r v. CANADA BORDER SERVICES, 2011 QCCA 1813

Unofficial English Translation Bouloud (Syndic de) 2011 QCCA 1813 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-021127-105 (460-11-001860-090) DATE: July 12, 2011 CORAM: THE HONOURABLE MARC BEAUREGARD, J.A. YVES-MARIE MORISSETTE, J.A. JACQUES A. LÉGER, J.A. IN THE MATTER OF THE BANKRUPTCY OF ERGUN BOULOUD Debtor – Respondent and JEAN-MARC POULIN DE COURVAL, in his capacity as trustee to the bankruptcy of Ergun Bouloud APPELLANT – INCIDENTAL RESPONDENT – Trustee/Petitioner v.

CANADA BORDER SERVICES AGENCY and PUBLIC WORKS AND GOVERNMENT SERVICES CANADA RESPONDENTS - INCIDENTAL APPELLANTS - Respondents and SUPERINTENDENT OF BANKRUPTCY IMPLEADED PARTY - Impleaded party JUDGMENT [ 1 ] THE COURT , on the appellant's appeal from a judgment of the Superior Court, District of Bedford (the Honourable Mr.

Justice Gaétan Dumas), rendered on October 13, 2010, which determined that the appellant could not, through his proceeding, obtain the return of $53,157.83 that was seized by an officer of the Canada Border Services Agency; [ 2 ] After having examined the file, heard the parties, and on the whole deliberated; [ 3 ] For the reasons of Beauregard J.A., with which Morissette and Léger JJ.A. agree: [ 4 ] DISMISSES the appeal, without costs. [ 5 ] ALLOWS the incidental appeal, without costs, and STRIKES the costs award in the trial judgment. MARC BEAUREGARD, J.A. YVES-MARIE MORISSETTE, J.A. JACQUES A. LÉGER, J.A.

Mtre Jean-Philippe Gervais (GERVAIS & GERVAIS) For the appellant - incidental respondent

Mtre Antoine Lippé and Mtre Pierre Lecavalier (DEPARTMENT OF JUSTICE CANADA) (JOYAL, LEBLANC) For the respondents - incidental appellants Date of hearing: April 7, 2011 REASONS OF BEAUREGARD, J.A. [ 6 ] In January of 2009, Bouloud declared bankruptcy. The balance sheet indicated assets of $147 and debts of $113,000. [ 7 ] A few weeks later, in February of 2009, Bouloud attempted to export over $53,157.83 in cash without declaring it to the Canada Border Services Agency, in violation of subsection 12(1) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act ( PCA ). [1] [ 8 ] Pursuant to

section 18 of the PCA , an officer from the Agency seized the currency "as forfeit" and, suspecting the cash to be the proceeds of crime within the meaning of subsection 462.3(1) of the Criminal Code , refused to return the cash to Bouloud. [ 9 ] At the same time, the Royal Canadian Mounted Police seized $26,000 in cash found in Bouloud's residence. [ 10 ] Attempting to argue that, under

section 67 of the Bankruptcy and Insolvency Act , [2] the amounts seized were part of the patrimony divisible among Bouloud's creditors, the trustee brought a motion before the Superior Court seeking to have both seized amounts remitted to him. [ 11 ] The judge dismissed the motion with respect to the amount of $53,157.83, but granted it for the amount of $26,000. [ 12 ] This being so, he also condemned the respondents to pay counsel for the trustee's costs “as between solicitor and client". [ 13 ] The trustee suggests that the judge should have ruled in his favour and ordered the return of the amount of $53,157.83 to him. [ 14 ] As for the respondents, while they support the judgment on this last point and do not question the conclusion ordering the return of the amount of $26,000, they submit that the conclusion awarding costs "as between a solicitor and client" is wrong. [ 15 ] For the following reasons, I find that the trustee is wrong to argue that the judge should have declared that he was entitled to the amount of $53,157.83.

In fact, the motion in this respect was inadmissible. [ 16 ] Subsection 18(1) of the PCA confers on an officer the power to "seize as forfeit" the currency that an individual is unlawfully attempting to export, regardless of whether this individual is the owner of the currency in question. This is apparent in subsections 18(2) and 32(1) and

section 25 of the PCA . [ 17 ] If the PCA provides for the forfeiture of an asset belonging to someone other than the person attempting to export it, it also provides for the forfeiture of an asset of which the trustee has seizin because, even though the trustee has all the rights of the bankrupt and enjoys some creditor rights and special powers, all these rights and powers do not exceed those of the owner. [ 18 ] It is wrong to assert that the holder of a property right in an asset – the holder of an absolute right – is bound by the PCA , while the bankruptcy trustee, whose rights cannot exceed those of the owner of the asset in question, is not. [ 19 ] The PCA supersedes the Bankruptcy and Insolvency Act .

The first law transcends the second. From the moment a violation of subsection 12(1) of the PCA is observed by an officer, a legal fiction is created: ownership of the asset is automatically forfeited to Her Majesty (section 23), as if it were an expropriation without compensation. But the owner affected by a seizure is not without recourse. [ 20 ] What remedies are available to the owner of a forfeited asset? They are limited to only those set out in the PCA (

section 24 ) and are twofold. [ 21 ] First, pursuant to

section 25 , the owner – including the trustee – may, within 90 days of the seizure, apply to the Minister to decide whether there was indeed a breach of subsection 12(1) of the PCA . The Minister will then proceed in accordance with sections 28 and 29. Afterwards, there remains the possibility of an appeal to the Federal Court under subsection 30(1). [ 22 ] Second, pursuant to subsection 32(1), anyone claiming to be the holder of a property interest in the seized asset may apply to the Superior Court to have that right confirmed and, if the conditions of

section 33 are met, to obtain a declaration that the right is not affected by the seizure. [ 23 ] The PCA is a special statute of public order. It includes its own code of procedure, which anyone wishing to dispute the seizure and reverse the forfeiture must follow.

[ 24 ] Finally, the respondents' submission whereby the judge had no cause to condemn them to pay the costs "as between a solicitor and client" is well-founded. In fact, since the part of the appellant's motion concerning the amount of $53,157.83 was inadmissible, when the judge granted the part of the motion concerning the amount of $26,000, he should have declared that each party would pay their own costs. [ 25 ] Consequently, I would dismiss the appeal without costs, allow the incidental appeal, and strike the costs award in the judgment a quo. MARC BEAUREGARD, J.A.