Max Realty Solutions Ltd. v. Canada (Attorney General)

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Federal Court (Canada)
• Judge: Strickland, J.
• Citation: (2014), 458 F.T.R. 160 (FC),2014 FC 656
• Date: 24 March 2014

Max Realty Solutions Ltd. v. Can. (A.G.) (2014), 458 F.T.R. 160 (FC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2014] F.T.R. TBEd. AU.019

Max Realty Solutions Ltd. (appellant) v. Attorney General of Canada (respondent)

(T-1869-09; 2014 FC 656; 2014 CF 656)

Indexed As: Max Realty Solutions Ltd. v. Canada (Attorney General)

Federal Court

Strickland, J.

July 4, 2014.

Summary:

The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) found that Max Realty Solutions Ltd. had committed four violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and imposed an administrative penalty of $27,000. Max Realty appealed.

The Federal Court dismissed the appeal from the determination that Max Realty had committed the violations, but allowed the appeal with respect to the penalty and remitted the matter to the Director for a redetermination of the quantum of the fine imposed.

Administrative Law - Topic 549

The hearing and decision - Decisions of the tribunal - Reasons for decision - Sufficiency of - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) found that Max Realty Solutions Ltd. had committed four violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and imposed an administrative penalty of $27,000 - The Federal Court allowed Max Realty's appeal with respect to the penalty and remitted the matter to the Director for a redetermination of the quantum of the fine imposed - Although the Director withdrew a fifth violation and therefore reduced the penalty stated in the Notice from $37,500 to $27,000, there was no evidence that the Director considered Max Realty's request that the penalty be revisited - There was no explanation as to why that penalty was chosen, what factors were considered, whether use of a compliance agreement was considered, or whether the exercise of the discretion afforded to the Director to impose the penalty proposed, a lesser penalty or no penalty was considered - Also, FINTRAC's internal fine policy was not provided to Max Realty - Without any reasons, or even reference to fines imposed in comparable circumstances, the court could not determine whether the fine imposed was reasonable - See paragraphs 75 to 79.

Administrative Law - Topic 2155

Natural justice - Administrative decisions or findings - Effect of failure of tribunal or official to give reasons for decisions - Sufficiency of reasons - [See Administrative Law - Topic 549 ].

Criminal Law - Topic 1995

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Defences - Due diligence - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) found that Max Realty Solutions Ltd. had, inter alia, failed to develop and apply written compliance policies and procedures that were kept up to date and approved by a senior officer contrary to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations - Max Realty appealed, asserting that it had exercised due diligence as it was supplied with an Office Compliance Manual and policies by its head office - The Federal Court noted that FINTRAC had requested that it be provided, in advance of the compliance examination, with a copy of Max Realty's compliance policies and procedures - The policy was not provided - Its absence was listed as a deficiency in FINTRAC's subsequent letter which also requested that within 30 days it be provided with an action plan for bringing Max Realty into compliance - No action plan was provided - Max Realty's subsequent response to the Notice of Violation indicated that it had developed and added the policy after the examination, but did not include a copy of the policy - It could reasonably be inferred that, even if the policy document existed at the time of examination, it was not then in Max Realty's possession - It was therefore inadmissible - Even if admissible, it was not a compliance policy within the meaning of the Act, but a reiteration of the obligations imposed by the Act and Regulations without an explanation of how Max Realty would comply with them - The Director's decision was reasonable - Absent any evidence that Max Realty took reasonable steps to implement a policy before the examination date, due diligence was not established - See paragraphs 63 to 66.

Criminal Law - Topic 1995

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Defences - Due diligence - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada found that Max Realty Solutions Ltd. had, inter alia, failed to appoint a person to be responsible for the implementation of a compliance program contrary to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations - Max Realty appealed, raising the defence of due diligence - Max Realty asserted that it had appointed Ghovanloo at the time of the examination and that, subsequently, it had appointed Mirkhan - The Federal Court stated that the only evidence of an appointment was the letter from Max Realty to the Director which indicated that Mirkhan had been appointed after the compliance examination and made no reference to a prior officer - Max Realty was aware of the requirement to appoint a compliance officer but failed to provide satisfactory evidence that it took reasonable steps to avoid committing the violation by appointing an officer prior to the examination date - Due diligence was not established - See paragraphs 56 to 62.

Criminal Law - Topic 1995

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Defences - Due diligence - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada found that Max Realty Solutions Ltd. had, inter alia, failed to assess and document the risk referred to in s. 9.6(2) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, taking into consideration the prescribed factors set out in s. 71(1)(c) of the Regulations - Max Realty appealed, asserting that it exercised due diligence by consulting with a lawyer and obtaining the Canadian Real Estate Association Risk Assessment (CREA) form - The Federal Court stated that the only evidence on the record concerning the risk assessment was the CREA form which was a blank form with no information entered onto it - Although Max Realty submitted that a completed "Risk Assessment for Brokerage Form" had been duly accomplished, that document was ruled inadmissible as it was dated after the compliance examination - Given those facts, the Director's decision was reasonable - Absent any evidence that reasonable steps were taken to effect a risk assessment before the examination date, due diligence was not established - See paragraphs 67 and 68.

Criminal Law - Topic 1995

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Defences - Due diligence - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada found that Max Realty Solutions Ltd. had, inter alia, failed to develop and maintain a written ongoing compliance training program contrary to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations - Max Realty appealed, asserting that it exercised due diligence by having its compliance officer train its agents and by having a lawyer attend at its offices on two occasions to train its staff - The Federal Court held that the Director's decision was reasonable - While there was evidence that Max Realty took some steps to train its staff, those steps did not amount to reasonable steps to effect an ongoing compliance training program and, therefore, due diligence was not established - See paragraphs 69 and 70.

