Date: 20130327
Docket: A-323-12
Citation: 2013 FCA 89
CORAM: PELLETIER
J.A.
GAUTHIER
J.A.
MAINVILLE
J.A.
BETWEEN:
MR. ROBERT DOCHERTY
Appellant
and
MINISTER OF PUBLIC
SAFETY AND
EMERGENCY PREPAREDNESS
Respondent
REASONS FOR JUDGMENT
PELLETIER J.A.
[1]
This is an
appeal from the decision of Mr. Justice Phelan of the Federal Court, reported
as Docherty v. Canada (Minister of Public Safety and Emergency Preparedness),
2012 FC 723, [2012] F.C.J. No. 701.
[2]
This matter
arises under the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act, S.C. 2000, c. 17 (the Act). On November 8, 2010, Mr. Docherty,
who was about to board an international flight at Pearson International Airport,
was asked by an agent of the
Canada Border Services Agency (CBSA) whether he had $10,000 or more in cash on
his person. Mr. Docherty declared that he had cash but that it was less than
$10,000. The currency was produced and it consisted of $9,880 in U.S. funds
and $335 in Canadian funds. When CBSA applied what it considered to be the
appropriate exchange rate, the total amount exceeded $10,000 by a small
amount. The CBSA seized the funds and, as permitted by subsection 18(2) of the
Act, concluded there were reasonable grounds to believe that the funds were
proceeds of crime. The funds were, as of the moment of seizure, forfeit to the
Crown, as provided by section 23 of the Act.
[3]
Persons who
wish to contest whether they failed to declare, as required by section 12 of
the Act, that they had in their possession $10,000 or more in cash can ask for
a determination by the Minister pursuant to section 25 of the Act. If the
Minister decides that they failed to make the necessary declaration, they may
challenge that decision by commencing an action in the Federal Court, as
provided in section 30 of the Act.
[4]
If the
Minister decides there was non-compliance with section 12, he may, pursuant to
section 29 of the Act, do one of three things:
a)
return the
funds to the owner, with or without payment of the prescribed fine;
b)
order the
return of the fine paid pursuant to subsection 18(2) of the Act;
c)
confirm that
the funds are forfeit to the Crown, subject to certain exceptions which are not
relevant here.
[5]
The
Minister's decision under section 29 is judicially reviewable pursuant to
sections 18 and 18.1 of the Federal Courts Act, R.S.C. 1985 c. F-7: see Tourki
v. Canada (Minister of Public Safety and Emergency Preparedness), 2007 FCA 186,
[2008] 1 F.C.R. 331, at paragraph 18.
[6]
In this case,
Mr. Docherty exercised his right to seek a ministerial determination under
section 25 as to whether s. 12 had indeed been breached. The Minister (acting
through his delegate) found that it had (the Section 27 Decision) and confirmed
the forfeiture of the funds to the Crown (the Section 29 Decision).
[7]
In his letter
dated July 29, 2011, the Minister's Delegate set out the reasons leading to the
seizure of the funds as well as those confirming their forfeiture. In response
to Mr. Docherty's assertion that the source of the funds was an inheritance
received from an American relative in 1993, the Minister's Delegate noted that
Mr. Docherty was not able to trace the link between the funds in his possession
and the inheritance. In response to Mr. Docherty's assertion that the funds
had been provided to him by his daughter, the Minister's Delegate commented
that Mr. Docherty had failed to provide any documentation establishing how it
was that his daughter had access to that amount of money. In particular, the
Minister's Delegate gave little weight to a statutory declaration provided by
Mr. Docherty's daughter to the effect that "in November 2010, I provided
U.S. funds to my father Robert Docherty to seek property opportunities in Costa
Rica." In the Minister's Delegate's view, this declaration was entitled
to little weight as it was made after the fact and for the purposes of opposing
the forfeiture. Finally, the Minister's Delegate took into account the fact
that the funds were not taken from a bank account but rather from an
undisclosed secure location.
[8]
Mr. Docherty
did not challenge the Section 27 Decision by bringing an action in the Federal
Court. Instead, he made an application for judicial review in which he
challenged both the Section 27 and the Section 29 decisions.
[9]
The Federal
Court rejected Mr. Docherty's application for judicial review. It held that it
did not have jurisdiction to review the determination that section 12 of the
Act had been breached (the Section 27 Decision) because Mr. Docherty had not
commenced an action as required by section 30 of the Act. Nevertheless, the
Judge reviewed Mr. Docherty's representations on that issue and found that they
were not persuasive.
[10]
The Federal
Court held that the standard of review of the Minister's Delegate's decision to
decline relief from forfeiture was reasonableness, following the decision of
this Court in Sellathurai v. Canada (Minister of Public Safety and Emergency
Preparedness), 2008 FCA 255, [2009] 2 F.C.R. 576, at paragraph 25. The
Court found that the evidence provided to the Minister's Delegate by Mr.
Docherty was not sufficient to establish that the funds came from a legitimate
source. In particular, the Federal Court was not persuaded by a Tax Court of
Canada decision resulting from his daughter’s appeal from a net worth
assessment of her income. The Court considered that the decision suggested the
inheritance had been spent buying real property. The Federal Court also
rejected Mr. Docherty's allegation that the Minister's Delegate was biased because
the latter did not investigate allegations of bias and perjury made against
various CBSA officers. While there appears to be some confusion in the record
as to the exchange rate used by the CBSA, that confusion does not support
allegations of bias and perjury. Nothing more need be said on this issue.
[11]
In the
result, the Federal Court dismissed Mr. Docherty's application for judicial
review.
