2008 BCSC 824 British Columbia (Civil Forfeiture) v. Cheung

Before: The Honourable Mr. Justice Metzger

Reasons for Judgment

(In Chambers)

Counsel for the Plaintiff: Attorney General of B.C.	D.J. Carvello
Counsel for the Defendant: Wai Keung Cheung	D.H. Murray
Date and Place of Trial/Hearing:	20080619
	Victoria, B.C.

[1] The applicant seeks an interim preservation order under s. 8 of the Civil Forfeiture Act, S.B.C. 2005, c. 29, as amended (the "CFA") on the terms set out in the notice of motion in this action dated June 6, 2008.

[2] On April 22, 2008, the Director of Civil Forfeiture (the "Director") filed an endorsed writ of summons seeking remedies against the defendants under the CFA. This action is an in rem action brought against the property at 4382 Blair Drive, Richmond, British Columbia (the "Property").

[3] A certificate of pending litigation was registered on the Property on April 23, 2008.

[4] The defendant had an offer to purchase for the property. The defendant and the plaintiff appeared before me on May 30, 2008. I ordered the Property was to be sold under the terms and conditions of the contract of purchase and sale and the proceeds of sale less the amount in respect of outstanding principle, interest and penalties payable to discharge the TD Bank mortgage, any taxes due and owing at the time of the sale and the reasonable realty and legal fees and disbursements directly related to the sale of the Property shall be held in trust by Douglas Murray and stand in the place of the Property; and further that the proceeds ("Net Proceeds") are restrained to the same extent of the Property, and are subject to forfeiture pursuant to the CFA as if the Net Proceeds are that Property. The sale completed.

[5] The TD Bank has been paid the amount due and owing under the mortgage registered under reference number BA404673, it is submitted that TD Bank has ceased to be a necessary party to these proceedings: British Columbia Supreme Court Rule 15(5)(a)(i).

[6] On June 9, 2008, the Director filed a statement of claim.

[7] The Director submits that the Property has been used as an instrument of unlawful activity with the meaning of the CFA.

[8] For the purposes of this application, the defendant admits that the plaintiff has established on the balance of probabilities the following:

(a) there was a large marijuana grow operation at 4382 Blair Drive on the date of the police raid, and such was an illegal activity;

(b) the defendant's brother Clement Cheung and his wife Wing Yan Tammy Tsui ("Tammy") were complicit in that illegal activity;

(c) the defendant was the registered owner of the Property at the material time and Clement Cheung and Tammy and their children were tenants;

(d) the defendant has sold the Blair Drive Property and his counsel is holding the sum of $250,104.73 in trust pursuant to my order of May 30, 2008.

[9] The plaintiff's position is that the defendant Cheung, and his brother, Clement, are the persons in control and beneficial owners of the Property and that the defendant Cheung is merely a nominee owner on behalf of his brother and the defendant Cheung had knowledge of, was party to, and/or acquiesced to the offences of possession, production, provision, selling and trafficking of marijuana within the definition of the Controlled Drugs and Substances Act, 1996, c. 19 ("CDSA"). Thus, the plaintiff wants the funds preserved on an interim basis so that a hearing can be held for the Director to seek forfeiture of the money in trust.

[10] The CFA authorizes the Director to seek the forfeiture of property that is either the proceeds of or the instrument of unlawful activity.

[11] The purpose of the CFA is the suppression of conditions likely to favour commission of crimes and to impose civil consequences for property that is found to have been acquired as a result of, or to have been used in the course of, unlawful activity by making such property the subject of a forfeiture order to the government and to provide compensation for victims of unlawful activity: Ontario (Attorney General) v. Chatterjee (2007), 282 D.L.R. (Ont. C.A.), at paras. 18, 19 and 30; British Columbia (Director of Civil Forfeiture) v. Angel Acres Recreation and Festival Property Ltd., [2007] B.C.J. No. 2475, at para. 19.

[12] Section 3 of the CFA empowers the Director to bring forfeiture proceedings in the following circumstances:

3 (1) The director may apply to the court for an order forfeiting to the government

(a) the whole of an interest in property that is proceeds of unlawful activity, or

(b) the portion of an interest in property that is proceeds of unlawful activity.

(2) The director may apply to the court for an order forfeiting to the government property that is an instrument of unlawful activity.

[13] Section 1 of the CFA defines "instrument of unlawful activity" as property that:

1. (a) 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, ...

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

(i) result in the acquisition of property or an interest in property, ...

[14] "Unlawful activity" is defined as an act or omission that is an offence under a federal or British Columbia statute or, where the act or omission took place in another jurisdiction, would be an offence if it occurred in British Columbia.

