When Police Records Disappear

A province says a police misconduct record is sealed and destroyed. The Supreme Court of Canada says a fair trial can’t work that way. We walk through a major ruling on criminal disclosure and why it matters when the credibility of an investigating officer is on the line, especially where past discipline involves dishonesty or reliability. From Stinchcombe to O’Connor to McNeil, we connect the dots between first-party disclosure, third-party records, and the real-world question defence lawyers face: what information must the Crown provide so an accused person can properly challenge the case against them? 

Then we pivot to the financial wreckage left behind by a long-running Ponzi scheme. When the operator is bankrupt and the money is gone, the bankruptcy trustee has one practical tool left: clawbacks. We explain “net winners” versus “net losers”, why payouts often aren’t profits at all but other victims’ funds, and how concepts like fraudulent preference and fraudulent conveyance can unwind transactions to spread losses more fairly. If you’ve ever wondered what happens after a fraud collapses, this is the legal playbook. 

We close with a sharp lesson on conditional sentence orders (house arrest) and breach allegations. A late-night compliance check leads to a simple defence, “I slept through it”, and a deeper legal issue: can the Crown jail someone for the rest of their sentence without proving intention? The BC Provincial Court says mens rea still matters, and we break down what that means for curfews, door-answering conditions, and proof. 

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Follow this link for a transcript of the show and links to the cases discussed. 

Transcript

Welcome And Today’s Legal Docket

Adam Stirling 0:00

All right. I thought I'm kind of time for a regular regular segment joined as always by Barister and sister with Mulligan Defense Lord legally speaking on Facts and Michael Mulligan. Michael, afternoon. How are we doing? Hey, good afternoon. I'm doing great. Always good to be here. What's on our agenda for today?

Supreme Court Rules On Police Misconduct Disclosure

Michael Mulligan 0:17

Well, the first case on the agenda today is a case that just recently came out from the Supreme Court of Canada. And it's a case dealing with a criminal charge that originally came out of Alberta. And there are a few interesting things about it. First of all, it's a case that deals with the issue of disclosure about police misconduct and disciplinary filings, uh findings. And the background to that is this. A long time ago, prior to the charter, uh the crown might choose to tell defense about what evidence they had that might show the accused person did or didn't commit the offense, but only as sort of a professional courtesy. Uh and whether that occurred and in what way that occurred and when it occurred would be wildly variable depending on who was prosecuting the case and how they wanted to uh to do that. Back in 1991, the Supreme Court of Canada in a case called Stinchcomb made it clear that that's a constitutional obligation, right? If you want to have somebody have a fair trial, one of the obligations there is that the crown turnover evidence the police have collected that show that the person is likely guilty or likely not guilty of the offense. Sort of makes sense. Um and so things went, but pretty quickly one of the issues that developed was well, what about evidence that is not things that the police collected in that particular investigation? Like what about um, I don't know, records about the mental health of the uh complainant, for example, right? Police may not even have that. Uh and in a case that came a few years later called O'Connor, the Supreme Court of Canada set out a different regime dealing with what are referred to as third-party records, like uh evidence that's not in possession of the police or crown, but somebody else, right? And when the defense wants to get those things, they would have to show that uh the material is likely relevant. And then if a judge agrees, the judge would be able to review the material and determine whether it should be provided to the defense or not. So those are the two broad categories of disclosure. What's called first party disclosure, like the actual evidence the police gathered, and third party, like the uh medical records or things of that sort that uh would be held by somebody else, right? Or what else might they be? Let's say a video recording of what happened, but it's held by the store or something, not the police. The police didn't get it for some reason. And then a final issue uh got crystallized back in 2009 when the Supreme Court of Canada dealt with the issue of what about disciplinary records for police that were involved in the investigation? What if the main investigator had been disciplined for dishonesty or something, right? What is that? Is that a first party record? Is that like in from that stinchcomb case? Is that like the fingerprints the police collected at the bank? Or is that more like, you know, oh, some evidence collected in some other case or like something that uh some other party might have? And the Supreme Court of Canada in that case, McNeil, found that broadly speaking, that sort of material, like records the police have about officers that were disciplined who were, you know, integral to the case, witnesses, um, that that material is dealt with in a way closer to the first party records, like the evidence collected in the uh the actual investigation. And so Crown then would have an obligation, uh, the Supreme Court of Canada made clear to disclose um information about uh police disciplinary records that could have relevance to you know the reliability or trustworthiness of a police officer, for example. Um well, what's happened since then is some jurisdictions, including in this case Alberta, uh passed provincial legislation and regulations that provided that after a period of time, even if a police officer had been disciplined, for example, for something relating to dishonesty, that those records would be sealed and destroyed, and the officer could not be asked about them uh after a certain time period. And so in this particular case, um the police sent to Crown with their report a note saying, Oh, none of these officers have any disciplinary records. Um, and the defense counsel on the case kind of heard by the by, hey, that officer in your case may have a serious disciplinary record. Uh and so the lawyer wrote to Crown and said, Hey, what about this? And Crown went and um ferreted that out of some older file before like that they had received before the uh disciplinary records had been destroyed by the police pursuant to that provincial legislation. And so the issue became, well, what Trumps what's the rule here, right? You've got that McNeil case from the Supreme Court of Canada saying relevant disciplinary records that might go to, you know, the credibility, for example, of a police officer, that should be provided. Whereas you had this provincial legislation that said, no, after some number of years it's destroyed, and the officer can't be asked about it. And the judge, the original judge at the trial, found that no, the the province might have some authority over how disciplinary records could be used in the course of like, let's say, for employment purposes or promotional purposes in the police department, but they can't pass a rule that sort of trumps the criminal obligation to uh provide the accused person with information about that might suggest, for example, the key police witness was dishonest in some uh previous uh police dealing, uh, and so ordered it uh to be disclosed. Now, the first interesting uh just procedural tidbit here is that there was that trial decision um in Alberta that yes, that should be disclosed, but and the crown was happy to do that, they weren't opposed to it. Who was opposed to it were the police organizations. They wanted this uh seizing, this um destruction of records to prevail. But neither

