Would the Canadian government ever try to seize investment property, mortgage investment security or any other valuable assets from law abiding taxpayers? The surprising answer is “yes.” Indeed, society’s best behaved and most productive citizens are vulnerable. There is a little-known provision in federal drug enforcement legislation which the government has been using to support such action and, regrettably, those never involved in substance-use or abuse have fallen prey. How so?
The Controlled Drugs and Substances Act (“CDSA”) is an important device in the federal government’s law enforcement arsenal. At the government’s request, it permits a court to order the seizure and restraint of any offence-related property pending the outcome of the offender’s criminal trial and, on conviction, complete forfeiture of the property to the government. “Offence-related property” under the CDSA includes any property, within or outside Canada, that is used in any manner in connection with the commission of a designated substance offence. An obvious example is a home used as a grow-op for the production of marijuana. If the Crown establishes reasonable grounds to believe that a house has been used as a grow-op, then a judge may make a restraint order under section 14(3) of the CDSA, “prohibiting any person from disposing of, or otherwise dealing with any interest in, the offence-related property specified in the order other than in such manner as may be specified in the order.” This section serves to prevent the disposition of offence-related property pending a criminal trial so that, if the accused is convicted, the Crown may seek, as part of the sentencing package, the property’s forfeiture to the government. These restraint and forfeiture provisions of the CDSA are intended by Parliament to serve as a general deterrent and to make offence related property unavailable for further criminal use and to impose a very high cost on the commission of a criminal offence.
All of this appears to be quite reasonable. The government must arm itself with powerful tools to fight crime. Other than the criminals themselves, no one would complain about the government’s seizure of a convict’s property.
The trouble is that the government does not believe that the CDSA should be limited only to participants in the alleged crime. On the contrary, the Crown says the statute empowers the government to tie up for indeterminate periods and ultimately to confiscate property even from those not charged with any offence. In two recent cases (Scotia Mortgage Corporation v. Leung, and Maple Trust Company v. Walton) involving foreclosures of alleged grow-op homes in B.C., the Crown argued that a CDSA restraint prevents mortgage lenders from foreclosing on their security before the criminal proceedings are concluded (even if that takes a number of years). The Crown said that it is necessary to stop the lenders’ foreclosures pending the outcome of the borrowers’ criminal trials because the mortgages themselves are liable to future CDSA forfeiture. After a borrowers’ conviction, the onus is on the lenders to prove that they were innocent of collusion or complicity in the crimes, and that they “exercised all reasonable care to be satisfied that the property was not likely to have been used in connection with the commission of an unlawful act.”
How does a mortgage lender prove that? How would a good citizen? Parliament doesn’t say, and that is not the Crown’s problem. Of course, the Crown never suggested that either Scotia Mortgage Corporation or Maple Trust Company participated in any way in the alleged drug cultivation. Those are large Canadian lending institutions interested only in the residential mortgage business, not drug cultivation, and it is absurd to even suggest that those lenders were complicit or parti¬cipated in any alleged criminal activity.
Both the B.C. Supreme Court and Court of Appeal ruled that clearly innocent lenders should not be dragged into the middle of their borrowers’ criminal disputes with the Crown, and they should not be delayed in their mortgage realization. At the time of writing, it is not yet known whether the Crown will appeal the B.C. rulings.
If a lender takes a mortgage security on a B.C. home that, through no fault of its own, was used as a grow-op, is it fair that its attempts to foreclose are delayed until after the criminal trial (and appeals) and it is forced to incur the legal expense of proving its innocence to protect its mortgage investment from the government? Fortunately, B.C. courts don’t think so. This may be because when a mortgage investment in Canada is made, the lender is more focused on the borrower’s creditworthiness than trying to assess the cost of litigation to oppose the government and realize on its security.