[15] The CFA is not conviction-based. It is not necessary for a conviction to have occurred in order for an act or omission to meet the definition of "unlawful activity". Forfeiture of the property and, in this case, the Net Proceeds, is not dependent on a finding that the defendant Cheung engaged in unlawful activity; all that has to be established is that the property is an instrument of unlawful activity: Chatterjee at para. 42.

[16] The test for granting the relief sought is found within s. 8(5) of the CFA:

8. (5) Unless it is not in the interests of justice, the court must make an interim preservation order applied for under this section if the court is satisfied that one or both of the following constitute a serious question to be tried:

(a) whether the whole or the portion of the interest in property that is the basis of the application under subsection (1) is proceeds of unlawful activity;

(b) whether the property that is the basis of the application under subsection (2) is an instrument of unlawful activity.

[17] The standard of proof to establish that the Property is an instrument of unlawful activity is to be made on a balance of probabilities: see s. 16 CFA.

[18] Is there a serious issue to be tried? In British Columbia (Director of Civil Forfeiture) v. Tse, 2007 BCSC 995, at paras. 16 and 17 the Court concluded that the evidence met what was characterized as the "relatively low requirement" of then s. 8(5) of the CFA:

16 ... As in Peterson, it is not "an unreasonable inference" that the illegal drug activities carried on in the residence contributed to its purchase. Nor is it unreasonable to conclude, given the paraphernalia found in the residence, that it was being used as an instrument of illegal activity.

17 I note that counsel for Tse has suggested that there are a number of legal issues, including a constitutional question, which may arise from this Act, and that it may be that the Crown's case against Tse is weak. However, those matters may be canvassed fully at the trial of this action. The order that I am making is an interim order only.

[19] I note that the "relatively low requirement" is now even lower as the definition of "instrument of unlawful activity" has been amended by the addition of the words "or was likely to" in s. 1(a)(i) and (a)(ii). This amended definition applies in this case.

[20] The evidence is that the rent on this property was paid by Clement and/or his realtor wife.

[21] The evidence is that the Property has been used to engage in unlawful activity, that is, the possession, production and provision of controlled substances within the definitions contained in s. 2 of the CDSA. The evidence reasonably supports the inference that the marijuana was produced for sale, and thus the activity likely resulted in the acquisition of property, namely cash.

[22] In the present case, as in Tse, there are reasonable grounds for the belief that the unlawful activity at the Property generated a financial benefit for the defendant Cheung, being rent received from his brother and sister-in-law, and that financial benefit in turn was used to reduce the debt obligation on the Property.

[23] Thus, I conclude there is a serious issue to be tried.

[24] The factual allegations in this action will be explored more fully at trial, with the benefit of pre-trial disclosure and examinations for discovery. An application for a preservation order does not constitute a full resolution of the forfeiture proceeding. In this case, it ensures there is no distribution of the Net Proceeds, pending a final resolution.

[25] Therefore, I make the following order:

1. The net proceeds (the “Net Proceeds”), as such term is defined in the Order of Mr. Justice Metzger made and entered on May 30, 2008, from the sale of the land and structures at 4382 Blair Drive, Richmond, British Columbia, having a legal description of PID 023-897-376, Lot 59, Section 35, Block 5 North Range 6 West, New Westminster District, Plan LMP35075 (the “Property”) under the contract of Purchase and Sale dated April 5, 2008 between Wai Keung Cheung and Sau Yin Amy NG, and any attached Addenda, currently held in trust by Douglas H. Murray, Barrister and Solicitor, must be paid into the British Columbia Supreme Court and be restrained and preserved for the duration of this action, subject to further Order of the Court or agreement by the Plaintiff and Defendant, Wai Keung Cheung.

2. The Net Proceeds stand in the place of the Property and are restrained and preserved to the same extent as the Property, and are subject to forfeiture pursuant to the Civil Forfeiture Act, S.B.C. 2005, c. 29, as amended, as if the Net Proceeds are that Property pending the duration of this action, subject to further Order of the Court or agreement by the Plaintiff and Defendant, Wai Keung Cheung.

3. All persons are hereby prohibited from disposing of, or otherwise dealing with any interest in the Net Proceeds, in any manner whatsoever, except as provided in this Order, or as may be further ordered by this Court, or as agreed by the Plaintiff and Defendant, Wai Keung Cheung.

4. The Defendant, The Toronto-Dominion Bank, having ceased to be a necessary party to the proceeding, cease to be a party.

5. The Plaintiff, or the Defendant, Wai Keung Cheung, may apply to set aside or vary the Order sought upon giving 7 clear days notice to the other of the intention to do so.

"R.W. Metzger, J."

The Honourable Mr. Justice Metzger

Citation:	*British Columbia (Civil Forfeiture) v. Cheung,*
	2008 BCSC 824