.

Even if they were to have done so, I do not think that would have foreclosed the appellant from making submissions on the interests of justice issue or from adducing evidence that did not controvert the allegations of fact in the notice of civil claim. [ 19 ] And at para. 80, the Court of Appeal helpfully and thoroughly summarized the workings of s. 6: [80] In

summary: 1. when taking the property of an individual, for good policy reasons, it is necessary to ensure that the power of the state is exercised recognizing the procedural rights of the individual; 2. when granting an order of forfeiture under s. 5 of the Civil Forfeiture Act , a judge must consider whether forfeiture, in whole or in part, is clearly not in the interests of justice pursuant to s. 6 of the Act ; 3. striking a defendant’s response to civil claim makes the defendant no longer a party of record entitled to notice of further steps in the proceeding; 4. a person whose home is the subject of an application for forfeiture under the Act is a person affected by the application and is entitled to notice under Rule 8-1(7); 5. a judge has discretion whether to permit a person to participate in forfeiture proceedings notwithstanding his or her response to civil claim has been struck or no material has been filed in response to the application for forfeiture. [ 20 ] And finally, in remitting the matter back to Supreme Court, the Court of Appeal cautioned this Court about hearsay and admissibility: [86] I wish to add a note of caution arising from the evidentiary record placed before the court by the Director in support of his application for judgment.

Much of that evidence appears to be hearsay. There may be applicable rules of evidence that make all or some of it admissible, but the court must consider carefully the admissibility of evidence in all applications for judgment under the Act . The Facts Pertaining to Forfeiture [ 21 ] Because of the defendant’s response to the notice of civil claim being struck, the allegations of fact made by the Director in the

notice of civil claim are deemed to be admitted: British Columbia (Director of Civil Forfeiture) v. Breakey , 2014 BCSC 1232 at para. 7 ; Crowley at para. 69 . [ 22 ] Therefore, these are the relevant facts: a. The defendant has used the Property for the purposes of storing and trafficking various controlled substances and illegal drugs including prescription drugs and also to store the Money which is both proceeds and instrument of unlawful activity. b. The defendant has stored various firearms at the Property to facilitate the trafficking of illegal drugs and substances from the Property. c.

The proceeds of the trafficking and controlled substances have contributed to maintaining the interest of the defendant in the Property. d. The Money was acquired from trafficking in controlled substances. e. If retained by the defendant the Money would be used to further facilitate trafficking in controlled substances. f. The Property is a residential property located near schools, parks and youth centres in Osoyoos, BC. The defendant is the sole registered owner of the Property. g. The Property has been used to store, possess and traffic in cocaine and other controlled substances.

The defendant was aware that this activity was going on and participated in it or did nothing to prevent it from occurring. The defendant profited directly or indirectly from the possession and trafficking from controlled substances from the Property. h. The Property has been and is likely to be used to store a variety of weapons, some of which were restricted or prohibited firearms, in an unsafe manner that could have caused serious bodily harm to a person.

Weapons were being stored in the Property for the purposes of assisting in the commission of unlawful activities, such as drug trafficking, which was likely to result in the acquisition or maintenance or possession of property, or to cause serious bodily harm to a person. Weapons stored in the Property had been used to cause serious bodily harm to a person on at least on occasion during the time the Property was occupied by the defendant. 4. On May 15, 2008 RCMP officer’s arrested the defendant and executed a search warrant at the Property.

During the course of this search, the members discovered indicia that the property had been used as a location to store and traffic control substances including: a. $92,468 in Canadian currency packaged in unequal bundles in various denominations and hidden throughout the Property; b. $908 in US currency in various denominations and hidden throughout the Property; c. Several weapons, including a loaded semi-automatic handgun, a loaded shotgun and several long guns; d. Digital scales; e. Empty plastic bags with cocaine residue in it; f. “Score sheets” recording drug sales; g.