Criminal Law - Topic 1995

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Defences - Due diligence - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada found that Max Realty Solutions Ltd. had committed four violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and imposed an administrative penalty of $27,000 - Max Realty appealed, raising the defence of due diligence - The Attorney General of Canada asserted that since Max Realty did not specifically raise a due diligence defence in the written representations to the Director, it should not be permitted to challenge the decision on that ground - The Federal Court stated that some context was required to address the Attorney General's assertion - The court discussed Part 4.1 of the Act which addressed notices of violation, compliance agreements and penalties - The right to appeal to the court was contained in s. 73.21 of the Act which stated that on appeal, the court could confirm, set aside or, subject to any regulations made under s. 73.1(1)(c), vary the Director's decision - Section 73.24(1) provided that due diligence was a defence "in a proceeding" in relation to a violation - Given that context, it was not apparent that when a person or entity was issued a notice of violation and elected to make representations to the Director respecting the violation, the due diligence defence was lost on appeal if not explicitly pleaded in the submissions to the Director - However the question did not have to be decided as the evidence did not establish that due diligence had been exercised - See paragraphs 49 to 53.

Criminal Law - Topic 1995

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Defences - Due diligence - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) found that Max Realty Solutions Ltd. had committed four violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations - Max Realty appealed, raising the defence of due diligence - The Attorney General of Canada asserted that Max Realty could not rely on the first branch of the due diligence test because it had not claimed that it had reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent - The Federal Court noted that, in any event, to succeed on that branch of the test, a defendant must have a reasonable belief - Max Realty was aware of the FINTRAC requirements but did not take them as seriously as it should have - It failed to fully inform itself of the compliance measures required of it - Therefore, it did not reasonably believe that its compliance efforts met the legislative requirements - See paragraph 71.

Criminal Law - Topic 1997

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Appeals (incl. standard of review) - The Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) found that Max Realty Solutions Ltd. had committed four violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations and imposed an administrative penalty of $27,000 - Max Realty appealed - The Federal Court stated that "... The function of FINTRAC, and the Director, is to assess compliance with the requirements of the Act and Regulations, to detect and deter money laundering and the financing of terrorism. It is a specified regime over which FINTRAC has jurisdiction. The question before the Director was whether Max Realty complied with the subject provisions of the Regulations which is a question of mixed fact and law as it required that the Director interpret the requirements of those provisions and apply the facts of this case to them to determine whether there had been compliance. Though worded as an appeal, this is a type of judicial review and attracts the standard of reasonableness ..." - See paragraph 31.

Criminal Law - Topic 1999

Offences against property - Money laundering and terrorist financing legislation - Compliance offences - Penalties - [See Administrative Law - Topic 549 ].

Cases Noticed:

New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 24].

Khosa v. Canada (Minister of Citizenship and Immigration), [2009] 1 S.C.R. 339; 385 N.R. 206; 2009 SCC 12, refd to. [para. 24].

Canada (Attorney General) v. Mowat, [2011] 3 S.C.R. 471; 422 N.R. 248; 2011 SCC 53, refd to. [para. 24].

Newfoundland and Labrador Nurses' Union v. Newfoundland and Labrador (Treasury Board) et al., [2011] 3 S.C.R. 708; 424 N.R. 220; 317 Nfld. & P.E.I.R. 340; 986 A.P.R. 340; 2011 SCC 62, refd to. [para. 25].

HBC Imports v. Canada Border Services Agency (2013), 446 N.R. 352; 2013 FCA 167, refd to. [para. 25].

Agraira v. Canada (Minister of Public Safety and Emergency Preparedness) et al. (2013), 446 N.R. 65; 2013 SCC 36, refd to. [para. 27].

Mega International Commercial Bank (Canada) v. Canada (Attorney General) (2012), 407 F.T.R. 232; 2012 FC 407, refd to. [para. 29].

Doyon v. Canada (Attorney General) (2009), 395 N.R. 176; 2009 FCA 152, refd to. [para. 31].

Rowan et al. v. Ontario Securities Commission (2012), 290 O.A.C. 159; 110 O.R.(3d) 492; 2012 ONCA 208, refd to. [para. 31].

R. v. Sault Ste. Marie (City), [1978] 2 S.C.R. 1299; 21 N.R. 295, refd to. [para. 47].

Laperrière v. MacLeod et al. (2011), 411 N.R. 174; 2011 FCA 4, refd to. [para. 47].

Cactus Café Turner Road Ltd. v. General Manager, Liquor Control and Licensing Branch (B.C.), [2010] B.C.T.C. Uned. 1691; 2010 BCSC 1691, refd to. [para. 52].

Guild Contracting Specialties (2005) Inc. v. Occupational Health and Safety Appeal Panel Nova Scotia et al. (2012), 321 N.S.R.(2d) 95; 1018 A.P.R. 95; 2012 NSCA 94, refd to. [para. 52].

Canadian Human Rights Commission v. Warman et al. (2014), 456 N.R. 200; 2014 FCA 18, refd to. [para. 78].

Lemire v. Canadian Human Rights Commission - see Canadian Human Rights Commission v. Warman et al.

Counsel:

Shahin Mirkhan, for the appellant;

James Gorham, for the respondent.

Solicitors of Record:

Shahin Mirkhan, Toronto, Ontario, for the appellant;

William F. Pentney, Deputy Attorney General of Canada, Toronto, Ontario, for the respondent.

This appeal was heard at Toronto, Ontario, on March 24, 2014, by Strickland, J., of the Federal Court, who delivered the following reasons for judgment on July 4, 2014.