[12]
Mr. Docherty
now appeals to this Court. His first ground of appeal is that the Federal
Court judge was biased, a conclusion which Mr. Docherty says is supported by
the Federal Court judge's reference to his greed. In Mr. Docherty’s view, this
characterization was unnecessary and demonstrated that the judge was not
impartial. In this case, the moral quality of Mr. Docherty’s motivation for
getting as close as possible to the limit for the exportation of currency from
Canada was irrelevant to the issues before the Court. In commenting as he did,
the Federal Court judge attracted the allegation of bias, unnecessarily putting
into question the impartiality to which all litigants are entitled from the
Court. That said, it requires more than an unfortunate turn of phrase to
support an allegation of bias. This ground of appeal fails.
[13]
Before us, Mr.
Docherty reviewed at length the evidence surrounding the appropriate exchange rate
in an attempt to persuade us that he was entitled to rely on the exchange rate
which he chose "in the normal course of business at the time of ...
exportation", to use the words of the Cross Border Currency and
Monetary Instruments Reporting Regulations, SOR/2002-412, at paragraph
2(2)(b). If Mr. Docherty’s rate is used, he was carrying less that $10,000
cash and was not subject to the reporting requirement in section 12. I agree
with the Federal Court that the legality of the Section 27 Decision was not
properly before it in the application for judicial review: see Tourki,
cited above, at paragraph 17-18.
[14]
While this
may strike Mr. Docherty as an instance of procedural rigidity, the fact is that
Parliament specifically provided that attacks on the correctness of the
decision as to whether section 12 was breached are to be commenced by action.
While the Court has a discretion to ensure that no proceeding is rejected
because it was commenced by the wrong originating document (see Rule 57 of the
Federal Courts Rules, SOR/98-106), that discretion is subject to the
opening words of Rule 63 which direct the Court to respect Parliament’s choice
as to the form of originating document in a particular case. This ground of
appeal fails as well.
[15]
As a result,
the only decision which was properly before the Federal Court was the Section
29 Decision, that is, the Minister's Delegate's decision to decline to grant
Mr. Docherty relief from forfeiture pursuant to section 29. On that question,
the standard of review is reasonableness: see Sellathurai, cited above,
at para. 25.
[16]
In the
corrrespondence between the Recourse Directorate of the CBSA and Mr. Docherty,
the constant preoccupation of the CBSA was confirmation that the funds seized
from Mr. Docherty came from a legitimate source. Mr. Docherty was asked for certain
information and was given the opportunity to provide whatever other information
he thought relevant. In the end, the Minister's Delegate was not satisfied that
the funds came from a legitimate source and therefore the possibility that they
were proceeds of crime could not be excluded. On the basis of the evidence
before him, this was a reasonable decision and should not be disturbed.
[17]
The sum and
substance of Mr. Docherty's submissions was that the U.S. currency seized from
him came from an inheritance from an American relative in 1993, which he and
his daughter used in their wild mushroom business, a business which was
conducted in cash and in U.S. funds. Mr. Docherty did not produce any business
or banking records to support his position. He relied on a statutory
declaration by his daughter affirming that she gave him an undetermined amount
of U.S. currency sometime immediately preceding the seizure of the funds, and
on a redacted version of a Tax Court of Canada decision in which his daughter
challenged a net worth assessment of her income. In my view, the Federal
Court was right in finding that the Minister did not act unreasonably in
failing to give this evidence the effect Mr. Docherty claimed for it.
[18]
A person who
is asked to establish the legitimacy of funds whose presence in his hands is
undocumented does not advance his cause by presenting evidence of undocumented
funds in the hands of another. Undocumented, in this context, means funds
which cannot be accounted for by financial or other records which one would
expect an individual, especially one operating a business, to maintain for
accounting and income tax purposes. It may be that there is an innocent
explanation for the presence of these funds in Mr. Docherty's hands, but he
cannot establish that explanation by pointing to the presence of undocumented
funds in his daughter's hands.
[19]
Individuals
are free to arrange their affairs so as to leave the smallest possible
financial footprint consistent with their obligations under federal and
provincial tax laws. The disadvantage of doing so is that when a question
arises as to the source of large amounts of cash found in their possession,
they have very few means of establishing the legitimacy of those funds. In the
context of the issues sought to be addressed by the Act - money laundering and
the financing of terrorism - the government is entitled to ask for a reasonable
explanation of the source of currency in excess of the prescribed limit found
on persons leaving Canada. In this case, Mr. Docherty’s explanations were
unverifiable and, as such, amounted to no explanation at all. In my view, the
Federal Court was entitled to find that the Minister’s Delegate’s decision was
reasonable
[20]
That said,
the Minister's Delegate expressed himself awkwardly in at least one
particular. In his July 29, 2011 letter to Mr. Docherty, he gave no weight to
Mr. Docherty's daughter’s statutory declaration because "it was prepared
after and as a consequence of the enforcement action." This suggests that
any after-the-fact explanation is entitled to no weight. If this is what the
Minister's Delegate meant to say, it is unreasonable and absurd.
[21]
I understand
the Minister's Delegate to be saying that documentation showing the source of
the seized funds created prior to and independently of the seizure is more
persuasive than an after-the-fact explanation. It is apparent that
explanations can only be provided after the enforcement action has occurred, so
that the timing of such explanations is not a sufficient reason to set them
aside entirely. Self-serving after-the-fact explanations do not have the same
probative value as documents prepared prior to the seizure by third parties in
the normal course of financial transactions. In this case, the daughter's statutory
declaration was imprecise and unverifiable. In context, I take this to be the
basis on which the Minister's Delegate declined to give any weight to Mr.
Docherty’s daughter’s statutory declaration.
[22]
In the
result, I would dismiss the appeal with costs.
"J.D. Denis
Pelletier"
“I
agree
Johanne
Gauthier J.A.”
“I
agree
Robert M. Mainville
J.A.”
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