Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20241205 DOCKET: COA-24-CR-0088

BEFORE: van Rensburg, Monahan and Madsen JJ.A.

BETWEEN:

His Majesty the King Respondent

and

Carolyn Burden Appellant

COUNSEL: Carolyn Burden, acting in person Peter Copeland, appearing as duty counsel ¹ Deepa Negandhi, for the respondent

HEARD: November 5, 2024

On appeal from the conviction entered on October 11, 2022 and the sentence imposed on January 18, 2024, by Justice R. Philip Campbell of the Superior Court of Justice.

Reasons for Decision

1The appellant was charged with one count of fraud over $5,000 arising from the misappropriation of funds while she served as a bookkeeper and financial controller in a small family-owned building business. On October 11, 2022 she pleaded guilty to the charge, although she declined to admit any of the details of her fraudulent conduct including the amount misappropriated. It was understood that facts detailing the fraudulent conduct would be established later in a Gardiner hearing. ²

2In March 2023 the appellant moved to strike her guilty plea on the basis that she did not understand the allegations to which she had pled guilty and did not appreciate the consequences of the plea, which included the possibility of imprisonment. The trial judge refused to strike the guilty plea. He found that the plea was proper, voluntary in the legal sense and made with a full understanding of its implications and consequences.

3The sentencing hearing continued throughout the remainder of 2023. In his reasons for sentence on January 18, 2024, the trial judge found that the appellant had engaged in a systematic, sophisticated, calculated and prolonged fraud, enabled by a façade of loyalty, competence and helpfulness. By exploiting her position of trust, she had misappropriated over $1.2 million with devastating personal and financial consequences for the company and the family that owned it. The trial judge described the fraud perpetrated by the appellant as reflecting an “egregious and deeply painful breach of trust and years of calculation and deception, all unmitigated by an expression of remorse, a commitment to reform, or a glimmer of an explanation.”

4Noting that the range of sentence in cases of large-scale fraud is generally three to five years, the trial judge found that the magnitude, complexity and duration of the fraud, the impact on the victims and the amount of the fraud, as well as the appellant’s prior convictions for fraud, justified a sentence at the upper end of that range. Although the appellant had entered a plea of guilty, its mitigating effect was diluted by a refusal to admit the details of the fraud, prolonging the proceedings by over a year, as well as by an “utterly spurious application to strike her plea almost half a year after she entered it.”

5Accordingly, the trial judge sentenced the appellant to five years imprisonment, and ordered her to pay, within 15 years, restitution to the victims in the amount of $985,269.94, which took account of the fact that the appellant had made partial restitution to the victims pursuant to a separate civil judgment which they had obtained against her.

6The Crown counsel at trial had initially sought orders for forfeiture and for a fine in lieu of forfeiture in that amount, to which the trial judge agreed. However, the Crown subsequently advised the court that the proper amount to be specified in the orders was the full amount of the fraud as found by the trial judge, although the Crown also indicated that the appellant would ultimately be required to pay only the lower amount that had initially been requested due to “adjust[ment] by law”. The trial judge accepted the Crown’s revised advice and issued a forfeiture order and a fine in lieu of forfeiture, in both cases in the amount of $1,208,000, with the fine to be paid within 15 years.

Conviction Appeal

7The appellant argues that her guilty plea should be set aside because she did not understand the allegations to which she was pleading guilty and did not appreciate the consequences of the plea, which included the possibility of imprisonment.

8We do not agree.

9As the trial judge noted in dismissing her motion to set aside the guilty plea, the significance of the guilty plea was explained in detail at the time the appellant entered the plea, including the possibility of imprisonment. Moreover, after speaking with counsel, the appellant drew boundaries around the explicitness of the admissions she would make. This reflected her understanding of the difference between admitting essential elements and admitting the entirety of the factual allegations, the latter being left for subsequent litigation at a Gardiner hearing. As the trial judge also pointed out, the appellant had direct experience of fraud prosecutions, including the meaning of the offence and the consequences of being found guilty of it.

10We see no basis to interfere with the trial judge’s finding that the appellant’s guilty plea was informed and voluntary. The conviction appeal is dismissed.

Sentence Appeal

11The appellant seeks leave to appeal her sentence on three grounds: (i) the trial judge erred in imposing a five-year term of imprisonment, which was unduly harsh and failed to reflect the principle of restraint; (ii) the trial judge erred in imposing both a fine in lieu of forfeiture and a forfeiture order, since only one of them could be issued; and (iii) the amount set out in the applicable order should be reduced from $1,208,000 to $985,269.94, in order to reflect the trial judge’s expectation that only the reduced amount be required. The appellant argues that the fine in lieu of forfeiture should be set aside, leaving the forfeiture order in place.

