In Ontario (Attorney General) v. Norwood Estate, 2021 ONCA 493, Ontario’s Attorney General argued for a vast expansion of the scope of Ontario’s civil asset forfeiture scheme.

In smacking down the province’s Attorney General, Justice David M. Paciocco didn’t mince his words.

“Ontario’s interpretation [of s. 18.1 of the Civil Remedies Act] is illogical and incoherent.”

“In my view, if this court were to accept Ontario’s proposed interpretation, the potential for well-intentioned but abusive settlements is palpable.”

It’s a precedent-setting decision that defines clear limits on the scope of Ontario’s Civil Remedies Act.

The government argued for an interpretation of the act that would have allowed them to enter into settlements with third parties before the assets had been determined to be tainted by crime. The court rejected this interpretation, going so far as to call it absurd.

“This case shows how far the government is willing to go to expand their power to seize private property,” said CCF Litigation Director, Christine Van Geyn.

“The government argued that this legislation allows them to give away seized assets before there is any determination that those assets had been touched by crime. This incorrect interpretation of the law is a broad and vast expansion of their power. We are pleased that the Court of Appeal has created a clear limit on how this law can be used,” said Van Geyn.

“We were pleased to represent the CCF as intervenors in this important case, and applaud this result which sets clear limits on government power to dispense with private property,” said Jessica L. Kuredjian, who represented the CCF with Robert Sniderman of Cassels Brock & Blackwell LLP.

 

Case Overview

The case stems from the disposition of the estate of Michael Norwood, who died before he could face narcotics-related charges.

As a result of those charges and before Michael Norwood’s death, the Attorney General of Canada seized Norwood’s home at 11 Cassone Court and commenced proceedings to secure its forfeiture.

Pending Canada’s forfeiture proceedings, the Cassone Court property was sold on consent and the proceeds were paid into Canada’s Seized Property Management Directorate.

After Norwood’s death, Canada terminated its forfeiture proceedings, but before the proceeds of sale could be returned to Norwood’s estate, the Attorney General of Ontario sought its own forfeiture order under the Ontario Civil Remedies Act.

Michael Norwood’s mother, Rosa Norwood, notified Ontario of her claim to an interest in the Cassone Court property. Before Ontario’s forfeiture claim could be resolved, Ontario agreed with Rosa that she should receive $120,000 from the sale proceeds.

On May 6, 2020, pursuant to s. 18.1 of the Civil Remedies Act, Ontario moved for approval of this proposed “settlement”.

Michael’s estate (the “Estate”) and 947014 Ontario Inc. (“947”), a company Michael controlled before his death, opposed Ontario’s motion and the payment of funds to Rosa.

On June 4, 2020, the motion judge granted an order approving the “settlement” between Ontario and Rosa, which required payment of $120,000 to Rosa’s counsel in trust.

The appellants contend the motion judge erred in approving the agreement between Ontario and Rosa prior to a judicial determination that Ontario’s forfeiture claim was successful.

Put another way, their so-called “settlement” was not a settlement in the meaning of the Act at all, and therefore not properly subject to judicial approval under s. 18.1, because Ontario did not obtain a determination that the property and the subsequent the proceeds of its sale were “proceeds and/or instruments of unlawful activity.”

You can download and read the entire decision here: Ontario (AG) v Norwood Estate (PDF)

 

Highlights from the decision:

[102] First, Ontario’s interpretation is illogical and incoherent. It will be recalled that the motion judge approved a settlement in which Rosa was to be paid some, not all, of the sale proceeds of the Cassone Court property. If the order under appeal were to stand, in order to resolve what is to happen to the balance of those proceeds, an adjudicated hearing would be required to determine whether forfeiture is appropriate. What if, at that hearing, the court found that Ontario had not met its burden of establishing that the sale proceeds of the Cassone Court property are the proceeds and/or instruments of crime? Would Rosa be entitled to keep the $120,000, or would she have to return it?

[103] Ontario could not answer these questions. As I see it, neither alternative is logical or coherent. If Rosa were permitted to keep the money, under a proceeds of crime statute she would have received property that is not the proceeds or instruments of crime. If she were required to return the money, even leaving aside the logistical problems this would present, the law would, illogically and incoherently, be treating the settlement as having been lawful pursuant to s. 18.1, yet invalid.

[104] Second, Ontario’s interpretation would produce extremely unreasonable or inequitable outcomes. I am certain I have already betrayed my conviction that it would be unreasonable and inequitable in the extreme to permit courts to approve settlements between Ontario and others that deprive third parties of their rights in private property, without any inquiry into whether the subject property was tainted by unlawful activity. This outcome, which violates due process, is not merely hypothetical. It is the very position Ontario seeks to uphold in this appeal.

[105] Indeed, Ontario argues before us that s. 18.1 enables it to seek court approval for settlements it enters into with anyone authorized to receive payments from a special purpose account, pursuant to ss. 6 and 11 of the Act, without the need for prior judicial determination that the property was tainted by unlawful activity. If Ontario is correct, it would be permitted to seek approval for “settlements” it arrives at with alleged victims of entirely unproven crimes to compensate them using money that legally belongs to a suspect from whom it has been seized. In my view, if this court were to accept Ontario’s proposed interpretation, the potential for well-intentioned but abusive settlements is palpable.

[106] In contrast, there is nothing absurd about the in rem settlement interpretation of s. 18.1 I have described.

Conclusion on the correct contextual and purposive interpretation of s. 18.1
[109] In light of the foregoing application of the modern approach to statutory interpretation, I would find that the in rem settlement interpretation of s. 18.1, rather than Ontario’s proposed interpretation, best accords with the words of the Civil Remedies Act, read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of the legislature.

[110] Accordingly, I would accept the appellants’ submission that the motion judge erred in approving the agreement between Ontario and Rosa as a “settlement” in the meaning of s. 18.1.

CONCLUSION
[117] Properly interpreted, to constitute a “settlement in relation to a proceeding under this Act” in the meaning of s. 18.1(1) of the Civil Remedies Act, a proposed agreement must relate to the in rem property interests being litigated in the underlying forfeiture proceedings.

[118] Since Ontario did not establish that the proceeds of sale from the Cassone Court property were subject to forfeiture as the proceeds and/or instruments of unlawful activity, it never acquired a higher claim to the in rem rights in that property than all non-parties to its agreement with Rosa. It follows that Ontario’s agreement with Rosa was not a “settlement in relation to a proceeding under this Act” within the meaning of s. 18.1(1). Therefore, in my view, the motion judge erred in law in approving that agreement.

[119] Accordingly, I would allow the appeal and set aside the order under appeal, dated June 4, 2020, which purported to approve the “settlement” between Ontario and Rosa.