Prescription drugs available for sale; and h. 15 individually packaged “flaps” of cocaine. 5. As part of a subsequent plea agreement, the defendant entered into an agreement with the Federal Crown to forfeit all of the money seized from his home to the Canada Revenue Agency (“CRA”) for tax purposes. The CRA issued a tax demand for $36,378.75 CDN, leaving $56,089.25 CDN and $908 US (the “Money”) unclaimed by federal authorities. 6. The Money represents the proceeds from the sale of cocaine and other controlled substances in the process of being dealt with in a manner meant to convert from its origins. 7.

The sale of controlled substances is a major or sole source of income for the defendant. The defendant does not have sufficient legitimate financial resources of income or financial benefit to account for his possession of the Money. 8. All or part of the money the defendant had used to maintain the Property or paid down debt obligations arising from property taxes and utility charges in relation to the Property was acquired directly or indirectly from the prior unauthorized production and/or trafficking of controlled substances and/or the laundering the proceeds of crime. 9.

The Property is likely to be used again in future to possess and traffic in cocaine and other controlled substances or to convert the proceeds of crime into seemingly legitimate equity in the Property. Parties’ Submissions Director [ 23 ] On these facts (taken from

Part 1 of the notice of civil claim), the Director argues the evidence is unequivocally clear that the Money is proceeds of unlawful activity ( s. 5(1) ) and the Property was an “ instrument of unlawful activity ” (s. 5(2)) under the CFA .

[ 24 ] The Director argues that the defendant’s July 3, 2014 affidavit is the first instance when he provided any evidence.

In other words, the defendant has not made full and frank disclosure. [ 25 ] The Director argues that the defendant is the registered owner of two other properties and has other assets, so forfeiture of the Property would not result in financial hardship to him. [ 26 ] In passing, I note the defendant concedes the point about the other properties. [ 27 ] The Director argues that the defendant has the onus to lead evidence to show that forfeiting the Property would “clearly not [be] in the interests of justice”. [ 28 ] The Director argues that the Money was deemed to be the proceeds of crime.

It is a reasonable inference that can be drawn from the facts. [ 29 ] The Director argues the defendant’s affidavit is silent on the financial issue and the defendant has not, in his affidavit evidence, tipped the heavy burden of showing that the interest of justice would not be served by forfeiting the Property. [ 30 ] The Director argues that before relief from forfeiture can be granted, the defendant must show that forfeiture would be manifestly harsh and inequitable. [ 31 ] Simply put, the Director argues, that test has not been met.

Defendant [ 32 ] On the facts that are deemed proven, the defendant concedes that the Director proved that the Money is proceeds of unlawful activity ( s. 5(1) ) and the Property is an instrument of unlawful activity (s. 5(2)). [ 33 ] Nonetheless, the defendant lists a series of factors that militate against forfeiture of the Property being in the interest of justice: 1. He has owned the home for 26 years. He purchased it 1988 for $32,400. There is no evidence that the Property was used as an instrument of unlawful activity prior 2006. 2.

He renovated the home with his father and self-effort and has continuously resided in the home for 26 years. 3. The RCMP search and seizure occurred in May 2006, almost 6 years ago. The defendant is elderly, currently age 77, and has one daughter who he wishes to bequeath the property to when he passes on. Forfeiture would result in a financial cost visited on his one and only daughter. 4.

The facts alleged in the notice of civil claim are boiler plate, and even though they are deemed to have been admitted, they must be taken in light of them being broad brush pleadings. [ 34 ] The defendant argues that much of the evidence the Director submitted is hearsay and inadmissible on the issue before me. As examples, he cites paras. 30 and 31 of Mr. Bargen’s affidavit filed January 10, 2012 and the entire affidavit of Mr. Barnwell filed June 10, 2014. [ 35 ] I agree with the defendant’s submissions on this point.

