R. v. Grimberg, 2002 CanLII 10640 (ON CA)

COURT OF APPEAL FOR ONTARIO

DATE: 2002-02-14 DOCKET: C35938

BEFORE: MOLDAVER, FELDMAN and CRONK JJ.A.

BETWEEN:

HER MAJESTY THE QUEEN Respondent

• and -

CHAIM GRIMBERG Appellant

COUNSEL: Marie Henein for the Appellant Marie Comiskey for the Respondent

HEARD: October 4, 2001

On appeal from the sentence imposed by Justice Shilton on February 7, 2001 at Newmarket.

REASONS FOR DECISION

FELDMAN J.A.:

1The appellant pled guilty to 5 counts of making a false statement and 5 counts of tax evasion involving collection and failure to remit $617,940.66 of GST, contrary to the Excise Tax Act. He was sentenced to a conditional sentence of 12 months, a fine of $617,940.66, and 9 months imprisonment in default of payment of a portion of the fine within 12 months. The appellant appealed from two aspects of the sentence: (1) certain of the strict house arrest conditions imposed for the first 8 months of the sentence; and (2) the imprisonment in default of payment of the fine.

2After serving 5 months on the stricter conditions of house arrest imposed by the trial judge, the appellant was granted bail pending appeal, which did not include house arrest. In the circumstances, Crown counsel did not press the court to retain those terms for a further three months of the conditional sentence once the appellant recommences service of that sentence.

3The appellant is a widower, 80 years old. In his reasons for sentence, the trial judge noted that the seriousness of the offences, including the deliberate retention of such a significant amount of GST collected as agent for the government, warranted a penitentiary sentence. It was because of the age and circumstances of the appellant that the trial judge imposed the 12-month conditional sentence but with the strict terms of house arrest. However, the trial judge was satisfied that the state of the law was that a conditional sentence was not available in respect of a term of imprisonment in default of payment of a fine. As a result, having concluded that a term of imprisonment in default was a necessary part of the sentence in this case, he imposed a 9-month term of imprisonment in default, if $101,472.53 of the fine was not paid within 12 months.

4When this appeal was argued, counsel were aware that the argument in the case of R. v. Wu, 2001 8626 (ON CA), [2001] O.J. No. 4885 (C.A.) was scheduled to be heard within a short time before another panel of the court. That case involved the issue of the availability of a conditional sentence in default of payment of a fine. Counsel took two alternative positions on this appeal: the first was that the trial judge erred in concluding that the appellant had the ability to pay a portion of the fine, and therefore no term of imprisonment in lieu of payment should have been imposed; in the alternative, depending on the result in Wu, the term of imprisonment in lieu of payment of the fine should be converted to a conditional sentence for the same reasons that the original term of imprisonment was imposed as a conditional sentence.

5For the reasons which follow, I would allow the appeal, convert the term of imprisonment in default of payment of $101,472.53 of the fine to a 9-month conditional sentence on the same terms and conditions as those imposed by the trial judge for the last 4 months of the original 12-month conditional sentence and, as further described below, direct that the appellant complete his 12-month sentence by serving the remaining 7 months of the sentence on the house arrest conditions imposed by the trial judge for the last 4 months of the original sentence.

PROCEEDINGS BEFORE THE TRIAL JUDGE

6It was common ground that by operation of ss. 327(2) and 331 of the Excise Tax Act, the court is required to impose a minimum fine of 100% of the tax evaded. Those sections provide:

s. 327. (2) Every person who is charged with an offence described in subsection (1) may, at the election of the Attorney General of Canada, be prosecuted on indictment and, if convicted, is, in addition to any penalty otherwise provided, liable to

(a) a fine of not less than 100%, and not more than 200%, of the amount of the tax or net tax that was sought to be evaded, or of the rebate or refund sought, or, where the amount that was sought to be evaded cannot be ascertained, a fine of not less than $2,000 and not more than $25,000, or

(b) both a fine referred to in paragraph (a) and imprisonment for a term not exceeding five years.

s. 331 Notwithstanding the Criminal Code or any other law, the court has, in any prosecution or proceeding under this Part, neither the power to impose less than the minimum fine or imprisonment fixed by this Part nor the power to suspend sentence.

7The trial judge proceeded on the basis that s. 734 of the Criminal Code applied to the sentencing in this case. That section provides:

s. 734. (1) Subject to subsection (2), a court that convicts a person, other than a corporation, of an offence may fine the offender by making an order under 734.1

(a) if the punishment for the offence does not include a minimum term of imprisonment, in addition to or in lieu of any other sanction that the court is authorized to impose; or

(b) if the punishment for the offence includes a minimum term of imprisonment, in addition to any other sanction that the court is required or authorized to impose.

