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Relief from Forfeiture - Statutory Forfeitures. R. v. Travelers Insurance Company of Canada
In R. v. Travelers Insurance Company of Canada (Ont CA, 2024) the Ontario Court of Appeal allowed a Criminal Code property forfeiture appeal by an insurance company against the Crown, here alleging a restitutionary/constructive trust claims by subrogation [under CCC 462.37(2.01)].
Here the court considers 'relief from forfeiture' in the statutory Criminal Code property forfeiture regime:[10] I would allow the appeal. The restitution and forfeiture provisions of the Criminal Code do not transform the Crown into a guarantor or trustee of claims. Even the Crown’s erroneous failure to put the Xpertdoc claim forward and bring it to the sentencing judge’s attention does not sustain Travelers’s claim of an unjust enrichment and a constructive interest in the forfeited property. However, it is the Crown’s erroneous omissions, in combination with the near certainty that restitution of the Xpertdoc claim would have been made, that amount to unjust enrichment supporting the requisite proprietary interest by way of a constructive trust in favour of Travelers. The Crown received monies that, but for the Crown’s erroneous omissions, should and would have been paid as restitution to Travelers in satisfaction of its subrogated Xpertdoc claim. As a result of the forfeiture, the Crown was unjustly enriched to the detriment of Travelers and without juristic reason. Those particular circumstances give rise to a constructive trust in favour of Travelers.
[11] The application judge erred in her application of s. 462.42 to the particular circumstances of this case. She erroneously characterized Travelers as being in the position of an ordinary creditor. This caused her to fail to give effect to her findings that support a constructive trust in favour of Travelers. These findings included that the Crown was aware of the Xpertdoc claim and had erroneously failed to put it before the sentencing judge, and, had it done so, the Xpertdoc claim, like the Thibert claim and other claims before the sentencing judge, would have received restitution beyond only the ransom payment. In these circumstances, the Crown erroneously received monies that should have gone to Travelers. As a result, the application judge erred by mischaracterizing Travelers’s claim as a claim for restitution rather than an interest in the property forfeited. She erred in finding that there was no claim for unjust enrichment in this case.
[12] This case turns on its unique facts: the Crown received monies that, but for the Crown’s errors, should have been paid to Travelers. Travelers therefore had the requisite proprietary interest in the seized proceeds of crime by way of a constructive trust. Travelers should therefore be granted relief from forfeiture beyond the ransom amounts already ordered by the application judge.
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[28] This case turns on its unusual and particular facts. As I shall explain, the application judge erred in failing to give effect to her factual findings and misapprehended the nature of Travelers’s status and its interest in the forfeited property. As a result, the application judge erred in finding that Travelers had no proprietary interest in the forfeited proceeds. I am also of the view that the application judge took an unduly restrictive approach to the scope of her discretion and failed to consider and apply the overall purpose of the relief from forfeiture provisions to all the relevant circumstances, especially the erroneous exclusion of Travelers’s restitution claim from the sentencing judge’s consideration and the failure to give Travelers the requisite notice of the Crown’s forfeiture application.
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[33] Relief from forfeiture is discretionary. Accordingly, it is important not to take a narrow view of the rules and procedures in the Criminal Code concerning the forfeiture of proceeds of crime: Chun v. R., 2015 QCCA 590, per Kasirer J.A. (as he then was), at fn. 12. Courts considering an application for relief from forfeiture must not lose sight of the rationale behind the scheme and the effect of forfeiture on innocent third parties with a legitimate interest in the forfeited property: R. v. 170888 Canada Ltée, 1999 CanLII 13794 (QC CA), [1999] 174 D.L.R. (4th) 340, at pp. 347-48 (Que. C.A.). As the Court of Appeal of Quebec, per Fish J.A. (as he then was), further observed in 170888 Canada Ltée, at p. 349:An important objective of that scheme is to afford a meaningful recourse to innocent third parties whose property rights are affected by an order of forfeiture under s. 462.37 - not ultimately, in the civil courts, but rather immediately, before a court of criminal jurisdiction and within the framework of the forfeiture scheme itself. ....
(v) The court’s discretion should be exercised to order relief from forfeiture
[62] The fact that Travelers has the requisite interest by way of a constructive trust in the forfeited property is not the end of the inquiry. Section 462.42(4) provides that “the judge may make an order”. Accordingly, the court still retains the discretion not to order relief from forfeiture even if the preconditions of s. 462.42 are met, but that discretion must be exercised judicially: Wilson, at p. 655.