12The Crown argues that the trial judge did not err in imposing a five-year sentence of imprisonment. The Crown does concede, however, that the trial judge erred in imposing the two orders. In the Crown’s view, the forfeiture order should be set aside, and the fine in lieu of forfeiture for the full amount of the fraud, namely $1,208,000, should remain in place.

(i) The five-year term of imprisonment was fit

13In our view, the trial judge took account of the principles of restraint and rehabilitation in sentencing the appellant to a five-year term of imprisonment. In fact, the trial judge found that the circumstances of the offence as well as the appellant’s previous convictions for fraud would justify a sentence above the normal three- to five-year range for a large-scale fraud. These circumstances included the appellant’s relentless recidivism, calculation and breach of trust and the devastating impact on the victims. The trial judge further found there was a real risk of reoffending since “fraud appears to be a deeply ingrained habit with Ms. Burden and in some sense, her occupation.”

14We agree that in the circumstances of this case it would have been open to the trial judge to impose a sentence above the normal three- to five-year range for large-scale frauds. The trial judge took proper account of the principle of restraint in not moving above that established range, and the five-year term he imposed was entirely fit.

(ii) The trial judge erred in imposing an order for forfeiture and a fine in lieu of forfeiture

15Subsections 462.37(1) and (3) of the Criminal Code set out the jurisdiction to order the forfeiture of proceeds of crime and to impose fines in lieu of forfeiture. They provide as follows:

Order of forfeiture of property

462.37 (1) Subject to this section and sections 462.39 to 462.41, if an offender is convicted, or discharged under section 730, of a designated offence and the court imposing sentence on or discharging the offender, on application of the Attorney General, is satisfied, on a balance of probabilities, that any property is proceeds of crime obtained through the commission of the designated offence, the court shall order that the property be forfeited to His Majesty to be disposed of as the Attorney General directs or otherwise dealt with in accordance with the law.

Fine instead of forfeiture

(3) If a court is satisfied that an order of forfeiture under subsection (1) or (2.01) should be made in respect of any property of an offender but that the property or any part of or interest in the property cannot be made subject to an order, the court may, instead of ordering the property or any part of or interest in the property to be forfeited, order the offender to pay a fine in an amount equal to the value of the property or the part of or interest in the property. In particular, a court may order the offender to pay a fine if the property or any part of or interest in the property

(a) cannot, on the exercise of due diligence, be located;

(b) has been transferred to third party;

(c) is located outside Canada;

(d) has been substantially diminished in value or rendered worthless; or

(e) has been commingled with other property that cannot be divided without difficulty.

16The term “proceeds of crime” is defined in s. 462.3(1) as including “any property, benefit or advantage…obtained or derived directly or indirectly as a result of the commission in Canada of a designated offence”. Fraud is a designated offence for purposes of s. 462.37.

17Crown and duty counsel agree on the following four propositions:

1. the $1.2 million that the appellant misappropriated from the victims is “proceeds of crime”, since the Crown established beyond a reasonable doubt that the appellant had obtained that money as a direct result of fraud;
2. the sentencing judge was therefore required, pursuant to s. 462.37(1), to order that these proceeds be forfeited to His Majesty, unless the making of such an order was not practicable;
3. the jurisdiction to order forfeiture or a fine in lieu of forfeiture is disjunctive, and a sentencing judge may impose one or the other, but not both. This is made clear by s. 462.37(3) which provides in relevant part that, where property of an offender cannot be made subject to a forfeiture order, “the court may, instead of ordering the property…to be forfeited , order the offender to pay a fine in an amount equal to the value of the property” (emphasis added); and,
4. therefore, the trial judge erred in imposing both the orders and one of them must be set aside.

18Where counsel disagree is on which of the orders should be set aside.

19Duty counsel argues that while the trial judge was required to order forfeiture of the proceeds of crime, he could not impose a fine in lieu of forfeiture because he did not make a specific finding that any of the circumstances set out in s. 462.37(3) (a)-(e) existed. Therefore, the forfeiture order should remain in place and the fine in lieu of forfeiture should be set aside.

20In response, the Crown points out that s. 462.37(3) (a) states that a fine in lieu of forfeiture may be imposed where the proceeds of crime cannot, on the exercise of due diligence, be located. The Crown argues that it was common ground during the sentencing hearing that the money that had been misappropriated by the appellant could not be located. Therefore, the trial judge properly imposed a fine in lieu of forfeiture and the forfeiture order should be set aside.

(iii) The forfeiture order should be set aside and the fine in lieu of forfeiture should remain

21The determination of which of the orders was properly issued (and which should be set aside) must be guided by Parliament’s purpose in granting the discretion to impose a fine in lieu of an order of forfeiture.