Alberta Record Destruction Versus Charter Rights

Michael Mulligan 6:23

the crown nor the accused person appealed that decision to the court of appeal. And the first interesting procedural thing is that there is a there is some provision in the legislation that deals with the Supreme Court of Canada that can permit, in narrow cases like that, an application to be to appeal a trial decision straight to the Supreme Court of Canada, never having gone through the Court of Appeal. And the Supreme Court of Canada on that basis granted leave to appeal the decision that you know the provincial legislation saying the disciplinary records are to be destroyed could be reviewed right by the Supreme Court of Canada, pursuant to the request from the police organizations without first making its way through the uh Alberta Court of Appeal. And so that's how the case wound up there. Um ultimately, the Supreme Court of Canada agreed with the trial judge and found that the uh provincial legislation just cannot prevail. Uh, it cannot be that um, given that, for example, that right to disclosure of information about you know a serious disciplinary matter that might go to the honesty or reliability of the police officer, that obligation can't just be circumvented uh by the province passing legislation saying that disciplinary records shall be destroyed after some number of years, and nobody may ask the police officer about what they did before. Uh and so the that's the final outcome, and the Supreme Court of Canada has confirmed that no matter what the province does, uh they can't uh have a process in place that foils the obligation to uh tell the uh accused about uh uh the police officer's disciplinary history. And they've also affirmed that the decision about whether those things, like that's kind of a record, is significant and should be provided, is relevant, is a decision that crown counsel needs to make, could be reviewed by a judge, but a decision for crown and not the police themselves. Uh otherwise the police could just say, well, we don't think any of this is relevant. We're just gonna say no. And so the Supreme Court of Canada has made clear now that the police are obliged to tell Crown Counsel about uh those kind of disciplinary records so that Crown can then make an assessment about whether this is some uh potentially relevant thing, like the dishonesty by the lead investigator, or maybe it's something that is uh dated and irrelevant, like, you know, the officer was uh disciplined for being late for their shift five times, you know, ten years ago. You know, but that has nothing to do with anything. And so the uh crown will be responsible for doing that vetting, not the police. And so it's now clear that the province can't trump the constitutional rights. And it's also clear that the decision about disclosing that kind of information, whether it's relevant or not, will be a decision for crown rather than the police themselves. So that's the latest from the Supreme Court of Canada on uh disclosure of information about police misconduct in criminal cases.

Adam Stirling 9:21

Michael Mulligan with Mulligan

How The Case Reached The Supreme Court

Adam Stirling 9:22

Defense Lawyers legally speaking will continue right after this. Legally speaking, with Michael Mulligan from Mulligan Defense Lawyers, continuing on C FACT 107. Michael, what's next on our agenda today?