(2) Except when the punishment for an offence includes a minimum fine or a fine is imposed in lieu of a forfeiture order, a court may fine an offender under this section only if the court is satisfied that the offender is able to pay the fine or discharge it under section 736.

(3) For the purposes of this section and sections 734.1 to 737, a person is in default of payment of a fine if the fine has not been paid in full by the time set out in the order made under section 734.1.

(4) Where an offender is fined under this section, a term of imprisonment, determined in accordance with subsection (5), shall be deemed to be imposed in default of payment of the fine.

(5) The length, in days, of the term of imprisonment referred to in subsection (4) is the lesser of

(a) a fraction, rounded down to the nearest whole number, of which

(i) the numerator is the unpaid amount of the fine plus the costs and charges of committing and conveying the defaulter to prison, calculated in accordance with regulations made under subsection (7), and

(ii) the denominator is equal to eight times the provincial minimum hourly wage, at the time of default, in the province in which the fine was imposed, and

(b) the maximum term of imprisonment, expressed in days, that the court could itself impose on conviction.

(6) All or any part of a fine imposed under this section may be taken out of moneys found in the possession of the offender at the time of the arrest of the offender if the court making the order, on being satisfied that ownership of or right to possession of those moneys is not disputed by claimants other than the offender, so directs.

(7) The lieutenant governor in council of a province may make regulations respecting the calculation of the costs and charges referred to in subparagraph (5)(a)(i) and in paragraph 734.8(1)(b).

(8) This section and sections 734.1 to 734.8 and 736 apply to a fine imposed under any Act of Parliament, except that subsections (4) and (5) do not apply if the term of imprisonment in default of payment of the fine provided for in that Act or regulation is

(a) calculated by a different method; or

(b) specified, either as a minimum or a maximum.

8Subsections (4) and (5) of that section provide for a deemed period of incarceration in default of payment of a fine, together with a prescribed method of calculation of the period of incarceration. The sections that follow s. 734 form a new scheme recently enacted by Parliament which allows a convicted person with a sentence which includes the payment of a fine to have every opportunity to pay the fine or make arrangements to pay it, with imprisonment in default to be used only as a last resort in circumstances where a person effectively refuses to pay a fine which he or she is able to pay.

9The trial judge was concerned about the duration of the deemed term of imprisonment that arose based on the calculation in s.734(5), and elected to follow the decision of Donnelly J. in R. v. Terracina, [1999] O.J. No. 5404 (S.C.) where he held that the deeming provision only applied when the trial judge did not state otherwise. Donnelly J. then went on to use s. 718.3(3) of the Code, which gives a trial judge discretion with regard to the imposition of imprisonment in default. ¹

10On the appeal, Crown counsel has pointed out that because these offences occurred before the original provisions of s. 734 came into force in September, 1996, the deeming provisions of that section were not retroactively applicable in this case and, for that reason, the trial judge was entitled to proceed under s. 718.3(3) of the Code on the issue of imprisonment in default of payment of the fine.

11The trial judge recognized that although he was obliged to impose the minimum fine, he could not impose a term of imprisonment in default unless he was satisfied that the appellant had the ability to pay the fine. See: R. v. Nattrall (1972), 1972 1017 (BC CA), 9 C.C.C. (2d) 390 B.C.C.A., R. v. Rasper (1978), 1 C.R. (3d) S-45 (Ont. C.A.), R. v. Q.I.X. Computer Corp., [1992] B.C.J. No. 1046 (B.C.C.A.). The guilty plea had proceeded based on an agreed statement of facts. No evidence was called on the sentencing hearing, although submissions were made by counsel for the appellant and for the Crown.

12The agreed statement of facts disclosed that the appellant controlled the two jewellery companies which collected the GST, and that he had collected it and deposited it into the corporate bank accounts for which he had signing authority. He had failed to co-operate with revenue authorities in the investigation. Finally"the GST collected, but not remitted, remained with the corporations as profit. As sole shareholder, Grimberg was the beneficiary of the annual profits enjoyed by the accused corporations." (par. 8)

13At the sentencing hearing, defence counsel submitted on behalf of Mr. Grimberg that he was unable to pay any fine. Although he could not demonstrate and prove where and when the money had gone, he no longer had any of the GST funds as he had spent the money in two ways, on his wife whom he took to the United States for medical treatments, and to pay very high interest to private lenders from whom he had borrowed when he started up the business. In submissions, Crown counsel confirmed to the trial judge that the accountant who conducted the investigation could find no entries in the books indicating that any of the funds in issue had been expended.

