legalease
24 | fall 2016 cmba-achc.ca CMB MAGAZINE
Recovering lenders' costs in
forfeiture proceedings
SOME BACKGROUND
A number of federal and provincial statutes give
the Crown the right to take property (without
payment) that has been obtained by, used in, or
related to the commission of an offence. is
process is called forfeiture. Statutes vary as to the
circumstances in which forfeiture can occur and
the criteria that must be met for the Crown to
obtain it. (Generally, a court order is required.)
e property that is the subject of the
Crown application to the court for forfeiture
oen involves real estate in which a lender
has a mortgage security interest. Such lenders
are able to become involved in the court
application process to defend their interest in
the property from forfeiture. For example, the
lender may want to demonstrate that he or she
was not involved in, was not willfully blind to,
and/or was not complicit in the wrongful act
concerning the property. Most forfeiture statutes
contain such or similar provisions for the lender
to become involved in the proceedings.
e problem is that involvement in the
forfeiture process can be very time-consuming
and very expensive for the lender. Perhaps
for the lender who becomes involved in the
process and then loses, the expenditures of time
and money are just desserts for the connection
to the wrongful conduct that triggered the
process in the first place. However, what of the
lender who has not been involved in wrongful
conduct, yet is pulled into the process by the
Crown, thus threatening the lender's security
interest? What if the Crown's court action – at
least insofar as the interest of the lender is
concerned – is unreasonable?
e recent Ontario Court of Appeal case
of R. v. Fercan Developments Inc., 2016
(OntCA) 269 provides some hope in forcing
the Crown to act reasonably or otherwise risk
serious consequences.
What happened in the Fercan case?
In the Fercan case, the Crown was seeking
forfeiture of two real estate properties. e
application for forfeiture was brought under the
Controlled Drugs and Substances Act (CDSA).
One of the two properties was
approximately 450,000 square feet of space
situated on 35 acres of land. Parts of the
property that had been leased contained two
massive, highly sophisticated, indoor grow
operations. e owner's brother managed
the property, and used his position to take
extensive steps to hide the grow operations
and prevent anyone from inadvertently
finding them. A number of people, including
the owner's brother, were convicted under
the CDSA in relation to the grow operations.
One of Ontario's largest credit unions
Costs
Recovering
Lender's
A recent civil forfeiture proceeding offers
hope for lenders and property owners
BY RAY BASI, LL.B
STAFF, EDUCATION AND POLICY REVIEW