Indeed, much of the evidence provided by the Director is hearsay and inadmissible. [ 36 ] The affidavit of Mr. Larsen (the assistant deputy director) filed April 14, 2013 is the only admissible evidence the Director filed since the Court of Appeal’s decision. And Mr. Larsen candidly acknowledges that he has no knowledge about whether any investment by the defendant in the Property occurred before criminal activity on his

part commenced: see para. 14. Indeed, there is no evidence before me indicating when the Property began to be used as an instrument of criminal activity. [ 37 ] The defence argues that the deemed admissions of fact contained in the notice of civil claim do not establish that the Property was an active centre of trafficking. He points out Schultes J.’s comments in British Columbia (Director of Civil Forfeiture) v.

Flegel , 2014 BCSC 1168 at para. 30 : … The question of when a residence has actually performed an instrumental function in the commission of crime, as opposed to having been a mere passive receptacle of illegal items, must be addressed with care and precision, to give proper effect to the intention of the legislature without empowering indiscriminate forfeitures. Governing Legal Principles [ 38 ] I will lay out the applicable CFA statutory provisions from s. 1 before turning to applicable case law. [ 39 ] In short, “unlawful activity” means

an act that is an offence under any Act of Canada or BC. In full, it means: (

a) if

an act or omission occurs in British Columbia, the act or omission, at the time of occurrence, is an offence under

an Act of Canada or British Columbia; (

b) if

an act or omission occurs in another province of Canada, the act or omission, at the time of occurrence, (

i) is an offence under

an Act of Canada or the other province, as applicable, and

(ii) would be an offence in British Columbia, if the act or omission had occurred in British Columbia; (

c) if

an act or omission occurs in a jurisdiction outside of Canada, the act or omission, at the time of occurrence, (

i) is an offence under

an Act of the jurisdiction, and (ii) would be an offence in British Columbia, if the act or omission had occurred in British Columbia, but does not include

an act or omission that is an offence (

d) under a regulation of a corporation, or (

e) under an enactment of any jurisdiction if the enactment or the jurisdiction is prescribed under this Act. [ 40 ] "Instrument of unlawful activity" means any of the following: (

a) property that has been used to engage in unlawful activity that, in turn, (

i) resulted in or was likely to result in the acquisition of property or an interest in property, or (ii) caused or was likely to cause serious bodily harm to a person; (

b) property that is likely to be used to engage in unlawful activity that may (

i) result in the acquisition of property or an interest in property, or (ii) cause serious bodily harm to a person; (

c) property that is realized from the disposition of property described in paragraph (

a) or (

b) under an order of the court under section 8 (3) (d) [interim preservation order] ; [ 41 ] “Proceeds of unlawful activity” means any of the following: (

a) the whole or a portion of an interest in property if the whole or the portion of the interest, as the case may be, is acquired directly or indirectly as a result of unlawful activity; (

b) the whole or a portion of an interest in property that is equivalent in value to the amount of an increase in value of the whole or the portion of the interest in property if the increase in value results directly or indirectly from unlawful activity; (

c) the whole or a portion of an interest in property that is equivalent in value to the amount of a decrease in a debt obligation secured against the interest or the portion of the interest in property, if the decrease in debt obligation results directly or indirectly from unlawful activity; (

d) property that is realized from the disposition of the whole or a portion of an interest in property described in paragraph (a), (

b) or (

c) under an order of the court under section 8 (3) (d) [interim preservation order] [ 42 ] And s. 6(1) establishes: 6

(1) If a court determines that the forfeiture of property or the whole or a portion of an interest in property under this Act is clearly not in the interests of justice, the court may do any of the following: (

a) refuse to issue a forfeiture order, (

b) limit the application of the forfeiture order; (

c) put conditions on the forfeiture order. [ 43 ] Subject to granting relief from forfeiture under s. 6(1), the Court is required by s. 5 to grant an order forfeiting to the Province “property that the court finds is an instrument of unlawful activity” or “the whole or the portion of an interest in property that the court finds is proceeds of unlawful activity”: British Columbia (Director of Civil Forfeiture) v.