[63] Molloy J.’s observation in 1431633 Ontario Inc., at para. 30, assists with this part of the analysis:Although Parliament intended to deprive criminals of the fruits of their crimes, it clearly did not intend to do so at the expense of innocent third parties who may have a legitimate interest in that same property. That is the purpose of the provisions permitting relief from forfeiture…and that purpose must be kept in mind when considering whether a particular applicant is entitled to the relief sought. [64] This is an appropriate case in which to exercise the court’s discretion to order relief from forfeiture. Travelers stepped into the place of a victim of criminal conduct and would have benefited from a generous restitution order if the Crown had properly put its claim before the sentencing judge or if it had the opportunity, by way of notice of the Crown’s application for forfeiture, to bring its claim to the sentencing judge’s attention. In the circumstances of this case, it has a legitimate interest in the property forfeited. . Karygiannis v. Toronto (City)
In Karygiannis v. Toronto (City) (Ont CA, 2020) the Court of Appeal considers the availability of the CJA s.98 relief from forfeiture provisions to a statutory penalty (including removal from office) under the Municipal Elections Act, 1996. After a thorough consideration of the Poplar Point case (considered below) it holds that is not [para 60-109].
. Poplar Point First Nation Development Corporation v. Thunder Bay (City)
In Poplar Point First Nation Development Corporation v. Thunder Bay (City) (Ont CA, 2016), the Court of Appeal considers the application of the CJA relief from forfeiture provision [CJA s.98] (including a discussion of previous common law relief provisions) to statutory forfeitures, rather than it's more common application in contract situations. It concludes that, without some corresponding express or implicit statutory restriction against such relief, that CJA s.98 does apply to statutory forfeitures (here, recovery of funds by a former owner after a tax sale of real estate):(1) Relief from Forfeiture under the Courts of Justice Act
[36] The Courts of Justice Act provides for what appears to be broad and unlimited authority to the court to grant relief from forfeiture. Section 98 is a general provision that states:A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just. [37] Section 98 is found in Part VII of the Courts of Justice Act. Section 95(1) provides that Part VII applies to “civil proceedings” in courts in Ontario.[5] “Civil proceedings” are not only proceedings commenced by statement of claim, but include proceedings commenced by application. In this case, s. 380 of the Act requires an application to the court before money paid into court will be released, whether by the party entitled to the surplus under s. 380(4), or by the municipality after a deemed forfeiture under s. 380(7). The context of the appellant’s claim for relief from forfeiture is within a civil proceeding commenced by way of application under s. 380 of the Act.
[38] The origin of the court’s ability to grant relief from forfeitures and penalties was in the equitable jurisdiction of the Chancery Courts. Its scope was limited, available only for penalty clauses. It was also restricted to contracts concerning the transfer of proprietary or possessory rights: J. McGee, Snell’s Equity 3rd ed. (London: Sweet & Maxwell 2010), at para. 13-015.
[39] With the fusion of the courts of equity and common law (commencing in 1873 with the Administration of Justice Act, S.O. 1873, c. 8 and completed in 1881 with the Ontario Judicature Act, 1881, S.O. 1881, c. 5) the ability to grant relief from forfeiture was no longer restricted to the Chancery Courts. Section 16 of the Ontario Judicature Act, 1881 provided that “in every civil cause or matter commenced in the High Court of Justice” where equitable relief was claimed, the court was empowered to grant “such and the same relief as ought to have been given by the Court of Chancery… before the passing of this Act."
[40] Specific statutory authority for granting relief from penalties and forfeitures appeared first in the Ontario Judicature Act, following an amendment to that Act in 1886: S.O. 1886, c. 16, s. 38(b). Relief from penalties and forfeitures was included as “a rule of law” for “every civil cause or matter commenced in the High Court of Justice.” This new statutory power was quickly interpreted as having expanded the circumstances in which relief from forfeiture could be granted. See, for example, Townsend v. Toronto, Hamilton and Buffalo Railway Company (1898), 28 O.R. 195, where Meredith C.J. noted that it was “unnecessary to consider what, if any, limit was to be placed upon” the “wide general language of [the] provision” (at p. 199).