14It is clear from reviewing the transcript of the sentencing hearing that the trial judge was concerned about the state of the evidentiary record before him on the issue of ability to pay, as well as the onus of proof. For example, toward the end of the transcript, the trial judge had this exchange with defence counsel:

THE COURT: I think I've asked you both about the ability to pay, i.e. what happened to the $600,000. So, if that's an issue before I could make a default order that I have to be satisfied about an ability to pay, I'm just wondering is - satisfied on a balance of probabilities that he has an ability to pay, is that the standard that I'm to meet if I'm to make that order. If so, Mr. Veltri, I asked him why that number as opposed to some other number, and I heard what he had to say, and I would ask you the same thing. Your client has admitted in the facts that he had these monies, you say there is nothing left, and I'm told it went to interest payments, to business expenses, and to paying for his wife's health. Am I just to accept that baldly without the absence of any evidence. Quite clearly on the evidence he had the money at some point in time.

MR. FYSH: Yes.

THE COURT: What happened to it, it seems to be a great mystery in this case, but if there is no evidence am I just to make an inference or make a determination and if so on what standard of proof, there is no evidence from the Crown, the Crown hasn't filed a schedule saying here we went through the books, here's all the cheques to cash, you know, that – here's clearly what came out of the company that isn't, we can't really identify. I don't have anything like that from the defence, what do you say the judge is supposed to do? And on what standard?

15Defence counsel informed the court that the appellant had only $1,000 per month as a government pension and therefore was not able to pay the fine. Crown counsel was prepared to concede that some of the impugned funds had been spent and that the appellant lived a thrifty lifestyle so that there was no evidence of conspicuous consumption. The Crown took the position, based on fairness and the fact that some but not all of the money had been spent, that the appellant could pay 1/6 of the fine:

THE COURT: Is it fair to say that it's what you, as the prosecutor in charge of the case, feel comfortable with as submitting to the court is reasonable and fair?

MR. VELTRI: Yes. It may be that – it may be that more of that money is left and maybe – it may be that less of that money is left but it's more likely that more of the money is left than less is the best way I can summarize it for you.

In his reasons for sentence on this issue, the trial judge said the following:

Coming back to my earlier remarks, I am satisfied that Mr. Grimberg has not been candid with the court regarding the whereabouts of these monies and his ability to either make restitution or pay fines…In my view, in light of the inquiry made during the sentencing hearing, it cannot be said that Mr. Grimberg has no ability to pay either some or all of these fines. In the absence of any plausible explanation and in view of what I find to be the indisputable evidence that he received these funds and the evidence that there is no paper trail, some degree of imprisonment in default is required. In my view, the position submitted by Mr. Veltri on behalf of the Crown is extremely fair.

16The trial judge then proceeded to impose separate fines in respect of the separate counts, and to impose concurrent 9 month terms of imprisonment in default of 5 of the fines totalling $101,472.53. He concluded by noting that he considered that he was unable to impose a conditional sentence for the term of imprisonment in default, but that had he been able to, he would have done so on the same terms imposed for the first 8 months of the sentence. Finally, although in his submissions counsel for the appellant advised the court that the appellant would not benefit from time to pay the fine, after hearing the sentence of the court he was invited to change that position and did so. He asked for 24 months to pay, and the judge ordered 12 months to pay.

17The appellant says that the trial judge erred by putting the onus on the appellant to satisfy the court that he did not have the ability to pay the fine, whereas it was the Crown who had the onus to satisfy the court that the appellant did have the ability to pay, before a term of imprisonment in default of payment could be imposed.

18As stated in paragraph 11 above, the trial judge recognized that although he was obliged to impose the minimum fine, he could not impose a term of imprisonment in default unless he was satisfied that the appellant had the ability to pay the fine. Where the trial judge can be satisfied, based on the evidence adduced at the trial or on the guilty plea, that the accused has the ability to pay the fine, then the evidentiary onus will shift to the accused to lead evidence to the contrary. In R. v. Desjardins (1996), 1996 4709 (NB CA), 182 N.B.R. (2d) 321 (N.B.C.A.), a tobacco trafficking case, Bastarache J.A. made the following observation at para. 29:

. . . Courts are not ignorant of the ease with which many convicted persons can prove their financial incapacity by showing their lack of legal financial resources at the moment of sentencing. It is for this reason that, where traffickers are concerned, the courts will infer financial capacity on the basis of the illegal profits realized from trafficking and impose a term of imprisonment in default of payment. In this regard, see R. v. Jung (1976), 1 C.R.(3d) S-1 (B.C.C.A.), and R. v. Dow (1976), 1 C.R. (3d) S-9 (B.C.C.A.). I also believe that it is up to the offender who claims to be unable to pay the fine to adduce evidence of his financial circumstances: see R. v. Calvin, [1993] R.J.Q. 1596 (Qué. Ct.), at p. 1602.

