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Restitution - Juristic Reason - Policy Reasons and Reasonable Expectations (Stage 2) (2). 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 arguments for the 'juristic reason' element for restitution, specifically it's 'policy reasons and reasonable expectations' (Stage 2) form:(iv) Is there a juristic reason for the Crown to retain the forfeited funds claimed by Travelers?
[51] The Crown argues that Part XII.2 of the Criminal Code is a comprehensive statutory regime relating to proceeds of crime, including its seizure, restraint, and forfeiture, and s. 462.42 specifically provides the complete statutory framework allowing for relief from forfeiture of property that is otherwise lawfully forfeited to the Crown. Travelers’s claim does not comply with the statutory provisions under s. 462.42 because it is not “an interest in property forfeited” but a claim for losses that might have otherwise been ordered as restitution by the sentencing judge.
[52] I disagree. As I explained earlier in these reasons, Travelers’s claim is “an interest in property that is forfeited” – it arises by way of a constructive trust because of the particular circumstances of this case. As Travelers has an interest in the property forfeited under s. 462.42, this factor distinguishes Gladstone v. Canada, 2005 SCC 21, [2005] 1 S.C.R. 325, on which the Crown relies. In Gladstone, the respondents were claiming interest as an equitable remedy beyond the statutory scheme in addition to their interest in the property forfeited. The Supreme Court was satisfied that the statutory scheme in that case was a complete code that did not provide for the payment of interest on property seized. That is not the case here.
[53] The forfeiture provisions under the Criminal Code do not provide a juristic reason for the Crown to keep the erroneously forfeited funds that should have been paid to Travelers. The purpose of the forfeiture provisions is to deprive wrongdoers of the profits of their crimes, not victims and innocent third parties who have a legitimate interest in the forfeited proceeds. As a result, the forfeiture provisions are subject to the rights of persons who have an interest in the property and who are seeking an exemption from their operation. The forfeiture provisions of the Criminal Code do not constitute either a disposition of law or statutory right, or obligation, which would permit the Crown to keep the enrichment; they provide a mechanism whereby the Crown can seek a court order depriving a wrongdoer of the profits of crime: 1431633 Ontario Inc., at para. 57.
[54] The Crown has not provided any other juristic reason for the enrichment. Moreover, in considering whether there is a juristic reason for the Crown’s enrichment, it is also necessary to take into account the reasonable expectations of the parties and the relevant public policy considerations: Garland, at para. 46; Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at para. 43. Those factors favour Travelers.
[55] Here, the reasonable expectations of the parties were that the Crown would put forward Travelers’s subrogated Xpertdoc claim before the sentencing judge for restitution. As the application judge found, the Crown erroneously omitted to do so. Further, s. 462.41(1) creates a statutory obligation to provide notice to parties who may have an interest in the property that the Crown seeks to forfeit as proceeds of crime. Moreover, it is the Crown’s responsibility to bring any known claim to the court’s attention so that notice may be provided: Connolly NLCA, at paras. 14, 16. The Crown was aware of Travelers’s subrogated claim, it was within the reasonable expectation of the parties that the Crown would fulfill its responsibility and identify Travelers to the court as an interested party to whom notice of the forfeiture application would be given. Again, the Crown did not do so.
[56] I reject the Crown’s submission that the issue of service of notice of the forfeiture hearing was of no moment. The failure to provide notice of a forfeiture hearing is “a factor to be considered in interpreting any apparent statutory limitations and requirements for a post forfeiture application under s. 462.42”: Connolly v. R., 2004 NLTD 228, [2005] 243 Nfld. & P.E.I.R. 226, at para. 40, aff’d Connolly NLCA. This reflects the recognition by Parliament that persons who are innocent of complicity in the criminal activity in issue and who have an interest in the property to be forfeited deserve an opportunity to be heard in order to protect their interests.
[57] In the circumstances of this case, had the Crown properly identified Travelers’s interest in the forfeited property to the court, at least because of its payment of the ransom, Travelers would have received notice of the Crown’s forfeiture application, which was scheduled to take place at the same time as the sentencing hearing. Travelers would have been able to attend and make submissions at the forfeiture hearing. As earlier noted, the rights of victims to participate with respect to restitution are addressed through the Crown at a sentencing hearing. However, had Travelers received notice of the Crown’s forfeiture application, it would have been in a practical position to note the Crown’s omission with respect to Xpertdoc’s subrogated claim and to have the omission corrected and its claim put before the sentencing judge prior to forfeiture being ordered.
[58] There is no public policy consideration in these circumstances that would favour the Crown retaining the funds that should and would have been paid to Travelers but for the Crown’s erroneous omissions. It is well established that the erroneous payment of monies to one party that should have been paid to another amounts to an unjust enrichment and may give rise to a constructive trust. As the Supreme Court instructed in Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303, at para. 44:The authorities on this point make clear that the measure of the plaintiff’s deprivation is not limited to the plaintiff’s out-of-pocket expenditures or to the benefit taken directly from him or her. Rather, the concept of “loss” also captures a benefit that was never in the plaintiff’s possession but that the court finds would have accrued for his or her benefit had it not been received by the defendant instead [Emphasis added. Citation omitted.] [59] Granting relief from forfeiture to Travelers in the circumstances of this case does not expand the law of constructive trust or the duties of the Crown towards victims and innocent third parties. It bears repeating that the Crown is not a guarantor or trustee of claims under the restitution and relief from forfeiture provisions of the Criminal Code. The imposition of a constructive trust in favour of Travelers arises on the unique circumstances of this case.
[60] For these reasons, I conclude that Travelers has a valid claim for unjust enrichment supporting a constructive trust over the portion of the proceeds forfeited to the Crown in the amount of Xpertdoc’s claim that was paid out by Travelers as at the time of sentencing.
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