[41] The statutory provision was re-enacted in the various Judicature Acts, until the last was repealed and replaced by the Courts of Justice Act, 1984, S.O. 1984, c. 11, where it was placed under Part VII (originally as s. 111, and now s. 98).
[42] The broad wording of s. 98 and its application to civil proceedings, suggest, without more, that it should be available in this case, in the context of an application to obtain payment out of court of monies deemed to be forfeited to the Municipality.
[43] I turn to consider the two impediments that the application judge considered insurmountable in applying s. 98 in this case: first that, as a general principle, s. 98 would not be available to relieve from a statutory penalty or forfeiture, and second that relief from forfeiture is precluded in the absence of a specific discretion provided by the legislature as part of the “carefully crafted legislative scheme” for municipal tax sales.
(a) Penalty or Forfeiture Imposed by Statute
[44] The application judge referred to two lines of cases as authority that relief from forfeiture is not available to relieve from a penalty or forfeiture imposed by statute. The first is what I refer to as the McBride line of cases, which would preclude such relief as improperly interfering with the legislative function. However, this line of cases has been overtaken by a modern approach that rejects a categorical exclusion of s. 98 in the case of any forfeiture arising under a statutory scheme, and instead considers whether as a matter of statutory interpretation, s. 98 may apply.
[45] The second line of cases involves true penalties for breach of a statute, where it is clear that civil relief from forfeiture should not in any event be available.
(i) The McBride line of cases
[46] At issue in McBride v. Comfort Living Housing Co-operative Inc. (1992), 1992 CanLII 7474 (ON CA), 7 O.R. (3d) 394 (C.A.) was the termination of rights of occupancy in a co-operative housing building. The Court of Appeal, resolving a dispute that had waged in the lower courts, decided that the residential tenancy provisions of the Landlord and Tenant Act, R.S.O. 1990, c. L.7 did not apply. These included specific authority to grant relief against forfeiture. Finlayson J.A. referred to s. 98 of the Courts of Justice Act as a “general provision giving the courts power to relieve against all penalties and forfeitures”. He commented that he “[did] not rule out the equitable jurisdiction of the court to grant relief against forfeiture apart from the provisions of the [residential tenancy legislation]” (at p. 402), but noted that equitable relief from forfeiture had not been relied on. He went on to comment that s. 98 “apparently does not empower a court to relieve against penalties and forfeitures imposed by statute” (at p. 402), citing Webb v. Box (1909), 14 O.W.R. 802 (Div. Ct.), leave to appeal ref’d (1910), 15 O.W.R. 205 (C.A.).
[47] Both comments by the court are obiter. Relief from forfeiture under the Courts of Justice Act was not requested by the moving party, and the forfeiture in question arose under an occupancy agreement, not as the result of the failure to comply with a statutory requirement. Perhaps Finlayson J.A. was attempting to define the outer limits for such relief – that it would not “apparently” apply to a penalty or forfeiture “imposed by statute”. What he meant by a forfeiture imposed by statute was however not entirely clear.
[48] In fact, the case referred to by Finlayson J.A., Webb v. Box, involved a true breach of a statutory provision (illegal distress by a landlord), and its prescribed consequence (payment to the tenant of double the value of goods). The landlord claimed relief from forfeiture under the Judicature Act to reduce the payment to the tenant to the actual value of the goods seized. In refusing such relief at first instance, Chancellor Boyd commented that to do so “would be to repeal by adjudication what the legislature has distinctly provided for, not so much in the way of penalty as to afford protection to tenants against unwarrantable seizure and sales of property to the great detriment of the tenants’ rights” (at p. 804). Leave to appeal to this court was refused, with Meredith J.A. observing that to take away the double value damages would “repeal the statute” (at p. 208). Citing Keating v. Sparrow (1810), 1 Ball & B. 367, he went on to query, “…apart from these considerations, what power has the Court to relieve from even a penalty imposed by statute, except under R.S.O. 1897, ch. 108 [a predecessor of s. 5(1) of the Fines and Forfeitures Act]?”
[49] The main reason for the court’s refusal of relief in Webb v. Box was that the statutory scheme specifically provided for the payment of double value of the goods as the consequence of unlawful distress. Even if the requirement to pay double value of the goods seized were characterized as a penalty then the only power to relieve from such a penalty would be under the equivalent to the Fines and Forfeitures Act. Again, the comment about the limitations on equitable relief from forfeiture was obiter to the court’s decision.