Wolff , 2012 BCCA 473 at para. 13 [ Wolff ]. [ 44 ] In Wolff , the BCCA reiterated the CFA ’s tripartite objectives at para. 16: [16] This court has confirmed the objectives of the Act in terms that are similar to those stated in s. 1 of the Civil Remedies Act, 2001 and accepted by the Court in Chatterjee . In British Columbia (Director of Civil Forfeiture) v. Onn , 2009 BCCA 402 , Madam Justice Garson stated: The purpose of the Act is threefold: (

a) to take the profit out of unlawful activity; (

b) to prevent the use of property to unlawfully acquire wealth or cause bodily injury; and (

c) to compensate victims of crime and fund crime prevention and remediation.

[ 45 ] Therefore, the Court must order forfeiture regardless of value, purpose, ownership or condition, unless the defendant shows that to do so would “clearly not be in the interests of justice.” Additionally, the concept of relief from forfeiture is broader than the CFA ’s three noted objectives: Wolff at para. 17 . [ 46 ] Each case is fact driven. The parties seeking relief from forfeiture must clearly make the case that forfeiture would be inequitable and unjust in all the circumstances: Wolff at para. 37 . [ 47 ] British Columbia (Director of Forfeiture) v.

Rai , 2011 BCSC 186 [ Rai ] considered the interplay between the CFA ’s purposes and the interests of justice, and at para. 111 Silverman J. helpfully set out a non-exhaustive list of factors that can be considered in such situations: 1. proportionality; 2. fairness; 3. the degree of culpability, complicity, knowledge, acquiescence, or negligence; 4. the extent of the problem in the community of the sort of unlawful activity in question; 5. the need to remove profit motive; 6. the need for disgorgement of wrongfully obtained profits; 7. the need for compensation; 8. prevention of future harm; 9. general deterrence. [ 48 ] And at paras. 113-114, Silverman J. laid out a framework: [113] Proportionality and fairness will always be the dominant considerations.

They are necessarily related and will often include a consideration of the following: 1. A balancing of the impact of a forfeiture order on, and a balancing of the interests of, the state, the defendant, and other affected parties, such as innocent victims, and/or innocent spouses or children of the defendant. 2. Where the extent of forfeiture of real property is under consideration, the following questions become relevant: (

a) how much equity is there in the property? (

b) how much was the defendant’s legitimate investment in the property before criminal activity commenced? (

c) how much equity has built up as a result of market conditions? (

d) how much equity has built up since an interim preservation order was granted under the Act ? 3. Would forfeiture require a drastic lifestyle change for the defendant and/or for innocent family members? 4. Would forfeiture affect employment opportunities? 5.

The magnitude of the unlawful activity and/or of its profits, or potential profits. [114] A purely mathematical analysis will rarely, if ever, be the most suitable approach. [ 49 ] The principles of proportionality and fairness will be the “dominant consideration” in most cases. [ 50 ] The word “clearly” in s . 6(1) suggests that relief from forfeiture is an exceptional remedy and should be granted sparingly: Ontario (Attorney General) v. 11140 Aubin Road, Windsor and 3142 Halpin Road, Windsor (in rem), 2011 ONCA 363 at paras. 85 and 87 . [ 51 ] Relief is granted very rarely and not in a way that amounts to an endorsement or vindication of the property owners’ conduct: Minister of Justice and Attorney General) v.

Sykes, 2011 ABCA 191 at para. 44 . [ 52 ] In sum, relief from forfeiture cases have no hard and fast rules, and each case must be determined on its facts. Decision 1. Notwithstanding the mandatory order of forfeiture that must be made under s. 5(1) (2) of the CFA for the Money and Property , should this Court exercise its discretion under s. 6(1) of the CFA to grant relief from forfeiture?

