A Costly Cautionary Tale: R v Fercan Developments Inc., 2016 ONCA 269

Authors: Michael Tochor, Q.C., Adryan Toth

This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

The Ontario Court of Appeal has upheld an extraordinary $1 million costs award ordered against the Crown.

In R. v. Fercan Developments Inc., 2016 ONCA 269 [Fercan], the Court held that when the Crown fails to fairly and objectively exercise its discretion in prosecuting a matter, it may be liable for costs. The case illustrates that judges have the power to order costs against the Crown in order to ensure the integrity of the criminal justice system.

Fercan involved an application by the Crown to have three respondents forfeit their interest in two properties pursuant to s. 16 of the Controlled Drugs and Substances Act. More than seven years prior, a sophisticated marijuana grow operation was uncovered on one of the properties, while a dismantled operation was found on the second property. The Crown took the position that the interests of all three respondents should be forfeited.

Two of the respondents were companies controlled by an individual who was “innocent of any complicity or collusion” in the marijuana operations. The third respondent was the largest Credit Union in Ontario which held a mortgage interest in one of the properties.

After one month of argument on the forfeiture application, the Crown suddenly decided to abandon its application with respect to the Credit Union. The trial judge then dismissed the case against the remaining two companies and, unexpectedly, ordered costs against the Crown of $1 million. The Crown appealed to the Court of Appeal.

On the issue of jurisdiction to award costs, it was held that courts hearing forfeiture applications in statutory courts (like Saskatchewan’s Provincial Court) have the power to award costs against the Crown. Without this supervisory power, the Court held, forfeiture proceedings could be unfair to respondents.

In determining whether the Crown should be liable for costs in forfeiture applications, the Court stated that costs may be awarded when there has been “a marked and unacceptable departure from the reasonable standards expected of the prosecution”. The Court of Appeal concluding by holding that the Crown’s behaviour met the requisite standard and that the $1 million cost award was not excessive in the circumstances.