19From my review of the record, it cannot be said that defence counsel was under any misapprehension of the onus or of the fact that the Crown had proved that the appellant received all of the impugned funds and that the records did not disclose any disbursement of those funds. The evidential onus was therefore on the appellant to explain where the funds had gone. He chose to do so through submissions of his counsel. The trial judge did not accept the veracity of the position taken on Mr. Grimberg's behalf. Nothing was tendered to substantiate his position.

20It was open to the trial judge to accept that some of the funds may have been expended by the appellant in the normal course or as submitted by his counsel, and to therefore impose a term of imprisonment in default of payment for only a portion of the minimum fine. The evidential onus remained on the appellant to refute the evidence that he had received the funds and that they had not been expended. It was open to the trial judge to reject the submissions of appellant's counsel that he no longer had the funds and to find that the appellant had not displaced the proof on the record that he had retained them. I note that the appellant sought to tender some fresh evidence on the appeal, but that did not include any evidence to prove the disposition of the impugned funds.

21The appellant's alternative submission on the appeal is that the trial judge erred by holding that a conditional sentence was not available in law in default of payment of the fine. Since the trial and the argument of this appeal, this court has decided in Wu, supra, that where the trial judge gives no time to pay the fine, the term of imprisonment in default is a sentence of immediate imprisonment which can therefore be served as a conditional sentence, if so ordered by the court.

22In this case, the trial judge stated that he would have made the 9-month term of imprisonment in default of payment a conditional sentence had he had the authority in law to do so. In my view, this was the correct approach to take. Where the circumstances of the appellant are such that the trial judge is satisfied that a conditional sentence is the proper sentence for the accused person for the offence, in my view it is both inconsistent and clearly inappropriate for that person to be in jeopardy of imprisonment in respect of the same offence for failure to pay the fine imposed as part of that sentence. This appellant is 80 years old. It was for that reason that the trial judge determined that a conditional sentence of 12 months should be imposed when the crime otherwise warranted a penitentiary sentence.

23At trial defence counsel originally advised the court that he was not asking for time to pay any fine, consistent with his position that the appellant did not have the ability to pay and would not as he only had $1,000/month income. After the trial judge imposed the term of imprisonment in default, the judge asked counsel if he wished to modify that position. Counsel then asked for 24 months to pay. The trial judge allowed 12 months. I think it can be inferred that had the trial judge had the benefit of the Wu decision, he would have ordered no time to pay with the conditional sentence in default. An order of no time is consistent with the trial judge's conclusion that the appellant has the ability to pay 1/6 of the total minimum fine.

24Therefore, following this court's decision in Wu, it was open to the trial judge to impose a conditional sentence instead of a term of imprisonment in default of payment of the designated portion of the fine. I note, however, that the trial judge was not obliged to order imprisonment in default. If the circumstances are such that the trial judge is of the view that imprisonment is not appropriate for the particular offender, for example, because of his age, and if a conditional sentence is either not available or in the trial judge's view, also not appropriate, a judge may decline to order any fine, or when there is a minimum fine, decline to order a term of imprisonment or conditional sentence in default. The Crown can be left with its civil remedies to recover the amount of the fine if it is not paid: ² R. v. Natrall, supra, at 398; R. v. Q.I.X., supra, at 5.

CONCLUSION

25The appeal is allowed as follows:

(1) With respect to the conditions of the original conditional sentence, the appellant has been on bail pending appeal since July, 2001. Before he sought bail, the appellant served approximately 5 months of his sentence on the more onerous terms imposed by the trial judge which were to be in place for the first 8 months of the sentence. In the circumstances, the appellant shall complete his 12-month sentence by serving the remaining 7 months on the less onerous house arrest conditions which the trial judge imposed for the last 4 months of the sentence.

(2) With respect to the 9-month term of imprisonment in default of payment of a portion of the minimum fine, I would allow the appeal and, following the intended disposition of the trial judge in this case, substitute an order that the appellant has no time to pay the fine and in default of payment, will serve a conditional sentence of 9 months on the same conditions as the trial judge imposed for the last 4 months of the original sentence.

Signed: "K. FELDMAN J.A."

Footnotes

1. 1s. 718.3(3) Where an accused is convicted of an offence punishable with both fine and imprisonment and a term of imprisonment in default of payment of the fine is not specified in the enactment that prescribes the punishment to be imposed, the imprisonment that may be imposed in default of payment shall not exceed the term of imprisonment that is prescribed in respect of the offence.
2. 2The trial judge has the discretion whether to impose a fine (unless it is a mandatory minimum fine), or imprisonment in default for pre-1996 cases. For post-1996 cases, under s. 734(4), there is deemed imprisonment in default of payment. That section has been interpreted in Terracina, supra, as only applicable where the judge does not make a discretionary order. Although the trial judge relied on Terracina, supra, Crown counsel on the appeal clarified that this case arose before 1996, and as a result, there was no need for this court to comment on the ruling in Terracina.