[ 53 ] Yes, this Court should exercise its discretion. [ 54 ] In my judgment, the Money must be forfeited to the Director under s. 5(1) of the CFA . The Deemed Facts prove that the Money is proceeds of unlawful activity.

The defendant has led no evidence that would justify relief from forfeiture regarding the Money; indeed he made no submissions on the point. [ 55 ] Regarding whether relief from forfeiture of the Property should be granted, proportionality and fairness are the dominant considerations. [ 56 ] This Court has discretion to consider the circumstances, but the onus is on the defendant to show that forfeiture would be harsh, unequitable and unjust in all the circumstances. [ 57 ] I have considered the interests of BC, the defendant, and the defendant’s daughter; the Property’s equity; the defendant’s investment in the Property; the lack of evidence as to when the criminal activity began; how much equity has built up because of market conditions since the interim preservation order was granted in this case; whether forfeiture would cause the defendant to have to drastically change his lifestyle; and the magnitude of the unlawful activity and/or its profits or potential profits. [ 58 ] Considering all of the forgoing, I am not satisfied that complete forfeiture of the Property would clearly be in the interests of justice. [ 59 ] The proportionality and fairness analysis persuades me that some relief is appropriate because: a. the Property has been the respondent’s home for 26 years and no evidence demonstrates when the illegal activity began on the Property; b. he purchased the Property for $32,000 in 1988 when it was a second hand store.

He borrowed one-half of the purchase price from his mother and re-paid her $250 per month until paid in full. Together with his father’s help, he converted the store into a residence; c. the respondent is age 77 and although he concedes he is not financially destitute, complete forfeiture would require him to be uprooted and find another home; and d. the RCMP investigation following the 2008 search and seizure resulted in a number of charges against him, and he plead guilty to possession of a controlled substance and possession of a prohibited weapon.

He received a fine as a sentence. [ 60 ] I exercise my discretion under s . 6(1)(

b) and limit the application of the forfeiture order for the Property as follows:

a) one-half of the defendant’s right, title and interest in the Property will be forfeited and transferred to the Director, subject to all legal and legitimate prior encumbrances, if any, and the Director and the defendant will hold their respective 50% interest as tenants-in- common;

b) within 60 days of the date of this judgment, the defendant will be at liberty to purchase the Director’s 50% interest in the Property by paying 50% of the agreed upon current fair market value of the Property. If the parties cannot agree on the current fair market value, a qualified appraiser, to be agreed upon by the parties, will determine the value;

c) if the parties cannot agree on the fair market value and the defendant therefore requires more than 60 days to purchase the Director’s interest in the Property, liberty is granted to apply to the Court for the appropriate directions.

Conclusion [ 61 ] There will be judgment in favour of the Director against the Money currently in Court pursuant to the January 25, 2011 Order of Ballance J, and the Money is hereby forfeited to the BC government. [ 62 ] The Money and any interest accrued thereon shall be paid out to the Director in the form of a cheque payable to the BC Minister of Finance and delivered to counsel for the Director. [ 63 ] There will be judgment in favour of the Director for an undivided 50% interest in the Property, namely those lands and premises situated at 8308 70 th Avenue, Osoyoos, B.C. with a legal description of Parcel Identifier 010-523-405, Lot 11, Block 778, Plan KAP3085, District Lot 2450S Similkameen Division Yale District Plan 3085.

That 50% interest is hereby forfeited to the BC government. [ 64 ] There will be an order allowing the defendant 60 days to purchase (“Redeem”) the Director’s 50% interest in the Property on the terms provided above. [ 65 ] Should the defendant fail to Redeem the Property, the Registrar of Land Titles is authorized and ordered to transfer and vest 50% of the Property in Her Majesty the Queen in Right of the Province of BC an undivided 50% interest as a tenant in common with the defendant. [ 66 ] The parties have liberty to apply for further orders as may be required to give effect to this judgment. “G.P.

Weatherill J.”