[50] The origin of the statement that the court has no power to relieve against statutory penalties and forfeitures is the 1810 decision of the Irish High Court of Chancery in Keating v. Sparrow.
[51] Keating v. Sparrow however was decided when civil relief from forfeiture was limited to circumstances where the forfeiture was designed to secure the payment of money. More importantly, at the time of the decision there was no statutory provision for relief from forfeiture. The court was unwilling to apply equitable jurisdiction to override the legislative will expressed in a statute. The equitable jurisdiction to relieve against penalties and forfeitures has since been both expanded and legislated.
[52] Many cases took the approach referred to in obiter in McBride. An example is Johnson v. Dominion of Canada Guarantee and Accident Insurance Co. (1908), 12 O.W.R. 980 (C.A.), where this court held that relief from forfeiture under the Judicature Act was not available to relieve from the requirement of providing timely proof of loss under an insurance contract. The court was confronted with the sympathetic case of a claim made out of time for a survivor’s benefit through no real fault of the claimant. In overturning the decision of Chancellor Boyd advocating a liberal interpretation of the court’s power under the Judicature Act and granting relief from forfeiture, this court noted that the legislature had “gone to great pains to regulate contracts of insurance” (at p. 982). Meredith J.A. stated that it would be “legislation, not adjudication” to grant relief from forfeiture other than as provided under the insurance statute itself. By 1994 however, the Supreme Court of Canada rejected an argument based on Johnson and stated that the case was no longer good law, as the court wrongly treated the insurance legislation at issue as a statutory code: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490, at 505-506.
[53] The evolution in the court’s approach is reflected in State Farm Mutual Automobile Insurance Co. v. Ontario (Minister of Finance) (2001), 2001 CanLII 28051 (ON SC), 53 O.R. (3d) 436. In that case an insured failed to provide a proof of loss within the 90 days prescribed by a regulation under the Insurance Act, R.S.O. 1990, c. I.8. The application judge denied relief from forfeiture under s. 98 of the Courts of Justice Act, stating that it was questionable “whether the court has any jurisdiction to relieve against a penalty or forfeiture that is decreed by statute” (at para. 38), referring to authorities including McBride. He concluded that “even assuming there is some residual jurisdiction in the court to relieve against penalties and forfeitures imposed by statute” (at para. 40), he could not see how the jurisdiction could arise in a situation where the legislature has “occupied the field” and stipulated for relief to be given in certain defined conditions; conditions the party seeking relief had failed to meet (at paras. 37 and 32)
[54] On appeal to this court (reported as Kingsway General Insurance Co. v. West Wawanosh Insurance Co. (2002), 2002 CanLII 14202 (ON CA), 58 O.R. (3d) 251 (C.A.)), Sharpe J.A. concluded that the court should not exercise “any general discretion it might have” under s. 98 to grant relief from forfeiture, because the regulation in question “provides a scheme that contemplates extensions of the 90-day notice period in certain circumstances, and that, by implication, any general discretion a court might have to grant extensions in other circumstances is excluded” (at para. 13). Sharpe J.A. approached the issue not through a blanket prohibition against the use of s. 98 relief from forfeiture in instances of statutory forfeitures, but by considering the statutory scheme itself. The focus of the analysis was on whether “by implication any general discretion a court might have…is excluded”. In that case, the provision for relief from forfeiture contained in the regulation was considered to be exhaustive, and therefore no further relief was available under s. 98.
[55] The question is not whether there is a statutory scheme, but whether the language and scheme of the statute would exclude relief from forfeiture under s. 98. This is now firmly the approach taken in the case of forfeitures arising under insurance contracts governed by the Insurance Act. Relief from forfeiture under s. 98 is available where the insured’s breach constitutes imperfect compliance with a policy term and the specific relief from forfeiture provisions under the Insurance Act do not apply: Kozel v. Personal Insurance Co., 2014 ONCA 130 (CanLII), 119 O.R. (3d) 55. As LaForme J.A. noted in Kozel at para. 58:…in the absence of clear legislative intent indicating that s. 129 of the Insurance Act applies to the exclusion of s. 98 of the CJA, I would hold that the latter provision is available as an avenue of relief for contracts governed by the Insurance Act. [56] See also Lavoie v. T.A. McGill Mortgage Services Inc., 2014 ONCA 257 (CanLII), 119 O.R. (3d) 651, where this court upheld the ruling in Kozel that relief against forfeiture under s. 98 may be available, however the facts in Lavoie were not amenable to such relief.