Michael Mulligan 9:33

Uh next on the agenda is a bankruptcy uh case uh which deals with uh the uh

Ponzi Scheme Bankruptcy And Clawbacks

Michael Mulligan 9:39

aftermath of a Ponzi scheme and what happens in terms of what the court referred to as the net winners and the net losers in that entire operation. Um and the background of it, there's a fellow named Quigley who is a per person behind this scheme. Um, and like most Ponzi schemes, maybe all of them, the basic theory of it is that the person operating it with it, operating it, will take in money purportedly to be used as an investment and will then uh pay out early quote investors with uh the additional money taken in by more and more people investing money, if that makes any sense, right? Um and so they he this fellow was promising people like 18% interest um if you'd uh loan money for these purported um investment opportunities. And it went on for years. Uh it went on from November of 2008 until August of 2020. And uh this fellow quickly had uh issued some 2,508, quote, promissory notes uh to all these people offering these uh returns of money. There was no investment, of course. It was just the later investors' money being used to pay out the 18% interest or whatever he was offering to earlier investors to keep the whole thing going. But naturally, of course, you eventually run out of people that are uh trying to get in on this uh and the whole thing collapses. Uh and when it all collapsed, it it became clear that there were no investments at all being made. Uh, and this fellow was just using, it looks like some $8.3 million of the $174 million he had taken in and paid out in this way just to fund a lifestyle. Um he was just spending it. Uh then he was declared bankrupt and he was charged criminally, uh, and maybe a little bit of karma came about him because uh before his criminal trial in 2025 could occur uh in June of 2024, he drowned in the Okanagan River and so he died. But what this Ness left behind was this uh bankruptcy trustee who was faced with all of these people who had invested, like, you know, their life savings and retirement savings and whatnot, trying to recover something uh of the money that they had invested with him. Uh and that there there were claims totaling some $26 million from all these people who had paid this fraud artist money uh in the hopes of these higher returns. And the uh initially the trustee was only able to collect uh modest things to sell, like there's a boat and a motorcycle and a half interest and a house, and originally the trustee was only able to collect some $528,000 from get getting those things collected up and selling them. But what the trustee then focused on was trying to collect money from what were described as the net winners in this entire scheme. And so this is really important to know about if you're ever facing something and you're wondering, you know, is this investment opportunity good too good to be true? And if you're somebody who might think, oh, maybe I get in early on this uh, you know, pyramid of Ponzi or whatever it might be. But what the um trustee set out to do is say, look, the money that the quote investors who were the net winners, like people who were in early enough before this scheme came tumbling down, weren't really getting investment proceeds. They were just getting money from other victims. And so the trustee set about uh trying to collect back the money from people who got more out of this scheme than they put into it. Because of course there are some people where that happens. The scheme went on for 12 years, right? And so some of the early people that got in on that may well have and did, in fact, get paid back more money than they put into it. And that's part of what feeds these schemes, of course, right? Because you could have somebody coming to you saying, you know, hey, this was great. I gave this guy $100,000, and he gave me back two months later $118,000. It's fantastic. You know, what are you doing? Get in on it. Uh and so the uh trustee, first of all, uh filed civil claims against all the people described as the net winners, the people that got more out uh than they put in, uh, but then also made application in the course of the bankruptcy proceedings uh to ask the judge uh that there be some order that that money be returned. And there's a basis for all of that, and some of it comes from a principle that people may be familiar with, which is referred to as a fraudulent conveyance or a fraudulent preference. And the idea there is that if you have somebody who knows, like, hey, I'm gonna go and go down the tubes here, it looks like my Ponzi scheme might unravel. And so what I'm going to do is, for example, pay out all my friends, uh, and then the other people will just be out of luck because all the money will be gone. Those kinds of transactions could be referred to as a fraudulent preference and can be set aside and reversed so that a debtor uh can't just say, I'm gonna pay out my friends and family, and then too bad for everyone else uh involved. What can happen there is the other people that wound up losing out, the net losers in the scheme, uh, can uh apply to a court to set aside those transactions and have the money taken back from the friends and family and someone who may have been paid out first, lest people think, well, I can just avoid all these problems by paying out the people I care about. And so the judge dealing with the bankruptcy found that that was a completely appropriate thing to do, and that that could be accomplished either by way of suing each of those people on the basis that, hey, these were you know, you unjust enrichment or fraudulent preference or fraudulent conveyance, right? That money you got as the uh from the scheme wasn't really an investment proceed, it was just money from somebody else uh that this fellow didn't spend on motorcycles or boats. Um, and so that's what's happened here. The uh uh bankruptcy judge has uh ordered effectively that. Uh and so there will now be a process whereby uh the uh trustee and ultimately the uh judge dealing with the bankruptcy will be able to look at the records to determine who got paid out more than they put in from other people's uh money, uh, and those things may all be reversed uh to try to even it out. Money is going to be lost, there's no way to get back the money the fellow spent on boats and motorcycles and a high flute and lifestyle before he drowned in the river, but the the money that was just passed along to other people earlier in the Ponzi scheme process um can be unwound. And so that's exactly what's going to go on here. And so I thought it was worth knowing about both in terms of some of those principles like fraudulent preference and fraudulent conveyance, how the bankruptcy process can work, uh lest uh, and perhaps to encourage people, if you have some reason to think, hey, I've been offering something that seems much better than any uh financial institution might offer, it seems too good to be true, even if you are some early person in the scam and and happen to get paid out, um, you may find that all of that money is just clawed back from you because you've just managed to get money from other people who were victims in the scheme. And there's no suggestion necessarily that the people who got paid out uh the net winners, they may have not been complicit in that at all. Uh they may have just thought, hey, this seems like a great deal, and in fact it worked out for them, and they got paid out money perhaps years ago, uh, and uh they may find that uh that's now getting clawed back and redistributed in an even way so that everyone's gonna wind up with uh a haircut rather than some people making a bunch of money and some people winding up with a big loss. Uh and so that's the latest sort of the BC Supreme Court in terms of how bankruptcy uh can be used to deal with the uh circumstance of the uh net winners and losers in a Ponzi scheme when it inevitably unravels.

