The Crown's errors unjustly enriched it at the insurer's expense: court
The Ontario Court of Appeal has granted part of an insurer’s claim for restitution from forfeited crime proceeds due to Crown errors during the restitution process following cyber-fraud incidents.
Travelers Insurance insured two companies, Xpertdoc Inc. and Robert Thibert Inc., against cyber-fraud. Following ransomware attacks by Sébastien Vachon-Desjardins, Travelers paid out over $250,000 to Xpertdoc and about $1 million to Thibert. Vachon-Desjardins, who pled guilty to several charges, cooperated with authorities, leading to the seizure of millions of dollars in Bitcoin and cash by the RCMP.
In the original restitution process, the Crown failed to present the claim for Xpertdoc's losses to the sentencing judge, although it did present and secure restitution for Thibert's claim. As a result, Xpertdoc received no restitution, prompting Travelers to seek relief from forfeiture under the Criminal Code.
The application judge allowed restitution for the ransom payment to Xpertdoc but dismissed claims for additional payments made by Travelers for investigation, consultation, and legal fees. Travelers appealed this decision, arguing that the Crown's omission amounted to unjust enrichment, warranting a constructive trust over the forfeited property.
The Court of Appeal agreed, noting that the Crown’s errors unjustly enriched it at Travelers' expense. The court emphasized that the Crown's failure to put forward Xpertdoc's claim likely deprived Travelers of restitution. The court ruled that Travelers had a valid interest in the forfeited property through a constructive trust, as the Crown erroneously received funds that should have gone to Travelers.
The court highlighted the Crown’s obligation to identify and notify parties with potential interests in forfeited property. It found that the Crown's failure to do so prevented Travelers from correcting the omission during the sentencing hearing. The court concluded that the Crown had no juristic reason to retain the funds and that granting relief from forfeiture aligned with the purpose of the restitution provisions.
Consequently, the Court of Appeal allowed Travelers' appeal, ordering the Crown to pay $255,800 from the forfeited funds to Travelers, representing the amount paid to Xpertdoc. The court left open the possibility for further submissions if the parties could not agree on the precise amount to be paid.
