Court quashes ruling on jurisdiction issue in estate dispute involving terrorism financing provision

Executors sought declaration on court-ordered payment to companies with alleged ties

Court quashes ruling on jurisdiction issue in estate dispute involving terrorism financing provision
Robert Frater

An Ontario judge lacked jurisdiction when it ruled that it would be illegal for an estate to pay a foreign court judgment to a pair of companies because of their alleged ties to a terrorist group, the Court of Appeal has found.

In Bunker v. Veall, 2023 ONCA 501, the court set aside the ruling that the payment would be illegal because, in the context of the case, such a finding would not be binding on courts and prosecutors and would provide no legal protection to the party involved.

“They found that a declaration wasn't the appropriate way to resolve this dispute because facts were disputed, and there is also a sense that the civil courts shouldn't be going too close to matters of criminal prosecution,” says Robert Frater, counsel for the appellants Ian and Christine Veall.

After the death of Donald Harry Bunker, a lawyer who practised in Dubai, United Arab Emirates, Sorinet Aviation Ltd. and Sorinet General Trading LLC brought a legal claim against the law firm Bunker founded. The Sorinet companies had retained the firm for an aircraft purchase. But the firm terminated the relationship when Sorinet’s majority shareholder revealed it intended to operate the aircraft in Iran, contrary to international sanctions.

The law firm kept a portion of the Sorinet companies’ legal fees as an indemnity in case the company made “any derogatory statements about the Firm,” said the Court of Appeal’s decision. The Sorinet companies obtained a judgment from the Dubai Court of First Instance, which granted them $1,000,000. The ruling that the law firm had unlawfully retained the indemnity was upheld at the Court of Appeal.

The executors of Bunker’s estate, which had an agreement with the law firm to pay 50 percent of the Dubai judgment, argued in Ontario Superior Court that making the payment would be counter to s. 83.03(b) of the Criminal Code, Canada’s prohibition on financing terrorism. The executor’s position was based on the possible connections between the Sobrinet companies and an alleged terrorist group. The application judge, Justice Cory Gilmore, agreed with the executors that any such payment would be illegal. The law firm appealed.

The Court of Appeal said that an estate’s ability to seek the court’s advice under s. 14.05(3) of the Rules of Civil Procedure and s. 60(1) of the Trustee Act is intended to assist and sometimes provide legal protection to trustees. But when seeking declarations or opinions on how a prosecutor would approach a criminal prosecution or what findings a court may make, these provisions cannot protect a trustee because such declarations and opinions are not binding on those decision-makers.

Because they cannot make a binding declaration of legality, courts have declined to give a declaration intended to “interfere with prosecutorial discretion or to provide immunity from prosecution,” and that was the request made in the application at issue, said the court.

“[A] declaration, if made, could offer no true protection to the respondents, and would not serve the purpose contemplated by s. 60(1) of the Trustee Act or r. 14.05(3) of the Rules of Civil Procedure.”

The Court of Appeal also said that this type of request was problematic from an evidentiary perspective. The law firm had argued that the evidence the executors used on the application was insufficient for a finding of illegality, consisting largely of newspaper articles and other hearsay. A prosecutor in a criminal trial concerning alleged offences under the terrorism financing provisions of the Criminal Code would base its ultimate finding on “entirely different” evidence.

“One of our main contentions about what happened here is the estate was relying on a legal opinion that really was based on facts obtained from newspaper articles and a lot of information that couldn't possibly be admissible at a criminal proceeding,” says Frater. “We felt there was no way that they were at risk of prosecution here.”

The court said a declaration would lack utility because “it would not be binding on a prosecutor; and, based on a specific evidentiary record, it could not even have persuasive effect where a prosecutor had different evidence as the basis to indict.”

Frater is a retired chief general counsel of the Canadian Department of Justice. He acted for the appellants with Fogler Rubinoff LLP.

The appeal court set aside the declaration of illegality, finding the lower court erred in exercising its discretion on whether the payment would amount to an offence.

The matter is still subject to litigation in Dubai.

“The main point for us is our clients have been put in a very serious position, both personally and professionally, by the fact that this money hasn't been paid,” says Frater. “And they have to pursue all avenues to try and get it back.”

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