[57] In my view, this is the approach that should govern in the present case. Section 98 is a statutory provision expressed in broad and general terms to be available in civil proceedings. Where a forfeiture occurs under a statutory scheme, the scheme should be examined in order to determine whether by necessary implication relief from forfeiture under s. 98 would be precluded.
(ii) Cases involving Penalties for Breach of a Statute
[58] The application judge also referred to a second line of cases in concluding that the court does not have the power to grant relief against statutory penalties and forfeitures. These cases involved, what I would refer to as “true statutory penalties” imposed for breach of a statutory provision. While, this is an appropriate limit on s. 98 relief from forfeiture, in my view, none of these cases would preclude reliance on s. 98 in the present case.
[59] In R. v. Canadian Northern Railway Co. (1922), 64 S.C.R. 264; on appeal to the Privy Council, [1923] 3 W.W.R. 547, the court held relief from forfeiture under the Alberta Judicature Act was not available to relieve from penalties for failure to pay taxes under federal taxation statutes (although the court concluded that the railway was not subject to taxation). In Canada (Attorney General) v. Wheeler, 1941 CanLII 84 (ON SC), [1944] O.R. 138 (H.C.J.), the court concluded that relief from forfeiture under the Judicature Act would not be available to relieve against a forfeiture of share warrants imported into Canada in contravention of orders and regulations under the War Measures Act.
[60] The application judge also referred to Mullen v. Flin Flon (City), 2000 MBCA 104 (CanLII), 193 D.L.R. (4th) 300, leave to appeal ref’d, 269 W.A.C. 160 (note). In that case, a taxpayer claimed relief from forfeiture of its property after a completed municipal tax sale, where the taxpayer had not received actual notice of the sale and the property was sold to municipal councillors at what was described as a “bargain basement” price. The court purported to follow the authority of the Canadian Northern and Wheeler cases to refuse relief.[6]
[61] None of these cases are determinative of whether relief from forfeiture should be available in the present case. First, both the Canadian Northern and Wheeler cases involved a forfeiture imposed as a consequence of the breach of a statute. As a matter of statutory interpretation, granting relief from forfeiture would amount to rewriting or repealing the statute, revoking the very consequence for breach of the statute that the legislature prescribed. Further, relief from forfeiture under the Judicature Act (and now the Courts of Justice Act) would not be available because the ability to grant such relief from forfeitures and penalties is in the context of civil proceedings, and not criminal or statutory offences.
[62] As for Flin Flon, it is only by regarding the sale of a taxpayer’s property in a tax sale as a forfeiture occurring as a penalty for failure to pay taxes that the analysis under the Canadian Northern and Wheeler cases would apply. Respectfully, the relief from forfeiture issue in that case could have been decided, not by referring to cases involving true statutory penalties, but by finding that relief from forfeiture would be contrary to the “carefully crafted legislative scheme” for tax sales, as the Supreme Court did in Zeitel v. Ellscheid, (discussed below at para. 66). The result would have been the same – it would be inconsistent with the finality and certainty of the scheme to permit an attack on a tax deed after a tax sale had taken place.
[63] I do not see this line of cases therefore as an impediment to the relief sought in the present case. The forfeiture of the surplus to the municipality under s. 380 is not a penalty for the taxpayer’s failure to pay taxes or breach of any other obligation, nor does it occur as the release of security for an obligation owed to the municipality. The municipality has already been made whole, having received the cancellation price consisting of the tax arrears, interest and its costs. The forfeiture does not occur in order to punish the property owner, but to ensure that the money, which belongs to the owner or other claimants at the time it is paid into court, does not sit in court unclaimed, in perpetuity. The forfeiture brings finality to the process where funds might otherwise remain in court and unclaimed. The forfeiture arises from the failure to meet a time limit, and not as the consequence of any breach of a statutory obligation.
[64] As such, I would find that there is no absolute bar to granting relief from forfeiture in relation to the forfeiture in this case simply because it occurs in the context of a statutory scheme. The issue is one of statutory interpretation. The question is whether relief from forfeiture is expressly or implicitly precluded.
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