The effects of forfeiture on third parties.

• Author: Davis, Kevin E.
• Position: Canada

Canada's federal government has recently expanded the scope of its criminal forfeiture legislation to include property that represents proceeds of crime, property that represents instruments of crime, as well as property that is owned or controlled by a terrorist group. Meanwhile, provincial governments in Ontario and Alberta have enacted novel legislation providing for so-called civil forfeiture. These developments suggest that Canadian lawmakers have become increasingly interested in pursuing property, as opposed to people, associated with criminal activity.

This article is concerned with how forfeiture affects the interests of parties who are not suspected of being complicit in the criminal activity that has motivated the forfeiture ("third parties"). Third parties include original owners or transferees of property subject to forfeiture as well as holders of security interests therein. Both the federal and provincial regimes grant judges--and, in some cases, the executive--remarkable amounts of discretion over whether and how to protect the interests of third parties. This article argues that this discretion creates undesirable legal uncertainty. It goes on to suggest ways in which legislation can be reformed, and judicial discretion structured, to ensure that the burden of achieving the public goals that motivate forfeiture does not fall disproportionately upon third parties.

Le gouvernement federal un Canada a recemment etendu la portee de sa legislation sur la confiscation de biens en matiere criminelle pour y inclure notamment les biens issus du crime, les biens ayant servi comme instruments du crime, et les biens possedes ou controles par un groupe terroriste. En parallele, les gouvernements provinciaux de l'Ontario et de l'Alberta ont mis en vigueur de nouvelles lois permettant la soi-disant >. Ces developpements suggerent que les legislateurs canadiens deviennent de plus en plus interesses a pourchasser les biens, plutot que les personnes, associes a l'activite criminelle.

Cet article etudie comment la confiscation des biens peut affecter les interets de parties qui ne sont pas soupconnees de complicite avec l'activite criminelle justifiant la confiscation (>), ce qui inclut les proprietaires, les titulaires, et les detenteurs d'interets sur les biens faisant l'objet d'une telle mesure. Les regimes provinciaux et federanx accordent tous deux anx juges--et darts certains cas, a l'executif--un large pouvoir discretionnaire quant a la pertinence et la maniere de proteger les interest des tiers. Cet article tend ademontrer que cette discretion cree une incertitude juridique indesirable. L'anteur suggere des avenues par lesquelles la legislation pourrait etre reformee et la discretion judiciaire stucturee, afin d'eviter que l'atteinte des objectifs publics justifiant la confiscation de biens n'impose un fardeau disproporfionne anx tiers.

Introduction

In recent years, law enforcement agencies around the world have become increasingly interested in pursuing property, as opposed to people, associated with criminal activity) Canadian law enforcement agencies are no exception to this trend, as evidenced most recently by the federal government's decision to expand the scope of its forfeiture legislation and the Ontario and Alberta governments' pathbreaking decisions to enact their own legislation providing for so-called civil forfeiture.

There has been considerable debate in Canada and elsewhere about the merits of forfeiture legislation. (2) Much of that debate focusses on the effect of forfeiture on people who have committed, or at least are suspected of committing, criminal activity. This article, however, is concerned with a different topic, namely, the potential impact of forfeiture legislation on parties not suspected of being complicit in (i.e., capable of being charged as parties to) the criminal activity that has motivated the forfeiture ("third parties").

Issues of this sort are bound to arise in connection with the application of forfeiture legislation. Suppose, for example, that an automobile is used to commit a crime. As we will see, both federal and provincial law, at least in Ontario, allow the government to apply to have the car forfeited as an instrument of crime. But what if the offender borrowed the automobile from someone else (with or without their consent)? Or what if he leased it? What if the car is subject to a security interest in favour of the bank? Or what if it is jointly owned by the offender and his spouse? Alternatively, imagine that the car was either bought or leased with the proceeds of a crime. Should the lessor's interest be affected by the forfeiture? What if the car is subsequently sold or given to a bank as collateral for a loan?