22It is well established that the Code’s proceeds of crime provisions in Part XII.2 are intended to deprive offenders of ill-gotten gains and to deter other like-minded persons from participating in such criminal activity in the future: R. v. Lavigne, 2006 SCC 10, [2006] 1 S.C.R. 392, at paras. 14-17; R. v. Abdelrazzaq, 2023 ONCA 112, 165 O.R. (3d) 721, at para. 36; R. v. Ruthowsky, 2024 ONCA 432, 439 C.C.C. (3d) 137, at para. 198. In designing the proceeds of crime scheme, Parliament recognized the practical reality that proceeds of crime are often not available for forfeiture at the time of sentencing. In such cases, merely ordering the offender to forfeit the proceeds of crime would as a practical matter be largely meaningless. In fact, it would provide an incentive for offenders to dispose of criminal proceeds so that, in the event they were successfully prosecuted, the illegal fruits of their activity would be beyond the reach of the Crown. This would render the attempted enforcement of a forfeiture order an exercise in futility, a result that would run directly contrary to Parliament’s purpose in enacting Part XII.2, which is to ensure that “crime does not pay”.

23Section 462.37(3) attempts to avoid such a perverse result by providing that where a forfeiture order would be impracticable, sentencing judges may instead impose a fine in lieu of forfeiture. Moreover, where such a fine is imposed, s. 462.37(4) requires the imposition of a term of imprisonment if the fine is not paid within the time specified in the order. These “fine in lieu” provisions are necessary so that offenders who have benefitted from proceeds of crime and then taken steps that make the forfeiture of those proceeds impracticable, are nevertheless deprived of the benefits they improperly obtained.

24Given this underlying purpose of the fine in lieu provisions, the imposition of such a fine was appropriate in this case, and the findings of the trial judge are sufficient to support that result. The fraud committed by the appellant occurred during her employment with Desini Fine Homes from August 22, 2011 until January 12, 2017. The trial judge found that during this five-and-a-half-year period, the appellant took money from Desini through issuing hundreds of cheques, for various purported purposes and in different amounts, as part of a systematic and lengthy scheme. The trial judge further found that the stolen money was not for any particular identifiable expenses, since the appellant did not appear to have any extraordinary expenses she could not meet. Instead, the appellant’s motivation for the fraud was primarily because “she appears to have wanted more money than she could acquire honestly.” The trial judge also found that the stolen money simply went into her bank account and her pocket.

25In our view, these findings by the trial judge are sufficient to establish that ordering forfeiture of the illegal proceeds would be impracticable in the circumstances of this case. Nor is this conclusion inconsistent with the fact that the trial judge also issued a forfeiture order. This order merely directed that the appellant forfeit $1,208,000, with no indication of where this money was located or how it could be identified. As such, it does not appear that the order could be successfully executed and, if the forfeiture order alone were to be left in place (as urged upon us by duty counsel), it would reward the appellant for carrying out the fraud in a manner that made it impossible for the Crown to recover her ill-gotten gains. This is precisely the kind of circumstance that led Parliament to provide sentencing judges with the discretion to order payment of a fine in lieu of forfeiture, which makes the imposition of such a fine appropriate and necessary in this case.

26Accordingly, the trial judge did not err in imposing a fine in lieu of forfeiture, which should remain in place, while the forfeiture order should be set aside.

(iv) The fine in lieu of forfeiture should be reduced by the restitution that has been repaid to the victims

27As noted above, the victims had obtained a civil judgment against the appellant and had recovered approximately $223,000 through enforcement of that judgment. The Crown initially sought orders in the amount of $985,269.94, to take account of this repayment. However, the orders that were actually issued were for $1,208,000, based on the later advice of the Crown that the fine had to equal the total amount of the proceeds of crime.

28Duty counsel argues that the fine in this case should be reduced by the amount recovered by the victims pursuant to their civil proceedings against the appellant. He relies in particular on R. v. Vallières, 2022 SCC 10, [2022] 1 S.C.R. 144, where the Supreme Court held that an offender may be ordered to pay less than the total value of the misappropriated property that was in their possession or control where several co-accused had possession or control of the same property that constituted proceeds of crime. The Court pointed out that if each offender was required to pay a fine representing the proceeds that they at any one time had in their possession, this could result in fines that exceeded the total value of the proceeds of crime. Such double recovery could be avoided by apportioning the amount of the fine between the co-accused where there is evidence indicating that they had simultaneous or successive possession of the same property. Duty counsel further notes that in Vallières the fine was reduced to account for the fact that some of the criminal proceeds had been subject to a freezing order and had been returned to the victim pursuant to s. 462.41 of the Criminal Code.