Adam Stirling 17:37

All right. And we've got three and a half minutes left. Up next, it says an allegation, a breaching, a conditional sentence order. What needs to be proven for something like that?

House Arrest Breaches And Intent

Michael Mulligan 17:47

So, first of all, a conditional sentence order is sometimes referred to as house arrest, right? If somebody who's been convicted of a criminal offense, but a court determines that they wouldn't be uh an undue risk to serve their condition, for example, on exactly that, house arrest, right? Or some other very strict conditions. Uh one of the conditions that's common uh is a condition that amounts to like a curfew. If you're not permitted, not required to be in perhaps all hours, maybe somebody's allowed to go out for work, there will often at least be a curfew imposed. Um, and the curfew conditions will often also include conditions like answer the door or something to make sure that you're home, otherwise pretty hard to enforce. The legal issue in this case uh involved what is the mental require like what's the uh mental requirement to be guilty of breaching your conditional sentence order? And the fact pattern here was the fella was on a um one of these orders and he was ordered to be at home between certain hours. The police came by as they do uh to check to make sure the person was there, and at 3 50 in the morning, uh police officer, she her evidence was that she knocked on the door uh three times with her middle knuckle, and she said she knocked on the screen door uh and there was no response to the knock on the screen door um at 3.50 in the morning. Uh it was a mobile home, so it wasn't a big residence, but nonetheless it was knocking the middle knuckle on the screen door. Then the officer said she made a phone call and got no answer. Uh and so that was the basis upon which the man was charged. Um at the hearing into that alleged breach, he testified, sorry, I just slept through it. And his girlfriend testified too, said yes, I was there, I wasn't woken up either by this rapping on the door. The crown nonetheless argued that in a conditional sentence breach, unlike in a criminal charge, all they need to do is prove on a balance of probabilities that the person didn't comply, in this case by answering the door, and unless the person had a quote reasonable excuse, which is some of the language found in the section, the person could be found in breach of their conditional sentence order. The reason that matters is that the starting point, if you breach your order when you're on house arrest, can be you just go straight to jail and serve the whole rest of your sentence in prison. And so the judge had to wrestle with, well, what is the requirement here? Is this like a criminal case? What is the what's required? And ultimately, looking at all the law and including a previous breach of conditional sentence case uh that uh involved a person who uh had to report to a supervisor and called the wrong number and left a phone number at the Crown Council's office rather than the conditional sentence supervisor's office, the judge ultimately concluded that uh no, like with other criminal charges, it's necessary to prove uh a mens rea, like an intention to do something wrong, not just you didn't hear the knock on the door. And so the judge found that yes, even though this is not a criminal charge on its own, it's a breach hearing about somebody who's already been sentenced, uh, that nonetheless it was necessary for the crown to prove subjectively that the person uh failed to do what was required. And so the the upshot is the fellow that slept through the wrapping with the middle knuckle on the screen door, has not been sent to jail to serve the rest of his sentence there. Uh, and is now made clear that the crown does have to prove the person did it intentionally, not just didn't hear the knock of the door. So that's latest on breach of conditional sentences from the BC provincial court.

Adam Stirling 21:10

Michael Mulligan with Mulligan Defense Lawyers, legally speaking, during the second half of our second hour every Thursday. Thank you so much. Pleasure as always. Thanks so much. Always great to be here. All right. Quick break. News is next.