Any workable forfeiture regime must provide some mechanism for determining how forfeiture will affect the interests of the third parties involved in each of these cases, and no assessment of the merits of any given regime can be complete unless it takes that mechanism into account. Surprisingly, however, in Canada at least, there has been relatively little analysis of those effects in the secondary literature. (3)

This article provides a review and critique of Canadian law concerning the effects of forfeiture on third parties. On the assumption that this area of the law will be relatively unfamiliar to most readers, Part I provides a fairly detailed discussion of the various circumstances in which a forfeiture order can be made under federal law and the provincial legislation recently enacted in Ontario and Alberta. Part II discusses the potential impact of forfeiture on third parties, taking into account the statutory provisions designed to protect third parties and the manner in which they have been interpreted by the courts. Part III focusses on the disadvantages associated with the most striking feature of the law in this area: the fact that current law gives judges and, in some cases, the executive, a great deal of discretion as to whether, or to what extent, to protect third parties, even innocent ones, from forfeiture. Part IV discusses how various policy considerations might inform the formulation of rules or guidelines designed to resolve the uncertainty that currently plagues this area of the law. In light of that discussion, Part V provides suggestions for reform of both Canada's forfeiture legislation and judicial practice.

1. The Circumstances in which a Forfeiture Order Can Be Made

   Canadian law permits forfeiture orders to be made in respect of three broad classes of property: proceeds of crime, instruments of crime, and property owned or controlled by terrorist groups. The provisions that apply to each of these classes of property are discussed below.

   1. Proceeds of Crime

      * Criminal Code

      At the federal level, the general provisions concerning forfeiture of proceeds of crime are contained in Part XII.2 of the Criminal Code. (4) Section 462.37 of the Criminal Code now permits a court imposing sentence for just about any indictable offence created by federal legislation (a "designated offence") to order that property that constitutes proceeds of crime be forfeited? (Previously this power was only available in respect of a more limited set of offences.) Proceeds of crime are defined as "any property, benefit or advantage" that is "obtained or derived directly or indirectly as a result of" the commission of the relevant offence. (6) This definition is obviously intended to include not only the original property derived from the commission of an offence, but also property into which the original property can be traced. (7)

      Part XII.2 of the Criminal Code provides for the forfeiture of proceeds of crime that both do and do not relate to the offence for which the offender is being sentenced. (8) In the former case, the court is required to make a forfeiture order once it is satisfied on the balance of probabilities that the property constitutes proceeds of crime and relates to the offence in question. (9) In making this determination, the court is permitted to infer that property was derived from the commission of an offence where the value of all of the offender's property after the commission of an offence exceeds the value before the commission of the offence and where the offender's income from sources other than designated offences cannot reasonably account for the difference. (10) The code also permits a court to make a forfeiture order in respect of property that is not necessarily derived from the offence for which the offender is being sentenced. So long as the court is satisfied beyond a reasonable doubt that the property is the proceeds of crime, it may make a forfeiture order in respect of the property, even if the evidence is not sufficient to establish that the property relates to the offence for which the offender is being sentenced. (11)

      * Remedies for Organized Crime and Other Unlawful Activities Act (Ontario)

      In December 2001, the Ontario legislature enacted the Remedies for Organized Crime and Other Unlawful Activities Act, 2001. (12) This pathbreaking piece of legislation permits Ontario's attorney general to initiate judicial proceedings to obtain orders forfeiting proceeds of "unlawful activity". The term "unlawful activity" is defined as an act or omission that constitutes an offence under either federal, provincial, or territorial legislation in Canada, or "is an offence under an Act or jurisdiction outside Canada, if a similar act or omission would be an offence under an Act of Canada or Ontario if it were committed in Ontario ..." (13)

      The Ontario forfeiture legislation differs from the federal proceeds of crime legislation in four main respects. First, because of the breadth of the definition of the term "unlawful activity", the Ontario legislation applies to proceeds of crime derived from a much larger set of predicate offences.

      Second, the Ontario legislation and the federal Criminal Code...