Mortgage Broker

CMB MAGAZINE cmba-achc.ca fall 2016 | 27 legalease frequently financed the owner's acquisitions and had a mortgage against the property. e lender had conducted extensive due diligence prior to advancing the mortgage funds, including having made multiple visits to the property. e other property that was being pursued for forfeiture had been bought by the same owner for his brother and his brother's family. It was later sold to a different owner. is article will focus on the first of the two properties addressed above, as it is the one concerning a lender with a mortgage security interest. Seven years aer the discovery of the grow operations, the Crown applied under the CDSA to have the Court order the forfeiture of the two offence-related properties. On the 31st day of the 36-day trial, the Crown suddenly abandoned the proceedings against the lender. Ultimately, the forfeiture application was dismissed against the owners as well. e Court responded by ordering the Crown to pay almost $1 million in costs to the lender and the owners; the lender received $297,347.76 and the owners together received $616,551. Why the large costs award? e Court said this case is exactly the kind of situation in which the lender should not be forced to bear a grievous, imposed financial burden. When the Crown commenced the forfeiture application, it exercised the coercive power of the state and forced the respondents to participate in a lengthy and onerous proceeding to defend their legitimate property interests. e lenders had acted reasonably, were unaware of and not involved in the criminal activity, and did not profit from the illegal acts. Yet they were exposed to punishment and loss beyond their control because of the prosecution's marked and unacceptable departure from the reasonable standards expected of the prosecution. e Crown had: n pursued a forfeiture application that had no merit. (e application was based on extremely speculative evidence, and there was a lot of evidence to rebut the inferences drawn by the Crown. e Crown's case essentially hinged on the brother having been implicated in the grow operations.) n taken a hardball attitude throughout the forfeiture application process and was unwilling to change it. (For example, the Crown did not provide disclosure to the lender or the owners, as they were not charged with an offence.) n told the judge, in an earlier application on the file, that it had "serious concerns" about the lender. (It took that position without any supporting evidence and without having reviewed the evidence it had available.) n misunderstood the collateral mortgage that was, in line with the industry standard, registered at 24 per cent but had an actual interest rate of prime plus one per cent. (e Crown did nothing to properly understand the documents they had been reviewing. A proper understanding would have shown that the lender had not over-encumbered the offence-related property.) n not accepted the lender's offer to answer any questions and allay any concerns of the Crown. n delayed in getting a production order to obtain documents it said it needed, and then delayed even further in reviewing the evidence provided. (Toward the end of the trial and aer hearing the lender's evidence, the Crown finally abandoned its claim against the lender. e Crown already had the evidence it heard, in the documents it had received from the lender much earlier. It was clear the Crown had not reviewed the material.) n no real evidence of collusion or complicity on the part of the lender. (However, the Crown, without justification, questioned the lender's security interest and motives.) e Court said the Crown had some obligation to ensure that it was using its power in the public interest and to advance the interests of justice. It failed to discharge that obligation. e Court ordered that the Crown pay almost $1 million to the lender and the owners. It said that the objectives of both denouncing the Crown's conduct and deterring similar conduct in future cases justified the high award in this case. Future impact on lenders It remains to be seen whether the denunciation and the goal of deterrence will impact the Crown's conduct in future cases concerning forfeiture. Certainly the Fercan case was a criminal case, whereas most forfeiture cases now occur in the civil case arena. It is rare for cost awards to be made in criminal cases, so it was a particularly strong message that a large award – let alone any award – was made in the Fercan case. In the civil case arena, the general rule is that the loser in the court action pays a portion of the winner's costs, in accordance with a schedule attached to the court's rules. Courts have discretion to award costs beyond the usual lower amounts provided in the rules. It remains to be seen whether courts in the civil case arena will use their discretion to make greater awards of costs where a lender is subjected to the civil forfeiture process because of a Crown using its power unreasonably. It remains to be seen whether the denunciation and the goal of deterrence will impact the Crown's conduct in future cases concerning forfeiture

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