29Similarly, in R. v. Rafilovich, 2019 SCC 51, the Supreme Court declined to impose a fine in lieu of forfeiture in relation to criminal proceeds that had been seized at the time of the accused’s arrest and were ordered returned pursuant to s. 462.34(4)(c)(ii) to fund reasonable legal fees necessary for the accused’s defence. The Court found that one of the reasons that Parliament enacted s. 462.34(4)(c)(ii) was to provide access to counsel and give meaningful weight to the presumption of innocence. The Court was concerned that if an accused person understood that judicially returned funds would be clawed back later through the imposition of a fine and possibly imprisonment, they would likely choose to represent themselves. Balancing the secondary purposes associated with the enactment of s. 462.34(4)(c)(ii) against the primary objective of Part XII.2, namely, to ensure that “crime does not pay”, the Court concluded that the fine should not include the proceeds that had been returned to the accused to fund his defence.

30Duty counsel argues that these cases establish that the court has discretion to impose a fine that takes into account restitution that has previously been provided to victims. Accordingly, he submits that the fine should be reduced to $985,269.94, since the victims had recovered the balance of the misappropriated funds through enforcement of the civil judgment.

31The Crown opposes reducing the fine in this manner, arguing that this court has declined to take into account the availability of civil remedies in imposing a fine in lieu of forfeiture: R. v. Schoer, 2019 ONCA 105, 371 C.C.C. (3d) 292, at paras. 108-11; R. v. Mojadiddi, 2021 ONCA 796, at paras. 11-14. For example, in Schoer, the court declined to reduce the fine in lieu of forfeiture by an amount that the offender had paid to one of the victims pursuant to a civil judgement, since that payment had been made out of commingled funds of other victims of the offender’s Ponzi scheme. In Mojadiddi, the court refused to reduce the fine on account of payments made by a co-accused or from funds stolen from other victims.

32We accept the submissions of duty counsel and would reduce the quantum of the fine in lieu of forfeiture in the matter he proposes. Vallières establishes that sentencing judges do have a discretion in certain limited circumstances to set a fine in lieu of forfeiture in an amount that differs from the total proceeds of crime.

33One such circumstance is where the offender has returned a portion of the proceeds to the victim from whom those proceeds were misappropriated. This court has affirmed on a number of occasions that a fine in lieu of forfeiture is to be reduced by amounts paid pursuant to a restitution order: R. v. Waxman, 2014 ONCA 256, at para. 31; R. v. Reeve, 2020 ONCA 381, 151 O.R. (3d) 65, at para. 3. It should not matter whether such a repayment is made in satisfaction of a restitution order or otherwise, provided that the offender has returned some of the criminal proceeds to the victim. Nor is this principle inconsistent with this court’s decision in R. v. Angelis, 2016 ONCA 675, 133 O.R. (3d) 575, at paras. 62 and 75, where the court declined to reduce a fine in lieu of forfeiture since the corporate victim had been indemnified for its loss from an insurer rather than from the offender.

34In this case, unlike in Mojadiddi or Schoer, there is a single set of victims and thus the amount that was repaid by the appellant was not obtained from other victims, nor was it paid by a third-party as in Angelis. It is true that we cannot be certain that the amount that the appellant repaid represented a portion of the illegal proceeds as opposed to other funds in the lawful possession of the appellant. However, the reason the trial judge did not inquire into this particular matter is because he was mistakenly advised by the Crown that he had no discretion and was required to set the fine in an amount equal to the total amount of the fraud. We are also concerned that the Crown advised the trial judge that, notwithstanding the higher amount specified in the Orders, the appellant would not be required to actually pay that higher amount through “adjust[ment] by law”. Thus, the expectation of the trial judge was that, regardless of the quantum of the fine set out in the formal order, the appellant would only be required to pay a reduced amount reflecting a ‘credit’ for the restitution that she had already paid. Indeed, the Crown acknowledged in his submissions to the trial judge that this was the fair outcome.

35In the circumstances, we would reduce the fine in lieu of forfeiture from $1,208,000 to $985,269.94. We would further direct, in accordance with Waxman, at para. 31, that the restitution order shall take priority over payment of the fine in lieu of forfeiture, and that the fine in lieu of forfeiture shall be reduced by any amount paid pursuant to the restitution order.

Disposition

36We dismiss the conviction appeal. We would grant leave to appeal sentence and allow the sentence appeal in three respects: (i) the forfeiture order is set aside; (ii) the quantum of the fine in lieu of forfeiture is reduced from $1,208,000 to $985,269.94; and (iii) the order of the trial judge should be amended to state that the restitution order shall take priority over payment of the fine in lieu of forfeiture, and the fine in lieu of forfeiture shall be reduced by any amount paid pursuant to the restitution order. The sentence appeal is otherwise dismissed.

"K. van Rensburg J.A."

"P.J. Monahan J.A."

"L. Madsen J.A."

Footnotes

Footnotes

1. 1Duty counsel only assisted the appellant with respect to her appeal of the forfeiture order and the fine in lieu of forfeiture.
2. 2See R. v. Gardiner, [1982] 2 S.C.R. 368, at pp. 414-15.